Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in sourcing, and brings some unique insight on the topic.
Nobody ever suffered from too much clarity in their personal lives, and the same is true from an operational standpoint. Procurement teams that run most efficiently typically have a high degree of visibility – they use this view to identify cost cutting opportunities faster, and communicate them more effectively to get the job done quicker. They also don’t suffer the lost opportunity cost of letting maverick and tail spend savings slip through the cracks.
But I’m not telling you anything you don’t already know. For most organizations, the business case is already clear for increased visibility – the challenge is attaining this increase and using it to improve Procurement practices. So, how do we do it?
Keys to Better Visibility
Strategies for improving visibility can be broken down into three groups: Focusing our efforts on People, Process, and Technology will set the stage for the improvements we need.
Are Our People Set for Success?
The first step we must take is ensuring our human resources are up to the task. There are plenty of skillsets your team already has in place that are mission critical – strong negotiating skills, relationship management, and the ability to drive change are our bread and butter. What about data analytics, statistics, or tech-based skills needed to interact with the latest data management and visualization toolsets? These aren’t skills every Procurement team has readily available.
Closing this gap may mean bringing in outside hires. On one hand, we can quickly assimilate the skillsets we need by bringing in data scientist and analyst roles. On the other hand, this can be a tough sell internally, especially if you’re building a brand new data practice. The ROI will certainly be there in the longer term, but it may take some time to get to that point.
Another direction is to grow internally. Review the members of your team and assess their ability to pick up data analytics skillsets. At the same time, work with your IT team to understand what building up this practice will mean, and utilize their expertise to do so.
Do Our Standard Processes Encourage Visibility?
The best resources will still get hamstrung if they have to stick out outdated, cumbersome, or bureaucratic SOP. If our processes aren’t built from the ground up with visibility in mind, odds are good that they’ll pose a challenge down the road.
How many steps are there from the time a purchase is requested to a PO being generated to a supplier getting that order? I’ve seen some complicated processes built around this staple of Procurement activity, requiring the input and effort of multiple team members, stakeholders, and ultimate product/service users. Despite the heavy lift, everyone’s actions are siloed, with visibility only to the point of their own sign-off.
We need to rethink SOP – simpler processes requiring the effort of fewer resources (yet open and visible to many) is key. This is especially true any non-critical, easily standardized purchases. Anything we can do to automate these purchases or implement catalogs to support buyers is a win.
Do We Have the Right Tools in Place to Succeed?
Lurking behind both our People and Process goals is the set of technology tools we need in order to function. As with traditional processes, technology platforms and practices built without visibility in mind could become a bottleneck.
Before even considering the tools, themselves, think of the data they are used to marshal. It isn’t uncommon for these data sources to be diverse in terms of physical or logical location, ownership, update frequency, and other key variables. Implementing a master data management (MDM) methodology solves this issue by establishing a centralized “golden record” that serves as a single point of reference. This way, everyone has the exact same view of data, and knows exactly where to go to find it.
As far as important tech tools go, we’ve already covered the business case for a few. Are platforms in place to establish proper Supplier Relationship Management? Do we have an electronic procurement system that supports and promotes the use of PunchOut catalogs? Have we ingrained unified communication platforms into our processes to ensure proper communication at every step? Have we built dashboards that actually act like dashboards (offering an at-a-glance look KPIs instead of cramming a bunch of numbers on a screen)?
The Benefits are Clear
It is far easier to describe the steps above than it is to enact them. The road to improved visibility isn’t short, and requires more than just process change – better visibility requires an organizational mindset change from everyone involved in the Procurement process as well as those that support it or depend on it.
Yet the benefits are clear. Better visibility is critical to strategic sourcing and shines a light on all of the dark spend that our teams would jump to address… if only we knew about it. It also helps to reduce soft costs by streamlining our process, cutting out wasted time and energy to maintain manual, opaque practices.
Laying the groundwork today will ensure that our teams move into 2020 in the best position possible to impact our organizations.