Category Archives: Procurement Innovation

The CPO Agenda May Be Gone …

… but it’s checklist for staying center stage is still valid 10 years later.

Ten Year’s ago SI published the below, and every word of it stands today. (Of course today you have to do even more, but you still have to do the below.)

The CPO Agenda’s Procurement Checklist for Staying Center Stage

Now that Procurement has received board attention as the greatest potential for cost savings in the organization, CPOs need to start planning on how they are going to keep that attention once the recession ends and the spending monkeys try to steal the spotlight again. Thinking (way, way) ahead, the CPO Agenda recently put together a good checklist for staying center stage that summarizes some of the key strategies that CPOs will need to pursue to help the board see Procurement as a driver of growth, innovation, and long-term cost reduction and not just a one-trick cost-saving pony.

  1. A Vision for Growth
    • Value Chain
      As the central point of the organization, Procurement is in a prime position to define organizational needs, asses the capabilities of internal resources, and define organizational core competencies. What other business unit touches not only every other business unit, but all of your partners as well?
    • Solution Procurement
      Procurement can source solutions that leapfrog current best-in-class and create a paradigm shift in customer value.
    • Innovation
      As the glue that binds modern organizations together, Procurement can play a critical role in the innovation process by bringing partners and ideas together.
  2. Customer Relationship Management
    As the one business unit that has every other business unit as a customer, Procurement is in a prime position to help the company better meet its customer expectations.
  3. Supplier Relationship Management
    Procurement is already managing supplier relationships on a daily basis … it just has to help the organization understand that it needs to be the central point and the channel by which supplier capabilities are secured to support the company’s growth agenda.
  4. Supply Chain Optimization
    Without an efficient supply chain, companies cannot support the chosen customer needs. In order to achieve its plans, all aspects of a company’s supply chain MUST be optimized. Procurement is in the best position to do that.
  5. M&A Due Diligence
    The ultimate success of a merger or acquisition depends on whether or not the combined organization will be able to deliver more savings and more value … Procurement is in the best position to help make that call.

Have You Mastered the 4th T of Tracery Yet?

Regular readers will know that the time of PPT — People, Process, Technology — has long passed. In today’s fast paced world where product life-cycles are sometimes over as soon as they hit the market, and where your competitors are constantly striving to outpace you in both sales and supply management, you can’t live on processes anymore — they go stale almost as soon as you’ve got them figured out. And in a knowledge economy, just having a butt in a seat or a worker at an assembly line isn’t enough to succeed — you need a worker who, at the very least, is smarter than the average worker and, preferably, smarter than the worker employed by your competitor. And your technology cannot get out of date.

That’s why SI has been promoting the 3 T’s for years — Technology, Talent, and Transition. You need a solid, regularly updated, technology foundation upon which to build your modern Supply Management Organization. You need talent to put together good operating procedures, properly use the technology, and to constantly identify new opportunities for cost reduction or value generation. And you need great transition management as even best six sigma process today won’t cut it tomorrow when you need to upgrade your product offering, switch suppliers, change distribution methods, and make sure your product is Designed for Recycling from the get-go as new regulations are forcing you to take back your product at end of life and recycle it as you are using chemicals and / or rare earth minerals that are heavily regulated.

But while these are necessary conditions for Supply Management success, they are not necessarily sufficient. As we noted five years ago when we first asked if you have mastered the 4th T of Tracery, while it is true you will not succeed without a mastery of technology, talent, and transition management, as per our first post on Project Assurance many years ago, organizational success also depends on selecting a superior strategy and seeing it through until the desired results are achieved (or the organization changes its strategy, which hopefully wasn’t done arbitrarily on the whim of a CXO after talking to a buddy on the golf course).

However, in order to properly implement a strategy, you have to not only see it through from start to finish, but you have to make sure all of the process streams necessary for success are both completed and properly synched. Just like the key to a good weave, as one might find in Egyptian Cotton, is a skillful interleaving of the thread, the key to a good strategy, is a skillful interleaving of the process strands into an effective transition plan from where you are to where you need to be.

And this, dear readers, is Tracery — the “delicate, interlacing, work of lines as in an embroidery”, or, more modernly, “a network” — the glue that not only binds the Technology, Talent, and Transition Management that your Supply Management organization needs to succeed, but that interleaves these threads in a way that causes each of them to reinforce each other and make a stronger whole.

And, hopefully, monitors them through a common network-enabled platform that can not only bring your internal stakeholders together on one platform, with appropriate views and collaboration features for each function, but also your partners and suppliers who have the data and best practice insights you need to actually get your supply chain in shape. Because it’s not something you can do alone, and it’s definitely not something that will never happen unless carefully monitored, as it’s always easier to “do it the old way”, even if the old way is unsustainable and will lead your down a path to organizational oblivion (through bankruptcy).

The Category Sourcing Scorecard – Still An Essential Tool for Category Sourcing

As we noted when we discussed this topic seven years ago, if you want a successful event that generates significant savings, you have to select the right category — and the best way to do that was often to evaluating them with the right scorecards that could predict savings opportunity.

But success requires more than just selecting the right category, it also requires executing a successful event, and this requires:

  • selecting the right sourcing event and
  • adapting quickly if market conditions change

However, today, to be successful, a sourcing scorecard is more than just a point-in-time snapshot of market factors, buying factors, supplier factors, internal factors, and category-specific factors. It’s historical data, even if anonymized, on past events with respect to size, savings, geography thereof, relevant market conditions, and event type.

This way a buyer not only knows the potential savings associated with a category at a particular time, but what type of event will be needed, and what market conditions need to hold throughout the event to maximize the chance of success. And if there are good projections as to how long conditions will hold, the buyer knows how long he or she has, or doesn’t have, to complete the event to maximize chances of success. And if conditions change unexpectedly, the buyer can halt the event and decide what to do next.

Plus, sometimes you can’t just select the category with the greatest sourcing potential, you have to select the category where the contract is going to expire in 60 days and you can’t be without a contract or risk a production line shutdown. Even if the market conditions are the opposite of what you’d need for best results, you still have to proceed — so having the best information possible on the option likely to give the least unsatisfactory outcome is still a positive. And having a platform that can use a modern category sourcing scorecard to enable the right workflows to drive the right events is most likely to minimize a less-than-ideal event as well as maximize an ideal event when it comes.

Knowledge is Power

So why would you want a platform that doesn’t embed any knowledge?

There is not a product or service in existence that cannot be made more valuable with information, and in technology, there does not exist a solution that cannot be made more valuable through embedded information. So why would you ever want a platform without it?

In fact, if the platform has enough embedded information, and can use it to power adaptive workflows built on top of robotic process automation, you’ll find that you might not even need any AI at all (especially if all it equates to is Applied Indirection). If the platform comes embedded with leading market knowledge for the majority of your categories, and you can define, and embed, rules with the help of experts to cover the rest, then you have the majority of what you need.

Because, at the end of the day, the best value comes from not only getting Spend Under Management, but making the best Sourcing / Procurement decision possible for the organization — and that can only be done if the organization has the right information. No organization has expertise in more than a few categories, and it definitely doesn’t have all the information. So having a platform that comes equipped with the best should cost models out of the box, integration to current market data feeds, and historical data on previous events (anonymized if necessary) to help organizations select the right type of even tfor current conditions is very beneficial — versus just a piece of dumb software that executes a canned one-size-fits-all workflow.

At the end of the day, the more you know about your raw materials, your components, your assembly / manufacturing options, your products, your shipping, the import and export restrictions and costs, and the inherent value of each product versus your other options, the more accurately you can model your options and make a good decision. The more accurately you can model your options, the better chance you have of determining the solution with the lowest cost, the lowest risk, the highest value, and the best value (defined as risk reduction, profit generation capability, etc — whatever makes sense) to cost ratio.

This is how leading Supply Management organizations can save 12%, off-the-top, in an optimization-backed information-enabled sourcing event — and even more if they collaboratively work with their peers to identify all of the options that may be available and all of the associated tradeoffs.

Plus, good, timely, information allows an organization to:

  1. constantly improve products and services by way of the fact that they are able to
  2. collect more relevant, timely, accurate, detailed, and integrated data.So get an information enabled platform – at the end of the day, it’s better than all the platforms with the fake “AI” that do nothing more than automate static, dumb, one-size-does-not-fit-all, workflows!

Driving Procurement Visibility: Why & How


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.

Thanks, Brian!