Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset Part II

Today’s guest post is by Brian Seipel, a marking project expert at Source One focussed on helping corporations achieve both marketing and procurement objectives in their strategic sourcing projects.

In our last post we noted that when Pepsi did away with their marketing procurement department, it was a big deal, but it wasn’t really a shock. Marketing teams have never had a great relationship with procurement. Procurement is still trying to get their foot in the door when it comes to marketing spend, so it isn’t too much of a surprise if that door occasionally gets shut in procurement’s face.

But, despite this example, Procurement should not have anything to worry about. Organizations don’t get rid of marketing procurement — they get rid of bad marketing procurement. And if Procurement can demonstrate value, Marketing will listen. How does Procurement do that? As per yesterday’s post, it starts by becoming an asset, not a roadblock. The next step is to …

REALIGN PRIORITIES

Work with marketing to establish which group should lead discussions on different aspects of agency selection. It may be a hard pill to swallow, but quantifiable apples-to-apples comparisons are difficult, if not impossible, for some marketing initiatives. Concede the value-oriented comparisons to marketing, but take charge where a number crunching comparison is warranted.
Procurement pros also need to do a better job at understanding marketing goals as well as how objectives are phrased using a marketer’s language:

  • Markets select agencies as partners, not vendors. There’s more at play than who can do a job at the lowest cost.
  • Tune into ROI. A marketer wins not by reducing the dollars they spend, but by improving outcomes of what those dollars buy.
  • Promote actions that achieve your long-term goals. Instead of focusing on cost avoidance, work with marketing teams and agencies to establish process improvements that lead to greater efficiency.

A failure to speak the same language or understand priorities is a big reason that procurement is alienated from marketing initiatives; getting on the same page in these ways helps.

These goals don’t always align with the costs savings mandate procurement pros are tasked with, which necessitates a discussion with the top brass to iron out inconsistencies. The point we need to make is simple; I would rather take part in guiding procurement on Marketing’s terms than have no say at all. All of our value counts for nothing if procurement gets overlooked and shut out because we don’t offer compromises.

PUT “MARKETING” IN MARKETING PROCUREMENT

Spend time with a marketer, and you’ll see what they want out of an agency. All of those key qualities need to apply to procurement, as well.

They want to have a relationship with their agencies, not just a series of transactions. They want to work with an agency that not only carries a brand’s identity, but can support their vision for how growing it. They want an agency that can turn on a dime to support new, hot, unconventional campaigns — and has the knowledge to assist in the decision making process for any uncharted waters.

They want an agency that “gets it”. If we want that seat at the table, procurement needs to “get it”, too.


Thanks, Brian.

Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset Part I


Today’s guest post is by Brian Seipel, a marking project expert at Source One focussed on helping corporations achieve both marketing and procurement objectives in their strategic sourcing projects.

When discussing marketing procurement, conversations still sometimes slide back to Pepsi’s big move at the end of last year, when they did away with their marketing procurement department. This was a big deal, but was it really a shock?

Pepsi’s news was huge, but hardly isolated; marketing teams have never had a great relationship with procurement. Procurement is still trying to get their foot in the door when it comes to marketing spend, so it isn’t too much of a surprise if that door occasionally gets shut in procurement’s face.

Let’s focus on the positive, instead. As long as dollars are still being spent on marketing initiatives, then there’s a spot at the table for you … if you are able to earn it.

BAD MARKETING PROCUREMENT

Let’s just be clear: Organizations don’t get rid of marketing procurement — they get rid of bad marketing procurement.

Pepsi is still devoting a good-sized budget to marketing and advertising, they just did away with a bad marketing procurement middle man. To be more specific:

  • If an agency search doesn’t move at a speed that keeps pace with marketing initiatives, that’s bad marketing procurement.
  • If you’re seen as a road block, that’s bad marketing procurement.
  • If short-term cost savings trump any other longer term considerations (“but it works when I buy office supplies!”), that’s bad marketing procurement.
  • If you don’t understand marketing, that’s very obviously bad marketing procurement.

If none of these concerns apply to you, then don’t worry. If they do apply, still don’t worry. Focus your energies, instead, on adding more value.

How do you do this?

START BY BECOMING AN ASSET, NOT A ROAD BLOCK

Procurement pros need to do a better job selling one of our greatest values: We allow marketing teams to focus on what they do best — marketing — by clearing the other stuff out of their way. We can make the process faster, not slow it down.

If you haven’t built this business case for yourself as an asset, then marketing teams have no idea what you can offer. They can, and will, view you as a stereotypical bean counter because you haven’t given them anything else to work with.

When I hear marketing complain that procurement slows the process down, I bang my head against a wall. Procurement has honed processes that help speed the process for identifying, vetting, and selecting agencies. Show marketers all of the procurement-based work you can take off their hands (they don’t go away even if procurement leaves the room) so they can focus on finding agencies that are the best fit.

But this is just the beginning. In tomorrow’s post, we will discuss the next steps.


Thanks, Brian.

AI Will Not Save Procurement — Thought Leaders Will

In yesterday’s post we pointed out that despite strong claims to the contrary, AI will not save Procurement (and, if hastily applied, will only hasten its demise). Procurement is at a crossroads, but the last thing it should do is sell its soul to the demon that spawned modern AI.

As the public defender pointed out in a recent co-authored piece on The Future of Procurement, courtesy of Trade Extensions, Procurement will survive, as long as it redefines its role to meet the needs of the new enterprise.

As highlighted by the public defender, Procurement will, among other roles, be the organization that

  • brings to the table an understanding of what markets and suppliers can offer to support the strategic direction of the business
  • brings to the table an understanding of what platforms will best support the organization’s business, not just the day-to-day sourcing and procurement solutions
  • brings to the table the deep expert market research and negotiation skills that are required to not only secure supply but transportation, talent for operations, and good customer relationships
  • brings to the table the value engine that increases organizational efficiency and effectiveness and innovation that takes the organization to the next level

But it will do more than that. It will be the department that helps set the strategic priorities for the organization. It will be the department that defines the best strategy for talent acquisition and management. It will be the department that will define not only where the organization fits in the supply chain, but how the supply chain will run to support the organization. It will be the new nerve centre of the enterprise, created by the thought-leaders of tomorrow.

AI Will not Save Procurement … It Will Only Hasten its Demise

A recent post over on Spend Matters UK from Andrew Nichols in “artificial intelligence help businesses save thousands” boldly states that Artificial Intelligence Can Help Procurement Solve Some of the Big Challenges. In fact, he predicts that AI in the not so distant future will play a major role in the international supply chain, supporting businesses to solve a number of very contemporary problems.

In particular, Andrew believes that AI could identify new markets, manage supply chain risks, track exchange rate volatility, and find the best value without compromise on quality.

If this were true, Procurement would not be needed at all, and the C-Suite would be chanting “Procurement is Dead. Long Live the Machine! Our Samaritan has Arrived!” If an AI (which does NOT exist by the way, intelligence is not artificial) could do that, you’d all be fired, because, let’s face it, when it comes to managing supply chain risks, tracking exchange rates, identifying new markets, and always finding the best value, your batting average is less than that of a major league baseball pro.

An AI can give you market statistics, and break it down by region, demographic, competitor, and product. It can NOT tell you how appropriate a market is for you. You have no idea why a market is good for a competitor. You can cross-correlate it’s products to other top selling products on the market and identify common features, common advertising channels, and common comments across brand surveys, but the best you can draw is conclusion based on correlations. Correlation is not causation. You could take the highest ranked strategy suggestion from the analytics engine, implement it, and flop miserably because a key factor was missed, flawing the entire model.

An AI can compute, for every product in the world, the cost to value ranking using market costs, exchange rates, correlation to desired feature lists, and consumer ratings, but this is not the best value. The best value is that where the cost to value formula is based on your value rankings, which could be much more heavily dependent on reliability, safety, and service than look, feel, and flash. And since your organization will not have every product rated, the best the AI can do is suggest the most likely candidates for human review.

An AI can detect the presence of risk indicators that you have defined against known risks, it cannot identify risk indicators for unknown risks. If the algorithm doesn’t understand that a tsunami is a risk because it can damage harbours and destroy coastal plants, the risk will not be identified until it discovers a news story about how the supplier plant had to shut down. And if it does not understand that legal proceedings can bankrupt a small company, it could overlook a filing with the potential to bankrupt the supplier. If the supplier was strategic, that is something the organization would want to know about immediately.

An AI can track exchange rate and give you a real-time view into which is the most preferable rate, the short-term and likely long-term trends, and give you suggestions with an expected level of confidence within plus/minus x%, but can not necessarily predict the right currency to use to lock in a long term value for any better than a human expert. No known algorithm knows all the factors that contribute to exchange rates, how to detect their presence, and how to incorporate them. There are a lot of advanced statistical algorithms that can model the trend curves well, but they assume that markets will more or less keep the status quo, which never happens. Their projections are useful, as they can identify which currencies are likely to be best and where inflection points are likely to occur, making the best use of an experts time, but they cannot replace the expert.

And if any CPO were to try and replace a team with an AI for one or more of these functions, then he would quickly bring an end to Procurement in his organization because, while it would succeed in many cases, sooner or later there would be a spectacular failure that would cancel out all of the previously identified value, putting the entire organization at risk.