Over on spendmatters.com/cpo, the maverick has been doing a great job knocking out Procurement myths one by one, with twenty (20) down and five (5) to go. While the doctor did not co-author this series, as per a post this spring, he did consult on them and believes that all of these are myths that you need to be aware of.
The next 10 myths are:
- Sourcing is Better than Supplier Management for Value Creation
- Efficiency and Effectiveness: You Can’t Have Both
- Apply the Kraljic Model to Spend Category Procurement
- Technology is Only a Tool
- Procurement Owns Spend Management
- Procurement ROI is the Single Best Procurement Metric
- “No PO, No Pay” is a Best Practice
- Spend Category Taxonomies are Hierarchical
- Procurement Needs a Mandate
- Supply Management is a Department
Of these, the doctor‘s favourites are:
- Technology is Only a Tool
- Efficiency and Effectiveness: You Can’t Have Both
- Spend Category Taxonomies are Hierarchical
Technology is not just a tool, it is a transformation engine that allows its users to be more efficient, effective, and transformational. It’s a process enabler, and the process at the same time. The level of your technology is directly proportional to the level of your Procurement maturity.
With the right platforms that enable the right processes, Procurement can be efficient and effective. It can also save money and provide increased value generation opportunities. For example, using technology enabled marketplaces to identify more sustainable suppliers can not only cut costs but also increase value as it gives marketing more to work with and allows the organization to increase brand value, which correlates to sales, with less effort and less money.
Finally, there is no one taxonomy, and if there was, it definitely wouldn’t be hierarchical. Products can be grouped by function similarity, component similarity, and department or geographic utilization, for example. Services by function, geography, and strategic nature, for example. Products and services can be mixed or kept separate. The best category definition at any given time will depend on market conditions, supplier capability, and projected utilization over the expected duration of the contract.
Supply is fluid, and Procurement must be as well to keep up. And it definitely must avoid the traps laid by the common Procurement myths.