Mark Twain observed, "Everybody talks about the weather, but nobody ever does anything about it". Well, doesn't it also feel like this is the case for procurement innovation? One often hears declarations such as "Innovation is our first priority"! Usually, however, procurement professionals politely agree and then continue what they were doing before. Why is this? I think there are several reasons. For one, many procurement professionals are measured primarily on savings (correctly so), and they may be concerned that if they focus too much on innovation it might erode their negotiating position. Another reason innovation is uncommon is that procurement professionals' approaches for gathering business requirements produce few new ideas: sending out e-mail requests that generate meager responses; brainstorming sessions that degenerate into complaints about today's offerings; surveys that are either too long to get responses or too short to get meaningful input; ad hoc conversations.
But what if there were ways to simultaneously achieve innovation and savings? Here's an approach that pharmaceuticals giant GlaxoSmithKline has used very successfully with numerous categories of spend. Begin by spending a half day with an initial group of about 12 people who actually use the sourced product or service and get them to start from scratch and design what they would ideally like. Freeing people to focus on the ideal opens up all kinds of new possibilities. It's as if they have been released from the small box in which they operate and a whole new world of possibilities begin to emerge. To make the process work, a facilitator must insist that the group be positive and build on each other's ideas and must not allow the people to talk about what they don't like or about what is in place today. Follow-on sessions should be held to help build support for implementation.
Coming back to procurement professionals' concerns that innovation could erode their ability to negotiate savings, how do we address that? Well, when they and the suppliers look at what the users ideally want, they will see ideas for doing things better and more efficiently and will see the wasteful things they are doing today that the users feel are unnecessary. This will reveal ways the buying and selling organizations can both save money by modifying what and how they do things. So, to answer the original question, innovation and savings can go hand in hand. Once the ideas are generated, procurement professionals can then make the suppliers compete for the business opportunity.
Does this all sound a bit theoretical to you? Well, here is an actual example that resulted in both innovation and savings -- for both the buying and selling organizations. GlaxoSmithKline buys a lot of industrial gases for its R&D operations. The procurement professional who manages that category assembled a group of scientists and had them design their "ideal industrial gas process". Here's what the scientists wanted:
- Ideally, there would be an always-available supply of gases piped from bulk tanks into our labs at the desired pressure.
- We would not have to get involved in checking or changing small tanks.
- The bulk tanks would have sensors that automatically reorder as needed. This would reduce time reordering and worry about disruptions to research.
In essence, the scientists were saying they wanted to be freed to focus on doing their science. So, the ideas were shared with suppliers, the business was put out to bid, and both GlaxoSmithKline and the chosen supplier were able to reduce their costs while implementing several key ideas. One of these, converting to more bulk-tank supply and getting rid of a lot of the small tanks, saved a lot of money and time.
Now, if only someone would do something about all this spring rain ...
- Jason Magidson