Friday Rant: Rebound or Not, Now is the Time to Shine

There's been quite a bit of conflicting news of late throughout the late summer months about whether or not a rebound is imminent or whether we'll continue to wallow in recession doldrums into 2010. Personally, from a procurement and supply chain perspective, I think this point is almost moot when it comes to what it will take to make ourselves as successful as we can in the coming 12 months. After all, regardless of whether or not the overall economy recovers, we can begin to think about ways of driving our own procurement rebound. Here are a few tips for making such a rebound a reality -- even if the top line doesn't gain as fast as your more optimistic team members think it will.

Without further ado, here is a list of five initial tips on how to shine over the next 12 months (hint, hint: budgeting cycles are starting, so prioritize these items now) regardless of whether or not the economy cooperates:

1) Measure first, manage second -- invest in benchmark data wherever you can get it or create it. I'm not just referring to systems and process benchmarks here. I'm also referring to commodity price information for both direct and indirect materials (e.g., metals, energy, IT, contingent labor). The more benchmark data you have, the better position you'll be in to create transparent contracts that save you money. And such data will also help you shoot down or reject unwarranted price increases from suppliers.

2) Automate, automate, automate. And do so without IT's involvement -- unless IT is driving a major ERP upgrade where procurement systems are involved (which is increasingly become less and less likely based on the number of ERP plans that CFOs have back-burnered). Focus on automating transactional procurement by bringing as much spend under management as possible even if you're deployment window is only 18-36 months before IT plans to put a new system in place. Pick up the phone and call Ariba, Coupa, Perfect, Ketera, Hubwoo and all of the other companies out there offering relatively inexpensive SaaS-based P2P software and related supplier enablement and catalog management. Even if you have an ERP SRM or eProcurement initiative in place, consider the third-party option if your current levels of spend under management aren't where they need to be.

3) Lean on your finance organization to help support and drive your supply risk management efforts. Remember, supply risk is a trailing indicator of the overall economy. Your suppliers are just as -- if not more -- likely to hit the bankruptcy button when the economy does turnaround as they are now (because they won't be able to ramp-up or build inventory to meet new orders). Finance should be your friend in these efforts to analyze your supply base and provide funding for services, content and technology as required.

4) Engage consultants on a contingency basis to help reduce costs. If anyone wants a large up-front fixed fee, tell ‘em to go fly a kite (the kind made in China with dangerous lead dyes and paint). There's no need to create a budget item to bring in consultants at the moment. Even some of the bigger names are turning to contingency and success-based pricing with their clients. And consider a targeted range of categories beyond just indirect. Experts in direct materials (e.g., metals, plastics, electronics, energy) sourcing might offer an even greater opportunity to help you save in the current climate -- and avoid unnecessary price increases in a rising commodity market -- than those who focus on indirect.

5) Get political and develop a point of view. No, by this I do not mean going out and telling everyone in your company how Obama's domestic, economic and trade policies are or aren't the work of the spend Messiah. Rather, I'd suggest developing a strong point of view and getting political in regards to issues that your company should have a view on where it should impact sourcing strategy. This might involve expectations in trade policy or commodity price trends. Or perhaps it might require developing a strong perspective on how forecast demand will impact the ability of your supply chain to ramp -- or not ramp, as the case may be -- production to meet expectations (and what you should do about it as a result).

In short, get passionate. Get fired up. And let your opinion be heard. Save the hedging for commodity strategies. In today's climate, good leadership means standing up and bringing a strong perspective versus sitting down and waiting for orders.

Jason Busch

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