Last week, courtesy of Paul Martyn, BravoSolution's new VP of Marketing in North American, I came across a column over on Supply Chain Brain. The article explores the decades-old subject of treating procurement and category management like a sales and account-management function. It quotes my long-time industry colleague and friend, Jim Wetekamp (who still owes me a case of Yuengling for some favor I did him years back). Jim says that "sourcing efforts [need to] be designed much like a traditional sale process, with commodity managers given performance targets along with the measurements needed to ensure they're being met."
After reading this, I thought I'd challenge Jim -- who probably knows more about sourcing and procurement products and processes than just about anyone I've ever met -- to go a bit deeper on the subject. I wrote to the Upstate New Yorker: "Jim, could you fill my RSS shot glass with a few more specific tipples on what we should and should not take away from sales? What are truly sales best practices as applied to vendor management and strategic sourcing?" Instead of a few sentences, he practically gave me a book. Or at least a chapter. Still, it's great stuff, and even though there are quite a lot of ideas here for a single morning read, I thought I'd print it in a single post all the same. Without further adieu, here are Jim's more detailed thoughts on the subject. It's worth reserving at least a few minutes to read what he has to say on the subject. Trust me.
"Although I can profess to be a supreme expert in neither sales management nor procurement category management, I do have some observations, having worked among a few groups that I believe are in fact top of the line in these areas.
"It is interesting how many parallels there are in what can be considered best practices in managing a sales process and procurement-sourcing process. While applying all of these sales-management best practices to your procurement process may not make complete sense given the specifics of your team, business, or markets, I have worked with a good number of procurement organizations that are applying these practices and making them work.
"The easiest place to begin is with some generalizations about what makes a successful sales organization. What is it that they do well?
- They plan ahead.
- They manage the pipeline and qualify maniacally.
- They measure aggressively.
"Effective sales-management organizations have a well-defined sales strategy. Sales strategies that I have seen generally involve a method for prospect selection, defining the winning sales process and laying out a plan based upon measurable goals for the organization. The most tangible manifestation of this is the sales forecast. The sales forecast provides a roadmap of how goals will be met, key categories that will drive those achievements, and other assumptions revolving around sales market transitions, organizational capabilities, and production feasibility. Sales organizations need this plan in order to drive proactive rather than reactive actions, as a framework for judging and rewarding performance, defining an expectation of delivery from the sales team, and aligning the organization from top to bottom.
"It's pretty easy to see how transferable this best practice is to procurement category management. Effective procurement organizations generally involve a method for opportunity identification, defining a winning procurement process and laying out plans based upon measureable goals for the organization. An equally tangible example of this is a procurement savings forecast. The procurement savings forecast provides a roadmap of how goals will be met, key categories that will drive those achievements, and other assumptions revolving around sourcing market transitions, organizational capabilities, and implementation feasibility. In the same manner as [with] a sales organization, this plan becomes instrumental with regards to driving desired actions, rewarding performance, and organizational alignment."
"In the sales environment, many sales can be lost simply due to a lack of proactive follow up. Effective sales organizations have a detailed process for managing every sales opportunity from cradle to grave. When was the opportunity identified, and how? Who are the key contacts? What is the scope of the opportunity, and value? What are the most effective steps in the sales process to close the opportunity? What step is the opportunity in now, and what is necessary to qualify it for the next step? One of the most important processes (and skills) in an effective sales process is the art (science?) of qualification. What is the likelihood of conversion of this opportunity? What is the competitive landscape? What steps need to be taken to tilt likelihood in favor of success?
"Similarly, I think it can be said that in the procurement environment, many savings opportunities can be lost due simply to a lack of proactive follow up. Procurement organizations can similarly manage a detailed process for every savings opportunity through a pipeline. The savings pipeline drives visibility to the source of the opportunity, key contacts involved, scope and savings potential, and most effective steps, risk, and decisions involved in closing the opportunity. Likewise, qualification is a skill/art within procurement to best manage limited resources in pursuing those opportunities. Without an approach to evaluating likelihood of success, ability to implement, and the competitive/market landscape, much time is wasted on low-success opportunities."
"It's often said that sales is the easiest area to measure. While I'm not quite sure that's true, it certainly doesn't lack for metrics. Sales metrics are often defined and actively tracked along every phase of the sales process. How many leads from marketing campaign? How long from lead to qualified lead? How many qualified leads per lead identified? What was the entire time for closure? etc.
"As with the other practices mentioned, certainly some of these measurements can have value in the procurement process. By aligning metrics linking the strategic procurement savings plan and procurement-opportunity management (all the way through to contract and savings realization), procurement organizations can begin to establish a view into the most effective methodologies, areas of need for additional resource training/coaching, or skill development, all while maximizing the savings yield of the procurement function.
"As I stated initially, you can find many procurement organizations employing some facet of any of the above today. And the ones I've worked with that have employed it most successfully, most importantly have a sales-oriented mindset to managing the function and process. They are aggressive, organized, communicative, and goal-driven.
"A 'worst practice' that procurement organizations should avoid adopting from their sales counterparts? Ignoring the risk elements that exist with any decision made through the opportunity-management process.
"Sales organizations are by design aggressive entities. Certainly, you hope that yours strives to win business regardless of the obstacles facing them. But it takes strong sales management to ensure that risk evaluations are factored into the sales process effectively. Risks of meeting margin targets, not just revenue goals. Risks of over-committing or under-delivering to client delivery expectations. Risks of sacrificing quality, continuity, or any other element of client sati
sfaction in the process of attempting to win the deal. On the other side of the table, procurement organizations can't afford to ignore these identical risks. When awarding business, how assured is the quality, continuity, or timeliness of the deliverable? What risks were accepted in terms of forward commitments, etc. when selecting a particular partner? All of these factors, while difficult to measure, are nonetheless already well-adopted critical elements of the procurement process."
I'd like to personally extend my thanks to Jim Wetekamp for sharing his thoughts on the subject. If you want to track him down, he's currently SVP of Solution Strategy for BravoSolution, but "Spend Product Guru" might be a better label. Thanks again, Jim. I think I owe you that case now.