There's a bit of an irony in the fact that McKinsey's Peter Kraljic wrote perhaps the most influential article for procurement. It was a paper that transformed hundreds of purchasing organizations and is still impacting the function decades after it was written in September of 1983. This noted piece is Purchasing Must Become Supply Management, if for some reason you're waking up from a thirty-year buying coma. Read it. Learn from it.
The irony, you ask? While Kraljic is a genius, I've come to believe that it's simply not worth the risk in hiring a strategy consulting firm to undertake the tactical aspects of sourcing and procurement projects, let alone a broader procurement transformation. I write this not as some analyst or journalist wimp who has never done procurement consulting, but as a former strategy consultant and one of the prolific observers of the market who has heard horror story after horror story of $5MM+ strategy consulting firm projects that left no savings to show.
I heard the latest one last night, which prompted this rant today. Without getting into too many details, one of the "big three" strategy firms came into an organization to tackle a large swath of procurement spend hitting costs of goods sold (COGs) -- i.e., not indirect or services. I don't want to get into the industry or spend types because the wounds are still deep and the failure recent, but it suffices to say that the executive management who hired this well-known firm got burned and was unable to implement enough of the savings "ideas" to even cover the firm's costs. But the PowerPoint looked good!
Besides largely un-implementable seven and eight-figure procurement studies that tipped the PPT file-size scales at between 175-250 dense slides (executive summary and appendixes included, perhaps additional spreadsheets and an analytics leave-behind separate – I've done this before myself, trust me), strategy firms bring a real and present danger beyond their fees alone. Unlike more operationally oriented firms, or those with rounded practices that go beyond strategy and into other aspects of the business, including systems and people, strategy firms have an empathy problem. A big one.
This, too, presents another strategy firm procurement irony. One of the top firms, especially, is known for looking for empathy among its new hires. They test for it in creative ways. But the empathy they seek (at least from what I've seen) is empathy for executives sitting across from you rather than the common man who doesn't have a Wharton MBA and is not being groomed to run the biggest P&L in the business. It's this solider who must implement savings, work with suppliers after a negotiation, develop suppliers, and really get in the weeds in the case of joint cost take out programs (multi-tier inventory doesn't just vanish overnight!) and truly sell a program to business stakeholders outside the management team and boardroom.
I pity them when that 2-pound PPT rolls downhill ... I really do.
To be continued next week.