In Part 1 of this series, we introduced the procurement productivity study and covered the first half of the productivity punch list. In this edition, we’ll finish up the list and provide some overall guidance on the topic. Onto the practices…
Productivity Practice #13: Use policies, internal white pages, ePortals, consumer-like search, online training, etc. to "guide" requisitioners to preferred supply
Make it easy for requisitioners to find you in procurement if they can’t find what they’re looking for in the eProcurement system. They can't do this if you bury policies and communications on an arcane intranet site, so over-communicate efficiently (help text, computer-based training, consumer-like procurement buying portal, etc.) to ensure that users can find their way.
Productivity Practice #14: Have an internal ‘help desk’ and related support processes - similar to an external CRM process
This is similar to the previous practice, which is in effect an ‘internal CRM’ capability, but this capability is more explicit and using all of the CRM-related techniques and tools to support internal. This includes using CRM capabilities that you may have elsewhere in house. You should also consider things like common mailbox, voicemail, ‘ticket’ system, e-mail routings based on business rules (e.g., by commodity), and using customer satisfaction surveys to guide improvement efforts.
Productivity Practice #15: “Right-sized” sourcing process steps based on the nature of the sourcing project and/or spend category
This practice is about finding the right balance between ‘3-bids and a buy’ vs. 99-step sourcing process. It should provide guidance on what to use and when – in addition to examples, templates, etc. Decision trees/guides are useful here. Also, don't make procurement staff fend for themselves. Set up a CoE for specialized activities (e.g., market intelligence) – which we’ll described in more detail later.
Productivity Practice #16: Outsourcing low-value processes to your own captive shared services and/or to an outsourcing firm
Outsourcing doesn't have to be a large, threatening program. Increasingly, outsourcing is coming from firms of many different procurement services sectors. Some procurement organizations have even proactively helped stakeholders identify tasks that THEY’D rather outsource! By doing this, you are growing your ‘market’ of supplier spending to influence.
Productivity Practice #17: Use e-Sourcing and contract management systems that automate workflow AND create/re-use standard templates to prevent "re-inventing the wheel”
Provide templates for:
- Process flows/techniques/tools by spend category
- Cost models
- RFx templates
- Contract templates (MSAs, clause libraries, etc.)
These do not necessarily have to exist within an eSourcing or contract management system (i.e., they can be spreadsheets or text documents), but, the study shows, as do numerous benchmarks, that formal enterprise systems help here, specifically from a knowledge reuse standpoint and not just from a straight automation standpoint.
Productivity Practice #18: Market segmentation to pick categories where longer-term evergreen contracts (with renewal notifications of course) combined with intelligence monitoring (e.g., via third-parties) for exception notifications
This practice is slightly more advanced. You don’t need to constantly re-source a category if market conditions aren’t changing very frequently – especially if your time can be spent elsewhere on new spending or new ways of creating value with suppliers. While it does include a well-known strategy for establishing evergreen contracts, it must also have triggers and checkpoints to ensure that market conditions have not changed, which requires some level of market strategy tuning and supplier re-engagement of some sort.
Productivity Practice #19: Have current/prospective suppliers develop multi-year cost reduction strategies to allow continual cost savings and to free you up
This practice is a good one to combine with the previous one such that it offloads some of the category management activities to the supplier itself. Although some procurement organizations might view this as a conflict of interest, it does not replace the need for a robust category strategy, but rather, lets the supplier bring you the best practices that have worked at other customers. It also can be useful when procurement only gets one year of ‘credit’ for year-on-year cost savings because the supplier is spreading the cost savings (using different collaborations with you for demand management, specification management, mix changes, etc.) over multiple years.
Productivity Practice #20: Use social media, specialized search, content aggregators, and industry/commercial associations to reduce search time for targeted relevant content
This practice surrounds using specialized tools to help reduce the amount of time you spend on search engines to do supplier/market intelligence. Although this type of capability seems beyond the reach of many firms, often, they may be able to not only use existing suppliers who are in the information/intelligence industry, but also use other departments like marketing in case they have built such capabilities on the customer facing side. There are a plethora of “Freemium” or low cost premium data sources that's can potentially help free up your time. Your biggest cost is often opportunity cost of your time wasted searching around.
Productivity Practice #21: Establish a Procurement CoE group and/or individuals to formally develop and deploy specific competencies within procurement (and out to stakeholders)
This practice does not have to be overly complicated and bureaucratic. It is basically designed so that you don't ‘re-invent the wheel’. All you need to do is designate competency leaders who perform an internal service on behalf of others – or train others to do it themselves. This is about taking responsibility for capturing, reusing, and disseminating knowledge. It can support things like job rotation and cross-training more efficiently. It can also tie in to corporate CoEs – or take a leadership position in establishing them (e.g., third-party management; crowdsourcing). Just make sure to articulates the key capabilities that you want somebody on point to build out – not just for themselves – but for the firm.
Productivity Practice #22: Reduce the “ROI deathmarch” process by piggy backing on other projects, using external benchmarks, etc.
This practice is about using ‘organizational judo’ to take the inertia from top-down initiatives, but also pick off a few other opportunities in the process. If there is an external regulation or other risk related event that is causing senior management concern to the point of a task force or initiative being kicked off, make sure to smartly latch on. A crisis is a terrible thing to waste. And even if there is no such event, consider aggregating not just your spend, but also the related improvement projects that might be languishing in the project portfolio without enough ROI individually (e.g., eInvoicing ROI is not built on laying off a few AP clerks). For example, ERP upgrades are a good vehicle for this if you can backward schedule the process to ‘sneak in’ some process and data reengineering as well. This lets you and IT get aligned on a joint business case.
Productivity Practice #23: Implement procurement as a managed PROCESS (e.g., supplier management) independent of whether the formal procurement organization resources execute the processes
This involves the democratization of procurement processes that follow procurement-led best practices, but also tap a broader resource pool than procurement. Just because a resource doesn’t report to procurement doesn’t mean it’s a ‘shadow’ organization. Take a cue from the Quality Function/Industry 20 years ago where corporate-led quality groups pivoted from doing quality improvement projects themselves, but rather focused on training up the rest of the organization to be able to implement quality improvement techniques themselves.
Productivity Practice #24: Use continuous improvement methodologies (and corporate resources) to 'lean out' your procurement processes
This may seem like a no-brainer, but many procurement organizations have not applied Lean/6 Sigma techniques to their procurement processes. For many organizations, these techniques are such a common language and approach (e.g., DMAIC process) and that internal stakeholders and suppliers alike are comfortable in using it to make improvements to reduce total costs and other business objectives. Also, there might even be some resources available to tap (or poach) from your corporate continuous improvement group. Bottom line: the approach will invariably improve your process efficiency, and most likely, if done right, effectiveness.
Productivity Practice #25: Simplify and automate (not just spreadsheets) how you track realized savings to the bottom line
One of the things that drains productivity is the care and feeding for performance measurement systems. For procurement, savings tracking is the biggest time sink here. Spreadsheets are the norm, but packaged systems and services can help, but at least work with finance to standardize the process. Regardless of approach, you need to find the right balance in terms of tracking realized savings vs. pursuing other savings opportunities. Also, you may want to consider using your lack of realized savings tracking capability to fund the development of such capabilities. In other words, finance is likely more frustrated with this problem than you, and can be an ally in working with you to obtain this capability.
Summary Conclusions and Recommendations
This research study certainly offers a robust list of potential productivity improvements, but it is by no means complete. For example, procurement professionals, like other employees, should consider the use of personal productivity tools and training. It can be something like from The Covey Institute, or it can focus on better utilizing business desktop applications, or it might focus on improving physical and cognitive health to improve workplace productivity. While not procurement specific per se, it’s important in a “stretch goal” environment and focuses not just on execution/alignment, but also growth/satisfaction and continuous improvement at both a personal level and a broader level. If you want to have spend/stakeholder influence, you also need to have personal influence, and have your act together. In other words, it makes you efficient and effective.
This last sentence is worth touching upon. Labor productivity tends to be the main measure of efficiency and the above punch list impacts both efficiency and effectiveness. It is important to realize that efficiency and effectiveness are not trade-offs. In fact, “efficiency funds effectiveness.” As you work to improve efficiency, you need to ensure that you are reinvesting some portion of those gains to improve effectiveness rather than just passing on the benefits to shareholders. Otherwise, you don't get stronger, you just get leaner. This is the same analogy as you should approach with your suppliers. You need healthy suppliers to create a healthy value chain, and similarly, you can't have a healthy set of internal procurement services if the focus is only on efficiency. So, hopefully you can use the punch list of 25 items to improve your own efficiency and effectiveness.