A New Approach to Scenario Planning: Procurement Strategy Design
Categories: Procurement Commentary, Procurement Strategy & Planning | Tags: L1, Process and Best Practice
If you’re interested in exploring the basics on the application of scenario planning to procurement, see How to Build Procurement Scenarios. For those whose interest I’ve piqued on the topic, I would encourage you think about how scenarios might apply to your organization to help plan, design, and invest for the future. The usage of scenarios in procurement planning efforts is almost limitless. Besides planning technology, systems, and architecture strategy, procurement and supply chain teams can use scenario planning to make better long-term planning decisions for the function and the business. These can include the following themes:
- The role of and charter procurement (e.g., savings vs. innovation)
- Procurement/Finance structural & reporting design and collaboration
- Engineering/R&D and procurement structure and support
- Geographic investments and exits
- Overall compliance or compliance specific initiatives.
- Supplier development and investment
- Strategic orientation and approach (e.g., split of
business vs. supplier consolidation / rationalization)
- Supplier risk and supply chain risk (overall or individual areas)
- Intersection of procurement with other corporate initiatives
- Cost savings vs. cost avoidance
Exploring Five Scenarios for Procurement Technology Architecture and Investment at a Large Multinational in 2018
The graphic above shows a rudimentary list of five different scenario building blocks for procurement technology architecture at a company in 2018. Note, these scenarios are clearly not mutually exclusive, but hold that thought for a minute. Let’s first explore these scenarios in a high level:
A: “Systems Go”
Clear focus and success creating both compliance centric and strategic systems “that hum” based on company needs; usability at the forefront to drive 100% adoption of an “operating system for procurement
B: “Platform Centric”
Traditional investments put on the back burner in favor of those that deliver robust market insight and intelligence at multiple tiers of the supply chain; ERP and P2P kept on life support only
Disparities drive internal autonomy; individual P&Ls drive stealth efforts; centralized procurement and IT tacitly let business units compete investments and ideas to see “what sticks”
D: “Muddling Through”
Struggle; alternating influence as ERP and other investments drag and go over budget; delayed upgrade cycles continue to freeze significant investments in end-to-end solutions and encourage one-off, ad-hoc tool selection and use
E: “Beating Company X”
Centralized rivalry for supply chain dominance based on systems/process leadership leads to specific investments (e.g., creation of new “trading groups,” investment in commodity management technology, locking up capacity at lower levels of the supply chain, etc.)
In a scenario planning exercise, I would divide different members of the procurement organization – and ideally IT and finance in this case – into teams to defend each scenario, as outlined above (albeit with significantly more detail behind each). This would include constructing specific “events’ to show how a scenario unfolded.
Telling the Story: Tracing the Evolution of Scenarios Through “Events”
In the above diagram, individual milestones or events contribute to the overall “story” of how each scenario unfolded. Note the example event as a “fork in the road” that could lead to a specific scenario unfolding.
Stay tuned as we continue our exploration of how to apply scenario planning to procurement. I’d also like to thank my colleague and friend, Art Hutchinson for many lessons and collaborations over the years in the scenario planning area.