Twelve Days of Christmas: A Procurement Best Practices Wish List (Day Two)

- December 20, 2013 9:39 AM
Categories: Procurement Commentary | Tags: ,

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On the second day of Christmas, my CIO gave to me…

A willingness to partner with me in procurement to help me help the business – and help IT.  Seems like a no-brainer, right? Value chains are increasingly dependent on – and create – information supply chains. And, as the extended physical value chains and their information supply chains are becoming virtualized and externalized, it would seem that IT and procurement would be both strongly resourced and integrated with each to support such a strategic capability, right? Anyone? Bueller? Bueller? Yes, it’s an area with lots of improvement opportunities, and often, it’s a downright dysfunctional one.

So, here’s our wish list:

  • A decent operating model regarding how procurement technology is purchased. If I’m going to be “taxed” with internal IT services, I want some say in how IT is provisioned to me vs. third parties – and I also want to have some choice in my ability to choose solution approaches and providers that best fit my goals to deliver business value through better supply performance. I discussed this in my Procurement Bill of Rights series.
  • A recognition that our individual metrics are different and that we have to get aligned. As with all categories, certain KPIs (e.g., SLAs) might be relevant for measuring performance and others will not be. There is nothing uniquely special about a vendor management office (VMO) in IT managing supplier performance vs. other parts of the business engaging with vendors on the same level. What is more important is realizing that we are both internal buyers and sellers to each other and must make sure that the “balance of trade” is healthy and that we’re helping to hit each other’s metrics. This can be in joint projects (e.g., implement an ERP upgrade for better procurement process and data quality outcomes rather than just install it until the next upgrade comes around). And maybe we can actually help each other. Maybe we can both work to improve data standards and improve the master data management (MDM) systems that can help implement them. And maybe we can even have a basic buddy system between my senior-most, IT-responsible procurement manager and the senior-most, supply-responsible IT manager?
  • An acceptance of the fact that I need more than a single application to support my broad swath of supply information management and supply intelligence requirements. Those requirements sit in a massive market basket that inherently can’t be supported well via a single vendor. Applying a “winner-take-all” sourcing approach is no less than a complete abandonment of strategic sourcing principles and practices. For more on this, see: “Winner Take All” is a Losing Strategy for Sourcing Procurement Solutions.
  • A set of architectural standards about IT “assets” that must be considered. I put quotation marks only because another word could easily be “constraints.” For example, is an Enterprise Data Warehouse an asset or a constraint? Sometimes the answer is both. If an IT architecture person even exists in IT, he/she must help procurement work within that context. It’s like a supplier negotiation. Start with individual objectives, find common ground, and then get creative when there are trade-offs. And like in collaborative sourcing, put a cost to those constraints and trade-offs to make a smart decision. Companies who take a “module menu mania” approach to breaking up their procurement information architecture often end up standing up lots of cloud-based applications with overlapping master data models that must then be integrated. By focusing on a “PIA” earlier, much of this can be avoided. For more information on this topic, click on the link above to read our PIA series on Spend Matters PRO.

The ability to get this architecture right is key to allowing much more of a “mix and match” approach that creates competition and innovation in the market – especially in advance of this approach that is coming in future procurement platforms offered as a service (not just applications). We’ll ask for this Procurement Platform as a Service (Procurement PaaS) in our next holiday wish list. In the meantime, I raise a holiday toast to procurement and IT leadership joining forces in a magical ‘round the world journey to deliver gifts to the rest of the business.

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