Spend Matters welcomes a guest post from Art van Bodegraven.
Fans of the innocent earlier days of popular music might remember the monster hit “Joy to the World,”by Three Dog Night. But an earlier Jeremiah was a prophet in the Kingdom of Judah, the "weeping prophet" who urged reform and repentance. He is recognized in Judaism, Islam, Christianity and Baha'i. Some think that I might be modeling Jeremiah, but my own views are not quite as pessimistic.
Tilting At The Windmill du jour
As we navigate the tortuous pathways of contemporary sourcing and procurement, hands, tendrils and teeth reach out for us, much like the underwater creatures who sought to ensnare Harry Potter. One hand that might be judged as either harming or helping belongs to the corporate legal function. Sometimes the appendage is a talon that captures and cuts; sometimes a pull toward safety and away from disaster.
Finding a positive balance in the relationship between legal and sourcing/procurement functions can be challenging. On one hand, we are charged with finding reliable, sustainable, high-quality, cost/value-effective and easy-to-work-with sources, suppliers, providers, manufacturers and distributors of products, components, materials, technology, software, consulting, project solutions, paper clips and other elements that make our businesses possible - and profitable.
On the other hand, we must accomplish our mission in ways that do not jeopardize the enterprise in any way, or leave it open to failure, litigation, business interruption or scandal. And, here is where legal peeks over our transom to - legitimately - make sure we are playing by the right rules.
Lawyers Run Amok
Shakespeare famously said, "First, let's kill all the lawyers.” Personally, I'd rather start with the accountants, but that is a tale for another day.
In some organizations, the legal function has taken control of, or exercises, universal veto power over contracts, agreements, RFX content and foundational qualifications for any provider of goods or services to the enterprise. In the immediate environment, the consequences might include: fights to the death between the supply chain or procurement functions and legal over all issues, both trivial and game-changing, delay, wasted energy, diminished attention to the really important issues and the unnecessary involvement of senior leadership in schoolyard brawls.
In others, legal is a trusted and valued ally in crafting appropriate contracts with prudent corporate safeguards in place. To be blunt, it is procurement's responsibility to: 1) take the lead in building productive collaborative relationships with legal; and 2) build, acquire and demonstrate capability in the fundamentals of contracting and provider management.
First Steps In Solving The Riddle
Here are some questions to ask, if you lead the sourcing and procurement functions in your organization. Your answers may lead to a revelation of what you might consider next.
Are there clear thresholds and classifications that define when and how to use RFPs, RFIs, RFQs and other instruments? Have these been defined by you or by legal (or another function)?
Does legal hold sway over all budding and contracting processes? Does this delay or confuse selection and award processes and timelines?
Do you use one contract template, with universal language, to control all goods and services provisions? Does this cause confusion, in holding HR consultants to the same bonding, licensure and insurance provisions as those who child nuclear power operations?
Is legal attempting to guard against all risks of all types and all sizes in all contracts? Does legal work with you to tailor individual contracts to manage reasonable risk in the activity, material, product or service involved - and does that process include definition of a specific supplier's profile and history?
Do you find it difficult to find DBEs willing to bid in your environment? Are you falling short of DBE contracting goals?
Are your "requirements" eliminating DBEs from the acceptable bidding pool? Do they also discourage all but the largest providers from proposing services or providing goods and materials?
Do your internal customers' traditions and preferences along with legal's demands erect barriers to entry for smaller, less traditional and possibly disadvantaged enterprises from working effectively with you? Are you actively collaborating with internal customers to open avenues to new thinking, new business models among suppliers and initiating conversations with potential DBE suppliers?
Does Legal have the ear of senior leadership in tilting the playing field to larger household names in solutions provision? What are you doing to establish SCM or procurement as valued internal partners, with a clear understanding of, and linkage with, enterprise performance objectives?
Has your working relationship with legal impacted your internal interactions with other functions, e.g., HR, IT, real estate, field operations, manufacturing, finance & accounting? What have you done to mitigate these impacts? What have you done to build close working relationships, in general, with peer functions and internal customers?
How have you categorized and classified the goods, services and suppliers that make your business operate? Do you distinguish among levels of business criticality, product complexity, corporate mission impacts and the like?
How do you manage supplier/provider performance - to contract, on specific goods or services - to both achieve performance targets and to demonstrate capability to your peers and superiors? How do you publicize the results of these efforts?
The Never-Ending Quest
The question and answer drill can go on and on. At core, though, is a frightening reality. How well you partner with peers, such as legal and others, will, to an extent, not always understood, define how successfully your end-to-end supply chain operates.
With legal as a permanent adversary, you are guaranteed to lose. With legal as a flexible and knowledgeable ally, you have a better than even fighting chance at supply chain success.
Wars have losers; we all know that. But, it is not important that you might win and legal (or other function) loses. In war, even the victor loses. Loses support, loses resources, loses credibility, loses focus - all very real possibilities with very real consequences.
Perhaps in a geopolitical arena, wars are sometimes necessary and unavoidable. In our world of integrated supply chain management, peace, teamwork and collaboration can make winners of us all - our function, our supply chain, our peers, our customers (both internal and external) and our supplier/provider bases.
And then, we will not have to face the specter of Nebuchadnezzar beating our brains out and throwing us in jail.