Spend Matters welcomes this guest post by Jim Kiser of GEP.
The simple dictionary explanation for functional blindness is the loss of vision related to conversion hysteria. Although the part of the definition can only speak to the loss of vision in comparison to management not following one, that part is consistent. I have heard at times through the years working within corporations, leaders bring up the topic of this issue of functional blindness, what they see it as and its effect on departments and management. From my discussions with leaders, it appears to be related to how a manager or group will continue to apply the same approach or reasoning to a business process or approach. Unfortunately, they cannot recognize that the same approach, while it produces the same results, does not account for developing a new level of performance and creative/innovative thinking which can lead an organization to higher levels of business optimization.
A strategic sourcing method when developed and implemented with the intent to drive true cost management and value improvement to an organization’s financials, helps initiate new perspectives in which departments can begin collaboratively to move beyond current sub-optimal processes and practices.
There are many areas of the strategic sourcing process that when employed can enable this move away from functional business blindness.
- Access, analysis and organize spend data. When departments follow the same coding and data management practices they lose insight to timely, accurate, complete and detailed spend data, which offers real-time intelligence on spending patterns, compliance, performance ratings, supplier management and parts management. This begins the process of “viewing” this critical information for identifying cost savings targets and developing sourcing, budgeting, planning and product strategies.
- Developing robust internal requirements and leveraging historical and current market intelligence.
When departments work together as teams to input the full scope of requirements from various sides of the company, the business reasoning for not only what is purposely needed from a specification becomes defined but all departments have a vested interest now in solving a collective goal that drives new ways of working and new behaviors. The use of good, clear market intelligence, both historical and current, as to how the market dynamics operate, provide management with a new perspective on how to develop a strategic category plan, identify suppliers and create a well-defined negotiation strategy based on market and spend complexity. This all leads toward new manners of business thinking and approaches.
- Implementing contract management and supplier management practices. The great part about strategic sourcing is that it is really both an art and a science. Developing a good clear performance contract is usually a departure from the standard contract processes and language companies tend to get comfortable using time and time again. Contracts can be constructed with many price, performance and robust business rules that open up the door to greater supplier management control and principled ways of working into the future. Suppliers, when driven toward new expectations and agreed levels of performance, bring optimal cost management, innovations and multiple levels of value creation.
Functional blindness in business is something that tends to develop overtime through unchecked and unchallenged routine approaches in which management justifies as “as long as it is not broke, don’t mess with it.” Something usually comes along to help jostle this stagnate mode of operation. Fortunately strategic sourcing is an area that provides elements within its various processes that give organizations a manner in which to curb and sidestep prolonged years of sub-optimal thinking, behaviors and practices leading to functional business blindness.
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