Author Archives: Pierre Mitchell
Exploring A/P and Procurement Best Practices at P&G: Lesson 6 (Part 2)
For companies like P&G, GE, J&J, etc., there will always be a tension and trade-off between opportunities at the business unit level versus the corporate level. Functions like procurement will need to walk the fine line between both rather than swinging wildly from one to the other. Procurement must help the business units and functional partners get more value from their supplier spending individually, and also look for cross-BU opportunities not just by spend category, but also by risk type, opportunity type (e.g., supply chain financing), region, corporate-wide program, etc.
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Exploring A/P and Procurement Best Practices at P&G: Lesson 6 (Part 1)
Trade-offs exist everywhere, especially in regards to the trade-off of cash, cost, service and risk. “Service” is broadly defined, starting with the end customer and aligning back through internal stakeholders and back to suppliers. We discussed the cash versus cost trade-off above. But it could just as well be trading off raw material inventory levels (cash) vs. inventory (service) level performance vs. the cost of replenishment. Similarly, the trade-off could be between the relentless search for innovation and revenue traded off against the costs of creating that growth.
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PMOs Have Failed in IT: Should We Really Use Them in Procurement?
My colleague Jason Busch just penned a fine piece on PMOs in procurement, and since I have some experience in this area, I thought I would weigh in. Project Management Offices (PMOs) sound great theoretically: better project visibility, coordination, standardization, resource utilization, etc. to optimize all the project activity going on. Great, so, let’s learn about PMOs where they’re most implemented and then adopt those best practices: IT. One would think that in areas such as IT where PMO's have been implemented more than anywhere else, we could look there to understand the benefits.
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Extending Procurement Information Architecture to Provider Ecosystems (Part 1)
In our previous series on procurement services provision and information architectures (here,here, here, here, here, here and here) we discussed the importance of thoughtfully designing various architecture elements such as MDM, analytics, workflow, portal infrastructure, etc. to re-frame overall information capabilities beyond the traditional provider-led “module-menu” approach.
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Exploring A/P and Procurement Best Practices at P&G: Lesson 5
By the “hand of God,” I don’t mean soccer player Diego Maradona’s famous soccer goal but rather the ability to take invoices that might have otherwise been DOA (dead on arrival) in terms of capturing an early payment discount— and bringing them to life via a dynamic discount offer (i.e., “pay me now” – even past the early pay discount date) to the supplier. I saw P&G do a presentation a few years ago. This was something they wanted to implement more thoroughly, and I suspect that they might use one of their banking partners to help offer this (e.g., JP Morgan Chase is a good example of this with their Order-to-Pay service, acquired from Xign), but of course there are many other options from a landscape of providers.
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Exploring A/P and Procurement Best Practices at P&G: Lesson 4
Lesson Four here is that project participants must understand improvement objectives and how to handle trade-offs. So let’s assume you’ve seized a nice prize, and per the WSJ article, let’s say the prize for P&G is $2B in cash. The prize could be taken as freed cash (or to a supplier, an increase in cash held captive!) But it could also be taken as a cost reduction in the form of an early discount. So, we have the classic cash vs. cost trade-off (we’ll ignore the service aspect of on-time payments that AP is measured on). So, which is more important? In this case, it’s cash.
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Maverick Spend: 12 Ways to Fix Internal Non-Compliance Beyond “The Stick”
In part one of our maverick spending series, Maverick Spending is Your Friend: Don’t Chase It, Ride It, we highlighted that while maverick spending in its own right is generally bad, its root causes often highlight problems with the procurement System (with a big “S”) that, if fixed, improves not only maverick spending, but other areas of procurement performance. In this second part of our series, we will highlight some proven practices to improve maverick spending performance beyond merely chastising malfeasant requisitioners. Here they are: Include maverick spending as one of the top-level metrics in the procurement scorecard. It is especially [...]
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Exploring A/P and Procurement Best Practices at P&G: Lesson 3
The third lesson to remember is that the invisible hand needs to make invisible opportunity visible. Even when companies strive to simplify the value chain, there are still opportunities, albeit they tend to be hidden and difficult to find. P&G has employed many typical strategies for creating value in the P2P process, including an ERP backbone "wrapped" with appropriate best of breed solutions, a supplier portal strategy and others.
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Exploring A/P and Procurement Best Practices at P&G: Lesson 2
We all know the flip side of opportunity. Complexity is also a driver of risk. More “moving parts” imply a higher probability of things breaking down. This makes modeling and reducing/managing complexity a key competency to staying lean and aligned across the value chain.
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Exploring A/P and Procurement Best Practices at P&G: Lesson 1
In this ten-part series of procurement lessons from P&G, the first thing to keep in mind is that there is "no rest for the best." I have yet to meet a single “award winning” procurement organization that does everything well and has run out of opportunities to pursue. I always roll my eyes when companies want to find the ultimate world-class procurement organization to learn from. That’s impossible – it’s a search for a purple squirrel.
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Maverick Spending is Your Friend: Don’t Chase It, Ride It
I have always considered myself a bit of a maverick (even though the term was sullied by Sarah Palin). I mean, the main character in “Top Gun” was Lt. Pete Mitchell, and as such, friends and colleagues at some of my previous employers have given me this nickname. I don’t mind. I think we need mavericks. Mavericks are good. Mavericks shake up the system, and they point out where the system needs change and improvement. This could not be more apt than in procurement. The conventional procurement wisdom is that maverick spending is bad and that we need to shut [...]
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25 Procurement Productivity Improvements You Can Make Right Now (Part 2)
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 [...]
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25 Procurement Productivity Improvements You Can Make Right Now (Part 1)
In April 2013, Spend Matters conducted a research study (sponsored by Hubwoo) with ISM (The Institute for Supply Management) to focus on how to improve procurement productivity. Even though procurement has a >10X ROI as a function, it is still under the same pressure as other functions to improve productivity, especially since they’re typically asked to do even more (beyond spend savings) with less. So, we came up with a punch list of 25 things that procurement organizations could do to free themselves up from the tactical and focus on the strategic. We used a web-based survey for the study. [...]
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Hackett’s P2P Performance Study: The Best Freemium P2P Benchmark in the World
My alma mater, The Hackett Group, has launched their bi-annual Purchase-to-Pay benchmark study. Unlike other free “benchmark studies” in the market which are 20-30 minute survey polls with sketchy data quality, the Hackett P2P benchmark study is in fact a “freemium” version of its full P2P process benchmark that uses the same general methodology as the flagship Hackett procurement functional benchmark that generates the venerable Hackett “world class” benchmarks, except that in this case it’s a “top performer” peer group that is essentially world class for just P2P performance. What this means is that you get: A true apples-to-apples comparison [...]
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SAP Sapphire: Moving to Frictionless AND Sticky Commerce
This year’s Sapphire conference has been extremely interesting, not to mention big, with 80,000 users attending on-premise or virtually! It’s been a while since I was at Sapphire, and this year, they co-located the ASUG (user group organization) conference. This is good news for practitioners, and personally, I feel that last week’s Ariba LIVE should be similarly co-located next year (i.e., a ‘conference within a conference’ type thing) both to preserve its value and to be kind to the limited travel time and budget of procurement practitioners. If there was one theme to the event, it’s “all about the network.” [...]
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Commodity Price Management at BorgWarner
Part 2: Going Deep in Profit Risk Mitigation and Improvement In Part 1 of this post, we introduced the general concept surrounding commodity purchase price risk management. Today, we’ll dive into some of the implementation details that are key to practitioners to building out this capability – not just for high-impact benefits, but also for elevating procurement’s role to steward strategic supply planning into the overall business planning process. In a Supply Chain Management Review article I penned last year, I talked about some research I had done regarding the integration (or lack thereof) of input cost planning and forecasting to the business plan [...]
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- PMOs Have Failed in IT: Should We Really Use Them in Procurement? : Ramesh said: The business world is aggressively reeling under outsourcing wheel than ever before. Hence... more
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Services Procurement Innovation
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