SCAN and CLAN – technology’s impact on procurement organisational approaches

We wrote last week about the CLAN and SCAN organisational approaches / strategies. The concept of CLAN is a small centre, keeping strategic control of the procurement function without having direct line management. The question is whether you need to exert line management authority in order to ensure your procurement strategy is implemented properly across the organisation? As CPO, do you need to have the power of the annual appraisal and pay award in order to get procurement people working as you want them to?

I had my doubts – hence the SCAN concept which I 'invented'.  But actually, I now believe that technology has changed the picture significantly.  So now, as the CPO, I can more easily exert strategic control without worrying about reporting lines, particularly if I have all or most of the following;

  • Regular data so I know what is being spent, where, by whom, with which suppliers through strong spend analytics processes
  • A single view of vendor master data, fed by common supplier information processes for all my major suppliers globally
  • Spend data to aggregate and leverage, use collaborative tools (panel scoring of bids etc) across the dispersed team and run major sourcing events (where appropriate) with multiple internal participants
  • An organisation wide sourcing process, supported by technology that provides an audit trail of how the process has been followed
  • A ‘no PO, no payment’ philosophy across the organisation, and I can see every requisition and purchase order being placed across the organisation, and have sign-off on the largest
  • Regular automated reports of orders and spend against our database of existing contracts and approved suppliers
  • An organisation-wide contract / supplier management process, including SRM (supplier relationship management) for my critical suppliers, with standardised repotting of KPIs and similar
  • A performance management process that measures real savings and the drivers of savings / cost changes by category…

This is an exaggerated and idealized picture of course; but all these elements are very possible now. They weren’t going back 10 years or so – or at least not without huge cost and difficulty. However, there is a paradox here. We’re suggesting that ‘control’ can be exerted through common use of processes and technology, without direct reporting lines. But of course getting that use of common systems and processes is not easy without having the direct control to ensure everyone implement them!  So we shouldn’t under-estimate the difficulty of getting to this point.

But having said that, there seems little doubt that a CPO sitting in London, Chicago, JoBurg or Munich can direct and manage a dispersed function – whatever the reporting lines – better than ever before through appropriate use of technology. (And even at a local level, the same applies to a head of function in any sized organisation who is perhaps looking to ‘control’ internal stakeholders who don’t report directly to procurement).

So has technology swung the pendulum back towards CLAN rather than SCAN? I hate to admit it, and despite the fact that Dick Russill invented CLAN when most of this technology was just a gleam in a teenage Jason Busch's eye...but I think it has.

Ironically, my feeling is that many organisations have been tightening up direct line control in recent years (towards SCAN rather than CLAN); perhaps in a response to challenging economic circumstances and a higher awareness of supply chain risk. But technology certainly gives organisations the opportunity now to combine local (apparent) ownership of the procurement team, which has some benefits, with real central control over the key levers of procurement power, strategy and process.

But next week we will sound one cautionary note….

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