Exploring A/P and Procurement Best Practices at P&G: Lesson 9

Lesson #9: Use the Right Techniques and Tools to Make Trade-Offs and Optimize Value

Collaborative sourcing tools are key in maximizing value based on diverse stakeholder needs. P&G is certainly familiar with this approach through their experience with epic combinatorial bidding projects (e.g., in truckload bidding with CombineNet). This is true for any type of spending and even for procurement’s own spend for technology and services – as I wrote about in “Winner Take All” is a Losing Strategy for Sourcing Procurement Solutions. However, it also includes things like the following:

  • Using project portfolio optimization to deliberately bundle and sequence individual improvement projects so that individual project teams are not working at cross-purposes.
  • Balancing insight vs. effort for benchmarking, compliance tracking or opportunity identification efforts. Much of this is also ultimately arbitrated based on the opportunity cost of people’s time. This applies to setting procurement involvement approval levels, sourcing categories to attack in sourcing waves, etc. as well.
  • Picking KPIs and setting targets that are “SMART.” This includes aligning procurement metrics to stakeholder metrics, whether as part of a procurement performance management process or an enterprise performance management (EPM) process such as “hoshin planning.” Bob Rudzki does a good job explaining how to link procurement activities to ROIC and EPS in this paper.
  • Creating a transformation toolbox that combines the best of various methodologies (e.g., n-step sourcing, Lean, Six Sigma, SRM, CRM, structured ideation), instead of different groups speaking different “improvement languages.” For example, sustainability efforts themselves feature the “triple bottom line” benefit, but they should also work with other programs.

This post is based on content contained within the following Spend Matters paper: P&G: A Case Study of Supply Management’s “Non-Invisible Hand” in 10 Easy Lessons. The paper is free to download in the Spend Matters Research Library.

See also:

Lesson #1 – No Rest For the Best

Lesson #2 – More Complexity Means More Rocks for the Invisible Hand to Look Under

Lesson #3 – The Invisible Hand Needs to Make Invisible Opportunities Visible

Lesson #4 – Project Participants Must Understand Improvement Objectives and How to Handle Trade-offs

Lesson #5 – The ‘Hand of God’ - Invoice Discounts Can Be Resurrected From the Dead

Lesson #6: Reduce Trade-offs Altogether (Part 1)

Lesson #6: Reduce Trade-offs Altogether (Part 2)

Lesson #7: The Hand Must Be a Helping Hand (Not Brass Knuckles)

Lesson #8: Whoever Has the Best ‘Hand’ Wins

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