“Mirror-Mirror on the Wall …” Is Procurement Ready for It All?

Ashima

Ouch! Did I just play every CPO's worst nightmare?

Another post in a series of illustrated procurement perception stories comes to us from Ashima Malik, Principal, Sourcing & Procurement Practice, Infosys. 

Customer perception is a tricky yet crucial aspect of meeting and excelling vital business metrics. As we are moving from a traditional and reactive role to that of a business partner, procurement is expected to deliver. Business sees the procurement function as adding value, not just to the bottom line but towards innovation, effective collaboration with suppliers and risk management.

In my previous post, we made an important observation – indeed the Procurement function is being taken seriously. At the same time,  it has become apparent that we still need to work towards how the business at large perceives us. Last year, I met a CPO of a large Nordics Bank who was very concerned about the perceived image of his department and wanted to turn it around as part of a business transformation plan.

I believe it is important to corroborate the following for Procurement to get to that objective:

  • Align Procurement strategy to customer needs: I have seen Procurement setting conflicting and thus painful goals for itself. When business requires shifting the supply base in view of a new/developing product strategy, procurement is often seen trolling over archaic PSLs (Preferred Supplier Lists) to resist the change.
  • Read the pulse of the business through data within the process: The embedded intelligence within the business process should be able to guide you on supplier and category strategy. Data points like number of exception approvals to add new suppliers, non-compliance to contracts, one-time buys, are way too important to be ignored.
  • Simplify buying for business users: The bars for user buying experience have been raised by e-commerce and users actually expect an ‘amazon-like buying experience’ at work. This is ofcourse achievable thanks to array of e-marketplaces available across categories globally. However, it’s essential to maintain adequacy and relevance of content to encourage desired buying behavior. At the same time ensure the availability of guided-buying interface for exceptions and overall support.
  • Bring supplier relationship management above just a prescriptive engagement: As a basic rule of thumb, category manager’s should spend two-thirds of their time in engaging with suppliers, understanding their core competencies, challenges, business goals and objectives. The other aspect of supplier relationship management beyond time spent with suppliers is the quality of engagement. The current supplier relationship management is prescriptive in nature to work around the boxed SoWs, contracts, policies and procedures that we expect our suppliers to adhere to. The next generation of relationship management needs to be more collaborative, enabling supplier-led innovations.
  • Focus on the core categories and spend: In order to retain focus and effort on the strategic aspects and managing effective relationships, it’s important to offload tactical/non-core activities and spend. There are various approaches to design an 'outsource-able' framework. That could be:
    • Threshold-based: Identify and define the tail spend below a specified threshold. One common mistake companies make is defining a uniform threshold across regions and geographies
    • Sub-category/Commodity-based: The non-core sub-categories and commodities with low complexity and with standard/universal specifications can be offloaded to be managed by a partner.
    • Risk-driven: This shall constitute commodities with low spend/business impact and  low supply exposure.
  • Communicate clearly and often: Last but not the least, it’s important to stay connected with business at micro as well as macro level. Communicate about the function’s readiness to manage business and its relationships with suppliers and partners. And communicate about any changes or transformations that you are planning to implement to improve process, relationships and overall buying experience.

The above pointers could go a long way towards transforming the perception of Procurement in the eyes of its internal and external stakeholders. Procurement just needs to be ready for a real-life ‘truth or dare’ with the proverbial mirror of customer expectations.

 

Voices (4)

  1. Mandy Chippindale:

    Great article, with some really good points. My question is when do we stop doing out 12 month savings plans in our objective, after all we set the objectives. I have worked with some really innovative companies who still have savings as number one on the agenda, when much more value can be obtained by other means.

  2. Ashima Malik:

    Thank CK. I agree with your inputs.

  3. Ashima Malik:

    Thanks CK. Agree with your inputs.

  4. CK Vashistha:

    Catchy cartoon and apt message supporting it. Some thoughts stand out e.g. “category managers should spend 2/3rd time with suppliers” as they indicate on “how” along with “what”. However, addition of some other vital points could enrich your points further e.g. ” signing off common objectives, role of line of business and purchasing in a simple matrix and reviewing mutual performance facts relative to it”. Actions like this actually set the common baseline across all stakeholders and purchasing and ensure consistency in which stakeholders-purchasing-suppliers continue to produce value together. Keep writing as we love what you write.

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