Over the past several months, Ardent Partners and IBM have worked to bring together several best-in-class chief procurement officers around specific themes with the express aim of garnering the best ideas, strategies, and practices that these industry-renowned experts use to drive top-flight results at their respective enterprises. Each roundtable is recorded and provided as a podcast for listeners to take advantage of the insights they might have missed. Our first, delivered last fall focused on collaboration strategies that CPOs could use to drive value and influence. This first recording can be accessed by clicking here.
This second installment, titled “Procurement Strategies and Best Practices to Increase Business Value in 2015 and Beyond,” (click to listen, no registration) focused on how procurement teams can link their operations to broader enterprise goals. This is a critical consideration for the modern procurement organization, particularly as this function takes on more strategic importance. In particular, this attitude becomes critical in order for procurement to handle the market forces that put pressure on the function to perform.
The panelists for our latest roundtable were Chris Shanahan, vice president of procurement and Becton, Dickinson, and Company, who has been responsible for global procurement operations since 2005; Bill McNally, assistant administrator for procurement and deputy chief acquisition officer at NASA, who directs procurement across the entire space agency; and, lastly, Dan Carrell, vice president of integrated supply chain, global operations, and client service procurement at IBM, who manages contracts across the company totaling $20 billion of spend.
The Pressures of Procurement High-Performers
In many regards, the procurement function is universal. Most Chief Procurement Officers around the globe manage similar processes, share similar goals and challenges, and leverage similar tools and strategies to drive value. This holds true with goals and objectives. It also holds true with business pressures faced by CPOs. What is often unique are the strategies and approaches these different CPOs take.
By and large, the biggest pressures facing the CPOs in this roundtable are (1) driving more cost savings to the business and (2) risk management compliance. IBM’s Dan Carrell says that his team is constantly on the lookout for ways to deliver more savings in order to help with IBM’s profitability. For that matter, Carrell has a complicated dance with managing risk for a global organization that works with a large, diversified set of suppliers located all over the world. IBM’s procurement team in general, and Carrell in particular, must constantly pay attention to the supplier base and all the risk that accompanies that.
Bill McNally tells us his biggest concern at NASA is taking cost out of the contracting process. Roughly 80% of NASA’s budget goes into supplier contracts, so McNally looks for ways to limit spending on the process of getting contracts into the pipeline. Much of this, McNally says, comes from looking at the procurement process itself in order to identify efficiencies in the overall workflow. The end result of this work, which includes improving and streamlining negotiations, is that NASA has more money to invest in the advanced and frequently, high-risk missions that are part of the space agency’s mandate. This is all done while also trying to reduce the risk of missions through the procurement actions his department takes.
Becton, Dickinson’s Shananan shares the same cost savings and risk management pressures as the other panelists, with some differences. Right now, Chris Shanahan is working to integrate Becton, Dickinson’s systems with those of CareFusion, a recent acquisition. He and his team are currently working to ensure that they can meet the goals of the new integrated company. Shanahan, like McNally and Carrell, also spends significant time and energy focused on risk and risk mitigation in the overall procurement operation and supply base. Shanahan is also focused on developing a user-friendly procure-to-pay process that can be rolled out on a global basis and make managing many procurement relationships easier. As part of integrating CareFusion into the parent company, Shanahan is also examining the unique needs of both businesses and refining the procurement function so that it will be able to best serve the combined company.
The average procurement department has undergone many changes over the past 15 years. It has evolved from a back-office team focused mainly on order-taking in the early days, into a team that can offer strategic value to the topline revenue of even the largest organizations. Carrell, Shanahan, and McNally combined oversee $75 billion worth of spend, with more than 4,500 procurement professionals reporting to them in some capacity. And yet, the pressures that they face: risk management, driving cost savings, and simplifying processes, are much the same as those in any sized organization.