The value driven by the average sourcing team over the last decade has, in many cases, been significant and transformative. But, competitive forces at play in a rapidly changing business environment require that many tried and true strategies must be enhanced if they are to retain their impact. Here are a few ways to unlock more value.
Improved Internal Collaboration
When sourcing and procurement professionals participate in the staff meetings and planning sessions of different business units or become active participants in the budgeting process, they begin to better understand the objectives and priorities of the business and how the business rewards its staff. Sourcing professionals with that level of access are able to develop a much better understanding of the business’ needs and execute plans that support them.
At a minimum, increased access and superior interaction provides greater lead times to react to business needs which should ultimately aid team performance. Integration with the business also increases the likelihood of formal and proactive engagement with business teams and an opportunity to place more spend under management and more spend into a formal sourcing process. Working side-by-side with the business professionals on key operational projects has the added benefit of improving the credibility and general standing of the procurement department.
Category Strategies
Sourcing/procurement/SRM teams in collaboration with the business stakeholders should develop strategies that define how the different spend categories should be managed to the benefit of the enterprise. The strategies should be based on a series of factors that include:
- How the category is used
- Where and by whom the category is used
- The amount of category spend
- How the category is procured, used, and/or managed
- The category’s level of strategic or operational importance
- Supply market characteristics (type and location of suppliers, etc.)
- Category characteristics (size, on-hand inventory requirements, etc.)
- The type of contract and supplier relationship desired
As the percentage of spend under management and thereby the number of managed categories increases, sourcing teams should increasingly seek out their business counterparts to help them understand the key aspects of certain categories and develop category strategies. Since no sourcing team can have expertise in every category of enterprise spend, collaboration with the business is needed to drive greater value.
The Compliance Dividend
Superior collaboration with key stakeholders throughout the sourcing process can also translate into improved contract compliance upon implementation. Early and consistent “buy-in” is more likely when the voice of the business “customer” is incorporated in the award decision.
Supplier Collaboration and Innovation
If procurement leaders believe that innovation can occur beyond the walls of their enterprise, suppliers should be viewed as a source of knowledge and expertise that can be leveraged to competitive advantage and mutual gain. Changing the construct of the traditional buyer-supplier relationship and working to build more collaborative relationships with key suppliers takes a commitment of time and resources from both sides and a deliberate effort to reframe or overhaul old views. One of the challenges in developing stronger ties with current suppliers is that the aftermath of a lengthy and protracted contract negotiation can be a difficult time to begin building a relationship that must be built on communication and trust if it is to flourish. Nonetheless, enterprises that have begun to pursue this collaborative approach are already reporting that they are finding more supplier improvement and innovation opportunities and that their suppliers are more likely to invest in the relationship. These early indications signal larger opportunities ahead as more enterprises begin to adopt collaborative sourcing strategies.
Technology Suites (In a Chief Procurement Officer’s Own Words)
“There is no doubt that conducting strategic sourcing activities in a global economy requires the use of a robust technology suite. At our bank, full utilization a new technology suite has allowed us to reduce internal cycle times, enhance relationships with internal customers and suppliers, and ultimately drive improved accountability and performance (savings and compliance). Prior to this deployment, every phase of the sourcing process was manual. Contracts were housed in filing cabinets, internal customers had to read through binders of information and communication with the supplier was slow and often redundant.
Soon after, cycle times improved by 20%, compliance benefits were realized and the ability to have all the data in one place (spend, RFP, contract) provided unanticipated benefits: a recognized internal brand and improved partnership with our suppliers. The sustained accountability and transparency for both our internal and external partners has significantly improved through the full use of the platform. As we look into the future, this platform will enable the implementation of a sustainable Spend Management model with full transparency to all stakeholders.” – SVP, Corporate Procurement (“CPO”) , Financial Services Industry.
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