Procurement used to be supply assurance and cost reduction; period! Not any more…

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I have for some time been thinking about technology and its impact on the CPO’s agenda; and it is becoming increasingly important for CPOs and other CXOs to recognise and contemplate how technologies can be deployed in today’s business operating environment. From my perspective this is possibly the biggest challenge for most CPOs.

The issues of procurement analytics has been covered in some depth in two of Optimum’s whitepapers “Better Buying Decisions: The Advent of Analytics-Driven Procurement” and “A Practical Guide to Procurement Analytics”. A mind-set exists, which portends that supply management professionals are somehow less credible than other functions; and suffice it to say it is often articulated as their inability to support business cases with reliable, data supported solutions.

Consequently their involvement in decision making comes later in the process and budgeting becomes a guessing game, with little input solicited from or provided by supply managers. Whether this is due to a lack of data or to procurement’s inability to anticipate and collate useful data required is a moot point; this disconnect needs to be remedied as it creates unnecessary problems for businesses.  My overriding feeling is that this anxiety is unnecessary because there is a solution at hand and this is why technology and data are becoming such big issues for those who lead the modern enterprise.

Possibly the distinguishing aspect of good data is the power it delivers to creatively deploy it to envisage what is actually going on.  This can help businesses decide how to assign attention effectively in the contemporary corporate world.  All CXOs have too little time in the day and too many complex issues vying for their attention.

The central tenet of data capture is to render its acquisition as simple as possible; and perhaps most importantly, to ensure that the right data is collected. We must ensure that we are plugged into the key data streams and performance indicators, which are critical to the business.

Let’s now turn to this issue in a way which will enable us to unpack the problems and move to a successful strategy to overcome the scepticism I have touched on above.

So to get past the sceptics and get a good night’s sleep we must, as a function, recognise that analytics is the key to a value adding procurement organisation; and what does this entail:

  • We need good data;
  • We need people who can interpret this data;
  • We must become skilled at asking the right questions of our data;
  • We must eliminate the notion of guess work and ‘gut feeling’;
  • We must become more proficient at understanding and engaging

a) The Supply Base

b) Our internal Stakeholders

In order that we introduce this sophisticated and ambitious mind-set and ensure its continuity here are six suggestions regarding what supply management must address in to the bargain:

We must develop a system of intelligent cost reduction strategies.

  • Focus on total cost and not just the price of the good or service.
  • Create opportunities by using analytics to uncover erstwhile hidden prospects
  • Establish and deploy metrics across the organisation to drive your supply-cost innovations

We must develop a risk conscious mind-set and focus on compliance

  • Make your contracts and supply management processes work for you
  • Develop a holistic risk management programme and embed it in your S2P process
  • Deploy an intelligent system which will give you flexibility and agility so that you can identify risks early and you prioritise them

We must maximise our value to the business via better use of technology

  •  Use technologies as an enabler in our strategic supplier relationships
  • Invest in new technologies which facilitate end-to-end transparency
  • Develop a data driven capability with robust analytics at the heart of decision your making

We must become the go-to-guys

  • Be explicitly aligned to the goals of the business
  • Become a significant part of the budgetary process
  • Become fluent in the language of commerce, finance and analytics

We must develop a talent strategy

  • Recruit a team which is explicitly focused on their value to the enterprise
  • Develop a bimodal capability amongst your team

We must stay ahead of the curve

  • The best are developing collaborative relationships
  • The best are using date to create fact-based outcomes
  • The best not waiting around to see what the rest are doing

To conclude this, my 100th LinkedIn Pulse blog post, I would like to proffer the following:

“Procurement was about supply assurance and cost reduction;
today it is about managing data and Financial Supply Chain!”

 

Gerard Chick is chief knowledge officer at Optimum Procurement  Group. His new book, ‘The Procurement Value Proposition: The Rise Of Supply Management’ is available from Kogan Page: http://www.koganpage.com/product/the-procurement-value-proposition-9780749471194. Enter this discount code and receive 20% off with a special PASA offer: PASA2016

 

PASA has declared 2016 to be ‘The Year of Entrepreneurial Procurement’. Read more here: http://www.pasaconnect.com/2016/01/2016-the-year-of-entrepreneurial-procurement/ 

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Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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