As a result, we chatted how Procurement professionals can become more strategic contributors to the business, where they should focus for quick wins and how they can “upskill” in today’s challenging environment.
Q: You’ve commented in the past, ‘the best category managers are always challenging the status quo.’ Can you explain and what you mean by that?
A: “Doing what you have always done” will continue to deliver the same or worse results over time. Covid-19 has highlighted this on so many levels in terms of process, data, people and technology; companies are looking for ways to drive out costs while maximizing top line growth.
Strong category leaders are attuned to what is going on in the marketplace, at their competition and opportunities to bring in best practices through their supply base. Often times, suppliers see across the entire value chain of a business in ways that those “sitting on the inside” are unable to see; listening to your suppliers and those who are truly advocates for category excellence can be a real game changer.
Each and every category leader should know how the business is operating and how their category is utilized across the company, which includes listening to suppliers on what is possible to increase productivity, improve compliance, drive out costs and leverage technology.
The phrase, “we can’t keep doing things the same way if we want a different result,” applies to category leaders and companies alike. Category leaders must look outside the four walls of their company to enable innovation and disruption that is necessary in today’s business world.
Seeing how other companies and industries are managing categories proactively vs. reactively is critical to bringing best practices to their business.
Q: How does a Procurement professional transform his/her mindset from that of one-time savings to that of Total Cost of Ownership (TCO)?
A: Well, this one boils down to common sense, which unfortunately is not so common!
Procurement departments must start calculating P&L impact vs. traditional competitive bidding or contract negotiation savings. In my 20 years, this is probably one of the slowest needles to move. The old way of only capturing the first year of savings only with no future savings associated with that contract or negotiation, is not representative of the actual P&L impact.
As both an experienced entrepreneur and a long-time corporate employee, P&L matters as the profitability of the business either drives thriving, surviving or dying.
Data and real time invoice audits that tie directly to contract compliance validates savings real time, while enables future year over year savings to be measured and tracked. TCO is where every Procurement professional and department must move to accurately capture immediate and future savings.
Another key opportunity is for Procurement to work more closely with Finance having a direct connection of savings validation to P&L.
Q: What are some of the internal headwinds facing Procurement professionals today? And what’s your advice on how to deal with them?
A: Procurement professionals have always had a unique lens into their company’s value chain. And with Covid-19 today, that lens has become even more powerful and insightful with executives asking Procurement where and how the company can save money.
The top three headwinds facing Procurement professionals are as follows and my thoughts on how to “deal” with them:
Q: Why do you believe “tail spend” and/or “nuisance” categories are areas for quick wins?
A: Tail spend and “nuisance expense” categories have historically been viewed as “non-sourceable” or “low risk” in the grand scheme of the hundreds or billions of dollars in company supplier spend.
Companies have operated in generally the same manner for years and addressing these spend areas are typically low on the priority list. With that said, there is GOLD to be found in consolidating tail spend suppliers and leveraging experts to proactively manage complex nuisance spend categories.
When the suppliers in these categories are not actively managed and the invoices/contracts not audited regularly, the suppliers in more cases than could be over invoicing for years.
Q: And finally, there are so many Procurement resources, communities etc. where Procurement professionals can learn and hone their knowledge, what are some that you recommend?
A: Great question! There are so many and having a general business acumen is key for Procurement professionals to “see the forest through the trees,” so I will include a few of my favorites for procurement, supply chain and general business.
- Procurement Foundry: a growing community of procurement professionals who openly share ideas, best practices and host events specific to categories
- Art of Procurement: great community and resources available for download as well as a semi-monthly podcast
- State of Flux: excellent benchmarking and process excellence intelligence
- Supply and Demand Chain Executive: well-known industry publication with both an online and offline presence featuring industry news and opinion
- Inside Supply Management: the first and largest not-for-profit professional supply management organization worldwide with 50,000 members across 100 countries
- All Things Supply Chain: industry blog featuring all types of content, refreshed on a regular basis