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June 14, 2019

Here's a look at where Source One's cost reduction experts have been featured this week!

New Whitepaper:
Building an Effective Procurement Organization: Part 4 (Tools)
Procurement groups the world over are eager to realize a digital transformation. So eager, in fact, that many organizations jump into initiatives without the necessary due diligence. Introducing a Procurement solution isn't as simple as making a selection or carrying out an implementation. It's a multi-step strategic process that requires careful planning and dedication. Source One offers tips for each step in this process in the latest installment of Building and Effective Procurement Organization, Download it today.

New Blogs:
Training and Developing Procurement Professionals
Samantha Hoy, Future of Sourcing, 6/11/2019
Even the most tech-empowered companies out there can't get by without a team of dedicated, effective people. Unfortunately, traditional methods of training aren't always sufficient to meet Procurement's evolving needs. Hoy shares tips for building training programs that will not only serve the function's present day needs, but also adapt with time.

In Spite of Ourselves: Procurement's Curious Contradictory Behavior
Anthony Mignona, Sourcing Innovation, 6/10/2019
Using the most recent Deloitte CPO survey as a jumping off point, Mignona examines a number of strange contradictions. The survey results suggest that Procurement considers talent and technology to be major priorities. They are not, however, committed to investing in them or taking any real strategic action. Mignona suggests it's time for the function to begin walking the walk instead of simply paying lip service to its priorities.

How to Build an Effective Procurement Training Program
Megan Connell, Thomasnet, 6/11/2019
Senior Consultant Megan Connell offers a wealth of tips and insights for refining Procurement's approach to talent development. The key, she suggests, is to establish a consistent program that's nevertheless capable of adapting alongside Procurement. She expects the function will look much different even a few years from now. That's why it's so important for training programs to remain malleable.

3 Ways to Make Your Company Stand Out from Amazon Business
Michael Croasdale, Thomasnet, 6/14/2019
Since it was introduced several years ago, Amazon Business has inspired fear among industrial and office supplies distributors. Small firms wonder how they can possibly compete with Jeff Bezos and his eCommerce juggernaut. Croasdale suggests traditional providers can still distinguish themselves in a number of ways. Personalized, hands-on account management, for example, isn't something Amazon can truly replicate.

There aren't too many organizations out there that can truly go it alone. Businesses of all sizes, across every industry rely on third-party support to boost profitability, reduce costs, and build competitive advantages. 

Though they have the potential to bring value, third-party relationships also present a variety of potential risks. These include:

  • Strategic Risk - These arise from bad business decisions or failure to implement decisions that will effectively serve 
  • Reputation Risk - These risks involve negative public opinion and dissatisfied customers. They might arise due to interactions that are inconsistent with policies, inappropriate recommendations, security breaches that expose customer data, or any illegal activity. 
  • Operational Risk - These risks arise from inefficient policies, ineffective people, broken systems, or other external disruptions. 
  • Transaction Risk - These arise from issues with product or service delivery. 
  • Compliance Risk - Similar to reputation risks, these can arise from violations to the law, rules, or regulations. In worst case scenarios, these violations and non-compliant activities are intentional. 
  • Information Security Risk - These risks arise from any unauthorized use, modification, disclosure, or destruction of information. The term applies no matter what form this information takes. 

Third-Party Risk Management (TPRM) programs empower organizations to identify, manage, and mitigate these risks throughout the lifecycle of their third-party relationships.  In leading organizations, the program starts during the early stages of the Procurement process and evolves all the way through off-boarding. 

The sheer volume of risk factors has compelled Procurement groups to evolve in their risk management efforts. What was once a mere 'check-the-box' exercise has become a nuanced function complete with its own adaptable policies and systems. Those companies who take third-party risks seriously are taking a comprehensive approach to ensuring compliance, protecting confidential information, and proactively addressing every possible disruption. 

At minimum, an effective TPRM apparatus provides: 
  • Visibility into third-party relationships and their contracts.
  • A formalized process for risk assessment and due diligence.
  • Standardized contractual terms and provisions designed to mitigate risk.
  • Risk-based monitoring and oversight processes. 
  • A formal off-boarding process for the end of third-party relationships. 

An optimal function will also involve selection and assessment processes for fourth parties (the third party's own suppliers and distributors). Risk factors don't end with third-party providers, so the more visibility the better. 

Remember, it's your third-party partners aren't responsible for mitigating risk on their own. It's up to you to take a proactive approach to protecting your organization's profitability and reputation. Standards for business ethics are continually rising, that means it's more important than ever to build an effective risk management plan. Why not let Procurement take the lead? 

You can never be too prepared for your next telecom services deal.  Unfortunately, many organizations are underprepared and leave themselves too little time to optimize the outcome of their sourcing and negotiation efforts.  This is nothing new, it has been the same challenge for procurement, IT, and telecom leaders for as long as enterprise communications services have existed.  What has changed, though, are some of the risks and opportunities that are cropping up along the way. 

One of the biggest challenges that comes with managing technology spend is maintaining an awareness of the market as it relates to the company’s requirements.  What’s available?  Who should we buy from?  How do we get from where we are today to where we want to end up?  How do we figure out where we want to end up in the first place?  For most companies these types of questions are only explored every three years or so and having to catch up is never the best place to have to start.  Increasingly, companies are encountering unexpected curveballs when working through their telecom renewals: carriers discontinuing services, not offering discounts on legacy service, or worse raising pricing for legacy service that suits its purpose just fine for the enterprise.

Of course, being prepared in the first place goes a long way in mitigating these risks.  This usually means looking out at least a year before your agreements expire (or when you plan to have met all of your obligations under them).  By doing so, you can become aware of where you may need to begin planning for a change of services and/or carriers.  With your awareness, you’re setting yourself up to translate significant renewal liabilities into opportunities. 

The reason the carriers are digging their heels in on pricing for legacy services is because newer technologies have become available to replace them and the old services are costly to maintain and support.  Account reps are being told to sell the new stuff, not the old stuff.  And that’s reasonable.  Not only are the alternatives typically more robust with expanded capability/functionality, but they’re lower cost and higher margin for the carriers –all positives for you if you can capitalize on them. 
Simply being prepared and taking advantage of these new technologies isn’t all, though.   They represent enormous leverage.  After all, if you’re going to have to move off TDM voice services to SIP anyway, why not see what the other carriers are doing?  If TDM access/loops are going up in price in favor of Ethernet or SD-WAN and you’re going to have to rip out and replace your circuits anyway, there’s no sense in limiting your options to the incumbent. 

If the carriers know you understand the landscape and where things are headed and that instead of being backed into a corner, you’re prepared to take full advantage of your flexibility to explore options at the end of your contract’s term you’ve set yourself up with a very strong and credible negotiation position right from the start.  For help planning and preparing for your next telecom renewal or sourcing event, contact Source One.

When I started my career in procurement, my colleagues would often tell me, and in some ways inculcate fear in me, that I should get ready because working in this area would turn me into a mix between a firefighter, analyst, politician, and a consultor; what they never mentioned was that in some occasions I would have to become a babysitter as well.

Many have probably lived through similar experiences as mine, experiences involving internal clients (IC) that are reluctant to follow company policy or procedures for the acquisition of goods and services; some simply because they ignore the process and others because they deliberately don’t like to go through the formal channels.

These situations are very stressful and require composure, so in order to win some of these internal clients over, we have to hold ourselves from saying some of those nice adjectives that we would love to vocalize, and start showing them the light at the end of the procurement tunnel.

In my experience, and trying to avoid sounding like a wildlife documentary narrator, this particular type of internal client is usually found in highly technical areas; they are almost exclusively involved in their specific science and don’t often interact with procurement. This internal client is someone who works or has worked at a company that has a basic procurement structure that is mostly transactional in nature; they have a habit of working directly with vendors, negotiating for themselves, establishing rules, and even signing agreements with no power of attorney and of course, bypassing legal (it’s amazing and dangerous that some vendors even accept this).

Unfortunately, the most common approach to getting introduced to this kind of internal clients is from above, their direct superior, who will just command the IC to work with procurement from now on, resulting in some rejection from the beginning. Definitely not a good way to start a work relationship.

As you can see I am generalizing a bit, every person and situation is different and your approach for connecting with them might vary, but in general it is important for the internal client to see you as someone who adds value, that your role will simplify theirs and bring in substantial know how into the relationship; as soon as you are able to demonstrate that your presence will help them save time, things should improve considerably.

To start implementing this change, we don’t want to come off as an aggressive invader, so we can discard the idea of going to his superior for a “do what you are told” speech. An alternative plan might be to have a pre-planned meeting (with the IC’s superior’s blessing and alignment) that involves “selling” procurement to the internal client and his superior at the same time. If the IC sees that he is being involved from the beginning in this change process and also witnesses his superior starting to get on board with the idea, then you would have successfully reduced the friction of transitioning things to procurement. The work from here forward should be somewhat less tragic.

Since nothing is this simple or effective, in some situations it will require that you help this transition go even smoother, meaning you have to get him involved in some sourcing instances that you normally wouldn’t. This sense of involvement will definitely help generate trust between you and the internal client by opening the opportunity to share a couple of good sourcing tips such as how to approach specific vendors or situations, benchmark insights etc.

I would also recommend you accept some tips from the IC as well, as these gestures will definitely show that you are not here to show off or preach; you might even get surprised and learn something new.

Finally, talk to the vendors about the new rules of engagement with the IC’s, find time to periodically align with these internal clients, work on the strategy and approach you want to take as a team prior to meeting and negotiating with suppliers, something as portraying a variation of good cop, bad cop with a supplier might help strengthen the relationship and trust.

In summary, properly identifying these internal clients and trying to have a more collaborative approach will definitely get you further, you want to avoid being to invasive, especially when some of these IC’s have been doing the same things for a long time. Change is hard for all of us, but not impossible, if you work to make it simple for them then you will be capable of achieving this change. Just remember that at some point everyone had to learn how to deal with PC’s and emails; procurement shouldn’t be harder than that, and who knows, you might end up with a new drinking buddy.

The following guest blog comes to us from Kate Began of

McDonald’s has long been a target of attacks from environmental groups and economists for its wasteful procurement practices and environmental negligence. All that changed back in January when McDonald’s announce ambitious plans to go green.

"Our customers have told us that packaging waste is the top environmental issue they would like us to address," said Francesca DeBiase, McDonald's sustainability officer, in a statement. "Our ambition is to make changes our customers want and to use less packaging, sourced responsibly and designed to be taken care of after use."

Since that time, McDonald’s has ‘gone green’ in a variety of ways including adding more recycling bins to its store, changing its packaging in 60 percent of its stores, purchasing sustainable beef and making plans to eliminate foam packaging from all its locations. All of this is part of a plan to go entirely green by 2025.

McDonald’s is one of several American corporations that is changing its practices and refining its supply chain to reflect a global concern for energy-efficiency, sustainability and the overall environmental stability of the planet.

Sustainable Products: The Heart of Green Procurement Practices

Like McDonald’s, Target, a leading U.S. retailer, pointed its green efforts directly at one its main revenue-generating products: clothing.

Target announced on Earth Day in April 2017 that it was teaming up with the fashion artisan, Accompany, to launch an ethically-sourced clothing line that is globally conscious. Accompany’s credo–Every purchase has a purpose–has become the cornerstone of its business practices.

Target scoured the planet to find handmade clothing derived from sustainable materials.

"Today, people are more culturally connected than ever, which creates a desire for aesthetics from every corner of the world," said Julie Guggemos, senior vice president of Product Design & Development. "Target's Product Design & Development team has the unique opportunity to travel the globe, get firsthand inspiration and create authentic products for our guests.”

Hewlett Packard has also made a sizable impression in the technology industry with its net-zero energy data centers. Concerned about carbon emissions stemming from its facilities, HP took action to create more energy-efficient systems that reduce carbon emissions by more than 50 percent.

Their labs in Palo Alto and Fort Collins have been restructured to consume net-zero energy from public utility grids. It is part of a growing effort of technology-based companies that have invested in “breakthrough capitalism,” a concept that explores whether businesses can be a catalyst for ensuring a healthy, fair and affordable world for the growing population.

Hewlett Packard believes that it’s possible. HP engineers are now designing mega machines and that produce less heat, less carbon and a more sophisticated, cloud-based sensor network, all running on a solar-powered microgrid. Plastic enclosures housing the PCBs inside the machines are digitally printed, eliminating the need for paper labels.

HP is also focused on finding solutions for the 70 percent of the world’s population that has no access to IT systems, sustainable infrastructures or even clean natural resources such as water. One recent example involved creating a marketing platform for a vegetable vendor in India who grew organic food for the local community. By giving the vendor internet access, HP increased his revenue by 500 percent, thus stimulating the local economy.

The net-zero server used to provide internet access served the vendor, cut the carbon footprint significantly and allowed HP to increase its revenue ethically and responsibly.

Toyota’s Prius: A Case Study of Sustainable Transportation

Whether the use of fossil fuel has a future remains to be seen. What is certain is that it’s not going away anytime soon. The sudden departure of fuel would create a catastrophic collapse in several economies around the globe. For this reason, the transition from fuel into electrical machinery or some other source must be gradual.

In the meantime, automakers have moved forward in providing better fuel economy with innovative solutions for reducing their carbon footprint.

Probably the best example of this is Toyota’s Prius, the world’s first mass-market hybrid vehicle. The Prius is one of the most popular cars on the planet, with Toyota reporting 38 million units sold worldwide. It’s received the highest praise from environmental agencies in numerous countries, including the EPA.

While some have dismissed the Prius’ eco-friendly reputation as mere hype, the majority of experts agree that, compared to other similar sedans and vehicles in general, the Prius is a breath of fresh air–especially from an environmental perspective.

The U.S. Department of Energy reports that the Prius can get 58 mpg in the city and 53 mpg on the highway. The cost of driving a Prius is less than $2 every 25 miles, making its fuel efficiency nearly unmatched in the industry. Although the cost of the sedan can be a bit much for average consumers, it is possible to purchase a Prius in the low $20ks.

The Toyota Prius hybrid drivetrain is also low-maintenance and requires fewer part replacements than standard fuel-based engines. It generally comes with an eight to 10-year warranty, depending on the model.

A More Biodegradable Landfill

When it comes to sustainability, pollution and carbon emissions, one of the most significant challenges for many countries is what to do with all that waste. Rather than pointing to landfills as the core problem, many agencies are putting pressure on manufacturers to create more biodegradable products.

Brooks– one of the leading sports shoe manufacturers–answered the call by designing running shoes that are engineered entirely from biodegradable materials. BioMoGo, the world’s first biodegradable midsole, breaks down in the landfill 50 times faster than soles made from conventional materials without losing running performance.

“Environmental stewardship is an important business pillar for Brooks, and we’re committed to creating products that help preserve and, whenever possible, enhance the environment,” said Jim Weber, president and CEO of Brooks.

If the user throws the shoes away and they are taken to a landfill, BioMoGo breaks down into its component nutrients and releases carbon that plants and animals can use for growth.

Manufacturers Turning the Tide on Carbon Footprints

It only took nearly two centuries for manufacturing companies to have a negative impact on the planet. Pollution, carbon emissions and poor business practices have hurt the environment.

However, companies are now turning that around. Manufacturers worldwide are discovering sustainable solutions that will help increasing populations, while reducing our dependence on fossil fuels and high energy consumption. The current trend is moving us forward into a cleaner and brighter future.

Recruiters, businesses, and job seekers alike know that LinkedIn is a valuable, increasingly necessary resource. Like any resource, however, LinkedIn only works when it's leveraged correctly. "There's a right way to use LinkedIn and a wrong way," says Source One's Supply Chain recruiter Andrew Jones. The line between the two, he remarks, could make the difference between finding a great opportunity or alienating yourself from future employers. Here are some guidelines informed by Jones' time in the recruiting space.

Do: Include a short, descriptive summary
"In all likelihood," Jones says, "recruiters and hiring managers will see your LinkedIn profile before they've seen an official resume." Digital first impressions have become a new normal, and that's not going to change anytime soon. That's why Jones advises candidates to supplement their profiles with an introductory statement that might not fit on a more traditional resume. This statement should provide a quick overview of your experiences, expertise, and interests. It's especially useful for passive job seekers who are hoping to turn up in a recruiter's search results.

Don't: Treat LinkedIn like Facebook
It's no secret that the lines between personal and professional life have blurred over the years. For better and worse, social media has had a lot to do with this phenomenon. On the positive side of things, LinkedIn makes it easier than ever to stay connected with peers and identify new opportunities. Unfortunately, the site's mix of social and professional networking sends some users down a dangerous path. "Anything overly personal would strike me as a red flag," says Jones. Using LinkedIn feeds like Facebook walls, he suggests, doesn't send the message that a candidate is "always on." More often, it paints them as totally unprofessional. In today's climate, many professionals even feel inclined to make political arguments on their LinkedIn feed. Jones suggests these folks should save their hot takes for a personal blog. LinkedIn also differs from Facebook in the sort of images that are appropriate. Photos from a recent vacation are no substitute for a professional headshot.

Do: Stay Active 
While Jones wouldn't advise anyone to send out daily updates, he encourages everyone to take advantage of LinkedIn's full potential. It's not enough to just keep a personal profile up to date. Jones also looks out for candidates who contribute and share thoughtful articles while also joining the discussions in industry groups. "Active participation," Jones says, "gives me a sense of a candidate's personality as well their subject matter expertise. It suggests they're interested in building a professional biography and engaging with their peers." Both are almost always a plus.

Don't: Embellish 
"We've all probably done it," Jones acknowledges, "but that doesn't make it acceptable." Fudging the facts on your LinkedIn profile is just as dubious as doing it on a more official document. If a recruiter or hiring manager is doing their job, they'll expect you to provide evidence of any skills you claim and a link to any relevant certifications. And remember, "endorsements" from friends, family members, and former classmates won't do you any good. No matter how compelling its language, no endorsement will supplant the need to walk the walk once you've accepted an offer.

Want more tips for standing out as a candidate in Procurement and Supply Chain Management? Check out some of Jones' appearances on the Source One Podcast.
Starting a procurement organization from scratch is difficult, to say the least. Taking a bare-bones or immature procurement organization to best-in-class is an even longer and more arduous process. Even if the initiative is successful, results will generally take 2-5 years to be seen. While some technology companies will preach the benefits of their product, software alone cannot and will not manage your spend.

People are a major factor in the equation, and it takes considerable time to find, interview, and hire those with the specific skills essential for a procurement organization. In the current economy, trying to find skilled employees who can hit the ground running is an especially tall order. Most CPOs will need to settle for workers who they will need to train in specific categories, which will not only require more bandwidth on the managerial side, it will also extend the timeline to becoming a best-in-class organization.

Another major component, and one that is often overlooked, is the process. Processes need to be researched, defined, and agreed upon by all the applicable stakeholders in the organization. Items such as procurement AI or machine learning can't even be considered unless you have a sound procurement process to back them up. Building out a procurement process can mean taking a long time to integrate it into the existing work culture. If there’s currently a laissez-faire attitude towards purchases, there will be even more pushback to something as common sense as reducing maverick spend. Employees who don’t want to respect new processes will find and exploit loopholes; a process failure on the first attempt may mean there isn’t a second chance to try again.

If you are looking at starting a new procurement organization, it could make sense to instead buy a turnkey procurement organization that provides the people, process, and technology right out the gate. Additionally, it can offer significant savings opportunities in both the short-term through GPO programs, and long-term through spend analysis, strategic sourcing, and category management by SMEs with a wide breadth of experience in their areas.

Having all of this under one roof is essential as it provides a central hub for metrics and reporting, as well as total spend visibility. These will not only allow the C-suite to see ongoing success measurements, but encourage continuous improvement with strong reporting and analysis. Determining when to source new items to be added to internal catalogs, SKU and vendor consolidation, and advisory teams who can review and update processes on a regular basis all lead to a successful strategic spend management program. The good news - this is something that can be bought from the start, rather than spending years trying to build one from scratch.

Last month, Amazon shook the retail and eCommerce space once again by offering free, one-day shipping to its Prime subscribers. Not to be outdone, Walmart answered by offering the same privilege to all online shoppers. The world's largest retailer even mocked Amazon on Twitter for failing to democratize the service. It's just one of several heated exchanges the two innovative, controversial brands have shared over the last year.

In a blog post last week, Jeff Wilke, Amazon's Consumer CEO, seemed to answer his company's customers, competitors, and critics by promising even faster deliveries. They'll reach this lofty goal, he writes, "by pioneering autonomous drone technology."

Drone-based deliveries are not a new project for Jeff Bezos and company. Back in 2013, Bezos gave a (now somewhat infamous) 60 Minutes interview in which he promised drone-based deliveries in the very near future. Throughout the last several years, progress has been slow and generally mysterious.

Thanks to Wilke's blog (and a same-day press conference in Las Vegas), consumers have finally gotten another look at the Prime Air program. Addressing Re:MARS conference attendees, Wilkie and CFO Brian Olsavsky showed off new footage and made a promise that should sound familiar. Amazon's fleet of drones, they announced, will take to the skies "in a matter of months."

The Amazon team touted the speed, efficiency, and, most importantly, the safety of their latest drone. Fully electronic, the drones are capable of flying up to 15 miles, carrying up to five pounds of cargo, and dropping off deliveries in under 30 minutes.  They also boast a unique hybrid design that allows them to switch freely between vertical and horizontal flight. This design innovation means that the drone is "controlled with six degrees of freedom, as opposed to the standard four" and can respond more quickly to windy conditions.

"We're building a drone," Wilkie writes, "that isn't just safe, but independently safe." Armed with cutting-edge AI, it will respond to changes in its environment without waiting on communications from a third-party. Amazon hopes this will provide for a new level of safety during transit, landing, and take-off. They're also bullish on the sustainability of their new drones. With fewer delivery drivers and consumers on the road, they expect to make quick progress on their Shipment Zero commitment.

Amazon knows better than anyone that a wealth of obstacles could stand in the way of a successful implementation. Strict regulations and logistical complications have thus far kept Amazon grounded. Count on more updates from the organization, ambitious competitors, and government regulatory agencies over the next several months.

Although the company's family members say otherwise, one of the nation's most well-recognized and respected food companies is on the selling block, for a purchase price that reportedly could range in the billions of dollars.

Latin food developer Goya - whose sweeping array of products are found in multiple grocery store aisles - is looking for a buyer, and has recruited the services of Goldman Sachs to help in the search, according to CNBC. The winning bidder could wind up spending approximately $3 billion.
"Stakeholders are reportedly at loggerheads over the direction of the company."

As its revenues suggest, Goya isn't struggling financially. However, there appears to be an internecine struggle over the direction the company should go in moving forward, as some of the stakeholders in the family-run business are at loggerheads. These disputes have occasionally wound up in court over the years to determine who has ultimate control.

Goya CEO says not so
However, despite CNBC independently confirming that the wheels are in motion regarding the potential sale, Goya CEO Robert Unanue denied
the report.

"The future of Goya is to continue to build our family legacy and to grow the brand worldwide," Unanue said in a statement. "For these reasons and many more, Goya is not for sale. To the contrary, over the years we have made acquisitions of other companies in order to expand the footprint of Goya Foods and we continue to do so."

He added that there are many moving parts to a family-run businesses, so it's not unusual for the company to take a step back and evaluate things from time to time for estate planning purposes.
That Goya has been in business since the 1930s is a testament to its supply chain management prowess and its ability to adapt to ever-changing consumer preferences. It takes stock of the products that sell and introduces new flavors, spices and ingredients to generate interest and avoid stagnation. For instance, in 2015, the company ventured into the organic foods space, investing $500 million in the process, Supply Chain Dive reported. The company has also more fully embraced its Hispanic roots by specializing in a variety of ethnic favorites like arroz con pollo, as well as specialty novelty soft drinks that are popular in Spanish culture.

As for the parties interested in buying Goya, potential suitors include J.M. Smucker, Conagra, Unilever, Kraft Heinz and Campbell Soup, among others, CNBC reported.
Despite the best of intentions, most Procurement Transformations come up short. Organizations are so eager to realize the benefits of an initiative that they often lose track of their end goal. In some cases, they neglect to establish these goals in the first place.  Those organizations that succeed recognize that it is vital for internal stakeholders at the organization to think about not only what they want to achieve in this transformation, but also how they are going to go about carrying out this change. That’s why so few initiatives succeed and so few organizations  have realized the full strategic benefits of an advanced and efficient Procurement team.

Joe Payne, Source One’s VP of Professional Services, believes that the first step in any transformation is asking, ‘Why?’ Until fairly recently, Procurement functions were an afterthought within most businesses. It was, typically, not engaged until leaders opened the books and learned how much they were spending across their supply chains. That is when they’d start to think about Procurement and suddenly call for change. Often, carrying out change would entail little more than going to suppliers and demanding lower costs. And while this may have worked in the short term, it could not fix the underlying issue, the nature of their Procurement function.

So how can high-level managers transform Procurement? By changing their mindset.
Contradictory as it may seem, Procurement transformations are less about Procurement itself, and more about an organization-wide change in mindset. Organizations can’t just come down on their procurement team and demand better results. They should instead focus on implementing initiatives that will result in something more long-lasting than a temporary price cut from suppliers. Procurement does, however, need to take the lead in finding a process that the whole organization can buy in to.

Instead of trying to insist upon a standard process, Procurement has to emphasize flexibility in your transformation. There’s nothing productive about saying, “here’s a standard approach we will use.” A more constructive approach would see Procurement ask itself and stakeholders from across the organization, “How can we approach this in a way that makes sense for our entire organization?” While some Procurement departments are more advanced than others, no one department has figured out everything there is to know. Even best practices and optimized processes can use some improvement.

Getting on the same page with internal stakeholders is vital to the successful implementation of a transformation. Active listening and an understanding of every stakeholder group’s end goals will provide the best results. These stakeholders are more likely to cooperate with Procurement if they understand the role they play in the project and the potential long-term benefits. Procurement should encourage them to view the initiative as more of a company-wide strategy implementation than a ‘procurement transformation’.

Having the right mindset is supremely important in fixing or optimizing a broken or inefficient Procurement unit. Trying to find a “quick fix” by bringing the hammer down seem to help in the short run, but will never address Procurement’s problems at their source. Remember, Procurement Transformations do not occur overnight. Take the time to understand your organization’s goals and how each stakeholder will bring them about.
Now that we’re about half way through the year, procurement departments are starting to refine expected savings and realizing the areas that will fall short of or exceed expected savings targets. The second half of the year can be a stressful time for teams falling below their goals and targets – but is also a critical time to keep procurement folks motivated and driving towards the proverbial finish line. There’s an entire industry built around employee motivation and recognition, but there are some specific ways Procurement can proactively manage their team’s expectations and motivation around organizational savings: 

Set Realistic and Informed Savings Goals – This is the most proactive step leaders can take to ensure procurement employees don’t feel left in the lurch when trying to reach their goals. Explain to your team how the targets were established, what categories savings are expected to come from, and what “counts” towards the goal within your organization (hint, you should be communicating and accounting for all ways Procurement adds value). Better yet, your team should be part of identifying opportunities within the categories and supply base that they manage to help inform the goal setting process. While this is tough to implement mid-year (especially if Procurement was handed down a target from “on high”), it’s a critical step that procurement leadership should take when planning next year’s goals. 

Managing Management – If you’re like many clients we work with, the pressure from leadership is likely stepping up around this time of year. Part of the role of managers is to strike the right balance in terms of passing on and shielding your team from that pressure. If a procurement team feels their leadership is advocating for the work they are doing and resetting expectations with management when necessary, they are more likely to feel secure in their roles, in the organization, and motivated to find creative solutions to help close the gap. 

Talk in Real Terms – Asking your team to “think strategically” or “go above and beyond” and using similarly generic buzzwords may leave your team questioning where they can really do more. Talk about real, actionable strategies related to their specific categories and collaborate to find creative solutions. 

Employee Recognition – With that said, be sure to recognize those that are exuding the actions, behaviors, and attitudes that you want to instill in your team, without creating an environment of “shaming” those who don’t make the list. Holding up employees who are role models and describing their work and accomplishments helps others understand how they may apply similar concepts and approaches to their work. 

Recognize More than Total Dollars – It may be easy to always acknowledge those who work in high dollar, high impact categories, but be sure to look for and recognize those who come up with creative solutions in smaller spend areas and “do more with less” to drive to their individuals goals or contribute other value-adds to the organization. 

Keep It Spicy – Sourcing and supplier management can at times feel repetitive or less than challenging; look for opportunities to expose your staff to other categories, supplier relationships, or to support sourcing initiatives outside of their typical category or supplier mix. This also helps to ensure your staff is trained in other categories in the event that changes in the team do occur. A fresh set of eyes on a category can also bring creative solutions to the table. 

Ask for Feedback – Different employees are motivated by different drivers and styles. Talk with your team individually to understand their concerns, what motivates them, and look to tailor your approach where possible as opposed to taking a blanket approach to motivating the team. 

It’s important for Procurement to work together and feel a collective ownership around the department’s goals and results. Especially in a time when it’s a candidate’s market and procurement talent is in high demand, make sure you’re not forgetting the importance of keeping and retaining the talented individuals who make these goals happen!
Congratulations, you’ve successfully made it to the last installment of the series! Are you empowered to start the Procurement journey? If you’ve made it to reading this far, give yourself a pat on the back, you are at the very least intrigued if not starting to make plans to begin your journey. Part 1 lead the reader to take the steps to identify their Procurement maturity and current state. Part 2 informed readers of what a best in class organization can look like and began the thought process of where they would like to land in the maturity spectrum. It’s important to remember here that a la carte Procurement Transformation/Reform will not work. Procurement’s pillars are highly codependent on one another and it will be difficult to simply just transform one pillar. In fact it will have adverse effects on the rest of the pillars and organization. Let’s discuss some high level steps in order to begin your journey the most effective way possible. 

Internal vs. External Resource Support
To begin your journey, you will first have to decide whether you have the resources internally to conduct a Procurement Transformation or will be seeking the help of consultants. Many organizations in the hopes to stay economical will tack on large scale initiatives to Procurement staff’s day to day job who may not necessarily have the skillsets nor time to properly execute a transformation. In other instances, organizations do not have the understanding of how many hours/resources will be required to conduct the project which leads to several resource constraints and starts & stops to projects. If your organization has a dedicated project management, continuous improvement, or operational excellence team or if you hire/allocate resources to be dedicated to the transformation that has the skillset to drive a transformation, by all means, conduct it in house! However, there is a plus side to consultants. They run transformations day in day out. They bring to the table specialized experience, market intelligence, industry knowledge, expertise on world class Procurement, and know what works and what doesn’t work. That doesn’t mean they will implement a cookie cutter approach for every client, it just means they have conducted transformations enough times that they can quickly assess and customize a roadmap and execution plan that works for you. They are skilled professionals that are hyper focused on a client’s transformation and can truly serve as unbiased third parties to your organization to provoke the change you need.

Kick Off
After you’ve decided on your resource plan and have had the project approved by your organization, it’s vital to begin socializing the project throughout the enterprise. This is a key step in order to lay the ground work for transformation. This can be done in multiple ways such as bringing up the project in cross functional meetings, company town halls, hosting a formal kick off, etc. Whatever avenue you choose, ensure that your stakeholder community is not only aware of the initiative but more importantly involved in the project. A successful transformation is built from the ground up deeply involving not only your Procurement department, but the stakeholder community and leadership team as well. When the transformation is socialized throughout the organization and input is solicited from all parties not only will the silos within the organizations begin to break but the transformation will lead to inclusive solutions that will benefit the entire company.

Formal Procurement Assessment
As emphasized throughout the series, it’s important to understand where your gaps truly are prior to fixing anything. A thorough assessment needs to be conducted on Procurement’s 4 pillars. Keep in mind you’re not going to be able to identify all the issues by speaking with just your Procurement department. In order to get a full 360 view, it’s important to talk to Procurement’s end users (Business Units), other areas of the business such as AP, IT, HR, Legal, and even suppliers. When conducting a transformation, it’s key to include the stakeholder community in order for change management to begin early.

Build a Roadmap with Timeline
When you have realized your current state through the assessment and identified your root causes, you will have to distill actionable recommendations for your organizations to execute on. When you have figured out what you want your future state to look like, it’s critical to make a decision on the timeline. Your timeline will be highly dependent on resources, budget, other projects in the pipeline, organizational goals/initiatives, and simply your decision on how critical is it to transform. Most organizations will opt for the 18 months to 24 months plan to see through a complete transformation of all their pillars. But again, timeline will also be dependent on your current maturity and how wide the gap between your current state and goal there is to close.

Execution/Continuous Improvement Plan
When you have created a detailed execution plan, ensure you have a methodology in place to measure success. It’s very rare any execution plan goes exactly as planned. It’s important to understand there will be many pivots and shifts throughout the process where you may be reevaluating your direction. In order to make most educated decisions, it’s important to have data to serve as decision support. Ensure you set up regular cadence meetings with your transformation team and the stakeholder community to touch base on the project as well as solicit feedback on the initiative. This will allow for an open feedback loop and cultivate a culture of continuous improvement throughout the organization, which is imperative for a Procurement Transformation.