John Q. Procurement is an MRO category lead for a large diversified manufacturer, ABC Incorporated. Recently, he read about the new government regulations aimed at phasing out energy hogging incandescent bulbs. Based on the information, he decided it was time for ABC to develop a new standard for their lighting requirements. To accomplish this, John planned to engage in comprehensive sourcing event for lighting that would result in a detailed comparison of the benefits and drawbacks of both compact fluorescents and LED bulbs, and would lead to the selection of a new preferred manufacturer and set of standards for ABC.
To get started, John reached out to Steve, who leads the Sourcing and Procurement Center of Excellence at ABC. Steve oversees the coordination of all sourcing activities company-wide, and makes sure that the appropriate policies and procedures related to sourcing are followed. Since it was the beginning of the year, Steve was heavily involved in a lot of planning meetings, and wasn’t available to talk to John for two weeks.
John needed to talk to Steve before he could get started though. He had to get approval for the project and verify that no conflicts exist with other sourcing activities that are ongoing or scheduled for the year. Once Steve became available he was able to validate that no conflicts existed, and the project could move ahead. However, Steve recommended that John talk to the Supplier Relationship Managers that represented ABC with their integrated supply company, as well as their electrical distributor, to ensure that the timing of the engagement was appropriate given the ongoing initiatives with those two suppliers.
Sandy, the SRM for integrated supply, was available the same day, but Jeff, the lead on electrical was currently in the middle of a two week road show, meeting with suppliers to finish up annual evaluations and scorecarding. Feeling it was best to kill two birds with one stone, John scheduled a meeting for the following week so both could attend.
After presenting his strategy to Jeff and Sandy, the team of three agreed that now was the right time to look for lighting alternatives. Both SRM’s had market intelligence regarding bulbs from their suppliers that they could provide to John, including manufacturer overviews and the latest technological advances. They also suggested that John meet with the head of Sourcing Analytics to determine what type of usage data could be provided to John to support the RFP process.
John then tried to reach out to the head of sourcing analytics, but found that the current lead was leaving the company at the end of the month, so John would need to wait until his replacement came in to review the project. Later that month he met the new lead, Donna, and gave her an overview of the goals and objectives of the initiative. Donna was happy to work with John on the project, but was still learning about the Ariba buying platform, since she had not used it at her old company. She suggested a joint conference call with the P2P manager and Ariba subject matter expert to ensure they could assist in providing John with meaningful spend data that could be used in the RFP.
Ted, the P2P Manager, called John the next day, and was able to confirm what reports could be pulled from the system at an SKU level. Ted also suggested that John consider extended payment terms and the ability to accept purchase cards if ABC were to buy direct from manufacturers. He also suggested John loop in the plant level buyers to get their input on qualitative and technical requirements for the sourcing engagement. John thanked Ted for his input, and decided to coordinate a lunch meeting with the plant buyers for the following month, when they would all be in town for a corporate training and team building event.
When the day of the lunch meeting came, John was excited and ready to move this project to the next level. He felt that this meeting was the official kickoff of his project, and he was ready for it. With 20 plant buyers in the room, he presented the business case and strategy for this initiative. When it came time for questions and comments, he received the following feedback.
We can’t change manufacturers; we have a local deal in place.
I don’t understand why we can’t keep using incandescent bulbs. CFL’s are more expensive, isn’t this the opposite of what we should be doing?
I’ve already switched to LED’s, and I will NOT use a CFL.
I’ve done the research, and it will cost our plant $750K to retrofit all our existing fixtures.
I don’t use corporate deals. The electrical distributor you selected can’t service our needs.
John did his best to address the concerns, even those that didn’t make much sense to him, but he left the meeting feeling demotivated. After 2+ months of getting the proper alignment within the strategic sourcing group at his company, he now worried that whatever his findings were would not be implemented. He decided to proceed with the project, but was unsure if it would be successful.
While this story is fictional, the challenges sourcing professionals have to face, even within their own organization, are very real. Even more troubling is that many of these challenges are self-inflected. Sourcing has discovered the enemy – and it is us!
2013 will be looked back on as the year we officially compartmentalized strategic sourcing. Roles have been defined and job descriptions have gotten narrower, all in an effort to create specialties within our industry. While these were done in the name of efficiency and improved support of the business, the long term result is individual sourcing professionals with no relevant experience, business acumen or skillsets outside of their area of focus.
Does this matter if it results in efficiency and improved results? Perhaps not, but I am guessing the extreme example of John Q. Procurement, reminded you of similar situations at your company. Efficiencies aside, as we commoditize our roles, the case for outsourcing our jobs becomes much easier. Why does your company need a sourcing analytics person to support the business full time, when they can outsource the function at half the cost and get access to more relevant market intelligence? Why have a category manager dedicated to the human resources department when there are subject matter experts that can take that role and utilize cross-industry experience to support the business? Why hire a P2P Lead when the supplier can provide that support at a discounted rate?
In the long term, compartmentalization is a not going to improve service levels to the business, because it makes the individuals supporting the business more tactical and less strategic. This is the opposite of what we should be trying to accomplish. Sourcing professionals that can adapt to different situations, have a broad based understanding of qualitative, financial and operational issues, and are empowered to make decisions based on these factors, is what we should be looking to develop in our teams. If sourcing groups don’t strive to make these changes, then there is a high probability that their jobs will be the next to be outsourced.