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In the News | Clippings from the Week Ending 17 June 2011

  

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I thought it worth sharing some comments on a few clippings that landed on my desk over the past week.

Distinction Between Direct and Indirect Procurement blurring
A recent blog post by Tim Cummins, President of IACCM, highlighted the division between direct and indirect being too simplistic “especially when it comes to the skills, knowledge and tools needed for their management”. We have recently put together a chart which drills into the division between Direct and Indirect from a Retail perspective.

The post further delves into the barriers indirect procurement professionals face when dealing with stakeholder communities such as Marketing or Legal (where the line between directs and indirects is very much lost), often being seen as “intrusive and threatening to established relationships”. Completely agreeing with Tim, a clearer understanding and greater emphasis needs to be placed on:

a) Understanding your stakeholders needs, drivers, challenges and personal connections – ensuring you are acting as an enabler and a partner rather than a hindrance or barrier to get the job done.
b) Defining what ‘value’ means from a stakeholder’s perspective and not simply “doing the easy thing” – which is what Tim talked about in his next post – CFOs Want Value

* Read original blog post here: Direct Versus Indirect

Value of Procurement in the eyes of the CFO
Per the above, Tim Cummins has also highlighted this week the vital importance of procurement acting as a partner of finance supporting business strategies – more than just cutting costs. However a key challenge to this is that “Procurement has been so tactical for so long, it is a lot to ask that they suddenly become strategic, that they suddenly master the skills of re-engineering and process redesign”.

This couldn’t be more spot on, we all talk about becoming more strategic yet our behaviours often fall short of our words - this is not to say we haven’t tried. Anyone working in indirects/GNFR/Non-core procurement will tell you that they are under-staffed, under-invested and generally under-stated as a function within the greater business. But could this be a fallacy of our own doing? The finance community and more importantly CFOs, per Tim’s post and our own ongoing conversations, are looking for “new insights, new ideas and leaders with the courage and imagination to propose new KPIs for their function” – the key word here is LEADERS. In a recent post in our Redefining Procurement Series we discuss this very notion of procurement leadership in more detail.

Ultimately, the question remains, does procurement have the right skills to take on this leadership role – or should the business look externally?

* Read original blog post here: CFOs want value

The Client Intimacy Game
An article that was published a while ago (but has just hit my desk this week), focusing on collaborative outsourcing states, [in regards to outsourcing] “one of the most common problems occurs when companies fall in to the conventional trap of beating up their suppliers on price”. This statement resonates outside of this outsourcing analogy, extending into the very core of procurement as a strategic partner.

Procurement’s focus on getting the lowest price possible has dictated behaviours in such a way that the notion of long term, strategic thinking has been lost along the way in search for the next best price. As such, functions (e.g. Marketing and Legal) do not calculate value the in same way that finance or operations does (i.e. keeping costs low YoY). Marketing, for example, often don’t particularly place too much importance on introducing a procurement process into their marketing plans (which potentially could create additional lags in supplier selection or plan execution) to save a nominal % of their existing budget to then have the amount saved taken out of their budget the following year.

However, if the same Marketing team understood that the application of a more rigid procurement process would lead to better supplier selection (i.e. value for money, innovation, improved service levels, a more weighted view of specification, risk, cost quality and quantity) ultimately impacting the ROI of the marketing activity (with view that any cost savings made would be re-invested back into the marketing budget) – I think you will gain their buy in rather quickly.

All of this ties intrinsically back to the notion of ‘Client Intimacy’ – understanding your stakeholder’s/customer’s (in this case marketing) needs, wants, drivers, challenges against which you can collaboratively build a plan which will create a win-win for both sides.

* Read the original article here: All in the Game