Is Your Procurement Group Staffed and Organized Appropriately for Success?

How is your procurement group organized and does each member of the team have the appropriate skillsets to perform at the highest level? What kind of traction does it get with internal business partners? How effective is the organization in meeting the pressing needs of the business? How much time is spent on the critical aspects of strategic sourcing vs. transactional processing? These are the primary questions AES Consulting helps you answer during the organizational assessment process.

This starts with a review of the way in which your procurement group deploys its resources and addresses critical categories of spend and a review of the mechanisms used to partner with internal stakeholders to jointly set and achieve their goals. We will identify gaps in skillsets and training needed to enhance performance and make organizational design recommendations, if warranted. We can also provide recommendations on how the procurement function can better partner with internal clients and build the business case for enhanced stakeholder involvement and acceptance.

Supply Management Has Come a Long Way!

Over the years, supply management has evolved to the point that it can mean the difference between a profitable and competitive business and one that continually struggles. The profession and world class procurement organizations have gone well beyond what was historically considered to be their primary role, i.e. to simply obtain the goods and services requested by internal customers. Today, leading procurement organizations:

• Understand the needs of the business and partner well with internal clients
• Develop the appropriate supply base that can deliver goods and services at competitive prices and at the right quality
• Work with suppliers to bring innovation and new product ideas to the company
• Are focused on risk mitigation for the business
• Become very knowledgeable about key categories of spend, understanding the economics and current issues and opportunities of the related industries
• Are skilled project managers with a keen focus on delivering results
• Understand and practice mutual gains negotiations, creating value for both parties but also ensuring that their company gets the appropriate amount of value vs. the supplier

All of this is enabled by having the right organizational design, appropriate in the circumstances, and a properly trained and talented procurement organization that is connected to the business.

Let AES Consulting assess your organization and help you identify additional ways in which to generate value for your company. Contact us at 609-306-8176 or by using our online contact form.

Make Strategic Sourcing Work in Your Organization

Procurement is a critical function in today’s competitive environment. And with the costs of purchased goods and services being more than 50% of sales at most companies, the stakes are huge. So often, the focus in strategic sourcing is simply on how well negotiations have been conducted. Don’t get me wrong, it is very important to have a good negotiation strategy and to capture your fair share of value in negotiations. But the key to longer term and lasting value starts with well thought out category sourcing strategies. I have seen too many situations where the procurement group runs from one RFP to the next, never seeming to get the breathing room to think through what they are trying to accomplish in a specific category and as a consequence, miss big opportunities. Thinking through that strategy, with the deep involvement and input of the appropriate internal stakeholders, will provide the roadmap and framework for all the work that will follow. This will provide greater results, reduce unnecessary false starts and decrease the time to value creation.

Working with your stakeholders helps you align with their goals and objectives and often identifies areas of need or dissatisfaction with the current supply base. It also allows you to spend time understanding the rapidly changing dynamics of the spend category/industry that are so critical as you prepare to go to market. Coupled with a good internal spend diagnostic, you are ready to think through the appropriate category strategy to meet the future needs of your business. And then subsequent RFP’s will have the structure and direction to be successful.

I have seen so many situations where purchasing is done without the assistance and involvement of the procurement group, and the negative impact on the organization can be staggering: a supply base that is far too large for the business with no leverage over common areas of spend, contracts that expose the company to incredible risk and don’t have appropriate out clauses, and the selection of suppliers who are not qualified to do the work and expose your company to significant risk. This is often the result of not having robust sourcing strategies or a good purchasing policy that makes it clear what the respective roles are in purchasing and with your internal clients. If you would like help in creating impactful strategic sourcing strategies and creating more value for your company, contact AES Consulting at 609-306-8176 or use our online form.

Having a robust sourcing methodology and efficient processes are critical elements of building a world class procurement organization. I don’t know of any procurement organization that isn’t over worked, so these measures can have a great impact on extending your reach in your company. Let’s start with methodology. It is important for your organization to know and follow a well thought out sourcing methodology in order to get the maximum value from the work that they do. Articulating how to go about understanding the spend, exploring the marketplace, developing the appropriate sourcing strategy, designing the RFP, and developing and executing on the negotiations strategy, all build on one another and contribute to successful sourcing events. And this is especially important when you bring new people into your organization in order to reduce the learning curve.

There are a number of processes that are also important to the efficiency and effectiveness of the organization. This starts with a good, clear purchasing policy that is well communicated and followed throughout the company. I have seen this have a dramatic impact on how the procurement group is engaged and significantly increase savings within the company. Simple to do when well written and clear about the roles and responsibilities of procurement and their key stakeholders.

Other important processes that should be reviewed and optimized include looking at sourcing cycle times, the use of Purchasing cards (P cards), aligning with stakeholders and setting procurement savings targets, the use of on-line auctions and last but not least, negotiations training. Done properly, all of this can take a tremendous amount of work off your plate and simplify the ways in which you engage your internal clients/stakeholders.

Whether your procurement processes need a little fine-tuning or a dramatic overhaul, AES Consulting can help you. If you would like to maximize the value your business receives from its procurement processes and methodologies, contact AES Consulting at 609-306-8176 or by using our online form.

Take the Higher Ground with Supplier Relationship Management

Does the following situation sound familiar? Your procurement group has cycled through several years sourcing your most important spend categories. With each new round of RFP’s, you see a significant reduction in the benefits generated and you begin to realize that too much of your effort is being spent in managing the switch to the new suppliers and stabilizing those relationships. Little if any time is being dedicated to working with your suppliers on your most pressing business problems. Don’t despair. It is time to think about deploying a Supplier Relationship Management strategy.

Supplier Relationship Management is relatively new but has gained great traction over the last several years. Essentially, SRM recognizes that there is a select group of suppliers who are critical to your business. And that does not simply mean suppliers with the largest spend but would include those suppliers who are critical to your success and help you differentiate your business in the marketplace. By engaging that group of suppliers in a trusting and integrated relationship, with the right governance and procedures, value is created for both parties.

The first part of creating an SRM program, is looking at your supply base and determining who you are working with in the most critical areas of your business. These are the suppliers who bring important knowledge and expertise and with whom you would greatly benefit from their input. They are the partners that look at the relationship from a longer term perspective and recognize the importance of performing well beyond the simple contractual terms. Why would they go to these added lengths for you? Because they recognize that business has become increasingly more competitive and they know that by bringing you their best ideas, that they are likely to have a longer relationship with you and the opportunity to win more business with you in other divisions, geographies and other service offerings.

Building this kind of program takes effort in determining which suppliers to include, sharing the critical issues you face as a business and ultimately developing joint business plans and measures of success. Wouldn’t you rather leverage the incredible knowledge of your key suppliers to help your company succeed? If you are serious about developing a comprehensive SRM program, let AES Consulting help by contacting us at 609-306-8176 or by using our online contact form

Go Beyond Price In Generating Value for Your Organization

Price and quality are generally the two primary areas of focus when it comes to sourcing goods and services. AES Consulting helps you expand that value proposition for your company by using the additional levers of consumption and specification management (CSM).

I remember like it was yesterday, when I challenged my procurement team at Bristol-Myers Squibb to look for different ways to drive value for the Company. As we were talking through the impact that managing demand and right sizing specifications could have, I heard a lot of concern about procurement suggesting to their internal customers that they adjust how they consumed goods and services or even change the specifications of what they were using. But with intense profit pressures on the business, and with the right approach, our internal customers were very interested in learning how they could use CSM to improve their bottom line. And the savings we achieved together were incredible. In fact, we have found that many businesses like yours can derive significant cost savings by developing the right specifications and monitoring the usage of products or services.

We have looked at a variety of areas such as travel, meetings services, salesmen’s fleet, computer hardware and software, promotional materials and office supplies and found significant savings opportunities. Part of this has to do with creating more transparency around the spend, often realizing that money was being spent in an inefficient or inappropriate way. Carefully reviewing and right sizing specifications also created big opportunities. Another aspect of CSM has to do with establishing governance and reporting that results in better compliance with established policies and desired practices. And the great thing about savings from CSM efforts—they go entirely and directly to the bottom line, often with only minor changes in the business.

Making Your Business More Competitive

Using the principles of CSM can unlock hidden savings for your business. Those savings can be either taken to the bottom line or reinvested in the business to drive growth.

But, you can’t do any of that until you have your business’s CSM processes optimized for success. If you would like to find more dollars for growing your business in an economy where new dollars are hard to find, contact AES consulting at 609-306-8176 or use our online contact form.

Supplier Diversity Needs to Be on Your Radar Screen

Being successful as a company is often about having a keen understanding of the marketplace and its customers. That means developing a diverse supplier base that reflects the marketplace and communities that a business serves and tapping into the energy, creativity and fresh perspectives that minority, women and disabled veteran owned businesses (collectively MWBE) can deliver.

Supplier diversity used to be viewed as simply fulfilling one’s social responsibility. But that is a narrow view as many companies also see a significant financial benefit as well. Engaging MWBE’s can drive down your operating costs as they price their goods and services more aggressively and operate with less overhead than larger, more established suppliers. This has been proven in new research conducted by the Hackett Group that showed that a “heavy focus on supplier diversity generates a 133% greater return on procurement investments than the typical business”.

The adoption of MWBE purchasing programs has grown steadily over the last three decades despite ups and downs in the economy and the push to outsource more work to such markets as India and China. Part of the steady growth is that by engaging diverse suppliers you often create sales opportunities as many companies require their suppliers to support their diversity efforts through their own purchasing programs. This has come to be a very important bid requirement especially in businesses within broad based consumer markets such as health insurance, telecom and consumer goods.

During my tenure at WellPoint, Inc., we worked hard to build our MWBE program, more than tripling our qualifying spend in just three years. That took a dedicated effort and a number of initiatives to get us to that point. Let us help you develop a leading edge Supplier Diversity program or take your existing program to the next level. Contact AES Consulting via phone at 609-306-8176 or use our online form.

Between a Rock and a Hard Place and Without a CPO? Hire An Interim Chief Procurement Officer

There could be a number of scenarios where you suddenly find your business without a procurement leader in place. That person might have quit without notice, pursued a different career path, or maybe needs to leave work for an extended period of time because of an emergency personal situation or medical condition.

Whatever the reason happens to be, what your business knows is that it needs someone to lead its procurement group and you needed them yesterday. In the meantime, everyone’s workflow is disrupted, productivity is impacted, and customers are getting upset. You don’t have time to run that aspect of your business yourself, and other employees don’t have the time to work their own jobs and someone else’s too. Without a leader in place, you run the risk of missing critical objectives, derailing key initiatives and impacting your company’s productivity. Don’t leave your business at risk when you are without a Chief Procurement Officer.

AES Consulting helps businesses trapped in this situation by connecting them with a temporary procurement leader. We possess an extensive network of qualified professionals who help you keep things operating as smoothly as possible. Who knows, this person may ultimately become your permanent procurement leader!

If you need help finding a qualified procurement leader and quickly restore order to the group, contact AES Consulting at 609-306-8176 or use our online form.