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Strategic Sourcing
I have seen so many situations where purchasing is done without the assistance and involvement of the procurement organization, 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 procurement and with internal clients.
Organization Assessment
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 each team member 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 we will explore during the organizational assessment process.
Methodologies and Processes
Having a robust sourcing methodology, appropriate technology 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 huge impact on extending your reach in your company.
There are a number of processes that are important including having a good, clear purchasing policy that is well communicated 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.
Other important processes include looking at sourcing cycle times, aligning with stakeholders and setting joint procurement savings targets, and last but not least, negotiations training. Done properly, this can take a tremendous amount of work off your plate and drive great value for the business.
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.
Essentially, SRM recognizes that there is a select group of suppliers who are critical to your business 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.
Consumption and Specification Management
Price and quality are generally the two primary areas of focus when it comes to sourcing. We can help you expand that value proposition by using the additional levers of CSM, sometimes called demand management.
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 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 directly to the bottom line, often with only minor changes in the business..
Supplier Diversity
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 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.
Interim CPO Services
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 internal 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 have an extensive network of qualified professionals who can help you keep things operating as smoothly as possible. Who knows, this person may ultimately become your permanent procurement leader!
