Webinar Notes: NLPA's Monthly Webinar What’s Next for Procurement: Innovating to Drive Value
This week, our webinar notes are on ‘What’s Next for Procurement”, the monthly Next Level Purchasing Association member call featuring Peter Nero from Denali Group. If you are not a member of the NLPA, I encourage you to join – it is easy and free. Click here for more information.
While this presentation is not available as a recording, you can read a whitepaper by Denali Group on their Procurement Innovation Research for 2011.
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
–Sam Walton, Founder of Wal-Mart Stores, Inc.
The focus of Mr. Nero’s presentation was that procurement needs to become a more customer-service centric function. And he’s not alone in this. Just this week, in the Supply Management daily, there was an article based on a roundtable discussion with a number of senior procurement professionals that concluded we need to do a better job of promoting ourselves internally.
Jason Smith, who leads the procurement advisory team at KPMG, said: “I get a sense that we are not actually marketing the function well enough.” He suggested that while procurement has become more important during the years of recession, it is still known by other departments as the team that can save money. “Outside of that there is almost a PR job needed to promote how and what procurement does to deliver strategic value to the business,” he said.
Getting back to this week’s webinar, what opportunities are we missing with regard to internal stakeholder satisfaction?
There are a lot of frustrated stakeholders these days, based on their perception that procurement has an introverted view. Regardless of how frustrating it is for procurement to deal with stakeholders, we have a responsibility to constantly re-evaluate the services we offer the organization and the way the organization sees those services. If we are to be successful in proving our value, we need to spend more time walking in our stakeholders’ shoes - to really feel their challenges.
The ultimate goal is to better engage stakeholders. They should want to engage with us. In order to bring this shift about, we have to find ways to be proactive rather than reactive (even if the stakeholder is to blame). Although procurement and our stakeholders don’t always want the same thing, we share common ground around cost effectiveness and value. The difference is usually that stakeholders put more emphasis on speed and simplicity, while procurement wants to do it right. We both want success and recognition from managers.
Finance As a Stakeholder
If Finance is among your stakeholders, you need to look at the needs of the shareholders too. Reducing spend and costs is the typical use of time, but we can serve the shareholders by focusing on operating cost reduction through demand management, total cost of ownership, and collaboration with suppliers. CFOs are focused on earnings per share and cash flow. When the CPO is trying to align with the CFO’s goals it is important to maximize the impact of favorable payment terms and discount terms to increase cash flow.
Becoming a Next Generation Organization
How do we become a next generation organization by unleashing our value within the organization? Once we have identified and articulated procurement’s assets within the organization, we need to consider how we make them available on demand to our stakeholders.
- Focus – what is our focus? What do our stakeholders value? Supplier discovery? Tools for self-service?
- Managing spend at the macro level (category perspective – global supply chain, approved supplier list, minimizing the suppliers we use v. diversification of supply sources) and micro levels (project level, where our stakeholders are engaging with suppliers and committing spend).
- Operating model – help stakeholders better understand the value procurement offers. Make presentations to the business featuring case studies that justify early engagement
- Procurement deconstructed: separate execution from strategy and decision-making, and consider outsourcing something. Alternatively, the focus must be on prioritizing the use of resources you already have in house. While some tasks require high stakeholder interaction, it is tactical execution that typically becomes the bottleneck for procurement teams.
- Knowledge management – if someone leaves or if a contract comes back up for re-source. This is a prime area where we can leverage technology.
- Cater to your internal stakeholders
- Know your business, not just the process
- Don’t underestimate the value of standard marketing techniques
Peter Nero is Managing Director of Denali Sourcing Services, a premier sourcing services provider. After graduating from Tepper Business School at Carnegie Mellon University, Peter worked as an independent consultant facilitating a Fortune 100 company’s North American on-line procurement and reverse auction program. He then joined the consulting firm Booz Allen, and during his six-year tenure successfully managed strategy development, large-scale organizational transformation, process reengineering and organization performance management for Fortune 500 organizations in manufacturing, energy, and entertainment, as well as federal government entities.
Peter’s key role at Denali Sourcing Services is enabling clients to leverage on-demand sourcing services to improve their sourcing execution capabilities, thus increasing addressed spend and driving additional cost savings to the bottom line. Peter’s expertise is in strategy, organizational design, change management, and program management execution.
Denali Group collaborates with supply chain and procurement professionals to deliver more value, faster and more efficiently. Denali Group’s innovative solutions help Global 1000 companies transform organizational capabilities, improve execution efficiencies, increase spend under management, and accelerate time to savings.
Founded in 1996, Denali Group services include:
- Denali Consulting – Procurement transformation and supply chain optimization
- Denali Sourcing Services – Managed sourcing execution and procurement outsourcing
- Denali Intelligence – Subscription and custom supply market intelligence
- Denali Recruiting & Staffing – Supply chain recruiting and staffing