Webinar Notes: Two Perspectives on Procurement Transformation

Each week I attend two or three webinars. Usually, I pick the most interesting event to share in this Friday webinar notes post. This week, there were two events on procurement transformation: one from Procurement Leaders/CombineNet/Kellogg and another from Sourcing Interests Group/Zycus/Capgemini. Both were good events in their own right, but combining what I heard in the two events provides a rich look at one of the hottest trends in procurement today.

For any effort to be truly transformational, there must be a significant, all-encompassing change that takes place. Externally, this involves solution and service providers, and internally it involves procurement as well as the people and groups they work with throughout the organization. Group/Zycus/Capgemini gave us a look at external procurement transformation through solutions and consultants. Procurement Leaders/CombineNet/Kellogg shared the internal levers through the true story of how Kellogg transformed their procurement function.

Capgemini presented a fundamental structure for transforming the procurement function. Ultimately it comes back to the tried and true people/process technology. Based on their broad look at transformation, most procurement organizations have been on a transformation journey since the start. Understanding where you are in that journey today, and where you want to go, required clearly defined goals that are aligned with the CEO’s agenda and take into consideration where procurement sits in the reporting structure.

Walter Charles, CPO at Kellogg, shared the intense effort his organization has made – which resulted in $113MM in savings in 120 days. I happen to believe that one of the ideas he shared early in his presentation is the key, and that is the idea that if you tell the business you are going to undergo a procurement transformation you must be able to ‘meaningfully differentiate’ between the old way of doing business and the new.

Kellogg took 100 days to change how they did their jobs and change the outcomes. One technique they used was ‘clean sheeting’ or getting a better understanding of where costs come from and how you can affect them. They successfully employed clean sheets in addition to more robust governance models, faster decision-making, and aggregation of spend across plants.

We also heard about Kellogg’s efforts to manage spend in a January event where the finalists in the Excellence in Purchasing Indirect Categories award competition presented their cases. In that event, Brian Bancroft, Senior Director of Procurement spoke about asking the tough questions and being decisive about change. Click here to read more.

It is impossible to achieve the level of success Kellogg did by playing it safe. They called it a transformation and it was, but the process and the effort required were intense. If you claim that you are going to transform the way spend is managed, people need to see some significant changes to strategy and results. Without that evidence, you are at risk of doing more damage to your departmental reputation internally than good.