Make Procurement Great Again

Does it not frustrate you, when you think you are doing everything that’s best out there, and you still end up in conflict situations with other business stakeholders?

You implement best tools – you hear noise, until people stop using them.

You write best-in-class policies – and the Pareto works against you: 80% of time people do not comply (versus anticipated 20%).

You achieve “improvement” in processes, that procurement controls – but overall business results are worsening.

You hire best negotiators – and they leave the business faster than you manage to pay recruitment bills.

Again and again, you find ways how to “make procurement great again”, but nothing seems to satisfy the business… I was talking about ways to assess the situation and adapt procurement strategy to meet the business needs in a conference and am sharing the material here.

I would gladly share working files and templates to those willing to use them. Thank you for reading, commenting and sharing.

Make Procurement Great Again

Strategy Map for Procurement

 

The Reality of Strategic Planning

I wish I could say Dilbert is completely wrong (I had the best time ever trying to choose illustration for this post, I must admit). I wonder – if anyone was to carry out an anonymous survey of what people REALLY think about strategic planning process in THEIR companies (not OURS, please note), what would they find? (And, let’s assume, respondents would be on honesty and anti-political-correctness pills – not to distort the reality with interpretations)? I think that would be a wake-up call for many.

Strategy for Our Companies

Anyway, this post is about the strategy for OUR companies and OUR procurement departments, which have nothing to do with Dilbert.

treasure huntStrategy is about knowing where you are now, defining, where you want to get to (by the way, according to the definition of the strategy, it really has to be a better place) and deciding how you will achieve it. As you can see per the very informative map to the right of the text, there are a lot of things to think about when you are planning your journey. Thankfully, in business, there still are things you can plan. Procurement is no exception.

Classic Factors to Consider

There are quite a few classical models to analyse strategy for businesses and I would not want to re-write Wikipedia or Google. To understand your business (or department), you would be looking at marketplace, industry, your companies strengths and weaknesses (products, teams, organization structure and culture). The same is applicable for individual departments, including, but not limited, procurement. McKinsey’s 7s is very simple and clear tool to use. Combine them with generic business strategies (customer intimacy, cost leadership and differentiation), and you will have decent evaluation of where you are in comparison where you would like to be.

Strategy Map for Procurement

I wrote before about the importance of aligning Procurement’s strategy to company’s strategy. This time I would like to share a fuller version of checklist points that I use and a visual communication tool. I call it P4S – Procurement for Success.  Whenever I plan procurement’s, I think about these factors: p4s strategy wheel

  1. People. McKinsey calls them “staff”, but, to me, it is much more than just staff. You should also consider suppliers, environment – people, who are not yet staff, but might potentially become one day. Also, most important part, before becoming role players and employees, they are people. Things to analyse: attitude, engagement, involvement, capabilities.
  2. Systems. What tools does the company use to run business? That includes everything: HR, P2P, ERP, project management, task management, document and knowledge management. I bet many CEOs would be surprised after a thorough system audit: about the quantity of different systems and the data quality within the systems, about how far from reality are the decision paths, designed on the system.
  3. Process. The way HOW company lives and breathes. Mapping out value chains, work streams will help to understand and improve – if needed – the ways of working. I consider various KPIs (efficiency, accuracy, discipline) and, also, the results. Not only hard results, but also, softer ones – like customer satisfaction. The company might be interested in Net Promoter’s Score, while procurement might focus on the internal stakeholder satisfaction and relationships with suppliers.
  4. Structure. You might want to examine structure of supply chain, structure of the wider organization, structure of procurement department. The smaller parts have to support the bigger picture and fit into the puzzle. AND!!! – they have to work well together! I would consider also the scope – area of responsibility and authority for procurement (directs / indirects / full cycle vs maybe only internal auditor’s function); empowerment – decision making points within management structure (usually, business decisions, based on financial threshold). Communication methods and channels (tools) are another important part of the structure.
  5. Strategy. The WHAT part of the organization’s existence. What is the strategy? What is the success? What is our unique selling point / differentiation? What is the message to the outside world? What is procurement’s role in all that?
  6. Values. Another important part to focus on, which will also influence procurement. Company’s core values might go into the supplier selection criteria. Team and corporate culture will define the way how procurement will work. It would be funny to observe a CPO trying to implement OJEU or legal company’s procurement policy in creative agency’s life. Possible, but highly unlikely.

Those are my main points I study to work out strategy. Companies are different and expert judgement is vital. In case you consider to run similar exercise at your department, I am adding a Procurement strategy map 2017 03 10 to make your work easier. I would welcome any different thoughts and opinions in comments!

Strategy Map for Procurement