Building Blocks to Achieve Sourcing Credibility

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June 8, 2011 at 11AM (EST)

"Building Blocks to Achieve

Sourcing Credibility"

Copyright © Iasta, All Rights Reserved

Keynote Speakers Moderator

http://www.iasta.com/


Audience Profile



Credibility

Definition of credibility… TRUST

Your reputation is:

You have the expertise

You bring out the best in people

You work well with others

You focus on important issues

You listen and communicate well

























Four Tactics



Tactic #1: Choose your path wisely

Do not oversell cost reduction

Work with stakeholders that are open to collaboration

Get quick wins and sell it internally



Mini Case Study Choose your path

Internal Analysis

Workflow

Priorities Goals

Core Challenge:

Lack of spend info & savings to justify acquisition

Lesson Learned: By analyzing and grading projects based

on key criteria, teams can quickly determine how to prioritize

their projects; leaving behind a proven methodology for

planning strategic initiatives in the future.



Mini Case Study Choose your path

What went wrong…

Selected indirect projects by spend size as top factor

Some 1st projects were “sacred cows” Marketing data, media buys

and 3rd party financials audit

Sourcing engagement used to train Commodity Managers

Backfired, sourcing lost credibility

Lesson Learned: Companies should only source

“sacred cows” after credibility has been built.

Consumer Products Manufacturer



Tactic #2: Identify and understand the data

Know your spend

How much is there

How much is influenced by

sourcing

Success stories of

spend

Know your key metrics

Past, current & scheduled

projects

Savings

Know your key suppliers

For critical categories

Influence their performance

via SPM



Tactic #3: Manage the gaps

• Right people with the right skillsSkills gap

• Spend/Contract data

• Supplier performance, risk & mgmt

• Creates the conduits for effective internal communication

Data/Visibility gap

• Understand goals and objectives of stakeholders and map procurement to them

• Build relationships / walk the hallsInfluence gap

• Bridge the disconnects and break down legacy issues

• Understand that finance can be your greatest ally

• Deliver the results with effective descriptions

Communication gap

• Translate the value to the stakeholders

• Responsibility is on Procurement to disclose the value to the organization or you will not get buy in

Culture gap



Tactic #4: Develop a Center of Excellence

Technology and tools

Spend analysis

Contract Management

Sourcing (RFx, optimization)

P2P

Creates the IQ of the organization – essentially the nerve center for a best in class process

Build the organization discipline for evolutionary cycles

which generate greater spend under management



Mini Case Study Center of Excellence

Avoid stop-and-start rollout program

Maintain momentum: Targets Bespoke training Reporting/ tracking KPI’s

New technology & rollout program: One view of truth New Strategic Sourcing Group Increased knowledge transfer

Lesson Learned: Create a strategic plan and collaborate

with other business units to create sourcing center of excellence.



Summary

Credibility is not built overnight

Next Steps…

1. Spend Analysis

• Will help you fill data gaps

• Will help you know your data

• Will help you choose your path

2. Center of Excellence

• Centralize technology

• Business processes

• Empower people



Q&A

Please submit your questions…



Question 1

Are there methods to measure the effectiveness or

productivity of category managers?

Yes- quite a few – anything from:

• # of categories

• #of events held

• Overall spend in those particular categories

• How that category translates into new and emerging

products



Question 2

How long did it take before FirstGroup plc started realizing

savings and gaining an ROI?

Within the first 3 months (wave 1), we started seeing benefits of

the sourcing program. We split the project phases into wave 1,

wave 2 and wave 3.

As we went through the ways, the projects became more

technically difficult; savings took longer to implement.

We didn’t see 100% of savings in an award position until about

12 months later.



Question 3

Relative to your chart regarding average

savings by category, have you noticed any

significant changes or trends in what people

are frequently doing and if the are any

changes in the savings on average?

The numbers in these charts are from research we

did 6-7 months ago.

The biggest difference is about how the service

providers / vendors have added more savings into the

bucket and also the different variety of categories.

More demand management techniques are being

applied

Some categories have gone up and some have gone

down- it all depends on:

• Organization’s maturity

• Collaborating with stakeholders

• Working with 3rd party providers and how they bring

about value add



Question 4

What are some tips to help sourcing teams take over some

unmanaged spend in non-traditional areas such as Legal

and Finance?

Develop relationships with those people

• Work out their influences and identify decision makers in each of those sourcing

groups

Select a project that might have little impact on their daily lives,

but allows you to demonstrate a big impact on something they

have overlooked.

• Example: office equipment

Approach legal about helping them manage their contracts

better and improve compliance

• Use their language to better improve your credibility



Question 5

Can you give some examples of selling sourcing credibility?

Procurement’s job is to sell situational influence, not positional

leverage.

The purpose of procurement is to lead internal customers to a

logical conclusion about what is ultimately in the best interest of

the organization.

When presenting your business case about a large opportunity in

a particular category:• Use data gained from spend analysis.

• Meet with everyone in that department.

• Present the data in terms of questions such as, “How would you approach this if we

worked together?”

• If they say they want to get back to you and schedule another meeting – the credibility

and selling; you don’t need to go in banging your shoe on the table and

trying to take over the initiative to drive down cost.

• Identify the problem, mitigate the risk and look for the threats in real-time.

• Let the stakeholders give you feedback on the best way to approach the

initiative and develop a secondary idea (if needed).



Question 6

In your opinion, what are 1-2 key activities (that have

greatest impact in the least amount of time) that

procurement can do to set the foundation of credibility?

Communication is always king.

• As a sourcing pro, you need to be involved in every aspect of communication that

is taking place on a project you are working on.

• If you are unaware of the discussions taking place about your project, it could

present a lot of problems.

Obtain strong support before escalating to executives.

• Communicate and collaborate with departmental leadership / key stakeholders

before reaching out to the business owners; get them on board to support the

initiatives you are pursuing.



Question 7

What are some good tactics or methodology for performing

an honest assessment of a sourcing teams skills so that

they know what the next steps should be?

Gartner recently fielded a study about sourcing talent- we will

have additional data the end of August. What we are asking

goes above and beyond an assessment:

• What have you done in the last couple of years?

• What are you doing today?

• Where do you want to go in the future?

Ask what you need to make your team successful.

• Do you need more category managers?

• Do you need more advocates in the business?

• Do you need different financial perspectives?



Question 8

When publishing savings results, how do you avoid the

potential embarrassment of stakeholders who were

historically paying a higher price? A lot of it is around sharing with those stakeholders that you found additional savings

based on their initial work and identifying the additional benefits from the new

sourcing process.

Explain that you found a new path to take with suppliers that takes costs out that you

hadn’t identified previously.

Take a team approach- as Dave said- it’s about situational influence, not positional

leverage.

Stay to the facts; know where you are going and you will not make an embarrassment

out of the organization.

Show that you have done this together and that the combined efforts jointly delivered

value; it shows you are a good team and can come together.



For more info

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http://www.iasta.com/resourcecenter_aberdeenbenchmarkstudies_structuredrollout.phtm




http://www.iasta.com/resourcecenter_aberdeenbenchmarkstudies_spendanalysiswikipaper.phtm

http://www.iasta.com/documents/2010/IastaCaseStudy_esourcing_FirstGroup.pdf

http://www.iasta.com/documents/2010/IastaCaseStudy_SourcingAdvisoryServices_Michaels.pdf

http://www.esourcingforum.com/archives/2011/05/25/use-best-practices-to-drive-procurement-credibility-at-the-c-suite/



http://www.esourcingforum.com/archives/2011/06/03/what-language-are-you-speaking/

http://www.esourcingwiki.com/index.php/Sourcing_Leaders