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Copyright © Iasta, All Rights Reserved
10 Ways to Drive Procurement Influence Using Advanced Technology
May 2, 2012
Copyright © Iasta, All Rights Reserved
Audience Profile
Has your company been involved in or have plans for a M&A within the next 12 months?
#1 CHALLENGE
hindering your company from becoming best in class in procurement…
LACK OFRESOURCES
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 4
10 Ways To Drive Procurement Influence Using Advanced Technology
IASTA hosted Webinar
May 2, 2012
Presented by: Jason Busch
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 5
A quick background on the Spend Matters family...
The team
The sites
www.spendmatters.com
First blog in sector, now much more
www.agmetalminer.com
4 years old, largest metals publication in North America
www.spendmatters.co.uk
Launched in 2010
www.hcmatters.com
Launched in 2011
Former:
Strategy and sourcing consultantsMetals traders
Heads of procurement
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 6
Our supply markets still won’t rest!
• Total cost/labor cost on the rise– Country-specific labor
– Trade/export policy
– Shipping (fuel surcharges, bunker charges)
• Currency volatility • Production capacity constraints• Lean extremes • Raw material availability (e.g.,
rare earth metals) • New regulations • Black Swan events
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 7
Think big for a moment... stepping into today’s global procurement and finance shoes
Currency & commodity volatility
Currency madness (Dollar, Euro, RMB, Pound, etc.)
Coming soon or already here: currency inflation (or deflation)/commodity inflation
Economic uncertainty
Quantitative Easing (continued)
Weak demand
Liquidity concerns, supplier access to capital
Globalization challenges
Trade imbalances, total cost hiccups (and missteps) and policy uncertainties
Different definitions of acceptable behaviors
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 8
What were the top procurement and supply chain priorities we observed last year (including finance)?
• Incremental cost reduction (including cost reduction based on total cost analysis)
• Capacity challenges (in certain markets)
• Managing the workforce:
– Contingent/services procurement
– Getting more from the procurement group
• Compliance and risk: supplier performance and visibility, operational/financial stability, etc.
• Balancing demand/supply volatility (e.g., part/component shortages for the holiday season)
• Evaluating alternative models vs. business as usual – shared services, BPO, contingent staffing (for both procurement and A/P)
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 9
What will the top procurement and supply chain priorities be for the rest of 2012 and into 2013?
• Continued focus on cost savings – either to protect fortress balance sheets companies have amassed or just to survive
• Anticipating/forecasting (cash, revenue, demand, etc.) and mapping to procurement and working capital strategies in a questionable recovery or possible recession
• Continuing to find new ways to become more efficient on the periphery (e.g., A/P, indirect spend) to focus on core operations
• Commodity, cost volatility and reducing exposure/risk
• Optimizing for total supply chain/supply management costs for procurement and payables (inventory, working capital, unit cost, logistics, tax implications, etc.)
• Risk management, albeit from an expanded perspective/definition
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 10
10 Spend Matters ideas that go beyond basic sourcing to enhance procurement’s value to the business
• Given the current market context, it’s critical to
think beyond the basics to deliver value to the
business
• Improving procurement’s value to the business
requires embracing new sourcing-related tools
(contract management, supplier management,
etc.) wrapped around basic strategic sourcing
activity and services spend knowledge to drive
additional savings
• There are ten ways (outside of transaction-
related focus areas) that we see to deliver this
new value
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 11
1: Go beyond basic eRFX and reverse auction capabilities
Advanced sourcing/optimization•Fluid RFI/RFP process
•More flexible data collection
•Supplier creativity/alternative specifications/alternative proposals
•Ability to fully explore – not just weight – all price and non-price factors in a tender
•Create and apply constraints
•Ability to run scenarios based on constraints and present a menu of outcomes for stakeholders to consider
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 12
2: Connect sourcing activity to contracts – implement savings faster and manage compliance
Sourcing and Contract Management•Link sourcing outputs to implemented savings
•Move from a static view of contracts as “papers in a vault” to dynamic usage and reference
•Use contract management as an opportunity to create greater trust and transparency with suppliers and shareholders
•Looking at contract management as an opportunity to locate additional savings and cost avoidance opportunities
•Ability to integrate with – and fully leverage – sourcing, spend analysis and related information to create an integrated contract lifecycle solution
•A user experience built around procurement and legal together to drive the contracting – and contract management – process
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 13
3: Go beyond the contracting basics
Advanced contracting philosophies •Pursue an active compliance approach that leverages internal systems and marketplace information (e.g., commodity pricing trends, currency rates)
•Make your contract management system a repository for the entire organization to rely on (procurement, legal, etc.)
•Rethink the notion of a contract– Make the contract a living document designed to manage
and govern the relationship versus serving as a static piece of paper to refer back to for re-sourcing or legal purposes
– Influence up front – introduce contract terms (e.g., indemnification) into the negotiation phase of a relationship; this can result in material savings and can foster a basis of mutual understanding and trust
– Think long-term – the ownership and transference of risk is often as important as the exchange of physical goods
Contract
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 14
4: Invest in capabilities to support basic supplier management activities
Supplier Management Activities •Supplier on-boarding (i.e., the need to efficiently electronically enable suppliers for eProcurement and invoicing)
•Supplier portals (i.e., basic portal capability designed to capture supplier information for a range of initiatives: eProcurement, supplier diversity, green/CSR, e-sourcing)
•Supplier performance and quality management (i.e., tracking qualitative and quantitative supplier performance metrics such as on-time performance, escapes, PPM; surveys such as ISO, QS, TS to qualify suppliers and ensure claimed credentials were real)
•Supply risk management (i.e., monitoring supply risk factors including financial data, operational data, compliance information)
•Spend visibility/supplier enrichment at the item level (i.e., creating a common – or virtual – vendor master with detailed and accurate information into spending data to drive sourcing strategies)
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 15
5: Leverage supplier management initiatives to drive advanced cost and risk reduction
Advanced Activities•Go multi-tier
•Embrace approaches that leverage the intersection of different datasets to drive visibility and predictive analytics (supplier performance information, supplier financial risk, geospatial, country risk, etc.)
•Invest in supply chain traceability to support the business in new ways
– Market entrance/new product introduction
– Avoidance of “conflict” items such as conflict minerals
– Certification that products do not contain restricted or hazardous substances
•Consider network, BPO and other approaches
Source: Aravo
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 16
6: Hunt for big category game (even if anti-poaching types are defending their territory)
Next Level Categories •Combine sourcing, contract management, compliance and transactional management
•High visibility (and high-value) services categories
– Marketing
– Legal
– Accounting
– Consulting
– BPO and outsourcing
•Pursue direct materials spend in new ways– Alternative specifications
– Demand aggregation
– Commodity management/hedging
– Supplier-generated innovation
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 17
7: Embrace specialists and specialty tools for advanced services categories
Supplier Management Activities •Consider specialty advisors (just as you would when buying BPO)
– Focus on knowledge transfer and building internal self-sufficiency
– Identify internal/external candidates to lead efforts for larger opportunities
•Understand the importance of generating trust within the business and winning executive support
•Use advanced (standard) toolsets when possible for sourcing activities, but leverage additional solutions as needed in specific categories (marketing spend intelligence, matters management/legal, etc.)
•Leverage a VMS for SOW/project-based engagements when required
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 18
POLL QUESTION
From a solution standpoint, what's your top investment area outside of strategic sourcing and procurement cost reduction (excluding transactional procurement)?
O Services procurement
O Contract management
O Supplier management
O Savings implementation
O Other
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 19
POLL RESULTS
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 20
8: Partner with suppliers in creative ways including targeting total cost
Focus on the total relationship cost•Understand the TCO of doing business with global suppliers
– Balance of global sourcing and regional sourcing
– Re-shoring
•Embed cost models at all stages of the sourcing lifecycle
•Put on your operational efficiency hat
– Joint cost take out programs
– Put waste in the crosshairs
– Just-in-time (JIT), vendor management inventory (VMI) and related programs for direct spend
•Understand “sweet spot” for preferred services suppliers and pooling the right set of business for them
Source: Chainlink
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 21
9: Track implemented savings, cost avoidance and results from a finance-driven perspective
Savings Implementation •Savings tracking and forecasting systems help companies drive savings opportunity identification in a way that goes beyond spend analysis
•They can accelerate the execution of savings implementation initiatives and objectives and reduce savings leakage by pinpointing and documenting specific areas where lost savings occurred
•For tracking information, users can get extremely granular with the inputs they want to report against on a high level including market indexes, rebate structures, baselines, currency rates, cost structures, dimensionality, target costing/pricing, budgets and forecasts
•On the actual reporting side, procurement leaders can define specific savings tracking mechanisms and fields (e.g., price savings, market/commodity/index fluctuation savings, currency fluctuation savings, substitution savings, batch size savings, spend reduction savings, external savings, realized savings) they wish to measure against
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 22
10: Deploy commodity management programs alongside sourcing activities
Get Serious About Direct Spend •Develop a point of view and explain to management and shareholders the underlying reasons driving commodity volatility and forecasting uncertainty •Reduce commodity exposure•Understand how to best price the underlying risk elements of contracts•Explore how suppliers price (and potentially misprice) risk •Lower overall costs (potentially) despite upward pressure on raw material inputs•Build more collaborative relationships with suppliers that help make us a customer of choice•Aggregate the buy (to enable hedging, to buy forward in rising markets, to create more effective budgeting/planning/forecasting, etc.)•Statistical modeling for demand planning and forecasting, plus more to correlate factors on the supply side. Gathering intelligence and building tools around it (looking for correlations)
Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 23
Contact details
Jason BuschManaging Director, Azul Partners, Inc.Founder and Executive Editor, www.spendmatters.com Email: [email protected]: 773-525-7406
© Joanna Martinez, May 2012, All Rights Reserved
Smarter Procurement to Drive Corporate GrowthA Partnership
Joanna Martinez, Executive Managing Director & Chief Procurement Officer
© Joanna Martinez, May 2012, All Rights Reserved
• Cushman & Wakefield, a privately held company, is one of the world’s largest commercial real estate services firms with brokerage, facilities management, consulting, capital markets, and other services.
• The company was founded in 1917 and the firm’s largest shareholder is Exor, the investment arm of the Agnelli Family.
• Cushman & Wakefield currently has 231 offices in 58 countries, and 13,000 talented professionals.
• Cushman & Wakefield was named the exclusive leasing agent for 1 World Trade Center, the Freedom Tower, by the Port Authority of New York and New Jersey. The Freedom Tower, will total 2.6 million square feet upon its completion in 2012.
Overview
Facilities Management Trends
• Facilities Management is evolving from localized building management and office services to a centralized workplace solution • Sourced through corporate procurement groups and/or consultants• Focus on operational and performance management to deliver best in class price points and service delivery levels.
Major changes in FM include:– Investments in energy and utility management – Expanding scope– Focus on enterprise goals
• Sustainability and LEEDs mandates• ISO compliance• Diversity
– Risk Management
© Joanna Martinez, May 2012, All Rights Reserved
Critical Systems Energy Management Emergency Preparedness Work Order Management Predictive Maintenance Housekeeping FM Staff Development Project management, and
resulting partnerships with GC’s, subecauseontractors
Compliance & Regulatory Management
EH&S Administration Sustainability Program Financial Management &
Reporting Office Support Services Knowledge of building codes
and regulations, and how they differ across the globe
Many Standard FM Services and Resulting Skill Sets are Not Necessarily Procurement Core Competencies
But our core competencies are complementary, and by working together we can do a faster, more effective job for our clients and our suppliers
© Joanna Martinez, May 2012, All Rights Reserved
The Circle Charts: Partnering to Better Serve our Clients
Former Process
Current Process
FM ProfessionalsRFI, RFPSupplier SelectionNegotiationsOngoing SRM
?
PurchasingSpot Buys for Corporate SpendTransactional ProcessingOrder EntryDelivery Tracking
FM ProfessionalsBusiness RequirementsDetailed SpecificationsScope of WorkFinal Decision
Corporate SourcingProcurement Tools and TechniquesManage Strategic Sourcing ProcessTotal Cost Analysis & MeasurementsCategory Management
© Joanna Martinez, May 2012, All Rights Reserved
Supplier EvaluationSourcing StrategiesNegotiationsContractsSupplier Mgmt
What Happens When a New FM Account Relationship Begins?
FM Action
• Manage people transition
• Organize contracts and understand key expiration dates
Related Procurement Competency
• Contract Management Systems
© Joanna Martinez, May 2012, All Rights Reserved
© Joanna Martinez, May 2012, All Rights Reserved
How a Contract Management System helps the Strategic Sourcing
process:
1. Automated alerts and reports on contract expiration.
2. Captures payment terms to support early payment discounts
3. Provides visibility to supplier rationalization options
4. Helps the accrual process by providing visibility to contractual
commitments
5. Assists in assessing compliance to signatory policy
6. System features help employees know where to go for purchases
7. Improves planning:
- Workload management
- Business cycles (union contracts, energy peaks, etc.)
Contracts Management Benefits
© Joanna Martinez, March 2012, All Rights Reserved
© Joanna Martinez, May 2012, All Rights Reserved
• Note: The trend line indicates the number of contracts identified, including contracts in queue.
Number of Contracts Archived
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Feb Mar Apr May Jun Jul Aug Sep Oct No7 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Information = Sourcing Projects
A Contract Management tool can be a powerful assetand a “To-Do” list for years to come
FM Action
• Manage people transition
• Organize contracts and understand key expiration dates
• Assess for cost reduction opportunities
Related Procurement Competency
• Contract Management Systems
• Global processes and linkages
© Joanna Martinez, May 2012, All Rights Reserved
What Happens When a New FM Account Relationship Begins?
Global
Local
Specific Generic
Suppliers ability to deliver
Business Needs
Client Preference Global
Regional
Leases
Maintenance Help Desk
Procurement Understands Global Relationships …and understands that not all spends should be global
Elevator Maintenance
© Joanna Martinez, May 2012, All Rights Reserved
MRO
Security
Local
FM Action
• Manage people transition
• Organize contracts and understand key expiration dates
• Assess for cost reduction opportunities
• Support facilities on behalf of the client
• Manage projects on behalf of the client
Related Procurement Competency
• Contract Management Systems
• Global processes and linkages
• Different sourcing approaches
• Automate/ apply sourcing tools to the general contractor relationship
© Joanna Martinez, May 2012, All Rights Reserved
What Happens When a New FM Account Relationship Begins?
© Joanna Martinez, March 2012, All Rights Reserved
Supported the facility management sourcing team consolidation for the integration of two large banks.
Team charter, spend analytics, supplier leverage opportunities
Utility company used eProcurement tools to speed up NDA process for 30 potential vendors
Large bank reduced cost audio conferencing via benchmarking
Created a client specific Contract Management System template as part of new client on-boarding.
Allowed facility teams to quickly identify sourcing opportunities
Enabled advanced negotiation tools to allow immediate pricing feedback to suppliers.
Immediate Pricing Feedback Tool – eProcurement tools for General Contractors to obtain “Best and Final” Pricing
Dynamic Bidding – spreadsheet bidding over several day to allow subecauseontractor input/ participation
Corporate Procurement Supports Facility Management
Budget Actual Savings % SavingsElectrical $270,000 $229,588 40,412$ 15%Doors Frames Hardware $170,000 $132,000 38,000$ 22%Glass Glazing $100,000 $89,500 10,500$ 11%HVAC $146,000 $157,900 (11,900)$ -8%Drywall Accoustical $205,000 $140,500 64,500$ 31%Paint Wallcover $60,000 $49,000 11,000$ 18%Flooring $140,000 $138,500 1,500$ 1%Millwork $140,000 $116,000 24,000$ 17%Mechanical $1,400,000 $1,224,765 175,235$ 13%Electrical $1,300,000 $1,175,000 125,000$ 10%Drywall $700,000 $574,615 125,385$ 18%Computer Flooring $146,000 $138,730 7,270$ 5%Paint $98,000 $73,900 24,100$ 25%Millwork $85,000 $76,000 9,000$ 11%Cabling $592,000 $522,382 69,618$ 12%Furniture - new $1,847,850 $1,129,616 718,234$ 39%Car Parks - 300 $600,000 $443,000 157,000$ 26%Carpeting $277,500 $198,860 78,640$ 28%Carpet II $580,000 $385,000 195,000$ 34%Movers $120,000 $55,453 64,547$ 54%Dallas Office VOIP $165,000 $147,000 18,000$ 11%Glass Door & Glazing $124,000 $117,500 6,500$ 5%Ceiling $215,000 $143,000 72,000$ 33%Telecom Software and Hardware $335,000 $261,000 74,000$ 22%
Total $9,816,350 $7,718,809 $2,097,541 21%
Savings Beyond Standard General Contractor Methods
© Joanna Martinez, March 2012, All Rights Reserved
© Joanna Martinez, May 2012, All Rights Reserved
ELEC
TR
ICA
L
C&W’s Reverse Auction Tool
C&W’s Immediate Feedback Pricing ToolC&W’s Online Pricing Tool
© Joanna Martinez, May 2012, All Rights Reserved
High
Low
High
Historical Procurement Expertise and Effort
Category Improvement Opportunity
Significant Benefit Opportunity
Strategic Sourcing Process Opportunity
Creative Solution Opportunity
Category Content and Technical Knowledge
OPPORTUNITY ANALYSIS
High Level Potential Cost Improvement
Low
20%+ 10%+
30%+40% +
The Process…
We found a place with no gatekeeper: The Process Itself!
© Joanna Martinez, May 2012, All Rights Reserved
And we applied the “Captain Cook” method of sourcing engagement
© Joanna Martinez, March 2012, All Rights Reserved
© Joanna Martinez, May 2012, All Rights Reserved
Portfolio
Professional fees
Rent
Capital
Print and Fulfillment
MRO
Travel
Tech - Maintenance, Leases
Recruitment, Training, Outplacement
Office Equipment & Services
Telecom
Tech - Consulting
Meetings
T&E
Promotions and Servicing
Misc. Employee Benefits
Employee Fringes
Misc. Business Fees
…Skip the obstacles and go back later
Sourceable Spend
© Joanna Martinez, May 2012, All Rights Reserved
Annualized Value of Cost Reductions (P&L and non-P&L)
Start Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
$
… because you can build a “tidal wave” of Justification.
Copyright © Iasta, All Rights Reserved
Q&A: Of the 10 ideas that go beyond sourcing, which do you think is most underused?Jason: We think Supplier Management is becoming a very big deal, especially if you can manage supplier relationships effectively and you have all the data to do so on a vendor & SKU level (for direct materials, safety, environmental issues). More broadly, we think there is so much potential in supplier risk management, supplier performance management and supplier development opportunities. Over the past 6 months RFP’s have been increasing in supplier management. It’s a smaller market, but advanced procurement organizations are determining how they can get on top of this information. It’s not just compliance or driving effectiveness in certain programs (like risk or diversity), there are also actual savings to justify the business case.
Copyright © Iasta, All Rights Reserved
Q&A: Based on the poll released in your presentation, were you surprised that “Savings Implementation” won the day?Jason: Yes, companies try to rig spend analysis to monitor savings per spend over time and tying that into implementation, but in many cases you see companies monitoring the implementation of savings in basic workflow tools, assignment tools and even complicated excel models. There’s been a real wake up call to the savings that procurement has generated on paper and a lot of it is not incumbent savings, but has had a hard time of implementing. Being able to track effective implementation is key. That goes back to contract management as well and the contracting process, which are huge hurdles regarding why we don’t see greater introduction of more suppliers despite rationalization programs; it’s painful implementing these suppliers. If you can streamline the contracting & supplier management process then you have a much better shot of bringing new qualified suppliers on board, which can go for all types of spend. I think one of the travesties of supplier diversity is a lot of companies have punted to their tier one suppliers to manage supplier diversity on their behalf and rolling-up those metrics because it’s hard to work with smaller suppliers if you’re trying to rationalize the supply base, but it doesn’t have to be. If you can automate a lot of these processes then you can get beyond having to add bodies to manage contracting vendor onboarding and the alike.
Copyright © Iasta, All Rights Reserved
Q&A: As it relates to savings implementation, as a technology provider, what is Iasta doing in the market today?
Scott: Iasta SmartAnalytics gets you places, as far as keeping track of suppliers, reporting on supplier scorecarding information. I think our answer over the last few years has been a little different than just technology. We are seeing Iasta’s Client Strategy Group, Iasta Acceleration Center, human factors and our industry experience become a big deal in how we’ve helped our clients regarding savings implementations over the last several years.
Copyright © Iasta, All Rights Reserved
Q&A: You suggested to skip the obstacles and go back later. How do you prioritize which source-able spend categories to tackle first?Joanna: Do some detective work and understand the pain points in the organization. Ask yourself, “What’s working?” “What’s not working?” In one business I was in, travel spend wasn’t working. Although it wasn’t a large spend category compared to the others, making an improvement there helped us get some credibility and use it as a spring board for other projects. In other place- financial services, it was a problem getting financial reports out on time, which is an issue because there’s a government/FCC mandated schedule by which reports need to be mailed out to shareholders. Even though a lot of that is moving to the web there are still certain things where physical copies have to be made. So that was a bit of a supply chain problem we fixed. It’s that kind of thing… just asking in the organization and accepting the fact that it might be small. I was at a CPO roundtable a couple of weeks ago and the question came up relative to marketing spend and there were lots of people around the table who were effectively running the marketing spend for their companies. There were 2 dozen people there and 1 person said he went right to the senior person and started with the hardest, most difficult, complex project first. Every other person in the room, including the really big name companies with successful sourcing organizations, said the opposite. They said they started with the pain point areas, and even though many were modest, they built from there.
Copyright © Iasta, All Rights Reserved
Q&A: Dealing with how procurement can work with finance, what key words can be used to build credibility and speak the financial language to ensure successful collaboration? How important is that in terms of driving value?Jason: 1) Empathy the exact role and what they’re after- you need to understand how / what Finance is being measured on. Someone in AP is going to be incentivized differently than someone in treasury. Figure out what their goal is in more effective supplier relationships, implementing savings and working capital. You’ve got to think of yourself as that internal consultant/ psychologist to understand what they’re after. 2) Skill set/ knowledge. Being able to read a balance sheet, understand a PNL and how companies are measured more broadly, being able to articulate what enterprise value is, etc. It’s critical. If you don’t have an MBA, it’s not an issue, you can learn these things. But having a basic knowledge on the finance side and managerial accounting side is very important as well. And that’s just finance. If you’re going to engage the general counsel/ CMO, having the empathy in those areas is just as critical. I don’t want a generic consultant. I want somebody who knows marketing. I want someone who knows legal to walk me through that. If your spend is high enough, hire someone within or bring in someone as a specialist on a full time basis. There is no substitution for that.
Copyright © Iasta, All Rights Reserved
Q&A: You probably needed executive leverage. Then again, it seems to reason that you use a lot of collaboration. Can you speak a little on that?Joanna: I think Jason was spot-on in his observation. There are a couple other points. 1) you need to admit your expertise (or lack thereof) in certain areas instead of moving forward with something you know nothing about. It’s important to be honest. One of the things that helped me in facilities management is I said early-on “I don’t understand anything about ‘this’ but I do understand ‘this,’ so how do we work together because I think I can help you in this way.” I think if you’re a decision-maker or the leader of the team, I’d encourage you to think about having your team members co-located with your internal clients. I think there’s no substitute for being there. Particularly when you’re trying to get a relationship up and going, if you can think about “In my case, I have folks who are sitting with facilities management people, who are sitting with the marketing community or other key decision-makers, and I don’t have a large staff.” But by understanding they’re better off being as close to their internal clients as possible to really get embedded in the organization by giving up that personal ego thing of having your staff clustered wherever you are. It’s an important step forward in terms of getting folks engrained and through the natural course of your team, attending other people’s staff meeting, coffee pot chit chat sort of thing, etc. It’s another thing to get invited to the party and being involved in activities that are coming up.
Copyright © Iasta, All Rights Reserved
Q&A: Continued… Scott: As a provider, over the last couple of years collaboration is a soft term
that we’re starting to see more often. A lot of democratization of data itself, marketing data inside of the spend analysis tool (Smart Analytics), finance data lying right next to/ integrated with the spend analysis data. Data systems that used to be in their own silos are now not just being requested, but required to comingle with each other. User pools of the technology are as collaborative as we want them to, which has been a huge movement for us as a provider over the years. I think that speaks to the softer point of collaboration, we’re actually starting to see now, all of that data come together into one system which as a technical provider is something we hope to be helpful in.
Copyright © Iasta, All Rights Reserved
Q&A: Clearly, what you’ve done has required investment on the software side. You’ve mentioned using category experts, or maybe even a 3rd party. How did you go about justifying ROI?Joanna: There’s less extent than you’d think. We didn’t go out to the big names in this space, the very expensive/ established providers. In each case, we went with people. Without this being a commercial for Iasta, the reality is we went with companies that have the right tools that were a price point that was palpable to the organization. Some of the very big names that have been out there with the big ERP systems where everything is tied together, is not what you really need in a lot of cases. Usually, something a lot smaller is a lot more digestible to the company. Another thing, in order to get category experts and things like that, you can do a lot of personal networking. I’ve been in environments, financial services in the early 2000’s when there were lots of investigations going on with financial services practices and money was very tight. Or real estate a couple of years ago in the recession, where there wasn’t money to join large organization or go to expensive conferences, you still figured out ways to do webinars like this to learn… to do other kinds of networking things and lots of times you may know something about a category or someone else knows about legal spend, so you trade the information.
Copyright © Iasta, All Rights Reserved
Related Resources
WEBCASTBuilding Blocks to Achieve Sourcing Credibility: Gain Fortune 500 Value with Mid-Market Resources
http://www.iasta.com/resourcecenter_webcasts_buildingblockstoachievesourcingcredibility.phtm
ESOURCINGWIKI ARTICLEContract Management 101
http://www.esourcingwiki.com/index.php/Contract_Management_and_Compliance
WHITEPAPERDynamic Procurement: The CPO as a Collaborator, Innovator and Strategist
http://www.iasta.com/resourcecenter_aberdeenbenchmarkstudies_dynamicprocurement.phtm
WHITEPAPER Spend Analysis: The Nexus of Spend Management
http://www.iasta.com/resourcecenter_aberdeenbenchmarkstudies_nexusofspendmanagement.phtm
IASTA INSIGHTS NEWSLETTERTaking Sourcing Beyond Auctions
http://view.s4.exacttarget.com/?j=fe8d16757063027d7c&m=fea415707566017d76&ls=fdfa1672766c067477177170&l=fec51570706c017a&s=fe5f11767761077f7612&jb=ffcf14&ju=fe5c1678776205797d10&r=0
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United Kingdom
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