Is your strategic sourcing process really strategic? Or is it tactical? What steps have you taken to streamline category management by addressing “value-destructing” processes?
In Episode 64 of The Sourcing Hero podcast, Una’s host Kelly Barner interviewed Patrick Jonsson, Founder of DigiProCure, to understand the pain points preventing modernization, the key to streamlining sourcing, and his tips on practical enablers that drive change.
Stone-age Procurement
Jonsson believes there are two sides to procurement: progressive organizations such as Maersk that have readily adopted modern technology to execute and automate processes; and the rest of us – companies that have stalled in maturity and are stuck in the “stone age”.
“This is an adapt-or-die moment," says Jonsson. “The number of start-ups is exploding with a lot going on in the digital procurement space. Some companies are starting to adapt by getting on the bandwagon. But most are not – they may not necessarily die tomorrow, but they will become laggards.”
“More people are getting it [recognizing the importance of adapting], but most of the time, people are just talking about how we can get cost-out."
Pain points
Jonsson nominates the three most common pain points organizations need to solve for before moving up the maturity ladder:
- Fragmented processes and technology that hold back productivity, automation, and integration.
- A short-term, operative focus: “We need to take a step back and have a longer-term strategic focus to work out how to create real value."
- Fragmented procurement skillsets, especially in relation to digital procurement and processes.
Tactical tasks and processes
Barner believes that rather than being embarrassed by the tactical elements of our workload, procurement should embrace these crucial tasks. “The strategic work is the exciting stuff … but we need to acknowledge that both types of work exist and they both need to be done well if procurement’s results are going to meet expectations.”
Jonsson asks if “strategic sourcing” is really strategic, or is it tactical?
“Being strategic means understanding the market dynamics, disruptions, creating a vision, doing a SWOT analysis, working with Porter’s Five Forces, and developing category strategies. But strategic sourcing is more tactical: you’re executing on procurement optimization projects that are an outcome of strategic work.”
In other words, if you’re following your five-to-seven-step sourcing process and checking things off as you go, that’s a tactical process. But this is still vital, and that’s what delivers results.
Practical enablers for streamlining the category management process
To start a paradigm shift, Jonsson recommends:
Rethinking your team structure
Are you giving your team enough time for strategic thinking? Dividing your team structure into tactical and strategic roles will help ensure operational work and fire-fighting doesn’t continually push out strategic planning.
Addressing value-destructing processes
A value-destructing process means you end up with less than you started with. For example, a process that is designed to save time may end up inadvertently eroding quality or value-for-money.
“Identify the heaviest, value-destructing processes that can easily be improved first,” says Jonsson. “Look for processes that exist across silos and consider establishing process-owners and a cross-functional team to address them, then build from there.”
Hiring and training
Hire team players and provide custom training related to the role. Don’t accept standard, out-of-the-box training from consultancies.
Start with simple tools
Purchase user-friendly, intuitive tools that are as easy to use as an iPhone or Facebook. “Don’t try to build a moon rocket! Start small, and start practically. Keep it simple by beginning with a spend overview or a contract overview tool.”
Tracking simple KPIs
Start by tracking simple metrics such as number of e-sourcing events or e-auctions, and slowly build up a more holistic suite of KPIs based on activity-based costing.
For more insight on streamlining the category management process, check out this episode of The Sourcing Hero podcast:
