Unless your company is amongst the very largest companies in the world then chances are your Procurement team will, at some point, be dealing with Suppliers that are larger than your company. They are the Elephant in the room.
In a function such as Procurement where negotiating is a central part of the role, leverage is a critical element in those negotiations. And in many cases size translates to leverage.
So how do you negotiate with a Supplier that is larger than your company and has greater perceived leverage?
How do you negotiate when your Supplier is the Elephant in the room?
There is a great line in one of the Spider-man movies, “With great power comes great responsibility!”
Procurement organizations can have the power to spend and control as much as 75-80% of a company’s revenue. Now that is power! And with that power comes a huge responsibility.
Less enlightened organizations still think of Procurement as a back office function processing transactional purchase orders and standard contracts. But better informed and leading organizations see and recognize Procurement for its strategic value.
What actually is the power that is within Procurement’s mandate? And what responsibility does Procurement have commensurate with that power?
Every day there are individuals and teams all around the world who are making a difference. They are driving transformational change in their jobs, in their Departments, in the Organization and in their Companies. And they are achieving amazing results that defy what they previously thought possible.
We want to hear your stories and we invite you to share those stories on https://supplychaingamechanger.com so that we can all applaud, and learn from, your tremendous efforts.
What is the role of the Chief Procurement Officer? And what is the role, and difference, of the CPO as compared to the Chief Value Officer?
Procurement is the process of translating customer requirements into the selection of highly capable suppliers, to timely, accurately, cost-effectively deliver high quality, mission-critical inputs and raw materials to internal customers. As well as assuring the accurate receipt and timely payment of all accrued invoices.
Regardless of what industry your company is in you are dependent on suppliers to operate your company. Thus it makes sense to have a Supplier Relationship Management program.
Suppliers provide components for products you manufacture and sell. Suppliers provide services for products or services you take to market. Suppliers move your goods from one point to another. And suppliers provide the goods, supplies, software and other items required by every function in your company to conduct day to day business.
Without suppliers no company could survive, let alone thrive.
Yet historically too many people have treated suppliers transactionally with no to little regard for fostering mutually beneficial relationships.
Going forward it will no longer be sufficient to just have passive supplier relationships. Companies must have a formal, strategic Supplier Relationship Management (SRM) program!
Previous CIO of General Motors (GM), Tony Scott, was once quoted saying,“GM is a highly collaborative organization; we rely on a whole tier of suppliers for everything that we do.” They rely on collaborative innovation.
Our organization’s products, customers, and profit, are ultimately a byproduct of the global supply chain networks that operate on a daily basis to add value through collaboration. The complexity of global supply chains – especially in organizations like GM, often the elephant in the room – require hands-on relationship management of suppliers to ensure that supplier collaboration will lead to added value, and innovation.
It’s nice to see that their previous Chief Information Officer had enough perspective to recognize their suppliers’ importance.
Suppliers are an intrinsic part of the Supply Chain. It does not matter what business you are in, what products you make, distribute and sell, or what part of the world you are in. And it doesn’t matter where in the Supply Chain you are. You can not accomplish anything without collaboration with your Suppliers.
Yet I have seen, like many of you, Suppliers treated in many different ways. No matter what the circumstances are poor treatment of Suppliers is never appropriate. Given that Customers fundamentally need their Suppliers to be successful why do people treat them badly? And how do we ensure there is a healthy and productive relationship between Suppliers and Customers?
Working together with your Suppliers is always a formula for success!
The term was coined over 35 years ago but still to this day there are a large number of different definitions of SCM.
To someone who is starting out their career, or who is new to the field of Supply Chain, it is understandable that there may be confusion as to the definition of SCM.
But the reality is that there are many expert individuals and organizations who define Supply Chain differently. Are they really that different or are there just subtle nuances in what some people consider SCM that others do not?
Watch our video to learn more about how people define Supply Chain Management!
Over these past 28 years of my career in Procurement (yes I started when I was 12), I’ve had the privilege and pain of seeing, not just procurement, but many different types of Transformation initiatives succeed and, unfortunately, fail. Let’s discuss why procurement transformation can fail.
It’s a good question. We often see these terms used interchangeably, but there are some concrete differences between Procurement and Purchasing such that we think they are two different practices, each with their own set of concerns and skills.
Supply Chain is a very difficult business area to work in. It is not for the faint of heart. But the fact that it is such a challenging area, promising both risk and reward, is one of the things that makes it an exciting career path. At any point you can be on the Naughty list or the Nice list.
These are hard jobs. I’ve heard it said many times that just staying afloat in Supply Chain is success because there are so many things that could drown you from one day to the next.
And even though the Supply Chain is absolutely essential for running virtually any business the Supply Chain team doesn’t always get the recognition they deserve for keeping the company afloat.
So we felt that it was time to sit back and reflect on what kind of year you’ve had and think about what you’ve done, what you’ve overcome, and what you’ve accomplished.
What do you think? Are you on the Naughty list or the Nice list?
The last few years have seen a lot of real (and over) hype associated with the emergence of Software Robots (called Bots/Bot) and Procurement Bots which are disrupting the legacy procurement processes involving human interface.
This research paper introduces the concept and evolution of the Bots, their characteristics with focus on Procurement processes, the Pros and Cons and debates on the transformation of the procurement function (vs destruction of human interface).
In summary – Bots will have a high appeal on the transactional and digital side of procurement processes and will gain exponential growth in the coming years with the advent of cognitive and machine learning tools.
In the fast-changing world of strategic Procurement, certain categories of spend get all the thunder: IT Procurement gets to help drive a company’s innovation. Business Services Procurement gets to restructure a company’s operations and drive competitiveness. Travel Procurement gets to look at pictures of exotic destinations all day (just kidding). But what about tail spend?
And most large companies are well aware – by now – of the cost savings and strategic advantages of being more strategic about the way you buy things in an organization. For the most part. For most of the stuff a company buys.
But there’s another sort of spend that never gets any love, a sleeping giant that’s actually costing companies millions of dollars and opening them up to risk: Tail Spend.
At Supply Chain Game Changer we believe in sharing experiences and expertise from people in every industry and from across the globe. As such we have introduced our “Seasoned Leadership in Action™” Interview series at Supply Chain Game Changer. This interview is with Stephany Lapierre, Founder and CEO at tealbook.