Art of Procurement

Whether we are responsible for Procurement and our stakeholder is the c-suite, or we are developing a Category Strategy and our stakeholders are the business users. Alignment continues to be one of the greatest challenges for procurement. Ultimately, it becomes the differentiator that determines whether you are perceived as being a trusted advisor or a back office function. Indeed, it is not possible to become a mature procurement organization without true strategic alignment, at scale. How can that alignment be sustainable, and not contingent only upon a team member's personal relationship and rapport with an individual stakeholder, or group of stakeholders? There is one tactic that consistently works. In today's show, I will explore why treating your senior level stakeholders as investors in the company of "procurement" is key to building alignment - and I'll share how you can get started!

I'm joined today by Anthony Clervi, President and CEO of UNA, a group purchasing organization (or GPO). He joined us last month for an AoP Live session that proposed an alternative approach to 'automating' procurement – one that doesn't involve robots and doesn't cost a dime. As the opening quote suggests, our preconceived notions can often prevent us from leveraging the full range of options available to us. Acting without being fully informed can be a huge misstep for procurement, given that our purpose is to identify and compare as many qualified solutions as possible for every business need. Since many procurement organizations do not have experience with a group purchasing organization, everything we learned about what GPOs are NOT is just as valuable as what they do and the opportunity they represent. GPOs are NOT: - Just for small companies - Just for hospitality, healthcare, and higher education - Just about savings - Just for indirect spend - And most importantly, GPOs do not represent a competitive threat to in house procurement.

The only guarantee that comes with a transformation journey is that there will be 'twists and turns' along the way. And since no organization can escape the unexpected, how procurement leaders makers handle those twists and turns becomes a critical differentiator and success factor. While I was at ProcureCon Indirect East, I interviewed Dave Quillin, Manager of Procurement at Alliant Credit Union in Chicago. I last interviewed Dave in early 2017, when he was at the end of his first year of procurement transformation. This conversation gave us an opportunity to get caught up on the progress his team and organization have made over the last two years and hear about what he has discovered along the way. The Alliant procurement organization is small, which forces them to prioritize strategically, leverage every resource available to them, and distribute some of the activities that would be centralized in a larger company. But does that make them completely different from big procurement organizations? Absolutely not, says Quillin. As he points out, even a 50 or 100 person procurement team will eventually tap out on resources or be asked to act on category expertise they do not possess. Perhaps his greatest lesson learned of all from his transformation journey to date is that those 'twists and turns' are the status quo. Adjusting to them, and designing every process with flexibility in mind, even governance and compliance, will likely make all the difference in the journey forward from this point. In this conversation, Dave Quillin discusses: • How small procurement teams can build (or access) specific category expertise • The talent requirements, particularly in the area of soft skills, that are absolutely mandatory in a smaller organization, and why Dave sees that as an advantage • Why implementing all P2P modules at once – even in response to stakeholder demand – may not be the best approach. • A key piece of management advice from a former colleague that has made all the difference on the Alliant Credit Union transformation journey.

Everything procurement delivers – from savings to risk mitigation to value – is predicated on having access to clean, trustworthy data. If this foundation does not exist or if it is shaky, then buyers don't know how much the company is spending with a given supplier, let alone how they can improve the efficiency or impact of a given spend category. While I was at the Ivalua NOW event in Paris, I interviewed Cyrille Naux, Purchasing and Supply Chain Vice-President at Chassis Brakes International, a multinational manufacturer of automotive brakes and brake components. He gave a keynote presentation about his company's procurement and supply chain transformation journey – one that is still underway. Unlike industries such as retail and professional services, which start by managing indirect spend and then gradually transition to influence directs, most procurement teams in the automotive space take a direct-spend first approach. Direct spend suppliers are large, global, and absolutely critical to the company's operations and their competitive advantage. Strong executive mandates bring the management of direct spend within easier reach for procurement than 'messy', non-transparent indirect spend. For Chassis Brakes, the first step to manage their spend was supplier consolidation: reducing direct spend suppliers from 12,000 to 6,000 (with an eventual goal of 2,000) and indirect spend suppliers from 10,000 to 4,000. They have also taken a hardline approach to supplier master data cleansing and standardization which led to a high quality supplier database they continue to work hard to maintain.

When procurement talks about transformation, we are usually referring to the critical changes we need to make to our own talent, processes and technology. But does the opportunity exist for procurement to transform the business as a whole? Evidence from the team at VSP Global suggests that it does. I interviewed two members of the VSP Global team, Nathan Haydn-Myer, Manager of Procurement Operations and Insights, and Siddharth Ramesh, Manager of Corporate Procurement about their dynamic program to centralize procurement and maximize savings, Spend it Like it's Yours (SILIY) with the help of "Moolah" the home-grown procurement mascot. As they were quick to admit, procurement can't promise to be everything to everyone, but that isn't a reason not to have broad, open-ended conversations with internal stakeholders. In fact, the same collaborative approach that led to the creation of Moolah (a silly - or siliy – character with a serious message) also made it possible for procurement to help the VSP sales team respond to RFPs. While VSP has received industry-wide attention and acclaim for their approach to centralizing procurement, it wasn't an easy journey. They were tasked with centralizing procurement and driving savings WITHOUT a mandate. The journey also took longer than outsiders might expect, requiring several years to execute and leading to some amount of natural but healthy turnover.

It is impossible to have a forward-looking discussion about procurement without digital transformation and automation coming up. That said, figuring out what their inclusion means on a company-by-company basis will differ drastically – creating a unique challenge for every CPO who decides to lead their organization on a digital journey. I'm joined today by Kris Koneru, the Business Practice Head of Sourcing & Procurement at Infosys BPO. He was in the 'hot seat' for a dynamic AoP Live session in early April about all of the considerations beyond technology that organizations need to be prepared for before committing to transformation. Since AoP Live sessions are driven by audience questions and comments – some submitted in advance and some submitted during the session – we never know quite where the focus will be on a given topic. For this AoP Live there was no question what procurement professionals felt the need to learn more about: they wanted to know how digital transformation will affect their performance objectives and metrics. Far more questions were submitted on this topic than any other. Kris also discussed how digital transformation can be incorporated in broad change management initiatives, what impact it is likely to have on procurement's internal and external relationships, and how talent management and leadership development priorities will need to shift to maximize a digital-first environment.

Saying that someone has or embodies the 'spirit of entrepreneurship' implies a lot of different drives and qualities. There is the willingness to take calculated risks, the need for self-accountability, contagious levels of energy and creativity, and a true understanding of the top to bottom impact of business decisions. Procurement can absolutely benefit from professionals with an entrepreneurial background – the question is how we can add them to our ranks. I interviewed Jill Robbins, Senior Director of Global Procurement - Indirect Goods & Services for Elanco, a global animal health company. She is the perfect example of both an entrepreneurial spirit and a non-linear career path. In addition to working in procurement, she is the author of a children's book, co-owns a small business with her husband, and has worked as a consultant. Empowering procurement to make the maximum contribution to the business requires a combination of analytical and broader business skills. Starting with a solid foundation in data, the most valuable professionals add to their experience over time without worrying whether they are following the fastest route to the top, but rather doing the most important, and the most interesting, work. In this conversation, Jill shares her perspective on: • The importance of finding a mentor that you connect with, regardless of the company they work for, the function they work in or their gender. • Whether certifications really matter, either in career investment or in hiring/recruiting. • The time and place for rules and norms, and when decision makers should push boundaries for the sake of creating an advantage.

When you get right down to it, innovation is just solving a business need in an entirely new way. In order to do that, however, you and your team have to really understand the business and its customers. The most strategic suppliers – usually a select few – play an important role in the process of innovation, which creates an opportunity for procurement to guide their technical value potential to the point where it delivers operational results. While I was at ProcureCon Indirect East, I interviewed Lawrence Kane, SIG Sourcing Supernova Hall of Famer and Senior Leader of Strategic Sourcing Functional Excellence and First Time Quality for a Fortune 50 company. In addition to NOT being the Zodiac Killer, he has spent over three decades innovating in various ways and keeping his perspective and deliverables in alignment with enterprise needs. You may also remember Lawrence from his last Art of Procurement podcast (Episode 164, published in December 2017), where we discussed the active power of empathy – both in supplier negotiations and in internal relationship management. In this conversation, Lawrence discusses: • The critical role of governance and contracts (believe it or not) in innovation. • The importance of making sure everyone in an organization – including the newest, lowest paid members – are motivated to contribute to brand value, especially when they have external contact. • The tenuous balance between savings and innovation, and how procurement needs to invest in one without sacrificing the other.

Everyone wants to be seen as an innovator, and procurement leaders are no exception. The problem with this desire is that, much like procurement transformation, the definition of innovation can be hard to pin down. We all know it when we see it, but setting out in the morning with "innovation" at the top of your to-do list can be paralyzing… unless you have a master plan. I interviewed Nancy Nicoll, Vice President of Not for Resale (NFR) / Indirect Strategic Sourcing, at ProcureCon Indirect East about everything from reporting to the C-suite to managing procurement through a huge corporate merger. Although savings continues to be a high priority in the razor-thin margin grocery retail environment, they are not the horizon of procurement's focus. For Nancy and the rest of her team, savings are the foundation – what gets them through the door and establishes their credibility – so that procurement can go on to deliver exceptional, sustained, big picture value.

When we hear about 'fintech' providers, most of us immediately think of a quickly shifting ad diverse landscape of startups – highly innovative companies, some of which are here today and gone tomorrow. If partnering with a fintech is even on your company's radar screen, how can procurement develop a reasonable strategy for such an unpredictable industry? I'm joined today by Andy Atkins, a professional commercial contract manager with a decade of experience negotiating and drafting complex financial, information technology and telecommunication agreements. He is an IACCM Certified Contract and Commercial Manager as well as a Certified Professional in Supply Management and Certified Professional in Supplier Diversity by the Institute for Supply Management (ISM). His broad array of industry experience has empowered him to become a subject matter expert in supplier management, including intricate multi-million-dollar transactional agreements. Andy recently authored an article for IACCM's Contracting Excellence Journal titled, 'The 'FinTech Five' – Mitigate Risk by Focusing on Five Clauses' (see link below). It caught the attention of the AoP team, and we brought him on the podcast to discuss the fintech industry (and more) for a broader procurement audience. In this conversation, Andy covers points such as: • What is fintech (or financial technology), and how mature are the providers in the market? • How to perform due diligence on startups, regardless of the product or service they provide. • What are the differences between procurement in highly regulated industries such as financial services and pharmaceuticals and managing spend in less regulated industries? • The importance of understanding your customers' perspective – no matter what industry they are in. • How procurement can be seen as a value-add rather than an internal roadblock by earning the trust of stakeholders and decision makers. --- Today's discussion does not condone nor condemn the investment, business relationship, acquisition or trading of any equity directly related to a financial technology company or entity. This podcast discussion is strictly for educational purposes and is not for legal or financial advice. The opinions represented here do not necessarily reflect those of Andy's current or previous employers and Andy is speaking today on his own behalf without further representation.