December 2017

PEER-TO-PEER SESSION: 7 PROBLEM STATEMENTS SHARED AT THE NOVEMBER 2017 ROUNDTABLE

For the November 2017 state-based CPO Roundtable Meetings, The Faculty opened the program in Melbourne, Sydney and Brisbane with a new format for the peer-to-peer session. This session is regarded by many members as one of the most valuable features of the meeting as it enables collaborative problem-solving of shared business challenges.  

Previously, the facilitator would run this session by asking every attendee to share their current challenges and insights with the group. While this format has its benefits, it often meant that there were limited opportunities to brainstorm or problem-solve the challenges in any depth.

New P2P Format

Seven CPO Roundtable members across the three state meetings shared with The Faculty some business challenges that they are currently facing in their organisation. Attendees split up into groups to hear these members explain their challenges in more detail and add further context to the issues.  

Challenge one: How do we align procurement value delivery and financial sheet impact?

The Roundtable CPO’s challenge involved a frustration with how procurement’s numbers are incorporated into their organisation’s budget. At present it is based on prior-year spend, with inflation added and known procurement value delivery subtracted to reach the plan number. Unfortunately, incorrect assumptions including inflation, interpretation of the numbers, cost blowouts and demand planning mean that the CPO has a difficult conversation every quarter about why the procurement number was incorrect.

Brainstormed suggestions included:

  • Seek increased involvement at the start of the process rather than having the conversation at the end.
  • Monitor and track (selectively) big plan assumptions.
  • Get the business to sign off on assumptions.  
  • Get the business to justify demand increases.
  • Be careful not to end up doing Finance’s work for them.

Challenge two: How do we deal with chronic under-resourcing and also get approval for additional headcount?

The CPO’s challenge is that as the team centralises more procurement activity and takes on ownership of the contracts, they are also being burdened with administrative tasks. The original savings that were won are now gone, but the burden remains. The problem is that centralising activity means team members are effectively working full-time in managing contracts but not delivering savings at all.

Suggestions included:

  • Does procurement really need to manage these contracts? Another member has set up a centre of excellence in India which manages contracts, then the FTE headcount gets charged out to the business units that use it.
  • What is the strategic value in managing these contracts centrally? Why not outsource it?
  • Do it better, do it smarter – improve the tactical stuff with robotic process automation.
  • Is the problem headcount, or budget? If you bring in contractors to manage the work, it then becomes a budget issue.
  • Build the systems to drive compliance, then empower others to manage the contracts.

Challenge three: How are we responding to the request from the businesses to be more involved in what they do and understand their strategies and deliver outcomes / vendor engagement opportunities accordingly? Is our current category management sourcing strategy still relevant and effective?

As the CPO’s organisation continues to mature, savings is no longer really a major driver. The question is around how procurement needs to shift its current set-up to meet the new drivers including revenue, a focus on customers, and helping the business go Agile. Is the old Category construct still relevant?

Suggestions:

  • Align with the tone at the top – what are the corporate pillars and corporate target (not just the procurement target). How are you contributing to these pillars?
  • Develop a partnership model or an alliance model to ensure relevance.  
  • Really understand what initiatives you can deliver beyond the traditional category sourcing strategy by looking for tension points and acting as commercial business advisors.
  • Team must be re-skilled if you really intend to realign procurement to the wider organisations’ needs.
  • Consider forming a ‘procurement council’ with execs across multiple functions to share ideas and facilitate buy-in.
  • Increase effort in bringing supplier innovation to the business through supplier shark tanks (15-minute pitches).
  • Use lateral thinking and deliver a value proposition, rather than just a sourcing outcome.

Challenge four: What’s the right balance of (procurement) ownership versus enablement of regulatory obligations and tasks?

The CPO is exploring the risks and opportunities involved in having the (significant) ownership of regulatory obligations owned by procurement, or by the business.

Suggestions include:

  • Map out who owns which risks and tasks.
  • Create checklists.
  • Push ownership back onto the risk and compliance team.
  • Seek clarity on decision-making processes and risk-appetite statements.
  • Find a tech platform/workflow that encourages collaboration and socialisation.
  • Explore ownership versus a ‘driving role’ to reduce procurements’ exposure.
  • Seek out a contract management system that ticks all the boxes.

Challenge five: How do we truly innovate from the supplier base?

The CPO asked Roundtable members for their opinion on how to innovate effectively and work with suppliers to drive innovation. Suggestions included:

  • Innovate through your SRM program with strategic suppliers.
  • Innovation is sometimes more likely to come from outside your top group of strategic suppliers (due to smaller size, flexibility, etc).
  • Hold supplier innovation workshops/speed-dating/hackathons.
  • Make sure you have an environment where innovation is encouraged.
  • Ensure you have executive support for driving innovation.
  • Find the right people in your procurement team to lead this.
  • Make sure you are driving targeted innovation for key business problems.
  • The challenge is facilitating, rather than owning, innovation.

Challenge six: How can procurement get involved in strategic planning at the beginning of the process, and not just when the project runs into trouble?

This CPO shared a common challenge faced by procurement – only being approached by stakeholders when there’s a problem, which leads to very limited opportunities to add true value.

Suggestions:

  • Consider having shared KPIs with the business, so it’s in their interest to involve procurement at the beginning.
  • Examine how you position the procurement team, how you market yourself and where you demonstrate your value-add.
  • Demonstrate that you understand business partners’ issues and concerns. Bring in team members from other functions who have that understanding.
  • Develop a procurement marketing strategy with the aim of making the function integral to the business through risk mitigation and a status of trusted advisor.
  • Get involved in business planning – change the process from within.
  • Upskill the team to be more strategic and show the business how you can add value.
  • Forge stronger relationships with business stakeholders.

Challenge seven: How do you objectively evaluate innovation?

Working in the public sphere, this CPO’s concern was that the tendering process was a poor way to drive evaluation and evaluate suppliers’ innovative offerings.

Suggestions included:

  • Move away from the concept of ‘innovation’ and define the problem statement instead. Put your problem statement to the market through an RFI, with two stages of evaluation: 1) compliance, 2) innovation.
  • Score/measure innovation through the following: 1) how does the idea align to strategic objectives; 2) what is the feasibility of its implementation; and 3) quantify what the innovation will replace/remove from the current process.
  • Examine what part of your process is stopping suppliers from delivering value to you.
  • Ensure you have a culture in place that encourages innovation.
  • Consider putting together a very nimble, cross-functional team that can quickly decide which solutions to eliminate and which to progress.
  • Re-frame the tender around innovation – announce that this is a fresh approach and you’re trying something different.