Procurement strategies can help CPO’s make the right decisions to improve cost savings, decrease supplier risks, enhance innovation and flexibility, and heighten the influence of the procurement office throughout the company.
These are times of War. Along the health front, the Coronavirus (COVID-19) pandemic has changed life and work as we know it. On the economic front, the economic crisis has globally impacted organizations both large and small. While some industries may gain from this pandemic, by and large, every company has a battle to fight to survive in the post-pandemic economic recovery.
Never before have Chief Procurement Officers played a more critical role in their companies’ future, nor has their supply chain risk been higher. If the CEO is the Commander-in-chief, the CPO is the General. The wartime CPO plays a radically different role compared to a peacetime CPO.
Under normal circumstances, the challenges to our organizations are competition, market drivers, and time; now the challenges are inertia, information asymmetry and inability to forecast outcomes. In order to succeed, a wartime CPO will have to adopt certain characteristics.
Comparison – CPOs at Peace and War
Here are six procurement strategies that can help you to make this shift.
1. Build a close-knit procurement team
First and foremost is the team. The CPO must gather or build a cavalry-like team. Cavalries are mobile, fast, and skillful. They are a special unit whose strength comes from speed en masse and the psychological impact it can have on the opponent. Cavalries are cohesive teams who fight together as single units. It is no coincidence that, despite having a massive army, Alexander the Great positioned himself with the cavalry in battles. Similarly, the CPOs should form a team of specialists, train them, toughen them, and prepare them for an action-oriented approach to procurement strategies and supply chain risk management.
2. Do not communicate, command
A Wartime CPO must command rather than communicate. Commands are clear, concise directions that require immediate action. Define the battle plans (projects and initiatives) and let each member of your procurement team execute them one by one.
As the head of procurement, you must earn the right to command too. Roll-up your sleeves and work with your purchasing team on the ground. This may not be your normal management style. However, you will get better buy-in and see improvement in your team if you share your knowledge, skills, and experience as you lead the way.
Create a sense of purpose – one that will inspire your team to work hard with you in the endeavor. After all, your action during wartime decides the long-term fate of your organization, including your procurement team developing into an elite squad.
3. Get the best procurement weapons
Like the ancient story of a commander who marched his troops up the hill every day in preparation for the upcoming war, CPOs must ensure their in-house teams will be ready for action. This includes equipping them with arms (technology) and bringing them to a state of readiness. Preparedness inspires confidence in your team to tackle any challenge, no matter how insurmountable it seems.
Upgrade the team with negotiation skills, strategic sourcing tactics, and technology tools such as spend analytics and sourcing automation. Ensure the team can categorize category spend to levels 4 or 5. With deep data visibility and clear insights to analyze, your procurement team can reduce purchasing spend and avoid costs more effectively and efficiently. Now is not the time for time-consuming evaluations and a thorough market review of best-in-class analytics tools. Leverage the knowledge in the market such as Spend Matters Solution Maps and get going.
4. Map your moves
Once you have the team and the tools ready, you play the role of tactician planning your cost elimination operations. Like how the commander picks which battles to fight, the CPO selects and prioritizes the sourcing projects and categories to pursue.
Spend analytics software is the compass that guides the CPO to the best locations to fight. It provides an intricate view of the landscape and identifies significant opportunities for both saving and cost avoidance success in your procurement strategies. In a war, the commander will study the enemy and its weakest links, but for a CPO it is the study of data, suppliers, risks, and changes to internal needs. Look for contracts that are expected to inflate, look for spend areas which are the weakest, look for the suppliers who are in a position to give you a cost advantage, and finally choose the market drivers (terrain) that give you an edge in the future.
Use insights from spend analytics to set up your project pipeline software and layout the sourcing campaigns. Plan the attack in phases, align your teams based on their strengths and the strategic categories. Be part of the team by picking your own battles too. Do not overwhelm the team by attacking too many fronts a once, that leaves no energy for the next battle.
With machine-learning procurement analysis software, not only can you see deep into past transactions, understand how you have spent and what you bought, the software can analyze and forecast your spending in the future. A war leader rarely has such detailed forward-thinking data on hand to provide broad visibility and transparency.
5. Form Alliances
Make allies your organization’s unfair advantage. If you have seen your suppliers in the past as interchangeable, then it is time to improve that. Get intelligence on your suppliers and choose your allies carefully as you consolidate your vendor list. Your allies should include both suppliers and internal business partners. Allies bring you the innovation that you need and multiply your collective strength.
They say the enemy of your enemy is your friend. Similarly, one procurement strategy CPOs could use is to look for the suppliers who are hit the worst due to this pandemic and make them your allies. Maybe what you have to offer them in terms of business is far more important than the few percent discount that you get. Maybe, they are working on an innovation to stay afloat during these times that you can buy into as an early mover.
6. Attack, now.
Finally, this is no time for theory, this is a time for action.
Call your team, explain the well-defined improvement goals, provide them the tools, share your procurement plan, find your partners, and execute your procurement strategies. Lead the war to survive and help your company to thrive.
Written for the Chief Procurement Officers who believe…
We are committed to being the best allies for the procurement community during these times. For none has the power to save companies, careers, and livelihoods than procurement today. To support our clients, we have waived upfront configuration setup costs during the pandemic.