building blocks to achieve sourcing credibility
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Building Blocks to Achieve Sourcing Credibility: Gain Fortune 500 Value with Mid-Market ResourcesJune 8, 2011 at 11AM - 12PM (EST)Webcast is Sponsored By IastaIasta Featuring Analyst Firm GartnerTRANSCRIPT
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Gain Fortune 500 Value with
Mid-Market Resources
Featuring
Sponsored By
June 8, 2011 at 11AM (EST)
"Building Blocks to Achieve
Sourcing Credibility"
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Credibility
Definition of credibility… TRUST
Your reputation is:
You have the expertise
You bring out the best in people
You work well with others
You focus on important issues
You listen and communicate well
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Tactic #1: Choose your path wisely
Do not oversell cost reduction
Work with stakeholders that are open to collaboration
Get quick wins and sell it internally
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Mini Case Study Choose your path
Internal Analysis
Workflow
Priorities Goals
Core Challenge:
Lack of spend info & savings to justify acquisition
Lesson Learned: By analyzing and grading projects based
on key criteria, teams can quickly determine how to prioritize
their projects; leaving behind a proven methodology for
planning strategic initiatives in the future.
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Mini Case Study Choose your path
What went wrong…
Selected indirect projects by spend size as top factor
Some 1st projects were “sacred cows” Marketing data, media buys
and 3rd party financials audit
Sourcing engagement used to train Commodity Managers
Backfired, sourcing lost credibility
Lesson Learned: Companies should only source
“sacred cows” after credibility has been built.
Consumer Products Manufacturer
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Tactic #2: Identify and understand the data
Know your spend
How much is there
How much is influenced by
sourcing
Success stories of
spend
Know your key metrics
Past, current & scheduled
projects
Savings
Know your key suppliers
For critical categories
Influence their performance
via SPM
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Tactic #3: Manage the gaps
• Right people with the right skillsSkills gap
• Spend/Contract data
• Supplier performance, risk & mgmt
• Creates the conduits for effective internal communication
Data/Visibility gap
• Understand goals and objectives of stakeholders and map procurement to them
• Build relationships / walk the hallsInfluence gap
• Bridge the disconnects and break down legacy issues
• Understand that finance can be your greatest ally
• Deliver the results with effective descriptions
Communication gap
• Translate the value to the stakeholders
• Responsibility is on Procurement to disclose the value to the organization or you will not get buy in
Culture gap
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Tactic #4: Develop a Center of Excellence
Technology and tools
Spend analysis
Contract Management
Sourcing (RFx, optimization)
P2P
Creates the IQ of the organization – essentially the nerve center for a best in class process
Build the organization discipline for evolutionary cycles
which generate greater spend under management
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Mini Case Study Center of Excellence
Avoid stop-and-start rollout program
Maintain momentum: Targets Bespoke training Reporting/ tracking KPI’s
New technology & rollout program: One view of truth New Strategic Sourcing Group Increased knowledge transfer
Lesson Learned: Create a strategic plan and collaborate
with other business units to create sourcing center of excellence.
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Summary
Credibility is not built overnight
Next Steps…
1. Spend Analysis
• Will help you fill data gaps
• Will help you know your data
• Will help you choose your path
2. Center of Excellence
• Centralize technology
• Business processes
• Empower people
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Question 1
Are there methods to measure the effectiveness or
productivity of category managers?
Yes- quite a few – anything from:
• # of categories
• #of events held
• Overall spend in those particular categories
• How that category translates into new and emerging
products
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Question 2
How long did it take before FirstGroup plc started realizing
savings and gaining an ROI?
Within the first 3 months (wave 1), we started seeing benefits of
the sourcing program. We split the project phases into wave 1,
wave 2 and wave 3.
As we went through the ways, the projects became more
technically difficult; savings took longer to implement.
We didn’t see 100% of savings in an award position until about
12 months later.
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Question 3
Relative to your chart regarding average
savings by category, have you noticed any
significant changes or trends in what people
are frequently doing and if the are any
changes in the savings on average?
The numbers in these charts are from research we
did 6-7 months ago.
The biggest difference is about how the service
providers / vendors have added more savings into the
bucket and also the different variety of categories.
More demand management techniques are being
applied
Some categories have gone up and some have gone
down- it all depends on:
• Organization’s maturity
• Collaborating with stakeholders
• Working with 3rd party providers and how they bring
about value add
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Question 4
What are some tips to help sourcing teams take over some
unmanaged spend in non-traditional areas such as Legal
and Finance?
Develop relationships with those people
• Work out their influences and identify decision makers in each of those sourcing
groups
Select a project that might have little impact on their daily lives,
but allows you to demonstrate a big impact on something they
have overlooked.
• Example: office equipment
Approach legal about helping them manage their contracts
better and improve compliance
• Use their language to better improve your credibility
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Question 5
Can you give some examples of selling sourcing credibility?
Procurement’s job is to sell situational influence, not positional
leverage.
The purpose of procurement is to lead internal customers to a
logical conclusion about what is ultimately in the best interest of
the organization.
When presenting your business case about a large opportunity in
a particular category:• Use data gained from spend analysis.
• Meet with everyone in that department.
• Present the data in terms of questions such as, “How would you approach this if we
worked together?”
• If they say they want to get back to you and schedule another meeting – the credibility
and selling; you don’t need to go in banging your shoe on the table and
trying to take over the initiative to drive down cost.
• Identify the problem, mitigate the risk and look for the threats in real-time.
• Let the stakeholders give you feedback on the best way to approach the
initiative and develop a secondary idea (if needed).
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Question 6
In your opinion, what are 1-2 key activities (that have
greatest impact in the least amount of time) that
procurement can do to set the foundation of credibility?
Communication is always king.
• As a sourcing pro, you need to be involved in every aspect of communication that
is taking place on a project you are working on.
• If you are unaware of the discussions taking place about your project, it could
present a lot of problems.
Obtain strong support before escalating to executives.
• Communicate and collaborate with departmental leadership / key stakeholders
before reaching out to the business owners; get them on board to support the
initiatives you are pursuing.
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Question 7
What are some good tactics or methodology for performing
an honest assessment of a sourcing teams skills so that
they know what the next steps should be?
Gartner recently fielded a study about sourcing talent- we will
have additional data the end of August. What we are asking
goes above and beyond an assessment:
• What have you done in the last couple of years?
• What are you doing today?
• Where do you want to go in the future?
Ask what you need to make your team successful.
• Do you need more category managers?
• Do you need more advocates in the business?
• Do you need different financial perspectives?
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Question 8
When publishing savings results, how do you avoid the
potential embarrassment of stakeholders who were
historically paying a higher price? A lot of it is around sharing with those stakeholders that you found additional savings
based on their initial work and identifying the additional benefits from the new
sourcing process.
Explain that you found a new path to take with suppliers that takes costs out that you
hadn’t identified previously.
Take a team approach- as Dave said- it’s about situational influence, not positional
leverage.
Stay to the facts; know where you are going and you will not make an embarrassment
out of the organization.
Show that you have done this together and that the combined efforts jointly delivered
value; it shows you are a good team and can come together.
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