If you are in purchasing or procurement and have the following symptoms, this article is for you:
1. You receive negative comments from internal areas saying that you are "slow" or "expensive.
2. Listen to say that the purchasing area does not know how to negotiate and anyone could do it better.
3. Internal customers say they don't understand the business, so they have to negotiate with the supplier.
This article is built from practice and real actions in multinational companies, product of facing diverse hostile environments where operability is the daily bread. So if you felt identified with one or all of the symptoms mentioned above, here are a few steps to follow to achieve a real transformation of the area from being transactional to becoming a pillar of strategic sourcing.
Paradigm shift
The first thing to do is "buying into the story" and convince the team of buyers of the indispensability of their work on a day-to-day basis. This paradigm shift certainly requires a series of adjustments in the structures, such as the creation of levels or roles: strategic buyer and transactional buyer, or negotiators and executors, among many other strategies that exist and depend on the size of the organization and the available work team..
The best way to leverage this change is through the implementation or restructuring of category management. ("category management") which should be based on a joint and realistic construction of the "kraljic" purchasing management decision matrix..
For this activity, the recommendation is to initially allow buyers to choose related categories. This generates trust and empathy with people. After a short period of time (no more than two months), adjustments can be made to the categorization of buyers, based on feedback and performance monitoring.
Follow-up in this period must be constant and detailed, implementing agile routines, such as a daily stand-up meeting to follow up on the purchase lines, focused on the difficulties of the buyers in the pending lines that have not been attended, visualizing the daily tasks and socializing future demands.
At this point, the most important thing is to understand the team's skills in terms of how they set priorities, propose solutions, link issues and understand the business. allow the identification of strengths and weaknesses as inputs in the correct categorization.
2. Expenditure analysis
The designation of resources to the analysis of expenditure ("spend analysis") is the most relevant step, being the most important. the formation of the "control tower" of the purchasing area and is the differentiating factor. The aggregation of demand is a visual that the user areas do not have, external factors such as logistical conditions, financial costs, are the best arguments to discuss why the negotiation should be centralized.
The visualization of data, however succinct it may be, is of immeasurable value to the company's directives.
3. Sponsor within the organization
This is perhaps the most complex task: seek an optimal sponsor within the company. An ideal position is to report directly to the CEO, but this approach may be utopian within the structure; therefore, a middle ground would be to report to the CFO (Finance) since his decisions are significant in terms of investment or financing in the company.
As a measure of inefficiency in the process, it is to continue to be part of a backoffice area, since it will continue to be considered a transactional area within the company..
At this point it is important to review processes. Many times an external opinion has more weight than the internal voice, unfortunately this is a common practice, since an external consultant saying exactly the same thing that the purchasing area has been diagnosing for a long time, has more validity. Therefore, hiring a consultancy is a valid tool when it comes to show the organization a migration plan.
4. Performance indicators
Last but not least, is the creation of indicators ("KPIs") that make it possible to make results tangible.The main objective is to generate a change in the perception of the areas of the organization towards the purchasing area and to establish an indicator of quantifiable savings factors, this being the most relevant aspect of the management.
As cross-cutting steps in the entire transformation process, it is to encourage the team's participation in negotiation courses and to assign part of the "script" in the negotiations that represent the most crucial decisions for the company.
These four points have addressed two of the three pillars of knowledge management: processes and people, It would definitely be necessary to adopt technologies that allow traceability and transparency of its management, giving visibility to other areas of the company that require it.
The best technological tool, in the end, is the one that allows you to accelerate your transformation without running over processes, that adjusts to the economic reality and that has the best world-class practices in supply management.
