- Understand the corporation's commitments to social and environmental responsibility.
- Be ready to work with Sales to represent the ways in which your firm supports the sustainability goals of your customers.
If the mission is Cost Savings...
- Develop a plan to communicate the cost savings initiative to the organization. A communication plan must have a goal, and its success must be measurable.
- Create category councils with cross-functional stakeholders and establish recurring meetings to discuss costs savings or process improvement opportunities.
- Establish clear definitions and guidelines with Finance on what constitutes "hard" and "soft" cost savings.
If the mission is Risk Management...
- Create a risk management function if it does not exist. Don't think you need one? Just ask yourself, how many suppliers are qualified for your top products? How many days of supply do you have on hand? Do you know who your suppliers' suppliers are? Or just read "Fooled by Randomness" or "The Black Swan" by Nassim Nicholas Taleb. This group needs to work very closely with Treasury. Some companies have a risk committee with representatives from multiple functions that meet monthly to review exposure and mitigation plans.
Clearly, focusing on any one or two of these initiatives has Procurement collaborating with individuals from all over the corporate organization chart. You think teaming is important?
Five Techniques to Engage the Organization
1. Tight Ship
"'Total Customer Satisfaction' drives everything we say and do..."
— Brad Holcomb, CPO, Dean Foods
First and foremost, procurement leaders need to earn their stripes. Unfortunately, experience often is earned through turmoil, failed implementation strategies or failed risk management strategies. The most recent AEP Study highlights the importance of managing risk in procurement. Nearly 85 percent of procurement leaders manage risk by defining and measuring KPIs (internal and supply base). To efficiently manage risk, for example, Volvo has adopted several supply chain mitigation strategies by putting the right people and processes in place throughout their Supply Chain and Procurement organization. Running a tight ship requires the development of KPIs, clear processes and risk mitigation strategies to ensure that the organization can support the business.
"You need to know what is most important in your company at a given time. Our company was in crisis mode — achieving savings was critical, but we had to do it in a way that was highly transparent and kept our suppliers engaged."
— Shelley Stewart, CPO and SVP Operations Excellence, Tyco
Successful businesses have more than one corporate objective at any given time. CPOs, as well as aspiring CPOs, need to decipher which is top on their CEO's agenda and then develop and execute procurement strategies that aid in bringing this specific objective successfully to fruition.
If the mission of the business is:
- Bringing new and innovative products to the marketplace, the CPO must set targets accordingly, focusing on innovation and growth projects or sustainability projects.
- Transformation, the CPO should set cost reduction or value chain optimization projects.
- Promoting green initiatives, the CPOs should set targets around sustainability and risk management.
On the other hand, if the mission is not clear and perhaps not plastered on the wall, the CPO must align the organization behind "trolling" for value-creating opportunities. Some of the more specific supply management opportunities come from collaborating with other business units such as Engineering or Marketing. One of the best ways to "troll" for value-creating opportunities is to set up category councils, which are typically composed of multifunctional teams such as Engineering, Marketing, Sales or Distribution.
Whether the mission is to emerge from a corporate crisis as Tyco did, build a $2,500 people's car (Tata), bring to market the next great electronic device (Apple or RIM), transform a century-old company amidst changing customer tastes and economic conditions (Ford), harness new markets as consumer demand shifts East (Louis Vuitton) or be stewards of the planet (Patagonia and The Body Shop), Procurement plays a role. The key point in these examples is Procurement's ability to align itself with corporate objectives. This would not have been attainable had they not extended their scope outside of their function.