This important element of successful SCM means an effort at silo-busting that is often discussed but rarely implemented. The new generation of Procurement will be a much more sophisticated and effective approach than previous iterations of strategic procurement, and its involvement in planning and measurement should be more obvious to both the function and corporate leaders.
Expanding the Scope of Procurement
While procurement is the only function within most companies primarily tasked with saving money, it is far from being their only task. Spend managers are also responsible for MWBE and related initiatives, Sarbanes-Oxley compliance, reducing the carbon footprint and a number of other key corporate initiatives.
Unfortunately, the traditional model of selling to functional stakeholders and sourcing categories does not lend itself to pursuing these strategic projects. However, SCM does.
At its core, strategic category management is focused on knowledge. It means earning a deep understanding of categories, housing that information in an accessible and refreshable format, and leveraging that knowledge to make meaningful changes to a company’s bottom line. This approach positions practitioners not only to create savings but also to understand and affect issues such as regulatory compliance and others that fall on Procurement’s shoulders.
At the same time, the majority of these efforts will be aimed at tackling the savings issues that lie beyond the reach of strategic sourcing methods. The fruit at the top of the tree must also be harvested, and SCM will bring the kind of focus and skills necessary to reach those objectives.
By creating a mutually beneficial environment of continuous improvement with suppliers, savings can be achieved without sacrificing the strength of vendor relationships. In maintaining these relationships, the SCM approach helps to secure a corporation’s business by creating consistent and lasting approach that protects service and delivery.
Nothing lasts forever, nor should it. Just as strategic sourcing was right for its time and ultimately ran the course of its effectiveness, so too will strategic category management.
For now, however, companies cannot afford more of the same, and delaying a transition to a new mode of doing business is just that. In order to meet savings objectives moving forward, simply increasing sourcing activity will fall flat regardless of the sophistication of the approach or the tools applied.
Instead, the application of knowledge, information management and relationship management and development are the keys to success in the next generation of spend management.
About the Author: David Clevenger is a vice president at Corporate United, a leading group purchasing organization. More information on Corporate United at www.corporateunited.com.