A Supply Chain Matters Guest Posting
By: Mickey North Rizza, BravoSolution
Supply Chain Matters is thrilled to feature the following guest contribution from Mickey North Rizza, recently voted Top Female Supply Chain Executive 2013.
We’re almost through the first quarter of the year, can you believe how time flies? It seems like just yesterday we were making our new year’s resolutions and sifting through predictions of what 2014 would hold for us. I won’t ask about your commitment to the gym, but I did want to check-in on your resolutions for your procurement team.
Have you fallen back into your old habits? Maybe you’re like many of the procurement teams I work with, and you’re just not sure where to start. If so, here are three areas to focus on this year, which if done successfully, will bring about measurable improvements, move you up the maturity curve, and put you ahead of your competitors.
1. Work Hand-in-hand with CFO’s
On a scale of 1 to 10, how would you rank your business relationship with your company’s CFO? If it’s anything less than an 8, it’s time to take a step back and find out why.
According to a recent survey of CPOs and CFOs from Ernst and Young, 70 percent of CFOs say their relationship with CPOs has become more collaborative over the past three years. This alone demonstrates that finance teams see the financial impact that procurement can have, and that developing a strong tie between the two departments can only help. The same study also found that when a strong business partnership between the CFO and the supply chain leaders exists, companies report stronger alignment with the broader business strategy and improved supply chain visibility.
Often times this “stronger alignment” doesn’t come from a sudden increase in savings, or spend under management; rather it’s a matter of finding the best way to communicate success. As procurement works closer with finance, they become more familiar with financial metrics and see that they can measure themselves against the same KPIs.
Standardizing the language used across departments makes it easier for stakeholders to get a snapshot of the company’s health, as well as dig into how each department is contributing to the company success. Of course, it’s important to remember that it’s not just the language that you’re using – it’s also what you’re telling your stakeholders, and how to communicate its importance.
2. Place equal importance on savings and sales
Too often, procurement has a narrow focus on cost savings, creating a perception that they’re a back-office function doing a tactical role.
Of course, you and I know that is far from the truth. And even though cost savings will probably always be important – it’s becoming increasingly challenging, and requires more strategic thinking than ever. In fact, last year 60 percent of procurement teams delivered 10 percent or less in savings, according to a survey from the Institute for Supply Management. Delivering marginal savings is a major red flag and a trigger for procurement teams to reevaluate the effectiveness of what they’re doing and whether they’re in need for a change.
If you feel that it’s a lack of resources or other internal obstacles that are holding you back from realizing significant cost savings, I’d recommend developing a business case that demonstrates why savings are equally as important as sales. Look beyond the amount of money that you hope to save, and instead demonstrate how those savings will impact the business. For example, instead of just saying that with more resources you’d be able to save X amount on office supplies, explain how this money could be invested into other business initiatives like research and development or infrastructure improvements.
Once you’re confident that your organization is supporting your efforts, it’s time to look outward at your suppliers and see where there’s room for improvement.
3. Give control back to suppliers
Imagine if you had an industry expert at your disposal, who knew the technical aspects of your business and well as the larger initiatives that you were working towards. Now what if I told you that you already do?
There is a huge strategic opportunity available to you with each of your suppliers, and it all starts with the selection process. Rather than just going through the motions of an RFP, agreeing on a bid and contract requirements, ask them how they’d solve a problem that you’ve been facing. Doing so will provide you with more information than just product specs – it’ll tell you if they can be your partner.
Moving forward, invite your suppliers to join your planning meetings, introduce them to your R&D team and share with them the pressures that you’re facing. The suppliers that you’ll want to work with will vie to be your go-to resource. Why not let them?
Undergoing a transformation can be overwhelming and confusing. I hope that these three initiatives: developing a business relationship with your CFO, improving cost savings, and working strategically with your suppliers give you with the necessary framework for your most successful year yet.
About the Author:
Mickey North Rizza is the Vice President of Strategic Services at BravoSolution. She is a key member of BravoSolution assisting companies accelerate procurement performance, increasing strategic value contribution, driving more spend under management and increasing technology adoption. Mickey has over 25 years of senior-level procurement, sourcing and supply management experience.