Dash-for-cash: The short term tactic that will do more harm than good

During recent times, supply chains and supplier relationships have been tested like never before, putting the Chief Procurement Officer centre-stage and in the spotlight to find solutions as businesses try to protect operations, revenue and profitability. Throughout the Covid-19 crisis we’ve seen many procurement teams adopt a so-called “dash for cash” response (i.e. a classic cost-out initiative) - whilst not a surprising response to a crisis it’s a very short term in focus and easy to do. There are many levers available for such an approach (control demand, change the specification, limit usage, aggregate spend and so on). Yes, cost-out has the potential to yield results quickly and it will help the bottom line but it can do a lot of damage at the same time - the kind of damage that is difficult to undo.

We’re not saying that cost-out is intrinsically a bad thing, but how it is done is crucially important. It’s often used without fully appreciating the wider consequences - it hurts supplier margin and it kills the goodwill in supplier relationships. And as we slowly work towards post-Covid recovery, an organisation that just a few months ago acted with scant regard for its suppliers will probably not be a ‘customer of choice’ to those same suppliers going forward.

Working in time of COVID – what will stay what will go?

There can be little doubt that the Covid-19 pandemic has been the most significant, and perhaps the most traumatic experience many of us will have had in our lives. It has and will continue to have a huge impact on us as individuals, as a society and as a workforce.

Catch the tiger by the tail – managing major consulting organisations

You’ve heard the story before, a new executive has joined the business, has ignored all processes and bought in ‘their favourite consulting company’ to review operations and they started 3 weeks ago….

Managing consulting and professional services organisations is a challenge almost every organisation grapples with. It is often compounded by the consulting company having contacts, relationships and often alumni at all levels of your organisation, meaning that, to manage them effectively, you also need to manage your own internal stakeholders effectively as well. Here we look at the common challenges faced in managing consulting companies and some techniques to help you.

Claim and counterclaim tell the story of a failing relationship

The best supplier relationships build value for both parties. The worst end up in court. That’s where car rental company Hertz found itself with Accenture. It had waited three years for the global consultancy firm to build a new website and mobile apps it was happy with.

Top three success factors to fast-track your SRM - part II

Businesses often feel they should get more value from contracts, but they don’t know how to make it happen. Tactical solutions have not worked. They might sense a strategic approach, such as supplier relationship management, can help but they are apprehensive about the commitment. They want to get the benefits of SRM without the work.

As we described in our last blog, A company-wide SRM programme offers big returns, but requires time and investment, there is a way of fast-tracking some aspects of SRM to get measurable results without a large-scale investment. With a small number of selected suppliers,  organisations can get work-streams off the ground in around 12 weeks and deliver value within a year.

But we have found that even for a fast-tracked approach, there are a set of pivotal success-factors which can help ensure you get the desired results.

Three pivotal success-factors to fast-track your SRM:

1. Selecting the right suppliers

First, success depends on selecting the right suppliers to work with. The approach does not require a full survey of suppliers; instead you pick a handful based on a few rules of thumb. Three points are important:

  • They should be critical or strategic or both. A few internal conversations with senior stakeholders can help identify the best candidates.
  • There should be clear recognised potential to meet business objectives by working more closely with the supplier.
  • Given the goal of securing rapid positive momentum, for the first wave, we would not recommend choosing suppliers whom you are facing major issues.

2. Leadership buy-in

Suppliers are usually willing to engage, if you involve the the right leaders on the buying side. This does not necessarily mean directors or C-suite individuals, but senior backing at least at departmental level is essential. You need to involve people at a suitable level of authority to make decisions.

Success hinges on the right level of management attending meetings between the teams from each organisation. As a rule, if the most senior person on the buy-side is still needing to check or seek authority, they’re not senior enough. Involving decision-makers gives the immediate sense to the supplier that this is an “above the power line” initiative, and not just about information sharing, or cost cutting. It becomes dynamic, and provides the opportunity to build relationships and trust – which are key to unlocking the benefits organisations are seeking.

Senior stakeholders in SRM also need to collaborate internally. Conversations on extra value and innovation with key suppliers will likely range beyond one area of business.  And if you have not managed to think that through in terms of the necessary partnership between internal business units, you risk revealing the organisation as being fundamentally unprepared for the level of external collaboration you are seeking.  Naturally, this runs the risk of stalling the initiative, hampering progress, and can lead to suppliers becoming disengaged.

3. Face-to-face meetings

Part of demonstrating leadership buy-in is a willingness to join face-to-face meetings. We have many years of experience in facilitating face-to-face workshops between suppliers and key stakeholders, using proven tools and frameworks, supported by data that is gathered in the early stage of the programme.  

However your approach to this is, we’d suggest data and open discussion are key: the aim is to bring people together in an way that encourages creative collaboration on projects which offer both sides value.

These are conversations that are rarely programmed within the normal governance arrangements for strategic suppliers, and happen surprisingly rarely even for critical, multi-year relationships. Too frequently, post-contract engagement is restricted to quarterly or annual reviews, which can remain tightly focused on current performance or issue resolution, and never explore the much wider potential within the relationship. This means the potential to realise extra value can build up over time – and be rapidly brought to fruition with the right approach.

With these success factors in place, a fast-and-lean SRM programme can quickly accrue results. In the next blog, we’ll look at how organisations can build on these initial wins to promote SRM more widely across the business.

There is definitely slavery in your supply chain. Here is how effective supplier management can help you manage that risk.

Just this week at the Global SAP Ariba conference in Barcelona, Amal Clooney called on corporations to put respect for human rights at the core of their business, highlighting the trend of ‘doing good’ as a way to bolster profits.

A company-wide SRM programme offers big returns, but requires time and investment part I

Since most businesses depend on suppliers to help deliver their products and services, managing supplier relationships to develop new innovations, avoid risk, and reduce costs can be a key differentiator for future success. But since changing commercial relationships across a whole organisation requires a long-term commitment, can a more nimble programme generate faster returns?

Mergers and cost cutting: careful what you wish for

Times are tough for the manufacturers of our most beloved childhood snacks. Not only are organic and healthy foods attracting consumers’ attentions, many firms are also challenged with rising costs. Stock values have performed poorly across the sector, but Kraft Heinz, which owns brands from Cadbury Crème Eggs to Kraft Singles cheese slices, has experienced an especially severe period.

State of Flux named to 2019 Spend Matters Providers to Know: The best-in-class companies in procurement and supply chain

April 10, 2019

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