Several years ago, I moved from Direct to Indirect procurement. I was asked to develop a new organization to uncover value in the untouched (by Purchases hands) Professional and Sales Services spending.
Having spent the majority of my career focusing on something the consumer could touch, see or experience, my first few months in the corporate services area was an awakening to what it really takes to run a company – particularly a Fortune 50 global enterprise.
I became more knowledgeable about what was required to close the books each month, to deal with patent infringement, to transition a new acquisition into the corporate structure or to hire merchandisers to entice customers to try our Beauty products than I was to the latest new initiative launch of Olay, Tide or Pampers.
I was intrigued, but not quite comfortable in this new space.
After all, I was an employee of the world’s best and largest consumer goods company in the world, shouldn’t I know what was happening in the moment with our brands?
After several months however, I realized my company needed help. We were spending well into 10 figures for this scope and it was fragmented, ungoverned and most times, not delivering the full value of what was possible.
In other words, it was a virtual playground for the procurement professional.
Money dangling from the proverbial trees.
But this playground was walled off, a gated community, and only those who lived inside were truly welcome. How to get an invite to this Christmas party was top on my wish list.
Professionally skilled buyers have been sourcing Direct goods and services – those materials that are part of the “Bill of Lading” (BOL) or Formula Card of what a company sells – for decades. Procurement in Indirect – spending, mostly Services, with third parties that contribute to how the company operates – is still relatively new. The Indirect Services buyer is engaged in solving business problems and setting strategy on how to invest spending in areas that will provide the greatest return to enable competitive advantage.
The value that a Procurement Professional can contribute is significant. But, how to start when there is no company mandate for spending to go through a proper procurement process?
I started my journey by hiring a whiz-kid in database management. I recognized we had some big data to manage well before the term Big Data became a thing. My analyst helped me understand what the data was telling me – not just where was the biggest spend and what suppliers were garnering the majority of those 10 figures. His analysis helped me understand categories of spend and key internal business partners. He was able to connect the dots across organizations and individual invoices to see patterns and identify on-going and emerging needs.
Next on my hiring list was a few senior buyers who had an entrepreneurial spirit as well as an interest in turning over rocks to find opportunities. One of the interview questions I used to break the ice was what kind of books they liked to read – a bit self-serving as I am always looking for a good book recommendation. I was particularly interested in those who enjoyed Detective Stories or Mysteries.
We had to sift through a lot of clues in order to find the treasure we needed and the small opportunities to crack open the case.
My mighty little team and I broke up into small groups and attempted to learn more about who lived in the neighborhood, where they spent their time and their money, what their biggest problems and concerns might be and what was their primary role in delivering results for the company.
We knew we would only be scratching the surface of their expertise, but we knew we needed to have enough knowledge of what concerned them in order to be a good conversationalist at that elusive Christmas party to which we had yet to get the invitation!
Slowly but surely, we had enough information to formulate a hypothesis that any business leader was hard pressed to pass on.
“Let us work with you and we promise to help you make your money go farther and your suppliers work harder to help you solve problems and win in the marketplace.”
Then we were really humble.
We focused on the objectives of the business partner.
Rather than offering to saving money, we focused on increasing the value we could achieve. We ‘carried a lot of bags’ and took time to do small things well in order to be invited to help with larger more pressing company challenges.
A big break came when I led an intervention on Consulting Services. This was the bailiwick of those senior leaders who hired me. And yet, it seemed that anyone in the company with a budget had the power to bring in a McKinsey type consultant and share company secrets. P&G’s CEO at the time, AG Lafley, asked me to help him get a reign over the spending and focus on those few really good consulting firms that could help us win in the market place.
I was able to carve out specific types of consulting – Strategic Management Consulting – and worked with Senior Executives to understand their business needs. I led a process to identify the few Management Consulting firms with whom we would work and aligned the rules of engagement, negotiated contracts ensuring confidentiality and negotiated preferential rates and attention of senior staff.
I also designed company policy that provided guidance on when, where and how employees could engage strategic management consultants. This policy significantly reined in spending and increased the value we derived in subsequent years from these engagements.
This work opened doors. We went on to help our Internal Controls organization establish a better engagement process with our Audit Company. We identified an offering from a Banking partner that leveraged our credit rating to provide lower cost financing – this offering became the Win we could offer our suppliers in the “Win-Win” of extending payment terms. We also started partnerships with merchandising firms and digital eCommerce companies that have remained committed to P&G.
Purchases is a connector function bringing business needs together with supplier capabilities. But we don’t just make the link, we need to craft good business deals, and shepherd relationships and engagements – especially in a large company when it takes so long to get things done.
The big value comes not from negotiating the best price but from securing the optimal value – and this is only realized over time.
So, we focused on these small wins and I did my best to hold back those senior leaders who had given me this assignment and were waiting for the big return on their investment. Patience and Urgency both have a place in this work.
Here are some steps you can take if you are just beginning to address the runaway spending in your business.
- Engage Purchases leadership and provide funding for a small team to investigate opportunities.
- Hire a few experienced entrapreneurial and inquisitive Procurement experts. Provide them with the resourcing to analyze your Big Data spending and mine for opportunity.
- Identify a Business Purchases Leader to be on the General Manager’s leadership team and charge them with making connections to help your company gain competitive advantage.
- Become a champion of the value that Purchase can bring. Challenge your Purchases professionals to be Business Leaders and not just money savers.
Good luck! Let me know if I can help you.