Dustin Cochran was named a 2019 Pro to Know by Supply and Demand Chain Executive for the second time.
I’ve spent the majority of my career working in the procurement space – I’ve worked with companies large and small, public and private. In doing so, I’ve built up a diverse range of procurement experience that I use to support procurement and finance leaders on a daily basis.
Now, as their role is evolving and there’s a focus on aligning with the broader corporate strategy, procurement professionals are faced with overcoming three major challenges this year: limited bandwidth, a talent gap and the declining value of cost savings. While these are not necessarily new challenges – they have existed for years – they are challenges that have yet to be fully addressed by most organizations.
1. LIMITED BANDWIDTH
This is perhaps the key challenge for procurement professionals – and many of the other issues faced by these folks are related to not having enough bandwidth to do the job effectively. I’ve worked with companies tasked with managing massive amounts of indirect spend. Oftentimes, they’re working with limited corporate buy-in to the value that procurement can bring, and they have an average team of three to four individuals.
Procurement individuals must wear many different “hats” in their roles to be successful. And given the issue of limited bandwidth, this can feel like they’re expected to also be super heroes. Many organizations feel like they can’t be successful without leveraging outside help, but because they are under the false impression that this assistance comes at a high cost, they opt not to follow this route.
2. TALENT GAP
Most organizations have outstanding talent that execute their roles extremely well, but the problem is that roles are evolving. The tactical buyer might be the right individual to negotiate with a supplier to save 5%, but are they the right person to build a relationship with HR stakeholders? The procurement practitioners of today might be the right people to negotiate terms and conditions, but do they know how the company’s marketing plan is evolving over the next 12-18 months?
With these roles continuing to evolve, it’s clear that procurement teams need to break out of silos and closely align with other functional areas to drive the greatest value. Best-in-class organizations are hiring individuals that look more like sales people than the typical procurement hires of the past. These individuals are ideally suited to build relationships internally, foster change management, find the levers of value and execute upon them via long-term strategic supplier partnerships.
3. DECLINING VALUE OF COST-SAVINGS
In many organizations, categories have been competitively sourced a handful of times, and consequently, delivering additional cost-savings becomes more and more difficult. In certain situations, organizations have switched to low-cost suppliers only to become extremely unsatisfied with the level of service they receive. A long-term struggle for procurement is how to continue to deliver cost-savings while creating a culture shift towards value-based measurements.
OVERCOMING THE CHALLENGES
In my current role at OMNIA Partners, I work with organizations to address and overcome all three of these challenges. First, cost-savings, in my opinion, is table stakes to working with a GPO, as we can use our scale to deliver on average double-digit savings for clients. Our model works well to remove the need for our member organizations to go to RFP, freeing them from a process that, by some accounts, can take 350-500 hours of manpower per category.
In terms of limited bandwidth, we work as an extension to our member’s procurement team. This frees up clients to focus on other strategic priorities and build internal relationships. In many situations, we work with departments beyond procurement to aid in building procurement’s credibility with these stakeholders. We do this by putting category managers and supplier experts in front of them to determine the qualitative considerations we need to address for a given category opportunity. Our approach also assists in the change management needed. By leveraging the experience of working with hundreds of large organizations, we know the roadmap of who we need to talk to, what information is necessary and how to perform a seamless implementation.