Quick Wins for the New Procurement...

In this briefing paper, we look at why it is important for new procurement leaders, in whatever leadership role they hold, to focus on demonstrating some “quick wins” in their relatively early days in the job.

Executive SummaryQuick wins must be aligned with longer-term strategic goals, but showing benefits quickly is important for credibility and confidence. That means both the leader’s own confidence, and the confidence that the organisation and stakeholders have in the individual.

Five potential areas for quick wins are then explored in more depth. Spend analysis is the first; that can identify opportunities for rapid supplier rationalisation, demand aggregation or better compliance. The second suggestion concerns challenging long-term contracts that might have slipped into a less than competitive state over time. Caution is needed, but the results can be good.

Then there are the core tools for any leader; people and technology. Taking action quickly here can deliver rapid benefits and also set up longer-term initiatives and performance. The use of auctions is the fourth and very specific quick win. They can generate significant savings and also be an excellent way of demonstrating internally what benefits procurement can bring. Finally, the seemingly simple idea of talking to suppliers is discussed. Those organisations are often very well placed to provide the new leader some good ideas for improving value and driving improvement.

IntroductionMany procurement practitioners will, at some point in their working lives, be a “new procurement leader.” That applies to any management role - because leadership is an ever-present element of management, just as management skills contribute towards leadership.

So whether you are promoted into a senior category role with two or three buyers and analysts reporting to you, or you have just been appointed Global Chief Procurement Officer of Apple or BP, you have both an opportunity and something to prove. Being new gives you a great opportunity to challenge the sacred cows, to ask difficult or naive questions, or to change things around.

On the other hand, there is also the challenge. You know that people, whether that is your staff, suppliers or senior colleagues, will be asking questions about you. Is the new man any good? Should she have been promoted into that role at her age? Does he seem to know what he’s doing? How does she compare to the previous holder of the job?

So it is important to combine two approaches in your early days in the role. You will be expected to define a strategy and turn that into plans and actions, for your function, category, project or role, but you normally get given some time to do that. No-one expects a brand new 20-page strategy document delivered during your first week in the job! But it is important to start the thinking and strategy development process sooner rather than later.

Quick Wins for the NewProcurement Leader

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Alongside this though, it is important to demonstrate some “quick wins”. These will help to answer those questions that are being asked in a positive manner. If the organisation can see visible and tangible evidence that you are having some early impact, that will start to build positive credibility. That can lead to building capability and performance in the longer term.

In practice, it is often useful to plan from the point of view of short, medium and long-term actions and priorities. Think about the timelines for each of the issues or areas you want to address. Clearly, there should be some continuity between those timescales; so a long-term goal to improve procurement technology might have a quick win of launching a spend analysis exercise. A three-year category strategy might start via immediate negotiations with a key supplier.

There are many activities and areas where quick wins can be found, and of course every organisation and every situation is different and will have their specific needs and opportunities. But for this briefing paper, we have drawn out five areas of focus that will often provide those opportunities to make a positive impact quickly; some will also provide the foundations for longer-term improvement or even transformation.

1. Spend Analysis - Know where the money is going

If you don’t have basic spend data to hand, whether that is at a category level or more widely if you’re in a senior role, it is difficult to prioritise and plan. If it does exist already, you can move into looking for quick win opportunities arising from that spend data. If you don’t have it already, remedying that becomes the first priority. Once the data is available, there is a range

of actions that can deliver rapid results. That might include the following – but do see the previous Real World Sourcing material for more detailed insight here:

• Aggregation - perhaps multiple suppliers for a single product or service where rationalisation might drive cost savings

• Compliance - a contract that is not being used where it should be, with resulting value leakage

• Untouched spend areas - identifying major spend that has not been addressed yet with professional procurement

• Price arbitrage - multiple prices being charged for the same item - sometimes even by the same supplier!

• Spend Recovery - seeking out duplicate invoices or payments, over-payments, even “fake suppliers!”

2. Challenge long-standing contracts

Most organisations end up with some long-standing contracts and suppliers, relationships that have not been tested for some time. So it is worth looking in your new job for examples of that within your sphere of influence. What are the largest contracts that have not been competed or re-negotiated for two years or more? Remember, you have the scope as the new broom, the new sheriff in town, to push and challenge in ways that might raise eyebrows later on in your tenure.

Why look in particular at these long-standing contracts? It is not always the case, but there is a strong probability that there will have been some slippage in the competitiveness of some of those deals at least over time. That may not be deliberate or cynical profiteering by the supplier but almost inevitably, long-

Quick Wins for the New Procurement Leader


CRITICAL SUCCESS FACTORS • Ability to access all the relevant spend data from

various systems• Accuracy - effective data cleaning and classification,

remember rubbish in, rubbish out• Turnaround time – it can’t take months!

POTENTIAL BENEFITS: cost reduction and savings, supplier rationalisation, cash recovery, compliance

CRITICAL SUCCESS FACTORS • Ability to identify contract detail e.g. start / finish

dates, key Ts and Cs• Buy-in from business stakeholders to process and

willingness to challenge• Negotiation capability

POTENTIAL BENEFITS: cost reduction and savings, quality improvement and wider business value

standing contracts just lose a bit of their competitive sharpness. Sometimes just letting the supplier know that procurement is taking a look at the contract is enough to bring a supplier to the table with some improved terms.

The chance of success here also depends on how strong the organisation is generally in terms of contract management processes and performance. The better the previous contract management has been, then of course the lower the chance of some quick wins. (Improving contract management is another generic topic for senior procurement executives in particular, and is also covered elsewhere in the Real World Sourcing series, but we have not included it here as one of our quick wins.)

One note of caution however - watch out for the “sacred cow” contract or supplier! That is the one that was personally negotiated by the CEO, or sits with the CIO’s most favoured software firm. Now that is not to say you should not take a look at it, but proceed with caution. So, along with the formal side of understanding the current contract position, getting to grips with the softer relationship side of things is another important aspect for the new procurement leader.

3. Staff and Technology

The building blocks of success for procurement, the “raw materials” if you like, are people and tools, with “tools” in the main meaning technology. When we think about performance, those two factors are really all we have to work with to generate the outputs and results that procurement delivers to the organisation. Therefore it is an absolute certainty that as you get into your new role, performance improvement will involve

addressing one or both of these – if you are more capable thanyour predecessor then, of course, that is in effect already starting to be addressed!

The beauty of starting sooner rather than later is that you canget away with taking actions when you are new that are much more difficult later on. So a new manager can introduce a staff skills and capability review and it is almost expected. Do that two years into the job, and everyone will wonder “why now,” and hostility may well develop. So there is a brief window of opportunity when you’re new into a role, and the earlier a manager can gain a good understanding of their team’s capabilities, their strengths and weaknesses, then the better.

Assuming you can get some sense of capability early on, then you need to decide quickly whether action is needed in terms of staff. That may be decisive action – a recruitment programme, a new training approach – or it might be explorative, such as a detailed skills assessment. But move fast. If you are in a major people-management role, some would advocate firing someone early on, just to show you are in charge! We would not go as far as to recommended that, but remember: the aim is to be respected by your team, not liked. Machiavelli said that the ideal is to be both liked and feared, but if he had to choose just one of those, he went for “feared.” There is something in that, perhaps unfortunately.



CRITICAL SUCCESS FACTORS • An understanding of technology good practice,

options and capabilities• Capability to assess and understand staff strengths

and weaknesses• A certain amount of budget availability will help!

POTENTIAL BENEFITS: effectiveness and eventually better delivery of all procurement benefits

We have mentioned spend analytics and auctions already, which generally have a technology implication, but there may be other technology improvements or investments that can deliver relatively quick results; for example, contract discovery and contract management platforms. But this may also be one of those areas where getting to grips with the subject early is well worthwhile in order to drive the benefits in the medium and longer term. Again, it is easier to put forward a business case for investment when you are coming to the job with fresh eyes. It is harder to ask for money two or three years in.

4. Auctions

Auctions have the beauty of speed. That does not mean they should be entered into lightly or hastily, but it does mean you can get results relatively quickly compared to a traditional tendering process.

A successful auction also has other benefits. The results can be very impressive, if the category is chosen well; we know of examples where genuine savings of 20 percent, 30 percent or more have been generated. The nature of the auction process also enables the new leader (if they so wish) to turn it into something of an event, which can be very good for gaining that credibility needed by someone in a new role or organisation. Let’s hear from the ex-CPO at Santander and Fujitsu, Guy Allen, on this.

“I’ve used auctions several times early on in a new senior job. In one case, the organisation had never run an e-auction before, and there was some scepticism. We chose mobile phone contracts as our first venture – a fast-moving market with strong competition. We booked a meeting room, but if you can get the Boardroom even better, and invited any senior executive who could make it to come along and watch the auction in progress. You need to put a time limit on the bidding to make sure something is happening, of course! If you choose the spend area well, it can be very effective as the senior stakeholders can actually see savings of 10, 20 or 30 percent being generated in front of their eyes.”



CRITICAL SUCCESS FACTORS • Appetite from business stakeholders to use auctions• The technology to run the events effectively • Choosing the right categories / contracts

carefully is vital

POTENTIAL BENEFITS: cost reduction and savings (often significant), product rationalisation

It is important to choose the spend area carefully however. Whilst there are few real limits in theory around the spend areas that are addressable through auctions, for the quick wins it is obviously better to choose competitive markets, with a good number of active bidders, and also a market where there is price movement and variation over time and between vendors. But this can be one of the most effective quick wins for the new leader.

5. Talk to your suppliers

Some of our other points may sound somewhat tactical and driven by the need to show rapid savings and cost reduction. As quick wins, such activities do have a clear motivation; they can bethe easiest and most obvious way for the new CPO or executive to show they are delivering value. But of course there will be other value opportunities, they are not necessarily just about cost reduction. To get at these quickly, the best route is often to talk to key suppliers.

Other quick wins that we have mentioned also involve contact with suppliers, but what we are really talking about doing here is picking their brains for their ideas. That can be done by engaging one supplier at a time, and it is likely that doing this will be beneficial for key suppliers at least. But there can also be merit in an event - a “supplier conference” - to get some early messages across to a wider group, or commissioning an independent supplier survey.

If you take the conference option, you may get less direct feedback from the suppliers on that day than you would from



CRITICAL SUCCESS FACTORS • Data to understand who the key suppliers are• Involvement and buy-in from business users /

stakeholders• A clear sense of purpose and objectives

POTENTIAL BENEFITS: cost reduction and other supplier-driven value, internal efficiency

face-to-face meetings, but it can set the scene for further discussions and indeed for a positive relationship in the future.

Just as in the case of the staff in point 3, you can also get away with things you can’t once you have been in the post for a while. So, as a new person, you can ask suppliers innocent,even seemingly stupid questions, and no-one is too surprised. Why do you do it like that? Are we one of your preferred customers? (Watch out for that moment’s hesitation before they say “of course!”)

Putting a direct question to your key suppliers - “What would you do if you had just started in this job” - is an excellent way to get into a meaningful discussion. They might come up with a self-serving example, but in our experience they tend to respond reasonably openly to a direct enquiry of that nature.

A long-standing supplier is also in many cases a great source of information about the hidden politics, culture and ways of working of your organisation. They can also be perceptive about the opportunities for you to make efficiency gains within your own organisation. Suppliers often see bureaucratic and non-

value-adding processes in their customers’ businesses very clearly.Rather than just seeking information, you are also looking

at opportunities to achieve more value. So the discussion with those suppliers can also get onto that area. What do we ask you to do that costs you money? Are we buying non-standard products or services? Do you have different or innovative ideas that we could use and would be mutually beneficial?

Particularly when you are new, suppliers are usually very willing to talk, and, as we said earlier, you have the perfect excuse to ask innocent but probing questions. Don’t waste that opportunity!

Conclusions and Three Take-AwaysBeing a new procurement leader, whether at CPO level or running a small team or a category, can be both a concerning time and an opportunity. It is often challenging, exciting and a little frightening too. But it is important not to waste the opportunities that being the “new boy / girl” gives you. It is also important to get off on the right foot both to make a quick impact and to start defining your longer-term contribution.

We have outlined five key areas of potential above. Finally, here are three fundamental points to remember if you are ever in that challenging but satisfying position.



Take-Aways

1. Look to generate some quick wins with tangible benefits and outputs, as well as making an early start on defining your longer-term strategies and plans for your area of responsibility.

2. It is much easier to do the difficult things early on than it is later - difficult staff decisions, asking for investment in technology, changing structures or processes; all are easier to do in week three than in year three.

3. Ask questions, including those that you think might be stupid, naive or upsetting. And listen to the answers - from staff, from colleagues, from suppliers. Again, because you are new, you will get more interesting, open and honest answers than you will in two years’ time.

Quick Wins for the New Procurement...

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