Part 1 of 2: You don’t have to act like a control freak to wield procurement influence.
In this two-part series, Determine Chief Product Officer Julien Nadaud tells how one word — influence — can empower procurement strategies to literally put top value into the outcomes all parties, including suppliers, seek. He explores three case studies that prove his point, starting with how one customer expanded its supplier’s visibility into overall spend.
Success is not about procurement getting the upper hand; in fact, it might be about giving it up! Such a statement might raise the eyebrows of people pursuing success. It’s true that all corporate functions want more influence — but the secret lies in how they go about pursuing and leveraging that influence.
For instance, for procurement managers to maximize the value from every contract, they must work with the best, most influential suppliers of every product and service — even if it means they can’t always maintain the upper hand.
Maybe it’s time to tweak our thinking about procurement influence. The real-life experiences described in the following case study — and the ones you’ll read in Part 2 — show that procurement teams need to learn three key lessons about influence before they can reach peak effectiveness and before strategic suppliers can exercise their own influence on behalf of buyers.
Case Study 1 — teaches that influence does not equal control.
Sometimes procurement teams must give up control to increase the influence of their supply chain. As they move away from reacting to transactional business needs and toward building strategic influence, procurement needs to stop emphasizing control in supplier relationships. Traditionally, procurement has been most comfortable when they have near-total control over suppliers. If they work to maintain that condition, however, they artificially cap supplier value creation. To make sure procurement has control over the relationship, they believe they must select suppliers that are not too influential, not too successful, or not able to challenge their customers directly.
But contracts do not exist for procurement’s benefit. If the best, most qualified supplier ends up having leverage over procurement, but they are able to create measurable value for the enterprise — that is the right way to go.
For example, consider the case of expanded insight that played out at Brunswick, a world leading provider of marine engines, pleasure boats, and fitness, bowling, and billiards equipment. They implemented a centralized spend analysis solution to increase both visibility and control. They understood that if they limited the increase in visibility to internal eyes only, they would be shutting the door on half of the value they could potentially gain from their investment.
With all of their business units’ demand and purchasing history combined into one cleansed data set, Brunswick’s suppliers understood more clearly their diverse business requirements and aligned more accurately with future business strategy and direction. If the Brunswick procurement team had decided to block their suppliers from this visibility, procurement certainly would have monopolized the upper hand during discussions, but suppliers would have been blindly trying to offer additional value. By allowing the suppliers to become well informed about Brunswick’s needs, suppliers became more influential, but they were also better positioned to deliver on the company’s behalf – increasing procurement’s influence internally and externally.
If you want to learn how technology can help you be more collaborative with suppliers and other third parties, schedule a personalized demonstration of our modular, integrated Supplier Management Solution on the Determine Cloud Platform, or contact us with your questions anytime.
This story first appeared on the IACCM Contracting Excellence blog.