Last week I attended the Zycus Horizon 2016 conference and was reminded of a conversation I had early in my career with a Chief Executive of a major food company. I’d completed a current state analysis of the business and needed to report on the team’s performance. Procurement’s performance was poor with limited cost improvement, poor coverage in volatile commodity markets and lots of complexity as the team had excessive spot market transactions, no risk analysis and limited supplier management. After reviewing the results with this executive, he was obviously aggravated and demanded to know who should be fired!
My response was a complete surprise to this executive; I told him that management’s expectation was low, there were no targets for cost improvement, no requirements to hedge commodities to protect the plan, limited engagement with the supply base, no requirement for innovation or value. The CEO paused and said, “I guess I should fire myself.“
5 Things that CEOs and CFOs should expect from the procurement team:
- Cost management
- Value Management
- Supplier innovation
- Speed to market
- Improved warranty
- Improved cost
- Continuous improvement
- Supplier investment
- Complexity reduction
- Business strategy alignment
- Supplier relationship management
- Internal and external collaboration
- Supply chain mapping, audit and risk management plans
It is unfortunate that Procurement’s past haunts its future ability to be strategic. I believe that value extraction will be the key to procurement leadership in the future. Is it better to gain a few cents on a product or be the first in the market? Is it better to save a few cents on refractory bricks in a glass furnace or develop a brick that extends the life of the furnace one year? It’s time to raise the expectations for the procurement team and deliver the performance that adds to shareholder value.
Are your expectations getting in the way of success?
Photo: My team manager Cubs Hall of Famer Andre Dawson helping set my expectations before my next at bat at the fantasy camp championship game. I was hitless at that point, but after Andre changed my focus, I got a hit off A’s Hall of Famer Rollie Fingers!