THE PATH TO STRATEGIC SOURCING

Changing my approach

OK, Im convinced I need to convert my purchasing efforts toward more strategic sourcing. The goal of any Purchasing organization,
indeed the goal of any organization, should be for optimal skill level and engagement of its resourcesincluding its Purchases resources. If you are motivated to pursue strategic sourcing, you are prepared to embark on a journey of continuing skill development and engagement in more and more areas where strategic sourcing can add value to your corporation. The conversion from a procurement agent to a Sourcing Pro requires both development of strategic sourcing skills and deeper engagement in the business, as depicted in the Sourcing Pro Model:

Copyright 2009 GrayLine Consulting, LLC. All Rights Reserved

THE PATH TO STRATEGIC SOURCING

Of these two areas, the first priority should be to develop the skill level of the purchases resources. Strategic Sourcing, like other skill sets, can be learned through the appropriate combination of valuable content, experience, and solid coaching. Improved sourcing skills will lead to better, more professional buyers who provide ever-increasing value in their current areas of responsibility. This value demonstration will enable, and, in the ideal, will also create pull for the application of these skills in new parts of the organization (both in new spend areas where purchasing resources are not currently applied, as well as in non-purchasing-owned tasks where the strongly developed and related skills can be applied in new ways to deliver new benefitsfor example, in the development of an R&D strategy that includes not only internal R&D capability but external resources as well). The other axis of growth in the strategic sourcing journey is along the path of deeper engagement with the business. The early stages of this deeper engagement involve working with internal counterparts to mutually determine the ideal way to purchase goods and services. As engagement with the business expands, the purchases resource will be sought to provide input in more and more areasfinding new suppliers, tweaking or enhancing specifications in order to optimize the value sought, and even determining what goods and services should be supplied externally vs. provided internally (e.g., business process outsourcing). The increases in skill level and in business engagement are mutually supporting. As skills are enhanced, they will be sought out by internal customers in new spend areas. As skills are applied in new areas, the purchases resource will grow in capability. This virtuous cycle will result in the expansion of strategic sourcing efforts into more areas and deeper business engagement, which will translate into greater skill development for the purchases resources as skills are applied in new areas and new ways.

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Copyright 2009 GrayLine Consulting, LLC. All Rights Reserved

THE PATH TO STRATEGIC SOURCING

Pathway of progression

The most effective progression along the path to optimal strategic sourcing is illustrated in the graphic below.

Details of the model above will be discussed in other white papers (see From Procurement to Buying and From Purchasing to Business Partner). However, the important takeaway for this paper is the specific pathway of progression as well as the shape of the phases as they occupy more area. The depiction shows clearly that improving skill level is a prerequisite to business engagement. One must bring skill and value to other parties if there is a hope that they make a place for you at the table. As such, business engagement opportunities will reveal themselves as the strategic sourcing team builds their skills. As engagement with the business deepens, there will be more opportunities to learn more skills and perfect them. Consequently, the overall skill proficiency will dilute (note as the pathway turns and moves from right to left). However, as the group engages more and becomes
106 Woodridge Drive, Kennett Square, PA 19348 t: +1.610.444.3727

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Copyright 2009 GrayLine Consulting, LLC. All Rights Reserved

THE PATH TO STRATEGIC SOURCING

increasingly adept at taking on new skills and applying quick learning methods to them, they overcome the dilutive trend and start improving on their skill sets while also engaging more deeply in the business. This, then, takes a strategic sourcing team into the final stretch. Leaders in all organizations would benefit tremendously by understanding the directional progression of their strategic sourcing team. This will provide clues on how to develop them and get the most out of this resource within the organization. Strategic sourcing teams themselves also benefit from this knowledge as it can help set priorities of work and it can create a platform for development. Business multipliers Three important business multipliers for a successful strategic sourcing effort are: 1. 2. 3. Culture Leadership Organization design

While these may seem unrelated to the purchasing function, they create the environment that allows strategic sourcing to occur. Culture represents the pulse of the organization. A good culture motivates people to work hard and view their organization as their own, whether they are truly financial owners or not. Employees in positive organization cultures tend to be open to teaching and will respond well to proactive problem solvers. A bad culture in a small organization often has an overbearing and controlling leader or leadership team. Bad culture in a large organization often surfaces as a strong political environment where employees spend more time watching their back or promoting themselves just so that they can survive. Strong leadership will foster an environment where learning and growing can occur. Additionally, good leadership is critical in creating a productive environment where employees learn from mistakes. Employees will learn the most from the mistakes they make if they are given the appropriate environment to fail, learn and be held accountable. Allowing them to problem-solve aggressively, while not being deathly afraid of mistakes, takes proactive involvement of strong leaders that will protect their people while appropriately holding them accountable.

106 Woodridge Drive, Kennett Square, PA 19348 t: +1.610.444.3727

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Copyright 2009 GrayLine Consulting, LLC. All Rights Reserved

THE PATH TO STRATEGIC SOURCING

Organization design impacts the strategic sourcing effort in a number of ways. Ideally, strategic sourcing resources should be separated from procurement work. In the never-ending battle for how we spend our time, the urgent requirements of procurement (responding to changing schedules, coordinating shipments, etc.) will always win out over the important-but-not-urgent requirements of strategic sourcing. To balance this separation of roles, strategic sourcing resources need to be physically accessible to both their internal customers and organization decisionmakers. If you try to build a strong strategic sourcing organization while ignoring the importance of organization design, good leadership and healthy culture, then the initiative may be doomed from the start. On the other hand, if your organization has good leadership, a healthy culture and a willingness to influence organization design, then you will find your organization naturally embracing the process of being a great strategic sourcing shop. Developing strategic sourcing skills can take considerable time and expertise. Leveraging the experience and expertise of Sourcing Pros who have been there and done that and can help expedite your skill development (and even identify some of the potential pitfalls) is essential. We welcome a conversation with potential clients.

106 Woodridge Drive, Kennett Square, PA 19348 t: +1.610.444.3727

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Copyright 2009 GrayLine Consulting, LLC. All Rights Reserved