Sep
20
What does strategic sourcing do?
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In one of our recent posts So you want a career in supply chain management, we talked about some of the fantastic career opportunities open in the world of supply chain. One of the areas that sees a lot of focus is that of the strategic sourcing, but what does that team actually do?
The first thing to understand is that strategic sourcing is actually a methodology – and involves a team of people each undertaking a particular function within the process
Strategic sourcing is all about an approach to using information/data to leverage an organizations purchasing spend to maximize its return.
In terms of roles, let’s first take a look at the typical strategic sourcing team makeup. In most organizations the team is usually led by a strategic sourcing head – who’s key role is to lead the team. Underneath the leadership come the strategic sourcing managers (often referred to as category managers). Under this level is often a group of buyers (note that in some businesses the buyers are execution only and work independently of category managers executing their “buy bench”.) Often, but not always, there is some commercial representation, they will typically deal with establishing and formalizing the legal framework which will govern selected suppliers.
So let’s look at them in a little more detail
Head of Strategic Sourcing
This role leads the team. They will typically lead the construction of the top level sourcing strategy developing and executing a “strategic sourcing business plan”. They will work closely with various departments within the business often at the leadership level to ensure that the demand requirements are known and that there are appropriate sourcing projects established. This role is typically part of the leadership team and helps inform and act on top-level business strategy. They have top-level responsibility for supply chain performance in support of the business and are as such a typical route of escalation.
This role supports corporate governance and they will help establish appropriate metrics to help understand the department’s performance against their objectives and will hold responsibility for establishing the appropriate review cadence to help ensure that the strategy is being executed. They will usually be responsible for leading process improvement within the function.
They will typically be involved in major reviews with stakeholders within the supply chain and will typically meet with key suppliers at key business reviews.
They are also responsible for talent management within the function leading the building of the appropriate strategic sourcing team.
Strategic sourcing managers
This role typically involves liaising with various teams within the business in order to understand requirements. Through analyzing company spend information and understanding the company strategy, They develop and deliver sourcing plans which deliver against the business needs maximizing spend opportunities and seeking to construct the optimum supply chain for the business. There are usually a number of sourcing managers within a business each responsible for a specific area of spend.
The incumbent will typically have strong purchasing process skills and be able to consolidate and analyze data in support of the task. These roles often require leadership skills as the job owner will need to lead contracting activities involving multiple projects (which can include improvement projects) and stakeholders at the same time.
They will lead tenders and will be responsible for supporting the supplier selection process.
In terms of objectives, they are often tasked with delivering against cost down targets, meeting compliance obligations and managing risk. These individuals are often the front face for supplier relationship management.
Buyers
Buyer roles can come at various levels, lead buyers (often in charge of the team) strategic buyers (for those directly aligned to commodities), tactical buyers (for execution only). The buyer role can vary considerably between organisations.
While typically they will be at the execution end of the role, buyers can also get involved in elements of strategic procurement decision-making offering assistance to sourcing managers in helping to build and run tenders.
Buyers usually help maintain the MRP system and are often involved in report writing and KPI collation.
Commercial managers
The commercial manager can find themselves both inside and outside the procurement organizations. Thier role is usually one of supporting major projects and tenders acting as the subject matter experts leading commercial based activity.
Commercial managers help the strategic sourcing team in leading supplier negotiations and help to articulate the legal framework supporting the conclusion. The key skills associated with these roles are being able to work to deadlines, excellent problem-solving skills, analytical and being an excellent decision maker.
While aligned to the procurement team commerical managers often find thier direct reporting line into either Finance or a larger commercial function.
Sep
19
Want to improve? Ask your supplier
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We often talk about continuous improvement in the supply chain. Often that involves auditing your suppliers, with them learning from the findings and putting actions in place to make them an even better supplier.
However, there is a different way of looking at it. What would happen if
you asked your supplier to audit you as a buyer? How would you fare?
I guess we’d all agree that we want to become the priority customer the one when we say jump the supplier asks how high? But that means that you need the right relationship and unless you are spending gazillions with the supplier developing that form of relationship will take time. Part of that is learning how to best make the relationship tick.
By asking your supplier to provide an insight into your connection you’ll likely gain critical insight into issues that are affecting your effectiveness as a buyer, harming your buyer/supplier relationship and more importantly helping to drain cost.
Following this approach can be a difficult and sometimes bitter pill to swallow. We all like to be thought of as super effective and it can be difficult when we find we’re not but if we’re trying to find methods to improve asking a few simple questions of our suppliers, about us the buyer can be super insightful.
So, we’ve agreed on the method, what questions should you ask? Each business is unique but there’s likely to be some common ground with a mix of transactional and communication issues that can be teased out. We’ve put together 20 questions below. With some of these the answers might hurt, but let’s face it we can’t improve if we don’t know.
1/ How well do I manage the relationship
2/ How well do I understand the parts I order and key issues such as lead times and key cost drivers.
3/ How do I treat Risk
4/ Do we communicate effectively?
5/ Do I listen to and understand your problems?
6/ What could I do better?
7/ Do you feel our sourcing process is effective and fair?
8/ Do you have sufficient access to other stakeholders in my organization?
9/ How well do I manage change?
10/ Are our transactions always clean and efficient?
11/ Do I understand the complexity in your supply chain?
12/ Am I open to new ideas?
13/ Do I clearly articulate my requirements?
14/ Do I share appropriate KPI information?
15/ Are our KPI’s representative of our relationship
16/ Does the way we manage our transactions result in large amounts of rework
17/ Do I understand what your business does?
18/ Am I your best client? if not why not?
19/ Am I open to new ways of doing things?
20/ If you could change one thing about our relationship what would it be?
OK, so there are some zingers in their that’ll hurt, but you get the idea.
Teasing out information from our supplier can help both organizations prosper?
So what do you think? Do you ask your supplier for feedback? Any thoughts on our questions above? We love your comments so please make sure you fire back in the section below.