Journey of a CPO: successful procurement digitalisation secrets straight from the field
In a webinar jointly hosted by Sievo and Cloudia on 18 September 2019, former corporate CPO, Anand Seshadri from Sievo, was joined by Cloudia digital procurement expert, Joonas Jantunen. Together they shared stories and practical steps to help drive your journey to digital procurement.
Begin by setting baselines
“As you prepare to launch off,” Jantunen advises, “the key question to ask is where are you are now?” Moving forward successfully means first setting some baselines, and establishing a clear understanding of where you are coming from?
In assessing your current status, Seshadri presents one comprehensive approach. “But there are as many ways of cutting up the whole ecosystem of procurement as there are consultants out there,” he jokes, “so find the one that works for you.” You should be overviewing your current execution strategy, by category, alongside your ongoing improvement activities. That means: what are you buying; where are you buying it; and how? At this stage, looking at what your competitors are doing can also often help give you a good idea of the procurement space you’re in.
“Basically, this is all about the price, the cost, the quality, the staying competitive, and the reduction of risk on various fronts,” Seshadri explains. “And by sitting down to analyse it all you get something on the record in terms of how your procurement is being impacted by all these outside forces as well as the demands of your own organisation in terms of its growth and profitability.”
Analyse your biggest issues
In determining how effective your procurement practices are in aligning the needs of the business, it also makes sense to look at some of your biggest challenges. Jantunen describes this step as your chance to map out the problematic areas of your buyer’s journey as you go from the early stages of sourcing, to payments and then on to managing your suppliers.
“It’s about understanding your major pain points and mapping out solutions for them,” says Jantunen.
Seshadri talks us through a list of typical issues facing CPOs, including the splitting of POs to avoid approval limits; warehouses full of unrecognisable equipment; and sub-purchasing layers where, as he puts it, “everyone and his uncle has become a purchasing expert!” Seshadri also shares a story of an incorrectly classified PO, from his days as a tenured CPO. The mysterious case of the Mercedes Benz, which was bought by the company and classified under Travel and Fleet. Seshadri eventually discovered that the high-end car should have been categorised as Marketing, but the marketing guy, who had already maxed out his own budget had done some shuffling behind the scenes.
It’s potentially serious, Seshadri points when maverick buying might not be totally clean. Lack of visibility in the supply chain can also be problematic from a CSR perspective, where hot button issues like child labour practices and environmental health and safety can’t be properly assessed. “These are areas where digitalisation of procurement practices could also be seen as a way of reducing risk.”
Prioritise your needs
From a digitalisation perspective, the next important question to ask is what are your needs and is there a business case for improvements?
“Remember,” Seshadri cautions, “we’re not talking about digitalisation at all unless you have established a need and a business case for addressing it.”
“Be honest with yourself,” Jantunen urges. “Make quality observations about your practices and analyse them.
This should include what Seshadri calls the Four Ps:
• Understanding your people
• Understanding your processes
• Understanding your purchases and turning them into projects
Do you have the right people? Are they able to absorb new technologies? As you digitalise your processes, people will more and more need to be able to operate across functions. Does your team have what it takes? Even issues like the English language are becoming more important. Some of your people might need additional training.
“In understanding your processes, consider what functions needs to be kept inside and what could and should be better served from outside,” Jantunen continues. “What are you good at? What are your competitors a little bit better at?”
“And in reviewing your spend,” Seshadri warns, “most importantly, be clear on what not to buy!”
Then for maximum acceptance across your organisation, you’ll need to catch all your improvement suggestions and related KPIS in a common language your company can understand. Then, once you have your analysis and feel clear about what you should be doing, it’s time to take action.
Hit the road map
Not all your improvements need to be digitalised. Process automation and robotics can improve many functions, but some efficiencies can be achieved manually just by changing processes, outsourcing, or introducing shared services.
Seshadri walks us through a sample map and timeline from his former CPO days. Everyone has a different journey, but a roadmap will give you an understanding of what’s important and when it needs to be done.
Understanding the baseline and analysing your data is where Sievo’s data analytics expertise comes into play. Then once you have your analysis, Cloudia is perfectly positioned to help you look into software services to do with eSourcing, managing supplier negotiations, tracking performance around contracts and generally managing your supplier relationships in an efficient and digitised way.
Keep reading more articles from Joonas Jantunen: Honesty the best policy when it comes to your data and From tactical to strategic sourcing: going beyond daily battles to long-term victory.
You might also enjoy reading why in CLM, it’s OK to say no to flashy AI and blockchain for now.
Don’t know where to begin with digitalisation? Let us help you! Order a complimentary process evaluation.