Implementing a Rigorous Strategic Sourcing Process
By Larry Mohammed, Director, Global Sourcing and Procurement, Teradyne, Inc. [NYSE:TER]
1) What according to you are the current market trends shaping the Procurement space?
Historically, Procurement may have been one of the hats worn by an IT Professional. Today, the Procurement discipline has emerged as a competitive advantage in many companies. Over the last decade, I have experienced a steady movement toward center-led procurement or centralized procurement organizations built around Category Management; Processing and Reporting; Supplier Risk/Compliance and Quality Management. This trend increases visibility and influence of Procurement professionals across the enterprise. According to one cross industry study done by CapsResearch, approximately 88 percent of Procurement groups are center-led or centralized, which suggests growing penetration in IT. It’s now common to see category specialists responsible for the Procurement of technology products and services. Depending on the size of the organization, the aggregate spend and complexity of the supply base, you will also find Procurement generalists responsible for technology together with other diverse categories of spend.
2) What are the common business challenges the Procurement sector faces at this point in time? As a technology enthusiast, please opine your views on the steps organizations should take in combating those.
One chronic challenge facing Procurement is the ability to find suitable talent. Finding people with the right mix of technical, conceptual and interpersonal skills is an ongoing challenge. This problem may be more pronounced with Technology Procurement which requires working knowledge of hardware and infrastructure, software licensing models, diverse technology services (Telecom, Cloud, Consulting and Outsourcing), and pricing constructs, combined with data gathering, analytical and consensus-building skills. Companies need to adapt their recruiting strategies and practices to deal with this challenge and develop more innovative methods to attract and retain the right talent.
Productive and effective teamwork, collaboration and communication between IT and Procurement can also be an obstacle. There is growing evidence that Procurement has a seat at the table now, however the inter-departmental relationship can be tenuous without management support, commitment and participation.
2) With technologies like Big Data, Cloud, Mobility and IoT put into use, the Procurement sector is through one of the most transformative periods in its history. What are your views on how these technologies can be timed to increase productivity and help companies reach their goals?
It’s important for Procurement professionals to have an awareness of the emerging trends influencing technology decisions.
Executing a rigorous strategic sourcing process is one of Procurement’s most valuable contributions
I believe open source, cloud, mobility and social networking are powerful drivers in technology selection decisions. By having an appreciation for these trends, the Procurement function can provoke learning and challenge the status quo in many companies. However, it can be difficult to establish a strong correlation between these technology trends and increases in company productivity, future revenues and profitability.
Executing a rigorous strategic sourcing process is one of Procurement’s most valuable contributions. This process usually leads to decisions supported by maximizing ROI, minimizing business risks, improving productivity, quality and/or customer satisfaction. Without a disciplined approach to Procurement, technologists can be tempted to react hastily to the marketing hype and buzz words we hear a lot.
3) Automation and digitization along the entire procurement, spend analysis, and contract management process can certainly answer cost and investment challenges. Could you please reflect your views on these technologies?
These forces have led to tremendous efficiencies across all industries by providing cost and time savings in the service sector and labor intensive operations.
Companies have varying levels of maturity and different appetites for investing in technologies used in Procurement, so the benefits are situational. There may be little to no ROI to invest in technology for some global companies which are engaged in Business Process Outsourcing, or have the ability to move work to low-cost regions. I believe it is important to have a broad vision of the technology, processes and resources required in the Procurement function and to continuously seek opportunities to optimize that investment.
4) Another trend that is unfolding its features in the Procurement space is Artificial Intelligence. Please reflect upon its capabilities and how it can help businesses to promote their products and services and to connect with larger audiences.
The current and potential business applications for Artificial Intelligence (AI) are very expansive and will impact most industries. Furthermore, the growth projections for companies that design, build and sell AI solutions are very strong.
Product companies have opportunities to utilize AI to drive efficiencies in their manufacturing, assembly or supply chain operations. For example, the ability to utilize robots collaboratively with people in an existing workflow, can have far reaching benefits for companies and customers. AI can also improve the usability and safely of products and services for customers, which can be a differentiator for some companies like in the automotive industry.
5) What is your advice for budding technologists in the Procurement space? How do you see the evolution a few years from now with regards to disruptions and transformations within Procurement arena?
Here are a few bits of timeless advice:
• Technology is dynamic and constantly evolving so it’s imperative to cultivate a willingness to learn new things and realize that career growth is about continuous learning.
• It is equally important to be firmly grounded in the strategic sourcing process which can be adapted across the organization to facilitate favorable outcomes for the business. Oftentimes this provides clarity when you get stuck and need to determine your next steps.
• Having a focus on execution will help to manage the emotions and conflict that are inherent with the role of influencing strategic decisions across the company.
• Do not compromise your integrity and honesty. The Procurement profession is people centric, and trust is vital in building productive relationships (with suppliers, stakeholders, investors and customers).
• Prepare to be wrong and learn from it – sometimes it is more important to be effective than to be right. Do your homework and always be open to alternatives. In many situations, there simply cannot be only one right answer.
• Enjoy what you do. Get a grip on the realities of the business. Do not be afraid to get in over your head and use laughter and humor as an antidote in stressful situations.