By Christopher Robert, CPSM
When you think of spend portfolio management, what comes to mind? Most procurement professionals would say cost reduction projects, risk mitigation initiatives or contract management — but all are ancillary to procurement’s primary mission: to drive value throughout the organization. Your most important allies in creating and executing this value are your stakeholders.
Getting to Know Stakeholders
Who are the stakeholders and what is their role? Stakeholders are any individuals in the organization that use or are impacted by the spend category you’re managing. They can vary dramatically — in some categories you may have one stakeholder who has significant influence on supplier selection; in others, you may have dozens of stakeholders around the world with minimal impact. Stakeholders can hold numerous roles throughout the organization, from administrative assistant all the way to the CEO.
With such a wide range of stakeholder possibilities, it’s important to set a strategy that effectively engages them. That strategy will vary significantly per category and per level. For example, when negotiating consulting services, key stakeholders are typically top-level executives.
The first — and most important — step will be stakeholder engagement pre-work: You should find out about the stakeholder as much as possible as well as anticipate their questions. If possible, review a (publicly available) copy of the stakeholder’s business-unit or functional objectives. Be prepared to ask how the executive (1) feels the consultant (or other product or service) will help accomplish his/her goals and (2) sees the supplier selection process unfolding. Inviting the executive for input on the supplier selection process will ensure he or she agrees to set criteria for supplier selection — and it creates goodwill for sourcing engagement in future bids.
Let’s look at a category in which stakeholder engagement is much less concentrated: MRO spend, in particular, power transmission. This diverse category is spread among multiple sites, and thus, the major stakeholders will likely be the lead engineers or maintenance managers at your manufacturing sites.
Typical engineering/maintenance concerns in this category — which will form the basis of your questions — are that (1) the supplier/distributor has a relationship with multiple manufacturers, (2) the supplier carries your highest moving SKUs in-stock, (3) there is minimal order lead time and (4) the ability of the supplier to offer technical support. If a copy of the engineering/maintenance organization’s goals are available, you should obtain them as well.
Once you have set your stakeholder engagement strategy and obtained copies of your stakeholder’s goals, align them with your own goals. I call this STP — the strategic triangulation process.
STP is the process of melding goals from procurement and your stakeholder(s) to determine one mutually beneficial category goal. For example, in pre-clinical research and development categories, the ability to minimize all non-critical study variables from research results will often trump any consideration of cost savings by moving studies from one provider to another mid-trial. The value in aiding successful development of a potentially billion-dollar drug far outweighs the savings of tens of thousands of dollars you may be able to save by changing providers.
In this case, the highest value for the organization would be an aligned category goal that focuses on minimizing research variables with the same providers who have provided previous studies for this project. However, in the long-term, the aligned category goal could be to use a new provider for the next research study to introduce competition, benchmark the incumbent, and solicit new ideas/approaches.
STP also can work well with service categories, like truckload freight. Over the last decade, rising demand coupled with the declining supply of truck drivers has led to significant freight-rate increases with longer tender lead times. To address this challenge, logistics professionals have been working with commercial and operations teams to craft a plan to the customer that allows them to effectively operate in this challenging environment while minimizing shipment lead times and rate increases. By switching from a myopic “lowest rate possible” approach to one that incorporates carrier reliability, lead time, house fleet options and customer preferences, logistics professionals have been able to deliver (1) greater carrier reliability, (2) more predictable shipment lead times and (3) minimal rate increases while aligning with their internal stakeholders and external customers.
Stakeholders have the ability to make or break your procurement and logistics projects. They want to be engaged — the spend categories you’re managing impact their daily work, so they want some control over the supplier selection for this work. By engaging them through the strategic triangulation process, they’ll own the success as well, thus enabling you to drive the project much faster.
Christopher Robert, CPSM, is director of procurement and logistics at FXI, Inc. in Media, Pennsylvania.