The very best thing about my role at Buyers Meeting Point is that I get to work and learn at the same time. I read and attend events under the ‘pretense’ that I’m helping my time-strapped colleagues stay on top of the latest in trends and thought leadership from around supply management. While that happens in the process, I am also on a fantastic journey where I get to follow my interests wherever they lead me.
I recently attended a webinar on direct materials sourcing presented by Greg Anderson and Michael Cross of Directworks (here is a link to my notes if you’d like to read them). Part of the level-setting that took place early in the event was the idea that you can’t source direct materials with an indirect sourcing solution. I’ve worked on the solution side of our industry, and I’ve sourced everything from freight to gas trap cleaning to water-added ham (don’t ask). We managed them all just fine using what I suppose you’d call an indirect sourcing solution. Do you seriously need a solution designed for direct materials? What is the difference?
Those questions bring me to the other fantastic thing about my role – I know people. Smart people who know things. And smart people who know things are usually very happy to answer questions from colleagues who are trying to increase their own understanding. After the event, I had a conversation with Michael. He was very helpful (not to mention patient) and answered all of my questions about the additional functionality manufacturers need when they are sourcing engineered designs, sometimes for completely custom parts or assemblies. Fascinating stuff.
I don’t pretend that I am in control of my learning journey. Sometimes I end up somewhere completely unexpected. When an idea is interesting, you have to follow the lead wherever it takes you.
As Michael was telling me about managing the design process, inventory management, scrapping fees and the collaboration with suppliers that are so critical to success in direct materials procurement, one word came to mind: value. When all of those things are managed well, those professionals are creating value and competitive advantage for their companies. In some cases it may keep them in business, and in others it may advance the company to a leadership spot in their industry.
Everyone in procurement – whether direct or indirect – wants to create value. Sometimes we’re operating under significant pressure from executives to do so. But not every category of spend is a candidate for value creation. If you are just segmenting a market or consolidating volume, you’re probably not creating value. Performing an important task, yes, but creating value, no. If you are struggling to define value for your organization or to demonstrate measurably that you have created it, the problem may be the categories of spend you are working on.
As we look for ways to parse or prioritize categories of spend so we can do more with less, looking at the potential for value creation should be honestly considered. This is one area where the strategic objectives of the organization should play out in procurement’s plans. Getting the right mix of traditional and strategic projects involves the right staffing and timing, both of which require advance planning. The projects that offer the greatest opportunity for value also come with the most scrutiny and the highest expectations. Laying the groundwork well in advance will ensure that the right relationships are in place and everyone is agreed as to roles and responsibilities.
How do you find these projects? My suggestion is that you go on a journey of your own. Talk to smart people that know things just for the sake of your own understanding. It might not open doors overnight, but it will absolutely improve procurement’s reputation in the eyes of the organization, and that is value creation all by itself.