In my August 26th weekly procurement update on the PI Window on Business Blog Talk Radio program, I addressed the continued need for human intervention in spend analysis, regardless of opportunities for automation and outsourcing. An over-reliance on technology at the outset of the spend analysis process can be costly later on, when procurement needs to convert visibility into results. While hands on involvement is not necessary to perform data collection, cleansing or classification, interaction with data, stakeholders, and operations will be necessary when the time comes to define categories for management and execute a sourcing plan.
In response to my comments, Jon offered up the idea of procurement ‘abdicating’ responsibility for processes like spend analysis in favor of outsourced solution and service alternatives. As an avid anglophile, my mind immediately turned to Britain’s King Edward VIII who abdicated the throne in 1936 in order to marry American divorcée Wallis Simpson. After doing a little more reading, and watching The King’s Speech for the umpteenth time, it occurred to me that the circumstances required for one to abdicate responsibility make that role all the more worth fighting to keep.
Abdication is only required when a leader or other responsible party has been formally crowned. When an official has been elected or appointed, the person is said to have resigned their position. “The word abdication derives from the Latin abdicatio, meaning to disown or renounce (from ab, away from, and dicare, to declare, to proclaim as not belonging to one)” (Wikipedia, Abdication). Based on that definition, a responsibility that must be abdicated belongs to the person through a deep connection, rather than being a role that she fulfills or a job she accepts.
In more recent days, the world was surprised by the abdication of Pope Benedict XVI in February 2013. Unlike Edward VIII, who abdicated because his personal desires did not align with those of his subjects and the Church of England, Benedict abdicated because of a “lack of strength of mind and body” (Wikipedia).
A perceived ‘lack of strength’ may be what causes procurement to transfer too much ownership to third parties. The process can seem overwhelming, particularly at the outset, and the more time goes by without procurement being solidly in charge, the harder it is to regain ownership.
If spend analysis really does belong to procurement, which I believe it does, we have reign over a rich kingdom. We have visibility into a wealth of data that can be used to accomplish many things – even beyond procurement’s scope. But in order to leverage that data, and the knowledge that can be derived from it, we have to know all of the ins and outs and think with a multitude of goals in mind. Making use of the efficiencies available through third parties makes the spend analysis possible, but owning the data through a deep understanding makes it actionable, not to mention powerful.
A key test of that power comes when problems have to be resolved: a supplier is miscategorized or the taxonomy does not properly reflect the roll-up of spend in the organization. Owning a problem really translates to owning the solution, particularly if procurement uses the right follow-up to make sure the requester knows they have acted on the observation. Effective procurement is as much about internal relationships as it is collaborative working arrangements with suppliers. Spend analysis provides a solid foundation for better relationships and the catalyst for positive interactions.
By abdicating responsibility for spend analysis, the good and the bad, procurement positions themselves are no more than an intermediary between business users and suppliers – hardly a strategic or executive level role. In order to take on additional responsibility, including innovation, mitigation of supply chain risk, and top line growth, procurement has to delegate some amount of their work. The most tactical of this work is likely to be outsourced, but the ultimate responsibility for success still lies with procurement – an important role that should not be passed on to a third party.