Did you hear the latest weather report? Meteorologists are predicting continual blizzards, with limited visibility from swirling winds. They’re appearing everywhere procurement professionals go to work…
Clearly, there is no dedicated weather service for procurement. But if you face a blizzard of daily tasks and an abundance of meaningless data and can’t see clearly, you’re not alone.
Working in procurement doesn’t have to be frustrating, however. I’ve spent my career in sourcing and procurement, and I know how rewarding it can be to contribute to a decision that reduces cost, delivers value, boosts company performance, and pleases internal stakeholders.
What do you need to become a more strategic advisor? In short, the right data.
The ‘So What? Then What?’ Test
To see if your data is useful, apply the “So what? Then what?” test. To pass, your data must be essential to decision-making and provide clear next steps. Otherwise, it’s data just for data’s sake.
When you look at your data, can you answer these questions?
- Which suppliers should I continue using?
- Should I single-source or issue an RFP?
- Should I negotiate any cost reductions?
- How likely is this project to be revised or extended?
I’ll give you an example scenario. Let’s say there’s a hard-working category manager named Kathy. (That goes without saying — everyone knows procurement professionals are the most dedicated, hard-working people out there!)
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If I asked Kathy about spend with one of her suppliers, she might say something like this:
“I know we spent $10 million on 10 statements of work with Do-It-All Services Inc. in 2018. They got the work done, I think. Well, we paid them, so it must have been done. But they were late on a few projects. I remember that because I got a few calls from project managers complaining. Now that I think about it, they may have delayed a few of their projects multiple times. … I don’t think we overpaid them though.”
Let’s say Kathy has data that passes the “So what? Then what?” test. She discovers the following:
- Do-It-All Services Inc. extended three of its SOWs a total of 257 days in 2018.
- Three other suppliers in the same category and with the same capabilities performed better and charged an average 25% less per SOW in 2018.
- Kathy’s company overpaid Do-It-All Services Inc. based on the average rate card structure in place with other suppliers in that spend category.
- Eight of the 10 SOWs with Do-It-All Services Inc. were on a time-and-materials structure, with no fixed deliverables or performance-based payments.
When Kathy gets these insights, she develops an informed negotiation approach for single-sourcing with Do-It-All Services Inc. First, she starts with a 25% cost reduction, along with penalties for missed deadlines. Then she fully defines deliverables and delivery expectations and ties payments to on-time performance and acceptance criteria.
Based on the supplier’s lackluster performance, Kathy might also consider issuing an RFP and seeing how competitive Do-It-All Services Inc. can be when up against similar but higher-performing suppliers.
With the right data, Kathy can deliver true value from the procurement function and become a more trusted partner to the business and her stakeholders. She can spend less time braving the blizzard and put more time toward building relationships, increasing her influence, and getting recognized for her strategic vision.
So, how’s the weather inside your office? Are you feeling overwhelmed?
Seek the right data and you will not only calm the blizzard but also enjoy the warm glow of the sunshine beaming down on you from the C-suite!
