Is Middle Market Procurement Really Any Different? (Part 1) -- Summary
I had the chance last week to connect with a fascinating gentleman that I hope to collaborate with in some capacity. This gentleman is pursuing a new type of organization to enable middle market companies to identify, learn and execute on best practices across the functional spectrum -- from sales to HR to procurement. His vision, which appears close to execution reality sometime this quarter, is a true knowledge sharing, network and enablement concept that is as different from models like Vistage and YPO as it is from conference, advisory and publishing companies (e.g., Gartner). Regardless, he asked me the question: is middle market procurement really that different from the challenges that large companies face?
If we first put a definition on "middle market," bracketing this description as companies somewhere between $100MM and $3B in revenue based on a whole variety of factors -- ownership, management, growth, talent, markets, etc. -- I do believe a common set of unique challenges for these types of organization arise which are worth confronting separately (or in addition to) those of larger organizations. These challenges often include the following:
- Lack of established processes (e.g., strategic sourcing, lean, Six Sigma, etc.)
- Among professionals, both a fear of "rocking the boat" and an overt focus on career stability over personal/professional growth
- A lesser emphasis on skills development
- Technology infrastructure differences
- Technology adaptability and agility
- Domestic (and often regional) blinders
- Fewer utility players
- Avoidance of commodity management and a misperception of supplier management
- Unfamiliarity with data-driven approaches
- Potential for owner/CEO/executive micro-management
- A comfort -- almost a justification for one's job -- based on fire fighting vs. fire prevention
- Inbound mentality (vs. proactive involvement) more common than not
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I look forward to the posts in the coming months. Many ERP vendors would do well to understand that these limitations are real and middle market companies (and indeed smaller companies than that) are entirely different animals when compared to their larger counterparts. Transposing something that works for the largest of organisations directly onto these middle market companies will not necessarity work.
# Posted By Colm Dolan
| 1/18/11 8:19 AM
Jason - Your points are excellent. I would add though another factor - maturity. Many mid-market companies (depending on industry) have a sales culture versus a profit culture that larger companies have outgrown. I can't count the number of times that I've heard from the CEO or even the CFO. "Costs - what costs, we don't have a cost problem we have a sales problem, we need to get more sales". This culture seriously hinders procurement professionals and solutions in mid-market companies. In response I will sit down with the CFO or CEO and do the simple math that one dollar of sourcing savings is equal to (whatever their margin is) $5 of sales. It can take time, but once the jump is made these companies are poised to move to the next level.
# Posted By Jerry McLaughlin
| 1/19/11 1:13 PM
In many cases the same could be said for indirect versus direct even in larger companies. I'm consulting for a large company and the tools, procedures, and visibility of sourcing on the indirect side (inlcuding IT) is years behind what is on the direct side.
# Posted By Sir Donald
| 1/20/11 12:40 PM
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