Among the big pharma companies, GlaxoSmithKline (GSK) is one of the most forward-thinking providers when it comes to procurement innovation and execution (more on this in a minute). Here at Spend Matters, we're lucky to count two former GSK procurement executives, Gregg Brandyberry and Jason Magidson, as contributors. Gregg formerly served as GSK's CPO and Jason was charged with driving innovation into procurement processes, technology investment and usage. The legacy of Gregg's and Jason's contributions -- along with that of countless others -- lives on in GSK's ability to deliver earnings results even an environment lacking new blockbusters.

[More]

Spend Matters is pleased to present a guest post by contributor Jason Magidson.

Over a series of posts, I'm going to discuss some of the best practices I'm seeing, inside or outside of procurement, which I believe can help procurement organizations move to the next level.

I've been talking with a number of procurement leaders and managers who are saying they have used category management and sourcing technology to get to a certain point but feel they have plateaued. They are saying they want new ways to take their spend categories to the next level.

[More]

Spend Matters welcomes back frequent contributor Jason Magidson in this post.

A Fortune 500 company sole sourced a key raw material from a Japanese supplier, who produced this specific raw material in only one plant. In 2008, the plant exploded and burned to the ground. This same Fortune 500 company used another raw material in one of its products. In 2008, Chinese supplies of this key material became tainted and killed hundreds of people around the world. Other companies were forced to issue product recalls, but this one didn't have to. Despite these two disasters, the company didn't lose a single dollar in sales, and experienced no disruptions to its supply chain.

How did the company avoid disaster? To answer this question, we need to go back to 2007. At that time, their direct materials procurement team maintained a spreadsheet-based, manual, and fragmented risk mitigation process. Raw materials were often looked at separately, and there was not a holistic bill-of-materials view of each product's supply chain. So, no one had a quick company-wide way to see sources of supply, stocks of raw material across the company, which company plants handled each raw material, and how the materials were processed and moved through the network.

[More]

Last year, my 15-year-old daughter asked if she could cut our lawn for pay. She was a tenacious negotiator, and we settled on $16 for the front and back, which takes about 40 minutes to cut. We worked out some key performance indicators (e.g., clean the grass clippings from the sidewalk afterward), some risk mitigation strategies (review the lawn beforehand for foreign objects that may have been left behind by your younger sisters), and a service level agreement (e.g., cut the lawn within 48 hours of request). We even held a couple of informal supplier reviews. I have to say, I was and am pretty happy with my "supplier."

[More]

Everybody is in sales, even procurement leaders. Perhaps you're trying to convince your business partners who have been using the same supplier for years that it's time put the business out to bid. Perhaps you are seeking funds for an investment in procurement technology. Most of us have become frustrated at one point or another about our inability to "sell" our ideas that we know can bring value. My business partner Gregg Brandyberry and I hear procurement professionals make the following statement over and over -- "We're not understood; the CFO doesn't understand our contributions." As professionals, we know the value we can deliver, but how do we get key stakeholders to say "This plan makes sense, we approve funding for it, let's get started?"

There are certainly many aspects to "getting to yes." Gregg and I worked with Ken Roy and Max Leisten of SciQuest to develop a three-step process to help procurement professionals gain approval and funding for their projects.

[More]

What will a thriving procurement function look like over the next five years or so? In this installment of the series, I join with Gregg Brandyberry, my partner at Wildfire Commerce, to explore a critical skill we believe is necessary to procurement professionals: the ability to get your business partners on your side.

Our original goal was to determine what procurement professionals should do in order to persuade decision makers to approve and fund their initiatives. However, when we engaged 15 procurement professionals and a CFO in a dialogue on this topic, we were intrigued by a broader theme that emerged: the importance of getting the people you're trying to influence onto your side.

It may seem obvious that such influencing skills are important, but it's not obvious what one should do. Here are six of the key ideas that came out of the session:

[More]

What will a thriving procurement function look like over the next five or so years? I'd like to begin a dialogue here on this blog, hoping that a number of people can share their perspectives on what a thriving procurement function helps to make happen. We can then synthesize these perspectives into material on which procurement professionals can act. Ideally, we'll get groups of people building on each others' ideas in live online sessions, but to start things off, I figured I'd reflect here on the work of a couple of procurement professionals who know how to get the attention and support of the CEO and other C-level officers.

[More]

One of the first moves made by a newly appointed Chief Procurement Officer at a Fortune 100 company was to find out from his internal stakeholders what they wanted from Procurement -- in other words, "What is procurement's value in the eyes of the customer?" His goal was to build better relationships with his internal business stakeholders in order to enable Procurement to bring more value to the company and become more of a strategic partner.

The CPO didn't want to just send out a superficial survey that wouldn’t tell him much. He wanted to get deep insights into what his partners are trying to accomplish, how they feel about Procurement, how Procurement could drive more value, and what Procurement could do better. So, he charged a team with conducting in-depth, open-ended customer interviews. The interviews identified not only their perspectives on Procurement -- what works, what’s missing, what constitutes value, and what they would ideally like -- but also the context in which Procurement's value can be viewed. This included each customer's business context and how it's changing, what impact they're trying to make, and the pleasures and frustrations of their work. Understanding this context is important because it reveals opportunities to enhance Procurement’s value in the context of the larger system it serves.

[More]

In 2007, the president of a global consumer healthcare products business tasked a team with reducing costs by $250 million. In response to this daunting challenge, the team initiated a number of savings projects. For example, one project cut costs by $3 million by creating multi-language packaging for a dental product. After realizing similar savings on a variety of other projects, team members concluded that they were reaching a savings plateau and would need creative approaches in order to access the next level.

That's when the team's leader turned to a process called idealized design, which had been applied successfully elsewhere in the company. The key feature of idealized design is that participants pretend that the product, process, system, etc. that they are designing was destroyed last night and they are starting from scratch and designing what they ideally want today if they could have whatever they wanted. Doing this frees people up to "think out of the box," unleashing creativity and generating ideas that save money, improve revenues, enhance customer satisfaction, and so on.

The team engaged a facilitator who was experienced with idealized design. He first helped them brainstorm the ideal process for saving money and then helped them cull the best ideas and turn them into implementable designs. For example, they realized that the richest savings opportunities were at the roots of the new product lifecycle rather than in the leaves -- so they designed a program to engage the new product development groups from the very beginning to ensure they bake in an end-to-end lifecycle cost management program and culture. Some of the things they focused on include: global standards (e.g., packaging, active ingredients, flavors, and components); getting product teams to utilize default materials and specifications; and, product formulation harmonization.

[More]