Beyond the Boundaries of Sourcing Category managers emerge as leaders
2 Beyond the Boundaries of Sourcing Category managers emerge as leaders Let s call 2020 the Year of the Category Manager. By then, more companies will be routinely turning to these leaders in Procurement for their expertise at developing corporate strategy and those with skilled Category Managers on their teams will have an edge on the competition. My Purchasing Center Executive Roundtable Procurement professionals participating in the My Purchasing Center Executive Roundtable all played a key role in leading educational and networking sessions for their peers and others at ProcureCon Indirect West held recently in Phoenix. That s the thinking of the Chief Procurement Officers, Procurement Vice Presidents, Directors and other leaders who participated in the My Purchasing Center Executive Roundtable at ProcureCon Indirect West in Phoenix recently. The discussion, led by Bill Michels, Senior Vice President at the Institute for Supply Management, and President at ADR North America and ADR-ISM China, focused on trends in Indirect Procurement. ProcureCon Indirect West is the annual educational and networking event for CPOs, Procurement Vice Presidents, Directors and others with responsibility for managing Indirect Procurement, the spend categories that keep a facility operational. The categories include: Office Products, MRO (Maintenance Repair, Operations), Information Technology (IT) and Telecommunications, Travel, Logistics, Human Resources Benefits, Contract Labor, Advertising and Marketing and Legal, among others. Now and Then Without a question, the My Purchasing Center Roundtable is putting aside all things tactical; Procurement at their companies is truly involved in developing strategies for indirect spend categories. In the words of Randall Clark, Senior Strategic Buyer at Volvo Group Trucks Technology, With that comes an influence that maybe we haven t had before. Deborah Stanton, CPO and Group Executive, Global Supply Chain at MasterCard Worldwide explained: My Strategic Sourcing group is so far beyond just looking at a category. They look across the entire organization and find opportunities. These are Quave Burton Vice President, Global Expense Management Abercrombie & Fitch Randall Clark Senior Strategic Buyer Volvo Group Trucks Technology Craig Demarest Senior Director, Chief of Procurement R.J. Reynolds Roger Gossett Senior Director, Indirect Procurement Flextronics Linda Guzzi Head of Indirect Sourcing and Procurement Applied Materials Jim Mangan Director, Corporate Services Procurement United Airlines Joanna Martinez Executive Managing Director and CPO Cushman & Wakefield Bill Michels Senior Vice President, ISM and President, ADR North America and ADR-ISM China Jeffrey Smith Global Indirect Sourcing Director DuPont Deborah Stanton CPO and Group Executive, Global Supply Chain MasterCard Worldwide Susan Avery Editor in Chief My Purchasing Center
3 minerals issue. One customer asked us to investigate their supply chain for them, and now we offer that as a service, one way Procurement demonstrates leadership in the organization. Analysis and Negotiation With Procurement s new influence, comes new responsibility. ISM s Michels outlined requirements in the job description for Category Managers which the Roundtable eagerly debated. For instance, key to developing successful strategy for a category is the process of gathering and analyzing market data. But is it a responsibility the Roundtable sees Category Managers performing in 2020? the efforts they re leading. They are very strategic and are at the highest level. That s Stanton s group today. Looking ahead, she said, we will be involved in projects in an entirely different way, beyond the boundaries of sourcing, projects for the entire operation that really affect some of our processes. One project in which Procurement takes a leadership role at many companies that quickly came to mind for the Roundtable is Corporate Social Responsibility and other sustainability initiatives. Especially timely for Procurement at technology companies is the role of the supply chain in meeting regulations on use of certain electronic components that may contain conflict minerals. Citing costs associated with ensuring compliance to the regulations along the supply chain, Linda Guzzi, Head of Indirect Sourcing and Procurement at Applied Materials, pointed out that in her role, We are seeing a whole lot more collaboration on sustainability, conflict minerals and Corporate Social Responsibility. At Flextronics, Roger Gossett, Senior Director, Indirect Procurement, said Procurement set up a group within the company s quality department to address the conflict While the CPOs and others gathered by My Purchasing Center agreed that it is the role of Category Managers to conduct this research, many conceded that some Procurement teams simply don t have the resources to thoroughly investigate every category sourced by their company. Having to do more with less in this new economy, the Roundtable saw that it can be appropriate in some instances to have assistance with the task, perhaps even outsource it. When I thought about my Category Managers who were just building their skills, I took the position that I wanted them to do everything, said Stanton at MasterCard. I wanted them to do the analytics. I wanted them to dig in through the spend and muck through that so that they really could learn and get experience and so forth. But then you get to a point where you don t want it to consume their time. At MasterCard, Stanton chose to create the role of Category Analyst to, in her words, really dig through the data...so that a Category Manager who is totally operating at that level can be there with the business totally engaged, totally integrated, collaborating on strategic projects, she said. Likewise at Applied Material, Guzzi said she s added an analyst role as well and the company also is outsourcing some analytical work to a third party. Whether doing the analysis themselves or working in tandem with a colleague or outsource provider, Category Managers are responsible for negotiating the agreement
4 with the supplier, Roundtable participants agreed. Executing the agreement and managing the relationship with the supplier is another matter. It depends on the size of the category, its complexity and the business partner you re working with, their skills and capability to hand it off to them, said Quave Burton, Vice President, Global Expense Management at Abercrombie & Fitch, and member of the My Purchasing Center Editorial Advisory Board. It s a fine line. We struggle with it because what ends up happening is we do a great job negotiating the deal, getting it all set up and then there isn t anyone to hand it off to in the business, she said. The business tells us, You did a great job. Keep going. But we really need to be off sourcing another category. Part of it is communicating expectations up front, Burton continued. We re going to go through this process and then when we re done, You are going to own it. It s about being clear about that up front and reminding them along the way to be ready to catch the ball. Jeffrey Smith, Global Indirect Sourcing Director at DuPont, asked the group for their thoughts on an organization creating a Strategic Sourcing team to support its Category Managers, a concept popular with some procurement consulting companies. While not a bad idea, the Roundtable dismissed it for several reasons including difficulty in separating out complex negotiations and the additional strain on already stretched resources. What I hear you say is that you want strategy and execution from your team, Michels said of the group. You want them to build strategy and execute that strategy, in cooperation and conjunction with the stakeholders. The best way to do it, he continued, is the procurement team owns the commercial relationship and the technical team owns the requirements. As long as you have that separation, it works well. Getting to Success Indirect Procurement and Category Managers has worked hard to get to this point. While they ve had to break through barriers to demonstrate their value, there are still some hurdles to overcome. One the Roundtable brought up is managing their companies spend data. In some cases, there s simply too much of it and in others there s not enough. Collecting the data, cleansing it and interpreting it continues to prove a challenge. Speaking for many in the group, DuPont s Smith said, Technology needs to be an enabler, not a barrier. So much time is wasted, looking for data, making sense of it. At MasterCard, Stanton said that a corporate initiative for integrating mergers and acquisitions at the company makes her job a little easier. Often times, these companies have different procurement systems and different ways of presenting spend data. We have a single instance of Oracle worldwide. There s no choice. For smaller businesses becoming a part of the financial services company, her team provides an option of using an e-payables system instead.
5 So maybe the trend is really procurement now assisting Finance, Mangan continued. We are helping finance with their own reporting, so we re getting a stronger seat at the table at that level. This gives credibility and helps us support the business. The Millennial Generation In a few short years, the workforce will look different as Baby Boomers continue to retire and the Millennial Generation moves into these new roles in Procurement. The Roundtable acknowledged the current shortage of talented individuals and discussed ways they re recruiting young professionals, by providing apprenticeships, rotational programs, and mentoring opportunities. Joanna Martinez, Executive Managing Director and CPO at Cushman & Wakefield, took a different view. Sometimes we get hung up on not having it all, she says. Sometimes there really is a good enough. There s enough to be able to have an intelligent conversation, allowing for some adjustment later on. Allowing Indirect Procurement and Category Managers to take on more of a leadership role at the organizations is their evolving relationship with Finance, the Roundtable agreed. Many, in fact, said they report to the Chief Financial Officer. What s more, companies are beginning to measure Procurement performance on metrics other than cost savings. From an organizational standpoint, one of our biggest strengths is our partnership with Finance, said Craig Demarest, Senior Director, Chief of Procurement at R.J. Reynolds. We really work well them. They are a big advocate for us and really help us when we sell the business case to the client. At United Airlines, Jim Mangan, Director, Corporate Services Procurement, and his team develop their category plan, align with the business on the budget they have for the coming year, and work to deliver savings or opportunity against it. They track against variance as well. We start to have an even closer relationship with our finance folks, and they can have the discussion with the business on reinvesting the dollars, he said. MasterCard s Stanton suggested that Indirect Procurement get involved with colleges and universities that offer degrees in Procurement and Supply Chain Management by joining advisory boards and offering to serve as guest lecturer. This will help ensure that the educational institutions are providing training Procurement needs to manage indirect spend categories, she said. Meanwhile, Burton at Abercrombie & Fitch said she looks for intellectual curiosity in the candidates she interviews for roles in Procurement. A candidate could end up with any category. They ve got to be able to dig in and get excited about it, figure out what they re doing and why and identify the process improvements. Cushman & Wakefield s Martinez added, I look for evidence that they ve done something very creative or turned something around in a very different way. As important for Indirect Procurement roles in 2020 is global experience. I ve made the mistake of putting people in global roles who had great depth in the subject matter, but were paralyzed when they really needed to think outside the U.S., she added. At DuPont, Smith has taken it a step further. We re starting to build capability outside of North America and Europe, but it s difficult to retain, he said, explaining that because of the value they add, new hires in Indirect Procurement working in Asia and South America are attractive candidates to other companies operating in the regions and can be recruited away.