Do You Know the Difference Between Strategic Sourcing & Category Management? Creating Value TOGETHER

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The number one biggest issue a Procurement organization has as it moves up the maturity model is internal stakeholder resistance.  This is true, by the way for any shared service organization that is trying to make a fundamental change in the way they work. We often find that misaligned metrics and the absence of “the voice of the customer” are primary contributors to this issue.  As we explore the challenges our clients are facing as they move toward Category Management, they are MOSTLY (nearer to ALWAYS, actually) internal.  I often ask myself – why does a function (Purchasing, Procurement, Strategic Sourcing, Supply Chain, etc.) that can add so much value to the company, constantly run into internal battles?

 I recently read an article on HBR, “How to Permanently Resolve Cross-Department Rivalries” and the title caught my eye because it certainly sounded like what we deal with every day.  According to the article, “it can be challenging to synchronize complex tasks across multiples functions.  Rather than cooperating, too many functions end up competing for power, influence and limited resources.”   There is an example in the article of a consumer products company that has a set of departments responsible for developing new products and bringing them to market.  There were sharp differences in how the subgroups defined success (sounds like metrics or KPIs) which led to conflict – “R&D viewed operations as “the people who only know how to say no to opportunities”, while operations viewed R&D as “the time and money wasters””.  Sound familiar?   Aren’t we the “cost cutters” while our business partners are . . . . . . .?

I would suggest that aligning our metrics first is key.  That would require us ASKING what is important to our internal business partners (identifying their VALUE drivers), so that we understand how they define success.  As a shared service function, we are REQUIRED to satisfy the needs of our customer – in our case, our internal business partners.  By the way, our job is always to strike a competitive deal for our company, BUT it is a myth to imply that it must come at the expense of satisfying our customer – they can and should be compatible.

The article suggests that leaders should address four critical questions that “enable cross-functional teams to work together more coherently”:

What value do we create together?  The beauty of the cross-functional team is leveraging the various strengths of the individual parties.  By clearly defining the objectives (Value Drivers) and how each party can contribute to fulfilling that objective, you will reduce the perception on conflicting goals.  

What capabilities do we need to deliver value? This one in particular is where you can leverage one another’s skill set.  I would expect the Sourcing / Category Management professional to lead the Sourcing process, your internal business partner may be the subject matter expert on the category and Legal may be the contracting specialist.  Bringing all those skills together and leveraging each other’s strengths is key.

How will we resolve conflicts and make decisions while maintaining trust?  In any team environment, conflicts will arise.  Determine a conflict resolution process that everyone agrees to up front.  Using a RACI chart that clearly lays out “who” is on the hook for making certain decisions will also help to head off conflicts at the pass.  

What do we need from each other to succeed?  I would suggest the use of operating principles for the team.  These are rules that the team develops collectively that everyone agrees to operate under.  This allows the team to hold one another accountable for the success of the team.

Internal rivalries are real and happen in every company.  Since most of work is done in cross-functional teams, we often feel the pain of these rivalries.  If we can work together to identify what is important to each party then we can surely create mutual Value.

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Anne Kohler
Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.
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Anne Kohler

Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.

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