I just got off the phone with a client who had been a CPO and now has assumed major P&L responsibility. We love hearing about alumni who have achieved great success (and he admitted that he still uses what he learned from TMG which is great for our ego). But I digress because there is a very interesting story here for all of us. My question to him was what is it like dealing with the Sourcing/Supply Chain organization at your customers who are all very large global sophisticated companies? Because he has P&L responsibility, his organization is the primary interface with the customer’s sourcing organization.
Since he was a CPO, I thought his perspective would be unique. He quickly reminded me of the discussions we’d had 10 years ago when we were helping him lead a Sourcing Transformation and how things had not really changed much.
- He was being treated like a commodity and he produces a very complicated, highly engineered product.
- They have always exceeded their performance metrics on quality and delivery yet those are ignored by procurement and they are pressured on price.
- When they do get access to the consumers of their products – quality and engineering- they are told how price is not important and the focus is on quality and delivery.
- It’s a very transactional relationship.
- Focus is on cost, cost, cost.
- He delivers on quality, delivery and can provide even more value if procurement would let him.
Imagine the frustration of an ex CPO having to be on the receiving end of this – there is some sad irony there? Clearly, a significant amount of Value is being delivered and more could be delivered if his customers were focused on Supplier Relationship Management Optimization or Category Management and not 3 bids and a buy.
So, there are two questions I would like to pose to you. First-is this reflective of your organization. meaning would your suppliers say that about you?
- If so, do you believe it might be leaving Value on the table (especially Value for your Stakeholders which often is not price)?
- Does that concern you?
- What have you done about it or are planning to do about it?
- If you have already started doing something about it, what have been your biggest challenges?
- Do you think your people have the right competencies to accomplish this?
My second question is asking you to put the shoe on the other foot. How can one of your suppliers who is focused on Value work with your organization to deliver that Value – especially if it’s Value which is highly desired by your Stakeholders? So just assume that what I described from our client above reflects your organization. What that means is that there may be significant Value that can be delivered by your suppliers and your Stakeholders rank that higher than price.
- How can you facilitate that or get out of the way?
- Will you have to change your metrics to include that Value and convince others to measure you by them?
- Will you have to redefine how you engage with those suppliers and get them to focus on Value?
- Will you have a credibility issues to deal with based on past engagements and communications with those suppliers?
- Is your organization prepared to make that shift?
If you have already started to address these issues then kudos to you and best of luck. If not, you may want to start thinking about it. By the way, this is the challenge we need to resolve for our client in his new role – just from the other side (supplier) this time 😊. Kind of ironic but been there done this exact thing before for others.