The components of strategic category management (SCM). Do your people in the workforce have these skills?
In the past, I've discussed how you can become a customer of choice to your suppliers by adopting the NFL strategy of providing coaches. The future of an NFL team depends upon the correct talent mix and a coach’s ability to make the whole better than a sum of its parts. The future of procurement lies in a combination of disciplines designed to address spend management challenges in an evolving, global economy.
To continue that analogy, strategic category managers are the coaches that help to develop suppliers and make them better, more effective contributors to the supply chain.
To successfully take hold of this dramatic new approach in the post-strategic sourcing era, your company must be organizationally prepared to do what’s necessary to manage the whole lifecycle of contracts.
This includes adopting six skill-sets that corporate spend management departments commonly lack:
Analysis: Identifying and realizing savings will not be dismissed in the SCM approach. However, the ability to quantify and report those savings will be a more complex and challenging process. Having the skills to measure total cost of ownership improvements and demonstrate the dollar value of those changes to the CFO is paramount to the success of implementing SCM.
Supplier Management: Relationships take time to cultivate, and good ones take a lot of time. If you want to see the fruits of SCM you must be prepared to invest time in all aspects of supplier management – advanced reporting, auditing and relationship building. The supplier relationship manager is the tip of the spear of SCM efforts.
Contract Management: Creative relationships must be governed by creative contracts, and advanced contract management is the centerpiece of effective SCM. By employing the systems and skills required to be best-in-class contract managers, companies create significant efficiencies while mitigating the risk associated with long-term contracts.
Talent Management: When companies moved from traditional procurement practices to strategic sourcing, they identified a talent gap. This move to SCM will be no different. The development of the right people is perhaps the biggest obstacle to going from status quo to becoming a leading SCM practitioner. A deep understanding of what skills are required, where to find them and how to keep them is fundamental to the next generation of spend management.
Information Management: “Trust but verify” means having something to verify. The ability to gather information from suppliers, users and outside sources is a critical element of SCM. If you lack this information, your ability to understand market dynamics is also lost – along with the possibility of developing best-in-class SCM. Beyond just relying on having this information, you must know how to read and respond to it.
Supplier Development: The impact of strategic sourcing is ebbing and the need to create savings is growing. Consequently, the final component of SCM is arguably the most important: Supplier development means the ability to apply the category expertise and supplier relationship management to identify opportunities to create total cost savings above and beyond piece price reductions.
Applied together, these six functions give your procurement group the ability to create dramatic and sustainable value for your company.
Which of these skills do you think is hardest to find or develop? Have you found more than one of these skill-sets in an employee or candidate? What was that combination?
Want another perspective on necessary procurement skill sets?
Watch "How to Future-Proof Your Procurement Team...Today!" This on-demand webinar shares how top performing organizations are blending a mix of modern skill sets to ensure they can adapt to new challenges.