Procurement success under time pressure

Procurement success under time pressure

Emergency room (ER) physicians constantly make critical decisions with limited information and under extreme time pressure. What separates best-in-class ER physicians from the pack is that they not only “do the right things,” but also “do things right.”

Similar to ER physicians, senior executives often find themselves pressured to drive savings under a tight timeline. Specific challenges might involve delivering against an aggressive post-merger target; bracing for a worse-than-expected economic downturn; or enabling a rapid enterprise-wide transformation where early wins become the critical change catalyst. In fact, companies often leverage an enterprise wide procurement transformation to seek efficiency and cut cost. However, a systematic  procurement initiative can often take well over a year to fully execute and deliver P&L impact.

Executives seeking to achieve procurement success under tight time pressure embrace three key takeaways from best-in-class ER physicians who both “do the right thing” and “do things right” in a hectic, time-pressured environment.

Expressed as business imperatives, these takeaways are:

Adapt your sourcing strategy to account for time pressure complexity.

Sourcing approaches that would be effective under normal circumstances are often rendered ineffective. For example, the stick based strategy may no longer work. Launching a full RFP bid takes too long as the hurdles to incumbent switching rise. The best approach in cases like this may, in fact, be a stick-and-carrot hybrid. For example, the company seeks joint process improvements and win-win gain sharing with the supplier, while still holding out the option of launching a competitive RFP bid. Incumbent suppliers may be more willing to grant timely concessions.

Leverage benefit-acceleration tactics

Recognizing the added supply market complexity inherent in time pressures and making the necessary adjustments in sourcing strategy is necessary to drive rapid benefits—but it’s not sufficient. What’s also required is optimal timing, which can be achieved through what we term benefit-acceleration tactics. To return to our ER analogy, the physician may opt for emergency surgery over a medicinal approach (that is, “do the right thing”). But she may also employ creative tactics to accelerate the benefits of the surgical approach (“do things right”) .

We’ve identified several effective benefit-acceleration. See figure below:

“Shock” and mobilize the internal organization

In addition to executing the supply market-facing strategies and tactics, companies need to “shock” their internal organization into marshaling the necessary focus, resources, and sense of urgency to deliver procurement success under time pressure. Most organizations need to be shocked to take them out of their business-as-usual mind set. When companies are successful here, we typically see three critical principles in place— adopt one voice, aim for one target, and get out of the comfort zone . (See figure below):

Adopting the above best practices will enable you to not only do things right but also do the right things when it comes to time pressured, high-impact procurement. In this sense, you will be like the skilled ER physicians we mentioned at the beginning of this article. For these physicians, as for supply management professionals, the goal is the same: Success under pressure

The above is an abbreviated version of our whitepaper “Sourcing Success Under Time Pressure”. Read full article here

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