Sourcing Leaders

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Sourcing Leadership

Contents

Introduction

This mini-wiki gets right to the point and defines what a great sourcing leader is and what a great sourcing leader does. This goes against the grain of most of the articles that simply try to define a great sourcing leader by what she does. However, the author(s) think that defining what a great sourcing leader is - the qualities that define her - is also important.

What Makes a Great Sourcing Leader?

Everyone likes to talk about sourcing leaders and the great jobs they do, but try finding an article that talks about the fundamental qualities that make a great sourcing leader, and that's a whole other story. While it's very easy to find articles on what a sourcing leader does, it's very hard to find even a single good article on what a sourcing leader is. Maybe it's because people believe that the qualities that make a good leader are universal and the domain is irrelevant, and simply accept the standard leadership literature as gospel.

There are some good arguments out there that great leadership is a unique skill irrespective of problem domain, but the author(s) feel that it must be reinforced that sourcing isn't like any other business function. Thus, even though there is definitely a lot of commonality between what makes a good leader in general and what makes a good sourcing leader in particular, this wiki-paper takes the viewpoint that to be a good sourcing leader, it might take a little more and explores that viewpoint.

However, regardless of your views, dear-reader, the author(s) believe that the advice herein is nonetheless sound and worth the time it takes to read it. Enjoy, and in the spirit of the wiki, please feel free to share your thoughts!

The Seven Savors of a Sourcing Sensei

The Seven Habits of Highly Effective People are well known, but the seven qualities of highly effective sourcing leaders, which will henceforth be known as the seven savors of a sourcing sensei are not, despite the fact that they are quite simple. Simply put, they are:

  • Experience
  • Customer Focus
  • Team Builder
  • Market Zen Master
  • Innovator
  • Collaborator
  • Communicator

In a sentence, a sourcing leader is an experienced, innovative, collaborative team-builder who is in tune with the market, focussed on the customer, and constantly communicating the role of sourcing and the reality it faces on a daily basis. This is what a sourcing leader is. In the sections that follow, each of these requirements will be explored.

Experience

A great sourcing leader is experienced in sourcing. A leader has spent time in the trenches doing the job that her team is doing. She's capable of guiding them, helping them when they run into trouble, and leading them to better performance. Not only can she talk-the-talk, but when push comes to shove, she can get down in the weeds and walk-the-walk.

She knows that leadership theories and "how-to" books need to be treated with a healthy skepticism because, just as there is no "one-size-fits-all" approach to good sourcing, there's definitely no "one-size-fits-all" approach to good sourcing leadership.

Most importantly, she knows how to do the job she's there to do. I think the great Scott Adams said it best in his post Bill Gates for President that originally ran November 30, 2006.

I've always felt that you should pick a president the same way you'd pick an attorney to help you out of a dangerous legal problem. Do you want the attorney who dresses nicely and belongs to your church? Or do you want the attorney who can rip out your opponent's heart and put it on the hibachi before he dies? Maybe it's just me, but I want an attorney who is part demon. And I want a president who isn't afraid to make rational decisions.

In other words, the sourcing leader can walk the walk, get down and dirty in the details when the need arises, and do what's needed to succeed.

Customer Focus

A great sourcing leader always has the customer in the back of her mind. What does the customer need? When does the customer need it? Where does the customer need it? Why does the customer need it? How can we do a better job for our customers? They recognize that leadership is essentially a service job, and do their best to insure that great service is delivered.

Leaders are not afraid to embrace modern technology to serve the customer better. Leaders recognize that technology can speed up processes, automate non-value tactical tasks, identify cost reduction and avoidance opportunities, increase supply chain visibility, and decrease risk. They look for the best system for the job and aren't afraid to break with the mold once in a while to get the best technology for the job.

Leaders are not afraid to do whatever it takes to serve the customer. When they identify a problem, they keep at it until it's solved. They plan ahead, plan for change, and are not afraid of it. They continually investigate their effectiveness and work with their team to insure constant improvement.

According to The Leaders' Edge: Driven by Demand by Kevin O'Marah in the Supply Chain Management Review: the old factory-driven, push model of the 20th century has seen its day. To succeed in the new environment, companies need to adopt a customer-centric, demand-driven approach to running their business. Plainly, this is not going to happen unless the sourcing leader is customer focussed from day one - otherwise, she may fail to grasp this coming shift, the importance of latching on early, and just how important it is to keep customers happy when it's easier than ever to identify a new supplier (or, in this particular case, a potential new leader - there may be a talent crunch, but money still talks).

Team Builder

A great sourcing leader recognizes that they key to success does not lie with her, but with her team. She is but one person, and one person can only do so much. She does her best to make her team the best team they can be, to constantly enable them, and to give them every opportunity for improvement. She's also capable of motiving them to meet any challenge they might face.

Leaders build their team by bringing in the best candidates, creating a structure where they can learn from their peers and superiors, offering regular training and improvement opportunities, and making sure that each team member is appropriately challenged. They also encourage and enable work-life balance and understand the individual priorities of their team members.

Leaders look at their team as the leaders of tomorrow and do their best to help their team rise to the challenge. Considering that the talent pipeline in most organizations is now at a slow drip, it's more important than ever that a leader be able to mold the next generation. Leaders recognize this and do their best to foster an environment and culture that enables the rising stars of today to be the great leaders of tomorrow.

As pointed out in Effective Team Building for Organizational Success, team building and team work is the key driver in organizational productivity. The days of the lone warrior corporate hero who could carry an organization to fortune 500 lists with his charisma and genius are finally over. A great sourcing leader recognizes this and is constantly looking to improve her team.


Market Zen Master

A great sourcing leader is in tune with the market. She knows where it's been, where it is now, where it's going, and can adapt the sourcing organization accordingly. Leaders don't react to market fluctuations, they design and implement strategies that not only allow the organization to align itself with the market, but keep ahead of it as well.

A great sourcing leader also recognizes when the "low hanging fruit" that resulted from the introduction of a new technology or a shift in the prevailing market dynamics is going to end and starts communicating that fact early and often while working out strategies to take advantage of the next technological or market shift. She sees the future and is capable of building sustainable programs that will serve the company well as the market changes.

Furthermore, as David MacEachern points out in Do You Have What It Takes To Succeed?, a great sourcing leader has a big-picture perspective in addition to being able to manage the details. The market is not just a sequence of point events to be reacted to, but a continual flow of information to be adapted to.

Innovator

A great sourcing leader is an innovator. She knows the name of the game is change and can adapt as the situation requires. She also knows that sometimes the best ideas do not come from within and isn't afraid to reach out to partners and suppliers for suggestions on how to improve operations.

The importance of innovation cannot be underestimated. Consider the article Innovation Key To Manufacturers' Success in Industry Week, for example, that found that (manufacturing) companies focussed on innovation reported returns on sales 50% higher than companies that compete by providing low-cost products.


Collaborator

A great sourcing leader is a collaborator. Not only does she know that success lies with her team, but that to be successful, her team will have to work with other groups in the organization, partners, and suppliers. To this end, a leader reaches out to partners and suppliers on a regular basis, develops strong relationships, and creates opportunities for the teams to work together.

A good article on the importance of being a collaborator is Johnn Kerr's The Adpative Leader: Corey Billington that was published in the Supply Chain Management Review. According to Kerr, Billington believes that the best leadership is adaptive leadership, a collaborative approach in which a leader's style is tailored to the circumstances and to those being led. According to Billington, Organizations are like pressure cookers. Too little stimulus and nothing much happens. Too much stimulus and they freak. The trick is to continually find the right leadership balance. Billington, who was a top supply chain manager at Hewlett-Packard Co, was at one point responsible for multi-billion dollar units and 1,400 people. During this time, he grew e-Auctions from small trials to programs that constituted $1.5B in spend and created a new division that offered procurement services that generated 8M in sales in its first year - so Billington obviously knows a thing or two about leadership.

David MacEachern's article, that asks Do You Have What It Takes To Succeed? also stresses the importance of collaboration and the ability to create relationships. He quotes, Rick D. Blasgen, a senior vice president at ConAgra Foods, who says Without relationship building, we would all be ineffective. Today, we have to build sustainable and collaborative interpersonal relationships with practically everyone because supply chain sits in the center of a lot of activity. This requires that we leverage tons of information throughout the organization. Be it through task forces or just old-fashioned teamwork, supply chain leaders must get their key constituents to work together and collaborate. If not, they'll fail.

Furthermore, as summarized in Tim Minahan's Five Strategies for High-Performance Procurement, published in the Supply Chain Management Review, Aberdeen Group has found that improved collaboration is one of the core skill-sets required to transform procurement from a tactical cost containment function to a strategic value generation unit. (Moreover, they've found this to be the case in multiple studies since this article was published.) Their research has been backed up by The Hacket Group who found that high-quality partnering initiatives can lead to greater savings.

Communicator

Last, but not least, a great sourcing leader is a great communicator. She knows that for sourcing to succeed, its goals, processes, and roles have to be well understood by everyone and takes it upon herself to spread the word. She creates a shared vision that people are motivated to work towards.

She can make a strong case for change, clearly and persuasively articulate it to the various stake-holders, and get buy-in. She can influence enterprise-wide strategy and targets. She's willing to share "moments of truth", be they good or bad, to illustrate her points and demonstrate commitment. She's confident in her skills and abilities as well as those of her team, capable of holding her own, and not afraid to back down from a fight when it's the right thing to do. She communicates early, and she communicates often.

Johnn Kerr's The Adpative Leader: Corey Billington (published in the Supply Chain Management Review) also makes a strong claim for the importance of communication skills in a sourcing leader. He states that it is crucial for all leaders to be able to speak publicly with confidence and commitment. He says they need to master the basics of sourcing risk management, become competent in buying and selling on behalf of other organizations, and clearly communicate this competency.

What Does a Great Sourcing Leader Do?

Now that we've covered what a great sourcing leader is, we'll focus on some of the key things that great sourcing leaders do to earn their place at the top. And, symmetrically, there are seven of them.

The Seven Scruples of a Sourcing Sensei

The easiest way to remember the seven scruples of sourcing sensei is to remember the word astricts. That's because great sourcing leaders analyze, strategize, believe in team recognition, innovate, focus on compliance, use technology, and always have an eye out for sustainability.

Analysis

A sourcing leader understands the importance of analysis and carefully analyzes the situation before making important decisions, putting something up for bid, or signing a contract. She has a data-centric approach that she uses to cut through the nonsense and find the real opportunities.

She's a big believer in real spend analysis. Real spend analysis is the ability to slice and dice organizational data any way that can be thought of, at any time, to uncover hidden relationships and opportunities. It's the ability to build - and then throw away - multiple spend cubes until the analyst finds the one that uncovers real savings opportunities, and it is the ability to do so in short time frames. It's not a spend data warehouse that gets updated once a month and gives a user one view of one cube. She's such a big believer in analysis that she makes sure each member of her team has the tools they need to do the analysis they need to do to succeed in their job. As noted in Spend Analysis: The Key to Optimizing your Sourcing Process, Aberdeen and AMR have found that an organization can enjoy savings of about 2% to 3% of their total spend by identifying and executing low hanging opportunities - and this is just skimming the cream off the top. Once an organization dives in with a real spend analysis tool, savings that are many multiples of this are usually found.

She's also a big believer in process analysis and making sure that the process is appropriate for each task. We all know that processes are the key to efficiency, productivity, and quality, but great sourcing leaders know that the process has to be the right process. The right process is complete enough to adequately account for regular operations and the most likely irregular exceptions, but as simple as it can be. The process doesn't have nine approvals if only two are needed.

Strategy

A great sourcing leader recognizes that the truly successful don't get ahead by flying by the seat of one's pants. She also recognizes that no one gets ahead by just focussing on day-to-day tactical operations.

A great sourcing leader has a strategy. One that is built on a solid foundation, based on detailed and thoughtful analysis. A strategy for building the sourcing department, for increasing it's role in the organization, and for increasing the organization's presence in the market.

As David MacEachern points out in Do You Have What It Takes To Succeed?, what works today may not work tomorrow. In order to keep succeeding, a leader needs to know how to position her organization for the future and stay ahead of the competition. This requires a strong strategic orientation and the ability to balance all of the essential components of the supply chain, including customer service, inventory, total supply chain costs, and responsiveness.

And it's not just David and the Supply Chain Management Review preaching the importance of good strategy and strategic alignment, so is The Hacket Group, who found that at least 75% of change efforts at world-class organizations are tied to business strategy, compared with just one third of change efforts at typical companies.

Team Recognition

Not only is a great sourcing leader a team builder, but a great sourcing leader is a team builder that believes in regularly recognizing and rewarding her team for her accomplishments. This recognition comes in the form of public praise when they succeed, bonuses when they exceed savings targets, and a salary that's at least at the high end of market average. After all, who makes the bigger contribution to the bottom line - the salesperson who brings in an extra $1M in sales or the purchaser who finds an extra $1M in savings? That's right, it's the purchaser - by a factor of five to twenty, depending on how much each dollar of sales costs.

And, contrary to popular opinion, which the author(s) hope becomes unpopular very soon, paying more does not necessarily mean lower profits - and this is doubly true where procurement is concerned. The Hackett Group has found that world-class procurement organizations, which generate twice the savings as their peers, have fully-loaded wage rates that are 41% higher than typical companies. Furthermore, they dedicate 74 more hours per year to training. This allows them to acquire and retain the best talent, who get the best results. And when every dollar saved impacts the bottom line as much as twenty dollars of sales in some organizations, these organizations could be paying 82% higher wage rates and still come out on top.

Innovation

A great sourcing leader is an innovator by nature. Thus, a great sourcing leader is focussed on constant innovation and improvement that enables her, and her organization, to not only adapt to the market, but to lead it where they want it to go. A great sourcing leader is constantly on the lookout for new innovations in technology, business process, and relationship management that she can use to improve the operations of not only her unit, but the enterprise and supply chain as a whole. She knows that if something is done a certain way just because it's always been done that way, it's usually a pretty clear indication that something needs to change.

Furthermore, investment in innovation always pays off. Consider the investment on R&D made in the US between 1993 and 2003. As summarized in Innovation, the Best Investment (by Chris Farrell and published in Business Week), during this period, the total investment increased 44%. As a result of this investment, productivity increased almost 100%. That's almost $2 back for every $1 invested.

Compliance

A great sourcing leader recognizes that compliance is not just the multi-faceted buzzword of the day, but the key to realizable savings, low risk operations, and positive press.

A negotiated savings of $10M is just that - a negotiated savings. It's not real until it hits the bottom line. This requires insuring that each buy is on contract, delivered on time to spec, and paid at the agreed upon rate. A great leader will make sure that the right systems and processes are in place to make it easy for everyone to buy on contract, will make sure that deliveries and quality is closely tracked and any issues quickly reported and resolved, and will make sure all invoices are matched against contracted terms before being authorized for payment.

These days, regulations are multiplying like Fibonacci's rabbits and failure to adhere to any one of a myriad of regulations can be very costly, with penalties ranging from large fines, to destroyed shipments, to having the company's product banned in one or more countries. A great sourcing leader recognizes this and puts systems and processes in place to insure that all known regulations are adhered to at all times so that when the compliance auditor comes a knockin', it's not long before happily out the door he's a walkin'. After all, failing to comply can cost a lot more than one might think! Just ask the East Kentucky Power Cooperative that had to pay a $11.4 M penalty to resolve violations of the Clean Air Act.

The media's always looking for the next poster child for evil corporation of the month, and failure to adhere to government regulations, and even voluntary codes of conducts that are in vogue, can put the organization on the nominees list. However, a company that is a shining example of good corporate social responsibility can not only can the company stay off the list, but such a company can generate a lot of positive press as the poster child of good corporate citizenship, a shining light in the darkness that the media seems to believe has corrupted most of the corporate world.

Technology

Old-school Gruff Purchaser may like his pencil and paper, but any company that thinks they can get by without modern sourcing, procurement, and supply chain systems is still in Never Never Land. A great sourcing leader is always on the lookout for new technologies that can help her team get a better handle on the supply chain as a whole as well as for new best-of-breed technologies that can improve performance in key activities with the potential to generate significant value or advance the overall organizational strategy. She's constantly evaluating new e-Sourcing, e-Procurement, e-SRM, e-Logistics, and other e-Visibility solutions that could help her and her team take it up a notch.

It should come as no surprise that the enhancement of infrastructure has been found time and time again as the key to enhancing the value of the sourcing organization. As pointed out by Tim Minahan in his article on Five Strategies for High-Performance Procurement, leaders are transitioning from tactical and fragmented investments in automation to more cohesive and integrated source-to-pay platforms. It's two years later and this is, more-or-less, still the case. Even though the systems may not be tightly integrated, since the value is not always there, the solutions that the systems provide are more extensive and cover more key areas of e-Sourcing, e-Procurement, e-Logistics, e-Inventory, e-Visibility, and e-Risk Management. The Hacket Group has also found that world class organizations leverage technology to increase efficiency and effectiveness.

Sustainability

A great sourcing leader knows that sustainability is more than just a buzzword, it's the key to successful business year after year. That's why she makes sure that each strategy employed is sustainable, that each supplier used is responsible, and that environmental and social responsibility is always considered.

Sustainability is a global issue, and one that, when done right, can lead to savings wherever the company happens to be. Just ask HP, who has reduced shipping costs by 70% by reducing the amount of packaging used for its printers.

Bibliography

The Adaptive Leader: Corey A. Billington by John Kerr, Supply Chain Management Review, July 1, 2005

The challenges of creating a global sourcing organization by William Atkinson, Purchasing, December 8, 2005

Corporate Performance Management: How Committed Leaders Drive Results by CFO Research Services, February 1, 2006

Do You Have What It Takes to Succeed? 5 Traits of Successful Supply Chain Pros by David MacEachern, Supply Chain Management Review, May 1, 2004

Effective Team Building for Organizational Success by R.G. Srinivasan, March 13, 2005

Exercising Common Sense by the doctor, September 5, 2007

Five Strategies for High-Performance Procurement by Tim A. Minahan, Supply Chain Management Review, September 1, 2005

Gene Richter: Leader, innovator, friend by Doug Smock, Purchasing, August 14, 2003

Getting ready for tomorrow's supply chain by Rhonda Lummus, Steven Melnyk, Robert Vokurka, Laird Burns, Joe Sandor, Supply Chain Management Review, September 1, 2007

Good Procurement Leadership by David Bush, August 22, 2007

Great Scott's Business Advice by the doctor, January 6, 2007

How Procurement Leaders are Using Supplier Relationship Management to Achieve High Performance by Accenture, 2006

How to be a Star at Your Company by Editorial Staff, Supply & Demand Chain Executive

Innovation Key To Manufacturers' Success by Jonathan Katz, November 28, 2005

Is a Chief Sourcing Officer Right for You? by Jason Busch, September 10, 2007

Is Your Company A Supply Chain Leader? by Clifford Defee, IndustryWeek, April 18, 2007

The Leaders' Edge: Driven by Demand by Kevin O'Marah, Supply Chain Management Review, May 1, 2005

Leadership Alert: You've Developed High Skill Set Demands, But Can You Keep Your Best People? by Denali Consulting, 2005

Leadership and Sourcing by Jason Busch, August 6, 2007

Leadership Development Strategy: Linking Strategy, Collaborative Learning, and Individual Leaders by AQPC, September 1, 2007

Leadership Practices in Procurement Management by F. Nikolaus Soellner & Carlo Mackrodt, 1999

Marrying Sourcing and eProcurement - Being Strategic By Going Tactical by Dave Stephens, November 6, 2007

People: Supply Chain's Secret Weapon by Anne M. Kohler, Supply & Demand Chain Executive

Supplier Performance Management: What Leaders Do Differently: A Benchmark Report on How Companies Manage Supplier Performance and Supply Disruptions by Beth Enslow, Aberdeen Group, September 2004

The Talent Series I: Succession Planning by the doctor, September 18, 2007

Thinking outside the box by Gary Borislow, Supply Chain Management Review, September 30, 2001

What is the Spend Manager Made of? by Jason Busch, September 27, 2005

World-Class Procurement Organizations Spend 25 Percent Less, Generate Twice the Savings by Editorial Staff, Supply & Demand Chain Executive

World-Class Procurement Organizations Staff More Strategically - Hackett by Editorial Staff, Supply & Demand Chain Executive

Author(s)

Michael G. Lamoureux, PhD of Sourcing Innovation

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