“Isn’t this just a new name for procurement best practice?” and/or
“What makes it disruptive, exactly?”
So, I thought I would clarify our thinking in this blog.
Fundamentally, it’s a mindset change
In a nutshell, our procurement consulting practice believes that disruptive procurement is a complete mindset change on three levels. Those who practice this challenging approach to procurement display the following traits:
1 – They have a passion for improving shareholder value, not just cost reduction.
2 – They are inspired thinkers, as a result of their true depth of knowledge of the supply chain.
3 – They are creative thinkers as a result of their breadth of knowledge beyond the “normal” sources.
4 – They work collaboratively with others – focusing on relationships as much as facts.
Let's look at each of the above in a little more detail:
1 - A clear focus on shareholder value
Shareholder value is what drives our procurement consultants– not just lower costs, and not just net profit, but all elements that make up stakeholder value.
They take time to understand how the business drives value.
Do you drive value by driving down costs or by increasing customer loyalty? For most businesses, it's probably the latter….
Disruptive procurement consultancy focuses on the business drivers and examines the impact of any cost reduction work on those drivers. Spending more to improve quality could lead to a bigger gross margin than a cost reduction!
2 - Inspired Thinking
With a depth of knowledge of the supply chain comes the ability to provide inspired ideas.
From finding new sources for components, to collaborating with suppliers to help them reduce their costs - in-depth supply chain knowledge (one of the 7 key ingredients) can drive out cost reductions beyond normal expectations.
3 - Creative Thinking
A disruptive approach to procurement looks not just within the company, the industry you’re in or your supply chain. This new breed of procurement consultants bring expertise from other business sectors – they dig deep to discover and apply learning from seemingly completely unrelated business practices.
Let me give you some examples:
- A field service company learning from a food retailer - read more (link to blog about field service)
- A retailer learning from construction - read more (link to blog about retail)
So, what should companies be asking their procurement teams to do?
4 - Working collaboratively
Disruptive-thinking procurement specialists don't simply source what the business requests. They work in collaboration with designers, operations, suppliers, employees, customers and all other stakeholders in the business to come up with solutions to real business issues.
In a manufacturing company, this could mean a change from asking procurement teams to:
“Get the cheapest price for spare parts for our equipment”
To challenging them to
“Obtain the lowest cost for this production process”.
(Note: lowering the cost for an entire process is a step beyond lowering the total cost of ownership for the equipment.)
The end result of a disruptive approach to procurement could be any of a wide range of solutions from cheaper spare parts, outsourced maintenance or a change to the production process to completely outsourcing the production. It's the mindset, the thought process and the application of knowledge and creativity that makes Disruptive Procurement different.
To get some real detailed insight, download our eBook "11 thought-provoking examples of Disruptive Procurement in action".