Our upcoming SCRC meeting on April 25 will explore a topic that has been top of mind for me and several other people for some time.
To give you a clue as to what this is about, consider the typical sessions you see at, for instance, the ISM meeting, that I plan on attending this year. One of the tracks in particular that caught my attention:
“EXPOSING THE TOP 5 SALES CLOSING TACTICS: GETTING THE INSIDE TRACK ON NEGOTIATION Have you ever wondered what sales people are taught to negotiate AGAINST buyers? This session will reveal the TOP 5 most popular negotiation tactics used by sellers against buyers. Participants will learn how to neutralize seller tactics to successfully negotiate lower prices and better agreements.”
This session captures the essence of what I believe is wrong with procurement’s relationship with sales. We look at sales as the “enemy”, and think of a negotiation as going to battle with a tricky, deceitful, and dishonest shyster, who is after our organization’s hard-earned capital. The goal of course is to get your sales person to capitulate, and give you a lower price, so that they can make less margin and quit ripping you off!
It’s about time that we re-think the sales-procurement relatinship. In fact, it’s long overdue. As a result of the incredible shifts in the global supply chain , three major shifts have permanently changed forever the way that industrial marketing and purchasing personnel need to interact, which we will explore further in our meeting on April 25.
- Technology development, brought about by the massive changes in cloud computing, real-time data, social media, “big data”, artificial intelligence, block chain, and smart contracts, have created a “real-time” shift in buyer-seller relationships.
- The expansion of industrial buyer-seller relationships beyond the interpersonal dimension, and is no longer between purchasing managers and sales agents, but across multiple stakeholders, requires increased alignment in defining contractual scopes of work, as well as on-going management of contractual outcomes in the face of uncertainty
- An increased recognition of the need to shared risks and rewards in product innovation, that includes not only the development and commercialization of the product, but also the product launch and life cycle management, will require increasing face to face interactions between industrial buying and supplying parties
These significant shifts have escalated in the last 5 years, due to several major changes in the global economy and emerging technology. The explosion of data, cloud-based computing, and the rise of other forms of technological innovations have allowed organizations to access more data than ever before in real-time. Real-time data can be transmitted within 15 seconds or less, a fact that enables managers to understand and predict what internal users and customers will need right now. During this same period, rapidly shifting demand and global events have led to the recognition that response velocity is the key ingredient for managing uncertainty in global supply chains. How has the need for responsive supply chains shifted the role of industrial marketing and procurement?
First, the ability to disperse supply chain data rapidly has been enabled through development of technological capabilities that provide inexpensive cloud-based computing, distributed computing ‘at the edge’, and the growth of a digital ecosystem. While the issue of visibility has been invoked for many years, we are only now seeing the technology that makes real-time data a reality.
A second change that has led to increased response velocity is the shift in governance over buyer and seller relationships, which are now comprised by multiple stakeholders. There is increased recognition that individuals are no longer the sole decision-makers in B2B relationships, but that multiple stakeholders may play a role. Procurement owes it to its stakeholders to address their needs through a cross-functional approach that takes into accounts the needs of multiple stakeholders, and effective communication of these needs to industrial marketing.
However, technology and governance over procurement decisions are only part of the story. The third leg on the stool is related to the reliance of large companies on smaller suppliers to drive product and business innovation. This has occurred in conjunction with the growth in the size of Fortune 500 companies, as they merged and expanded across the globe. Many of these companies as they expanded began to shed their R&D functions, and also sought to outsource business processes that once resided within their companies. Outsourcing dramatically changed the nature of buyer-seller relationships, and the role of procurement as the primary business function responsible for managing third party suppliers increased both in scope and importance. As procurement became a primary decision-maker for third party agreements sales organizations now find that they are dealing with a more powerful procurement function, that is more centralized, reports directly to the Chief Financial Officer, and has a mandate to drive cost savings.
Our upcoming SCRC meeting will capture insights from multiple individuals who will share perspectives on this subject. We will be featuring an “all-star” lineup, including the following individuals who have incredible experiences to share on these subjects.
- Dan Mahlebashian, Former Chief Supply Chain Officer, General Motors – “Moving Away from One-Dimensional Procurement”
- Bill Knittle, Chief Purchasing Officer, Cheniere Energy, Supplier Relationships as a Source of Value
- Mike Boman, Director of Business Development, UPS Supply Chain, Creating Long-term Customer Relationships.
- Juergen Scherer, SBU President Retired, Mauser Group, Purchasing and Marketing: Separated at Birth?
We will also feature a panel discussion that brings together multiple perspectives from sales, purchasing, legal, and business development:
- David Henard, PhD Professor of Relational Marketing, Poole College of Management
- Peggy Barber, Americas CEO, International Association of Commercial & Contract Mgmt
- Brian Carrier, UPS Global Logistics
- Ed Smith, DHL Logistics
- Dan Mahlebashian, General Motors
This will be followed by our 11th Annual Leadership and Innovation Showcase, featuring more than 40 student project posters from a number of areas (about 25 of these will be supply chain related).
You don’t want to miss this!