How do procurement and supply chain teams move beyond savings to drive value and revenue growth for the organization?
In the quest to maximize total value for your organization, an often overlooked but key focus area with significant savings AND revenue potential should be a deep dive into your procurement teams and your global supply chain operations.
There are many models and organization designs out there to evaluate and deploy within your organization. The Center Led Procurement (CLP) model is our of our preferred models.
The CLP model is built on cross-functional teams led by the sourcing and procurement organization. These teams represent the different areas of your organization, aligned by the what, why and how you spend your money.
As we like to say, CLP can provide procurement and supply chain teams freedom within a framework. As always, we encourage some organizational prototypes to try the model and test drive it, to see if it is for you.
What are the Long Term Benefits of the CLP Model?
Benefit 1: Global Standardized Supply Chain processes focused on Revenue AND Savings:
A procurement Center of Excellence, helping to guide process, globally, and managed in a coordinated (not controlling) way. The CLP framework creates the basic business processes with local input and helps to standardize how your supply chain works globally, in a coordinated (not controlling) and consistent way. This drives the team (over time) to understand how their supply chain approach can migrate from delivery of widgets or services to directly impacting the net margin revenue of your organization.
Benefit 2: Local Execution for Spending:
The CLP model Allows Flexibility for the local teams to work within a framework AND provides flexibility for local resolution and execution of matters that can best be handled in the region, by your local teams.
Benefit 3: Shifts focus from tactical to strategic
Over time, as the processes and technology build out, the organization can make a decision to shift resources away from the tactical activities, buyer – planner – expediter to a solution sourcing approach mentioned previously.
Benefit 4: Repurpose of Budget for Re-allocation of Resources
Understanding the organization challenges and build the business processes frameworks allows your team to “give back” to the organization in areas of increased efficiency and flexing up and down staff to support changes in the business environment.
Benefit 5: Reduces Operational Risk
The CLP approach of managing in a coordinated (not controlling) way helps to allow time to focus beyond operation and gives time to look at Risk and Resiliency strategies to help with alternate/dual sourcing and critical supply chain analysis for weakness in the supply chain.
Benefit 6: A Catalyst for Supplier Enabled Innovation(TM) and Open Innovation Initiatives
The CLP framework will become a key catalyst for Supplier Enabled Innovation(TM) and Open Innovation, to which we will write more about in an upcoming post.
Supply Chain Teams with a focus on Total Value evolve to include deep strategic thinking applied to procurement supply chain business operations.
This approach educates the team to concentrate on how to save money for the organization, operate to a centralized model that optimizes efficiency, then step up the strategic thinking to the level where the supply chain and procurement organizations can help develop business growth models for your organization.
The CLP Model builds and strengthens your team capability, supplier relationships and can maximize deal flow and generate long-term positive net margin revenue growth for the organization.
So, what’s the proof that the CLP model works?
Does CLP work? You bet it does.
In one case story, with a $1 Billion Privately held CPG company, the structure helped to drive a portfolio of business processes and projects that identified 10% Year over Year Savings Opportunities.
In a second case story example, with a $3 Billion dollar publically traded organization, CLP techniques can also capture opportunity quickly. The client was able to identify $10M of actionable savings and revenue acceleration opportunities in a 6-8 week period.
The Methods and strategy applied (over time) in a third case story with a fortune 500 $6 Billion organization, has helped to deliver over 4,000 savings projects with $350M in savings and accelerated revenue harvest of new product introduction of $50M two years faster than compared to previous initiatives.
As we stated previously, a strategically aligned and highly trained procurement organization, with proper foundational education, business systems, tools and technology can be THE functional group to harmonize, scale, solve long-term challenges and maximize total value for the organization.
To learn more about how The Innovation Garage® can help support your plans for Center Led Procurement and Supply Chain with our 3 phase approach, blended education delivery, and the supporting tools and technology to help. Please reach out to us below.
At The Innovation Garage®…
We help organizations become more profitable. We build strategy. We build ideas and the capability of teams. We design products, services and supply chains. We guide leaders from startup to the Global Fortune 50 to intentionally self-disrupt their offerings and organizations. We provide world-class education, tools and technology on how to craft business operating systems focused on long-term profitable growth.