Procurement - switch your focus from sourcing to supply chain management
I have worked in marketing for more years than I care to remember. The one key observation I have regarding this discipline is that it continues to expand in breadth whilst at the same time growing in complexity. This is clearly a challenge for marketers but, in addition, it also provides a whole new set of challenges to the procurement teams who are tasked will helping marketing make their investments go further.
I am also a cofounder of several start-ups, that have been developed to help marketing procurement leaders address this complexity and unlock hidden value. BUT to be honest I mostly find myself facing a wall of silence. However, there are some young, highly talented individuals who seek knowledge at every opportunity, embrace change, address risk and add exceptional value to a business. So, this is my way of sharing the attributes of these unsung heroes.
As Arthur C. Clarke once said:
“The Information Age offers much to mankind, and I would like to think that we will rise to the challenges it presents. But it is vital to remember that information — in the sense of raw data — is not knowledge, that knowledge is not wisdom, and that wisdom is not foresight. But information is the first essential step to these.”
The real challenge is that Procurement focuses too much on margin reduction rather than removing waste from the supply chain. The first approach reduces the margin and profit of the supplier thereby negatively impacting them whilst the second can benefit all parties.
The challenge, if you negotiate or even bully a supplier to give you a lower price, is that several things happen; you become less important to them, you don’t gain access to their best people, they take their innovations elsewhere and ultimately, they deliver their best service to their more rewarding clients. However, the biggest negative is that they don’t see the relationship as a partnership of equals and you lose access to very valuable information. Information that is essential to remove waste and to deliver real value to the business.
Very simply Procurement needs to embrace Lean Thinking. To achieve this, you need to understand every element of the supply chain and this requires partnership with all the stakeholders. By understanding every step in a supply chain, you are then enabled and empowered to identify areas that don’t add value and to remove them.
So, how important is this? Well, Mark Pritchard certainly thinks it is. Look at what he says about the “media supply chain”. Even Mark Ritson throws more fuel on the media supply chain fire. What is interesting is that the same theme comes through from two of the most influential and experienced marketers globally; to deliver value you must have information, transparency and standards. To be honest this is not just an issue with digital advertising, it transgresses all areas of marketing spend.
“Good procurement practice is negotiating a better price but great procurement practice is removing waste from the supply chain.”
It is not just standards but it is the ability to compare one element with another in an objective way. This requires the marketing procurement team to confirm that it is indeed comparing like-for-like. If comparison is not possible, how can you achieve an objective judgement?
“If you are not comparing oranges and oranges when running a marketing tender of any sort, then you are participating in an exercise in pure futility.”
Dissect the supply chain
Due to the complexity of many of the materials and services used by marketing, it is inevitable that the supplier you are working with is outsourcing huge elements of the programme. If you don’t know how the supply chain works or who is involved, how can you have any chance of identifying where savings can be made?
Spend time to get to know how the supply chain works, what the steps are, who are the responsible parties, who adds value and who doesn’t. Once you have a clear picture, identifying and adding value becomes relatively easy.
Focus on the detail
Adapting the well-known saying:
“Look after the marketing pennies and the marketing pounds will take care of themselves.”
This is very true and it is often the small details that can unravel a supply chain and cause untold problems. Identify these blockers and develop solutions which are specifically designed to remove them.
Invest in Flow
Flow is a key component of a Lean Manufacturing supply chain and it is where one task is completed and the project is moved onto the next task. Invariably marketing supply chains break down at these points. An obvious example is where Marketing have spent so long working on and approving creative, that production only has days to deliver the required materials leading to excessive overtime costs.
Gain control over the supply chain flow and these problems can be removed along with all the extra costs associated with short production lead-times or other shortfalls.
“In a marketing relay race, it is not how fast you run that counts but how well you pass the baton.”
Take out waste
What do I mean by waste? Well very simply it is any cost that does not directly or indirectly contribute any value to the final solution. There are many ways you can identify waste. Here are a few examples:
- Teams spending too long in meetings where limited actions are taken (resource waste)
- Solution goes through multiple changes (duplication waste)
- Delays happen due to late or delayed approvals (process waste)
- Use of third parties that are just passing information from one party to another but not impacting the final solution (layer waste)
- Too many solutions are created (production waste)
- The wrong solutions are delivered (planning waste)
“Focus on looking for marketing waste and you will find it everywhere. Change your mind-set and transform the marketing procurement function.”
This is a hard one and I do not envy the challenge that many of these very capable marketing procurement professionals face in trying to deliver additional value to the business. However, you must adopt a mind-set where you seek to become the most informed individual in the supply chain. By achieving this, you will be able to focus on removing waste and in so doing, to gain the commitment, support and data that you need from all stakeholders, both internal and external, to establish a lean supply chain that is subject to continuous improvement.
So, the next time an email arrives or the phone rings, consider this. Is this an opportunity to gain further data, insights and knowledge? To succeed, you need to be open to learning something new every day, so embrace every opportunity to network, find those hidden areas and unlock that additional value.
If you would like more information on how LG&P and LeanPie can transform your shopper marketing supply chain, please feel free to contact David at firstname.lastname@example.org