The 12th Annual ISM Services Conference, this year held in Phoenix, AZ December 1-2, focused on many topics dealing with the challenges involved in sourcing things like temporary labor, marketing agencies, and legal services. The conference had a full agenda, covering topics such as Building a High-Impact Indirect Sourcing Function and The Five Golden Rules of Negotiation. Several of the sessions are summarized below:
Enlightening Marketing Procurement: Maximizing Investment. Minimizing Waste.
Presenters: Chuck Hatsis: President of Surge Consulting and Shannon Puhl, MBA: Director, Supply Management Services
There is a difference between purchasing and strategic sourcing, and marketing is not an expenditure to minimize, but an investment to maximize. When strategically sourced correctly, marketing spend has the potential to have a great return on investment, which makes it very different from many other things a company purchases. Unfortunately, in most cases the CMO and CPO of a corporation have very different underlying incentives, which can prove difficult when attempting to strategically source this category. Recommendations presented at the conference include
• Allowing marketing to keep identified savings to reinvest in other areas
• Remembering to spend time strategically sourcing media spend and not just agencies
• Using easy, quick wins in other areas of the organization to get marketing to buy into the process
Building a High-Impact Indirect Sourcing Function
Presenter: Derek Everitt, CPSM: Global Sourcing Director, Terex Corporation
In this session, Derek Everitt reviewed Terex’s journey in creating an indirect sourcing program. In a business as cyclical as Terex, it has been essential for procurement to get more involved with indirect spend. Through opportunity assessments and discussions with stakeholders, they have been able to align savings plans across the organization, track savings, create a supplier management program, and formalize communication across the organization. A key takeaway Everitt emphasized was that implementing a supplier management and strategic sourcing process takes time.
The Five Golden Rules of Negotiation: Negotiation Best Practices for Services
Presenter: Martin E. Latz, Esq.: Founder and CEO, ExpertNegotiator Planning & Management Software
In order to ensure a successful negotiation, a procurement professional should write down goals, visualize victory, and maintain focus throughout the negotiation. Martin Latz reviewed his own key rules to follow in order to ensure an effective negotiation:
1. Information is power – so get it
2. Maximize your leverage
3. Employ “fair” objective criteria
4. Design an offer-concession strategy
5. Control the agenda
One of Latz’s key points was that identifying the “Best Alternative to a Negotiated Agreement” (BATNA) is essential in order to know when to walk away from a deal. Additionally, knowing and understanding the supplier’s BATNA may provide more leverage during the negotiation. Ultimately, the most important elements to a negotiation, according to Latz, are to prepare and to protect and preserve your reputation.
Navigating Uncharted Sourcing Territory: How to Gain and Maintain Access to the Relationship Categories
Presenter: Whitney A. Taylor: Senior Sourcing Manager, Advanced Micro Devices, Inc.
Challenges in relationship categories can be daunting. They include:
• Roadblocks with stakeholders such as not wanting to share expertise for fear of the procurement department stealing their job
• Stakeholders not wanting to hurt relationships with long-term suppliers
• Stakeholders thinking they are experts in negotiation and can do it themselves.
Almost every procurement professional entering the realm of a relationship category will deal with at least one of these issues, and Whitney Taylor discussed ways to overcome objections internally.
Ultimately, it is procurement’s job to facilitate the strategic sourcing process, and it should be accomplished together with the stakeholder. Procurement should listen to and learn the stakeholder’s business goals, provide data and facts to build trust, and be flexible with the purchasing process to meet the stakeholder’s unique needs as necessary.
Many times auctions can be successful in relationship categories, but the procurement professional should ensure that trust is built with the stakeholder and specifications are clearly defined before choosing this path.