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Trade Enablement

September 23, 2010

Today I interviewed DalipRaheja, CEO of The Mpower Group, to discover the thinking behind his recent article, ‘The Death of Strategic Sourcing’.

Dalip has received wide recognition for his contributions to the supply management profession and was an early leader in the foundation and implementation of strategic sourcing. I was therefore delighted to learn that his thinking is driven by a belief that the next phase of evolution is towards the model endorsed by IACCM – the combination of buy-side and sell-side resources to devlop an integrated corporate capacity in the management of trading relationships.

During the interview, Dalip acknowledged the major benefits that sourcing and procurement have delivered in recent years, but emhasized that it was not as much as was hoped for. And he feels that continued progress demands a new model, better equipped for today’s volatile market conditions. ‘Crisis management’ is now the norm – so organizations must design for the unpredictable, the unexpected. This means much tighter integration between the needs of the market and the capabilities created by the supply base. Organizations can no longer afford the consequences of poor information flows that result from functional silos.

Dalip also acknowledged the difficulties created by the compliance and control approach of many procurement staff. These ‘left brain’ characteristics have tended to be strong in many top managers, whereas the real need is for leadership skilled in collaboration and creativity. ‘Trading relationships are key. A lack of collaboration means that risk events are handled in boxes and organizations lack absorption capacity.’

Dalip’s proposals include the creation of an integrated ‘trade enablement group’ looking at the market and the supply base. He sees an urgent need for procurement to become part of the sales process, operating with far more sophisticated supplier selection criteria, stronger alignment with the executive agenda and with focus and incentives based on outcomes.

In response to a question regarding the steps needed to achieve this integration,  Dalip and I agreed that today’s procurement image will in many cases be an obstacle. It is essential that any merger with sales contracts / commercial teams is performed collaboratively, not atttempted through some sort of hostile take-over. The business case is strong; the skills  are coalescing; the need for far better integration of marklet and business intelligence has become urgent. And there are a growing number of groups that have moved successfully down this path, which provide benchmarks and evidence of success.

Anyone interested in discussing or exploring this new way forward is invited to contact either Dalip or myself and join the developing band of believers in an integrated ‘trade enablement’ function.

The interview recording is available in the IACCM Member Library.

2 Comments
  1. Re: Trade enablement group and synergy between sales and procurement

    I’m not sure I see the synergy, Yes, both of them use contracts but they are very different contracts. Other than that, what is the synergy?

    Are you leading toward reciprocity? Because you buy from me I should buy from you? Most folks in the US believe that’s illegal under Robinson Pattman.

    Or perhaps leading toward choosing suppliers from particular countries to help sales in those countries? My experience in those efforts wasn’t a happy one.

    I certainly can’t argue against more sophisticated supplier selection criteria, nor against executive alignment but I think factories will work best if procurement is free to find the best suppliers they can possibly find.

    • Dick, thanks for your response.

      No, reciprocity certainly is not the issue here – though certainly there are many multi-faceted business relationships where it would help greatly if the right hand knew what the left hand was doing!

      The issue here is far more about ensuring greater business integrity through the flow-through of market information and its connection to business information, ensuring the right supply relationships to drive competitiveness. The challenge has become far more severe in recent years due to the turbulence of ‘the market’ and the need this imposes to shorten internal communication lines. It has also become more important because of the growig dependence that companies have on the performance of their trading partners – both customer and suppplier. For example, you talk about ‘the factory’, but as you well know, many manufacturers no longer own the factory. Masses of historically direct procurement has now switched to outsourced supply, driving the shift to more and more buying of services and solutions. And as you know, the role for traditional procurement staff is changing as a result of this – because services and solutions depend far more on overseeing performance and ensuring outcomes or outputs are achieved.

      This means that the similarities in role and skill-sets between buy-side and sell-side contracts / commercial staff are becoming steadily more aligned; I am confident in that statement because increasingly we train both sides. And it is resulting in growing consolidation of such resources, sometimes with individuals performing both roles. Indeed, nearly 35% of IACCM members tell us that they preform both roles. And of the remainder, there are significant numbers who have made the switch – in just the same way as a lawyer may, during his or her career, move between supporting buy-side or sell-side activity.

      So no implication here that there is any loss of objectivity. Quite the reverse; it is about making certain that buyers benefit from the latest market insights and trends, to ensure the suppliers they select have the capabilities and adaptability needed to service the business.

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