In our recent webinar Planets of Value: Procurement Creates New Wealth for Organisations, Craig Lardner FCIPS provided a review of 17 Planets of Value. Several questions were asked during the Q&A session, but we ran out of time to answer a number of additional good questions. We’d like to thank Craig Lardner FCIPS for taking the time to respond to these questions, providing an extended Q&A.
Q: How do you quantify risk into savings – what is the baseline you use?
There is no one, single baseline for the subject of risk in procurement. However, a baseline must be determined and it is determined on a case by case basis, for each sourcing project uniquely. Within a specific sourcing project the process would be:
- consider the various risks in the project
- quantify them
- qualify them
Then, scale them using likelihood and impact, this gives you an overall risk score.
Create mitigations for each risk. Rescale the same risks, compare the before score to the after score. The shift in the score is the extent the overall risk profile has been reduced due to your mitigations. Savings in risks can be very tangible and measurable on a single risk area. [Rather than the overall.] In my example, the battery acid burns no longer being incurred was easily measured in terms of medical costs not incurred.
Q: Can we apply these 17 aspects in a typical trading set up?
Yes. They will take different forms but the same 17 names apply. The working capital planet is very relevant to traders as the cost of stock is a pain point for them and for their end customers. Ideas that a trader might have to create access to new products for their end customer can add value to both the trader [additional throughput] and their end customer [discovery of new useful product they didn’t know existed]
Q: How would you balance the 17 planets when looking at Transactional vs Strategic deals. That is, is every deal worth exploring the 17 planets on?
Every single deal is worth exploring the 17 planets. Some will be quickly disqualified by you in a heavily transactional trading event. [Too hard, too little return for effort, too ‘maybe’]. More appetite will exist in the strategic deals as they typically have a wider potential impact across the organisation. Everything is possible, use the full list of planets, choose the ones that have most appeal in each unique deal.
Q: You mentioned that exclusivity is a ‘Holy Grail’ in terms of a product being exclusive to one company. What happens when the value achieved in that exclusive deal is lost because the private sector customer is aware of other value but cannot access it due to an exclusive agreement with a supplier? Does exclusivity not then become a ball and chain for the private sector company?
A ‘Craig’ rule for you…’Always start with the end in mind’. When setting up the exclusive deal [if it’s likely be to be a two-way exclusivity] think hard about how you exit it painlessly if it all goes pear shaped. Have exit clauses that allow termination for exactly the circumstances you have described. A shift in technology clause will help here.
Q: Given the broad range of categories we cover as a profession, what’s the best way of prioritising which planets we explore first and most fully, and others which we might just skim past?
Do a ‘relevance chart’. It’s a A 2 x2 where one axis is the relevance of the planet to the category [low to high] and the other axis is the potential positive impact of a more open supplier relationship [low to high]
Any category that you put in the high/high box goes in the special opportunity list.
Hint: Don’t let your own paradigms keep you from thinking a pretty plain and traditional category couldn’t be a pot of gold when it’s attached to a new planet.
Q: Want to hear your idea about how procurement can create values through supply market intelligence (SMi) activity and your experience relevant to this if you have any?
SMi is a great source of fertiliser [of ideas] for the planets. What was once seen as impossible or impractical can be very possible and very implementable when you make new discoveries through SMi. New enablers are uncovered through SMi.
In my own SMi I have 2 great questions to ask. I listen hard after I’ve asked a procurement colleague this question: “What was the best piece of breakthrough thinking you came across this year?”
I listen even harder after I’ve asked a supplier this question: “What’s the cleverest thing you saw one of your customers do with you that was really impressive [other than buy more from you]?”
These 2 are simple and effective pieces of my own SMi process.
Q: There are a lot of folks in our organisation’s procurement field who think – PRICE or COST only. How do you get them to think beyond and break that barrier?
Left to their own devices they will not move in their thinking unless they have a personal ‘accidental’ event that makes the penny drop for them in their thinking. This is not their fault. There are many things we all have a misunderstanding about because it’s not our specialist field. And that’s not our fault either.
The remedy for our colleagues who you describe above is to take personal ownership of their education and familiarity with procurement. Give them small digestible and interesting doses of procurement. I call it ‘sprinkling procurement gold dust on heir heads.’ Little drops every now and then, not a Tsunami of procurement that will have them glaze over.
Don’t talk process, talk outcomes to them, outcomes that they can relate to. In fact, outcomes they would see as advantageous. Sound bites and snippets of real case studies are most easily absorbed by them and understood. Each one of those gets them closer to understanding value beyond price.
Do one planet only [as a starter] that brings them an outcome that was not about price but was still an outcome they loved. You will have an ambassador in the making.
Q: When you are buying a commodity type category such as office supplies – how do you engage/encourage the supplier to participate in exploring the 17 planets?
Ask 2 questions:
- What are the 2 the most difficult things in doing business with you?
- What are the 2 most difficult things in doing business in their market with their customers as a collective group?
Hidden in their answers are the clues to a planet [or 2 or 3]. Take that link and explore [open free-flowing conversation] about the cause of the 4 answers above.
Explore by asking: “What could we both do together that might tackle those 4 problem areas?”
The key word there was ‘both’.
Q: What metrics can be used to measure the value of these different items?
There are many effective KPIs for the planets. The KPIs will vary in relevance depending on the specific initiative underway in the planet. The KPIs are initiative specific before they are planet specific. If you have some initiative in mind, and the planet it refers to, send it to me and I’ll help you develop a KPI for it.
Craig Lardner FCIPS is contactable via email: cg.lardner at bigpond.com
You can access the entire webinar recording or download the slides here.