For years, businesses were encouraged to see their IT departments as a non-core activity; solely there to enable transactional business, improve company efficiency and keep the lights on. A consequence of this perspective was the outsourcing of IT. Do you really need to own the infrastructure, the hardware, the development capability? If not, why not outsource it, or consume it as a service?
Organizations are now looking at digital transformation and asking a similar question – “After years of outsourcing, what exactly do I have control over? Can I still digitally transform if the majority of my IT services reside outside of the organization?
Digital transformation is not an impossible task with a modern, complex supply chain, but it changes the approach. For most organizations, digital transformation is an exercise in supply chain transformation. You cannot transform what you don’t control, so digital transformation starts with the supply chain. Here are 12 tips to ensure you take control of your digital transition, and don’t spend the next few years herding cats!
- No more long term, single supplier deals: Keep control of your IT by avoiding long-term, single supplier deals, whether you are buying “as a service” or via more traditional outsourcing contracts. This allows you to spread the risk of supplier failure.
- Align with your organization’s strategic goals: Transformation is not just about installing technology or implementing new processes, but it is there to meet the strategic goals set out for it, which must be aligned with the company strategy. This must be the key message for the supply chain transformation project.
- Don’t be afraid to change processes: Making a change in the way in which your supply chain works often involves the use of new technology and a fundamental review of the processes you use. While it isn’t always possible to change the approach or processes, you might be able to implement some technology changes that will support the organization’s transformational change.
- Procurement must share contract and deal knowledge with the project teams: Don’t just back off, make sure the knowledgebase is fully populated, whether you use technology to do this or become an advisor to the project or preferably both.
- Training: Enhance the skills of your supply chain people, but remember that training shouldn’t just be about procurement. Project management and some technical training will help improve effectiveness. Embed procurement staff in the heart of the area where the change is needed so that they fully understand the requirement.
- Work with your suppliers, not against them: Keep your suppliers close, build trust and allow them to help you with your ideas. We know this is difficult to do because of the need to keep within the rules, but often the “rules” make us fearful of engaging with the people who understand the specific issues you will encounter and have wide, market-led knowledge. Use early market engagement techniques to get the best from your potential suppliers.
- Engage with other organizations who have done something similar: People are generally keen to share their experiences, good and bad. Reach out and gain benefit from the experiences of successful (and unsuccessful) projects.
- Use consultants (sparingly): Consultants are often essential to deliver transformation successfully, but they should only be used for short periods to fill specific skills gaps; don’t allow them to become the norm. Use companies that will pass their knowledge on to the team and not keep it to themselves. It is important that organizations improve and retain the skills they need to manage the transformation going forward.
- Embrace the necessary cultural change: It’s not easy to influence internal organizations, especially if they are conservative, but the supply chain function can lead the way by being more involved at all stages of procurement. It can also lead the cultural change. Show how much market knowledge you have and how you can help to get the department what it needs. Be involved with messaging the department or organization to help make the cultural change for your people.
- Where it makes sense, shift from long-term contracts to frameworks and outcome-based Statements of Work (SoWs): This may require more management and effort, but that will be outweighed by the benefits of success. Change from outputs to outcomes as a way of expressing your requirements, manage your KPIs based on what is needed now and be willing to engage with your suppliers to assess the best ones to use. Also be willing to work to change your suppliers if you are not getting that you need.
- Use the right skills for success: Recognize that category managers, supplier managers, or supplier relationship managers may not be enough. You may also need contract managers for larger projects.
- Price isn’t everything: While we may instinctively know this in our daily lives, procurement is still so often dominated by price. Value is the most important driver for supply chain. We need to ensure that when we undertake bid assessments that we truly understand where the value is. So many companies are now offering “as a service” options, moving us from capital purchases to ongoing operational costs. A proper assessment of what value that brings, including all aspects including business continuity and disaster recovery is required to ensure you get the right service.
Ultimately, if you do not align your suppliers for the digital transformational activity, you will always be playing catch up. Now is the time to get these contracts right for the future. With proper handling and support for procurement, you can improve costs, value, service levels and realize all the benefits of the business case. With a cross-transformational team to support the project, you can deliver digital transformation without project delays, diminished staff morale or capital budget over runs.
If an organization lacks procurement resources to support the transformation, then the benefits will never be realized; procurement must play a full part in the transformation and must be part of the team from the outset.
Gail Evans, director, Brightman