In response to Sourcing Innovation’s Michael Lamoureaux request, I posted last week about the different skill sets required as sourcing for single internal customer contracts progressed through a sourcing maturity model. And I promised a second post on a contrasting topic: the skills required for enterprise-wide sourcing in the future.

Well, my good friends, here’s that post…

Strategic sourcing has shown signs of maturity. Best practices have been implemented and stabilized at the Fortune 100 companies. And the rest of the purchasing world is beginning to catch up.

Today’s strategic sourcing decisions are made by sourcing teams who are led by purchasing representatives. The more complex strategic sourcing decisions usually involve a total cost of ownership (TCO) analysis or, at the very least, a multiple-selection-criteria analysis using a weighted average supplier scorecard. It is not uncommon for this analysis to be done within the context of an eSourcing solution.

So project management and analysis, and spreadsheet skills are indispensable skills for successful sourcing today.

Both of the aforementioned analysis methods consider the differences in cost, quality, delivery reliability, and service of the competing suppliers. And this pretty much works well and has worked well, positioning today’s strategic sourcing on somewhat of a plateau.

But I believe that the sourcing world is ready to get to another level. In the not-too-distant future, we’re going to look back at today’s supplier selection methodology and consider it archaic.

The purpose of putting together a TCO analysis or a weighted average supplier scorecard is to give some acknowledgment of the potential impact of differences in suppliers on the buying organization. But anyone that has ever negotiated selection criteria or relative weights with an internal customer or commodity team knows that each team member’s own personal speculation of the results greatly impacts the internal negotiation.

In the future, I foresee this speculative bickering to be replaced by the widespread watching of simulations of various scenarios associated with the various supplier selection opportunities. The sourcing team will see the risks and the impact on the buying organization if those risks come to fruition. These simulations will be delivered through technologies that factor in all of the variables associated with a supplier selection: supply chain logistics, material availability, supplier financial health, competition in the marketplace, etc.

The simulations will show the impact and probabilities of potential scenarios, large and small, such as:

  • Materials getting caught in a customs delay.
  • A supplier having a major quality issue (think Sony laptop batteries)
  • A supplier declaring bankruptcy
  • Chronic billing errors
  • Erratic lead times
  • And every situation you can imagine!

These simulations will give the entire sourcing team a more comprehensive, tangible understanding of the factors influencing the decision.

So does that mean that purchasing professionals will need fewer skills in the future?

H*ck no!

The implication for purchasing professionals is that they have to be “smarter” than the simulators. Look, you can have a computer pick your suppliers for you and just quit your job. But, in jobs where levels of uncertainty are high, a human has to make decisions.

To be “smarter” than the simulation means understanding what factors the simulation considers and how to evaluate those factors to arrive at the optimal decision.

What new and different additional skills will this require of purchasing professionals? Here are just a few…

  • Skills in quantitative analysis, with an understanding of statistical probabilities, decision trees, etc.
  • Knowledge of macro-and microeconomics
  • The analytical ability to quantify the total cost of the supplier relationship, not just the total cost of ownership

Before the world gets to this new plateau of sourcing, there’s still a lot of “current-style” sourcing to be done with the comprehensive blend of skills that are in demand today for the successful execution of a sourcing strategy and where you may get these from NLPA:

Analysis and spreadsheets

  1. Leveraging SWOT Analysis for Procurement Strategies
  2. Excel Basics for Buyers
  3. Microsoft Excel for Purchasing Professionals
  4. Contract law

Project Management

  1. Professional Procurement Project Management 

Purchasing Best Practices

  1. 14 Procurement Best Practices
  2. Expert Procurement Operations Management

Sourcing

  1. Executing a Global Sourcing Strategy 
  2. Sourcing Intelligence
  3. Sourcing Tips
  4. Sole Sourcing
  5. Outsourcing Procurement: Pros & Cons
  6. Executing a Global Sourcing Strategy
  7. Make Sourcing Your Competitive Advantage
  8. Creative Negotiation for Buyers
  9. Championship-Caliber Negotiation Preparation

Negotiation

  1. 7 Steps for Negotiating Optional Procurements
  2. 8 Bad Negotiation Assumptions
  3. Championship-Caliber Negotiation Preparation
  4. Creative Negotiation for Buyers
  5. Incorporating Value-Driven Procurement Into Negotiations
  6. Making the Right Negotiation First Impression
  7. Negotiation Checklist
  8. Negotiation No-No’s
  9. Powerful Negotiation for Successful Buying

I want to close by thanking Michael for the idea of coordinating this effort. He has helped inject purchasing intelligence into the blogosphere and has inspired others to do the same.

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