Improving a team's negotiating ability is the fastest way to transform procurement performance, according to a consultant.
Angus McIntosh, a former procurement VP at Mars, said by focusing on technology the profession risked forgeting about the power that negotiating strategically important spend categories can have on a business.
The procurement profession is “obsessing about technology and process” and forgeting about the catagories that really have the power due to their size or strategic importance, he added.
“More and more of the functional discussion in procurement is about the process and the technology of the source-to-pay process… I think that’s essential and necessary but I think it’s beginning to dominate the debate within procurement to an unhealthy extent,” he told SM.
He said the profession was starting to lose its ability to talk about the big categories, the impact they have on businesses and the need for expert negotiators that are trusted by the board.
“These are the categories that are going to have an impact and will get written up in the annual report as being the major ones that are driving the performance of the business,” he said.
McIntosh is currently associate director at Total Negotiation, where he is developing specialist procurement programmes for clients. He started his procurement career as a buyer for Mars, where he worked his way up to become procurement VP for Mars Petcare Europe. He has also served as global CPO for skincare firm Beiersdorf.
Speaking to SM, McIntosh said procurement was focusing a lot on repeat processes and process-driven purchases. “We’re forgeting a little bit those massively important purchasing decisions, either the one-offs or the big continuous categories, that really make or break the business.”
For example, during his time at Mars Petcare McIntosh and his procurement team realised early the business faced a shortage of supply for their main pet food ingredient, animal protein, because human food demand and environmental concerns increased. “We were able to put on the table a very big strategic challenge for our business which then turned into a major stream of activity to look at how we anticipate the future and develop alternatives,” he said.
“In my experience, it’s those big categories that open up the discussion with the board.”
McIntosh is not averse to the use of technology and automation, but says they should be used to free up human resources that can be ploughed back into big spend or strategic categories.
It is also wrong to think your procurement function is completely mature. McIntosh said he saved an “embarrassingly large amount of money” for a company that thought they were down to the bone by working with the CEO and board to reapproach suppliers with more assertive demands, “and to back that up with negotiations”.
“It’s too easy to make assumptions that your category’s mature and my challenge to you is: have you really applied the smartest negotiation and supply management techniques to test that?” he said.
Part of McIntosh’s focus now at Total Negotiation is to help firms and procurement departments integrate negotiation into their strategic vision. “Nobody’s really talking about how to really link your negotiating approach to your sourcing strategy, your goals and your KPIs… There’s a really big opportunity here.”
McIntosh’s top five negotiating tips:
1. Boost your team’s negotiation skills. “This is the single biggest and fastest path to improved results, driving your team’s motivation and building their credibility.”
2. Find the two or three “super strategic” categories fundamental to the competitiveness or operation of your business and become “the expert” on negotiating those categories.
3. Never assume the potential for savings or value creation in your big categories is exhausted. “If it looks that way then change something. Disrupt the current sourcing model, contract cycle or negotiation format.”
4. Don’t be afraid to create tension with your suppliers, even if they are strategic partners. “Tension creates focus, tests boundaries and forces people to think differently.”
5. When you’ve made a deal, make sure its value is delivered. “That means having the discipline to follow through and hold both sides to what was agreed.”