Introduction
Organizations – especially those in the new technology areas – have always focused on the magic mantra of 'Growth'. Part of this growth has been achieved through organic growth – increase in the number of products and service offerings, number of markets served, channels through which customers are served etc. Another route for growth has been mergers and acquisitions. In addition, rapid technological advancement, feisty competitors and demanding customers have forced organizations to be much more aggressive in the way they address their markets. The result – Increased complexity across the value chain!
Traditionally, company executives have focused on complexity issues that are 'customer-facing'. There are constant reviews of product and service configurations, brands and product lines, distribution channels and number of SKUs – with an objective of rationalizing these heads and optimizing the overall customer service model. However, these also drive complexity in 'non-customer facing' areas such as distribution, manufacturing and procurement. These have typically been given lower priorities in the past.
A recent survey of CPOs across industry groups has indicated that this is changing! As Figure 1 illustrates, 'complexity management in procurement' has become one of the top 5 annual objectives for CPOs as part of their savings delivery programs.
In fact, after procurement professionals exhaust traditional savings approaches viz., rate negotiations, volume consolidation, and even low cost country sourcing – complexity management becomes the one of the most important tools to drive significant savings. This paper shares GEP's perspective on how to manage complexity and drive savings through that in procurement. We illustrate this through a case study of the work done for a bio-technology major recently.