Transcript of a discussion on how companies are exploiting advances in procurement and finance services to produce new types of productivity benefits

1. CPO Expert Joanna Martinez Extolls the Virtues of
Redesigning Procurement for Strategic Business Agility
Transcript of a discussion on how companies are exploiting advances in procurement and
finance services to produce new types of productivity benefits.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: Tradeshift.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're
listening to BriefingsDirect.
Our next business innovation thought leadership discussion focuses on how
companies are exploiting technology advances in procurement and finance
services to produce new types of productivity benefits.
We'll now hear from a procurement expert on how companies can better
manage their finances and have tighter control over procurement processes
and their supply chain networks.
To learn more about how technology trends are driving innovation into invoicing and spend
management, please join me in welcoming Joanna Martinez, Founder at Supply Chain Advisors
and former Chief Procurement Officer at both Cushman & Wakefield and
AllianceBernstein. She's based in New York. Welcome, Joanna.
Joanna Martinez: Thank you, Dana. It's great to be here in the Big Apple.
Gardner: What's behind the need to redesign procurement for agility?
Martinez: I speak to a lot of chief procurement officers and procurement execs, and people are
caught up in this idea of, we’ve got to save money, we’ve got to save money. We have to deliver
five times the cost of our group, 10 times, whatever their metric is. They've
been focused on this, and their businesses have been focused on this, for a
long time.
The reality is that the world really is changing. It's been a 25-year run of
professional procurement and strategic sourcing focused on cost out, and
even the most brilliant of sourcing executives, at some point, is going to
encounter a well that's run dry.
Sometimes you work in a manufacturing company, where there is a constant influx of new
products. You can move from one to another, but those of us who have worked in the services
industries, in real estate, in other kinds of businesses where a tangible good isn't made and where
it's really a service, don't always have that influx. It's a real conundrum, a real problem out there.
Gardner
Martinez

2. I believe, though, that events and these changes are forcing the good, the smart procurement
people to think about ways they can be more agile, accept the disruption, and figure out a way to
continue to add value despite of it.
Gardner: So perhaps cost-out is still important, but innovation-in is even more important?
Changing metrics
Martinez: That's it, exactly. In fact, I have seen some things written lately. Accenture did a
piece on procurement, "The Future Procurement Organization of One," I think it was called.
They talked about the metrics changing, and that procurement is evolving into an organization
that's measured on the value it adds to the company's strategy.
People talk a lot about changing the conversation. I don't think it's necessarily changing the
conversation; it's adjusting the conversation. After you've
been reviewing your cost savings for the last five years for
your CFO, you don't walk in one day and say, "Now we're
going to talk about something else." No, you get smart about
it, you start to think about the other ways you're adding value, and you enhance the conversation
with those.
So, you don't go from a hundred to zero on the cost savings part of it. There's always going to be
some expectation, a value added in that piece, but you can show relatively quickly that there are
a whole lot of other places.
Gardner: While, it might be intimidating to some, it seems to me that there are many more tools
and technologies that have come to bear that the procurement professional can use. They have
many more arrows in their quiver, if they're interested in shooting them. What do you think are
some of the more important technological changes that benefit procurement?
Martinez: Well, there are all these services in the cloud. It's become a lot cheaper and a lot faster
to move to something new. For years, you’ve had a large IT community managing the disruption
of trying to put in a product that's integrated with every piece of data and servers.
It's not over, because lot of those legacy systems are there and have to be dealt with as they age.
But as new services are developed, people can learn about them and will figure out ways to bring
it to the company. They require a different kind of agility: It’s OPEX, not capital expense. There
is more transparency when service is being provided in the cloud. So some new procurement
skill sets are required.
I'm going to speak later tonight, and I have a picture of an automobile assembly line. It says,
"This is yesterday's robot." When you talk about robotics, people think of Ford Motor Company.
The reality is that robotics are being used in the insurance industry and in other industries that

3. are processing a lot of repetitive information. It is the robotics of technology. The procurement
organization knows these suppliers and sees what the rest of the world is doing. It's incumbent
upon procurement to start to bring that new knowledge to companies.
Gardner: Joanna, we also hear a lot of these days about business networks whereby moving
services and data to a cloud model, you can assimilate data that perhaps couldn't have been
brought to bear before. You can create partner relationships that are automated and then create
wholes greater than the sum of the parts. How do you come down on business networks as a
powerful tool for procurement?
Martinez: Procurement has to get over the “not invented here” syndrome. By the way, over the
years I have been as guilty of this is anyone else. You want to be in the center of things. You
want to be the one at the meeting with the suppliers coming in and the new product development
people at your company.
The procurement organization has to understand and make friends with the product development
and the revenue-generating side of the business. Then They have to turn 180 degrees and look to
the outside world, and understand how the supplier community can help to create those
networks, then move onto the next one, and then, be smart enough in the contracting, and in
things like the termination clauses to make sure that those networks can be decoupled when they
need to be.
Redesigning procurement
Gardner: Do you have any examples of organizations that have really jumped on the
bandwagon around redesigning procurement for agility? What was it like for them, and what did
they get out of it? It's always important to be able to go and show some metrics of success when
you're trying to reinvent something.
Martinez: If you're looking for an example, you’ve got Zara, the global retailing chain. Zara
changes their product constantly. They're known for their efficient supply chains. They have
some in-house manufacturing, and that in-house manufacturing gets done by them, but it's for the
basic product, the high volume, where lean manufacturing is important, because the variability is
low and the volume is high.
When you get to things like the trend of the minute, be it gold buttons, asymmetrical hemlines, or
something like that, they're using a network of third parties to do that. In those cases, the volume
is low, the variability is high, and so they create and disassemble these networks.
Whether financial services companies realize it or not, there's a lot of agility built into that. There
are some firms, some third parties, that a financial services firm will use to get those shareholder
reports out. They send them the monthly reports, and the companies have very high volume, very
excellent quality controls. Post offices are on site. They don't even truck it to the post office; the
post office is sitting right there, and the mailings go out.

4. When you need to do something, for example a special mailing on a particular fund or
shareholder meetings that might only be held once every couple of years, you find yourself in a
situation where those kinds of networks don't serve you very well, and you have to kind of
assemble and disassemble temporary networks.
Gardner: We hear a lot these days, with services organizations in particular, that finding labor
and skills is a big issue for them. It seems to me that when we look at some of the tools that
procurement is using, and the role that procurement is playing, that perhaps there is some more
synergy between procurement and human resources management than we have seen in the past.
Do you see that as a potential benefit when you're looking for agility and procurement, that they
should be working hand-in-hand, perhaps using some of the same platforms and methods of
procurement and human capital management (HCM)?
Martinez: HCM is an important organization for procurement to bond with. Often, in a
company, there's a lot of technology and human resources (HR) spend, and not a lot of
professional third parties on the use of that spend.
There consultants who can advise you on insurance policies, but they're not always using the best
tools to go out and find those providers. Sometimes, there are relationships, payments, rebates,
and that sort of thing that are in play that the HR community might not be aware of or asking
about.
In HR, legal, and some of the other parts of a company that often use services, there are
technology solutions that are coming in place. So, if you’ve got a procurement specialist working
with HR who knows a lot about recruiters and doing deals with recruiters, they had better be
learning how to do a deal with LinkedIn. They had better be able to understand that those
traditional service providers are not going to be needed any longer.
Procurement advice
Gardner: Last question. What advice would you give procurement professionals who are
interested in redesigning their procurement of agility? Maybe they haven’t begun that journey
fully. What would you advise them as important opening position steps or thinking?
Martinez: Two things. Number one, there's no reason for your organization to call you up one
day and say, "You can do this differently." You have to be self-motivated and you have to
recognize that the change has to occur, do-it-yourself. I was going to say to ask forgiveness not
permission, but you're not going to have to ask forgiveness, because you're going to find lots of
good things.
The other thing is that there are supply chains embedded all through organizations, even when no
one in the organization has heard the term “supply chain”.

5. Procurement organizations have to think about making sure that someone in their group
understands supply chain or understands that mentality of owning something from start to finish,
because as long as you're looking at discrete little pieces, you're not going to extract the
maximum value.
Gardner: So get to that strategic level as fast as you can.
Martinez: Absolutely.
Gardner: Well great. I'm afraid we'll have to leave it there. You've been listening to a
BriefingsDirect thought leadership podcast discussion on how companies are exploiting advances
in procurement and finance services to produce new types of productivity benefits. And we've
heard how technology innovations from new services, from such cloud suppliers as Tradeshift,
are translating into new business benefits.
So, please join me in thanking our guest. We've been here with Joanna Martinez, Founder at
Supply Chain Advisors.
Thank you, Joanna.
Martinez: Thank you, Dana. It was fun.
Gardner: And a big thank you too as well to our audience for joining this Tradeshift-sponsored
business innovation thought leadership discussion.
I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator. Thanks
again for listening, and do come back next time.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: Tradeshift
Transcript of a discussion on how companies are exploiting advances in procurement and
finance services to produce new types of productivity benefits. Copyright Interarbor Solutions,
LLC, 2005-2016. All rights reserved.
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