This blog has been written for Market Dojo by Procurement Insights’ Jon Hansen, ahead of our upcoming webinar Mapping success: Taking digital transformation from concept to realization. As the Editor and lead writer for the Procurement Insights Blog, Jon Hansen has written nearly 3,000 articles and papers; as well as five books on subjects as diverse as supply chain practice, public sector policy, emerging business trends and social media.
In preparing to moderate the February 6th panel discussion, Mapping success: Taking digital transformation from concept to realization, I spent time talking with one of the panellists – David Latten.
David is the Head of Global Indirect Procurement at Logitech.
I remember when Logitech started back in October 1981. The reason I remember is that it was approximately around the same time that I began my career in the high-tech industry, and I was very familiar with their products.
Back then, they had a great reputation that continues through to the present day. I am sure that their reputation is one of the reasons why they are one of the pioneers of the high-tech world that is not only still around but thriving.
As a result, and for many reasons, I was very interested in gaining a better understanding of their procurement automation strategy. After all, they are a tech company, and who better to ask about the use of technology to drive a procurement practice.
Inside, outside, inside procurement
Logitech’s procurement practice was originally an internal function within the finance department, which is the universal origin for procurement in general regardless of industry. This history is probably why many still consider procurement to be a cost centre instead of a revenue and profit source.
Before repatriating the strategic sourcing function in-house 4 short years ago, the intervening period saw the company outsource the procurement function to a third-party service provider. It is a notable period in the company’s procurement history because, like the experience of others, the outsourcing strategy – which cost half a million dollars annually, didn’t deliver the promised results.
Now one might think that bringing the process back in-house would be a welcome decision. After all, reclaiming full control of the process would seem like a good idea.
But like most organizations, the link between procurement’s efforts and the value it delivers to stakeholders across the enterprise is not always clear.
As David put it, at the time, procurement became an internal function again; the biggest challenge was the lack of appetite for doing it in-house.
Against this backdrop, and to demonstrate they could deliver “real value” to the enterprise as a whole, David and his small team had to implement a solution based on simplicity, efficiency and speed of execution. In short, and even though indirect spend accounted for a few hundred million dollars per year – a “paltry” sum compared to Logitech’s $1.3 billion direct spend, it accounted for 80 percent of the procurement process. The question initially was whether or not it was worth the effort.
Fortunately, David and his team did demonstrate the value in repatriating procurement, and in the process, are now setting their sites on expanding beyond strategic sourcing to becoming a “full-circle value provider” to the company.
A “results-first” approach
In explaining one of the key reasons for their success reintroducing and reinvigorating the appetite for an internal procurement function, David cited two important factors.
The first is their alignment with Market Dojo. According to David, the service provider shared the same entrepreneurial zeal and passion for the procurement process that he and his team did.
The second point is that while the low cost of entry provides a results-first approach in which the financial investment is minimal, it is the seamless implementation of the solution that met the simplicity, efficiency, and speed of execution requirement. As a result, David and his team were able to demonstrate how he and his team could deliver value consistently in a very short window of time.
In the February 6th, 2020 webinar Mapping success: Taking digital transformation from concept to realization, I will be talking with David and his lead partners from Market Dojo about digitally transforming your strategic sourcing practice. We will also discuss how you can demonstrate procurement’s value to key stakeholders both within and external to your organization.
Click here to reserve your seat today.