The Point

Note: This post by Kelly Barner originally appeared in the March 2012 PSD Group Procurement & Supply Chain Newsletter.

In this week's eSourcing Wiki-Wednesday excerpt on Seven Facets of Cost Reduction and Avoidance, compensation structures are brought into question as they incent procurement professionals to behave a certain way, 'Like all employees, a supply manager will engage in behaviors rewarded by the company. This will create a problem if cost avoidance or cost reduction efforts beyond hard savings do not count toward a supply manager’s compensation and performance.'

As organizational expectations of procurement increase, many practitioners are questioning the structure of their compensation plans. Traditionally, procurement professionals received a straight salary. If there was a bonus structure in place, the bonus was typically based on corporate performance against stated goals and qualitative individual performance rather than savings targets.

This week’s event pick was hosted by Sourcing Interests Group and sponsored by Ariba but the team from McDonald’s absolutely stole the show. They shared information so detailed that SIG was unable to share the slides from the webinar even with their own members. In an effort to respect their wish to contain the detailed information they shared within the live session, I will focus on their general recommendations regarding a successful category management program and how it is different than traditional strategic sourcing.

Below are my notes from last week’s webinar from The Executive Conversation called “Closing the CFO” by their Chairman and Co-founder Jim Melillo. The event was targeted to sales professionals who are trying to get more time with CFOs and then make the most of that time once they have gotten it. I think you’ll be amazed at how much procurement has in common with sales in this respect.

We are all familiar with the line from the "Jerry Maguire" movie - SHOW ME THE MONEY! In procurement we are often asked to SHOW ME THE SAVINGS! The blog of the week discusses just that which is why I selected it.

If you read (or listened to) our event update on Monday, you know one of the events I was looking at seemed to be a re-run of a CPO Agenda webinar run last month. “Strategic Sourcing – Quick Wins to Boost this Year’s Savings Total” by ISM and CapGemini was anything but a repeat. Different speakers, different format, different message – but every bit as worth attending.

This week’s BMP event pick, “Quick Wins to Boost This Year’s Savings Total” by CPO Agenda and CapGemini, was an absolute winner.

The event had an interesting format - four speakers, same topic: quick savings wins. While all of the speakers were qualified, two set themselves aside by taking on the harsh realities of trying to increase savings for the year with only a sort time left to go.

This week's Wiki-Wednesday topic is CAPEX (Capital Expenditures) v. OPEX (Operating Expenditures). Once you understand the difference between them, the next step is realizing the impact that distinction has on negotiated savings recognition.