SMART STRATEGY SETTING DOES NOT REPLACE DECISIONS, IT EMPOWERS THEM
Project strategies like negotiation approaches should be derived from the category strategy, but in practice are often executed completely independently.
Digital solutions are still widely underutilized as an enabler when it comes to defining commodity or project strategies in procurement organisations.
Strategy setting is seen as a core responsibility of decision makers, however, traditional approaches fail to keep up with rising complexity and speed in modern procurement.
Using game theory, we manage complexity and provide recommendations as actionable advice.
There are 4 key issues to be solved
1. NO CLEAR ADVICE
Many existing strategy documents, in particular on the category level remain on a rather abstract level, both as they are done many months before implemented, yet also are manual and lack the ability to make more granular recommendations scalable.
2. STRATEGIES TOO STATIC
The category strategy is usually revised every 12 to 18 months, but the general conditions in procurement change much faster. Hence, project-level strategeies are often not in sync with commodity strategies which are not adapted to the current conditions, risks and challenges.
3. TOO LONG LEAD TIME
Due to the facts described before, methods employed in strategic procurement are also not static, but need to keep up to date with state-of-the-art methodology and change often. Classical strategy processes have way too long lead times to embed new methodologies.
Especially with large, global purchasing teams, there are often differences in buyer experience and thus in efficiency and effectiveness of negotiations. The consistent use of all available information and data is not always given.
STRATEGY ADVISORS OVERVIEW
Advises bilateral or multilateral strategy
Delivers a recommendation about contract length and type of assessment basis (per per use, flat fee, user-based, transaction based)
Consists of a strategy & homework advisor and a negotiation tactics advisor
Lever analyses are supported by a ZOPA tool
Contract extension or back to competition
Which KPIs do you need in the contract so that the supplier does not take advantage of you when the project conditions change
Generates an advice that is based on economies of sales AND degree of competition
HOW EACH ADVISOR WORKS
Right question and possible answers (poka yoke style), data from upstream process and guided expert evaluation
Mechanism connecting inputs and outputs based on TWS knowledge
(= game-theory-based decision matrix) and data trained ML-model
Implementable recommendation based on data and pattern recognition and still a tailored to the circumstances at hand. Ranked options with
suitability score indicating best fit.
Most common use cases for nnamu strategy advisors
Applicable across industries and company types
All categories, today more often used for direct materials
Projects large enough, yet with wide range from 100-500k to 10b
Companies using the nnamu strategy advisors achieve higher savings. In addition, purchasing is involved earlier in procurement decisions and can conduct better stakeholder management.