Using a cross-functional team in a strategic sourcing exercise for a key commodity is the accepted and preferred way to go, many teams having delivered successful outcomes. However, it is no assurance of improved performance. But what causes a less than successful outcome? Elaine Porteous asks in this month’s SmartProcurement.
Cross-functional teams (CFTs), made up of experts with different technical and functional knowledge, collaborate to solve a sourcing problem. A core team usually consists of members from at least three functions brought together to develop a solution, with other co-opted people called in as required. Their main tasks are to prepare the scope of work, do supply market research, manage the tender process, set the performance criteria, select suppliers and establish contracts.
Supply managers must understand the purpose and composition of CFTs, and how best to manage them. The benefits are well-documented: a more robust outcome, transfer of skills and learnings, improved internal cooperation and relationships. The University of Michigan in the US, which regularly researches opinions on this topic, states the main benefit as “the ability to bring greater knowledge and skill together at one time.” So what causes a less than successful result?
Where does it go wrong?
According to the University of Michigan studies, CFTs are unsuccessful in these scenarios:
– The team has no real power or authority to make major decisions.
– The team has little insight into how it is performing over time.
– Managers outside the team attempt to control activities or influence team decisions.
– Certain members dominate team meetings or control team activities.
– Commitment of resources does not meet the team’s requirements.
Do any of these statements look familiar?
The team leader needs to take the time to educate and train the team on the sourcing process and internal purchasing procedures. It may be necessary to explain the rationale for undertaking this process at all. Members need to know about Total Cost of Ownership and key issues such as sustainability of suppliers, ethics, risk and compliance, confidentiality etc. Any supplier biases or conflicts of interest must be uncovered and dealt with before the process starts.
Team selection is critical. Team members should be stakeholders with a strong degree of commitment to the outcome. Owing to pressure of time, teams sometimes try to expedite the process by skipping steps. You often hear “we already know who the potential suppliers are” when they most definitely don’t. It is vital to walk through every step in the supply chain to make sure that all stakeholders’ needs are met.
Performing a due diligence on short-listed suppliers is painful but necessary and includes site visits. Face to face negotiations are often needed to discuss their approach, capabilities and past successes as well as to firm up pricing, delivery, contract terms, etc.
Five critical success factors
- The time availability of the key people on the team. This is one of the most important, and often overlooked, factors. Without strong commitment from top management, teams will struggle to keep to the project plan.
- Strong leadership and tight discipline to plan and manage the process.
- Members must participate willingly and have the support of their line manager.
- Committed stakeholders with a vested interest in the outcome. Stakeholders all have their own agendas, not always aligned with the team.
- Include a qualified and experienced subject matter expert.
It may sound obvious, but no team will succeed without the necessary resources to achieve its goals. Resources include the members, administrative team support, tools and a budget for expenses (research, travel, equipment, etc.).
The successful outcome of a sourcing project that has used a well-structured CFT produces a result that provides cost savings, value added services and a robust contract. In addition, organisational learning will increase as the technical experts work together and exchange knowledge and ideas. Communications will improve both internally and with the suppliers. Rewards for team members include exposure, career growth, public recognition and consideration for future assignments.
Executive management support must be visible and consistent. The sponsor must be knowledgeable, in a position of influence and ultimately held accountable for the team’s efforts. The sponsor should conduct regular status meetings to ensure progress and to address any concerns early in the life of a team.
The pitfalls are many and failure is possible. Attention to the five critical success factors will help ensure a successful outcome.
* The role of cross-functional teams in optimising commodity management will be discussed at the Smart Sourcing and Supply Management conference, part of the 2014 Smart Procurement World Conference and Expo in September.
Elaine Porteous is a business writer and commentator on supply chain issues and procurement issues. Contact her on email@example.com.