A large fashion retailer wanted to grow fast and the COO concluded that its systems were too confused and slow to achieve that growth. That’s because there was a mix of legacy IT systems and procedures in different departments that caused conflicts and slowed down decision making. It also meant the stores couldn’t deal with peaks in consumer demand. That can be fatal in the retail world.
The COO didn’t want to ditch all the legacy systems overnight and needed a managed transformation so that the business could focus on – and deliver – growth.
Instead of shifting talent from one part of the business to another and perhaps losing the focus they were after, specialists were brought in. They extended the life of the company’s mainframe, reduced complexity and streamlined processes such as batch processing so that peaks in demand could be managed.
What those examples show is that there are ways you can re-orientate your energies so that you can concentrate on strategic thinking and focus on achieving business objectives instead of merely keeping the lights on.
Explore more COO best practice case studies at TCS Connect.
A major supermarket chain recently made a major acquisition which grew its market share considerably, but also meant that its IT infrastructure became suddenly unwieldy and complex. Various legacy systems competed with one another and applications needed to be rationalised so that they could work across the organisation.
The team at the top – led by the COO – got together and asked a very simple question: what are we in business to achieve?
The answer was equally as simple: sell groceries at competitive prices through great customer service. The IT support to do all that was, frankly, a burden on the business. What was vital was the data the company got from its customers. As a result, the entire IT function was detached and given to external experts.
That made perfect financial as well as operating sense. The COO’s team could focus on the operations of the stores, including the entire supply-chain, pricing and promotions. Meanwhile the IT made the whole thing work.
The COO ensured that the IT delivered a consistent service and that processes were improved and standardised to promote efficiency.
Visit TCS Connect for more COO insight.
A Chief Operating Officer has to deliver an operating model that enables a company to do what it does best and also to grow and innovate to reach new markets before the competition does.
And they have to ensure that the right amount of effort – and cash – is being expended in the right areas.
To do that you need a broad perspective. You need to be able to ask important questions like: is your organisation flexible enough to compete and innovate?
Does it operate consistently so that it can produce more when demand is high and slow down when demand falls?
To achieve all that you need a complete overview of how your organisation is performing so you can see whether your operating model is fragmented or inefficient in particular markets.
It’s vital that COO’s ask simple questions – such as… are we involved in too many operations that serve only to distract us? In the next few posts we’ll be considering the best practice COOs can learn from as they seek to grow their operations.
Visit TCS Connect for more COO case studies.
Here’s another case of how CPOs can structure the right relationship.
One global provider to the cellular and broadband communications market for instance decided that to stay at the leading edge of its market the company needed to develop a fixed station for communicating with phones. But developing it internally would slow the company down so, the CPO’s team brought in a specialist team, created a demanding contract in terms of cost, time frames and quality. They kept a close eye on the project. As a result, product development lead-time was cut considerably and the company is now ready to compete in the 4G market.
Our conclusion: CPO’s that buy the solution best suited for their business and get it working before their competitors do will deliver growth.
Let’s face it – procurement has become a high-pressure profession. You have to stay true to your business objectives, and ensure that your priorities are paramount rather than those of any of your vendors.
CPO are, increasingly, insisting on contracts that specify levels of cost savings, or even transferring the ownership of risk by getting the partner company to underwrite it themselves. And, it’s even better if your partner has greater clout when it comes to negotiating third-party costs. It all helps.
To learn more about CPO insights, visit TCS Connect.
The Chief Procurement Officer’s role is about dealing with the relationship between what a business needs and the external companies who supply those needs.
One CPO in a large chemical company had to make hard choices when the board decided to re-vamp its global supply chain. Rather than procure a range of different specialists and technologies and then knit them together, the CPO contracted with one, highly experienced specialist to deploy sophisticated mathematical models that would take a range of issues into account, from safety and security to sustainability. The CPO didn’t have to be an expert in those models; only to understand their objectives, provide the contractual framework that guaranteed success at the right price, and then manage the relationship with the supplier to ensure that what was promised got done.
That’s strategic decision making.
For more insight on CPO strategy visit TCS Connect.
Beware of signing multiyear contracts with companies that ultimately have no staying power. That’s just one of the pitfalls CPOs face as they plot a path to growth.
Sourcing products and services has become a global game, which means uncertainty about the credibility and integrity of some providers. Vetting the transparency of vendor processes, the metrics they employ to measure performance, and the willingness of the vendor to guarantee performance is a growing part of your job.
You must also assess the credibility of the vendor’s past performance, as well as its financial stability.
There are other pitfalls for CPOs to avoid detailed on TCS Connect.
Procurement is about ensuring your organisation has the right skills and capabilities to deal with ongoing changing business needs – in business, in the market and technology. We’ve been looking at the various ways innovative companies are adapting. Here is another case study.
A large car-hire business with a global reach took a long hard look at its IT infrastructure and applications not so long ago and found that they weren’t flexible enough to enable them to get into new markets and make the most of new opportunities… let alone serve their existing customer base. What had happened was that an array of legacy systems had clogged up the company and the vendors of those systems actually had power over the company.
So, it was decided to re-engineer them all into a service-orientated set of applications. What the CPO’s team did was to focus on actually delivering the ability to transform the business through its customer data.
The skills and technology were brought in to transform a rigid, hierarchical approach to databases to a relational one. Strict contracts gave the company total ownership and control over the data as well as real-time access. Costs were cut, and the data’s value as an asset increased tremendously.
That’s a good example of how procurement professionals have to develop new skills and capabilities so that they can map the service delivery for new operating models to the new processes, taking into account handoffs and possible risks, of course. It’s clear that professionals should be focusing on integrating traditional methods of procurement with today’s new operating models.
To learn more about CPO innovation visit TCS Connect.
Anyone can buy the lowest cost product or service. The assertive CPO must holistically view the project the purchase is to support. If a vendor is selected solely on price, how committed will that vendor be?
Ask your vendor:
- How much risk is built into the contract?
- Can you provide ideas to help solve our problems?
- How can we use your intimate sector knowledge to simplify and innovate our processes?
- How can we relate your fee structure to cost, quality, and sustainable service delivery?
Demanding that vendors become active partners in your value chain—even if the base cost rises slightly—can result in better-structured relationships and more value, commitment, and innovation.
Learn more about CPO pitfalls to avoid at TCS Connect.
We’ve been looking at some of the proven tactics and pitfalls that CPOs should avoid as they plot a path to growth.
CPOs face increasingly complex sourcing relationships and must become orchestrators of an entire ecosystem, accounting for many more factors when figuring the total cost of goods.
Many CPOs operate in a silo around facilities, professional services, and some areas of IT, with limited control in strategic categories of business spending, such as advertising and marketing. That leaves the door open for maverick spending. Now is the time to close it.
The CPO can and should expand their authority across the value chain and flex their muscle in the boardroom, as tight integration and spend visibility become basic operating requirements. Fewer than 5 percent of CPOs in global organizations sit on the operating boards of their companies. Less than 60 percent of procurement functions comprehensively control third-party spending. This statistic needs to change if the return to growth is to happen with any discipline. Now is the time to assert your role as a strategic partner of the other CXOs.
You may not be able to directly sign off on all spending, but you can set preferred supplier policies and implement locked-down accounts payable controls and other techniques to control maverick spending. That preferred vendor should also be evaluated first on quality. Interview the staff of key vendors, question their methodologies, and cross-reference qualitative points between competitors—before soliciting prices.
Learn more about CPO pitfalls at TCS Connect.
We’ve been looking at how CIOs need to look beyond technology and to be strategists who understand business fundamentals.
It doesn’t matter what sector you’re in – IT has to enable – if it doesn’t – change it. One of the world’s leading chemical companies brought in TCS to come up with an end-to-end solution to its complex supply chain needs – needs that covered everything from efficiency, costs and dealing with stringent security regulations worldwide.
The focus was on moving to next-generation solutions literally for a generation. They created a system that would be in place for years ahead, and was focused on safety as well as optimising efficiencies and revenues. The CIO made a series of innovative strategic decisions.
To deliver value and growth to your business your IT has to have an organisation-wide perspective and a transparent one that delivers power where you need it, and predictability in terms of costs.
The point is to be perfectly aligned to the operating model that’s fit-for- YOUR-purpose now and into the future.
Having IT that gives you that perspective and control is vital.
Learn more about CIO strategies at TCS Connect.