Q&A: high-profile former CPO says social media is key to procurement’s development.

Key Takeaways

1) Social media tools have a key role to play in improving supply chain visibility, which in turn can feed into S&OP decisions. 2) These same tools should feed information back to key suppliers also, creating a more

responsive, agile channel of communication. 3) Social media can offer closer alignment between customer and supplier, influencing product cycles. 4) Giving the right technology tools to a developing team can improve training, responsiveness and help the right individuals thrive.

For many, social media means Facebook, Twitter, Pinterest and a few sites beyond that. It’s possible to point to events of global significance like the Arab Spring, a movement that made heavy use of social media for its organisation, as pivotal moments when even the more senior generation of executives took notice of the power of the tweet.

Still, the question of ROI and the difficulty in understanding how various well-known tools might fit in, in practical terms, with the complex world of supplier relationships and stakeholder alignment present problems rather than solutions, especially for the technologically averse.

Dennis Omanoff, president at Omanoff Consulting, formerly CPO of McAfee and SVP, supply chain and procurement at Seagate, takes the view that this is an opportunity that procurement can’t miss out on.

Why should procurement executives be investing time in social media?

DO: For me it breaks down into aim and drive: customer loyalty, ROA and

ROI and employee engagement – and there are factors that correlate between those.

When you think about the way procurement used to, and perhaps still does in some cases, deal with suppliers: a business might send over a PO number and suppliers would confirm. Then circumstances might change and the supplier might be left with a load of stock on their hands or they might not have the stretch to meet the demand. There’s potential for a bullwhip effect; very small schedule changes could have big effects on suppliers especially when multi-sourced.

Mature Sales and Operations Planning (S&OP) is all about managing all these changes and making alignments so that at each point you have visibility of what decisions have been made and what that impacts. That way, if you’re a supplier and you’re looking at your own capacity and your inventory and you’re making decisions on what to make, you can share that trade-off with a customer so the decision can be a collaborative one.

S&OP has evolved to become siloed – those are part of a huge opportunity. Most procurement departments can see the opportunity but can’t capture it in topside revenue. Utilising social media can help organisations achieve breakthrough performance by breaking through those silos.

But why is social media the tool for that and how can it be relied on?

DO: It’s about using data in motion rather than sequentially, and that’s actually a huge change. Especially if you’re able to align financial plans, other suppliers’ capacity and customer inventory, you can use that communication and collaboration to see things from and end-to-end view.

Look at hard drives and the flooding in Thailand: businesses lost revenues because they didn’t know where their parts were and what they had in the system, so that though a particular supplier may have been disrupted, the larger problem was that there were loads of parts in the system and they just weren’t aware of those and what their options were. A heightened ’sense and respond’ network would have made a significant and material difference.

How do you trace the benefit and combat that old problem of ROI?

DO: In terms of ROI, when you consider SaaS (softward as a service), it wasn’t a huge upfront investment. We had a license per user so if we hadn’t used it, we wouldn’t have paid for it.

If you see the existence of these social media tools you realise that it can affect market capitalisation if you adapt to a more modern approach and can use every asset to generate revenue and customer loyalty.

Suppliers get tired of getting jerked around – they can get frustrated, especially if they’re in a VMI situation. Often if information is available sooner, they can produce what businesses need and create greater revenues without the long lead times. There is something in it for them and if they’re able to see into inventory systems without having to react to plans being pushed to them from buyers, it opens doors to more controlled inventories, avoiding risk, creating innovation.

A lot of our content was delivered digitally and you probably come across that space everyday and you’ll know how quick the feedback is. If you think about people reacting to a product, you’ll see how different customer reactions are when they respond online, compared to the relatively slow process of phoning customer support.

Could it contribute to product lifecycle times? That’s one thread to it.

What kind of impact can social media have on alignment?

DO: Alignment is like the spinning plates acts that used to be in circuses, it is incredibly difficult to gain alignment across an entire organisation as it means something different to different people. People don’t understand things in the same way, they don’t learn in the same way.

We found that you can reach them more in a social media setting and that was something we used to create a space in the cloud, whether through Twitter, blogs, or less-universal collaborative tools to try and reach people and give them a chance to reach us and converse on a particular project.

Abstinence is not a fair rationale and its fatal to transformations as it results in rejection of strategy. We need to align goals and objectives (specific, measurable, attainable, relevant to the business, and timely with clear priorities,) roles and responsibilities - but then we’re able to use social media to deploy our process and make sure everyone involved has a way of contributing and communicating.

The potential for engaging employees is immense – you can really up the performance level, think about a work force that people are; Say, Stay and Strive! (Saying great things about the company and their management, striving to achieve their personal best and voting with their feet by staying.)

If you’re talking about driving value, that ability to respond to the customer and particularly to react to time-sensitive demand, which is often where there’s highest profitability and opportunity to create loyalty.

Where I’ve worked, we created the highest performing team and the highest engagement – part of that was giving them the tools to be responsive and to look at the processes. On the other side, we’re able to see who has engaged and where we had opportunity to refine and reach out.

Recognition is also a positive, both by other functions and the recognition of our own team members.

What are the prospects for CPOs who don’t choose to adopt this technology?

DO: I’d advise CPOs not to get too wedded to old ideas of technology – huge shifts and disruptions are occurring. CPOs have to think about those disruptive changes and be conscious that what may have seemed like a crazy idea before isn’t now. Some companies are not built to allow innovation, but a business that can leverage technology to get an end-to- end view of its value chain and focus on adapting to changes there is going to have a huge competitive advantage.