Not Too Much—Not Too Little: Fostering a “Goldilocks”  Procurement Strategy

This is an excerpt of the original article. It was written for the March-April 2015 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2015

Anyone who’s ever bought a house knows the realtor’s motto: Location, location,location. It’s the most important factor in determining the value of a property. Based on the press releases that come across my desk these days, supply chain’s motto is: Innovate,innovate, innovate. This issue includes approaches to inventory optimization, contract management with third party logistics providers and contract manufacturers, and the Goldilocks approach to supply management—an innovative concept aimed at keeping your procurement department from running too hot or too cold.

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Most of us know the story of Goldilocks and the Three Bears: Hungry from a long walk, a girl stumbles across a vacant cabin in the woods and helps herself to some porridge that is out cooling. The first bowl is too hot, the second is too cold, but the third is just right. Parents have long used this story to teach lessons about decision making to their children, and based on our work, we believe it holds wisdom for procurement organizations as well.

Procurement organizations have many levers that can drive improvement in the supply chain. The challenge is finding the right lever and knowing how much it should be applied so that the outcome is “just right” for the procurement organization, the business it supports, and the supply base.
When procurement struggles to find this “just right” amount for each situation, it can ultimately have negative consequences on supply chain stability, trade compliance, company financials, and internal business engagement. Procurement organizations need a balance in which they are challenging stakeholders and the supply base enough while not simply redistributing cost and risk.

This balance is not meant to be a “middle of the road” solution to make everyone happy or to reduce procurement’s influence, but rather it should be a thoughtful approach to initiatives that are sustainable for the long term. This concept of looking for this “just right” position for each of procurement’s key levers is what we call the Goldilocks Procurement Strategy, or GPS for short.

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