Ahead of his appearance at the 2018 Americas Congress, Tim Cronin, VP and CPO at Florida Blue, shares how he is changing and reaping the rewards of challenging traditional procurement and sourcing processes.
Procurement Leaders (PL): Why does procurement need to be looking beyond its conventional approaches?
Tim Cronin (TC): Procurement must look beyond its traditional processes and setup if it wants to stay in step with the rest of the business, which is evolving rapidly.
In the health insurance industry, there has been a lot of changes and new pressures over the past five years. It used to be a case of building and maintaining relationships between insurance companies, healthcare members, and hospitals or healthcare providers. Now we need to think a bit differently; suppliers are now directly impacting member care and so supplier relationship management is more important than ever before. Traditional insurance companies need to reposition themselves in the marketplace and partner more effectively with members, providers, and their suppliers.
Florida Blue is made up of several different business entities, some of which are around 175 years old and are stable, while some are new, unstable and evolving rapidly. This means for us, we need to balance factors of compliance and risk that are dominant in the healthcare sector with the need to be always on the lookout for new ways of sourcing, which can meet the needs of the business as it changes and evolves.
PL: How have you challenged the conventional sourcing model at Florida Blue?
TC: It all starts with people. The first challenge we have is to get business stakeholders to not regard procurement as a roadblock, hurdle or process that they simply have to go through.
Instead, we need to show we can act as consultants to the challenges the business may face in the future.
At Florida Blue, we focused on training existing procurement executives and hiring new people. We have recruited business experts from non-procurement roles and from outside the healthcare industry into the team, and have found these people are able to bring different perspectives to those we already had in place. As such, we have been able to push the traditional boundaries of procurement.
Procurement now has more direct accountability and category responsibility, and this is all because someone didn’t say no to new opportunities that fall outside of the function’s remit. If there is a project that adds value enterprise to the business, we have to make sure we are involved in it.
It all starts with the people, and then processes and technology follow.
PL: What is the Sourcing Business Model theory and how have you implemented it into your business?
TC: The Sourcing Business Model (SBM) theory is simple. Most supplier segmentation strategies start by looking at the organisations the business has the highest spend with, and aims to gain power in negotiations to get the best deal.
SBM looks beyond attributes of power and spend. It looks at things like aligning with suppliers and trying to find the best business outcomes that can have more of an impact in the long run.
SBM has become the cornerstone of our sourcing strategy at Florida Blue. It has challenged us to take a different approach to how we view the supply base and how we set up contracts. It has also helped us segment our suppliers in a way that makes sense to both the procurement team and the wider business. It’s not just a procurement tool but also a business tool.
PL: What type of technology have you introduced to support this model?
TC: The great thing about SBM is that we have been able to adapt it to fit our business and the industry we operate in. As part of this, we’ve built a tool that sits on top of our enterprise resource planning system and integrates SBM into our processes. It consists of a heatmap made up of 20 questions covering different attributes, which can be added to over time. The beauty of this model is that it is simple, which means the technology is also simple.
PL: The theme of the 2018 Americas Congress is ’innovation in the age of accelerated performance’. How do you think procurement can be more innovative?
TC: My view on innovation and procurement is twofold. I believe there has been very little true innovation within the function to date. While businesses as a whole have become much more innovative, and procurement has, to some extent, followed, there is much more the function can do.
But, my other view is that, from an operational perspective, there’s a lot of basic procurement processes that aren’t currently as efficient as they could and should be. So, while we want to look to innovate, there’s a lot of process improvements to be done on the basics first.
PL: What lessons are you hoping to take away from the Congress?
TC: It’s great to collaborate with likeminded procurement professionals at these events, as it’s a chance to hear about new processes other companies are doing that we can potentially implement into our own business. Through networking and building relationships at these events, it also means when a challenge arises down the line, we have a community of people to connect with and help each other overcome the challenge.
Tim Cronin, VP and CPO at Florida Blue, will be speaking with Kate Vitasek, faculty member of graduate and executive education at University of Tennessee and creator of the Sourcing Business Model (SBM) theory, about how you can challenge conventional procurement thinking at the Americas Congress 2018 in March
To find out more about Procurement Leaders Americas Congress 2018 click here
This article is a piece of independent writing by a member of Procurement Leaders’ content team.