How to achieve the perfect work/life balance for a productive 2015

Gordon Donovan takes the opportunity to look back at 2014, and look forward to 2015 both in terms of what’s happening in procurement as well as some new year’s resolutions to consider for 2015.

Looking forward to 2015

 

What happened in 2014

Google has just released its year in search 2014. We searched for hope, fear, to understand, to be inspired, to get cold and wet, and to remember.

Hudson has just released its workforce facts in 2014 for Australia and New Zealand.

Key numbers are:

  • 11.6 million workers in Australia
  • 45.9 v 54.1 ratio of women to men in the workforce
  • $13.1 million is the highest salary paid
  • And Barbie has joined LinkedIn…

Elliot Epstein has shared his best and worst sales stories for 2014. Here are the best and astonishly worst sales stories that have wafted over his desk this year.

They are all verified, true and names are only withheld to protect the guilty. The Darwin awards section is both funny and scary…

On the subject of the Darwin awards, they have announced the shortlist for us all to vote on. Some of these (if not all) will make you shake your head.

Things to think about in 2015

Procurious is a social media platform that’s all about being connected,(get connected, get ahead anyone!) being connected can also mean collaboratring with others over projects or even just sharing connections or knowledge. So what makes us the best at colloboration and connecting? And what are we going to do differenlty next year?

To me its an interesting article about who and why we connect and how do we get better;

To summarise; Its all about people.

  • It’s about the people who are trying to get from ‘here’ to ‘there’, and knowing; people who also know that you know someone well that can help them do it faster.
  • Understanding what they want, need & value. And respecting them for their perspectives, views and beliefs, especially when they differ from your own.
  • Its also always about trust – the trust that each person has, to know that you have best interests at heart; that the people you put in their path have a common interest & alignment and that they are also trustworthy.

So if it’s all about people we need to consider how we can make a huge difference in our life and in the lives of the people you care about, both professionally and personally?

This was quite an inspiring blog I read by Jeff Haden. His 8 things we can do are;

  • I will appreciate the under-appreciated.
  • I will answer the unasked question.
  • I will not wait.
  • I will give latitude instead of direction.
  • I will stop and smell my roses.
  • I will look below the surface.
  • I will ensure love is always a verb.
  • I will be myself.

How do we balance time in the best way? You may have seen this article doing the rounds on linked in among other places. In our search to be more efficient with our time and also to have the work life balance.

Here are the 5 tips with the full article.

1)     To-do lists are evil. Schedule everything

2)     Assume you’re going home at 5:30, then plan your day backwards

3)     Make a plan for the entire week

4)     Do very few things, but be awesome at them

5)     Do less shallow work — focus on the deep stuff

It’s something that I intend to put into practice (when I have the time…)

One of the things we talk about in our training is the need to always be processing information, a colleague of mine tweeted this article which I thought was excellent, it also has the added attraction of referencing star wars so it makes it a winner for me (roll on December 2015) Whilst it presents it as a sales forum it is directly relevant to us in procurement for many reasons.

  • The skill of being a Waiting Room Jedi is to transform a series of waiting room habits—checking email, posting on Facebook, and flipping through magazines—into a deliberate process of exploration and discovery.
  • More than anything else, being a Waiting Room Jedi is about being [pro] curious. The more genuinely [pro] curious you are, the more you learn, and the more you learn, the more likely you’ll be able to make connections with your client.

Finally to look into the future top minds give their predictions on what we will see in 2015:

This Year, We’ll All Get Raises

More Companies Will Fire Customers

Employees Will Finally Gain the Upper Hand

Wearable Tech Will Lead to a Better You

More Companies Will Act Like Startups

Content Will Be Saved — One Micropayment at a Time

 

Category approach, simply tactical excellence…

There is no single accepted global name or branding for what we are discussing here. It is category management, the sourcing process, the purchasing wheel, supply management or sourcing material group management.

The philosophies of different companies and their purchasing departments have led to different definitions. To avoid confusion, I will use the term category approach to describe an end-to-end sourcing process. As I will highlight in this article intent, the process has a wider approach, taking into account project, workload, performance and compliance aspects.

Bees working together

Globalization intensifies market competition. Political regulations apply more than ever. Supply chains and supply markets are in movement and need to be more flexible and scalable than ever to quickly adapt to demands and product lifecycles. CFO´s and shareholders require sustainable contributions from procurement departments and accuracy in forecasts regarding cost and volumes. Whether decentralized, centralized or center-led, many purchasing organizations began some time ago to evolve as they identified the need to invest resources in managing this complexity, in proportion to spend and material groups with more strategic implications.

With the specific dedication of resources to support supply decisions, buyers were shifting from a traditional approach (huge effort put into negotiation but less on preparation and implementation) to an effective approach (intensive preparation and implementation with much less negotiation, supported by strategies and tools that create the right competitive atmosphere). This way of working with dedicated resources began to foster the category approach.

At the same time technologies were accelerating: at the beginning of the 90´s with the explosion of ERP´s and then since the mid-late 90´s the large battery of requests for quotation tools (RFQ or RFx), vendor portals, contract databases, evaluation tools, e-procurement tools (differentiating buying channels) and supplier relationship managers has risen. By ensuring robust and specific process steps, the tools created savings however, in many cases they were not aligned with a comprehensive end-to-end category approach that would meet overall expectations.

We need to assess the true potential of the category approach, ensuring that procurement departments prove their value contribution towards their organization and P&L, and meet these expectations.

Diagnosing expectations 

Expectations with regard to procurement are of both internal and external nature. Internally, stakeholders have diverse expectations depending on their relationship with procurement. Research & development, quality, marketing or IT know that at least for the purposes of segregating duties, they have to work with procurement. And they expect and deserve an honest delivery without hidden agendas. Finance wants procurement to deliver on savings expectations and the audit and compliance teams expect that governance and sourcing processes are effective (do the right things) and efficient (do things right). Supply markets increase their expectations regarding procurement when these relationships, and the businesses themselves, mature.

By assessing the company´s position regarding the key process category approach excellence, executives can determine the type of expectation-fulfillment that needs to be improved by exploring questions like:

Do you have a description of the category approach path that shows stakeholders the End-to-End Sourcing process? 

Marketing uses new product introduction processes with milestones in order to bring all people concerned on board and provide them with all relevant information for keeping timelines and making a launch a success. Only if awareness of the complete sourcing process is embedded in the organization, can you hold a meaningful dialogue with senior stakeholders.

Are you persuasively closing the loop between expectations and deliveries? 

Say what you do and do what you say. Procurement professionals cannot work isolated from the other departments. Staff and skills requirements have to be adapted and professionalism in all procurement layers has to be widely known and sustained by adequate system support.

Is the company making the best use of the procurement team? 

A consumer printer producer faces product lifecycles of less than 15 months and organizes a team to increase customer experience for the following launches. Only a carefully designed dynamic resource allocation plan can help team-leads to identify which resources, at which steps, and for how long, can be released without jeopardizing the previously pledged deliverables.

How are you making sure that the expected process steps are completed? 

In times of high workloads and time pressure, it is easy for individuals involved in procurement to make shortcuts to the sourcing process (damaging credibility that was acquired at great expense). In some cases, tool usage (RFx or contract management) is low or nonexistent. In other cases, rigid sourcing process methodology is driven forward for categories that, due to their internal maturity or low complexity, just do not justify the workload your buyer is investing.

To what extent can you anticipate deviations in the delivery of savings due to sourcing process constraints? 

Credibility is established by meeting the company’s expectations in the appropriate way and selling them adequately. It does not help the company to ignore disruptions and delays. Only appropriate advanced notice and the setting up of a remediation plan can prevent disappointment.

Shaping the Category approach excellence excellence 

To maximize the potential of procurement departments, only a few companies that I know have successfully used an approach to devise the foundations of procurement category management. This simple but effective framework meets expectations, captures value contributions better and facilitates a faster decision-making process.

Following this approach, the company first predefines all categories and specifies project initiatives they will cover in the short and medium term. Next they link accurate process steps to each sub-category and initiative. Then, supported by a practical tool, the company can track project progress, monetary volumes and savings, compliance to the process, performance and resource workload.

Step 1: Capture the total picture 

I do not mean to capture the total spend. The total spend, depending on the maturity of your PO compliance, simply cannot be correctly ascertained. The monitored amounts on the budget are real, but a purely financial view cannot tell you the necessary details the market would need to provide these goods or services.

What we propose is a practical application recording the expenses of all categories that are actively influenced by procurement. Spend that is actively managed is spend that you have been negotiating or you are going to negotiate for the first time. It is the spend that procurement could clearly footprint (by using RFx, bidding, e-auction or competitive negotiation). You can also add all specific initiatives you have in your pipeline. A simple tool will support follow up and will bring reporting to a higher financial level.

Step 2: Predefinition of process steps for each sub-category 

A source to pay (S2P) or source to contract process (S2C) has sub-process steps and related tasks that for each type of spend and supply risk should vary, depending on supplier base, availability, company or supply market strengths.

You can define for each sub-category which process steps you will apply. Then you can make them visible and discuss them with your stakeholders.

In many companies, excellent sourcing toolkits and buyer guides have been developed. But if these are not linked specifically to each of the process steps upfront then you are not capitalizing on their full value.

When performed every year, this exercise will give you a more differentiated communication approach to each of the stakeholders, including those in finance and audit. It will also allow you to gain an overview on resource planning. You will be better prepared for dialogues around top-down targets and bottom-up expectations.

Step 3: Follow up and tracking 

An essential part of a successful category approach excellence, that moves money “from the paper to the pocket”, is the team, and their performance depends on the category project. Placing trust in people does not exclude monitoring and systematic follow up and the task of category management is mandatory for team leads. Too often the procurement department is managed in a reactive manner based on the escalations of stakeholders, rather than being proactively managed.

In order to enable managers to evaluate outcomes and coach their procurement staff, tool support is needed! Consistent inputs and functional information flow are required. One way to reduce instinctive resistance is to provide a tool that is user-friendly and that provides benefits such as reducing the rising preoccupation with compliance within procurement.

Additional benefits would include reporting capabilities for the status for all ongoing initiatives and team dimensioning capabilities.

Conclusion 

Sourcing departments need more than ever to meet expectations regarding their organization and prove their value contribution to the profit and loss statement (P&L). The category approach as TACTICAL excellence is the basic prerequisite for the successful improvement of a company’s existing sourcing process.

By applying a rigorous process and project approach with the support of a tool, sourcing professionals can gain credibility and improve their value contribution.

Very often you will need external process support to redesign existing ways of working. Additional benefits are consolidation of all categories and initiatives in one view, proper resource allocation, facilitating managers with follow up and performance measurement and supporting compliance requirements.

Category approach, simply a TACTICAL excellence, has still a real potential!

Job survival skills : get a grip on the numbers

There is fierce competition for the most interesting and challenging roles in procurement. Role content is constantly changing; procurement specialists and sourcing managers need to be more analytical and sharpen their finance skills. 

Finance within procurement

Only being able to slice-and-dice spend data will not be enough.  Managers will expect you to be able to do a should-cost-analysis, explain the implications of fixed- and variable costing and analyse financial ratios.

Fluctuations in commodity prices and upward pressure on day-to-day costs mean that you have to be on top of market and commodity price movements, technology and other innovations affecting the industry or field you work in.

Finance within Procurement 

Procurement management jobs are emerging that are really finance jobs in disguise.  Here’s an highly-paid opening posted by a global leader in industrial chemicals:

“We currently have an exciting opportunity for a Procurement Finance Lead. This individual will partner with the Global Procurement Lead to develop sourcing strategies, improve quality of supplies and services, and deliver economic efficiency.

Goldman Sachs recently advertised a senior procurement role where the main tasks were to keep up-to-date with emerging business, economic, and market trends. The successful applicant must have strong research skills,  pay attention to detail, take initiative to broaden his/her knowledge and demonstrate appropriate financial/analytical skills.

Nice work if you can get it! Employers like these look for evidence that a candidate can focus on profitability and cash flow and not just manage down current costs.

Supply Market Analysis

There is so much data available on-line with a few clicks.  However, this is not usable information.

Supply market analysis is hard, but rewarding work. An effective supply market analysis for a product or service starts with an overview of the global market and industry trends. Applying it to a category plan or a sourcing event, the researcher has firstly to validate the data and

  • understand historical prices and the price drivers
  • study the supply and demand fluctuations and market forces
  • follow the price indices such as Producer Price Index  (PPI)

all of which require analytical and research skills.  Secondly, get to know the market leaders in depth. This includes evaluating the financial health of the main players including studying their results and their profitability.   The final steps are to do a comparative analysis of the major players and prepare an industry analysis report on which you will base your sourcing decisions.

5 things to do to get ahead of the pack

1.  Brush up on your MS Excel skills now.  This involves getting to, at least, Intermediate level which means being able to analyse and sort complex data, create advanced formulas, work with look-ups, pivot tables and graphics.

2.  Become an expert user on your Company’s ERP and other internal systems.

3.  Be alert to new technologies that are being introduced to your organization including those supporting mobile media and social/business platforms. Work out how they could be applied in the procurement environment.

4Go back to school!   There are many opportunities for distance learning even if you have a day job.

5. Be more organized with your research process. Document the results and update them regularly.  It is possible to learn how to do research in a structured way. It is not all about Googling. 

What else could you do to be ready for the higher paid roles?  

What makes a great Procurement boss?

As a bonus for the festive season, we have wrapped one final discussion from our forum. The discussion topic nicely links with other Procurious content you can catch up on and one of our key events next year.

What makes a good boss?

The Good or the Bad? What makes a great Procurement boss?

What attributes a leader requires can provoke much discussion and provide a wide variety of opinions. As Procurement seeks recognition both for the value that it provides to organisations and in gaining that C-level seat, our leaders might need to be something different.

The top voted answer in the discussion was that the leader needed to have ‘the ability to innovate in the process and supplier relationship management dimensions’. With process and supplier management both providing big news stories this week, this would seem to be a critical attribute.

The answer also touched on drawing value from the market for the benefit of the company, something that the recent IBM CPO Study on creating value research in more detail.

Other answers focused on listening, supporting and encouraging employees and leading by example. The leader needed to have followers, while at the same time having strong influence in order to ensure strategic alignment and shared objectives.

Other attributes that were highlighted included:

  • Understanding procurement and the value it brings
  • Earning and being respected as a leader
  • Communication, openness and honesty
  • The ability to think innovatively and challenge the status quo
  • Being inspirational and visionary
  • Creating energy in a team to reach goals
  • Being structured and aware of strategy

Of course there are plenty other attributes that could be attached to a procurement leader, but these are a good start. If you are looking for more information, check out some of the following:

  • Events Hub – find events near you, get more information and get connected in person to other procurement professionals
  • Learning Hub – find videos and content on leadership and key attributes

Procurious favourite posts from 2014

Well that was the year that was… and we’ve had quite the journey!

Despite our young age we’ve already secured a place in the final of the UK Blog Awards 2015 #UKBA15.  None of this would’ve been possible without sterling efforts from our guest bloggers, including: Gordon Donovan, John Viner-Smith, Helen Mackenzie, Elaine Porteous and more.

Procurious has been shortlisted in #UKBA15

We also thank our 3000+ members, wherever you are spending Christmas (we know you hail from 70+ countries worldwide…) and invite you to look back at some of the most popular posts published on Procurious during 2014.

What can the Spice Girls teach us about being reasonable? – Gordon Donovan

5 common procurement myths busted – Procurious HQ

Sourcing things differently: the world of alternative storefronts – Matt Farrington Smith

How Better Together is putting the excitement back into public procurement – Helen Mackenzie

Why your business card is a piece of crap – Matt Farrington Smith

How to successfully negotiate with an Italian – Sergio Giordano

Are the golden children of procurement? Tania Seary

Negotiation is no game but here’s how to win at it anyway – John Viner Smith

Procurement crisis? Social media can save the day! Procurious HQ

24 of the most influential people in procurement – Matt Farrington Smith

Your job role might be obsolete by 2020 – Elaine Porteous

5 must have attributes of a Procurement superstar – Procurious HQ

Why anchoring matters in negotiation – John Viner Smith

Black Friday/Cyber Monday: the real effect on supply chains – Procurious HQ

Social network faux pas – Matt Farrington Smith

If you want to join our impressive pool of contributors send your ideas and pitches to our Content & Community Editor – Matt Farrington Smith.

Santa’s supply chain: the challenge to build a new logistics solution

Operation Santa Claus: the results from 2014’s Unbelievable Challenge are in!

Santa's supply chain

The Unbelievable Challenge is an open architectural design competition open to young architects and designers to find the best idea for a logistics centre for Santa Claus.

The competition was organized jointly by Ruukki Construction, the City of Oulu, Helsinki Design Week and the architecture and design office Snøhetta.

The competition sought unique, innovative ideas and solutions for a logistics centre for Santa Claus, who was the competition’s imaginary investor. It was his wish to find from among the competition entries a functioning centre to meet his growing logistics needs and increase the attraction of the area.

Evaluation criteria included energy efficiency, sustainable, values, usability, architectural values, suitability to the given surroundings and an ability to enhance the attractiveness of the area.

The competition attracted a total of 243 entries from 59 different countries (that’s almost as far-reaching as Procurious!)

And why is a new logistics solution so important? Well as per Morgan McKinley hypothesis “with today’s global population clocking in at 7.125 billion people, we can estimate that there are approximately 2.375 billion children currently at present receiving age. Given that the Christian population of the world works out at 32 per cent, that’s approximately 760,000,000 children.”

Christmas logistics

The winning project was titled “Nothing is impossible”, from an idea by Alexandru Oprita, Romania and Laurentiu Constantin.

The judges’ commented: “It is feasible and innovative but not futuristic. It is also well thought through – from land use all the way to detailing.

The entry presents an idea of making the most visible façade and the front of the building a magical element that could both integrate the building into its surroundings, and highlight whatever aspects of the building or its functions are desired.”

They continued: “The idea could be realised without sacrificing any of the practical or economic aspects of the logistics centre. It provides understandable solutions for energy efficiency and attempts to introduce a lot of good thinking about how to utilise this within the building. It also has a good understanding of the local situation. The entry seeks to embrace and enhance the function of the building as a hub for new technology in addition to the logistics centre – it connects well with Oulu as a city.”

Here’s a couple of the runner-up entries:

Santa's supply chain

 

Santa's logistics

Think you could do better? Put your thinking cap on, and keep an eye on unbelievablechallenge.com for a chance to enter next year.

Get your Christmas logistics fix with this Euro Truck Simulator

Father Christmas is looking for logistic professionals who want to help out with Santa’s substantial delivery backlog. 

Despite what fable tells us, Father Christmas/Santa/St. Nick is secretly a long-haul truck driver. The reindeer and sleigh are just a cover… sshh let’s keep this between us eh?

Now you can make like Santa and get in on the logistics game from the comfort of your own home with Euro Truck Simulator 2.

The wildly popular truck simulator has just been gifted a sizeable update in time for Christmas – the Polar Express 2014 event adds a selection of icy new truck designs to proceedings, unlockable through completion of a festive-themed challenge. The challenge? Ferrying the  pallet of ‘Christmas Gifts’ across Europe (or more specifically, the distance between the game developer’s offices and The North Pole).

Procurement – New Year, New Image

It’s very nearly time to wrap up for Christmas at Procurious HQ, but not before we’ve had our say on some of the key stories over the past week.

jjbsportsIf you haven’t thought of a procurement-related New Year’s resolution for 2015, why not join Procurious in aiming to change, improve and lift up the brand and image of procurement.

The function’s image has taken a bit of a battering in recent weeks, with a glut of stories on the treatment of suppliers, ethically questionable procurement practices and convictions for fraud and bribery in both supplier relationships (JJB Sports, UK) and tenders (US Defence Contracts).

Procurement has both the ability and responsibility to ensure that these practices are stamped out. Procurement professionals hold a unique position in the organisation of being able to influence spend, but also control the ethics and governance of the purchasing process.

So how do we do this? First, check out recent articles including detecting fraud in your organisation and the importance of Supplier Relationship Management. Then invite your network to get involved with Procurious and we can collectively get working on our aims in 2015.

SRM – https://www.procurious.com/blog/in-the-press/three-key-insights-on-the-importance-of-srm

Fraud – https://www.procurious.com/blog/in-the-press/how-to-detect-fraud-in-your-organisation

Oh, and just to lighten the mood, keep an eye out this week for an article on the best and slickest supply chain in the world. Who else but Saint Nick himself…

GST reduces complexity, improves supply chain

  • With GST Bill being tabled in the Parliament, companies operating in supply chain business stand to benefit, says Vineet Agarwal, MD of Transport Corporation of India .
  • But GST will have no direct impact on a company like his, which is a services company, since it is essentially a consumption tax and will have an impact on manufacturing.
  • However, the introduction of GST will lead to some reduction in expenditure, he adds. He expects the supply chain business to grow at around 20 per cent in FY15. He also has a positive outlook for FY16.
  • Going ahead, Agarwal sees a revival in the auto sector. Transport Corporation of India derives nearly 70 per cent business from it. When compared to FY13 and FY14 he sees significant improvement in business.

Read more and watch a video at Money Control

Procter & Gamble reports big moves in 16th Annual Sustainability Report

  • The Procter & Gamble Co. (P&G) is serious about environmental stewardship, as its 16th annual sustainability report reveals.
  • The multinational consumer goods company met several environmental goals ahead of schedule: P&G met its waste reduction goal for 2020 six years early and its pulp certification goal a year early.
  • P&G only disposed of 0.40 per cent of input materials as manufacturing waste to landfill across its facilities. That means 99.6 per cent of all input materials are either recycled, reused or used for energy conversion. The 2020 goal called for less than 0.50 per cent.
  • In April, the company announced steps it would take beyond Roundtable on Sustainable Palm Oil (RSPO)certification to ensure it does not contribute to deforestation. The steps include developing a traceable supply chain, no development of  high conservation value (HCV) areas and high carbon stock (HCS) forests, no development of peat lands, no burning to clear land for new development or replanting and complying with P&G’s Sustainability Guidelines for External Business Partners.

Read more at Triple Pundit

St Helens surgical gloves supplier in position to supply the whole NHS

  • A Merseyside supplier of surgical gloves has won a place on two NHS procurement frameworks – meaning it can now supply its products to NHS trusts across the UK.
  • St Helens-based Leanvation was established one year ago by former healthcare executives Dr Jonathan Day and Tony Downes, with backing from the North West Fund for Venture Capital. They have developed a range of surgical gloves that aims to reduce the risk of allergies and hand fatigue.
  • Under EU rules, NHS Trusts are limited in the value of products they can purchase from any one supplier without going through an official tender procedure. Securing a place on the NHS Shared Business Service Framework and the Health Trust Europe Framework allows Leanvation to overcome this barrier.
  • The company will be launching four new products in early 2015 and is about to start work on a new range of surgical gloves designed to further improve infection prevention, thanks to its success in winning a five-figure research grant. Dr Day, Leanvation’s managing director, said: ”This is a major step forward for Leanvation, effectively giving us a licence to supply the NHS in volume and compete alongside the traditional multinational surgical glove brands.

Read more at Liverpool Echo

Canadian defence procurement – everything old again is new again

  • The Conservative government last week released its Value Proposition Guide that is supposed to provide direction for firms who will be preparing bids for future defence procurements. Those procurements will be governed by the government’s new Defence Procurement Strategy.
  • “The Value Proposition Guide is a new tool for fostering investment in the Canadian defence industry,” the news release from Industry Canada noted. “The guide will ensure that the Government of Canada’s Defence Procurement Strategy will result in the creation of high-skilled jobs and economic growth across the Canadian economy.”
  • It seems that everything old again is new again. I was writing articles in the mid to late 1980s about the efforts of the Mulroney government to shore up the defence industrial base. Such benefits linked to defence contracts are called offsets in the U.S. and other nations. The Canadian offset program continued throughout the Kim Campbell and Chretien governments and into the Paul Martin government.
  • The linking of work for Canadian firms to the awarding of contracts to foreign companies was, however, eased under the Harper government. After much concern was raised by the domestic aerospace and defence industry that they were getting little work of value even as the Harper government spent billions of tax dollars buying new military equipment, the Conservatives came up with its “value propositions” program.

Read more on Ottawa Citizen

How do your products define your purchasing behaviour?

Jacques Adriaansen, ‎co-founder of Every Angle, explains the importance of tailoring your purchasing strategy to get the best possible results.

The phrase ‘horses for courses’ is one that’s well worn, but it’s nonetheless particularly applicable for those looking to develop a robust purchasing strategy.

 How do your products define your purchasing behaviour?

Let’s be clear about this – getting your purchasing strategy right is an important part of the operational processes undertaken by any organisation, and yet it seems to be one that many devote an insufficient amount of time to. Too many organisations seem content to fall back on a ”one size fits all” approach, leading to them paying over the odds and having insufficient supplies in place when they are most needed as a result.

So what’s the answer?

The truth is that when people think of purchasing, they often think of hard, tense negotiation and bartering as an integral part of the process. It’s a huge misconception, and one that can lead to significant problems further down the line. The key thing to remember is that it can be just as important to tailor your approach in purchasing as it is in other walks of life. For example, just as it wouldn’t be appropriate to turn up to a gala dinner event dressed in a t-shirt, shorts and sandals, you wouldn’t necessarily think of entering a period of intense negotiation with a supplier over the price of a pack of staples!

Clearly, there’s little risk in not getting staples or nuts and bolts in on time

Broadly speaking, there are four different types of product to consider when identifying a purchasing strategy. Each of these product types requires different behaviours when it comes to the procurement process, based on balancing cost against risk. Firstly, you have products that are easily available and which a great deal of money is spent, due to large volumes and/or high purchase prices. A good example of this might be standard sheet metal, which can be bought at various suppliers. Because this product type has such a relatively high cost associated to it, it puts those in charge of purchasing decisions in a strong position to negotiate. The fact that they are so easy to obtain means that there is very little risk involved in doing so, which means that these products will always be heavily negotiated as part of the purchasing process.

Secondly, there are products, like the staples mentioned earlier or standard nuts and bolts, which are cheap and easy to obtain. Clearly, there’s little risk in not getting staples or nuts and bolts in on time, but the cost is so low that it would be a waste of time to negotiate it. Thirdly, are high impact products, like very specific engines used by machine builders or upper quality lithography lenses for computer chips production. High impact products are only available from a select few suppliers, but which, if you do not have the products available, could significantly harm your ability to perform as a business. In this case, both the cost and associated risks involved are high, which means that the balance of power lies with the supplier. What’s needed, as a result, is a more collaborative, considered approach to purchasing, with limited negotiation and a focus on ensuring that the product is available for you to use when you need it.

Finally, there are very niche products that, although cheap, can only be supplied by one or two experts. A part for an important piece of machinery that helps your factory to operate is a good example of this. These products need to be ‘buffered’. What this means is that it helps to ensure that there is always a supply in stock, as the consequences of, say, your factory having to close because you have to wait for a new part to arrive don’t bear thinking about!

Because this product is so important, and relatively inexpensive, you once again see very little in the way of negotiation. I once had a customer that couldn’t ship a very expensive machine, because purchasing decision makers had blocked one specific part that was needed for it to work. The reason: the supplier of that specific part had increased the sales price of his product by 50 per cent, without contacting them! The new price of the material was a mere US$ 7.50!

These four different product types, and the costs and risks associated with them have to be factored into any purchasing decision. It’s a model that is well known in purchasing circles, and which was first devised by Peter Kraljic, who suggested that a purchasing strategy can only be effective if each of these elements is closely examined. Although Kraljic’s model was originally conceived by Kraljic for purchasing, it can also be successfully applied to managing logistical and production processes (consider determining production series volumes, for instance).

However, although the model acts as a good guideline for decision-making in operational processes, it’s important to remember that there are no hard and fast rules. Before making any decision, you will also need to consider all other necessary information, such as the anticipated sales, prices and other factors that could influence it.

So how do you make the best choices as to the right purchasing approach for you? Perhaps the best way to achieve this is by first asking yourself what you want to achieve, and then considering how you want to achieve it. Clearly, some products will always be in high demand, while others will be in lower demand, but require a different level of negotiation. The important thing is to modify and adapt your purchasing behaviour in line with your desired outcome. By selecting the right horse for the right course, you can guarantee that your purchasing strategy is successful – and improve your business performance as a result!

Where next for the automation revolution?

This is a guest post by Sandeep Kumar, Vice President at ITC Infotech and Head of the Business Consulting Group.

The increasing automation of the supply chain has become a major talking point in recent years as technology continues to play a pivotal role in the way operations are run.

Supply chain automation

The buzz is easy to understand – automation enables businesses to address the need to scale their operations without having to add to their workforce, with a more streamlined, flexible and efficient operation that drastically reduces errors.

Although it continues to dominate headlines today, the supply chain technology revolution actually started in the early 1980s with the advent of powerful computing models in MRP and MRP II. This later evolved into the next generation supply chain software that helped bring in advanced planning and optimisation capabilities as well as strong functional automation of warehouses and factories. The equation has been shifting ever  since then, with newer technology becoming more affordable, the cost benefits of tool driven automation became extremely attractive and application of smart tools came to be realised as a critical competitive advantage.

Many geo-political events and technology breakthroughs have contributed to this trend. The oil crisis of the 70’s triggered multiple innovations in cost reduction and efficiency, and the opening up of China and the Far East in the 80s made the making and selling of products across different continents not only possible, but cost effective. The end of the Cold-War and increase in globalisation led to rampant consumerism in the 90s – driving product proliferation, miniaturisation and reduction of life cycles, digitisation of information exchange , and increasingly stringent statutory requirements for safety and ethical practices.

The forces of globalisation have continued to drive newer themes which dominate the agenda today, such as the globalised supply chain, cost and profitability improvement, value chain integration, integrated planning and optimisation, global supply chain analytics and more. Technology has helped shape business evolution at each step.

In essence, what we see today is the supply chain being more and more digitalised and therefore more intelligent. By setting up a centralised supply chain analytics centre, for instance, businesses can benefit from processes like demand forecasting, replenishment planning, inventory analytics and sales and operations planning support in a shared services model. In this way, they can extend the benefits of standardised processes and analytics across multiple business divisions without having to increase human resources.

The impact of growing automation in supply chains has been widespread across industries. Among those most affected by transformation in supply chains are high tech OEMs and consumer electronics OEMs. These are largely sectors where cost efficiencies are paramount and technology adaptation is helping to lower the cost of product operations, and this demand has made them the pioneers in adopting new advanced capabilities that disrupt the supply chain models.

In these sectors, functions such as designing, sourcing and distribution have gone through transformational change. Companies like Cisco, for example, operate a business model that uses technology as a powerful integrator of supply chains. The automotive, aerospace and industrial manufacturing industries have also undergone similar transformation.

This evolution does not come without challenges.

In addition, the CPG, fashion apparel and retail industries are good examples of how global supply chain models bring together raw materials and ingredients from across the world, before products are manufactured and then distributed to global markets. Wal-Mart’s Retail Link, for instance is a great case of how a retailer manages its huge supplier base through a supply chain Information portal.

This evolution does not come without challenges. In this case, the challenge lies primarily in staying ahead of the curve. Early adopters of supply chain risk management like Cisco and Ericsson, for example, have been pushed into investing in such capabilities based on environmental factors putting their supply chains at risk. Wal-Mart and Lego are other examples where supply chain sustainability and codes of conduct are being put in place as a consequence of management not being live to bad supplier practices.

Another concern has been the decreasing relevance of human labour in the face of growing automation. Although, it is clear that this transformation does impact manual work content by changing the way certain tasks are performed, arguing that it subsequently leads to the removal of people from supply chains would be quite an overstatement.

Sandeep KumarWhat however needs to be reinstated is that despite the rapid technological developments, humans have always and will continue to be the drivers of these processes. Even though specific roles will keep changing, supply chains will continue to depend on technology-savvy people. Supply chain technology is moving human tasks from more repetitive data entry and crunching tasks to more intelligent supply chain decision making, enabled by smart data and technology support.

This is an interesting time for supply chains as a series of innovations and technological shifts such as mobility and the rise of digital commerce will drive further change in the coming years. Supply chain risk management, sustainability, global integrated planning capabilities, and the use of instrumented intelligence are becoming key areas of interest that will help increase in-process visibility and enable the quicker business turn around on key operations. Fast-paced change in this area means there is plenty of space for players to claim the “pioneer status”. Businesses that want to succeed and reap the benefits of supply chain automation need to be forward-looking and brave enough to take the extra step ahead of their competitors.