Change In Procurement – Who Are The ‘Change Makers’?

Capturing collective experience and sharing stories from procurement leaders on making change and progress will help shape the profession for the future.

Change-Makers

I remain impressed by those who have driven real and substantial change in the way procurement is done in their businesses. There were some great examples at the recent ProcureCon conference, from the centralisation of both operational and transactional procurement activities by AstraZeneca, to initiatives within Ericsson, Philips Lighting and Shell to name a few.

It’s also understandable, and not a little depressing, to see how many of today’s procurement problems haven’t really changed over the last 25 years. These issues continue to challenge procurement leaders, hindering progress and change.

Change Makers

What remains perennially powerful, however, are the stories we share about what has – and hasn’t – worked so well. Our collective experience helps propel our profession further and faster into an ever turbulent and challenging future. Our people expect us to help prepare them for this path. Our suppliers expect us to be more efficient so they can improve their terms, and our business partners expect us to anticipate, respond and improve the value gained from external suppliers.

To learn from those procurement leaders with tales to tell about the changes they have made in the function we will be running a regular ‘Change Makers’ profile. Our aim is to help capture collective experience and invite your responses comments and contributions to create an essential debate for our industry.

To start with we have asked a few of the Procurement leaders we know well to share their stories by asking a few questions about the biggest problem they had with the way Procurement was operating.

Richard Stewart, Group Head of Procurement, Smiths

Change Makers - Richard StewartWe asked Richard Stewart, Group Head of Procurement for FTSE100 company Smiths Group, to share his experience of creating group procurement expertise in a de-centralised business.

Smiths is a decentralised global technology company with five divisions: John Crane; Smiths Medical; Smiths Detection; Smiths Interconnect; and Flex-Tek. The changes Richard was implementing covered all five of these divisions, no mean feat in a global operation.

Improving Group Procurement

“When I joined Smiths in 2013, my remit was to work with the five divisions to improve procurement across the group. We believed that there was good scope to create greater financial returns from procurement, but also to help us manage risk and improve levels of expertise.

“Smiths is a highly decentralised global technology company, with five different divisions, operating in different markets. So the biggest issue initially was creating connections across the individual teams to work together as a function.

“A key enabler for this was the leadership team. They work together to set direction for procurement across the entire organisation. An early step was to bring this team together to develop a roadmap for the next 2-3 years. As part of this, we invested in key software tools, market intelligence, and spend analysis. For instance, we closely watch volatile commodity prices. Not to mention cost modelling, driving take-up of e-auctions and, in particular, standardised scorecards for all procurement.

Creating Shared Understanding

“A core part of our programme was category management training that involved 90 per cent of colleagues (around 100 people). This has helped helped us foster a procurement community with a common language, which has been vital. Overall, we are aiming to create a framework for procurement,  and a shared understanding of best practice.

“Of course, it’s all a learning experience too – it is important to push forward new ideas but you also need to adjust the speed of proposed change to the pace of the organisation and this requires patience.

“Reflecting on the first two years, I’m pleased with the progress we are making and we have had great support from senior leadership. We’re now aspiring to build links between procurement and revenue growth for the next phase of our development – that’s our ambition anyway.”

Common Language and Shared Experience

Working with Richard we have seen how he has tried to strike the balance between maintaining divisional procurement autonomy, expertise and passion, and leveraging group purchasing power and expertise widely across the different divisions of Smiths, with different cultures and business models.

Using a suite of procurement enablement tools and by implementing a category management toolkit and training he is creating a common language and a set of shared experiences which will maintain the existing strengths but will drive consistency and the ability to collaborate to leverage power and expertise across common categories.

This way of building momentum for change, and a group approach, appears to sit well with Smiths group corporate culture and strategic objectives.

 

Future-Purchasing-Change-MakersFor more on the ‘Change Makers’ series, check out Future Purchasing’s blog.

If you would like to appear in the Future Purchasing ‘Change Makers’ series, please contact Anna Del Mar for details here.

Understanding the Alternatives to Temporary Labour

The hiring and management of temporary labour can be an expensive business. However, there are alternative ways to bolster your workforce, explains Jon Milton, Business Development Director at Comensura.

Temporary Labour

Temporary labour comes in many forms, sometimes to cover permanent workers absent from work, or to fulfil short-term demand. In each case, the hiring manager’s default position will be to hire this resource from an agency. However, just because the need is temporary and use of an agency has always been a sensible approach in the past, doesn’t mean that it’s the way it always needs to be done.

In certain situations there can be more cost effective and flexible alternatives to temporary labour, to supplement the use of agency workers. Here we highlight various options for consideration.

Reassigning a permanent worker

There may be one or more existing permanent employees who can be reassigned, seconded or trained to provide short-term cover. If it’s an important role, some businesses have permanent workers trained to step up when the need arises and their role is then back-filled with a temporary worker.

Your business may also have a number of employees currently facing redeployment or redundancy that may be also seeking new opportunities. Alternatively, the demand from across your business may be stable and large enough to justify and sustain an increase in the number of permanent workers.

Fixed term contracts

The demand for temporary workers may be stable and consistent for a set period of time in the year. In this scenario, recruiting employees to the business on fixed-term contracts may be a viable alternative to temporary labour.

Direct workers

Your organisation may be able to create a database of people who are ready-to-work on a temporary basis when called upon. This approach can be referred to as the ‘staff bank’, ‘internal resourcing pool’ or ‘benched resource.’ It typically uses an internal agency approach and contracts workers to temporary or flexible roles.

This can work well in areas of your business where your need for temporary labour is low but with spikes in demand throughout the year. From a worker perspective it can be a beneficial way to retain the skills and experience of older, possibly retired workers, who want to continue working on a temporary, part-time or flexible basis.

Limited Company Contractors

Another alternative is to contract with workers who set themselves up as a limited company. This works best for highly skilled or project-led assignments where a defined scope of needs can be set and the worker measured and paid against milestones and deliverables, rather than salaried costs. It is important to note that in some sectors, such as IT, the best qualified and skilled workers may only work on a limited company basis.

Welfare to work

Your business may be able to work with Jobcentre Plus and welfare-to-work agencies to offer employment opportunities to long-term unemployed people. These agencies focus on getting candidates job-ready, typically by assessing the specific skills you require and then providing potential candidates with the relevant training and support. This approach can be a useful way to fill entry-level positions.

Apprenticeships

If your business has an apprenticeship programme you may be able to assign the apprentice to a relevant task.

Use of agencies remains a sure fire way of meeting significant temporary staffing demand but it doesn’t have to be your only strategy. These alternative approaches can help remove or reduce demand for pure temporary labour too. The key is to plan for your workforce requirements with an open-mind and evaluate the merits of how and when you use the non-permanent workforce.

How Do You Survive a Zombie Apocalypse? Ask Amazon

Amazon has been keeping us on our toes throughout the last fortnight. There have been rumours about their intention to open hundreds of bookstores, not to mention the white bald eagles that are being trained to keep control of the company’s drone deliveries.

Amazon in the News

However, I’m not sure any of us could have predicted that the next Amazon news story to hit headlines would entail self-preservation in the event of a zombie apocalypse.

The retail giant also plans to build a global shipping business to rival those of UPS and Fedex.

Amazon Terms of Service

Amazon made an intriguing alteration to its terms of service this week following the release of its new Lumberyard Materials development tools.

Lumberyard is a game engine and development environment designed for professional developers. It supports the development of high-quality, cross-platform games, which can be run on Amazon’s AWS servers.

Clause 57.10 of the organisation’s Terms of Service, which refers to Lumberyard, states that the Materials tools should not be used with systems such as nuclear facilities, manned spacecraft, or military use in connection with live combat.

Fortunately, there is one, potentially useful, exception. The clause states that “this restriction will not apply in the event of the occurrence of a widespread viral infection, transmitted via bites or contact with bodily fluids, that causes human corpses to reanimate and seek to consume living human flesh, blood, brain or nerve tissue, and is likely to result in the fall of organised civilisation.”

So, if you think that you can utilise a game engine to your advantage in the event of a zombie apocalypse, you’re in luck. But, as The Guardian rightly points out, we’ve learnt from Shaun of the Dead that a cricket bat to the head works best of all.

Global Shipping Business

Bloomberg News revealed this week that Amazon plans to expand its ‘Fulfilment By Amazon’ service to directly rival FedEx and UPS, a claim that the company has repeatedly denied in the past.

The service, which could potentially launch a global shipping and logistics operation later this year has been named “Dragon Boat”.

Bloomberg claims that there are documents detailing Dragon Boat as a “revolutionary system that will automate the entire international supply chain, and eliminate much of the legacy waste associated with document handling and freight booking.”

‘Fulfilment By Amazon’ currently oversees storage, packing and shipping for third-party merchants on the site. Dragon Boat, however will enable these sellers to use Amazon to deliver products from warehouse to customer.

There are also plans to remove further intermediaries from the shipping process, theoretically simplifying things and further reducing prices in Amazon’s supply chain.

This move will put Amazon in the position to rival Chinese e-commerce powerhouse Alibaba, as well as Fedex and UPS.

Colin Sebastian from Baird Capital commented, “Amazon may be the only company with the fulfilment/distribution sophistication and scale to compete effectively with incumbent service providers [UPS, FedEx].” His thoughts reinforce what most of us already believe, if anyone can do it, Amazon can.

We’ve been keeping up to date with the other top procurement news stories from the past week. Check out what’s been going on.

Deloitte Global CPO Survey 2016

  • Almost two-thirds of CPOs do not believe their teams have the skills and capabilities to deliver their procurement strategy according to Deloitte’s 2016 CPO survey.
  • The survey profiles the views of senior procurement leaders from around the world on key issues facing the procurement function.
  • The survey, involving 324 responses from 33 countries, also found 45 per cent of CPOs reported a rise in procurement related risk, such as volatility in emerging markets and geopolitical uncertainty affecting supply chains.
  • CPOs are primarily focusing on consolidating spend, increasing supplier collaboration and restructuring existing supplier relationships to deliver value over the coming year, the survey found.

Read more at Supply Management and check out the full CPO Survey 2016 here

Lord Carter Review Promotes Procurement Transformation

  • A report on Productivity in the NHS, published by the UK Department of Health, has highlighted the need for procurement transformation across NHS Trusts.
  • Lord Carter, the report’s author, that although some trusts are doing well, others “still don’t know what they buy, how much they buy and what they pay for goods and services”.
  • The report recommends the implementation of a new Purchasing Price Index (PPI) for all NHS Trusts in England from April 2016
  • It also recommends that Trusts collaborate more to “aggregate sourcing work and reduce variety”

Read more at Future Purchasing

Pentagon Reduces Aviation Procurement Budget

  • The Pentagon has reduced aviation procurement by 7.2 per cent to $45.3 billion in its fiscal year 2017 budget submission.
  • This lower funding level buys eight fewer fixed-wing aircraft, and 35 fewer rotorcraft for the US Army and Navy.
  • The budget has been designed to offset perceived threats by Russia, China, Iran, North Korea and global terrorist organisations that are running amok in Iraq, Syria and now Libya.
  • Deputy Secretary of Defence, Robert Work, says in crafting the budget, the Pentagon focused on shape, not size, and modernisation versus readiness for today’s conflicts.

Read more at Flight Global

The ICC Academy Announces Speakers

  • The International Chamber of Commerce (ICC) Academy has announced its keynote speaker lineup for the 4th annual Supply Chain Finance Summit in Singapore on 9-10 March.
  • The Summit will gather over 50 speakers and 150 participants from across Asia, and will focus on topics such as supply chain financing in Asia, and the global growth of supply chain finance.
  • This year’s speaker lineup features leading players and industry experts from some of the largest organisations in the region, including ANZ and Standard Chartered Bank.
  • The ICC have said that the speakers have been selected to reflect “the progress of the industry, and provide unique insights into the trends, opportunities, and challenges affecting supply chain finance”.

Read more at ICC

7 Reasons Why Procurement is the Perfect Valentine

Don’t be shy, you can finally admit it. You’ve always thought that procurement is the perfect Valentine for your organisation.

Valentine

It’s that time of year again.  The shops are full of hearts and flowers and we’re all encouraged to share the love.  But, in these times of increased pressure to deliver, reduce costs and improve outcomes, who really should be an organisation’s secret love, their special Valentine?

Well, I’ve got news for you.  Procurement is your perfect match and here are seven reasons why.

  1. We Can Show You a New Angle on Things

Getting procurement involved in sourcing your requirement can give you a whole new perspective on the process. We’ll challenge your specification, make you think about new developments in the market and, more often than not, get you a better price.  We’ll even bring things like ethical sourcing and sustainability into the mix and really broaden your horizons.

  1. We Love You Regardless of Your Flaws

We don’t mind if you come with an input specification when you really should be focusing on outputs. We’ll forgive you if you’ve already chosen something without going through the correct sourcing process. We’ll even turn a blind eye if you’ve indulged in a bit of maverick spend in your past. After all you wouldn’t be the first to have strayed down that path.

  1. We’ll Put Your Needs Ahead of Our Own

Procurement is all about your needs and the needs of the business.  While you may think all we care about are our metrics, nothing could be further from the truth. We’ve designed our procurement processes so that we can do everything in our power to deliver the outcomes that you need.

  1. We Believe Life is Better With You, Rather Than Without You

It’s easy to think that those of us in procurement would rather just get on and source things, and that we’ll manage suppliers without input from those of you on the front line. However, we know from experience that your input and involvement makes things better. We couldn’t just bear to think of sourcing things without you.

  1. We’re Willing to Lose an Argument

In many conversations we have with you about sourcing, we know we’re right, and you’re wrong. But we’re so focused on your needs that, if you really must have a particular supplier or a certain product, and there’s a way we can source it without breaking the law or company rules, we’ll come up with a procurement strategy to help you achieve that aim.

  1. We’re Incredibly Loyal

Because we spend so much time with suppliers it would be easy for you to think they might lead us astray.  But there’s no need to worry – our integrity won’t falter. We want the same things as you, so we’ll be true to the flag and the organisation’s goals. We won’t use processes that are corrupt. Transparency is our middle name. You know you can trust us no matter what.

  1. Our Sex Appeal is Second to None

I must warn you that once you’ve got involved with us in procurement you’re bound to be hooked.  After all there’s something alluring about being listened to and having your needs met. Top that with a large dose of innovation, ethical sourcing and a gold star from the management for your achievement of company aims, and you’ll be coming back for more.

Working with us could just be the most excitement you’ve had in years. After all you don’t get that sort of feeling from working with colleagues in Accounts now do you?!

So, when you’re pondering your choice of Valentine this year,  remember us in Procurement – your ideal secret love.

Make 2016 Your Year for Personal Development

Are you someone who always needs to be learning something new? Or do you need to find the right personal development topic before your motivation kicks in?

Personal-Development

Whichever group you fall into, you should always be on the look out for new opportunities for personal development. Whether it’s a course on bike maintenance, learning how to do that bit of DIY that’s been sitting since last Christmas or expanding your knowledge in your professional field.

The good news is that Procurious has the answer for you (well for expanding your professional knowledge at least…), with over 80 free eLearning modules on a variety of topics in the procurement and supply chain space.

Getting Started

And where better to start than at the beginning? If you are just starting out in procurement, or are one of the many procurement and supply chain students at universities around the world, Procurious’ ‘Introduction to Procurement’ series is the one for you.

The series starts with “What is Procurement?“, running through the important foundations of procurement knowledge in stakeholder management, negotiation, specifications and much more.

And if you think you know it all already, why not take the chance to refresh your skills? Or, as many Procurious members have done in the past, share it with suppliers or stakeholders to clue them in about the function’s role.

Or, even better, share it with friends and family who, even after hundreds of explanations, still aren’t sure what it is you do for a living!

Whatever you choose to do, make sure you are looking for opportunities for personal development and learning.

Stay tuned in the coming weeks as we highlight more of our great learning content!

Like this? Join Procurious for FREE and meet like-minded procurement professionals from across the world.

Going to Negotiation Training? No, I Learned Last Week

In the final article in this series, I consider how our stakeholders outside of the procurement function consider negotiation. After all, everyone can negotiate, right…?

bigstock-Man-Drawing-Maze-53939659

As seasoned buyers many of us will have been asked the question; “Can I join your next negotiation?”

Nearly always the request is well meaning and indicative of a willingness to learn the art which is core to our profession (despite my belief that buyers fall back on the perception of their own negotiation skills too easily). It is also, I feel, always unintentionally dismissive of the skill itself.

Unwritten within the question is the inference that the invitee assumes learning to negotiate can be done within a few hours, and perhaps even in a single sitting. “I’ve attended the training course, now I need to take the test”, is the secondary call. Those of us practising negotiation for all of our careers know all too well that during every negotiation, even the most experienced and skilled of us make mistakes, and value egresses to the other party outside of our control and planning.

Of course, being the type of individual who is passionate about developing people, particularly in the area of procurement and business management, I seldom refuse a request and attempt to install the observer in to the next appropriate negotiation. Many readers will also recognise that this often means waiting several weeks or months as “good, old fashioned, round-the-table, face-to-face” negotiation happens less and less in today’s technology driven world.

Perpetual Conditioning

Without question, we are “negotiating” during every email, phone call or meeting that we have with our negotiating counterparties – or “conditioning” as we like to call it. We negotiate by requesting our leaders to set out our message to their senior counterparties.

We set out and plan our negotiation, conduct detailed cost and market analyses, plan the room layout, the attendees, the tone of the questions and who will ask them, our critical requirements and our tradeables, and lots more besides. And after all this work, unseen by the requestor, we execute the negotiation, hopefully in the allotted time. However, I contend that the single most critical success factor in any negotiation is ensuring you are negotiating with the correct party. Note: I say party, not person.

Having the correct person in the room is important, too. Most of us will have learned a valuable lesson at some point in our careers by experiencing frustration and delay at a counterparties repeated requirement to refer to more senior colleagues. “Surely you expected that question and prepared a response?!” is our, often silent, cry.

But, my point is not about having the correct person in the room, it’s about negotiating with the correct party. Negotiating is tough enough with a counterparty that is willing and hungry to reach a resolution. Negotiating with a party who simply does not have to negotiate; a party who does not need to concede and does not believe he will lose is the toughest of all. And this, invisible to the prospective negotiation observer, is where the high performing buyer excels.

This type of negotiation started a long time; ago often months and sometimes years ago. Recognising a growing dominance or complacency of any given counterparty, the skilled negotiator develops hunger. A hungry competitor who may or may not force the complacent of dominant supplier to move position and concede value. It actually doesn’t matter whether the incumbent moves position or not, the high performing buyer now has options.

Negotiation 101

Do not misunderstand my point here. I am not describing the time-served tactic of “play one off against the other“. At the start of this negotiation there simply were not two parties to play off against each other. Success in this negotiation is the culmination of hard fought manoeuvring, which ultimately makes the dominance of the incumbent supplier irrelevant.

Manoeuvring which creates a credible threat to the incumbent where previously there was none. All of a sudden the negotiator has options. All of a sudden the BATNA (Best Alternative to Negotiated Agreement) just got a whole lot better and a positive result will ultimately be obtained.

I am also conscious that my use of the word manoeuvring may be perceived negatively. It is not meant to be so. In the world of complex, multi-national negotiations with poor market dynamics, limited competition and high switching costs, I use the word merely to explain what is necessary to extricate an organisation from contracts with under-performing suppliers.

In this sense manoeuvring is meant only in a positive and necessary sense and it may occur for years before tangible results. But as high performing buyers, manoeuvre we must, unless of course, we are content with negotiating brilliantly with the wrong party. 

Read more articles from me on Procurious here and here.

Jim WillshawJim Willshaw (MBA, MCIPS, MIIAPS) is an experienced procurement professional acting as a consultant, speaker, coach and trainer to leading organisations all over the globe.

3 Key Steps to Effectively Improve Manufacturing Operations

As the name suggests, reducing manufacturing complexity is no simple task. Success in this area requires careful planning, analysis and implementation.

Manufacturing Operations

Simplifying manufacturing operations should always be done in a way that doesn’t adversely impact product performance or customer preferences. Top performing organisations typically take the following three key steps to identify opportunities to reduce complexity:

  1. Analyse drivers of complexity and key market trends

Higher customer expectations for customisation and service have increased manufacturing complexity. These expectations demand greater flexibility in operations, but can also improve overall revenue opportunities.

However, increasing complexity has also been highlighted as the cause of  significant cost increases. These cost increases can be attributed to lower performance levels, or increased inventories of materials or finished goods.

In order to reduce complexity, it is important for organisations to understand the key market trends that are driving demand. Once trends are understood, they can then be analysed in order to develop new manufacturing strategies.

  1. Examine best practices of top performing organisations

Understanding what top performing organisations are doing is a key way to establish industry best practice. However, best practice should typically act as a guideline rather than a hard rule. Any strategy for complexity reduction should be tailored to fit an individual organisation. What works for one organisation may not necessarily work for another.

It is often difficult to replicate the best practices of top performing organisations, as best practice will be linked to a number of factors. However, by using this as a guideline, organisations will be able to identify where changes can be made.

Data on best practice is not always readily available. You can use the Hackett Group’s repository of key best practices is a good place to start gathering data. This will ultimately allow you to carry out your analysis and plan new strategies.

  1. Benchmarking against Key Performance Indicators

Many potential metrics and KPIs are available to measure the performance of an organisation’s manufacturing complexity. Using these KPIs will allow organisations to benchmark themselves against industry leaders.

Of all the available metrics, there are several that The Hackett Group recommends using to indicate the overall effectiveness of complexity reduction initiatives:

  1. Production Rate as a percentage of Maximum Capacity
  2. Total Inventory Turns (Raw, Work in Process (WIP), Finished Goods)
  3. Finished-Product First-pass Quality Yield
  4. Scrap and rework costs as a percentage of sales (see below)

Manufacturing Complexity Reduction_Slide 6

As with all metrics, it’s important to be measuring the right things. The SMART (Specific, Measurable, Achievable, Relevant, Timely) rule will also help you ensure that good data is output from them. You should be looking to limit the number of KPIs to around 6 or 7.

The Hackett Group’s Perspective

Reducing manufacturing complexity is a crucial element of a successful supply chain. Through reducing complexity, organisations will typically see a number of improvements. These include:

  • Reduced overall product cost
  • Stock Keeping Unit rationalisation
  • Improved product performance
  • Reduced product development cycle
  • More motivated and specialised workforce
  • Increased manufacturing flexibility
  • Better product planning and scheduling
  • Improved supplier relationships and performance

Reducing manufacturing complexity is a crucial performance indicator in itself for the supply chain. By driving changes across operations, organisations will start to see improvements in their supply chains, and will move towards being a top performing organisation.

If you want to learn more about trends, best practices and metrics you can use in manufacturing complexity reduction, download the Hackett Group Supply Chain Insight Report here.

Marcos Cominasa is a Director in The Hackett Group’s Strategy and Business Transformation Practice. He has over 18 years of management consulting experience, and specialises in improving supply chain operations for Fortune 500 companies.

Supplier Relationship Management – Stay Ahead of the Curve

What does it take to stay ahead of the curve nowadays? Exploring why successful Supplier Relationship Management (SRM) can help procurement adapt to the circular economy.

Supplier Relationship Management - Ahead of the Curve

As a company it is important to adapt to the circular economy. The limitations and growing problems of the linear economic model, which has served us well for many decades, demands that business ‘as usual’ is unlikely to be a winning strategy in the future. The winning strategy lies within the circular economy.

The Ellen McArthur Foundation defines a circular economy as an industrial system that is restorative or regenerative by design. It replaces the end of life concept with restoration, shifting business towards the use of renewable energy and elimination of the use of toxic chemicals, which impair re-use.

Ultimately, it aims for the elimination of waste through intelligent design of materials, products, systems, technologies and business models. We could call it circular innovation.

Collaboration Is Key

Supply chains are getting more complex every day in terms of the number of involved partners and the quality and degree of interdependency between them. One of the predictions in relation to the integration of the circular economy is that complexity will increase, and collaboration with partners across and outside the supply chain will be crucial in order to stay ahead of the curve.

Procurement plays a key role in the transition. There is, for sure, more to procurement than savings. The world’s leading global companies are looking to the sourcing and procurement function to do a lot more than cut the price of supplies. Procurement needs to broaden its role in the organisation, well beyond the traditional job of negotiating with suppliers.

Suppliers, along with procurement professionals, should be involved in the innovation life cycle, from initial idea, all the way to manufacturing and continuous improvement. Innovation is happening with or without the involvement of procurement. The key question is how procurement can build competences to enable the transition?

Supplier Relationship Management – An Effective Tool

One of the ways that procurement could build competences is through supplier relationship management. Companies that have demonstrated this ability typically generate higher profits, innovate more effectively and are better able to manage risk.

Research done by State of Flux shows that the role of the suppliers will only become more important in the future. Companies are becoming both flatter and this makes them rely more on third parties. As in many other areas of life, you are only as good as the weakest part of the chain. In this case business can only be as good as its worst supplier.

The research also shows a direct correlation between companies that are leading the way in this area and strong senior backing of SRM, with 46 per cent of leading companies saying that SRM has the support of their top executives.

Customer Of Choice = Access To Innovation

Organisations that want to make a real difference with Supplier Relationship Management, or put in other words, any organisation that wants to stay ahead of the curve – need to be led by people who understand its importance. That means recognising that changing business dynamics are giving suppliers more power and choice about who they partner with, and how.

It means in turn recognising that becoming a key supplier’s customer of choice will bring access to a range of benefits, from price advantages to innovation – and that failing to do so will mean such benefits accruing to competitors instead. This understanding must be paired with a board-level commitment to investing in the technology and training that underpin successful SRM and to creating an organisational culture.

How is Big Data Relevant to Procurement?

Or perhaps better still – what on earth is big data?

Big Data

Open up any industry magazine and you’ll inevitably find a story referencing Big Data or the ‘Internet of Things’. Consultants use the terms in their sales pitches and product offerings, but there’s frequently a lack of understanding of exactly what Big Data is, and how it is relevant in a procurement context.

In this series of articles, we are looking at a few questions which should serve to give us a better understanding of this topic, and why and how it is relevant in the procurement environment.

But let’s start at the beginning…

Can Anyone Properly Define Big Data?

After a little research, it seems the answer to our first question is a resounding “No”.

If you were to ask ten procurement professionals what big data is, the likelihood is that you’ll get ten different responses. Ask ten IT professionals, and chances are you’ll get another ten, completely different, responses.

There is a great article by Gil Press on Forbes titled ’12 Big Data Definitions: What’s Yours?’. The crux of this article is that Big Data is, by its very nature, a subjective term.

While writing a much quoted research paper, US-based global consultancy firm McKinsey offered the following definition:

“Datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyze,”

This definition came with the following caveat: “This definition is intentionally subjective and incorporates a moving definition of how big a dataset needs to be in order to be considered big data.”

The Oxford dictionary has defined the term as “data of a very large size, typically to the extent that its manipulation and management present significant logistical challenges.”

But the question here remains: what is a “very large size” and who determines if its “manipulation and management present significant logistical challenges”?

Agree to disagree

Regardless of how we define big data, there is a common understanding that over the last decade there has been an explosion of information (most of it digital). As we continue to do business and live our through digital interfaces, that volume of data is only going to grow.

Whether we call it ‘big data’, or simply ‘data’ as we have for the previous few hundred years, is a question for the marketers and tech journalists out there. The fact is that today we have access to more data about more people in more places than ever before.

The challenge is, how do we harness this mountain of data into information that we can use to make better business (or procurement decisions)?

This point was highlighted expertly by group of computer science researchers back in 2008 in this paper. While failing to define what big data actually is, the paper highlights that big data computing will “transform the activities of companies, scientific researchers, medical practitioners, and our nation’s defense and intelligence operations.” Evidently they were correct.

If that hasn’t brought us closer to understanding exactly what big data is, it’s certainly given a broad foundation on which to work. But how does this all relate to the procurement profession? That’s the question we’ll be answering in the next part of the series.

‘Productivity in Pharma’ Procurement Think-Tank

The Beyond Group are excited to announce our fourth ‘Productivity in Pharma’ Think Tank.

Productivity in Pharma

This conclave of senior procurement leaders from the Pharmaceutical industry kicked off in 2013. The aim was to create a unique, mini-MBA style environment, where the most pressing issues facing the function are explored in detail and, from which, key insights and applicable takeaways are derived.

In our first two years we deeply probed two important topics that surfaced in our original “Beyond Procurement” study:

  1. SRM and why it has failed to live up to its strategic promise
  2. Procurement’s role in driving Sourcing Innovation.

Our aim with this article is to share some of the insights from our most recent series, which focused on deeply integrating procurement into the broader productivity arena.

How it Works

We divide the Think Tank sessions into three 1-day sessions, four to six weeks apart. Each session has a particular purpose.

  • On Day 1, we attempt to clearly define the topic we are discussing
  • On Day 2, we delve into the substance of the issues and discuss options for meeting the challenges uncovered on Day 1
  • On Day 3, we try to bring our learnings together to develop applicable takeaways that can be directly applied by attendees

2015 – Outputs and Takeaways

So what were the great insights and outputs from ‘Productivity in Pharma’ 2015? All members from the 12 global Pharma companies present felt that there was increased pressure for procurement teams to step above their traditional role of price management, and build connections with other parts of the company to drive even greater levels of productivity.  The group developed several key observations:

  • Activities aimed at generating greater productivity returns must be cross functional and not purely the remit of procurement
  • Discovering met or unmet customer needs often points towards areas of collaboration that directly create customer value
  • Procurement teams need vastly improved analytical skills and tools
  • Specific tools and knowledge required by procurement teams are LEAN/Six-Sigma, Offshoring and Outsourcing, and Demand Management
  • The strongest path of collaboration for procurement teams would be to work closely with internal teams for project management, LEAN experts, outsourcing, and business analytics

During the second session the group had a chance to further refine the insights from Day 1. They delved more deeply into how other companies were recognising procurement’s contribution to value creation in non-traditional ways.

A highlight from the session was a discussion on how procurement figured into the M&A process and what skills did it need to bring to the table to be recognised as a business advisor. Lastly our Talent Development partner for 2015, Korn Ferry, provided on-line assessment for each attendee to allow individual measurement against the ideal set of skills required for CPOs in the future.

Conclusions

In our closing Think Tank session, there was general consensus that most organisations were demanding much more from procurement teams than in the past. This included operating outside of its traditional commercial/risk management role.

However, no company had fully assembled all elements, forming neither an integrated productivity function nor a consensus on guidance for procurement organisations moving in this direction.

Four key imperatives were generated for procurement teams to consider when evaluating their enhanced role as productivity leaders.

  • Mandate: Procurement teams can lead cross-functional efforts to develop a broader collaborative mandate to drive productivity.  Productivity gains are greatly magnified (sometimes more than doubled) when process are evaluated side-by-side and not purely functionally.
  • Structure: Purely functional structures are beginning to fade.  Procurement teams should embrace agile structures and project roles that attack costs in a multifaceted way.
  • Measurement: Procurement’s yardstick of performance, savings, tells only a small part of the productivity story. New methods of measurement, including the increased value perceived by customers, need to become part of our performance lexicon.
  • Skills: New skills and new roles are required for procurement leaders of the future. Three new roles were specified by the group

The intensity of these sessions left most of our Think Tank members hungry for more.  We concluded our last session recognising that skills and capabilities were going to be a defining element for procurement teams, either being recognised as true business advisors, or as those that have yet to transform.

Next Steps

Our 2016 ‘Productivity in Pharma’ Think Tank will focus on “How to grow the skills to drive next-level procurement”, in order to face the formidable challenges of the future.

We are delighted to announce that Procurious will be joining us in order to chronicle the events, conversations and outputs over the course of the three days. This is a great opportunity for our members to get to know Procurious, but also for members of the Procurious community to gain a unique insight into this event.

Our first session kicks off on April 26 in Basel Switzerland, with 13 of the 15 membership slots already confirmed. If you are in the Pharma procurement field and are interested visit our website or drop us an e-mail.

Productivity in Pharma - Giles BreaultGiles Breault, co-founder of The Beyond Group AG, is an acknowledged expert in the field of Global Procurement, Productivity and Offshoring/Outsourcing. He has strategic and operational experience in the Pharmaceuticals, Electronics, and Aviation industries.

Productivity in Pharma - Sammy RashedSammy Rashed, Principal and co-founder of The Beyond Group AG, is a procurement strategist and productivity advisor with 25 years experience in senior management, primarily focused in the Pharmaceutical industry. He has become a recognised thought leader on growing procurement into a broader productivity champion.