Raise Your Glasses to the Cloud

Does being stuck in our ways, and doing things “the way they’ve always been done”, mean procurement misses out on the benefits of the Cloud?

The Cloud

You can download the latest GEP white paper on the impact of cyber security, and the benefits of a cloud-based procurement technology solution here.

You can buy flip-flops that have a bottle opener built in to the sole.  Notwithstanding the sartorial choice of sporting said footwear, the synthesis of the two household objects into one ‘solution’ was clearly something born of necessity, or desperation, or more likely both.

The crown cap on a beer bottle, the correct name for which is actually a misnomer – the ‘crown cork’ – is 124 years old and still going strong. The ubiquity of the particular type of stopper means that almost everyone can access a tool designed with the express purpose of removing one, but finding oneself on the beach without one can lead to some unusual inventions, or some risky and occasionally painful improvisations.

Bottle Opener Flip Flops

Necessity – the Mother of Innovation

What is surprising is that it took seventy years for someone to come up with the bright idea of combining the crown cap with a screw thread on the bottle – negating the need for a tool altogether, and even today bottles of beer that one can open with a simple twist are far from the norm.

Interestingly, that most useful combination is still limited to mass-production, mass-market brands, and rarely or never to be found on small-scale, independent, or craft brewery products.

The same, of course, applies to wine. There is unquestionably a huge resistance to screw caps on premium products from the industry, the consumer and the media alike.  Until, that is, you actually talk to the real experts.  Not the self-appointed armchair connoisseurs – I’m not being denigrating, I’m definitely guilty-as-charged – but those who really know their stuff.

I’ve met wine producers, merchants and critics all of whom are desperate for the screw cap to be considered as acceptable at the “high end”, as at the mass-market end, because the product is only better as a result.

Consider the labour-of-love winemaker who has to play Russian Roulette with their prized vintage every time a piece of possibly-contaminated tree bark gets stuffed in the neck of a bottle.

But, on the whole, we consumers feel it cheapens the product, and the lack of ritual and satisfying “pop” detracts from our enjoyment of the contents. The real experts say it’s just snobbery – and, of course, they’re right. But today there remains a relatively low ceiling on what a restaurant can charge for a bottle with a screw cap. Good wines simply don’t come in screw-capped bottles.

What finally convinced me of the ridiculousness of that position was finding myself with wine but without means of access. Today I find myself tutting in a very English manner if I find I need to go get a corkscrew to open a bottle.

Migrating to the Cloud

I find myself in the same mindset when thinking about the Cloud.  For a while I felt somehow discomfited by the idea of putting all my files, and music and images and books and data in the cloud, preferring instead to create my own personal cloud of NAS drives and IP sockets so that I could access what I wanted, wherever I was, but I would still ‘have’ all my data.

How daft is that? If my NAS drive goes down (which it has) who has to run around in a panic trying to fix it? If I move house or country (which I have) who has to handle the business of relocating and reconfiguring equipment to deal with the change?

You see the point, I’m sure. I was on a hiding to nothing. Insisting on a model of how data storage should be, because that’s how it’s always been, supported by some spurious mythology of physical location, is no different to saying screw-caps cheapen the experience of drinking wine. Nonsense.

Cutting away all the snobbery and enjoying wine starts and ends with glass to mouth. What happens up to that point might be interesting, but it’s not in the least relevant.

Now I find myself tutting in overly-dramatic fashion if the service or software I need is NOT available in the Cloud. Install? Oh, really!

Cloud computing is a loaded subject. There are genuine concerns, and genuine things to be concerned about, when considering moving business critical systems into a new environment.

But, let’s make no bones about it, you need to be thinking about those things anyway. The threats and risks won’t go away if you choose not to pay them any attention.  But the opportunities sure will.

We’ve applied a great deal of brainpower to design and build a cloud procurement platform that delivers a massive bang-to-buck ratio, in a secure and highly performant environment, and our two-part paper, ‘Securing Procurement in the Cloud of Tomorrow‘, is designed to help business and IT people alike start a meaningful dialogue on the subject. The Cloud is here, it’s huge, and growing.

But even now I catch myself out. Trying to improve performance of my video editing capability at work I spoke to our splendid and ever-cheerful head of IT about getting some kind of box dedicated for the purpose.

“Have you thought about a cloud video-edit-suite solution?” he said.

Well, d’uh!

Enterprises should be moving their procurement processes to the Cloud, say GEP. For more on this, download the latest white paper research.

For more information on high-performing procurement software, visit the Smart by GEP website.

Is Any Profession Safe From AI Disruption?

Would you trust an “artificially intelligent colleague” to solve your legal disputes? It may be closer than you think as AI and cognitive technology advances prove no industry is safe from disruption.

AI

At the end of last week, it was announced that a major US law firm, Baker & Hostetler, had hired Ross to run its bankruptcy practice. Not major news you might think, until you realise that ROSS is the world’s first “artificially intelligent attorney”.

Built upon the same concept as IBM’s Watson, and using the same cognitive technology, ROSS is another example of a major technological disruptor, and proof that no profession is safe from the advance of AI.

Setting a Precedent

In many ways, ROSS is very similar to the original Watson technology. The AI can read and understand language, generate hypotheses for questions it is asked, and can back up these hypotheses with research and citations from legal literature and cases.

The success of ROSS is centred on how it learns. As the AI interacts more with its human colleagues, it learns from its experience, getting more intelligent and faster at problem solving with each task it does.

It can also perform these tasks faster than human counterparts, examining thousands of documents in a fraction of the time it would take a person to do. It is also able to filter these results, and only presents the most relevant cases and citations from the data available.

Although Baker & Hostetler are the first to publicly announce signing up ROSS, Andrew Arruda, CEO and co-founder of ROSS Intelligence, has confirmed that a number of other law firms have already signed licences to use ROSS too.

Big Data for Recruitment

Big Data, AI and cognitive technologies all go hand in hand, with many seeing Big Data as a key driver behind the development and advancement of the technologies. At the Big Ideas Summit, Barry Ward, Procurement Brand Manager at IBM, stated that 80 per cent of the data available to us is unstructured.

Unstructured data is difficult for humans to sift through, and find relevant information with any speed. Cognitive technologies, such as IBM Watson and ROSS, have been designed specifically to work with this unstructured data. While the potential applications for procurement from Big Data have been spoken about extensively, it’s to the recruitment industry that we look now.

A recent edition of the BBC Radio 4 In Business programme highlighted the work of Bill Nowacki, MD of Decision Science at KPMG. Nowacki works with Big Data, trying to improve the way organisations work, by analysing the data available to them.

One facet of this is uncovering the so-called “data trail” left by individuals when they use electronic devices, search on the Internet, and post on social media. All this data can be pulled together to generate a picture of the individual in question.

In a corporate setting, it can show how people are performing. There are further applications in the recruitment process too. Potential candidates can be identified by on comparing them with high performers already in the organisation, as well as assessing the candidates for cultural fit.

The benefit of using Big Data and cognitive technologies in recruitment is the lack of bias in the process. Whereas human interactions can fall victim to inbuilt bias, the technology has no such issues.

And as the technologies learn from experience, it’s possible that the recruitment process may benefit from greater understanding of personality traits, individuals’ values and norms, and create a fairer process all round.

Events in Brief

A couple of final pieces of news from Procurious this week include what you’ll be seeing on the site soon. We’re attending Coupa Inspire and ISM2016 and we’ll be bringing all the major headlines and information from these great events in the coming weeks.

Last week was Coupa Inspire, where the business announced that it had connected its 2 millionth business on its Open Business Network, plus Sir Richard Branson, and his son Sam, gave a keynote address on a variety of topics including the importance of philanthropy, leadership and inspiring others. Plus Sir Richard also talked about his plans to build Virgin Hotels in space!

Stay tuned for more on these topics soon!

What do you think of the latest AI developments? Do we have anything to worry about from AI in the future, or is it just the stuff of science fiction? Let us know your thoughts.

Each week we sniff out the top procurement and supply chain headlines for you to enjoy…

Concerns over US Retail Sector Health

  • Macy’s, the largest department store chain in the US, has increased fears over the health of the US retail sector with its poor Quarter 1 results.
  • The company announced its worst quarterly sales since 2009, with sales falling 5.6 per cent, for a fifth consecutive quarterly decline.
  • A move away from traditional stores to online shopping and fast fashion has been blamed for the struggles of many companies in the retail sector.
  • With consumer demand not expected to increase for department stores, Macy’s is now intensifying its cost cutting efforts.

Read more at the Wall Street Journal

Switzerland Tops Global Supply Chain Index

  • Switzerland has taken top spot in the 2016 FM Global Resilience Index, unseating 2015 leader Norway.
  • The index ranks the supply chain resilience of 130 countries according to nine drivers that affect business vulnerability.
  • Falling oil prices have been blamed for the falling ranking of Norway and a number of other countries, including Kuwait and Venezuela.
  • Terrorism has also been a factor in the 2016 rankings, with Belgium, Pakistan and Nigeria all dropping down the list.

Read more at Supply Management

Release 15 Announced at Coupa Inspire

  • Release 15 is Coupa’s second major release of the year, delivering a number of enhancements across the platform.
  • Hyperlocalised Languages addresses local language requirements across 100 countries, along with terminology unique to individual businesses, by allowing customers to modify Coupa’s 20+ languages for their own purposes.
  • Updated Sourcing Recommendations Engine enables savings initiatives to now be recommended based on predicted trends in expenses spend.
  • The New Supplier Risk Recommendations Engine monitors supplier data and reports on risk triggers including expiring certificates and outdated information.
Read more at Coupa

£30m Reasons Why UK Businesses Should Recycle Ink Cartridges

According to new research, British businesses stand to save up to £30 million per year if they recycle their used ink and toner cartridges.

Recycle Ink Cartridges

UK printing firm CartridgePeople.com surveyed 1,000 UK workers on their recycling policies and processes within their organisations.

The research found that just 11 per cent of these organisations currently recycle ink and toner cartridges by sending them to a recycling centre, or refilling with ink to reuse in the business. This is an increase of 5 per cent from a previous survey carried out in 2014.

And, based on recycling costs provided by recycling organisation, Empties Please, these habits could be costing UK businesses approximately £30 million per year.

Business Falling Behind

More than 40 million ink cartridges are dumped each year in the UK, instead of being reused or recycled. If disposed of in general waste, ink cartridges can take up to 1,000 years to decompose.

CartridgePeople revealed that businesses in the UK are failing to reduce their carbon footprint in the office, despite the increase in household waste being recycled in the UK.

When questioned on the reasons for not recycling ink cartridges, 38 per cent of respondents confessed that there are currently no processes in place to encourage recycling at work.

The survey also revealed that 1 in 20 employees in the UK choose to ignore the recycling policies that do exist in workplaces, and put everything in general waste.

CartridgePeople.com spokesperson, Andrew Davies, said: “Many businesses and workers are unaware of the savings and extra revenue that can potentially be made from recycling ink cartridges. Ink cartridge recycling firms can pay up to 75p for original branded, or even remanufactured, ink cartridges.

“An individual ink cartridge can be reused or remanufactured by an ink cartridge recycling centre up to seven times, which reduces the amount going straight into landfill. We work with many companies in the UK to help reduce their carbon footprint and wastage, by supplying ink cartridge refill kits and tanks amongst other recyclable office supplies including LED bulbs and stationery.”

In the UK, the industries with the most green office policies are:

  • Design, Media and Marketing
  • Education
  • Manufacturing
  • Food and Catering
  • Administrative and support services

The financial and legal sectors currently have the fewest green policies of all the industries covered in the survey.

Reducing Carbon Footprint

CartridgePeople offered the following tips to businesses to help reduce their carbon footprint, and encourage recycling within the office environment.

  • Green Printing

To reduce financial and economic damage during the printing process, businesses can recycle or refill ink cartridges, use recycled paper, and keep hardware such as printers up to date. A new printer will be more energy efficient, in addition to producing an improved quality of print.

  • Switch Off and Unplug

Encourage all staff and employees to switch everything off at the end of the day, including all lights and equipment. This will not only save money on energy bills, but reduce overall consumption.

  • Which Bin Is It In

Make it easy for your company to recycle, by introducing paper and plastic bins for workers in which they can easily recycle their waste. In addition to this, businesses produce technological waste such as mobile phones, cameras, obsolete laptops and computers, which can be toxic for the environment when sent to landfill. There are many companies that will recycle and refurbish old tech.

CartridgePeople.com is a leading UK retailer of high quality printer ink cartridges, supplying home users, businesses and public sector organisations including schools and Government departments.

Supply Chain Sustainability: A Strategic Responsibility

Supply Chain Sustainability is in the spotlight, thanks to the influence of social media. Companies realise that they must lead the way in this area.

supply chain sustainability

The supply chain function has evolved significantly over the past decade, becoming a key strategic pillar of business. Going beyond its core role
 of delivering goods on time, in full, it has a vital role to play in customer experience and brand perception.

Supply chain now has a seat in the boardroom in many organisations. Barely a week goes by without a supply chain issue – be it supplier failure or reputational risk – hitting the headlines and the share price.

The proliferation and influence of social media has put supply chain sustainability and risk firmly in the spotlight. Companies are publicly held to account for the actions of all tiers of their supply chain. This is why companies must lead the way on sustainability issues.

Supply Chain Sustainability

The sustainability discussion evolved from companies purely focusing on taking from society and wanting to give back, to realising there are risks to reputation from non-compliance.

Sustainability issues are often supply chain issues. For example, the introduction of the Modern Slavery Act aims to ensure that slavery and human trafficking is not taking place in businesses or supply chains.

Today, however, organisations are now seeing supply chain sustainability as a strategic opportunity that can increase competitive advantage.

Two main streams have emerged:

  • The risk dimension: what do companies have to do to avoid risk of brand damage?
  • The aspiration dimension: what is the strategy for the long-term survival of the  business?

Creating a Positive Impact

Supply chain sustainability is increasingly seen among senior executives as essential to delivering long-term profitability. A sustainable supply chain captures value creation opportunities and offers significant competitive advantages for early adopters and process innovators.

At the same time, supply chain is one of the key components for organisations 
to create a positive impact in the world, with an estimated 80 per cent of global trade passing through supply chains. Many large corporations, such as Nestlé and Nike, want to do good business and do the right thing.

A recent study on the global supply chain community saw three current trends emerging on supply chain sustainability in 2015/2016:

  • Industry collaboration is the biggest opportunity
  • Eliminating supply chain risks is the main driver
  • Traceability and environmental concerns are the biggest risks to watch out for

Industry Collaboration

Starting with ethical and responsible sourcing, supply chain professionals have begun to understand the importance of building long term relationships with suppliers. Having a win-win partnership is crucial. Companies who are a valuable customer to their vendors will have a considerable competitive advantage.

Organisations are demanding more 
from their suppliers. Traceability and transparency are key requirements. Companies sharing their big picture vision with their suppliers, and their role in the long-term strategy, will get more from their partners. Too many businesses are still failing to achieve this. Partnering with suppliers empowers them to unlock innovation quickly.

Working on more collaborative partnerships helps to minimise the risk factors too. Companies are liable for all tiers of their supply chains. Increased collaboration with others is vital to be
 able to efficiently assess all layers of the supply base.

Organisations can never 
be too informed if they want to prevent risk. They also need to demonstrate they have acted responsibly when risks are exposed. Companies must start with themselves, and build open and transparent relationships with their suppliers.

Codes of Conduct and Audits

Some pharmaceutical organisations,
 like Takeda, have recently established
 a supplier code of conduct in line with
 their international business ethics. They proactively audit and monitor their vendors to review performance in line with this code. It helps Takeda to have a much stronger supplier selection process, as they are able to build stronger relationships and reduce risk exposure.

Collaboration with other industry leaders can be very valuable in sharing information when it comes to supplier audits. Takeda recently joined the Pharma Supply Chain Initiative, composed of 20 companies. It has a supplier audit program and engages with the suppliers on behalf the member companies to make sure they comply. It also raises awareness from an environmental and ethical point of view.

Collaborative Platforms and NGOs

However, collaboration between businesses from the same industry is not widespread. Many companies fear a loss of commercial control and competitive advantage by working closely with others. As a result, there is an emergence of collaborative platforms. One of these is EcoVadis, which works with many global brands to provide supplier sustainability ratings for global supply chains.

Collaboration can also take the form of partnering with NGOs. They can help and guide organisations on environmental
 or ethical issues. Greenpeace is one such organisation. In the past they have worked with Kimberly-Clark to practice responsible forestry management, as well as Unilever and others on palm-oil sourcing. In building those partnerships, the willingness to talk is key, particularly when there is a history of conflict.

Supply Chain Sustainability can also be a source of competitive advantage for organisations. Stay tuned for the second part of this article to find out more.

Are Procurement Professionals Stuck in the Stone Age? – Part II

Is procurement losing ground by having antiquated, “stone-age” technology solutions? Why are B2B solutions struggling to keep up?

Stone Age Computers B2B

This article was originally published on Market Dojo.

In the second article in this series (you can read the first part here), Anya McKenna, of Market Dojo, and Ed Cross, of Odesma, ponder why B2B software remains stuck in the past, while B2C software is moving forwards in leaps and bounds, providing users with the experience they want.

The question is why big B2B software solution providers have not changed and emulated B2C? We would postulate the following reasons:

  1. Customer demand or acceptance.
  2. Drive for consulting revenues by providers.
  3. Decision makers equate complicated to valuable.
  4. Industry  Research organisations are in the pocket of those who pay and report as such.
  5. Existing suppliers balance sheets stifle innovation or change due to the impact on profit of asset write downs.
  6. Big business inherently do not trust small innovative start ups / CIOs don’t get fired for selecting the old guard.
  7. B2C companies are not interested in selling to the B2B customer base.

In order to fully understand this, we need to look at each of these points in more detail:

  1. Customer demand or acceptance.

Interestingly there does not appear to be a huge clamour amongst B2B customers to secure simpler, easier systems.

Take SAP or Oracle for example. They continue to dominate their sector (SAP acquired Ariba for $4.3 billion), and continue to thrive, making little effort to simplify and re-invent with ease of use at the heart of their solutions.

Whereas, in the B2C arena, there is no choice for the providers. Millions of users’ voices are being heard, and all leading solutions, from Amazon to AirBnB, are simple and easy to use. Perhaps the imperative to change amongst B2B players is just not being voiced by action.

  1. Drive for consulting revenues by providers.

The prevailing model for providers is to maximise revenue (after all they answer to shareholders), and they have predominantly built models that support this goal. They do this by securing licence annuity, and augment this with implementation, training, consultancy and delivery services.

Take a leading and long established eSourcing provider for example. They provide a complicated and unintuitive, but effective, solution for e-Sourcing, which they support with a very large consultancy practice (600 professional staff delivering revenues of greater than €70 million).

Though figures are not available we might hypothesise that at least 50 per cent of the revenues are consulting and support related. Clearly it is not in any legacy B2B providers interests to simplify the user interface, due to the resulting loss of support revenues.

  1. Decision makers equate complicated to valuable.

Is it human nature in business to expect business solutions to be inherently complicated?

Look at Jive, a sort of Facebook for business. Whereas Facebook is really easy to navigate and personally manage intuitively, Jive is not.

Given Facebook came first, and Jive built a similar tool, albeit for a closed company environment, is it that those that selected it, measured its value in terms of its complexity?

  1. Industry Research organisations are in the pocket of those who pay and report as such.

A rather contentious point perhaps, but when looking at Gartner’s report on the e-Sourcing market a few years ago, they had only just added a 7th criteria to their analysis: Ease of Use.

Gartner had historically focused on functional components – i.e. spend analysis, contract management, etc. (making up 4 of 7 criteria) – alongside technology platform and business services.

Additionally the analysis of providers generally only lent itself to the bigger or more established players. The 2013 report included fewer than 30 suppliers, with the leaders in their opinion being the likes of IBM, BravoSolution, Ariba, GEP, and SAP.

Very few emerging and new players are included. This may be due to time constraints, but clearly is at the detriment of newer, and easier to use, solutions.

  1. Existing suppliers’ balance sheets stifle innovation, or change due to the impact on profit of asset write downs.

It is a fact of business that the balance sheet plays a large part in driving companies’ behaviour, especially if they have many millions of $/£ intangible asset value.

SAP had Intangible Assets of €25.6 billion on revenues of €17.6 billion in 2014. A write down in an asset, results in an equal write down in profits. Institutional shareholders typically take fright (and flight) at write-downs. Therefore re-inventing the hegemony of existing solutions, requires a potentially significant investment and potentially a write down in previous investments – this is not something the neither executive nor board will countenance.

Is it therefore a surprise that existing solutions lack innovation in the user interface, which may well require re-programming in a newer language?

  1. Big businesses inherently do not trust small, innovative start ups; CIOs don’t get fired for selecting the old guard.

When was the last time the CIO of a large corporate suggested taking a risk? Corporate behaviour is typically risk averse. It is much safer to select a proven provider such as IBM or SAP, than take an opportunity to shake the tree.

This therefore precludes newer, start-up technologies that will deliver often much more cost effective, easier to use solutions. Coupa are making real inroads here, but few others are.

  1. B2C companies are not interested in selling to the B2B customer base.

The question is why don’t Amazon, or Tesco for that matter, move into the B2B space? They provide a huge range of products that businesses use. Yet they generally haven’t, other than grudgingly, thought to move into the B2B market – it is not part of their strategy.

However, we understand this is changing at Amazon! They believe their market is the consumer, not business, possibly because they are much simpler to deal with, pay immediately and do not add massive administrative, process and management burdens (i.e. contracts, risk questionnaires, etc.), which corporates do add as a matter of process.

But will this change? We postulate it is slowly shifting, with B2C principles slowly coming into the B2B World. In our follow up we will discuss this shift in some detail.

Market Dojo and Odesma have partnered to combine their intuitive eSourcing software and expertise in offering business advisory services to offer clients a winning procurement solution.

Happy Birthday – Procurious Is Two!

It hardly seems like any time at all, but it’s been two years to the day (nearly!) since the launch of Procurious. While wishing the site a happy birthday, we look back at how far we’ve come.

2nd Birthday Cake

On May the 14th 2014, the Ebola epidemic was sweeping through East Africa, Ukraine was on the “brink of civil war”, Scotland had scored a chart double with Calvin Harris and Paolo Nutini at number 1, and Donald Trump was still considered a celebrity/businessman, rather than a US Presidential candidate.

And under the shadow of the Sydney Harbour Bridge, at the 7th Annual Asia-Pacific CPO Forum, hosted by The Faculty, Jack Slade stood up and announced the launch of Procurious to the assembled audience.

Getting Started

In the room that day, amongst a Who’s Who of Asia-Pacific CPOs and Procurement leaders, were two future Procurious employees, and a host of people who would be the site’s first movers. At the time, the site was just finding its feet as a community-based, niche network for Procurement and Supply Chain professionals.

The idea of Procurious, originally conceived as a procurement news service, took flight in late 2013, and was steadily developed and streamlined until the site you see today was formed (well, the first iteration at least!).

It took just under 6 months for the site to add its first 2000 members, with first movers coming from across the globe as the word spread. By Christmas 2014, the site had over 3000 members, was engaging with professionals from around the world, and over half of these members returning to the site on a monthly basis.

Making Strides

From that point on, there’s been no stopping Procurious. Earlier this year we celebrated our 10,000th member, but didn’t stop there. As it stands now, the Procurious community numbers nearly 14,500 people from over 140 countries, at an average of 6 per cent week on week growth.

You can see some of our stats in the infographic below:

Happy Birthday Procurious

At the heart of Procurious we want to help build the image of procurement, share learnings and provide a platform for information gathering and collaboration. In the past two years we have seen the following on the site:
  • A truly global community of over 42,000 people across Procurious and our social media channels
  • Coming up on half a million unique sessions from over 220,000 users
  • Over 2 million page views since May 2014, and over 690,000 page views since the start of 2016
  • Over 1,000 high-quality, original blog articles published on topics ranging from procurement systems and sustainability, to community empowerment and breathing techniques
  • 771 discussion questions asked; over 3,500 community answers provided
  • Over 100 free eLearning resources published to the site (with over 100,000 views on YouTube collectively)
  • Over 600 procurement and supply chain events listed

And that’s not to mention two very successful, and well regarded Big Ideas Summits in 2015 and 2016, with more events to follow this year, and Big Ideas 2017 already in the works!

The Future

We’re already excited to see what the next year has in store for Procurious, and are looking forward to taking the site to the next level with your help.

All that is left for us to say is thanks for all your help in making Procurious what it is today. Join us in making a Happy Birthday toast to Procurious, and have a glass of bubbly and a slice of virtual cake on us!

Challenges Ahead for Buyers Making Late Payments

Few buyers are aware of changes to late payment regulations, as well as the potential penalties for making late payments to suppliers. 

Late Payments Main Image

In the modern procurement world, there are many hurdles to timely payment that exist on both sides of buyer-supplier relationship. Overcoming these, and ensuring that organisations are not making late payments, is a key way to build good relationships.

New Hackett Group research has found that nearly one-quarter of all supplier invoices are paid late (Fig. 1). Despite the working capital benefits, only a very small percentage of respondents to The Hackett Group’s Payment Practices Poll, intentionally pay suppliers late.

Fig 1: Common Reasons for Late Payments
Fig 1: Common Reasons for Late Payments

Most payments are simply delayed by slow approval processes, late receipt of invoices, or technology problems. That being said, there is a continuing trend for larger organisations to extend their payment terms, or make unilateral contract changes aimed at slowing the payment clock.

Well over half of procurement organisations surveyed by The Hackett Group were not aware of legislation and government initiatives to encourage faster payments to suppliers. Further, because it is uncommon for suppliers to charge interest or fees for late payments, 76 per cent have no plans to pay suppliers for late payments.

In general, late payments have a proportionally higher impact on smaller suppliers’ financial positions. These may be the very same companies that buyers have committed to help grow as part of their diversity and supplier development strategies.

Why is there such a large disconnect? And what needs to change?

This disconnect has become an important economic issue for several reasons. Banking regulations like Basel III have tightened bank capital requirements and financing costs, thereby reducing financing funds available for smaller companies.

There is also a belief that money unnecessarily caught up in the supply chain counteracts growth in the economy (e.g., missed business opportunities, financial distress), causing additional concern.

Given the higher risk of financial penalties being incurred for late payments, companies purchasing goods and services from SMEs need to resolve any process issues to enable a more efficient payment program.

What can buyers do to avoid late payments?

Not only do late payments cause operational issues and loss of discounts for early payment, they can also hurt relationships with suppliers and result in financial penalties due to contractual obligations and government regulations.

Buyers should start by looking internally to ensure better communications, processes, and automation around the payment process. Payment organisations can also look externally, to their suppliers, to improve the payment process.

Although buyers are ultimately the main driver, suppliers can still influence the timing of payments through the use of various strategies. Buyers should work collaboratively with suppliers to implement both internal and external changes spanning from people to process to technology.

Learn more about Hackett’s Procurement Executive Advisory Program here

Laura Gibbons is a Research Director for The Hackett Group’s Procurement Executive Advisory Program. She has industry and consulting experience in areas such as purchase-to-pay, strategic sourcing, payment strategies, manufacturing operations, economic impact analysis, and organisational and process design. You can contact her via email at: lgibbons@thehackettgroup.com.

What is the Biggest Challenge Facing Procurement?

From talent management, to ethics and transparency, there are some major challenges facing procurement in the current environment. But which is the biggest challenge?

Biggest Challenge

When considering the potential issues and risks that procurement professionals need to be aware of in their day to day work, it’s difficult to single out one in particular requiring greater focus than the rest.

In fact, if you were to ask the question of what is the biggest challenge currently facing procurement, the chances are high that you would get a considerable number of topics listed. However, that is exactly what Deltabid did with a survey of over 500 procurement professionals. More on this shortly.

Blind Spots

During the Big Ideas Summit 2016, Procurious asked its delegates to tell us what they considered to be procurement’s blind spots, and major areas of risk, in the coming years. Our panel of experts highlighted these areas:

  • Too great a focus on savings
  • Dealing with the wider business
  • Talent attraction and management
  • A lack of ambition in procurement
  • Working with legal teams

A contributor to the Procurement Leaders blog commented that, “CPOs face one of the most complex roles in an organisation”, and highlighted skills required for the future including a focus on strategic relationships, management of global supply chain risk and use of big data.

At the 9th Annual Asia-Pacific CPO Forum, The Faculty will be discussing the need for procurement to leverage supplier-enabled innovation, and a focus for procurement on SRM in order to make this a reality.

And when you consider the prevalence of stories and news reports on sustainability and supply chain transparency, it seems we are reaching a point where not only can we not reach a consensus on what the biggest challenge is, but also facing a lack of understanding about how we tackle these challenges.

Making Progress?

The other issue to consider is whether or not the procurement profession is making progress dealing with its biggest challenges. A quick search reveals a number of articles from the past couple of years asking a similar question of procurement leaders, including this one from Spend Matters.

In it, the top 5 challenges for CPOs are highlighted, including mitigating spend creep, the visibility of realised savings, compliance, technology, and procurement skills and capabilities to deliver on strategies. Starting to sound familiar?

What procurement must do is set out to tackle these challenges, and actually make some progress on them, instead of moving on to the next thing. And also to realise that these challenges don’t go away – it’s going to be a continuous process.

Biggest Challenge

This circles back to being able to identify the biggest challenge facing the profession, and perhaps assessing an order for them to be in, and a plan of attack for meeting them head on. This is where Deltabid’s research can help.

A survey of over 500 procurement professionals found that the biggest challenge was supplier-related issues, including finding and qualifying suppliers and maintaining consistent supply, with strategy selection, and cost reduction making up the top three. You can see the full results in the infographic below:

Procurement Biggest Challenge

While the results may not be surprising, they go some way to helping generate a consensus on the biggest challenge facing procurement. It’s now down to the profession as a collective entity to work out the best way to tackle these challenges.

One of the best ways of doing this is by collaborating openly, sharing knowledge, information, and lessons learned, and flexing our collective muscle in order to change the profession for the better.

If you have any comments, ideas, thoughts, or anything else you would like to share, please let us know in the comments below. If you have also had successes in dealing with any of these challenges, then we would love to tell your story!

Creating Community Empowerment With Football

How taking an interest in football can help put community empowerment at the heart of public procurement.

Community Empowerment

Lots of public bodies at national, regional and local level like to talk about community empowerment don’t they? That’s because promoting community empowerment is perhaps the holy grail of participatory democracy.

Many politicians and policy makers believe that getting communities more involved in what public money should be spent on and, more importantly, why, will lead to improved outcomes for people and their communities. And there’s plenty of evidence to back this up.

For procurement, tasked with delivering more for less, increasing community empowerment could also mean that the ever-decreasing pot of cash available to spend on public services could actually be deployed in a much more effective way.

Empowerment and Football?

So what we can we do in procurement?  How could we promote community empowerment and what benefits could that bring?  When I was searching Google for examples, strange connections started to occur.  Wherever I found a good example of procurement and community engagement, great football, or soccer to those of you on the other side of the pond, was also evident too. You don’t believe me? Well read on…

Let’s start in the home of sexy football, Brazil.  They’ve been doing a thing called Participatory Budgeting there for a number of years, and it’s a great way to do community empowerment at the front end of the procurement process. Participatory Budgeting in Brazil is an approach which gives local people a direct say in how, and where, public funds can be used to address local requirements.

It started in a place called Porto Alegre in southern Brazil over a decade ago. The first phase of participatory budgeting was to get people together to prioritise how money should be spent, and where investment should go. Should it be parks or water supply, or schools or roads? People at the grass roots of the community were asked to come together in neighbourhood assemblies, and make those decisions.

As the process matured people were able to take decisions at an increasing lower level.  From choices between thematic areas, to choices between services within a theme, to choices about what the specification for that service should be.

So people at the front end determining priorities. Something perhaps we already get involved in from a procurement point of view through User Intelligence Groups, particularly when we have service users involved in that process.

Community Empowerment

What they’ve done in Brazil is a start, but how could we shift control even more directly to people’s hands and empower communities through procurement?

To have a look at how this might be done I moved on to another football hotspot – Spain. I zoomed in on a city which features on a daily basis in my house, and probably every household that has football crazy kids in their midst. Now the football club might be having a great season, but the real reason why Barcelona is a great place isn’t the sublime football of Messrs Neymar, Messi and Suarez.

It’s their approach to procurement using open problems that was the real wow factor for me. Instead of coming up with a specification for a service, they’ve specified the problem, and then gone to the market and asked suppliers to solve it.

They asked people from geographic communities, or communities of interest, to identify what needs they have, and then turned it over to the world’s entrepreneurs to solve them.

Barcelona’s approach was successful. They had 50,000 views of their contract notices, and ultimately let six contracts in this way for issues ranging from tackling bike theft, to systems to tackle social isolation, and empowering local retailers using technology. The thing to understand here, is that communities don’t always know the answer to what they need at the outset – they just know they have a problem.

This method of empowering them to say what they want to change and then enabling them to choose what the answer should be from a range of options, some of which they might not even have considered, is very powerful and procurement is right at the heart of it.

Going Remote and Rural

But is it just in big cities and the regions where these community empowerment approaches might work? Could we use them in remote and rural locations?

My final destination is in one of the great footballing heartlands (well we like to think so anyway!) – Scotland, and my own organisation in the Outer Hebrides.

We wanted to improve community empowerment and link it to a procurement process and so we gave a combination of Brazil and Barcelona a try.  We used a bus service contract but flipped the requirement on its head so we went out to the market to seek travel solutions for people without cars – the problem we sought to solve.

We engaged with the community to identify needs, drive specification development and score the tenders. We embedded community engagement the length and breadth of the procurement process.

To make this happen we assembled our squad of players. The Transport Team in defence, yearning to retain the old ways of doing things, community workers in midfield being creative with their consultation techniques, corporate policy playing in goal making sure we didn’t make any strategic blunders, and finally our strike force, the procurement team, taking all the needs, creativity and service requirements, and converting this into the winning goal by putting a great procurement process and contract in place.

With a 5 per cent budget saving delivered over the lifetime of the contract we clinched the trophy with no need for extra time.

Footballing metaphors aside, promoting community empowerment as part of the way we do things gives those of us in public procurement a real opportunity to shine.

It’s a chance to showcase our talent – getting the right people to have the right input into the procurement process at the right time.

It’s a chance for us to stretch ourselves and learn new techniques. To work with different types of people, using different engagement techniques, at different points in the procurement process.

And it’s the chance to deliver more for less, to provide real answers to the challenges of austerity, and to score that winning goal!

Supply Chain Transparency: Why We Need It More Than Ever

As scrutiny over supply chain practices increases, organisations need to ensure supply chain transparency, from Tier 1, all the way down.

Supply Chain Transparency

This article was first published on Greenstone.

As non-financial reporting frameworks and requirements for organisations evolve, so does the need for transparency throughout supply chains. There is an ever increasing emphasis within current, and upcoming, regulations on being able to demonstrate a deeper understanding of your suppliers and vendors.

Most recently we have seen evidence of this advancing mood through the UK Modern Slavery Act, the EU corporate disclosure directive, and, of course, the Dodd Frank Act covering conflict minerals.

Last summer UK Prime Minister David Cameron further clarified the criteria surrounding the UK government’s commitment to anti-slavery and supply chain transparency in a speech in Singapore.

The prime minister stated: “From October [2015], we will also require all businesses with a £36 million turnover or above to disclose what they are doing to ensure their business and supply chains are slavery free. This measure is one of the first of its kind in the world, and it will be a huge step forward, introducing greater accountability on business for the condition of their supply chains”.

Legal Requirements

Guidance for compliance with the Modern Slavery Act was published in October 2015. And businesses with a turnover of greater than £36 million have some work to do. This includes involving internal buyers and procurement departments so that they are aware of any potential implications of the Modern Slavery Act, and can prepare to embed it in their processes. As well, as including the requirements into any current audit practices.

Supply chain transparency is also being driven by EU Directive 2014/95/EU, relating to disclosure of non-financial and diversity information. This requires by 2017, that all companies concerned (all companies based in the EU with over 500 employees) disclose in their management report, information on policies, risks and outcomes with regards to the following:

  • Environmental matters;
  • Social and employee aspects;
  • Respect for human rights;
  • Anti-corruption and bribery issues; and
  • Diversity in their board of directors.

Even though there are already mandates around CSR reporting in some EU countries, and many large enterprises already report on their environmental and social impact, the new directive will demand further commitment, as it also requires disclosure on the supply chain.

Placing Responsibility on Companies

The Dodd Frank Act, also known as the conflict minerals law, has been in operation for over two years. Under the law, over 1000 U.S. listed companies report their conflict minerals status to the Securities and Exchange Commission.

The law is designed to reduce the risk that the purchase of minerals from Central Africa contributes to conflict or human rights abuses. It places a responsibility on companies to be able to trace the designated minerals throughout their supply chain. This is something that can only be achieved through increased transparency of information at all levels.

Companies have struggled to accurately disclose information through their conflict minerals reports. They may also struggle with the Modern Slavery Act and the latest EU Directive. Like organisational level, non-financial reporting before it, supplier information disclosure and supply chain transparency is a new way of working for many businesses.

Those that address this area now will be creating robust processes that ensure a competitive advantage, as well as being well positioned for future legislation.

Role of Software

At Greenstone, we are increasingly seeing organisations turning to software solutions. This is not only to drive supply chain transparency, but to enable organisations to handle the burgeoning reporting requirements, and stakeholder expectations, efficiently.

Previously, supplier compliance has been a box ticking exercise for organisations. The processes of data gathering were ill conceived and incomplete, and information gathered was rarely interrogated, and almost certainly not used for reporting purposes. This lead to disillusionment amongst suppliers, and even lower levels of engagement.

However, we are now seeing that users of SupplierPortal are utilising the analytical tools available to manage suppliers and their data. The increasing emphasis on transparency and reporting means that organisations are no longer ticking boxes, but adopting new processes and procedures in order to identify and manage non-compliance.

What is more, is that this doesn’t have to consume a great deal of additional resource, but rather for organisations to acknowledge a new way of working, and realign current practices.

Gyles is Head of SupplierPortal at Greenstone, a non-financial reporting solutions company providing software and supporting services to clients in over 100 countries.

Greenstone’s SupplierPortal solution enables buyers to effectively manage supplier risk and compliance through a secure and private online platform. Buyers have the flexibility to distribute standard framework questionnaires, as well as proprietary questionnaires, to their suppliers and can then manage and analyse this information through a comprehensive suite of analytical tools.