Four tips for working with SMBs from the experts

Procurious caught up with Ed Edwards, Audience Outreach Manager at THOMASNET.com, to discuss his organisation’s recommendations on connecting with small and medium-sized businesses.

SMB big business

THOMASNET.com knows that it’s tough to connect with SMBs. The product sourcing and supplier discovery platform has been in the business of connecting buyers and suppliers for no less than 118 years. Recently, though, their analysts have noticed a worrying trend. “We run sourcing events through the platform”, says Edwards. “We discovered that large Fortune 500 companies were only getting a 12% response rate when they issued a sourcing event to 100 suppliers. Further investigation revealed that SMBs are increasingly unwilling to engage, and buyers need to make more effort in this respect.”

Why SMBs are important to you

Ignoring SMBs means turning your back on half of the potential supply base – in the US, 49% of manufacturers have between 5-99 employees. According to Edwards, the trend towards supplier consolidation is a false economy. “More supplier choices means less dependency, and therefore less risk”, he says.

It makes sense to source regionally from SMBs. THOMASNET.com’s research shows that 41% of organisations always prefer a local source, while 57% generally prefer a regional source. The further away your source becomes, the more risk and cost are introduced into the supply chain. Edwards explains that when things go wrong, you need to be able to respond quickly and creatively. “Local and regional SMBs can do things better with less resources at a lower cost”, he says. “They’ve got the advantage of being nimble and innovative.”

Working with SMBs is also one of the best ways to reduce costs, as there’s a strong correlation between the size of a company and the average payroll. A US manufacturer with 5–9 employees, for example, has an average payroll of $36,313 per employee, while a manufacturer with 500+ employees pays an average of $61,150. “If you only work with large suppliers, you’re going to be paying for their higher overheads”, says Edwards. “More bureaucracy equals more cost and less innovation – and more people equals more bureaucracy.”

Understand where SMBs are coming from

Small and medium-sized businesses often have an owner-proprietor and operate with limited resources. They generally need to be cautious in investing time and energy in pursuing new business, while running their existing operation. Common concerns held by SMBs around engaging with large buyers are:

  1. Can I fulfil the order?
  2. Am I wasting time bidding on an opportunity with very little chance of winning?
  3. What happens to my other business if I become beholden to a large company?
  4. What if the new opportunity becomes 50% of my business and it dries up?

Four recommendations for improving your relationships with SMBs

THOMASNET.com has worked with suppliers and buyers to create a list of best-practice recommendations for working with SMBs:

  1. Be transparent throughout the process to convey that winning your business is possible.
  • Outline your process upfront
  • Provide a timeline with milestones
  • Be specific regarding vendor selection criteria
  • Divulge who the decision makers are (if not by name, by role)
  • Convey number of suppliers under consideration
  • Provide case studies of similar relationships you have built with SMBs
  • Divulge why you are looking for a new supplier
  • Be specific regarding quantities.
  1. Simplify your process to increase the likelihood that more SMBs participate.
  • Only ask for information that is critical to the specific supplier qualification process
  • Break lengthy supplier questionnaires into smaller chunks.
  1. Humanise your process to build trust and reduce downstream confusion.
  • Leverage phone communication early in process
  • Provide specific Procurement and Engineering contacts
  • Provide feedback
    • Communicate timeline and process changes
    • Let suppliers know if they have been eliminated from consideration along the way
    • Let them know why they were eliminated.
  1. Consider shortening payment terms and offering financing to minimise your risk and ensure your suppliers have sufficient working capital.
  • Create a special program with reasonable payment terms for SMBs
  • Consider adopting a Supply Chain Finance Solution (reverse factoring).

“We’ve become very efficient at communicating in the 21st century”, says Edwards. “But at the end of the day, decisions are made when people connect with each other. That’s why I can’t stress enough the importance of humanising the procurement process if you want to connect with SMBs.”

ED EDWARDSEd Edwards enjoys educating procurement and engineering professionals on how to use THOMASNET.com’s Supplier Discovery and Product Sourcing platform to streamline and improve their work. As part of this mission, he provides customized training to organizations’ engineering and sourcing teams at their offices and online. Ed and his colleagues work together to listen to the challenges facing buyers, and help them address those issues as well as new opportunities.

THOMASNET.com exists specifically to help you find, evaluate, compare and contact suppliers for what you need, where and when you need it. Access 700,000+ North American suppliers in 67,000+ categories – create your free user account today.

*Update: Check out THOMASNET.com’s new eBook The ABC’s Of Making The Shortlist, written to help you shore up any shortcomings that may prevent you from making buyers’ shortlists and put you in position to win more business.

Editor’s Choice: 5 Big Ideas to energise your day

On April 21st, 50 of the world’s most influential procurement minds joined forces with over 14,000 digital delegates to crowdsource Big Ideas for the future of procurement.

Big Ideas

By popular demand, we’ve brought together five thought-provoking Big Ideas from some of the biggest names in procurement.

Big Idea – Millennial Talent Response


Nic Walden, Director – Procurement P2P Advisor at The Hackett Group, talks about the greater expectations that Millennials have for job roles.

From expectations about working on CSR projects and building sustainable relationships, to the technology that they will be working with, Nic argues that procurement needs to change the way they engage with the Millennial generation in the workplace.

Big Idea – Maximise Social Impact


Hugh Chamberlain, Commercial Procurement Lead at Johnson & Johnson, challenged procurement professionals to buy from social enterprises in his Big Idea.

Buying from these enterprises can help add value to society, the community and the planet, as well as giving buyers immense personal satisfaction.

Big Idea – Everyone Can Contribute


Nathan Ott, CEO e.g.1 Ltd and Director at The GC Index Ltd, argues that while not everyone is a ‘Game Changer’, everyone is capable of making a game-changing contribution, from the top to the bottom of the organisation.

However, in order to do this, organisations need to create a culture where it is safe to fail, and these ‘Game Changers’ are not seen as disruptive, pigeon-holed, or made to conform. Only by doing this can organisations create real step change.

Big Idea – Harness the Crowd


Lisa Malone, GM – Europe at Procurious, talks about how procurement can lead organisations in harnessing the power of the crowd, and the concept of ‘hackathons’ in order to drive innovation.

Hackathons provide an opportunity to work on the business, rather that in the business. They give employees the chance to take time out and come up with new ideas, and communicate and collaborate with people they would not have the opportunity to do so with otherwise.

Big Idea – Challenging Traditional Procurement


Lee Gudgeon, Client Engagement Director at REED Global, says that the increasing role of procurement has highlighted a shortage of candidates with the right skill sets available to come into the profession.

Lee argues that procurement recruiters also need to be up-skilled in order to recognise the relevant skills and capabilities required in procurement, in other functions, and open up the market to people who might otherwise have been overlooked.

Want to see more Big Ideas? Check out our extensive library containing two years’ of Big Ideas from some of the world’s leading thinkers in procurement.

Buying a better future – Procurement’s sustainability leaders recognised

Once seen as a ‘niche’ part of the profession, sustainable purchasing is fast moving into the mainstream. The misbelief that sustainable solutions cost more is quickly giving way as businesses recognise that competitive advantage lies in developing innovative, sustainable supply chains.

Sustainable purchasing

Evidence of this came this week with the Sustainable Purchasing Leadership Council (SPLC) recognising 12 organisations and one individual who are using their purchasing power to advance the long term health and vitality of society, economies, and the planet.

Winners were recognised across a range of sustainable purchasing initiatives, including cooperative buying contracts for green cleaning products, a week-long zero waste initiative at the Phoenix PGA Open and supplier incubator programs designed at improving environmental performance.

Background on some of the award winners includes:

Leadership Award for Overall Sustainable Purchasing Program (SPLC’s highest honour), presented to The District of Columbia for having put in place a comprehensive sustainable purchasing program that exemplifies the qualities defined in SPLC’s Principles for Leadership in Sustainable Purchasing. DC conducted extensive market research and stakeholder engagement to develop sustainable purchasing guidance and specifications for more than 100 priority products. Hundreds of employees have been trained on the guidance, which DC shares publicly.

Leadership Award for a Special Sustainable Purchasing Initiative, presented to The Commonwealth of Massachusetts and the Responsible Purchasing Network for leading the establishment of a cooperative contract through which agencies in multiple states can now buy independently certified green cleaning products at favourable pricing and with specialised training and outreach.

Leadership Award for Public Interest Advocacy, presented jointly to International Campaign for Responsible Technology and the GoodElectronics Network for organizing the “The Challenge to the Global Electronics Industry”, which has been endorsed by more than 200 organizations and individuals in 40 countries. The Challenge calls on the global electronics industry to respect human rights, workers’ rights, and community rights, including the right to a safe and healthy workplace, and to healthy communities and a safe environment.

This award was also presented to the Initiative for Responsible Mining Assurance for bringing together a coalition of businesses purchasing minerals and metals, mining companies, NGOs, affected communities, and trade unions in order to promote a world where the mining industry respects the human rights and aspirations of neighbouring communities, provides safe, healthy and supportive workplaces, minimises harm to the environment, and leaves positive legacies. Through the many years of collaboration, IRMA has developed the Standard for Responsible Mining, which is currently being piloted.

Leadership Award for Purchasing Innovation
Two organisations were recognised for leveraging sustainability to find and promote innovation: King County (Seattle, WA) for purchasing battery-electric busses for its Metro Transit fleet and documenting significant cost savings and environmental benefits associated with this new technology; and Philips Corporation for innovative procurements that have enabled the company to achieve carbon neutrality in its North American operations while saving money. The Philips’ Procurement and Sustainability groups have collaborated on energy efficiency, onsite renewables, renewable energy certificates, and long-term Power Purchase Agreements for wind power.

Sam Hummel, Director of Outreach and Operations for SPLC, says that the breadth of award categories demonstrates that sustainable procurement is about more than just buying green. “We are talking about human rights, ethical conduct and supplier diversity”, says Hummel. “Sustainable procurement is a holistic approach.”

In other news:

China mandates renewable energy procurement across 11 provinces

  • China’s National Development and Reform Commission has forced grid companies to buy enough renewable power to enable wind farms to operate at least 1800 hours per year, and solar farms to be utilised at least 1300 hours per year.
  • The mandatory procurement is applicable across 11 provinces, including Xianjing and Gansu.
  • Solar capability in China has increased seven-fold and wind has almost doubled since 2012, with China aiming to generate 15% of its power from renewable and nuclear energy by 2020.

Read more at http://www.bloomberg.com/news/articles/2016-06-01/china-s-order-for-green-power-purchases-lifts-wind-solar-shares

World’s longest – and deepest – rail tunnel opens in Switzerland promising to transform Supply & Logistics in the region

  • The Gotthard rail link has taken 20 years to build, cost more than $12bn (£8.2bn), and is tipped to revolutionise Europe’s freight transport.
  • At 57.1km in length, 4,00,000 cubic metres of concrete were used to create the tunnel, employing 2600 people.
  • Its maximum freight amount is 377,000 tonnes per day, the equivalent of 15,080 shipping containers.

Read more at http://www.bbc.co.uk/news/world-europe-36416506

Human Rights Watch calls for binding global convention on supply chains

  • HRW has released a report calling for governments to effectively regulate business activity to protect human rights in supply chains.
  • The report highlights abuses including child labour, labour rights, environmental damage, and lack of safety.
  • Juliane Kippenberg, Children’s Rights Director at HRW, said. “It’s clear that a binding standard on human rights in supply chains globally is needed to ensure that businesses live up to their human rights responsibilities.”

Read more: http://www.cips.org/en/supply-management/news/2016/may/binding-international-convention-is-required-to-protect-human-rights-in-supply-chains/

Autonomous taxi startup nuTonomy raises $16 million in funding to compete with Uber

  • Autonomous taxi startup nuTonomy hopes to bring self-driving taxis to the road by 2018.
  • The company counts the government of Singapore as one of its main partners. It runs a fleet of R&D vehicles in Singapore and is the first private company approved to test on public roads.
  • The startup is promising to develop the whole suite for driverless taxis, from autonomous navigation software (nuCore), fleet routing and management, remote vehicle teleoperation, and smartphone-based ride requesting.
  • The firm uses retrofitted Mitsubishi iMiev electric cars and is expected to add Renault Zoe EVs in its autonomous cab service later this year.

Read more: http://futurism.com/a-new-uber-competitor-just-raised-16-million-in-funding-for-complete-autonomous-taxis/

7 Ways to Effectively Utilise Big Data in Organisations

The popularity of Big Data is growing as organisations begin to understand how to effectively utilise the volume of information available to them.

Big Data

The buzz around Big Data is undeniable. Regardless of the size of the organisation, managers can use this information, to help drive better, more effective organisational decision making, as a result of accurate analysis.

But how? Below are seven ways how effective utilisation of big data could become a boon to your business.  

1. Improve Business Intelligence

Business Intelligence is a process of analysing data which helps managers and corporate executives make more sound business decisions. So if you try to put in some extra effort to ameliorate your organisation’s business intelligence, it will result in a more accelerated decision-making process, optimised internal business processes, increased operational efficiency, generation of new revenues, and identification recent market trends.

2. Practical Business Decisions Based On Customer Behaviour

Big Data contains a wealth of information about the way customers of a particular organisation act and behave, like their interests, habits, and demographics in some cases. By analysing sales, market news and social media data, organisations may collect and analyse real-time insights of their customers.

Better marketing strategy can be devised through a careful watch over the customer’s needs, taste, and behaviour.

Big Data Approach
Source: www.cio.co.ke

3. Build Trust Among Customers

It is a well-known fact that the more customer trust and satisfaction an organisation has, the more profit it is likely to generate. Feedback from customers gives organisations the key information to make improvements in products and services.

Organisations can use the information gathered from customer feedback in order to make changes to products and services, showing that they listen to customers, and generating further customer satisfaction.

4. Risk Assessment

Big Data houses a vast amount, and variety, of information which could be used as part of risk assessment activities.

Data from sources like mobile devices, social media platforms, and website visits, and information about credit, legal, e-commerce spendings and other online activities, of a particular person reveals hidden consumer behaviours that may not be otherwise known.

This is advantageous for the banking industry, as big data can help in fraud detection through the use of pattern recognition and by comparing internal and external data of the customers. Organisations like MasterCard already use Big Data to assess whether a certain transaction is legitimate or fraudulent.

This information can play a major role in managing risks and making judgments about credit approvals and pricing decisions, before moving forward with the customer at both an individual and product level.

5. Predictive Personalisation

Predictive analytics creates a huge opportunity for behavioural segmentation of the consumers. It analyses personal information of people on websites, their behaviour, their social data and their browsing data.

Content similar to their interests is then catered to the users, giving them their own personalised space to explore and use the services. In this way, you customise your website to suit the requirements of the individual customers based on their demographics and interests which makes them distinct from the crowd.

There are many companies, like Spotify, who are targeting their customer base providing personalised products as per their needs.

Big Data Drivers
Source: www.thewindowsclub.com

6. Tailor-Made Products and Services

Through big data, we have access to all demographic and personal details of the customers. By matching consumers with the similar products, and the content they have already viewed, personalises their experience on a website.

This method of providing tailor-made services, where customers are connected with exactly those products and services in which they’re interested, may also be known as Digital Hospitality.

This often takes customers by surprise and makes them feel special. However, it would be best to ask for the customer’s consent before using their personal information, as this will make it appear less intrusive.

7. Cost Reduction

Big Data can also be used for automated decision-making systems, where managers can get regular alerts about maintenance support systems and cost cutting opportunities in their business.

For example, Tesco used Big Data to cut its annual refrigeration cooling costs by 20 per cent across 3000 stores in UK and Ireland. Business operations can be optimised without compromising on the quality standards of products.

Since Big Data is, by its essence, huge, taming it can be quite a difficult task because of the continuous generation of data from different platforms in all realms of the world.

With the efficient utilisation of information received, a huge difference can be made to the business operations of an organisation, provided that the information is critically analysed such that it can be transformed into profits.

For this purpose, a good project management tools platform may come in handy for organisations, as managers will be able to keep an eye on the projects concerned with Big Data extraction.

Swati Panwar is a content writer and tech blogger. Writing is her passion and she believes one day she would change the world with her words. She is a technical writer by day and an insatiable reader at night. Her love for technology and latest digital trends could be seen in her write-ups. Besides this, she is also fond of poetry. She’s extremely empathic towards animals and when not writing, she could be found cuddling with her cat.

LinkedIn: https://in.linkedin.com/in/swati-panwar-5030b589

What Happens When Best Practice Is Ignored?

Most organisations know that they should be aiming towards best practice processes – but what does it really mean – and can something as diverse as accounts payable ever be constrained to a simple set of rules across all organisations?

Ignore Best Practice

This article was originally published on PPN.

If we’re talking about specifics, the answer is probably no. But the general framework and methods of working can be aligned in a way that can be translated across AP departments regardless of size, and to some extent industry and internal culture.

The opposition can come from those who decide to carry on working in a manner which they feel has served them well enough in the past. Others may simply not have sufficient resources to implement the practices which management are asking them to do.

Three results of Bad Practice

Ignoring best practice in any environment, but especially in AP, can have catastrophic consequences for the organisation. There are three very tangible results from an organisation where the operation is overly flexible and unstructured.

The most obvious one is that inefficient organisations cost more to run. Financially crippling as this may be in the long run, often this area should be the least of your worries.

An operation where internal controls are lax is leaving itself open to fraud. An enterprising individual can take advantage of such an organisation with relative ease, and as long as they’re not too greedy, their fraudulent activity can go unnoticed for a very long time – perhaps forever.

None of us like to think that any of our colleagues would behave in a duplicitous fashion, but the sad truth is that, in all probability, some of us already have.

Lastly, the third most tangible effect of not adhering to a code of best practice is the existence of duplicate payments within the accounting system. The Institute of Internal Auditors have found that duplicate payments make up between 0.05 and 0.1 per cent of annual invoice payments.

This may not sound like a lot, but if your organisation makes £50 million in annual invoice payments, you are likely to be paying out £50,000 or more in duplicate payments every year. Unfortunately many people assume that if a vendor receives payment twice for the same service or product, then he will simply return the payment. However this is seldom the case.

Quick Solutions to Common Failures

Current Practice: Many people can input invoice numbers and can make changes to the Master Vendor File.
Best Practice: Restrict this to just one or two key personnel – preferably those who do not approve invoices.

Current Practice: Invoices arrive, are approved and paid in a variety of locations.
Best Practice: All are dealt with in one centralised area, preferably by specified employees.

Current Practice: Issuing travel and entertainment reimbursement cheques.
Best Practice: Include payment along with monthly salary.

Current Practice: Petty cash box which anybody can access.
Best Practice: Don’t have one.

Current Practice: Urgent cheque request.
Best Practice: Don’t allow rush cheques.

Current Practice: A long winded paper trail of invoices and reconciliations.
Best Practice: Automate the 3 way match.

Current Practice: Time consuming duplicate payment retrieval.
Best Practice: Implement duplicate payment prevention technology.

Current Practice: Long processing and approval times – no early payment discount capture.
Best Practice: Implement AP automation solutions, including automated dynamic discounting.

Even if your organisation is unable to implement some of the more costly changes, by changing even just a few of the more minor ones, your organisation will see both a rise in productivity and, over time, this will generate an increase to the bottom line.

However, it’s good to bear in mind that best practice should be something which is constantly evolving. It’s no good to slavishly adhere to outmoded working methods. Ultimately, departmental success will depend on the ability to work within given boundaries, while keeping an open mind, receptive to change.

Purchase to Pay Network® (PPN) is a trusted information base with direct access to 14,000 key decision makers in the finance sector across a variety of different industries. 

Are Charities & Non-Profit Organisations Getting the Most from Procurement?

We’ve all donated to charities at some point, but do we know where our donation is being spent? How effectively are third sector organisations able to leverage their procurement?

Charities Donation

This article was originally written for, and published on, Novo-K.

A bucket in the street. A bake sale or coffee morning. A fun run. A phone call. We’ve all donated to charity at some point in our lives, and we frequently put our money down without thinking about where it goes to. But do you know how your donation is being spent?

With an ever-increasing number of charities in existence around the world, organisations need to be seen to be spending money wisely, or else donors could take their money elsewhere.

It’s not something that immediately springs to mind when you make a charitable donation, but charities and not-for-profit organisations rely on procurement teams in the same way as the public and private sectors. And the role that procurement plays for them is just as valuable.

Procurement Complexity

Despite my experience working in procurement, and the countless conversations I have had with procurement professionals, I will admit to a lack of extensive knowledge on procurement in the third sector. I had also (mistakenly) thought that procurement might be less complex than in other industries such as manufacturing.

However, following some conversations, and giving the subject more consideration, it’s clear that there is just as much complexity as in any other organisation. It’s not just indirect procurement activities as people might think.

In many cases charitable organisations are looking at procurement of a range of services, highly complex machinery, chemicals and drugs, and even construction services for new buildings.

Fighting the Same Battles

I asked the Procurious community whether they thought that got the most from their procurement activities. What struck me was that these organisations face the same issues the wider procurement community, one in particular being maverick spending.

In charitable and non-profit organisations, as with procurement across the world, there is still the need to convince business stakeholders, end users and other functions of the value procurement brings to the organisations.

Traditional mind-sets of, “But we’ve always done it that way”, and “We’ve used that supplier for years”, exist in these organisations. You might think that convincing stakeholders might be easier for a charity – more procurement involvement means better deals, means more money to go on research or helping people.

Effective Procurement

All of this brings me back round to my original question. In truth, as a donor, I don’t really mind what my money is spent on, just that it is being used to support the charity’s cause. As a procurement professional, however, I feel that there is more that could be done to make this more transparent, and also to support these organisations when procurement is less mature or experienced.

There are a number of ways that procurement in charitable and non-profit organisations can be supported. In the UK, the Charities Aid Foundation provides various services on a pooled basis for smaller charities.

There are also opportunities for procurement professionals to work with charities and social enterprises on a pro bono basis. This is a great way for the organisations to access procurement skills, without having to pay for a full-time staff member.

Another option is to expand our procurement networks, getting as many people involved as possible. By creating global networks, procurement professionals can access a wide range of knowledge and experience.

If you have a procurement issue, the chances are high that someone else has dealt with it before. By creating networks, we can help create real value.

All this can help to raise the profile of procurement within charities, educate stakeholders to procurement’s role and value, and make a major difference to how (and how effectively) money is being used.

Best Procurement Books – Explaining Procurement with Apple Pie

The Faculty’s Hugo Britt shares one of the best procurement books he has found. Did we mention it happens to be for pre-schoolers?!

chook1

“But mum/dad, what is procurement?” How many times have your kids asked you this question, and how often have you struggled to explain your complex role in simple language understandable by a child? The best response to this question that I’ve ever heard is “I do the shopping” – which paints a relatable picture of mum or dad pushing a giant supermarket trolley around all day at work.

The best procurement books should be able to answer that question, and I’ve found a picture book that answers it much better than I can. One of the many books my three-year-old enjoys reading with me at bedtime (hundreds and hundreds of times over) is Marjorie Priceman’s whimsical “How to Make an Apple Pie and See the World”.

Best Procurement Books - Cover
How to Make an Apple Pie and See the World – All Images are copyright to Dragonfly Books

The book is delightfully illustrated, about a little girl in Edwardian times who wants to make an apple pie. The premise is summed up in the first few lines:

“Making an apple pie is really very easy. First, get all the ingredients at the market. Mix them well, bake, and serve … Unless, of course, the market is closed.”

list

The Apple Pie Supply Chain

And this is where this great little book becomes a textbook on Procurement. The little girl packs a suitcase, puts on her walking shoes and takes a steamship bound for Europe and beyond. Along the way, she sources a number of ingredients which will help to make the apple pie:

  • Semolina wheat from Italy
  • Elegant eggs from a French chicken
  • Cinnamon from the bark of a Sri Lankan kurundu tree

kurundu

  • Milk from a good-mannered English cow
  • Seawater and sugarcane from Jamaica
  • And, of course, apples from a Vermont orchard

orchard

She appears to be a master negotiator (or perhaps just very charming), as there’s no mention of money changing hands for any ingredient. Along the way she has to overcome many of the challenges faced in Procurement, such as language barriers and creative means of transport.

The little girl then goes through the exhaustive process of turning the raw materials into the ingredients she needs, milling the wheat into flour, grinding the kurundu bark into cinnamon, evaporating the seawater from the salt, boiling the sugarcane, persuading the chicken to lay an egg, milking the cow, churning the milk into butter, slicing the apples, and finally mixing the ingredients and baking the pie.

process 1

Her reward is to share the delicious pie with all the new friends she made on her journey, including the chicken and cow.

Before my son demolishes a piece of cake or pie, we sometimes pause to talk about this book. It’s fantastic to see him wonder about all the work and ingredients that went into his slice of cake, and he’s even starting to think the same way about everyday objects all over the house, including clothes he wears and toys he plays with.

I give this book 5 out of 5. Do you have any children’s books to recommend that touch on Procurement? What are the best procurement books you have found answering that all important question? Share your thoughts below!

All images above are the property of Marjorie Priceman (and publisher Dragonfly Books). You can purchase How to Make an Apple Pie here: http://www.amazon.com/Make-Apple-World-Dragonfly-Books/dp/0679880836

Hugo Britt is a Research Consultant at The Faculty, helping to support The Faculty Roundtable, an influential group of Australian procurement leaders who gather to share their experiences and insights. 

For more information on The Faculty Roundtable contact Program Manager, Belinda Toohey.

Connecting the Dots: 5 Key Learnings from Interviewing Procurement Thought Leaders

How can we elevate the role of procurement? What are the key lessons we need to be learning from the profession’s thought leaders?

Connecting the Dots Thought Leaders

I love working in procurement! From my first day as a Junior Buyer I got the bug and never looked back! However, our profession is now at the crossroads of profound change.

Never before has the value that we can bring been needed more by our employers, as they seek to become more agile and rely more on their supply base. Yet we run the risk of irrelevancy if we do not adapt as the world around us changes.

It was with this in mind that I founded the Art of Procurement podcast last November. I interview thought leaders every Tuesday so that we can all benefit from their experience and perspectives as we seek to collectively elevate the role of our profession.

I want to share five key themes, or learnings, that I have taken from the first 50 episodes: 

  1. Alignment holds the key to our relevancy

Alignment differentiates the haves and have nots in procurement.  Yet, too often, we operate in a silo. It starts with the way our performance is measured. We are measured on a metric – cost savings – that is not the primary objective of our leaders and our internal clients.

We then look at a stakeholder as an opportunity for us to achieve our objectives, rather than help them achieve theirs. Every guest that I talked to agrees: to become or remain relevant, we have to be aligned with the objectives of our executives, and focus on helping our stakeholders excel in whatever it is that they do to contribute to our organisation’s value proposition.

  1. A two-tier procurement model is imminent

This is already occurring. Every activity that is not a core competency, that materially impacts our ability to bring competitive advantage through procurement, will go away. Some of it will be outsourced, but a lot of it will ultimately be automated out altogether.

A point that interviewees often stated, is that with this shift will also come a change in what we actually view as strategic. There will be no sacred cows.

  1. The value of the traditional skill set is diminishing

The executives that I talked to believe it will be our ability to bring a commercial mindset to our stakeholders, to influence and facilitate their use of external partners, to help our businesses build and retain a competitive advantage in our marketplaces, that will define our value in the future.

The new procurement skills most often cited are business acumen, relationship building, influencing and data analytics. CPOs tell me that it is easier to train procurement skills to an outsider who already has the soft skills needed, than vice versa. We need to step up or face becoming redundant!

  1. Collaboration is a competitive advantage

Is collaboration the latest procurement buzzword? The thought leaders I don’t believe so. In a world where third party spend is representing a larger percentage of revenue than ever before, an organisation’s success is becoming more and more dependent upon their relationships with their most critical suppliers.

The likelihood is that competitors in any market rely on many of the same suppliers to supply the products and services that materially impact their success. Competitive advantage will be gained by those who are able to foster true, two-way, collaborative relationships with those partners – where the sum of the relationship is greater than the parts. If you do not achieve this, your competitor will! 

  1. Change must come from within

Too often we lament the fact that we don’t have a seat at the big table. As thought leaders repeatedly told me, the seat is there, we just have to take it. Members of the C-suite at most companies do not understand what we are capable of, and so we will never make progress if we wait for an invite.

We need to have courage to demonstrate the value that we know we can deliver in procurement if we focus on the right things – and change the conversation around how that value is defined and measured.

Doing so will make our desire to become the trusted business partner a reality across all of the organisations within which we work, rather than the isolated few. 

Philip Ideson is a long time procurement practitioner, leader and service provider, who hosts the Art of Procurement podcast. You can listen to the show here, or subscribe via your favourite podcast app. 

Coupa R15 – delivering agility and measurable value

David Hearn, former CPO Indirect Procurement at Kaiser Permanente, Sun Microsystems and Juniper Networks, talks to Procurious about how Coupa’s latest product releases (Coupa R15) deliver more value to businesses.

Coupa R15 InvoiceSmash

One of the benefits of being a leader in cloud-based spend management solutions is that you can push innovative enhancements to customers rapidly and efficiently. Coupa does so three times per year, with each release being something of an event as customers eagerly await the latest improvements to the platform.

We’re talking with Indirect Procurement guru David Hearn about which of the more than 45 new features he’s most excited about in Coupa Release 15.

Hyperlocalised Languages and Suggest-A-Translation™ (Patent Pending)

People access Coupa in over 100 countries and more than 20 different languages. Coupa has recognised that their customers have unique language requirements, and also that every organisation has a business language of its own. Hyperlocalised Languages allows customers to modify any of Coupa’s 20+ languages for their own purposes, with changes limited to their organisation only and not impacting other customers. Coupa also added Suggest-A-Translation to collect end-user translation suggestions and route to the customer administrator for real-time updates. This personalises the cloud platform in ways never before seen in this industry and is a key reason for the patent pending status.

David says: “The hyperlocalised language feature helps all users of the platform feel included in the management of the tool which is a huge benefit to getting 100% adoption. Language is important, and if an employee in Japan (for example) thinks that an on-screen word doesn’t fit their organisation’s business vocabulary, they can simply suggest a change to better suit their local business needs.”

Unified Platform Innovations and Enhanced Analytics:

Coupa has updated its sourcing recommendations engine to add real-time monitoring expenses, along with a new supplier risk recommendations engine, an inventory trends dashboard and enhanced embedded analytics functionality that adds more visibility and control. The platform embraces ‘suite synergy’, which means applications are fully unified, and the user experience improves with the use of multiple applications.

David says: “I can’t stress enough the importance of having everything seamless on one platform. Having the Coupa platform provide recommendations across all the ways an employee spends money is a game changer. The entire end-to-end process is electronically sharing data and pro-actively prompting procurement teams with new ideas for better sourcing. This enables those teams to focus on being strategic – and that’s a huge value. These latest updates help companies be more agile and make decisions faster”.

Contract Collaboration

Contract Collaboration is a new Coupa application that brings real-time authoring to contracts and extends Coupa Contract Lifecycle Management. It removes the need to use Microsoft Word for redlining documents passed around via email. The new application provides automatic versioning, captures key terms and conditions and transfers them electronically into the ordering system.

David says: “For as long as I’ve been a CPO, we’ve struggled with the entire lifecycle management of contracts. This latest application from Coupa captures the upfront authoring collaboration and links it to the actual transaction – no one has done this before in a unified suite that captures all spending from expenses, to invoices, to requisitions. There’s no longer a need to manually input the contracts terms and conditions into the system; it auto-fills the whole process. It frees up time to focus on better sourcing instead of clerical duties. It also reduces the risk of contract errors.”

Check out Coupa’s great video on Contract Collaboration (watch for the procurement professional smashing up his keyboard in frustration at Microsoft Word). 

InvoiceSmash

While we’re talking about smashing things, Coupa InvoiceSmash enables suppliers to automatically parse emailed PDF invoices so details are auto-filled into Coupa. One of the most exciting aspects of this product is its machine learning, which ensures the same mistake won’t be made twice and minimises the need for human intervention. The application is currently available in an early access program.

David says: “No one wants to use their limited headcount budget to fund clerical duties of manually entering data from invoices.  It’s archaic. Many have tried using OCR for invoice processing, but this is expensive and the human review and rework on invoices is extensive. InvoiceSmash automates this mundane data entry through accurate digital data extraction and means companies can remove most of their clerical team members and re-invest back into the business.”

Coupa released a clever parody video showing AP and AR professionals on the couch with a relationship counselor – their “marriage” can only be saved by InvoiceSmash.

And much more in Coupa R15:

For the full list of R15 updates, visit http://www.coupa.com/newsworthy/press-releases/release-15/

Procurement KPIs – Measuring the Unmeasurable

Is it time to develop new procurement KPIs? As the profession delivers more value, we need to consider measuring the ‘unmeasurable’.

Procurement KPIs

How on earth do you put a KPI against innovation in procurement? How about risk management? Or talent? It’s time for the profession to come together and quantify the value we deliver beyond cost savings.

For me, a revelation that came out of the discussion at The Beyond Group’s “Productivity in Pharma” (PiP) Think Tank in Basel last month, was that there is an urgent need to create procurement KPIs that fully reflect the broader value our profession delivers.

Unfortunately, we will never escape the requirement to track savings (and nor should we; we’re good at it!), but it’s time to define the value-addition areas of what we deliver – productivity, innovation and risk management – in hard dollar terms so that we can quantify our value delivery in these areas.

In my previous post, I shared five rules of thumb for good procurement KPIs. To recap, each KPI should be:

  • clearly linked to an overall business objective,
  • uncomplicated and measurable in hard-dollar terms,
  • based on outcomes, not inputs,
  • not too long nor too many (five to six KPIs at a maximum),
  • achievable and inspirational.

Taking these rules as a starting point, let’s look at five value-addition areas that every procurement professional should be measured against:

  1. Productivity

I know there are a lot of CPOs out there who are tired of the old ‘cost savings’ metric.  And I understand it. But the reality is that cost savings is at least ONE thing that clearly defines our contribution. If we walk away from this, then we have lost an important anchor.

However, we do need to ensure that the broader business audience understands procurement is about so much more than savings, and that we can clearly define value in other areas as well.

One important point I would make (an opinion also shared by ISM CEO Tom Derry at the Procurious Big Ideas Summit) is around cost avoidance. Don’t insult yourself, or your CFO, by reporting on this metric. Costs that have been avoided simply don’t count.

  1. Efficiency

There are so many ways CPOs can deliver efficiency gains that result in bottom-line value for their organisations. In the pharmaceutical world, I imagine this would be measured in terms of speed to market (or “speed to patient”, as one clever pharma Procurement Head put it), faster clinical trials or even the good old basics like reducing inventory.

There are so many ways that procurement can free up cash in the business, but the hard dollar value of this needs to be quantified – which is not impossible.

Business cases are always based on the time value of money. Net Present Value (NPV) is a fundamental financial measurement for businesses. So, before you embark on one of these efficiency projects, work with your finance team to agree on a calculation for the hard dollar value of the efficiency gain, then deliver it, and stick to the agreed value!

  1. Innovation

Procurement rock-star and former CPO of Deutsche Telecom, Eva Wimmers, talked last year about incentivising procurement-driven innovation by creating a suite of relevant KPIs, including cost and time savings achieved as a direct result of innovative improvements.

Innovation KPIs can be process-centric, behavioural or customer-focused (such as service and net promoter scores). What’s important is that every KPI is measurable in its own right and clearly connected to overall corporate objectives. 

  1. Risk management

This is a powerful measurement that will capture the attention of your CEO and other executives. You see, the challenge with risk management (like safety) is that the ultimate success is when nothing goes wrong!

Procurement and other parts of the organisation can spend a lot of time and energy securing supply relationships and carefully managing contingencies, which result in absolutely nothing happening (which is a good thing!). At the C-level it is, therefore, quite easy to take risk management for granted and be tempted to reduce funding and resources in this area.

Actually, safety is a very powerful metaphor for the role procurement plays in managing risk. Nothing captures an executive’s interest more than safety. The language and methodology of safety measurement is well known to executives, most of whom are rewarded on safety metrics.

So, rather than re-invent the wheel with a whole new set of measurements around risk, simply reframe risk in a safety context.  Work with your safety department to understand their metrics, explain what you are measuring and get their advice on how they would construct metrics for risk management in procurement.

When ‘selling in’ your risk management KPI to senior management, don’t underestimate the power of good storytelling. It is critical to illustrate your business case with rich examples of how much market share and stock market value has been lost by competitors and peers when supply chain risk is not properly managed.

Traditionally, we have valued this in terms of potential legal costs, but today it is so much more than that. Social media now ensures that your end customers (and the press) quickly become aware of supply chain issues, and these are amplified to such a point that they result in loss of market share and ultimately share price value.

Supply chain disruptions can have catastrophic impacts on corporate brand and equity value. Procurement, however, can play a huge part in protecting the company from this type of disaster, and I believe this is one of the most valuable roles we can play today. Risk management must therefore be highlighted and reported upon in our procurement KPIs.

As you will see at the close of this story, my bold recommended KPI for risk management is number of days supply chain disruption reported in media (with the objective of keeping this at zero!).

As a side point, research in the US has shown that companies who have invested in appropriate social procurement (projects that aligned and complement your brand) will bounce back faster after a market ‘shock’ event.

  1. People

Call people what you will – ‘assets’, ‘human capital’, or even ‘resources’ – but I prefer to use the word ‘talent’. People are frequently regarded as an enabler metric, but I think it should be much more than that.

We should position procurement as a source of leadership talent for the business, particularly if we believe what we say (and I do!) that procurement provides some of the best commercial training of any function.

Procurement offers its team members the opportunity to work across the business internally, as well as externally – so let’s put our money (and our KPIs) where our mouth is! Develop a metric that measures procurement’s contribution to developing leadership talent. Once again, this is something to which senior leadership is very committed in the best organisations. 

So, to be provocative – here are six procurement KPIs that I would put forward as a CPO today:

  1. Cost savings – $ saved in financial year
  2. Productivity – $ released through working capital initiatives
  3. Innovation – Projected $ value delivered through procurement-negotiated supplier-led innovation.
  4. Risk management: Number of days supply chain disruption reported in media.
  5. Talent: Number of employees who have worked in procurement and are now on the enterprise leadership development program.

Procurement KPIs are a hot topic for everyone, and I’m sure you won’t agree with all my points. So…what are your thoughts?

The Productivity in Pharma Think Tank brings together a conclave of senior procurement leaders from the Pharmaceutical industry, creating 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.

You can find out more about this event at The Beyond Group website, and connect with the event hosts and facilitators Giles Breault (@GilesBreault) and Sammy Rashed (@RashedSammy) on social media.