Defining & Defeating Maverick Spend

Is maverick spend an issue for the UK public sector? Is local government adhering to procurement practices when spending taxpayers’ money?

maverick spend

It’s not uncommon for businesses to suffer from high levels of uncontrolled procurement, often known as maverick spend. These levels can often reach 80 per cent of total spend, a figure likely to send shivers down the spine of any procurement professional.

To elevate its role within an organisation, procurement must extend its reach. A CEO is unlikely to take a function seriously that only influences 60 per cent of the activity for which it’s responsible.

Yet that is the situation of the average procurement team. No other function would allow this: Legal, HR, Finance, Compliance, Public Affairs – all insist their writ runs broad.

Maverick spend is a major obstacle to extending procurement’s influence. However, decades of setting policies and rolling out enterprise systems have had limited impact in reducing it.

Maverick Spend in the Public Sector

While it’s often easy to see the figures in an individual organisation, actively tackling this spend is another matter. Solutions range from improving reporting to enabling other functions to see the benefits proper procurement processes bring.

Today, Applegate PRO has released a whitepaper on maverick spend via Procurious. The paper will showcase data on procurement practices gained via a Freedom of Information (FOI) request to all local councils in the UK.

This is one of the largest FOI requests relating to procurement processes that has ever been conducted in the UK.

We hope that this research will provide a valuable snapshot of how local councils weigh up in the use of their allocated budgets on a national scale.

Applegate PRO are exploring further areas of research to analyse the maverick spend in public sector bodies, including the Ministry of Defence and NHS.

What the Whitepaper Offers

This white paper uses a case study of local government procurement to explore the varying levels of maverick spend across a set of comparable organisations. It reveals startling differences in levels of uncontrolled expenditure and explores the ramifications for this.

Findings from the 276 councils that responded from across the UK include:

  • Definition of maverick spend.
  • The top three councils that reduced levels of maverick spend between the financial years of 2012 and 2016.
  • The councils whose maverick spend increased the most between the financial years of 2012 and 2016.
  • Local council with the most maverick spend.
  • Local council with the least maverick spend.
  • The percentage of maverick spend undertaken in their council from each financial year from 2012 to the present day.
  • The sanction systems in place for non-compliance to procurement practices.
  • The percentages of transactions that require a purchase order.
  • The number of procurement professionals that have a CIPS or other professional procurement qualification and how many are currently undergoing procurement training.

If you are interested in reading the full report, you can sign up to receive your copy here.

Applegate PRO is a free-to-use eProcurement system that streamlines request for quotation and purchase order processes, enabling buyers to submit a request, receive up to ten competitive quotes and raise a PO in a matter of hours.

Submit your request for quotation today with no obligation to buy at http://www.applegatepro.com/

Love It or Hate It – The Importance of Supply Chain Stability

A disagreement relating to rising supply chain costs has highlighted the importance of supply chain stability.

marmite supply chain stability

Early on Thursday morning, the top news headlines weren’t about conflict or celebrity scandal, but the future of a famous British staple. Maligned and loved in equal measure, Marmite was the topic on everyone’s lips.

The sudden interest in the salty, yeast-based spread came about due to a very public spat between Tesco and Unilever over rising product costs.

According to reports, Unilever had requested that Tesco, and other UK retailers, raise the price of their products in store by 10 per cent. However, when Tesco refused to pass on this cost to customers, Unilever stopped supplying certain goods to the retailer.

Tesco responded to this by halting online sales of Unilever products. This sparked concerns of a prolonged shortage of goods on supermarket shelves.

However, by Thursday evening, the situation was resolved and the stand-off ended. It’s expected that Unilever goods will return to the Tesco website in the next few days.

It’s understood that Unilever gave some ground in negotiations, leading to an agreement between the companies. Asda has also publicly commented that it successfully negotiated with Unilever on the price increase.

Rising Supply Chain Costs

Unilever’s reason for the requested price increase was the continuing fall in the value of the pound. This has in turn led to higher import costs for goods into the UK.

While many of its products, including Marmite, are manufactured in the UK, Unilever imports products and raw materials from its base in the Netherlands.

Since the Brexit vote in June, the pound has fallen in value by over 17 per cent. As the pound dropped to its lowest level since June 23rd on Tuesday, it was reported that some airport Bureau du Change had been offering exchange rates of less than one Euro per pound.

Graeme Pitkethly, Unilever’s Chief Financial Officer, was quoted on Thursday morning as saying the price increases were part of “normal business“. But, while the price increases may be a normal part of business, experts have warned that this may just be the beginning.

As the UK’s exit from the EU comes closer, it’s expected that consumers will see rising prices for many products. As the UK imports more than 60 per cent of what it consumes, the FMCG industry will be one of the hardest hit.

Items such as bread, milk, bananas and wine are expected to increase as manufacturers and retailers stop being able to carry the increasing import costs. A rise of between 8 and 10 per cent is expected on clothing, while petrol will rise an estimated 4 or 5 pence per litre in the UK before the end of the month.

Importance of Stability

At a time when margins are being squeezed, the importance of supply chain stability is huge.

A survey published by the UK Food and Drink Federation (FDF) showed that 63 per cent of manufacturers are suffering from decreased profit margins. As well as this, 76 per cent a seeing higher ingredient costs too.

With 96 per cent of the UK’s food and drink businesses small or medium-sized, larger organisations need to be aware of the impacts of margins throughout their supply chains.

Some organisations will try to put increasing costs back on to manufacturers, without taking into account the long-term impacts. Any further supply chain disruption on top of what is happening already could potentially drive prices higher again.

While prices rises for consumers are probably inevitable, increasing supply chain efficiencies and demand forecasting can help to limit the damage.

Helen Dickinson, Chief Executive of the British Retailers Consortium, said: “Retailers are firmly on the side of consumers in negotiating with suppliers and improving efficiencies in the supply chain to control the inflationary pressure that is building through the devaluation of the pound.

“However, years of falling shop prices and higher costs have left limited scope for retailers to continue absorbing this pressure. Everyone in the supply chain will need to play their part in maintaining low prices for consumers.”

By building a greater understanding of the costs through the supply chain, retailers and manufacturers can try to overcome a lack of stability collaboratively.

Do you work in procurement in retail or FMCG? What are your experiences of the recent price rises? Let us know below.

Away from the worries of empty shelves, we’ve stocked up on the week’s big procurement and supply chain headlines.

GM in Court Over Price Bargains

  • A court in Massachusetts will heard a case last Friday, brought against GM by a now bankrupt supplier.
  • Clark-Cutler-McDermott, alleges GM knowingly led the company into a bad faith deal, and encouraged them to take on more debt.
  • GM have requested the case be dismissed, arguing CCM is trying to pass the blame for poor management.
  • The case will help to shed more light on the highly-criticised bargaining practices allegedly happening in GM’s supply chain.

Read more at Supply Chain Dive

Samsung Galaxy Note 7 US Recall Begins

  • Samsung have begun the process of recalling a further 1.9 million Galaxy Note 7 devices, bringing the total to nearly 3 million since the beginning of September.
  • A fault in the Note 7’s battery has led to it overheating, with users experiencing smoking, sparking, or on-fire devices.
  • The recall is expected to cost Samsung an estimated $2.3 billion.
  • The company has seen $21 billion wiped off its market value since Tuesday last week.

Read more at The Guardian

MPs Call for End to Antibiotic “Overuse”

  • A group of MPs has called for the curtailing of the “systematic overuse” of antibiotics in supermarket meat supply chains.
  • Conservative MP Zac Goldsmith tabled a motion calling on UK supermarkets to adopt policies prohibiting routine mass-medication of livestock because of the emergence of antibiotic resistant bugs.
  • The motion has so far received the support of 21 MPs from across the parties.
  • Goldsmith tabled the EDM after a report found resistant E. coli in supermarket pig and poultry meat.

Read more at Supply Management

Amazon Fined by FAA Again

  • The FAA has proposed a fine of $78,000 for Amazon for breaching regulations on shipping of hazardous materials.
  • It’s the online giant’s fourth fine in as many months, with more likely to come from the UK.
  • The latest fine relates to the shipment of an ethanol-based hair tonic, without the correct documentation for flammable goods.
  • The issues highlight the hurdles Amazon faces in scaling up its own logistics and transport operations.

Read more at the Wall Street Journal

5 Imperatives for Creating Greater Procurement Agility

Is your procurement organisation world-class? Improving agility is a key step in this journey, according to new research.

world class procurement

New benchmarking insights from The Hackett Group have revealed that world-class procurement organisations now have 18 per cent lower operating costs than typical companies. They also operate with 28 per cent fewer staff, and generate more than twice the return on investment.

How are they doing it? Here are the five key strategies identified in Hackett’s latest research paper.

  1. Embrace digital transformation

World-beating procurement organisations have shifted to a complete digital experience for their business users, according to The Hackett Group Principal, Sourcing and Procurement Practice Leader Robert Derocher.

“This includes a true move to a paperless environment and the ability to work from anywhere on any device. Companies are implementing new, integrated source-to-settle technology platforms, primarily in the cloud, and adopting new capabilities that enable the agility required by their customers and the marketplace,” says Derocher.

Added to this is a convergence in software advances and wider use of new technologies. Cloud-based infrastructure, and virtual business and technology networks make up the first parallel. The second comes from rapidly transitioning user bases that are increasingly adept with new mobile technologies and business models.

The research found that world-class organisations spend 23 per cent more on technology per person. The investment yields real productivity gains, including 71 per cent lower cost per order than typical companies.

  1. Reallocate resources from transactional focus to value adding

A high level of automation also allows staff to devote more time to talent development and business performance-related activities. Digitally-enabled processes reduce errors, and make information easier to access, freeing procurement staff for higher-value work.

In addition to operating with dramatically fewer staff, leading organisations also allocate their people very differently. They dedicate a significantly larger percentage of the overall staff to sourcing, supply base strategy and planning/strategic roles.

They also have a much smaller percentage of people focused on operations and compliance management.

Top organisations spend 13 per cent more on outsourcing than typical companies.

They selectively outsource in areas such as procurement system support, supplier help desks and market intelligence to tap into greater expertise, augment knowledge, and leverage the capacity and capability of third-party providers.

This helps to increase agility by providing resources that can scale to demand and frees up procurement to focus on anticipating and responding to critical business needs.

  1. Leverage analytics-based decision making

Increased investment in cloud-based infrastructure and applications is creating tremendous new opportunities for procurement organisations to apply digital technologies to transform service delivery.

Increasingly, this becomes the platform for delivering a whole new class of services, such as information and predictive analytics to guide decisions.

According to the report, the hallmarks of information-centric world-class procurement organisations are:

  • Having a sophisticated information/data architecture that makes effective data analysis possible;
  • Planning and analysis capability that is dynamic and information driven;
  • Performance measurement that is aligned with the business.

World-class procurement organisations also invest a greater proportion on systems and tools to enable analytics capability.

  1. Adopt a stakeholder/customer-centric service design and delivery

The customer must be the focal point of all key activities and functions within procurement. With this approach, services are designed based on users’ wants and needs, rather than forcing them to change their behaviour to accommodate procurement’s internal processes.

World-class organisations are service-oriented and customer-focused in their approaches to procurement delivery. They design services and processes from the customer perspective or outside in rather than from the inside out.

According to the report, two mainstays of a formal service delivery model are global business services/shared services units and centres of excellence (COEs).

Overall, 39 per cent of all procurement organisations have some form of COE in place today. 

  1. Re-skill the procurement function

The report recommends the following steps to enhance the skills sets of procurement staff:

  • Invest in Talent Development

Hire or train procurement staff with the skills and business acumen required to meet the business needs of senior executives. Recruit staff from key business units in your company, and have them mentor and coach other business partners who have come up through the procurement ranks.

  • Increase your Team’s Business Acumen

Assign staff to cross-functional teams to provide exposure to different parts of the organisation’s operations. Make sure that having an understanding of business fundamentals is a requirement when hiring new staff.

  • Build Analytics Skills

Create a dedicated analytics group to fully leverage skills and tools across all areas of procurement.

  • Create a talent retention plan

World-class procurement organisations are nearly twice as likely to have talent retention planning in place, and see turnover rates that are more than 50 per cent lower than typical companies.

You can download your copy of The Hackett Group’s research here.

The Hackett Group is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies.

The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology.

Big Ideas Summit 2016: Big Idea #18 – Integrated Procurement Operations

Could integrated procurement operations help break down silos and instil good practices? Isn’t it time to find out?

At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.

From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.

Success is Integrated Procurement

Anna del Mar, Director at Future Purchasing, believes that procurement doesn’t need to be separate to the rest of the business. She believes the function can be integrated into the business, instilling the culture of good procurement across the organisation.

Anna goes on to say that by up-skilling everyone in the business to be great procurement people, it will help to increase collaboration in the business. This can also take away the silo mentality, and allow procurement to act as a guide along the way.

Catch up with all the delegates’ Big Ideas from the 2016 Summit at the Procurious Learning Hub.

Want to find out more about Big Ideas 2016? And maybe what we have planned for 2017? You can visit our dedicated website!

Integrate Your Learning & Career

If you enjoyed Anna’s Big Idea and you want to read more from her, then you’re in luck! Anna shared her wealth of experience in procurement, and gave her 5 top tips to stand out from the crowd.

You can hear all our podcasts, and read all our great content by enlisting here. You can catch up on topics from becoming a CPO, to taking your conscience to work, and many more.

If you like this (and you haven’t done so already) join Procurious for free today. Get connected with over 17,500 like-minded procurement professionals from across the world.

Why the Traditional Procurement Skill-Set Won’t Make a CPO

Perfecting a traditional procurement skill-set traditionally is a sure-fire way to stop your career progression in its tracks.

skill-set

 

A large part of my professional career has been devoted to leading global procurement organisations around the world. My business partner, Sammy, and I have collectively spent the better part of five decades doing this.

It’s true enough that we gave it all up and we are now in our own practice (The Beyond Group AG), following our own rules. However, those years instilled in us a number of ideals, which, on reflection, were less crucial than we were conditioned to believe in the earlier stage of our careers. Luckily, we have been smart enough to realise it over time!

It’s Time to Check Your Skill-Set

What am I referring to?  As we develop our procurement careers we have a notion that a certain skill-set is expected of us. Proficiency in category management, price analysis and negotiation tactics, to name a few, are most typically associated with the procurement function.

Whilst softer skills come into play as you advance into more senior roles, procurement professionals are expected to demonstrate aptitude for these sharper procurement skills from the offset.

We spend the vast majority of our professional lives honing these very same capabilities.

In my experience, these skills can only get you so far and certainly not into the CPOs chair. In today’s world, there is an important arsenal of skills demanded of CPOs.

These skills, as well as scoring above the traditional ones, will largely supplant the capabilities procurement professionals have been diligently polishing for so many years.

Organisations will simply demand of us that we are much more than we are today.

Where’s the Proof?

For the last five years, The Beyond Group has been at the forefront of dealing with the issues pressing the procurement function to change. We hold annual Think Tanks where a limited number of invited companies send their senior procurement people to deeply delve into a specific topic over the course of 4 and a half days

In 2016 we addressed the skills and capabilities needed by procurement professionals in the future.

Over the course of our three sessions we brought together practitioners, academics, professional recruiters and insightful speakers to help us pinpoint the skills that will differentiate between simple buyers and the new leaders of the function.

Assess, Analyse, Solve

Our sessions follow a specific agenda.  In the first session of the Think Tank we assess the real issues we are trying to solve. Then, in the second session we analyse options and debate outcomes.

In the third and final session we get to the bottom of the issue and try to solve it by coming to a collective understanding and collaborative solution. This year was no different.

This year the collective output of the group was that three sets of capabilities will define the CPO of the future:

1. The Business Partner (know your customer)

  • Intrapreneurial agility
  • Game Changer capability
  • Credible Experience

2. The Cross-functional integrator (manage your internal relationships)

  • Consultative skills
  • Project manager
  • Credible performance

3. The Alliance Manager (know your market)

  • Big Picture view
  • Ambassadorial skills
  • Risk and conflict manager

Most interestingly, despite the fact that we had a roomful of procurement professionals, not one of the “traditional” skill-set appeared anywhere on this list of the skills future CPOs need.

Place for ‘Hard’ Skills

This is, of course, not to say that hard skills no longer hold value in the procurement industry. It’s crucial that procurement pros master the skills associated with an interconnected supply chain: horizontal networking through social media; big data & analytics; and cognitive computing (e.g. Industry 4.0).

However, it is my belief that these will be rudimentary in the future and, as such, it won’t be necessary to call them out. They will simply be part of the assumed knowledge that everyone will have. We will continue to explore this theme in our future Think Tanks.

Sammy and I have taken to heart what a respected mentor once said to us: “You must lead with your head, heart, hands and guts”.

This has a very different, and more profound, meaning than it did some years ago in the procurement world.

Giles Breault is Principal and Co-founder at The Beyond Group AG, a specialised research & advisory firm focusing on the topic of “what’s next” in Procurement, and Business Productivity.

Communication Queen – Not Your Typical Procurement Pro

There’s a step change coming in the procurement technology and software industry. And communication and relationships will be the central pillars of it, says this Millennial.

Communication Queen
Simona Pop

There is step-change coming in procurement, and the change is going to be keenly felt in the procurement technology and software industry. But for this change to take effect, it needs support on both sides of the aisle – buyer and supplier.

Simona Pop, Head of Partnerships & Global Communication at InstaSupply, is not your typical procurement professional.

She’s one of a new breed of professionals involved in procurement and supply chain, who believes change is on the horizon, and that it can’t come soon enough.

A tattooed Millennial, with a stake (both monetary and emotional) in the company she works for, Simona presents a refreshing view on buyer and supplier relationship management, and believes in creating emotional connections with clients.

Not only that, but she also walks the walk when it comes to leveraging social media in business.

Procurious caught up with Simona, and chatted to her about her career, her approach to social media, and why she believes we shouldn’t have to leave the real-time efficiencies of our personal lives at the office door.

Tell us a bit about yourself – how did you get to where you are today? 

It has to be said, my career trajectory isn’t what you might call straightforward. I got out of school thinking I was going to be in advertising. Then I moved to the UK and started working with Brakes, the food supplier, in a sales role. I then went 180 from that path and started working in events.

Finally, I started working with InstaSupply as Head of Partnerships and Communication. One thing lead to another really, and in the end, it makes a lot of sense.

I love communication and building relationships. That’s what makes the world go round, as far as I’m concerned. My communications background is ultimately the driving force behind my take on business.

You’ve recently won your place at Virgin Disruptors – congratulations!

Yes, I am very excited about it. It was all about presenting my vision on what industry needs disrupting and how I would do it. I went straight to the core and illustrated how ALL business needs disrupting.

You can see my video below. It’s all about changing procurement and finance. They are the engine of each and every business so they need to be as well oiled as possible.

What role did social media play in the award?

As with every bit of communication I put out there, this was also a social affair. I got to chatting with Virgin via Twitter and found out about this opportunity. As everything in social media moved pretty fast, I only had a couple of days to script and create the video in order to stick to deadlines. I then uploaded it on YouTube and shared it via Twitter again.

I am a true believer in the power of social and its ability to not only bring us information in real time but also challenge us to become more creative and innovative. It’s why I am so happy to be part of the Virgin Disruptors community as a technology company.

So many procurement technology implementations fail – why do you think this is?

It comes down to how people interact with the technology and the company providing that technology. Is there a match there in terms of values? Or is it more about ticking a box and signing a three year contract so you don’t have to worry about it?

So many businesses will go for old technology just because someone else in their industry has used it before. Even if it’s not a great fit for them and their staff, they will implement it anyway just to tick that “tech” box and consider it done.

More often than not, businesses pay the price tag of an Aston Martin, and end up using it like a second hand Ford.

The fact that back office operations, procurement and finance technology involve so many different roles and levels of seniority, makes it paramount that the interface and functionality appeals to all age groups.

There shouldn’t be a difference between the way we interact with brands in our personal lives, and brands that we see at work.

What are the key changes you think need to be made? Can we make procurement/B2B software more like B2C counterparts?

The way I see it, every business relationship is a partnership – it’s not a case of sell and move on. As a tech supplier, you are going to be working closely with your client, as they will interact with your product every single day.

You want to allow them to work smarter, be more efficient and ultimately make their lives easier. You need to provide top notch tech, but also real time support. There’s no place for a helpline that keeps people on hold for hours, or an email they get a response to in three months. That would be unacceptable in B2C nowadays!

There needs to be a shake-up. We need to remove the jargon, the boring pages of bland text, the hieroglyphic appendices, and the contracts that tie you into five years, whether you like it or not.

Software providers want partners, not prisoners. We are here to simplify buyer-supplier relationships, and make life easier for everyone involved in running a business, regardless of role and seniority. Ultimately we want to support them in growing their business, and having a better quality of work.

After all, why should we leave all the efficiencies of B2C, our personal life, at the door, when we get to work?

Some Procurement Lessons Just Can’t Be Taught

Not everything in life can be taught. Why is attitude more important than aptitude…(and almost everything else).

taught a class

David Hearn is the Chief Advisor at CPO Advisement Services, specialising in effective change management and the successful implementation of eProcurement tools.

With 20+ years leading direct and indirect sourcing and procurement groups under his belt, David has some great advice to offer regarding the importance of building good relations, retaining millennials with challenging roles and what defines the procurement talent gap.

David keenly asserts that the attitude of his employees is of the utmost importance. Only with a good attitude, good relationship building skills and effective collaboration can you build a successful career. Everything else can be taught.

1. What were your first 3 jobs?

My first job was as an engineer for General Motors where I was responsible for sourcing parts.

I moved on to the telecommunications company, AT&T. As a system consultant here I developed skills in selling, influence and relationship building. 

My third job was at Sun Microsystems as global sourcing manager. Whilst here, I honed skills gained from my first two jobs and learnt more about business partnership. 

2. What’s one thing you know now, that you wish you’d known at the start of your career?

 I wish I’d understood the importance of building relationships with the people you work with, internal and external. Good working relationships enable you to accomplish so much more, faster.

3. How can CPOs attract and retain millennials?

There are a number of ways to retain the enthusiasm of millennials in the workplace. Don’t given them boring, stereotypical procurement roles. Instead, craft new roles which allow them to learn on the job whilst delivering tangible results that they can be proud of.

Millennials want to contribute to the common good so it’s a good idea to find projects for them which have a positive impact on the world.

Finally, it’s a smart move to rotate millennials through multiple roles quickly.  Keep them learning, motivated and challenged.

4. Does the procurement talent gap exist? Or is it just as perception problem?

The only gaps are in soft skills such as relationship building, influence and collaboration. These skills are necessary in order to be a success as a trusted business partner.

5. What’s more important for your hires – attitude or aptitude?

Attitude – 100 per cent. Anything else can be taught but you can’t teach attitude.

6. What key skills are critical for procurement in the next 5 years?

  • Relationship building
  • Collaboration
  • Influence
  • Selling
  • Leadership

The Procurious Career Boot Camp will increase your stamina, get you in the best career shape of your life and help you stand out from the crowd.

It’s not too late to sign up. Enlist here and get access to our 15 free podcasts from some of the best career coaches around. Don’t miss out – your career will thank you for it!

Setting KPIs for Beginners: Why Bother?

An introductory overview of the role and relevance of KPIs to support Supplier Relationship Management (SRM).

KPIs article 1

In this three-part article, we discuss some of the different KPIs that are used specifically for SRM. This list is by no means exhaustive; it can’t be, as performance indicators must be relevant to your own organisation, customers, and requirements.  However, this list can be used as a guide and can become an essential part of your toolkit.

We’ll also review some of the popular ways people measure and monitor KPIs through systems and reports. Again, this won’t be an exhaustive list because of cultural and technical requirements unique to every organisation.

You’ll also find some key tips for implementing KPIs successfully, including a checklist (more tools for your toolkit!).

We will explore how dashboards can be a fantastic tool for procurement professionals to use when communicating to stakeholders and promote hard-won benefits to the business. An effective dashboard will include KPIs that demonstrate how suppliers or categories are being managed and their impact on the business. Remember, the KPIs you set may influence senior management decisions. Therefore, you need to get it right.

Why bother with KPIs?  

To get started, let’s talk about why we use KPIs.

As procurement professionals, we’re responsible for making smart purchasing decisions that support the values and principles of procurement, such as probity and value for money. These decisions must also support the philosophy and strategy of individual organisations. Importantly, we need to be able to justify and document how (and why) we’re spending money.

KPIs can help us justify spend. In fact, KPIs can be used to identify risk, cost savings, innovation opportunities and successes, value-for-money initiatives, customer satisfaction and any number of other factors that we or our customers feel is important.

The role of a supplier KPI is vast. They set the performance standard and have measurable features used to identify areas of improvement, such as establishing a baseline, identifying where you want to be and developing a path to get there. But it doesn’t stop there – KPIs can also be connected to payment milestones, credit payment and liquidated damages.

The important point to remember is that supplier KPIs must be agreed upon by all parties involved. If your supplier doesn’t know what is expected of them, they won’t be able to comply, let alone excel. That’s just one side of the relationship.

The other side of the relationship involves the professionals within the buying organisation. How do you, the procurement professional, know which KPIs to use? Are cost savings important? Delivery times?  ISO standing? Inventory reduction? You won’t know unless you ask your customers about their requirements.

So, why are KPIs important?

What gets measured gets done. KPIs are a way of ensuring your supplier focuses on your fundamental business needs. We can do this through:

  • Incorporating our customers’ requirements into the KPIs to align supplier performance with organisational goals.
  • Providing constructive feedback (rather than punitive criticism). Why? Because the end goal is a win-win situation where you get what you and your customers need, while the supplier gets to improve its reputation and build its business.
  • Promoting a continuous feedback loop using KPIs to drive supplier performance, initiative and improvement. KPIs should be linked to the terms of the contract but remember, the focus is on the relationship. Indicators should therefore reflect the “spirit” of the contract as much as the “letter”.
  • Bringing clarity to overly generic contract requirements to drive meaningful performance.

Challenges in KPI management

Here are some common challenges that we’ve seen through our own experience:

  • Capturing the data – identifying the relevant data and accurately acquiring the data points.
  • SRM fatigue – motivating yourself, your team and your suppliers to continue SRM activities over the life of the contract, which can be months or even years. Activities can easily become stale and sometimes you’ll need to push them along.
  • Comparing and contrasting suppliers – supplier performance will be very different depending on their size, sector and region. Ensure you’re comparing apples with apples.

Engaging end-users is important

When driving supplier performance over long-term contracts, we want to keep things moving so end-users don’t feel that nothing is happening. Keep end-users in the loop, ensure their voices are heard and let them know how things are progressing.

We often focus on senior management as our primary “customer”, but the end-user is arguably more important – especially when it comes to compliance. After all, they’re the ones who will use the product, system or tool that is being purchased.

Stay tuned for Part 2 of this series, which will explore the different types of KPIs, complete with a KPI checklist and contract-level KPI reports.

How to Stay Ahead of the Curve with Process Automation

Traditional supplier relationships are under scrutiny as organisations assess capabilities for the future. Could process automation help procurement teams stay ahead of the curve?

process automation
Image courtesy of Opus Capita

ProcureCon Europe 2016 is rapidly approaching! The ProcureCon team has been investigating some of the fast-moving issues which are affecting CPOs across Europe today.

Perhaps more than any other factor in the industry right now, process automation and advanced analytics are having a huge effect on the ability of Procurement teams to deliver improved cost performance.

This changing landscape calls into question traditional supplier relationships. Of the CPOs and Heads of Procurement we interviewed in advance of the event, 76 per cent told us that they are concerned about the ability of their existing supplier base to serve their business needs in future.

At the same time, more than half of our research participants think that implementing automated procurement is a high priority for their business. This raises questions about how best to manage your supplier network to make sure that you’re ahead of the curve when it comes to process automation.

We spoke to Kelly Babbit from jCatalog and the Opus Capita Group to find out more.

ProcureCon: How is digitisation and process automation affecting CPOs today?

Kelly Babbit: In the digitised, networked economy, companies find themselves in a changed competitive field. The game is no longer primarily based on unique business relationships.

The success of a corporation is premised on the performance of its network of supply chains – its entire business ecosystem. Corporations are looking to strengthen relationships, and create new forms of collaboration – and gain control and compliance over their extended business processes.

It is significant that more than half of respondents to this research gave high priority to the implementation of automated procurement processes. Furthermore, we expect a future adjustment to the demand drivers and criteria used for selecting P2P service providers.

This trend is due to a far-reaching shift in business priorities toward digitisation and automation.

What kind of processes are we talking about?

Progressive solutions cover the complete process from sourcing to payment – from managing the first request for quotations (RFQ) to optimised working capital management and supplier settlement.

This is where the traditional view of P2P processes needs to be expanded. Enterprises will no longer evaluate the quality of solutions with a sole focus on basic procurement functions. Solutions need to be part of a global strategy and based on pivotal interconnections between buyers and suppliers.

As a result, the responsibilities of the CPO and CFO functions will begin to converge. Cloud based SaaS solution providers will need to support this interconnection with a global perspective and inclusion of diverse company stakeholders.

Connecting and automating processes from sourcing through to payment will become the expectation of leading companies.

What features should CPOs / CFOs be looking out for in a source-to-pay solution?

Cloud-based business network solutions must support effective sourcing, procurement, invoice, and payment automation. This includes implementation and adoption across their global business.  Some of the key features to look out for are:

  • Complete transparency, real time control and compliance with full audit trails across the entire source to pay process.
  • P2P automation and integration of the purchasing department with the accounts payables department. Plus full visibility to all purchasing and accounts payment data.
  • Visibility to company spend with total cost monitoring and supplier performance tracking as well as contract improved contract compliance.

Thanks very much for your time, Kelly.

To read the full results of our research amongst 100 CPOs and senior procurement executives, download the Procurement Challenges report here.

ProcureCon Europe, now in its 17th year, is Europe’s most strategic procurement conference for CPOs and senior procurement executives. See the full range of topic and speakers at the event here.

6 Ways to Attract and Retain Procurement Talent

Procurement job openings are on the rise and, as organisations squabble over the best talent, it’s important to make sure you’re doing the right things to attract the crowd you want!

how to attract top talents

Recent studies reveal that the number of advertised procurement and supply chain roles increase by 22 per cent each year, demonstrating a huge demand for talent in the industry.

As more people consider making the move into a procurement role, it’s important for organisations to find ways to attract the best possible employees.

I’ve come up with six innovative methods that will help you to attract, and then retain, the top talent out there.

1) Emphasise Your Standing Within the Industry

The position your company holds within the industry plays an important role in a potential candidate’s decision to apply or not.

Demonstrating extensive experience and knowledge of your industry will show candidates that you are a firm to be taken seriously. It’s crucial that you explain the influence your company has within your sector by highlighting the key successes you have enjoyed.

2) Offer an Attractive Salary

If you want to recruit the best talent, you need to offer a competitive wage. It’s important that you look at what similar businesses are offering, and how you’re able to match it.

If an employee is deciding whether to go with you or another employer with a better wage, chances are they will pick the higher salaried position. If you can’t quite match the salary your competitors are offering, investigate how to make your position seem more attractive by offering employee benefits and rewards.

3) Provide the Training and Support Needed to Succeed

Showing that you value your staff and take their development seriously is a great way to attract talented professionals to your available roles – think what training or support you can offer that will encourage professional growth.

Those who are serious about their career will actively seek out any opportunities to advance their skills and knowledge. Employers who can’t offer a competitive wage may find that by showcasing the importance of training and support within their company, they can still attract a high calibre of talent.

By providing the training and skills needed to succeed, you’ll show a determination and passion to help your employees climb the career ladder.

4) Stay On Top of Industry Trends

Is your company making any broad moves to digitise how its employees work? The procurement and supply chain industry is continuously facing rapid technology change. With new software and developments changing the way the industry works, you need to stay on top of these changes in order to attract the best staff.

The latest E-procurement software allows businesses to smoothen out operational processes. By having up-to-date tools, you will demonstrate to both current staff and potential candidates that you are keen to stay ahead in the technology game.

5) Clearly Articulate the Skills Required

When advertising your job offerings, it’s pivotal that you understand the role fully.

Fully articulate the skills and abilities you’re looking for and you will attract the relevant procurement staff. Being thorough and clearly describing the role will show talented individuals that you know your industry.

6) Forging Strong Relationships with Other Departments

Procurement seeks out new ways for organisations to work, throughout every department in the company. It is essential that your procurement department have strong relationships with other members of the organisation in order to work effectively.

When advertising new positions, demonstrate how well departments work together and how the role of procurement comes into play within your company. This will help to show potential candidates just how seriously you take procurement.

Attracting the Right Candidates to Succeed – In Summary

To appear attractive to potential candidates, it’s important that you speak their language.

Using the correct business jargon, thoroughly explaining the role and outlining how your organisation is beneficial to their career success will help you draw in the right people for your procurement roles. Knowing the industry will also help to retain your best talent.

With the procurement sector receiving a huge demand for roles, it’s vital you find how to reach the right people who will not only work for you but stay with you too.

Adam Maidment is a content writer for Portfolio Procurement, a procurement recruitment specialist which focuses on managerial roles through to executive appointments in procurement, category management and leadership.