The Procurement Tipping Point

At what point should a growing business bite the bullet and professionalise procurement? New research from Wax Digital has found that the right time is surprisingly early in a businesses’ growth, but it’s usually done on the back foot. 

As professionals in the sector we tend to think that procurement is the sole domain of large organisations spending millions of pounds on thousands of suppliers. However, new research has found that many smaller and more formative businesses also turn to procurement.

We recently surveyed 260 UK business and procurement experts and asked them at what point organisations needed to professionalise procurement to get a firmer grip on spend, suppliers, sourcing and so on. We were surprised by how many thought the ‘tipping point’ for procurement was relatively early on in a business’ growth. The results were as follows:

  • 75% said procurement was required once a company reaches £50M turnover
  • 77% claimed to need procurement by the time a business has 100 supplier contracts
  • 72% said once 500 invoices per month are being processed, procurement was essential.

Clearly, it seems that many smaller organisations are adopting procurement, so why is this? When asked why they introduced procurement, 68% said that it was due to rising costs, while 45% said that it was due to inefficient and labour intensive processes. Being a successful, up-and-coming business means experiencing rapid growth and significant change in these areas – more so than a larger, more established business.

For example, an organisation may be undergoing a merger or be highly acquisitive, bringing in more complex supplier portfolios or increasing spend overnight. These types of events can force a business to rethink processes like procurement. The very foundations of the organisation could adjust dramatically, and existing resources may simply not be adequate enough to support it.

Quick, someone build us a procurement function

Another interesting discovery in our research was that procurement is often introduced ‘on the back foot’ as opposed to being part of a pre-planned vision. We found that procurement is implemented as a reaction to a negative situation 48% of the time, compared to 31% of the time when it’s rolled out as a proactive and positive step forward. So few businesses planning ahead with procurement suggests that it’s (wrongly) an afterthought for many. Many businesses are ‘reactively’ using procurement, suggesting that they are already experiencing issues such as a lack of spend control or inefficient processes. But pre-planning with procurement could help businesses evolve more efficiently to try and reduce these problems.

That said, rolling out procurement isn’t always plain sailing, and smaller businesses with limited resources may particularly struggle to establish this new function successfully. Gaining senior management buy-in is the most common barrier to adopting formal purchasing processes, cited by 35%. Managing cultural change and a lack of internal knowledge followed, scoring 27% and 19% respectively. Given that they work for a smaller business – perhaps with a less rigid structure – the need for a procurement function might simply not occur to some SME employees, and it may take some time to win the support of colleagues. Those in the business being hindered by the lack of procurement shouldn’t be afraid to make a case for it to senior management.

Make sure the time is right

No two businesses are the same and each will feel the need for procurement at different stages. It’s not right to see procurement as something that should only be introduced when you reach a specific size or stage in the business cycle. Instead, consider when the businesses is feeling a strain that formalised procurement could help with.

It’s time for the procurement community to help strip its perception as a function for the larger business. This way more businesses can realise its effects.

Contributed by Paul Ellis, Managing Director at Wax Digital.

Has Technology Tipped the Scales on Your Work-Life Balance?

Information on demand. Constant connectivity. Global coverage. Are these a boon to our working lives? Or can there be too much of a good thing?

We live in a world of unprecedented connectivity. No matter where we are in the world, we have a host of information at our fingertips. Which is great when it comes to accessing vital data on the go, but could be having a detrimental impact on our personal lives.

The benefits of being constantly connected are easy to see. But it’s leading to a situation where people struggle to switch off when they’re not in the office. Checking emails on the way to work, or before going to sleep. Doing that “last bit of work” on the train home. Catching up on work over the weekend, or even the night before returning to work following a holiday.

Work phones and laptops, internet-based document storage and the increase in working from home leaves that bit of temptation to do a little bit more. After all, if you clear some of those emails tonight, you can start afresh tomorrow. Right?

Wrong! If this sounds familiar to you (and yes, there are plenty people in this position) then you should think hard about what you’re doing. No-one minds working beyond contract hours or staying a bit later when there’s urgent work to finish. But why, when there aren’t pressing deadlines, do we voluntarily give up our free time, weekends, or even our holidays to do extra work?

At best you get a reputation for not being able to switch off. At worst, it can impact on your personal life, and could even create an expectation that you’ll be on hand to respond to any query, no matter when it’s been sent.

Right to Disconnect?

Some countries are helping workers rebalance their scales. At the end of 2016, a new law was introduced in France, which meant that organisations had to give employees a “right to disconnect”. Companies had to work with employees to establish a basis for out-of-hours or home working, or make clear what expectations there were of workers.

In other European countries, companies are allowing employees to delete any emails that are sent to them while they are on holiday. Given the choice of a clean slate on your return to the office, it might also help remove temptation to access your inbox in your own time.

The Millennial generation is the first to really confront this issue (though this doesn’t mean other generations aren’t failing foul of it too). However, it’s hard to diagnose an issue until you know what it looks like. Author and motivational speaker Simon Sinek sheds light on some of the key points in this video.

(The key part is at 3:15, but if you have time, then it’s worth watching the whole video.)

So how do you change these habits and start to regain control of your work-life balance? Here are some top tips:

  1. The Phone. Down.

It might not always be possible, but it’s time to create some space between you and your phone. It doesn’t need to be all the time, but having no-go areas in your home, or certain times when your phone is off is a good place to start.

If you have a dedicated work mobile, then leave it somewhere that you’ll just pick it up as you leave the house.

Why not start by not having your phone next to your bed overnight? This will help to remove the temptation to check emails first thing in the morning or last thing at night. It might help you sleep better and start your day off on the right foot.

  1. Time Off is Your Time

You’ve earned the right to some downtime at the weekend. You’re entitled to your annual leave, and to enjoy it as time away from the office. And you’re entitled to be left in peace outside of working hours. Don’t voluntarily give this time up checking your email or finishing work.

It’s not always going to be cut and dried. But try to set yourself a time to stop working each evening, particularly on a Friday. This is particularly important if you work from home. Try to create a separation between work and home.

After all, does it really matter if that email is sent now, or document completed, when no-one else is going to see it until Monday anyway? Your brain will thank you for it (and your family/friends/loved ones probably will too!).

  1. Stop and Smell the Roses

Life doesn’t have to be lived in front of a computer screen or glued to a phone. Get outside and enjoy spending some time away from your desk. Challenge your friends and family to leave their phones behind (or in a bag at least) when you’re out.

Keep phones, tablets, computers, and technology away from the dinner table. Who knows, we might even rediscover the lost art of conversation!

Some of this is tongue in cheek. Most of it needs to be taken with a healthy dose of realism and knowledge that we can’t just drop technology. But we can make it work for us, instead of making it seem like a completely indispensable aspect of our lives.

So take control of your technology, and tip your work-life balance scales back in your favour!

Different Country, Same Procurement Culture?

Heading off to begin a new procurement chapter abroad? Make sure you’re prepared to accommodate, and adapt to, a new culture.

Have you ever wondered what courage it would  take to pack your bags and set off across the globe in order to start an entirely new chapter?

Juggling a new home, new job and a new life isn’t a challenge for the faint-hearted but it’s one you’re unlikely to regret and something that ISM board member, Kim Brown, knows all about!

Throughout her impressive procurement career, Kim has enjoyed roles at Reynolds and Reynolds Company, General Electric, Toys R Us and, most recently, at Dell, Inc as Vice President, Global Materials.

Kim’s lengthy career has taken her around the world so it’s unsurprising that she’s honed and developed her cultural intelligence (CQ) over the years. When we interviewed Kim, we were interested to hear about her global experiences, both what she’s learnt and how she’s adapted to different circumstances, and gain some advice on what it takes to hold a position on a board as noteworthy as ISM.

Procurement around the world

“I’ve lived in quite a few places, four or five US states and two countries,” explains Kim. ” I also did a stint as an ex-pat in Mexico city for a year and spent on year in Singapore.”

Was she able to observe distinct differences in working cultures  during her time abroad? “Very much so, particularly at the beginning of my time in Mexico, which has a very, verY different culture. I was working for General Electric at the time and accustomed to the direct and process-driven culture in the US. In Mexico, the conversations with suppliers, local people and colleagues were very family-based. They wanted to know about me, and understand what my family life was like before doing business with me.”

In Singapore, Kim faced the challenge of managing a widely dispersed and culturally diverse team. “I had team members in 26 or 27 different countries, all of which had cultural nuances.”

Pulling together a strategy for a large team is challenging at the best of times but it becomes even more so when you must be cognisant of how different cultures are motivated by different things. “Something that someone in the US would regard as a very small factor might mean a lot to someone in India, for example.

“Singapore itself was a very different culture.  It seemed at times cautious and a little shyer than in some other parts of the world. I’m the kind of person who says hello to a lot of people, and in Singapore they would look at the floor in response! However, once you get to know them and they get to know you I found the community to be friendly and outgoing.”

This, in a way, is the motto of Kim’s story. Working across cultures and borders requires patience, tolerance, compromise and understanding from both sides.

“As long as you go about making a change in the right way, it will work. When I first started in a global role I tried to supplement it with videoconferencing. I quickly found I was questioned “When are you coming, when will we see you?”  And there is no substitute for that. Employees are often very excited by and enthusiastic about a visit from the regional office – I’d arrive in Malaysia, for example, and find that the room was packed with people who wanted to see me, listen and ask lots of questions.”

What a board wants

If anyone knows the answer to the question “what does a board want?” it’s Kim Brown. As well as being treasurer for ISM, she’s held positions on two additional NFP boards, one of which had 70 board members. “When I went on [the board with 70 people], I wanted to be really involved, to be on the executive committee and be a decision maker, not just a voter. These roles are extracurricular but if you’re going to do it, do it!

“At ISM, we have very robust conversations, which is fun! I learn a lot and have the opportunity to interact with a whole bunch of new network contacts. I try to look positively upon any experience where I can learn something new.”

Kim’s top tips for procurement when presenting to the board:

  • Keep your strategy clear and concise and ensure you know how to sell it!
  • You need goals and objectives; lay out the salient points and present them in a way that makes sense
  • Get your act together! When you’re presenting, make sure it’s in an understandable manner.
  • Do your homework and always  look at alternatives and contingencies.
  • Use your  junior team members! I really like it when CEOs do this. It gives your team an opportunity to showcase the work they’re capable of doing, and allows us, as the board, to show your team that we’ve got confidence in them!

Are You Emotionally Intelligent? Here’s How to Tell

What exactly is emotional intelligence (EQ)? How can you determine if you have those characteristics? And why is it so important?

You’ve probably heard the term “emotional intelligence.” It’s come into vogue in recent years, with numerous books being written about the subject. Businesses are increasingly focusing on emotional intelligence and researchers are increasingly learning its importance.

What is emotional intelligence?

The term “emotional intelligence” (EI or EQ) was coined by researchers Peter Salavoy and John Mayer. Author Dan Goleman made the term mainstream in his book “Emotional Intelligence.”

Typically, EQ includes two related, but distinct items:

  • The ability to recognise, understand and manage your own emotions
  • The ability to recognise, understand and influence the emotions of others

 

The 5 characteristics of emotional intelligence

Emotional intelligence is characterised by 5 distinct characteristics:

1. Self awareness

Those with high EQ are able to recognize emotions in the moment. One of the keys to developing EQ is being aware of feelings, evaluating those feelings and then managing them.

2. Self regulation

Everyone knows that emotions come quickly and with force. It’s rare that you have control over when we are hit by an emotional wave. Even the slightest thing can trigger something deep within you. However, if you have a high EQ, you can control how long that negative experience lasts.

3. Motivation

It’s very difficult to be motivated if you always have a negative attitude. Those who are full of negativity don’t often achieve their goals. Those with a high EQ are able to move toward a consistently positive attitude by thinking more positively and being aware of negative thoughts.

4. Empathy

Empathy is the ability to recognise how others are feeling. This is essential for functioning well in society and excelling in your career. A person without empathy will end up regularly insulting and offending people, while a person with a high EQ will be able to understand what a person is feeling and then treat them accordingly.

5. Social skills

The final characteristic of EQ is having and developing excellent interpersonal skills. It used to be that access to the greatest amount of information would allow you to succeed, but now that everyone has immediate access to knowledge, people skills are more important than ever. Those with a high EQ are able to wisely and skillfully navigate the various relationships that fill their lives.

How can you tell if you have high EQ?

There are various tests that can help you identify your emotional intelligence, such as the Emotional Intelligence 2.0 test. However, these tests have their limitations in that EQ is intangible, making it difficult to precisely measure.

There are a number of markers that accompany those with a high emotional intelligence.

Some of those markers are:

A curiousity about people

Curiosity comes from empathy, which is one of the most significant elements of EQ. If you are curious about people, you will also care about what they feel and how they struggle.

On the flip side, those with a low EQ don’t have any interest in others. They aren’t interested in what others think or feel. Their primary focus is on themselves.

A thorough emotional vocabulary

Remember, EQ is the ability to identify and understand emotions. Research done by Travis Bradberry, who is the author of “Emotional Intelligence 2.0,” suggests that only about 36 per cent of people have this ability.

This is partially due to an inadequate emotional vocabulary that prevents people from properly identifying what they’re feeling. Every negative feeling is simply called, “Bad,” and every positive feeling is, “Good.”

However, those with high EQ can specifically name their emotions, which then allows them to deal with them in the most effective way.

A holistic understanding of themselves

If you have high emotional intelligence, you have a holistic understanding of yourself that goes beyond just feelings. You know what you’re good at and what you’re not. You know the people and situations that frustrate you. You also understand how to avoid or effectively navigate situations that will hurt you emotionally.

If you have a high EQ, you can tap into your strengths and minimize your weaknesses.

Not easily offended

Emotional intelligence involves a thorough knowledge of yourself and the ability to control your emotions. Combined, this makes you difficult to offend. You are confident in who you are and are able to understand when someone is simply making a joke versus when they are degrading you. You don’t let people easily get under your skin.

An ability to judge character

EQ gives you the ability to read and understand people. You are in tune with their emotions, which then allows you to more readily understand their actions. You can tell the difference between someone having a bad day and someone who is a bad apple. The more you develop your EQ, the more skilled you become at making character assessments about people.

Not haunted by the past

A low EQ makes it difficult to manage emotions when they appear unexpectedly. When a past mistake comes to mind, it’s easy to get dragged down into discouragement and despair.

If you have a high EQ, you are able to think about past mistakes without letting the associated emotions overwhelm you.

Giving without expecting

Those with a high EQ are able to give without expecting anything back. Because you are constantly in tune with the emotions of others, you know the effect that a gift will have on someone. When someone needs something, you want to meet that need.

This giving attitude allows emotionally strong people to build deep relationships with other people.

An ability to handle toxic people

Toxic, difficult people will often draw a reaction out of you. You feel surges of negative emotions when you are around them and often lash out, which then hurts both you and them. Lashing out also fuels their toxic behavior even more.

If you have a high EQ, however, you can keep your emotions in check when dealing with a difficult person. You don’t allow your anger to boil over. You’re able to see multiple perspectives, calmly.

As Daniel Goleman said:

“If your emotional abilities aren’t in hand, if you don’t have self-awareness, if you are not able to manage your distressing emotions, if you can’t have empathy and have effective relationships, then no matter how smart you are, you are not going to get very far.”

Janae Ernst (M.S. ’17) serves as the marketing communications coordinator for Cornerstone University’s Professional & Graduate Studies. This article was orginally published on the Cornerstone University blog.

Why Being Reliable Spells Doom to Your Career

Do people in your workplace ever refer to you as reliable, trusty, dependable? That’s got to stop! 

Are you a woman working in procurement? Join Bravo, our specialised group on Procurious. 

Truth or myth

Myth: Having a reputation for being “reliable” and “getting the job done” makes you valuable.

Over the weekend I’ve been helping a friend in a sticky situation. She is downsising her business, which is a smart move.

She has the potential to sell her business, which is a lucrative move.

In either case, she has to make layoffs.

Ouch.

As we strategised together on how to deal with this difficult decision, a staffer’s name kept reappearing.

My friend feels indebted to her for all her years of service.

I asked her what value the woman brought to the team. How does her work enhance results, solve problems, and propel the company forward?

Her answer?

“I don’t know…she just always does what I ask and gets the job done.”

Hire or fire?

We discussed this some more and came to the conclusion that despite her loyalty and workhorse ethic, this staffer would not make the cut and has to be let go.

That’s painful. And I see this a lot.

When I ask women what their special sauce is at the office, I hear “I’m known for my work ethic” or “I always do a good job” or “I’m reliable and get the job done”

I get it. I was once that person, too. And it cost me thousands of hours of my life and hundreds of thousands of dollars that I could have been earning.

Dammit!

Being known for getting the job done is not enough to build value and does not get you the pay scale, nor the flexibility you crave.

And what is even harder to see is that, most likely, working hard feels good. And when something feels good it becomes a hard habit to break.

When you realise how much you’re worth, You’ll stop giving people discounts. – Karen Salmansohn 

There is certainly pride in staying at the office late to produce a stellar result. And it’s nice to be the first one the boss reaches for when there’s a difficult task at hand that will require overtime. Who doesn’t want to feel needed?

Yet, when you are the person who is routinely called in to do the tough jobs that require a maximum time commitment, the only person to blame is YOU.

Sorry.

It’s okay to work an 80 every now and then if you’re in your flow and loving what you do.

And it’s great to commit to a special assignment that will open up doors of opportunity.

But it sucks to work that 80 day-in and day-out while telling yourself “it’s only for a year or two until I prove myself”

Don’t hold yourself back

Finding value in how hard you work is a script from your childhood. And if you’ve watched my master class you know what those scripts do. They hold you back. They make you trade hours for dollars. They keep you from your littles. They pull you off course so you can’t be the real, authentic you.

Defining your value and pouring your heart and soul into developing that is priceless. It’s a linchpin in your ability to create the career you really want.

You just need to hone it, sell it, and make sure the whole world knows your secret sauce solves their acute pain. Now you are simply PRICELESS! (But you already knew that, didn’t you?)

And the best part about this is that anyone can do it. You don’t have to be special, you already are special…you just have to find that special spark inside and nurture it. You don’t have to be lucky, you create your own luck by seizing opportunities and taking a stand for what you care about. And you don’t have to be master craftsman. Women always think they don’t have the skills, experience, or blah, blah to do this. Of course you do!

So when are you going to claim the life you really want? If you’re not living it today, then I suggest now  is a good time, right?

Are you a woman working in procurement? Join Bravo, our specialised group on Procurious. 

This article was oringally published on LinkedIn. In 2003, Kathleen Byars  left her lucrative executive career to go live on an island. Today she specialises in helping corporate women redesign their lives and leverage their talent to create fulfilling, flexible careers without sacrificing the success they’ve earned.

There’s One Key Reason To Buy American In 2017

With the Trump administration’s “Made in America” campaign in full swing, attention has turned to the Pentagon’s global supply chain. The reasons to Buy American might be a little more compelling than you expected….

In 1933 Franklin D. Roosevelt signed into law the 1933 Buy American Act which required the Pentagon to purchase US-manufactured products for anything over a $3,500 threshold. The military supply chain looked very different to today’s, over 80 years later.

The law required that the U.S. military’s entire supply chain be sourced domestically, from the textiles that go into uniforms to the raw materials that are used to create tanks and other weaponry. Roosevelt’s intention was clear: firstly, the law was a patriotic one, with the ‘buy American’ message resonating as strongly in the 1930s as it does among voters today. More importantly, the Act was designed to ensure a strong manufacturing base, critical to the country’s recovery from the Great Depression.

Roosevelt said in 1940: “Guns, planes, ships and many other things have to be built in the factories and the arsenals of America. They have to be produced by workers and managers and engineers with the aid of machines which, in turn, have to be built by hundreds of thousands of workers throughout the land.”

Is Buy American realistic in 2017?

While the 1933 law is ostensibly still in effect, the military supply chain draws heavily on foreign materials and components. In 2013, for example, nearly $20 billion (6.4 per cent of all U.S. military spending) went to overseas entities. This is achieved through the use of exemptions or waivers, which guarantee flexibility and security of supply.

After the White House published a “Buy American” executive order in April, the Office of Management and Budget provided new guidance to federal agencies on enforcing the existing laws, limiting exemptions and maximising the procurement of U.S. products. The Pentagon’s acquisitions office has reportedly instructed its contractors to put in place a training program on how to comply with the 1933 law.

However, there are also a number of materials that simply can’t be found or manufactured domestically, such as the rare earth element needed for flame-resistant rayon fibres used in uniforms (sourced solely from Austria), night vision goggles (91 per cent of which are from China), or lithium ion batteries, semiconductors, microchips and even missile propellant.

Is cybersecurity a reason to Buy American?

Two of the reasons for the 1933 Buy American Act – building patriotism and manufacturing jobs – still remain valid and are a key focus on Trump’s administration, but in today’s world of hi-tech military hardware, there’s a third, critical factor – cybersecurity.

Commentators are alarmed by the presence of Chinese-made microchips in America’s most advanced fighter jets, while components from other foreign entities can be found in American communication satellites, unmanned drones, bomb disposal robots and other gear. Futurist and author Peter Singer, predicted that these microchips could be used to “blow American fighter jets from the sky” if the two countries were ever to go to war.

While very little can be done about the rare-earth materials and metals found only outside of the U.S., it remains to be seen whether the Made in America push will lead to supply chains for vital components including microchips and semiconductors re-shored to the U.S.

In other news this week…

Supply Chain Management software market booming

  • Analyst firm Gartner has announced that the supply chain management (SCM) software market will reach $13 billion by the end of this year, up 11% from 2016.
  • Gartner has also predicted the market will exceed $19 billion by 2021.
  • Growth is being driven by a demand for agility, as vendors move to cloud-first or could-only deployment models, while end-users are becoming more comfortable about cloud security and recognise the benefits of software-as-a-service solutions.

Read more on MH&L news 

When does an SME need a procurement function?

  • New research from Wax Digital has found that having a procurement function is just as vital for SMEs as it is for large corporates.
  • The UK-based survey found that 75% of respondents said procurement was needed once a company reaches a £50M turnover, 77% claim to need procurement by the time it has 100 supplier contracts, and 72% said that procurement was necessary once 500 invoices per month were being processed.
  • Rising costs was the most common reason for introducing procurement, followed closely by inefficient processes and increasing business risk.

For more information visit www.waxdigital.com

Elon Musk’s Hyperloop hits the news again

  • Tech entrepreneur Elon Musk made headlines on Friday when he announced via Twitter that he had “verbal approval” to build a hyperloop – an ultra-high-speed underground transport system – linking New York and Washington DC.
  • If it goes ahead, passengers and cargo would be packed into pods and shot through a system of giant vacuum tubes on magnetic cushions, cutting the current travel time from nearly three hours (high speed train) to 29 minutes for the 355km journey.
  • Musk has also been in conversation with Chicago and Los Angeles officials about hyperloops.

Read more at Financial Review

 

Long Tail Spend 101: New School Approaches

Procurement ought to care a whole lot about long tail spend and lay out the best way to manage it in the “consumerisation of tech” era…

I have no doubt that agility, innovation, and adding value to the business should be of paramount focus to procurement teams evolving beyond cost-center status. Who wants to be in the back office pinching pennies while the rest of the business struggles to keep up with the new rules of the digital revolution? But as leaders keep one eye on those critical matters, the other must still cover the basics of the procurement practice to deliver the right experience and results. That means continuous tracking and improvement of spend influence, which includes long-tail spend management.

Long tail spend 101

Long tail spend is not strategically managed or under management. This means any spend without a contract framework agreement or negotiated work order. In organisations that have invested significant effort into strategic category management, managed spend tends to be around 80 per cent of all expenditures, leaving long tail spend at 20 per cent. It also includes a small, but significant amount of spend with managed suppliers, which is known as hidden tail. This spend includes purchases made from managed suppliers, but these purchases are outside existing contracts.

The remaining tail spend tends to come from roughly 80 per cent of the total number of suppliers. Often this will be fragmented: ad hoc purchases from multiple suppliers, low-value transactions at one-time vendors, non-purchase order spend, off-contract spend, etc. When all the long tail spend is added together it becomes the biggest overall supplier! This biggest supplier costs you a lot of effort and time, which is not clearly visible within the organisation.

What is the business value of tail spend management?

Until recently, the generally accepted figure for how much sourcing organisations can save through managed tail spend has been 1 – 5 per cent (the less mature the organisation, the more the saving). However, analysts at The Hackett Group, concluded that this figure might be higher: as much as 7.1 per cent. High-value maverick buying that should have been strategically sourced was cited as a factor in raising this figure (30 per cent of respondents estimated 10 per cent or more in savings). This underlines the importance of gaining visibility of tail spend.

Apart from up to 7 per cent  savings, what are the other benefits of managing long tail spend? First, by better managing long tail spend, you can significantly reduce the number of transactions and the related costs of procurement, and in other departments such as finance. This will help minimize the number of internal resources (sometimes senior) working with tail spend suppliers to further reduce procurement costs. These savings can be significant considering that the administrative cost of each pound spent can be as high as 35 per cent. Improving the visibility of low-value spend suppliers will create opportunities to identify sourcing savings and supplier consolidation.

Second, increasing strategically managed spend, and managing long tail spend, will result in increased contract compliance, leading to further savings. Added to this, suppliers are more likely to offer increased discounts when they are the sole providers for a specific category, or when a set volume of purchases is guaranteed.

Third, beyond cost savings, managing long tail spend helps eliminate noncompliant suppliers and consolidate larger suppliers, which leads to reduced business risk, and a reduced risk of fraud across the supply chain. This also increases the chance of your organization being compliant to external legislation.

The visibility challenge

One of the main difficulties with long tail spend management is poor data visibility, caused by factors such as complex supply chains; different IT systems and data sources; and, fragmented and disconnected business processes such as sourcing, contract management, and procurement. Also, the sheer number of suppliers, items, transactions, and the high number of business stakeholders can simply overwhelm some organizations.

There are often not enough available resources with the right skills to analyse the problem and set a corrective action plan. Unfortunately, neither strategic category managers nor operational procurement agents tend to have the knowledge or skills to handle the long tail. Organizations that don’t have clearly set policies or well-defined processes are more likely to lack effective control. Part of this process must be constant maintenance to prevent slippage. A good analogy for this aspect is that of keeping a garden. Just as a neat and orderly garden will become overgrown if neglected, maverick spend will creep into the spend cube. This results in a higher percentage of noncompliant purchases, often with low-value transactions and small-volume suppliers.

Finally, there is often a lack of adequate tools to help the organization analyze and manage long tail spend in an efficient manner. A purely manual approach to tail spend management quickly becomes cumbersome and error-prone without the right tool support. There is no quick fix for overcoming these obstacles, but the benefits of doing so are estimated by different sources to be between 15 – 20 per cent through reduced procurement cost, increased efficiency, supplier consolidation, additional sourcing savings, and decreased business risk.

The smart approach to long tail spend management

Organisations should first analyse their spend data with a thorough spend and supplier assessment. This type of spend analysis exercise helps gain an understanding of the current state and will serve as a foundation for a business case in readiness for the next step. The next step is to gain top management and stakeholder backing. To be successful with a long tail spend management initiative, it is necessary to have the buy-in of your C-suite, i.e., the CPO and CFO, by means of a solid business case and clear description of the savings outcome.

Establishing the support of top management will also help with the third step, which is to set-up clear policies and processes to drive the long tail management initiative. This includes compliance policies, preferred vendor lists, no purchase order–no pay policies, etc. The processes should also include automated procurement, with catalog suppliers, as well as spot buy, and free text orders channeled through a tactical and operational procurement team. The next step involves, selecting and implementing the right tool to the complete solution for long tail spend management. Consider an easy-to-use eProcurement system with a good search engine featuring rich content, efficient buying channels, and support for spot buy and tactical eSourcing.

Finally, setting up a dedicated team to monitor long tail spend suppliers is key to a complete solution for long tail spend. Spot buying and operational-free text orders at preferred suppliers will run more efficiently with a dedicated group managing the process. It is also possible to outsource this work to an external team.

In closing, it is important to realise that there is no silver bullet to managing long tail spend. Without clear policies or processes to guide an organisation on what to do and who needs to do it, there’s little that can be done to optimise and manage tail spend. By combining the right tools with the right approach, you can gain an additional level of visibility and savings, and, in turn, greater spend influence.

This post was adapted from the IBX Business Network white paper, Using Long Tail Spend Management to Achieve Savings, published in 2016. Tradeshift acquired IBX in early 2017.

Evergreen Wisdom for a Changing Profession

When was the last time you reached out to a Procurement Guru? Although the battleground is changing, those among us with scars have a lot of relevant insights to share.

We knew we’d be in for a treat when we locked in an interview with ISM board member Ann Oka. Ann is the former senior VP of supply management (CPO) for Sodexo, Inc. in North America where she was responsible for a whopping US$5.5 billion spend.

While working, Ann believed in contributing beyond her formal role, and served on the board of trustees for the A.T. Kearney Center for Strategic Supply Leadership at ISM, the board of the Sodexo Stop Hunger Foundation, and was a member of the executive committee of the GS1 Foodservice Initiative.  She retired in June of 2014, and other than the ISM board, now occupies her time with family and leisure.

Of course, she has a wealth of knowledge to draw from thanks to decades of procurement experience but, interestingly, she’s objective about its value to the next generation of procurement professionals. “Some things don’t change over time; motivating and leading people, looking at evolving tech and enlarging the sources of value. But, whilst there might be a lot of insights those of us with scars can give, the battleground is changing.”

The battleground may well be changing but surely that means Ann’s insights, as a seasoned pro, are all the more significant? As such, we were fascinated to learn how she has seen the profession develop over time and what she believes the future holds.

The evolution of procurement

Ann explains how drastically procurement’s role has changed over the years, both in terms of job responsibilities and external perceptions of the profession. “Where people were once identified as buyers or negotiators, they became category managers as the implementation of strategic sourcing evolved. These developments redefined the role of the average procurement person – they became professionals; their strategic impact increased and they had a broader scope.”

It’s a tricky and lengthy transition to lead any team through. “There’s a big task in the up-skilling of your people, particularly when you want to bring as many of them along with you as you can.”

Of course, some things don’t change. “The major evolution of procurement that we’re currently experiencing is comparable, in many ways, to what happened twenty years ago” Ann begins. “It was in the mid-90s when I first realised the importance of systems, technology and data. There was a tremendous amount of data available to procurement and category management, but harnessing it and getting it into the hands of the supply professionals was the challenge.”

What does the future hold?

Ann believes that the most competent procurement professionals will take the onslaught of Artificial Intelligence entirely in their stride. As she puts it, in a message to “The Change Resistant”:

“The train has come to the station. You have the choice of getting on it – and we’ll help you with the ticket – or you can be run over.”

The bottom line, she says, is that “people may well have been successful in the past, but the world is changing and you need to change with it, or it will pass you by.”

As far as procurement roles being totally displaced by AI, Ann is sceptical at best. “I don’t think the advent of new technology really changes a procurement role. Those with an ability to look at the long-term picture will be able to incorporate that into their strategies. Look at how the future is evolving and the possibilities it presents and work out how you’re going to work with the firm and with your supply base to extract the maximum value.”

Permission To Fail, Please!

It’s apparent that Ann rates a good procurement leader as much as, if not more than, someone who’s AI-ready.  “The harder thing for many organisations is having a management team that allows employees room to stretch and fail, that lets them try new things without instilling a fear of repercussions. There is such a thing as a successful failure. People are loath to say a project they’ve run hasn’t worked  out, fearing they will be judged on its success or failure. But occasionally  encountering a failure is a part of the journey to improvement.”

Procurement leaders can effectively work as safety nets for their teams. They should allow enough flexibility but know when to pull the plug to avoid too much fallout.

“I was in my position at Sodexo for 11 years. It allowed us to do things like put in some industry-leading systems, change the way we worked with suppliers, and harvest a culture of continuous improvement. In this time the continuous improvement team came up with several far-fetched ideas and used the leadership  team as a sounding board. It’s useful to invite new ideas and to have an off-the-wall ways of looking at things.”

Of course, not everyone thinks in this way. The key is finding people who have strategic vision. “Leaders should be on the look out for hires who have an intellectual curiosity and the courage to tickle the edges of things that are scary.  Embracing functional diversity is important in achieving this – perhaps your next star will come from legal, or IT, or straight out of college?”

Once a CPO, always a CPO

She might be retired, but its clear to see Ann still lives and breathes procurement. “I have people from past roles who, surprisingly, come back and approach me for our old heart-to-hearts”. She holds­­ board positions and still mentors younger professionals.  Safe to say there’s a spot for her on our board any day!

We concluded the interview with a final piece of advice from Ann; “If you’re a CPO, think about how you best position your company for tomorrow. Keep an eye on emerging technologies and bring the conversation to the table.” In other words, don’t miss the train!­­

 

Don’t Be Afraid To Kick A Colleague When Negotiating

In a major negotiation, procurement needs to deal not only with the supplier representative on the other side of the table, but with the internal stakeholder sitting next to you. If that person deviates from the script – as they so often do – then don’t be afraid to kick them in the shins. It’s your job!  

Procurious was invited to attend a Negotiation Roundtable organised by CABL (Conti Advanced Business Learning) and facilitated by its Founder, Giuseppe Conti.

Conti introduced the subject by pointing out that in many negotiations, it isn’t enough to negotiate with the suppliers. Usually, there’s a minefield of internal negotiation to get through first.

Don’t enter the maze without a map

Håkan Rubin refers to his company (IKEA) as a “matrix organisation”, and therefore sees stakeholder mapping and management as crucial before any sourcing activity. In his role as Supply Chain Operations Leader (Group Sustainability Innovations), Rubin says that identifying who the key players are internally isn’t always that obvious. “We try to get everyone on board, to make sure that resources are available and that everyone feels they are involved.”

Paul André, Emerging Products & Commercial Supply Director at JTI, built upon Rubin’s point: “I find that even though you’ve carried out your stakeholder mapping and have a joint meeting with key people involved, a lot of discussion happens outside of that meeting. What happens between the meetings is often more important, where people agree on things in one-to-one discussions.”

Overcoming resistance

Kemira’s Senior VP of Global Sourcing, Thierry Blomet, examined some of the typical resistance that procurement faces from internal stakeholders. “They have restrictive time constraints, heavy specifications, and often want to select suppliers based on past history and how comfortable they are with using them. It’s often challenging for procurement to convince stakeholders that there’s a better option against so much resistance, especially in a conservative industry not willing to take on the adventure of new technology or new suppliers.”

Xinjian Carlier (Strategic Sourcing Commodity Manager -Honeywell) shared an example of how she overcame resistance to a request for extra resources to deal with a major issue with significant financial impacts. “The reaction was ‘we don’t have time – I can’t give you the resource.’ I explained that the reason I came to them was that the company including both procurement and engineering would suffer an impact of hundreds of million in sales. Basically, I converted the issue into facts and put both of us in the same boat. This helped the senior leader in engineering understand, and reprioritise his resources.”

Resolving conflicting objectives

Laurence Pérot, Head of Global Supply Chain & Procurement at Logitech, comments that particularly in larger organisations, it’s procurement’s responsibility (and challenge) to juggle differing objectives and agendas from varied teams. “When you’re dealing with different functions, it sometimes isn’t clear what the company actually wants out of the negotiation. It means we [procurement] are unsure what we’re going to ask for. I had an experience where we had to make the decision on our own about the objectives on behalf of the rest of the community, because we couldn’t get alignment between the functions.”

Procter and Gamble’s Global Capability Purchasing Leader, Tamara Taubert, adds that procurement owns the discipline to be able to turn around complex, multiparty negotiation effectively. “To do that, our stakeholders need to get educated on what a negotiation is, the do’s and don’ts, and their role in the negotiation itself. The procurement representative might be the only person sitting at the table across from the supplier, but there are others involved in the negotiation, whether they like it or not. Procurement can lead by connecting all parties together and help them come to a value agreement.”

Staying in control

Blomet has found that engineers are generally happy to be guided by procurement as they’re often less experienced in negotiations and sourcing events. But when senior business stakeholders step in, it’s often more challenging for procurement to keep control of the process. “Business stakeholders are more likely to say that they know how the negotiation should be handled. Procurement may be tempted to back off at this point, but my advice is don’t back off. It’s even more important to help set the scene, do the roleplay, and keep them under control both during the preparation phase and during the meeting itself. And yes, this means it might be necessary to kick someone under the table if they deviate from the script.”

Alessandra Silvano, Global Category Director Capex and MRO at Carlsberg Group, says this has happened to her. “I had to ask someone who was not keeping to the script to leave the room. This person was becoming emotional and I could see we would be left in a bad position. I called a time-out, we took a break, left the room, and the supplier stayed behind. Eventually, we went back into the meeting and said we’d like to continue in a smaller group – leaving out the person who was not playing according to the script.”

Francesco Lucchetta, Director of Strategic Supply at Pentair, noted that although emotion can cause people to leave the script, it’s part of the negotiator’s toolset. “There’s a difference between playing with emotions and keeping negotiations under control. In a supplier negotiation, you’re the customer, so you can be much more emotional than they are. In an internal negotiation, you’re more likely to change a stakeholder’s mind by pointing out the emotional/risk side of the issue, rather than presenting facts around savings.”

Interested in attending a CABL Negotiation workshop? Visit http://www.cabl.ch/ to find out more. The founder, Giuseppe Conti, has over 20 years of Procurement experience with leading multinationals and over 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

Can I Really Be Me And Succeed At Work?

Scores of women struggle to be their most authentic selves at work without the fear of negatively impacting their careers. How can you be your fabulous self in the workplace and still succeed! 

 

Join the women in procurement conversation in the Procurious Bravo group. 

I moderate forums quite regularly for women that focus on the themes of vulnerability, building business acumen and authentic leadership. There is a consistent theme in the conversations I have before, during and after these forums. Frustration and exasperation that women are not advancing quickly enough into leadership.

The structural, system level reasons are well documented, however women tell me:

  1. I want to advance, but encounter barriers and exclusion due to implicit bias
  2. I am perceived to lack the confidence that men typically do in the workplace
  3. I want to show up authentically, confidently and courageously, but do not believe I will be rewarded for ‘being me’

Why do women feel like they cannot be authentic?

One answer is the issue of likeability. There is a catalogue of articles about the ‘Heidi/Howard’ story cited by Sheryl Sandberg in her seminal work, Lean In. Heidi who is an authentic female entrepreneur and go-getter, successful, wealthy, powerful and respected. Her success story, profile and achievements are reviewed by a group of students from NYU. Then her name is changed to Howard and the same group of students review her/his accomplishments.  The students rate Heidi/Howard the same for competence, however Howard was rated as more likeable and someone that the students would prefer to work with.

Heidi is ‘selfish and not the type of person you would want to hire or work for.’

It feels true, doesn’t it? It also feels awful and contributes to the exasperation and frustration that women feel. However, there is hope. Andersen Cooper from CNN recently reran the experiment with a group of students. This time around, students rated the female entrepreneur as more likeable and desirable as a boss than the male. Hooray! But why?

  1. Because in the 10 years since the original study, we have seen more women ascend to positions of power
  2. Women’s participation rates in the workforce are at their highest rate ever

However, the societal expectations of how ‘nice girls’ behave and as a result, the challenge of being an authentic leader, female or male, are not shifting quickly enough.

To put a completely gendered lens to this issue; I asked women;

  1. Can I really be me and still advance at work?
  2. Is my authentic feminine leadership style valued the same way as traditional male leadership styles?

Disappointingly, many women say no to both questions. Women are waiting for the right environment to advance to be truly authentic feminine leaders. I say wait no longer!

We expect a lot from women

We want them to lead, manage, coordinate and juggle life, leadership and career. Often this results in women prioritising their career last in a long to do list.  I want women to invest time and effort in themselves, their development and their fulfilment because I know, from my own experience, that understanding myself, my skills and how to use them effectively has positioned and propelled me into doing what I love and what the world needs. More women in leadership!

Get the career advice you need

In her Ted Talk watched over 3 million times, Susan Colantuono says get the career advice you need, not what you’ve always received! Here is some good advice;

  1. Traditional training, development & advice will get you to the middle, not the top
  2. Embrace your identity as a leader
  3. Identify and act to close your leadership gaps

Identify and act to build your leadership muscle

If you want to lose weight, get fit and be healthy, then you would identify and act, wouldn’t you? You might get a gym membership, start eating healthy or engage a personal trainer to help keep you committed, focussed and accountable.

Why not use the same formula for your career?

  1. Lose weight:lose the incomplete career advice, lose the lack of confidence.
  2. Get fit:practice self-awareness & business skills exercises and build authentic leadership muscles
  3. Be healthy: discover your purpose, your vision and values then build a career advancement plan

These are logical steps but require commitment, discipline, support and expertise. That’s why I want women to think of me as their career personal trainer. I have designed a 6-step program to build the career muscles that matter for women.

Advancing Women workshops are designed to build the EQ (Emotional Quotient) IQ (Intellectual Quotient) and SQ (Social Quotient) muscles of the current and next generation of female leaders in Australia.

Advancing Women programs are not designed to ‘fix’ women, they are designed to provide the strategies, tools and the practical actions to women who are serious about advancing their prospects. The learning content is balanced to ensure that women aren’t over-committing and perfecting skills, attributes and traits they are already comfortable with and competent at.    All of which result in women advancing, on their own terms!

This article was originally published on MichelleRedFern.com. 

Join the women in procurement conversation in the Procurious Bravo group.