Establishing a pool of preferred or pre-qualified suppliers is a great idea as long as you are actively managing your supplier pool. Here’s how it’s done…
Last year Government Technology published an article describing how the state of Colorado has turned to a process they call “mini-RFP’s” to streamline and expedite procurement in their IT category.
The author Jessica Mulholland reports the state performed a prequalification of vendors and awarded multiple contracts to address a “specific set of issues and implementations”.
This select group of vendors operating under pre-negotiated legal terms are solicited when new work comes up. The lowest bidder is awarded leveraging their prenegotiated terms and conditions.
This is a concept that I have seen quite a few times before. Many private organisations operate in this manner. Essentially awarding MSA’s that include no rates or commercial terms, just legal terms.
It should be noted that the reason this is more expeditious is because it streamlines the contracting portion of the procurement process. This isn’t a shortcut to procurement, you still need a scope of work, you still need a bid period, and you still need analysis. The time saved is the time with legal.
Prequalification of suppliers isn’t anything new, but it is a unique approach in public procurement. I’m no expert on the legality of this as a government practice, but I will address this from a private business perspective.
1.Agreements without Commercial Rates
Perhaps this is a nuance of the public sector and possibly the reason why the state of Colorado can have a closed bid, but in private business there is simply no good reason to have an MSA without pre-negotiated rates. Nonetheless, I have seen this quite a few times. If you are going to go so far as to negotiate legal terms, locking in rates and commercial terms should be a no-brainer.
2. Obstacles to inclusion
If you plan to add a pre-qualification process to your organisation, consider keeping the process simple and straight-forward. It should not take more than a couple of weeks to complete the process. Anything more than that and you may find that your process becomes an obstacle for inclusion.
3. Scale the Pool
Be sure to have a large enough pool to allow for multiple projects to occur at the same time without depleting your bench. There is nothing worse than having an emergency project when all of your pre-qualified vendors are at capacity and you have no one left to award.
4. Diversify your Pool
Your pool of pre-qualified suppliers should be as diverse as the projects you contract. When I talk of diversity here, I’m not speaking of minority owned businesses. That is important too, but more than that you need to make sure your pool of vendors has large firms for the big projects as well as small firms for the small projects. Don’t just include all the big guys or you may find you have no one at all.
5. Score Performance
If you are going to establish a pool of pre-qualified suppliers it’s important to score each performance. Develop Key Performance Indicators (KPI) to evaluate how the suppliers performed and make sure to collect a report for each engagement. This will give you actionable data to evaluate the performance of each supplier.
6. Aggregate and Report KPI’s
Grading the suppliers on each project is essential, but when you collect and aggregate that data across a year, now you have powerful data. Anyone can have a bad project, but with a consolidated view of a vendors performance over a year, you can address specific problems, identify weaknesses, and generally grade each supplier objectively. With this data, you can elevate suppliers that perform well and downgrade those who perform poorly.
7. Evaluate your Pool at Least Once per Year
With your performance data in hand, you should meet with your suppliers annually and share the results of your scoring. This may be a difficult conversation, but if you are basing your comments on facts, it will be easier. In addition to reviewing existing suppliers, this is the time to look outside of your pool to identify new or up-and-coming suppliers to add. You should also evaluate the state of your organisation to right-size your pool.
8. Update your Agreements
Above all else, don’t let agreement expire. Track the end of all agreements and create reminders on your calendar to ensure you are proactively renewing, terminating, or renegotiating agreements before they expire.
Establishing a pool of preferred or pre-qualified suppliers is a great idea as long as you are actively managing your supplier pool. Keep on top of your contracts and you will soon see the fruits of your labor.
Do you have prenegotiated or prequalified Suppliers in your organisation? If so, do you follow these recommendations? Are there any best practices you recommend? Tell me your stories.
What is blockchain? How can it impact your organisation and help establish trust? Why should procurement be embracing it? We answer all of your burning blockchain questions…
Blockchain belongs to the (long?) list of buzzwords that are part of the growing hype surrounding new technology. Many people equate blockchain with Bitcoin, the first relatively mainstream cryptocurrency. For some, this association makes blockchain seem like something for hackers and illegal commerce, and far removed from typical B2B or B2C applications.
However, what many may not realise is that blockchain can have a significant impact on business because it can be a powerful tool in establishing trust. Trust is at the heart of business and drives:
How we cooperate with other people (blockchain makes it easier to build trust in new business partners),
How we automate activities (blockchain can ensure that a “machine/process” performs as expected)
How we make decisions (blockchain creates more confidence in data),
What Is Blockchain?
Blockchain can be intimidating. It is a complex technology and understanding and explaining it is far from easy (I still haven’t entirely figured it out). However, for procurement and supply chain professionals, understanding what blockchain enables and the associated implications is much more important than knowing how it works. What makes blockchain so valuable is linked to how records are added to the database:
A network of computers stores and verifies any new record, making the blockchain more robust than a single instance (like in most traditional databases),
Every transaction (“block”) is linked to the previous one (“chain”), creating complete traceability and preventing any data alteration,
It is decentralised (peer-to-peer), which means there is no authority deciding the rules or with a personal interest in manipulating data in one way or another.
Data in the blockchain is therefore immutable and impartial. It is shared among parties (publicly or privately) and cannot be changed by anyone.
“Protected from deletion, tampering, and revision. In this world every agreement, every process, every task, and every payment would have a digital record and signature that could be identified, validated, stored, and shared. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organisations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.” The Truth About Blockchain, Harvard Business Review
Therefore, blockchain is a form of digital trust. More trust makes doing business easier, streamlines many processes, and creates transparency. Furthermore, and more importantly, it means that blockchain can serve as the backbone for new types of cooperation between machines (M2M) and between humans (H2H) that were, until now, limited by the cost of building trust or by a lack of trust altogether.
Businesses and business relationships stand to benefit significantly from what blockchain technology has to offer, and here are the main reasons for why procurement and supply chain professionals need to start taking notice:
1. Streamlining Operations
Beyond making transactions more secure and efficient by removing intermediaries, blockchain technology can also increase transparency in the supply chain. At each step of the value chain, from the extraction of raw materials to the customer, blockchain technology can store and record every transaction and exchange of ownership. This would provide companies with a complete, trustworthy and traceable record that would facilitate and simplify the process of due diligence, which companies need to complete in order to ensure compliance with rules and regulations restricting illegal or unethical corporate activities (child labor, modern slavery, conflict minerals, product traceability, fraud, counterfeit, etc.). Not only would this streamline internal processes (increasing efficiency and reducing costs), it would also establish more trust between companies, suppliers, regulatory bodies and the consumer. This is why many companies with a complex supply chain in industries with strict regulations and requirements related to product traceability (pharmaceutical, food & beverage, etc.) are already testing blockchain technology for that purpose.
2. Better Cooperation Between People
Blockchain can also enhance and improve Human-to-Human (H2H) cooperation because collaboration between people also relies on trust. This is particularly true when partners do not know each other, which is especially common in new business models (platform/ gig economy).
Identity and reputation are the two pillars of building trust. Because of its cryptographic nature, blockchain embeds mechanisms that ensure that users are who they say they are. That covers a user’s identity and extends to other credentials:
“Using the blockchain and strong cryptography, it is now possible to create a certification infrastructure that puts us in control of the full record of our achievements and accomplishments. It will allow us to share a digital degree with an employer while giving the employer complete trust that the degree was in fact issued to the person presenting it.” Certificates, Reputation, and the Blockchain, MIT Media Lab
Reputation is nothing more than the result of past transactions. As noted earlier, the blockchain logs all transactions securely and transparently. So, the blockchain makes it easy to measure and know someone’s reputation. Blockchain therefore makes it easier to do business with new partners by reducing the costs and risk which are often associated with new business relationships. Traditionally, a fear of risk and unexpected costs has been behind the rationale to aggregate spend towards a limited number of suppliers and/or to favor (consciously or unconsciously) incumbents. The use of blockchain can allow procurement organizations to revisit their category strategies!
3. Better Cooperation Between Machines
With blockchain organizations can
Trust the data stored in it,
Create new data collection points by digitalising more processes,
This creates a distributed system (data + process) that they can trust (completeness, accuracy, authenticity, resilience). So, it is possible to automate further without being exposed to typical risks due to lack of data, poor/corrupted data, unreliable execution, interferences by third parties/intermediaries,…
Blockchain is the ideal infrastructure for machine-based activities that the Internet of Things (IoT) has been lacking. It opens the door to new “apps” that will run precisely as programmed. An immediate area of application that is relevant for Procurement is Supply Chain Management.
For example, companies can track the movements of a container at all times. Whenever it reaches specific points, the blockchain will record the activity and smart contracts will execute automated actions (e.g. registration for customs, payments,…). The same concept also extends to upstream/downstream activities like inventory tracking/management or ordering/requisitioning/replenishing.
4. Better Insights with the Convergence of IoT, AI, and Blockchain
“Blockchain and AI are the two extreme sides of the technology spectrum: one fostering centralised intelligence on close data platforms, the other promoting decentralized applications in an open-data environment. However, if we find an intelligent way to make them working together, the total positive externalities could be amplified in a blink.” The convergence of AI and Blockchain: what’s the deal?, Francesco Corea
When considering the Internet of Things (IoT) + Blockchain and adding Artificial Intelligence (AI) to the landscape, a bigger picture emerges that covers data, insights, and actionable intelligence: the core of business activities! When combined, these technologies represent an opportunity to address the “big data” challenge summed up in the “6 Vs”: Value, Volume, Variety, Velocity, Veracity, and Variability.
Some of the latest technologies represent critical components for building better insights and actionable intelligence:
IoT = Provides the ability to collect more information (Volume) and in a real-time manner (Velocity & Variability). This is especially true when monitoring physical supply chains (e.g., sensors and geolocation for containers) and changing demand (e.g., sensors in machines for predictive maintenance). It is the foundation that makes gathering data possible and keeps the Big Data engine running and improving (e.g., machine learning).
Big Data = Makes it possible to consolidate, aggregate, and slice more data coming from multiple sources (Variety), both internal (e.g., ERPs, or other information systems) and external (e.g., IoT sensors, third party data providers…).
Blockchain = Increases trust and reliability (Veracity) in the data collected and stored which is a critical factor in trusting the insights and decisions derived from that data. It also creates a “data backbone” that can be utilized to create interoperability (internally and externally) opening the door to further automation and “interconnections” between physical and financial supply chains.
AI = Exhibits tremendous computational capacity to analyze massive sets of data to build new knowledge (Value) and continuously learn and improve from new data.
Too Good to Be True?
Blockchain represents an important for the business world. Procurement organisations cannot afford to ignore it because it has the potential to open doors to further improvements from streamlining paper-based processes to enhancing cooperation and developing new strategies and supporting new operating/business models.
Despite the potential benefits, however, organisations should still make an informed decision about testing blockchain bfore rushing in. Blockchain is still a relatively new technology, and in addition to understanding the potential it holds, procurement organizations also need to understand the limitations and risks, which we will cover in our next article. Stay tuned!
Brexit is complicated and it’s very, very messy. And what happens during the next couple of years will be determined by a number of political factors…
At last month’s CPO roundtable Anand Menon, Director of the UK in a Changing Europe based at Kings College London, spoke to us about the long-term causes of Brexit and their future implications.
“Hand on heart I don’t know [what’s going to happen]” he said. “If I could answer that I’d be rich and famous!”
It’s the most uncertain moment in British politics since World War Two and what’s striking is that, two years on from the referendum, nothing has been decided.
A key reason for such uncertainty is the nature of the referendum itself. As Anand explained, the referendum packaged so many different options and outcomes into a binary choice: leave or remain. No one understood quite what they were signing up for and since the result, Brexit has largely been defined in terms of the different adjectives applied to it; black Brexit; white Brexit; hard Brexit; soft Brexit; white red and blue Brexit… the list goes on.
“Brexit was a vote against globalisation and it was a vote against the economic status quo. Subsequently, it’s interesting to see that the South of England has noticed the North and we’ve had a chance to address issues that never got air time under old centrist, liberal politics.
“More profoundly, the referendum and its outcome have taught us about us. In the same way that Trump has been a wakeup call for the U.S, the fallout from Brexit should be a wakeup call to our politicians to think about the real problems confronting the country. ”
And how to best to manage negotiations as we ready to leave the EU.
Does the UK want to establish a relationship with the EU similar to that of Norway’s or maybe more like a more distant partner?
Anand admitted that due to Brexit being such a complex and all-consuming process, there is no avoiding it being a messy one at that! What happens during the next couple of years will largely be determined by the following three political factors:
The UK Prime Minister relatively quickly defined what she meant by Brexit (leave customs market, end free movement etc) and her position has remained relatively unchanged since. Whilst she is unpopular with many in her party, it is unlikely her critics will choose to get rid of her yet. As long as she in place, she is a powerful force for stability.
The Conservative Government
There are a significant number of Tory MPs who want a much softer Brexit than the Prime Minister is proposing so it’s possible they will vote against May’s Brexit deal. However, if May loses this vote there is no question that she has to go; after all, her whole mission as Prime Minister is Brexit. If that happens, the Conservative Party will either elect a new leader or the UK will face a new general election. And the one thing no Tories want is another general election.
The Labour Government
In the last general election, Labour picked up votes from both remainers and leavers. As such, the party have been careful to keep their Brexit policies ambiguous. Whenever Corbyn speaks about Brexit, he speaks in ambiguities.
Does Anand believe there is any chance of a second referendum? “The beauty of Britain at the moment is that any outcome is possible – I can imagine us crashing out with no deal or a great deal but I can also imagine a scenario where the first referendum is overturned.”
“No one knows what would happen to public opinion at this point – we could vote Brexit again. Or, imagine second time around the UK votes to remain 52-48 per cent. We’ll find ourselves in a political groundhog day. There would need to be a huge swing in vote for it to carry much weight.”
Ultimately, Anand warns, the real danger for the UK’s economy is that the negotiations go pear shaped, the UK crashes out of the EU in March 2019 and they end up with no wiggle room to extend the UK’s transition period.
His advice to procurement organisations trying to prepare? Plan for a World Trade Organisation outcome from 2021 – “That, I think, is the most likely outcome.”
Learn how to persuade your colleagues and suppliers with 6 tips from 20th-century propaganda masters. Guest post from Invaluable.com.
Since their introduction in 1984, Dr. Robert Cialdini’s six principles of persuasion have become the framework for understanding the science of influence. Each principle is distinct and outlines different methods for effective persuasion.
Mastering the art of persuasion has become a major “soft skill” in the modern corporate world. The ability to influence others is key to developing strong relationships with suppliers, employees and end-users. Persuasion can help to convince others that we are credible, trustworthy leaders worth following and allows us to manipulate the psychological processes of others to our benefit to achieve better results.
In the procurement profession specifically, strong persuasion skills can help to convince your organisation to be more strategic in managing money and can also be a key factor in your fight to minimise maverick spend.
Learning from the propaganda masters
Before the rise of the social media influencer, advertising and propaganda posters were some of the most powerful persuasion tools available. Propaganda posters have been used for decades to inspire, educate, and galvanize the public. Whether you are selling a product, a war, or an idea, advertising can be a powerful tool to inform and persuade your audience. Propaganda posters from the 19th and 20th centuries addressed topics ranging from patriotism to healthcare to feminism.
This article, originally from Invaluable, takes Dr. Cialdini’s six principles of persuasion and applies them to famous propaganda posters used throughout history to wield influence and power over their audiences. With their striking imagery and bold messages, these posters are superb examples of each principle and perfectly illustrate the mechanics behind persuasion.
The first principle, reciprocity, is based on the idea that people often feel obliged to match or repay the behaviors and gifts they receive from others. When using the principle of reciprocity for persuasion, look for opportunities to be the first to give, and make your token unexpected and personal whenever possible. This tactic facilitates a relationship in which the recipient feels appreciative of your contributions and is likely to be more open to the message you share or the favor you ask for.
The propaganda poster “Remember Your First Thrill of American Liberty” is an example of reciprocity in action. This poster was created by the Food and Drug Administration in 1917 to encourage immigrants to the United States to invest in the war effort by purchasing Liberty Bonds, which were a crucial source of funding for the war effort.
By highlighting the benefits and opportunities that the United States had given to immigrants, the poster called upon its audience to invest in the country’s war effort in return. The poster also strategically included the Statue of Liberty as a metaphor for the opportunities available in the United States and to remind immigrants of the emotional experience of arriving in the U.S. for the first time. The artist’s powerful illustrations and the poster’s authoritative call-to-action prompted Americans to recall their debt to their country, which ultimately proved persuasive in raising money for the war effort. This poster remains a powerful example of the way reciprocity persuades us to act.
The second principle of persuasion, scarcity, refers to the idea that when people have less of something, they want it more. Scarcity speaks to our human nature to place greater value on things that are less readily available. To use this principle, incite people to act, agree, or buy your product by demonstrating how they can benefit from it, what’s unique about your offering, and what they could potentially lose out on.
In the poster “Doctors are Scarce, Learn First Aid and Home Nursing,” the artist used the scarcity principle to promote basic at-home care. By making it clear that good medical care would be hard to come by, the poster instilled fear and communicated the importance of individuals learning to manage their own minor health concerns. The poster was created to communicate people’s need to learn to handle their own injuries and illnesses since many doctors were oversees fighting in the war effort.
This poster is historically significant because it is one of the many examples of ways Americans on the home front were forced to ration supplies and services to aid in the wartime effort. Its message drove Americans to act and remains a powerful reminder of the scarcity principle and its ability to influence.
The third principle of persuasion is authority. This principle says audiences are much more likely to listen to messages from sources they respect or view as experts. Whether you are explaining your point of view or selling a product or service, showcasing your credentials will help your chances of success. No matter what your message is, it will be better received if it is packaged in a way that makes it seem authoritative.
When using authority, the source doesn’t always need to be yourself. When someone else points to your credentials the message can be just as powerful or even more effective. In the propaganda poster “Christ Guerilla,” Jesus was portrayed as a guerilla fighter. The poster was created by the Organisation of Solidarity with the People of Asia, Africa, and Latin America based on a quote from the Colombian priest Camilo Torres who said, “If Jesus were alive today, he would be a guerrillero.”
The poster called on the authority behind the Christian religion to convince audiences that being a guerilla fighter was a noble cause. This piece of propaganda was created in Cuba during the 1970s as part of a political movement to fight imperialism and defend human rights. Its message was clear: guerilla fighting was noble, necessary, and moral. Because the poster called upon the authority of Jesus to deliver its message, its theme was especially resonant for its audience.
The consistency principle refers to the idea that people like to remain resolute with the things they have said or done in the past. If someone already agrees with some of your message, or if you are able to get your audience to buy into your point of view in a small way, you’re much more likely to convince them to take further action.
The “We Can Do It!” poster used the consistency principle to encourage women who were already working in factories to work harder. While today this poster is considered one of the most iconic U.S. propaganda posters of all time, it was not widely circulated during World War II when it first appeared. The poster was made in 1943 by J. Howard Miller for Westinghouse Electric, and was part of a broader effort to encourage both male and female workers to work harder due to the high demand for manufacturing generated by the war effort.
The poster resonated with women in its original context in the 1940s and continues to serve as an icon of feminism today. When it was first created, the poster used the consistency principle to remind women of the importance of committing to their factory jobs while encouraging them to work harder and stay motivated. The likeness of Rosie the Riveter still resonates, and the poster has become a rallying cry for recognition of equality.
It’s commonly accepted that people are more likely to agree with the opinions of someone they like. The fifth principle of persuasion, liking, is based on this idea. This principle notes that people agree with those who are similar to them, those who pay them compliments, and those who cooperate with them. If you know your audience already likes you, you have a leg up for persuasion, but incorporating these three factors into your communication efforts can go a long way towards making your audience receptive to your message. Before making your case, consider spending a few moments with your audience to build rapport and likeability.
The poster “Women of Britain Say ‘Go’” incorporated the liking tactic to encourage the men of Britain to buy into the government’s request to join the war effort. During World War I, posters were one of the most important mediums for conveying a message. Women were used in these posters to spread ideas of morality, innocence, and justice in the face of danger.
While this poster was intended to remind the women of Britain to encourage their men to enlist, it also clearly communicated to British men that they’d be spurned by their loved ones if they refused the call to serve. Using the opinions of their families as advocates proved to be an effective persuasion tactic in getting men to enlist.
The sixth principle, consensus, is the idea that people are likely to agree with something if it is in line with what the broader group believes. To get others to believe in your message or your product, point to what those similar to your audience believe and do. When people are unsure of how to act, they look to the behaviors of others they identify with to determine their own beliefs. By highlighting what your audience’s larger social group thinks, you are more likely to get their buy-in.
The title of the poster roughly translates to “Let’s Fulfill the Plan of Great Works,” and shows clear parallels to the consensus principle. The tiny hands fill up a larger hand to communicate to the viewer that all of Russia is working together to reach a common goal. The poster was created in 1930 by Gustav Klutsis, a popular poster artist during this time period who was a popular designer for the Soviet government. This piece was created in the Constructivist style, which originated in Russia in 1919.
Klutsis was associated with the Communist party and created propaganda art for the organization, especially when the party was under the control of Stalin. The hand in this poster is Klutsis’ own hand, but it was used in the poster to represent the workers who were crucial to achieving the Communist party’s goals. The artist incorporated the faces of the workers directly into the poster’s design so they appeared not as individuals, but as a collective mass united around the same goal.
Shark Tank star, entrepreneur and talent expert Andrew Banks presented at the 2018 CPO Forum as a guest of our Premium Sponsor, American Express. Here are the highlights for this top-rated speaker.
There’s no single, agreed-upon definition of what leads to career success. If you pose the question on Google, you’ll find opinions ranging from salary levels, to happiness, to work-life balance, to growth opportunities.
It was refreshing, then, when Andrew Banks stood on the stage at the 2018 CPO Forum and announced that he had discovered the following formula: career success lies at the sweet spot between:
what you are passionate about
what you are good at, and
what the world
Banks is a modern-day polymath who might have delivered a fascinating speech on any number of topics, but knowing that he had over 60 CPO-level delegates in the room, he chose to speak about leadership and talent. Drawing upon his experience as a co-founder of Morgan & Banks, he spoke about motivation, attributes, values and purpose, and the winning combination when hiring talent.
“Intrinsic motivation is desirable, but extrinsic motivation helps direction”, says Banks. His point is that although a self-driven professional is admirable, a savvy leader will tap into their teams’ innate competitiveness and desire for rewards. He recommends driving performance and out-of-the-box thinking by:
creating competitions and prizes for teams and company-wide goals
making the rewards special (outside of normal rewards that are a part of the job)
making it open to all (anyone can play!)
setting specific targets and timelines to drive a sense of excitement and urgency.
Attributes Beat Skills and Knowledge
Banks is a strong believer in the power of psychometric testing and its ability to predict future job performance. Psychometric tests soon became a key differentiator for Morgan & Banks, with candidates tested across areas as diverse as cognitive ability, personality, interests, and attitudes. His message is similar to that of U.S. media figure Arianna Huffington, who tells businesses that no matter how brilliant an employee may be, the company should no longer tolerate “brilliant jerks” in the workplace.
Banks quoted Peter Drucker’s famous observation that “Culture eats strategy for breakfast” before delving into an explanation of what cultural leadership looks like. It involves:
a constant rally around a ‘noble purpose’ – remembering that part of Bank’s definition of career success is “what the world needs”
highlighting core values daily/weekly.
being interested in your team, not interesting
providing inspiration and expecting the best.
The Winning Combination When Hiring Great Talent
If you can find a candidate with the combination of both passion and ability, you’re onto a winner. Banks comments that in job interviews, there are ways to ascertain what people want, opposed to what they think they want. Get them to explain the why within questions such as “What’s the best job you’ve ever had?”, and “Where do you excel?”
Similarly, when you’re writing a job description, always describe the behaviours and qualities you seek, not the role – just as you would describe the driver, not the car.
According to Banks, an ideal team member understands the business model and displays curiosity, thinks for themselves and innovates naturally, gets on well and never settles, has extra capacity for the next challenge, and makes their boss’s life easier.
In summary, if a leader is able to:
keep yourself refreshed by staying curious, seeking new input and inspiring the team,
motivate with games and rewards for out-of-the-box thinking,
get the team culture right around noble purpose and values,
Looking for a new procurement job? The good news is that there are a whole load available that are yours for the taking… you just need to broaden your vision!
Do you have your eye on an exciting opportunity in international category management, predictive data analytics, or do you have a passion to make sourcing more sustainable? The good news is that new job roles like these are emerging in procurement and they are waiting for you. Conventional manual processes are disappearing as we automate routine tasks, even contract management is deemed at risk: artificial intelligence and algorithms are already being used to draw up “smart” contracts.
Where are all the great jobs?
Traditionally the most desirable careers were to be found in the big multinationals that have mature procurement organizations; this still holds quite true. Some of the companies in the fast-moving-consumer-goods (FMCG) sector are leading the way in strategic procurement. Unilever, P&G, Amazon and Coca-Cola are listed in Gartner’s Top 25 companies in supply chain. Any one of these companies may be a good place to get a foot in the door and gain solid early experience.
Procurement solutions providers and consultancies
With the development of software solutions for procurement functions such as strategic sourcing, contracting and supplier management, many companies are outsourcing some functions to technically proficient service providers. These problem solvers service a range of industries, locations and functions. Spend Matters publishes a list of the top 50 solutions providers To Know and another top 50 to Watch. This list includes some consulting firms, both big and small. Phil Ideson of the Art of Procurement says that this type of experience can be valuable if you want to go back into a corporate leadership role. He says “I am a believer that procurement is a service provider to our stakeholders and not a function. Being with a solutions provider really helps you experience the need for customer centricity.”
Not-for-profit and Public Procurement
Public sector procurement is a real job option. Don’t disregard the experience that you can get from working on big-ticket items and major projects that positively affect your region or your city. It may not seem as cool as working for Apple Inc. but it may be more rewarding. There is some perception that working for a non-profit organization means a drop in pay, not so. Love to travel? Opportunities to work abroad abound in the many divisions of the United Nations, the World Bank and the Red Cross, at market-related salaries.
Should you get certified or get a degree?
Unlike in finance and legal, there isn’t a license to practice in procurement. However, most employers prefer candidates with a least a bachelor’s degree in business or a professional certification in supply chain or procurement. Which one depends on whether your targeted employer has a preference for certification over a formal degree and what your desired end-game is.
1. Getting certified
Many of my colleagues without a professional certification have never felt that that impeded their career growth or work opportunities. However, in the early stages of a career, it may be useful especially in locations where professional certifications are held in high esteem. CIPS, CAPM, IACCM and ISM are examples of certifications and affiliations that you could follow. In the UK and in Australia the push for certification and affiliation is stronger than in some other parts of the world.
2. Educational qualifications
Formal degrees in procurement are actually quite rare but there are lots of possibilities in supply chain management (SCM), of which procurement is a key element. Leading employers source their talent from the best-ranked colleges internationally that offer supply chain advanced education and from the top UK universities with registered supply chain degrees. If you are thinking it is too late to start, it really isn’t. Many of these degrees are available online. Always take advantage of an offer of financial or other educational assistance from your employer.
Sometimes it’s all about the piece of paper, sometimes it’s about the affiliation.
“If I knew then what I know now”
I asked some mature and experienced colleagues what they would tell their 21-year old self and this is what they said:
Soak up everything. Read widely to stay on top of new trends, changes in regulations and advances in technology. Don’t always accept commonly held positions, beliefs or strategies as absolute truths. Question what you see and what you hear. You can look at everything with a fresh pair of eyes.
Get wide exposure
Take advantage of any job rotation that you are offered, opportunities to get exposure to many industries and many categories don’t come along every day. Be open to change and chances to diversify your skills. Transitioning between functions helps you build your knowledge and helps you to better understand your stakeholders.
Find a mentor
It may be useful to get guidance from someone who has been through a similar experience. A well-chosen mentor provides advice and helps navigate you through the trials and tribulations of your career. Gordon Donovan (FCIPS), of Epworth Healthcare, says a mentor can come from anywhere, even another industry.
Ask for feedback (and act on it!)
Actively seek feedback on the things that you do well and things that need improvement. Sometimes it’s hard to take criticism but it can help develop both your technical and behavioural skills.
Networking does not come naturally to everyone but it is worth developing some skills in this area. Meeting new people is so important because you never know when it’ll be someone who can help you to open doors or change your direction. Tanya Seary is a champion of networking, you can follow her example here.
6. Job descriptions are not cast in stone
Many advertised jobs that you come across may be cut-and-pasted from descriptions used in previous recruitment activities. Too many times employers and recruiters look for what they looked for last time, not what they need now. If you think you would fit their needs, go for it, there’s nothing lost.
What the under 30’s say
Most under 30’s surveyed agreed with the boomers talking to their 21-year-old selves. They suggested working hard to keep learning and gaining new qualifications and ask lots of questions. As Christina Gill, one of the “30 under 30” stars with over a decade of experience in supply chain, said, “This is an exciting time in your career. Be open, be adventurous, be a sponge, listen, learn, and take risks in your career.”
A final thought: organisations that focus on supplier collaboration, unlocking innovation and making the best use of their precious data make attractive employers.
Everyone procurement team is talking about AI, cognitive technology and machine learning. But for these technologies to work at their best, your business needs to be prepared…
There is a lot of talk these days about Artificial Intelligence, Cognitive Sourcing, Machine Learning, and data-driven procurement.
Almost every major procurement organisation in the world talks about how their organisation uses these tools to make decisions.
The direction of procurement is almost certainly towards data-driven decision-making. This is a reality we all need to embrace.
I certainly subscribe to the notion that the best procurement decisions come from fact-based data-driven strategies and I firmly believe that over time, cognitive tools and technologies will become better and more effective than they are Today.
The truth is that we are not there yet.
As someone who’s industry is in the cross-hairs of cognitive technologies, I have been exposed to more than a few examples of how this technology works.
The category knowledge that these tools will draw from to generate their insights currently resides with guys and gals like me. As such, we (the subject matter experts and category leaders) of the procurement space hold a special and specific set of keys that unlock these technologies. It is with that focus that I would like to proceed.
In order for these technologies to work best there are certain fundamental elements that must be right in order for the tool to generate the best insights.
Well organised and structured data is an essential foundation for cognitive technologies.
When it comes to any form of data analytics, the old adage “garbage in, garbage out” still holds . Unfortunately, the vast majority of organisations simply have poor data.
Before you can point any cognitive tools at your data set, the data needs to be scrubbed and normalised. This is still done manually by a team of people. I’m sure one day this will be 100 per cent automated and perhaps technology will find a way to avoid these errors in the first place. The fact is that whenever we receive data Today, it is highly flawed and requires weeks of work to make it usable.
Be sure you allow sufficient time for your data to be cleansed before you deploy your cognitive tools.
Define your Benchmarks
The greatest value that AI and cognitive will bring is being able to benchmark your organisation in ways never before possible.
In a recent article I wrote on how to use bench-marking to develop cost estimates, but cost estimating is not the extent of how you can use bench-marking with AI.
Consider the value of bench-marking your organization against a competitor’s current performance. Cognitive tools allow you to bring in publicly available information in real time.
Imagine that you are an electronics manufacturer and your closest rival releases their financial report. Cognitive tools can seek out these reports and extract data from them to benchmark against your performance. You can also combine cognitive tools with web crawlers that seek out competitor’s pricing information. Without cognitive tools, this kind of information would require weeks or months of manually collecting data. Cognitive tools allow this kind of analysis to be done instantly.
To take advantage of AI, take time to consider all the different ways you can measure your performance and see if you can come up with a few you never thought possible before.
All goods and services are affected by market forces. Staying on top of market indices is important for making strategy decisions.
An effective cognitive data strategy uses data from market indices. Market Indices will enrich your own data and allow you to forecast into the future. Adding this level of depth to your cognitive platform will reveal the actionable insights that cognitive data promises.
The Bureau of Labor Statistics is great resource for all kinds of indices. If you are in construction, there are a number of private organizations that publish various indices to help forecast the future. Look at the AIA, Dodge, and AGCjust to name a few.
Add market indices to your data set to enrich your analytics and strategise with forecasting.
Cognitive technologies offer beautiful data outputs rich in data and content, on their own these outputs are just eye-candy. The interpretation of that data and content must be made by skilled experienced subject matter experts.
Eventually we may get to the point where computers can read the data and a clear strategy will be automatically spit-out for anyone to act on. Even then, how you act on the data will require some expertise. Until such time, you must have your cognitive data interpreted by a human with category expertise.
It’s too easy for data to be misinterpreted and for an organisation to run-off in the wrong direction. Even the most advanced Artificial Intelligence we have Today is unable to interpret the various human factors that go into strategy making and for that reason, Subject Matter Experts (SME’s) are still required.
Be sure you know that the person who will receive and interpret your data has the skills needed to execute a sound strategy. After all the time and energy you invest in cognitive tools, you need to be sure your direction is sound.
The future of AI and cognitive is bright. We are heading in a great new direction where information will rule. Today there are a few trail-blazers paving the way for us all. Those using these new technologies Today are sure to be better prepared Tomorrow as they find new and creative ways of using data to guide their business decisions.
Both ISM and CIPS have released their annual salary surveys. Read on for a short summary of the similarities and differences in salaries across the Atlantic.
Salary surveys make for interesting reading. They reveal much about the perceived value of procurement and supply management, and provide a very helpful data set to have at your disposal the next time you ask for a raise.
If you haven’t seen them already, the two most comprehensive salary surveys for 2018 are available here:
Let’s look at 5 of the most interesting findings across the two surveys:
Average salaries for the profession
ISM has announced that the average overall compensation for participating supply management professionals was US$117,425, while CPOs earnt an average of US$263,578.
CIPS reported an average salary of £46,422 for procurement and supply professionals, with CPOs earning an average salary of £124,000.
Salary increase smashing the national average
In the U.S., ISM reported that supply management salaries rose an average of 4.1% over 2016 salaries, versus 3% for U.S. professionals generally.
CIPS found that 68% of procurement professionals received an average 5.1% increase in salary, versus a 2.2% increase for the UK national average.
Paul Lee, Director of ISM Research & Publications, offered the following explanation:
“In today’s global economy, excellence in supply management improves both top- and bottom-line performance, and advances companies’ leadership on the worldwide stage. Supply management professionals’ higher-than-average wage growth reflects the significant value they add every day”.
Certifications DO boost salaries:
ISM: Those with the ISM Certified Professional in Supply Management (CPSM) certification averaged 14.7% higher salaries than those without any certification.
CIPS: The data reveals that MCIPS and FCIPS professionals have increased earning power, with an average 12% salary disparity between MCIPS and non-MCIPS, and an average of 11% disparity between FCIPS and non-FCIPS across all job levels.
Most important factors when considering a new job
We’re a mercenary bunch. “Salary” has once again come out at the top of both ISM and CIPS’ research into what people consider when evaluating job opportunities. Beyond the money, however, are some other factors that employers should note:
Company commitment to training and development: 58%
Gender gap disappointment
ISM’s data reveals women are paid less than men across every level in U.S. supply management, with male CPOs earning 26% more than female counterparts, male VPs earning 52% more than women, and male Emerging Professionals earning 13% more than women.
CIPS reports that the most striking pay disparity exists at the Advanced Professional level, where men earned 33% more than women, a pay gap that has widened since the previous year’s (25%). Pay disparity at the Professional and Managerial levels is also considerable, at 14% and 11% respectively
In a world where cost-savings are no longer king in procurement, how can the function demonstrate its business value and earn a seat at the table? Jaime Mora talks upgrading your procurement mindset!
In recent years, our organisations have gotten a better understanding of the valuable contribution Procurement can deliver to the business.
And yet, there remains a feeling that the function has not yet reached its full potential. Procurement is certainly a relevant and appreciated corporate function. But we’re not yet sitting in the C-Suite…
As procurement professionals, we unanimously agree that the function should be elevated within the business, but convincing those at the top is easier said that done. Whilst all organisations consider implementing cost-savings to be a crucial part of business success, it’s no longer regarded as a strategic process or a competitive advantage. Leaders are becoming increasingly aware that savings alone will not distinguish them against their competitors. As such, procurement can be dismissed within the business as a less important function.
The bottom-up approach
If traditional procurement contributions are not at the top of an organisation’s agenda, how can procurement earn its place in the C-Suite?
It’s difficult to find a “one size fits all” recipe but we could start by upgrading our procurement mindset. I propose that we rebrand ourselves as: “External Competitive Advantage Strategists.”
But what on earth does that mean?
As it stands, we’re pressured into taking a bottom-up approach to our work. We know we have to bring savings to the table, we achieve this, and only then do we start thinking about the other nice things we can do with our time; innovation, sustainability, supplier development etc. And we deliver on those things too.
It makes sense that the more value-adding contributions we make, the more arguments we have to justify a spot, and a voice, at the highest levels of the organisation.
But in reality, we end up doing bits and pieces here and there, following trends and simply trusting our gut.
Taking this approach is one of the reasons that procurement objectives and output may deviate from actual business goals.
Taking a top-to-bottom approach
If we truly want to step up our contributions, we should be taking a top-to-bottom approach. Our organisations operate in highly competitive environments, where sustainable advantages are required in order for us to outperform our competitors.
Procurement is uniquely positioned in the business given our access to so much information from our supply networks and an awareness of the opportunities here. We’re in the perfect position to source more than just products and services – we can actually source competitive advantage.
Procurement is capable of seeing things strategically. We can analyse where our organisation stands in a competitive environment and we are capable of both meeting our business targets and identifying where and how our organisation could compete better. To take a holistic approach, this should be complemented with strategic analyses of our suppliers.
As I mentioned at the beginning of this piece, cost-savings will always be appreciated. But procurement’s work should never be limited to that. The new approach to procurement is about sourcing the external competitive advantages on offer to give our organisation unique advantages in a competitive environment.
Imagine the following scenario: one of my organisation’s strategies is to develop its people. From my knowledge of the supply market I know a particular supplier that is uniquely skilled in people management and development and this makes them the most competitive supplier. We have the power to bring this supplier to the table; to initiate the discussion to build a partnership and leverage the supplier’s competitive advantage, or even a vertical integration. Boom! Now Procurement is sitting at the M&A table.
As saving becomes a commodity and not a priority, it is time to reinvent procurement. Leave the Procurement Manager title behind and become a External Competitive Advantage Strategist!
How sure are you that all your current contracts are still delivering their intended value? Or is the legacy beginning to hold you back?
In the third article in a series charting the key issues in public sector procurement, we examine the challenge of delivering value in long-term contracts.
As we have discussed in previous articles, time is a precious commodity in public sector procurement. The time taken to tender, retender or extend contracts needs to be factored in when making an initial decision on contract length.
Make the contract too short and there’s less scope for realising the value that you have worked into it, or very little incentive for suppliers to invest in the relationship (and potentially offer something of more value, for example, innovative solutions).
However, a contract that is too long has just as many issues. There’s more time for relationships to sour and more time away from the market where new solutions and technology might be providing better services and efficiencies. Finally it’s more time locked into a contract where costs are only likely to be on the rise.
There’s no right or wrong answer when it comes to contract length. A goods contract might benefit from a shorter term as it means new products or solutions can be assessed as the market develops them. There’s also the argument that for less complex goods a strong business relationship isn’t as critical, particularly if you aren’t going to do business with them again in the future.
That’s not to say certain products shouldn’t have longer contracts instead. Where there is high value, or a high level of complexity, a longer contract term may be necessary to ensure continuity of supply, or ensure the stability of a supplier.
A service contract might be better served with a longer contract. There’s more time for both parties to develop their relationship and gives the supplier time to understand the service without looking over their shoulder from Day 1.
But what of the contracts that professionals have no say over their length?
The Legacy Issue
It’s inevitable with the churn of professionals that at some point you will end up in a role where there are contracts that have been put in place by colleagues who have moved to a new role, or left the organisation entirely.
And you’ll certainly not be alone in thinking, “why have they done this?” when you get your hands on the contract specifics. You’ll probably even end up attributing issues on the contract to PBE (Previous Buyer Error) – even if you swore you’d never be one of those people!
In the public sector, the majority of these contracts will be in place for 3-5 years, potentially with an extension period should it be applicable for the contract, good or service. The extension could be up to another two years, meaning there’s a long time between procurement exercises for the product in question.
A hangover from previous public sector practice in procurement is perhaps the willingness to set contract length at 3 years and rarely changing. This might be the norm for frameworks (limited to 4 years at its longest length anyway), but as we have mentioned, there’s scope to make the length shorter where appropriate.
Another consideration for legacy contracts come in the information that is attached to them. It’s likely that, unless it’s been refreshed, most of the information will be out of date. Without the up to date information, you may not be able to see the full picture and it’s something that will have to be done as a priority when it comes to any extension or retender.
Finally, you should always be aware of what Terms & Conditions the contract was issued with and if it complies with all current regulations and legislation. Compliance is key here, so you shouldn’t hesitate to speak to your Legal team. It’s also something to remember when setting up new contracts that they account for all legislation, both current and potentially to come into force during the contract term.
From Legacy to Cutting-Edge
There’s no getting away from the legacy issue. You might put in a terrific, watertight contract now, but in 3-5 years’ time, it could be one of those legacy contracts your colleagues are wrangling with! If there’s no getting away from it then, what is there to do?
Never think you can’t put your own mark on a contract, even if it’s already up and running. Even a contract that’s over halfway through still has another half where you can contract manage and add value, all the while looking at options for the new contract.
So what are my top tips for dealing with the legacy issue? I’ve put some below:
1. It’s never too late to start contract management
Ultimately, preserving or releasing value in a contract comes down to the quality of the contract management. And it’s never too late to do some good contract management. If you work on the basis of any value is good value then even half a contract is enough time to make sure that your organisation is getting something out of this.
2. Use the time to build relationships
If you’re struggling to release any value from a legacy contract, use the remaining time to build up good relationships with the incumbent supplier. You’ll get to know their business and anything you learn can help when it comes to putting together new requirements for the next contract. At the very worst, you’ll get a chance to assess the whole market and see your other supply options!
3. Prepare for the new contract
Don’t leave it too late to start working on the new iteration of the contract (or retender). You might have planned for a good exit, but you need to be sure that any new contract going to do a better job. Use the time wisely and make sure that you put any lessons learned into practice.