Making Supply Chain Your Organisation’s Competitive Advantage

In order to succeed, a business must be able to deliver more value to customers than its competitors. How do you make supply chain your organisation’s competitive advantage?

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In order to succeed, a business must be able to deliver more value to customers than its competitors. It is becoming more difficult to find, develop and sustain these opportunities in the rapidly evolving business landscape.  The free movement of people across borders, developments in technology and real-time communications add complexity to global supply chain management.   World trade is highly competitive, constantly changing and volatile.

As a result, supply chains today need to become more strategic. They are multi-layered, integrated manufacturing and distribution systems that, to work efficiently, need to be optimised on a continuous basis.

Technology

Automation of manufacturing using robotics and self-driving equipment in factories is now commonplace.  Software solutions and telematics improve information sharing, processing, and analysis of data which is converted into usable information to inform policy and operational decisions. However, it’s important to ensure that technology investments are based upon business needs – and not just the newest tech available.

Areas of competitive advantage

Many global businesses now compete on the basis of their supply chain capabilities rather than only on their product lines.  Leaders with efficient supply chains such as Wal-Mart, Proctor and Gamble, Tata Motors, and Unilever focus on rationalizing each activity in their supply chains. They constantly monitor costs, demand patterns, lead limes and administrative processes to achieve competitive advantage while applying relevant technologies.  

Cost of goods sold (COGS)

Reducing the cost of goods sold can be achieved through a more focused approach to procurement including price negotiation and strategic sourcing.  Inventory, distribution and freight costs are specific target areas where the potential to save can be found.  Walmart runs a retail compliance program that defines when, how and where their supplier must deliver. This helps the company reduce its costs by adjusting its storage and distribution needs in line with customer demand. This means lower prices for the customer.    

Freight costs can be managed down by outsourcing delivery logistics where there are potential economies of scale.  Telematics is used extensively by third-party-logistics providers (3PLs) to provide visibility into the movement of goods, both in the warehouse and in transit, and ensure their safety.   

Shorter lead times

There are many delays experienced in supply chains.  Some of these are because of slow processing of orders due to cash flow challenges, batching of orders, organizing shipping and freight and slow communication processes.

One of the main methods by which a business can drive increased value is by decreasing these lead times. Both business- and consumer-facing companies are experiencing increased demand for faster shipments. Speedy deliveries can have a significant impact on sales. Amazon Prime customers will often pay more for guaranteed next day delivery.

Flexible demand management

Technology now provides us with forecasts of future customer demand using artificial intelligence tools. Predictive analytics are extremely useful in determining the optimum seasonal stockholdings and allows us to prepare suppliers for increases in demand. 

A flexible supply chain can quickly adjust to fluctuations in supply and demand keeping inventory down when interest is buying is low but being agile enough to respond to spikes in demand.

Documentation and administration

Streamlined and slick documentation and administrative processes in the supply chain are a great competitive advantage.  Reducing re-work and duplication, increasing visibility and smoothing communication channels are real advantages.  Supply contracts and service level agreements are often neglected areas that create hold-ups and expensive errors.  Some progressive organizations are using blockchain technology for maximum visibility and security.      

Insource or outsource?

The decision of whether to outsource manufacturing and/or services depends on in-house capabilities. Ideally, areas where competency or capacity are lacking are prime candidates for outsourcing.   Some larger organizations have the capital and resources to manufacture their own products, others will typically outsource their manufacturing to white-label providers.   Building internal warehousing, logistics and distribution facilities is a major undertaking and capital intensive. Successful outsourcing contracts in this category have robust service level agreements and detailed contingency plans. 

Supplier relationship management (SRM)

SRM is a huge topic and ranges from simple tasks such as paying suppliers on time to developing long-term collaborative partnerships with suppliers for mutual benefit and to promote innovation.  Leading companies in SRM such as Nestle, Toyota and Coca-Cola treat key suppliers like collaborators to get them integrated and prepared to take extra steps to ensure quality and speed.

Sustainability

A sustainable supply chain makes long term business sense.  Consumer awareness of environmental and social issues is growing around the world. IKEA is one of many companies that work with suppliers on a variety of challenges, from energy efficiency to sourcing materials responsibly.  Ignoring this trend may create reputational damage that takes years to restore.  

Conclusion

Effectively making use of rapidly advancing technology could be the key to leveraging your supply chain to get ahead of the competition. Difficulties in supply chain management occur due to evolving complexities and interdependencies. Companies that work on achieving continuous improvement through consistently and persistently working on strengthening linkages will drive competitive advantage.  

If you’d like to read additional related content or get involved with thought provoking discussions check out the Supply Chain Pros group – a one stop shop for all your supply chain need


A Cross-Industry Look At Direct vs Indirect Spend

Vishal Patel explores the difference between direct and indirect spend across three different industries…

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The most fundamental spend categorisation in procurement is the line between direct and indirect spend, but one effort that transcends this split is supplier management. This includes supplier information management, supply chain risk management/mitigation, and supplier performance management.

Whether spend is direct or indirect, supplier information should be maintained centrally and with a high level of accuracy. Who is the supplier, who are the points of contract, what are the terms of service or delivery? How much spend does the company have with the supplier and for what? As long as indirect suppliers are meeting expectations, they are doing what is required. Direct spend suppliers, on the other hand, must deliver a different level of ROI. Meeting expectations is the foundation for strategic partnership and collaboration.

Manufacturing

In manufacturing, materials, components and assemblies that will be sold to customers are direct spend while facilities, equipment, consumable supplies and MRO are indirect.

Direct suppliers often become strategic partners because the company’s collaborative efforts with them have a direct impact on innovative potential. They make it possible to develop products that lead to the expansion of market share and profit margin, both through their product offerings and their ideas. They sometimes participate in the R&D process, adding their IP to the company’s own.

Because of the key contributions these supply partners make to corporate performance, procurement needs to pay far more attention to risk and quality issues – whether they are present in the supplier or in their supply chain. Ensuring continuity of supply is far more critical when a supplier is a strategic partner and difficult to replace.

Most indirect supplier relationships are far more transactional, although services and deliveries still have to be dependable. Customer orders can’t be filled on time if machines don’t run, safety supplies are out of stock or facilities are poorly maintained. While procurement might not consider these relationships strategic, they are critical nonetheless. What you don’t necessarily want to do is separate your direct and indirect supplier information, risk and performance management efforts, ideally, you want to be able to look across all suppliers and spend.

Financial Services

One could make the case that financial services firms have no direct spend. Since salaries are beyond procurement’s purview, nothing the company ‘buys’ is resold to customers. That said, supplier information and relationship management are still high priority efforts. Risk and regulatory compliance requirements span nearly all categories of spend, and address global, high-profile concerns such as bribery, corruption, and data protection and privacy. We’ve all heard of KYC (know your customer) initiatives in banking for example. KYC has now gone beyond verifying and monitoring customers of the financial institution and now also often includes suppliers that provide IT solutions that touch the FI’s infrastructure (and thus their customers) called know-your-suppliers (KYS). For instance, a key piece of information that is often difficult to find but critical is knowing the ultimate parent of a supplier.

Although the vast majority of a financial services company’s spend is indirect, it can still affect the top line. In the case of banks, for instance, property management is critical to securing and maintaining customer loyalty and reinforcing brand identity. The remainder of indirect spend includes the ‘usual suspects’ like office supplies, travel and IT/telecom but often with a heavy services procurement need

Healthcare

Not unlike financial services, procurement teams in healthcare organisations are predominantly focused on indirect spend. The primary exceptions are the equipment and facilities that patients come into contact with. These indirect spend items have a direct impact on patient satisfaction despite not being resold. Machines must be running, supplies must be plentiful, and facilities must be spotless.

For the rest of indirect spend, Group Purchasing Organizations (GPOs) are common, based on the fact that the vast majority of transactional purchases are common across institutions. There are cases, however, where physicians need to have additional selection authority. These non-standard items, often referred to as Physician’s Preference Items (PPI), can present a challenge in terms of finding a qualified source and managing the cost and supply of the items. Those purchases, while indirect, do justify closer and more strategic supplier relationships, similar to a direct materials supplier

Supplier management is spend management – although the information, risks, and relationships vary by category and industry. Procurement’s challenge is knowing which supplier relationships are strategic and deserving of additional effort and which are not (but still knowing who they are) – regardless of the type of spend in question. Overall, having a strong supplier management capability and technology can work as a solid foundation to accelerate and improve digitisation and transformation efforts in all areas of procurement.

Ivalua is sponsoring the upcoming Procurious London CPO roundtable on 29th May. If you’re a CPO and would like to attend one of our roundtables in person please contact Olga Luscombe via [email protected] to request an invitation.

7 Ways For Procurement To Drive Innovation 

How can procurement professionals drive innovation within their organisation, by working closely under the CEO.

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 “Conformity to the present is invisibility to the future.”  

Stefan Molyneux

Innovation is anything but business as usual. As procurement professionals, we are responsible for thinking of new ways of creating value, thereby bringing innovation into our organisations. We also have access to the most internal functional stakeholder teams and often act as a bridge between different departments on communicating key strategies. We have access to the outside world via our external supplier database. This puts us in a unique position to drive innovation even for new product development or ideas, in addition to bringing in supplier driven innovation

Have you read the fascinating fable centered around innovation called “How Stella saved the farm”? It is loosely inspired by the George Orwell classic, ‘Animal Farm’. It illustrates a framework of not just thinking about innovation, but also implementing it. Innovation is not a person or a department. It is a mindset. The approach outlined in the book can be replicated across any organisation that is willing to learn by doing.  In the book, the CEO, Dierdre appoints a horse called Mav as the ‘Innovation Leader’. As per a recent data from Entrepreneur magazine, 61 per cent of CEOs consider innovation a top priority and describe a lack of resources and a structured process as top challenges. I could not help but wonder if procurement can help organisations overcome these challenges due to the extended role we play as a “harbinger of innovation”.

The fable is about a mare called Dierdre who inherits her father’s profitable animal farm as the CEO and must find breakthrough new business idea to survive beyond the next few years. She is chosen to run the farm by her father over “The Bull” who learnt everything from her father and worked exactly like him. The Bull is naturally dissatisfied at not being chosen to run the farm. Stella is the bright, young sheep who travels the world and brings a new idea of running luxury wool (derived from Peruvian alpaca) business to the farm. Thus, begins the journey of implementing this idea with the help and expertise of all animals in the farm.

Here is my hypothesis on how Procurement can drive this process in the organisation, by working closely under the organisation’s CEO.

1) Need for Innovation:  In the words of Albert Einstein,” If you always do what you always did, you will always get what you always got.” The first step in the process of implementing innovation is the realization and honest acceptance that you need it. This understanding must be reflected unanimously across the organization.

2) Process for getting a breakthrough idea: The second stage is obviously pitching for “breakthrough” ideas to unleash creativity without defining restricted metrics. And what better way to get it than from your team and key internal stakeholders who know what a breakthrough can be, with the least effort and investment. Here, it can be procurement’s job to engage all departments. This exercise should lead to a creative dialogue to evaluate the ideas holistically and end with the selection of the right best idea to focus collective organisation energy on.

3) Communication to the right channels at the right time: As they say, ‘Finding the right idea is only the beginning’, so an organisation working on a new idea would allocate resources towards it and communicate the priorities to the different departments and across the hierarchy. This is easier said than done, as many changes will occur during the project and the communication on changed priorities will often end up making teams confused on what roles they need to play for the idea. Procurement can ensure that changes are articulated clearly and explained to everyone throughout the idea execution so that everyone is involved in playing their roles. Thus, leveraging our project management skills and providing stewardship.

4) Flexible organisation structure to facilitate new areas: During innovation, it becomes important that organisation structure is not set in stone and can change as you discover the bottlenecks in the implementation. Procurement can be proactive in identifying these bottlenecks by working across departments and suggesting corrective changes. 

5) Facing Reality of what the customer wants: Sounds like the most obvious one, though it could be an acid test to know if you are producing what you can, or are you producing exactly what the customer wants you to produce. At the time of idea testing, procurement can engage its external resources to do a deep dive on the customer need and provide concrete data on the idea. If the data suggests that the idea should be modified or changed to meet market requirement, then procurement would need to influence a change in strategy in line with customer needs.

6) Organisation culture issues: These are bound to happen for an organisation trying to embrace change. It would involve “letting go of control” for some team members and it is one of the most difficult tasks to do in the way of change to make an inclusive environment. Procurement’s role could be to team up closely with CEO and HR to resolve these issues timely.

7) Measuring the Innovation:  Procurement pros need to work on defining metrics for measuring innovation such as defining a clear hypothesis, identifying most critical unknowns while planning, analysing results and deciphering the lessons learnt. These will help drive innovation culture within the organisation in the long term.

Organisations can reflect on below questions more objectively during a new idea development or innovation process- 

Is our idea a breakthrough idea? Are we making something that the customer wants? Do we have the right team structure? Are we communicating enough and well? Are we learning to innovate? Are we measuring innovation in the right way?

They would often discover that what they assume to be a fault with the idea, is sometimes more a fault with the execution. This is where giving clear ownership to procurement as ‘Innovation Leaders’ would help as procurement brings in its existing skills and develops further its skills of cross-company collaboration, communication and influence.  

What do you think about procurement playing the role of ‘Innovation Leaders’ for new products or ideas in your organisations?  What could be the challenges we face if we take up this role? How do you think we can overcome those challenges?

What Every Procurement Professional Needs To Know About Music

How much should you pay for using music in a commercial?

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Around 70 per cent of TV commercials use music in one form or another. That is a lot of music. And a lot of money being paid by brands and their agencies to the music industry.

Procurement departments ask us three questions:

  • Can you explain to me why we are paying so much for music?
  • Where can we make savings without compromising creativity?
  • How do we know that the music we are paying for works?

Library music (with their regulated rate cards) still often feels like the poor relation to the agency creative team. Fees for commissioned music and new productions can be as creative as the music itself. And copyright owners don’t have rate cards because it is forbidden by law.

So, to a Brand and their procurement departments, negotiation on music rights can feel like operating blindfold. The underlying challenge is that the parties involved all have a different agenda. Procurement needs to work within the budget. The creative teams don’t want to know about budgets – they just want the track that they believe works with their brilliant visuals. And the TV producers have a harder job than David Davis at the Brexit table with a deal that works all round. No wonder there is tension between the will of the agency and the chequebook of the brand.

Giving a straight answer to a brand about buying music usually demands more questions:

  • Do you have a full breakdown of your music spend, beyond a total amount spent?
  • Do you know where you are spending your money and with whom over the last three years?
  • Do you or the people who buy music on your behalf have a music-buying strategy that you have seen and approved?
  • Do you have centralised buying of music across all agencies and all media?
  • Do you ever test the music you buy which goes beyond ‘like’ and ‘dislike’?

It is still common practice for music to be a one-off consideration for each campaign and for each agency production department to negotiate and buy music. Very often, final decisions about the music are left to the last minute in the editing suite, when the creatives make up their minds what works best. But when things are left to the last minute, people are under pressure to negotiate.

And when things happen this fast it is harder to justify taking time to test the resonance of a track with the desired target market.

But these two apparently small steps have vital ramification on the final outcomes. I know of a brand where the music was changed in the editing suite for the sake of saving €15,000. Six months and €7.5 million later, when consumer testing did take place, the brand was mortified to discover that the last-minute music change meant that consumers missed the point of the ad completely – in hindsight, a very expensive cost saving.

It’s natural for people to spend money on the things they care about, whether they are fully aware of it or not. In business, however, we have to be aware and strategic. If buying music is still seen as a one-off transaction and the discussions about the costs feels like one from ‘Groundhog Day’, then something has to change.

There is not one solution for all companies, but having a music-buying strategy is a good starting point. It removes ambiguity and puts measurable systems in place. For the above – mentioned brand, it meant ongoing savings of 25 – 30 per cent year on year with commercials that scored well in post-production testing.

If music is not to be regarded as an expensive indulgence, we need to liberate those involved in the creative process and hand it over to people who are not, but still have all parties’ interests clearly in focus.

Ultimately, having real figures about music spend will make it easier for planning, production, and marketing teams to justify their budget requirements. That will be good news all round.

This article was originally published on Sound Lounge

The Three Keys To Building More Influence

How are you letting perfection get in the way of offering an important (and influential) contribution?  

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Have you ever wondered why some people are able to lead and influence those around them while others are left out in the cold?

They may be less charismatic, a poor presenter or frightfully timid, yet they influenced the other party enough to move them through to a decision where perhaps you couldn’t?

In many cases, the element that stood them apart from the crowd was nothing more than trust – trust that that person was genuine, capable and had the integrity to stand by their word.

Confucius said: “Better a diamond with a flaw than a pebble without”. Voltaire wrote: “Perfect is the enemy of good”.

In decades past, huge fortunes were made by organisations that understood this. Companies like General Electric, Westinghouse and Ford Motor Company all dominated their respective fields through this principle.

Very little has changed since those days – despite the increasing sophistication of advertising and corporate shine. The Nielsen Global Online Consumer Survey claims that only 33% of people now trust brands, while 90% of people trust service or individual recommendations directly from people they ‘feel’ they know.

I want you to pay attention to that last part – ‘feel they know’. What does it take to feel you know someone?

In my world that’s called influence. It involves sharing enough of yourself so that I trust your intent. It involves stepping out and letting your voice be heard. Having the courage to leave the jargon behind – and share real insights, predictions and opportunities based on the hard yards of your experience.

Those who can build this level of connection – either online or in your organisation – generate more engagement, have a greater impact on decision-making, a more frequent seat at the table and face less opposition when it comes to implementing change.

So how do we do it?

More process, less perfect

If the average social media feed – or corporate presentation – were to be believed, just about every single one of us would look like we’re a) getting the perfect results b) enjoying an endless cycle of tropical beach holidays, or c) tucking into the world’s best meal in the fanciest restaurant in town.

If we’re looking to create real engagement, a ‘polished and perfect’ image just won’t cut it.

It takes courage to show vulnerability and let people know that our results and lives aren’t always perfect (and therefore we aren’t always perfect). And yet – here’s the irony. That’s exactly the most impactful thing we can reveal.

Show me a mistake you made – and I will know you have the courage to pick yourself back up when things go wrong – the curiosity to get to the bottom of what doesn’t work – and the tenacity to keep going until a better solution is found.

Tell me about a question you haven’t been able to answer yet – and I will feel invited to contribute – impressed by your determination to always get better – and connected in the shared vulnerability of not knowing it all.

Essentially – I will feel something. As opposed to the disconnection we are often left with when only someone’s ‘best moments’ are shared.

Be intentional and capable

While we don’t want to portray a picture-perfect image, that doesn’t mean that we should be showing up looking tired, unprofessional or underprepared either.

If our goal is to build trust and influence others then it’s far more effective to be intentional, and to reveal those intentions to our target audience, rather than flounder around without direction.

We need to show that we’re capable of handling the challenges that are thrown at us. We might make mistakes along the way, but we also need to make it crystal clear that we have a clear direction about how we will move forward despite setbacks.

Talking about what is important to us, the ideas behind our intentions, the experiences that led us to those ideas and our goals for the future – these are the traits of trusted leaders.

Take us on a journey

If you’ve been working on your project for weeks and had to scrap the whole concept and start again with a new approach, write about it!

Create a monthly update for your team or stakeholders. Start a blog. Let your audience know that you are there to out-contribute everyone else in your field. That you’re willing to share what you’ve learnt, and as a result the future trends, opportunities or challenges you see coming in your field.

They’ll appreciate the fact that you’re letting them follow your journey – and will value the end result infinitely more if they know your history and feel involved in the process along the way.

It also gives them more exposure to you as a person, and the longer they keep you in their lives, the more likely they are to trust you.

Many project managers make the mistake of keeping their project under wraps until it’s 100% complete – and ready to reveal to their organisation with a big fanfare.

The problem with that plan is that the audience hasn’t been taken along on the journey – so the end-product they’re presented with fails to get any attention. A little like watching the final five minutes of a movie and trying to care about the characters or plot!

So – what’s the bottom line?

I want you to take a step back from any place where perfection is currently holding you back. From engagement, from sharing your mastery, experience or insights. From essentially stepping out and actually being seen.

Then I want you to ask yourself these questions – what passionately imperfect contribution could I make here? How am I hiding behind technical language and not revealing the real story or opportunity? How can I invite others to contribute and engage with the outcome?

Do those things – and I promise you will significantly increase your influence (and results) in all the places where it counts. J

Will You Be Your Organisation’s First Chief Sustainability Officer?

For most organisations, there are far more risks and opportunities related to CSR and sustainability in their supply chain than there are within the “internal” business…

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What’s the biggest change in terms of the focus and priorities for procurement teams and leaders over the last decade or so? There are a few potential answers to that question, but my feeling is that the whole area of corporate social responsibility and sustainability is a strong candidate for that award.

It’s just over a decade since I last held a full-time CPO (Chief Procurement Officer) role, but I don’t remember issues such as modern slavery, carbon reduction, global warming, plastics or human rights featuring too much in my thinking as a CPO through the nineties and noughties.

But now, it is right up there on the agenda for most organisations, in terms of both procurement priorities and indeed overall business focus.  That’s been driven by consumer demand and a more aware population, with younger people taking the lead on issues such as climate change, as we’ve seen in the UK with major protests and the visit of Greta Thunberg in recent weeks. Firms have become aware of the risks if they mess up on these issues, and that has spread through to shareholder action and sensitivity – a sign that firms really do need to get to grips with this agenda.  

We’ve even seen some CPOs morphing into “Chief Sustainability Officers” in their organisations, or combining the two roles. That’s not surprising when you think about it. The fact is, for most organisations, there are far more risks and opportunities related to CSR and sustainability in their supply chain than there are within the “internal” business.

Certainly, an organisation can look at its own energy and water use, how plastics fit into its packaging strategy, and make sure it is behaving properly with regard to the human rights of its own staff. But if we consider the wider issues once we look at our suppliers, the scope is far greater. For larger organisations in particular, the impact they can have on hundreds or thousands of suppliers, all around the world, almost certainly outweighs anything they could do purely internally.

We can see another sign of how these issues have risen up the agenda with the announcement of SAP Ariba’s “Sustainability Summit” in June. It takes place on Tuesday June 4th, from 9 am to 12 noon, just before the opening of the SAP Ariba Live event in Barcelona that afternoon. There will no doubt be a certain amount of discussion around how SAP Ariba products can help in this area, but the morning is primarily designed to be a very interactive session, with expert panel discussions and small group sessions as well, so participants can pick up ideas from each other as well as from the experts involved.

And this isn’t just about “saving the world”, although there is nothing wrong with believing that we should all do our bit to make the world a better place. There are selfish reasons too for procurement organisations and leaders to position themselves in the foreground for their organisations’ sustainability efforts. From a functional standpoint, the vast majority of us look for purpose in our work, but as we said earlier, younger people are particularly concerned about these issues. So, if you want to attract the brightest and best to your team, it makes sense to show that you are concerned about sustainability and similar issues and that procurement in your organisation is deeply involved in worthwhile initiatives.

It is also clear that because sustainability is high on the corporate agenda, procurement can gain in terms of internal profile and reputation if we are seen to be taking a lead and driving the agenda through our supply chain. I’ve heard a number of procurement executives talking about how topics such as carbon reduction or supporting social enterprises have got them onto the Board agenda, in a manner that day-to-day procurement frankly just didn’t.

Back to the Summit: SAP Ariba Live is the largest procurement event in Europe, we suspect, and numbers for the Summit are limited. So if you are interested, don’t delay and do register now – please contact Miriam Kuritzkes to express interest and for further details.

Procure with Purpose

Procurious have partnered with SAP Ariba to create a global online group – Procure with Purpose.

Through Procure with Purpose, we’re shining a light on the biggest issues – from Modern Slavery; to Minority Owned Business; and from Social Enterprises; to Environmental Sustainability.

Click here to enroll and gain access to  all future Procure with Purpose events including exclusive content, online events and regular webinars.  

Supplier Failure – Are You as Protected as You Think?

Supplier failure and collapse on a massive scale – it’ll never happen to you, right? How do you really think you’re doing to help protect your organisation from the fallout?

By Sergey Novikov/ Shutterstock

London, July 2017. Despite an “encouraging start to the year”, the warnings are coming thick and fast on Carillion. By November 2017, the company has issued its third profit warning in five months and things are looking bleak. And in mid-January 2018, despite the deferral of two financial covenants, the company collapses into liquidation.

In the days that follow, the investigations and enquiries begin. How did a company so integral to so many high value and high profile UK Government projects get into such trouble? Where and how did billions of pounds worth of contracts become over £1.5 billion worth of debt?

And, perhaps most importantly of all, how did numerous civil servants, Government contract specialists and expert financial consultants not see it coming?

2018 – The Year of Demises

The demise of a construction giant will go on to leave an enormous hole for the UK Government to fill in order to continue providing key services across the country such as school meals and hospital and prison cleaning, and ensuring that the 19,500 employees delivering public services are able to be paid.

The final cost to the UK taxpayer is estimated to be more than £148 million, but the knock-on effects will be felt for some time to come. Late last year it was reported that there had been a 20 per cent rise in insolvencies in the construction industry as sub-contractors and small businesses struggled following Carillion’s collapse.

But 2018 wasn’t finished there. Fast-forward a little more than ten months and the unthinkable happened again. Twice. First, one of Carillion’s key competitors, Interserve, issued a warning on the state of its finances and increasing debt predictions to between £625 million and £675 million in 2018.

Then just before Christmas, Healthcare Environmental Services (HES), a key provider in the disposal of medical and clinical waste, closed its doors with the loss of nearly 200 jobs and leaving the NHS and Local Authorities scrambling to ensure that services could be delivered by another organisation.

Where did it go wrong?

If your procurement department was anything like mine, then all three situations dominated conversations for weeks after these public announcements. Beyond the usual, “well, I’m glad that wasn’t us”, and the frantic checking to understand exposure, questions were starting to be asked.

Give a procurement professional long enough and they’ll be able to pick through the wreckage of a broken contract and understand roughly where things went wrong. And frequently, lines are drawn back to the contract or contracts put in place and the overall management of this.

But in these cases, and particularly in the case of Carillion, there was a general disbelief that something like this could have been allowed to happen. After all, how was the overall performance of the supplier missed? And just why, even though it was clear that there were serious financial difficulties, was Carillion awarded more contracts to help bolster its financial position?

Like me, maybe you thought, “I’d like to have seen the procurement process for that one.” Or maybe you wouldn’t…

And probably just as likely, even though you tell yourself that it would never happen on one of your contracts, you go back to check. You know, just to be 100 per cent sure that all your checks and balances are in place.

Checks and Balances

What has subsequently been reported is that Carillion, in conjunction with its appointed internal auditor Deloitte, had been, “”unable or unwilling” to identify failings in financial controls, or “too readily ignored them””. This is where there may be some explanation or sympathy for the procurement process.

In the public sector, as in the private sector, procurement will work in tandem with other departments in its organisation to ensure the robustness of the contract and the suitability of the supplier. As part of public tendering exercises, there are a two stages in which this can happen for Economic and Financial standing assessment.

The first comes as part of the European Single Procurement Document (ESPD). Buyers will outline the minimum financial requirements for the contract, usually linked to contract value, complexity, volume and length, as part of their Contract Notice and ESPD. This can be, for example, a positive outcome for pre-tax profits for the previous 3 years, and/or certain outcomes linked to financial accounting ratios.

Suppliers will confirm that they comply with this and at this stage may provide evidence for this. This is backed up by the second stage for financial checks, the Request for Documentation (RfD). The RfD allows for this evidence to be requested by procurement of successful suppliers as a final check before contract award. These checks then provide the comfort that the supplier has a firm financial footing to undertake the contract.

The key issue here, and in the case of Carillion, is that the assessments are only as good as the information that is filed and provided.

Procurement’s Role and Remit

As with many of the challenges in the public sector, we’re left asking the question of what is procurement’s role and remit in this situation. There needs to be an understanding that procurement can only do so much. However, what they do have the responsibility to do needs to be done correctly.

In the Carillion example, procurement may asked all the right questions, but if the evidence provided isn’t accurate, it still wouldn’t have made any difference. Procurement can put in the ground work up front, before they even get to the stage of requesting responses to ESPDs and the like.

When looking at your next contracts, make sure that you have the following:

  • An accurate specification – this will fully outline the scope of requirements and the supplier’s responsibilities;
  • Estimated project volumes – based on historical usage data where applicable, otherwise linked to the specification requirements;
  • Market analysis – who are the suppliers that are likely to bid for this work? What is the overall market spend like with the top suppliers?; and
  • Understanding of current contracts – which suppliers have won the most business from you recently? Is anyone looking like they may have capacity issues?

Working with key stakeholders across the organisation is critical. Not only will this improve the accuracy of the data that is issued with the contract, but it will also mean that there’s an overall understanding of who is actually best placed to cope with the new package of work. Particularly if one supplier seems like they are overstretching themselves.

Then it’s back to a footing of openness and honesty with suppliers so that any potential issues with financial performance are flagged up well ahead of time. Build that relationship with your suppliers and you may help to head off a situation where it’s your contract on the front page of the newspaper next time.

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

Procurement Across Borders – Looking Into The Cultural Mirror

A useful tool for developing cultural intelligence is the Cultural Mirror, which plots culture across nine dimensions…

By tankist276 / Shutterstock

As part of our ongoing article series on Cultural intelligence (CQ) we are discussing each of the four individual components of CQ and how they can be applied to effectively work across cultures. In earlier articles we discussed what Cultural Intelligence is and CQ Drive, which is the motivation that individuals have in approaching and interacting with different cultures. Now we move onto the next component which is CQ Knowledge.

CQ Knowledge refers to your own personal knowledge and understanding of other cultures. Differences and similarities between cultures can be assessed in terms of core values, beliefs, norms and behaviour.

A useful tool for developing CQ Knowledge is the Cultural Mirror, which plots a culture on nine dimensions. These dimensions are based on the work of anthropologist Geert Hofstede, Fons Trompenaars and Asma Abdullah that I amalgamated. The Nine Dimensions of Culture provides us with a continuum of values and by exploring each of these and where a culture sits on the continuum, we are able to gain insight into the culture itself and how it operates. It is critical to firstly appreciate where you sit on the cultural mirror yourself.

Here is the Cultural mirror and the Nine dimensions:

We will look at the first three dimensions in this article and understand what they are, how they are applicable and provide some tips on how to navigate these cultural differences.

Dimension One: Relationships – Task

In some cultures around the world the focus in the early stages of interactions is on building the relationship. In these cultures, getting to know the people and establishing trust is much more important than simply achieving the task. Examples of countries on the relationship end of the continuum are Saudi Arabia and Brazil. In other cultures the initial priority is on getting the task done. This is not to say that the relationship is not important, however the focus is primarily on getting the task done before building the relationship. Examples of countries that are on this end of the continuum would be Australia, Germany and Finland. In both situations, the outcome is to get the task done but the approaches are different.

Tips for those coming from a relationship oriented culture working with a task oriented culture:

  • Be focused and clear on outcomes
  • Give clear instructions about the task

Tips for those coming from a task oriented culture working with a relationship oriented culture:

  • Spend time initially building the relationship
  • Invest in small talk to make people feel more comfortable

Dimension Two: Harmony – Control

This is the view of how humans deal with the environment, nature and with people around us. People from harmony based cultures believe we need to live in harmony with nature and have an external locus of control. They believe in concepts such as yin and yang, fate, destiny and karma. Countries which are more on the harmony end of the continuum include Pakistan and China. Conversely, people from control based cultures believe that you are the master of your own destiny. You are in control of your life and you need to control the environment. Countries more towardes the control  continuum  are the USA and Switzerland.

Tips for those coming from a Harmony based culture working with a Control Culture:

  • Be aware that rigorous debate maybe encouraged
  • Be conscious of delivering on timelines

Tips for those coming from a Control based culture working with a Harmony Culture:

  • Be mindful that open conflict is likely to be avoided
  • Learn how to disagree in a polite manner

Dimension Three: Shame – Guilt

 In shame orientated cultures, avoiding a ‘loss of face’ is important. Thus, what others think of you and how they judge you is a strong motivator. Examples of countries which are more on the shame end of the continuum are India and Japan. Conversely, in guilt based cultures, it is more about up to the individual to judge themselves on their conduct. Guilt based cultures include Italy and Argentina.

Tips for those coming from a shame based culture working with those from a Guilt Culture:

  • Allow time for experimentation and brainstorming of ideas
  • Appreciate that candour may be present and encouraged in discussions

Tips for those coming from a Guilt based culture working with a Shame Culture:

  • Encourage participation through group based tasks to remove attention from individuals which may cause “loss of face”.
  • Do not expect public or rigorous debate

For the three dimensions we have discussed, please consider where your cultural preferences are and how that influences your interactions with others from different cultures?

How To Cope When You’re Working For Someone Half Your Age

Increasingly employers are looking to fill their ranks with ‘digital natives’, which usually translates to people younger than you. But how do you work for someone half your age?

By Petr Malyshev/ Shutterstock

Millennials (Gen Y) and Post-Millennials (Gen Z) now make up 40 per cent of the workforce.  So, if you are over 36 years of age you should probably get used to the idea you will one day be working for someone young enough to be your son or daughter.  How you deal with that reality can make a big difference to how happy you are at work and your chances of career progression.

Increasingly employers are looking to fill their ranks with ‘digital natives’ which usually translates to people younger than you. At the same time older workers are staying in their jobs for longer or rejoining the workforce after ‘retirement.’  And while every workforce has always been a mix of the old and the young and everyone in between, for many workplaces how that mix is distributed throughout the organisation has been changing.

In a traditional organisational hierarchy a significant part of the reason you were promoted was because of your length of service. This meant that older people tended to be more senior and young people tended to be lower in the chain of command.  Today this structure still very much persists in government organisations such as the Public Service, Law Enforcement,  the military, Health and Education.  But sheer weight of numbers (of younger workers) and a trend towards less structured workplaces has meant that May-December working relationships between a Boss and their direrct reports is more and more likely particularly in industries where social media capability is a requirement.

Naturally psychologists have a term for this. It’s called ‘status incongruence’ and it means a situation where a person’s status is not what you would expect, in this case, because of their age. 

While the phenomena has been discussed by sociologists since the 1950s, it’s only recently that studies on the impacts for organisations have started to appear. One such study was recently performed by researchers from Naveen Jindal School of Management at the University of Texas in Dallas.  One of the lead researchers, associate professor Orlando Richard told The New York Times the research showed “older workers are not as responsive to [a] younger boss, because they feel he or she shouldn’t be in that position,” and, “[they] are less committed to the company. They’re not as engaged in the job. If they’re close to retirement, they may not leave, but they may not work as hard.”

The study also found that organisations with older workers reporting to younger workers needed to adapt their leadership style to take account of that.  Transformational Leadership is popular among the types of firms likely to experience status incongruence.  But the research suggests this style of leadership in particular is likely to be less successful. 

Transformational leadership requires a leader to work with teams to identify needed change, create a vision to guide the change through inspiration, and execute the change in tandem with committed members of a group.  In order for this to work, the members of the team have to believe in the credentials and ability of the leader.  While that is not impossible where the leader is significantly younger than a team member, it is something that needs to be taken into account in how a leader works with the team.  They will have to work harder to establish their credentials, so that workers can see past their relative youth and develop faith in the leader’s abilities.

It is also something that the organization has to bear in mind when selecting a younger person to lead a team. If that person is not capable of convincing the team that they have the credentials to be there then status incongruence is likely to result in a team which significantly underperforms its ability.

For their part, older workers should focus on not being guilty of reverse ageism.  They need to recognise that age, like gender and race does not define a person’s ability.  They should especially resist the urge to give the leader tips on how they would do the job.  They should strongly resist the urge to say “having done this for years …” and leading with ‘in my day’ is not a good plan no matter who your boss is, but it is definitely a land-mine with a younger leader. 

Instead they should use their experience to help their younger boss in a non-threatening way.  Making yourself and your experience valuable is likely to be a pathway to doing better in any company but this is likely to be especially the case in an organisation that values skills over age.

The 6 Stages Of Your Procurement Job Interview

How to you prepare for (and ace!) your procurement or supply chain job interview?

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There is no shortage of general advice available online on how to prepare for and behave in an interview situation, and it’s free. That’s all very helpful, but what about preparing for an interview in supply chain or in a procurement role, how is it different?

1. Before the interview

The basics are the same whatever the role, preparation is vital.  Do research the following:

  • The background of the company, its culture and the industry it is in.  The more information you gather before the interview, the better prepared you will be to answer leading questions during the interview. Be fully prepared to answer the questions “How much do you know about our company?” or “Why do you want to work here?” 
  • The interviewer (or hiring manager).  Who is he or she?  What is their work background and experience?  This will help you find some common ground. 
  • Know your TCO, RFI, P2P, SRM and the rest of the acronyms. Interviewers may use these in conversation. It may unsettle you if you don’t know what they mean.   
  • Make sure you really understand the skills that are required and how much experience is expected. If you don’t quite fit their view of a dream candidate, motivate how you will grow into the role quickly. Think about the types of questions that you can expect and prepare your answers in advance. 

2. At the interview

Job interview formats go in and out of fashion:  you can be asked to do a video or panel interview or even one that includes end-users or stakeholders.  Whatever the format, you need to demonstrate your suitability for the role on offer and how your skills and background will provide tangible benefits for them.  

3. Functional skills

You will probably be asked about your experience and skills in relevant supply chain technology and related tools, e.g. SAP, Oracle, Ariba or other e-sourcing software. You may be asked about direct and indirect categories that you have worked in (make sure you understand the difference) and about your particular expertise in certain commodities or services.  In both these areas be careful not to embellish or over-represent your knowledge or achievements as your interviewer may know a lot more than you do. If you claim that you saved your organization £5 million in spend last year you will need to be able to substantiate it.  Currently, employers are looking for people with specific experience in complex procurement categories. In these types of role they expect candidates to be already familiar with the external marketplace and key suppliers. 

Questions sometimes start with “Tell me about a time when…”, where the interviewer will work through the STAR technique:  

  • The SITUATION 
  • The TASK or problem that arose
  • The ACTION you took
  • What was the RESULT

Prepare multiple examples in advance and rehearse them well so that they tell a story. Be ready for “tell me more”.  Make sure that you demonstrate that you have good critical and analytical thinking skills, are a good communicator, have time management skills, and are flexible, i.e. show that your expertise is transferable to them. 

4. Behavioural skills

Behavioural interview questions are very common in supply chain and are designed to elicit specific and detailed responses about inter-personal and conflict situations which you have been exposed to. How did you handle the issue, what actions did you take and what was the outcome?  Your answers will show that you understand effective ways to deal with suppliers and internal clients.  Listen carefully to any clues the interviewer gives you on what’s important to them so that you can respond by giving your own examples. You need to be able to articulate how you would be able to bring about change and implement improvements seamlessly, where required.

5. Do you have any questions?

An interviewee will almost always be asked this. Understanding how to communicate your interest is very important so have your questions ready.  This is not the time to discuss the remuneration package or benefits that may be offered. Genuine questions about how the company manages its procurement function and how the different elements of their supply chain operate will be welcomed.  If the interviewer is interested in you they will demonstrate it by asking a variation of the following, ‘why our company, why this position and why you?’  This often is your most critical response during the interview process.

6. Where it can go wrong:

Feedback from senior managers and top recruiters says that where candidates fail most is in:

  • Not being fully prepared and having to refer to their CV for details
  • Did not know enough about the company and its operations
  • Did not have the right attitude/did not demonstrate any energy for or interest in the role offered.
  • Could not provide examples or explain how they are suitably qualified
  • And arrived late for the interview!

Displaying a positive attitude and expressing a sense of enthusiasm for the company and the role is an excellent starting point for landing that job. Cultural fit and good inter-personal skills may be the clincher; processes and applications can be taught over time to fulfil gaps in experience. 

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