Are you Effectively Mitigating your Automation Risk?

Procurement’s new direction comes complete with a number of new risks to consider. And automation accounts for a few of them.

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For several years now we’ve heard the same message – procurement is going to become more strategically focused in organisations. One of the key enablers cited in this change is technology and the increasing automation of transactional tasks to help free up time and resources.

But technology and automation bring their own challenges, not least the impact of dealing with the ever-increasing issue of cybercrime and third-party risk. And, as I’ve said before, despite knowing about it, few CPOs if any have a full grasp of the risk present throughout their supply chain.

It’s not just technological advancements that represent a key risk, but also the role of technology in the changing nature of work. Being educated and aware of these risk factors will help put mitigation strategies in place. But it will come down to how well risks are managed when it comes to understanding the impact of any future major risk events.

I’ve selected three areas linked to technology and automation that procurement must be mindful of as they take their new strategic direction.

Third Party Risk Management & Personnel

Technology has helped to drive and support the rise of the gig economy. A 2018 report estimated that over one-third of US workers (36 per cent; 57 million people) were part of it. It may have started smaller, but the gig economy has grown beyond the names traditionally associated with it, the like of Uber, Lyft, Deliveroo and Freelancer.com.

The attractiveness of the gig economy lies in greater flexibility on where, when and how people work. For organisations it means they don’t have pay all the costs associated with a full-time worker – potentially saving 50 per cent on rates by using a gig worker. This would even hold true in spite of recent legislation passed in the EU and in California regarding workers’ basic rights.

However, organisations may not realise that they are exponentially increasing their third-party, technology-associated risk. An estimated 90 per cent of hacks targeting organisations take place through an individual employee’s computer.

How can they be sure that the laptop or internet-capable device the worker is using is compliant with network security? Or free from viruses or malware? It’s not only the gig workers, but the employees too, with 87 per cent admitting that they use their own devices for work purposes.

How will organisations support the gig economy workers to carry out their tasks while managing their risk levels? It’s a question no-one has really answered yet.

Changing Skill Sets for Sourcing Professionals

An increasing level of automation in procurement will naturally change the skill set that sourcing professionals require to do their job. This will be seen in a move away from data and analytical skills, and an increasing focus on Emotional Intelligence (EQ) and soft skills like change management, negotiation, selling, presenting.

The question is what are organisations going to do with displaced employees? Do they have an ethical responsibility to retrain them, retain them or up-skill them to allow them to move on? Yes, EQ and soft skills can be trained and will come more naturally to some people. However, there will still be a number who have difficulty in moving into this new way of working.

In my opinion the key skill, even accounting for EQ, will be adaptability. With the speed of technological advancement we are now seeing, people have to be far more adaptable than they ever used to be.

It’s impossible to fight change – some people embrace change, others fight it, others are paralysed by it. People will struggle if they don’t have that adaptability as a natural barometer. It’s a much tougher skill set to train, but as technology continues to advance, it’s a risk that organisations need to be aware of.

Responsible Automation

Linked to this is the final risk factor I’ve chosen to highlight here – responsible automation.

Most automation is pretty obvious, for example, installing an ordering kiosk instead of a human for ordering fast food, or having self-service checkouts at the grocery store. What people don’t see is the impact on the low to mid-level managers, who lose much of their transactional and managerial work as a result.

They are at risk as much as the frontline employees, but this isn’t always considered. Organisations have the social responsibility to have intelligent automation, to consider this through the risk management lens and assess how their technology fits with the social agenda.

Being more socially responsible with automation will represent a dramatic change from the current situation. Organisations need to stop automating for the sake of it, only eliminating the transactional elements because there is good reason to do so.

By being too keen to automate, organisations lose site of the need to have humans in the process, which may in turn increase risk. Until such times as bots and AI have the EQ we discussed before, they will miss out on the human aspect of detecting fraud or seeing the human thought process behind decision-making.

This is a more responsible approach, but also, from a risk point of view, protecting organisations against the loss of the crucial human element in some tasks.

About the Author

Dawn Tiura is the CEO and President of SIG, SIG University and Future of Sourcing and has over 26 years’ leadership experience, with the past 22 years focused on the sourcing and outsourcing industry.

In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children’s issues in the Jacksonville, Florida area. 

She is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.

Dawn provided some great insight and thought-provoking ideas at the Big Ideas Summit Chicago 2019 this week. If you weren’t able to be there on the day and couldn’t get there as a Digital Delegate, don’t worry. You can still sign up to access all the great content by clicking here.

Supply Chain SOS: How Proactive Risk Management Can Put Out Fires

Spend all your time at work fighting fires? Proactive risk management can help douse the flames and get you ahead of the game.

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For as long as procurement has been a profession, risk management has largely been seen as a data collection exercise, undertaken at alarmingly infrequent intervals. Often, it was nothing more than a checked box to indicate assumed compliance, with no deeper insight or follow-up.

But as the reach of procurement extends beyond savings, compliance and performance. The profession touches almost every facet of a company, and mitigating risk is increasingly being seen as the fourth pillar of the profession. To be truly successful, risk management requires robust insight into all links of a supply chain – a task that has often been insurmountable.

How can you properly manage your company’s risk as supply chains go global? And who should be responsible for ensuring you’re ahead of issues before they arise?

Procurement teams have the potential to drive big changes on a global scale. If you’re not successfully navigating your risks then you’ll struggle to join the ranks of the world leaders.

Proactive vs Reactive

Whether caused by bankruptcy, politics or even severe weather events, risks to your supply chain come in all shapes and sizes, so it’s not completely unreasonable to be overwhelmed. Preparing for every single eventuality is a daunting task that seems to stop procurement professionals in their tracks.

As such, many people start on the back foot, considering the risks only when their bottom line has already been affected. However, if you understand your risk profile – the types of threats that will have the biggest impact on your business, whether they’re physical, logistical or reputational – then you’ll be able to develop proactive risk mitigation plans that can keep your business flowing seamlessly through strikes, shut downs and storms.

Successful risk management in action

At riskmethods, we combine advanced AI technology with human support to offer comprehensive risk management solutions for our customers. We train our AI using over 5 million articles relevant to their unique risk profiles, to allow us to give our clients the visibility into what the current and future risks are for their business and offer insight into the underlying threats in their supply chain – so they can take action before it hits.

For example, when Hurricane Harvey hit Texas in 2017, it made landfall three times in six days, causing $125 billion in damages and sending a third of Houston underwater. As the storm began making news, we were able to use our technology to create storm projections for our customers that narrowed down the affected location as the storm approached. This alerted them to the risk of damage or delays, and allowed them to contact any suppliers or manufacturers within the impact zone before the storm arrived.

As a result, they were able to take action to create proactive mediation plans for their impacted suppliers with outstanding orders before the storm even hit the ground, successfully navigating potential shutdowns that could have impacted their supply chain for weeks to come.

In an elite enterprise, this active monitoring of new and emerging threats means that while it may not be financially possible for all enterprises to have crisis management teams on hand, ready to pounce at the first hint of trouble, they will have contingency plans in place. This increases your ability to react faster and could potentially give you the leg up on your competition.

Where is risk management going in the future?

The next procurement transformation is taking the profession from a singular discipline to a cross-organisational centre for increased collaboration and supplier transparency.

Risk management is set to go hand-in-hand with this transformation to alleviate the risks within an enterprise, bringing another tool to the table for CPOs to leverage and creating a competitive differentiation for enterprises. While this direction may seem like common sense going forward, the reality is that it’s only in recent years that its importance has really been acknowledged.

Those who continue to think of risk as someone else’s problem will soon find themselves falling behind.

riskmethods was one of the sponsors for the Big Ideas Summit Chicago 2019, with Bradley Paster delivering an ace keynote too. Don’t worry if you missed out, you can still sign up to access all the great content. Register now by clicking here.

Suppliers: Partners not Punching Bags

If suppliers are treated as part of the team, rather than punching bags, it can actually help to accelerate procurement’s ability to add value.

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When you are hiring employees, do you focus just on the salary negotiations?  With the only goal being to get the lowest cost talent?  No, because we know the value we are going to receive from that individual is through many years of ideas, quality work and the leadership they provide to others.   

The price negotiation is a point in time, while the relationship is the multiplier.   

The same holds true with suppliers.   

As you look across our supply base, procurement has a range of suppliers from “high potential” to “needs improvement”.  As we do with top performing teams, procurement has the opportunity to cultivate high potential suppliers through exposure, stretch assignments, and trust. 

There is also an opportunity to manage up or out the “needs improvement” suppliers by developing their capabilities and giving them the opportunity to improve.  Through this approach, procurement now has the ability to discuss with their new-found talent how to creatively reduce total cost of ownership, to solve problems, and to provide innovative solutions.  

When trusted are offered development opportunities, suppliers will go above and beyond for the customer.  They assign their best people on the account.  They look for ways to improve the relationship, reduce costs, and proactively call out risks.  And, in times of short supply, will serve their preferred customer of choice first.   

Through one change in perspective, one change in a relationship, procurement achieves lower TCO, lower risk, more innovation, and a reliable supply chain – this is the key to delivering value.   

The Next Big Idea in Procurement  

Procurement is on the brink of significant change, as are many more areas of our lives.  There will be many big ideas that brilliant procurement professionals implement into their organisations to support the advancements in technology, the new expectations of talent, and techniques to add value well beyond cost.  These are exciting times to lead, inspire, and create within procurement.   

Each year a small group of influential procurement thought leaders gather in Chicago for the Procurious Big Ideas Summit.  Participants are inspired and take back many big ideas for their personal growth as well for their organisations.    

While technology advancements often receive a lot of focus, perhaps the biggest shift within procurement is the expectation to move beyond cost to becoming value providers.  Procurement is being challenged to find new ways to reduce risk, increase sustainability, to help solve complex business problems, to increase revenue, to generate new innovations, to become an internal consultant to their stakeholders to obtain the best out of every investment. 

This expectation is becoming more pronounced and will allow procurement to analyse how they measure success, the skills their talent need, and even what technology they might need to deploy.   

Those organisations who make this change exceptionally well will also realise that their suppliers offer a limitless capability to accelerate procurements’ ability to add value.  When suppliers are treated as an extension of the supply chain, as part of the team, the relationship with suppliers also moves beyond cost.  In fact, one could argue that becoming a customer of choice to suppliers is the key to unleashing value, reducing risk, increasing innovation, and achieving agility within the supply chain.    

Leading the Supply Base 

An idea is just an idea until it is implemented, so how do procurement organisations get started with this change?  Below are some low investment ways to start this journey. 

  • Toss out outdated segmentations – Start looking at the supply base like one would talent.  Understand high potential suppliers, remain in role, and need improvement suppliers.  This does not need to be complicated nor does this need to be scientific.  Without putting much effort into this, the top performers and the lowest performers could be listed.  Start there.   
  • Offer development programmes – As one would with their internal talent, offer programmes that will help suppliers operate with excellence.  These programmes can even be supplier funded, but it shows suppliers that procurement cares about their success.  It develops a relationship where it is understood that procurement is only as good as their suppliers.  When suppliers perform at their best, procurement, suppliers, and the communities around them all benefit. 
  • Think differently about procurement’s role – When procurement starts thinking about their role as a hiring manager to suppliers, it creates a change within every interaction.  Set the expectation that a procurement manager’s role is to lead their team of suppliers to success.  This will have downstream impacts around measurements and skills needed but starting here will start the cultural change needed for success.   

Procurement is on the move.  These are indeed exciting times to renew the spirit of what procurement is all about.  Let’s not be overwhelmed and paralysed by the amount of opportunity.  The best thing to do now is to start.  Start taking the small steps that will create big change and the next big ideas.   

As the Big Ideas Summit Chicago facilitator, Amanda Prochaska will be harnessing the biggest and brightest ideas presented. You don’t need to be “in the room where it happens” – you can register as a digital delegate and get up-skilled and uplifted from the comfort of your own desk.  Register now by clicking here.

Taking Intelligent Spend Analysis to a New Level

Going from data to intelligent spend analysis? Traditional tools just don’t cut it anymore. How do we get from data to tangible, valuable ideas?

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Supply chain leaders today are being asked to help contribute to business growth and promote innovation while reducing costs. That’s a lot to ask.  Managing expenditures across global organisations has become increasingly complex and involves just about everyone: especially procurement, legal, finance and operations.  

Intelligent Spend Management is about more than classifying and reviewing historical spend. It is also about compliance, governance and mitigating supplier risk, all of which are needed to make informed decisions about future purchasing strategies.

Traditional Spend Management

The main objective of spend management is to identify and exploit savings opportunities and ultimately improve the firm’s profitability. It involves collecting, collating, cleansing, maintaining, categorising, and evaluating spend data from across the enterprise.

Traditional free-standing tools that manage spend analysis, P2P, contracts and supplier relationships are not set up to provide a consolidated view across all spend categories. Often these data sets reside on systems that don’t talk to each other and provide limited information.

What is Intelligent Spend Management?

A strategic, intelligent approach to spend management allows for a unified view and better management of risks across the supply chain and harmonisation of procurement policies and processes. This approach requires all spend data to be centralised so that any analysis efforts are applied to the total organisational spend thereby providing visibility of and control over each spend category. Intelligence means learning from past actions and improving responses over time.

Supply chain leaders can exploit spend opportunities provided by this “big data” to increase their cost savings, decrease operating costs, and reduce risk. To do this they need an end-to-end platform that uses the best-suited technology and the right tools.  These resources need to be applied in such a way as to deliver reliable real-time information that can be used for decision-making. 

Using conventional tools, it is difficult to achieve these outcomes.

Machine Learning

Machine learning is an application of artificial intelligence (AI) that provides enterprise-wide systems with the ability to automatically learn and improve from experience.  Using these new approaches we can learn much from the historical volumes of spend data without human intervention.

We can answer questions related to customer profiles and their spend history, provide explanations for past actions and guide users with recommendations about future purchases.  

What can Intelligent Spend Management deliver?

Intelligent spend management has the capacity to transform any organisation’s data into information that becomes a source of ideas and plans that can be used to grow the business.  

1. Historical data tells a story  

It reveals repeating patterns about users, approvers and suppliers. It also offers insights into which types of requests should be approved automatically and which others call for human intervention. Intelligent technologies that have exposure to a holistic view of spend-related data can provide learnings to continuously improve decision-making across the source-to-pay spectrum.

2. Improved user experience 

Intelligent processes provide a real benefit to users and approvers alike by ensuring compliance with all corporate policies and regulations while cutting down on waiting times and streamlining document approval processes. Supply chain staff and end-users need easy-to-access, reliable, real-time information on supplier performance to make optimal buying decisions.

3. Better market intelligence

To manage spend efficiently and identify new sources of supply, businesses need to interact with data coming from external sources such as from suppliers, government and business associations as well as from internal sources. This includes accumulating industry and economic intelligence automatically from third parties and using it in conjunction with their historical spend data.

“As enterprises embrace an increasing number of partners to compete globally and as value chains grow longer and more complex, they need intelligent platforms not only to extract the fullest value from data but to extend its broadest capabilities.”

Patrick McCarthy, Senior Vice President and General Manager of SAP Ariba and SAP Fieldglass.

Predictive spend analysis in supply chain is still fairly new, but it is becoming increasingly essential in large organisations that have already been exposed to spend analysis tools,  supplier segmentation and relationship management.

An enterprise-wide system that can provide a unified view of spending that brings spend data together from across all sources and categories allows users to make smarter, faster spending decisions. 

Achieving this requires investment in the right IT infrastructure and systems which will really put your spend data to work.

Innovations like AI, machine learning, IoT and blockchain are reshaping entire industries, but this is an opportunity for procurement, not anything to fear. Join Pat McCarthy at the Big Ideas Summit Chicago 2019 tomorrow (Wednesday 18th September) to find out why. Register as a Digital Delegate by clicking here.

Why Contracts Are Key to Executing Your Sourcing Category Strategy

The implementation of a category strategy is seen as best practice in procurement. But contracts themselves hold the key to success.

For procurement organisations, “category management” is considered a best practice for sourcing. Simply put, category management is the process by which companies segment all the goods and services they need to procure into discrete categories that reflect the specific common characteristics of the products they’re buying.

For example, the procurement department at an automobile manufacturer will likely be responsible for sourcing everything from steering wheels to cleaning services. While in both cases the company needs to make prudent decisions about its spend, what goes into to choosing vendors for those goods and services are obviously very different.

Some goods are highly commoditised and therefore cost will be the determining factor. Other goods may have stringent performance requirements attached to them. These will be evaluated based on the quality of the vendors bidding for business. Some goods are business critical. Others, less so.

A category management strategy for steering wheels may look something like this:

  • The company’s steering wheel vendors should be equally dispersed between the North American, APAC and EMEA regions;
  • No one vendor should supply more than 40 per cent of all steering wheels;
  • The total spend on steering wheels can’t exceed a pre-determined amount.

This strategy means that the supply of steering wheels is more resilient to disruptions like natural disasters (since they are coming from various geographies) and not exposed to undue damage if a single vendor fails (since no one vendor dominates the supply). And, of course, it provides predictability in how much will be spent procuring the product.

Making Sure the Category Strategy Is Followed

But designing the category strategy is just the first step of the process. The greater challenge is carrying it out. The history of large enterprises trying to execute category strategy-driven procurement shows that while they are sometimes able to apply the category rules at the time of sourcing, it becomes a struggle to monitor adherence during the operations phase of a contract.

For example, contracts may have been awarded assuming a certain mix of supply sources (with differing costs and quality parameters) to deliver on certain quarterly cost goals, but issuance of purchase orders in a different proportion at the execution stage will invalidate those assumptions and cause the category strategy to fail.

To improve compliance with a category strategy, leading enterprises are taking a new approach. Putting contracts at the centre of the process.

Using contracts to drive category management compliance is enabled by the emergence of digital contracts and contract management software. By managing contracts on an enterprise contract management platform, companies can leverage contract data to execute effective contract strategies—and design superior strategies to begin with.

How It Works

Let’s go back to the steering wheel example and see how enterprise contract management can optimise the process.

First, the procurement organisation develops the category strategy for steering wheels. The development of a category strategy is a consultative process and depends on data to draw insights and validate assumptions. Much of this data exists in past contracts: supplier performance on existing contracts, spend on different sub-categories and geographies, and other data points. That information, when available on a contract management platform, gives rise to a superior strategy.

Next, the company put out requests for bids from vendors. Contract requests and bid lists aligned with the adopted strategy are launched from within the contract management system. This ensures that the vendor shortlisting and price discovery process conforms to the category strategy.

Once purchase orders begin to be issued, business rules in the contract management platform ensure the strategy is carried out. If a buyer tries to execute a contract that goes against strategy – for example, with a vendor whose geography has already reached its limit in the strategy – the contract will be blocked or routed for special approval.

Finally, the contract management software monitors in real time vendor performance against the contract. This is done both through data tracked within the platform itself and through integrations with other enterprise systems. This way category managers can not only make sure contracts comply with the strategy, but that performance complies with the contract.

Contracts Are the Foundation

Since contracts are the foundation of buyer-supplier relationships, an enterprise contract management platform can support all phases of a category strategy:

  • Insights to develop the strategy;
  • Tools to execute the strategy;
  • Rules to enforce the strategy; and
  • Integrations to monitor the strategy.

Icertis is focused on how digital contracts and cloud-based enterprise contract management software can improve business performance, including in procurement. To learn why Gartner has named Icertis a “Cool Vendor in Sourcing and Procurement” and why “the clear leader” in buy-side contract management, contact us today.

Want to get access to more great insight on contract management, A.I. in procurement and all things procurement software? Icertis are one of the main sponsors for the Big Ideas Summit Chicago 2019, and will be delivering one of the keynotes on the day. There’s still time to register as a digital delegate – find out more and sign up today here!

Procurement Can…Save the World

Procurement can do much more than it’s already doing when it comes to sustainability. And together we really can save the world…

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Historically, Procurement’s mandate has involved cutting costs and little else. The reputation for barking orders and slashing spend has led to more than a little resentment within certain organisations. Business units are often hesitant to engage with the function. When they do, they’re typically gritting their teeth and counting down the seconds until they can go back to focusing on their own key objectives.

Reducing costs is a noble cause – and Procurement’s top priority. But it’s just the beginning of what Procurement can offer the business and its customers. With its cross-functional position and unique insights into the supply chain, Procurement has the capacity to fundamentally change the way an organisation operates.

In Part 1 of this blog series, I examined some of the life-saving initiatives that Procurement teams across the globe are supporting. Cracking down on modern slavery and optimising disaster response plans, they’re evolving in their role and making it possible for corporate leaders to serve a higher purpose.

This time around, I want to look into Procurement’s efforts to address even broader issues. In addition to saving individual lives, great Procurement teams can potentially save entire species by working to identify and address worldwide environmental concerns.

Procurement Can . . . Save the Planet

Addressing Climate Change

The most pressing environmental crisis of our time, climate change, has dominated conversations among politicians, business leaders, and consumers for more than a decade. While forecasts vary from source to source, it’s clear that rising temperatures and sea levels present nothing short of an existential threat. From a business perspective, the myriad effects of a changing climate could mean a 10 per cent reduction in profits for American businesses. The planet and its people could suffer even more dire consequences.

The global economy simply cannot continue along the path that’s gotten it to this troubling position. For Procurement, the looming threat of climate change should provide the quintessential burning platform. It’s an opportunity for the function to distinguish itself as the value-added entity and to take the lead in designing a totally new worldwide supply chain.

When most of us think of climate change, we think of greenhouse gas emissions. While it’s somewhat reductive to describe such a broad issue through these narrow terms, addressing emissions is certainly a high-impact way to begin promoting responsibility. It’s not nearly enough to clean things up internally. Even organisations that don’t personally burn coal and oil often rely on supplier networks that make an outsize contribution to climate change.

The Carbon Disclosure

The Carbon Disclosure has found that suppliers often account for four times as many carbon emissions as an organisation’s direct operations. This eye-opening fact has inspired a number of businesses to broaden their approach to sustainable business. As organisations gain additional visibility into their supply chains, they have more and more power to enforce a higher standard of responsibility.

Target, for example, has made supplier-generated emissions an important part of its climate goals. In addition to establishing objectives of its own (including a 30 per cent reduction in emissions by 2030), the retailer is asking nearly every one of its suppliers to begin working toward similar goals by 2023.

One of Target’s direct competitors, Walmart is taking a similar approach. The world’s largest retailer is not merely holding its suppliers accountable for cutting down emissions, but offering additional incentives for those who successfully do so. They’ve partnered with HSBC Bank to introduce a new program that will provide better loan terms to organisations who make demonstrable progress.

Data, visibility, and consistent communication will only become more important as Procurement teams work toward cutting down emission and addressing their contributions to climate change. Still CDP reports that just 35 per cent of organisations are tracking emissions throughout their supplier networks. With the wealth of information at Procurement’s disposal growing in scope and the conversations around our climate growing in intensity, there’s no longer any excuse for inaction.

Fighting Ocean Pollution

Paper straws aren’t especially popular, but they’ve already served a valuable purpose. In addition to getting plastic out of the restaurant supply chain, they’ve forced consumers to confront their own reliance on plastic-based products and materials. Simply put, businesses and their customers buy a lot of plastic and Mother Nature is typically the one stuck footing the bill.

Eight million tons of plastic wind up in world’s oceans every year. With consumption expected to surge, experts predict we could see more plastic than fish by 2050. In certain regions, plastic particles are already outnumbering plankton 26 to 1.

With its central role in material purchasing, Procurement enjoys an obvious opportunity to take the lead in identifying and introducing sustainable alternatives to plastics. In 2017, Dell Technologies announced that it would take an especially creative approach to amending its supply chain. The organisation elected to create an entirely new supply chain dedicated to collecting and re-purposing ocean-bound plastics. This initiative provides a perfect example of the wide-reaching effects an environmental initiative can have.

Post-Plastic World

Providing access to near-endless supply of affordable materials, Dell’s new reclamation supply chain helps the organisation cut down on its material spending, create a slew of new jobs for collectors and recyclers, and (most crucially) provide an example for other business leaders to follow.

They’re already partnering with likeminded organisations through their Next Wave program to build a collaborative supply chain for collecting and reusing ocean waste. They expect to reclaim more than three million pounds of it within the next five years.

Dell’s not the only organisation cleaning up its act to clean up our oceans. Businesses throughout the retail and restaurant sector have also taken swift action to address the question of waste. Walmart, Aldi, and Trader Joe’s are just three of the retailers looking forward to a post-plastic world.

Starbucks and Dunkin’ Donuts, for their part, have made headlines by pledging to provide sustainable alternatives to their single-use cups. Each of these projects, regardless of scope or industry, will rely on strong Supply Management minds to steer the ship.

Procurement Can . . . Do More

It’s an unfortunate reality, but time is running out for businesses to take action and pursue environmental initiatives. In the past, organizations might have hemmed and hawed on the subject of sustainability. Fearing higher costs or the hard work of transitioning to new suppliers, they might have looked for excuses to forget about the environment and focus on something more directly relevant. There’s no forgetting about the environment anymore. Reports from organisations like the Intergovernmental Panel on Climate Change suggest that while businesses and consumers have done a great deal of damage, they still possess a valuable opportunity.

Back in 2015, Nielsen confirmed that more than half of consumers will pay more to do business with environmentally responsible organizations. They want to purchase natural, sustainable products from companies that have made green practices a central component of their missions. The conversations around pollution, deforestation, climate change, and other environmental concerns have only grown more intense in the intervening years. Companies that continue to avoid pursuing the “triple bottom line” (people, profit, planet) will soon find themselves growing more irrelevant, unsuccessful, and even controversial throughout the next few.

I look forward to addressing Procurement’s environmental imperative at the Big Ideas Summit. Last year saw thought leaders describe their efforts to identify alternate materials, repurpose recycling, and make Procurement a more purposeful function. This year, I’ll join the conversation by sharing some of the green initiatives my team has spearheaded throughout the last several years. Want to listen in? Make sure to register as a Digital Delegate today.

Do you want a steer from Diego on what your organisation can do with your triple bottom line? You can access this and much more by registering as a Digital Delegate for the Big Ideas Summit Chicago 2019 next week. Even if you can’t be there in person, you can still be in the room. Find out more and sign up today here!

The Secret of Successful Supplier Selection

Still using cost as a primary criteria for supplier selection? Our latest webinar shares all the secrets you need for success.

Have you been tasked with running a selection process for a new supplier but don’t know where to start?  Perhaps you’ve been using the same routine for years but feel it’s time to freshen it up?  Are the old ways just not delivering the outcomes you need?

In our recent Procurious-Ivalua Webinar, Critical Success Factors for Supplier Selection, our panel of experts revealed the secrets to how they get the outcomes they want from their sourcing processes. 

Here are five great take-aways from that discussion.

Supplier Selection – Get the Balance Right

Our panel reported that many organisations are not yet on a path that leads away a cost-driven focus.  Tech tools that are available to help with future cost modelling mean procurement can go to the market with uncertainty about this type of risk reduced.  When cost risk is managed this leaves the way clear for the road to value. 

A great example quoted in the discussion was a utility contract. The focus was on value rather than cost. It led to costs being reduced and also meant a more sustainable outcome was delivered. This lowered usage and introduced measures to promote sustainability. 

Can you introduce a selection process that balances cost, value and your organisation’s wider sustainability goals to select a supplier who is right for you?

Remember, One Size Doesn’t Fit All

Making sure a supplier is a good cultural fit for the organisation is a key requirement that all our panel members stressed.  Think about the impact of a cultural misalignment on your organisation’s reputation or brand.  

Cultures vary across the world and getting a cultural fit when you’ve got a global supply chain is hard. However, there are many things on which the buyer and supplier can agree. How about meeting with your supplier’s leadership team as part of the sourcing process? This would allow you to assess their management ethos to make sure that the cultural fit is there right from the start?

The unknown unknowns

Managing external factors and risks, particularly those that are not yet known, are something that supplier selection process is often expected to address.  All panel members reported the challenge of grappling with the unknown unknowns in the current period of global upheaval and change. 

The advent of technology-driven real time data is something panel members welcomed to manage supplier and supply chain risk.  It’s also a great way to check and monitor supplier financial health. 

Make use of the new tools that are available to ensure your organisation is prepared and have a backstop position to allow a response when situational or supplier risks change.

Be a customer of choice

When it came to the supplier-buyer relationship our panel had very clear advice.  Whether we’re a supplier or a buyer, we’re all looking of a return on the investment in the relationship we’re about to have.  Focus clearly on the outcomes both sides are trying to achieve. 

Make sure you put yourself in the seat of your supplier’s sales director – how can a contract with your organisation provide a supplier with the opportunity for fair value earnings or a sustainable revenue stream?

Start the conversation

Changing the way your organisation selects suppliers will not happen overnight.  When you’re engaging with stakeholders our panel advises you to talk in their terms not the language of procurement. 

Will the change you’re proposing add value?  Why will it improve customer experience?  Why could it safeguard or improve reputation?

So, go ahead and pick one of the secrets that the webinar panel shared as being critical factors for success and start that conversation with the business today.

A recording of the Procurious-Ivalua Webinar – Critical Success Factors for Selecting Your Suppliers with panel members Gordon Tytler, Rolls Royce, Stephen Carter, Ivalua, Fred Nijffels, Accenture and host Tania Seary, Procurious is available here.

How Procurement Professionals Can Look Like Rockstars

Will procurement ever achieve ‘rockstar’ status within an organisation? It’s an idea that hasn’t gained much traction in the past. But help may be at hand from a new source.

Muhammad suryanto/ Shutterstock

Despite the profession’s best efforts, the terms ‘procurement’ and ‘rockstar’ are uneasy bedfellows in a sentence. When you picture a rockstar – Keith Richards, Dave Grohl, Joan Jett, Pete Townshend – they are a free spirit; perhaps anarchic, but certainly someone who lives life by their own rules. Does this sound like procurement to you? No, me neither.

Even now, after all the efforts to make procurement a strategic partner, moving from transactional purchasing to strategic buying or strategic sourcing, the image of procurement remains the same. A profession that’s very traditional, process driven, compliant (not that this is a bad thing) and just maybe a little … boring.

Although some progress has been made, rockstar status is still a ways away. While there are huge, global names that have come from the profession, the name recognition is still an issue. You know Sheryl Sandberg, Bill Gates and Tim Cook, but do you know who their CPOs are?

Have you heard of Bo Andersson, formerly GM’s ‘Mr Purchasing’? How about Jennifer Moceri, CPO of global drinks giant, Diageo? Without wider recognition of what these rockstars have achieved, very few people outside the profession will be able to understand much about what procurement can deliver.

Collective rather than Individual?

The profession has spent so long trying to create ‘rockstar’ CPOs and leaders with global profiles that it may have lost sight of the true aim – to elevate procurement as a whole. When it comes to being a ‘rockstar’, the one thing that nearly all the greats have in common is a group by their side or backing them up. And it’s in this power of the collective that procurement’s ultimate success may lie.

For the collective profession it’s about understanding what the business needs, aligning a procurement strategy with the overall business strategy, and then delivering on this. Procurement will be treated as a strategic partner when it has earned the organization’s trust as a value-adding operation.

It might be an unpopular move, but the first thing that’s going to be on the agenda is savings. The drive in procurement has been to promote an agenda that covers more than just savings – efficiency, compliance, risk management and supplier development are just a few.

However, without even realizing it, the majority of these elements underpin savings and cost reduction. The trick is to not get too focused on savings to the detriment of the wider strategic agenda. Supplier consolidation and centralized procurement are a couple of approaches which tick both the savings box and that of the wider strategic aim of adding value.

Procurement Solutions – Your Backing Vocals

Rather stretching the metaphor of the rockstar and the band, it’s important to understand the tools available to help create your own procurement version of the Traveling Wilburys. Rockstar status won’t happen in isolation and that’s where procurement solutions and procurement consulting can take to the stage.

The best procurement solutions can help turn your data into a major strength through the power of spend analytics. Software can help organizations understand who they are spending their money with, how much they are spending and, most importantly, if they are getting what they have paid for. It makes spend visible, facilitating a greater understanding of how cost optimization and spend management will work within the wider procurement strategy.

As with any band, it’s important to pick a software solution that acts in harmony with existing systems, processes and how it will work once it’s been implemented. Given that employees are the ones who will be using it on a day-to-day basis, it’s critical that the solution is user-friendly, and that employees are trained fully.

Even the great rock bands (Queen, Black Sabbath, the Beatles) sometimes need to bring in external experts to push them on to greater things. For procurement it’s no different and the choice may be to engage procurement consulting organizations to assist.

These consultants can assist with software choices, implementation and running. But Group Purchasing Organizations (GPOs) go one step further, offering contract monitoring, spend management and collective buying power through their membership network.

This can help drive savings targets, aid supplier consolidation and all the other positives that organizations want from their procurement teams. Put simply, they help transform procurement from an undiscovered and unappreciated talent to a global rockstar!

Visit UNA to learn more about the benefits of Group Purchasing Organizations.

Creating a Procurement Video to Make Your Mum Proud!

Photo by Donald Tong from Pexels

This article was written for Procurious by Sievo. Find out more about them here.

Have you ever had a hard time explaining what you do to friends or family? Do you love your job but get the sense other people find it boring?

We all know sales drives growth, marketing builds brands and the buck stops with finance. Why is it so difficult to explain the excitement and value procurement brings to the table?

According to Wikipedia, procurement is “the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process. Procurement generally involves making buying decisions under conditions of scarcity.”

Yeah, I know! It sounds boring. Compare it to what we came up with to describe procurement analytics. And we promise you, this is NOT just another boring video about procurement.

Time for a Re-Brand

So why did we break the procurement as we know it and create that simple-fun video? We all know that procurement is often introduced in a boring way – it’s no Sales or Marketing.

But if Sales and Marketing can brand themselves well, why can’t procurement? Why is it that when think-ing about sales, people think of smiling businessmen in suits making deals on lunch dates that increase the company’s revenue, and when thinking of procurement it’s something….well…different.

At Sievo we do procurement analytics. It’s arguably the nerdiest, geekiest, most jargon-filled area of procurement. Analytics is tough to explain on its own. But analytics combined with procurement? I’m not going to even put the definition of that here.

But don’t worry – the fact that procurement is boring is not your fault!

You can choose who and what to blame – the fact that procurement professionals are focusing on savings instead of branding or the lack of knowledge about the subject – but one thing is true: procurement has a branding problem.

Our Procurement Video – Sharing the Excitement

A while back we were looking at YouTube videos about procurement to have some inspiration for future projects. Turned out, we weren’t very inspired at all after watching all of the long and technical videos. In fact, we got a bit worried when wondering what our moms would say if they decided to look into what we do for a living.

We decided we had to do something. Anything. We found that there was a clear demand for an interesting and fun video about procurement. Like the one the sales function has where Leonardo DiCaprio shows how to sell a pen. If for no-one else than to finally explain to our partners and mothers what it really is that we do in a way that they wouldn’t fall asleep halfway.

The thing is, procurement and procurement analytics are actually quite exciting. You should know. Sure, it’s not smiling people out on launch dates all the time, but dang it, procurement is an important function. It’s a function that should be portrayed in the exciting way it deserves.

This subject of changing the way we talk about procurement seemed to be close to the hearts of many since there has been an abundance of comments in response to the video.

Check some of those out:

“Definitely going to show this to my family to let them know what I do at work all day!”

Naavie

“Very cool – this video shows importance of procurement analytics to CPOs, cate-gory managers, compliance officers who look for sustainability in procurement process and even legal department!”

Alexandra Shtromberg

“Shared to my network, great vid… procurement analytics, simply explained and fun to watch… ”

Laura Garcia-Hornell

“Interesting and fun video, really liked it. I am all in for procurement analytics because on the best case it helps to support better decisions which lead to better negotiations… ”

Phil Kowalski

Want more? Read here 14 of some of the most creative definitions of procurement analytics by the ex-perts. Who knew procurement analytics could be explained with Tequila, an Indian wedding, and digging up gold?

Comment what you think about our approach and let us know how YOU would rebrand procurement!

We are Living in Exponential Times

We are living in exponential times. While that fact makes it exceedingly exciting to be alive right now, it also comes with a lot of procurement related issues. Let’s examine a few facts, and see if you can realise where I am going with this:

  1. In 1984, there were 1,000 internet capable devices.
  2. By 1992, there were 1,000,000.
  3. In 2008, there were 1,000,000,000.
  4. Today it is estimated at 30,000,000,000.
  5. Last year, 4 exabytes (4.0 x 10^18) of unique information was generated, which is more than the previous 5,000 years in total!
  6. It is estimated that there will be 70 billion connected devices by 2025.
  7. NTT Japan has successfully tested a fiber optic cable that pushes 14 trillion bits per second down a single strand of fiber
  8. Technical obsolescence is accelerated with technologies becoming obsolesced in as little as 3 years!

The Exponential Risk in Your Tail Spend

Let’s talk about third-party risk management. In procurement we need to focus on getting the correct supplier/provider/adviser at the best total cost, delivering the right level of quality and service levels.

To most people, this means that we are living in exponential times. But to a procurement person it means “oh no, I need to look at all of my supplier relationships because of the possible threat of risk.” The issue with this logic is we don’t know what we don’t know. And that means we have probably done little to no research/cyber security/risk assessment on our tail spend, let alone on every supplier in our critical spend.

Most companies have entered into multi-year agreements with their critical spend suppliers. This is in an effort to secure the best total cost of ownership and allow ample time for their suppliers to retool, ramp up and to get to know them in order to meet their service and quality requirements.

Therefore, despite quarterly business reviews (QBRs), it can possibly be as long as one to 10 years since that contract and relationship has been assessed (if ever) for real third-party risks.

Getting to Grips with your Supply Chain

I speak with CPOs on a daily basis and every one of them admits that they do not have a perfect grasp of their third parties, let alone their fourth-, fifth- or sixth-level parties. When was the last time you asked a supplier (especially in the tail) if they ever subcontract? Or whether their third parties, or fourth, have been reviewed for cyber risk? Or any risk at all for that matter?

Do you know whether your fourth parties are using human slavery? If every device is updated for the latest virus check? Whether employees are charging their phones through their devices, or if they are permitted to insert USBs into their computers from an unknown source?

How do we know if our fourth-level parties have a proof of mining to avoid conflict minerals? When was the last time we even checked our own staff for complying with strong cybersecurity norms?

The Cyber Risks Within Your Organisation

Just recently at a convention for hackers, cables that looked like Lightning cables were modified with extra hardware that gave hackers remote access to devices. Here’s how they work:

“O.MG cables are indistinguishable from the real thing, and they even come with the iconic adhesive binding rings you’ll find wrapped around new Apple cables. The [modified] cables act normally, too, letting you charge your devices via USB or transfer files from your iOS devices.

Neither your PC nor your connected devices will ever notice that anything is amiss. Short of dissecting the cable to look for the extra hardware, the only way to detect that you’re using an O.MG cable is when you realize, after the fact, that your device was exploited.

And even if you happen to catch an attacker running a terminal window on your PC remotely, O.MG cables include a kill switch that disables the implanted hardware, thus destroying any possibility to track down the attack’s origins.”

‘These Dummy iOS Lightning Cables Let Hackers Remotely Access Your Devices’, Lifehacker, August 2019

Secure Apps?

Apple would have you believe that your iPhone is very secure, until you add your first app. For example, when traveling recently I downloaded an app to play Dominoes (the game, not the pizza). This is seemingly innocent, but since I was on a long flight, I actually read the privacy information.

Check out some of the following extracts from the Terms & Conditions and Privacy Information:

  • FM GAMES App is a gaming application that may utilise your personal data. You also consent to FM GAMES’s cookie policies, as described herein.
  • Types Of Data We Collect: We collect personal data and non-personal data about you.
  • Location and Distance Information: When you use the FM GAMES App, we will collect your location to determine your distance from other users (“Distance Information”) through the GPS, Wi-Fi, and/or cellular technology in your Device. Your last known location may be stored for the purpose of calculating Distance Information between you and other users.
  • Messages: When you send a message we may retain the message for archival purposes or as otherwise allowed by law.
  • Purchases: We collect information necessary to complete purchases. This may include, among other things, your name, credit card information, billing information, address, telephone number, and email address.
  • Third Party Tracking Companies: We may share your hashed Device ID, Profile Information, Distance Information, and demographic information with our advertising and analytics partners. These third parties may also collect information directly from you as described in this Privacy Policy.
  • Third Party Service Providers: We may share your Personal Data with third party service providers

When I tried to turn off location services, this was not allowed, so I discarded the app. If this is the case with a gaming app for my phone, can you imagine the angst my home screen caused our IT folks?

Would you know if you had been hacked?

If I charge my phone through my computer, imagine what I am opening up for hackers to get to? How many of you reading this are using public Wi-Fi? What about Starbucks, or at the airport? Many of us will pass through at least one on the way to the Procurious Big Ideas event.

Did you connect to the seemingly innocent Wi-Fi? Would you know if you were hacked? If you haven’t heard about the reporter whose email was hacked on an airplane while using the airline app while working on a story about the FBI and Apple, take the time to do so.

The hacker read nearly everyone’s email on the plane. They then pulled the reporter aside when they landed to discuss the security, or lack thereof, of his phone while using public Wi-Fi, even if was at 35,000 feet.

The Fallability of Passwords

If this isn’t enough, consider what anyone can do with your passwords. Take for example my login for Amazon. If you were able to see my screen while I was logging in, this is what you could do.

Then, if in Chrome, right click and click on Inspect.

By merely highlighting the password and writing the word “text,” you will see my password. It is that easy if someone is “looking at your email” as you are logged in.

So, there you go. This is my Amazon password and I have now changed it since I wrote this post (but don’t tell my kids). This is the most basic level of cyber protection you can get, but even at a personal level with my own “research,” we are so out of our league, especially when dealing with technology obsolescence.

In the era of BYOD (bring your own device) who knows what your staff is exposing your company to. If we take this one level further to our third parties, who out there is doing the exact same thing and exposing their company to the same risks I just showed you?

So, while we are going to discuss third-party risk management in my session at The Big Ideas Summit, this is just the icing on the cake. If I am just one of the hundreds of contractors, imagine what damage I could be doing to your risk profile.

The Art of Third-Party Risk Management

So, the long and short of it, we are living in exponential times and it is time we paid clear attention to all of our third-party relationships (and their third parties, etc.) along our supply chains or we are destined to be in for a large risk event. It isn’t a matter of if, but when it will happen. If technology obsolescence is happening faster all the time, then we need to stay educated and alert, not paranoid.

To overcome these obstacles, we need to have an effective third-party relationship management and framework. Successful third-party management programs should focus on the four cornerstones approach: contract and performance management, risk management, financial management and communication management. The risk aspect of the relationship framework needs to be addressed for both critical and non-vendor relationships, along with non-critical vendors.

I recently took SIG University’s Third Party Risk Management Certification Program and was amazed to learn how much risk we are exposed to within our contracts and the need for a strong third-party relationship framework with a focus on risk. For a framework to be successful, it must have strong governance and approved by senior management.

As a result of the 2008 financial crisis, there has been a renewed focus on the role of board of directors, the composition of the board, capabilities, accountabilities, and responsibilities for prudent acceptance and management of risk. This renewed focus has made it much easier to focus on third-party risk and to get strong governance in place to mitigate risks.

The most important lesson to leave you with is that third-party risk management is an art, not a perfect science. Having a framework in place to address and mitigate risk, escalate issues and seek resolution is the key to making strategic procurement decisions.

Learn more about procurement’s role in managing third-party risk by attending Dawn’s session at the Procurious Big Ideas Summit Chicago 2019 on Wednesday, September 18. If you can’t be in the room, there’s still time to register as a Digital Delegate. Find out more and sign up today!

About the Author

Dawn Tiura is the CEO and President of SIG, SIG University and Future of Sourcing and has over 26 years’ leadership experience, with the past 22 years focused on the sourcing and outsourcing industry.

In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children’s issues in the Jacksonville, Florida area. 

She is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.