All posts by Alex Saric

7 Tips For Today’s Procurement Managers

Alex Saric shares his top tips for procurement managers in order to succeed as the profession continues to evolve.


By Makistock/ Shutterstock

As the role of procurement continues to evolve, a new approach is required. Leaders are actively transforming their organisations, with a new mindset, new processes and new technology. There is no textbook answer to all of these – needs differ based on the organisation, talent, industry and other factors. Yet best practices exist and certain approaches are clearly driving procurement in the right direction. Having worked with hundreds of leading organisations as they transform procurement, I’d like to share some tips for procurement managers that should serve them well.

1. Digitise – Automation is your friend

A massive trend across companies is digitisation, with digitization of the Source-to-Pay process a key initiative for many CPOs. The inherent automation, which promises to only accelerate as innovations such as Artificial Intelligence (AI) evolve, is viewed suspiciously by many as a threat to jobs. There is no doubt certain roles are changing or even being eliminated by automation, but fundamentally it is critical to empowering procurement to succeed. As the list of objectives continues to grow, from a cost focus to risk management, driving innovation, improving cash, increasing revenue and more, Procurement is becoming ever more strategic. But doing so much more is only possible if capacity is freed, which is a key benefit of digitisation. Don’t resist digitisation – it’s coming. Embrace it to redefine your role and become ever more valuable to your organisation. Leaders are already doing so, in some cases automating 99 per cent + of their procurement and AP processes, CACI being one great example.

2. Know your suppliers

Supply risk is hardly new, but with ever growing dependence on suppliers paired with more complex, global supply chains, it is ever harder to manage well. And with social media amplifying scandals around the world in minute, the potential impact has never been as large. Few things can strike terror in a CEO’s heart faster than a scandal or supply shortage, which we read about daily. Even compliance, take GDPR for example, often requires ensuring suppliers are compliant. Procurement leaders must ensure a solid understanding of their existing and potential suppliers. It can be a daunting task, but there is so much information now available and tools such as SRPM solutions that can bring it together, generate insights and make them available at your fingertips. Integrated action plans, flexible surveys and other capabilities let you quickly gather information, address deficiencies and ensure auditability of your actions. Leaders are going a step beyond, not just passively assessing risk but proactively helping mitigate risk, as Fannie Mae  does by notifying suppliers at risk from cyber security threats.

3. Build a solid data foundation

There is so much focus today on the latest innovations, with AI front and center of most conversations. But not many actual success stories. A key reason, as confirmed in a recent Forrester study, is poor quality data. Procurement leaders that are having success operating smarter, leveraging analytics and technologies such as AI, are addressing data quality in parallel to implementing new technologies. Integrated suites generate clean data, at least if they have a unified data model, and master data management solutions are available that can address issues in back end systems, cleaning and normalizing suppliers records for example. Embrace new technology but don’t forget to work on the basics too.

4. Believe in Darwin

Charles Darwin famously stated that “It is not the strongest or the most intelligent who will survive but those who can best manage change.” This was part of his theory of natural selection, but it has never been more relevant to companies than today. Markets are rapidly evolving with a continuous stream of new regulations. New technologies are disrupting traditional business models. New risks such as cyber security are arising. The only certainty about the future is uncertainty. Procurement is well placed to help companies adapt, meeting new regulatory requirements, shifting supply to optimise an evolving tariff landscape and much more. Successful Procurement leaders are ensuring their organisations are agile and can evolve. That means being flexible in processes and it also means ensuring technology supports rather than constrains your plans. The shift towards Cloud-based solutions offers many advantages to companies, but can also impose constraints, forcing companies to adjust processes to the software and tying your hands if your needs change. This is a key reason why so many companies switch providers – they realise too late the technology doesn’t meet their ongoing needs. Be sure any technology you implement is likely to allow you to meet unforeseen needs.

5. Care about your customers

Successful Procurement leaders are seen as helping employees do their jobs better. Increasingly, that means making the purchasing experience a pleasure rather than a hassle, as employees expect consumer-like shopping at work and home. Companies of course have constraints, such as buying off contracts or from preferred suppliers, but that should be built into your procurement process so it feels seamless to employees, who are guided to what they need and can easily track the status of orders. The more procurement can be viewed as making employees happier and more efficient, the better for the function and your career. And the more automated this process, the more time for strategic activities.

6. Engage your suppliers to innovate

Suppliers are a vast pool of potential innovation. Much talk is made of untapping that innovation but far less results. This is a tremendous wasted opportunity, and one that needs more attention. Success here can drive significant revenue opportunity and reduce costs, ultimately greatly increasing the stature of procurement in an organisation. A great example is MBf Holdings, where procurement collaborated with suppliers to develop a new outpatient services offering to not only save a strategic customer, but grow share of wallet and create significant upsell opportunities. The key to success here is making such collaboration scalable, through effective platforms that allow sharing of requirements and communication between internal stakeholders and suppliers.

7. Think beyond best-in-class

As a final tip, I feel its important to look at your end goal. procurement teams are often obsessed with benchmarking against and achieving best-in-class performance on a range of metrics. This is all good, but the most effective procurement teams don’t aim for best-in-class as their end goal but an interim step. You don’t build a competitive advantage by being as good as your competition and doing everything the same. You also don’t attract and retaining talent by forcing them to operate in a fixed, generic best-in-class process. Winners empower their talent to bring their best ideas to life and do a few strategic things differently, better than the rest. A leading Telecom provider realized they had an untapped source of revenue in used mobile devices so configured their sourcing tool to run forward auctions, generating tens of millions in new revenue. Join the upcoming webinar to hear how Meritor, a leading automotive supplier, configured a unique New Product Introduction (NPI) process to drastically accelerate launch of more profitable products, driving huge share price appreciation relative to peers. So if you rather win the World Cup than just play in the tournament, leverage technology that can both bring you to best-in-class quickly but still empower you to go beyond.  

Registrations are now open for Ivalua NOW The Art of Procurement, which takes place in Paris 10th-12th April 2019.

The event will bring 1000s of procurement, supply chain, and finance leaders together in Paris at the Carrousel du Louvre and is set to reveal technological innovations that will transform the art of procurement and empower leaders to successfully transform their functions and maximise value to their organisations.

Your Procurement Resolution: Don’t Settle For Best-In-Class

What better time to set and start tackling key objectives for 2019? Your new year’s resolution is to be better than best-in-class…

In this time of personal New Year’s resolutions, it seems appropriate for leaders to also consider a resolution for their departments. For Procurement leaders in particular there couldn’t be a better time to do so. In recent years, the function has made tremendous progress in transforming into a strategic value driver.

Yet, as leaders broadly acknowledge, this transformation journey still has a long way to go. A recent study by the Hackett Group found that only 63 per cent of procurement organisations have even developed a plan for digital transformation and 33 per cent bluntly stated their service does not meet customer expectations. A Forrester study on enabling smarter procurement found only 22 per cent believe their reporting and analysis is where it should be and only 22 per cent that they have the required agility to respond to changing requirements.

So what better time to set and start tackling key objectives for 2019?

My recommendation is to set an aspirational resolution that reflects procurement’s true potential. One that is distinct from your MBOs, which are likely based on continuous improvement of performance aimed at closing the gap with best-in-class.

The problem with best-in-class

There is nothing wrong with benchmarking yourself and striving to improve performance to match the best of your competition. Organisations should do so, especially if still early in their transformation journeys. Success will result in greater value to those organisations. But achieving best-in-class performance won’t result in procurement becoming truly strategic, and may actually hinder progress in the long term.

How is that so?

Look at it in the context of the World Cup (or the upcoming Superbowl). Every team in the tournament earned its spot by being the best in their region. Hence, each team can be said to be best-in-class. Yet only one is the champion and that team doesn’t win by playing at the same level as their best-in-class peers but by playing better, doing something critical differently. Best-in-class is not a competitive advantage in sports, nor in today’s increasingly winner-take-all market. It is a stepping stone on the path to true greatness.

If leaders are to build competitive advantage and truly drive strategic value, they have to think beyond best-in-class and view that as an interim objective on their transformation journeys. Leaders must ensure that the people and technology they embrace to navigate those journeys have the capability to take them the full way, and not become a constraint at some point.

Yes, your top competitors are doing this right now

What exactly does going beyond best-in-class entail? Is anyone actually doing this? Yes they are. Your top competitors are extending their competitive advantage even as you’re reading this. Below are just a couple of examples:

  • Revenue: A leading Telco leveraged the flexibility of our platform to create a private marketplace where suppliers can bid for used mobile phones in mass volumes, generating hundreds of millions of dollars each year
  • Innovation: In 2014 Meritor launched a three-year initiative to drive massive value by transforming their supply chain in what can be thought of as a drive to achieve best-in-class. They then followed that with a new initiative to unlock massive innovation through a unique approach to new product introductions, configuring our platform to their ideas. The result? Their stock price rose from $4.45 to $13.30 at the end of 2016 and much further since, far ahead of competitor growth.

Note that in both of these examples the teams implemented best-in-class processes and wanted quick value. It should never be a compromise. But they kept the ultimate objective in mind and brought on the right talent and technology to take them to the next level when ready.

The talent challenge

In any meeting with CPOs I have attended in recent years, the top pain point raised is attracting and retaining top talent. Talent that is up to the task of driving successful transformations, to best-in-class and beyond.

The above examples illustrate an important point about talent, and the symbiotic relationship with technology. What good is top talent if your systems are too rigid for them to bring their best ideas to life? Out of the box best practices are important, but that shouldn’t mean constraining yourself from doing a few strategic things differently.

Meritor has a great team with great ideas. So when deploying software, they took embedded best practices but ensured they had the flexibility to easily configure once they were ready for that next phase. This empowered them to realise a unique and innovative approach that supported their financial success.

Realise your true potential

So as we enter a new year, filled with endless challenges and opportunities I encourage you to set a procurement resolution. One that, if achieved, will set you on the path beyond best-in-class, to building a competitive advantage. One that will empower your talent to truly make procurement strategic and realise your true potential.

How To Enable Smarter Procurement Today

If AI is the light at the end of the tunnel, why are there so few success stories to be found? How do we enable smart procurement?  

Success with today’s broad set of complex objectives requires Procurement leaders to think strategically and process ever greater volumes of diverse information. Unfortunately, this is an area with significant room for improvement at most organisations. A survey of over 400 procurement leaders by Forrester found their top priority to be “improv[ing] business insight on purchasing activity through reporting and analytics.”

The obstacles to more informed, strategic decision-making are quite consistent. The study, entitled “Enabling Smarter Procurement” found three common issues

1. Firstly, despite efforts at automating processes, too much capacity is still consumed by operational or manual activities. Teams must free capacity to work on new projects, conduct analysis and plan, but are struggling to do so.

2.  Secondly leaders struggle to access relevant insights when and where they are needed. The volume of information now available is of little help if not digestible, simply leading to information overload.

3. Compounding this, respondents also cited poor data quality as a key challenge. Duplicate supplier records, inaccurate data and poor integration between systems all were cited as sources of data quality issues.

Fortunately, new technologies are available that can empower procurement to address these and other challenges and rise to the occasion. AI in particular is finally coming of age and often viewed as the answer to many of Procurement’s challenges. The same survey found that 71 per cent of business leaders plan to adopt AI in procurement over the next 12 months. Yet if AI is the light at the end of the tunnel, why are so few success stories to be found?

A key reason is the approach taken to implementing AI solutions to date. As vendors struggle to burnish their innovation credibility, there has been significant marketing ahead of capabilities which has led to unmet expectations post implementation. As capabilities are now coming in line with past marketing, this problem will subside. Of greater concern, the innovation race has led to nearly an exclusive focus on the algorithms, leading to poorly designed implementations. Less innovative but equally important areas, especially data quality, are being ignored. AI relies on a solid foundation of data, in terms of volume and quality, so solutions that offer clever applications alone are sure to disappoint.

To remedy this problem, organisations must implement AI in conjunction with cleaning up their data, rather than using poor data quality as an excuse for inaction. Source-to-Pay suites that are built upon a unified data model partially address the challenge by generating clean data that can be mined by AI applications across all processes. For example, suites with a single supplier record can provide true 360 degree visibility of supplier performance and activity, and enable AI applications to predict potential risks.

That still leaves issues with existing data or data in other systems. Here, master data management solutions should be leveraged that can actually fix issues in back end systems, linking vendor and item master records across systems. This further improves visibility and the potential for new and better insights.

Empowering procurement to make more informed, strategic decisions is no longer an option. There is simply no other way to effectively meet the broad set of objectives now expected. Fortunately, new technologies are finally reaching the level of maturity where they can have a transformative impact. By implementing AI applications in parallel with initiatives to improve their data foundation, leading organizations are both enabling smarter procurement today and ensuring they are well positioned to leverage tomorrow’s innovations.

Ivalua sponsored today’s London CPO roundtable. If you would like to attend or sponsor a Procurious roundtable please contact Olga Luscombe via [email protected]