All posts by Elaine Porteous

Is Hybrid Best? The Centralised vs Decentralised Debate

Centralised, decentralised and hybrid models – is there actually a ‘best’ way to organise procurement departments. The debate rages on.

Hybrid Model

Recent studies, and accepted wisdom, have continued to confirm the trend towards a centre-led procurement model. Both fully centralised or decentralised procurement operating models have their downsides, and that a middle (or hybrid) road is preferable.

Centralised organisations unfortunately:

  • do not always understand regional and local supply markets and consumption patterns.
  • run the risk of maverick buying outside contracts.
  • are not suited to managing some indirect commodities.

In decentralised organisations, there is often:

  • inability to leverage corporate spend.
  • poor coordination of information and best practice sharing.
  • uneven supplier performance.
  • higher procurement operating costs.

The Centre-Led Model

The best centre-led procurement organisations concentrate on defining strategy and policy, as well as applying best practices to both direct and indirect procurement. They mostly employ a category management structure, which supports the roll out of their directives to business unit and regional level.

In the Aberdeen Group’s recent report, they noted that centre-led companies reported more spend under management than others. This was twice more than companies with a decentralised structure, and nearly 20 per cent more spend under management than companies with a centralised structure.

“Organisations with centre-led procurement considerably outperform their non-centre led counterparts, in both spend under management and supply cost reductions” (Aberdeen Group 2015).  

Leading from the Centre – Levi Strauss  

The Director of global indirect procurement at Levi Strauss, Celeste Smith, said recently that the while the company wants to create a centre-led global function, there should be good regional support.

“Success for me looks like centre-led, a global approach to managing indirect – not necessarily with global suppliers – but that we have a very consistent and disciplined approach to procurement globally.

“Centre-led means that everyone is on the same page in terms of methodology and approach. But I think it’s very important to have the same regional support.”

Levi Strauss has a global spend of around $1.8 billion (£1.09 billion), of which it wants to manage $1.2 billion (£723 million).

Leverage Central Knowledge – Fluor

Fluor is a world-leading engineering and construction firm. It also offer clients procurement and project management services for capital projects.

Fluor uses a centre-led procurement model, leveraging international procurement expertise and market knowledge, with the aim of providing the best value for their clients’ capital projects.

Their procurement organisation manages an annual global spend of more than $16 billion. This is done through consistent execution strategies across their worldwide network of 1,900 procurement professionals.

For example, Fluor’s local operation in South Africa uses a global logistics planning strategy to help clients overcome procurement execution challenges unique to operating in Africa.

Stakeholder Challenges for Hybrid

A hybrid model seems to combine the advantages of a centralised structure and decentralised execution with minimal downside. So why isn’t everyone doing it?

It’s not that easy. Whatever the model, the satisfaction of stakeholders and end users is paramount. The best model seems to be one that delivers results through open lines of two-way communication, and processes that are flexible enough to take into account regional and cultural differences.

One way to generate higher levels of stakeholder support is to ensure that the global category management structure is replicated in decentralised business units or regions, probably on a more limited scale.

It has been suggested that this type of structure encourages agility and innovation, as well as better compliance to contracts.

The Wheel Turns     

Procurement Leaders’ recent survey on procurement operating models found that no one single model can sustain the expected benefits indefinitely.

They report that savings delivered from a given procurement operating model can erode over time as behaviours become ossified. Incremental savings thus become more and more difficult to achieve. The model just gets tired.

A structural change may be needed to allow procurement to deliver value in new ways, and enable benefits to be sustained or even improved.

Procurement Leaders say that procurement organisations must tackle a wide range of hindrances that arise from change, in order to maximise the benefits from a change in operating model.

Their research also found that the greatest factor preventing transition in procurement is its own lack of change management capabilities.

As a procurement organisation matures, it is likely that it will revise and adjust its hybrid or centre-led structure, in order to stay aligned to corporate objectives and continues to deliver value.

Is Indirect Procurement Really So Complex?

You could be forgiven for thinking the management of indirect procurement is akin to rocket science. Is it really so complex?

Indirect Procurement Rocket Science

Sourcing and contracting indirect goods and services in categories like I.T., consulting, HR and travel is important to keep the business running.

You could be forgiven for thinking that the procurement of such services is akin to rocket science, especially if you listen to those many external “solution providers” whose income stream may depend on you.

It may be tempting to consider outsourcing some or all of the management of your indirect spend. In many organisations it is often poorly recorded, loosely managed, widely dispersed, and, generally, messy or neglected. But first let’s consider the issues, and how this indirect spend could be managed internally.

Direct and Indirect Procurement 

Direct (or core) procurement traditionally focuses mainly on the sourcing of goods, and some allied services, that are used in the manufacturing or production of goods for sale. These items are usually clearly specified, often with a pre-defined supplier base.

Indirect procurement is different. It is essentially the sourcing of services (and maybe some goods) to support day-to-day operations.

The indirect spend may make up around 30 per cent of all third-party spend, but there are significantly more suppliers and the buying community is more decentralised. Add to that, a higher potential for maverick spend and sensitive stakeholders, and there is the added complexity.

What is happening now is that the percentage of indirect spend-under-management is growing in many companies. Difficult areas such as advertising, insurance and consulting fees are slowly being brought into the category structure.

It is often said that indirect procurement is not strategic. However, some high spend categories, such as sponsorship and employee benefits, could definitely qualify.

Key issues in Indirect Procurement
  • Buying decisions are often dispersed throughout an organisation into diverse and competing business units or locations.
  • Stakeholders can, and will, resist any changes on which they have not been consulted.
  • Managing an indirect category such as marketing services or consulting requires assembling the historical data and providing reliable spend information. Often transactions are miscoded – sometimes on purpose – which creates the wrong picture.
  • Suppliers can only be a resource for continuous improvement if the communication channels are open in both directions.
Strategies for Indirect Procurement  

The first step in a category strategy should be to aggregate the spend and understand it and its sub-categories. Next, present this information, in a digestible form, to stakeholders to elicit their input.

It is never too early to talk to stakeholders about the data or the proposed Scope of Work. After the Request for Proposal has been issued, it is too late.

Two of the success criteria in indirect procurement are a robust Scope of Work and a detailed Service Level Agreement with workable measurements.  Without these, any contract can fail.    

Indirect Procurement as a Career Choice

The requisite technical skills for individual success in procurement have been well-documented. One of the key skills of the future is to be numerate and have analytical ability, but not necessarily be a mathematician.

Managing indirect categories requires a different skill set from that which is needed for working in direct procurement. Behavioural skills, which can also be acquired, come into the spotlight here.

Particularly important is the need to collaborate with stakeholders. An aspiring category manager needs Influencing and listening skills, empathy, and the ability to take the initiative as well as being decisive when the need arises.

Indirect categories (when the tail-end spend is excluded) do not easily lend themselves to automation or the use of the e-procurement tools, such as e-catalogues or vendor management systems.

This creates a dilemma for external service providers who have these tools, but readily admit that there are nuances and emotions at play that may be beyond their control.

The organisational culture and landscape on the indirect side has many nuances that do not exist on the direct side. Procurement executives will therefore need to traverse the waters of indirect spend with unique strategies to ensure success.

Indirect procurement is all about building trust with stakeholders and suppliers to ensure continuity of supply and smooth operations.

Just try to procure the same make and model of smartphone for everyone, or change the catering company without considering end-users.

Leadership & Chicken – Reflections on SAPICS 2016

Visibility, leadership and SRM in chicken sourcing – highlights from the 38th SAPICS Conference in South Africa.

Earlier this month, I attend the 38th Annual SAPICS Conference, held in Sun City, South Africa. With the theme this year of “A Concert of Coordination”, the conference focused on bringing supply chain professionals together to network, and to discuss topics and access resources relevant to the supply chain profession.

A number of high-profile individuals and organisations graced the speaker list for 2016, far too many to see in 3 days, let alone cover off in a post-conference article! However, I have picked out three major themes and points that I took away from the conference.

1. Gaps in Supply Chain Visibility

Lora Cecere, the renowned Supply Chain Shaman, was in South Africa this month to share her US survey results and some views on the wide range of topics at the SAPICS Conference.

Of particular interest to the procurement community was her take on the challenges in two of the main identified areas of pain: supply chain visibility, and problems in talent management; the latter being that all-time favourite topic of speakers that has no clear solution.

When comparing the importance of visibility of information on first tier material suppliers vs. their actual performance, respondents acknowledged that there was a big gap between importance (83 per cent) and performance (38 per cent). Almost all respondents (96 per cent) identified that there was also a similar gap in visibility into transportation and logistics networks.

Supply Chain Insight

In some cultures, a shaman is believed to be able to use magic to cure sick people, to control future events, and more. Since Lora Cecere is seen as a shaman, we could look to Supply Chain Insights for help when trying to work out why visibility into first tier material suppliers is such a challenge.

What is also interesting from the research, is that respondents did not identify much of a gap between the importance of visibility and actual performance in second and third tier suppliers. Could that really be the case in other markets?

2. Leadership – a hundred years ago

An interesting parallel was drawn by a speaker, Kate Stubbs of Barloworld Logistics, about styles of leadership 100 years and today.

She was reporting back on the annual study, supplychainchangeforesight 2016which was undertaken in conjunction with Frost and Sullivan. She considered the leadership style of Sir Ernest Shackleton, the 1920’s polar explorer, with the traits and approach required of current supply chain leadership.  Shackleton was:

  • a leader that could create order from chaos.
  • one who had to adapt and change to suit his rapidly changing circumstances.
  • optimistic and had a people-centred approach to success.
  • able to reconsider his path and redirect his goals when he hit serious snags.

Shackleton

Sound familiar?  We often have to change direction mid-stream track due to circumstances, often because of events beyond our control.  Constantly redefining our plan has become the norm.

How much has changed in 100 years?  Men (and women) wanted for hazardous unknown journey, that part’s definitely true. People hope for honour and recognition in the event of success, but it’s not always delivered.

3. Chicken and chips, anyone? Nando’s supply chain

Perinaise

A category manager in the casual dining restaurant business (a more polite term than fast food), has a very different life to the rest of us.  Sourcing electrical parts or software licences is not half as exciting as negotiating for containers of African bird’s eye chillies from Southern Africa, or for the manufacture of bottles of Perinaise.

Nando’s supply chain, although directed from its HQ in Johannesburg, has staff in many of the 30 countries it trades in. Linda Reddy, Supply Chain Director, says that one of their main areas of focus is supplier relationship management, with a major emphasis on continuous improvement. That’s quite important when you have to get fresh-not-frozen chickens from factory to table in less than 8 days.

Next time you are in Nando’s, take time to view the art while you are considering how your hot sauce got to meet your half-chicken. 

References to Powerpoint Presentations at SAPICS:

Lora Cecere: 15 Years Forward: 15 Years Back :  Supply Chain 2030

Kate Stubbs : “supplychainforesight 2016”. Barloworld Logistics.

How South Africa is Building Engagement with Small Business

A thriving small business community is a sign of a prosperous economy. In South Africa, a new network has been launched to help build engagement with these enterprises.

Procurement on-line portals that efficiently link prospective buyers with qualified small enterprises are the next big thing.

Technology is now available that allows us to quickly and smartly facilitate business transactions for mutual benefit, why are we not doing more to support Small, Medium and Micro Enterprises (SMMEs)? Central and local government departments spend billions; some of this procurement expenditure can be channelled in to the development of the SMME sector.

Some ‘portals’ exist primarily to deliver advice and guidance, that’s useful but it’s not enough.

Why is developing SMMEs important?

A thriving and growing small business community is a sign of a healthy economy. One main objective across Africa is to stimulate economic growth and create jobs; this is one way to do it.

Public sector bodies in South Africa have been urged to ensure their purchasing strategies “explicitly recognise the significant benefits of procuring from local small businesses”. The Minister in charge of small business development said that small businesses have been “historically shut out as a result of bureaucratic and costly procurement practices which favoured big suppliers”.

Developing the SMME sector solves many challenges for governments and for companies that have diversity or enterprise development targets.

South Africa’s initiative

South Africa has a fully functioning SMME solution that has now been in operation for five years. The Supply Chain Network (SCN) came about by necessity. Organisations are required by government to assist in creating jobs for the lesser skilled and unemployed sectors of the population. This portal is made affordable by the support of big businesses and especially by one of the major banks.

It works for the seller by…

  • Providing a profile page with all key information about the seller
  • Showing the seller’s credentials, certifications and trade references
  • Providing a platform for advertising goods and services using an e-catalogue with images

SCN provides a verification service that allows the approved seller to get a priority listing in search results.  Sellers with a high profile score have a better chance of attracting bigger and better clients.

A great feature is easy access to tenders. Available tenders are interrogated using a powerful search facility which all allows for setting up alerts using key words. Tenders can be accessed in summary form or in full detail, saving time and effort for the seller.  

Better still, it works for the buyer…

  • SCN manages vendor certification renewals so that all credentials are current, including Tax Clearance and Company Registration
  • Buyers can use verified information to update their master vendor files
  • Due diligence is simplified, as buyers can rely on the integrity of the profile information
  • The search function uses standard industry terminology (UNSPSC) and smart filters

The SCN system also provides an eRFQ facility with built-in rules. Suppliers can upload all their attachments electronically as part of the response. It is an on-line paperless solution that includes automatic notification to suppliers of any changes, updates, withdrawal, regrets and awards. Particularly useful is the full audit trail on all sourcing activity.

Supply Chain Network in South Africa is a low-cost solution that aims to promote the objectives of growing a healthy small business community. Why can’t it work in other emerging markets?

You can find out all you need to know about the Supply Chain Network on its website.

Fast Fashion – But at What Price?

Is the concept of ethical fast fashion an oxymoron? Do we as consumers have a good enough grasp of the ethical considerations?

Today’s typical fashionista has high expectations. She, or maybe he, wants to buy cheap and affordable trendy clothes in the latest styles straight off the catwalk.

Never mind that an item is unlikely to last more than ten washes. Fast fashion is getting faster and cheaper, but what is the real cost to society and the environment? We may have an uneasy feeling about the issues, but generally have a poor grasp of ethics.

How important is this industry?  

The direct value of the UK fashion industry to the economy is around £26 billion and growing fast. Average spending on fashion in Europe is about €700 (>£500) per person per year. Italy, Germany and the UK are Europe’s largest fashion markets in terms of consumption.

Fashion’s total economic contribution is much more if we include activities in indirect and related industries. We may be feeding the economy with our purchases, but we are also harming the environment. Shipping, transportation and logistics are energy demanding, time consuming, and pollution-spewing.

The formula for success in this industry was always to give the customers what they wanted: trendy garments at the right price, of acceptable quality, in the right place, and with a dash of speed. In the last five years there has been a concerted effort by some retailers to become more ethical buyers, employing better human resources policies and safety practices.

Ethics in Fast Fashion

Do procurement teams harbour concerns about sweat shops or care about child labour or manage waste disposal? Or is it more important to buy cheap to satisfy the consumer who just wants to pay £3 for a T-shirt?

Paul Brownhill, Group Chief Executive at Britannia Garment Packaging, says that although the majority of consumers want quick access to the latest trends at an affordable price, they are now also seeking assurances about the way these items are produced. He notes that consumers are increasingly concerned about the quality, safety and environmental impact of the clothes they buy. Is this really true?

The University of British Columbia recently researched this issue and came to the conclusion that, theoretically, young consumers place an importance on sustainability but have a blind spot when it comes to fashion.

“They may care deeply about eating organic foods, but fast fashion consumption is exempt from such moral decisions. This approach can in part be explained by the fact that youthful consumers may fail to fully grasp issues of sustainability, in particular the disastrous future environmental risks associated with unsustainable production.”

Other similar studies demonstrate little evidence that ethical issues have any effect on consumers’ fashion choices or that they are likely to sacrifice their own personal needs for the greater good.

Some Bright Spots

Leading retailers like H&M, Gap and Zara have all signed a pledge to improve factory conditions. H&M, whose tag line is ‘Fashion and quality at the best price in a sustainable way’, was recently named one of the world’s most ethical companies by the Ethisphere Institute.

One of its claims to fame is that it is the number one user of organic cotton in the world. H&M, with 3,900 stores in 61 markets, is also one of the first and largest fashion companies in the world to make its supplier factory list public.

Louis Vuitton Moet Hennessy, (LVMH) a corporation comprising over sixty luxury brands, has been auditing its carbon footprint since 2004. Tiffany & Co. produces a Corporate Responsibility Report, which touts their support of human rights, anti-corruption practices, and commitment to responsible mining. This is all very commendable if it is more than just words on the page.

Fast Fashion and the Ecosystem

For those that do care about the future of our children and damage to the environment, there are a couple of other options. Buyers can check questionable supply sources, read every label, and buy only locally produced items, but this may come at a cost.

What about sourcing second-hand or hardly used items? Re-purposing items creates a positive ethical and environmental impact and can be both cost-effective and trend-setting – it even has possibilities in the commercial environment.

Landfills are full of synthetic material. Cheap clothing goes out of fashion and people end up with a lot of unwanted items. UK consumers ditch more than a million tons of clothing every year.

In poorer countries the problem is less noticeable; items get handed down and re-circulated until they totally disintegrate. In developed countries, they may end up in the rubbish bin.

What can we do to help?

  • We could support ethically sourced products from brands that have committed to best practice
  • We could create more awareness among commercial buyers about poor labour practices and sustainability
  • We could buy fewer higher quality garments to reduce the environmental impact of fast fashion.

The campaigning organisation Labour Behind the Label provides information on what brands need to do to up their game and move closer to employing ethical sourcing practices.

Suppliers are anxiously trying to satisfy the market’s needs for speed and price, at what cost? Is ethical fast fashion” an oxymoron?

Curbing Public Procurement Fraud in Africa

Are we making any progress curbing public procurement fraud in Africa?  The consensus seems to be very little, although there are pockets of not quite excellence, but at least some promise.

The Anti-corruption Agencies

10 years ago the World Bank reviewed the activities of anti-corruption agencies active in Africa and came to the conclusion that they were not particularly effective, despite some significant funding.  They concluded that African governments, in general:

  • lack the know-how or the political will to control corruption and procurement fraud
  • want just to be seen to be taking some action, however ineffectual it is in practice

In reality, if a study was undertaken today, the results would be about the same. This is despite efforts by the Organisation for Economic Cooperation and Development (OECD), Transparency International (TI) and Corruption Watch and others.

TI’s arm in Ghana, GII, says that their “vision is to make Ghana a corruption-free country in all spheres of human endeavour, where people and institutions act with integrity, accountability and transparency”.  Worthy sentiments, but is it just rhetoric?

The OECD tells us that “public procurement remains the government activity most vulnerable to waste, fraud and corruption due to the size of the financial flows involved”.  On average, 12-15 per cent of a country’s GDP is spent on public procurement. Some of this is wasted. However, there are no reliable statistics of how much money is lost to procurement fraud and corruption across Africa, as much of it goes unreported.

Kenya’s Procurement Woes

Despite an active but bureaucratic watchdog in Kenya: The Public Procurement Oversight Authority (PPOA), public procurement fraud and collusion in tenders is alive and well, and some say endemic. Many of the reported high value failures are in transport and logistics including railways and ports, and particularly in education.

PPOA has as its tag line “transforming procurement”. It has a laundry list of tender appeals awaiting attention and looks like it is losing the battle. Ask Haier Electrical or Hewlett Packard who together won a case against the Ministry of Education, Science and Technology in 2014 involving a project of more than US$400 million.

PwC says in a newly published report that one in every three Kenyan business leaders reported procurement-related fraud in the past two years, making it the most common type of economic crime in the country. The report faults Kenya’s procurement processes as not being robust enough to guarantee integrity at all levels.

The Politics of Preference – Women, Youth and Local Sourcing 

There is growing disquiet about preferential procurement rules and guidelines like those legislated in countries such as Nigeria.  The Nigerian government wants to help the local economy by developing emerging businesses, but new legislation on local sourcing may have the opposite effect if it is prescriptive.  Will “Made in Nigeria” allow suppliers to charge more for inferior products and services and will government buyers somehow be tempted to offer guarantees – for a fee or other benefit?

Initiatives being taken to tackle the scourge

The World Bank’s new procurement framework will allow it to better respond to the needs of client countries in Africa, while preserving robust procurement standards throughout Bank-supported projects. Since they have a portfolio of about US$42 billion in over 1,800 projects in 172 countries, this is significant.

There’s also some good news coming out of South Africa.  The Chief Procurement Officer, Kenneth Brown, has kept a low profile. Behind the scenes, his team are quietly reviewing all tenders over R10m for compliance to the rules and are looking for opportunities for cost savings.

On an expenditure of R500 billion annually, its target of savings of R25 billion looks achievable.

The State’s fragmented spending practices are now being centralised to reduce waste and get more leverage through technology. They have set their sights on some key categories: travel at R10 billion per annum, ICT, construction and leases.

The new online eTenders portal launches in April 2016 with a modest maintenance cost of just R16,000 a month. It introduces much needed transparency and will save a staggering R400 million a year that the government spends on advertising the tenders in newspapers.

Your Number 1 Resolution – Learn Something New

This is the time of year when most of our resolutions (lose 10lbs, get back to the gym, drink less, do something useful for the community) have fallen by the wayside. There’s one thing you can still do to make a difference in your life – learn something new.

If you are a millennial, you probably know plenty about social platforms and the innermost workings of WhatsApp, but what about taking a course in supply chain dynamics or an appreciation of jazz? You can learn about almost anything on-line, and most of it is free.

Find a MOOC to suit you

MOOC stands for a Massive Open Online Course (MOOC). These courses are offered by universities and other quality education providers via the internet and are free. There is a huge range of subjects that have quality content, although they do not normally provide certificates or academic credits on completion.

Many of the courses are developed by universities, but are structured and presented by training organisations, like edX, using specific technology that supports interactive and other forms of on-line learning. When you sign up, you are committing to the class time and assignments (which is good). You can register for classes offered by many leading USA and UK universities including Harvard, Stanford and Yale.

What are the course options?

The choices are vast. Massachusetts Institute of Technology (MIT) is a leader in this field. It is “dedicated to advancing knowledge and educating students in science, technology, and other areas of scholarship that will best serve the nation and the world in the 21st century.”

They have courses that will teach you how to manage and harness the dynamics and interactions between firms and other entities within a supply chain. They also have courses like Drugs and the Brain and Introduction to Algorithms.

There’s a course coming up at the University of West Virginia called The Science of How Communication Technology Shapes Our Social Lives. Presumably this will be suited to more mature students who are bemused by the growth in the use of hand-held devices and mobile technology.   

Some courses are on not on a fixed schedule but are self-paced, and more suitable to those of us with challenging day jobs. Social Media Marketing for International Business from the University of Salford’s Business School is one of those that you can fit in with other extra-murals. 

It’s not all about work

If that all sounds a little heavy, how about a Jazz Appreciation Course from the University of Texas? You can listen and learn about the artists, eras, and musical methods that make jazz a great original art form. Louis Armstrong. Charlie Parker. John Coltrane. You’ve heard their names, but do you know what makes them great? It doesn’t even sound like work!

You can try Lynda.com for video-based courses on Photoshop or Lightroom, which cost a small fee. These are great skills to have for improving the visuals in your slide presentations and management reports. How about learning something that will let you have a serious conversation with your I.T manager without feeling inadequate? The Khan Academy is a well-established not for profit organisation that provides free courses on many subjects.

If you want to try something that is directly related to improving your skills on the job, how about: Analyzing and Visualizing Data with Excel or Career Edge: Communication and Teamwork. It doesn’t matter what you do, just do something!

South African Public Procurement – A Work in Progress

Despite some leaps forward in recent years, South African public procurement is still suffering from the same issues.

“Despite the reform processes in public procurement and the employment of Supply Chain Management (SCM) as a strategic tool, there are predicaments in South African public procurement practices”.

This was one of the observations in a report by two leading academics at the University of South Africa in 2012. They noted, “For example, there is non-compliance with procurement and SCM-related legislation and policies as well as tender irregularities.”

You could say that not a lot has changed, South African public procurement still has some predicaments.

The Last Few Years

Since 2012, we have seen the appointment of a Chief Procurement Officer, Kenneth Brown, who is responsible for overseeing the entire SCM operation. His role is to ensure that the procurement of goods, services and construction works is fair, equitable, transparent, competitive and cost effective, and in line with the Constitution and all relevant legislation.

This in itself is a big ask as there are many laws, guidelines and regulations to adhere to. His portfolio includes central and provincial governments, municipalities and state-owned enterprises.

A new initiative is an e-tender portal and the creation of a centralised database of approved suppliers. This is a noble effort to fight corruption and make government procurement more efficient and cost-effective. The system, where all tenders are advertised, is also designed to electronically verify a supplier’s tax and black employment equity status, as well as to uncover any government employee attempting to do business with the state.

In the 2014-2015 tax year, the public sector spent >R500-billion on goods, services and infrastructure. The Government itself has admitted that at least R30-billion of this was lost to corruption. In 2015 the Treasury took a bold step of undertaking a Supply Chain Management Review on the status of SCM in South Africa and found it wanting.  This was the first attempt at assessing the situation since 2004.

The 2015 Supply Chain Management Review

The Treasury should receive kudos for highlighting its own shortcomings and imperfections, and providing some glimmer of hope of improvement.

The Review acknowledged that:

  • SCM across South Africa is highly fragmented. This makes it difficult for government to obtain maximum value from the purchasing of goods and services.
  • It needs to improve skills, processes and systems which are critical for a well-functioning SCM system.
  • It is dogged by “constant allegations of corruption and inefficiency”.
  • Key problems are: inexperienced leaders, high staff turnover rates, confusion about roles and responsibilities, political interference and the red tape for small and medium businesses.

So what is the plan?  

The big plan is to replace all the legacy systems, more than 30, with just one. This will be an integrated financial management system (IFMS) which will include the central supplier database. This will make data mining possible, and will provide more transparency into bid awards, a concept that has not been well understood in government circles up to now.

The intention is to centralise government contracts for categories such as:

  • Banking services;
  • Information Communication Technology (ICT) services;
  • Infrastructure;
  • Consulting services;
  • Security services;
  • Air travel and accommodation;
  • School textbooks and stationery;
  • Healthcare equipment; and
  • Leased buildings.

Technology will take us part of the way

Investment in technology, especially an e-procurement solution, has the potential to improve SCM efficiency and effectiveness considerably. Currently, the different systems result in fragmented and unreliable data, inconsistent processes, varying compliance levels and ineffective results.

It is not straightforward though. South Africa has a complex and unique system of preferential procurement policies to protect and advance previously disadvantaged people. These variables have to be integrated into any decision making software.

The many challenges can be grouped into these categories:

  • managerial, compliance and monitoring issues
  • lack of knowledge, skills and capacity
  • inadequate control systems
  • fraud and corruption
  • fragmented spend and lack of transparency

Comparisons with other countries

South Africa is not alone in its aspirations to do better. The UK has just implemented the Public Contracts Regulations which adds another dimension and complexity to Government procurement in UK, and brings practice into line with European Union regulations. One objective is to make procurement across EU countries easier and increase transparency.

A bill was introduced recently to promote the appointment of a Chief Procurement Officer for the United States. However, it was not passed into law due to the start-up costs, despite projected savings of 10 times the investment. It just goes to show that even developed markets have their problems.

5 Must-Have Attributes of Successful Procurement Leaders

Not all successful procurement leaders have the heady designation of Chief Procurement Officer (CPO). Forget the title, it is just a label. What is important is that for any person to lead a procurement organisation, he or she requires a basketful of skills and abilities.    

The good news is that no one person in a leadership position in procurement is in possession of all these skills. Most technical skills, such as strategic sourcing and contracts management, can be learned over time through training and experience. The jury is still out on whether behavioural traits, like the ability to lead teams and communicate effectively, can be developed.

Many recruitment advertisements ask for attributes using undefined phrases such as “good communicator”, “visionary”, “innovative”, “collaborative”, without knowing what they really mean. Here are five main attributes that procurement leaders need:

1. Ability to Drive Change

Many mid-sized organisations are grappling with the transition from a tactical function within the Finance Department, to a strategic function within the supply chain. The main objective will continue to be cost reduction, sometimes combined with or expressed alternatively as value creation.

Managing change is difficult. It needs a firm hand and a strong will, while being calm under pressure. The ideal person to manage the transformation may be a new hire from another industry, or a seasoned executive from another function in the business. What is important is that he/she has a track record of influencing top management and internal stakeholders across all functions.

Dapo-Ajayi

Dapo Ajayi, CPO at AstraZeneca, came into procurement management from the sell-side of the business. She has paid her dues, having worked in a variety of senior marketing and branding roles in multiple countries over a period of 10 years.

2. An Affinity for Leading People

It is generally accepted that a collaborative and participative style is a preferred trait. Although traditionally successful, an autocratic approach now doesn’t work, particularly with the under 30’s. Retaining top performers is a constant battle.

Leaders will spend a fair portion of their time on competency development and building teams, as well as understanding what subordinates want and need from their managers to perform well. Because cross-functional teams are established features of best-in-class procurement organisations, leaders also need to nurture non-procurement members and earn their trust.

3. Talk Less, Listen More

For many CPOs, one of their goals is to gain the trust and support of their main internal customers or stakeholders. The key to understanding their problems is to listen intently and absorb their concerns without making knee-jerk assumptions and providing instant solutions. The desired result is to develop open relationships with peers and provide workable solutions for their users in line with corporate objectives.

The successful leader will develop a high level of skill in influencing the more difficult stakeholders and persuading them of the value that professional procurement adds.

Opening two-way communications, across all available channels, can increase cooperation and support from peers in other functions or divisions.

4. Global View, Local Focus

It is becoming increasingly important for procurement leaders to have had global business exposure. This can either be from working in virtual teams or preferably by having completed international assignments. Progressive firms are looking for those with process-driven experience, often in similar sized companies from other countries.

When recruiting from outside, people from management consulting firms, and those with re-engineering experience within the supply chain, are regarded as attractive candidates. Know global, think local.

5. Expertise in Procurement

Last, but not least. To have any credibility with top management, internal and external stakeholders and subordinates, leaders need to have some or all of the following knowledge and experience:

  • Category Management – By understanding the concept of leveraging spend across multiple commodities to deliver cost savings and create value, the leader who has shown results this way will be ahead of the competition.
  • Problem solving – Our prospective leader needs to be able to focus on the root cause of an issue and devise and test various possible solutions.
  • Procurement technology – A familiarity with the relevant available systems and tools will provide opportunities for speeding up and automating some routine functions or even outsourcing them.
  • Negotiation skills – Everyone has some experience of negotiation in their everyday lives. Upgrade those skills and get as much practice as possible.

What is likely is that you did not make the decision to become a leader in the procurement function, but guess what? Here you are, ready to launch! Opportunities are emerging for new types of leadership roles that did not exist a decade ago. Find one that suits you.

How Generation X Managers Can Help Generation Y Succeed

Hundreds of column inches and pixels have been dedicated to the challenges of managing Generation Y, that group of upwardly mobile professionals that are currently in their twenties or early thirties.

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Also called millennials, they have had a lot of bad press, not all of it deserved. Generation X managers, born somewhere between 1965 and 1980, and now with their youth behind them, have inherited Generation Y, and are grappling with both age and cultural differences in their teams.

Generation Y employees need flexibility, interesting team-based work, and freedom to work with new technologies. The over 50s may work independently, prefer to be office-based and are often reluctant to embrace new ways of communicating.

The key is to be able to align the two without providing any special treatment to the newcomers, which can have its own pitfalls, legal and otherwise.

What Does Generation Y Want?

Human resource managers and recruiters tell us, in no particular order, that they want:

  • Interesting and challenging project-based, non-routine, exciting work
  • Career growth opportunities and active mentoring
  • Inspiring and enabling leadership including regular feedback.
  • Flexibility – telecommuting, working remotely and time for their other life
  • Access to key decision makers. They need to know about strategy and how their job fits into the organisation’s goals
  • Community-centric and supportive working environment
  • Access to data and information. They want to see the full picture.

This shopping list may look impossible at first glance but some organisations are making strides to adjust their HR policies and operational guidelines to accommodate at least some of the requirements.

Retention of key staff in procurement needs a new approach. Some US companies that are leading the way with Generation Y are Shell, Boeing, Caterpillar and Cisco. They must be doing something right as they have some star employees under 30 years old who love their jobs.

What Generation X Managers Need to Provide 

  1. Leadership and guidance.
  • Don’t try to manage Generation Y, just lead them
  • Provide guidance and direction while giving consideration to their input; they don’t take kindly to direct instructions
  • Facilitate mentoring between different levels of employees, not only top down
  • Focus on the results employees produce rather than on how they get it done
  • Set aside time to provide honest feedback – feedback is coaching
  1. Provide flexibility in their work life
  • Consider offering partial telecommuting and/or working offsite
  • Build in some scheduling flexibility to allow management of their personal time. It doesn’t matter as long as the work gets done.
  • Review conventional approaches to face-to-face meetings – use available technology
  1. Career development and training
  • Keep employees engaged by providing inter-active and technology-based educational and training opportunities as well as career growth advice.
  • Make small promotions regularly – don’t make them wait for a year.
  • Regular performance management systems won’t work – more regular and constructive one-on-ones are needed
  1. Team-based projects
  • Take advantage of Generation Y’s preference for teamwork
  • Fulfil their high expectations with special assignments.
  • Give them full responsibility for a sub-project or make them a “champion”
  • Consider putting them on a task force to solve an outstanding problem.
  1. Open communication channels
  • Let everybody to contribute to decision-making through sharing of information and collaboration.
  • Allow multiple communication methods depending on preferences.
  • Use available electronic tools to speed up project delivery

What Does Generation Y Need to Do to Succeed? 

Generation Y individuals need to show a willingness to learn more and feel free to ask for help. The internal culture must support this approach, if it doesn’t, find out what the problem is and fix it. My advice to young procurement professionals is:

  • Build your technical skills and get qualified to give you a head start on the competition
  • Take ownership of your job by taking pride in your work and assuming responsibility for your results and outcomes. Go beyond the job description to do whatever it takes to get a task done.
  • Grow your job by making it your own and taking on any challenges that are offered. The expression “it’s not my job” is not in your vocabulary.
  • Ask for technical guidance and advice when needed from subject matter experts. Most successful people are keen to share their knowledge.
  • Read widely on your chosen field and make it your mission to learn about best practice and apply it in your own environment.

3 Final Tips for Managing Generation Y

  • Understand and accommodate different learning styles.
  • Consider personal employee needs, such as flexibility with scheduling.
  • Be careful not to follow blanket age stereotypes.