All posts by Gordon Donovan

Well-known to the UK and Australian procurement community, our Procurious guest blogger this week is Gordon Donovan – Principal Consultant to The Faculty’s Training and Capability division. The first in a series of guest blogs, Gordon will be unpacking the news and providing us with a ‘what this means for procurement’ viewpoint.

With 25 years of procurement knowledge and expertise and a vastly experienced trainer, Gordon has designed and delivered accredited and non-accredited programs covering the full range of procurement and commercial skills programs, including: procurement strategy development; sourcing; cost management; negotiations; risk management; source to contract; supplier relationship management; market and supplier segmentation; and category management.

During September, October,and November Gordon will be running Category Management Accelerator and Negotiation workshops in Sydney and Melbourne, Australia. Learn more about the procurement training programs Gordon delivers here: http://www.thefaculty.com.au/capability-and-training/open-training

Gordon is also a Fellow of CIPS and an active member of CIPS Australasia. A keen supporter of Manchester City and Hawthorn football clubs. He enjoys the fact that both teams he supports seem to be doing quite well at the moment! For his non-sport, non-work downtime, he and his wife enjoy entertaining their young son and friends generally over dinner and wine!

If you found Gordon’s insights valuable, why not reach out to him directly via his network on Procurious and follow him on Twitter @gdonovan1971

Do you have the soft skills to deliver on strategies?

Today we’re talking about soft skills.  We are all aware of the need for us all to be technically proficient at what we do, however more and more the drive for us is to drive and build relationships, indeed it’s often cited as one of the most important aspects of what we do.

Do you have the necessary soft skills to succeed?

A recent Deloitte CPO survey identified that globally 57 per cent of CPOs consider that their teams do not have the required skills to deliver on the strategies. Potentially this is because of the lack of the relationship and soft skills that are required to make connections with individuals.

The Faculty’s recent research on procurement capability discusses the increasing need for soft skills within procurement: “As the category management process matures, procurement leaders are shifting their focus from core concerns (cost, delivery, quality and compliance) to supplier relationship management. There is a recognition that effective relationship management has the potential to improve performance in all of these areas and drive supplier innovation and value.” Stay tuned for more articles on The Faculty’s research findings around procurement capability and soft skill development.

Your grandmother may have always told you that you never get a second chance to make a good impression, well the writers at Harvard Business Review beg to differ. BTW the “Gordon” the article refers to is not me!

In this article they suggest that when people view others they do through a series of lenses, these are trust, power, and ego.

  • The trust lens is employed when people want to figure out if you are friend or foe. Perceivers answer that question by tuning in to two particular aspects of your character: your warmth (your expression of friendliness, respect, and empathy), which suggests that you have good intentions, and your competence (evidence that you are intelligent, skilled, and effective), which shows that you can act on your intentions.
  • To get someone to see you accurately through her trust lens, project warmth and competence
  • The power lens comes into play when there is a disparity of power, especially when the perceiver has more than you do. He or she gazes through this lens to assess your instrumentality: “Prove yourself useful to me, or get out of my way.”
  • To create the right impression in your perceiver’s power lens, be sure to demonstrate your instrumentality at every reasonable opportunity.
  • The ego lens gives the perceiver a sense of who’s on top. Subconsciously, people often want confirmation that they, or their group, are superior to other individuals or groups.
  • To be seen positively through the ego lens, be modest and inclusive. Go out of your way to affirm the strengths of others, and try to create a sense of “us,” so that your perceiver can celebrate your achievements rather than feel threatened by them

If you started off on the wrong foot and need to overcome a bad impression, the evidence will have to be plentiful and attention-getting in order to activate phase two thinking. Keep piling it on until your perceiver can no longer tune it out, and make sure that the information you’re presenting is clearly inconsistent with the existing ideas about you.

A common theme we hear is to try and influence senior leaders within the business about the value of procurement or a specific strategy. A recent podcast I was listening to discussed the importance of getting the boss to buy in. There is a written piece to accompany this too.

The piece discusses that most managers struggle to sell their ideas to people at the top. They find it difficult to raise issues to a “strategic” level early in the decision-making process—if they gain entry into such conversations at all. Studies show that senior executives dismiss good ideas from below far too often, largely for this reason: If they don’t already perceive an idea’s relevance to organizational performance, they don’t deem it important enough to merit their attention. Middle managers have to work to alter that perception.

The piece highlights and expands on key tactics, these include tailoring your pitch, framing the issue, managing emotions on both sides, getting the timing right, involving others, adhering to norms, and suggesting solutions.

Let’s take a closer at involving others – while seeking input from multiple individuals can aid decision making, it can also fail as we select the wrong team members. The following piece from Harvard Business Review is all about avoiding this and how to make under-performing teams actually deliver what was desired.

The main issues that go wrong in groups are:

  • Groups do not merely fail to correct the errors of their members; they amplify them.
  • They fall victim to cascade effects, as group members follow the statements and actions of those who spoke or acted first.
  • They become polarised, taking up positions more extreme than those they held before deliberations.
  • They focus on what everybody knows already—and thus don’t take into account critical information that only one or a few people have.

The report goes on to suggest ways to make groups work better:

  • Silence the leader
  • “Prime” critical thinking.
  • Reward group success.
  • Assign roles.
  • Establish contrarian teams.

As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.

How to achieve the perfect work/life balance for a productive 2015

Gordon Donovan takes the opportunity to look back at 2014, and look forward to 2015 both in terms of what’s happening in procurement as well as some new year’s resolutions to consider for 2015.

Looking forward to 2015

 

What happened in 2014

Google has just released its year in search 2014. We searched for hope, fear, to understand, to be inspired, to get cold and wet, and to remember.

Hudson has just released its workforce facts in 2014 for Australia and New Zealand.

Key numbers are:

  • 11.6 million workers in Australia
  • 45.9 v 54.1 ratio of women to men in the workforce
  • $13.1 million is the highest salary paid
  • And Barbie has joined LinkedIn…

Elliot Epstein has shared his best and worst sales stories for 2014. Here are the best and astonishly worst sales stories that have wafted over his desk this year.

They are all verified, true and names are only withheld to protect the guilty. The Darwin awards section is both funny and scary…

On the subject of the Darwin awards, they have announced the shortlist for us all to vote on. Some of these (if not all) will make you shake your head.

Things to think about in 2015

Procurious is a social media platform that’s all about being connected,(get connected, get ahead anyone!) being connected can also mean collaboratring with others over projects or even just sharing connections or knowledge. So what makes us the best at colloboration and connecting? And what are we going to do differenlty next year?

To me its an interesting article about who and why we connect and how do we get better;

To summarise; Its all about people.

  • It’s about the people who are trying to get from ‘here’ to ‘there’, and knowing; people who also know that you know someone well that can help them do it faster.
  • Understanding what they want, need & value. And respecting them for their perspectives, views and beliefs, especially when they differ from your own.
  • Its also always about trust – the trust that each person has, to know that you have best interests at heart; that the people you put in their path have a common interest & alignment and that they are also trustworthy.

So if it’s all about people we need to consider how we can make a huge difference in our life and in the lives of the people you care about, both professionally and personally?

This was quite an inspiring blog I read by Jeff Haden. His 8 things we can do are;

  • I will appreciate the under-appreciated.
  • I will answer the unasked question.
  • I will not wait.
  • I will give latitude instead of direction.
  • I will stop and smell my roses.
  • I will look below the surface.
  • I will ensure love is always a verb.
  • I will be myself.

How do we balance time in the best way? You may have seen this article doing the rounds on linked in among other places. In our search to be more efficient with our time and also to have the work life balance.

Here are the 5 tips with the full article.

1)     To-do lists are evil. Schedule everything

2)     Assume you’re going home at 5:30, then plan your day backwards

3)     Make a plan for the entire week

4)     Do very few things, but be awesome at them

5)     Do less shallow work — focus on the deep stuff

It’s something that I intend to put into practice (when I have the time…)

One of the things we talk about in our training is the need to always be processing information, a colleague of mine tweeted this article which I thought was excellent, it also has the added attraction of referencing star wars so it makes it a winner for me (roll on December 2015) Whilst it presents it as a sales forum it is directly relevant to us in procurement for many reasons.

  • The skill of being a Waiting Room Jedi is to transform a series of waiting room habits—checking email, posting on Facebook, and flipping through magazines—into a deliberate process of exploration and discovery.
  • More than anything else, being a Waiting Room Jedi is about being [pro] curious. The more genuinely [pro] curious you are, the more you learn, and the more you learn, the more likely you’ll be able to make connections with your client.

Finally to look into the future top minds give their predictions on what we will see in 2015:

This Year, We’ll All Get Raises

More Companies Will Fire Customers

Employees Will Finally Gain the Upper Hand

Wearable Tech Will Lead to a Better You

More Companies Will Act Like Startups

Content Will Be Saved — One Micropayment at a Time

 

What does ‘Best’ look like in procurement?

Opportunity Knocks and being the best are the themes of the day. For me this brings images of 1970’s and 80s TV shows from the UK and remembering that dedication is what you need….

How to be the best at procurement

So to start our coverage of being the best, AQPC have conducted some research into what does “Best” look Like in procurement?

They have analyzed data from its Open Standards Benchmarking in procurement to determine how the top 10% of organizations compare to the rest in 4 core areas:

  • cost effectiveness
  • process efficiency
  • cycle time
  • staff productivity

The results indicate that there is a significant difference between top-performing procurement functions and others. You can read the full report is here.

KPMG is telling us that opportunity is knocking for procurement and that a single-minded focus on reducing input costs is not enough. Procurement leaders need to focus less on driving down suppliers’ prices and more on driving up value from end-to-end across the business.

From a procurement priority perspective according to their research:

  • 58% want to improve performance
  • 42% align more closely with business functions
  • 40% improve governance
  • 39% drive costs out of indirect spend
  • 36% improve supplier management with tier 1 organisations
  • 35% change the operating model of procurement
  • 29% drive costs out of direct spend

In terms of metrics used to measure procurement value added the results may not surprise.

Cost savings and management is still the most used followed by compliance and costs of running procurement function.

So how do we know who the best are? ‘Top Procurement Groups Deliver 7x Return on Investment’ according to Global Procurement Study by A.T. Kearney, ISM and CIPS.

The inaugural ROSMA Performance Check report findings were developed through the survey responses of hundreds of companies. The headlines are:

  • Top-quartile performers are reporting hard financial results in excess of seven times their costs and investment base in procurement, providing a strong basis for reinvestment and recognition. These leading procurement functions generate about $1.6 million in financial benefits per procurement employee each year.
  • Middle-tier performers are accretive, typically generating four to five times the investment and cost of their supply management assets, including people and technology, but they have not improved their productivity since tracking began in 2011. Bottom quartile teams are dilutive, with financial benefits that do not cover the cost of and investment in their organizations.

In previous articles I have talked about the importance of culture in both the supplier selction and and ongoing management aspects of procurement. This article talks about the importance of creating the best match of culturual fit for you as an employee. The example from WestJet is quite touching and serves to remind us that the cultural fit of employee and employer is crucial after all Culture is the heartbeat of a company.

To round things off I hereby present the following key takeaways:

Preserving company culture takes A LOT of hard work. It’s not easy. And it’s not always fun.

All of it amounts to nothing and it’s only a matter of time before it comes crashing down if the beat that drives your company isn’t strong and distinct enough to be felt by your people.

I think this can be applied to supplier relationships and ensuring that the effort that goes into selecting the right one to start with is maintained by the team throughout the relationship.

My three CIPS Australasia conference highlights

This is the fifth article in a fortnightly series from Gordon Donovan.

With the dust having now settled, this won’t be a blow-by-blow account but instead I’ll share my key highlights from the event.

The CIPS Australasia conference took place across a jam-packed two days – here are my key takeaways from three of the highlight speakers:

CIPS Australasia conference 2014

David Noble, CIPS CEO

The key theme of this year’s conference encompassed the issues of change in business and the global economy. In opening David addressed the rapidly changing business environment and highlighted the key factors are affecting modern supply chains and that the conference would hinge upon. Namely: technology, talent, transformation, and tomorrow.

The advance of technology is constant, so it’s critical that today’s procurement professional has an acute understanding of what this key enabler can deliver. Complexity has rendered traditional tried and tested change management plans obsolete. This has called for a more innovative and creative range of solutions that are flexible, adaptable and agile allowing the organisation to change direction quickly to meet market challenges. Only one third of procurement professionals are ready for the challenges ahead according to CEOs.

In an unpredictable volatile world, the need to make sense of the future will be an important and critical competency for procurement leaders.

David demonstrated that CIPS is now a true global institution, boasting offices throughout the world and a truly worldwide membership base. The following was also shared with delegates from CIPS HQ at Easton House:

  • Licensing the profession is a multifaceted approach
  • Chartered status will follow from Jan 2015
  • Fellowship remains highest CIPS qualification level
  • CIPS is now holding regular CEO supply forums to both brief and be briefed by the C suite
  • There will be three routes to obtain chartered status which will require 30 hours of CPD to maintain annually
  • A new concentrated focus on ethics and walk free foundation

Sam Walsh, CEO of Rio Tinto

A detailed account of Sam’s key note speech “The golden age of procurement” can be read on Procurious here, but here’s a primer for those unfamiliar with his words:

Sam revealed that most companies are not making the most of the possibilities of procurement. In fact, research showed that when it comes to procurement, 50% to 90% of companies recognise that they do not employ best practices

“Shift your perspective.  Instead of spending your whole time obsessing only about the top line, and the bottom line, focus on the middle line as well.”

Sustainability was also a key focus for the Rio Chief: “So the saying goes, we are what we eat. In business, we are what we buy.”

A note on new talent struck a chord with the millennial’s in the room. Sam mused that today’s procurement professionals require a much wider skills-set than was needed when he first started as a trainee buyer.

Mark Donaldson VC, Corporal

The highlight of the conference for many… Mark’s keynote speech was about transforming you and your team – good leaders create other leaders and not followers.

He reminded delegates that knowledge alone rarely changes behaviour; behaviour changes behaviour with practice, and with repetition the knowledge becomes practiced and ingrained. Further adding that exposure to new things increases behavioural change. Longer-lasting change takes a great deal more time to properly bed in.

Mark warned against the dangers of becoming too emotionally attached to a plan – reminding all that plans often fail due to this blind spot. Letting emotions in also places limits on flexibility.

But Donaldson didn’t finish there, he instead went on to reminisce about the end of the day he received his VC: “I was a bit tired and hot and was running out of water, and as I sheltered behind a vehicle I noticed a young soldier returning fire whilst bleeding profusely as he had been shot in the head. ‘you don’t stop, so I don’t stop’. If we think we have been having a bad day, ask yourself the following: Have I run out of water? Is it over 40 degrees in my work environment? Have I been shot at for three hours? No, well not so much of a bad day then…”

Awards Dinner

Congratulations to the winners of the CIPS Awards – at The Faculty we were especially proud to see so many of our Roundtable members and their teams collecting accolades.  A complete list of winners is below:

Best Cross-Functional Teamwork Project

  • Alcoa of Australia

Best Example of Socially Responsible Procurement

  • Department  for Communities and Social Inclusion
  • Ministry of Social Development

Best Infrastructure or Capital Works Project

  • Transurban

Best People Development Initiative

  • Telstra Corporation

Best Process Improvement Initiative

  • Santos Limited

Best Supplier Partnership

  • Centennial Coal

Most Improved Procurement Operation

  • Thiess Pty Ltd
  • Fonterra Co-operative Limited

CIPS Australasia Procurement and Supply Chain Management Professional of the Year

  • Kevin McCafferty – Fortescue Metals Group

CIPS Australasia Young Procurement and Supply Chain Management Professional of the Year

  • Bree Pitcher – Stanwell Corporation Limited

CIPS Australasia Overall Winner

  • Santos Limited

CIPS Australasia Leadership Award

  • Sarah Collins – Roads and Maritime Services

In space, no one can hear (the procurement professional) scream…

This is the fourth article in a fortnightly series from Gordon Donovan.

Captains’ blog (well there is a space theme to this one….)

Procurement in space

You may have read recently about NASA issuing an RFP to resupply the international space station.  

It reminded me of a couple of quotes from John Glenn:

“I guess the question I’m asked the most often is: “When you were sitting in that capsule listening to the count-down, how did you feel?” Well, the answer to that one is easy. I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts — all built by the lowest bidder on a government contract.” 

“As I hurtled through space, one thought kept crossing my mind – every part of this rocket was supplied by the lowest bidder.”

In a previous article I talked about the supplier selection process and the use of cultural fit rather than the traditional supplier selection methods, for some projects. I wonder how they would cover the cultural issue with this one. Would Romulans and Klingons be prohibited for instance? Would the Jedi be able to use the force to deliver the goods?

This leads us nicely to an article about the draft report into tenders for the Australian government. 

In summary the article and report states that “Tender documents have traditionally been written prescriptively and with an overarching focus on value for money. While risk management and value for money are both important considerations, too narrow a focus on these factors can constrain choice, innovation and responsiveness in the government-commissioned provision of goods and services.”

Will this lead to a change in evaluation criteria in general for use of tenders, will this lead to more thought about the way of interacting with the supply market in general? I wonder what innovations NASA could tap into?

On the subject of evaluation criteria a recent blog article by Kelly Barner highlighted that sometimes trying to do the right think in evaluation (in this case diversity actually backfired. She stated that:

“In 2013 the Massachusetts State Lottery Commission awarded a contract for $5 million in advertising services. Like many public sector agencies, the lottery commission has diversity targets and required that a portion of the work be sub-contracted out to a minority- or woman-owned supplier.

The lottery commission evaluated all bids on cost and presentation as well as the diversity requirement. The contract was awarded to a firm that did not earn the highest score for cost or presentation but did commit to sub-contract 0.24 percent of the contract’s value, to a woman-owned supplier. The firm that earned the highest scores for both cost and presentation was, itself, a certified woman-owned business and therefore did not commit to sub-contracting work to another business.

Had that company been awarded the contract, 100 percent of the $5 million would have been awarded to a diversity supplier that also scored highest in the price and presentation criteria, and the state would have gotten a better result for less money.”

There has been a rash of benchmarking reports released recently:

Procurecon Europe

  • 20.7% of you believe  you have a poor level of supplier contract compliance
  • 74.1% of you approach recruitment for your organisation’s procurement teams in a combination of functional and non functional way
  • Relationship management is the biggest skills gap in your procurement teams today
  • 58.6% of you are investing in consultants as a third party solution/service for your business

Hackett Group

  • Management priorities in 2014 center on innovation-led growth
  • In 2014, procurement’s top priority is to expand its spend influence
  • Rebalancing supply risk
  • Recalibrating procurement’s technology and tools
  • Reinventing procurement’s value proposition

KPMG

  • Supply chain was the number one area where respondents said they will increase investment the most over the next 12 months.
  • Supply chain also topped the list when companies were asked which issues would be most challenging over the next 12 months
  • Human resources development will be ‘very’ or ‘critically important’ to their company’s strategy over the next 12 months.

Mckinsey

  • More and more companies are addressing sustainability to align with their business goals
  • Company leaders and all others increasingly see sustainability as a top CEO priority.
  • Companies’ current approaches to reputation management vary by industry
  • The reputation-management activities viewed as most important are not necessarily the most pursued
  • Sustainability ‘leaders’ set themselves apart through target setting and a clear strategy
  • Organizations excel at creating a culture and direction for their sustainability programs, but they struggle with elements of execution.

The last point on the Mckinsey report talks about creating a culture which brings us full circle back to where we started, and to round-off this piece I came across this article from Procurement Leaders. 

In it Steve talks about creating a cost conscious culture, which reminded me of something my organisation discussed earlier this year at our CPO forum. How to create that culture, Chris Lynch the CFO at Rio Tinto gives his 14 points here.

Strangely couldn’t find any mention of interplanetary co-operation on either of them…

For readers in Australia, I will be attending the CIPS Australasia conference in Sydney on 15-16 October and if you wanted to catch up please get in touch via the usual channels and I’ll be delighted to grab a coffee. Alternatively you can follow me on Twitter as I’ll be live-tweeting the highlights during the conference.

As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.

What can the Spice Girls teach us about being reasonable?

This is the third article in a fortnightly series from Gordon Donovan in which he ponders ‘is now the time to be reasonable?’

One of the banes of contract is the term “reasonable”. For many of us the first time we have been introduced to this concept is via Carlill v Carbolic smoke ball when one of the judges (Lord Justice Lindley) suggested that:

Another meaning, and the one which I rather prefer, is that the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball”

What can Spice Girls teach us about reasonable endeavours?

Springing into the 21st century we have now got contractual terms that says reasonable or best endeavours, but what does this mean. Recently I came across a couple of decisions and pieces which seek to put some further rigour around it.

First is an article in Supply Management that seeks to understand what a “reasonable “notice period for termination is.

This case states that a reasonable period would be subject to 5 key principles namely:

  • each decision must be made on its own facts;
  • what amounts to “reasonable notice” should be ascertained at the time at which the notice is given;
  • consideration should be given to the general circumstances and practices within the relevant trade;
  • any specific circumstances existing at 
the time of the contract should be taken account of;
  • the degree of formality in the relationship is a relevant factor.

Next was a case in Australia that made it to the high court. The case centred on a gas supply agreement. The agreement obliged the sellers to use “reasonable endeavours” to make available a supplemental maximum daily quantity of gas.

The court outlined three observations about reasonable endeavours clauses in general:

  • they are not an absolute and unconditional obligation.
  • the extent of the obligation is conditioned by what is reasonable in the circumstances.
  • some contracts with a reasonable endeavours clause contain their own standard of what is reasonable

Read more about reasonable endeavours here.

In a couple of recent articles a lawyer friend of mine has written about the differences between nest and reasonable endeavours (in Australia there does not appear to be any practical difference between the meanings of these terms).  

And in this article she goes onto discuss a specific case which gives us the following learnings

  • The words “reasonable commercial endeavours” mean that a party is obliged to take steps reasonably available to it to put it in a position to fulfil the obligation
  • If the party does take steps, but is unable to fulfil the intended outcome of the clause, the clause does not require that the party go any further

So what does all this mean?

You need to be specific rather than relying about the criteria of the obligation and how the clause should be followed (describe an example of the steps required maybe?)

Think about how changes in market conditions or the commercial landscape will be dealt with

If you are going to use best or reasonable then don’t use a ‘reasonable endeavours’ clause AND a ‘best endeavours’ clause within the same contract. Pick one set of terminology and stick with it.

Above all, early engagement with the legal team is important to help in managing the risks that come with this.

In other words you have to know what you want, what you really, really want! And while you’re at it, refer to this article in Supply Management…

As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.

High risks and high rewards: dangers of low-cost sourcing

This is the second article in a fortnightly series from Gordon Donovan.

This blog concentrates on international sourcing activities and the trends and pitfalls of this high risk and high reward strategy.

Apple and Nissan

You may have heard lots of talk over the last couple of years about reshoring or nearshoring. Basically this means goods and services that were previously bought from international environs are now being purchased more locally. Several reasons for this, one you can only have a supply chain as long as your forecast is accurate (i.e. if you can forecast your requirements a week in advance, your supply chain must be about one week – otherwise we are into the world of safety stocks- amongst other things)

Several notable organisations have decided on this strategy for a number of reasons:

  • Politics, energy costs, supply chain inefficiency (GE & Apple)
  • Risk Reduction (Nissan)

All in all what this means is that CPOs are looking at all the elements of cost – the total cost of ownership (TCO) -rather than just a few costs in the quest to achieve corporate objectives. Some US States are hosting reshoring workshops in an effort to drive more of these initiatives. I’m not sure if it’s a trend as yet but it could be.

Of course sometimes these strategies go badly, badly wrong.

On the subject of low cost sourcing I read an interesting article from Jim Kiser about a client he had advised about a low cost sourcing initiative for resins. Essentially he states that the lack of work done upfront meant that the initiative created a blind spot for procurement. Namely:

  • No planning discussions around contract areas needed, payment terms, exchange rates, shipping, capacity of product, quality assurance, and so forth.
  • Not understanding the supplier’s financials, this was an Asian supplier and no records were accessible, it was a privately held supplier and only there was only one location from where the product was derived.
  • Analysing other countries for suppliers that could provide this material and a good landed cost.
  • No planning on a bonded warehouse arrangement overseas or at home for forward inventory control or capacity needs.

I think that these (amongst others) are good thoughts for any sourcing plan.

I was recently asked to give a presentation to a group of CPOs recently about culture within organisations and how does procurement influence and be influenced by it.

In preparing for this presentation I remembered a great quote from Peter Drucker, in that “culture eats strategy for breakfast” and therefore the need to ensure cultural alignment with suppliers is highly important (read my previous article on supplier selection). It’s a topic of huge interest to me. We live in a multicultural society and understanding cultural impacts in decision making is imperative.

Recently Harvard business review published a link to a simple cultural tool, it’s easy to take and makes for interesting reading when you analyse the results.

The profile test suggests that to get an accurate picture, you need to gauge cognitive, relational, and behavioural differences where cultural gaps are most common—and to assess yourself in those areas.

There are two other notable researches on country culture that are worth understanding if you are sourcing internationally as part of understanding risks.  See The Hofstede Centre and Journal of Cross-Cultural Psychology

You may also consider that as organisations are now more international, the heritage of the company may be as important as the country in which they are operating in.

You can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.

Bite-size procurement takeaways for the time-poor

Gordon Donovan provides his insights into procurement-related articles and news stories.

I am a principal consultant with The Faculty a management consultancy specialising in procurement. I have been involved with the profession for 25 years as a practitioner, consultant, trainer and coach. I am passionate about procurement, and am one of the few that made a conscious choice to go into procurement. It was a choice made when I witnessed my father (who was a sales manager for many years) dealing with buyers –  and I thought I’d much rather be on the other end of that conversation. In later years it made for some very interesting dinner conversations…

Gordon Donovan on procurement

In this blog series I will trawl the news and provide you with my personal procurement take-aways.

First up is an article I found on LinkedIn on why the supplier selection process is dying [read it here]. It is written for selecting marketing or creative agencies, but I think its just as relevant for selection of any strategic supplier of goods and services.

To summarise it suggests that the “traditional way” of selecting (RFI, Shortlist, RFT, Shortlist, Presentation/trial, Award) isn’t working and fails to find a supplier that’s best suited for the organisation about 50 per cent of the time.

This reminds me of an article written some time ago which stated that 80 per cent of the things we buy are from distorted supply markets, yet 80 per cent of the tools we use are for competitive markets.

Don’t get me wrong, I think that RFT/P/Q are great tools, but we should use them where they are the most effective, or at least do some groundwork to ensure that they are effective when we use them. They rely on competition (or the illusion of competition) to be successful. The worry for me is that ignore can be bliss; we don’t really know when we don’t get the value unless our preparation is good enough.

Talking about preparation brings me to the second article that caught my eye. This is for a podcast I subscribe to by AT Kearney (yes it’s a procurement podcast, don’t judge me!)

Download ‘Wave of the Future’ from iTunes

This episode is all about why Googling isn’t enough. It hits a nerve with me as I hear a lot of my workshop delegates chime “well we will just Google it”.

The podcast says that while Google has made things quicker and simpler, it doesn’t give you the breadth or depth of information that you really need to fully understand supply markets.

According to ATK, 60 per cent of information is in commercial online databases. Some tips provided within include:

  • Use the advanced search feature rather than the vanilla search. Click the cog icon to select this mode.
  • Disable the personal settings. As a default it will look at your previous searches and location and customise the results – especially useful if you’re trying to source a supplier from overseas.
  • Compliment with other more traditional methods (such as interviewing subject matter experts.
  • When reviewing a web site think about who wrote it, for whom and why.

Finally, I came across an interesting article from Mckinsey about different sourcing strategies.

It’s not ground-breaking but contains some interesting insights.

My main takeaways are:

  • The vast majority of onshoring initiatives were in manufacturing.
  • A two-thirds decline in the US price of natural gas since 2008 is attracting some manufacturing industries that use gas as direct fuel or feedstock.
  • Strategic offshoring of IT and business processes retains the promise of reducing costs, hedging production risk, and increasing access to talent by employing a network of offshoring locations.
  • American International Group (AIG), is moving ahead with the creation of nearshore centres in multiple regions.
  • Many companies are discovering that sourcing decisions cannot simply be made based on the notion that ‘noncore’ business activities can be offshored.

I trust that you find these articles and insights useful, and if you wanted to discuss please feel free to contact me via Procurious, join my network, or follow me on Twitter @gdonovan1971