All posts by Hugo Britt

Five Gems from Eva Wimmers’ Innovation Workshop – Part 2

The Faculty’s Hugo Britt recently attended a one-day workshop with Eva Wimmers, former CPO of Deutsche Telekom, on innovation in Procurement.productivity-innovation

Last week I shared the first two of five ‘gems’ I took away from Eva Wimmers’ thought-provoking working on Innovation in Procurement. Read on for the remaining three insights from this world-class CPO:

  1. Make time to discuss innovation with your “ideas suppliers”

As part of her “dialogue rich” approach to Procurement, Eva recommends that category managers make the time with suppliers to talk exclusively about innovation. That means there’s no talk about contracts or pricing; just ideas and brainstorming. Visit your suppliers and make an effort to personally meet the brains of the operation.

This means you’ll be making valuable direct contact with engineers, programmers and other boffins and can chat with them directly about their ideas. Importantly, making this contact will start them thinking about what they can do for you. The key, Eva tells us, is to think of your vendors as “ideas suppliers”, make time to discuss innovation, and always be willing to listen and learn.

  1. Diversify your supply base to include SMEs and startups

Deutsche Telekom is an enormous organisation, and before Eva’s tenure as CPO it had fallen into the same trap as many similar-sized companies: big only deals with big. This mindset is driven by concerns that only large organisations have the capacity to meet your needs, while risk-mitigation policies around team size and insurance are often put in place that limits Procurement’s ability to engage with smaller organisations.

Eva reversed this mindset at DT by declaring that innovation Procurement requires vendors of every size and shape. The benefits of working with SMEs and startups include:

  • faster provision of products and solutions
  • new idea generation (“ideas suppliers”)
  • customised and specialised solutions
  • getting a glimpse of future disruptive technologies
  • app solutions to fix your legacy IT problems
  • cost control and cost savings
  • savings in personnel costs
  • relationships with individuals at the supplier.

In Eva’s words, “We do not care how big an organisation is, as long as both the solution and the organisation are scalable and financially solid’”. She uses Dropbox.com as an example of a small organisation with less than 50 staff that wouldn’t even have shown up on many organisations’ radar, yet now it has world-wide take-up.

  1. There are risks, but they can be managed

We know that small vendors are often faster, more flexible and more cost-effective, but what are the risks? Eva says that CPOs need to equip their teams to work with SMEs and startups to overcome the following negatives:

  • Higher financial risk than big suppliers
  • Risk of takeover slowing down the process
  • Smaller account teams
  • Often no international linked account team and support
  • Under-developed processes
  • Lack of scalability
  • Increased risk of bankruptcy through illiquidity
  • Change of key people endangers product
  • Continuity of solution depending on engineers and programmers/individuals.

Eva worked with her team to mitigate the risks of interacting with SMEs and startups at DT by implementing the following:

  • Requesting financial due diligence including detailed revenue overview. Invite the CFO to explain the finances in detail to ensure full transparency.
  • Requesting an overview of concurrent projects with other customers.
  • Using incentives rather than penalties to ensure you don’t cripple your suppliers.
  • Spending significant time on explaining your product needs and definitions as SMEs may be unused to the needs of large organisations.
  • Requesting counter-proposals from vendors, such as “What would you change to save 30 per cent on cost? What would you change to gain speed?”
  • Locking-in the availability of key individuals from the vendor teams by name in the contract.
  • Contractually requesting key engineers’ availability by name.
  • Including a first right of refusal to buy company (in case of bankruptcy) – sometimes buying is cheaper than migration to any supplier (talk to your legal team about insolvency law).
  • Defining termination rights in case of a supplier takeover.
  • Reducing the amount of interfaces at the supplier.
  • Defining one overall point of escalation at the supplier.

In summary, Eva argues that CPOs can’t afford to limit their supply base to large organisations if they wish to drive innovation. Use risk mitigation strategies to protect your operation and focus on having the right level of contractual protection for each innovative supplier. Make the time to convince your risk-averse stakeholders of the benefits of working with smaller suppliers of products, solutions and disruptive ideas.

Procuring innovative products and profiting from the ideas of innovative companies requires behavioural change in your Procurement teams. Concentrate on driving early involvement, deeper knowledge of your products and vendor landscape, closer alignment with business stakeholders, and true dialogue where you see eye-to-eye rather than just pressing for the best price.

Innovation needs to be driven with and by smaller new companies as much as by larger incumbent organisations. In short, it’s about having “an idea that pays”.

Five Gems from Eva Wimmers’ Innovation Workshop – Part 1

The Faculty’s Hugo Britt recently attended a one-day workshop with Eva Wimmers, former CPO of Deutsche Telekom, on innovation in Procurement.

Innovation1

How many of the CPOs you know would you describe as ‘glamourous’? Not many, I bet. That’s because Procurement still isn’t seen as a particularly glamorous career, despite having all the ingredients that should make it so: world travel, high-stakes negotiations, and rubbing shoulders with C-level decision-makers.

Procurement’s understated profile is most likely a legacy of its back-office beginnings, but things are starting to change. Eva Wimmers, the confident, sharp-dressing, eminently capable former CPO of Deutsche Telekom, is glamour personified. She’s a striking departure from the stereotypical ‘back office’ CPO, and in my opinion the profession needs more leaders like her if it’s going to attract talented Gen-Y professionals looking for an exciting and fulfilling career.

Innovation in Demand

It’s a cool spring morning at The Faculty HQ in Melbourne, and I’m balancing a cup of coffee in one hand and a muffin in the other while chatting with fellow attendees at Eva’s workshop on innovation in Procurement. I’ve met senior and mid-level professionals from National Australia Bank, Realestate.com.au and even from Perth-based Rio Tinto, who have flown an impressive 2700km to join us today.

Why make the trip during one of the busiest times of the year? I’m told there are two main reasons – firstly, insights from the stellar career of someone like Eva are not to be missed, and secondly, Australia’s largest organisations are increasingly turning their attention to innovation in Procurement.

Eva is a knowledgeable and highly successful modern Procurement leader. During her time at Deutsche Telekom, she was responsible for overseeing €27 billion in purchasing value and managed 1500 employees across 50 countries. The workshop today came about as a result of a unique opportunity – Eva is finishing up at DT and moving into an exciting new role (currently hush-hush), meaning she had a rare gap in her calendar.

This is very good news for Procurement professionals in Australia – normally we have to travel overseas to hear from international Procurement stars of Eva’s calibre, and the prospect of an entire day with Eva generated a lot of excitement amongst Australian CPOs and their teams.

In this two-part blog post, I’ll cover five gems that I’ve taken away from Eva’s workshop, namely:

  1. Innovation is an idea that pays
  2. Procurement innovation is both a philosophy and a program
  3. Make time to discuss innovation with your “ideas suppliers”
  4. Diversify your supplier base to include SMEs and startups
  5. There are risks in working with startups, but they can be managed.
  1. “Innovation is an idea that pays”

This quote was the catch-cry of the day. It’s the basis of Eva’s philosophy around Procurement innovation, and it should be the foundation of every CPO’s business-case to invest in startups.

Eva illustrates how Procurement professionals work on the frontlines of innovation. We talk to vendors all the time, and if we know how to listen, this means that we are exposed to a constant flow of new ideas. Other functions, such as IT or even R&D, will only go looking for innovation when they start a new project.

Eva makes the distinction between incremental and disruptive innovation, or “evolutionary” versus “quantum leap” ideas. She illustrates the difference with a description of tall ships; with a millennium of incremental innovation behind them, early nineteenth-century sailing ships were the epitome of luxury and humankind’s harnessing of wind and weather – but they were made obsolete within a few decades by the disruptive technology that led to ocean-going steamships. Our challenge is to keep as informed as possible to try to predict the next big disruption steaming towards us over the horizon.

Eva’s message is to seek out “ideas suppliers” in the form of SMEs and startups. Even if 80 per cent of their innovations are irrelevant to you, the 20 per cent could be absolutely crucial to your business’ competitive advantage.

  1. Innovation in Procurement is both a philosophy and a program

Eva describes her two-tiered approach to driving innovation at DT through changing both the culture and the process. She created cultural buy-in through:

  • Introducing the tandem system – procurement staff are partnered with someone from the functional side (such as an engineer) to encourage the sharing of ideas, leading in turn to innovative thinking.
  • Cross-functionalising by having a variety of functional expertise, professions, backgrounds, disciplines, hierarchies, nationalities and cultures working in self-directed teams.
  • Encouraging Dialogue-rich Procurement – Eva encouraged her staff to greatly increase their communication with both internal stakeholders and with vendors. You’ll find that vendors in particular are eager to share their ideas if you are willing to listen and learn.
  • Celebrating accomplishments – if someone in the team has an innovative idea that leads to a positive change, publish it in a newsletter and share it with your whole team. This will help people realise “I can be innovative too”.

Eva changed the existing process to encourage innovation through:

  • Having vendor meetings to discuss innovation exclusively.
  • Holding regular internal meetings on innovation to plan three years ahead.
  • Diversifying the supply base to include SMEs and startups.
  • Introducing an innovation review panel.
  • Creating an ‘Easy Department’ program by cutting new contracts down to a 5 pages.
  • Incentivising Procurement-driven innovation through a suite of KPIs.

Stay tuned for Part Two of this article on Eva Wimmers’ Procurement innovation workshop.

5 Key Findings from the ‘Making It Stick’ Research Literature Review – Part 2

Have you read The Faculty’s Making it Stick report yet?

Sticky-Glue-Works-in-Space-Too-2

Our researchers undertook a literature review to understand the present state of play for CPOs worldwide. This is the second part of The Faculty’s article on the key findings from the literature review.

In the previous article, we discussed:

  • How benefits realisation levels are poor and remain an enduring challenge for CPOs around the globe.
  • The need for organisation-wide change management programs to address poor benefits realisation.

To wrap up the final three findings:

3. Business alignment and shared goals are integral to winning stakeholder support for identified benefits

As mentioned above, Procurement can’t drive savings all the way to the bottom line in isolation from the rest of the business. Shared goals across the organisation are absolutely essential for stamping out the culture of “somebody else’s problem” when it comes to poor benefits realisation.

Noah Costelloe (Ernst & Young) wrote in 2014: “The procurement team should not be the ‘sole owners’ of savings. Instead the focus of the team should be on facilitating and driving initiatives. They should also be accountable for the governance function through recording, measuring and reporting savings.”[1]

So, what’s the first step to creating shared goals? The answer is to ensure Procurement’s targets are aligned to those of the wider business. A report from Proxima (2015) stated that “Success in the procurement field … is a nebulous concept [because] procurement’s objectives aren’t usually clearly defined. Or perhaps, more accurately, it’s because procurement’s objectives are defined quite differently by its practitioners and the business leaders they serve.”[2]

The Managing successful programmes report already quoted above gives excellent guidance on alignment: “[Procurement must] provide alignment and clear links between the programme [benefit], its vision and desired outcomes, and the strategic objectives of the organisation involved.”[3]

4. Procurement teams are expanding their strategic footprint beyond costs through the identification and realisation of additional value opportunities.

What do additional value opportunities have to do with benefits realisation? Everything. In the Making it Stick report, “costs” are identified as the base of the pyramid, or the essential piece that must be in place before the function can move beyond transactional benefits, through commercial to strategic benefits.

If you can’t make savings stick, you won’t have the base necessary to successfully expand the value you contribute to the organisation. In ProcureCon Europe’s 2014 survey of 2,000 procurement professionals, “Total Cost Savings” still retains its place as the most popular metric for measuring the value of procurement (85%).[4]

KPMG’s The Power of Procurement (2012) reports: “Significant opportunities still remain to drive sustainable bottom line and top line value …. Procurement will need to stretch beyond savings to become a centre of value creation throughout the organisation. Executives will also need to play a part.”[5]

5. Clear definitions and categorisation of savings and other benefit types drive cross-functional understanding, shared measurements and realisation.

Without rigorous benefits definitions in place, other parts of the business with dispute Procurement’s wins. Benefits should be:

  • categorised by type
  • agreed upon with Finance
  • clear and concise
  • in plain English (not “Procurement lingo”)
  • aligned to business targets
  • linked to a clear set of measurement and validation methodologies.

To illustrate the importance of a set of definitions, consider the term ‘savings’. If you were to tell a roomful of colleagues from various departments that Procurement is focused on savings as its primary benefit, it’s more than likely that there will be multiple interpretations of what a ‘saving’ actually involves. Andrew Bartolini wrote in 2014 that “Savings [is] an inherently complex metric [with] greater disparity among the definitions used by procurement teams today”.

A 2006 report from CAPS Research found that, “Crucial to [Procurement’s] mission is the proper categorisation of the various types of cost reduction and their application to the company’s operating budgets and profit and loss measures.”[6]

The Making it Stick report contains sample definitions and measurements employed by participating organisations. Reproduced to give readers a broad set of examples to adapt for their own organisations. A concise set of definitions aids cross-functional understanding and should be developed in partnership with the wider business.

If you haven’t done so already, you can download the ‘Making It Stick’ research report here.

[1] Costelloe, Noah. Five things: getting the basics right in Procurement. Ernst & Young, 2014, p.4.

[2] Cooper-Bagnall, Jonathan, “Defining procurement success”, Proxima, June 2015

[3] Great Britain Office of Government Commerce, Managing successful programmes, Norwich, The Stationary Office, 2003, p.32.

[4] ProcureCon Europe 2014 Benchmarking Survey.

[5] KPMG. The Power of Procurement: A global survey of Procurement functions. KPMG, 2012, p.14.

[6] Ashenbaum, Bryan. “Defining cost reduction and cost avoidance”, CAPS Research Critical Issues Report 2006, p.2.

5 Key Findings From The ‘Making It Stick’ Research Literature Review

Making it Stick

Have you read The Faculty’s Making it Stick report yet? As part of the investigation into the challenges and opportunities presented by benefits realisation, our researchers undertook a literature review to understand the present state of play for CPOs worldwide.

There’s some excellent material out there on benefits realisation, predominantly in the IT space where organisations want to ensure they extract the full value from significant investment in technology and systems. The amount of literature confirmed that this topic is front-of-mind for CEOs, CFOs and CPOs in procurement functions all over the world.

Boiling down the literature review to a handful of key findings produced the following five recurring themes:

  1. Globally, benefits realisation levels are poor and remain an enduring challenge for organisations.

Four years ago, Aberdeen produced a stand-out piece of research that contained an assessment of benefits realisation levels across 130 organisations.[1] The Aberdeen Worldwide CPO survey found that the industry average (middle 50 per cent of aggregate performance scorers) achieved an average of only 8 per cent realised contract savings. The best-in-class (top 20 per cent) organisations had an average of 17 per cent, while “laggards” (the bottom 30 per cent) realised only 4 per cent of contract savings.

Eight per cent is a truly alarming figure and by all rights should have sent the procurement profession into a panic. To illustrate, imagine you have a staff member who works hard, seems extremely productive, yet at the end of the year, someone from Finance taps you on the shoulder and informs you that only 8 per cent of the staff member’s claimed achievements have actually made their way to the bottom line. You’d be furious, and that person’s job would be on the line. The same applies to procurement teams as a whole – this statistic brings the effectiveness and credibility of the function into question.

Findings from an earlier survey published by Gerald Bradley (UK, 2006) estimated that 10 per cent to 25 per cent of potential benefits are achieved from investment in change, costing the UK over £50bn per annum.[2] The Faculty’s own 2015 survey found an average of 50 per cent in unrealised savings across our research participants [3] – an improvement on Aberdeen’s 2011 figures, but still representing a lot of money being left on the table.

  1. Benefits realisation is inextricable from change management

The Making it Stick report makes the point that there’s no quick fix to improve benefits realisation. It requires an organisation-wide change management program to encourage shared ownership of procurement’s targets, drive cross-functional collaboration, improve end-user compliance and build a cost-conscious culture. C-level support is integral to this process to mandate change from the top.

A report from the Great Britain Office of Government Commerce entitled Managing successful programmes (2003) defined the necessity for change very succinctly: “The fundamental reason for beginning a programme is to realise benefits through change”, [4] while Gerald Bradley also framed his definition of benefits around change: “A benefit is an outcome of change which is perceived as positive by a stakeholder.”[5]

Stay tuned for part two of this article, and be sure to download Making it Stick if you haven’t already.

[1] Limberakis, Constantine G. Procurement Contract Lifecycle Management: Assessing the value of contract automation, Aberdeen Group, December 2011.

[2] Bradley, Gerald. “Why more CEOs are turning to Benefit Realisation Management”, CEO Magazine, August 2006.

[3] The higher figure is likely to be due to the relatively small number of research participants drawn from The Faculty Roundtable, with higher-than-average functional maturity across the group.

[4] Great Britain Office of Government Commerce, Managing successful programmes, Norwich, The Stationary Office, 2003.

[5] Bradley, Gerald. Benefits Realisation Management: A practical guide to achieving benefits through change, Hampshire, Gower Publishing, 2006, p.102.

Paul Dobing of NSW Procurement – Moving The Profession Into A Complex Future

Paul Dobing NSW

One of the highlights of last week’s CIPS Australasia conference was, without doubt, Paul Dobing. The Executive Director of NSW Procurement at the Office of Finance & Services is a familiar figure to those of us involved with The Faculty Roundtable Program, of which he’s a very active member.

Paul’s bursting with energy, and strides up and down the stage rather than standing behind the podium to deliver his insights. He has recently been motivated and inspired (and tanned) by a trip to the Garma Festival in far north-east Arnhem Land and is passionate about Indigenous constitutional recognition.

Paul’s on stage to talk about the future of the profession. He takes the audience through a list of CSIRO’s “Global Megatrends”, including planetary pushback, the pivot to Asia, longer life expectancy and digital immersion. Each of these topics could generate enough material for a conference in themselves, but Paul is making the point that to create competitive advantage for your procurement organisation, these are the sorts of longer-term “horizon themes” you’ll need to be engaged with to support your push into the future. CPOs need to think about what these Megatrends mean for procurement, how we can redesign our models for the future and importantly, what capabilities we’ll need to meet these challenges. Paul points out that just about every audience member is in the midst of some kind of change/transformation program, and asks how we can operate in an increasingly “VUCA” world (volatile, uncertain, complex and ambiguous).

On his own journey to bring his procurement function into the future, Paul has:

  • created a consulting advisory practice for the wider sector
  • created a data and analytics team.
  • introduced a research capability for longer-term thinking, and

None of these reflect “traditional’ procurement functions, but Paul believes they’ll be integral to providing ongoing support to the public sector into the future.

Emerging models:

Rather they viewing change with suspicion, Paul’s enthusiastic about emerging organisations that are disrupting traditional business practises. CPOs, he says for example should be embracing the sharing/collaborative economy and seizing upon the opportunities it creates in this space he has recently been working with Tu Share and Sendle CEO James Chin Moody to identify new models of service a delivery supporting government. We should keep ourselves informed of future trends, work out how we can start to engage with them and make sure we’re well-positioned in that conversation to drive competitive advantage. His advice:

  • Think ahead to the next wave of disruption.
  • Think about how procurement can tap into disruptive models of supply.
  • Build the capability required to embrace change.
  • Shift the risk-averse, rules-based culture traditionally found in procurement teams to a flexible, interpretive culture that can engage with new opportunities.

Hiring the next generation of procurement professionals:

Hiring is increasingly about the values and behaviour rather than technical skills. Members of Generation Procurement, as we like to call Gen-Y here on Procurious, and going to be:

  • Purpose driven
  • Values aligned
  • Diverse
  • Connected
  • Agile
  • Disruptive, and
  • Adaptive

What are you doing to move your procurement function into the complex future?

What Can Art History Teach Procurement Pros About Executive Presence?

Power poses and swagger portraits…

Louis_XIV_of_France

After Karen Morley’s great presentation at last week’s CIPS Australasia conference, I was inspired by her words on how “power poses” can be used to increase your executive presence. Investigation into the topic led me to the authority on this topic, social psychologist Amy Cuddy, whose 2012 Ted Talk entitled “Your Body Language Shapes Who You Are” launched awareness of the importance of power poses onto the world stage.

Cuddy talks about how body language, or “non-verbals” govern not only how other people feel about us, but can affect how we think and feel about ourselves. Mirroring behaviour seen in the animal kingdom, humans make themselves bigger and stretch out when they feel powerful, and make themselves smaller by closing up when they feel powerless. Cuddy takes the audience through a range of high-power and low-power poses, including this great pose dubbed “The Wonder Woman”.

amy-cuddy-high-power-pose

Body language is inextricably linked to power dynamics (or power dominance) and is, unsurprisingly, an important part of gender dynamics. Unconfident, shy, “powerless” people can practice high-power poses until they feel more powerful, with the ultimate goal of faking it until you become it.

A Google Image search of “power poses” makes for entertaining viewing. Alongside Lynda Carter’s Wonder Woman, there’s Frank Underwood from House of Cards leaning forwards with both palms flat on a table, IMF’s Christine Lagarde physically dominating ex-Greek PM Lucas Papademos at a Euro Conference in Brussels, and Beyonce striking a high-power pose on stage.

Power posing isn’t new. As an art history buff, the concept immediately brought to mind the “swagger portrait”, an artwork commissioned by powerful patrons to emphasis their status and dominance. I wanted to share a few of these historic power poses with you on Procurious so you can learn from some of the greatest swaggerers in history, who were predominantly clustered in the flamboyant 16th century. At the top of this article we have King Louis XIV of France (a la “The Sun King”) who isn’t afraid to awe his detractors into submission with the cut of his stockings. He’s joined by…

Henry VIII (1491 – 1547)

Check out that swagger:

Henry_VIII_Ditchley_Portrait_after_Holbein

Elizabeth I (1533 – 1603)

Emulating her father’s swagger with an enormous neck ruff and none-too-subtly dominating the entire globe with her right hand:

800px-Elizabeth_I_(Armada_Portrait)

Richard Sackville, 3rd Earl of Dorset (1589 – 1624)

Proving that shoe pom-poms were back in fashion…

800px-Richard_Sackville_Earl_of_Dorset

George Clifford, 3rd Earl of Cumberland (1558 – 1605)

His lance is longer than yours…

418px-Nicholas_Hilliard_-_Portrait_of_George_Clifford_Earl_of_Cumberland_-_WGA11421

So, if you’re feeling powerless or need a bit of confidence before an important meeting, why not take some inspiration from the 16th century and add a bit of swagger to your power pose.

 

Member Exclusive – Make Your Savings Stick

The Faculty’s Research Consultant, Hugo Britt, announces the release of ground-breaking procurement research exclusively to Procurious members.  

Download the exclusive report on Procurious

Astoundingly, more than 50 per cent of contracted savings are not making their way to the bottom line of Australia’s leading organisations. This troubling disconnect between contracted and realised savings has the potential to undermine the very credibility of the procurement function.

The Faculty’s latest research paper ‘Making it Stick’, is a call to action for procurement teams, CEOs and CFOs to address the fundamental shortfalls that are costing organisations hundreds of millions in unrealised savings.

You can access ‘Making it Stick’ from the  Procurious community feed.

Our report highlights exactly where organisations are coming unstuck in the process of realising savings and provides actionable pragmatic steps that can be followed to ensure contracted savings hit the bottom line.

What we uncovered

Our research, currently available exclusively on Procurious, identified that:

  • 29 per cent of organisations have no defined benefits realisation program for tracking savings
  • 58 per cent of interviewees were unable to estimate the precent of negotiated savings that actually reached the businesses bottom line
  • Only 20 per cent of organisations incentivise their staff on savings delivery beyond contract execution
  • Weaknesses in benefits tracking programs are shared across public and private organisations
  • Significant change management needs to occur before organisations can fully realise the savings they have negotiated
  • There is a lack of definitions and measurements around savings tracking and benefits realisation that undermines procurements efforts in this area

Why you should download “Making it Stick”

This timely and practical research report will enable you to:

  • Understand why organisations fail to deliver on contracted savings
  • Access a roadmap to ensure that your contracted savings hit the bottom line
  • Hear from industry-leading organisations that have got it right
  • Access checklists, tools and measurements in order to define and validate your success in this area

Download our latest research from the Procurious Community feed www.procurious.com/community and make your savings stick.

30 Under 30 Supply Chain Stars

Roundtable photo

This year marks a historic tipping point in US demographics. The Baby Boomers will be overtaken by the Millennials (18-32 year-olds) as the largest living generation, and nowhere will this be felt more than in the workforce. In fact, Millennials will comprise about 75 per cent of the workforce within 10 years. Research by ThomasNet suggests that employers’ perceptions of Millennials need to shift – most manufacturers (62 per cent) say Millennials represent a “small fraction” of their workforce, while eight out of 10 (81 per cent) say they have “no explicit plans” to increase these numbers. At the same time, 38 per cent of manufactures report that they plan to retire in one to ten years. 

So, the answer seems obvious – businesses need to move fast to attract and retain Millennials before they find themselves in the midst of a major talent crisis. ISM and ThomasNet have joined forces to strike a major blow in procurement’s “war for talent” with the 30 Under 30 Supply Chain Stars initiative.

I’m sitting at a press conference with five of last year’s 30 Under 30 winners lined up in front an enthusiastic group containing many of their fellow winners –  in fact, you could say that the future of US procurement is concentrated right here in this room. Today is all about putting a spotlight on the best young talent working in the supply chain to encourage more Millennials to enter the profession, excel like the panellists lined up before us, and tackle the looming demographic crisis head-on.  

What’s more important, in my view, is that the professionals in front of me really buck the trend of negative stereotypes of “brattish” millennials. They’ve all climbed to impressive levels of responsibility for their age bracket and are poised to fill the void as Baby Boomers retire. We have Amy Alpren, Manager of Strategic Sourcing at CBS Corporation; Nick Ammaturo, Director of Profit Improvement and Procurement at Hudson’s Bay Company; Matt Bauer, Procurement Administrator at City of Mesa Arizona; Katy Conrad Maynor, Category Manager, Finished Lubricants/B2B, Shell Oil, and Weslet Whitney, Sourcing Specialist at Enterprise Products. They’re joined by Jami Bliss, Director of Global Procurement Program Management at Teva Pharmaceuticals, who was a nominator for the competition. Each one of the panellists shares with us the impact they’ve already made upon the profession, reeling off a list of combined achievement that would silence even the most vocal critic of their generation.

Following the event I catch up with another 30 Under 30 winner in the exhibition hall. Leah Halvorson is ‎Director of Procurement & Supply Chain Development at Minneapolis Public Schools and very enthusiastic about the award. She tells me that she and the other winners have seen some amazing benefits flowing from 30 Under 30 – her peers have been offered job opportunities, scholarships and celebrity status at ISM and ThomasNet, but most importantly, they’ve had the opportunity to network with each other. Leah herself has had some fantastic recognition at her organisation, with senior executives congratulating her personally and career-boosting recognition in the company newsletter.

ISM and ThomasNet are already looking ahead to the next batch of 30 Under 30 Supply Chain Stars and expect to double the number of nominations this time around. This initiative has won the approval of businesses large and small across the US because it celebrates young talent, attracts more Millennials into the profession and, like the 30 Under 30 winners themselves, it has a bright future.

You need a plan: managing risk in the supply chain

hand_over_the_dice_by_andepangeran-d46c1zy

Increased complexity in supply chains means increased risk, coupled with unprecedented visibility from social media and a lowered public tolerance for disruption – in other words, a perfect storm. For my last session of ISM2015 day two, I’ve come to find out about what supply chain professionals can do to weather the storm and become their organisations’ risk-management experts.

Hannah Kain speaks earnestly and authoritatively, with a dry sense of humour. She’s the president and CEO of ALOM, a global supply chain services provider that has been operating for almost 20 years primarily in the electronic and technology space. It’s headquartered in the Silicon Valley and works with tech, automotive and medical companies – in short, cutting edge players that use Kain to solve their complex supply-chain challenges. Kain’s here today not just to lay out the challenges involved in operating supply chains in the age of social media, but to give the audience some solid and invaluable advice on minimising risk.

The context

Procurement professionals have to navigate more layers, more partners and more regulations than ever before. They’re dealing with globalisation, compressed timelines and increased customer expectations around speeds, prices and visibility. Corporate boards and the public are no longer just interested in what supply chain professionals are doing, but how we are doing it. The reason behind this is that procurement is moving from the back to the front of organisations. Visibility has changed, expectations have changed, along with the nature of communications and global immediacy. We’re not used to this level of scrutiny, but it isn’t going to go away.

Brand risk factors include social responsibility, cultural sensitivity, cybersecurity (40 per cent of data breaches happen through the supply chain), personal conduct, customer service, ethics, regulatory compliance, sustainability and, of course, quality. It’s important to understand that we’re all stakeholders in our organisations’ brand, from the board of directors through to shareholders, customers, suppliers, the community and employees.

Social reputation

Millennials are very concerned about the social reputation you have as a company. Kain’s blunt observation that “if you have a poor brand reputation, you have a hiring problem”, made me think of the NSA and its recruitment woes after Edward Snowden.

An example of a well-executed risk strategy was Adidas’ enforcement of its workplace safety policy in 2014. The company drove standards aggressively amongst its Asian suppliers, issuing 66 warning letters, dumping 13 suppliers for non-compliance and rejecting 104 new suppliers over safety concerns. No doubt this was a costly and difficult process but the flow-on effect is a greatly improved public perception of Adidas’ social responsibility, and of course a lessened risk of supply chain disruption through accidents in the supply chain.

Ensuring regulatory compliance is now a significant part of a procurement professional’s role. Kain praises some of the laws that have been passed recently in the US, making the point that rather than seeing regulations as a headache, CPOs should embrace them as a well-structured way to minimise risk. The Conflict Minerals law, for example, exists to ensure raw materials are not sourced from the Democratic Republic of Congo, where rebels are using indentured labour and channelling the revenue to fight a brutal war. US public companies are required to trace the origins of their metals all the way back to the smelter level – in practise this means auditing as many as six levels back down the supply chain.

Similarly, if you sell over $100 million of product in California, you have to certify that no child labour has been used in your supply chain – a very high standard to meet. As with Conflict Minerals, it’s a huge but worthwhile task to audit an entire supply chain. The real headaches start, however, when your company has two suppliers of a product to avoid disruption, or even three – this means the size of the auditing task is doubled or even tripled. In consequence, CPOs are now concentrating their supply base, often to a single trusted supplier. These regulations really delve into the “how” rather than the “what” of supply chains and illustrate Kain’s point about unprecedented transparency.

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Kain divides risk-management strategies into two categories; preventative and reactive. Both are equally important and I soon learn that risk-management is a lot more complex than I’d thought.

Preventative risk-management strategies

  • Preventative strategies are best for stable industries, public companies and high-profile organisations with good alignment, a culture of planning, strong conceptual corporate supply chain staff and reward planning.
  • Put in place a SCOR (Supply Chain Operations Reference) model: create objectives, KPIs, measures, targets, KRIs, loss tracking initiatives. Assign numeric value to disruptions.
  • FMEA (Failure Mode Effect Analysis) method: identify failure points and causes, predict the potential frequency of failure, assign numerical probability and severity factors resulting in a Risk Priority Number (RPN), document your mitigation strategy and response actions.
  • Manage based on data: establish a dashboard and a supply chain event management system with alerts and pre-alerts on the state of your suppliers.

Reactive risk-management strategies

  • Reactive strategies are best for fast-moving, smaller and innovative companies with a culture of agility, resourcefulness, entrepreneurship. These organisations reward resourceful fire-fighting and focus on minimising disruptions that have occurred.
  • Have a communication plan on social media: the response should come from senior management level. Acknowledge the problem, know the facts, be truthful initiate a solution and define escalation actions.
  • Poor reaction: Lululemon’s reaction to customer complaints on social media about transparent fabric was to blame the issue on customers’ weight, rather than taking responsibility for the quality. The result? A social media storm, sending the stock price tumbling 15 per cent in one day, followed by a two-year recovery process.
  • Good reaction: In response to reports on unsatisfactory working conditions, Apple’s CEO regularly visits Chinese iPhone suppliers to meet with employees, management and government officials.

Kain’s eight tips for putting out fires on social media

  • Prepare for the worst – have a plan
  • Take responsibility
  • Put consumer and work safety first
  • Respond quickly, sincerely and truthfully
  • Be real – personally respond and take it offline if possible
  • Respond privately to personal inquiries
  • Fix mistakes expediently
  • Arguing with social media users is always a bad idea.

Kain concludes with a reminder that your supply chain and brand are intertwined. Risk is always present and disruptions are inevitable – you need to be both proactive and reactive to minimise and deal with events as they happen.

Founded in 1915, the Institute for Supply Management (ISM) is the first and largest supply management association in the world. A not-for-profit association with 47,000+ members and 140+ affiliated organizations around the globe.

The ISM Mastery Model: what is it and how does it work?

A bold move to standardise roles on behalf of the profession.

The ISM Mastery Model

Standardisation. The supply chain profession is crying out for it, but it’s very difficult to achieve. If you’ve ever worked with procurement teams from more than a handful of organisations, you’ll have seen that people don’t speak the same language when it comes role titles and the competencies they entail. It’s day two of ISM2015 and I’m attending a press conference with some of ISM’s top brass – Thomas Derry (CEO), M.L. Peck (Senior VP Programs and Product Development), Cecilia Mendoza (Director Education and Training) and Tony Conant (COO). As the cameras zoom and flash, Derry clears his throat and announces his organisation’s biggest initiative of the year so far: the ISM Mastery Model.

This year ISM celebrates its 100th birthday and is using this milestone to create a model that will drive standards into the next millennium. ISM has plenty of experience in this area – they’ve been the hand at the tiller of the US supply chain profession since 1915, setting the standards and moving the professional boundaries as the responsibilities and expectations of procurement professionals grow at an incredible pace. As Derry says, “Procurement has moved so fast we’ve almost outstripped the ability to have formalised career structures.”

So, what is it?

The ISM Mastery model represents ISM’s bold move to standardise roles on behalf of the profession, with the goal that the model will become an integral part of the hiring process and career development for supply chain professionals. The model was built by drawing on ISM’s own experience over 100 years in the sector, including 50 years as the USA’s leading provider of supply chain certification. Two dozen supply chain professionals took part in validating the thinking behind the model. It creates a crystal-clear career path for young people, or rather a number of possible career paths by detailing the competencies required and how they can be achieved. The model is scalable and configurable to different companies’ needs, and surprisingly, it’s free.

Here’s how it works: the model is organised into 16 major competencies; namely business acumen, category management, corporate social responsibility, cost & price management, financial analysis, legal, logistics management, negotiation, project management, quality management, risk, sales & operations management, sourcing, supplier relationship management, supply chain planning, and systems capabilities & technology. There’s a mix here of core or “hard” competencies, and what we traditionally call “soft” skills, such as negotiation. Derry comments that it’s time to change this label to “critical skills” to reflect the importance of hard-to-learn competencies, as you’ll absolutely need these skills to advance in modern-day procurement.

The major competencies are then broken down into highly detailed sub-categories, in what Derry proudly calls “the world’s greatest collection of job descriptions”. The detail is superb, laying down in the plainest language what is required to master that competency. Take business acumen as an example – ISM has determined that procurement professionals will need to come to grips with no fewer than 10 sub-categories, ranging from business intelligence to strategy development. The model then lays out the expectations for these sub-categories at four different career levels – essentials, experienced, leadership and executive leadership. That’s 40 detailed competency descriptions under business acumen alone. The final piece of the puzzle is found on the website – I click on the competency “business acumen”, the sub-category “change management” and the “essential” experience level, and I’m directed to the ISM certification programs (online courses, podcasts, articles, seminars and more) that will equip me with this skill.

Who will the Mastery Model benefit?

  • Individuals – build your career path, identify the gaps in your knowledge and create a business-case to request training or personal development.
  • Managers – map out the skill-set of your team and pinpoint the exact training required to fill gaps. Create a clear roadmap for ongoing investment in training. Lock in key checkpoints for career advancement using this model.
  • Global organisations – use the ISM Mastery Model to raise your decentralised team to common levels of proficiency.
  • Private equity firms – use this model to assess the procurement functions of your portfolio of companies.
  • Recruitment organisations – use the Model to help identify the right candidates and speak the same language across every procurement organisation.

The Mastery Model is impressive, and my only concern is its sheer size seems overwhelming. Derry points out, however, that although a huge amount is expected of the modern procurement professional, we can only do so much. People can use this model to create a career path into an area of specialisation – for example, I might want to begin my career with a generalised “essential-level” skill-set, but concentrate on specialising in legal as I gain the upper reaches of the model.

The launch of the model has some interesting implications for ISM. Derry talks about the data they’ll be able collect, such as tracking a surge in interest in a particular competency in a particular industry. ISM can then research the reasons why and adjust their training programs accordingly. Derry also stresses that the model is adaptable and is expected to change over time – if procurement has altered so much between 1985 and 2015, just imagine how different the roles will be by 2030.

This model makes personalised growth possible. Having a clear roadmap and standardisation will help accelerate the development of younger teams and will be of immense benefit in attracting and retaining talent. Check it out at www.instituteforsupplymanagement.org.