All posts by Kelly (McCarthy) Barner

Three Economic Indices You Can’t Ignore In Procurement

Procurement professionals need the ability to understand – and react to – changes in inflation, employment and optimism.

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The interesting thing about procurement’s typical line of sight is that it very closely aligns with the terms of the sourcing projects we run and the contracts – and therefore supplier relationships – we manage. This might be 6 months, 12 months, 3 years, or 5 years long, but regardless of the exact length of time, you can be assured it is far longer than the changes being seen in global and local economies.

Since the summer of 2016, I have been the Business Survey Chair for the ISM-New York Report on Business. It has been an amazing learning opportunity, and I am fortunate to be working with a career economist to learn to decipher and draw meaning from the data. There are two pieces to the report: 1. the indices (some seasonally adjusted and some not) which provide a monthly trend up or down as the economy contracts or expands, and 2. the narrative, which highlights some of the key figures and milestones and adds some context to the numbers.

You don’t have to be a professor to see the connections between procurement and economics, but it is easy for us to become overly focused on information that is internally available or provided by suppliers. Based on what I’ve learned, the following categories of information tie directly to procurement’s efforts and objectives. And although they may not often come up in internal conversations, they need to be present in procurement’s thinking and strategy development.

Inflation

Investopedia defines inflation as “the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.” Most of what procurement buys tends to be based on pre-negotiated contracts, so we’re unlikely to see annual changes in prices based on inflation. What we might see, however, is a difference in the prices we are able to negotiate every three years. This will be especially true of anything we buy internationally or that has significant foreign-sourced materials in it because the relative purchasing power of the U.S. Dollar in global markets will be affected by inflation. But it’s not just an international issue – for any procurement team that reports into finance, keeping an eye on inflation will give you a benchmark for the minimum project-level ROI, as the alternative might be to just hold onto the cash if the project is expected to return less than 3% (the average rate of inflation) per year.

Employment

Higher levels of employment are usually considered a good indicator or economic growth and stability. From a procurement perspective, however, employment also tells us what to expect about trends in services-category spend. With an increasing portion of organizational demand being met ‘as-a-Service’, employment rates (and therefore costs) are critical to our cost to operate. For some industries, services are so important that even the factors driving alternate economic measures like ‘Prices Paid’ are services too – the New York Metro area is a perfect example of this, as are many other major cities. It’s why you must know the product/service mix in your spend before trying to figure out what approach to take. The other consideration relative to employment is talent availability. Higher employment means lower UNemployment (see how I did that?) and therefore less candidates available to compete for open positions. Luckily for procurement, we have a wide array of talent options at our disposal through contingent workforce programs. Striking an optimal mix of employment models presents an opportunity to maximize both costs and capabilities.

Optimism

The final economic index I’ve learned to appreciate is optimism – in the ISM-New York Report on Business we call this the Six-Month Outlook. In other words, as of today, how much better or worse do you expect things to be going six months from now. It would be unrealistic to expect the outlook to be more specific than a trend up or down, but even this insight provides important information for others watching the economy. The fact that this question is even asked is an indication of how special procurement’s perspective on the economy and business activity is. This perspective is due in part to our understanding of the organization’s anticipated demand levels and the prices we are paying, but also the conversations we have with suppliers about the conditions they are doing business in. Competition drives prices down, differentiation drives margins up, increases in demand drive prices up, and large increases in price may push buyers and suppliers to innovate together to come up with alternatives, and procurement has a front row seat for it all.

Many people in the business world watch the monthly reports on business, whether the ISM national reports or regional reports, like ISM-New York. If they value procurement’s perspective on the economy enough to wait for the numbers to be released each month and report on the findings, then we should have a greater appreciate for our own insight and do everything we can to deepen it.

 2017 could be a pivotal year for the procurement profession. The Big Ideas Summit in London will help lay the ground work for all of  the changes ahead. Our London event takes place on 23rd February and you can now register as a digital delegate now! 

Is Generation X The Forgotten Generation?

Is Generation X the equivalent of the middle child? Is it the forgotten generation? Unsurprisingly there’s more to the generation than that.

generation x

“In general, middle children tend to possess the following characteristics: people-pleasers, somewhat rebellious, thrives on friendships, has large social circle, peacemaker.” (Parent Magazine)

Generation X includes adults in their mid thirties up through age 50. They – or I should say WE – are younger than baby boomers and older than Millennials. There you go! I’ve now summed up everything most people know about Generation X!

But there is so much more to our generation – especially when you look our potential for career development. Baby boomers are retiring and Millennials are just getting started, while Gen X is transitioning into the vast majority of leadership positions.

Even though Gen X’ers are an up and coming group, we don’t get much attention. We are the forgotten middle children in a crowded professional landscape. And yet, we are also the answer to many of the professional challenges being faced by our older and younger peers.

An Inter-Generational Bridge

A 2014 article from The Pew Research Center stated, “…in most of the ways we take stock of generations – racial and ethnic makeup; political, social and religious values; economic and educational circumstances; technology usage – Gen X’ers are a low-slung, straight-line bridge between two noisy behemoths.”

If you look at most of the writing about the generations in the workplace today, commentary that isn’t about Boomers or Millennials, is about how they struggle to work together. Clearly a bridge is exactly what they need.

By combining the traits of people in Generation X with the characteristics of middle children, we are given a unique opportunity to help ourselves, our peers, and our companies by being independent peacemakers who are ready to blaze new trails and leverage the power of our networks to make change happen.

Dear Baby Boomers, Share your wisdom and we will make your legacy soar

While not all you baby boomers are on your way out, the vast majority of you have gone as far as you are going to go professionally. Making sure that your career experience is not lost to retirement requires it to be passed down to someone who can understand it.

You lament that you have little in common with Millennials, making it hard to connect and communicate with them. Gen X, on the other hand, shares quite a bit with the Boomers, and we are in line to fill your positions next.

By passing along your wealth of knowledge to Gen X, you ensure that your legacy lives on and that the organisation achieves a kind of continuity. This also takes advantage of a whole new range of opportunities, and helps translate the lessons of the past to the conditions of the future.

Dear Millennials, We can help you make your revolutionary ideas a reality

Despite the fact that we seem just slightly less old than everyone else you report up through, we aren’t as established as you might think. We have seen a lot of change come to the workplace – we’ve driven some of it.

We’re (almost) as tech savvy as you are, and we have a lot of experience with change management. We also know a thing or two about how to work the room, and have the connections that will help us sell your ideas in a way that respects their spirit while making them seem achievable.

By working together with Gen X, you can take some of those wild new ideas you’re so famous for and make them possible – without having to wait until you are in their thirties.

Take it from an X’er that was in her 20’s about 15 minutes ago – you are going to be 35 in a flash.

From One Gen X’er to Another

Baby Boomers and Millennials have an edge in that they are getting a lot more coverage than we are, but we must accept some level of responsibility for that as well. The advantage of being – well – ignored, is that we have lots of extra time to prepare ourselves for the professional roles still to come.

Get an MBA, earn a certification, take a class, build a diverse network of colleagues, and do it in a way that is uniquely ‘X’.

We want to be connected to our colleagues, which is made easier by the fact that (unlike the Millennials) a lot of us will pick a general area of professional focus and stick to it over the course of our career.

Many Gen X’ers have families, which means we have an incentive to commit to a company for a few years at a time – simultaneously increasing our impact at that organisation and boosting our earning potential.

On the other hand, we aren’t bound by geography, which might otherwise see us spending our precious networking time in Flinstone-esque ‘Lodge’ meetings with local procurement professionals.

We are fortunate to have at our disposal sites for virtual networking that allow us to form new relationships quickly and easily, not to mention all over the world. With this power, we can leverage ideas across industries and continents in a way that our predecessors could only dream of.

The biggest challenge for Generation X is defining our own identity. The best way to do that is by leaning on each other. Not to the exclusion of the other generations, but in a way that allows us to leverage and amplify the power of our own generation.

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