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The Biggest Myth about Supply Chain Visibility

supply chain visibility
Photo by pascal allegre on Unsplash

Traditionally, when organisations have discussed supply chain visibility, the focus has very much been on the downstream. Why? Because common thinking is that the customer is king. And, as downstream visibility focuses on the customer, it is the first, and sometimes only, priority.

This has in turn given credence to the biggest myth about supply chain visibility, which is that downstream visibility is more important than upstream visibility. It’s high time this myth was busted, because this belief has a very narrow focus, and is not truly reflective of modern supply chain thinking. The truth is that upstream visibility is just as important as downstream visibility. Why? Because a lack of upstream visibility is just as likely to impact your customer.

Supply Chain Visibility – Upstream vs. Downstream

Before we get any further, let’s make sure to clarify some basic definitions.

Downstream visibility is a clear understanding of exactly how your products are moving down to your customer. Basically, it covers all the processes and actions that are involved in getting your finished product from your warehouse into the hands of the end user.

Upstream visibility, on the other hand, is a clear understanding of exactly how all the parts required to make your product are moving down through to your organisation. From a supply chain perspective, this covers all the processes and actions involved in getting what you need to create the finished product.

You might also occasionally hear the term “midstream visibility” to refer to what’s happening in production. From a supply chain perspective, these processes are often amalgamated into the category of downstream visibility.

Together, upstream visibility and downstream visibility combine to create end-to-end supply chain visibility.

Too Much Downstream Focus?

Let’s say, for example, that your company manufactures cameras. You need to make sure that you have full visibility of what’s happening when a camera is moving from your warehouse to your customer. Right from final testing right through to delivery to the store.

There are several processes that are available to organisations in order to track and improve downstream visibility. Depending on the complexity of the product in question, this can range from optimization of transportation and warehouse logistics and unifying ERP systems, to creating digital twins of their production, and more.

If your organisation is already looking at these kinds of projects, well done. But if downstream visibility is your only focus, you’re only doing half the job.

Without upstream visibility, you run the risk of not getting the parts you need to build your product. How are you going to get your cameras into the hands of your customers if you can’t build them in the first place? This is why upstream visibility is just as crucial as downstream visibility.

Upstream – Just around the Riverbend

So how do you get upstream visibility? A supply chain risk management programme is a crucial first step. If you’re not monitoring your suppliers (not to mention your supply paths, your own sites and your second and third tier suppliers too) for events that are going to impact them, then you have virtually no upstream visibility.

Here’s where you should start:

• In procurement: Your procurement department owns the relationship with suppliers. The department needs to have access to data allowing for all the necessary insight into any type of risk affecting your supply chain, both upstream and downstream.

• In your supplier sub-tiers: According to the Business Continuity Institute, most supply chain disruptions occur below tier one, where visibility can be even harder. You need visibility into not just your tier-one suppliers, but of all your sub-tiers. This is where good tier-one supplier relationships are key.

• With your major logistics hubs: What major logistics hubs are your supplies and your products going through? Do any of these areas represent bottlenecks? And are you aware of events there that might impact your supply paths? If not, you’re not going to be able to effectively mitigate threats.

• Your own warehouses and distribution centres: You need to monitor your own sites as much as you need to monitor your suppliers. Creating good communication lines and relationships with internal stakeholders is going to help here. The people on the ground will know best if issues are on the horizon, and then you can collectively work to implement actions and processes to prevent, or at least mitigate, them.

The supply chain visibility conversation is an important one to have in any organisation that has a supply chain. But if you’re focused on just downstream visibility, you’re missing half of the equation. And this could ultimately be the difference between success and failure.

Myth = Busted!

Find out more about upstream and downstream visibility, as well as Supply Chain Risk Management software, with Big Ideas Summit sponsor, riskmethods, here.

Want to get your wheels turning towards a supply chain career one could only dream of? Then don’t miss our upcoming Career Boot Camp with IBM – a free 5-part podcast series with some of the very best of the best. Check it out here: https://www.procurious.com/career-boot-camp-2019

Critical Factors for Selecting your Suppliers

What critical factors do you look for in your suppliers? What does an organisation have to offer to get their foot in your door?

When you think of procurement, and get beyond the savings agenda, then the first thing that comes to mind is managing suppliers. While employees may be the life-blood of an organisation, suppliers are definitely the nourishment and support that keep organisations alive.

Without suppliers and their extended supply chains, organisations wouldn’t have any raw materials to make into products, any products to sell, or anyone to deliver much-needed services. That’s why a good supplier relationship (or relationships) can be critical to your daily operations.

However, one bad apple, one flawed contractors could not only stop the seamless functioning of your supply chain. It could also harm those two vital elements for all businesses – trust and reputation.

Your Critical Factors

If supplier relationships are key, then surely procurement should be taking its time selecting the right ones. And given the importance of this, procurement also needs to be applying the right ‘critical factors’ when selecting their suppliers.

As has been discussed in the past on Procurious, there are a number of factors that must be considered when selecting suppliers. The only issue is that these don’t appear to have changed very much over the years, begging the question – is procurement doing everything it can to adapt these criteria in line with the external environment?

Sure, it’s high time that procurement was looking past the traditional criteria of cost and quality when making their assessments. But the truth is, there’s no getting away from them.

However, this isn’t necessarily a bad thing if they aren’t the only factors in the equation. As procurement professionals, you are probably only too aware of the myriad of other factors that you need to be accounting for, from cultural fit and financial stability, all the way through to ethics and sustainability.

So which are the critical factors that procurement should be using? Is there a list that we should all be looking at?

Join our Webinar

Help is at hand in the form of Procurious and Ivalua’s latest webinar, ‘Critical Factors for Selecting your Suppliers’.

Sign up now to join our panel of experts at 11am (BST) on Tuesday the 3rd of September:

  • Tania Seary, Founder, Procurious
  • Stephen Carter, Senior Marketing Manager, Ivalua
  • Fred Nijffels, Accenture Operations ANZ – Procurement & Supply Chain
  • Gordon Tytler, Director of Procurement, Rolls Royce

In the webinar, you’ll hear from a panel of experts on a range of topics including:

  • The importance of cultural fit in your supplier relationships;
  • If sustainability, social value and fair working practices are becoming more prominent for procurement;
  • What your suppliers are looking for in your organisation; and
  • How to start the conversation in your organisation to move away from just cost and quality criteria.

FAQs

Is the Critical Factors webinar available to anyone?

Absolutely! Anyone & everyone can register for the webinar and it won’t cost you a penny to do so. Simply sign up here.

How do I listen to the Critical Factors webinar?

Simply sign up here and you’ll be able to listen to the on-demand. 

Help – I can’t make it to the live-stream of the webinar!

No problem! If you can’t make the live-stream you can catch up whenever it suits you. We’ll be making it available on Procurious soon after the event (and will be sure to send you a link) so you can listen at your leisure!

Can I ask the speakers a question during the Critical Factors For Selecting Your Suppliers webinar?

If you’d like to ask one of our speakers a question please submit it via the Discussion Board on Procurious and we’ll do our very best to ensure it gets answered for you.

Don’t Miss Out!

This webinar promises to provide a fascinating insight for all procurement professionals into the Critical Factors you should be considering in supplier selection.

Make sure you don’t miss out by signing up today!

Intelligent Spend Management – Your Next Smart Move

Photo by Val Vesa on Unsplash

Bringing it all together by bringing Intelligent Spend Management to the business.

If you’re just buying office supplies, you’ve probably got a good idea what you’re spending on paper and pens. But odds are your budget goes beyond a few reams of ultra-white printer stock. And while you are specifically tasked with procurement, you actually help hold the reins and hold influence on multiple categories of spend — from direct and indirect goods, to services, contingent labour — even T&E.

True, this spending is spread out across your organisation and, yes, in many of these categories, spending is more decentralised than ever with employees all over the company buying what they need when they need it. And, it’s true that all of this spending and all of these categories aren’t even in your charge.

However, the business needs you to help bring all that spend under control across all those categories, so you can not only reduce costs, but also help your company:

  • Manage supplier performance holistically
  • Diminish delivery and reputation risks across the board
  • Improve compliance and enforce purchasing policies equally in all categories
  • Increase productivity across procurement and throughout the entire company

Changing Expectations

Organisations are expecting this and more from procurement.

  • They want you to collaborate with finance and supply-chain leaders and address spend management across the business.
  • They’re expecting you to bring more spend categories under control, to unify how you manage suppliers across all categories, and to help bring direct and indirect spending together with services and T&E to increase visibility into all your spend.

They want more, and there’s an easy way to deliver and manage every source and every category of spend in delivering one, unified view.

Unfortunately, the systems most businesses use to manage all of these different spend processes can create barriers between spend categories and keep people from working together. Intelligent Spend Management, on the other hand, is a strategy designed to bring those barriers down, so you can get visibility into and control over each and every area of spend. In one place.

Why Intelligent Spend Management Matters

Intelligent Spend Management means comprehensive policy and supplier management. This gives you oversight over indirect and direct suppliers while bringing that same level of discipline to services/external workforce suppliers as well as key travel suppliers.

And, integrated with your ERP system, an Intelligent Spend Management solution creates a common set of spend data — a hub where you can unify and clarify the information. You’ll also be able to:

  • Capture and centralise once-invisible spend like p-card transactions, non-PO invoices and direct travel bookings that used to slip through the cracks in your systems
  • Apply sourcing best practices consistently to all of your suppliers across all categories
  • Centrally manage supplier risk as well as tax and other regulatory requirements

It brings you best-in-class control of each spend category. This means you can manage the entire procure-to-pay process for direct and indirect expenses from a single solution. Imagine being able to:

  • Deliver a guided user experience that makes it easy to follow policy
  • Give users a simple way to make procurement requests, plus tactical purchases directly from suppliers
  • Ensure the suppliers you source, the prices you negotiate and the terms you establish are pulled through right to the point of purchase, so policy compliance becomes everyday practice
  • Capture data from across the process and use AI and machine learning to automate mundane tasks and serve up insight-driven recommendations at critical decision points
  • Strengthen supplier relationships and, ultimately, get more innovation from suppliers to improve how you work and what you deliver

And you can bring that same level of precision, efficiency and user experience for services, your external workforce – and the same level of control.

Presenting a Unified View

You get a unified view of spend. The Intelligent Spend Management solution connects procurement spend data with data from across spend categories, giving you a single, near-real-time view — without having to piece together reports from disparate systems.

This means you, your friends in finance and your supply-chain peers can see where every bit of your budget is going, and help the organisation:

  • Ensure that all spending is in line with corporate policy and priorities
  • Get up-to-date views into your KPIs, so you can adapt accordingly
  • Manage discretionary employee spend before it gets away from you
  • Feed this spend data back into supplier management and fuel stronger negotiations

Intelligent Spend Management breaks down the silos, so companies can control spend across the board.

This is about procurement, but it isn’t simply for procurement. Intelligent Spend Management enables you to work across categories and bring all the data together — so you can bring confidence to your company by bringing certainty to your spending.

This article was written for Procurious by Drew Hofler, VP of Portfolio Marketing for SAP Ariba & SAP Fieldglass.

Navigating the Choppy Waters of the Future – An Expert’s View

Photo by Garrett Sears on Unsplash

The US escalating a trade war with China by imposing additional tariffs on Chinese goods. The ongoing debacle of European trade policies over Brexit. The perennial Middle East crisis over oil. 2019 has not been easy for global businesses and their procurement professionals.

But given that it is only one-quarter of the exhaustion, could we benefit from an expert’s insights and frame strategies such that procurement can navigate successfully through the rest of the waters?

Sure! Zycus got in touch with the CEO & President of SIG, Dawn Tiura soliciting her point-of-view on how procurement professionals can navigate through the uncertain times ahead. Dawn, a former partner in a CPA firm, focused on early-stage Silicon Valley enterprises and high wealth individuals, kindly agreed to explain her actionable list of do’s and don’ts that every Procurement leader can benefit from.

Zycus: What elements should be central to our conversation on procurement in the coming year?

Dawn: One of the important conversations that procurement teams all over the world should reflect on at the moment is their understanding that every dollar-saved might not directly translate into company’s eventual revenue objective but they do improve the bottom line when the focus is consistent. We have the unique ability to impact not only bottom-line savings but also top-line growth. We have insight into all lines of business as they are making decisions, not in the rearview mirror. And, we have relationships with suppliers who are incented to bring innovation to us. If that is not enough, why not use equivalent revenue? That will get the attention of the CFO, CEO, and Board.

Zycus: Most organizations majorly use hard dollar savings as the primary parameter to measure procurement and sourcing performance. Would it be safe to say it is a dated method of measuring current performance?

Dawn: Absolutely. We have to stop using savings as our sole barometer for measurement. Let’s look at an example:

The spend of an organization is $500 million; the cost avoidance from sourcing efforts at 12% comes to $60 million. Net profit margin is 7.5%. The equivalent revenue to generate the same value from sourcing efforts is $800 million (or $60 million divided by 7.5%)

The amount of energy required by the company to generate $800 million in revenue is massive and clearly understood by all members of the C-suite. Therefore, reporting results in terms of “equivalent revenue” instead of “savings” positions the sourcing organization in a more impactful and compelling way.

While you would assume that others will make this calculation and realize this is the case, they don’t, or can’t make the analogy to give us the credit we deserve. We must step up and change the dialogue to get the respect we have earned. 

(Read Dawn’s complete blog that talks about this issue and a lot of others here)

Zycus: So the first focus of a procurement and sourcing professional is getting the C-Suite to shift focus from savings to equivalent revenue, what would you say would feature next in their “things to keep in mind” list?

Dawn: Third party risks. Procurement and Sourcing professionals should be particularly mindful about these threats and therefore should have a foresight aided by technology that would mitigate the potential of loss. A take charge approach towards risks is what the current environment demands. Procurement and sourcing teams all over are responsible for managing goals and key relationships for the organization. It becomes vital for them to work on these objectives while taking into consideration the various risks they might be exposed to. Strategical planning and readiness will help not only tackle these risks better but also ensure the routine operations and performance doesn’t get disrupted.

Zycus: From what we’ve seen, these discussions seem much underrated, what can organizations do to ingrain this line of thought across the team?

Dawn: You make a valid point. However, that is changing. Organizations are becoming more mindful that this change in mindset is long due, and they need to adapt. This is why we’re seeing more and more people investing in education and certifications, so they have the necessary skillset to tackle these changes better.

Zycus: Artificial Intelligence has created a lot of buzz. How do you think that is changing procurement today.

Dawn: There is a breakthrough using Artificial Intelligence to manage risks in tail spend. A lot of companies are still new to the idea of AI, but the use of AI will be a game-changer.

Zycus: Gartner’ predicts, “By 2022, 75% of all B2B tail spend goods will be purchased in an online marketplace.” Do you agree with this?

Dawn: Indeed. As legacy systems continue to phase out, it is only AI that can redeem procurement an improved balance sheet.

Another aspect of change that people might miss out on is accounting regulations changing concerning leases and procurement people need to be aware of the changes and impact on their companies.  While the implementation of the new lease accounting guidance will fall within the accounting department, procurement needs to be a part of this review to provide its perspective on any proposed changes to agreements and to do the cost/benefit analysis.

Zycus: Moving forward, one thing that has always been a concern is how procurement can have a facelift from being a more tactical function to a strategic one. So what steps would you recommend teams take for this significant makeover?

Dawn: A strategic mindset is crucial to this rebranding of procurement. This transition is what will make other functions value procurement’s take on importing sourcing decisions. For this procurement, professionals need to be all eyes on various risks and opportunities. Professionals must be mindful of changing technologies. They need to prepare for it with certification in third party risk management and sourcing professional’s coursework.

Procurement and sourcing teams should consistently measure their contribution to the enterprise. An excellent way to measure one’s impact on to company’s strategic objectives would be to create a chart that cascades from the top management down to the business units, and how at each phase, the person has contributed to every success. On this note report from the Hackett Group also states, “This is a unique time for procurement organizations. Never before have companies been able to derive more competitive advantage from superior procurement capability. The function’s role is shifting from a sourcing gatekeeper to a provider of insight and decision support, made possible by improved access to digital technologies, data, and advanced analytics. World-class procurement organizations consistently get better results with 29% fewer (but higher-paid) FTEs per billion dollars of spend.”

Zycus: One parameter to measure overall procurement impact would be to track contribution in top-level business objectives, what do you think could be other benchmarks procurement teams could use to measure performance holistically?

Dawn:We need to, as proactive procurement practitioners, change how savings from procurement is measured. “Equivalent revenue,” the term will not only consist of hard dollar savings but elements like savings through cost avoidance. Anything that impacts the bottom line and contributes to growth counts!  

Another common and useful benchmark used to measure performance is FTEs. The number of full-time equivalent employees (FTEs) needed to perform a process, or a group of processes is one way to gauge process efficiency. The fewer FTEs required to process purchases, the higher the efficiency and the lower the overall cost of the procurement cycle. However, consider only those who formally report into the procurement organization.

FTEs are employees who devote all or part of their jobs to sourcing activities, and they should factor into the measurement. Meaning, if a non-procurement employee spends a portion of his time to procurement or sourcing activities, he or she is a partial FTE. Their effort will also eventually add up to that of full-time employees.

Zycus: My last question to you is, what are three things procurement should start/stop doing this year?

Dawn: The first thing that Procurement professionals must stop is being transactional and writing checks. The second to stop would be to keep talking about savings over everything else, while the last one would be to learn to communicate in the language of the CFO.

Our Conclusion from the interview

A seemingly strong inference that can be drawn from this interaction is Procurement’s transition from a transactional to a strategic function. This shift in approach has been a necessity for some time now; statements from subject matter experts and veterans advising Procurement professionals advising alignment of goals and their measurement, to learn the language of a CFO instead of focusing on operational goals, go to show how vital that shift is now.

Read our latest eBook “Procurement Experts Outlook 2019” to gain more insights into what eight other experts predict for the procurement future.

References:

–         https://www.linkedin.com/pulse/may-i-vent-lets-change-how-we-talk-procurement-dawn-tiura/

5 Ways To Achieve Marginal Gains In Procurement

By Eugene Onischenko / Shutterstock

At the Big Ideas Summit 2019, Justin Sadler-Smith, Head of UK & Ireland, Procurement & Supply Chain at SAP Ariba shared his view of procurement in an insightful and thought-provoking presentation.

Among the issues that Justin talked about was an ever-decreasing time for procurement to react to the changing market environment and put actionable strategies in place. Because if procurement isn’t fit for purpose, not delivering against stakeholder expectations, then there is the potential for huge, negative impact from a brand and shareholder perspective.

There is a whole mix of uncertainties which are causing people to reassess how they are doing business and then ultimately doing it in a different way. Organisations, and procurement as part of them, need to be looking at what we are doing tomorrow and reinvent ourselves to become more competitive than they have been in the past.

As part of this Justin talked about an issue that is fast becoming a key for procurement to take account of and account for in its day-to-day operations. And that is leaving behind a positive legacy. Here is Justin explaining it in his own words:

Faster Reactions, Greater Purpose

When it comes to procuring with purpose, procurement professionals around the world need to be able to react quicker to changes in order to set the foundation for the legacy we should all be leaving behind.

Justin argued during his presentation that it’s almost as if procurement is in a race. In simple terms, those who are fastest to react, fastest to respond to changing demands are those who will win. It might not even be procurement who are the ones triumphing in the race, and that could spell the end for procurement as we know it.

The issue here is that many procurement professionals just haven’t been trained to do this. Without adequate training, much like an Olympic athlete, or Tour de France rider, there is no chance of being able to meet these demands and deliver what is required.

How do procurement professionals get trained up then? There’s no use knowing that there is a need to change unless there is willingness to do so, as well as more support to implement it.

Help is at hand, however, from an unexpected source. When Sir David Brailsford became Performance Director at British Cycling, he came up with the idea of breaking down the individual aspects of a race and then improving them one by one. The notion of ‘marginal gains’, was that a number of small, 1 per cent, improvements would collectively add up to a major competitive advantage.

It was this thinking that helped British Cycling dominate on the track at successive Olympic Games between 2004 and 2012, and then Team Sky/Ineos win seven of the last either Tours de France (not to mention other events and Grand Tours).

How then do we take this concept and apply it to procurement? Justin has shared his thoughts on this, helpfully broken down into five key areas.

Marginal Gains in Procurement

  1. Data – Where is data stored within your organisation and how easy is it for you to get it? How is HR data incorporated in your function? You need to look after people – those who own the data – as this is the life-blood of the organisation and you need to make the breadth and depth of your data valuable and usable.
  2. Productivity – procurement can drive this in an organisation by looking at different areas of automation that probably haven’t been looked at before. For example, how many people are really looking at AI as a way to change their organisation, without worrying about the spectre of job losses?
  3. Innovation – this is the concept of co-innovation by working in collaboration with suppliers to building differentiation. For this you need to get closer to your supplier base and remove any barriers to working closely with the right suppliers.
  4. Purpose – what do we mean by purpose? It’s the idea of driving social responsibility through supply chains at multiple levels. This is well beyond a tick box exercise now – it’s a must for good business as well as for making a better world. The idea runs beyond risk mitigation and focuses more on building value through sustainability.
  5. Well-being – people are living in a much more stressful period globally. However, by driving these needs and having a purpose, it can change the game when it comes to how people operate and feel. For procurement, this means attracting, retaining and caring for their top talent and nurturing their people.

Procure with Purpose

Procurious have partnered with SAP Ariba to create a global online group – Procure with Purpose.

Through Procure with Purpose, we’re shining a light on the biggest issues – from Modern Slavery; to Minority Owned Business; and from Social Enterprises; to Environmental Sustainability.

Click here to enrol and gain access to  all future Procure with Purpose events including exclusive content, online events and regular webinars.

4 Steps For Sourcing Pros To Win The Hearts Of Marketers

There are four steps sourcing professionals can take to win the hearts and minds of their marketing colleagues…

By 4 PM production/ Shutterstock

“Once upon a time, Martians [men] and Venusians [women] met, fell in love, and had happy relationships together because they respected and accepted their differences. Then they came to Earth and amnesia set in: they forgot they were from different planets.” “And since that day men and women have been in conflict.” 

These passages from John Gray’s best-seller “Men Are from Mars, Women Are from Venus” could be applied to procurement and marketing. It can seem at times as if they are from different planets.  And the result is a relationship that is often tenuous at best. Marketers see procurement as an overbearing watchdog that must be kept on as tight a leash as possible. Meanwhile, many sourcing professionals view marketing as the poster child for undisciplined spending. This disconnect exists because of fundamental differences between the two functions. They have different goals and objectives, different mindsets and different business cultures.  So, is there a way to bridge the gap between procurement and marketing? Improving the relationship ultimately requires the commitment of both sourcing professionals and marketers, but there are four steps sourcing professionals can take to win the hearts and minds of their marketing colleagues.       

These passages from John Gray’s best-seller “Men Are from Mars, Women Are from Venus” could be applied to procurement and marketing. It can seem at times as if they are from different planets.  And the result is a relationship that is often tenuous at best. Marketers see procurement as an overbearing watchdog that must be kept on as tight a leash as possible. Meanwhile, many sourcing professionals view marketing as the poster child for undisciplined spending. This disconnect exists because of fundamental differences between the two functions. They have different goals and objectives, different mindsets and different business cultures.  So, is there a way to bridge the gap between procurement and marketing? Improving the relationship ultimately requires the commitment of both sourcing professionals and marketers, but there are four steps sourcing professionals can take to win the hearts and minds of their marketing colleagues.       

1. Make the Goals and Objectives of Marketing Job One  

The starting point for sourcing professionals is to recognize that marketing is all about revenue growth. Marketers live and breathe revenue growth and other growth-related objectives. As a result, they tend to value effectiveness over efficiency when thinking about marketing programs and investments. This creates a potential flashpoint with sourcing professionals, who are trained to focus on cost efficiency.  So it’s critical for sourcing professionals to position their role in the right way. They need to make it clear that they understand that marketing’s goals and objectives are paramount to the company’s survival, and that the role of procurement is to support marketers’ efforts to achieve those goals and objectives.  

2. Focus on “Optimizing the Budget”  

Marketers often believe that the primary objective of procurement is to cut costs, regardless of the consequences. In contrast, the objective of conscientious marketers is not to spend less, but to spend better. Therefore, it’s important for sourcing professionals to emphasize that their purpose is to help marketers optimize the marketing budget and obtain the greatest possible value from every marketing dollar that is spent.  In fact, it’s a good idea for sourcing professionals to drop the terms “cost cutting” and “cost savings” from their vocabulary entirely when dealing with marketers.  This approach is more than a communication tactic. Most marketing expenditures should be viewed as investments, not as “garden variety” operating expenses. Therefore, they should be evaluated by the return or value they produce, as well as their costs.      

3. Recognize that Marketing is Different 

As a sourcing professional, the second key to building an effective working relationship with marketing is to recognize that the marketing spend category is different from almost every other category that you encounter. Then you need to make sure that your marketing colleagues know that you know they’re different. What separates marketing from most other spend categories is the degree to which intangible and subjective factors play an important role in purchase decisions. When marketers are selecting an agency, for example, two of the most important factors in the selection process are how well each prospective agency understands their company’s brand and the quality of each prospective agency’s creative work. Both of these factors are intangible, and they must be evaluated subjectively. This is a case where proposal cost and the results on a vendor scorecard are less important than other factors in the ultimate purchase decision. There are also, however, some types of marketing purchases that are suitable for typical procurement processes. One example is the purchase of printed marketing materials. Advances in print production technologies have transformed printing from a craft to a manufacturing process. So it’s now possible to obtain work of comparable quality from several commercial printing firms. It addition, the specifications for printed products can be defined in detail, which makes it easy to compare proposals from multiple printing firms. Under these circumstances, obtaining competitive bids from a group of pre-vetted printing firms is just good practice and helps ensure that marketing is buying printed materials at competitive prices. The important point here is that sourcing professionals must recognize that many marketing purchase decisions will not follow typical procurement norms, and they must be prepared to adjust their expectations and processes accordingly.       

4. Land and Expand  

In any relationship, it takes time to develop trust and confidence, especially if some level of skepticism exists when the relationship begins. Therefore, when sourcing professionals first begin to work with marketing, it’s important to take a “land and expand” approach.  By land and expand, I mean that sourcing professionals should first seek to work with marketing on “low risk” purchases. Marketers may perceive purchases as low risk because of the dollars involved, or because the transactions don’t have major or long-term strategic importance. Once the working relationship is established – and once trust and confidence have developed – sourcing professionals will have a better chance to become involved with larger and/or more strategic purchases.  Sourcing professionals and marketers can build a productive working relationship if they make the effort to understand each other. If they are willing to respect each other’s legitimate goals and objectives, the four steps I’ve just described will enable sourcing professionals to jump start the relationship and build a successful joint outcome. 

This article was originally published on Future of Sourcing.

Procurement Experts Outlook 2019

An interview with the Senior Research Director at The Hackett Group, Jimmy LeFever.


By Billion Photos / Shutterstock

Welcome to Zycus Procurement Experts Outlook 2019. In this interview, we have Senior Research Director, Procurement Advisory Practice at The Hackett Group, Jimmy LeFever.

Zycus: What is the most prominent trend visible in 2019?

Jimmy LeFever: Digital transformation is the ruling trend which Procurement has to continue focusing on to develop strategic roadmaps. While some organizations have significantly outperformed others, some organizations have are fast gearing up for digital transformation.

Zycus: As you mentioned, digital transformation does give an organization an edge over others. What is it that best-in-class organizations do differently to stay ahead of the curve?

Jimmy: Best-in-class organisations have a focus on talent and skills. They are rethinking their approach to attract talent, invest in development, and plan better retention strategies. Some organizations are even beginning to create new roles, e.g., procurement-specific data scientists and digital specialists. Many organizations have implemented advanced data, analytics, and visualization tools. The focus on digital skills is as strong as the focus on storytelling and explaining complex concepts helping businesses find the right market solution.

Zycus:  Do you mean that along with attracting the right talent pool, organizations should also focus on talent retention to benefit in the long run?

Jimmy LeFever: Absolutely! I can see more and more companies focusing on stakeholder experience. This means Procurement is going beyond delivering primary responsibilities to the stakeholder and moving towards improving the stakeholder experience via streamlined processes and promoting the wellbeing of the business.

Zycus:  Most people consider procurement, tactical and technical. But when you talk about stakeholder experience, it is beyond technology and strategy. Do you think Procurement requires rebranding?

Jimmy LeFever: The brand perception that Procurement has is myopic around savings and savings alone. Such knowledge holds people back from seeing the strategic impact procurement can have in the organization’s overall objective. The function can play a massive part in making the organization more agile during times of unpredictable changes. However, to change this perception of a rigid, slow, and tactical function, Procurement needs to take a few steps in the direction of rebranding itself.

Zycus: Procurement’s scope of work is changing and expanding, but the image transition hasn’t been proportional to this. What are some things Procurement can do to rebrand or reinvent its image in an organization?

Jimmy LeFever: First and foremost, organizations should strive to build a strong brand identity, brand value, and brand goal. Then, all the teams should work in sync to deliver the goal. For example, many organizations are moving towards more sustainable ways of doing business. As supply-chain and procurement professionals, we can provide that brand value by adopting a sustainable procurement model. Such a change in behavior will significantly impact both the global economy as well as the environment.

Zycus: Since we are talking about sustainability, what suggestions do you have for procurement teams when they look into the market for a source-to-pay provider?

Jimmy LeFever: My suggestion will be that they should select a vendor who can make a difference by employing rigorous standards. They should look out for providers who can assess the way they operate and do business, and affect their local communities and the environment. Many organizations are also looking to grow their supplier diversity programs to be more inclusive of underrepresented groups within their supply base.

A provider with stringent practices and standards will be impactful when measured consistently. Benchmarking is another way, a systematic method of regular monitoring to discover best practices and improve continuously. As you’re probably aware, The Hackett Group is the leader when it comes to process and technology benchmarking. For Procurement, it is to critical benchmark and measure to identify problem areas, weak links, and modification and debugging of the current strategy.

Zycus: What are procurement benchmark metrics that a procurement leader should track to measure his team’s performance effectively?

Jimmy LeFever: The two primary measurements that have long been at the forefront are the cost of Procurement and the cost savings that Procurement can achieve. For procurement leaders, those should continue as great metrics.

Zycus: We often see Procurement Leaders focused on just savings as a holistic parameter to measure performance effectively. Do you think the result garnered would be the complete picture? What other things can we consider?

Jimmy LeFever: Yes, organizations overlook two other metrics. I have already discussed stakeholder experience, and the second one is ROI. ROI is an excellent performance measure because it looks at cost and cost savings holistically. Stakeholder experience is a little tricky because it isn’t easily quantifiable. What can drive value for the business is to acknowledge Procurement’s role aligned with business objectives. Focusing on cost savings alone will rarely line up to meet the broader goal.

Zycus: As we conclude, what are the three things procurement leaders should start/stop doing in 2019 to achieve the goals you have informed us?

Jimmy LeFever: First, stop pushing out information that nobody cares. Second, stop focusing on just savings and widen your scope. Third, for an organization to value Procurement’s efforts, staff should be aligned with the business objectives.


From this interview, we can conclude that if Procurement has any directive this year, it is to widen its horizon! And to do so, organizations need to-

  • Move from tactical to strategic, which is more value-based
  • Align goals with their brand value
  • Adopt sustainable Procurement

Following these three will not only rebrand Procurement’s image as a strategic partner but will also increase its impact and value within the organization.


Read our latest eBook “Procurement Experts Outlook 2019” to gain more insights into what eight other experts predict for the procurement future.

Human Rights Falter In Grey Areas Of Procurement Policy

Workers are often the victims when there are gaps in legal procurement and ethical procurement, but businesses nowadays have a lot to lose as the lines between profit and social conscience are no longer so easily defined… 

Back in 2010, rotten Apple stories started flashing up on smartphones everywhere. Forget tales of environmental unsustainability, these concerned social injustice: poor pay, unhealthy conditions and worryingly low levels of worker welfare. Then came the shocking news of staff suicides.

Attention focused on a prime link in the Apple supply chain: a vast 1.4-square-mile megafactory complex owned and run by Foxconn Technology Group, a Taiwanese multinational contract-manufacturing company, specialising in electronics.

Dubbed ‘Foxconn City’, the mini metropolis housed almost half a million workers on a giant industrial park in Shenzhen, China.

Fast forward to 2019 and Apple is still sourcing from Foxconn, across various sites. The roll-call of Foxconn manufacturing, present and past, still reads like a who’s who of the tech world, and includes other monster brands such as Google, Huawei, Microsoft and Sony, to name but a few.

So, given that Apple was soon to become the first public company on the planet worth $1 trillion, how did it get embroiled in such a dubious ethical sourcing saga in the first place, plus seemingly fail to crisis-manage its public relations effectively when the story broke?

The simple, grim fact is that Apple and the tech community are by no means alone in this. The recent history of procurement by global consumer brands is littered with the reputational detritus of bad ethics and selective legality.

Fast fashion, in particular, has struggled to keep its name out of incriminating headlines, with ethical procurement issues ranging from ongoing stories around ‘dirty’ cotton, through ‘cry for help’ labels sewn into high street clothes, to the tragic Rana Plaza factory collapse in 2013, where 1,134 lost their lives.

Sourcing scandals also continue to flood out of food and agriculture. Ethical issues served up for public consumption range from TV exposés of supermarket chicken suppliers tampering with ‘kill dates’, to the abuse of water rights by industrial-scale avocado farmers in Chile.

Across all sectors and societies, employment remains the most mapped, but least navigable, legal and ethical intersection.

Figures from the International Labour Organization (ILO), released most recently in 2017, revealed that more than 40 million people worldwide were in modern slavery in 2016, including around 25 million in forced labour. Of those in forced labour, some 16 million were being exploited in the private sector. Furthermore, there were more than 152 million estimated victims of child labour, almost half of whom were aged between 5 and 11.

Ethical procurement is essentially a people business, affecting lives and livelihoods, for good or ill, says group director at the Chartered Institute of Procurement & Supply (CIPS), Cath Hill.

“Applying rigorous ethical standards to your supply chain is not just about compliance or completing necessary paperwork, but implementing good governance and preventing exploitation of human beings across the globe for the sake of profit,” she says.

In international waters, though, standardisation is a slippery fish.

If not a definitive and demonstrable difference, often at least, there exists a commercial and cultural tension between the norms of legal and ethical procurement. Discrepancies abound in a grey area between the two disciplines and, if unchecked and unpoliced, carve out a policy gap where human rights fall down.

Legal standards can lag behind best practice, especially in relation to global companies with complex supply chains, explains Martin Buttle, strategic lead for general merchandise at the Ethical Trading Initiative (ETI).

“A company that meets local labour laws in one country could still breach international minimum standards. The UN Guiding Principles on Business and Human Rights make it clear that businesses have a responsibility to respect human rights even in countries where national law is weak, or poorly enforced,” he says.

Based on ILO conventions, the internationally recognised ETI Base Code of labour standards has been designed to tackle exactly this kind of cross-border inconsistency and jumble of jurisdictions, representing a commitment to ensure all workers are free from exploitation and discrimination, paid a living wage and enjoy conditions of safety, security and equity.

Stepping out of the moral maze for a moment, there are also many bottom-line business-case benefits to be gained by adopting such an ethical approach, suggests Mr Buttle: “It can maintain the supply of goods, increase productivity and quality, and enhance a company’s reputation with its customer base, which is increasingly expected by consumers.”

However, it is often the pressure of competitive marketplaces and overly aggressive procurement practices or pricing policies that result in damaging knock-on effects, he says.

“Brands should understand how their actions impact on their suppliers’ ability to uphold labour rights. For example, a company with poor purchasing practices, such as unrealistic deadlines or unit prices, can cause challenges for its suppliers, leading to increased risk of poor wages and excessive working hours. This is particularly the case if a supplier feels forced to accept orders below the cost of production to win contracts.”

All too often, there is little communication and accountability, says Alex Saric, smart procurement expert at Ivalua: “Cost is the only discussion point and data isn’t shared effectively, while risk and CSR assessments can be a ‘tick-box’ exercise, meaning transparency initiatives end up half-baked.”

Weaknesses notwithstanding, big brands can still set a positive agenda for supplier behaviour, beyond compliance. “If suppliers see that being responsible is more likely to win them a contract, ethical practices change from a minimum requirement to a valuable key differentiator. They must operate sustainably, or face losing out to more ethical competitors,” Mr Saric says.

While any ethical shift is relatively slow and undoubtedly late, legislative momentum is only pushing in one direction and businesses would do well to watch this space closely, suggests Lee Rubin, counsel and global sourcing expert at international law firm Pillsbury Winthrop Shaw Pittman.

“When it comes to lawmaking, legal and ethical considerations are merging, typified by the Modern Slavery Act. While not all sections of the Act are directly applicable to business, the provision around ‘transparency in supply chains’ impacts the largest brands and companies.”

Serious money is also flowing more towards the good and the green, adds Mr Buttle: “Many investors understand that poor human rights practices in the supply chain can put their investment at risk. With a growing interest in social impact, we are starting to see the investment community influencing business decisions.”

All in all, this collective chorus calling for ethical procurement is simply becoming too important to ignore, says Ms Hill: “It is not only the right thing to do, but also the lines between profit and social conscience are no longer so easily defined. News travels fast and bad news travels at lightning speed.”

The heat is most definitely on, says Shaun McCarthy, director at leaders in sustainable procurement Action Sustainability: “These days the court of public opinion is an unforgiving place and brands need to be aware they are playing with fire when it comes to ethical procurement.”

Ultimately, therefore, brands that muddy transparency, frustrate traceability and neglect communications get burned, concludes retail expert and consumer champion Martin Newman: “Consumers will shop with their feet and their mouse. If you pay this lip service or they think you’re being disingenuous, they will not only not buy now, they’ll never come back; and they’ll tell all their friends and family about it.”

This article, edited by Jim McClelland, was taken from the Raconteur Future of Procurement report, as featured in The Times. 

4 Terms We Should Ban In Procurement

We asked a number of procurement leaders to reveal the procurement term they would most like to ban, for good!

Every procurement professional has a different opinion on the terms that should and shouldn’t be used in their day-to-day working lives. Some terms are loathed because they undervalue the huge contributions procurement make to the organisation. Others are just downright confusing to anyone unfamiliar with procurement lingo.

Because we quite like a healthy debate, we asked a number of procurement leaders to reveal the procurement term they would most like to ban, for good!

1. Cost-cutters

“This is something I really feel is doing a discredit to the profession – it’s very important we are being seen as value-adding procurement people.”

Amelle Mestari, Head of Procurement – Bouygues Energies & Services

“We’ve been spending a lot of time reeducating the business around the extra value we bring so it’s not simply about getting a better unit price it’s about the wider value we can bring to the organisation.”

Gemma Bell, Head of Purchasing – L’Oreal

2. Savings Targets

“Sure, Procurement has to reduce costs and be financially motivated but you don’t see many organisations mission statements being to save money. Nowadays it’s crucial that procurement is measured on its contribution to delivering organisational goals and not just on savings.”

Chris Cliffe, Director – CJC Procurement



3. RFP

“I think there is still a lot of confusion around RFP as silly as it sounds. It’s something we band about and we know exactly what it means but when you speak to stakeholders it’s always the first thing they ask ‘what is an RFP and what does it mean’ and it actually means different things to different people. So I would there must be a different term we could use or a different way we could articulate what that particular process is.”

Chris Emberton, CPO – Clifford Chance

“If I’m going to speak to one of my stakeholders, if they don’t understand the language I’m speaking, how on earth is that going to help me in the business.”

Lucy Bunting, Head of Procurement

4. Negotiation

“It’s what everyone assumes we do and I think it comes to a point where you always get the hospital pass at the end of the day when someone says ‘I need you to negotiate this’ – so it means you’ve done something wrong.

Matt Beddoe, Head of Procurement – Nestle

These responses were obtained from attendees at Big Ideas Summit London earlier this year. If you’re a procurement leader and you’d like to get involved with similar discussions and networking at Big Ideas Chicago on 18th September, we’d love to have you there!

Big Ideas Summit Chicago 2019

It’s never too late to take control of your procurement career. And what better way to do so than spending a day with the profession’s best and brightest minds. 

At Big Ideas Summit Chicago 2019 we’ll be joined by 50 thought leaders to discuss how to set yourself apart from the pack, the neuroscience of decision-making, the evolving relationship between human and machine and procurement with purpose. 

By enrolling as a digital delegate, no matter where you are in the word, you’ll be able to…

  • Follow the day’s action from the comfort of your sofa
  • Submit questions to our speakers and the 50 CPOs who will be in attendance on the day
  • Gain an insight into the future of procurement
  • Watch video footage from the event including exclusive interviews with our speakers and live-streams of the day in action!

Want to get your wheels turning towards a supply chain career one could only dream of? Then don’t miss our upcoming Career Boot Camp with IBM – a free 5-part podcast series with some of the very best of the best. Check it out here: https://www.procurious.com/career-boot-camp-2019

How Public Sector Procurement Can Have Social Value

With public sector organisations becoming increasingly aware that their procurement decisions have an impact on local communities, some are rethinking how they award contracts.

By Jacob_09/ Shutterstock

Both private and public sector entities are becoming more interested in how their organisations impact society. Whether it’s in contributing to the community or managing the impact on the environment, organisations recognise they can change their local communities through who they pick to deliver goods or services.

Traditionally, it had been assumed that choosing a supplier that added social value may mean compromising for a sub-standard quality product or service, but views are slowly starting to change.

“They recognise the benefits of working with social enterprises, but are ruled by the need to mitigate risk and deliver efficient and economic services,” says Beth Pilgrim, co-founder of Supply Change.

“Often companies will just go to suppliers they know. What we are trying to explain to the public sector is that adding social value into your supply chain doesn’t have to be difficult or require extra work.”

Ms Pilgrim established Supply Change in 2018 with colleagues Aoise Keogan-Nooshabadi and Verena Wimmer after the trio conducted a series of research studies on the public sector procurement process. They found that while public sector bodies were keen to award contracts to social enterprises, they struggled to do so.

“One of the key themes that came out of our research was that social enterprises struggle to navigate public sector procurement processes,” Ms Pilgrim says. “The existing portals are not really tailored towards them, so they don’t get good visibility.”

In 2013, the UK government’s Social Value Act came into force, obligating public sector bodies to look at the social and environmental benefits of awarding a contract to a supplier, as well as the economic ones.

Heralded as a game-changer by the then-government, the Act has nudged public bodies to look more closely at the attributes of companies bidding to win work.

Despite this, some experts say that the legislation doesn’t go far enough, with a company’s social and environmental points score only accounting for a very small percentage of the overall total, and the outcome weighted towards other factors such as quality and cost.

“A number of leading authorities have recognised this and increased the social value element of their contracts,” says Ed Cross, executive director at procurement advisory group Odesma.

Mr Cross says that upping consideration of social value attributes could be good news for smaller businesses competing for contracts, but adds that the public sector still has some way to go.

“There seems to be a lack of trust in smaller enterprises, particularly social enterprises, from the public sector,” he explains.

“Part of this is down to the false assumption that social enterprises working with volunteers or part-time employees aren’t as reliable as larger organisations with full-time, paid employees.”

Mr Cross’s sentiments are shared by many, who feel that smaller enterprises can often face a real battle just to get an initial foot in the door.

“One of the biggest challenges smaller businesses face when it comes to gaining access to contracts that offer social benefits is the tick-box process of tenders for contracts, as well as how public sector guidelines are inflexible,” says Craig Knowles, marketing manager at procurement software group Market Dojo.

“The tick-box approach often means small businesses that might not fit specific criteria are left at the door before they’ve even been given the chance to prove themselves.

“There needs to be a change in attitude on taking “risks” on small business as many, often wrongly, believe they don’t have resources to work through big tenders when in reality this couldn’t be further from the truth.”

Despite widespread concerns that social enterprises and small and medium-sized enterprises (SMEs) are still missing out on contacts from the public sector, there is evidence of innovation.

Supply Change’s Ms Pilgrim says initiatives at some local authorities show how awarding contracts to smaller, local businesses can be transformative for the local community. She cites Preston in Lancashire as an example.

In 2013, the council brought in external consultants to evaluate whether it would be possible to redirect some of its annual contract-award budget to local businesses which had clear social impact objectives. Since doing so it has stimulated the local economy, putting money into local firms and increasing employment.

“We have seen how that can be a real success story,” says Ms Pilgrim. “Preston has a strategy of spending money within their local economy to build up SMEs, social enterprises and the voluntary sector as much as possible. It has resulted in a turnaround in the local economy.”

Similar projects are now underway across the UK, with Manchester City Council and Birmingham City Council among the larger authorities to consider how they can alter their approaches.

For SMEs and social enterprises looking to get a piece of the action, Malcolm Harrison, group chief executive of the Chartered Institute of Procurement & Supply, says small firms should play to their strengths.

“SMEs and social enterprises need to work hard to showcase the flexibility, innovation and financial rigour they can provide,” he says.

“To help SMEs, government should do more. Simpler language, less jargon and the chance for an open dialogue all help SMEs to compete with large companies. SMEs can themselves take charge and become more visible to potential contractors, and websites such as Contracts Finder and Compete For can be a great way of finding opportunities.”

One of the biggest challenges smaller businesses face is the tick-box process of tenders for contracts, as well as how public sector guidelines are inflexible.

This article, edited by Peter Archer, was taken from the Raconteur Future of Procurement report, as featured in The Times.