All posts by Procurious HQ

Throwback Thursday – Procurement’s Greatest Ambassador?

If we’re to change the image of procurement, we need a figurehead to point to. Could Apple CEO, Tim Cook, be the ambassador the profession needs?

Tim Cook - Procurement Ambassador

One of the key goals of Procurious is to improve the image of our profession. We are the brown cardigan brigade no longer (unless it’s a snazzy, modern cardigan!). The latest generation of procurement pros are highly intelligent, motivated, and tech-savvy.

However, to help push the image change along, procurement needs a figurehead. A high profile ambassador for the profession, who highlights just how far you can go. And Apple’s current CEO, Tim Cook, could be that ambassador we need.

We take a look back at an article from last year, highlighting Cook’s journey to the top.

Procurement’s Greatest Ambassador?

It’s fair to say procurement has received a bad rap over the years. We’ve been dubbed corporate policemen, paper pushers, roadblocks, as well as a raft of other unflattering names we dare not mention.

Thankfully, due to the innovation and hard graft of procurement professionals, the function is shedding this negative image and starting to become recognised as an integral part of any successful business.

Perhaps the greatest exemplar of procurement’s ascendancy to date is Apple CEO Tim Cook.

In 1998, Tim was the vice president of Corporate Materials for the Compaq computer company. The role saw him hold responsibility for the organisation’s procurement and inventory operations.

Despite having no real intentions of leaving this role, the enigmatic Steve Jobs managed to convince Cook to take on a role at Apple (pre iMac, iPod, iPad, and iPhone).

Stellar Performance

Tim’s performance at Apple was stellar, particularly from a procurement point of view. In his authorised autobiography of Steve Jobs, Walter Issacson described Cook’s methodical approach to supplier rationalisation and inventory management.

“Cook reduced the number of Apple’s key suppliers from a hundred to twenty-four, forced them to cut better deals to keep the business, convinced many to locate next to Apple’s plants, and closed ten of the company’s nineteen warehouses.

“By reducing the places where inventory could pile up, he reduced inventory. Jobs had cut inventory from two months’ worth of product down to one by early 1998. By September of that year, Cook had gotten it to six days. By the following September, it was down to an amazing two days’ worth.

“In addition, he cut the production process for making an Apple computer from four months to two. All of this not only saved money, it also allowed each new computer to have the very latest components available.”

The procurement and supply chain decisions made by Cook highlight the critical importance of procurement to Apple’s success. The strength of the company (and arguably its competitive advantage) has been in building and managing a complex network of suppliers.

The company has then successfully leveraged this network to produce ground-breaking technology products. Put simply, without the supply network, there is no product.

Recommendation From The Top

Cook’s performance in Apple’s supply chain clearly caught the attention of Steve Jobs, who gave the follow recommendation of Cook during his departure from the firm.

Jobs stated, “I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.”

The promotion of Cook to CEO shows that the board of Apple understands the critical importance of external suppliers as a source of innovation for the company. Apple clearly sees the procurement function as the conduit to successfully managing these relationships and ensuring the future success of the business.

Apple is the world’s most valuable brand. It has undergone a remarkably successful business transformation, and has produced products that have changed the way we interact with each other and the world around us.

With so much of this success being attributed to great procurement practices, could there really be a stronger endorsement for our profession?

“Tim Cook came out of procurement which is just the right background for what we needed.” – Steve Jobs

The Benefits Procurement Can Realise from RPA Adoption

Understanding the benefits of Robotic Process Automation (RPA) can help sell adoption to the rest of the business.

RPA Procurement Automation

In our first instalment, we described the fundamentals of robotic process automation (RPA), how it is typically used, and some pricing trends.

Here, we discuss some of the benefits of RPA, as well as what to think about as your organisation considers adoption.

The RPA Value Proposition

Purchase-to-pay organisations that are implementing RPA expect benefits in higher productivity and lower operating costs (Fig. 2).

RPA
Fig. 2 – Benefits Expected By Purchase-to-Pay Organisations with RPA

These improvements are realised in a number of ways, including:

1. Ability to bypass the IT department

Because RPA does not require IT development resources, and calls for a very limited technical infrastructure, businesses are able to undertake these projects by themselves.

However, a big lesson learned from early pilots is that IT needs to be involved in some capacity early in the project, even though this may bring in extra bureaucracy and potentially slow down progress.

Getting IT to sign off on performance demands, system availability, security infrastructure, etc., will pay dividends later when RPA is in production.

2. Shorter, less expensive development cycle time

The typical timeline to develop and deploy RPA is six to eight weeks, dramatically less than traditional, IT-led application integration projects. The latter’s cost to design, program, test and maintain system interfaces is significant. In some instances, it can exceed the cost of the software itself.

The ability to link systems through the user interface layer in a non-invasive way, without these costs, is core to RPA’s value proposition.

3. Labour Cost Savings

RPA vendors claim to deliver as much as 60-80 per cent in savings. Feedback from participants in interviews conducted by The Hackett Group indicated that returns are much more modest, but still significant at 20-30 per cent.

4. Increased Auditability and Consistency with Fewer Errors

Routine tasks executed by humans are prone to errors and inconsistent application of rules. Robots apply the same set of rules consistently and operate without errors.

Furthermore, all tasks executed by robots are recorded, and these execution logs are auditable.

5. Improved Scalability

Human capacity is difficult to scale in situations where demand fluctuates, leading to inefficiencies such as backlogs or overcapacity.

In contrast, robots operate at whatever speed is demanded by the work volume. Multiple robots can be deployed when demand exceeds the capacity of a single one.

However, an RPA must still work within the performance limitations of the software with which it is designed to interact.

Looking Ahead

We predict that RPA may have an impact on the number of people needed to perform mundane, repetitive tasks. Ultimately, this is a good thing, because many of these resources can be reassigned to more rewarding activities and job satisfaction will increase.

Fortunately, this shift in the profile of source-to-pay talent is consistent with the direction that procurement has been heading in for some time, moving away from transactional work, to more of a trusted advisor and partner to the business.

This will require complex problem-solving abilities, interpersonal skills, emotional intelligence and intellectual curiosity. There will also be a strong need for people who understand how to orchestrate a combination of automation solutions to obtain the best results.

Patrick Connaughton is the Senior Research Director, Procurement Executive Advisory Programme at the Hackett Group. He has published groundbreaking research in areas like spend analysis, contract life cycle management, supplier risk assessments and services procurement. You can contact him via email or on Procurious.

You can also learn more about Hackett’s Procurement Executive Advisory Program here.

The Truth? Businesses Still Struggle with Indirect Procurement

The procurement industry is evolving at a rapid rate. But it still has broad issues with indirect procurement and how to determine value for money.

Indirect Procurement

No matter where you are in the world, indirect spend is a notoriously difficult area for CPOs to control. Because of this, it presents huge potential for savings for companies.

Direct Procurement refers to the act of acquiring raw materials and goods for production. Indirect Procurement is the act of purchasing services or supplies required to keep the day-to-day business ticking over.

However, there’s a consistent message out there that procurement, and indirect procurement in particular, is under-appreciated by the broader organisation.

Establish Internal Targets

Celia Jordaan is the founder of Australia’s Ichiban Commercial Solutions, which helps businesses with tendering, risk management and procurement solutions.

Over two decades, Jordaan has worked in a number of different countries, locations and cultures. She has experience across procurement, supply chain, contract management, law and risk.

The procurement function often influences the company budget, but doesn’t always entirely control it, she says. The difficulty with indirect procurement or procurement for internal use, is that it’s difficult to determine value for money.

“Indirect procurement is generally seen as soft services that aren’t adding direct value to the cost of production or core business. However, it’s a service that’s vital in order to be able to effectively make the business run,” Jordaan explained.

The downfall in many cases is a clear budget. Professionals need to establish their own internal targets around value created, and qualify what they do and the value they create.

“There’s no real crystal clear way to measure the cost avoidance elements of indirect procurement. It presents a lot of complexities.

Procurement professionals need to sell their own value, and put their own processes in place that helps them demonstrate the value they can create for an organisation, Jordaan says.

Procurement Outsourcing?

David Rae, editor of Procurement Leaders, wrote in ‘Procurement Outsourcing – Managing Indirect Spend’, that change will come when CPOs get involved and influence buying behaviour across the entire organisations, and in every category.

They must also apply the same rigour to the indirect categories as they do to direct materials, he wrote.

“The research shows that, while there is still much work to be done, CPOs are tackling this area. One way of doing so is to engage an outsourcing partner, who can often bring category expertise, greater buying power and improved compliance to an organisation’s indirect spend categories.

“And, while it continues to struggle to match the likes of HR and finance in terms of uptake, there are signs that procurement outsourcing is really taking off,” he wrote in the report.

Under-Investment in Indirect Procurement

Meanwhile, a research report by Proxima explores what procurement can do to redefine how it’s perceived by the broader organisation.

The report says that a vast majority of C-suite executives feel that indirect procurement is under-invested across the UK, Europe, US and further afield.

This prompted Proxima, in conjunction with NelsonHall, to run a research study to uncover perceptions, attitudes and desired outcomes of indirect procurement. It was hoped this would catalyse the common sense that procurement could and should play a greater role in most businesses.

Responses indicated that indirect procurement in some organisations is perceived to have a role that is tactical and administrative. Some respondents advised that it can create process blocks, and can, on occasion, even be antagonistic to specialist suppliers of the business.

Five Key Challenges

The research found five key challenges for the procurement function, impacting on CPOs’ ability to effectively manage indirect expenditure.

These include, as outlined here in the report:

1. Lack of capacity

The indirect procurement team has to focus on sourcing commonly purchased and high volume goods and services, as well as transaction processing.

2. Lack of political clout

CPOs involved in the research study tended to be quite self-critical. This was particularly prevalent in areas such as their ability to introduce process improvement, and to increase the level of spend under contract.

3. Lack of mandate

The primary responsibility for most indirect procurement categories often lies within the business units. For some categories, such as travel, it may not even be clear as to who actually owns the policy.

4. Lack of awareness and low visibility of indirect procurement

Indirect procurement is often seen as less important than direct procurement in the eyes of senior executives. It is seemingly even less important at the business unit level. Many stakeholders view an indirect procurement professional’s role as the ‘rubber stamper’ at the end of the process.

5. Organisations lack the skills required for effective stakeholder management

A common perception held by CPOs and CFOs is that the indirect procurement function has to find ways of working more effectively alongside the various business units and stakeholders within each business unit.

Taxi! Have Google & Uber Been Pipped to Self-Driving Cabs?

A number of major companies are developing self-driving taxis. But have they been pipped to the post by a Singaporean start-up?

Self-driving Cars - nuTonomy

Over the past few years, a number of organisations have been in a race to develop, and launch, self-driving vehicles.

Google and Ford have both entered the market for self-driving cars, while Uber has been more active in the taxi market. It’s even rumoured that Apple are set to join the competition in 2021 with ‘Project Titan‘.

But it appears that they have all lost the race to put a car on the road to a small, US and Singapore-based start-up.

Self-Driving Taxis in Singapore

nuTonomy was founded in 2013 by two MIT researchers, Karl Iagnemma and Emilio Frazzoli. It has both a US and a Singapore base of operations.

On Thursday last week, nuTonomy started a trial of its self-driving taxis in the business district in Singapore. The company is starting its test with just six cars, but hopes to double this number by the end of the year.

However, the timing of the test makes Singapore officially the first country to allow autonomous, self-driving cars on its roads.

Passengers in the business district will be able to hail the cabs using a smartphone app. In the early stages at least, nuTonomy engineers will be sitting in the vehicles, partly to monitor performance, but also to take over driving if needs be.

Significant Market Developments

The nuTonomy testing marks a significant development in the self-driving car market. Ford has made large investments in new technology companies, and increased its development team in Silicon Valley.

This is all part of the company’s ‘Ford Smart Mobility‘ plan, which aims to make Ford a leader in autonomous vehicles, particularly those for ride-sharing.

Uber have also confirmed that they will start testing of autonomous taxis in the coming months in Pittsburgh. As with nuTonomy, cars will be hired via their smartphone app, and a driver and engineer will be in the vehicle too.

However, there are questions about how much autonomy the cars will be given on the Pittsburgh streets. Experts have pointed out that there are still limitations behind Uber’s, and other companies’, vehicles, and that completely self-driving cars are still a way off.

“The reality is these cars will be closely supervised systems because it doesn’t matter if they are 80 percent self-driving or 99 percent self-driving, you will still need a human involved for the bit that is not,” says Bryant Walker Smith, an assistant professor of law and engineering at the University of South Carolina.

Significant Issues to Overcome

It raises an interesting question as to when truly driverless vehicles will be on the road, and on the market. There still appears to be a number of issues that must be overcome before this can happen.

As one article from The Register points out, no matter how advanced the technology has become, there are still glitches. While the rules of the road are common nature for many of us, it takes a lot longer to programme this into a computer.

Google’s self-driving cars are prone to be confused by traffic lights (or things that look like them), poor road markings, and glare from sunsets. Junctions, cyclists, bad drivers, and adverse weather conditions also create issues that need to be solved.

And, of course, there’s no accounting for human interactions. Tesla have recently been forced to tweak the definition of their ‘Autopilot’ software to a “driver assist function”. This comes after confusion that it was actually a self-driving function you might find in an aircraft, or science-fiction movie.

There is an argument that people want a self-driving car that doesn’t require them to have any input. But, without the technology to support this, there will be a reliance on some level of human interaction for some time yet.

Would you be happy to get into a self-driving taxi? Or buy a self-driving car? What would be holding you back from taking this journey?

In a week full of scandal in the procurement press, we’ve been scouring the headlines for the hottest topics…

Major US Retailer to Investigate Fake Cotton Claims
  • Major US stores are investigating if bedsheets and pillowcases are made from non-Egyptian cotton despite being labelled as such.
  • The investigations follow Target’s severance of ties with large textile manufacturer Welspun India.
  • Walmart, Bed Bath and Beyond, Costco and Macy’s are all supplied by Welspun India.
  • Welspun has announced the appointment of an external auditor to audit supply systems and processes.

Read more at the Chicago Tribune

Australian Companies Embroiled in Foreign Bribery Scandals
  • Two major Australian companies have been implicated in bribery scandals relating to foreign contracts.
  • Staff from mining company, Sundance Resources, have allegedly bribed the leader of the Democratic Republic of Congo to secure approval for a major iron ore project.
  • Additionally, Snowy Mountains Engineering Company staff allegedly bribed officials to secure a $2.3 million sewerage project in Sri Lanka, and a $2.2 million power plant project in Bangladesh.
  • The list of Australian companies implicated in foreign bribery continues to grow, with recent allegations implicating Tabcorp, Leighton Holdings and BHP Billiton.

Read more at The Age

Safety fears as Mylan Hikes EpiPen Prices

  • Pharmaceutical company Mylan is under intense scrutiny after raising the price of its epinephrine delivery system, the Mylan EpiPen, from $57 to over $500 in the US.
  • Mylan acquired the EpiPen auto-injector in 2007, but has only recently raised the price after the demise of its competitor Auvi-Q.
  • The single-use EpiPen delivers approximately $1 worth of epinephrine per injection. 
  • Commentators fear patients will stop buying the EpiPen, opting instead to inject by syringe. This risks an incorrect dosage or accidental injection in a vein, which can be fatal.  

Read more at Forbes

Fire Services Told to “Collaborate” on Procurement
  • The UK Government has told fire authorities across the country that they need to collaborate more on procurement.
  • It comes after a report that many authorities are paying vastly different sums for similar items.
  • The government said in a statement it was “determined to help authorities adopt a collaborative approach”.
  • This is the first time nationwide statistics on fire authority procurement have been released.

Read more at Supply Management

Procurement Goes Cloud-Based To Mitigate Risk

Many procurement professionals aren’t taking all available routes to mitigate risk in overseas transactions. Cloud-based solutions can change this.

Mitigate Risk

A high percentage of procurement professionals aren’t doing everything in their power to mitigate risk when trading with overseas countries, according to an Australian fintech startup.

Trade with international countries can be fraught with issues, warns Hugh Young, General Manager at Octet.  And while there are tools on the market to help mitigate risk, there are plenty of major companies that continue to trade without any kind of secure platform in place.

Mitigate Risk – Know Who You’re Dealing With

Young says that, to start with, it’s critical that you know who you’re dealing with. “It’s critical that anyone dealing with China and ordering meaningful volumes actually goes and visits the supplier on their own turf, which is a lot different to meeting them at a trade show,” he says.

He also adds that nothing can replace the peace of mind that comes with actually seeing the factory you plan to do business with. This helps to get get a clear picture of their production processes, something that’s paramount to mitigating risk.

Another thing for companies to consider is the importance of maintaining the professional relationship, and visiting at least once a year. Some businesses have chosen to engage quality control agents in China, or other countries, which is also worth considering.

Fraud Risk in Exports

“The other major issue is fraud risk. Quite often Chinese exporters are SMEs and they’ll require a company to pay a large balance to be able to finance the manufacturing of the goods for you.

“But we don’t recommend agreeing if they’re asking for the balance to be paid before the shipment has left China. The risk of fraud is too high. It’s also possible for these suppliers to go out of business, taking your money with them,” warns Young.

Another common issue is the exporter deliberately uses a related company bank account, which looks almost identical to the other one. This can cause confusion for procurement, and could mean money is paid into an account that isn’t the exporter’s at all.

Businesses must also be sure to carefully check bank account details, and the names on all of the invoices they’ve been sent. At all times, individuals must check the documented supplier paper trail carefully.

Don’t Get Caught With Hands in the Cookie Jar

While some companies have created their own secure online platform to mitigate risk, many others are leaving their company exposed by not utilising one of the myriad existing secure platforms on the market.

“The world is in a cloud environment. Procurement professionals need to catch up, and implement something that’s going to protect them and their company’s reputation. Everything is shifting toward a secure platform over the coming decade.”

Young says that it’s only a matter of time before something goes wrong for those not utilising a platform.

“The procurement department only needs to get their hand caught in the cookie jar once for the mud to stick,” he says.

Connecting Customers & Suppliers

Octect GM, Hugh Young
Octect GM, Hugh Young

Meanwhile, Octet has partnered with Chinese bank Asiafactor to provide SMEs with a global payment platform. The company will now connect its customers across China to more than 10,000 suppliers around the world.

The partnership means Octet can cater to both existing domestic small to medium enterprises, as well as a range of prospective exporters throughout China.

Octet has also been working with Westpac to offer Australian businesses a platform to facilitate overseas credit card payments. The platform supports 10 foreign countries, and is the first platform of its kind for Australian banks.

Octet is a supply chain management and financing platform that enables people to manage and pay international suppliers. 

The platform is utilised by more than 1,000 Australian and New Zealand importers, spanning more than 60 countries, and facilitating over $1 billion in transactions. Suppliers include Unilever, L’Oreal, Mars, BlueScope Steel and packaging giant Visy.

Big Ideas Summit 2016: Big Idea #11 – Making Agility Core

Chris Sawchuk states that procurement needs to make agility core to all of its activities in order to survive.

At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.

From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.

Agility Core to Success

Chris Sawchuk, Principal and Global Procurement Advisory Practice Leader at The Hackett Group, says that procurement needs to make agility core in all of its activities.

With new events, such as disruptive innovation, happening all the time, and new organisations being created, existing organisations need to be more agile in order to cope with these challenges.

Catch up with all the delegates’ Big Ideas from the 2016 Summit at the Procurious Learning Hub.

Want to find out more about Big Ideas 2016? And maybe what we have planned for 2017? You can visit our dedicated website!

If you like this (and you haven’t done so already) join Procurious for free today. Get connected with over 16,000 like-minded procurement professionals from across the world.

Maximising Scientists’ Most Precious Resource – Time

Latest Enterprise Reagent Manager (ERM) system streamlines procurement processes and user interface, freeing up scientists’ valuable time.

ERM - Scientist Time

In the pharmaceuticals and life sciences business, time is the most precious resource. The more time available to be spent on research, the more ability scientists have to innovate. To support this, procurement processes need to be accurate, swift and robust.

Mid-way through their Next Level 2016 event, SciQuest announced the release of the latest version of Enterprise Reagent Manager (ERM).

ERM is a chemical inventory management software module that gives researchers and scientists full control over research inventory, from sourcing and purchase, through tracking and disposal.

Differentiated by it’s offering as the first and only triple-federated search functionality, SciQuest’s ERM is used by 8 of the 10 top global pharmaceutical companies.

Dynamic & Responsive Interface

According to SciQuest, ERM allows users to check material availability from suppliers in real-time, and to search across all internal and external sources simultaneously.

“ERM 9 is up to 90 per cent faster than previous versions,” says Raj Aggarwal, SciQuest Product Marketing Manager. Aggarwal adds, “Users can only search chemicals not only by supplier, or text description but also by molecular structure.”

So what has customers excited about the new version? Raj explains it’s all about the new user interface, speed and the three-way search.

ERM’s speed comes via a more dynamic and responsive user interface. Raj explains, “One-click tiles speed up navigation to important tasks, while status icons display user actions, like items in a shopping cart, or requesting a container for use from inventory.”

Bruce Cherrin, Chief Procurement Officer at the University of New Mexico confirms this. He believes the new look and feel of the system will, “Drive higher adoption among users campus-wide and streamline our procurement processes.”

Fast, Real-Time Availability Checks

In addition to the search feature, the upgrade includes the following features:

  • Real-time material availability check from suppliers: Users can now search across all internal and external sources simultaneously.
  • Web service integration: External inventories and catalogues can now be incorporated into ERM’s search function.
  • To Do List: Researchers can checkout and manage items from labs or self-service areas, and conduct a transfer of ownership and update usage without a scanner.
  • Held Cart: Allows administrators to control purchases of high cost and/or hazardous materials from non-authorised personnel.

“Since ERM closely integrates with procurement, pharmaceutical manufacturers can control complex inventories with reduced general spend and disposal costs, optimised inventory use, and increased regulatory compliance while managing the risks associated with hazardous materials,” said Stephen Wiehe, President and CEO of SciQuest in their announcement.

SciQuest NL 16

Aligning ERM with Unlocking Value

It’s these sorts of enterprise wide business challenges that are driving SciQuest’s product strategy. We asked Raj how the new release of ERM aligns with this mission to unlock more value. Raj offered four reasons:

  • Expense Optimisation – The inventory system allows users to order from stock, rather than placing new orders for expensive reagents from scratch, and efficient, safe disposal.
  • Compliance – Scientists often deal with hazardous materials. Certification is required to purchase, store and use many of the reagents used. The system provides for more than just internal compliance. ERM also allows research institutes to ensure suppliers are meeting their certification and storage obligations
  • Safety – Maintaining safe labs is a paramount concern in the life sciences industry. With greater visibility, users can see what’s coming in before it arrives and make plans to safely store and manage their liability.
  • Compliance and Approvals – ERM has a robust permissions system which allows users to lock access to different levels by putting reagent requests into held carts. Approvals can then be granted based on spending limits that get put in workflow.

Regardless of the industry, leveraging information more effectively for the business is a clear mandate for the product team at SciQuest.

Raj concludes:  “ERM will help get inventory information out where users can see it, create ad hoc reports, and use this to anticipate, plan and mitigate. And most of all, it puts time back in researchers’ hands to innovate.”

For more information about Enterprise Reagent Manager, please visit SciQuest website or contact SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

The Big (and Alarming) Procurement Disconnect

Chris Sawchuk reveals an alarming disconnect between the most pressing issues for Procurement, and our ability to address them.

Big Disconnect

The number one priority for Procurement leaders this year? “Reducing Costs,” says Chris Sawchuk, Principal and Global Procurement Advisory Practice Director of The Hackett Group.

Before you stifle a yawn and declare this a no-brainer, it’s actually the first time since the depths of the Global Financial Crisis that Cost Reduction has been back at top of the heap in The Hackett Group’s annual Key Issues Survey.

“For some years now procurement’s top priorities have been about growing the top line, increasing influence and becoming a trusted advisor to the business,” explains Chris. He notes a clear shift in 2016. “It’s back to basics and the enterprise needs help to remain cost competitive in an ever volatile world.”

Speaking at SciQuest Next Level 2016, Chris doesn’t find it surprising to see Cost Reduction back at the top of the list. Particularly when more than half (55 per cent) of companies have a major enterprise cost reduction initiative planned this year.

However, Chris is quick to note the second highest priority for procurement leaders is driving top line growth. This is also consistent with the fact that nearly half of all enterprises have a major sales and marketing strategy optimisation initiative planned for the coming year.

Within The Hackett Group’s top priorities, the big mover is tapping supplier innovation. This has taken a significant leap up the list of ‘must-dos’ for procurement leaders this year.

“Increasing spend influence is always fairly close to the top, but more and more innovation is being looked on as an enabler for driving top line growth – as well as cost competitiveness,” says Sawchuk.

The Big Disconnect

So far its been a compelling whirlwind of data points, but it’s Chris’ next slide that has me concerned. This is where the disconnect lies.

It shows those priorities Procurement leaders think are most important to address, mapped against those which we also think will be most difficult to do.

These are the priorities that alarmingly fall into Chris’ ‘Red Zone’ – that dangerous, “Important, but rather tricky to do” box:

  • Tap supplier innovation
  • Improve agility
  • Increase spend influence
  • Elevate role of procurement as trusted advisor

Undoubtedly these are tough issues to address, not only for their complexity, but because they require Procurement to look well beyond it’s traditional value lens. They demand more than the ‘bread and butter’ cost-analysis and sourcing skills for which procurement is renowned.

So with a deep breath and a can-do attitude, Chris walks us through how Procurement leaders can get a handle on these important ‘Red Zone’ priorities.

Chris Sawchuk
Chris Sawchuk

Enough buzz words! What does it take to be a Trusted Advisor?

First up, Chris addresses what it actually means to be a ‘trusted advisor’. According to The Hackett Group’s annual survey, the top criteria determining what makes a trusted advisor are:

  • Consistently deliver on the basics (77 per cent)
  • Hire and retain high caliber staff (64 per cent)
  • Increase agility (61 per cent)

The main point to note here is there has to be consistency to this. “Procurement needs to do what it says it’s going to do,” says Chris. “Building trust takes time.”

When it comes to identifying high calibre staff, Chris doesn’t so much see a problem with the depth of the talent pool, but more with how we engage and retain top talent.

Chris also linked back to a concept discussed during Sigi Osagie’s earlier SciQuest keynote. Putting people at the centre of your strategy, really engaging them and helping create an environment where people thrive, is the real challenge.

Improve Agility  

Next up, agility. This has been a key thought leadership theme for Chris and The Hackett team over the past 12 months. “Procurement can’t be a hammer going about looking for a nail, we need to listen to our customers. What do they need? And if what they need is outside our portfolio, find out what we can build to help them.”

Again, drawing on Sigi’s presentation, Chris reminds us it’s all about ‘delighting the customer’.

Undoubtedly future leaders must be able to deal with ambiguity, provide differentiating intelligence to the business, make and implement decisions quickly and forecast and plan continuously to mitigate future risks.

“We need to think about how we weave agility into every aspect of what we deliver back to the business,” challenges Chris.

Hear more from Chris about Making Agility Core to all procurement activities.

Increase Spend Influence

Chris keeps this point brief. “As Procurement leaders, we cannot continue to fish in the same pond,” he explains. “We need to find new ways to source of value.”

A classic case of diminishing returns, if you will. To this he adds that we also need to improve the quality of our influence, not just the quantity.

Tap Supplier Innovation

As the biggest mover on the list of procurement priorities, Chris believes that the best way to encourage innovation is to make it part of the job and reward contributions.

Finding ways to support and encourage intrapreneurs – those people inside your business who can drive innovation and lead change – is how the most successful businesses of the future will steal a march on their competition.

Naturally Chris also advises that Procurement leaders need to be aware and up-to-date with innovations and trends occurring in the market place. “Get knowledgeable about big data, robotics, cognitive computing, mobility, cloud and social media, if you want to get ahead.”

Like anything that’s new, it’s going to require courageous leaders to address this gap between procurement priorities and preparedness. Chris suggests a good place to start, “Ask yourself, are these things we’re focused on? Should they be? And if not, why not?”

SciQuest Next Level takes place from August 21 – 24 2016. For more information on agility and the big procurement disconnect, visit www.sciquest.com or Tweet SciQuest via @SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

Uber: The Great, Untold Procurement Story

Addressing 800+ delegates at SciQuest Next Level 2016, Stephen Wiehe’s enthusiasm for design, disruption and innovation is infectious.

Overcrowded Uber

Stephen Wiehe, CEO at SciQuest, is clearly a man who likes to ‘make stuff’. A tinkerer, a designer, an ideas-man, maybe a little bit of a tech-head.

Opening Next Level 2016 with a take on ‘Procurement’s Future in the Era of Disruption’, Stephen starts with some alarming, if increasingly familiar, facts and stats:

  • We are experiencing the fastest technological change the world has seen
  • Interest rates are at their lowest since records began
  • Market volatility has doubled
  • We are seeing unprecedented, rising geo-political instability
  • 40 per cent of companies will be extinct in 10 years

It’s not long, however, before he pivots towards his passion for design, innovation and customer connectivity.

Stephen points to GE’s First Build R&D facility as an example of how businesses are going straight to the customer for their next great innovation.

A darling of the corporate crowdsourcing movement, First Build aims to invent new home appliances by creating a community of home enthusiasts, designers, engineers, and makers who share ideas, try them out, and build real products.

“Once upon a time, R&D facilities were hidden and process driven,” says Stephen, “Today, GE have flung open their doors to anyone who has a good idea. Customers with an idea can quite literally walk-in, use the machines and GE will help you build it.”

No Industry is Immune to Disruption

As a London local and 4.8 star rated Uber user, it still comes as a surprise when I meet someone who has never used this global phenomenon before. For me, Uber has transformed the way I move about the city, track payments, and even the amount of cash I need for a night out.

So when Stephen flicked up a slide of yellow taxi cabs, I must admit my first thought was, “Ok, here we go, Uber. Heard this before.”

But Stephen takes the analogy much further: “Uber is not a technology story, it’s a procurement story.

“The whole process of getting an Uber is really a procurement process. First you request an Uber – not dissimilar to filling out a requisition form. Next, there’s a sourcing event – Uber drivers, armed with your passenger rating, your location and destination, bid to win the job.

“Then, the passenger accepts the job, confirming they are happy with the driver’s rating and location. A contract is formed – we accept the job and the mode of payment is agreed. And finally the AP process occurs seamlessly and conveniently with your stored credit card details.”

Uber in a Traditional Procurement Lens?

Uber even provides a handy Spend Management Tool allowing the user to see their complete driving, payment and ‘performance’ history. Particularly handy for parents of teenagers, as Stephen points out!

The penny drops. I’ve not thought of Uber in this way before – a fully automated Source-to-Settle process.

But Stephen pushes us to go one step further. “Imagine if Uber had approached their business from a traditional procurement lens.  We’d have the lowest vehicles, more passengers per vehicle and cheaper drivers.”

True – Uber’s open network has flipped the transport industry on its head. Stephen explains that Uber looked at the cab industry from the customers’ perspective and wondered what total transparency, real time data, and an open and connected network could deliver.

And I for one am thankful they did.

disruption
Stephen Wiehe – CEO, SciQuest

The Disappearance of the Back-Office

Just like Uber, which has automated the entire administration process of booking and paying for cabs, Stephen predicts the concept of procurement administration will disappear in coming years.

The issue for most businesses is that they are trying to do the same things over and over, and (not surprisingly) seeing only incremental value delivery.

Stephen told delegates that businesses will only see a step change when they start to simultaneously use procurement automation, collaboration and insights to drive decision making.

When it comes to procurement, our customers want a simple, straight forward way to connect with suppliers, get what they need, and make a payment. Fairly or not, Procurement is all too often accused of being slow, cumbersome and hard to deal with. Not the ideal adjectives for a ‘Business Partner’.

Maybe Stephen is right. Maybe the key to unlocking innovation and value will come from the customer. Just like Uber and GE, is it time to put sourcing in the hands of the customers and people who need the products? It’s certainly time to think differently.

SciQuest Next Level takes place from August 21 – 24 2016. For more information on procurement and disruption please visit www.sciquest.com or Tweet SciQuest via @SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

Has Procurement Dehumanised The Sourcing Process?

It’s only a matter of time before the procurement profession realises that it’s dehumanised the sourcing process, a move that will negatively impact the industry.

Sourcing Process Relationships

Procurement needs a new measure of success that reflects its impact, not its output. This is according to a Melbourne-based procurement coach, and self-proclaimed procurement disrupter, Matt Perfect.

Procurement with Purpose

Just as conscious businesses are learning that profit is a by-product of business with purpose, so too savings will be a by-product of procurement with purpose.

Perfect argues, “What have we really ‘saved’ if we drive down our suppliers’ pricing to unsustainable levels?

“Levels where they are forced to compromise on service and quality, or worse, safety and ethics? Procurement needs a metric that reflects the exponential impact of its decisions throughout the supply chain.

“The impact on suppliers and their employees…and suppliers’ suppliers and so on. This metric must measure real human value. Not just economic value,” Perfect says.

Cost at Any Cost

The Melburnian has carved an enviable niche in the Australian procurement landscape. Perfect has worked in numerous procurement roles, including for FreeMarkets, National Australia Bank, Toll and The Faculty.

Now as an independent coach and facilitator, he advocates the importance of supplier relations, and feels that major disruptive change within the procurement industry is only a matter of time.

Perfect writes about the disruption of the procurement sector in white papers. One, titled Supplier Love and Why You Need More of It, published in July last year, explains that as much as 70 per cent of revenue now goes to third parties (according to Proxima Group). Never before have suppliers been more important stakeholders in an organisation’s success.

Yet, despite significant investment in procurement capability and strategic focus over the last few decades, many supplier relationships remain transactional at best and at worst, adversarial.

Businesses continue to prioritise shareholder value above all else, sometimes even at the expense of customers, employees and the environment, but almost always ahead of suppliers’ interests.

One might be forgiven for thinking that ‘cost at any cost’ is the primary operating model for these businesses.

Conscious Business

Conscious businesses understand that this is not sustainable. Fortunately, there is a better way, but it requires a fundamental shift in the way we define stakeholders and value.

“We need to be looking at ways to win the hearts and minds of suppliers, rather than purely relying on negotiation tactics. When you look at the mindsets of procurement professionals, relationships just aren’t playing a big enough part at the moment,” Perfect says.

“You need to look at supplier relationships and help improve those relationships to get better outcomes. I work to improve that level of trust in a relationship, with the view of generating greater impact. I also look at the broader impact of relationships, which comes down to how it affects the lives of people.”

Perfect says that procurement is ripe for disruption, and is in fact on the cusp of a major shift. Part of this shift should include the consideration of whether procurement accurately sums up the role – supplier relations could be closer.

“There will be a shift to a new age. A human age, which is a process that procurement doesn’t have its head around yet as a profession. We need to be more engaged with vision and purpose moving forward as a profession.”

Perfect believes the younger generation will drive the changes as they strive for a more human-centred career.

Remembering the Human Element in Sourcing Process

A focus on supply chain issues, and the human elements within supply chains, is another driver for change.

Other industries embrace change more readily than procurement has to date. Marketing, for example, understands that to be really effective and cut-through, it has to touch the lives of people.

The human relations industry has also moved away from seeing staff as a number and has improved the way it operates within the business environment by focusing on the people. Procurement hasn’t made this leap yet, he says.

“We’ve also got to be thinking about how to appeal to the hearts and minds of consumers. We need to head into this space as a broader industry if we’re ever going to survive. I urge my clients to be the change they want to see in the world.”

At the moment, the industry is narrowly focused on shareholder value, rather than a broader stakeholder orientation, which is drawn from the realm of conscious capitalism.

“There needs to be an interdependence that creates value without trading off one another,” he says.

People Over Process

Matt Perfect
Matt Perfect

Perfect has an undergraduate degree in economics from Cardiff in the UK, and pursued a consulting career before landing an analyst position, specialising in e-sourcing and online technology. This kick-started a procurement career spanning multiple consulting and management roles in a variety of industries.

He left The Faculty a couple of years ago to focus on coaching. He works to help his clients create better and more conscious relationships with their internal and external stakeholders.

“This is where I focus my energy now. Looking at all spending in procurement and how that impacts on people. I believe we all need to have a greater focus on people than process.

Since working as a procurement coach, Perfect has worked with Social Traders, CPA Australia and The Trusted Negotiator, among others.

You can follow Matt at mattperfect.com or on Twitter at @m8ttperfect.