All posts by Procurious HQ

Why We’re Embracing e-Procurement in 2016

While e-Procurement has been around for a number of years, it seems to have made significant strides in a number of areas recently.

e-Procurement

You might have seen that the Procurious team attended the eWorld Procurement & Supply Conference in London last week. This bi-annual event is the leader for procurement innovation and it was great to be a part of. We’ll be sharing some more content about our experiences there soon.

However, it has been interesting to note that the subjects of e-procurement and technology have turned out to be hot topics all-round in the procurement and supply news over the last seven days.

The Ukraine has introduced e-procurement to help fight corruption; Verian, a software solutions company, has announced the release of its e-procurement solution; and a report by Webexpenses has claimed that UK workers are hindered by outdated technology.

Ukraine Introduces e-procurement

Ukraine are launching a new electronic public procurement system this April which will make procurement in Ukraine more transparent and save money.

The system, called ProZorro, will be mandatory for all public procurement tenders. To date, 15 per cent of public sector buyers, approximately 3000 of them, have signed up voluntarily to ProZorro, as well as 10,000 potential suppliers.

Arseniy Yatsenyuk, Ukrainian Prime Minister, said in January that public procurement had been a source of corruption, something ProZorro will prevent. The system will also reduce government spending and lower prices.

Verian Aim to Raise User Engagement

Verian, a US-based cloud spend management and P2P solutions provider, recently announced the release of its winter e-procurement solution, aimed at helping to change user behaviours to gain the benefits of e-procurement such as greater efficiencies and cutting cost.

Businesses will be provided with a configurable solution that allows users to track performance metrics and top performers. It will be possible to see a visual representation of the impact of a user’s individual behaviour on the success of the organisation.

Heidi Murphy, Director of Procurement, YMCA of the Greater Twin Cities commented that, “We wanted these metrics to show users how they were personally impacting the process, and create a common ground for communicating with them on something other than policy adherence.”

Verian are hoping that the latest updates to its software will help with user engagement, long believed to be one of the main barriers to successful e-procurement implementation.

UK Held Back by Outdated Tech

A recent survey on workplace technology has revealed that 85 per cent of UK office workers believe their company’s technology is not up to scratch.

The survey, conducted by Webexpenses, a cloud-based expense management provider, also revealed that the workers believed that if this situation were to change, work would be completed more efficiently.

Over a quarter (26 per cent) of participants specified that it was the IT systems which they felt needed improvement, while 41 per cent thought that the process of managing teams and internal communications could be easily enhanced with better technology.

The report ultimately reinforces how crucial it is for businesses to engage with the latest technologies. Don’t get left behind!

As always, we’ve been on the lookout for more of this week’s top procurement news stories.

Foot and Mouth Disease

  • The US has calculated that an outbreak of foot and mouth disease could cost the livestock industry in excess of USD$188 billion.
  • The Livestock and Foreign Agriculture Subcommittee met to discuss how prepared the US are to handle such an outbreak and determined that there was an alarming gap.
  • Michael Conaway, Agriculture Committee chairman and Republican Congressman, said, “It is essential we have all of the plans and infrastructure in place so we can be suitably prepared against intentional or unintentional introduction of plant or animal pests and disease”.
  • The hearing formed part of a series by the committee highlighting the importance of agriculture to national security.

Read more at Supply Management

Australia to Boost Defence Procurement

  • Australia is to increase spending on defence by AUD$29.9 billion over the next decade, including funding to help SMEs access global supply chain markets.
  • The Department of Defence has published its 2016 Defence White Paper outlining strategic defence priorities and challenges up until 2035.
  • The investment plans include: a continuous naval shipbuilding programme, starting with nine future frigates and 12 offshore patrol vessels and 12 submarines.
  • The government is also creating a new Centre for Defence Industry Capability and a new approach to defence innovation. 

Read more at Supply Management

Apple’s Supply Chain Recovery

  • J.P. Morgan analysts tracking the Apple supply chain issued a note to investors this week, revealing that build projections for the coming months are better than had been anticipated.
  • Having initially forecasted iPhone sales to drop up to 15 per cent quarter over quarter, units are expected to be flat between March and June, at about 45 million units for each.
  • Their visits with the supply chain suggest a build rate of 2 million units for the new 4-inch “iPhone SE” this quarter, growing to 4 million in the June quarter.
  • The  “iPhone 7” update is expected to arrive later this year.

Read more at Supply chain 24/7

India Expands e-Waste Recycling Company

  • Attero, an Indian company based outside New Delhi, has patented a technology which extracts gold and other precious metals from electronic waste.
  • The company collects one million pounds in weight of mobile phones and computers per month in India and resells the precious metals it extracts back to the electronics industry.
  • Attero has won the backing of US investors such as the International Finance Corporation and Draper Fisher Jurvetson to help it expand into the US.
  • It is much cheaper to install Attero’s urban mining centres than the European counterparts and the centres take up less space.

Read more at Supply Management

Denmark’s Out-of-Date Food

  • The first supermarket in Denmark called Wefood selling food beyond its “best before” date has opened to help cut the 700,000 tonnes of food waste produced by the country each year.
  • The food is still safe to eat but would be considered waste by supermarkets because it has passed its “best before” date, has damaged packaging, is labelled incorrectly or too much has been produced.
  • The Danish minister for food and the environment, Eva Kjer Hansen said “A supermarket like Wefood makes so much sense and is an important step in the battle to combat food waste.
  • Similar stores across the country are planned if the first is a success.

Read more at Supply Management

The Best Companies to Work for 2016

The Sunday Times released its “100 Best Companies to Work for 2016” last week, and there was a new name at the top of the list.

Best Companies to Work for

London-based online insurance retailer, Simply Business, beat the competition to top the main list this year. Not only has the business never been in the top spot before, it was a completely new entry for 2016.

The retailer beat telecoms reseller, Chess (up one place to second, from third in 2015), and Red Carnation Hotels (first in 2015, but third this year), into first place.

How To Be ‘The Best’

The Sunday Times has been running their Best Companies survey since the year 2000, attracting the big names in UK business, all trying to make one of the high-profile lists – Best Companies; Best Small Companies; Best Not-for-Profit Organisations.

The organisations register themselves to take part – 925 did so this year – but it’s their employees who decide if and where they make the list. This year, over 240,000 employees completed anonymous surveys about their employers, rating that on the following categories:

  • Leadership – the head of the company and senior leaders
  • Wellbeing – stress, pressure and work-life balance
  • Giving Something Back – if companies are putting back into the local community and society in general
  • Personal Growth – whether staff feel stretched and challenged by their job
  • My Manager – how they feel about immediate and day-to-day managers
  • My Company – how they feel about the company, rather than the people
  • My Team – how they feel about their colleagues
  • Fair Deal – how happy they are with pay and benefits

It’s not a one-time thing either. Firms choose to enter on a year by year basis, and it’s clear that they need to keep engaging with employees and working hard to stay on the list. There were 79 new entrants in the three lists for 2016, meaning some companies will have to work hard to regain their place next year.

Secret to Success

Analysing the survey results this year, The Times has highlighted team spirit as one of the key factors in enabling companies to succeed. Although many of the survey participants said their workplace stress was increasing, this was frequently outweighed by the benefits of a strong staff identity.

Jason Stockwood, CEO of Simply Business, also highlights employee empowerment as part of his business’ success. Since taking over as CEO in 2010, Stockwood has worked to build an engaged workforce, aimed at bringing benefits to all business stakeholders.

He says, “It’s a fact of modern business that by investing in a happy, engaged workforce you’re also investing in your customers. Getting it right internally is good for everybody, including the SMEs buying our products.

“Six years on we have grown from 130,000 to 350,000 small business customers and the workforce has doubled in size. This has only been possible by making every single member of the team feel empowered to achieve their full potential.”

Not All About Rewards

And working towards being one of the best companies doesn’t necessarily mean spending more money. In fact, strong leadership, a focus on employee engagement for all employees, and ensuring a good work-life balance were all seen as more important factors for the top companies this year.

It was also found that small companies were out-performing their larger counterparts across all the categories this year. According to Dr Ian Dennis, Best Companies’ Director of Research, the teamwork found across the small organisations that is making the difference.

The Table Toppers

It was all change at the top of the Best Small Companies list, while two of the top three from 2015 were up at the top again in the Best Not-for-Profit Organisations.

Best Small Companies to Work for 2016

  1. Paragon Interiors Group (New Entrant)
  2. Phaidon International (23rd in 2015)
  3. Educ8 (New Entrant)

Best Not-for-Profit Organisations to Work for 2016

  1. SLH Group (1st in 2015)
  2. Wales & West Housing (3rd in 2015)
  3. B3Living (7th in 2015)

To see the full “Best Companies to Work for” lists, and get more information on all the companies involved, visit The Sunday Times.

Why It’s Critical to Keep Your Skills Up to Date

Technological change is disrupting every industry and profession around the world, and obliging professionals to ensure their skills are up to date.

Keep your skills up to date

In recent weeks, Procurious has published a number of articles on personal development, training and up-skilling. The idea of keeping skills up to to date, and making time for learning and development, are applicable not only in procurement, but also to virtually every profession in every country.

However, this is not to say that all the onus is on the individuals to take responsibility for their development. It’s important also for organisations to ensure that resources are made available to allow employees the opportunity to take advantage of the training that is available.

AT&T – Remaining Competitive

AT&T is a US-based telecommunications company, currently owned and operated by SBC Communications. In the USA, the company is the second largest provider of mobile phone services, and the largest provider of fixed phone services. The company also provides broadband services.

The rapid pace of technological change in the telecommunications industry has left AT&T vying to remain competitive against larger technology organisations, such as Google and Amazon. Part of the strategy for remaining competitive in this industry is ensuring that employees’ skills are up to date.

It was estimated that approximately 280,000 employees need to update, or learn, coding skills, something that the organisation is supporting through the provision of eLearning. The company will reimburse around $8,000 (USD) per year per employee for this training, although this will still mean employees are funding some of the training themselves.

Up-skill. Or else…

While this may sound like the organisation is being supportive of employees’ efforts to ensure they have the skills they require to perform their job, there is something of a darker undertone. In essence, AT&T are forcing their employees to learn these skills, or find that their career choices are “very limited”.

CEO, Randall Stephenson, has been quoted as saying people who do not spend 5 to 10 hours per week in online learning will “obsolete themselves with the technology”. The time commitment involved means that many employees are now working evenings and weekends, on top of their day jobs, just to keep up to date.

The company also plans, eventually, to include personal development and learning as part of performance reviews too. This will be based on what people have studied, how well they did, and whether they are willing to keep learning.

The Right Reasons

It would be easy to point the finger at AT&T and say that they are being unfair. That they shouldn’t be forcing employees to learn skills, or essentially be out of a job. However, there are many organisations who do not offer the support that AT&T are giving their employees.

Yes, employees own time and money are required in order to keep pace, but if these employees don’t have the same skills as those at competitor organisations, then the chances are good that AT&T will cease to exist, and those employees will be looking for new jobs in an ultra-competitive job market.

It is also not to say that AT&T are leaving their employees to fend for themselves. The company has a programme called “Vision 2020”. It combines online and classroom-based work in subjects like digital networking and data science, but also looks at old skills that can be transferred to new careers.

AT&T management want to ensure that the company has a future, and the employees have got on board with this, and are actively working to make sure that they have the necessary skills to do so.

Stay ahead of the personal development game by making use of all the eLearning resources at your disposal. Check out the Learning Hub on Procurious for over 80 free video and audio resources, from learning about procurement, to learning from the experts.

Manufacturing in China? Here’s What You Need to Know

Manufacturing in China might be a cost-effective solution, but it can bring with it inherent risks to global brands.

Manufacturing in China

For procurement professionals, that means trying to understand the cultural nuances that dictate how to do business in China.

Stories of issues have appeared in the media, including now-defunct Australian boot manufacturer Bennett’s Boots blamed a Chinese factory for trying to reduce its margins for the collapse of the entire business. While early orders were perfect and business grew, subsequent orders were cheap imitations, with 80 per cent of the container load of boats un-sellable.

Company founder Amanda Bennett told BRW magazine that: “Success to the Chinese is trying to do things behind your back and get away with it. I don’t mean that in a derogatory way, it’s a cultural thing.”

Navigating the Cultural Landscape

But there are companies that specialise in helping foreign companies wanting to manufacture in China navigate the cultural landscape.

Chris O’Halloran is the founder of Striking Group, a project management consultancy, and has been to China dozens of times to build the bridge between China and Australian companies since launching in 2008.

O’Halloran admits that the Chinese do business by going in cheap and then trying to recover the margins by cutting corners, hoping no-one notices.

When manufacturing in China, the biggest trap Australian companies fall into is sending a drawing to China, and asking for 10,000 products to be manufactured without enough instruction, he says.

“To the Chinese, if it looks the same to them, then it is the same. They’re not trying to be nasty, it’s just the way they do business.

“Having said that, I’ve been to factories in China completely automated where you can eat off the factory floor that are far beyond anything we’ve got here.”

New Wave of Challenges

China has emerged as a manufacturing powerhouse, with immaculate robotic factories and far greater capability to manufacture luxurious goods rather than just mass produce cheap items.

However, the country faces new challenges. According to this report by McKinsey & Company, these include increasing wages, more complex value chains, and consumers growing more sophisticated and demanding.

Australian companies trying to do business with China also often fall down by thinking they’re dealing direct with the manufacturer, when in fact there’s two or even three middle men shielding the manufacturing operator, O’Halloran explains.

“The Chinese like to keep their cards close to their chest, so often you don’t really know if you’re dealing with the manufacturing facility or not. This is very common in Australia, and not the best way to do business.

“However, no-one can build to scale as well in Australia. They are light years ahead of many major manufacturing hubs around the world, and often Australian companies don’t realise how big these Chinese companies are.”

Fostering Relationships

O’Halloran shortlists a number of factories for his clients and helps them foster a relationship with the business owner and arranges guided factory tours. He also conducts spot checks for clients.

“We’re looking for things like, do they have a quality control process in place, and how do they buy their goods, and whether Fair Trade Agreements are in place. We always try to establish if they’re managing the entire manufacturing process in-house, because sometimes they’ll outsource some of the work to a sweat factory down the road without telling you.”

He also says that the Chinese are not great at design, but they’re amazing at copying and reproducing something, and mass producing it. Smaller scale runs are also increasingly cost-effective. Australian companies also need to understand cultural nuances, such as the importance of hierarchy to the Chinese, he adds.

The Chinese are also very superstitious, and their lucky number is eight, he says.

“The Chinese will go out of their way to find the number eight in their business dealings. They even design buildings with eight floors or eight windows in a room, and other things based around feng shui,” O’Halloran concludes.

Top Tips for Manufacturing in China

  • Don’t try and navigate the Chinese manufacturing industry alone, hire an expert.
  • Explain what you want in as few words as possible. Don’t leave anything open to interpretation.
  • Always start slow, on a small scale.
  • Understand cultural nuances and the importance of hierarchy.
  • As a sign of respect, when you accept a business card with two hands, and look at it carefully. Put the card on the table in front of you, never in your pocket.

 Source: Chris O’Halloran, Striking Group.

The Fine Art of Negotiation

Your negotiation skills come into play practically every day in the procurement game. But that doesn’t mean there isn’t room for improvement.

essential negotiation strategies

Strong negotiators master verbal, written and non-verbal communications. They’re assertive, approachable and know what they want.

And while procurement professionals are relying on their negotiation skills more than most, there’s always room for improvement to ensure you’re getting what you want during the negotiation process, regardless of whether you’re the buyer or seller.

Getting the Right Result

Strong negotiators rely on specific skills including patience, self-confidence and creativity. This is according to Australian business and leadership coach Cheryl Daley, who focuses specifically on the art of influencing others.

“People don’t often believe they have strong negotiation skills, but it’s a skill we all need in life, particularly in business. There’s always better ways to approach negotiations, but we often fall into the same rut and forget about the importance of looking for new ways to get the result we want when negotiating,” Daley says.

Negotiations often become a power-play between two parties, but the aim should be for everyone to walk away feeling good about the outcome, she says.

Long-Term vs. Short-Term

Anyone about to enter into a negotiation of any kind should start by determining the type of negotiation it will be.

“The type of negotiation will have a huge impact on the way you approach it. A buy and sell negotiation with someone you will deal with once, will be a completely different situation than if you’re entering into something you believe will be a long-term partnership,” Daley explains.

“The longer-term negotiation processes in the business world can take months or even years. These usually involve higher stakes, and can involve a discussion back and forth for some time until everyone has an outcome they are happy with.”

Set Your Goals

Be sure to set the goals in your own mind, before the initial discussions with the other party, so you don’t feel disadvantaged from the outset, Daley says.

“Be prepared to do some personal preparation before the first discussion with the other part. Always be polite and create a dialogue that doesn’t position one party as the ultimate winner and the other one as the loser. Be firm, but not aggressive. Stay calm, because the moment you lose it, you’ve lost the battle.”

Knowing what the other person’s weaknesses are will really help. It’s easy to be steamrolled by the other party if there’s no connection or relationship in place, so take the time to get to know them, and how you can help them achieve what they’re aiming for.

“It will always be more difficult to negotiate if you don’t first ask a few questions of the other party first to determine whether you’re able to solve their problems during the negotiation process. Otherwise, you could find yourself at a disadvantage,” Daley adds.

Not All About Price

Meanwhile, licensed Buyers’ Agent Nicole Marsh reminds us that negotiation isn’t always just about price. Often, negotiating other terms for real estate buyers such as a longer settlement, being able to move in on an earlier date, or the vendor leaving behind the white goods is enough to get the deal over the line.

“Long term partnerships may require each party to make concessions to make it work and may involve more problem solving skills to get the deal across the line,” Marsh says.

On the other hand, when a negotiation does come down to price, it’s important to set a ‘walk away’ price so you don’t agree to a higher price than you can afford, she says.

“It’s never too late to look at how you approach your negotiations, and consider adding new skills to your repertoire,” Marsh says.

Top Tips for Negotiating

Marsh also shared her top tips for negotiating:

  • Be firm, but not aggressive.
  • Strive for solutions that work for both parties.
  • Stay calm. Stick to the issue, and don’t become hostile or frustrated.
  • Don’t take it personally.
  • Pick a mutually convenient time and place for the negotiation to take place.
  • Put details in writing.
  • Consider whether you need legal advice.

It Takes a Perfect Procurement Programme to Cut Costs

How would you define perfect procurement? We’ve spoken a great deal recently about how saving money or getting the best deal is no longer the be all and end all in procurement.

Perfect Procurement

Customers demand and expect a more transparent, more ethical, and more sustainable supply chain. This ultimately means that procurement priorities vary globally, and across companies. This week, however, we are singing the praises of some perfect procurement strategising which has led to some serious savings.

The Aircraft Carrier Alliance announced savings of $139 dollars on the UK’s two new aircraft carriers, South Africa plans to reform public procurement to save R25 billion, and Australia’s fifteen-year-long infrastructure plan aims to to save the average Australian household $3,000 a year by 2040.

And, under the pressure of a slow economy,  sources have suggested that Russia plans to cut defence procurement by 5 per cent this year.

The Aircraft Carrier Alliance

The Aircraft carrier Alliance (ACA) have just announced savings of £139 million on the construction of two new aircraft carriers at the CIPS Supply Management ‘Best in Procurement‘ event in Manchester. Having initially been tasked with saving £86 million, the ACA significantly exceeded this thanks to their implementation of an effective procurement programme with PwC.

PwC supported a savings delivery team using their procurement cost savings methodology following a five week assessment phase and prioritising of opportunities to cut costs. Currently, savings have come from 67 areas but there are still three years to go on the project.

Ross Elliott, director at PwC said “We had a very robust process, but you have got to take your shareholders with you. As a result [of this project], we have got an organisation that looks for savings and is more cost aware.”

The ACA won 2015’s  Best Procurement Consultancy Project of the Year at the 2015 CIPS Supply Management Awards. The 2016 awards will be announced in April.

South Africa’s Public Procurement Plan

The South African Government is holding talks with suppliers, with the hope of reducing prices and renegotiating contracts for banking services, ICT infrastructure, health technology and learner support materials.

The reforms to public purchasing processes should save the Government R25 billion, out of an annual procurement spend of R500 billion.

South African Minister of Finance, Pravin Gordhan, stated, “It is clear that we can achieve considerable savings to the government, while also ensuring that procurement processes are streamlined and service providers are paid on time.”

Australia’s Procurement Plan

Australia has launched its very first fifteen year infrastructure plan in which procurement has a key part to play.

A report from Infrastructure Australia has detailed a number of reforms to infrastructure to be undertaken by 2040. Among the procurement responsibilities is a suggested increase in competitive tendering.

The report cites how Sweden has increased competitive tendering in public procurement, leading to lower subsidies and 20 per cent cost savings, and calls for the same approach in Australia.

In addition to this, infrastructure projects should take account of the government’s Indigenous Procurement Policy which will “contribute to growing indigenous businesses and increasing employment through remote infrastructure procurements.”

Throughout the plan, whole-of-life costs will be accounted for in procurement when new infrastructure projects are commissioned, including future maintenance costs as well as initial capital expenditure. It is estimated that the plan will save the average Australian household AUD $3,000 by 2040.

Defence Procurement Cuts in Russia

Sources have suggested that the Russian government might be pushed to make a 5 per cent cut in defence procurement spending this year. Despite President Vladimir Putin making military growth a national priority, it seems that the slowing economy could put a halt to his plans.

Russia has entered into its second year of recession as oil prices continue to decline.  Four official sources have said that the cut proposals are to be put forward for discussion at a cabinet meeting.

The finance ministry have argued that Russia can no longer afford a multi-billion-dollar revamp of the armed forces, so will consider the realisation of this plan to be a significant victory.

In today’s current climate saving money is definitely the aim of the game. Perfect procurement might not be possible all the time. But, as proven by this week’s news, a methodical and meticulous procurement plan can make all the difference and ensure money is saved in the right places without compromising quality or ethics.

We’ve scoured the net to keep you updated with some more top procurement news stories from the past week.

Procurement Plans at the zoo

  • Hyderabad zoo animals are soon to find new partners thanks to the biggest procurement plan the state has ever seen.
  • The Central Zoo Authority accepted proposals put forward by the state forest department which permits animal exchange as well as procurement of them.
  • The Nehru Zoological Park (NZP) will soon be procuring a whole host of new animals to complement its existing residents including a pair of barking deer, an Otter, a hyena and an Indian wolf.
  • The NZP’S assistant director said “With the upcoming exchange and procurement, most of the single animals will be complemented with partners.”

Read more at New Indian Express

Deliv Partners with UPS

  • Same-day delivery startup Deliv Inc. is getting a funding boost from an unlikely source: United Parcel Service Inc.
  • As more and more commerce moves online, retailers must match the next-day and even same-day delivery speeds made commonplace by Amazon.
  • Surveys indicate that just by having the option of same-day delivery increases purchase conversion during the checkout process by 20-30 per cent.
  • Deliv, which offers enterprise-grade integrations into point of sale, has completed a $28 million Series B round of funding, adding a key strategic partner and investor in UPS. The company looks set to be the platform that powers this new on-demand future.

Read more at Supply Chain 247

Jacobs’ Procurement Pilot

  • California-based technical services provider Jacobs Engineering Group (Jacobs) has confirmed it is fronting a procurement programme in Australia
  • The programme features a new contracting model designed to enhance efficiencies in military acquisitions.
  • The model is centred on tasking original equipment manufacturers with overseeing project management activities from the funding approval stage through to programme closure.

Read more at Janes

Procurement to help ex-offenders

  • Procure Plus has been awarded a five-year contract to help ex-offenders access employment and training.
  • The not-for-profit organisation, which buys goods and services for several housing associations in the North West of England, will place 24 ex-offenders into employment, apprenticeships or training with contractors in its supply chain every year.
  • Ann-Marie English, senior regeneration manager at Procure Plus, said: “What’s different about our approach [to helping ex-offenders] is a focus on the long term, via sustained career opportunities and support.”

Read more at Supply Management

Are Your Suppliers Treating You Like a Cash Cow?

Businesses are at risk of being treated like a cash cow by their suppliers if they are not managing their supplier agreements and contracts with complete visibility.

Cash Cow

This article was written and has been shared with Procurious by Daniel Ball, Director at Wax Digital.

We’ve all done it. Stuck with the same old suppliers year after year, because they’re doing the job and, let’s face it, it’s far less hassle to stay put than to make a change. Whether it’s for banking, car or home insurance, or even utilities, as long as prices haven’t risen too significantly, and you’re getting what you pay for, why go to the effort of changing?

For the consumer, a failure to review supplier agreements means that, at worst, you’re potentially missing out on a more competitive deal (and a complimentary Meerkat). For a business it can have much more serious consequences.

A large organisation will typically have hundreds or even thousands of contracts in place. A lack of management of these contracts can have a huge impact on business performance, bottom-line and risk. So what can organisations do to make sure they’re not milked like the proverbial cash cow?

Lack of Clear Visibility

Auto-renewing ‘evergreen contracts’ are a problem we see frequently, and they cost organisations millions of pounds in wasted budgets or unintentional spend. With no system in place to effectively manage contracts, they can easily get ignored or forgotten about, and without realising it, you’re locked in for another 12 months.

Worst case scenario, a high value contract has auto-renewed just as you sign another with an alternative supplier offering a similar service, or decide that you no longer need this service at all. It’s easy to see how missed renewal dates, contract overlaps, timely supplier reviews or intended supplier terminations can be overlooked.

This can be an inconvenient truth for large organisations whether they have a procurement function or not, left grappling to manage the contracts they have in place without clear visibility of them.

Aside from wasting money, with no control over contract terms, how can you be sure that your contracts are delivering what was originally agreed with the supplier? If you’re not in the habit of reviewing or monitoring your supplier contracts, the service you are receiving may have gradually moved away or deteriorated from what was originally intended.

The supplier may have been providing alternative quality products (substitutes), changed services levels or personnel (in the case of professional services), or altered other factors from the original terms agreed. All of this could potentially reduce the value of the original agreement.

Factoring in Change

It’s also necessary to consider the changes that will undoubtedly have occurred in your business since your contracts were first put in place. Throughout the lifecycle of a contract, it’s highly likely that your business will have changed in some way, whether that’s changes to pricing, or other things which may affect the terms of the original contract, or your organisational needs.

For example, the sum you spend with a supplier may have quadrupled since the start of your contract, putting you in a far stronger buying position. This of course should mean you are in a better position to negotiate discounts or lower rates, but it is difficult to do this without having the facts at your fingertips.

The first step towards managing contracts effectively is to have a clear and in-depth understanding of them. This won’t happen if they’re stuffed in the top drawer of a filing cabinet, or indeed held by each department that owns the supplier relationship.

The last thing any department head wants is to be going into a new budgetary period with a legacy of unwanted supplier costs to justify and accommodate. It’s one thing to have to field tricky conversations with your CFO, but another entirely using up valuable budget on historical services that are no-longer essential to you.

Your suppliers’ contracts themselves hold the answers to many of the key things you need to know in order to effectively manage them. How often do you actually review your suppliers’ contracts? And how do you get the information you need to effectively monitor, manage and measure the value they are delivering to your business?

Avoid Being a Cash Cow

Contract control gives you sight of which contracts are up for renewal in the next few months. If you’re unhappy with that supplier then you have the time to put them on notice, or appraise their performance and renegotiate a better deal. Or if you wish to invite new suppliers to bid for the contract, you have time to factor in this work and consider your options.

Effective contract management is an essential part of the supplier management process. It is only made possible if they are held in a central repository so that they are accessible for all key stakeholders.

Such a repository enables all contracts to be reviewed periodically to determine if changes are needed or even if it should be renewed at all. The growing realisation for this process to be automated has led to the adoption of contract management systems.

These systems deliver a simple and secure way to store contracts which are easy to audit and provide automated alerts and reminders if an agreement is due to expire. A full contract management system within an integrated source to pay process can further streamline the process by automatically adding newly sourced suppliers’ contracts to the repository for future tracking.

So don’t risk becoming a cash cow to your suppliers because contracts were signed and filed away years ago. A structured and more formalised approach to contract management is the key to unlocking operational efficiencies, compliance and savings.

Is There a Case for a Leap Year Public Holiday?

It’s a leap year this year, meaning that on the 29th of February we have a whole extra 24 hours available to us.

Leap Year Day

However, looking at it in a different way, as the extra day this year falls on a Monday, work gets an extra day from all of us. For salaried workers this pretty much means employers are getting an extra 8-10 hours for free. According to some calculations, this means workers lose out on around £113 on average.

Now, before you all run off and demand either a day off or an additional day’s pay from your employer, we should examine if there is a case for an additional, global public holiday.

What is a Leap Year?

Just by way of context, a leap year occurs once every four years. An additional day is added to the end of February in order to ensure that our clocks and calendars remain in sync with Earth’s seasons.

Scientifically speaking, the Earth takes exactly 365.2422 days to complete its orbit of the sun. However, the Gregorian calendar only runs to 365 days. These additional quarter days are added together, and, once every four years, a leap year occurs.

Due to the rarity or novelty of the 29th of February, a variety of ‘traditions’ have come into being during leap years. One of the most famous is that a woman can propose marriage to a man at any time during the year. Tradition also dictates that, should a man turn down the proposal, he needs to pay a fine. This can be anything, but around the world it ranges from 12 pairs of gloves (Denmark), to fabric for a skirt (Finland).

Additional Public Holidays

There is precedent around the world for the creation of an additional public holiday. The most famous in recent years was the UK public holiday for the wedding of Prince William and Kate Middleton. It was estimated that the holiday brought an additional £500 million into the UK retail sector, with another estimated £2 billion boost from tourism.

However, not all the economic stories from the day were positive. There were concerns at the time that the additional holiday was bad for the economy, which was still recovering from the financial crisis at the time. Leading economists had predicted that the proximity of the wedding to the Easter weekend would reduce growth by between 0.1 and 0.2 per cent.

In Australia, the Victorian Government is facing additional costs of AUD $405 million (£200 million; US $287 million) through the addition of two new public holidays to the calendar. Even factoring in economic benefits such as increased shopping, travel, and complimentary spending, PwC have stated that the costs will ultimately outweigh any benefits.

Bank Holiday Mondays

When compared to the rest of the world, the UK actually has fewer bank and public holidays (a total of 8) than many other countries. In Japan, the total is 15, in Spain, it’s 14 and there are 11 in China. But there is still hesitance, from both the UK Government and business leaders, to increase this number.

Recent figures from the Centre for Economics and Business Research (CEBR) might go some way to explaining why. The CEBR estimates that each bank holiday in the UK actually costs the economy in the region of £2.3 billion. There is also the argument that the close proximity in the calendar of bank holidays can have an impact on businesses.

The accuracy of these figures could be debated, as it has also been argued that any loss of growth due to holidays is recovered later in the year. There is also the argument that by spreading the holidays out, the overall cost to the economy may actually drop.

There are also many positive trends for businesses see around the Easter weekend. Many people will use the weekend to start their annual DIY attempts in the better weather. In fact, it is estimated that 15 per cent of businesses see a positive result from bank holidays.

So, the 29th of February…

The truth is, no-one is entirely sure whether or not bank holidays are good or bad overall for the economy. This also goes for the argument for the UK having more bank holidays, including the potential for a leap year one.

The goodwill impact of an extra day off is hard to measure, particularly if employees return to work refreshed and ready to work hard. Plus, as the 29th of February only appears once every four years, surely it couldn’t have too great an impact.

For the time being, we’ll just have to content ourselves with what we have. But if you’re really desperate for a leap year holiday, you could always sign this petition

Is Procurement Serious About Sustainability?

When price is king, and procurement is often accused of “bullying” suppliers, can we really say procurement is serious about sustainability initiatives?

Procurement Sustainability

This article is by Gerard Chick, Chief Knowledge Officer, Optimum Procurement Group.

As we entered 2016, many of us will have made New Year’s Resolutions. It strikes me that this is as relevant to our professional lives as it is to our personal lives.

Eating or drinking too much is as unsustainable as exercising too little. The above all have outcomes that are bad. We know they are bad, and we also know that to change them is hard.

Last year, the newspapers and other media outlets were teeming with stories about procurement professionals using “bullying” tactics against suppliers, and with claims that big brands were using their power to squeeze suppliers. Inevitably a breakdown of trust (amongst other things) began to emerge, and this clearly needs to be resolved.

We read about farmers protesting against Morrisons’ terms of contracts. We read about Majestic Wine dropping their chief buyer after its pre-tax profits dropped by almost half, and supply chain relationships became tense after it asked suppliers to give them cash towards new warehousing. We also read about Carlsberg facing hostility from its suppliers after it extended its payment terms to 93 days.

Regrettably, such practices are all too common. The tactics used by big business towards suppliers have become a standard feature of today’s marketplace, where price is king and any means of reducing costs seems to be considered valid.

Contemplating Behaviours

And yet procurement frequently claims it is in the van when it comes to issues regarding sustainability. Some supply managers are, but many aren’t. A more sustainable supply chain is needed, but it will only emerge when the breakdown in trust between suppliers and procurement is resolved.

Let’s take a step back. The word frequently used in the media was ‘bullying’, but perhaps if we are to put this right we should contemplate ‘behaviours’. A better word, I feel, and one we can focus on in a more professional manner.

Perhaps these behaviours reflect that many of these people are simply unskilled and, even worse, unaware of it. The difficulty being that it is hard for them to recognise their incompetence, which in turn leads to inflated self-assessments of their skills and abilities.

Bad relationships are not just about negative publicity and brand damage, but also impact on the ambitious sustainability targets many businesses are now setting themselves.

Take climate change. Up to 90 per cent of the greenhouse emissions linked to a company are generated outside its immediate operations, with the lion’s share often occurring in its supply chain.

Collaboration Over Compliance

Moreover, business’ struggle for economic survival must not come at expense just about anything else! Big business characteristically operates in a top-down manner. Supply managers issue suppliers with codes of conduct and environmental targets, and oblige them to comply. The result is an exploitative game between suppliers and auditors sent out to verify farms, factories, working conditions and so forth.

Not only is compliance difficult to achieve, especially beyond the second tier, but it’s only half the story. A more effective solution would be for procurement professionals and suppliers to work together to develop innovative solutions to supply chain issues and to help ensure each others’ sustainability.

It strikes me too, that the smaller, more agile supply organisations (as well as procurement organisations) are more likely to be able to innovate than the behemoths of big business, stuck in their cycle of annularity and the need to satisfy shareholders at all costs.

Tapping Supply Base Creativity

So how can companies looking to become more sustainable tap the creativity of their supply base? The first and most obvious answer is to cut the double-messaging. Corporate procurement teams are frequently blindsided by a ‘cost-out’ mantra. The risk this poses is it frequently supersedes all other agendas and that is simply not sustainable.

The perennial issues of time, cost, quality and service will always feature in procurement decisions, but social and environmental considerations must be factored in as well. Alignment is key. For example, Marks & Spencer prohibits its procurement teams from purchasing any product that can’t meet at least one of the goals of its corporate sustainability plan.

This often leads suppliers to view such demands as a box to tick. To remedy this, suppliers need to be incentivised. New ways of working need time, resources and dedicated attention – all of which are at a premium for small suppliers.

Changing Behaviours

What is needed is a change in behaviours and the development of more trusting relationships. Ideally procurement organisations need to co-invest in the long-term research and development with their key suppliers.

As mentioned above, annularity dominates the mind-set and behaviours of many large companies. They simply focus on the short-term and would rather sit back and wait for proof of concept, than stump up the cash and experiment.

Ultimately, talk of sustainability-focused supply chain innovation will only ever begin to take effect when the breakdown in trust between suppliers and buyers is resolved. That requires a shift from a model based on adversarial brinkmanship, to one of mutual interest and transparency. The more open and honest a corporate customer is about its sustainability challenges, the higher the chance of generating innovative solutions.

Perhaps now is the time for procurement professionals to make a New Year’s resolution.

How to Get the Most from Your Training Budget

During the financial crisis, many organisations slashed their training budget, classifying this business requirement as ‘discretionary spend’.

Rise in the Training Budget

The classification of training as ‘discretionary spend’ is certainly a topic for further investigation on another day. However, as companies began to re-emerge from the cost constraints that governed their businesses in the years following the financial crisis, we are, thankfully, seeing a marked increase in training budgets.

Forbes outlined that corporate training budgets in the US grew by 15 per cent in 2014, the steepest increase in the last seven years, to over $70 billion USD.

Many organisations have cited skills and competency gaps as the key inhibitors to corporate progress. The severe cuts to training budgets during the Global Financial Crisis recovery period have surely contributed to this problem.

Maximise Your Training Budget

However, as training budgets start to creep upwards once again, how can procurement teams ensure that they are getting most bang for their buck when it comes to corporate training?

1. Determine your budget

It’s important to start with some pragmatic goals around what your organisation is looking to get from it’s training program. Once you have done this, you can then set a budget that will allow you to achieve these goals. Setting a firm training budget and objectives also eliminates the possibility of scope slippage and increases in unplanned spend.

2. Determine where to focus

Successful training is targeted training. There is no point in delivering high-level category management training to a workforce that lacks a sound understanding of the basics. Training needs should be identified at a personal level and should make up part of a broader development and HR planning process. Once the focus areas have been determined the task of prioritising can begin.

3. Before going external, look internally

There is likely a wealth of knowledge that lies within your procurement team. Facilitating and promoting knowledge sharing sessions benefits your firm in two ways. Firstly, you save precious money for other training initiatives. Secondly, at the same time you give your team an opportunity to show their skills and expertise to their colleagues.

4. Understand the external offerings

This one seems simple, but you need to do your research. There are numerous procurement training providers out there. Some are good, others not so good. It’s important to understand what your goals are and search for the most effective and well-regarded providers to help you meet these needs.

5. Train one, teach many

This process involves sending one staff member to a training course and holding knowledge sharing or training session when they return. This way, the lessons learned by one staff member can be amplified to your entire team. It’s a lot more cost effective than sending everyone on the same course.

6. Consider the benefits of eLearning

If your training budget is tight, then you need to look for a way to maximise Return on Investment. There is a wealth of training available on online platforms such as Lynda.com and Procurious. Most of this training is free and comes from some of the top names in education. There is also a potential saving when it comes to time out of the office for employees, and on travel and expenses.

7. Measure what happened

Do you want your training budget to increase next year? The quickest way to make that happen is to prove the effectiveness of the training you undertook this year. Investing in people is the quickest route to success, but if you are unable to track and measure these improvements, promoting the benefits of training becomes a far harder task.

These are just some easy steps you can take to ensure that you are getting the most out of your budget, while still providing the required level of training for employees.

Many employees now cite development opportunities as a reason for looking for or starting a new job. It’s important that your organisation isn’t the one missing out, and by ensuring the availability of quality training, you can work to keep hold of your star players.