All posts by Procurious HQ

The Carrot and Stick Approach to Open Booking

Open booking is a massive problem for organisations globally, and one of the largest compliance challenges facing procurement.

In the US, over 50 per cent of hotel bookings, and 24 per cent of airline bookings occur outside the parameters of corporate travel programmes. The issue costs organisations $36 billion per year, and is one of the largest compliance challenges for procurement.

But what can be done about it?

Travel Management

Ethan Laub knows travel software. He founded a startup called TripScanner, a travel booking system giving clients the ability to book on any travel website while achieving compliance with their organisation’s travel policies. His startup was acquired by Coupa in mid-2015, and Laub now works at Coupa as a Director of Product Management.

Here at Coupa Inspire, Laub is running a session on open booking. Most of the audience members manage travel in some fashion, and all of them are frustrated by compliance issues. The consequences of open booking are potentially very serious. According to Laub, it can effect:

  • Risk management: if there’s an emergency, you need to know where your employees are and be able to contact them immediately.
  • Sourcing: open booking hampers procurement’s ability to negotiate discounts with travel providers.
  • Policy: making sure people are spending smart and within budget.
  • Visibility: not having any data on travel spend, hampering your ability to make decisions. 

What drives open booking?

Laub asks for a quick show of hands on why people would decide to avoid the corporate travel system. The top five reasons are:

  1. Better Deals: employees who claim they “got a better deal” outside the approved system.
  2. Conference Booking: conferences with hotel discounts where bookings must go through the conference portal.
  3. User Experience: people are increasingly confident in booking personal travel and are unfavourably comparing the quick and easy experience with clunky corporate travel booking.
  4. The Sharing Economy: people preferring to use companies like Uber and AirBnB, often unavailable on the corporate site.
  5. Airlines and Hotels Pushing Direct Bookings: otherwise individuals can’t claim loyalty points, free Wifi, or other perks.

What’s the solution?

Having established that open booking is a serious issue, and explained why people are avoiding company travel sites in droves, Laub recommends travel managers take an approach that best suits their organisation’s culture.

Stick Approach

  • Prohibit open bookings and refuse to reimburse.
  • Flag out-of-policy post-bookings.
  • Escalate repeat offenders to managers.

Carrot Approach

  • Improve User Experience

Over the past 10 years, consumer sites have become increasingly user friendly, while the policy-focused corporate booking tools haven’t kept up. There are a lot of attractive, easy-to-use applications on the market that can improve UX for your site. Some tips:

  • Ensure you have as few steps as possible
  • Explain to travellers why things are the way they are (policy)
  • Communicate the realities of the travel program.
  • Nuance the site to enforce your policies behind the scenes: users shouldn’t be able to see the out-of-policy options
  • Show fare comparisons to prove your negotiated fares are the best option.
  • Reward savings

If the employee comes in under their travel budget, the company shares half of the savings with the employee. This can be considered part of the gamification process of employee management.

  • Clear guidelines

Ensuring that you have clear guidelines for your employees is key. Employees need to understand when it is okay to book outside of the system, and when they need to be following process.

What does the future hold for business travel management?

Check out this video from Coupa that shows the exciting future of corporate travel artificial intelligence. This system anticipates all of your needs and is so intelligent that you’ll fall in love with it – in the case of this hapless user, literally!

eISM – Introducing the Future of Learning

People don’t want a one-size-fits-all solution for their professional development. eISM aims to provide a set of flexible options to take e-learning forward.

Whether skills are learned through small chunks, longer competency-based training, or direct job experiences, there’s no one-size-fits-all solution when it comes to gaining career knowledge and experience.

ISM’s Senior VP of Programs and Product Development, M.L. Peck, understands this, and has made it the foundation of ISM’s exciting new eISM initiative. “E-learning is the future of learning – it’s how our customers are consuming information”, says Peck. “But just like face-to-face learning, it has to allow for individuals’ learning styles”.

That’s why ISM has come up with no fewer than three completely different methods for varied learning styles within its eISM offering: Just-in-Time learning, Self-Guided learning, and Guided Learning. It’s up to the user to choose the method that best fits in with their busy schedule and learning style.

ISM’s e-learning is designed to support ISM’s Mastery Model, providing the training needed to equip practitioners with the skills and certification to master various competencies and sub-competencies within the model.

The content itself is pulled from ISM’s impressive 101 years of supply chain leadership, drawing upon its global network of subject matter experts to create a remarkable library of digital knowledge.

Just-in-Time Learning

Peck talks about the “just-for-me, just-in-time, and just-enough” approach. For example, if you have a negotiation in an hour and need an answer immediately, all you have to do is search for your answer based on Mastery Model competencies and sub-competencies. You’ll find the answer they’re looking for in a short video of no more than 15 minutes in length (micro-learning). Information is delivered in multiple, engaging methods, including:

  • whiteboard animations,
  • live interviews (Q and A’s) with executives and leaders in industry,
  • short lectures from industry experts,
  • fun activities, games and flashcards.

Self-Paced Learning

Self-paced learning courses are longer, on average an hour in length each. Users are given access to a wealth of knowledge with which they can create their own schedule and work at their own speed. This method is ideal for exploring a broad topic, or for diving deep into a sub-competency.

Guided learning

Nothing will replace the benefits of face-to-face learning, but eISM’s Guided Learning comes close. It includes an online instructor and peer-learning, ideal for people who want to make contact with the subject-matter experts or who are uncomfortable with learning a completely new concept alone.

The facilitated courses range from three to five weeks in length, running five days per week, in which the learner logs on and completes an activity of approximately 40 minutes each, or participates in a 1-hour weekly webinar (to be viewed live or recorded). The facilitator sends reminders to complete exercises.

Getting started

For more information on eISM, including subscription and pricing, visit the Education Area on ISM’s website. The best way to start is by using ISM’s self-assessment tool, which will rate your skill-set against the Mastery Model sub-competencies and identify gaps in your knowledge.

From there, find the learning approach that best suits you, whether it’s small, focused micro-learning, longer self-guided courses or the facilitated classes. “People are craving content that address specific needs at specific times”, says Peck. “eISM offers our customers that choice”.

Selling While Shy: Introverts in Sales

While it sounds counter-intuitive to declare introverts make the best salespeople, their characteristics may truly make them a perfect fit for a sales job.

Last month, Procurious looked at the work of Susan Cain, and assessed whether introverts could thrive in procurement. Now, on the other side of the coin, with help from College Match Up, we look at why introverts actually might be the best sellers too.

Best Sellers

Introverts make up 50.7 per cent of the personality types in the United States. An illustrated chart of the introverted personality types shows the percentage of different introverts in the general public.

Sales jobs are expected to increase by 5 per cent in the next decade, and by 2024 there are a projected 778,000 new jobs to be created. As these jobs are created, new people will be searched for to fill them, and industry specialists will be looking for a particular skill set for a good salesperson.

Traditionally, the most defined skills for people in a sales role have included:

  • Assertiveness,
  • Self-awareness,
  • Empathy,
  • Problem-solving skills,
  • Optimism.

Not exactly a set of attributes that you would associate with introverts or introverted people. So why would introverts be useful, and potentially better, in these roles?

Key Attributes

Well, introverts are often quiet and thoughtful which works well in a sales setting, because customers are often put off by the high-energy assertive employees.

Introverts themselves prefer to be helped by other introverts, and at the same time, introverts communicate best one-on-one, which is great for a sales role, because they can really connect with their customers.

Introverts are known to form few deep attachments rather than many, shallow friendships. In a sales environment, this works because they can form deeper relationships with their customers than extroverts, leading to people trusting them more.

Finally, introverts are known for being reflective. This again ties into the sales environment, as they will be looking back on their performance and working out how they can do things better next time.

Need Convincing?

So, what kind of career options are there for introverts who want to try working in sales? Introverts might try out being advertising agents, real estate brokers, sales engineers, or travel agents to name a few.

If you still need convincing, you can check out this infographic from College Match Up:

Introverts in Sales

So what do you think? Do you think that introverts would make better sales people? Could there be a way to leverage an introvert relationship between buyers and suppliers? Tell us your thoughts in the comments below.

Technology Will Expose Supply Chain Deficiencies in Near Future

In the not-too-distant future, technology will reveal everything about products, and expose all the supply chain deficiencies that exist.

Smartphones, embedded with the technology that enables consumers to scan items in the supermarket and see the entire supply chain process, will happen sooner rather than later, according to Fairtrade Australia and New Zealand CEO, Molly Harriss Olsen.

“We’re getting to the point that we can build these technologies. Mark my words, it’s on the way and it will be instantaneous. The world of connectivity isn’t coming – it’s here,” she told the room.

Cleaning Up Supply Chains

While the procurement industry well and truly knows about the challenges of cleaning up the supply chain, the fact that the technology that would automatically expose supply chain deficiencies was met by furrowed brows. As she made the statement, you could literally hear a pin drop in the large conference room.

Fairtrade assists marginalised producers (mostly in the agricultural space) and addresses issues like child labour, environmental issues, water usage, waste management, ensuring the employment of women and helping these farmers to have profitability in their farms and a robust foundation upon which they can succeed.

This includes the 30 million coffee farmers around the world who are at the mercy of speculative financial markets.

She impressed on the procurement professionals in the room that they had the power in their hands to either resolve the problems the planet faces in the future, or contribute to it.

“The biggest leadership decision you need to make as a procurement leader is implementation. Once you make that, you can’t even begin to imagine what the impact might be.”

Moving Away From Economics

Harriss Olsen was asked by a major Australian food brand representative, whether Australian businesses were embracing the initiatives implemented by Fairtrade.

“On the whole, I’d say we’re on the edge of embracing it. I’d urge you to take the next step. We need to stop making every decision based on economic grounds. We are either part of the solution, or we’re part of the problem. All our decisions are based on improving the planet. Virtually everything we can buy is traded on the stock market, and value the farmer gets on a daily basis,” she says.

“It might come as a surprise to you that while we got rid of slavery some time ago, there is still an extraordinary amount of it going on today. And until is blows up in your face, you often don’t know what you’re dealing with it.”

Coupa Inspire: Rethinking the Possible with Rob Bernshteyn

Lights, music, action! Hugo Britt recounts his experience of the spectacular opening keynote at this year’s Coupa Inspire conference.

The Faculty’s Hugo Britt recently attended Coupa Inspire ’16, a dynamic conference bringing the Coupa community together in San Francisco, California. 

Doof, doof, doof, doof.

I’m sitting in the Grand Ballroom of San Francisco’s stunning Westin St Francis hotel and the place is packed. The Coupa Inspire ’16 conference is just about to be launched, and all the seats are taken. People are lining the walls and spilling into an adjoining hall, complete with a big screen set up to cope with the numbers.

Outside the hotel lies San Francisco’s famous Union Square, most of which is taken up by an enormous pavilion bearing the Coupa Inspire logo. This is where the exhibiters spruik their products, and also where the 2000 or so delegates gather for breakfasts, lunches and networking.

The tent itself is generating a lot of interest among the locals – I was stopped by onlookers on more than one occasion, who asked me what the tent was for and what was going on in there. You could even hear the word “Coupa” shouted by tour guides from the top decks of the red buses regularly cruising past the square.

In the tent it’s dark, with spotlights flashing around the room, and the music is turned up LOUD. I can feel my ribcage vibrating: doof, doof, doof, doof. The guy at the sound desk receives a cue and, unbelievably, doubles the volume. Into this buzzing, clubby atmosphere, walks Coupa CEO Rob Bernshteyn, and the crowd roars.

Cultural Buzz

Coupa has to be applauded for the vibrant culture it has created. The 600-strong Coupa team’s enthusiasm is infectious, and the marketing is superb, giving the whole conference the atmosphere of a celebration. This celebratory buzz can be felt in the brilliant ‘Freedom‘ video, featuring the team lip syncing and dancing around their head office and Union Square.

Bernshteyn stresses that Coupa isn’t a technology company. Rather, it’s a “value as a service” organisation. Simply put, it’s about discovering, realising and optimising the value for its customers.

The numbers are impressive. Coupa has been adopted by hundreds of businesses globally, representing millions of users, and over two million suppliers on its open business network. Together, Coupa users conduct tens of millions of transactions per year, with approximately $200 billion in spend under management.

Building on Data

All of this activity on the system generates a vast amount of data, and the developers at Coupa take full advantage of its potential. “Think about what can happen”, says Bernshteyn, “when we combine the insights around the billions of dollars running through our system”. Customers have access to real-time benchmarking that shows how you are tracking against the entire Coupa community.

Bernshteyn also takes the opportunity to launch Perfect-Fit Benchmarks, which enable users to understand savings, invoice cycle time and more by industry and by category. This vertical application means the AI can predict the right time to buy specific products and services based on historical data.

Bernshteyn circles back to Coupa’s catch-cry: rethinking the possible through measurable value creation.

The software’s popularity comes down to the platform’s simplicity, efficiency and ease-of-use, designed to gain maximum visibility of what you’re buying and who you’re buying it from. The phrase “suite synergy” (at first I thought they were saying “sweet” synergy), is used constantly at this conference, referring to the single unified platform that has vanquished the decades-old frustration of software products not speaking with each other.

As Bernshteyn leaves the stage, the DJ enthusiastically takes the opportunity to rattle our eardrums again. I walk past him on the way out, and he has an excited gleam in his eye – he knows that we’ve got a huge event ahead, with more inspirational keynote speakers (including Sir Richard Branson), more exciting product launches…and plenty more opportunities to turn the volume all the way up.

Stay tuned for more from Coupa Inspire in the coming days!

Unlocking the Hearts and Minds of Millennials

A Millennial warned a room full of procurement leaders that they need to rethink their mindset if they’re ever going to win the hearts and minds of Millennials.

Too many Australian leaders overlook the fact that 50 per cent of the world’s population is aged under 30, and have no idea how to effectively communicate with them.

Holly Ransom is the CEO of Emergent Solutions, which works with leaders, organisations, and governments, globally to set the benchmark, and be frontiers of change and innovation.

It helps challenge their thinking, evolve their strategy and build their capability to engage with market disruptions head-on, unlocking new opportunities, outcomes and value.

Trusted Sources

The room full of procurement leaders collectively leaned in while Ransom spoke, captivated by her high energy talk despite it being the last session of the 9th Asia-Pacific CPO Forum, held in Melbourne last week.

Ransom outlined some research around purchasing decisions among Millennials that found that 1 per cent of Millennials trust advertising, 30 per cent trust blogs, while the majority are looking for some sort of online reference before making a purchase. And 65 per cent of Millennials are judging companies and businesses based entirely on their digital presence.

“Sometimes we seem to forget that half of the world’s population is under 30; probably because we spend so much time talking about the other end of the spectrum – the elderly.”

She urged the room to bear in mind that the average American male has spent 10,000 hours gaming by the time they reach of the age 18, which is exactly the same amount of time they’ve spent in school.

“It’s about thinking about how you can leverage that to your benefit,” she says.

Feel Connected

The procurement sector needs to understand that trust is manifesting in new ways, citing the fact that people are prepared to jump into a car with an Uber driver they’ve never met, and appear to feel safe.

“This younger generation wants to see, connect and feel. They want authenticity from our brands and businesses, and they want to see that footprint extending to something far more than just shareholder returns.”

Ransom also touched on the changing face of the workforce, explaining that Millennials with a laptop and a few clients much prefer to work from anywhere.

“Freelancing is a reality and it unlocks the global human capital pipeline, which presents huge opportunities for businesses. You can hire someone to handle a project for you, rather than having to hire a new employee.”

The benefits of being able to outsource to a freelancer includes allowing leaders to think more laterally, and spend more time on their leadership approach, she says.

“Through leadership when dealing with consumers and suppliers, we need to make sure that Millennials can see, touch and feel what we’re trying to get across to them. They want to come on the journey with you.”

The ‘Why’ in Communications

Ransom also spoke about her initial cynicism toward Rotary International when invited along to a meeting, but the statistics prompted her to get involved to bring about change.

“When I thought about Rotary, I thought of pale, stale and male. I couldn’t believe it when I was told that there were 1.2 million members, and yet only 12 per cent of that were women, and 2 per cent of that were under 30. Hearing that was enough for me to want to get involved.”

Ransom has helped Rotary lead with the ‘why’ in their communications to help build engagement, and better explain what they’re about.

“We realised that Rotary focused too much on the youth message. It’s a classic example of how easy it is to assume that our why, is someone else’s why. And that wasn’t the case here.”

Ransom ended by giving an example of innovation that involved a young girl who was given $10. She used the cash to hire two DVDs, which she played them in two halls, and charged everyone a few dollars to come and watch the movie. She turned that $10 into more than $300, in a clear demonstration that innovation doesn’t have to be expensive.

“I challenge you to think about what that $10 could do to build engagement in your business in the next two weeks. We need leaders to stop thinking that innovation needs to be hugely expensive, and that you need entire teams to drive innovation. That’s just simply not the case.”

Automation & Giant Aircraft – Revolutionising Logistics

As new technologies take hold across the supply chain, we take a look at the main disruptors revolutionising the logistics industry around the world.

There seems to be two approaches to the next steps for organisations and disruptors revolutionising logistics – go automated, or go huge! From new technology for driverless trucks, to the soon-to-be-largest aircraft in the world taking off in the UK, there are game changing disruptions afoot in the logistics industry.

Plane vs. Blimp

In the past week, the world’s largest freight aircraft touched down in Australia, following a 14,000km journey around the world from the Czech Republic. But, even this huge plane looks set to be usurped by an even bigger aircraft, about to undergo flight tests in the UK.

The Antonov 225 Mriya, weighs in at an astonishing 175 tonnes, is 84 metres in length and needs six engines to help it get off the ground. It’s capable of carrying loads of up to 640 tonnes, and is the only one of its kind. Perhaps most surprising is that this behemoth is nearly 30 years old.

The plane has mostly been used in recent years in the logistics field to transport heavy commercial items, such as heavy mining equipment, around the world. It touched down for the first time in Australia earlier this week carrying a 117-tonnes mining generator to a customer in Western Australia.

However, it’s about to be surpassed in size (although not in load capacity) by a new aircraft hoping to carry out its first UK-based test flight in the coming weeks. The Airlander 10 stands at 92 metres long, and has required the world’s largest hangar to be constructed in order to allow it to be housed.

The key difference about the Airlander? It’s a blimp. While this currently limits its payload to 10 tonnes, it’s hoped that successful flight tests, and commercial use, will enable a larger craft, with a 50-tonnes payload to be manufactured.

While it’s never likely to rival the Antonov for capacity, the Airlander has a number of potential uses in the logistics field, including commercial, military and scientific research.

Driverless Big Rigs

From the giants of the air, to giants of the road, but with a difference. In the past 12 months, Mercedes, Volvo and Daimler have unveiled their own driverless trucks, with the intention of removing some of the potential danger from the trucking industry.

However, they may be overtaken by a new team on the market. Otto, a team formed by former engineers from Google, Apple, Tesla, and including Anthony Levandowski, the former leaders of Google’s self-driving car project, is approaching this issue from the other side.

Instead of designing autonomous trucks, the Otto team and aiming to create technology that can be fitted to trucks already on the road. The technology is aimed at increasing safety by allowing drivers the chance to sleep, while the truck drives itself along the long American highways.

While this might not seem as impressive, there are a number of benefits from this approach:

  • The technology can retrofitted to the majority of vehicles retrofitted to existing vehicles;
  • It’s cheaper than the outlay for a new truck in its own right;
  • It aims to help, rather than replace drivers, meaning there will be human control for some of the journey;
  • It doesn’t fall foul of legislation in a number of US states which require steering equipment, or a driver, to be in the vehicle cab.

The next steps in this area will be fascinating to see, particularly how the major manufacturers react to this, and potentially adapt their offerings to account for it.

Procurement Awards Season Here

We couldn’t let this week pass without congratulating some of the worthy winners of procurement awards around the world.

  • Johanne Rossi, CPO at Caltex, took home the ‘CPO of the Year‘ Award at The Faculty’s Asia-Pacific CPO Forum
  • Rising star Joanna Graham, Strategic Sourcing Manager (Asia Pacific) at BP, received the ‘Future Leaders in Procurement‘ Award at the same event
  • Timothy R Fiore, CPSM, C.P.M., was awarded the 2016 J. Shipman Gold Medal Award, by ISM, in recognition of his distinguished service for the cause and advancement of the supply management profession.
  • Volvo, Flex, Roche and J&J were among the winners at the Procurement Leaders ‘World Procurement Awards‘. See a full list here.

Is bigger necessarily better in logistics? Could we see a combination of both larger size and automation for vehicles in the future? Let us know what you think below.

We’ve been keeping an eye on the headlines this week, giving you something to share over your morning coffee…

Gartner Reveal Supply Chain Top 25

  • Research firm Gartner has revealed its annual Supply Chain Top 25 for 2016, now in its 12th year
  • For the first time, Unilever has topped the list, ahead of McDonald’s (2), Amazon (3), Intel (4), and H&M (5)
  • Previous multiple winners Apple and P&G have been awarded a place on the ‘Masters’ list by Gartner, which celebrates 10 or more years of sustained supply chain leadership
  • New entries to the list include BMW and Schneider Electric, with both HP and GlaxoSmithKline returning after a few years’ absence

Read more at Supply Chain Digital

HP Release “Large-Scale” Manufacturing 3D Printer

  • HP have announced the release of the HP Multi Jet Fusion 3D Printing Solution, the world’s first large-scale manufacturing 3D Printer.
  • The model prints items 10x faster than current machines, and one version offers an end-to-end solution (including software).
  • 9 companies, including Nike, BMW and J&J are currently testing the machines on a large scale
  • Stephen Nigro, who runs HP’s 3-D printing business, said that “Customers are looking at how to transform their (3-D printing) business from prototyping to production.”

Read more at USA Today

Procurement “Cut Off” Says Report

  • According to a new report, procurement teams in hotels are seen as not collaborating with other departments.
  • The Hotelier Middle East’s Hospitality Procurement Report 2016 shared the perception that procurement were “trying to do it cheap” from members across the region.
  • The report goes on to share some examples of best practice in getting procurement more involved.
  • These included having procurement represented at meetings with key suppliers, as well as in design meetings for major hotels.

Read more at Hotelier Middle East

UK SME Spend “Stalling”

  • A report from the Public Accounts Committee (PAC) has claimed that efforts to direct more public spending to UK SMEs has stalled.
  • The current Government set a target of 33 per cent of overall spend to be with SMEs by 2020, though despite major efforts, it doesn’t appear to be working.
  • One issue the PAC highlighted was a lack of clarity on whether the money was being spent directly with SMEs, or via larger contractors.
  • The PAC has also disputed figures stating that spend with SMEs was up from 6.8 per cent in 2010-11 to 27.1 per cent in 2014-15

Read more at Supply Management

Using Community Collaboration to Create a Change Narrative

Finding a way to create a narrative for change can be the difference between an organisation being able to successfully adapt, or not.

Lightspring/Shutterstock.com

One speaker at the 9th Asia-Pacific CPO Forum opened the collective eyes of the audience to the possibility of change, and what that might look like.

Michael Williams, CEO of The Wheeler Centre, a public institution devoted to engaging conversation and Melbourne’s literary advocates, supporting the nation’s literacy activity.

Sharing Ideas and Conversations

Founded, and funded by a State Government injection, in 2009, it supports the health and vitality of the writing and ideas ecosystem. The centre also contributes to a deeper thinking society, and enables the storytelling and story-making that builds communities around the sharing of ideas and conversations.

“I’m very concerned that words used by companies in Australia today are losing their meaning. We seem to be forgetting how we use them, and how they can help customers and run businesses,” the head of the new cultural institution says.

Words such as agility, innovation and disruption, for example, he told the audience.

“We say these words as a sort of shorthand. I’d suggest that we need to stop and think about the words we say, and how we refer to them to do business. We say these words and repeat them to each other, and they’ve ended up being very much like those messages they play about piracy at the start of a DVD. They just almost cease to exist.”

Williams says he hopes that the Wheeler Centre gets to the bottom of some of these words, unravel what they actually mean, and change the conversations and business practices.

Challenging Perceptions

More than 200 events held across Melbourne each year challenge these perceptions, and work to extend the literary culture in the southern city. Speakers discuss everything and anything including pop culture, politics, history, literature, art and ethics. These discussions happen in Melbourne three times per week, and an average of 180 attend to the three weekly events.

Business custodians need to understand that people used to identify themselves as being readers of one of the local newspapers, but as the media landscape shifts, that’s no longer the case.

“We don’t identify ourselves as being a reader of The Age, or Herald Sun anymore. The internet is the biggest disrupter we’ve ever seen. It’s a challenge that we all need to get our heads around.”

Businesses need to understand that instead, consumers are looking to identify with authentic stories from brands.

Williams finished by pressing on the audience of procurement professionals in the room to consider that inviting people to be part of your own conversations, can be a hugely powerful way to engender broader engagement.

“True conversation starts with a question, so you need to consider how that might play out in your organisation, and find a way to make it authentic, rather than just hollow words.”

Dynamic Discounting to Ease Payment Woes

A new report has highlighted that three quarters of UK businesses plan to use Dynamic Discounting to reduce supplier late payment woes.

Changing legislation, public and governmental pressure, and the threat of financial and reputational penalties are leading many businesses to use innovative new methods to ensure suppliers get paid more quickly/on time.

As many as three quarters of UK businesses plan to use the practice of Dynamic Discounting – offering suppliers the chance to accept a lower than invoiced price in return for speedier payment – potentially helping to overcome the endemic problem of unfavourable customer terms or late payments.

Cash Flow Issues

In research conducted among 100 UK procurement professionals, on behalf of procurement software provider Wax Digital, 27 per cent said that their business already used Dynamic Discounting with suppliers. Another 30 per cent said they plan to start doing so in the next 12 months and a further 20 per cent said they had it as a longer term objective.

It was also recently estimated that UK small and medium sized businesses are owed an average of £12,000 each in late payments, equating to £55 billion countrywide. 23 per cent have also considered insolvency as a result of late payment related cash flow issues, while 68 per cent wait for 60 days or more for payment.

The government’s recent enterprise bill is also designed to tackle the imbalance of bargaining power between suppliers and their customers.

But the trend of businesses taking up Dynamic Discounting suggests that suppliers and their customers are taking matters into their own hands. Dynamic Discounting systems work by offering a scaled discount for early payment at the point when invoices are issued to customers.

This has also become possible through the increased use of e-procurement software that automates and massively speeds up the matching and reconciling of supplier invoices on the customer side. Because many businesses can now process invoices in a matter of hours they are in a better position to pay the supplier early, should they choose to do so.

Cash in the Bank

Daniel Ball, business development director, Wax Digital, comments: “Serious late payment and cash flow issues are more likely to destroy a business of any size over and above anything else. It appears that the business community is now taking the bull by the horns to solve this growing problem while suppliers can use a different type of bargaining power.

“Although businesses may get paid slightly less for their products and services they gain the benefit of having the cash in the bank much more quickly.”

The research was commissioned by Wax Digital and conducted by Morar Consulting in early 2016.

Should We Stop Using the Term ‘Strategic’ in Procurement?

No other profession puts the word ‘strategic’ on their business cards. Why do we do so in procurement?

A high-powered panel at ISM2016 drove a spirited debate about the use of the term ‘strategic’ in the profession. Chaired by Joe Sandor (Professor of Purchasing and Supply Management, Michigan State University), the panel included:

  • Hans Melotte (ISM Board Chairman, Senior Vice-President and CPO, Johnson & Johnson);
  • R. David Nelson (procurement veteran and Chairman, Dave Nelson Group);
  • Jeff Smith (Global Sourcing Director – Indirect at DuPont); and
  • Beverly Gaskin (Executive Director Global Purchasing, General Motors).

Actions Not Words

Actions speak louder than words. That’s the message from Hans Melotte, who argued that it’s unhelpful for the profession to continually emphasise how ‘strategic’ we want to be.

Overuse of the term dilutes the concept, especially when having a conversation with sceptical stakeholders. “Procurement needs to be strategic”, says Melotte, “rather than just talk strategic.”

Being strategic comes down to having the right people in procurement, who can talk the language of the business, define their value contributions in a way that resonates with stakeholders, are forward thinking, proactive, and focused on the future.

Historical Overuse

When did procurement start to use (and overuse) this term?

R. David Nelson, who started out in an enormously different procurement landscape in 1957, has watched the profession grow from a back-office function to a highly-influential business partner.

As any modern professional knows, there are plenty of stakeholders who still remain unconvinced, and it’s very possible that our constant repetition of the term ‘strategic’ was a somewhat ham-fisted attempt to convince these sceptics that we do indeed deserve a seat at the table.

Interestingly, none of the major organisations represented on the panel use the term any more. Hans Melotte explains: “At Johnson and Johnson we abandoned the use of the word strategic, because you shouldn’t label yourself who you want to be – you should be who you are. The whole notion has passed its expiry date”.

Divisive Term

The other problem with the term is that it’s divisive. By calling half the population “strategic”, you’re implying the other half of the function is non-strategic. This sends a negative signal throughout the organisation, and breeds resentment around job titles.

Beverley Gaskin agreed: “Strategic buying is like an oxymoron. If you’re doing anything in the buying field that isn’t strategic, you shouldn’t be doing it.”

Even the term “purchasing strategy”, says Gaskin, is misleading. “There’s no such thing as a purchasing strategy. There’s a company strategy and you have to understand your role in getting that done.”

The same concept appliers to how we talk about strategic and non-strategic suppliers. Again, it’s our responsibility to move away from divisive language. After all, you’re never going to tell a supplier that they’re ‘non-strategic’.

Definitions are important. Melotte reasons that if you define ‘strategic’ as something that serves the strategy – a choice wisely made, based on facts and intelligence – does that mean ‘non-strategic’ is defined as the opposite of this? No CPO would want any resources who are not aligned with the company strategy or value mission.

This isn’t to say that the term ‘tactical’ is the opposite of strategic. Professor Joe Sandor provided a valuable reminder that the word ‘strategy’ comes from the military, and simply means planning. ‘Tactic’ means execution, and a plan must be executed. Tactics, therefore, are strategy in action.

Jeff Smith of DuPont summed up the sentiment of the panel: “It’s time the profession moved away from the term”, he said. “If you behave strategically, you’ll always be invited back”.