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Best of the Procurious Discussion Forum 2015

In 2015, Procurious members started over 400 discussions, and provided an amazing 2000+ answers for these burning questions.

Discussion Forum

These discussions covered a vast range of topics, from Key Performance Indicators (KPIs) and professional qualifications, to eSourcing and if there is a typical Myers Briggs profile for procurement professionals. We’ve picked out the most popular Discussions of 2015 to have another look at, and perhaps inspire you to start your own.

KPIs for Procurement Function

We frequently talk about the concept of KPIs or metrics, both for procurement to measure, and for procurement to be measured by. There were a few discussions started on the subject of procurement KPIs, but one in particular that generated some interesting debate.

The Discussion asked for the community’s thoughts on the top KPIs that could be used for measuring procurement performance. While the KPIs and metrics mentioned by the respondents didn’t throw up too many surprises, what was surprising was what the most common answer was.

In fifteen of the responses a savings KPI was mentioned as one of the key metrics. At a time where procurement departments are looking to move away from savings targets, it is surprising that such a high percentage of professionals would highlight it as a key KPI.

A number of respondents highlighted value as a key KPI, however it was much lower than savings, and also lower than total spend managed. Even within the small sample, it’s clear that the traditional mindsets of procurement professionals still have to be changed.

Other key KPIs highlighted were:

  • Percentage of on time delivery
  • Total Spend
  • Customer satisfaction
  • Stock Turnover
  • Quality
  • Supplier Consolidation
  • Supply Chain Security & Risk
  • Cost Avoidance
  • Customer of Choice
  • Procurement Engagement
  • Time
  • Inventory
  • Sustainability
  • Ethics
  • Agility
  • TCO

Within the other discussions on the site, it was recommended that there be a limit on the number of KPIs in use, with 6 being a good number that could be effectively used and reported on. As well as this, the KPIs needed to be meaningful to both parties in order to be successful.

How Did You Get Your Start in Procurement?

One of the more popular discussion from earlier in 2015 concerned how members of the Procurious community had come to be part of the procurement profession.

Traditionally, many professionals have ‘fallen’ into procurement, and only recently has the trend shifted towards graduates actually setting out to have a career in procurement. Within the community, there were certainly a few who ended up in procurement by ‘accident’ or ‘fell’ into the profession, but also many who had been moved into procurement by their organisations.

It was interesting to see that a number (including one of Procurious’ own!) moved into procurement to escape another profession. As well as this, there were professionals who had either made a conscious choice at the outset of their career, or chosen to move following exposure to procurement activities.

There were also a number of success stories from people who ended up in procurement despite this not being their qualification and then succeeding in adding value or creating savings for their organisations.

It just goes to show that there are a number of ways into the profession, but the vast majority of professionals stick with it once they are there!

Is there a ‘typical’ Myers-Briggs profile for procurement pros?

People’s interest was certainly piqued by this question, and it was one of the most answered discussions of the year. As it stands, there is no one profile that is most common for procurement professionals, although there are some trends that have emerged.

A full breakdown of the responses shows:

  • ENTP – 10
  • ENTJ – 6
  • INTJ – 6
  • INFP – 3
  • ISTP – 2
  • ENFP – 2
  • INFJ – 2
  • INTP – 1
  • ISFJ – 1
  • ENFJ – 1
  • ESTJ – 1
  • ISTJ – 1

The most common trait across the network was for N (Intuiting), which appeared in 30 of the profiles. In theory, this meant that we have a group of professionals who are good at spotting patterns and plan well for the future, who also like to acquire new skills.

Whether this is what you perceive procurement professionals as or not, the concept certainly provided some very different viewpoints. One other idea that was mooted as part of the question was whether our profiles change over time, and if we have the profiles we do because we are in procurement, or the other way around?

Other Popular Discussions

There were other great, popular discussions on the topics of vendor management best practice, definitions or first thoughts on hearing the word eSourcing, whether or not professional accreditation and courses were worthwhile in procurement and responsibility in organisations for the drafting and issuing of a specification or brief.

You can also catch up with our Discussion Wraps from 2015 on the Procurious blog by following one of the links below:

And don’t forget, you can always start your own discussion on any topic you can think of from procurement and supply chain. Let’s keep the Discussion forum just as busy in 2016 and continue sharing the knowledge!

Why Social Media Will Play a Role in the War on Terror

Social media can help to facilitate global communication and information gathering, but it can also be used for illegal means such as terrorism. With Twitter being fined for non-removal of “terrorist propaganda”, we investigate what countries are doing to stem this particular use of social media. Social Media for Terror

As we reported last week, Twitter was fined in Turkey for failing to remove content that the Turkish Government said was “terrorist propaganda”. The major social media platforms have been very careful in the past to strike a balance between removing materials, while at the same time trying not to inhibit or stop legitimate political debate.

However, in light of the terrorist attacks in Paris, Lebanon and the USA, organisations and legislators are now looking at what can be done to limit access to social media for terrorist organisations, both for communication and publication.

Pressure on Platforms 

Twitter, Facebook and YouTube have recently come under more pressure from governments to closely monitor, and remove, posts, accounts and videos that are either violent or contain terrorist propaganda. However, all three platforms take a reactive stance on this, relying on their users to report content like this before it is removed.

Extending the powers that the platforms operators have to carry out removal and tracking activities on these posts has been discussed. This has raised concerns among free-speech campaigners as to where these powers would end and as to what would fall under the categories for removal, as this is frequently hard to define.

New legislation was passed last week by the US House of Representatives, which now requires the Obama administration to produce a strategy to combat terrorists’ use of social media. The legislation was passed in response to the terrorist attack in San Bernardino, California, and aims to allow for more close scrutiny of social media activities as part of visa application consideration.

Rights and Freedoms

At the same time as the legislation went to vote, the UN was holding a special meeting of its Counter-Terrorism Committee, where preventing terrorists from exploiting the Internet was also on the agenda. Prominent in the discussion was how to carry this out, without impinging on the rights and freedoms of global citizens to legitimate debate and activities.

It is suspected that ISIS/ISIL has used social media to attract over 30,000 foreign terrorist fighters, from over 100 countries, to join their fights in Syria and Iraq. However, all parties were keen to assess how terrorist activity could be halted, while at the same time ensuring that any restrictions did not create grievances that would play into the terrorist groups’ hands.

Jeffrey Feltman, UN Under-Secretary-General for Political Affairs, told the Committee, “It is precisely [the] exploitation by terrorists and violent extremists that can easily result in us restricting human rights and fundamental freedoms”. Feltman went on to say that the intention was to put “young people at the centre of these efforts”, with this generation both most comfortable with social media, as well as the most susceptible to extremist propaganda.

Immature Business Sector

In the UK, the social media companies have also been reprimanded by the county’s most senior counter-terrorism officer, Mark Rowley, who, in describing social media as an “immature business sector”, criticised some of the organisations for not co-operating fully with police investigations.

Legislation similar to that discussed in the USA doesn’t exist in the UK, creating concerns that the police are missing important intelligence on terrorist activities, and falling behind these organisations by not being able to operate in the social media environment as well as the people they were tracking.

It will be interesting to see how legislation is developed, as well as how the platforms themselves can deal more effectively with pages and information relating to terrorist activities, and having a better solution for dealing with the spread of information.

Do you think social media could or should be more closely monitored? Is there a line that can be drawn between freedom and public safety? Get involved on Procurious and join the discussion. 

Meanwhile, we have been keeping an eye on all the major headlines in procurement and supply chain this week for you to share with your friends…

Apple Price Falls on Supply Chain Concerns

  • Concerns about Apple’s supply chain data and predicted sales for the first half of 2016 have caused its price targets to be reviewed
  • Investment firm RBC Capital Markets cut its price target for Apple to $140, down from $150 (already a decrease from earlier in 2015)
  • The firm cited slower than expected sales of the iPhone 6 in the first two quarters of 2016 as the reason
  • This was also due to key organisations in Apple’s supply chain cutting estimates for business in the same period

Read more at Apple Insider

French Courier Companies Fined for “Collusion”

  • 20 competing package delivery firms in France, as well as their professional trade union, have been fined €672 million by the French Competition Authority for price collusion
  • The authorities stated that the firms had shared sensitive information about price increases during group meetings with the transport and logistics trade association, TLF, between 2004 and 2010
  • 8 of the companies, including DHL Express France, Norbert Dentressangle and Royal Mail’s French arm, General Logistics Systems, comprised 71 per cent of the French market during this period
  • The authority concluded that French SMEs had been hit hardest by the collusion activities, as they did not have the negotiating power of the largest clients to reject or renegotiate the price increases

Read more at Supply Management

Tech Companies Suffer Due to Supply Chain Disruption

  • The 2015 Global Cleantech Risk Survey has reported that 61 per cent of clean tech companies had suffered some form of supply chain disruption in the past three years
  • Of these companies, 84 per cent stated that their bottom line had suffered due to the disruptions
  • 75 per cent of the 300 organisations surveyed, who sourced products from China, said that they had suffered from a supply chain disruption
  • These disruptions resulted in delayed deliveries, eroded profit margins, brand and reputation damage and reduced revenue

See more results at My Central Jersey

Global Firms Tied to Slave Labour

  • A number of high-profile global grocery supply chains have been linked to slave and forced labour in the seafood processing industry in Burma
  • Shrimp from the suppliers is used in the USA by a number of companies, including the organisation that owns Red Lobster and Olive Garden, as well as retail chains Wal-Mart, Kroger, Whole Foods, Dollar General and Petco
  • Thai Union, the primary supplier to the American companies, has committed to cleaning up its supply chain and reduce reliance on poorly regulated contractors

Read more at The Indian Republic

Skills Shortage and Access to Finance Top Concerns for UK Entrepreneurs

Difficulty obtaining finance and a general skills shortage risk undermining Britain’s start-up revolution, the Institute of Directors has warned this week. skills_shortage

The first ever survey of the IoD 99 network – a group of more than 650 entrepreneurs under the age of 35, running businesses in every part of the country and every sector of the economy – has confirmed that finding skilled employees and accessing scale-up finance are the most important issues for Britain’s start-ups.

Barriers to Growth

Worryingly, two-fifths (42 per cent) of the entrepreneurs surveyed said they have trouble hiring people with the right skills, and 39 per cent cite difficulty accessing finance as a potential barrier to growth.

More than half (53 per cent) said that money from family members had been instrumental in getting their business off the ground, while 56 per cent had used personal unsecured finance, like credit cards, and a further 45 per cent had used money from friends.

The IoD has called for government to open up the ‘equity economy’ to make it easier for savers to invest in young companies and turn Britain’s fledgling start-ups into scale-ups. The business group has also warned politicians against imposing arbitrary restrictions on the UK immigration system, which will make it harder for growing firms to bring in skilled workers from around the world.

Positive Social Impact

The survey of 122 members of the IoD 99 network – entrepreneurs running companies across the UK in every section of the economy, also showed:

  • Six in ten (61 per cent) young entrepreneurs were in full-time work when they started their own business
  • One in five (21 per cent) said the primary reason for starting their business was to have a ‘positive social impact’, 22 per cent said they wanted to work for themselves and one-third (36 per cent) said they wanted to build a successful company
  • Difficulty hiring skilled employees was ranked as the top barrier to growth, cited by 42 per cent of entrepreneurs, followed by trouble accessing finance (39 per cent), the high cost of finance (33 per cent), business taxes (29 per cent) and personal taxes (26 per cent)
  • While money from family, friends, and unsecured loans are the most important sources of finance in an entrepreneurs’ early days, private equity, bank and non-bank debt along with private and public sector grants are all seen as important sources of scale-up finance.

The full results can be found here.

Start-Up Revolution 

Jimmy McLoughlin, Deputy Head of Policy at the IoD, said, “The start-up revolution has taken hold in Britain like nowhere else in Europe. With so many young, exciting and cutting-edge businesses having popped up in recent years, it is vital to harness their potential and create the next raft of world-leading companies. Finding people with the right skills, and tapping into the right mix of finance will be the biggest factors in achieving scale-up success. For start-ups, overcoming these obstacles can be the difference between success and failure. 

“It is a worry, therefore, that so many start-ups struggle to hire skilled employees. The push to teach children digital skills, like programming, at school is part of the long-term solution, but we must remember that start-ups face skills shortages now. Therefore, it is crucial that Britain’s immigration system is as open and easy to navigate as possible.

“The last few years have seen exciting developments in alternative finance. Businesses can access more sources of capital than ever before and innovations like crowdfunding and peer-to-peer lending are quickly becoming mainstream options. Entrepreneurs see them playing a big role over the next decade. Regulation cannot stand in the way of this growing demand. We should strip back the layers of complexity which currently stand in the way of individuals investing through schemes like the Enterprise and Seed Enterprise Investment Scheme (EIS/SEIS) to give more people across the country a stake in the success of British start-ups.”

 This view was backed up by Alex Mitchell, chair of the IoD 99 network. “More and more young people are growing up with dreams of being an entrepreneur, with millions rejecting the idea of a nine-to-five job in favour of the freedom, flexibility and control of running their own business. Little can compare to the feeling of taking an idea to market and building a successful company. With so many support schemes like the IoD 99 around the country, it has arguably never been easier to go it on your own,” said Mitchell.

“Interestingly, most entrepreneurs were employed when they launched their own enterprise, demonstrating the commitment and dedication it takes to build a successful company, often while working full-time. Young entrepreneurs also said they were motivated more by the vision of building a successful business, being their own boss and having a social impact than financial reward. This is a testament to the vibrancy and diversity of the UK’s start-up scene.”

The Institute of Directors has called on the government to make EIS and SEIS easier to use for small-stakes investors and encourage more people to invest in growing companies. The full recommendations can be found in the report, Opening the Equity Economy.

Procurious Big Ideas Keynote #4 – Ethics in the Profession

The growing influence of the procurement function in organisations has both positive and negative potential consequences.

David Noble, Group Chief Executive of The Chartered Institute of Procurement & Supply (CIPS), provides a fascinating insight into the profession from the point of view of the chartered body.

Addressing and shifting some paradigms about procurement first, David then goes on to speak about the importance of ethics and compliance and how licensing the profession helps professionals in their day-to-day roles.

Watch the full keynote here.

See all the keynotes and panel discussions from the Big Ideas Summit, plus Big Ideas from our 40+ Influencers.

Like this? Join Procurious for FREE and meet like-minded procurement professionals from across the world.

Best of the Procurious Blog 2015

At Procurious, we pride ourselves on publishing high quality, original and interesting content on our blog. In 2015, we have produced, hosted and provided over 600 articles for our community to read.

Best of the Blog

We were honoured this year to receive a “Highly Commended Company” award in the UK Blog Awards 2015 for PR, Marketing, Media and Comms (we’re hoping to go one better in 2016 and win!) – this is a great achievement for us in our first full year of the Procurious blog.

As we draw towards the end of the year, we’re going to take a look back at some of articles that made a real impact with the community, and sparked discussions on Procurious and across social media.

Procurement Careers

During 2015, much of the focus in procurement and supply chain was on how to attract, retain and developing the best talent, but also on personal development and career progression.

Our most read article of 2015 was from our founder, Tania Seary, who let us all in on her Sure-Fire Tips for Becoming a CPO

We also featured an article on the new Apple CEO Tim Cook, himself a former Supply Chain Manager, and his rise to the top position at one of the world’s top organisations. It’s always great to see a procurement or supply chain professional take the lead in an organisation, as it helps to showcase the value of our function to the wider audience.

We also had top tips when considering a procurement role in Singapore, as well as the skills Generation Y or Millennials need to get a head start in their procurement careers.

Technology Trends

Another of our key themes in 2015 was on the increasing impact of technology on procurement and supply chain. The idea that both procurement and supply chain will be affected by technology in the coming years was a popular one, as well as how organisations could use these technologies to their advantage.

One subject that kept popping up during the year was 3D Printing and how this technology was changing the supply chain. We examined what the growth of 3D Printing meant for manufacturing and outsourcing, which generated plenty of interest and comments.

Entwined in the theme of future technologies was the concept of digitisation and the increasing use of digital currencies and payment mechanisms, such as bitcoin. We highlighted the use of these digital currencies as part of 5 “Megatrends” in technology, as well as how they can be used to assist with supply chain transparency.

Finally, we looked at how technology is disrupting industries and professions, including procurement, as part of an “Uberized” economy, and which technological ‘Unicorns‘ to watch out for in the coming years.

Social Media

No round up would be complete without a look at social media and it’s fast-growing impact on the world of procurement and supply chain. The benefits of social media aren’t clear to all, as we found out when looking at CPO input to networks and social media.

We also offered some insights into the potential pitfalls of social media when using it as part of your procurement and career activities, and examined the role of social media in breaking news events, both from a positive and negative point of view, in the aftermath of the terrorist attacks in Paris.

Best of the Rest

Our round-up wouldn’t be complete without having a look at some of the other popular topics from this year.

Early in the year we highlighted the disruptive forces keeping CPOs awake at night – it will be interesting to see whether these are the same in 2016.

One of our most popular articles from 2014 was also popular in 2015 – our list of procurement influencers. Stay tuned in 2016 to see our updated list!

And finally, late this year we focused on the role of women in procurement and supply chain. As part of this Tania Seary picked out the 10 women who had influenced her procurement career – check out Part 1 and Part 2 of her list again.

We hope you enjoy reading these articles again (or for the first time!). Have you got a favourite from this year? Why not let us know!

Adding Value to Procurement Through Change Management

Rio Tinto’s procurement function is globally known for its high standards and principles. When it comes down to building a world class global procurement department, change management plays a key role.

change-management

Ahead of Women in Procurement 2016, Renae Rutherford, Director – Optimisation Delivery, Global Business Services from Rio Tinto, has shared some key insights with us, which will be presented as a case study at the conference. Renae has embraced change management as a strategy in all her roles to help Rio Tinto functions, including Procurement, achieve significant improvement on a global scale.

Challenges and Opportunities

We asked Renae to share the biggest challenges and opportunities Rio Tinto is facing in procurement at the moment. She says that Rio Tinto is in a moment of “more opportunity than challenge, with decreasing commodity prices, business units are depending on procurement to deliver significant cost reductions including managing working capital more effectively. The challenge is finding more value, as we have a mature global & regional category management model that has caught most of the quick win opportunities.”

Renae also identified a number of other challenges for Rio Tinto’s procurement team, including “achieving efficiencies through global process standardisation in Procure to Pay and master data management” and “identifying how best to evolve procurement as part of a cross-functional organisation that is moving towards an integrated business services model, where procurement will operate more closely with other global functions including IS&T, people services, finance services and property”.

Value in Change Management

When asked how change management is helping Rio Tinto manage these conditions, Renae responded: “Change management is a very broad category.”

“The very first module in my change management post-graduate course was self-management skills – and this was a revelation!  All leaders are change agents, and the most capable leaders have excellent self-management skills, which they apply to cope with job challenges and organisational change, as well as propel their own professional development (aka personal change!).”

“People change management skills are essential for identifying others’ reactions to change and helping them work through this fully, in the fastest way possible.  Resolving business challenges typically brings change impacts to our people and it’s important we help them manage this effectively.”

“Organisational change management skills are essential for taking a holistic approach to bringing about and sustaining the change, where changes will not achieve full benefits nor be sustained if they are not aligned with formal and informal people, process and organisational systems.”

Speaking at the Women in Procurement 2016 conference in March, hosted by Quest Events, Renae will be presenting a session focused on how to embrace change management to build a world class procurement function, including Rio Tinto’s approach, lessons learned, and being a change leader.

Leadership and Career Advancement

Women in Procurement 2016 is also addressing leadership and career advancement themes, so we asked Renae to share some useful tips of how she has approached her career progression.

Here are Renae’s 5 recommendations for those aspiring a leadership role in procurement:

  1. Take on every opportunity to learn and develop, especially when it’s different or daunting
  2. Put in the hard work early, to build that depth of diverse experience
  3. Recognise you passions as well as situations that bring our your strengths, and find more like these
  4. Big 4 consulting experience was a significant accelerator – taught me how to learn quickly, how to influence, and how to manage risks with engaging people and leading projects
  5. Be ok with not knowing everything or not feeling comfortable in your role (mistakes provide the deepest learning); when you do feel comfortable, it’s time to move on

To read Renae Rutherford’s bio and find out more about Women in Procurement 2016, please visit the website here or download the conference agenda.

Your Procurement Christmas Booklist

The Christmas holidays are great – plenty of time to relax, see family and relax in front of the fire with a glass of wine and a good book…

stack_of_books

If you’re like the team at Procurious HQ, you can’t get enough of procurement, supply chain and leadership related literature, then we’ve compiled a short list for you to add to your bookshelf/Kindle/eReader for the festive period:

Strat-Sourcing-IKEA

  • Strategic Sourcing and Category Management: Lessons Learned at IKEA – Magnus Carlsson
  • A Quick Guide to Procurement (for non-Procurement people) – John Bowen
  • The Procurement and Supply Manager’s Desk Reference – Fred Sollish and John Semanik

Procurement-Mojo

  • Procurement Mojo – Sigi Osagie (procurement capability)
  • The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change – Stephen Covey (change)

Getting To Yes

  • Getting to Yes – Roger Fisher and William Ury (negotiation)
  • The Brand You 50 – Tom Peters (personal brand)
  • Start with Why: How Great Leaders Inspire Everyone to Take Action (leadership)

Screen Shot 2015-12-15 at 12.03.39

  • The Art of Social Media: Power Tips for Power Users – Guy Kawasaki and Peg Fitzpatrick
  • Music Rights Without Fights – Richard Kirstein (marketing procurement)
  • Who Moved My Cheese – Spencer Johnson (change)
  • Winning! – Clive Woodward (leadership)
  • Extreme Ownership: How Navy SEALs Lead and Win – Jocko Willink and Leif Babin (leadership)

That should be plenty to keep you occupied when you are looking to escape the mayhem or avoid another couple of hours of dodgy Christmas TV.

Let us know if we have missed your favourite and put the title in the comments below!

Happy Reading!

Working Capital: The Role of Procurement

Procurement has a central role to play in the effective management of working capital, enabling investment, growth and supply chain efficiency.

working-capital-featured

This article has been written by Neil Ross, Regional Manager, EMEA Trade Credit.

Working capital is the fuel behind any successful mid-market organisation, representing the amount of cash available at any one time. If managed effectively, it ensures the business is able to invest in new products and services, optimising its existing operations, while also shoring up against future risks. Failure to maintain control of working capital will inevitably force companies to rely on borrowing, often through expensive bank finance, putting further pressure on the business.

There are three primary factors dictating working capital – Days Sales Outstanding (DSO), Days Payable Outstanding (DPO) and Days Inventory Outstanding (DIO). Essentially, if DSO and DIO are too high and DPO is too low, then companies will encounter cash flow issues. Simple economics mean money will be going out of the business faster than it is coming in, so striking the right balance between these three factors is imperative.

The Role of Procurement

Responsibility for the day-to-day management of working capital ultimately sits with the treasurer, whose role it is to ensure the company has the necessary funds to operate and meet its objectives for the months and years ahead. But the treasurer cannot work alone. He or she must collaborate closely with numerous departments across the business to ensure working capital is maximised. The procurement team forms a crucial part of this network.

As the primary interface between a business and its supply chain, procurement can make or break an organisation’s working capital strategy. Procurement has numerous factors to consider within its remit, not least management of cost vs. value from suppliers. However, a fixation on costs alone can be a mistake, masking other factors which can also seriously impact working capital.

For example, high logistics and warehousing costs can make working with a particular supplier unviable. Similarly, the ease of doing business with suppliers is a prime consideration – if their contractual terms or the process of purchasing are overly complex, this will eat up hours of administration time that could be better used elsewhere.

Favourable Payment Terms?

But perhaps the most important working capital consideration for procurement is the ability to negotiate favourable payment terms with suppliers, ensuring that money isn’t leaving the company bank account until it absolutely has to.

Extending payment terms is a popular method used by large and increasingly by mid-market companies to maximise their working capital and cash flow. Research by YouGov on behalf of PrimeRevenue and AIG[1] found that over three quarters of supplier businesses have been asked to accept longer payment terms, potentially holding up over £29bn.

A smart move by buyers you might think? Well not necessarily, when you consider the impact this could be having on the supply chain. YouGov’s research found that these longer payment terms are affecting suppliers’ cash flow (55 per cent), leading to additional administration (33 per cent) and putting a strain on client relationships (29 per cent).

The knock on effects can be huge, forcing suppliers to borrow money at a high cost, or to cut costs in production and investment. These issues ultimately drive up prices or impact quality, potentially reducing efficiency and sales, while increasing risk all along the chain.

Supply Chain Finance

Procurement professionals are now waking up to this dichotomy and looking at a more holistic solution to the problem. This means building greater collaboration with suppliers, fostering mutually beneficial relationships, and minimising the risk for the supply chain in the long term.

One key aspect to this more holistic approach is supply chain finance, a financing tool that enables businesses to offer their suppliers early payment, while retaining their own longer payment terms. This is possible through third party financing based on the credit rating of the larger buyer organisation.

Until recently, supply chain finance platforms have been limited to supporting the largest, investment grade businesses. However, innovative online and credit insurance backed solutions mean that it is now an option for thousands of mid-market, non-investment grade companies. This can offer a working capital ‘win-win’, while also helping to streamline processes for all involved.

With the economy on strong footing, many businesses are in growth mode, with ambitious plans for investment and expansion. But these plans won’t be possible without a comprehensive and strategic approach to working capital management. Procurement has a central role in making that happen. The tools and technology now available mean it has never been easier to optimise working capital, across both individual businesses and the broader supply chain.

Supply Chain Finance from PrimeRevenue and AIG frees up significant funding for mid-market (£100m+ turnover), non-investment grade companies and their suppliers, providing low cost access to working capital on both sides of the transaction. More information can be found here.

[1] AIG and PrimeRevenue research carried out by YouGov. Total sample size was 250 adults with responsibility for invoicing and payment terms within businesses which provide goods and services to large organisations (with revenues of £100m or more).

Businesses were asked how much of their revenue is currently tied up in invoices with payment terms longer than the standard. If these results were replicated across all businesses in the UK which provide goods or services to large organisations they suggest that around £29 billion is tied up in this way.

Can Procurement Set an Example on KPIs?

Metrics, Key Performance Indicators (KPIs), Performance Management – whatever your organisation calls them, it’s almost certain that your procurement team are both measuring and being measured on performance. But are organisations measuring the right areas?

Metrics

Every week in the procurement and supply chain news, we read reports and headlines focusing on savings and supply chain practices, often highlighting the work organisations are doing to measure these performance areas.

Knowing which elements to measure is tricky, as no two sources will agree on what the ‘best’ metrics are to use. A quick Google search for ‘Procurement KPIs’ comes up with over 400,000 results, with a variety of links to organisations, articles and journals with different views on what constitutes ‘best practice’.

What is clear is from what we read, see and encounter in organisations is that there is a huge volume of resources (time, people, money) being devoted to managing these metrics, but frequently the data produced is poor or the metrics themselves are flawed from the outset.

Defining a Purpose

Anyone in procurement will be able to tell you that the purpose of KPIs is to measure internal and supplier performance across a number of areas. Most of these elements stem from the classic concepts of cost, quality and service. Each indicator focuses on a specific aspect of a contract, has defined what success and failure look like, and should service an organisational need or requirement.

The ‘SMART’ acronym (Specific, Measureable, Achievable, Realistic and Timely) is frequently used in conjunction with the creation of KPIs. Following these steps, the theory is that the KPIs will be both useful and successful and, what’s more, encourage behaviours that drive value.

The Reality

Far too often, however, KPIs in organisations fall short of this. Sometimes it’s because they are poorly defined, other times that they are unrealistic, and frequently that they are measuring the wrong thing entirely. From a procurement point of view, this generally means the focus is on savings and little else.

Externally, suppliers can be given huge lists of KPIs that they are expected to report on as part of their contract. This in turn makes meeting and reporting on KPIs onerous, putting the supplier off focusing on them, and potentially driving behaviours that are carried out to ‘tick off’ the KPIs in order to get paid.

Measuring Intangibles

But examples of good practice are out there. When Ben & Jerry sold their ice-cream brand to Unilever, they were eager for their brand to continue to be associated with the environmental and social activities for which they had gained a great reputation for. This involved the creation of “Social Metrics” – aimed at measuring the social and environmental performance of the brand under Unilever’s auspices.

A difficult task, but one that the organisations stuck with, ultimately creating the concept of “multicapitalism”, a performance accounting system measuring economic, social, and environmental impacts in an integrated way. So far it has been a success, and is setting the bar high for the use of metrics.

This is a good example of performance metrics being used to measure an area that often has intangible outputs.

Taking the Lead

So how can procurement take the lead on creating metrics and measuring performance? If procurement departments are keen to be measured on more than savings, then the organisations need to get their own house in order and create better KPIs for their suppliers.

A recent discussion on Procurious asked about other KPIs to use beyond tracking savings for high value projects. One key point made was to workshop metrics with internal customers to increase engagement. This holds true for suppliers too, and should help to ensure that the right areas of the contract are being measured.

We are not saying that savings trackers should be dropped, but procurement needs to focus on other value areas with suppliers. Once the profession leads by example and stops putting such a high importance on savings externally, the chances are good that this will also happen internally.

Is your organisation setting a good example on KPIs? Tell us what you think and get involved with our discussions.

We’ve scoured the headlines this week and picked out the main ones for you to digest with your morning coffee.

Nations Sign Historic Climate Agreement

  • The COP 21 event in Paris drew to a close last week, with nearly 200 countries signing a new agreement to reduce global emissions
  • The agreement sets a new goal for all countries to collectively reach net zero emissions in the second half of the century
  • The deal includes provision for rich countries agreed to raise $100bn (£66bn) a year by 2020 to help poor countries transform their economies and reduce emissions
  • The deal has been hailed as a significant step in the right direction by global leaders and environmental campaigners

Read more at The Guardian

Jaguar Land Rover Sees Resurgence

  • Jaguar Land Rover reported its best ever November sales, with volumes up by 27 per cent on the same period last year
  • The UK has taken over from China as JLR’s main market, with sales up 70 per cent, but also partly due to the slowdown in China’s economy
  • The high sales in Europe and North America have helped to offset the slower Chinese market, which had been responsible for a weak start to the 2015/16 financial year
  • The organisation is expanding production facilities into Slovakia, with the new plant expected to open in 2018 in order to help meet increasing demand

Read more at Forbes

Twitter fined in Turkey

  • Turkey’s communications technologies authority, the BTK, has fined Twitter 150,000 lira ($51,000.) for not removing content it says is “terrorist propaganda”
  • Although there were no further details on the content in question, it is not the first time Twitter has fallen foul of the Turkish Government
  • In the past, the site has been temporarily banned after failing to remove content following requests, although this is the first time a fine has been levied

Read more at Reuters

Tokyo Police to Launch “Drone Squad”

  • Police in Tokyo are to launch a specialist squad tasked with locating and, if necessary, capturing drones in the city
  • The squad has been set up following a number of incidents involving drones in the city, including a drone landing on the roof of the Prime Minister’s office carrying radioactive material in April
  • The police will use drones themselves to track down possible threats and nuisances, and will patrol high-profile buildings in Tokyo
  • The police drones will be equipped with nets in order to bring down other drones if required

Read more at the BBC

Catalytics – The Next Generation of Procurement

Catalytics® is a business concept that powers Proxima’s new suite of procurement services, delivering triple bottom line outcomes: people, profit and planet.

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45 per cent of consumers have revealed that they would stop spending with a company whose supplier practices are called into question. With so much at stake, Proxima the procurement services provider, today announces the launch of Catalytics®, a refreshing approach to managing a complex network of suppliers. 

Working with leading minds in business and academia Proxima has constructed a framework for Catalytics® built on five pillars – Strategy, Structure, Mastery, Culture and Enablers. The Catalytics® framework changes the conventional approach to managing supplier relationships, moving away from the heavy focus on financial metrics and instead focussing more on long-term value-creation.

Risk in the Supply Chain

Jonathan Cooper-Bagnall, Executive Vice President, Commercial Director at Proxima, comments: “Wider forces such as risk, innovation and sustainability critically influence the success or demise of businesses today. Seemingly indestructible brands have shown themselves extremely vulnerable in recent years.”

“Following horse meat scandals, uncapped oil-wells and garment factory disasters; even major European car manufacturers can witness their reputation and finances holed by the risks buried in the chain of command or hidden in the supply chain.”

The reliance on external suppliers for goods and services shows no sign of slowing down. Additional research conducted by Proxima found that the average FTSE 350 organisation spent 69.9 per cent of its revenue with outside agencies, and only 12.9 per cent spent on the in-house workforce in salaries and benefits.

Further, 46 per cent of risk managers in global businesses say supply chain failure is their number one risk. A Catalytics® approach will help to mitigate against supply led risks and, conversely, help businesses drive more value out of their supplier relationships.

 Triple Bottom Line

Catalytics® allows businesses to rethink how they manage complex supply chains in line with Triple Bottom Line (TBL) outcomes – looking beyond the transactions of buying goods or services.

With almost 70 per cent of operational activity performed by suppliers, businesses stand to receive significant benefits from taking a more strategic approach to their supplier ecosystems. 

Catalytics® accepts that companies today cannot isolate themselves from financial, operational and reputational risks in their extended supply ecosystem, and that those same suppliers are a valuable source of competitive advantage.

Cooper-Bagnall concludes, “Organisations must look beyond profit to evaluate their performance and direct their operations. Long-term value creation – for shareholders and other stakeholders – requires leaders to deliver on triple bottom line outcomes: people, profit and planet. Failure to align operations with the principles of TBL outcomes can have serious effects on brand reputation and market position. Thinking differently about supplier ecosystems will allow business leaders to reshape their entire business to meet the new realities of modern business.”

For more information about Proxima’s Catalytics® framework, visit www.proximagroup.com/what-is-catalytics