All posts by Procurious HQ

How Will Technology Transform Procurement Operations?

New research claims Automation and Internet of Things (IoT) will have biggest technological impact on the function.

How technology will change procurement functions

In its third set of results from its 2015 Global Procurement Study, Xchanging assesses the impact new advances in technology will have on procurement.

Technology Adoption

Savings tracking (77 per cent) and spend analytics (76 per cent) technologies are the most widely implemented, in the context of a tough economic climate where spending cuts and streamlined processes remain top priorities for businesses.

This mirrors respondents’ answers about the KPIs on which their procurement functions are measured – the top four all being cost related (47 per cent cite cost savings realised as their most important KPI, 19 per cent revenue impact, 16 per cent cost savings identified and 14 per cent cost avoidance). 

Over half of companies questioned also already have automation (68 per cent), reporting dashboards (68 per cent), contract management (67 per cent), supplier performance management (64 per cent), market intelligence (60 per cent), eSourcing (59 per cent), predictive analytics (54 per cent) and Internet of Things (54 per cent) technologies in place.

In general, the organisations most likely to have the above solutions in place were:

  • In the U.S.
  • Larger, with 3,000+ employees
  • In retail, consumer goods or manufacturing industries
  • That outsource parts of their procurement operations

U.S. companies are 8 per cent more likely to have all of the listed technologies in place than those in mainland Europe.

Overall, supplier performance management software and predictive analytics are the technology solutions most likely to be implemented in the next two years (both cited by 12 per cent of respondents), whereas 46 per cent claimed they are unlikely to ever implement online auctions.

Technology Impact

Predictive analytics and the Internet of Things (IoT) are expected to be the most revolutionary technologies for supply chain operations, with eight in 10 respondents (80 per cent/79 per cent respectively) stating they will have an impact, and nearly a quarter (23 per cent/24 per cent) expecting them to have a major impact.

A report issued by DHL and Cisco in April this year estimated that by 2020, 50 billion devices will be connected to the internet – an increase of more than 300 per cent from today’s 15 billion – and that IoT will generate $1.9 trillion across the supply chain and logistics operations industry, with warehousing and freight benefitting the most.

Luke Spikes – Xchanging’s Procurement Technology spokesperson, provides the following insights on the research:

On high technology adoption rates:

“When analysing the data, it is key that we consider how ‘technology’ is being interpreted by respondents. It’s surprising that over half of all companies surveyed said they already have the majority of the listed technology solutions.

“A notable 76 per cent reported having spend analytics technology, but we need to question what technology they are actually using. Are they really utilising a solution that analyses all spend data – how much is spent, on what, with whom and by whom – and transforms this data into actionable business intelligence? Or are they simply using Excel spreadsheets?

“It’s also important to note that there is a big difference between having the technologies in place, and using them to their full advantage, to enhance performance and improve the bottom line. There needs to be a drive on education around technology applications for them to deliver real benefits.

On IoT, predictive analytics and future technologies:

“The supply chain landscape is increasingly global, and IoT can enable businesses to track the exact whereabouts and the condition of goods in transit, automatically monitor inventory levels to manage cash flow more efficiently, and remove human error from the process.

“Predictive analytics will drive a far more strategic approach to sourcing – for example, enabling hedging on the price of raw materials to become a daily part of the procurement process – as well as creating further opportunities for automation to increase accuracy and efficiency.

“Procurement leaders ignore technology-driven progress at their peril. If they don’t seize the opportunity, they will quickly fall behind their competitors. The adoption of new technologies – alongside a continued focus on the value and expertise of procurement professionals – will ensure the function remains a strategic, indispensable part of their organisation.”

The study is a major international project that surveyed 830 procurement decision makers across the UK, Europe and North America.

Rethinking Suppliers: Spotting Future Crises

81 per cent of procurement execs fail to include key insights from global suppliers into wider business reporting.

Businesses fail to include key insights from global suppliers into wider business reporting

The latest survey from Proxima reveals that businesses need a rethink on how to better engage suppliers to spot future market crises and opportunities.

The research highlights that many businesses are potentially limiting their capability to gauge market activity using critical insights derived from supplier sentiment.

The research found that news media is a key source with 65.3 per cent of respondents using it to monitor market sentiment. Commodity pricing and currency volatility came in close second and third as key sources with 61 per cent and 57.6 per cent, respectively, of respondents advising that they primarily look to this as an indicator of market movement. 

Although an encouraging 57.6 per cent of procurement respondents indicated that they are looking towards their suppliers for insight into the wider market, a staggering 81.2 per cent confirmed that although they see the value in monitoring market sentiment, they do not include key findings and insights into the reports or dashboards that they present back into the wider business. 

Guy Strafford – EVP, Chief Client Officer at Proxima, said: “This statistic suggests that there is perhaps a slight disconnect between information being collected from suppliers and insight that business leaders need to make strategic decisions. If the procurement team is unable to bridge the two, this insight is often, unfortunately, kept within the procurement department, leaving the rest of the business to their own devices. This often leads to divisional leaders looking externally for the same information.”

7.6 per cent of respondents stated that they did not measure market sentiment at all with 26.3 per cent saying they lacked the necessary resources (budget or people). Of those that do, news media is the single most important source of information (21.7 per cent). A surprisingly small number (8.8 per cent) of respondents indicated that they use the Purchasing Managers’ Index (PMI) as their most important tool for gauging activity on the market.

Strafford added: “The study highlights the overreliance on news media as the primary source of information, when by its very nature, news is an explanation of events that have already occurred. Businesses are therefore making important decisions based on historic data that is not necessarily real-time nor forward-looking. Businesses need to have their fingers on the pulse, and gaining valuable insight from suppliers could significantly help companies to glean sentiment on the ground that ultimately helps them make better decisions in real time.”

Alongside news media, insight from suppliers is the most important source of market sentiment for 21.7 per cent of respondents. It is surprising, therefore, that almost a quarter (24 per cent) engage with their suppliers only once a year or even less frequently. The largest group (28 per cent) gauge market sentiment with their suppliers on a monthly basis. 

Strafford said: “Even though supplier insight is clearly valued as a monitoring tool, the Procurement team is faced with a further challenge that many business leaders simply want to keep suppliers at arms length – either driven by culture, their experiences or for strategic reasons – and will resist integrating suppliers closer to their operations.” 

The results potentially raise questions regarding whether the procurement and supplier management functions currently have the right tools for capturing, and forums for presenting, supplier information back into the business. 

“Less mature procurement functions, defined by their size, scope of influence and heavy focus on savings, will often struggle to connect deeper supplier insights back into other business activities”, added Strafford. “As a result, these functions (not for lack of want) cannot achieve wider benefits such as supplier-led innovation, more flexible terms and faster responsiveness to demands.

‘Uberization’ – Is Any Profession or Industry Safe?

The phenomenal global success of Uber boiled down to a simple premise – that consumers wanted a way to source a traditional service more easily and cheaper than before. Its success has given rise to the so-called ‘Uberized’ economy. But what product or service is next? 

MADRID, SPAIN - OCTOBER 14: In this photo illustration the new smart phone taxi app 'Uber' shows how to select a pick up location next to a taxi lane on October 14, 2014 in Madrid, Spain. 'Uber' application started to operate in Madrid last September despite Taxi drivers claim it is an illegal activity and its drivers currently operate without a license. 'Uber' is an American based company which is quickly expanding to some of the main cities from around the world. (Photo by Pablo Blazquez Dominguez/Getty Images)

Taxis were first, along with hotels (Airbnb), retail (Alibaba), real estate (Suitey) and car sales (Beepi). You can even look at media (Facebook) and freelancing (Upwork) and see similar disruption.

What these new organisations have in common is that they are network based, don’t own any inventory, stock or hard assets, and they all took an existing service and provided a more customer-centric, lower cost service.

Traditional professions like medicine and legal and financial services have been largely sheltered from this disruption so far, but this looks set to change.

End of the Old Guard

For some, these traditional professions have been viewed as ‘untouchable’ (this might be down to them working in these professions and trying to resist this shift), but, for others, the services offered by these professions was ripe for ‘Uberization’.

One profession viewed as ‘untouchable’ was the Legal profession and, more specifically, the provision of legal services. There is an increasing number of online start-ups aiming to provide this more ‘customer-centric’ service than has been available previously.

Not only do these companies offer a cheaper service, but also a simplified purchasing experience for individuals and organisations. Services can be purchased on a task-to-task basis, rather than paying by the hour. The concept of a set fee for services, like the offering from Avvo, is an attractive one, particularly for a procurement department.

Simplified Procurement

An overall spend figure for legal services is hard to come by, but, with global banks spending over £200bn, and spend with the UK arm of global law forms topping £28.5bn, it would be safe to give a conservative estimate of around anywhere between £500bn and £750bn.

In 2013/14, local authorities in the UK spent £156m on legal services. Although these costs were down on the previous three years, it seems there is still plenty of scope for further reduction.

While many procurement teams may have been shut out of the process of purchasing legal services, the ability to reduce the cost, while at the same time retaining the service level required by internal stakeholders, leaves procurement in a powerful position.

Put simply, procurement can make changes for the better and a good place for them to start is with these ‘Uberized’ companies. Not only could costs be reduced, but also time spent on lengthy (and often costly) tender processes.

And next…?

So if one ‘untouchable’ can fall victim to the ‘Uberized Economy’, then which one might be next? Some suggest that Financial Services might be the next profession to be ‘Uberized’.

With many similarities to the Legal profession, there doesn’t seem to be a good reason why you might end up getting your financial services via an app in the not-to-distant future.

And as people move towards vertical marketplaces, where a few things are done well, in depth, rather than the common horizontal marketplace with multiple avenues carried out in less detail, it’s likely that other professions will follow suit.

Now, if only there was a vertical network for procurement that people could take advantage of…

Do you procure legal services for your organisation? How would this impact your job – would it be a positive thing for you? Join us and start a discussion on the future of ‘untouchable’ professions.

While you’re digesting the main event, why not check out this week’s main headlines from procurement and supply chain for your Monday morning tea break…

Police asked to investigate London Garden Bridge Contracts

  • Scotland Yard has reportedly been pressed to investigate allegations the procurement process behind the capital’s planned garden bridge “was rigged”
  • The central allegation is that the procurement process was rigged and that designer Thomas Heatherwick and engineering firm Arup had been lined up to win the contracts before tenders were issued
  • Further revelations have shown that meetings were not recorded in London Mayor, Boris Johnson’s, diary, where go ahead was given for the process
  • There are also questions over how Arup won its contract, and why it was asked to resubmit its bid while other firms were not

Read the ongoing story at The Guardian

iPad Pro Launch Date Leaked

  • According to Mac Otakara, a Japanese blog, the release date for the new product is set for the 6th of November
  • Although a highly guarded secret, the blog spoke with workers in the Apple supply chain in China and gathered information from them
  • Apple still has the iPad Pro listed on their website as “Available November”, and hasn’t commented on the leak

Read more on Ledger Gazette

Demand-Driven Perishables Offer Fresh Look for Groceries

  • Up to 133 billion pounds of food is wasted annually in the U.S. alone – at a staggering cost of $162bn
  • Cognizant has created a new infographic aimed at showing how a demand-driven model can reduce inventory, spoilage and wastage
  • A demand-driven replenishment model can help grocers better anticipate supply requirements, improve storage and maintain food freshness

Check out the infographic on Cognizant

General Mills recall set to impact supply chain

  • FMCG giant General Mills is recalling 1.8 million boxes of gluten-free Cheerios, as they are thought to contain gluten
  • The company said wheat flour had been “inadvertently introduced” into its gluten-free oat flour used to make original and Honey Nut Cheerios
  • The company are unsure how much the recall will cost them in cash-terms, but look set to be the latest organisation to suffer from a reputational hit
  • The case shows that supply chains need to be aware of track and trace systems and the supply chain will be reviewed in light of the incident

Read more at the BBC

Procurement Hero Reaches For The Skies In Aid Of Cystic Fibrosis

He has recorded every single flight he has been on since he was born — an incredible 1232 flights

Every two years Matthias Fuchs has been undertaking a flying marathon challenge. The challenge is supported by Qantas and raises funds for terminally-ill children at the Children’s Hospital Westmead.

This time around Matthias will take on a record 12 days flying in economy class without ever leaving a plane or airport terminal. Qantas has already supplied Matthias with the proposed flight schedule, and we can tell you that it clocks in at around 200 flying hours, over a distance of 167,000km…

During his time spent in the air, Matthias will cross the Pacific Ocean six times, and the Indian Ocean four.

The challenge has been an enormous success in previous years, in 2013 he alone raised a whopping $140k for the Cystic Fibrosis Unit at the Children’s Hospital Westmead. This year Matthias says that the proceeds will be used to maintain the mass spectrometer machine that was bought previously, as well as fund a clinical research fellowship.

Sponsor the challenge here

Matthias says: “This is a cause very close to my heart as my 12 year old daughter Kristen has cystic fibrosis.”

Matthias loves to fly, so much so he’s kept a record of every flight he’s ever taken. That’s 1232 flights…

Will you support the good man in his noble cause, as he attempts the marathon challenge for one last time? To-date $161k has been raised, but he hopes to reach $175k-200k before it’s time to take-off.

What’s more, donate $5k and you’ll get your company logo embroidered on the shirt he’ll be wearing during the challenge.

Come on, dig deep!

How Can Procurement Increase Health And Happiness?

By delivering social good, procurement has the ability to increase health and happiness.

How can procurement promote health and happiness?

Procurious has been attending the CIPS Annual Conference in London.

Professor Olinga Ta’eed, Director – The Centre for Citizenship, Enterprise and Governance, who spoke at our own Big Ideas Summit back in April 2015, said that although financial value is still wonderful and still king, we’re more interested in social value. It is essential that procurement (as a function) converts sentiment into financial value.

The Social Value Act was passed in 2012 and allows local and national government to consider the social good offered by bidders during procurement exercises in addition to monetary value.

The Act has been designed to make it easier for charities to win public sector contracts, applies only to procurement exercises worth more than £113,000 if awarded by central government and the NHS and £173,000 if awarded by local councils.

But what do we mean by social value?

“Social value” is a way of thinking about how scarce resources are allocated and used. It involves looking beyond the price of each individual contract and looking at what the collective benefit to a community is when a public body chooses to award a contract. For instance, social value asks the question: ‘If £1 is spent on the delivery of services, can that same £1 be used, to also produce a wider benefit to the community?’

It is now becoming increasingly necessary for social enterprises to report on their social value. Social value should equal happiness – but in order to promote the good you’re going to need happy people, a happy company, and ultimately a happy world. We have to look at ourselves, and how much value we bring to the table as both individuals and as businesses.

 

Is there a true and fair view of social value?

Olinga points out that there are lots of handcrafted metrics out there, but you need to have a model T Ford. You need a benchmark – the benchmark is critical. It has to matter. You can be doing great things, but you need to be able to articulate it.

Hugh Chamberlain – EMEA CSR Procurement Head, Johnson & Johnson, followed Olinga and explained how his organisation was helping people to live happier lives through the products they bring to market.

Johnson & Johnson has the lofty ambition of ensuring people live longer, healthier, happier lives, it is estimated that around a billion people use its products every day.

Johnson & Johnson’s Credo (a common set of values unifying diverse business) states: “We are responsible to the communities in which we live and work and to the world community as well”.

Hugh wanted to highlight the measurable social impact through procurement Johnson & Johnson was making. For instance it buys the goods and services it needs from organisations that would otherwise struggle to get a foot in the door – and also targets those organisations that employ people who are furthest from the job market.

What you need to know about social enterprises

Social enterprises are businesses that trade for a social and environmental purpose. At the time of writing there are 70,000 social enterprises in the UK, collectively contributing £24 billion to the economy. health and social care, but also in housing.

Social enterprises are growing faster than most SMEs, with more women leading and taking charge.

In-fact research from 2014, showed that that 38 per cent of social enterprises are led by women compared to 19 per cent of SMEs and 3 per cent of FTSE100 companies – and that 91 per cent of all social enterprise boards have at least one female director, compared to 51 per cent elsewhere.

Do you know how much social value can be achieved through buying your organisation’s services? How much emphasis (if any) do you put on delivering social value?

86% of UK Sales & Marketing Teams Say Procurement Hinders Progress

Sales and marketing fails to see importance of negotiating deals with suppliers.

Sales and marketing teams fail to see importance of negotiating deals with suppliers

According to new research from eProcurement software company – Wax Digital, sales and marketing is the department least likely to get the best deal from its suppliers, with a massive 86 per cent saying procurement hinders their progress.

The CPO Viewpoint research, surveyed by Redshift, on behalf of Wax Digital, found that over one in three sales & marketing functions place orders and spend budgets with suppliers without any procurement involvement. And only 24 per cent in sales and marketing said that they use formal supplier tender processes managed by procurement, far fewer than other departments such as IT and finance.

The problem seems to be sales and marketing’s negative perception of procurement with only 12 per cent of sales and marketing respondents describing the relationship as ‘very close’ and only a quarter of procurement respondents saying the same.

Sales and marketing appears to view procurement the least favourably, with only 28 per cent regarding it as value adding or critical, compared to 44 per cent of finance having the same view. A significant 86 per cent of sales and marketing describe procurement as hindering progress, and 1 in 5 view it as a ‘necessary evil.’

Dissimilar procurement priorities suggest why the two departments fail to work collaboratively. Procurement sees ‘handling supplier negotiations’ as the top way it can help other departments, but this scored the lowest with sales and marketing – only 4 per cent of them prioritising it.

The two departments also disagree over sales and marketing’s spending priorities. While sales and marketing are focussing on creative communication activities such as advertising, website and branding, procurement prioritises marketing fundamentals such as analytics, data and CRM.

Daniel Ball, director at Wax Digital, said: “Businesses need to bridge this gap between procurement and sales and marketing but it’s often a difficult challenge as the two departments function uniquely. This often places an importance on different areas such as creativity and personal relationships versus best price and supplier risk and compliance, which clearly leads to them clashing and being poles apart.

“Through better communication, sales and marketing could perhaps learn from procurement the importance of negotiating worthwhile deals with suppliers, and how damaging maverick spend with suppliers who are not adequately vetted can be. This could also help procurement better understand what sales and marketing value, hopefully leading to a more balanced set of priorities between the two departments.”

Will ‘Unicorns’ Deliver a Horn of Plenty in the Future?

Traditionally a Unicorn is a mythical creature, much wished for but seldom seen outside the bounds of the Harry Potter universe and the pictures doodled on children’s notebooks and stencilled on their bedroom walls. However, a new type of Unicorn has been coming to the fore in recent years and is multiplying fast.

unicorn-feature

For those who aren’t aware of this phenomenon, a ‘Unicorn’ was a term coined by Aileen Lee, founder of Cowboy Ventures, back in November 2013 and used to describe a start-up company whose value has exceeded $1 billion.

When you think of unicorns in this regard, think Facebook (actually classed as a ‘super-unicorn’ thanks to a valuation over $100 billion), Slack, LinkedIn and Uber. It is estimated that there are around 80 ‘unicorns’ prancing around currently, predominantly in San Francisco, but the odds of building or investing in a billion dollar organisation are around about the same as being struck by lightning…

So what’s the secret?

It depends who you listen to, but the common consensus is that there is no secret or magic bullet to creating a ‘unicorn’. As with any start-up, innovation plays a huge role in success, but for a unicorn it’s also about catching the right wave, at the right time, and taking advantage of prevailing trends and public opinion.

These trends, and their unicorns, go all the way back to the 1960s and look something like this:

  • The development of the semiconductor (Intel)
  • The advent of the personal computer (Apple; Oracle; Microsoft)
  • Development of new networks (Cisco)
  • The Internet (Amazon; Google)
  • The rise of Social Networks (Facebook; LinkedIn)

The list looks like a who’s who of powerhouse technology companies, all instantly recognisable, all companies we have come across or used ourselves during our lives. But where will the next trend come from?

The New Unicorns

Investors and experts have begun to look to the short-term future to see where the next unicorn might come from. According to a couple of sources, the Collaborative and On-Demand Economies may give birth to the next unicorns. You probably haven’t heard of them yet, but here are just some to keep an eye on:

  • Envato – an online marketplace for creative, enabling access to freelance talent, videos and tutorials
  • Canva – an online graphic design tool, aimed at making design accessible and easy for everyone
  • Campaign Monitor – providing easy creation, sending and reporting on e-mail marketing (clients already include Coca-Cola and Airbnb)
  • ROKT – online marketing platform aimed at delivering higher engagement for service advertising

Could the ‘Bubble’ Burst?

However, all this needs to be delivered with a word of caution. Most people in business are old enough to remember the dot.com bubble of the late 1990s. What started out as a rush of new, innovative online organisations, ended with a set of spectacular failures and the loss of hundreds of millions of dollars.

This is the concern for some analysts with this new wave of technology start-ups and unicorns. Greycroft Partners founder, Alan Patricof, warns against the belief of being able to raise endless capital, with businesses vulnerable to changes in the market and the outlook.

Some organisations have lost their unicorn status, and even Facebook’s value dipped dramatically before reaching its current peak of around $225 billion.

Your Unicorn

So if you have an innovative idea, now might be the right time to get started and you could end up with a unicorn of your own. But be wary, you might want to get started soon, before someone takes your idea or the bubble bursts entirely…

We’d love to turn Procurious into a unicorn, but there’s plenty work to be done first. If you’ve got any ideas or comments about the site, we’d love to hear from you!

And just because we’re so good to you, here are some top headlines from procurement and supply chain this week…

No Evidence of Wrongdoing in London Garden Bridge Procurement

  • An audit has concluded that there was no evidence of wrongdoing in Transport for London’s (TfL) procurement for the London Garden Bridge project
  • The audit aimed to provide assurance of an open, fair and transparent process in the procurement of design and development services
  • While the audit found that in some instances where TfL policy and procedure were not fully complied with, it concluded that it had not identified any evidence that the final recommendations did not provide value for money from winning bidders
  • However, concerns have still been raised by the London Assembly Liberal Democrat Group as key documentation supporting the evaluation of the bidders had been disposed of during a TfL office move and could not be evaluated

Read more at Supply Management

Schultz stresses need for Supply Chain at top table

  • Howard Schultz, CEO of Starbucks, stressed the importance of the supply chain during a keynote address at this week’s Council of Supply Chain Management Professionals (CSCMP) Annual Conference in San Diego.
  • Schultz explained that a classic mistake made by most companies is that two areas often left behind by companies are HR and supply chain
  • Schultz argued that the supply chain needs to be at the forefront of every enterprise in the world, especially the ones that are consumer-facing

Read more of the keynote points at Logistics Management

‘Freelancing in America: 2015’ Report Released

  • Upwork and Freelancers Union released their jointly-commissioned study “Freelancing in America: 2015” last week
  • The report included a sizing and segmentation of the freelancer population, and assessed a range topics, including freelancer motivation, earnings, attitudes and outlook for the future
  • The study estimates, as of mid-2015, that overall there were 53 million freelancers in the US, representing about 34% of the total US workforce
  • Upwork CEO Stephane Kasriel stated that “strong growth in the economy and the rapid increase in full-time job opportunities, has led some number of freelancers to return to full-time employment”, showing a potential changing environment

Read the results at Spend Matters

US Car Sales on the Rise in September

  • The Big Three car manufacturers in the US projected the overall sales pace for September will top 18 million vehicles
  • General Motors Co., Fiat Chrysler Automobiles NV and Ford Motor Co. each posted double-digit percentage increases compared to a year ago
  • If volumes continue at the same rate as predicted, it would be the highest yearly volume since 2000, bringing much needed good fortune to the industry

Read more at the Wall Street Journal

Procurious Big Idea #42 – Getting Involved With Risk Management

Matthias Fuchs, CPO at Boral thinks the procurement function needs to broaden its horizons.

Matthias talks about procurement broadening its horizons by getting involved with risk management and insurance management, adding the procurement rigour to the process.

See more Big Ideas from our 40+ influencers

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

You’re invited to come and join 14k+ others…

Did you know that Procurious is also on Facebook? Come and join our 14k+ fans!

There are many other ways to stay connected to Procurious – this post will highlight but one of them. Today we’re talking Facebook.

Like Procurious on Facebook

It doesn’t matter whether you’re a social media maestro, or tentatively dipping your foot into the cloudy networking waters for the first time – sometimes there are just not enough hours in the day to log on, contribute and share.

The folks here at Procurious know this, so that’s why we ensure all of our newsworthy announcements, talking points, notable events, and informative videos (along with the latest stories hitting the headlines in the world of procurement) are signposted across all of our social channels.

This is what our page on Facebook looks like – why not give us a like and share with your network!

screenshot_616

Facebook is also great for those who might have heard of Procurious, but perhaps don’t feel comfortable being a committed member just yet.

So come and join our Facebook page, after-all 14k+ fans can’t be wrong…