Going from data to intelligent spend analysis? Traditional tools just don’t cut it anymore. How do we get from data to tangible, valuable ideas?
Supply chain leaders today are being asked to help contribute to business growth and promote innovation while reducing costs. That’s a lot to ask. Managing expenditures across global organisations has become increasingly complex and involves just about everyone: especially procurement, legal, finance and operations.
Intelligent Spend Management is about more than classifying and reviewing historical spend. It is also about compliance, governance and mitigating supplier risk, all of which are needed to make informed decisions about future purchasing strategies.
Traditional Spend Management
The main objective of spend management is to identify and exploit savings opportunities and ultimately improve the firm’s profitability. It involves collecting, collating, cleansing, maintaining, categorising, and evaluating spend data from across the enterprise.
Traditional free-standing tools that manage spend analysis, P2P, contracts and supplier relationships are not set up to provide a consolidated view across all spend categories. Often these data sets reside on systems that don’t talk to each other and provide limited information.
What is Intelligent Spend Management?
A strategic, intelligent approach to spend management allows for a unified view and better management of risks across the supply chain and harmonisation of procurement policies and processes. This approach requires all spend data to be centralised so that any analysis efforts are applied to the total organisational spend thereby providing visibility of and control over each spend category. Intelligence means learning from past actions and improving responses over time.
Supply chain leaders can exploit spend opportunities provided by this “big data” to increase their cost savings, decrease operating costs, and reduce risk. To do this they need an end-to-end platform that uses the best-suited technology and the right tools. These resources need to be applied in such a way as to deliver reliable real-time information that can be used for decision-making.
Using conventional tools, it is difficult to achieve these outcomes.
Machine learning is an application of artificial intelligence (AI) that provides enterprise-wide systems with the ability to automatically learn and improve from experience. Using these new approaches we can learn much from the historical volumes of spend data without human intervention.
We can answer questions related to customer profiles and their spend history, provide explanations for past actions and guide users with recommendations about future purchases.
What can Intelligent Spend Management deliver?
Intelligent spend management has the capacity to transform any organisation’s data into information that becomes a source of ideas and plans that can be used to grow the business.
1. Historical data tells a story
It reveals repeating patterns about users, approvers and suppliers. It also offers insights into which types of requests should be approved automatically and which others call for human intervention.Intelligent technologies that have exposure to a holistic view of spend-related data can provide learnings to continuously improve decision-making across the source-to-pay spectrum.
2. Improved user experience
Intelligent processes provide a real benefit to users and approvers alike by ensuring compliance with all corporate policies and regulations while cutting down on waiting times and streamlining document approval processes. Supply chain staff and end-users need easy-to-access, reliable, real-time information on supplier performance to make optimal buying decisions.
3. Better market intelligence
To manage spend efficiently and
identify new sources of supply, businesses need to interact with data coming
from external sources such as from suppliers, government and business
associations as well as from internal sources. This includes accumulating
industry and economic intelligence automatically from third parties and using
it in conjunction with their historical spend data.
“As enterprises embrace an increasing number of partners to compete globally and as value chains grow longer and more complex, they need intelligent platforms not only to extract the fullest value from data but to extend its broadest capabilities.”
Patrick McCarthy, Senior Vice President and General Manager of SAP Ariba and SAP Fieldglass.
Predictive spend analysis in supply chain is still fairly new, but it is becoming increasingly essential in large organisations that have already been exposed to spend analysis tools, supplier segmentation and relationship management.
An enterprise-wide system that can provide a unified view of spending that brings spend data together from across all sources and categories allows users to make smarter, faster spending decisions.
Achieving this requires investment in the right IT infrastructure and systems which will really put your spend data to work.
Innovations like AI, machine learning, IoT and blockchain are reshaping entire industries, but this is an opportunity for procurement, not anything to fear. Join Pat McCarthy at the Big Ideas Summit Chicago 2019 tomorrow (Wednesday 18th September) to find out why. Register as a Digital Delegate by clicking here.
The implementation of a category strategy is seen as best practice in procurement. But contracts themselves hold the key to success.
For procurement organisations, “category management” is considered a best practice for sourcing. Simply put, category management is the process by which companies segment all the goods and services they need to procure into discrete categories that reflect the specific common characteristics of the products they’re buying.
For example, the procurement department at an automobile manufacturer will likely be responsible for sourcing everything from steering wheels to cleaning services. While in both cases the company needs to make prudent decisions about its spend, what goes into to choosing vendors for those goods and services are obviously very different.
Some goods are highly commoditised and therefore cost will be the determining factor. Other goods may have stringent performance requirements attached to them. These will be evaluated based on the quality of the vendors bidding for business. Some goods are business critical. Others, less so.
A category management strategy for steering wheels may look something like this:
The company’s steering wheel vendors should be equally dispersed between the North American, APAC and EMEA regions;
No one vendor should supply more than 40 per cent of all steering wheels;
The total spend on steering wheels can’t exceed a pre-determined amount.
This strategy means that the supply of steering wheels is more resilient to disruptions like natural disasters (since they are coming from various geographies) and not exposed to undue damage if a single vendor fails (since no one vendor dominates the supply). And, of course, it provides predictability in how much will be spent procuring the product.
Making Sure the Category Strategy Is Followed
But designing the category strategy is just the first step of the process. The greater challenge is carrying it out. The history of large enterprises trying to execute category strategy-driven procurement shows that while they are sometimes able to apply the category rules at the time of sourcing, it becomes a struggle to monitor adherence during the operations phase of a contract.
For example, contracts may have been awarded assuming a certain mix of supply sources (with differing costs and quality parameters) to deliver on certain quarterly cost goals, but issuance of purchase orders in a different proportion at the execution stage will invalidate those assumptions and cause the category strategy to fail.
To improve compliance with a category strategy, leading enterprises are taking a new approach. Putting contracts at the centre of the process.
Using contracts to drive category management compliance is enabled by the emergence of digital contracts and contract management software. By managing contracts on an enterprise contract management platform, companies can leverage contract data to execute effective contract strategies—and design superior strategies to begin with.
How It Works
Let’s go back to the steering wheel example and see how enterprise contract management can optimise the process.
First, the procurement organisation develops the category strategy for steering wheels. The development of a category strategy is a consultative process and depends on data to draw insights and validate assumptions. Much of this data exists in past contracts: supplier performance on existing contracts, spend on different sub-categories and geographies, and other data points. That information, when available on a contract management platform, gives rise to a superior strategy.
Next, the company put out requests for bids from vendors. Contract requests and bid lists aligned with the adopted strategy are launched from within the contract management system. This ensures that the vendor shortlisting and price discovery process conforms to the category strategy.
Once purchase orders begin to be issued, business rules in the contract management platform ensure the strategy is carried out. If a buyer tries to execute a contract that goes against strategy – for example, with a vendor whose geography has already reached its limit in the strategy – the contract will be blocked or routed for special approval.
Finally, the contract management software monitors in real time vendor performance against the contract. This is done both through data tracked within the platform itself and through integrations with other enterprise systems. This way category managers can not only make sure contracts comply with the strategy, but that performance complies with the contract.
Contracts Are the Foundation
Since contracts are the foundation of buyer-supplier relationships, an enterprise contract management platform can support all phases of a category strategy:
Insights to develop the strategy;
Tools to execute the strategy;
Rules to enforce the strategy; and
Integrations to monitor the strategy.
Icertis is focused on how digital contracts and cloud-based enterprise contract management software can improve business performance, including in procurement. To learn why Gartner has named Icertis a “Cool Vendor in Sourcing and Procurement” and why “the clear leader” in buy-side contract management, contact us today.
Want to get access to more great insight on contract management, A.I. in procurement and all things procurement software? Icertis are one of the main sponsors for the Big Ideas Summit Chicago 2019, and will be delivering one of the keynotes on the day. There’s still time to register as a digital delegate – find out more and sign up today here!
Procurement can do much more than it’s already doing when it comes to sustainability. And together we really can save the world…
Historically, Procurement’s mandate has involved cutting costs and little else. The reputation for barking orders and slashing spend has led to more than a little resentment within certain organisations. Business units are often hesitant to engage with the function. When they do, they’re typically gritting their teeth and counting down the seconds until they can go back to focusing on their own key objectives.
Reducing costs is a noble cause – and Procurement’s top priority. But it’s just the beginning of what Procurement can offer the business and its customers. With its cross-functional position and unique insights into the supply chain, Procurement has the capacity to fundamentally change the way an organisation operates.
In Part 1 of this blog series, I examined some of the life-saving initiatives that Procurement teams across the globe are supporting. Cracking down on modern slavery and optimising disaster response plans, they’re evolving in their role and making it possible for corporate leaders to serve a higher purpose.
This time around, I want to look into Procurement’s efforts to address even broader issues. In addition to saving individual lives, great Procurement teams can potentially save entire species by working to identify and address worldwide environmental concerns.
Procurement Can . . . Save the Planet
Addressing Climate Change
The most pressing environmental crisis of our time, climate change, has dominated conversations among politicians, business leaders, and consumers for more than a decade. While forecasts vary from source to source, it’s clear that rising temperatures and sea levels present nothing short of an existential threat. From a business perspective, the myriad effects of a changing climate could mean a 10 per cent reduction in profits for American businesses. The planet and its people could suffer even more dire consequences.
The global economy simply cannot continue along the path that’s gotten it to this troubling position. For Procurement, the looming threat of climate change should provide the quintessential burning platform. It’s an opportunity for the function to distinguish itself as the value-added entity and to take the lead in designing a totally new worldwide supply chain.
When most of us think of climate change, we think of greenhouse gas emissions. While it’s somewhat reductive to describe such a broad issue through these narrow terms, addressing emissions is certainly a high-impact way to begin promoting responsibility. It’s not nearly enough to clean things up internally. Even organisations that don’t personally burn coal and oil often rely on supplier networks that make an outsize contribution to climate change.
The Carbon Disclosure
The Carbon Disclosure has found that suppliers often account for four times as many carbon emissions as an organisation’s direct operations. This eye-opening fact has inspired a number of businesses to broaden their approach to sustainable business. As organisations gain additional visibility into their supply chains, they have more and more power to enforce a higher standard of responsibility.
Target, for example, has made supplier-generated emissions an important part of its climate goals. In addition to establishing objectives of its own (including a 30 per cent reduction in emissions by 2030), the retailer is asking nearly every one of its suppliers to begin working toward similar goals by 2023.
One of Target’s direct competitors, Walmart is taking a similar approach. The world’s largest retailer is not merely holding its suppliers accountable for cutting down emissions, but offering additional incentives for those who successfully do so. They’ve partnered with HSBC Bank to introduce a new program that will provide better loan terms to organisations who make demonstrable progress.
Data, visibility, and consistent communication will only become more important as Procurement teams work toward cutting down emission and addressing their contributions to climate change. Still CDP reports that just 35 per cent of organisations are tracking emissions throughout their supplier networks. With the wealth of information at Procurement’s disposal growing in scope and the conversations around our climate growing in intensity, there’s no longer any excuse for inaction.
Fighting Ocean Pollution
Paper straws aren’t especially popular, but they’ve already served a valuable purpose. In addition to getting plastic out of the restaurant supply chain, they’ve forced consumers to confront their own reliance on plastic-based products and materials. Simply put, businesses and their customers buy a lot of plastic and Mother Nature is typically the one stuck footing the bill.
Eight million tons of plastic wind up in world’s oceans every year. With consumption expected to surge, experts predict we could see more plastic than fish by 2050. In certain regions, plastic particles are already outnumbering plankton 26 to 1.
With its central role in material purchasing, Procurement enjoys an obvious opportunity to take the lead in identifying and introducing sustainable alternatives to plastics. In 2017, Dell Technologies announced that it would take an especially creative approach to amending its supply chain. The organisation elected to create an entirely new supply chain dedicated to collecting and re-purposing ocean-bound plastics. This initiative provides a perfect example of the wide-reaching effects an environmental initiative can have.
Providing access to near-endless supply of affordable materials, Dell’s new reclamation supply chain helps the organisation cut down on its material spending, create a slew of new jobs for collectors and recyclers, and (most crucially) provide an example for other business leaders to follow.
They’re already partnering with likeminded organisations through their Next Wave program to build a collaborative supply chain for collecting and reusing ocean waste. They expect to reclaim more than three million pounds of it within the next five years.
Dell’s not the only organisation cleaning up its act to clean up our oceans. Businesses throughout the retail and restaurant sector have also taken swift action to address the question of waste. Walmart, Aldi, and Trader Joe’s are just three of the retailers looking forward to a post-plastic world.
Starbucks and Dunkin’ Donuts, for their part, have made headlines by pledging to provide sustainable alternatives to their single-use cups. Each of these projects, regardless of scope or industry, will rely on strong Supply Management minds to steer the ship.
Procurement Can . . . Do More
It’s an unfortunate reality, but time is running out for businesses to take action and pursue environmental initiatives. In the past, organizations might have hemmed and hawed on the subject of sustainability. Fearing higher costs or the hard work of transitioning to new suppliers, they might have looked for excuses to forget about the environment and focus on something more directly relevant. There’s no forgetting about the environment anymore. Reports from organisations like the Intergovernmental Panel on Climate Change suggest that while businesses and consumers have done a great deal of damage, they still possess a valuable opportunity.
Back in 2015, Nielsen confirmed that more than half of consumers will pay more to do business with environmentally responsible organizations. They want to purchase natural, sustainable products from companies that have made green practices a central component of their missions. The conversations around pollution, deforestation, climate change, and other environmental concerns have only grown more intense in the intervening years. Companies that continue to avoid pursuing the “triple bottom line” (people, profit, planet) will soon find themselves growing more irrelevant, unsuccessful, and even controversial throughout the next few.
I look forward to addressing Procurement’s environmental imperative at the Big Ideas Summit. Last year saw thought leaders describe their efforts to identify alternate materials, repurpose recycling, and make Procurement a more purposeful function. This year, I’ll join the conversation by sharing some of the green initiatives my team has spearheaded throughout the last several years. Want to listen in? Make sure to register as a Digital Delegate today.
Do you want a steer from Diego on what your organisation can do with your triple bottom line? You can access this and much more by registering as a Digital Delegate for the Big Ideas Summit Chicago 2019 next week. Even if you can’t be there in person, you can still be in the room. Find out more and sign up today here!
We are living in exponential times. While that fact makes it exceedingly exciting to be alive right now, it also comes with a lot of procurement related issues. Let’s examine a few facts, and see if you can realise where I am going with this:
In 1984, there were 1,000 internet capable devices.
By 1992, there were 1,000,000.
In 2008, there were 1,000,000,000.
Today it is estimated at 30,000,000,000.
Last year, 4 exabytes (4.0 x 10^18) of unique information was generated, which is more than the previous 5,000 years in total!
It is estimated that there will be 70 billion connected devices by 2025.
NTT Japan has successfully tested a fiber optic cable that pushes 14 trillion bits per second down a single strand of fiber
Technical obsolescence is accelerated with technologies becoming obsolesced in as little as 3 years!
The Exponential Risk in Your Tail Spend
Let’s talk about third-party risk management. In procurement we need to focus on getting the correct supplier/provider/adviser at the best total cost, delivering the right level of quality and service levels.
To most people, this means that we are living in exponential times. But to a procurement person it means “oh no, I need to look at all of my supplier relationships because of the possible threat of risk.” The issue with this logic is we don’t know what we don’t know. And that means we have probably done little to no research/cyber security/risk assessment on our tail spend, let alone on every supplier in our critical spend.
Most companies have entered into multi-year agreements with their critical spend suppliers. This is in an effort to secure the best total cost of ownership and allow ample time for their suppliers to retool, ramp up and to get to know them in order to meet their service and quality requirements.
Therefore, despite quarterly business reviews (QBRs), it can possibly be as long as one to 10 years since that contract and relationship has been assessed (if ever) for real third-party risks.
Getting to Grips with your Supply Chain
I speak with CPOs on a daily basis and every one of them admits that they do not have a perfect grasp of their third parties, let alone their fourth-, fifth- or sixth-level parties. When was the last time you asked a supplier (especially in the tail) if they ever subcontract? Or whether their third parties, or fourth, have been reviewed for cyber risk? Or any risk at all for that matter?
Do you know whether your fourth parties are using human slavery? If every device is updated for the latest virus check? Whether employees are charging their phones through their devices, or if they are permitted to insert USBs into their computers from an unknown source?
How do we know if our fourth-level parties have a proof of mining to avoid conflict minerals? When was the last time we even checked our own staff for complying with strong cybersecurity norms?
The Cyber Risks Within Your Organisation
Just recently at a convention for hackers, cables that looked like Lightning cables were modified with extra hardware that gave hackers remote access to devices. Here’s how they work:
“O.MG cables are indistinguishable from the real thing, and they even come with the iconic adhesive binding rings you’ll find wrapped around new Apple cables. The [modified] cables act normally, too, letting you charge your devices via USB or transfer files from your iOS devices.
Neither your PC nor your connected devices will ever notice that anything is amiss. Short of dissecting the cable to look for the extra hardware, the only way to detect that you’re using an O.MG cable is when you realize, after the fact, that your device was exploited.
And even if you happen to catch an attacker running a terminal window on your PC remotely, O.MG cables include a kill switch that disables the implanted hardware, thus destroying any possibility to track down the attack’s origins.”
‘These Dummy iOS Lightning Cables Let Hackers Remotely Access Your Devices’, Lifehacker, August 2019
Apple would have you believe that your iPhone is very secure, until you add your first app. For example, when traveling recently I downloaded an app to play Dominoes (the game, not the pizza). This is seemingly innocent, but since I was on a long flight, I actually read the privacy information.
Check out some of the following extracts from the Terms & Conditions and Privacy Information:
FM GAMES App is a gaming application that may utilise your personal data. You also consent to FM GAMES’s cookie policies, as described herein.
Types Of Data We Collect: We collect personal data and non-personal data about you.
Location and Distance Information: When you use the FM GAMES App, we will collect your location to determine your distance from other users (“Distance Information”) through the GPS, Wi-Fi, and/or cellular technology in your Device. Your last known location may be stored for the purpose of calculating Distance Information between you and other users.
Messages: When you send a message we may retain the message for archival purposes or as otherwise allowed by law.
Purchases: We collect information necessary to complete purchases. This may include, among other things, your name, credit card information, billing information, address, telephone number, and email address.
Third Party Service Providers: We may share your Personal Data with third party service providers
When I tried to turn off location services, this was not allowed, so I discarded the app. If this is the case with a gaming app for my phone, can you imagine the angst my home screen caused our IT folks?
Would you know if you had been hacked?
If I charge my phone through my computer, imagine what I am opening up for hackers to get to? How many of you reading this are using public Wi-Fi? What about Starbucks, or at the airport? Many of us will pass through at least one on the way to the Procurious Big Ideas event.
Did you connect to the seemingly innocent Wi-Fi? Would you know if you were hacked? If you haven’t heard about the reporter whose email was hacked on an airplane while using the airline app while working on a story about the FBI and Apple, take the time to do so.
The hacker read nearly everyone’s email on the plane. They then pulled the reporter aside when they landed to discuss the security, or lack thereof, of his phone while using public Wi-Fi, even if was at 35,000 feet.
The Fallability of Passwords
If this isn’t enough, consider what anyone can do with your passwords. Take for example my login for Amazon. If you were able to see my screen while I was logging in, this is what you could do.
Then, if in Chrome, right click and click on Inspect.
By merely highlighting the password and writing the word “text,” you will see my password. It is that easy if someone is “looking at your email” as you are logged in.
So, there you go. This is my Amazon password and I have now changed it since I wrote this post (but don’t tell my kids). This is the most basic level of cyber protection you can get, but even at a personal level with my own “research,” we are so out of our league, especially when dealing with technology obsolescence.
In the era of BYOD (bring your own device) who knows what your staff is exposing your company to. If we take this one level further to our third parties, who out there is doing the exact same thing and exposing their company to the same risks I just showed you?
So, while we are going to discuss third-party risk management in my session at The Big Ideas Summit, this is just the icing on the cake. If I am just one of the hundreds of contractors, imagine what damage I could be doing to your risk profile.
The Art of Third-Party Risk Management
So, the long and short of it, we are living in exponential times and it is time we paid clear attention to all of our third-party relationships (and their third parties, etc.) along our supply chains or we are destined to be in for a large risk event. It isn’t a matter of if, but when it will happen. If technology obsolescence is happening faster all the time, then we need to stay educated and alert, not paranoid.
To overcome these obstacles, we need to have an effective third-party relationship management and framework. Successful third-party management programs should focus on the four cornerstones approach: contract and performance management, risk management, financial management and communication management. The risk aspect of the relationship framework needs to be addressed for both critical and non-vendor relationships, along with non-critical vendors.
I recently took SIG University’s Third Party Risk Management Certification Program and was amazed to learn how much risk we are exposed to within our contracts and the need for a strong third-party relationship framework with a focus on risk. For a framework to be successful, it must have strong governance and approved by senior management.
As a result of the 2008 financial crisis, there has been a renewed focus on the role of board of directors, the composition of the board, capabilities, accountabilities, and responsibilities for prudent acceptance and management of risk. This renewed focus has made it much easier to focus on third-party risk and to get strong governance in place to mitigate risks.
The most important lesson to leave you with is that third-party risk management is an art, not a perfect science. Having a framework in place to address and mitigate risk, escalate issues and seek resolution is the key to making strategic procurement decisions.
Dawn Tiura is the CEO and President of SIG, SIG University and Future of Sourcing and has over 26 years’ leadership experience, with the past 22 years focused on the sourcing and outsourcing industry.
In 2007, Dawn joined SIG as CEO, but has been active in SIG as a speaker and trusted advisor since 1999, bringing the latest developments in sourcing and outsourcing to SIG members. Prior to joining SIG, Dawn held leadership positions as CEO of Denali Group and before that as a partner in a CPA firm. Dawn is actively involved on a number of boards promoting civic, health and children’s issues in the Jacksonville, Florida area.
She is a licensed CPA and has a BA from the University of Michigan and an MS in taxation from Golden Gate University. Dawn brings to SIG a culture of brainstorming and internal innovation.
Change all starts with one small step. But Big Ideas are great in helping us get our feet moving!
What happens when Australia’s biggest CPOs and procurement leaders gather in one room?
You get a flood of ground-breaking ideas that are bound to push our profession into an exciting new era.
The Big Ideas Summit Melbourne 2019 has wrapped after a day of thought-provoking speeches, lively discussions and the unforgettable sight of 120 procurement professionals hopping on one foot before their morning coffee. You probably had to be there to believe it, but it’s true.
A recurring theme throughout the day – both from our presenters and from the attendees themselves – was fun. Whether they were creating unusual networking opportunities, encouraging us to gamify our processes to make the mundane tasks more enjoyable, or reminding us that positivity was the secret to longevity, fun permeated this procurement event.
Our line-up of inspiring speakers spent the day continually challenging existing ideas and shifting the goalposts as we took a glimpse into the future. Here are five of the biggest ideas to come out of the Melbourne Big Ideas Summit this year:
1. Co-design is the essential skill needed to succeed in Industry X.0
Ben Tulloch, Managing Director at Accenture, lead us on a journey through the history of procurement. We’re standing on the cusp of Industry X.0. Soon we’ll be utilising the full force of advanced technology and challenging the ways we do business to become faster, smarter and better.
But what do procurement professionals need to focus on now to best utilise emerging technologies in the future? Co-design is the ability to actively involve all stakeholders in the problem-solving process, focusing on the user and pulling apart the problem to find the best answer.
2. Think with your head, but lead with your heart
We all know the three C’s of procurement: cost, control and compliance. But Henrik Smedberg from SAP Ariba believes we need to be aware of three new C’s: convenience, connectivity and conscience.
It’s time to move beyond just checking the boxes of legal compliance, and start using our hearts to think about the humans affected by problems like modern slavery.
But if administrative processes to monitor our supply chains are too difficult, they simply won’t happen. We need to utilise tech solutions to manage and automate our supplier risk administration. Only then can we have a more holistic view of our suppliers and be proactive about driving change.
3. Psychological safety is the number one factor in high performing teams
We’re at record high levels of anxiety in the workplace. When we’re under extreme stress our brains can only focus on getting the task in front of us done, making us lose our ability to think creatively, innovate and problem solve.
To counteract this and create high performing teams within our businesses, John Dare of Emotous believes we need to create a positive environment and foster a level of trust that will lead to psychological safety.
This is the common thread of high performance – the confidence to innovate, share ideas and take risks with the support of your team.
4. We need to give new starters support to agitate change
During their panel discussion, Billie Gorman of Accenture, CPO of the Year, Lisa Williams, and Future Leader in Procurement, Sapphire Loebler, tackled the issue of encouraging the next generation to drive change.
Ultimately, we need to give them room to operate, an opportunity to speak and the space to try new things. Whether they make mistakes or have success, there will be important learnings that will benefit the business going forward.
5. Agile procurement is a competitive advantage
Agility and flexibility are big news at the moment. It’s a trend that has crept in from software development into all facets of the business world and is increasingly becoming important in procurement.
Andrew Shaw, Enterprise Sales Manager at Felix, shared how agile frameworks can help to increase efficiency, simplify processes and shorten delivery times. Moving away from rigid plans make you more able to adapt to change – an increasingly important skill as the entire profession evolves exponentially.
The Big Ideas Fun isn’t Over Yet…
As an added bonus, our high-energy MC, Dean Gale from Phuel, reminded us of an important lesson for all procurement professionals: learning and growth comes from incremental changes and regular challenges. If we’re going to drive change within our company – and the wider world – it all starts with one small step.
Thank you to everyone who joined us in Melbourne and online – we can’t wait to see what ideas await us in Chicago on September 18th.
Did you miss out on Melbourne? Or can you just not get enough of the Big Ideas vibe? If you want to get more, more, more, there’s still time to register as a Digital Delegate for the Big Ideas Summit Chicago 2019. Even if you can’t be there in person, you can still be in the room. Find out more and sign up today here!
Traditional procurement roles will perish if significant progress isn’t made. But how can the profession progress enough to deliver true value?
By Ben Tulloch, Managing Director at Accenture
Ask any business executive in Australia how procurement has made their life easier, and they’re more likely to tell you that it’s been a roadblock.
Despite the profession’s brilliant minds, appetite for improvement, and advanced solutions from AI to blockchain and beyond, only 20 per cent of procurement tech projects down under prove successful. The issue, it seems, is something more deep-seated. The modern Australian enterprise is not geared for rapid evolution.
By the time Aussie companies have dedicated years of effort and distraction to available solutions, the market has advanced beyond recognition. What we really need is the ability to rapidly prototype and test ideas, implement them at scale and do it all again next month.
A lack of agile skills has left Australia lagging behind the EU and US. In fact, we’re probably at a 3/10 in terms of our capabilities and maturity, still using procurement tech and processes that harken to the 1970s. As we’re so late in implementing the basics, how can we even begin to place ourselves ahead of the curve?
Progress: The role of the traditional procurement manager will perish if it doesn’t change
There’s a fearmongered risk that jobs will be lost to advanced technologies. At some level, that’s correct: if a theatre nurse implemented AI to predict, trigger and record stock orders in the blockchain, they wipe out the P2P function of procurement. But this doesn’t spell disaster, it opens up new opportunities for growth.
If we can remove the administrative element of the job, procurement professionals can progress from a traditional role and take a more strategic view, rather than just buying stuff. They can leave a legacy and make a tangible difference – socially, environmentally and economically. For example, readily available blockchain solutions have the ability to eradicate modern slavery by providing ultimate transparency across supply chains.
But the skills needed to run a digital control tower or AI stock predictor are different. We’re going to need system integrators, program managers, design thinkers, full-stack engineers, mathematicians and AI experts. How do you rapidly shift engrained national mindsets – quickly and cheaply? A culture of co-design, ecosystem partners and using the success of tangible use cases to build trust are key.
‘Design Thinking’ is the Next Step
One of Accenture’s government clients had small armies of people trying (and failing) to keep up with updating pricing lists. Place an order, and it was most likely attached to the wrong stock number. As a result, buyers lost trust in suppliers and vice versa.
Now imagine if those master pricing lists were housed on the blockchain – transparent, secure and updated in real time? That technology exists, it’s cheap and takes only weeks to implement. But this isn’t a tech problem, it’s a change problem.
In the startup ecosystem, design thinking is in their DNA. Even three months is considered a long time, and products evolve continuously to keep up with market changes. These newer generations of Australian innovators would laugh our outdated tech and processes out the room, instead turning to a slick new app or platform that can be pushed to market within weeks.
But if procurement brought a startup solution to the CMO of a large Australian enterprise, it would likely be met with, “they’re not on our preferred supplier list.”
The Business Case for Innovation
The return on investment for agile solutions is not only profound, it’s immediate. We’ve been working with a major airline in Australia on using AI to predict, prioritise and elevate invoices for large suppliers, and manage changes in very complex supply chain relationships. In doing so, they’ve removed all paper processes, increased transparency, and seen a significant ROI in only three months.
Another major telco client has been tackling customer service with an omnichannel conversational platform that can replicate complex human conversation, comprehend voice, text and multiple trains of thoughts – not just spit out an answer to a direct question. Within months, the bot has compressed contract changes from 3.5 days to 8 minutes. This relatively inexpensive solution has potential solutions for the entire procurement profession.
The best part is that the platform was in live testing by week three. That’s on a live contract with live scaling and live data, three weeks after the idea was suggested. That’s design thinking in action.
The Art of the Impossible
Showcasing the impossible is powerful. If I utter the word ‘blockchain’ to an old-school Australian organisation, they’re likely to palm it off as a futuristic dream. But show them a functional, cheap and efficient blockchain contract in action and they’ll get it. Demystify advanced technology for your workforce, and take the objection off the table.
Collaborate with industry partners to forge a path forward that benefits everyone – not just your company. Start with the problem, and isolate solutions. Sure, there are technical and personal risks involved in evolution. But there are risks with everything in business. Not every idea has to be rolled out permanently across your entire enterprise. But not taking steps towards the future is the biggest risk of all.
At this month’s Big Ideas Summit, procurement professionals will be coming together to understand, challenge and solve the profession’s biggest problems. I’ll be speaking to the power of design thinking in facing the future of procurement, and how an “Industry X.0” mindset can pave the way forward.
The bottom line is that if you do nothing, people will find their way around you. The best way forward is to recognise that you’re not alone – Australia lags behind with you – and then get on the front foot and be ready to progress.
Traditionally, when organisations have discussed supply chain visibility, the focus has very much been on the downstream. Why? Because common thinking is that the customer is king. And, as downstream visibility focuses on the customer, it is the first, and sometimes only, priority.
This has in turn given credence to the biggest myth about supply chain visibility, which is that downstream visibility is more important than upstream visibility. It’s high time this myth was busted, because this belief has a very narrow focus, and is not truly reflective of modern supply chain thinking. The truth is that upstream visibility is just as important as downstream visibility. Why? Because a lack of upstream visibility is just as likely to impact your customer.
Supply Chain Visibility – Upstream vs. Downstream
Before we get any further, let’s make sure to clarify some basic definitions.
Downstream visibility is a clear understanding of exactly how your products are moving down to your customer. Basically, it covers all the processes and actions that are involved in getting your finished product from your warehouse into the hands of the end user.
Upstream visibility, on the other hand, is a clear understanding of exactly how all the parts required to make your product are moving down through to your organisation. From a supply chain perspective, this covers all the processes and actions involved in getting what you need to create the finished product.
You might also occasionally hear the term “midstream visibility” to refer to what’s happening in production. From a supply chain perspective, these processes are often amalgamated into the category of downstream visibility.
Together, upstream visibility and downstream visibility combine to create end-to-end supply chain visibility.
Too Much Downstream Focus?
Let’s say, for example, that your company manufactures cameras. You need to make sure that you have full visibility of what’s happening when a camera is moving from your warehouse to your customer. Right from final testing right through to delivery to the store.
There are several processes that are available to organisations in order to track and improve downstream visibility. Depending on the complexity of the product in question, this can range from optimization of transportation and warehouse logistics and unifying ERP systems, to creating digital twins of their production, and more.
If your organisation is already looking at these kinds of projects, well done. But if downstream visibility is your only focus, you’re only doing half the job.
Without upstream visibility, you run the risk of not getting the parts you need to build your product. How are you going to get your cameras into the hands of your customers if you can’t build them in the first place? This is why upstream visibility is just as crucial as downstream visibility.
Upstream – Just around the Riverbend
So how do you get upstream visibility? A supply chain risk management programme is a crucial first step. If you’re not monitoring your suppliers (not to mention your supply paths, your own sites and your second and third tier suppliers too) for events that are going to impact them, then you have virtually no upstream visibility.
Here’s where you should start:
• In procurement: Your procurement department owns the relationship with suppliers. The department needs to have access to data allowing for all the necessary insight into any type of risk affecting your supply chain, both upstream and downstream.
• In your supplier sub-tiers: According to the Business Continuity Institute, most supply chain disruptions occur below tier one, where visibility can be even harder. You need visibility into not just your tier-one suppliers, but of all your sub-tiers. This is where good tier-one supplier relationships are key.
• With your major logistics hubs: What major logistics hubs are your supplies and your products going through? Do any of these areas represent bottlenecks? And are you aware of events there that might impact your supply paths? If not, you’re not going to be able to effectively mitigate threats.
• Your own warehouses and distribution centres: You need to monitor your own sites as much as you need to monitor your suppliers. Creating good communication lines and relationships with internal stakeholders is going to help here. The people on the ground will know best if issues are on the horizon, and then you can collectively work to implement actions and processes to prevent, or at least mitigate, them.
The supply chain visibility conversation is an important one to have in any organisation that has a supply chain. But if you’re focused on just downstream visibility, you’re missing half of the equation. And this could ultimately be the difference between success and failure.
Myth = Busted!
Find out more about upstream and downstream visibility, as well as Supply Chain Risk Management software, with Big Ideas Summit sponsor, riskmethods, here.
Bringing it all together by bringing Intelligent Spend Management to the business.
If you’re just buying office supplies, you’ve probably got a good idea what you’re spending on paper and pens. But odds are your budget goes beyond a few reams of ultra-white printer stock. And while you are specifically tasked with procurement, you actually help hold the reins and hold influence on multiple categories of spend — from direct and indirect goods, to services, contingent labour — even T&E.
True, this spending is spread out across your organisation and, yes, in many of these categories, spending is more decentralised than ever with employees all over the company buying what they need when they need it. And, it’s true that all of this spending and all of these categories aren’t even in your charge.
However, the business needs you to help bring all that spend under control across all those categories, so you can not only reduce costs, but also help your company:
Manage supplier performance holistically
Diminish delivery and reputation risks across the board
Improve compliance and enforce purchasing policies equally in all categories
Increase productivity across procurement and throughout the entire company
Organisations are expecting this and more from procurement.
They want you to collaborate with finance and supply-chain leaders and address spend management across the business.
They’re expecting you to bring more spend categories under control, to unify how you manage suppliers across all categories, and to help bring direct and indirect spending together with services and T&E to increase visibility into all your spend.
They want more, and there’s an easy way to deliver and manage every source and every category of spend in delivering one, unified view.
Unfortunately, the systems most businesses use to manage all of these different spend processes can create barriers between spend categories and keep people from working together. Intelligent Spend Management, on the other hand, is a strategy designed to bring those barriers down, so you can get visibility into and control over each and every area of spend. In one place.
Why Intelligent Spend Management Matters
Intelligent Spend Management means comprehensive policy and supplier management. This gives you oversight over indirect and direct suppliers while bringing that same level of discipline to services/external workforce suppliers as well as key travel suppliers.
And, integrated with your ERP system, an Intelligent Spend Management solution creates a common set of spend data — a hub where you can unify and clarify the information. You’ll also be able to:
Capture and centralise once-invisible spend like p-card transactions, non-PO invoices and direct travel bookings that used to slip through the cracks in your systems
Apply sourcing best practices consistently to all of your suppliers across all categories
Centrally manage supplier risk as well as tax and other regulatory requirements
It brings you best-in-class control of each spend category. This means you can manage the entire procure-to-pay process for direct and indirect expenses from a single solution. Imagine being able to:
Deliver a guided user experience that makes it easy to follow policy
Give users a simple way to make procurement requests, plus tactical purchases directly from suppliers
Ensure the suppliers you source, the prices you negotiate and the terms you establish are pulled through right to the point of purchase, so policy compliance becomes everyday practice
Capture data from across the process and use AI and machine learning to automate mundane tasks and serve up insight-driven recommendations at critical decision points
Strengthen supplier relationships and, ultimately, get more innovation from suppliers to improve how you work and what you deliver
And you can bring that same level of precision, efficiency and user experience for services, your external workforce – and the same level of control.
Presenting a Unified View
You get a unified view of spend. The Intelligent Spend Management solution connects procurement spend data with data from across spend categories, giving you a single, near-real-time view — without having to piece together reports from disparate systems.
This means you, your friends in finance and your supply-chain peers can see where every bit of your budget is going, and help the organisation:
Ensure that all spending is in line with corporate policy and priorities
Get up-to-date views into your KPIs, so you can adapt accordingly
Manage discretionary employee spend before it gets away from you
Feed this spend data back into supplier management and fuel stronger negotiations
Intelligent Spend Management breaks down the silos, so companies can control spend across the board.
This is about procurement, but it isn’t simply for procurement. Intelligent Spend Management enables you to work across categories and bring all the data together — so you can bring confidence to your company by bringing certainty to your spending.
This article was written for Procurious by Drew Hofler, VP of Portfolio Marketing for SAP Ariba & SAP Fieldglass.
“The overall standard of the speakers and content was very strong, and here are four points that stood out for me as positives.”
Yes, I was looking forward to the Procurious Big Ideas Summit last Thursday. But when I got up to see pouring rain and realised that the opening session was all about Brexit, my heart sank more than a little. Perhaps South Western Railways would come through with a handy 45-minute points failure? But no, all went well, and I was at the rather lovely Soho Hotel in good time for Professor Anand Menon, Kings College London and Director of think tank “UK in a Changing Europe”. I sank back into the very comfy seat and prepared to be bored.
And he was great. Probably the clearest description of where we are with Brexit that I’ve heard, and convincing ideas of where we go next. Why isn’t this man on the BBC more often, I wondered? And guess what? When I got home that night, there he was, reviewing the papers at 10.30pm on the BBC News Channel!
So, what else was good about the Summit? The overall standard of the speakers and content was very strong, and here are four points that stood out for me as positives.
1. Whether it was planned or not, almost all the speakers left plenty of time for questions and discussion. With the size of the group – around 50 – that meant we got into some genuinely interesting and engaging debates. For instance, Julie Brignac (from WNS Denali) gave an interesting viewpoint on why CPOs don’t make it to CEO very often. But because she only used half of her 35-minute slot for her formal presentation, we then had a really good interactive session with loads of comments and ideas flying around. A good lesson here for speakers and event organisers generally, I think.
2. Although there were “sponsor speakers” from Ivalua, SAP Ariba, Barclaycard, and Icertis (plus WNS Denali), none of them simply promoted their product. Indeed, in the case of Justin Sadler-Smith of Ariba, someone asked him why he hadn’t focused more strongly on technology as an enabler for procurement transformation during his session! That showed admirable restraint from him in my book. Vishal Patel from Ivalua was similar, talking about the hype and reality of AI, including the vital need for robust and accurate underpinning data, without pushing his own solutions too strongly.
3. That size of audience – around 50 people – does help with networking. You generally see and interact with people several times during the day, so particularly if you go along to the post-event drinks, you can make real personal connections through the event. That’s harder to do when there are 200 people at an event.
4. The non-procurement “inspirational” speakers were very well chosen. Darren Swift lost both his legs when serving in the Army in Belfast, and has since become a champion sky-diver, a snowboarder, actor and motivational speaker. Just amazing and testament to the power of positive thinking. And David Gillespie is an actor and writer who told us about the power of stories, and how we can project our “status” and image in a way that will make us more respected and effective when working with others. It’s the sort of thing that initially sounds a bit fluffy and new age, but he was actually very down to earth and totally convincing in his messages. And perhaps he gave us some clues in terms of answering those questions I mentioned above about CPOs getting to CEO!
So, I assume the sessions will be available online at some point, and they are pretty much all worth checking out (there was only one during which I may have dozed off…!)
If you’d like to attend Big Ideas Summit London 2020 on 12th March please contact Holly Nicholson [email protected]
Procurement professionals need to think in more innovative ways about how we can drive competitive advantage and shareholder value for our organisations.
In my recent article, I talked about “the Art of Procurement”, and suggested that the time is right for procurement to move beyond our traditional focus on transactional improvement and basic cost reduction. Whilst remembering those are still important aspects of the role, we need to think in more innovative ways about how we can drive competitive advantage and shareholder value for our organisations.
Revenue growth is one
key factor that determines shareholder value and organisational health
generally. While profit is of course important, and the procurement goal of
cost reduction plays a key role here, “you cannot cut your way to growth” (or
ultimate success), as the saying goes. Growth is vital, and stock markets
arguably value growth more than absolute profit levels or even margins.
So, firms can grow revenue through a
variety of activities, for instance;
Finding new customers for
Improving existing products (so
the firm sells more)
Introducing new products –
either totally “new”, or line / range extensions and additions
Improving the efficiency and
effectiveness of sales and marketing activity
In every case here, it’s clear that
procurement has a potential role to play. Even in terms of the “improved sales
/ marketing” route, there are possibilities – maybe procurement can work with
the marketing team to find innovative suppliers in areas such as digital
For one European bank, the capability of
their internal procurement team has become a customer benefit that is winning
new revenue. Potential business customers
– particularly small and medium sized firms who may not have much internal
capability – are offered access to a set of procurement tools, templates and
good practice guidance developed by the bank’s procurement team, who are also
available for telephone consultation if the clients want that too. In a market
where the core banking service on offer from every competitor is very similar,
this has proved to be a differentiator that has won new business for the firm.
When it comes to improving existing products
(or services), suppliers are often better placed than the business itself to
identify opportunities. Procurement can really come into its own by supporting
that supplier-driven innovation and improvement. But in many cases, it is not
simply about identifying the innovation or improvement – it may well be that
the firm gains revenue and advantage through the speed to market compared to the competition.
That was highlighted in a recent webinar I
enjoyed, which featured my old friend and ex-colleague Jason Busch of Spend
Matters as well as KPMG and Ivalua. But the highlight was hearing from Mark
Gursky, Director of the Procurement Center of Excellence at Meritor (a $4
billion global manufacturer of automotive components). He explained how
procurement in that business was contributing towards ambitious targets for
growth via new product launches.
The key was (and is) enabling more
effective working between Meritor and key suppliers, who are supporting the
drive for growth. That change in the whole working relationship between buyer
and suppliers, needed to support Meritor’s goals, has itself been supported by
technology (that’s where procurement technology firm Ivalua comes into the
It struck me that the technology achieves
two goals. First of all, to really make the most of what your suppliers can
offer, you need to manage the basics
of supplier management well. That means supplier master data management; spend
and contract analytics; risk management and so on. Putting it simply, if you
don’t have a grip on who your suppliers are, what they’re doing with you, where
in your organisation they are already working, and how they are performing, then
impressive sounding “supplier innovation programmes” will be built on sand.
Then, having got the foundations in place, technology
can support the actual collaborative development work. Gursky talked about
using the Ivalua platform to manage all the work between the firm and key suppliers.
Information is captured in one place rather than emails flying around between
lots of different people. Complex requirements can be quickly translated into
bills of material, then suppliers can respond rapidly to requests and
questions. Projects can be tracked, data and information exchanged securely
between the parties, and outputs tracked and monitored via the platform. Information
is easily shared, but proper controls are managed too, important when we’re
talking about potentially innovative new products.
can still access the webinar here to find out more about the Meritor story;
it’s a great example of procurement looking beyond the norm, and really
contributing to those wider goals such as revenue growth. And at the Ivalua Now “Art of Procurement” conference
next month, I’m expecting to hear more examples like that of procurement moving
beyond our traditional heartland of cost control and transactional management.
You can book for that here, and join the firm, key clients such as Total, Suez and Deutsche Telekom (and me) in Paris for what should be a stimulating couple of days – maybe see you there!