We know that procurement professionals like to get the latest intel on the hottest topics from the best in the business – so we’ve sorted you right out. Your big procurement questions: answered.
What are the surefire ways to speed up procurement processes?
Can procurement ever completely eliminate maverick spend?
Why shouldn’t procurement simply squeeze their suppliers for every dollar they’ve got?
What technology will be the most game-changing for procurement?
What’s the best question to ask a candidate during a job interview?
Procurement questions as big as these require big answers from people who know their stuff. Happily, we gathered 50 of procurement’s top influencers and thought leaders in Chicago last month for Big Ideas Summit 2018 and managed to steal a few quiet minutes to put some of them to the test.
Pat McCarthy, SVP & GM – SAP Ariba
Pat on eliminating maverick spend…
“Procurement can [eliminate maverick spend] but it has to make the purchasing process a destination people want to come to”
Pat on supplier relationships…
“You have to have a great relationship with your suppliers, one where they benefit and you benefit so that making a profit and you fining value in their solutions is the right balance.”
Pat on his favourite job interview question…
“I love to ask candidates about the last book they read because I’m most interested in curiosity – are they curious, what are they curious about – it tells me a lot about them.”
“I think there are certain people, especially executives, who are special and they will always go around the system. If you had the power to say only those that are in the system will be paid then perhaps you [could eliminate maverick spend] but i’ve never seen a situation that had 100 per cent compliance.”
Doug on his favourite job interview question…
“My go to question is – what are two or three things that you’re really really bad at? What I’m looking for is A) what they’re really bad at but more importantly the degree of introspection they have. If they’ve been honest with themselves and done a real inventory of what their areas of development are, what are their weaknesses then they’re somebody I can trust and work with. If I hear somebody say that they don’t have any then they’re not going to be a good fit for us”
Daniel Perry, Global Alliances Director – EcoVadis
Daniel on eliminating maverick spend…
“I don’t think procurement can necessarily eliminate all maverick spend, buyers find ways around any rules that you might put in place. But if you can provide a very strong vision and mission for procurement and the company in general as to why you are trying to avoid maverick spend, if you can align it to your company’s sustainability mission or the fact that you want to try and avoid using suppliers that use modern slavery then it gives the buyer another cause for pause before going off and doing maverick spend.”
Daniel on game-changing technologies…
“Transparency is really changing the way that business is being done these days – there is much a higher expectation for businesses and their supply chains, who they work with and who they’re associated with so I think the technology around due diligence, around assurance, around using companies that are reputable is going to be a big game changer in the way that companies decide which suppliers to use.”
After two smash-hit Summits in London and Chicago, we’re bringing Big Ideas 2018 to Sydney, Australia! Find out how you can get involved.
Did you hear the one about the time an expert on influence, a clinical psychologist and a digital transformation guru walked into a bar?
… Unfortunately we don’t have the punchline for you, because it hasn’t happened yet. But it WILL happen on Tuesday 30th October at the conclusion of the most exciting #procurement event to hit Australian shores – the Sydney Big Ideas Summit.
Julie Masters, Nicky Abdinor and Gus Balbontin are just three of the incredible speakers that will take the stage in Sydney. Let’s check out the agenda:
Innovate and Disrupt
Electrifying keynote speaker Gus Balbontin will open #BigIdeas2018 with a strong message about how to survive – and thrive – in an ever-changing market. Drawing upon his experience as Executive Director and CTO of iconic Australian publisher, Lonely Planet, Gus will share powerful concepts of change, adaptability, transformation and innovation.
Adapt and Perservere
Jamila Gordon has an incredible story to share about her journey from a refugee escaping the Somalian civil war to the boardrooms of some of Australia’s leading organisations. The former Qantas CIO and current Director of Jayride will deliver memorable messages about the importance of dreaming big, the keys to effective leadership amidst change, and the crucial role of resilience and positivity.
Born without arms, not without attitude! Nicky Abdinor is an expert on doing more with less. A clinical pyschologist and motivational showstopper, Nicky will demonstrate how to create sustainable change in our attitudes, beliefs and emotions.
The Procurement Evolution
One of the most recognisable faces in procurement, Tom Derry is the CEO of the Institute for Supply Management, a not-for-profit organisation with more than 50,000 members worldwide. Tom will join Procurious Founder Tania Seary for a fireside chat about the evolution of procurement, presenting ISM’s latest research into the procurement tasks most likely to be taken over by AI.
Supplier diversity, sustainable sourcing and corporate social responsibility are now recognised as key sources of competitive advantage for businesses around the world. Henrik Smedberg will share SAP Ariba’s thought-leadership into why every procurement professional must procure with purpose.
What will procurement resemble by the year 2030? The future is brimming with AI, cognitive technology, and robotic process automation. This presents an incredible opportunity for the profession, but also a great deal of uncertainty. In this session, delegates will collectively brainstorm the greatest threats and opportunities facing procurement, and identify the crucial skills needed to meet the challenges of Industry 4.0.
Delegates will also hear leadership insights direct from one of Australia’s top Chief Procurement Officers – Thomai Veginis, CPO of Telstra.
Surviving a toxic workplace
Have you ever reported to a workplace psychopath? Have you ever had to manage one? David Gillespie, best-selling author of Taming Toxic People, will take delegates through the strategies that will preserve our sanity in a toxic workplace. David’s articles on workplace psychopaths have been some of the most popular ever published on Procurious!
How do I get involved?
Attending in-person: If you’re within cooee of Sydney, this is your opportunity to be in the room! The Sydney Big Ideas Summit is suitable for highly motivated, forward-thinking, tech-savvy future leaders. If you fit the bill, join us at the Australian National Maritime Museum on October 30th, but be quick – places are strictly limited.
Become a Digital Delegate: The Sydney Big Ideas Summit will light up social media, spark vigorous discussion and crowd-source ideas for the future of the profession via our Digital Delegate group here on Procurious. Sign up (it’s free!) to follow the action, including live-streamed speaker presentations, speaker interviews and blog articles without ever having to leave your own desk.
Contingent Labour represents an ever-increasing proportion of our workforce, and it’s not hard to understand why. What is challenging for procurement teams, however, is effective management of their organisation’s contingent workforce…
“Depending on whose data you believe, the contingent workforce now makes up from 20 per cent  to 40 per cent  of the global workforce, with some analysts estimating that it will reach 50 per cent by the year 2020,” says Doug Leeby, CEO – Beeline.
Procurious caught up with Doug ahead of his keynote presentation at Big Ideas Summit Chicago to learn more about the state of contingent labour in the workplace today and to pick his brains on how procurement teams can best manage, and leverage, their ever-evolving workforce.
The rise of the contingent workforce
“It’s easy to understand why contingent labour is growing,” explains Doug. “Most companies are under intense pressure to improve their bottom line and usage of contingent staff, contractors, freelancers, and consultants is an excellent economic model that can be deployed to both accomplish discrete projects and assist an organisation during surge periods of work.”
“There is an enormous economic benefit in being able to ramp up key areas of the workforce during heavy times and down in lighter times. Additionally, the enterprise can complete important project work by hiring external experts rather than having to bring highly specialised skills into the organisation. The short-term costs may appear high but the total cost to production can, in fact, be much lower.”
“Traditionally, companies have looked to the contingent labor population for work that is less strategic, saving that for FTEs. However, more and more, we are seeing a hybrid approach. Successful companies in which HR and Procurement are working together have figured this out. Most of us can’t afford a team of data scientists but we can contract a team for a specific goal. That’s a very strategic example whereas the contingent workforce can produce extraordinary value.”
The challenges of contingent labour
Employing a large proportion of contingent labour to your organisations presents a whole new set of challenges for both procurement teams and HR. But, as Doug advises, it is specifically in-effective management of contingent talent that will lead to enormous problems and risks for your organisation.
“Companies may be operating out of compliance, exposing themselves to severe penalties. Additionally, improperly managing this talent can lead to overpayment or under-delivery of results. Metrics and KPIs are critical to ensure that the program is properly managed. Everyone has heard about the now-infamous ‘war on talent.’ It isn’t subsiding. Not having a smooth-running program to manage contingent labor invariably leads to losing great talent to those who do have solid programs.”
Part of the difficulty with managing contingent labour is procurement’s failure to work constructively and efficiently alongside HR departments.
“Asking the two departments to take time to think about optimising their workforce is a tough ask,” explains Doug.
“This is not a small undertaking nor is it something that can be accomplished in one meeting, or even a series of meetings. It is transformational, which means it requires a significant investment of time and resources, but I believe it will happen as the focus on talent comes into greater view at the C-suite. HR has an outstanding opportunity to look at talent holistically and work with Procurement to ensure that it is sourced and managed properly. This will deliver tremendous value to the organisation.”
Using tech to manage contingent labour
“Technology today is an enabler,” Doug explains. “However, with the progress being made in AI and machine learning, it will soon become far more than just an enabler – it will become an advisor.
“Technology shouldn’t just be about workflow and reporting. Rather, it should act more as a subject matter expert or concierge helping procurement and HR to analyse their workforce and make strategic decisions.
“The challenge with this transformation is that it depends on organisations getting all their data into the technology and most still have a way to go. At a minimum, they need get all of the contingent labor into the system – complex, statement-of-work (SOW) based, milestone-based services as well as contingent staff.
“VMS technology can manage not only who the contingent workers are, where they are, what they are doing, and what facilities and data they have access to, but also how well they perform their assignments.”
The future of the workforce
“The workplace and workforce model that has been in place since the Industrial Revolution, designed for stable markets and long-term business planning, is giving way to a new model based on constant change and adaptability,” Doug believes. We asked Doug to outline what he believes will be the key features of the workforce of the future…
1. Talent first
Over time, I believe organisations will adopt a “Talent First” approach that will be led by HR. Procurement will remain a solid partner, but HR will need to lead the initiative within the organisation. They will work, proactively, with department heads and finance to figure out the best way to achieve desired outcomes.
2. The human touch
Some outcomes will be handled via artificial intelligence and robotic process automation, but much will still depend on people. Competitive organisations will focus on optimising their workforce. They will then focus on how to source this talent holistically.
3. Talent pools
Talent sourcing won’t be done in silos anymore. Organizations will establish private talent pools and work to attract talent, both FTE and non-FTE, to their pools. Then, they will be able to hire/engage known talent which leads to a higher propensity for success.
Companies will make use of functionality like our Self-Sourcing. In other words, they will go directly to the contingent talent rather than through intermediaries. This is already being done with freelancers, but we will see more of this with contractors and consultants.
Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.
Daniel Perry, Global Alliances Director – Ecovadis believes that the role of procurement is evolving. Evolving from being “primarily focused on cost savings and operational efficiency, to a more strategic and central player in risk management and value creation.”
Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.
“Stakeholders, including end consumers, B2B customers, shareholders etc. are demanding that businesses take responsibility for practices all the way into their value chain. They’re driving transparency and, ultimately, a positive impact by working with high-integrity partners. And it’s procurement teams that are in the ideal place to meet these higher stakeholder demands.”
“The power of the spend that procurement controls (often between 50-70 per cent of turnover) puts procurement at the crossroads of not only risk management and brand protection, but also as internal partners for driving value creation. Of course they want the value chain to be resilient – to avoid interruptions or damage to their company’s reputation – but they also want to provide supplier-driven innovation and support for transformative business models and offerings. –
“Procurement teams focused on sustainability do this by selecting and working with the best suppliers in a way that goes far beyond price, quality and delivery, to include performance around environmental, social and labor and ethics practices.”
The value-add of sustainability programs
It’s all too common to hear an organisation defend their lack of commitment and lack effort in this space. “It’s too expensive”, “it’s too difficult”, “it’s too time consuming” or “we’re just not ready” are typical refrains.
“The benefits and ROI of sustainability include not only operational savings, but strategic outcomes. A well-developed Sustainability and Corporate Social Responsibility (CSR) program that is integrated into the company values, and is driven with executive support, can drive key business performance metrics such as:
Sales and reputation: A burgeoning wave of consumer sentiment is cresting. More and more customers are comparing the sustainability details of products and services, and it is changing their purchase decisions. Companies making the right sustainability investments can realise a possible increase in revenue of up to 20 per cent.
Employee morale and productivity: Sustainability programs can do wonders to improve employee satisfaction, reducing a company’s staff turnover rate by up to 50 per cent and increasing employee productivity by up to 13 per cent. Integrating CSR practices in your company and brand also has a hugely positive impact on recruiting. If your company has a better sustainability reputation, it often generates more interest from applicants, allowing you to be more selective and choose higher quality candidates.
Increased market value: Sustainability programs can increase a company’s market value by up to 6 per cent.
Innovation: With more power comes more responsibility…and more options. Many companies are pursuing sustainable procurement strategies in order to find innovative suppliers that will help them differentiate their product or service offering.
Dupont, for example, changed its innovation strategy to embrace a “sustainable growth” mission, saying “If we bring the solutions to the market sooner than our competitors do, we will be more successful in continuing to grow the company.”
Making sustainable procurement work
“One of the biggest challenges companies face in sustainable procurement is measuring and understanding current performance within their supply base, in the context of global standards and benchmarks. It can also be challenging to engage suppliers as collaborators in their mission. And to get there requires a mix of expertise, the right technology, change management and process integration backed by executive commitment.
“First, the organisation needs a clear mandate from the executive team, which makes the sustainable procurement program an integral part of the function’s mission and values. This is embodied by investing in change management and communication programs and taking steps towards implementation and company-wide adoption.
“Success also requires reliable, agreed-upon indicators for sustainability performance that both buyers and suppliers can understand, and that are actionable. Many companies collect lots of unvalidated data, but buyers rarely have the CSR expertise or time to validate or interpret it – and this is where a standardised, evidence-based, and analyst-generated rating – like EcoVadis provides – comes into play.
“Additionally, CSR criteria and performance indicators must be integrated across the procurement function and include the use of clear and enforceable codes of conduct, contract clauses and tender criteria. Buyers need to believe in and leverage these criteria in their supplier development and sourcing activities., And, procurement groups should agree on, measure and reward on the critical CSR / sustainability KPIs in the same way they track cost savings or other key metrics. These all drive adoption in the organisation and make sustainability inherent to the procurement role.
“Increasing the benefits to a single company, a mutualised platform can make it much easier for suppliers to share the same scorecard results with all their customers, enhancing transparency and collaboration to drive network effects for maximum improvement and impact.”
What are the three essential factors for effectively addressing the shifting conditions of sustainability risks and opportunities?
This year has provided plenty of examples of why organisations need to better manage or participate in more effective sustainability and CSR initiatives to better manage risk, and purchasing and supply chain managers are finding themselves at the forefront of these initiatives, as keepers of the risk management keys. While hot button issues like worker safety and reputation risk are only increasing in importance, transparency and sustainability are reshaping consumer demand, and intelligence trumps data in supply chain risk management.
Luckily , this emphasis on sustainability and CSR is breathing new life into purchasing and supply chain teams, giving them a renewed sense of urgency to establish or expand supplier assessment programs and position themselves as greater strategic assets to their organisations and industries.
After reflecting on the variety of new supplier sustainability programs EcoVadis has helped launch or evolve, our experts have discovered three key factors as essential for effectively addressing the shifting conditions of sustainability risks and opportunities.
1. Program Reach and Depth
When setting up a supplier monitoring system, the assessment methodology should cover all key themes in sustainability and Corporate Social Responsibility. It’s common for homegrown or initial assessment programs to start by tackling just one issue, like environmental sustainability or human trafficking. To truly have an impact and effectively manage risk, however, the system should cover criteria across environment, labor and human rights, ethics/anti-corruption, and the supplier’s own sustainable sourcing practices.
Geography is also a significant factor when designing and implementing a program. Most modern supply chains span over 100 countries, so the assessment methodology should be appropriately adapted to cover this spread, engaging and supporting suppliers in local language wherever possible and taking into consideration variances in regulations and culture, at least for the top regions.
Finally, the size of the suppliers/third parties you are working with is another important dimension to examine. Many of them will be small- or medium-sized enterprises (SMEs) that are not listed on any stock exchange, and with little required reporting or public information. The monitoring system and methodology should be adapted accordingly to measure these SMEs.
2. Seamless Integration: Change Management and Processes
To make sure your teams and partners have the best chance of success with a new or changing sustainability and CSR initiatives, the methodology and processes used to both collect data and adopt performance indicators must be integrated into current, familiar processes and workflows.
There are two elements to this:
It is essential that the supplier sustainability monitoring solution vendor be able to support you and your team in the required change management program that will drive adoption of the initiative. This could include consulting on strategy and rollout, program branding, communications and supporting content development, training, support/helpdesk, onboarding services and reporting.
System and process integration
A key enabler to maximizing the impact of sustainability criteria on purchasing behavior is to integrate the assessment system into the current supply chain management platforms such as e-Sourcing, e-Procurement, CLM, SRM or similar platforms.Supplier monitoring solutions that come with an API that can be used to integrate the CSR indicators to other platforms are a huge advantage here. This way, you can give buyers and category managers access to current and complete sustainability data within the tools they are using today.
No matter how thorough or amazing the assessment solution, it will only be effective with supplier participation. Here are a couple key ways sustainability monitoring programs can provide value to suppliers, which is vital to engagement and the ultimate success or failure of the initiative:
Alignment with relevant labels, certifications and standards
Suppliers will always care about compliance and a core feature of any monitoring system is to ensure suppliers adhere to the relevant global, regional and/or category-specific labels, certifications or standards. Examples might include FSC for fiber-based products, REACH registration of chemicals in Europe, or EnergyStar for appliance makers in North America, and so on. There are thousands of such labels, certifications and standards across the 120+ countries touched by global supply chains. A comprehensive supplier assessment program must take into account all relevant assessments and maintain an annually updated list in each major region/country. In doing so, suppliers can ensure that their efforts are “valorized” in the monitoring process, making it more efficient for them to participate.
Actionable results, benchmarks and feedback
The results of a sustainability assessment should be digestible and actionable by both the buyer’s side (procurement and supply chain, EHS&S, risk), but also for the supplier. Visually exhausting spreadsheets of checkmarks, or a list of documents from a supplier is often hard to understand and thus not actionable by a purchasing or category manager. These roles want instead to understand how suppliers’ sustainability performance compare to their peers and what the norm for the industry or geography is. Also, being able to also clearly understand performance over time is another vital part of any system. Solutions that make the short list should provide actionable results and indicators, benchmarks for comparing performance, and feedback on areas of improvement.
Do you know who your non-employee workers are? Where they are? What facilities, networks, and data they have access to? If not, chances are very good that you need a Vendor Management System.
For most organisations, human capital expenses constitute the largest single cost of doing business, often up to 70 per cent of operating expenses. Human capital is also a growing source of concern for executives who fear they don’t have – and can’t acquire – the top-tier talent they need to compete and succeed in an increasingly on-demand world.
Companies that have traditionally relied on internal workforces of direct employees are increasingly adopting a more flexible, extended workforce approach that lets them adapt quickly to market changes while effectively managing their fixed costs.
To manage this extended workforce, companies increasingly employ sophisticated vendor management systems (VMS). These VMS solutions can do much more than simply automate the contingent staffing process. They can source and manage all types of talent and deliver a wide range of insights to help organisations make better workforce decisions.
Where does VMS fit in your procurement picture?
Simply put, a VMS is the software that automates the hiring process of an organisation’s non-employee workforce. It is often a web-based application that helps manage and procure staffing services, from requisition through billing.
Most VMS tools are delivered through a Software-as-a-Service model. A VMS provides significant improvements in reporting and analytic capabilities that far outperform manual systems and processes. VMS tools are typically operated externally by a Managed Service Provider (MSP) or self-managed by a program office within the organisation.
This structure enables a streamlined and automated process with real-time of all contingent labor: who they are, where they are, and what access they have to your facilities, networks, and data. A VMS allows you to see all relevant job orders and accurately assess labor services spend and performance, often leading to significant cost reduction.
Should you implement a VMS?
Typically, large organisations, or companies who employ more than 100 contractors at a time will benefit greatly from a VMS solution. Companies with non- employee workers in multiple countries and varying labor classes can also streamline their hiring, management, and payment processes with a VMS.
Below are some of the top reasons to implement a VMS for your organisation:
Cost savings: A VMS helps eliminate rogue buying of labor and maverick spend. You can gain hard dollar savings by consolidating suppliers and benchmarking rates to gain negotiated savings or volume/early pay discounts, as well as soft dollar savings through process improvements like consolidated invoicing, reduced timecard and invoice errors, and compliance tracking.
Visibility: Cost savings from a VMS are driven by the analytics and reporting, which help reveal where and how you are spending money on contract and project-based labor in order to make better decisions for the future.
Compliance: Transparent analysis of all stages of the procurement lifecycle provides greater control and ability to enforce procurement strategy and policies. By implementing a VMS and gaining full visibility into your staffing spend and activity, you can ensure that all labor is properly categorized and mitigate risk of potential exposure to co-employment and tenure litigation.
Quality: A VMS allows you to measure and monitor the performance of your suppliers and non-employee workforce to ensure there is an efficient process in place for acquiring the best talent at the best rates (through self-sourcing or using staffing suppliers) and a strong program for sourcing and managing statement of work (SOW) contractors.
Operational efficiency: By implementing a VMS, you can automate many steps in the procurement process.
How to select a VMS provider
There are many VMS providers in the market today, ranging from software solutions offered by MSPs or ERP providers to independent contingent workforce specialists. Make sure you choose wisely.
Here are eight things you will want to consider when selecting your VMS provider:
Trusted partner commitment: It is critical to find a partner that is willing to invest in a relationship with you, to work with you, and to support your program’s changes, including geographical or labor category expansions.
Financial stability: Your VMS provider should be a viable choice for today, tomorrow, and over the next decade.
Flexibility: VMS providers should understand trends, emerging talent acquisition models, and how best to facilitate sourcing talent.
Expandability: The tool should have the ability to accommodate all labor categories and easily expand to include SOWs, not just contractors on a time and materials basis.
Global reach: Select a provider who understands the tax and labor laws in all geographies where you do business.
Visibility: Robust reporting and analytics capabilities are critical to maximising the value of your investment.
Ease of use: The tool should be intuitive enough so that users can learn about 90 per cent of the functionality on their own. Training, online help, online tutorials, and help desk assistance should be available for the remaining 10 per cent.
Technology compliance: The vendor you’re considering should be certified by an independent service auditor to ensure they have undergone the most rigorous data security assessments and compliance
Now more than ever, contingent workforce managers, procurement teams, and human resource professionals need a significantly enhanced toolkit to address business executives’ priorities. They need innovative solutions that can dramatically lower costs while boosting productivity. They need to find and engage the right people with the right skills – quickly – to deliver better customer value in an on-demand world.
Most of all, you need solutions that will help your companies turn your workforce into a competitive advantage, differentiate your business, and set up your organisations to win. A VMS is that kind of a solution.
For information about the value a VMS can offer your business and how to build a winning business case for a VMS in six easy steps, click here.
Doug Leeby will be speaking at Big Ideas Chicago on 27th September. To follow the action live from wherever you are in the world, register as a digital delegate.
At a time when technology is transforming nearly every aspect of the enterprise and its approach to buying and selling, the role of the procurement professional — already central to any organisation — has become even more strategic, more consequential, and more indispensable.
By linking together vast troves of data across enterprises and unlocking meaningful insights, cloud-based applications have freed up procurement professionals from the tangle of day-to-day tactical activities so that they can focus on strategic responsibilities such as supply chain resilience and flexibility, brand protection, and new sources of innovation.
Key Accelerators for Digital Transformation
The transformation is just beginning. As emerging technologies like artificial intelligence, machine learning, the Internet of Things and blockchain begin to take hold, procurement will become even smarter, faster and more connected. And beyond savings and efficiencies, it will open the door to innovations that improve customer satisfaction, and ultimately, impact revenue generation.
Another accelerator in digital transformation in procurement are business networks. They are driving totally new way of interacting and expanding the value that procurement can deliver across the enterprise. Just like their social counterparts, they bring together millions of buyers and sellers and provide a community in which they can shop, share and consume. On a true many to many platform, trust and transparency are the benefits the network participants find.
Managing Supplier Risk and Corporate Responsibilities
More than ever, customers, regulators and investors hold companies accountable not only for their own ethical conduct, but for that of their suppliers and their suppliers’ suppliers. Companies with strong supply chain practices invest to mitigate any risk and respond to adverse events and recover from the any disruption faster. With business networks, companies can gain the transparency needed to ensure that they are not only in compliance with laws in every locale they operate in, but that they are upholding and advancing their own corporate social responsibility goals.
Leveraging real-time and historical purchasing data, supplier intelligence and business network content, procurement can shine a light on the materials, regions, and suppliers that are most likely to have issues or challenges with unexpected natural disaster, forced labor or conflict minerals. To drive a positive impact, companies may launch campaigns to connect diverse suppliers on the business networks in underdeveloped markets where a little assistance goes a long way.
Supplier Insights for Innovation
Take product design. Suppliers can be rich providers of design ideas, providing insights on new technologies and innovation while improving costs given their technical knowledge of manufacturing processes. Adopting the Design to Value approach, companies involve procurement organisations in the product development process far earlier.
Through business networks, procurement gain significant supplier insights quickly and potentially open the door to new, more innovative and cost-effective ways of producing products and components. With a better collaboration with suppliers on the networks, the companies can even invent a new product or services and create a new business model. Finding new sources of supply in a global operating environment is exponentially easier with a business network.
Procurement Leading the Digital Transformation
This enhanced visibility and insights in supply chain through data may have once seemed a luxury, but business networks and the technology underlying them make it easier to achieve today. Procurement organisations that embrace these ideas can continue their digital transformation journey and lead their companies to new worlds of operational and performance excellence.
Pat McCarthy will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.
To become more agile, companies are re-evaluating their workforce strategies. Although strategists often talk about “total workforce management,” what their companies need most is something much simpler: total workforce optimisation.
For most businesses, human capital is both the organisation’s most important asset and its largest single operating expense. It is also a constant concern for executives who fear they don’t have, and can’t acquire, the right mix of top-tier talent to compete and succeed.
Total Workforce Optimisation is the process of determining the right mix of employee and non-employee talent to meet operational requirements. It ensures that the organisation has the skills it needs as well as the flexibility to anticipate and respond to market changes.
What it is, and what it’s not
Total Workforce Optimisation is sometimes confused with Total Workforce Management (TWM), also called Total Talent Management (TTM), which is a much larger and more comprehensive process. TWM/TTM not only incorporates the engagement and management of employee and non-employee labor, but also issues such as training and succession planning, which are outside the scope of Total Workforce Optimisation.
Total Workforce Optimisation is also different from Total Talent Acquisition (TTA), which is a subset of TWM/TTM. However, Total Talent Acquisition is compatible with, and can be incorporated into a Total Workforce Optimisation program.
Total Workforce Optimisation is actually very simple. It is nothing more than looking at your organisation’s entire employee base and your non-employee base, putting them together, and determining the right mix to achieve your desired business outcome.
1.Focus on business outcomes
The focus on business outcomes is one reason Total Workforce Optimisation is more specific and easier to achieve than Total Talent Management. While Total Talent Management has the potential to offer great long-term benefits, which are often somewhat abstract, Total Workforce Optimisation is concerned with finding the most cost-effective, highest-quality way to accomplish specific tasks and achieve specific outcomes.
Total Workforce Optimisation is the process of modeling and sourcing the right mix of employees, contractors, freelancers, and consultants—all viable labor options—to achieve the outcomes that are important to your business.
To get there, there are six key steps you need to take.
Step 1: Get the data in one place
To implement Total Workforce Optimisation successfully, you must start by getting all of your workforce data in one place. It is all about visibility.
Most organisations are already doing a great job in terms of employee visibility. You probably have human resource platforms containing all relevant employee data. So, the missing link tends to be non-employee data.
With the advent of vendor management systems (VMS) about 15 years ago, we started collecting data addressing the contractor population. And, about 7 years ago, organisations started managing statement of work (SOW) based activity and putting that data into their systems as well.
With the advent of the gig economy, freelancers represent another large labor pool whose data must be gathered and put in one place where it can provide visibility.
This can be accomplished using your VMS or possibly another system, but the important thing is to gather this non-employee data and make it visible.
Step 2: Risk-proof the workforce
The second step is to risk-proof this workforce, both employees and non-employees. This means ensuring proper classification of every individual worker. Every organisation has a governance model in place to protect against co-employment and statutory compliance risks. To risk-proof your workforce, you must ensure that every worker is in the proper employment bucket.
You start by putting them in the right classification bucket and then ensure that they’re in the right sub-buckets—temporary staff or contractors, W-2 or 1099, outsourced labor, freelancers, interns, or retirees. Then you can confidently put them to work and not worry about what the legal, compliance, or security consequences are going to be.
Step 3: Ascribe quality to all workers
The third step is very important, and for some reason, it appears to be very elusive for many companies. It is simply the process of ascribing quality to all workers and all work efforts.
Organisations do that already when it comes to full-time employees. Virtually all organizations require periodic performance appraisals, as well as quarterly KPIs or similar processes.
So, the concept isn’t foreign, and implementing it is not a challenge. The challenge is to extend this process to contractors, to consultants, and even to freelancers. Sometimes clients tell us that they’re afraid measuring non-employee quality due to co-employment risks. We believe that is only an excuse because there are ways we can assign quality measurements to the work effort and even to individuals without getting into co-employment trouble.
So, organisations must correct this misconception internally. Once you become comfortable with ascribing quality to all workers and all work assignments, you can rate the work and tie the cost equation to the quality equation.
For years, organisations have been so focused on costs and the lowest bill rate. While this is valuable, it is also short-sighted. To optimize the workforce, it is absolutely essential to factor quality into the mix.
Step 4: Merge the data
If your organisation has good employee data, and make a serious effort to bolster your non-employee data, what is next? The next step is to merge those two together.
It does not necessarily have to be one database. Organizations have separate Applicant Tracking Systems and Vendor Management Systems. Analytics programs available today can consume data from both sides with ease. By analyzing and comparing this data, organizations can get to what is really interesting and fun, which is the modeling. Modeling leads to predictions, forecasting, and what-if scenarios. That is the next step.
Step 5: Analyse the data for decision-making
Once the employee and non-employee data is merged, the next step is to analyze and apply the data. Artificial intelligence and the spectrum of the analytics available today allow organizations to use visualisations to discern where changes in the workforce mix will produce the most benefit.
For example, you may traditionally be working with 80 percent employees and 20 per cent contractors. On a specific task that will deliver a specific outcome, what would happen if you changed the mix to 50 per cent full-time staff and 30 per cent consultants, 10 per cent freelancers, and 10 per cent contractors, based on skills? How would that compare to other possible blends of resources.
Modeling also allows you to factor in scarcity of talent, core and non-core positions, and other considerations. Once you start to bring these factors into play, you can engage in a variety of what-if scenarios to determine what would best fit your business strategy.
Step 6: Take action
Of course, the last step is to do it—simply execute a workforce optimisation program. Create a model and try it.
You are probably closer to Total Workforce Optimisation than you imagined. You already have a tremendous amount of data. What you lack—probably the performance quality data from certain elements of your extended workforce—can be obtained with a little effort and the right technology.
Of course, implementing Total Workforce Optimisation cannot be accomplished by snapping your fingers. It will take resources and commitment. But your workforce mix is critical to your organisation’s agility and competitiveness.
So, now is the time to begin to make progress toward the goal. And, frankly, the technology is there to enable you to reach it. To find out more, click here.
Doug Leeby will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.
How are digital networks providing greater visibility and helping to achieve savings by making risk more manageable?
On route to a recent conference on how procurement networks are reshaping the aviation industry, I realised how amazing it was to be arriving in the historic city of Athens, the cradle of Western civilisation. My enthusiasm owes not only to the city’s timeless beauty, though that’s reason enough to visit. Athens, it turns out, is ideally suited for such a gathering because it holds a unique place in the imagination for all of us who’ve ever wanted to fly.
When you’re fortunate enough to have as many Greek family members as I do, you learn about the ancient legends. So the fable of Icarus is well known to me.
Icarus, of course, was an early aviator. He looked to the birds and thought, “Why not me?” So he constructed a set of wings using wax and feathers. But his father warned him not to fly too close to the sun as the wax would not tolerate the heat. As we all know, Icarus declined to follow his dad’s advice — and, as he soared skyward, his wings began to melt. Icarus crashed back down to Earth.
What’s the moral of the story? Some people say Icarus was too ambitious, too proud, too single-minded. They say he flew too high.
But I believe Icarus had a different problem. Now, I may not be an expert on classical antiquity. Yet I believe Icarus could have been much more successful — he could have built much stronger, sturdier wings — if he’d only had a better supply chain!
In all seriousness, when it comes to aviation in our own time, there’s no mythology about it: The industry faces immense opportunities but also enduring challenges. High demand and low interest rates have fueled significant growth in recent years. Air transport has doubled in volume every fifteen years, with no end in sight. Aircraft keeps getting more reliable, more efficient, more technologically advanced. But high fixed costs and fierce competition are facts of life for airlines.
That’s why controlling costs spells the difference between success and failure, in every economic climate. To control costs, airlines are turning to technology to improve operations and the customer experience in four main ways: increasing real-time visibility and control, optimising efficiencies across business functions, enhancing service offerings, and deepening customer loyalty through personalisation and rewards programs.
In aviation, we’ve moved from wax and feathers to variable-intake turbofan engines and intelligent avionics. Yet in other respects, the industry remains largely unchanged. After all, the very same factors drive profits year after year:
Revenue per passenger kilometer flown. How do airlines engage with customers to generate revenue premiums? Data, of course, plays a key role. What do they know about the passenger in seat 11C?
Load factor. How do airlines optimise their routes, aircraft and services to ensure maximum lift per weight? Here again, data proves essential.
Unit cost per available seat kilometer. How do airlines maximize efficiency and minimise costs? As with the other factors, the right data leads to the right outcome — for passengers, shareholders, and the environment.
Meanwhile, as airlines seek to optimise value, safety and support while improving the passenger experience, they need to be able to track and manage every part and every piece of equipment. Naturally, it helps to do so when airlines can also track and manage the suppliers of those parts and equipment.
In an industry like aviation, where risk management is so crucial — risks ranging from weather to regulation to commodity prices to exchange rates — savings become essential. Digital networks achieve savings by making risk more manageable. By providing visibility into the interconnected operations of airlines and their suppliers, cloud-based procurement platforms help to identify and resolve issues before they arise, aided by machine learning and artificial intelligence applications.
In addition, digital networks enable trading partners to collaborate on product design and service delivery, thus creating mutual value, extending competitive advantage for their organisations, and empowering them to reimagine not only the airline industry’s future but procurement’s role in shaping it. In the aviation business, real-time collaboration with one’s suppliers unleashes innovation and spurs growth. More often than not, success arises through partnership.
Agile principles are all about the decision-making process. What changes should you implement to drive greater value at higher speed?
At IBM, we understand agile as a set of principles and values that when thoughtfully considered across the business, enable quality decision making, empower teams, and delight customers.
In procurement, the Category Manager’s role is to enable their internal customers by eliminating any disruption or friction within the business while also managing cost using their category knowledge and procurement skillset. The key here is the category managers’ ability to have deep category knowledge paired with a breadth of understanding for all internal customer profiles and needs.
As a category manager, team members must build a consultative skill set that allows them to identify pain points, use time wisely, and seek feedback. The result is a category manager who works towards customer needs rather than contract expiration dates and the latest price benchmarks. As a guide, we should seek to digitise and automate as much as possible regarding benchmarking, negotiations, RFx process’, contracting, etc., allowing us to give the appropriate attention to discovering internal customer needs including service levels, pain points, and demand.
What we did before vs. what we do now!
Previously, IBM, like most large companies, hosted a heavily layered procurement organisation requiring multiple sign offs and complex processes in order for decisions to be made. Agile principles are all about the decision-making process. Our leadership knew we needed to make some major changes resulting in fewer layers of management, accountable teams with decision making authority, and greater collaboration across the business, allowing them to drive value for our customers at the speeds they expect.
In a traditional procurement organisation, the category manager’s role is to identify where the savings opportunity is and act accordingly. They do this while following age old processes and having little to no interaction with internal customers. Many organisations seek to use poorly participated customer surveys to get a sense of how well category managers are serving their customers.
Yet, the best way is to open the channels of communication and collaborate with the business, whether it be face-to-face or virtually, allowing category managers to make the right decisions.
While cost reductions are still a priority for nearly all organisations, we found that when we work closely and listen to customers, we can eliminate the costs associated with under and over delivering across the business, which in turn, results in lasting cost savings.
To achieve this transformation, it takes strong displays from leadership of all the principles and values agile organisations are known for, establishing a belief system across the business encouraging category managers to ask ‘why’ when performing a task their internal customers do not care for or need to be successful. Implementing an agile belief system into a large organisation requires a major cultural change that takes time and patience from all parties.
In this new space, the role of a category manager has quickly evolved from contract and cost management to a crucial role that links business needs to the external marketplace for a specific category of goods. To achieve success in this role, category managers must interact daily with internal customers and evaluate each moment of their time spent not serving their customer’s needs.
Even so, many procurement organisations are too deep into spreadsheets and other manual processes to be ready for such an agile way of working. These manual processes make it impossible for category managers to have the time capacity to be a true advocate and trusted advisor for the business. To lift category managers’ heads from the clutter, organisations must invest in digitising their procurement processes where possible and identify the areas where they are not ready and get ready!
This article was written by Shawn Busby, Global Category Lead- IBM and Norman Braddock, Sourcing Consultant – IBM.