Category Archives: Generation Procurement

Procurement 2030: Preparing For The Revolution

Only 7 per cent  of procurement functions are perceived as ‘maturing’ in terms of digital transformation and a mere 38 per cent of teams have the capability to meet the challenges of Industry 4.0. Find out how to address these challenges in our latest report: Procurement 2030: Level 2.

Without careful preparation, revolutions fail.

From Spartacus’ slave rebellion in Ancient Rome, to the Satsuma Samurai uprising in Imperial Japan, to the Boxer rebellion in colonial China, history has shown that a revolution cannot be powered by enthusiasm alone. Successfully landing a change of any significant scale requires strategy, planning, and no small amount of determination to see it through.

The Fourth Industrial Revolution (Industry 4.0) is now upon us, and its effects can be seen in the assembly lines and offices of companies around the globe. Game-changing technology such as 3D printing, the Internet of Things (IoT), and Blockchain will super-charge the supply chains of many organisations, but need to be implemented with care.

Level One of the four-part “Procurement 2030” series by Procurious and Michael Page UK examined the forecast for procurement and the threats and opportunities facing the profession. The latest report, Level Two, shifts the focus to the practicalities of procurement and supply chain management’s evolution – against the backdrop of a technological revolution.

Our survey of 590 global professionals revealed that there is a great deal of preparation to be done before the majority of procurement functions will be equipped to take full advantage of Industry 4.0, particularly in the areas of strategic planning, creating a roadmap that gives priority to the most impactful elements of the digital revolution, and (crucially) having the right talent on board.

Download Procurement 2030: Level 2.

Low Maturity

Our survey revealed that only 7 per cent regard their procurement functions as ‘maturing’ in terms of digital transformation. The factor holding back this maturity would appear to be a lack of support from the wider business, with comments such as:

  • “Management is not interested in a digital transformation journey.”
  • “Our desire to transform is not matched by the business, who do not see the value.”
  • “Digital transformation of procurement is not even on the agenda.”

Some steps that might be taken to improve this situation include:

  • Do your homework and build a rock-solid business case that supports digital transformation. Alarmingly, 43% of survey respondents indicated they do not have a formal digital transformation strategy.
  • Ensure you align each step of your digital transformation journey to an enterprise-level objective.
  • Find a sponsor (a senior person in the organisation) to support your proposal.
  • Have the courage to take a risk – have confidence behind your ideas and be prepared to stand up for them.

Procurement’s Kryptonite

What do you regard as procurement’s greatest weakness? This research reveals that a narrow focus on cost savings and a lack of influence in the wider organisation are two stand-out factors that are holding procurement back.

HSBC CPO Jan Fokke Van Den Bosch shared his opinion of procurement’s greatest weakness in this video interview.

What’s Your Priority?

Moving systems into the cloud and leveraging big data analytics are by far the two most likely technologies to be implemented within the next 24 months by surveyed organisations.

Although AI and cognitive procurement are perceived as two of the most difficult-to-implement technologies, they are also expected to have the greatest impact on organisations. Other high-impact technologies include big data, cloud computing, and robotic process automation.

When prioritising these technologies to create a digital transformation roadmap, take the following factors into account:

  • Enablers – which technologies need to be implemented first to enable others to work successfully?
  • Impact – which technology will make the greatest positive impact on your wider organisation’s goals?
  • Costs and benefits – what is the long-term ROI on this investment? What are the benefits beyond cost savings?

The Right Team For The Job

Our survey-takers believe that on average, only 38% of their colleagues heave the capability required to meet the challenges of Industry 4.0.

For procurement functions on the cusp of a major digital transformation, now is the time to examine the team’s attributes and capabilities and, if necessary, bring in fresh talent with the ability to drive change and reap the full benefit of enabling technology.

While digital skills are a must, candidates should be screened for attributes such as a willingness to embrace change, agility, and the flexibility to make use of new behaviours and technologies.

Another solution to the perceived capability gap is to embrace the gig economy. The future of work will be project-based and outcome-focused. From the employer’s perspective, it will become increasingly important to bring in the right team for the right project.

A higher percentage of contractors in procurement will enable project managers to scale up and down as necessary, with results revealing that employment of contractors is expected to nearly double by 2030.

Interested In Learning More?

This content-packed report also contains links to relevant thought-leadership from Procurious and Michael Page UK,  including videos, blog articles, podcasts and webinars.

And don’t forget … parts 3 to 4 of the Procurement 2030 report will be released in the coming months!

  • Part 3: Human vs AI Skill Sets: October 2018
  • Part 4: Procurement Makeover: November 2018

CLICK HERE TO DOWNLOAD PROCUREMENT 2030: LEVEL 2.

Teeing Up For AI in Procurement: It’s All About One Thing…

The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?

Over the last year, machine learning and artificial intelligence (AI) technologies have graduated from the class of “emerging tech” – they’re here now, they’re increasingly sophisticated, and their adoption will only continue to accelerate.

We’ve seen machine learning and AI go mainstream in consumer tech environments, and they are rapidly shifting from hype to reality in enterprise environments as well; however, enterprise executives are still working to understand how AI applications can move beyond specific product features to influence broader business functions and strategies.

Let’s take a look at the procurement department, for instance. Procurement and purchasing professionals have a lot to gain from leveraging AI. In fact, AI has the potential to completely transform how organisations manage their spend, from automating invoice coding based on learned criteria, to predicting potentially fraudulent transactions, and preventing rogue spending before it happens.

The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?

Gartner’s report, “Start Preparing Now for the Impact of AI on Procurement,” states that “technologies’ need for data will force application leaders in procurement to ensure access to the necessary internal and external data sources.”

Essentially, the first step to getting predictions out of AI is to capture all data – internal data, external data and third-party, public data. Furthermore, procurement professionals should be asking themselves if they have the volume, the quality and the completeness of data needed to leverage AI within their department.

Ticking each of these boxes can feel like an arduous process, but a good starting point is to hone in on three particular sources of data that provide the greatest visibility into spend:

1. Supplier Data: This means capturing data from 100 per cent of suppliers in the procurement system. Not just the largest multi-national suppliers who use sophisticated EDI or XML formats, but the whole tail. This should include mid-tier suppliers that may be using online portals or emailing PDF invoices, all the way down to the smallest “mom and pop” businesses, who continue sending paper invoices. Using an open commerce network that accepts and supports all invoice formats and requires no changes on the supplier’s end enables 100 per cent supplier onboarding and captures all transactional data. To gain true visibility and power future platforms, procurement and finance leaders must aggregate as much financial data as possible beginning with supplier data.

2. User-Driven Data: The ability to capture user-driven data–specifically, buying insights that track 100 per cent of all purchasing requests that run through the system, is vital. Visibility into employee spend ultimately depends on how user-centric procurement tools, technologies, and processes are designed. The bottom line is: procurement systems shouldn’t be designed for the procurement department. They should be catered to potentially thousands of employees around the world that are buying things in their organisation.

Searching for orders, dynamic routing and approvals, and guided buying, for instance, should be easy to navigate and fit seamlessly into the way employees already work. The key is to create a system that users adhere to not because they have to, but because it’s the easiest way to get what they want from preferred vendors at the negotiated price, providing another layer of spend visibility.

3. Invoice Data. By nature, the accounts payable function is primed for intelligent automation. There is a huge opportunity to use AI for things like improving processing efficiencies and reducing costs, increasing discounts and eliminating late payment fees, for instance.

But, these enhancements can only be achieved if the invoice data feeding into AI is complete. That means procurement needs to capture 100 per cent of invoices, irrespective of format (paper, PDF, electronic) and irrespective of invoice type (PO-based, non-PO based, invoices for direct spend, for indirect spend, for facilities and utilities, etc) –  truly, any and all. Whatever the invoice, it should be captured.

These three particular sources of data can truly position a company to take advantage of all the benefits AI promises just over the horizon. Elements of machine learning, AI and predictive analytics already exist within procurement today. Forecasting budgets for approvers, alternative cost-effective suggestions during a user’s shopping experience and intelligently aggregating POs based on purchase trends are just a few commonplace applications. But to take advantage of any of these applications, and future opportunities to gain a competitive advantage, data is an absolute prerequisite. Only when armed with data – especially from suppliers, users and invoices – can procurement make the most of their investment in AI technology, enhance spend visibility and optimisation, and ultimately, boost the organisation’s bottom line.

Continue reading Teeing Up For AI in Procurement: It’s All About One Thing…

Helping Procurement Professionals Embrace AI

Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?

Haywiremedia / Shutterstock

Artificial intelligence (AI) has begun to infiltrate all areas of businesses – and procurement is no exception. In fact, studies show that 88 per cent of business leaders believe automation will significantly impact the procurement space within five years.

The biggest projected impact that advancements in AI technology will have on procurement is increasing the number of activities that can be automated within this space. It’s expected that 60 per cent of source-to-pay processes can be fully or largely automated using emerging technologies, including AI.

The promise of AI technology and automation in the procurement space is exciting – it offers opportunities for increased efficiencies, greater visibility, fraud prevention, cost savings, and more. However, it also induces a level of fear and uncertainty around how it will impact the role of procurement professionals.

Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?

1. Distinguish “tasks” from “roles”  

When AI and automation enter conversations about how work can be transformed, they bring with them a sense of fear and unease. It’s only natural that people begin to ask themselves, will there still be a need for manual and human skill? Will my role be replaced by a machine? Will I soon be out of a job?

Easing these concerns will require focusing on what exactly will change. AI, as the building block for automation, fundamentally affects how tasks are performed. That’s why companies should emphasise automation’s potential on impacting tasks within procurement, rather than looking at how roles themselves will change.

It’s hard to say which – if any – roles will go away over time due to automation. However, it is safe to say that every role will likely still exist in some capacity, but that certain tasks within each role will be automated, thus redefining existing roles and opening the door for employees to focus on higher priority responsibilities.

Rather than allowing employees to become fearful, help them prepare for change by empowering them to understand which tasks and activities in their roles are and are not likely to be touched by automation. For example, the majority of tasks within the vendor selection and negotiation process can and will be automated, meaning that role will shift to incorporate other tasks that couldn’t have been part of the role before, given the volume of manual vendor selection tasks.

Moreover, identify the skills that will be required for employees to excel in their shifting roles – such as data analytics and collaboration skills – and invest in training employees on those skills. This will ensure that employees can work effectively with AI and automation technology, and ultimately feel prepared for the inevitable shift.

2. Stress the importance of human critical thinking 

Another way to prepare your company and its procurement professionals for AI and automation is to turn the definition of AI upside down, taking negative assumptions about how this technology impacts professional roles and asserting a more positive interpretation and understanding of this change. Instead, business leaders should discuss how AI will be used to augment their own intelligence.

While employees may wonder whether they will be replaced by AI and automation, it’s important to stress to them that people will continue to play a critical a role in whether these technologies can even be successful. For instance, while AI can make recommendations around business decisions and procurement processes, the AI is not responsible for executing these recommendations – people are.

To help employees overcome fears around AI and learn to better work with this technology, companies must place an emphasis on the importance of the critical and systemic thinking. By teaching people how to recognize biases and heuristics in their own decision-making, employees will be well-positioned to critically review AI’s suggestions, and connect information from the real world to make optimal judgements. AI will not replace managers – but managers that use AI will replace those who don’t.

3. Go beyond the business case

 The business case for automating procurement with AI is already there – that’s why 51 percent of today’s accounts-payable organisations are already prioritizing the link between procurement processes and associated automated systems. What’s important now is getting your employees to buy-in and fully embrace AI to ensure successful implementation of and execution with this technology.

While initial reactions may be full of fear and skepticism, business leaders must remember to communicate with employees empathetically, helping them understand anticipated changes, investing in preparing them for these changes, and re-positioning the impact of this technology more positively so that it becomes something employees can get excited by.

By getting procurement professionals ready for AI’s impact, business leaders can empower them to do their jobs better and grow with the company as it undergoes this inevitable transformation, all the while setting their business up to reap the benefits of AI and automation.

Here’s What Procurement Will Look Like By 2030

92 per cent of respondents believe that by 2030, procurement will look very different to today’s profession. But what exactly will this evolution look like, and how do we get there? Download the Procurement 2030 Report!

Procurious and Michael Page UK recently surveyed 590 procurement and supply management professionals from around the globe to uncover the facts about the outlook for the profession, the threats and opportunities facing procurement, and perceptions of procurement. Here’s what we uncovered in our new report, now available for download.

Procurement is expected to evolve

All but 8 per cent of survey-takers roundly rejected the suggestion that procurement in 2030 would be similar to today. This stands to reason, given the transformation the profession has undergone in the past 10 to 15 years from back-office function to an influential and highly-visible part of the business that’s increasingly focused on driving innovation and generating value.

Here’s the result when we asked respondents what they expect procurement will resemble in 2030:

Just over half of our respondents believe procurement will evolve into “an agile group of strategic advisors”. But what does this actually mean? It could refer to Agile (with a capital A) work practices that are sweeping through many of the world’s top organisations, or perhaps it means that procurement will evolve into a high-value team of experts who will move around the business to give advice at the highest levels and solve specific challenges.

To use an analogy from the gaming world, this evolution is a bit like moving from a Space Invaders-style “mission-control” approach where you are dealing with a never-ending stream of issues from the bottom-up, to the approach taken in 21st-century games such as Fortnite or Call of Duty, where a highly cooperative group of professionals with different areas of expertise parachutes into a certain area to solve a problem before moving on to the next mission.

The word “strategic” is also key here. This report discovered that an incredible 49 per cent of procurement’s current workload is regarded as “tactical”. Filtering by role and seniority revealed that:

  • Survey-takers with “junior” roles identified 59 per cent of their workload as tactical in nature.
  • Analytics professionals have the most tactical tasks (57 per cent), followed by supply chain professionals (56 per cent).
  • The tactical workload of category managers sits at 46 per cent.
  • Concerningly, 57 respondents who identified as Chief Procurement Officers indicated that 40 per cent of their workload is tactical on average, despite having what is regarded as a highly strategic role.

It’s also worth noting that two persistent concerns about the future of procurement have also been dismissed by survey-takers. Only 3 per cent believe the profession will be completely outsourced, while 9 per cent believe procurement will be completely automated by 2030.

Positive forecast

Procurement professionals remain optimistic about the profession, despite the rapid development of ever-smarter AI and media coverage of white-collar job losses to automation. In fact, optimism about the future has climbed by four points since this question was first asked in 2017.

Similarly, job security is relatively high. Only 9 per cent of respondents report a lack of confidence that they’ll be able to keep their role of the next 24 months.

While the profession itself is confident about its future, the task at hand is to broadcast this positivity to the wider organisation, other functions, and to suppliers. Building upon the brand of procurement will enable us to:

  • change the face of the profession from the inside out
  • overcome outdated stereotypes, and
  • educate others on the full value-offering of the profession.

Threats and opportunities

When we asked survey-takers to nominate the greatest threats and opportunities for procurement and supply chain management, we were surprised to discover that the top two threats are also seen as the top two opportunities.

  • “Not keeping up with technological advances” is seen as the biggest threat, while technological advances are also seen as the number one opportunity.
  • Being unable to recruit and retain top talent is seen as the 2nd-biggest threat, while recruiting and retaining top talent is also seen as the 2nd-biggest source of competitive advantage.

Organisations must therefore retain their focus on investing in top talent, even while they are investing heavily in technology. It also follows that procurement functions with leading-edge technologies will be more attractive to top-tier candidates.

Prisoners of our own perceptions?

We know that the profession wants to evolve into an agile group of strategic advisors by 2030, but what’s holding us back? In one word: perception.

  • Less than a quarter of respondents say their organisations have a strong understanding of procurement’s value, while 21 per cent have “little understanding” of procurement’s value-offering.
  • Procurement’s own perception of its purpose needs to change if it is to expand its value offering and transform into strategic advisors and commercial leaders. At present, 38 per cent believe cost reduction is procurement’s main purpose, followed by risk management.
  • The good news is that by 2030, the main purpose is expected to shift to two high-value tasks: “driving supplier innovation (29 per cent), followed by “driving sustainability” (25 per cent). Both of these revised areas of focus will also support procurement’s core capability of cost reduction.

CLICK HERE TO DOWNLOAD THE REPORT.

But wait, there’s more:

This content-packed report also contains links to heaps of relevant thought-leadership from  Procurious and Michael Page UK,  including videos, blog articles, podcasts and webinars.

And don’t forget … parts 2 to 4 of the Procurement 2030 report will be released in the coming months!

  • Part 2: Preparing for Industry 4.0: September 2018
  • Part 3: Human vs AI Skill Sets: October 2018
  • Part 4: Procurement Makeover: November 2018

CLICK HERE TO DOWNLOAD THE REPORT.

The Key Procurement And Technology Trends for 2019

The times, they are a-changing, and so are the markets and environments that procurement operates in. What then are the key trends in procurement and technology you need to watch for in 2019?

View Apart/ Shutterstock

As I am reliably informed by my Christmas-mad colleague, there are only 125 sleeps (as I write) left until Christmas. That means there’s a little over 18 weeks until the year ends, so it’s time to start looking forward to what’s coming in the next 12 months.

2019 is set to be a seismic year around the world. Major changes, such as further geo-political upheaval, the looming spectre of global trade wars and tariffs aplenty, have the potential to disrupt supply chains and set metaphorical trip wires for procurement professionals everywhere. And, as we’ve already heard, it’s rarely been more important to get a solid grips on the key factors in the market and external environment.

So gather round as we gaze into the opaque mists of the future and make some educated insights into the key procurement and technology trends waiting around the corner.

  1. Supplier Management

Let’s start with an oldie, but a goodie. Wait, I hear you cry, supplier management isn’t a new trend! We’ve been talking about this for years. Well, if we’ve talking about it for years, why aren’t we any better at it? And why is it that it’s one of the key areas a large number of procurement teams fall down on?

Like it or not, your suppliers hold the key to all your wildest procurement dreams. Innovation, top and bottom line cost reduction, avoidance and savings, stress-free supply of services and goods and free cake for all! (Ok, maybe not that last one!)

In their Vision 2020 publications, pwc state that the top 25 per cent of procurement functions will have gone beyond incremental improvements and be implementing fundamental change to process and policy alike. This includes how they interact with suppliers and shifting focus from cost and value to Return on Investment (ROI).

These outcomes all hang on better supplier relationship management in order to tease out further innovation from suppliers (who are seen as partners, rather than sponges to wring cash out of) and closer collaboration to source solutions to problems we don’t even know we have yet.

At the heart of this is great communication. Select the right suppliers and talk to them more. You never know, you might just learn something!

  1. Blockchain and Digital Adoption

Unless you’ve been living in a cave on a remote hillside (or perhaps a Faraday cage in your basement), you should have heard by now about blockchain.

From blog articles to webinars, it’s one of the hottest topics in procurement right now, and is likely to still be throughout 2019. Blockchain is and will continue to be a key tool in shaping the transparency of a supply chain. Information is shared and transmitted easily and safely, while the technology allows an “immutable signed and time stamped record of identity, ownership of assets, transactions or contractual commitments”.

This transparency will have the added benefits, and some drawbacks, of making procurement and CPOs more visible in the public environment, say EY. Procurement will wield greater power and have greater opportunity to interact with external stakeholders. But, at the same time, organisational processes and procurement will play out in a public setting like never before.

In line with blockchain’s increasing influence, there is a predicted rise in digital adoption and use of the Cloud. An estimated $1 trillion of IT spend will be moved to the Cloud by 2020, according to Gartner, as organisations look to make their IT services more agile.

  1. Social Value

There is a prevailing opinion amongst the procurement professionals I speak to that 2019 will be the year for social value and sustainability to really take hold. Organisations have begun to realise that cost and quality are only a part of the overall package and not only do they need to be seen to be doing more in the community, but they need to follow through on it.

That goes for the wider supply chain too. Using work practices and value-adding benefits for communities into tenders will become the norm and procurement will no longer be able to award contracts on cost without taking the wider impact into consideration.

  1. Next-Gen Workforce and Automation

Disregard what you’ve heard very recently regarding automation, machine learning and AI as scaremongering. Yes AI will take on tasks and people may have to move to new roles, but it’s not a future that we should be burying our head in the sand about. It’s a natural human reaction to fear change, but procurement needs to muscle up and be brave in order to evolve and survive.

Infosys estimates that AI and procurement automation will eliminate human intervention in 15 per cent of digital spending by 2019. If that’s the case, then procurement needs to embrace the change and develop, train and retain its Next-Generation workforce to meet the demands of new roles where human interaction and input is still key.

  1. Risk

From Brexit to trade wars, risk is going to be possibly the biggest trends for businesses as a whole in 2019. The organisations who will thrive in this unstable environment will be the ones who are best prepared to deal with the unexpected.

Deloitte believe that procurement will become the forecasters of risk in an organisation, raising the profile of the function as it factors total cost of risk and risk mitigation in supply chains into contracts and tenders.

Risk runs throughout the other trends that have been suggested above. Brexit, protectionism and trade wars make supplier and supply chain management all the more important. The increasing need for cyber security as technology advances is something that cannot be ignored.

Procurement is ideally placed to deal with all of these risks, but it needs to put its hand up and be at the front of the queue, or face being left behind and marginalised at a time when the function has a crucial role to play.

Blockchain Will Not Save The World (At Least Not This Year…)

Blockchain hype has spread like wildfire… But it’s time for a reality check…

Don’t—

Don’t—

Don’t—

Don’t—

Don’t believe the hype

Don’t Believe the Hype” is a song by Public Enemy that dates back to 1988 and (if loosely interpreted) carries an important message that can be applied to blockchain technology. Blockchain is almost everywhere, and—let’s face it—it’s getting a lot of hype.

It is very surprising that  such a new and relatively obscure technology like blockchain has received so much  exposure so fast, even in mainstream media. Blockchain hype has spread like wildfire, and this is largely because blockchain is the underlying technology behind Bitcoin, a digital currency (a.k.a. as cryptocurrency) that received a lot of coverage in the media.  In the wake of the cryptocurrency craze, blockchain has continued to attract more and more attention.

Time for a reality check

The response to blockchain exemplifies many of the issues that are commonly  associated with introducing new technologies. Firstly, the market’s inflated expectations do not match the reality of blockchain’s current applications and actual capabilities (see for example: “187 Things the Blockchain Is Supposed to Fix”). Secondly, many consider blockchain as an end in itself when it is actually just a tool that serves an objective or purpose. These are probably the two factors that are doing the most damage to the credibility and future of this technology, despite the very promising applications of blockchain.

At its core, blockchain is a form of digital trust, which has a number of potential uses and applications in business because trust is one key component in such a context. However, some of the characteristics of this technology that make it so valuable are also limiting the scope and possibilities of blockchain’s real-world applications beyond trials and prototypes. As with many other things, it is a matter of trade-offs. There is not a single, universal, and magical solution to every problem. So, before blindly jumping on the blockchain bandwagon, it is crucial for Procurement and Supply Chain professionals to know what blockchain is, understand its value proposition, and to be aware of what challenges and issues may be associated with using it.

Limitations and challenges of first-generation blockchains

You can trust data contained in a blockchain because of the way records (blocks) are added and managed. Unlike other methods of data management, blockchain is a decentralized (peer-to-peer) network composed of nodes. There isn’t a single “party” managing and owning the data, but rather a network of independent nodes that operate the network. This removes the risk and temptation of manipulating data. Even if someone was tempted to tamper with the data ,  they would need to find a way to  change it at all “n” nodes of the network simultaneously, which is more or less impossible, or, at the very least, extremely difficult.

A second aspect of blockchain that makes it such a secure data management option is its unique form of record keeping. “Miners” verify every new record and they must reach a consensus to allow a new record to be added to the chain. On top of this, each new record (“block”) contains a link to the previous block, meaning that it is impossible to change or remove a record without editing the entire chain. This is why data in the blockchain is immutable, which is one of the key value proposition of blockchain (although immutability and the new GDPR do not really work well together…).

Looking at the process above, it is easy to imagine that adding a new record in a system like blockchain takes more time than it would in centralized databases. This is because many actors (nodes) are involved and they have to perform tasks (mining) to verify the transactions (and that also serve as prevention against hacking and attacks). So, in its current form, blockchain is a somewhat slow technology when compared to what already exists. For example, Visa processes and verifies transactions more than 7,000 times faster than what happens on the bitcoin network.

Another issue is that, all the nodes of the network store all the data contained in the blockchain. This drastically increases the size of the blockchain, making it slower as it grows and more and more difficult to manage. In short, a blockchain network would explode and become  unmanageable very quickly in a number of real-life scenarios, such as, for example, if blockchain was used to track the origin of materials and parts across all tiers in a company’s supply chain.

There are also other potential threats related to security. Blockchain technology  relies heavily on cryptography and peer-to-peer networks that make it very robust and resilient. However, history has shown that almost nothing is unhackable. The blockchain may be incredibly difficult to hack but someone with the right motivation, tools, and probably a lot of time could, one day, hack it. And, as the blockchain’s popularity grows, so does the potential pay-off for successful hackers! Also, even if we were to assume that the blockchain is  totally unhackable, the systems around it are not. Systems and programs connected to the blockchain may be vulnerable to attacks and/or to bugs.

All in all, the blockchain technology is not a magic solution for every problem. Like any other technology, some trade-offs make it a more or less viable solution. For the blockchain, the trade-off is between three properties: scalability, decentralisation, and security. Today, you cannot get all three!

New and future  generations of blockchain could make it a viable option

A lack of scalability is probably the most serious limitation of blockchain, and it will probably determine the life or death of the technology. The first generations of the blockchain network, like Bitcoin, do not scale at all and are even incredibly dangerous if you look at sustainability issues and energy consumption. Newer generations are addressing this issue by introducing new designs and concepts.

For example, they are moving away from the consensus/mining mechanism that older generations use, which is based on the “Proof of work” concept (miners must perform more and more complex calculations and need more and more computing power and energy to complete them). “Proof of Stake” (PoS) is a newer and much more energy conscious algorithm that will address the “cost” of blockchain and make it a viable option.

Another example of how blockchain technology is being updated can be seen in the radical changes being made to the blockchain’s design. In new conceptualizations of blockchain, the design is moving away from linear models, where one block is only linked to the block before and after it (like links in a chain), and are instead moving towards networks of blocks, where one  block is connected to n other blocks. The benefit of this model is that operations on records can occur simultaneously on several branches of the network.

Too bad to be true?

It is true that there are essential trade-offs (scalability, decentralization, and security) to be aware of and to consider before adopting blockchain technology and moving towards a form of digital trust (which means trusting the software more than other parties). However, in many situations, the benefits offset the challenges and make blockchain the best alternative. A recent real-world example of this is the use of blockchain in a refugee camp as a means to address identity challenges and issues. As Houman Haddad, the UN executive behind the introduction of blockchain technology in a refugee camp in Jordan explains:

“Of course we could do all of what we’re doing today without using blockchain,” he says. But, he adds, “my personal view is that the eventual end goal is digital ID, and beneficiaries must own and control their data.” From “Inside the Jordan refugee camp that runs on blockchain” published in the MIT technology Review in April 2018

Another way to look at the trade-offs/dilemma is to consider what can be achieved with blockchain that was previously impossible. An interesting example in the Procurement / Supply Chain sphere is Productivist a service provider that wants to address the “manufacturing surplus” by connecting, , manufacturing companies and their customers via the blockchain.

Some say I’m negative,

but they’re not positive

But what I got to give,

(The media says this?)

So,  don’t believe the hype…

Instead, proceed cautiously and be aware of what blockchain can and can’t do. Blockchain is undoubtedly a powerful and exciting technology, but it is not yet fully mature and has several limitations, which explains why it still is far from being widely adopted, despite all the hype surrounding it. However, the newest (and future) generations of blockchain (that will probably part ways with “blocks” and “chains”) will make blockchain a more viable application than what is readily available now. These new generations, just like the older ones, will not save the world, but they represent a real and unique opportunity to create a platform/protocol which (new) businesses can build on, and which can help them grow.

3 Ways We WISH We Could Deal With Serial Mavericks

(Satire alert!) Does out-of-control maverick spend in your organisation give you high blood-pressure and/or violent thoughts? Check out these suggestions for cruel and unusual ways to deal with your mavericks!

They really knew how to send a message in medieval England.

After being found guilty of treason in the summer of 1305, William Wallace was dragged through London at the heels of a horse, hung, drawn (eviscerated) and quartered, with each of his four limbs sent to trouble-spots throughout the kingdom as a warning to others.

One hundred and twenty years later, Pope Martin V was so infuriated by the teachings of John Wycliffe (who translated the New Testament into English) that he declared him a heretic. Wycliffe had died of natural causes 44 years earlier, but the message still had to be sent – so Wycliffe’s bones were exhumed, crushed, burned and scattered into the River Swift.

Highly effective PR, right? The extreme brutality of these acts was motivated not so much by a desire to punish the offenders as horribly as possible, but as a way to discourage others from going down the same path.

For the 21st-century procurement professional, maverick spend is one of those issues that can lead to us having (secret) violent thoughts in the office. How many times have you confronted a serial maverick and been offered these weak excuses:

  • “Oh, sorry – I didn’t know!”
  • “But I have a really good relationship with this other supplier…?”
  • “I found a better deal.”
  • “I always use this website to book my travel!”

Infuriating. Maverick purchasing cuts profits, impacts contract fulfillment, damages supplier relationships and can mean no legal protection outside of contracts.

So, it being a Monday, let’s indulge in a bit of fantasy about some effective ways that procurement could deal with mavericks in their organisations.

To begin our list of cruel and unusual punishments…

1. The Maverick Leader Board

Name and shame! What if every procurement function had a Top Gear-style leader board on prominent display, listing your organisations’ worst mavericks? You could make a real spectacle out of it whenever it’s time to add a new maverick to the board (lights, music…), and even call them over to receive a prize!

  • Pros: People will work hard to ensure they get their name off your leader board asap.
  • Cons: With maverick spend as high as 80% in some categories, you’re gonna need a BIG board.

 2. The Scarlet Letter

American author Nathaniel Hawthorne’s masterpiece The Scarlet Letter tells the story of Hester Prynne, a woman accused of adultery in 17th-century Massachusetts. Hester is forced to wear a scarlet “A” (for adulteress) and has to stand on the scaffold for three hours while the Puritan townsfolk hurl insults at her.

Wouldn’t it be satisfying to see your most notorious maverick skulking around the office with a giant “M” for Maverick sewn onto their lapel?

  • Pros: Very visible, and a great way of spreading the message as your mavericks move around the office.
  • Cons: Making people sew symbols onto their clothing is a more than a little suggestive of the Third Reich, so maybe we should give this one a miss.

3. Make them pay

A “cost-conscious culture” is a workplace where employees treat every dollar of company money as if it were their own.

Sounds good in theory, but even the most tight-fisted person can suddenly become extremely lavish when it comes to spending someone else’s money.

The solution? What if it actually is their own money on the line? We need a piece of software that draws unauthorised purchases straight out of the offender’s personal bank accounts – and watch your maverick spend problem vanish overnight.

  • Pros: You could spin this as procurement’s contribution to top-line growth.
  • Cons: Probably illegal.

Seriously, though:

There’s plenty of great advice to be found online about tackling maverick spend, including these articles and videos here on Procurious:

3 Mega-trends In Procurement You Need To Understand Before 2019

What are the key mega-trends procurement pros need to get their heads around before 2019?

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1. Co-Creation –  Using collective efforts to bring the best value

Since the very beginning of my career in Procurement competition was a key.  Competition helps procurement drive down prices using quotations, tenders, e-auctions or other tools.

And, of course,  it is much easier to negotiate contract terms and conditions with  if you have alternative sources.

Striving to establish, at least,  dual sourcing for every product helps you to decrease supply related risks.

But with greater experience I started to see that competition has its limits,  that RFQ’s and tenders were not bringing the desired effect.  This was particularly apparent for certain groups of products with limited supply possibilities and higher complexity.

I learned that for such segments a more efficient strategy is to cooperate with your key suppliers.

Cooperation is about alignment and harmonising performance, goals and strategies.  The very first step should be about aligning performance and KPI’s. Then you align the goals, including price reduction. At this point, the strategies of both companies should be aligned.

So cooperation is the alignment and harmonisation between two parties: the procurement organisation and the vendors.

But is cooperation and competition with suppliers enough in the modern world?   My simple answer is no. Procurement of tomorrow is about more than delivering goods, reducing prices and mitigating risks. The future of procurement is creating value for the final customer. And so the new buzz-word coming in 2019 is Co-Creation.

Co-creation is about developing and delivering products, services or systems using the common efforts of all interested parties.

2. Digitalisation

In my consultancy work I meet ten to twenty Procurement and supply chain organisations every year. It’s a big privilege to meet so many great people, and work in a variety of industries and businesses.

But one thing that surprises me is the fact that the majority of organisations are not making procurement decisions based on  complex benchmarking or performance indicators.

In fact, the majority of organisations in Europe and North America are making Procurement decisions based entirely on  cost reduction. Whatever has been discussed before quotation is ignored and whatever might happen after is neglected.

“Give me the best price: here and now! And you get the business…” – is still the driving force for many procurement organisations.

Of course, this approach is beneficial in the short term. But on a strategic level it will not work.  In the era of big data this approach is a crime. I know that digitisation and fact-based Procurement decisions may not sound like a mega trend for many readers. But before you skip this point – answer one simple question. Do you really include performance evaluation and risk analysis in all your Procurement decisions?

3. Sustainability: Part of our new reality

Sustainable procurement is not a new term.

The United Nations definition says that sustainable procurement practices are the ones that integrate requirements, specifications and criteria that are compatible and in favor of the protection of the environment, of social progress and in support of economic development, namely by seeking resource efficiency, improving the quality of products and services and ultimately optimising costs.

It might look a little complicated at first glance, but it is quite a straight forward definition.

More and more countries are shifting towards sustainable procurement; improving national procurement policies and procedures. But the true leaders in this shift to sustainable procurement are the international corporations. Using their massive purchasing power, they are able to make real impact to ecological, technological or social standards across entire industries.

Some companies use the sustainability messages for marketing of their products or services, creating positive buzz and media attention to their brand. Many more develop their sustainability agenda for mitigating or preventing risks within supply chain.

One thing that I can say for sure; sustainability is becoming part of a new reality for procurement organisations. It is not a buzzword anymore, it is an expectation customers. People are beginning to understand that low prices should not be achieved by unethical or unsustainable means.

So what can you do to introduce sustainability to your Procurement agenda?

Start by investigating in more sustainable sources and raw materials. Look around your industry or category to identify the best practices and get some inspiration.  I guarantee that you will find great cases of good environmental, social and sustainability impact for any area and any category.

Of course you should also include sustainability parameters to your RFI/RFQ evaluation criteria.

Another great idea would be to involve some measurable indicators for your sustainability progress. For example, carbon emissions, water footprint, share of renewable energy used for manufacturing or recycled materials used for products.

And remember: responsible sourcing is more profitable in a long term!

Back To Blockchain Basics

Do I need to understand how Blockchain works? Where does bitcoin fit in? And how long until this tech hits the mainstream? Your questions: answered!

Kumpol Chuansakul/ Shutterstock

When it comes to Blockchain procurement pros don’t know what or who to believe, when to expect its takeover or how to prepare.

What’s the difference between bitcoin and blockchain, are they one and the same?

Do you need to understand the ins and outs of how the technology works?

Ahead of today’s Procurious webinar on Blockchain , Jack Shaw, Co-Founder and Executive Director of the American Blockchain Council, clears up some of the Blockchain basics!

Blockchain and bitcoin

“There is a widely held misunderstanding that blockchain and bitcoin are one and the same or inextricably connected with one another.

“In fact blockchain is an underlying enabling technology. Bitcoin and other digital crypto currencies are one of the first effective applications of that technology.”

“Think of it as being similar to the situation in 1990s with the emergence of the internet as an underlying enabling technology platform of which email was one of the first successful applications of internet technology and one of very many ways the internet is being used.”

Why you don’t need to understand Blockchain

“Blockchain is so highly technical that only people with advanced degrees in cyber science could possibly understand it.

“Often we get down into the weaves of the technical details of how blockchain works. I’ve found it helpful for procurement pros to understand what it is that blockchain does.

“You don’t need to be able to build an engine to know how to drive a car similarly you don’t need to understand every technical detail of how blockchain works in order to understand what it can do for you…”

What can Blockchain do for you?

“Blockchains do four things that we haven’t been able to do previously…

  1. Blockchains can create immutable signed and time stamped record of identity, ownership of assets, transactions or contractual commitments
  2. They allow that information to be shared among multiple entities; either people or businesses or other organisations, governmental agencies, across the internet without any of those entities having to depend on any one of the others to be the so called master record keeper. And without having to pay a third party intermediary for that service, which can take tremendous costs and delays out of inter-enterprise business processes
  3. They allow that information to be shared with complete transparency among all those authorised to see that information and the subset of those that are authorised to update it by adding new information
  4. [Blockchains are] virtually unhackable in terms of preventing those not authorised to update that information from doing so or even being able to see it”

The combination of those four capabilities means Blockchain provides a tool for the use and sharing of information across business and social ecosystems that goes far beyond the ability to exchange value via currencies. It, in fact, gives it the potential to impact every aspect of our personal and organisational lives.

When will blockchain hit the mainstream?

“I’ve been around emerging technologies for so long that I’ve finally come to recognise these things do not simply suddenly switch on full-blown and ready for everyone in the world to use at once. [adoption] increases over time.

“Blockchain is coming along much more quickly than the internet. Widespread adoption of Blockchain technology will be in place within the next two or three years. Most of the major IT solution providers are already actively in the process of delivering blockchain enabled capabilities.”

The purpose of the American Blockchain Council is to help senior level executives understand the strategic business implications of blockchain.   

Jack Shaw will be speaking on our latest webinar Blockchain: The Technology, the Myth, the… Legend? which goes live today at 11am EDT/ 4pm BST. Sign up here.   

The Private Company Paradox

Procurement is going to have to do some extra work when it comes to evaluating private companies.  Kelly Barner outlines the common pitfalls to be ready for…

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Many procurement teams have been tasked with diversifying the supply base. This often means partnering with small, diverse, or locally-sourced suppliers.

One challenge that arises is that many of the companies that qualify for such programs are privately owned. The lack of information that usually accompanies private ownership is at odds with procurement’s transparent supplier evaluation frameworks. Add to this the fact that participating in an RFP process just to be ‘diversity fodder’ is onerous and potentially even harmful to small businesses, and we’re left with a paradox:

How can procurement stay true to our mandate while also finding mutually beneficial opportunities for small and diverse businesses?

Procurement will have to do some extra work when evaluating private companies. Here are some common pitfalls to be ready for:

1. Limited or no access to current financials

This begins in the opening section of an RFx: ‘Please attach your company’s most recent corporate financials here.’ To which the supplier responds, ‘N/A: we are a privately held company and as such do not publish our financial statements’. That may be true, but it does not eliminate the need for the supplier to demonstrate that they are financially sound enough to justify an award.

2. Inability to determine risk levels

Procurement has to determine if there are concerns about the supplier’s ability to stay in business. What does their revenue pipeline look like? What are their customer retention rates? Keep in mind that this is a challenge with all companies, not just privately held ones. Procurement has to ensure that private companies are not hiding behind their ‘privateness’.

3. Few customers able to serve as relevant references

While private companies are not always new or small, it is a common combination of characteristics. The customers of small, privately held companies may be as tight lipped as the company they buy from. In fact, some may view their relationship with the private supplier as a competitive advantage or not want to accept the risk associated with speaking for or against such a company in the customer reference checking process.

4. Missing rigor from the expectations of shareholders

Being privately held means drawing capital from angel investors, venture capitalists, and sometimes employees or ‘friends and family’ investors. Who can procurement look to when trying to ensure that the leadership team faces appropriate challenges to their decisions?

Part of this dynamic needs to come from the relationships between leadership team members. Hopefully they (if not their private investors) are willing to fight to ensure the company stays on track.

5. Looming prospect of acquisition

Most private companies are on a journey towards either IPO or acquisition. While both can be disruptive for customers, having a privately held supplier acquired by a larger company is perhaps the greater concern. What changes will be made to contracts or terms of service?

Will the relationship be valued in the same way? Not having the answers to these questions (in large part because the private company’s leadership team doesn’t have them either) can make it hard to commit to a long enough term contract that both parties realise the desired level of value from the arrangement.

Being a private company shouldn’t be the only reason not to consider an otherwise qualified supplier for a contract. The problem is a circular one: if procurement doesn’t have access to the same level of information we do with publicly traded suppliers, how can we determine if they are qualified or not? The answer is likely to be a combination of pushing for additional information and accepting that some of what we are looking for isn’t available. As with all strategic decisions, we can never be 100 per cent certain that our choice is the right one. All procurement can do is maximise the availability of facts to ensure that the decision to contract a private supplier – like all other procurement informed decisions – is based on analysis, not assumptions.