Category Archives: Generation Procurement

Extreme Procurement

With growing focus on emerging markets, ‘extreme procurement’ will become more common.

camo-business-suit-640x533I was at an airbase in the desert when the call came in on my satellite phone: my regular security detail was stranded in Northern Iraq and wouldn’t be able to meet me when I arrived in Baghdad. My firm had won a tender to re-establish banking systems after the war – a great opportunity for us, a great contribution to rebuilding the country – but dangerous work. Western contractors like me were being kidnapped, tortured and beheaded on a regular basis. To travel without security would be suicidal.

Fortunately, a quick call to another of our suppliers established that they had a team available that could stand up at short notice to meet me on arrival. All that was left to do was to call the office in London to have the work order put through…which I did, to be told by a purchasing manager that as I hadn’t followed the firm’s required processes, that couldn’t possibly be done.

On that occasion, a fairly direct suggestion that he join me on the trip and see if he felt the same resolved the matter. With the anaemic performance of Western economies driving more and more businesses to seek growth in increasingly exotic locations, however, the challenges of what might be termed ‘extreme procurement’ are being faced more frequently by the profession and line staff alike.

In extreme environments, procurement is more important than ever

So should procurement butt-out and leave the people on the ground to get on with it? Far from it. In the more exotic emerging markets, procurement is more important than ever:

  • The reputational – and legal – risk from engaging with suppliers who don’t meet the right standards, for example of workforce welfare, is significant, and this can be more common in less developed economies;
  • Strict transnational laws on bribery and corruption require supply chain assurance – you need to know not only that your staff are not involved, but also that no one acting on your behalf is either;
  • Costs can be far higher, and much more varied: the potential for savings is greater than in more settled supply chains;
  • The rate of economic growth may require your business to move fast to capture the opportunity, in a fast developing market vital materials may be in short supply – effective procurement can make the difference between failure and success.

Rules are still needed – but they may need to be different rules

The requirements behind your organisation’s policies and procedures – compliance with law, good governance etc. – will remain. If it hasn’t operated extensively in emerging markets before, however, the way those principles are applied may need to adapt.

Reviewing the supplier landscape at an early stage will provide the best sense of this. If you make exceptions to some requirements due to, say, there being only one appropriate supplier in a category, make sure to insert a ‘sunset’ clause so the exception is revisited as the market develops. 

Check the practicality of your procedures

Having defined policies suitable for the circumstances, double check their practicality. If costs are significantly higher than in your home market, approval levels may need raising. If you have an exceptions policy, make sure those who can grant them will be readily available when needed – bearing in mind both time zones, and that Saturday and Sunday may be working days.

Get familiar with different cultures 

Understanding different cultural norms is crucial to understanding how business gets done – and how you can do business effectively. This isn’t just about the new countries with which you may be dealing: expats can also be a breed apart, those who open up the riskiest locations especially. Spend some time getting a handle on how all involved think and act – and you’ll be able to work out the most effective ways to get them on side.

There’s no substitute for first-hand experience

To be truly effective – especially if this is to be a major part of your business – you need to experience the markets involved for yourself. It may be a hard sell to your boss, the finance department and even the frontline staff to fly a ‘back office’ person out, but the case should be clear: procurement is more important than ever in these markets, for you to understand the supply landscape, you need to see it for yourself.

Exotic emerging markets are challenging, difficult, often dangerous and invariably highly demanding. Both for you and for your business, they can also offer unparalleled opportunities: for growth, for profit, for developing skills fast and for demonstrating your worth.

Now, where did I leave my flak jacket…

Brockle

Stuart Brocklehurst is Chief Executive of Applegate Marketplace. His past roles have included Group Communications Director of Amadeus IT Group SA and Senior Vice President for External Relations at Visa International CEMEA.

2015 Rewind – Best of the Blog: 6 Sure-Fire Ways to Become a CPO

Our first blast from the past from the blog in 2015 is to revisit our most popular article this year. Our founder Tania Seary talks through her top tips for becoming a CPO.

6 Sure-Fire Ways To Become A CPO

I have worked in Procurement for twenty years now (a scary thought). During that time, I have had the immense pleasure of watching a number of trailblazing procurement professionals ascend through the ranks of their companies to take the coveted position of CPO (Chief Procurement Officer).

If your professional goal is to become a CPO, there are some very simple tips I can share for how to successfully climb the career ladder leading to the ivory towers of procurement. 

  1. Build your trophy cabinet

“Make sure you have successes you can point to,” is one of the best pieces of career advice I have ever received. You need to be able to clearly and convincingly explain projects that you have personally been accountable for and how they have delivered value. Your successfully completed projects with defined benefits are your career trophies.

Put another way – to get promoted, you first need to excel in the job you have today. Ok, this seems rather elementary, but I hear from CPOs around the world that many category managers today are so focussed on where they want to be tomorrow, that they aren’t delivering on the job they are meant to be doing today!

I cannot emphasise how important the basics of professionalism are for making positive impressions on those who will promote you. Do your homework before every meeting, be on time, have an agenda, be well presented, be composed, write and distribute notes following the meeting and, most importantly, do what you said you would do and notify everyone that you have done what you said.

I can’t stress these last two points enough.

Doing what you say you will do and confirming that you have done it may be the two biggest contributors to people getting promoted. Leaders like to have people working for them who actually get things done. Leaders also need to know that the job has been completed. It’s not enough just to do what you said you would do. You need to make sure everyone knows you’ve done it, so they can get it off their to-do-list and put a mental tick beside your name as someone who delivers. 

  1. Don’t burn your bridges… EVER

No matter how old or experienced you are, if you are ambitious, you will find yourself getting frustrated. This will come in many forms. You’ll get frustrated with the lack of progress on projects; you’ll get agitated with certain decisions and actions, and you most likely get frustrated with the people who work below you, beside you and above you. It’s understandable.

In these stressful situations it is often difficult to contain yourself and maintain harmonious, productive relationships with those around you.

But it is critically important that you do.

As I shared in my blog How to Quit your Job with Style, everyone you work with, whether they are inside or outside you organisation, are invaluable long-term supporters of you and your career. As you progress up the ladder (or across your portfolio career!), you will be amazed how every person you have worked with plays a role in helping “buoy” your promotion. You need as many people as you can to endorse your capability and to recommend you for promotion. Getting ahead is hard enough – you certainly don’t need any detractors.

With this is mind, it’s clear that an invaluable skill for future leaders to develop is patience. Great leaders have an uncanny ability to pick the right time to hold back and when to push. As America’s founding father, Benjamin Franklin once said, “He that can have patience can have what he will.”

  1. Be squeaky clean – a beacon of integrity

When The Faculty developed its X Factor assessment for future CPOs, it became obvious that a key differentiator for our profession was its role in clarifying the ethical “true north” for our organisations. Procurement’s competitive advantage is that it can provide rock solid guidance on the most ethical commercial processes and decisions our businesses are involved in. Few other functions can boast these credentials.

As sustainable sourcing and the ethical responsibility of our businesses continues to draw an increased (and warranted!) interest, future procurement leaders must have an unblemished track record in conducting business and leading teams with the greatest integrity.

One of my favourite sayings is, “Know you’re right, rather than hope you’re not wrong”. With this mantra in mind, I would suggest you and your team complete the CIPS Ethical Procurement and Supply Course. Completing this e-learning program will help identify areas of ethical and social risk and will suggest how to best respond to these situations. It just might save you from a crisis. 

  1. Raise your voice, raise your profile

If you want to be promoted you first need to be noticed. As we all know, this is easier said than done. To be viewed as a leader today, you need to be seen as an influencer… someone with something to say… someone with a unique and informed opinion.

Future leaders need to constantly nurture and nourish their personal brand. In order to succeed, you need to position yourself for success. Often, this will mean stepping out of your comfort zone. Holding knowledge sharing events in your office, speaking and conferences and actively maintaining your social media presence are all great ways to get noticed and position yourself as a thought leader. It may appear difficult at first, but its vital training for your development as a leader.

The most challenging element of raising your profile is finding your audience and in this endeavour, social media is your friend. The online procurement community is enormous, active and hungry for information. By connecting into this community, you amplify your opportunities to learn and to teach.

There are procurement groups on LinkedIn with over 300,000 members. Twitter is awash with market information that can enable procurement professionals to do their jobs better and Procurious, the social media network we established to connect procurement peers across the globe and facilitate knowledge sharing.

The social media world is waiting to hear your story; it’s your job to get out there and tell it.

  1. Build a reputation for developing others

One of the most important attributes HR will be looking for in a CPO (or any leader) is their ability to develop people and build a high-performance team. No matter how junior you are in an organisation, there are always opportunities for you to demonstrate that you are focussed on others’ professional development. You can mentor someone looking to get into procurement, you can share your ways of working openly with your peers, you can suggest bringing in some training or speakers to talk to the team on a topic of mutual interest, you could even be a “millennial mentor” for one of your bosses. There are a myriad of opportunities to demonstrate that you understand the power of people continually learning and developing. 

  1. Work for blue-chip companies

Firstly, let’s remember that the CPO role itself only exists in larger companies. Secondly, larger companies prefer to hire people who have already worked at other large companies.

Why? Because it’s safer.

Great companies (on the whole) invest in developing their people, they have great values systems that, by osmosis, influence the performance and behaviour of their people. This means that you become both a technical and ethical “output” of the companies you work for. This may seem a bit weird, or scary, but it’s true; “The company you keep defines your character and your character defines your success.”

Procurement Systems – a Panacea or Pancake?

In a far off world, our intergalactic cousins may have a procurement systems panacea, but in my world I’ve yet to see it.

pancakes

Of course they can help manage the process flow, speed up the approvals, assist contract management and supplier performance. Some even claim to manage relationships. (Really? Systems manage relationships? – that’s news to me!)

Of course, systems have their place and are a necessity in most organisations. I am not suggesting a reversion to having no procurement systems in place. It would be folly in today’s ever-global world, with increasing expectations on corporate governance, to do so. My issue is not with procurement systems, per se, my issue is with systems being used as an excuse for under performance.

The ‘Panacea’ Menu

A commonly held view is that the system’s deficiencies are a core reason of procurement’s inability to deliver the business’ requirements, and a conclusion is drawn (sometimes hastily, sometimes protracted) that a new procurement system is needed.

Procurement software companies pitch for the new and the panacea, complete with all manner of whistles and bells is selected. Rather like my own children at a pancake house selecting from the menu, this is their most fun part, seduced by all manner of options – it is often all downhill from here.

Having made the significant investment commitments, the intricacies of software become known and the integration of the selected system panacea hits trouble and is scaled back, perhaps even being stacked alongside or on top of previously selected ‘panacea’ systems.

Often bells and whistles become either un-implementable or unaffordable. The panacea has turned in to a pancake; or moreover, a large stack of pancakes complete with sickly, unpalatable toppings upon which the consumer looks and questions why such a large, unappetising feast was ordered. Appetite quickly disappears and nausea kicks in. When half of the stack is consumed, cries of “I’m full” resound.

Make Systems work for you

In a previous article, I set out my thoughts on procurement personnel too often remaining in their comfort zone, failing to challenge themselves or their stakeholders.

My point in this article is simple – expecting a procurement system to play too large a role in any procurement transformation is madness. Systems are only systems. Systems are nothing without the people who use them. Buyers who dislike the old system will, in time, learn to dislike the inevitable deficiencies of the new system.

The skilled buyer needs to master their system and make their system dance; using the system to assist, not hinder, meeting the most strategic requirements of the business; to not be constrained by its imperfections. During implementation care needs to be taken to not impose distractions on to the business which reinforce any misconceptions that procurement is only interested in cost cutting.

Clever configuring of almost any well maintained (up to date) reputable system can deliver necessary controls without the unnecessary frustrations and costs of a wholesale re-implementation. Systems should save time for the procurement team and for the business users. Systems should perform for us, not the other way around.

I hope that it is needless to say, that of course, systems need to be maintained, developed and users professionally trained to extract value from the system, not be constrained by it. I simply urge all who are considering a procurement transformation not to over-estimate the criticality of their system, and to correctly consider the manner in which its personnel use existing tools. Systems can become the rule by which we are measured, but they should never become our ruler, nor our excuse.

The scarce resources of your organisation are at stake, and along with it the reputation of the department. Previously, I have contended that buyers are too narrowly focussed in their practised skills – I simply favour investing in the flesh and blood that use the systems ahead of investing in the systems themselves.

Read more articles from Jim here.

Jim WillshawJim Willshaw (MBA, MCIPS, MIIAPS) is an experienced procurement professional acting as a consultant, speaker, coach and trainer to leading organisations all over the globe.

What Does the Board Look for When Hiring a CPO?

In the second part of this series on CPOs, we look at what Boards look for in their CPOs.

interviews-s

Read the first article on expectations of CPOs here.

The successful procurement leader today is expected to establish credibility by embedding the basics. Good financial data consistent with the reporting model of their business, robust controls across a lean supplier base, and well negotiated contracts that are fit for purpose. They must build a function that operates across international boundaries and divisional corporate structures.

Comments from Board level executives in the last three months include:

  • “I want someone smart, quick and innovative. In my business if we can make a 1 per cent saving on our cost base we will increase profit by 50 per cent. I will judge success by the MDs wanting to spend time with the CPO”
  • “I need someone who can sit with my Divisional MDs and help them create a profitable business. Procurement is absolutely critical to the operating model of our organisation. We are in turnaround, and its success is linked directly to the cost base”

How Do You Compare?

When you are invited to interview for a CPO role, be it an internal promotion opportunity or an external process, remember you are not operating in a vacuum. Assume your competition is the highly respected, experienced CPO in your direct competitor and ask yourself, “How do I compare?”.

It is most likely that an executive search firm would have been engaged to identify the best possible talent in the market and competition will be fierce. At this level, everyone is good. So, what makes the difference at the margin?

1. Business first, procurement second

This point was stated clearly in a recent discussion with a CFO of a global Consumer Packaged Goods (CPG) company and experienced Non-Executive Director. When you get close to Board level, everybody is expected to know their “job”. The differentiating factor becomes what else you can contribute to help the company achieve its goals or solve its problems. The ability to understand the business strategy and its challenges, and align procurement to it, is essential and execution is non-negotiable.

2. Leadership 


The ability to build and lead a diverse, global team is vital to being a successful CPO. Generating energy, creativity, ambition, commitment and loyalty amongst the broader team are key attributes of a successful leader. This is particularly relevant in a complex corporate environment. Leadership amongst peers is also critical. Being seen as a credible and well respected leader by colleagues in other functions across your business is vital for your individual success and that of the function that you lead.

3. International Experience 


Many organisations operate in a global environment, from its operations to its supply base and customer markets. Those with experience of living and working outside of one region (Europe, US, Asia) will be more desirable than those who have not.

4. Breadth

Procurement can be viewed as quite a narrow skill set and, therefore, gaining experience across all elements of spend (directs and indirects) will be viewed positively. Exposure to pre- and post-merger acquisition work, integration and delivery of synergy benefits would be another tick in the box. Outsourcing is also on the list, along with experience gained in more than one industry sector.

5. Commercially Astute 


To be respected internally it is vital that your reported numbers and achievements are accurate. Many times, in discussions with CEOs and CFOs, they state that the reported numbers bear no resemblance to their data. They joke that if procurement saved as much as they said year on year, their spend would be zero in three years’ time.

You must be able to build a function that is aligned to the way the business measures and reports its numbers. They need to believe you. A recent McKinsey study stated, “Companies that have invested in developing best- in-class purchasing capabilities have nearly double the margins of those that have not”.

In a recent NED appointment, we specifically targeted the global procurement and supply chain community. The press comment from the FTSE 100 Chair on the successful appointment was “…their extensive expertise in driving efficiencies in manufacturing processes and procurement in global organisations will be of real value to us”.

And Finally…

The good news is that the momentum is building and procurement is getting on the Board agenda. Having been a headhunter in the procurement marketplace for the last 13 years I can confirm that the quality of talent at the top has improved significantly.

The reality however, is that expectations are higher than ever and competition is tough. If you want to reach the CPO role, it’s worth taking a little time to reflect how many boxes you can tick and take steps towards closing any gaps.

Behavioural Traits Boards are Demanding from Procurement Leaders

Uncovering the surprising truth about the behavioural traits Boards are demanding from Procurement Leaders.

Behavioural Traits

It’s a well-known fact that individuals with certain behaviours are better matched to certain jobs. For example, senior Sales Executives tend to be driven and goal orientated, whereas, in contrast, Chief Analysts have a high process orientation, like direction, and have great attention to detail.

But what about Procurement Leaders?

This year is my twelfth in the Procurement Executive Recruitment space, and one in which I was lucky enough to run numerous executive searches (alongside our Procurement Recruitment Practice Lead Craig Elvin) across the industry.

As part of our standard candidate assessment process, we require the hiring executive (typically a COO, CFO, HRD or MD) to fill out a behavioural job fit profile which helps both us and them build a picture of the ideal cultural behaviours they are looking for in the successful candidate.

We then take that behavioural profile and match it to our shortlist of candidates using our award winning executive intro® platform. What we’ve found is that when hires are made through this process, the candidate has a significantly higher chance of being a cultural fit within the organisation, and as a result have increased tenure and success.

This process has provided invaluable insight data throughout 2015 into the behavioural blueprint that senior executives are looking for right now from their procurement leaders – and the results are a little surprising.

The graph you see below is created from data gathered across a number of typical senior procurement hires e.g. (CPO, Head of Procurement, Procurement Director) we made this year, and combined into a single behavioural composite.

So here is what the ideal behavioural profile for a procurement leader looks like in 2015:

Behavioural Graph

What does the graph show?

The graph is split into four main areas and offsets what are seen as behavioural opposites. For instance a high red scale indicates someone is more dominant, whereas a low red scale would indicate someone is more accepting. So what can we learn from this?

  1. Boards are looking for goal-orientated risk takers (Red Bar)

This is our first interesting insight! The large red bar in the profile confirms businesses are now actively looking for procurement leaders who are forthright and able to challenge the status quo.

Traditionally risk adverse, the Procurement Leaders that are now most in demand are passionate about brands, competitive in negotiations and ultimately want to win in business. The overriding trend here is ambition and procurement candidates who match this profile will set challenging goals for themselves and their team, while encouraging healthy competition amongst staff and confront performance issues quickly.

  1. Boards want sociable & outgoing leaders (Green Bar)

Sociable and outgoing aren’t two words that necessarily meet the traditional procurement stereotype! As Procurious is proving though, that stereotype is changing. Procurement leaders need to be people-people, popular and likeable in order to effectively influence and partner with stakeholders to make informed business decisions. This is key to ensuring that their ambition and risk taking (explained above) is well received and helps them navigate through complex organisations.

Executives across all sectors consistently asked for procurement leaders with EQ (Emotional Intelligence) who can influence and build meaningful strategic alliances with external parties and manage a diverse and often international team to commercial success.

  1. Boards want driven, high urgency and high energy leaders (Blue Bar)

Boards now clearly want us to find Procurement Leaders who have pace, drive, adaptability, and can keep up with fast moving market trends. As with the red bar the blue bar here is very prominent and suggests that organisations are looking for procurement professionals who are both restless and energetic. Leaders with this profile will tend to seek and enjoy pressure, be decisive and get excited by opportunity. This excitement will transfer to their staff who will always feel part of a mission that is heading somewhere and be highly productive themselves.

  1. Boards want independent leaders (Yellow Bar)

The modern executive team wants to be challenged as they know it holds the key to progress. This goes someway to explaining why they want such assertive and independent procurement leaders.

Procurement leaders have the unique opportunity to work across the value chain and have to be self-reliant to be successful and add material value.

A strong procurement candidate with this profile has faced up to resistance, has made difficult decisions and has shown determination while remaining open to others’ ideas.

What Next?

So those are the 4 key behavioural traits the boards have been asking us to test for when hiring new procurement leaders. In my view it’s a subtle blend of these traits that leads to success in the eyes of the board. As you go through your own self-assessment and personal development I hope the above can help shape some of your learning.

On a final note, the other discipline that had a similar behavioural profile requested recently was Sales Directors – albeit the green bar is more pronounced in that case. In my opinion, this provides even more evidence that the type of person in demand across all commercial functions are becoming more similar than ever. If you would like to learn more about how both science and technology can be used to identify whether a candidate is suitable for a role then download our ebook.

Andrew MacAskill has spent the last decade researching, placing and networking with the smartest commercial leaders globally.  He is the author of a well-read leadership blog, regular speaker at conferences and industry events and strong advocate of EQ focused leadership.

5 Ways Social Media Can Help Your Procurement Career

Post your way to success!

2014-01-socialmedia-jobstage A while ago I posted about the career-limiting bear traps to avoid when using social media for business. It’s good to be conscious of those, but they shouldn’t scare anyone away from making the most of these great communication tools: the one bear trap I forgot to mention last time would be to ignore social media altogether.

But how are we supposed to use them for business? It’s clear enough how Facebook can keep us in touch with friends’ culinary exploits and their kids’ school projects, how Twitter can crowd-source a thousand puns and how LinkedIn can be invaluable when job-hunting – but none of that helps us in the day to day of doing the job you’re in.

1. The Boundless Network

Anyone doing a job with an ounce of stimulation or challenge to it will face questions they can’t perfectly answer on a daily basis. What’s the best technique to manage that auction, who can supply the parts we’ll need in that new market we’ve entered, what’s the best training course for my new team member?

The web gifts you a boundless network of people who can – and overwhelmingly, want to – help. Place the question on a discussion board, detailed, intelligent answers often flood in from around the world; complete strangers happily take time to help you out. If the issue can’t be aired publicly, send a connection request to another customer of that supplier you’re evaluating, a CPO who does business in that country, and more often than not they’ll be happy to help.

We have access to huge amounts of data – and many videos of cats – via the Internet, which often turns out to be less helpful than one might hope (especially the cats). Being able to tap into real experience, however, is priceless.

2. Inspiration saves perspiration

Wondering how your colleague effortlessly develops brilliant strategies and is always ready with a great new idea? Well, it could be they’re just smarter than you, but maybe they’re keeping on top of the latest trends via blogs, Procurious and LinkedIn Pulse.

Social media are great tools to keep yourself up to date with the latest thinking. A quick scan of the latest articles, posts and discussions keeps you current and will often provide ideas you could use in your own role.

3. Colleagues might actually listen…

Comms professionals have long since known that the best way to get colleagues to read an announcement is often to get it covered in the press – for some reason we pay more attention to external sources than we do to those infernal internal memos. Most of us don’t have newspaper editors on speed-dial, but we can all now be our own publishers.

Post an article about an initiative you’re undertaking, file an update when you’ve completed a major achievement. It can be striking how others’ opinions of you can be moulded by the mood music you create through social media.

4. Check out the competition, keep close to suppliers

 At a previous company, we spotted that our main competitor’s Twitter account had been hacked and that over several weeks, they – a big company – didn’t even notice. We thought we should let them know, but the lawyers told us we couldn’t talk to anyone there directly – so in the end we helpfully mentioned it to a journalist who covered our sector, knowing the news would then soon reach them…

Anything that egregious is unusual, but it’s amazing what you can pick up about both your suppliers and your competitors. A worrying number of staff from Company X seem to be moving on – could it be unstable? People at Company Y keep asking about a new market – do they have plans you don’t know about? 

5. Amaze your colleagues and astound your friends

Social media is fundamentally meritocratic. Anyone can build a network, we’re all free to create content, and it’s then shared in the same style whoever we are. It gives you an opportunity to show yourself as a leader in your profession, to your peers, your colleagues – and, of course, your bosses.

For this reason, it’s especially important for procurement professionals. In a discipline where your company may not have any benchmark of how good you are, it gives you an opportunity to demonstrate your abilities. As the saying goes, you don’t necessarily need to blow your own trumpet, but at least let people know you have one.

Stuart Brocklehurst is Chief Executive of Applegate Marketplace. His past roles have included Group Communications Director of Amadeus IT Group SA and Senior Vice President for External Relations at Visa International CEMEA.

What if Savings Didn’t Matter in Procurement

There are countless articles and blogs on the value procurement brings to an organisation.

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This article was originally published on LinkedIn.

Most say that savings are just one component of this value proposition and that we need to look outside of savings into other areas of value like stimulating innovation, supporting the organisation’s corporate social responsibility goals and reducing risk throughout the supply chain. Everyone agrees with these articles and, as we map out KPIs for our procurement department or individual team members, we ensure savings is just one, albeit important, metric that their value will be evaluated on.

What happens though when you remove the value of savings altogether from a procurement department and it’s individual team members? Even from the offerings of procurement consultancies which often focus on savings as a way of convincing CPOs to purchase their services?

Other Value Opportunities

This is a question I first grappled with in Singapore where I came across organisations so cash-rich that they did not seem to value savings, were not actively looking for savings within procurement or from external suppliers, and they actively pursed other types of value like corporate social responsibility as mentioned earlier.

Interestingly, the procurement team members in these organisations also seemed to be grappling with this issue as when savings are off the table the value procurement, and individual procurement professionals, brings becomes harder to demonstrate.

I came across a great quote recently in an old article on the SpendMatters website which is from a technical stakeholders view and sums up their view on savings well: “Procurement is like a UFO — here one day, gone the next. Zapping savings here and then going off to the next project.”

It is interesting that this technical stakeholder wanted his procurement representatives to focus on areas of value outside of savings as well. It seems then that in some of these organisations in Singapore that do not value savings, other areas of procurement value get their time in the spotlight.

Here are some brief observations on three of the many areas of value these organisations focused on rather than savings. I think these are valuable as they are complementary components of value and can be applied in organisations with and without a focus on savings:

1. Compliance

For a number of the organisations I met with in Singapore a key area of focus for the procurement team was on how they supported compliance within the wider organisation. A large part of their value proposition therefore was based around maintaining the quality of the goods and services being purchased, managing supply chain risk especially around continuity of supply and ensuring that supply chain practices around labour and bribery complied with applicable legal requirements like the UK Bribery Act.

Compliance is an area that all procurement teams focus on, however outside of Singapore I have not come across many compliance related KPI’s from a procurement team or individual view other than basic ones like non-acceptance rate for raw materials or supplier certification rates. By raising awareness of the way procurement supports compliance and measuring teams against it, procurement can grow its brand away from the traditional savings agent.

2. Innovation

Singapore has a focus on pioneering advances in innovation and driving competitive advantage for growth according to Teo Lay Lim, MD, Accenture Singapore and ASEAN. I found this to be true with most of organisations in Singapore I have met with recently bringing innovation into our conversation and wanting to discuss methods for using procurement to stimulate and support innovation.

Outside of Singapore, innovation is increasingly being recognised as the key to sustainable growth by companies around the world and as Capgemini research points out, innovation has evolved from a purely internal capability to a collaborative process with the external network of supply partners. Therefore the ability of procurement to work with suppliers to identify and execute innovation within existing contracts and to stimulate innovation outside of existing arrangements is a key part of the procurement value proposition.

Some simple observations from Singapore include having incentive schemes in place relating to innovation in supplier contracts, having innovation as an agenda item on regular meetings with key suppliers as well as internal stakeholders and having KPI’s in place which reward procurement team members for focusing on innovation rather than relying purely on traditional savings or throughput metrics.

3. Corporate Social Responsibility

Research conducted by the Harvard Business School found that organisations who focus on corporate social responsibility (CSR) significantly outperform their competition in terms of stock market and financial performance. One Singapore-based organisation, Fuji Xerox, describes their view of CSR very clearly, “…forging a link between long-term competitiveness and the sustainable development of society and the company…” which seems to be a view echoed by many of the organisations I have met with in Singapore.

Each of these organisations had different ways of using their procurement team to support their organisation’s focus on CSR. Some common examples included the standard inclusion of evaluation criteria on environmental, social and ethical standards, educating suppliers on CSR principles and supporting suppliers to implement improvements in their manufacturing processes to reduce environmental impacts.

An IBM IBV CPO study found that 97 per cent of successful and influential procurement teams are significantly involved in their organisation’s CSR initiatives compared to 61 per cent of average procurement teams.

Regardless of the current maturity of a procurement team though, or if it is the organisation driving these initiatives or procurement lobbying for them, clear KPIs (results driven rather than process orientated ideally) will allow procurement to demonstrate the value it is providing to the organisation.

In summary, regardless of whether your organisation is cash-rich and based in Singapore, a not-for-profit based in South Africa or is financially and geographically somewhere in between, your procurement team needs to deliver value beyond savings.

Whether the area of value is compliance, innovation, CSR or any other area, having good stakeholder communication and clear KPIs will help ensure the value your procurement team brings is clear and you avoid the sobriquet UFO unlike the unfortunate procurement team in the SpendMatters article. 

Supplier Relationship Management – Cavalry or Surgery

In my first article I consider whether buyers resort to blunt negotiation too much, arguing that a significant amount of value is ignored by not appropriately committing resources to the early and later stages in the procurement cycle.

Surgery or Cavalry

In this, my second article in a series of five, I address the issue of SRM and some of its potential pitfalls.

Much of the recent procurement press, conferences and social media has been consumed with organisations promoting their methods of working with suppliers in a collaborative manner to create value and return greater profits for all parties. Supplier Relationship Management (SRM) is the most commonly used phrase.

I agree with the outlook that often suppliers are the experts in their field; more expert in that field than the buyer’s organisation. This should not be a surprise as, for the most part, the buyer’s organisation only expends a very small fraction of its resources in any area of supply, but for the supplier that same area may represent a very significant part of its entire business.

Who Are the Experts?

It follows, logically, that suppliers may know more about the upstream supply chains and its extant inefficiencies than the buyer. It also follows that any supplier whose business substantially relies upon a small number of goods or services will have greater capability, capacity and appetite to analyse and strategise over how to extract maximum value from the supply chain when compared to the buyers organisation.

Of course, there are exceptions to this rule – particularly, in the case of new product/service launches or when the buyers organisation has a lot to win or lose. Generally though, I contend that such projects which are truly strategic to both the buyer and the supplier seldom occur and are even less frequently in the scope of the SRM blunderbuss.

Indeed, when such circumstances arise (true interdependance, or buyer dominance between buyer and supplier) then I will agree that full scale SRM can be appropriate. For a majority of buyers, I assert that they might never work on a project which is of enough significance to either their own organisation or that of the supplier to warrant full scale SRM and its associated direct and opportunity costs.

I also contend that if a SRM programme is pursued, unless buyers are aware of the dangers, the supply chain as a whole may become more efficient but that the buyers organisation sees little tangible benefit itself.

Who benefits most?

A core facet of SRM is the sharing of information in a collaborative manner. As we also understand from our first, rudimentary attempts at negotiating, information is a primary determinant of price and value. The party with better information is likely to conclude the negotiation nearer to their most desirable outcome.

As such the “players” in the supply chain (organisations in any supply chain are both buyers and suppliers) will seek to extract maximum value from the supply chain for themselves – as their shareholders oblige them to do. So, any high performing buyer needs to be aware of the impact of sharing any information and making sure that increasing their supplier(s) knowledge will not be detrimental to their cause – or if it is, to ensure that greater value is reciprocated.

Once information ceases to be confidential capitalist rules and human behaviours means that parties will, first and foremost, seek to extract maximum value for themselves, sharing the newly created value only when they are influenced to do so by the other players in the supply chain.

So far, so good, but repeated experience of working with major multi-national organisations has seen them under-state the investment necessary to ensure that at least their fair share of the value created by the SRM collaboration is retained by their own organisation, both in terms of direct costs and technical benefits.

Some organisations have recognised that and have invested heavily in a cavalry of SRM personnel (who often mis-practice SRM by performing Supplier Performance Management (SPM), which I will discuss in another article) and who impose a newly created SRM process on to unwilling suppliers who feel obliged to comply with the requests of the buyer as “building a relationship must be good for the two organisations as a whole, right?” Wrong.

Surgery, not Cavalry

In the circumstances I have set out above, building tight, well managed SRM relationships with key suppliers can be critical to the delivery of a project, even to the survival of a company however, no supply chain can survive the substantial costs which an ill-thought out SRM programme imposes; and well executed SRM relationships cost money, a lot of money. The substantial additional costs – and they need to be sustained over the medium/long term – can outweigh the benefits.

Furthermore, if those personnel are not skilled in controlling the information and understanding the dynamics of the relationships throughout the supply chain, and over a period of time, then organisations may only see a hefty number in the costs column while their benefits column remains meagre. The benefits are retained by others.

The opportunity costs of employing procurement’s scarce resources in SRM rather than other tasks can be significant. SRM may not deliver results quickly (although, it most certainly can) and small incremental improvements may be more likely produced as the parties feel their way around each other in the early stages.

Unless the supply chain dynamics are appropriate for implementation of SRM, organisations should prefer suppliers who simply perform to the required specifications – no more, no less. Commit resources to work on developing specifications to better reflect the needs of the business, but do not impose a wide-scale SRM programme that can be predicted to fail.

Instead of a SRM cavalry wielding blunt tactics and weapons, I favour a surgeon and scalpel approach. Firstly, identification of a small number of appropriate projects/supply chains on which to run (not impose) an SRM programme (4-8 is normally all except the very largest organisations can handle and/or afford).

Secondly, the selection or development of a small number of highly skilled individuals to perform the SRM and co-ordinate the efforts of the internal stakeholders. So the final element must be to have a medium/long term commitment, sponsored at a senior level outside of the procurement functions, and to have equally skilled surgeons willingly participating within each player in the supply chain.

Effective, sustainable SRM cannot be imposed.

Jim WillshawJim Willshaw (MBA, MCIPS, MIIAPS) is an experienced procurement professional acting as a consultant, speaker, coach and trainer to leading organisations all over the globe.

Getting it Right on Social Media – 10 Do’s and Don’ts

Even for a seasoned pro, or ‘Master’ as we like to say at Procurious, social media can be a minefield to negotiate.

SocialMedia_Large

One wrong word, one misplaced link, or even something as small as a spelling mistake, can have you people clicking “Unfollow” in droves.

Like with reputation or trust, a social media following takes a long time to build, but can be undermined and disappear in the blink of an eye. But what can you do to ensure that you are getting social media ‘right’, and providing value for your followers.

We’ve pulled together a list of Do’s and Don’ts for you to remember the next time you are linking, tweeting or social networking.

Do

  1. Add Some Personality

Some platforms more naturally lend themselves to being a bit more creative with your profile, while others are very much more suited to a more professional outlook.

It’s important to make this distinction when creating your profile. You can still add some of ‘you’ to a professional profile, but try to get the balance right. Inject some personality into your profile and people will naturally engage more with it.

  1. Use Accounts Wisely

Use your profiles in a sensible fashion, but also in a way that suits you best. Want to use Twitter to gather information, rather than post yourself? Great – look for people to follow and stay up to date.

If you do post, do this in a logical way. Don’t post a dozen times one day and then nothing for the next week. It’s a sure fire way to stop people following you. Whatever you do, don’t create a profile and leave it to stagnate – it’s probably worse than not having a profile at all.

  1. Post Sensibly

Facebook is great for keeping up to date with your friends; Instagram is awesome for photos you want to share; Twitter is amazing for condensing your message; LinkedIn can help you get ahead professionally.

Your friends probably don’t need to see your CV, in the same way peers, and potential future employers, don’t need to see photos and videos of your children/pets/wacky family. Keep the message in line with the feel of the platform.

  1. Shorten Your URLs

There are few things more off-putting on Twitter than a post that is more URL than content. Long URLs are hard to read and interrupt the flow of your message.

There are great tools out there like bit.ly and tinyurl that can help with this – plus they’ll also help to steal a few characters back for you.

  1. Change Your Public (Vanity) URL

Surprisingly few people take advantage of this on Facebook and LinkedIn. When you first create a business account, your public URL will be a stream of unintelligible letters and numbers. However you can change this to your name, or the name of your business.

This will make it easier for people to find your profile and will be significantly easier for you to remember too.

Don’t

  1. Overuse Hashtags

People still use hashtags on Facebook, although they don’t work well, while Twitter and Instagram are the key platforms for them. Limit your hashtags to between 1 and 3 in each post, no more. Use too many and people will stop following you, or reading any of your posts.

Try also to fit them into a sentence or post so it makes sense and reads well. Don’t use them on LinkedIn. Ever.

  1. Connect with Everyone

You might want to seem like you are a master-networker and one of the most connected people on social media. However, you should be mindful of who you are connecting with. Are they going to give you value? Will you ever have a meaningful interaction with them?

Make sure you’re connected with key colleagues, peers, suppliers, even competitors, but keep it relevant.

  1. Auto-post Across All Platforms

Tools like Buffer and Hootsuite are brilliant. Using these tools wisely to schedule content can save you a huge amount of time and effort in getting your message on to social media.

However, remember that each platform displays messages differently, and a post good for Facebook probably won’t work well on Twitter. It’s worth creating tweets separately, as usernames and hashtags you have included won’t display well on other sites.

  1. Just Advertise

People have probably followed you based on the strength of your profile, or the value of your message. However, these people don’t just want to hear you advertise your own goods, services or brand.

Other people in your industry will have good messages too, and content that has value too. Help share it across your network and you might find that it increases your own following too.

  1. Give Up

Social media can be hard to get to grips with, especially if you are trying to do too much, across too many platforms. Pick the one(s) you are most comfortable with and build them up in order to get the most value from them.

Don’t worry if you aren’t getting hundreds of followers or connections either. Keep trying and posting good content and it’ll happen. Remember, even the best users started at zero.

There you have it – our 10 tips to get it right on social media. If you think we’ve missed something, or you disagree with any of this, please get in touch. We always love to learn!

What Does the Board Want From its CPO?

In the first part of a two-part series, we look at what organisational boards are expecting from CPOs and the procurement function.

BoardOfDirectors

Purchasing, Procurement, Strategic Sourcing, Category Management, Spend Management, Supplier Relationship Management…the list goes on.

The Procurement profession has created a myriad of titles over the last decade, which can be confusing to those not involved in the function. To complicate matters further, the role of procurement varies by industry depending on its strategic dependence on third party suppliers.

Regardless, the “bread and butter” role of procurement remains a valuable function of any business – to source fit for purpose goods and services and to deliver on time, in full and at the right price to meet the business needs.

Procurement has been moving up the corporate structure, gaining visibility in the Boardroom over the last decade or so. Today, it is increasingly viewed as a function that can offer significant strategic value. Effective strategic procurement has become a Board priority.

Establishing Good Practice

For some CPOs, their focus is on limiting exposure to commodity price fluctuation and managing supply chain risk. This comes not just in the form of supply chain disruption but increasingly reputational risk, exacerbated by the social media phenomenon. For others, it is harnessing innovation from the supply base. In addition there is the ever present expectation to deliver cost savings.

The challenge is to deliver this within a complex matrix of geographical regions and business divisions. The Procurement Leader of today must exhibit a high level of leadership capability, personal gravitas and cultural dexterity. Creating the balance between global strategy and local need is an ever present conundrum.

Establishing good procurement practice is fundamental to building the trust with business stakeholders and the Board. Building strategic partnerships with suppliers can prove vital in stormy economic times and constrained supply markets, and will be a valuable competitive advantage in a more buoyant global economy. Increasingly important is the on-going management of suppliers in terms of service delivery and cost management.

More focus is required to harness supplier relationships that drive innovation as an enabler to improved quality, productivity and speed to market.

In the second half of this series, we will be looking at what a Board looks for when hiring its CPO, and what they are expecting from these individuals once they are in place.