Category Archives: Generation Procurement

Centralization of purchasing in business networks (Part 2)

How are the business networks towards the centralization of purchasing operated?

How are the business networks towards the centralization of purchasing operated?

  • Formal consolidation of the relationship with partners who have for years been part of a single supply chain, putting together a greater production, marketing, commercial and sales capacity.
  • Once the primary objective has been consolidated, it is important to look at the secondary objectives, best exploiting the indirect advantages of being part of a business network: what can be improved and optimised by working together? Clearly, suggestions in this respect can be obtained by looking at how big companies and/or industrial groups operate.
  • During this phase, the contribution by the network manager, who is responsible for performing this analysis and suggesting the right strategy by which to exploit the indirect advantages of the network becomes essential. Of these, one of the most natural, highest-impacting actions is without doubt the introduction of centralised purchasing.
  • For the centralization process to be a success, it is important to introduce it gradually, starting with the product markets that are most immediately and easily able to be centralised.
  • Finally, specific professional skills will be needed in the field of purchasing for managing the relevant activities, issuing the contracts/orders open and managing them (in some cases, the networked companies are of different sizes and the most structured may already have staff with specific professional purchasing skills who can therefore be used for the management of centralised activities, alongside the network manager).

Difference between business networks according to logistics

  • Same region
    • Greater attention may be paid to local suppliers for more categories
  • Multi-region
    • National/international supplier categories will mainly be used

E-procurement and the use of a platform to manage purchasing

The tool that helps us in centralization is an e-procurement platform. This is a question of equipping the business network with a “shared” computer system, based on the latest web technologies and used by all networked businesses.

The introduction of innovative purchasing tools such as e-procurement is one of the most important subject matters by which to improve the overall efficiency of the procurement processes of a complex organisation like a business network. The electronic negotiation of purchasing (e-procurement), in fact consists of enabling those using it to manage all relations with its suppliers over the internet, using a “dedicated purchase” IT platform that enables processes like the selection of the contractor, receipt of offers, submission of orders and catalogue consultation to take place on-line. For example, in the purchasing of consumable goods or in any case of repeated purchasing, the choice of a centralised procedure that defines a series of conventions with a series of suppliers makes it possible to include on-line catalogues available to the various different network structures by which to make direct purchasing at competitive prices, insofar as they had already been established in the conventions.

Current IT technologies also enable a simple interfacing and sharing of data, virtually in real time, with all the various managerial information systems (MRPs) of the individual networked businesses.

Methods for the use of the e-procurement platform and possible market offers:

  • purchase of licences by which to obtain a platform in Saas (Software as a service, i.e. hired, not purchased) mode for each buyer-operator;
  • hire or payment of an annual tariff for each utility activated for the use of a partner company platform;
  • delegation of the entire purchasing activity or part of it (through the e-procurement platform) outsourced to partner companies (maintaining complete visibility and sharing of all specialised processes in this activity.

The advantages of using such a platform include:

  • standardisation of the buying process using a single, common tool for all networked companies;
  • possibility of creating on-line catalogues for use by the individual customers of each company, whose list prices will be negotiated upstream, according to the forecast total quantities required by the network as a whole;
  • in the expenditure cycle activities, it enables the correct management and attribution of invoices for the individual company involved in the purchasing process. The platform will be easily integrated with the ERPs of the individual businesses (each business receives invoices from the supplier for its part or in any case as envisaged by the network contract rules);
  • use of electronic invoicing;
  • single roll of network suppliers available to each individual networked business;
  • objective supplier assessment system for the continuous improvement of performance;
  • each company can easily pool purchasing experiences (suppliers that are valid and others that are not, price references for individual expense categories, etc.), with clear reciprocal benefits;
  • standardisation of the technical specifications for purchases with the best practices of the networked businesses with consequent improvements in the price/performance of the goods and services purchased. It is easy to imagine enhanced efficiency in the purchasing of common materials such as Personal Protection Equipment, stationary, cleaning services and facility management, etc.

Procedures and controls

A choice to centralise purchasing entails special attention paid to the procedures regulating the purchasing procedure. In actual fact:

  • In the case of structures that are mutually independent, the procedures used by the individual networked companies vary considerably and may be more or less complex, depending on the dimensions of the structure (micro/small/medium-sized business) and the purchasing budget. In most cases, we find ourselves looking at a lack of written procedures insofar as the purchasing methods are connected with the common sense of the person implementing them.
  • In this type of situation, moving towards centralised purchasing entails paying special attention to the drafting of a purchasing procedure. This procedure, according to the expenses involved, must be:
    • coherent with the objectives of reducing costs and procurement time
    • coherent with the incoming quality and efficiency objectives
    • compliant with the ethical standards established for purchasing
    • shared and approved by way of protection of expenses managed by each individual structure participating in the purchasing group.

Again by way of protection of the interests of the individual networked companies, there must be a control of the operative application of said procedure by an appointed person/audit structure for the network (e.g. network manager).

Closing remarks

Considering that the priority objective for the centralization of purchasing can certainly be identified as the exploitation of scale economies by which to reduce the unit prices of the goods and services to purchase, it is important to see if that objective looks to include a standardisation of said goods and services or, additionally, the identification of the goods and services with the best cost-benefit ratio. In actual fact, these objectives need three different operating approaches, the consequences of which need to be carefully assessed, particularly according to the time frame involved in order to obtain results. In actual fact:

  1. it is relatively simple to obtain scale economies to reduce the unitary costs by bringing previous specifications together, but this can at most have a positive financial effect in the short-term. Already at the second tender, with the same logic, it is difficult to obtain significant additional discounts;
  2. If we add an objective of standardising goods and services to the positive effect of scale economies, we are then facing a more complex work in which all the individual structures must be involved (data collection and assessment/sharing/choice of standards), but at the same time, we are also looking at greater economic benefits;
  3. Finally, identifying the goods and services with the best cost-benefit ratio is an extremely complex matter, as it requires lengthy technical analysis and the concentration and sharing of data with the internal applicants. This, however, represents the launch of a virtuous process of the introduction of logics and instruments governing the business network, ensuring a comparison of peers and the construction of organic partnerships with suppliers, which may represent a carrier for long-term organisational development.

Finally, if the competences in terms of purchasing are limited to within the network of businesses, one solution may be to appoint external procurement professionals who, alongside the Network Manager, can start the centralization of purchasing process and, potentially, thereafter manage the activities by e-procurement, with the use of an appropriate platform. This choice would have effects that are so immediate that the costs of the solution would rapidly be repaid by the immediate returns enjoyed in terms of the reduction of the TCO.

Centralization of purchasing in business networks (Part 1)

Purchasing groups have many advantages including boosting 'purchasing power'
Purchasing groups have many advantages including boosting ‘purchasing power’

What do we mean by the centralization of the purchasing or purchasing group?

A PG (Purchasing Group) can be defined as an entity that groups two or more independent purchasing organisations that join together formally or informally or through a third independent organisation. Doing this combines their individual needs with the volume in the purchasing of materials, services and goods on capital account. Thereby exploiting the greater contractual strength in order to obtain the added value from suppliers in terms of best prices, best service and best technologies, which could not have been obtained individually by each organisation.

Advantages of the purchasing group

1. Scale economies or “purchasing power”

The first, most obvious advantage of a purchasing group is the scale economy. The volume of the aggregated purchase demands, for example of a network of businesses of reasonable size, gives the individual businesses that scale economy and consequent purchasing power that they could not hope to obtain alone.

2. Lower prices/Greater negotiating power

By increasing the forecast purchase volume, the PG is generally able to negotiate lower prices for the goods or services purchased with respect to what could be obtained, alone, by the individual companies. These savings are usually considerable, ranging from 10% to 35% according to the competence level of the structure dealing with making the centralised purchasing.

3. Reduction of transaction costs

By adhering to a PG, the organisations can effectively simplify the procurement processes. This not only reduces the unitary cost but also the total transaction costs, due to the reduced number of contracts (to be negotiated, prepared and managed).

4. Process economies

By sharing information acquired on suppliers, new technologies and market knowledge, as well as past purchasing experiences, not only is all redundancy successfully avoided, but transaction costs are also reduced and far greater process economies achieved than would have been possible by each individual organisation by itself.

5. Reduced workload

Given that the PG manages all stages for the issue and related management of contracts on behalf of the network, the individual businesses benefit from a significant reduction in their workload and are free to focus on their core business, which is therefore more strategic for them.

6. Improvement in best practices over time

The organisation that manages the PG enables the network businesses to improve their results by sharing the best practices in some business processes, exploiting competences in specific functional areas. In actual fact, most of the modern organisations that handle the PGs use sector experts for each individual product market managed. These sector experts constantly search out ever more effective methods aimed at improving the processes, quality and efficiency of the supplier in order to guarantee the optimisation of processes at increasingly competitive prices (improvement in the TCO – Total Cost of Ownership).

7. Technical savings and improved TCO

The organisation that manages the PGs in the future will offer all the advantages connected with its purchasing skills in the individual categories that will go beyond the initial advantage connected with scale economy alone. In actual fact, once the initial phase is complete, in which maximum use will be made of scale economy to lower prices, the organisation managing the PG will use its experience to help the networked businesses allow buying technology to progress, reducing waste and optimising the use of goods and services purchased.

8. Positive impact on the profits for each individual networked company

We know that a reduction in purchasing costs, for example of 5%, produces an increase in profits of more than 2% and that to obtain the same result, sales would need to increase by more than 20%…! Therefore, the saving generated by a centralization of purchasing in a network of businesses, increases profits in each individual network company.

Business networks contract in Italy: a great solution for SMEs

The business network contract is a private agreement between two or more enterprises to jointly perform one or more economic activities to increase their potentials for innovation and competitiveness. The network contract therefore enables companies (usually SMEs) to combine two key elements of business growth, which seldom coexist: enterprises can collaborate on large scale projects without losing their legal independence and their autonomy in the business activities not included in the contract.

Critical Issues affecting Business networks in Italy

The PG applied to the business networks, although having these undeniable advantages, also has critical issues that are often underestimated and that need to be managed in the right way:

  • Local supplier vs national supplier vs international supplier
    • Use of centralised purchasing by a group of networked companies, considering the increased quantities and related purchasing power, inevitably results in the involvement of national and international suppliers, as well as local ones. In this comparison/assessment of suppliers, it is important to pay attention to ensure that the right consideration is paid not only to the final price but also to the quality of the product and the services relating to the supply (lead terms, after-sales activities, etc.). It is also important to consider the characteristic aspects of long-standing (valid) suppliers linked to knowledge of the client, which results in greater flexibility in the customer-supplier relationship as well as the avoidance of the inevitable discontinuity typical when changing supplier. Naturally, alongside the attention paid to all the aspects highlighted, there must also be a new “Vision” towards the market, connected with the fact that now one is no longer alone, but rather part of a group of businesses, hence the choices to be made must be the best for the whole network of businesses.
  • Resistance to change (old supplier (history, knowledge, customs))
    • As for any process that results in a change in procedures/consolidated habits, etc., the centralization of purchasing will also be initially resisted. It is therefore important to pay close attention to dealing with this change gradually, so as to help the people involved to make it the best possible experience.

10 tips for procurement professionals from a brand wizard

What Procurement can learn from CPA Australia

10 tips for procurement professionals from a brand wizard

According to Murray Chenery, Executive Marketing Manager, Brand, CPA Australia, procurement professionals cannot afford to ignore their business’ brand.

Speaking at the 8th Asia-Pacific CPO Forum, Chenery who for 12 years was marketing director of Target, one of the country’s most recognisable brands, guiding the retailer through the process of Coles Group selling to Wesfarmers, detailed that ignoring a business’ brand affects a company’s ability to do business.

Chenery highlighted that managing a business’ brand can help grow an organisation into a global player and detailed that this process has a direct effect on recruitment pipelines. Bad decisions in procurement can deal enormous damage to a companies’ brand, meaning brand risk needs to be constantly top-of-mind for every decision made.

It’s no accident that CPA Australia is a brand powerhouse. Under Chenery’s guidance, the accounting body has followed a clearly defined roadmap to success. Chenery highlighted the most important points of what he called “building brand DNA”: know your core business, protect it, nurture it and resource it. Define the brand by understanding your purpose, points of difference, your organisation’s personality and the customer promise.

Chenery stressed the importance of brand differentiation and the value of putting time into finding, understanding and amplifying what makes you stand out from your competitors. Importantly, your competitive advantage must be sustainable to establish and maintain your edge. CPA also places a big focus on customer centricity with an enviable growth market in young professionals between 24 and 32 years of age. His advice on “being where your customers are” to connect with this generation is 100 per cent relevant for the procurement profession and its ongoing challenge of securing the talent bank of future business leaders. Chenery also shared some valuable advice on the need to avoid internal-gazing, the importance of creativity and the immense opportunities for Australian businesses to push into the Asian market, where CPA Australia currently boasts 40,000 members.

To close his speech, Chenery gave the audience his top ten tips for good procurement practice. He’s not a CPO, but his background as a risk-averse brand expert makes his advice valuable and extremely relevant to the assembled procurement professionals.

  1. Recognise that marketing is a creative process.
  2. Treat suppliers as strategic partners.
  3. Understand your brand’s DNA and strategy.
  4. Understand the dynamics of the market in which you are buying.
  5. Appreciate the history of relationships.
  6. Be as clear as possible in your briefings.
  7. Understand the processes being bought.
  8. If you don’t measure, things don’t get done.
  9. Evaluate partners by visiting their operations.
  10. Use flexible, longer contracts to build partner loyalty leading to better deals.

The 9th Asia-Pacific CPO Forum will be held in May 2016. To ensure you receive an invitation, register your interest in attending here ([email protected])

 

30 Under 30 Supply Chain Stars

Roundtable photo

This year marks a historic tipping point in US demographics. The Baby Boomers will be overtaken by the Millennials (18-32 year-olds) as the largest living generation, and nowhere will this be felt more than in the workforce. In fact, Millennials will comprise about 75 per cent of the workforce within 10 years. Research by ThomasNet suggests that employers’ perceptions of Millennials need to shift – most manufacturers (62 per cent) say Millennials represent a “small fraction” of their workforce, while eight out of 10 (81 per cent) say they have “no explicit plans” to increase these numbers. At the same time, 38 per cent of manufactures report that they plan to retire in one to ten years. 

So, the answer seems obvious – businesses need to move fast to attract and retain Millennials before they find themselves in the midst of a major talent crisis. ISM and ThomasNet have joined forces to strike a major blow in procurement’s “war for talent” with the 30 Under 30 Supply Chain Stars initiative.

I’m sitting at a press conference with five of last year’s 30 Under 30 winners lined up in front an enthusiastic group containing many of their fellow winners –  in fact, you could say that the future of US procurement is concentrated right here in this room. Today is all about putting a spotlight on the best young talent working in the supply chain to encourage more Millennials to enter the profession, excel like the panellists lined up before us, and tackle the looming demographic crisis head-on.  

What’s more important, in my view, is that the professionals in front of me really buck the trend of negative stereotypes of “brattish” millennials. They’ve all climbed to impressive levels of responsibility for their age bracket and are poised to fill the void as Baby Boomers retire. We have Amy Alpren, Manager of Strategic Sourcing at CBS Corporation; Nick Ammaturo, Director of Profit Improvement and Procurement at Hudson’s Bay Company; Matt Bauer, Procurement Administrator at City of Mesa Arizona; Katy Conrad Maynor, Category Manager, Finished Lubricants/B2B, Shell Oil, and Weslet Whitney, Sourcing Specialist at Enterprise Products. They’re joined by Jami Bliss, Director of Global Procurement Program Management at Teva Pharmaceuticals, who was a nominator for the competition. Each one of the panellists shares with us the impact they’ve already made upon the profession, reeling off a list of combined achievement that would silence even the most vocal critic of their generation.

Following the event I catch up with another 30 Under 30 winner in the exhibition hall. Leah Halvorson is ‎Director of Procurement & Supply Chain Development at Minneapolis Public Schools and very enthusiastic about the award. She tells me that she and the other winners have seen some amazing benefits flowing from 30 Under 30 – her peers have been offered job opportunities, scholarships and celebrity status at ISM and ThomasNet, but most importantly, they’ve had the opportunity to network with each other. Leah herself has had some fantastic recognition at her organisation, with senior executives congratulating her personally and career-boosting recognition in the company newsletter.

ISM and ThomasNet are already looking ahead to the next batch of 30 Under 30 Supply Chain Stars and expect to double the number of nominations this time around. This initiative has won the approval of businesses large and small across the US because it celebrates young talent, attracts more Millennials into the profession and, like the 30 Under 30 winners themselves, it has a bright future.

9 Killer Questions for Corporate Mega Stars

So you’ve found yourself a mentor. Congratulations. They have a glittering CV, impeccable corporate track-record and stirring leadership vision. There’s only one problem:  you’re terrified of creating an awkward ‘tumbleweed moment’ by asking your corporate superstar a stupid question.  

tumbleweed-roadkill_LRG

Having a mentor can be one of the most valuable assets for career growth. So while some will tell you ‘there’s no such thing as a silly question’, its also understandable that you want to be smart, poised and considered in front of your career idol and make the most of their (and your) time.

Tomorrow, more than 30 of Australia’s brightest rising stars will gather for Future Leaders in Procurement (FLiP 2015) in Melbourne.

Delegates will have a once-in-a-career opportunity to sit down with some of Australia’s leading CPOs in a master class session to discuss and debate perspectives and seek leadership tips for their own career.

Here’s a list of 9 great questions that will take the pressure off and help you make the most of your ‘hour of power’ with a corporate mega-star:

  1. As a leader, what are the things that only you can do?
  2. Where do you ‘big ideas’ come from, i.e. what is the context in which you feel most inspired?
  3. What are the issues that keep you awake at night?
  4. What is the one behaviour that you have seen derail more leaders’ careers than any other?
  5. What impact has networking had on your career?
  6. Who else would you recommend I connect with?
  7. What tips do you have for working smarter?
  8. What would you do if you were me?

And if you’ve still got time left over (or better still, the promise of a second mentoring meeting), ask your mentor: “How can I help you?”

Most leaders will be accustomed to mentees who are only interested in what they can take away from the meeting, so demonstrate a willingness to create a win:win relationship and recognise you have a unique vantage point too.

What are the best questions you’ve been asked as a mentor? 

 

 

Chris Lynch: `You’ve shown me the money, now show me how we’ll get there`

Rio Tinto’s CFO, Chris Lynch offers: when you’ve got a big idea that you believe in, then don’t waste the chances you get to convince others – communication will be key.

Chris Lynch talks communication

Remember that people at the top of organisations are time poor, therefore Big Ideas, backed by courage, resonate.

So if you get the opportunity to present your idea, make sure it’s punchy and grabs their attention.

Don’t overcomplicate it. And make sure you frame it so they can quickly see how it will solve their business problems.

What should give you confidence is that pitching a Big Idea should be a lot easier than a small one.

Because you are passionate about the topic, and you have sized the prize. If not, you better make sure that you are, and that you have.

We all have our own way of communicating, but two things stand out – rehearse, prepare and test.

We can all write our best ideas on a page, and even all convince ourselves we have every angle covered.

My tip is don’t just believe in yourself, test your concept first, with family, or a friend or colleague.

They will give you the feedback, and the confidence, to make sure you have properly stress-tested your idea and your plan.

If you were presenting to me, I’d want to know: what’s different about your idea? How come we haven’t been able to capture this value before?

What resources will you need to get it done, and how long’s it going to take? Don’t underestimate the time and effort it can take to drive change through an organisation.

And importantly, make sure you know how you’re going to measure success.

So the art of communicating in procurement, as it is in any field, is, once you have shown me the money, show me how we will get there.

Communicating within your own organisation, be it up or down, is one thing, but communicating across boundaries or outside to others may help you create wealth.

For it will probably be outside our own walls that new ideas are flowering or taking hold. We need people on the inside with visibility of the outside.

To act as intrapreneurs for our business and help re-invent it.

At Rio Tinto we have 60,000 people and operations in 40 countries over 6 continents. So for us social media provides a global platform to communicate and share.

I think there is a real opportunity in eLearning. You can imagine as a CFO, I see a better ROI on that than bringing hundreds of people together for training.

We live in a world of instant communication, from email to social media, but let us not overlook face to face communication, be it real – or via satellite to save money!

You can learn a heck of a lot by picking up a phone, and you can speed up and broaden your connections through social media – it can often be the shortest route to an answer and can expand your breadth of knowledge.

In a relatively small but specialised field of procurement, communication is even more important.

Accountants, well, I hate to admit it, but there are a lot of us…and we all kind of do the same job.

But if you’re a procurement professional, you may be specialised and isolated.

Social media platforms [like Procurious] may well be your best way to connect and share learnings and the experiences of others in similar circumstances.

The short distance between two points, or a knowledge gap and a solution, maybe just a phone call or email away.

Tania Seary’s Big Ideas on shockproof procurement

Tania was talking at the Big Ideas Summit, the world’s first digitally-led procurement event. Join the Big Ideas Group to see how 40 influential thought-leaders aired their ‘Big Ideas’ on cost, risk, technology and people management.

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If procurement is to “shockproof” the profession, we need to move out of our silos and work together to solve potential supply chain disruption issues.

Most of these issues – slavery, child labour, unsafe work practices, exploitation and neglect for the environment, copyright – are too big for any one person – or even any one company – to solve alone.

The procurement community can build muscle, by continuously flexing and responding to each other’s calls for support.

Procurious, in particular, could support the development of the procurement community’s muscle by providing the forum for solving some of the biggest problems we face today –

  • Mitigating potential supply chain disruptions
  • Driving innovation
  • Winning the war for talent

Mitigating potential supply chain disruptions

Supply chain risk is now regularly quoted as the number one concern for many CEOs.

We also know from recent history that unethical practices can permanently impact corporate reputations and brand equity.

It is interesting to consider the powerful role of social media in both exposing, and educating, everyone in the supply chain about inappropriate practices. Consumers are very fast to share their discoveries through social media, but procurement and other supply chain professionals have been slow to leverage social media in their due diligence and reporting processes.

Alarmingly, many organisations cannot see past their first tier supplier and are unable to readily investigate the supply chain that lurks behind them, resulting in product recalls, disruption and, in some cases, death. As my colleague Gordon Donovan likes to say “we need to pull back the supply chain curtain

So Gordon has proposed a Big Idea on how we could use social media to solve one of our biggest threats – by creating a Global Supply Chain Tree.

As we all know, Wikipedia has used thousands of volunteers to create a free encyclopedia with a million and a half articles in two hundred languages in just a couple of years. This is the opportunity for procurement too!

Why couldn’t we use Procurious to build a detailed map of our supply chains? We could –

  • Record ownership structures
  • Detail parent/child supplier relationships
  • Rate supplier performances and compliance

This information tree could be fully built and self-governed by supply chain professionals as they uncover each layer in their supply chain.

This would dramatically increase our supply chain visibility and hopefully verify its purity – which would mitigate some huge risks we have in our supply chains today.

Leveraging growth and innovation opportunities

The second challenge we face is to deliver growth and innovation from our supply base. Today’s procurement professional is as much about contributing to the top line, as the bottom line.

Being able to actively seek out information is part of social’s beauty – and crafting a network of thought-leaders, influencers, and experts around you is an unquestionably valuable thing in identifying and developing growth opportunities.

One of our team members, Jordan Early, has put Barcelona-based Citymart forward as a great example of turning traditional procurement on its head. See what he has to say.

Citymart enables citizens to choose which city problems need solving and to provide less traditional suppliers with an opportunity to win the contracts to solve them.

This is an inspiring example of how we could use our global online networks to collaborate and deliver better outcomes for ourselves and our communities.

Winning the war for talent 

I have written previously that if procurement is going to win the war for procurement talent, we need to engage with Millennials on the platform they 
use the most: social networks.

Unfortunately most of the online images of procurement are outdated and uninspiring. We need to encourage all CPOs and vested parties in the profession to quickly upgrade their online presence to make the whole profession more attractive.

By creating and
maintaining fresh and dynamic Facebook, Twitter, and Google+
company profiles, we can open the door to new recruits to our profession.

In addition to conducting a “social media audit” on our online presence and positioning, we should also consider online projects that appeal to Millennials such as PACE – Procurement Advice for Charitable Enterprises – which was developed by a group of participants in The Faculty’s Procurement Executive Program.

The PACE concept is to connect sourcing professionals with charitable enterprises to provide volunteer professional procurement advice.

Via a social media platform, procurement professionals, either independently or via their employer, register their interest, specific skills and availability. Not-for-profits then access the register and find a ‘match’ that provides timely advice and assistance to solve their procurement problems.

This is a great example of using our community muscle to ensure everyone wins:

  • For not for profits, it provides real, targeted assistance via ready access to procurement expertise on demand and an extra level of accountability and transparency, without spending a fortune on consultants.
  • For procurement professionals, it facilitates an opportunity to undertake meaningful work in manageable chunks of time, networking and a development opportunity of using existing skills in a different setting.
  • For employers, it can easily be incorporated into an existing Community Relations or Corporate Social Responsibility program, and offers a means of broadening community relationships and increasing good corporate citizenship beyond the traditional photo opportunities of planting trees or painting fences.

Whilst still in the conceptual stage, it shows the power of procurement working together and plays to the need of the Millennials to do something “meaningful” in their careers.

The opportunities for procurement to collaborate on-line to shockproof and enhance the profession are boundless. What is your BIG IDEA for our first collaboration project?

Chris Lynch on why the best Big Ideas might come from our suppliers

Rio Tinto’s CFO, Chris Lynch talks partnerships.

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Given the speed of change in business and procurement trends, no enterprise can afford to be an island.

Like the Internet, it is the speed of connection, and new partners bringing new ideas that will help define the pace of change and business reinvention.

Our partners, much like our friends, can point out things we didn’t see before.

That’s why partnership is so important, as is choosing our partners wisely.

Rarely do Big Ideas get advertised, for if they do they are probably now in the mainstream.

It is our partners who can help find the new ideas on the margins or periphery of our control that can help us reinvent business and create value.

On the hunt for the next Big Idea in the procurement world, we all know that the best ideas might come from our suppliers themselves.

I’ve always believed you should “reward the idea”.

If a supplier comes to you with a unique idea, do the best you can to work with them and recognise their suggestion.

Partnerships can be hard work, but they can also be more fertile and rewarding.

That is why we look to partnerships around the world.

The key to partnership must be a sense of shared value – even in tough times.

For example in the mid 90s when I was at Alcoa, we had to achieve a turnaround for an operation. If we could achieve this, it would be a win-win for us and our suppliers.

I called a town hall meeting… It was then that I confirmed the lesson, that suppliers want your business to survive, and even thrive, and are prepared to play a part in that success if they are brought on the journey.

Rather than seeing our suppliers as a cost that just needs to be controlled, recognise the value that can be unlocked by working together.

That might be changing a specification, introducing new innovations or standardising production processes, for instance.

Be clear about your objectives, and if you don’t have the expertise in-house to achieve them, then use them to help you choose the right partners, and build the strong alliances you need to succeed.

As Sam Walsh, our chief executive at Rio Tinto, said in a recent speech in Korea: “Innovate to grow, partner to succeed”. That is because solo genius is rare and partners make a difference.

There are inventors, and then there are entrepreneurs.

Look at the great entrepreneurs. They all had partners – be they in finance, technology, procurement, you name it.

At Rio Tinto our partners are behind our greatest successes – be it our customer partnerships for our Pilbara iron ore operations in Western Australia.

Or our supplier partners, such as Komatsu, who have helped lead the development of autonomous trucks.

These are huge 308 tonne, three storey-high robots that operate themselves, overseen from our Operations Centre some 1,500 km away near Perth airport.

They have hundreds of sensors that are continuously feeding information to the control centre. They are already some 15 per cent more efficient than our other trucks; they use less fuel and have less wear and tear.

They really are our version of big data in action. And this is just the tip of the iceberg.

The sensors are now appearing on all our equipment and potentially have huge benefits for the way we operate and our whole approach to maintenance and procurement.

For example, with the help of our IT experts in our Indian Excellence Centre, we can now sense the wear on individual components and better predict when a piece of equipment is going to need maintenance, rather than just using a standard hours schedule.

Ultimately the data and the role of procurement with our partners will become more important, and significantly enhance the value of the actual equipment we buy.

Technology is changing the way we operate and the way we do business, but ultimately we still need people and partners with big ideas and the commitment to getting them implemented.

In procurement it will be our partners who will help shape our future. We don’t have a view on what the future should look like, because with great partners we aim to always be one step ahead of it.

Chris was speaking at Procurious’ inaugural Big Ideas Summit as one of 40 most influential commercial thought-leaders. Learn more about the Big Ideas Summit and how to access exclusive content from the event.

David Hames: `Big Data?` Organisations should sort out their `Small Data` first

big-data

One of the overarching themes at our Big Ideas Summit was that of technology. We quizzed Dr David Hames, Executive Chairman of Science Warehouse on e-business, Big Data, and social media. Here’s what he had to impart:

Procurious asks: E-procurement and e-business sectors have seen a surge in growth over the last few years, what advances do you predict for the next five, ten (and beyond) years?

David: We see a growing demand for user-friendly cloud-based e-procurement solutions that are easy for users to access over a wide range of technology interfaces. Users are demanding the same intuitive, fast and responsive solutions at work that they already enjoy in the B2C world. Purchasing online is now the norm in the B2C world and is fast becoming the norm at work as well. This makes sense for employers too – cloud solutions that are delivered without costly infrastructure, a workforce that needs minimal or no training to use the e-procurement solution, and active engagement by staff driving a common process and delivering process efficiencies.

But just as in the B2C world where a user quickly moves onto the next website if the current one does not have the required content, so we see content as core to delivering the full benefits of e-procurement in the business world. Good content will become an increasingly key differentiator for e-procurement success.

Looking ahead, we expect B2C and B2B (e-procurement) to continue to converge, both focusing on maximising engagement with end users. Less  B2C or B2B, more a unifying ‘Business to User’ approach – B2U!

Procurious: How can e-procurement services help CPOs manage their spending more sensibly?

David: By giving up-to-the-minute visibility of real spend – on demand and at multiple levels right down to individual order level, facilitating better planning, better informed operational management and accurate and comprehensive spend data for contract negotiations.

To deliver this successfully needs not only powerful technology but also great data.  Quite simply, spend analysis is only as good as the data being interrogated – and delivering accurate detailed spend data requires rich, consistently-classified, QC’d  product information as the source. That’s why Science Warehouse offers a fully managed eCatalogue service, producing rich accurate data to fully inform user choice at the point of purchase and to allow users to analyse spend data in a way never available before.

Procurious: As a function procurement is always under pressure to deliver results. You covered some scenarios in your recently-published Trends Survey – can you share the biggest findings with us?

David: We have seen a substantial increase in departments achieving more than 80 per cent of spend under management, but no increase in those who believe they are delivering strategic procurement – that is still stuck at a third of respondents.

Most respondents (68 per cent) see the cloud and data analytics as the future. 

Looking at e-procurement solutions, ease of use and data quality are increasingly rated as key criteria for success; up 51 per cent and 21 per cent respectively over the last 3 years.

The biggest challenge in 2015 (reported by 40 per cent of respondents) is a lack of procurement resource – mirrored by a 22 per cent increase in intentions to recruit to new roles.  This is great for candidates but bad for CPOs – concerns over talent acquisition and development have doubled since last year. 

Procurious: Is there a disparity between technology and engagement?

David: Done well, there is no disparity at all in that the technology should drive user engagement – not be a block to it.  Unfortunately, some e-procurement solutions have offered technology without the necessary engagement – proving themselves to be clunky and hard to use, or usable but without discernible benefit.  That drives users to find a way around the technology rather than engage with it and be empowered as a result. It follows that only solutions which fully engage with users and drive strong user adoption can deliver the promised efficiencies and savings to the buying organisation.

Procurious: How can procurement use Big Data more effectively, will Big Data analytics help drive a change?

David: The fact is that many buying organisations need to sort out their “small data” first. All too often the data sits in multiple silos and is not rich enough or properly quality checked to deliver detailed and accurate analytics. The lack of consistent data categorisation also often makes meaningful analysis difficult if not impossible. 

High quality consistently-mapped data is essential to delivering spend analysis that can be relied on to drive successful change.

Procurious: Let’s talk social media… What can social offer to the procurement professionals of today, and is it helping win the War for Talent?

David: Social media such as YouTube are popular for procurement training videos and demos but by far the most useful platform to date has been LinkedIn with procurement professionals collaborating, following trends, news, opinions, advice, etc.  Procurious looks set to raise the profile of procurement still further. 

In the War for Talent, social media can both help an individual get noticed (building a strong personal reputation) and create awareness around a company seeking top quality employees. Without question, fast growing companies need to harness social media to advantage.

Chris Lynch: the BIGGER the idea, the greater resistance you will face

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Lions are known for their courage – and courage is something that Rio Tinto’s CPO, Chris Lynch wants to share with Procurians today.

People whose big ideas become reality are people who have the courage of their convictions.

It’s important to persist to see your ideas through.

It might take years for your idea to come to fruition, and so in the meantime, you have to keep to your plan and keep delivering.

There’s nothing more refreshing than a fresh perspective to old problems.

I really believe that younger professionals have an enormous contribution to make, so you shouldn’t be afraid to share your thoughts. In a way, we’re relying on you to do so!

And don’t take my word for it.

Steve Jobs said it best: “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking.

“Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition.”

If you have a great idea, supported by good research, and a vision of how you want to get to the next stage – you are almost there.

In procurement the ideas and opportunities will be all around us. Chances are, with colleagues and friends and robust reviews, the idea can evolve to a plan.

I’ve mentioned before that at Rio Tinto we operate in 40 countries and in procurement we have $13.4 billion contestable spend and relationships with 62,000 suppliers.

That is more suppliers than we have employees.

The talent pool of ideas from employees, contractors and suppliers is immense.

So clearly there is plenty of scope for reinvention, improvement and BIG IDEAS and relationships to share.

It you have a plan all you need is the courage to execute it.

The process of securing this support is tough, but not nearly as tough as getting the whole organisation to implement your idea…a blog for another time.

What you will need is tenacity.

Sometimes the better and bigger the idea, the greater resistance you will face.

That’s because your idea is really breaking the current perspective and challenging people to look at the world in a totally different way.

This was my experience when I became the CEO at toll road operator, Transurban, and I had to convince the market and the board of a new direction, one less reliant on high gearing.

I took my plan to the board, I had a convincing argument, and what gave me confidence was the plan was backed by data, based on strong financial reasons to move forward.

Courage is a whole lot easier when you have done your homework.

Often people at the top of organisations are very time poor, and therefore big ideas with courage resonate.

They will either see the potential and passion for your idea or they won’t.

If they do, you have opened the door to new opportunities for you and your company.

If they don’t, they will still be engaged by the fact that you bring forward new ideas, new ways of thinking, new possibilities.

Today we have so many opportunities to reinvent our businesses from the inside.

To borrow new ideas, turn them to our advantage.

To borrow a sporting analogy, the football match is not won or lost until the final siren.

It is lost when the courage is gone to follow a game plan, to take measured risks, or to continuing trying.

Chris was speaking at Procurious’ inaugural Big Ideas Summit as one of 40 most influential commercial thought-leaders. Learn more about the Big Ideas Summit and how to access exclusive content from the event.