Category Archives: Generation Procurement

This pyramid shows how procurement is evolving

Newsflash – our profession is evolving.

…And this pyramid holds all of the secrets.

Procurement pyramid

The pyramid seeks to put the evolution of the procurement profession into a relatable context.

What does it tell us about our profession?

The profession represents a fast track career for truly ambitious purchasing professionals and we are seeing evidence of CPOs securing this status quickly.

A procurement career has two strands in terms of career development. Management roles including SRM for ‘people people’ and process driven roles for the more analytical data driven individuals. Both of these elements are as important as each other in a 21st century procurement department.

There has been analysis of interviews taken place in the last 6 months that show 71 per cent of the candidates failed to demonstrate the non-technical competencies required to perform the role they were applying for.

This surely suggests a need for companies to further invest in training around key competencies such as negotiation, influence and communication – all business critical areas for purchasing professionals to make their mark. There is also a case to suggest that neuro-linguistic programming should also be a consideration.

Another interesting observation is that the traditional title of the CPO is shifting towards CCO – Chief Commercial Officer. This reflects today’s acceptance in business of the commercial nous that a good CCO brings to the Board table.

CPS Group UK are Global Recruitment Specialists to the Procurement Profession. They provide niche Permanent and Interim solutions in the business transformation and change environment. For further information email [email protected]

What the Spice Girls can tell us about procurement…

What can the Spice Girls teach us about procurement?

There I was, having a discussion on LinkedIn about engaging with clients before sourcing commodities when on comes Wannabe by the Spice Girls. Other than reminding of me of another time, place and alcopops, strangely, it made me think about specifications.

When you’re in that exciting part of setting up a new contract, it’s really easy to fall back on the last specification and just reproduce it; particularly if you’re short on time. I mean, if no one has complained about it, then it must be ok.

But I think we are missing a huge opportunity to review, challenge and improve on the contract and, ultimately, the final result.

In the public sector we’re assessed more and more against how and when we engage with our client departments, the people who actually use the things we buy. We’re expected to establish User Intelligence Groups to come up with specifications and then to challenge these UIGs on what they come up with. We’re even expected to challenge them as to whether they actually need it in the first place!

Then when clients have decided on what they want it’s our job to steer them in the direction of an output (you might call it a performance) specification. Thinking about what they actually want rather than what they’ve already had can be a challenge. It’s so much easier for clients to specify the product they’ve always used, the way that things have always been done, rather than allow suppliers to come up with something new.

Of course improving specifications is much easier when you’re working in one organisation but opportunities to collaborate are being pursued not only in the public but also the private sector now.

Where do you start when faced, as we are in Scottish local government, with 32 different requirements? In his seminal piece Towards Tesco, Colin Cram gives the example of 100 different specifications for tarmac in Greater Manchester when seven would do. Is this a set of varied needs or be-spoking gone crazy? How can we balance diversity against the reduced cost and benefits of standardisation?

So what’s happening in practice?

In China the standardisation of viaducts used to carry railway tracks has saved millions on construction costs. Closer to home Scotland Excel has succeeded in devising a core specification for residential care for children which enabled the first ever framework agreement for these services to be put in place in Scotland.

In my own organisation we’ve been working hard to standardise requirements and use output specifications wherever we can. We’re just about to finalise the contract for a new school which will see the building of the 4th A shaped footprint – enclosed courtways, essential for our windy climate.

We’ve used an output specification for the first time for grounds maintenance in the expectation that this will allow more responsive and innovative suppliers to shine.

And finally we’re just embarking on a project to redesign transport services in Uist and Barra which will not only use an output specification rather than timetabled services, but also a participatory budgeting approach to allow true community engagement to devise specifications and prioritise services prior to tendering later in 2015.

The Spice Girls know what they want, what they really, really want (I think it was Zig-a-zigah) and your clients do too.

Ultimately, it’s your responsibility to discover from your clients what they really, really want and help them achieve this through a great specification.

Why aren’t more procurement teams using capability assessments?

Why aren’t more procurement teams using capability assessments?

Procurement is the fastest-growing sector in the Asia-Pacific with a rapidly-emerging talent gap problem. Procurement leaders are well-aware of the existing “war for talent”, particularly in a profession that still suffers from a lack of targeted higher-education courses. The role of on-the-job training is therefore vital, yet budgets are limited, with an average of $3000 to $3500 allocated per person per annum for skill development. This is where capability assessments play such an important role – they help identify the skills the team possesses as well as those that are lacking to ensure gap-measures are targeted and effective. In other words, capability assessments help you make every dollar count when closing skill gaps.

This article is a call to action for procurement leaders to conduct a capability assessment and create a subsequent business-case for investment in team development, paving the way for improved staff retention, lower hiring costs, uplift in team performance and resultant value delivery. 

There is a pressing need to develop and implement fact-based capability plans…

In 2011 the Australian Chamber of Commerce and Industry (ACCI) conducted a survey entitled Employers’ Commitment to Training, concluding that only 80 per cent of employees possessed the skills required to perform their jobs.[1] More concerning was the statement that this figure was predicted to drop to 75 per cent by 2015. The procurement sector is no exception, with the Deloitte Global CPO Survey 2014 finding that 81 per cent of CPOs in the Asia-Pacific region feel that their teams lack the skills needed to deliver their procurement strategy.[2] Workforce capability was nominated as one of the highest business priorities for 2014 by The Faculty Roundtable, consisting of an elite group of procurement decision-makers representing 30 blue-chip organisations in the Asia-Pacific region.

People are a business’ great competitive advantage. Success is dependent on the ability to attract, retain and manage individuals with the right mix of skills and capabilities. Investing in people development will equip a business with the right blend of technical, commercial and leadership skills to accelerate performance and provide a clear career roadmap to engage and retain top performers. Employees provide value to organisations and, as more and more organisations recognise this, there is an increasing focus on developing the capabilities of their best talent.

…Yet only half of our surveyed organisations are using capability assessments.

The Faculty’s survey of 70 ASX-listed organisations revealed that only 54 per cent of respondents currently undertake some form of capability assessment in their organisations, highlighting an incongruence between the perceived need for capability assessments and the number of organisations acting upon this need.

So, what’s holding organisations back?

Every organisation has different priorities, but four recurring reasons for not making use of a capability assessment have emerged:

  1. It’s easier to fill skill-gaps through external hiring than to identify and address the capability gaps in my existing team.

47 per cent of our respondents stated they have more external hires than internal promotions, while 16 per cent had more internal promotions than external hires, and 37 per cent stated they had a balance between the two. This issue is inextricably linked to the shift from long-term to short-term retention of staff and the resultant hesitation to invest in people who are likely to leave your organisation. Capability assessments, training plans and clearly-articulated career paths, however, are some of the most effective tools that managers can use to reverse this trend and improve staff retention.

This is not to say that capability assessments can’t also be used as part of your external hiring process. 43 per cent of our surveyed organisations do not currently do so, passing up an opportunity to pinpoint the required skills by linking the position description to a web-based capability assessment. The online assessment could focus on core procurement skills and complement (rather than supercede) traditional face-to-face interviews to determine subjective factors such as cultural fit. 

  1. My team is nervous about being assessed.

Any form of assessment can make staff uncomfortable and risks being interpreted as a performance-management exercise. Careful positioning and communication is therefore vital to let staff know exactly what’s in it for them, as discussed in last week’s article.

  1. I don’t have the resources to roll out a capability assessment.

The initial set-up of a capability assessment will require an investment of both time and money, depending on whether you elect to use an off-the-shelf assessment or require a more tailored approach to meet your specific needs (as was the case with 61 per cent of our respondents). The potential benefits and longer-term savings, however, are enormous – targeted gap-closure, lower hiring costs and improved staff retention to name a few, followed by an established benchmarking and measurement process that you can undertake as regularly as necessary.

  1. The last capability assessment we rolled out was ineffective.

It’s all about the follow-up. Undertaking a capability assessment may provide you with some interesting results, but what you do with them is more important. Before beginning the assessment, create a gap-closure plan that incorporates a blended approach of formal training, on-the-job coaching and mentoring. A surprisingly high 70 per cent of our survey respondents reported that they were unable to measure the impact of capability assessments in the past, making it very difficult to judge its effectiveness. The solution is to measure your team’s competencies immediately before and after your gap-closure rollout to ensure you capture the gains you’ve made and further opportunities to be addressed.

Still unsure?

If you’re in the Asia-Pacific region, give us a call – The Faculty offers a range of procurement capability uplift training programs, consulting services and a procurement-specific capability assessment that can be tailored to your needs. Rolling out a capability assessment will help you anticipate the development needs of your team for the coming decade and ultimately assist in the creation of a business-case to invest in your most important asset, your people.

[1] Australian Chamber of Commerce and Industry (ACCI). Employers’ Commitment to Training: Key findings from the ACCI National Workplace Skills Survey 2010 (2011).

[2] http://www2.deloitte.com/uk/en/pages/operations/articles/cpo-survey.html

How to secure trust when procuring across borders

Securing trust when procuring across borders

Trust is the foundation of all good relationships. When sourcing across borders and cultures, the key variable between a successful and unsuccessful procurement strategy is trust. Trust includes reliability, truth, honesty, credibility, competency and predictability. If it is absent, commitment wanes and frustrations, misunderstandings and missed opportunities ensue.

Procuring across borders: Do you have trust on your side?

All cultures value trust, the difference lies in how it is developed, sustained and repaired – or not. Although some of the strategies for building and maintaining trust are universal such as delivering on what you promise, there are others that are culturally specific; there is no ‘one size fits all’, particularly in terms of relationship-based cultures. There are both subtle and comprehensive differences between countries such as India and China, Australia and Germany for example.

The necessity for establishing trust when procuring across national borders include the following:

  • Tap into and connect with new markets
  • Increased reliability of people ‘on the ground’
  • Increased brand loyalty within new markets
  • Increased speed and on-time delivery
  • Greater sharing of knowledge and expertise
  • Focus and commitment especially when things go wrong

We intuitively know the common beliefs and values that are held in our local markets; such as the appropriate balance of personal versus business conversations, appropriate and inappropriate behavior, how to address people and so on. But the rules change instantaneously as we pick up the phone or engage in meetings or teleconferences that involve crossing cultures and borders. In this moment we need a heightened level of awareness and flexibility in order to adapt our communication and behavioural styles to ensure that they are appropriate to that current cultural setting. This new cultural setting may even occur without you leaving your office.

Strong, trusted relationships with local people provide many opportunities, one of which is a ‘right-hand’ person.  They offer not only greater access to understanding your customer/client base, their needs, preferences and desires; but also can be a valuable sounding board for cultural knowledge and etiquette. Local contacts can act as intermediaries, performing a significant role in establishing trust amongst local suppliers through introductions. They can open doors, offer connections within local networks and ‘lend their reputation’ to build trust with others. 

Strategies for Building Trust Across Cultures:

  • Be open to new experiences and situations.
  • Be prepared to have personal discussions about family etc; sometimes your conversations may not include work discussions at all.
  • Provide as much data and information as possible when working in unfamiliar cultures.
  • Spend some time learning about the culture. Read local newspapers, and make extra time for personal conversations.
  • Listen…especially to the tone of voice, to what is not being said and to the contexts of the conversations.
  • Pay attention to the non-verbal communication such as eye gaze, postures, tone of voice etc.
  • Consider finding an intermediary or go-between person. They can be valuable in terms of tapping into local networks, industries and introductions.
  • Engage in some cultural intelligence training.

Nurturing new talent – the lure of the graduate

The graduates are coming

Procurious is in Cardiff for Procurement Week. Are you attending?Come and join our #PW2015 group!

Today we’ve heard from Chris Nye of Axiom. Axiom is a service-driven business, specialising in the medical, industrial, and military fields.

In just a couple of years Axiom has doubled its workforce and trebled its turnover – and as any organisation knows
keeping this momentum is paramount to the success of the business.

And of course there are always challenges – for Axiom, number one was the realisation that its recruitment strategy needed a little help.

Axiom woke up to the idea that graduates can fill the skills gap.

What improvements can be made?

Axiom previously had trainees come and go, it was classically recruiting the wrong individuals. What it needed was a blank
canvas (with the right skill-set), and saw determined graduate trainees to be the best fit.

Graduates represent young, intelligent, questioning minds, and more importantly a lack of baggage. By hiring graduates
you can allow them to find their own skills and own career fit. Give them the opportunity to find themselves within the
business, to see what sticks and what interests them.

Axiom’s approach is not overly prescriptive – an entrenched view falls prey to shortsightedness, and errors can be locked into a vicious cycle. Instead you shouldn’t dictate the graduate’s path, encourage independence and let them find their own way. It is important that after the training period ends, graduates are deployed into only what they enjoy and
excel at – the fields they have chosen to specialise in and want to develop these skills further. The path should be continuously monitored and adapted as necessary to ensure the graduate is shaping the role.By adopting this approach it is possible to maintain the graduate’s youthful enthusiasm throughout the development plan.

The new power generation

By training (and inevitably employing) graduates you will often find this exercise opens-up new opportunities, and  you’ll be able to fill newly-created roles. What’s more graduates can be thought of as thought-provoking and questioning assets to any team. By mixing up your team and employing new blood, it encourages an honesty when it comes to looking for solutions. It’s all about balance – the graduates provide the business with a different view. Sometimes all it takes is fresh eyes…

Axiom put this into practice a couple of years ago – now, 2 years on it has welcomed 5 graduates through its doors.

By looking towards graduates you’ll be furnished with bright, young minds who possess an unquenchable thirst to continuously improve. The graduate solution is indeed a brave new world, the only constant being change…

How to Achieve Award Winning Procurement – Learn from the Experts

Procurement and Supply Chain Management Professional of the Year – Fabienne Lesbros, CPO, Britvic Soft Drinks

fabienne

Fabienne Lesbros started her procurement career in 1991 on the Channel Tunnel project. Since then she has worked across a number of sectors and industries, procuring for well-known companies such as Future Electronics and GlaxoSmithKline, before being appointed CPO for Britvic Soft Drinks in 2010.

Britvic has an annual global spend in excess of £1.1 billion, with suppliers in over 40 countries. Since 2010, Fabienne’s team has achieved great success in both savings and value creation, but has also led the way in sustainability, innovation and education.

In 2014, Fabienne was awarded the CIPS ‘Procurement and Supply Chain Management Professional of the Year’. Of her career she says, “My passion for the profession is stronger than ever, fuelled by a changing world focussed on sustainability, responsibility, innovation and the digital age.”

Fabienne talks to Procurious about her continuing journey and where she sees procurement in the future.

How did you get started in procurement?

Like a lot of my peers, I ‘fell’ into procurement at the start of my career. I had finished my studies and procurement was the first role I got. Again, like many of my peers, I didn’t really understand what procurement was or what the job entailed.

I started as an analyst in the procurement department as part of the channel tunnel project for Eurotunnel and I loved it from day one. I’ve always thought that procurement was a fascinating profession to be part of. You work with one of the few functions where you have contact with all parts of the business. You can touch so many things – the scope for procurement is immense.

What is your proudest achievement in procurement so far?

About a year ago, our CEO (Simon Litherland) spoke to the city about Britvic and how procurement was one of the key pillars to deliver the company’s strategy going forward.

This was a big achievement as it showed how much the procurement team was valued by the business. In many organisations, procurement simply doesn’t have that level of focus, although this is changing as more and more organisations realise that procurement is one of the most powerful tools at their disposal.

Similarly, getting the award from CIPS has to be right up there as one of my proudest achievements, both from a personal perspective but equally from a team perspective. I see this award as just as big an achievement for them.

What prompted you to submit a nomination for the CIPS award?

I hadn’t intended to submit a nomination for the award at all. However, a friend of mine from the CIPS Fellows said that I should and kept asking me until I applied!

The way it works is as follows: you write the submission yourself, but a lot of documentation comes from peers about your work, line manager testimonies and recommendations from colleagues and people you have worked with throughout your career.

After you have submitted the paperwork, a pre-selection takes place and people are informed if they get through to the next stage. If you are selected, you are given a month to prepare a presentation to be delivered to a panel of industry experts.

The key success factor in this part of the process was the ability to communicate, specifically being able to consolidate your message into something clear, concise and pitched at a business level. Of course getting it right first time is essential! This was a challenging exercise preparing 6-7 slides to cover a 20 year career to date.

However, this is no different to everyday procurement activity – one of the main areas I look to develop my team in is the ability to avoid procurement jargon and get their message across by tapping into business issues through the language of the wider organisation

What does the award mean to you and your team?

What the award gives to the team is a great external benchmark and recognition, which then leads to more gravitas internally and the ability to influence the business agenda at pace. People start to understand procurement’s role in more depth and realise that they can reach and surpass their own business objectives by collaboration with us.

Procurement can unlock the potential of the supply base to directly deliver the needs of the business rather than getting lost in the complex world of third party supply chains, which if handled incorrectly can have serious detrimental impact to an organisation.

Quality leads to recognition, which in turn leads to trust and building this trust means our business partners rely on and want to work with procurement for a quality output.

It of course works externally too, as suppliers clamour to work with an award winning team.

What is the most challenging aspect of being the CPO in an organisation the size of Britvic? And the best thing?

The most challenging aspect is the high number of initiatives that the organisation has running at any one time – we are an ambitious organisation and that means there is lots to do!

As commodity experts there is always a lot of pressure on procurement to avoid volatility and equally the cost consciousness agenda that runs through the organisation means our Indirect Procurement team is at the forefront of this – challenging but that’s the way we like it!

The advantage is the size of the company – we are not a behemoth and the closeness to the product that procurement has means we can act with pace. You can see the immediate impact on the bottom line that your decisions are making.

It’s also easier to get round all the business partners and you are able to do more of that face-to-face.

One of the best things about being CPO is being in charge of the coaching and development of the team. I find it very rewarding to develop the team and to see individuals achieve things that they didn’t previously think would be possible – we are nothing without a team that has development opportunity, ambition and talent.

What are your key aims for 2015?

Professionally, I am trying to get the team to develop greater engagement with the commercial and sales teams. The engagement often stops with the marketing or operations teams, but I believe that there is a lot to get from engaging on the commercial side.

They understand the competitive edge, trends and where future products might be heading. I’m pushing the team to work in this area, which will be a big change in terms of engagement, as it doesn’t really happen at the moment. I think you need to do things in a collaborative way and work very cross-functionally.

After all, sales can help procurement on getting into the mind of a seller and vice versa – it’s a trick many organisations miss, which could really strengthen supplier and customer negotiations and relationships.

How can procurement become more strategically involved in organisations?

For me, it’s all about understanding the business needs, adding value and not doing procurement in a silo. This goes back to the engagement with other parts of the business.

The procurement team doesn’t speak in procurement terms to other teams; they try to speak their language. You engage the business better by speaking in IT, marketing or operations terms to those other teams and understanding what their key drivers are

You constantly need to understand what the business’ needs are. You fulfil a need from the business, but finding a need that the business never knew it required in the first is far more powerful: this is how procurement adds value to the business.

Procurement can be seen as part of the team and can bring so much functionality into the business. It’s the only team that can touch everything internally and externally every day.

What do you see in procurement’s future and how can social media play a role?

You can look at this from two angles, the first being the impact from social media on the supply and demand for goods and services. We live in a world of multiple social media streams, which has completely changed the way we interact with our consumers.

This is at the forefront of our marketing strategies which ultimately impacts us all – for procurement reacting to customer preferences and rapid changes in trends means we have to be quicker than ever in dealing with the supply base and sourcing innovation to match our needs. We have more information at our finger tips to inform us of supplier performance/preferences and this will only accelerate over the next 5 years.

Secondly, I look at social media from a perspective of developing the profession. Procurement is not a profession that is really on people’s radar, you don’t see procurement anywhere in terms of being a career. Kids don’t come home from school and tell their parents that they want to be a buyer!

We need to establish procurement as a profession in the same way as law and accountancy, and make people in schools and universities aware that there are careers in procurement out there.

Social media can help this happen. Engaging with schools, showing them what procurement is and how to qualify, what careers are available and what you can do in procurement – all of this can be shown on social media.

How can we engage with the next generation of procurement professionals?

As with the previous question, we need to show procurement as a profession. There should be programmes in schools about it, have universities linked up with CIPS to offer information and qualifications and courses in procurement and then for companies to create graduate programmes where they can.

The profession needs people. At the moment, we don’t have enough people with the right skill sets. Procurement should be a profession for which there should be a degree/professional accreditation, the same as being a lawyer or an accountant.

It’s vital for procurement to become a recognisable profession. It’s becoming too critical to organisations not to have people coming naturally from a professional stream.

“Help! Why does my boss want me to do a capability assessment?”

Capability assessment

Picture this – you manage a team with a mixed bag of competencies and you are very aware that skill gaps need to be identified and addressed before they frustrate the execution of your strategy. You decide that rather than hiring externally, you’re going to upskill your existing team with a smart mixture of formal training, on-the-job coaching and mentoring. What’s the best way to go about it? You could launch an expensive hit-and-miss generalised training program for the whole team, or you could spend your limited development budget wisely by rolling out a capability assessment first to identify and target competency gaps.

You make your decision, find a great online capability assessment tool that suits your needs, and dash off a quick email to your team informing them that they’ll be undertaking a capability assessment next week…

… and suddenly you have a revolt on your hands.    

What went wrong? Any form of assessment can understandably create anxiety, with people’s immediate reaction being that it’s some sort of performance management exercise. And when management rolls out a performance management program, we all know what’s coming next. Positioning and communication, therefore, is absolutely imperative before introducing a capability assessment.

The ‘quick email’ mentioned above should have been a carefully crafted piece of communication to the team about why a capability assessment is being carried out to gain trust and create buy-in for the process. In The Faculty’s 2014 Mind The Gap report on procurement capability, survey respondents nominated “positioning and communication” as the single most important factor in running a successful capability assessment. A surprisingly high 52.5% of respondents who had carried out a capability assessment reported that it had a negative impact, which may very well be attributed to confusion or distrust from their teams about why an assessment was being conducted.

Explicitly assure your staff that the assessment isn’t a performance management exercise and make an effort to spell out what’s in it for them. Some of the benefits to communicate to the team may include:

  • Empowering individuals to have meaningful development conversations and take ownership of their careers.
  • Providing staff at all levels with a vehicle and direction for their professional development plans.
  • Establishing a baseline of current capability at an individual, team and organisational level.
  • Demonstrating genuine leadership commitment to learning, continuous improvement and optimising talent, while reducing the need for external hiring.
  • Identifying high-potential employees and aligning skilled candidates with job descriptions.

This isn’t to say that a capability assessment can’t be used for more sinister purposes such as identifying “incapable” staff for upcoming redundancies – if this is the case, best of luck with writing the communication piece! But an assessment can also be a positive experience and can potentially help place participants on a meaningful professional development and career path.

What do you think? If you were asked to undertake a capability assessment would you view it with mistrust or see it as a positive opportunity?  

What is procurement like in your country? Next stop – Ukraine

Procurement expert, former CPO and current Procurement consultant, Elena Kononenko, talks about the profession in her home country of Ukraine.

What is procurement like in the Ukraine?

How do you think procurement differs in your country, as opposed to elsewhere in the world?

Up until April 2013, procurement in the Ukraine was mainly focused on reverse auctions (which were used poorly, causing lost savings), RFP/RFQ techniques and local tender procedures, with little or no e-procurement. Procurement professionals rarely shared their experiences and the profession was closed off.

This only changed following the I Procurement Forum in March 2013 and after the launch of the Ukrainian Association of Procurement Professionals. E-auctions were opened up, achieving savings, and procurement professionals had the opportunity to expand their networks and share their experience and knowledge.

Procurement is still a passive function in most organisations and tends to be reactive, based on requests from other functions. It doesn’t play a strategic role in the organisation and strategic tools like category management, strategic sourcing and outsourcing are rarely used.

Fewer than 10 per cent of organisations co-operate with the three PO providers there are and only 5-10 per cent use an automated system for e-procurement. There aren’t any companies whose procurement process is fully automated.

The current trend in procurement is to focus on more modern, specific techniques in the areas of vendor selection, sourcing spend management, e-procurement and contract and inventory management.

Do you know how many other procurement professionals are in your country?

A few hundred, I suppose. Maybe 200-300.

In terms of accreditation,there is a lack of certified procurement professionals in Ukraine due to the lack of knowledge about CIPS and ISM. Only around 1 per cent of procurement specialists and CPOs know about these institutes, their certification and its advantages.

How did you get started in procurement?

Absolutely by chance! I decided to try something new and sent my CV to Metro Cash & Carry and got a job as a Purchasing Manager’s Assistant. After that, I went back to work for the World Bank, firstly as a Financial Manager, then as Procurement Manager for one of Bank’s projects in Ukraine.

What do you see in procurement’s future in your country and how can social media play a role?

The future of procurement in the Ukraine depends on a few things:

  • Education and continuous professional development of procurement professionals
  • Strong external and internal PR campaign showing procurement as a strategic function
  • Changes in senior managers’ attitude to procurement
  • Progress on advanced development opportunities for the profession

Social media can help by providing a platform for peers in different countries to connect, share positive experiences and success stories. It can also be a source of knowledge on the latest best practice, instruments and soft skills and act as a global supplier database.

Why did you join Procurious?

Procurious fulfilled a few key things for me. It allows me to communicate with colleagues and peers from around the globe, find new sources of knowledge and understand what I have to learn and improve to build successful international career in procurement.

What are you hoping to get out of the network?

Everything that’s mentioned above and more!

How are you going to get your peers involved?

I’ll be getting them involved by putting links across my social networks (Facebook, LinkedIn, Twitter) and inviting them to join.

What can board games teach us about procurement?

I was listening to a HBR podcast a couple of weeks ago and it highlighted several parallels between games and business strategy

What can board games teach us about procurement?

We have probably all played Monopoly at one time or another (it was a Christmas staple in my household)… Well, when it was first designed it was meant to be a teaching tool to teach players about the evils of monopolies and private land ownership (property is theft?!). As such this article discusses what can we learn from the modern version of Monopoly…

The article also suggests that other board games centre on creativity, innovation, teamwork, empathy, and resource management but also emphasize outcomes more closely resembling the collaborative wins that have become so desirable within and between organizations.

  • Pictionary comes to mind as clearly requiring observational and empathy-based skills
  • Cluedo (or whodunit) helps sharpen our deductive-reasoning skills.
  • Trivial Pursuit, especially when played with teams, can teach us the value of diverse knowledge sets

Next I want to talk about Game theory. We teach game theory on our advanced negotiation programs and one of the takeaways is to understand the type of game for negotiation you are in. From a business point of view companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game.

The game of business is all about value: creating it and capturing it, at the Faculty we take our clients through the value matrix, a tool designed to help business and procurement speak the same language, HBR talked about a value net to identify customers and who the players are. There is a tinge of Porter’s 5 Forces (unsurprisingly really) to it but it’s worth a read. Take a step back, consider who the players are in your procurement or organisation, and then decide on the type of game you want to play.

Talking of strategy, according to My Purchasing Centre: Over 95% of purchasing or supply management organizations do not have a long-term strategic plan

Many of the plans that are completed are done once, and then put away in a ring binder or on a hard drive – never to be referenced again. My Purchasing Centre provides some tips on creating and living the strategy:

  • Create a vision and mission statement that aligns with the organization’s vision and mission
  • Be bold and make sure people realize that you are aiming for supply management not traditional bureaucratic purchasing.
  • Try to gain a broad consensus and gather input from surveys, one-on – one meetings, research and as many employees, suppliers and customers as possible
  • Keep it dynamic, up to date and a living document

Finally, I’d like to draw your attention to this particular article that examines the strategic decisions surrounding extending the scope of procurement. It suggests that there are three main questions that need to be asked:

  • How will your customers and procurement staff collaborate?
  • Do your procurement professionals have sufficient category expertise to add value?
  • Are there enough skilled procurement professionals within the team to handle the volume of buying?

The article goes onto say that until recently the answers to these questions have been routine: policy, process, technology, hiring, and training. However, the reality of execution is more complex.

However some of the learnings can be applied into designing our internal strategies for greater collaboration with the business. For example, it mentions that strategy documents comprising more than 50 pages in length rarely resonate with the internal stakeholder.

I think the key thing with all strategies is applicability; rarely does one size fit all. In today’s volatile environment where economic, political and technological change runs rife, greater flexibility and agility is required in our strategic choices – making the games we decide to play and enter into all the more important.

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Are direct and indirect spend classifications relevant any more?

Direct vs indirect procurement

Like many before me, I started out in procurement without knowing much about what procurement actually was. One of my meetings in my first week as a graduate procurement analyst was with the head of direct spend. I entered his office with no idea of what direct spend was and left an hour later no more enlightened.

After the meeting I Googled indirect and direct spend and although I thought it seemed like an odd way to classify spend, proceeded to use the terms for the next decade of my career.

However, I recently found myself revisiting the oddities of these terms and questioning why we use them at all.

As business models and procurement operations continue to change and diversify, I feel that addressing spend as either direct or indirect is has become far less relevant.

In order to consider this more fully, it’s worth reviewing the following definitions from CIPS around direct and indirect materials.

Direct materials

Materials that are converted or processed to make the finished product.  In category management in a manufacturing business, the most basic classification of categories is between direct and indirect materials.  As direct materials usually account for a greater share of total spend, and affect the quality of the final product, direct materials are usually seen as the more demanding of the two groups.  Indirect spend includes stationery, printing, office supplies, pest control, telephone costs etc., while direct materials will be whatever is used to create the finished product.

Indirect material

Goods which are purchased to support the operation and which are not converted into finished products or resold.  Many manufacturing organisations separate direct materials, which are raw materials from ‘indirects’ such as cleaning, MRO supplies, travel, catering, printing, stationery etc. which are needed to support the operation.  Many indirect acquisitions are low value and low risk and so lend themselves to simple acquisition systems and e-Commerce, such as online ordering through catalogues.

Two things jump out at me about these definitions and their relevance to modern procurement:

The first is that both definitions seem to be trapped in our industrial past – in that they only address firms that manufacture actual products. So, while I think these classifications would have held some relevance during the industrial revolution, I question whether they still stand up in today’s service driven economy?

Is direct more important?

The second concerning part of these definitions is the importance CIPS has attributed to each of these areas.

The CIPS definition suggests that “As direct materials usually account for a greater share of total spend, and affect the quality of the final product, direct materials are usually seen as the more demanding of the two groups”. It follows then, that direct procurement is the more demanding of the two groups.

I would argue that this is a huge generalisation.

We live in a service driven world

Look at banks, investment firms, lawyers, consultancies and tech organisations, these companies now make up a huge percentage of our economy but don’t produce a clearly defined, manufactured product. I would suggest that for these firms, indirect spend is infinitely more complex, demanding and risky than direct spend. Do they even have direct spend?

I guess what I am suggesting here is that while these classifications may have made sense in the past, they now seem like an antiquated way to classify spend.

Do we really think that a spend classification that groups pest control and advertising spend together has any real relevance in today’s procurement landscape?