Category Archives: Generation Procurement

Late, Late For An Important Date? Why Time Isn’t On Public Procurement’s Side

Time is fleeting and never more so when a contract deadline is looming large. How can public sector procurement professionals use their time more effectively?

In the second in a series of articles on the challenges facing public sector procurement, we examine the issue of time and why it must be managed better.

Before we begin, I have a riddle for you:

This thing all things devours;

Birds, beasts, trees, flowers;

Gnaws iron, bites steel;

Grinds hard stones to meal;

Slays kings, ruins town,

And beats high mountain down

Extract from ‘The Hobbit’ by J.R.R. Tolkien, 1937

Those of you familiar with the great J.R.R. Tolkien will recognise this as one of Gollum’s riddle to Bilbo Baggins in ‘The Hobbit’. The answer? Time, of course.

Time is the one thing none of us can avoid and all wish we had more of. How many times have you wished you had an extra hour before a work deadline? And that’s before we even consider more time at the weekend, or an extra hour in bed!

For public sector procurement professionals, it frequently feels like time is not on our side. An increasing volume of ‘Business as Usual’ work, combined with new ‘one-off’ projects, means it can feel like a juggling act to meet all the relevant deadlines.

In the public sector, these deadlines can sometimes mean the difference between the delivery or not of critical goods or services across a city.

It often feels like we’re like the White Rabbit from Alice in Wonderland, constantly running late for an important date. And the more time pressure builds, the more likely it is that mistakes will be made, costing even more time in the long run.

Typos in letters, ambiguity in specifications and issues with evaluation or award criteria – they all have the power to send us back to the drawing board. Getting it right first time is critical as the more time spent doing tendering, the less time there is to actually manage contracts.

When it comes to creating the value and savings required in the public sector, contract management is key. After all, you can agree savings in a pre-contract phase, but without effective contract management, organisations will typically lose 50 per cent of this value in the first year of the contract.

And that is why we need to manage our time more effectively.

More Haste, Less Speed

Before looking at how time might be managed more effectively, it’s worth examining why procurement in the public sector can be so time consuming.

Public sector procurement is a very bureaucratic, very legalistic, very risky – for both buyers and suppliers – and, ultimately, very slow process.

For procurement exercises above the EU Procurement thresholds, and requiring advertising through OJEU (Official Journal of the European Union), it’s not unusual for the process to take up to nine months (and frequently even longer) from identification of need to the award of a contract.

And while that may seem like a complete anachronism to those of you in the private sector (and believe me, it did when I first started in the public sector), there are good reasons for this. The process is aimed at promoting competition and procedural conformity, not necessarily value for money, though this is what most public procurement professionals are aiming for.

Greater competition allows for more open and transparent tendering and contracts, where SMEs, local suppliers and parties that may not ordinarily have access to these markets can get involved. A wider supply base may lead to new ideas, innovations and process improvements while at the same time potentially being a boon to the local economy.

The bulk of this time is taken creating a set of fully auditable documents for any procurement exercise above these thresholds. This includes a sourcing strategy, outlining key decisions and the reasons for them, detailed tender documents, including specifications, selection and award criteria, and a fully tracked evaluation process.

The type of route to market will, of course, be determined by the product, service or public works being procured. The detail of all of these routes is too much to go into here, but you can find a lot of useful information on ‘The Procurement Journey’, if you want to understand the end-to-end process.

There is limited scope for reducing the time taken to complete these processes, so where can time be saved to allow for more contract management? This is where good planning comes in.

Proactive Procurement

Procurement could be accused of operating in a reactive manner and it’s no different in the public sector. However, this can often be attributed to the nature of procurement’s place in the organisation and the changing nature of how organisations operate and procure goods and services.

The increasing number of ‘one-off’ projects, on top of the ‘Business as Usual’ work, can make even the best procurement functions feel like there is a never-ending volume of tenders to complete (referred to as the “tender sausage machine” where I work).

Moving from a reactive to proactive approach can help in this and crucially buy more time for that all important contract management. There are three suggestions below to help make this work, but it’s important to understand the caveats on these at the same time.

Making this a reality takes not only input from procurement, but from all its stakeholders and end users across the organisation. Procurement needs to be seen as a key strategic function and help mould the strategic direction that underpins procurement requirements.

That said, there’s still plenty scope for procurement to make changes and help things run that bit smoother.

  1. Proper Planning Prevents Poor Performance

This is very simple to say, but very hard to do. Get all your contract details in one place, including the dates of when they need to be retendered or procured and plan accordingly. Have quality project plans available to help understand when the procurement process needs to start and the key dates involved. Most importantly, share these dates with your stakeholders and then stick to them.

  1. Don’t “Boil the Ocean”

Once you know the procurement requirements, assess the market to see if other organisations or Local Authorities are doing the same or have been there before. Ask for documentation – my experience is that people are only too willing to share if they know it will be reciprocated in the future.

Also check out organisations like Scotland Excel, Yorkshire Purchasing Organisation (YPO) and Crown Commercial Services (CCS) for frameworks. If the framework is applicable, that’s half the work done for you and a major time saver.

  1. Kick-off Means Buy In

A kick-off meeting is a good way to get all the appropriate people in the room to discuss the requirements of the contracts and make sure that all the vital details are captured. Getting this done up front not only means you are better prepared, but you also get buy in from stakeholders who feel involved and will be better placed to help push the project along.

These suggestions by no means cover everything that can and probably should be done to make the procurement process more efficient. However, from the point of view of marginal gains, making these adjustments should help increase procurement efficiency and free up time to manage the contracts you’ve put so much effort into creating in the first place.

Procurement Operating Models Explained

Centralised? Centre-led? What’s the difference, and how do I know which operating model is best for my organisation?

Starting a new job can be both stressful and exhilarating. The people are different, the location is strange and the way they work is peculiar to that enterprise. There may be a seven-level procurement organisation chart or a loose, undocumented reporting structure to be navigated.  What is also daunting is the “in-speak”, the specific terminology which may be like a foreign language to you.   Let’s clear up some misconceptions about ways that procurement can be organised, and try and demystify some of the jargon.

 An operating model is just the way the procurement function is set up to work.  Most companies start up being decentralised, unstructured and even disorganised until the workload grows.  As the functions expand and mature, there needs to be some form of formalising and centralising of the activities to consolidate the spend. Only then can we expect to make savings and reduce our risk exposure.

Centralised or centre-led?

Centralised procurement does have its benefits. It means more control over suppliers and contracts and it helps drive supplier diversity and corporate social responsibility (CSR) initiatives.  The risk is mitigated and skills development is made easier, expanding capabilities.  However, it can become a very bureaucratic and expensive cost centre. Too much data and not enough information can cause loss of focus and poor service to stakeholders.  People at the centre do not always understand regional and local supply markets and consumption patterns.  If “central” means the US and the region is Papua New Guinea, there may be cultural challenges too. As procurement organisations move on and mature, over time, many of them become centre-led, taking some time to decentralise personnel and day-to-day operations.

Image: www.zycus.com

Wherever your organisation is on this curve, it is helpful to know what it means to be where.  There is no one best structure. The way your organisation works is influenced by the external supply market, the end-users needs and the overall company strategy. You just have to ride the wave.

 Centre-led procurement organisations concentrate on defining strategy and policy for both their direct and indirect procurement.  Corporate spend can be fully leveraged on strategic commodities and services which are well-suited for centralised sourcing.  Non-strategic categories not suited to centralised sourcing can be handled by the individual business units or regions.

Centre-led procurement uses a category management structure which supports the rollout of sourcing and contracting plans to business unit and regional level.  The type of set-up is often called a hybrid model.

Category management means the bundling of third-party spend into buckets to extract more value.  The main aim behind category management is to aggregate the internal demand and achieve economies of scale by contracting the best suppliers at the lowest price.  In its best form, it involves an active category manager to roll out category plans, strategic sourcing and supplier management initiatives.

In a centre-led organisation, a global category manager would set the strategy for the category group, e.g. transport logistics, and for the sub-categories (also sometimes called commodities) within that group:  road, rail and air transport, freight forwarding, port activities and courier services.  At regional or divisional level, the category plans are followed and executed locally to achieve the best results for the organisation.  This is the ideal but it is rarely implemented in full. Some categories are really challenging. Marketing services, technology and professional fees come to mind.

Cross-functional teams (CFTs)

To be effective, a category needs to be managed using one or more cross-functional teams.  A cross-functional team comprises representatives of key divisions and business units that work together, with procurement, to achieve the best results for the organisation in that category or commodity. Although extensively used in strategic sourcing, CFTs are being used increasingly and successfully across process improvement, product development, quality assurance and the assessment of suppliers.

The benefits are well-documented:  a more robust outcome, transfer of skills and learnings, improved internal cooperation and sustainable relationships.

Global organisations that run virtual CFTs have special challenges.  With the application of innovative methods and up-to-date online technology, it is now easier and more effective.

Whatever the operating model or the make-up of the CFT, the satisfaction of stakeholders and end users is paramount.  A stakeholder is anyone that has a vested interest in the outcome of your project or action.  He or she could be any one of these:

  • An internal departmental executives, manager or end-user
  • Another procurement team member
  • A co-opted subject matter expert
  • A supplier or a subcontractor
  • A member of the media or a regulatory body

Stakeholders are capable of influencing the success or failure of a project.

 The model is not cast in stone

As a procurement organisation matures, it is likely that executives will revise and adjust a hybrid or centre-led structure so that it stays aligned to corporate objectives and continues to deliver value.  The best model is always the one that delivers results through open lines of two-way communication and uses processes that are flexible enough to take into account regional and cultural differences.

Procurement In 7 Memes

They say a picture tells a thousand words. How about a procurement meme?

Okay, millennials. Strap yourselves in, because I’m going to attempt to meme. Is meme even a verb? Perhaps not, but that isn’t going to stop me.

For older readers who don’t really know (or care) what memes are, don’t worry – I’ve got you covered. Whether it’s Bad Luck Brian, Kermit Sipping Tea, or King Leonidas screaming “SPARTA”, I’ll attempt to add a bit of context around the meme before applying a Procurement gripe to each.

1. Boromir Demurs

Rivendell; Middle Earth. The mood is tense. Gandalf has brought together a motley crew of humans, elves, dwarves and hobbits to discuss how best to destroy the One Ring, which has to that point proven impervious to both magical and physical force. A solution is put forward – take the ring to the enemy realm of Mordor and throw it into the volcanic fires of Mount Doom. At this point, the human warrior Boromir makes his most famous speech of the film, beginning with the words “One does not simply walk into Mordor…”

Since The Fellowship of the Ring, Boromir (Sean Bean) has become a meme, trotted out as a retort whenever someone suggests something that’s impractical, unrealistic, or simply a bad idea.

Here’s my procurement take:

Amirite? (Am I right?) This is Procurement 101 stuff – a company that selects its suppliers based solely on the cheapest quote will inevitably run into risk and quality issues. And besides, if that’s the strategy, then you might as well set up an e-auction system that automatically selects the cheapest bidder, then dispense with the procurement function altogether. Which brings us to…

2. Bad Luck Brian

Poor Brian. This high-schooler in his plaid vest and braces never gets a break. The meme generally follows the formula “[Brian does something positive … something terrible happens”]. For example:

“Spends all night studying … sleeps through exam”

“Only Facebook friend is mum …. cyberbullied”

“Wins a free cruise … on the Titanic”

From a procurement viewpoint:

Procurement professionals LOVE robotic process automation. Think of all those humans doing repetitive tasks at your organisation that could just as well be done by a robot. It’s a cost-saving no-brainer, right? Bring in the bots! Great idea – until it happens to you.

3. American Chopper Argument

Stills of row between father and son from the reality show American Chopper have recently become internet hits. The meme format lends itself well to any internet argument – whether it’s a discussion about the best pizza toppings, or a protracted “debate” in an academic journal.

For my text, I’ve taken an excellent debate from the Procurious Discussion section about reporting on Cost Avoidance. Check it out:


4. More American Chopper

I could do this all day … here’s another debate from the Discussion section, this time on Decentralised vs Centre-Led Procurement:


5. Distracted Boyfriend

This has to be my favourite meme of all due to its simplicity. A man walking down the street turns to leer after a woman walking past while his girlfriend stares at him with an appalled look on her face.

In procurement land:

We’re about more than cost savings!! Really!

I’ve heard this sad story again and again. Procurement professionals are eager to show their organisations that they’re more than a one-trick pony. We talk about how we can improve operational efficiency, bring in CSR & social procurement initiatives such as fighting modern slavery, and even generate top-line growth, but it’s incredibly disheartening when the boss (usually a CFO) only cares about one thing… cost savings.

 

6. Leonidas Goes Nuts

The film 300, a retelling of the Battle of Thermopylae in the Persian Wars, contains a gem of a scene where the Spartan King Leonidas loses his patience after being threatened and insulted by a Persian envoy. The envoy, suddenly in fear of his life, says “This is madness” before Leonidas responds with: “This is SPARTA” – and kicks him down a well. It’s an intense moment, as the Spartans know that the murder of the envoy makes war inevitable.

I’m really not advocating the murder of suppliers, but there are moments when you do have to remind them of the terms of a contract.

 

7. Kermit The Frog looks smug

This meme is particularly useful if you want to be facetious. Kermit the frog, calmly sipping a glass of Lipton tea, has lent himself to many a captioned meme ending with the phrase “… but that’s none of my business”.

As procurement professionals continue to wage their endless struggle against maverick spend, we inevitably have a lot of “I told you so” moments when an unapproved supplier turns out to be a disaster. Along comes Kermit…


While we’ve got your attention – do you want to win a multi-game, table-style retro arcade machine worth £599 /$US800? Complete our 15-minute survey on the future of procurement to enter the draw! Survey closes Friday 22nd June 2018.

Tail Spend: Are You Counting Your Losses?

Nobody said controlling tail spend was easy. But those “insignificant” purchases soon add up…

For 35 per cent of procurement teams, tail spend – those small, ‘insignificant’ purchases that soon add up – is one of their top nuisance areas, according to research by Spend Matters.

And it’s no wonder, with a disproportionate amount of your procurement managers’ time being taken up with a small percentage of spend, staying in control of tail spend is challenging at best.

Whether it’s spot buys, commercial credit cards, non-PO invoices, expenses or rogue spending, tail spend often only makes up around 5-10 per cent of indirect spend – but comes with the overhead of managing 80-90 per cent of the total supplier count.

Controlling your tail spend isn’t necessarily easy, but it does represent a significant opportunity to cut costs and improve your processes. The key is finding something that can help.

Cost cutting and process improvement

Reducing costs is a priority in all corners of the business, but it’s right at the top of the agenda for most procurement teams. This year, 78 per cent of CPOs surveyed by Deloitte named cost reduction as their top priority going forward.

Tail spend puts the money you save through careful strategic purchasing at risk, but with research by The Hackett Group indicating that businesses save an average of 7.1% through better management of tail spend, there’s an opportunity to be had here.

To make the most of it, procurement teams should consider joining other departments in their business in digital transformation – looking to technology to help you find smarter, more streamlined and more cost-efficient ways to manage tail spend.

According to Forrester, 38 per cent of procurement managers are already handling over half of their purchases online, with estimates putting that percentage at 55 per cent by 2020. This shift is largely due to convenience: 38 per cent cite the ability to buy using online portals 24/7 as key, while 22 per cent agree that transactions are faster and easier. (There’s also the bonus of lower prices through online procurement channels.)

Digital purchasing also offers procurement managers more insight into what’s being bought, how much is being spent, and where employees are buying from. With this unprecedented level of visibility, your procurement team can take greater control of spending – particularly when it comes to tail spend.

In an independent research study commissioned by Amazon Business, 53 per cent of respondents were already using less formal, flexible procurement methods – and 59 per cent said they expected their companies to use more flexible spending processes in the next two years.

With flexible purchasing channels, your procurement team won’t just save money; they’ll also be able to spend less time micro-managing tail spend, and more time on strategic objectives. However, convenience can’t come at the cost of control. The challenge now is finding the right approach and technology that meets both needs to build these flexible processes.

Combining consumer ease with business buying

Some procurement teams are borrowing from the business-to-consumer space to change their procedures. Using the principle of guided selling, where buyers are presented with a specific selection to purchase from, they’re bringing their employees a ‘guided buying’ experience.

Guided buying connects the procurement team with other employees more directly, so they can understand exactly what kind of resources, equipment and services the organisation needs. The employees then get access to a digital catalog, which is shaped by both personalisation for the employee and the preferences of the business.

The opportunity for cost-saving here is two-fold. The company gets to outline restrictions and preferred sources for purchasing, which helps prevent tail spend from unauthorised sources, and the platform can give them increased visibility – allowing for analytics to monitor their outlay.

The most important thing for procurement teams is to be able to tighten tail spending management without making major, disruptive changes to how people work. That relies on choosing the right platform, that matches the needs and priorities of the business, and can be adopted at scale.

Introducing Amazon Business

With the Amazon Business marketplace, you can give your employees a consumer-like experience while saving your procurement team hours of supplier management time – and get visibility into your tail spend.

It gives your buyers a broad selection (approved by your organisation) that integrates with your existing procurement apps, gives you rich analytics and reporting capabilities, and can offer prices up to 9 per cent lower than average. Amazon Business can help you lower the admin burden of managing tail spend and give your team increased visibility and control.

If you’re serious about getting tighter control on your tail spend, we’d recommend digging deeper. You can learn more about the challenges and – most importantly – the opportunities in Fix the Tail to Propel Procurement: Attacking the Tail Spend Problem in B2B, a collaborative white paper by Spend Matters and Amazon Business.

How To Avoid Transaction Automation Landmines

When it comes to implementing transaction automation, managing the trade-off between the speed of execution and the granularity of data is a challenge…

There are many factors that require careful consideration to bring about effective cognitive solutions.

It’s akin to conducting a group of musicians – it might be possible (easy even!) to attain a pleasant sound from a solo instrument… 

But, if expertly managed,  you could accomplish a symphony from the entire orchestra! 

This week, our podcast series will guide you through the five steps required to conduct a dazzling cognitive symphony. 

On Day 3 of Conducting a Cognitive Symphony Anna Madarasz, Analytics & Cognitive Lead , IBM Global Procurement discusses the importance of appropriately applied transaction automation, striking a balance between speed of execution and granularity of data and how to avoid landmines.

The importance of transaction automation

Marco Romano, Procurement Chief Analytics Officer, Global Procurement, Transformation Technology, IBM discusses  taxonomy in his white paper, “Transaction automation is a business necessity.

“We all want to spend less time doing repetitive lower-value work and use our skills to provide higher-value services to the business. However, as with many good things, badly applied transaction automation results in poor data and ultimately lost productivity and analytics effectiveness down the road.”

Transaction automation landmines

Procurement organisations are usually very well intentioned when it comes to the implementation of transaction automation but that’s not to say the process is without its challenges. We asked Anna to describe some of the landmines she’s seen procurement professionals hit.

Catalogs or other automation processes that allow the editing of item description and price can make the life of the client and the buyers easier.

As companies  see the positive effect of this they are likely to have a higher percentage of their transactions and spend going through catalogs.

The risk with this, as Anna points out, is  setting yourself unrealistic targets, “there is always a logical threshold, over which it is a risk to apply automation. Of course, you will not implement a catalog line if you  only have two purchase orders of the same nature in a year.

“With wrongly defined targets, a catalog isn’t going to decide action and then, of course, you spend more time on creating and maintaining your catalogs than creating your purchase orders.

Bulk Purchases

Anna also advises avoiding the catalog lines that allow bulk purchases.

“Many times it is really not easy to identify the purchase in a fixed line. Let’s say you are buying server configurations [or] storage configurations. Those are made up of multiple parts, so you  have hardware, software and services elements in it.

“A configuration can be made up of 50, 100 lines. If you allow your clients and your buyers to raise purchase orders simply as a one line item, this server [could cost] one million US dollars!”

“Of course, it’s a really sensitive balance because you also want to avoid the workload of raising incredibly granular purchase orders, so it is really your call at what level you would like to analyse [a given category.]”

“If this is a category which is your main area of focus, then try to go granular, try to get the data. If it’s not, then it’s your call if you are allowing these bulk purchases.”

The trade off

“There is always going to be a trade-off between speed of execution and granularity of data” says Marco

“Finding the right balance again takes us back to developing an understanding of what data we need to achieve our desired cognitive and analytics state. There is no doubt that teaming with the right technology and innovation provider, and selecting the right tools, is critical to that balance”

Striving to conduct a cognitive symphony but in need of some expert guidance? Our podcast series runs throughout this week and will have your orchestrating cognitive success in no time! Register here.

RPA vs. BPA: Spot the Difference…

If you’re getting your RPA mixed up with your BPA. let us clear a few things up…

When it comes to trending topics, there’s a lot of acronyms getting thrown around these days and sometimes they get used interchangeably when their meanings are actually very different. Robotic process automation (RPA) and business process automation (BPA) are prime examples.

Read on to learn the distinction between RPA and BPA.

What is Robotic Process Automation or RPA?

First, let’s define what RPA is not: RPA is not a physical robot which handles physical operations, like in manufacturing company (e.g: car manufacturer).

Physical robots are machines which do almost everything that can be done by a human. Those devices are programmed and mechanically designed to perform physical tasks.

Instead, RPA is a virtual software ‘robot’ or application that replicates the actions of a human being interacting with the user interface in the same way that a human would. It is task-oriented, so rather than improving entire business processes, it looks at fixing individual tasks. RPA can be use-trained in weeks to perform a variety of functions and processes.

What is Business Process Automation or BPA?

BPA isn’t a specific piece of software but an approach to streamlining business processes for maximum efficiency and value (rather than being task-oriented). It is an in-depth look at how processes are operating, identifying areas for improvement, and building solutions – usually from the ground up.

BPA is about making sure the infrastructure of your business processes is solid.

While you could use RPA to handle high frequency processes which had previously been performed by humans, perhaps what is really needed is an overhaul of your workflow. If a certain type of transaction makes up the bread-and-butter of your organisation’s service, for example, you’ll want to make sure that process is as tight, efficient and self-contained as possible.

There are times when you have to transform the process itself rather than trying to just layer automation over the process. That’s when you need BPA.

So how do RPA and BPA work together?

The simple answer is that companies streamline business processes with automation and then complement that with RPA.

This image illustrates a before and after example of a company:

RPA-v-BPA.png

The ‘before’ image illustrates a situation where a company has a a very low level of automation, so a lot of processes are paper/human intensive. They do have an AP system in place, but a there is a definite efficiency gap. Using BPA, they need to evaluate and re-engineer processes to get rid of unnecessary steps, manual activities, paper-heavy activities and other inefficiencies that are draining time and money.

In the ‘after’ image, the company has increased their automation level up to 80-85 per cent by streamlining and improving their business processes. Now that they’re up to an automation level of 85-90 per cent the company can explore use cases where RPA makes sense.

What’s an example of a use case for RPA in this situation?

With the purchase-to-pay process automated, RPA is layered over the process to fill in the gaps. Here’s an example of how it could be applied:

  • A customer receives an invoice from a supplier.
  • That supplier is not in the ERP database.
  • RPA notices that the supplier does not exist in the ERP database.
  • RPA creates the supplier in the database master file and complements the supplier profile with data from Basware.

This is a task that would take a lot of time for a human to do as it would require the person to manually seek out the required information from various systems and make sure all details are correct. RPA can take care of this in seconds.

How can Basware help?

With 30+ years in purchase to pay, Basware has extensive expertise in this industry. We understand complex workflows, exception scenarios, compliance requirements, supplier data quality and other intricate areas of procurement and finance. Our experience in this space has enabled us to build a team of business consultants that can help you maximise efficiency and cost savings to simplify operations and spend smarter.

Read more  about what RPA means for procurement and finance and contact us to learn more.

Four Essential Capabilities For Your Procurement 2020 Roadmap

Procurement 2020 will look a little different with new skills, knowledge and tools to address entirely new challenges. Procurement has seen rapid change in a relatively short span, the value creation of this function has increased multi fold becoming more strategic, collaborative and technology driven. This momentum is expected to continue and quicken in the coming years. Procurement will emerge in the forefront as an important and integral function of an enterprise.

The Hackett Group’s research showed that 85 per cent of the procurement organisation believe that digital transformation will change the way they deliver services over the next 3 -5 years. To stay competitive, procurement needs to embrace disruptive effects of technological innovation in conjunction with organisation which is lean, agile and responsive to stakeholders and suppliers.

It is imperative for the procurement function to develop journey roadmap on four essential capabilities that are vital for future – Digital Transformation, Supplier Relationship, Stakeholder Engagement and Talent. The first step in this journey will be to fully understand how the procurement landscape is shifting.

Procurement in 2020 will look very different with new skills, knowledge and tools to address entirely new challenges. Organisations that fail to embrace new procurement models may fall behind the competition, jeopardising overall competitiveness and viability.

Digital Transformation

Procurement is effectively positioned to join the Digital revolution. It can offer a radically different value proposition to the organisation as Robotics Process Automation, cloud based applications, Big Data analytics, Artificial Intelligence and Mobile Computing begin to converge. These smart tools will improve service delivery, reduce errors and free procurement staff for higher value work.

Technology provides dual track opportunities to support ‘upstream’ or Source to Contract (S2C) and ‘downstream’ or Procure to Pay (P2P) which predominately consists of operational, repetitive and transactional activities.

Technologies like Artificial Intelligence, Crowd Sourcing, Live Digital Dashboards can be effectively used for decision making accurately and with speed to support ‘upstream’ while Robotics Process Automation is widely used to drive efficiency and effectiveness ‘downstream’.

Robots interact with different IT applications to enable transaction processing, data manipulations and communication across multiple IT systems. In effect, multiple Robots can act as virtual workforce to process operational and transactional activities. This could allow CPOs’ to rebalance their functions upstream and reducing the focus on downstream activities.

Supplier Relationship

With the advent of technology, the organisations have started to realise the growing importance of suppliers in terms of innovation, security of supplies, corporate social responsibilities, risk mitigation and cost savings. Strategic partnership will be at the top of the corporate agenda and Supplier Relationship Management will be seen as significant differentiator.

Supplier Relationship Management is systematic approach for developing and managing partnership. It is focused on joint growth and value creation with limited number of suppliers based on trust, open communication, empathy and win – win orientation.

The 4C’s model will govern the future of Supplier Relationship Management – Capabilities, Continuous Growth, Customer of Choice and Creating value.

The speed of business continues to accelerate, market expectations are higher, product life cycles are shorter, turnaround times are faster and the risks are wider and deeper. Clearly organisations rely on suppliers to bring innovative and new products to their markets.

Essentially procurement will have sound understanding of supplier market across the world and be able to link their potentials and limitations. Demands on procurement to become more business oriented, more mature and integrated in its ways of working. All of these reinforces the need to re-invent robust supplier relationship management.

Suppliers are increasingly being looked upon as trusted business partners and engaging early and ensuring all parties are on track will propel procurement organisation to  greater heights.

Business Stakeholders

Procurement has been rapidly evolving to keep pace with the changing trends.  The procurement profession has made significant leads moving from price management to category management and in the future it becomes very clear that procurement will move from category management into value creation.

Becoming a trusted business advisor is a long drawn process and time consuming, it varies from person to person. The individual has to not only understand stakeholder needs but go beyond to understand the breadth of business challenges and develop deep personal relationship.

Most stakeholder relationships are at service provider and enhanced service provider level providing answers, sharing expertise and resolving business related problems. Relationship with stakeholders are usually good at a business level but have no real depth at a person level.

The challenge seen by many procurement professionals is to move from been seen as just a service provider into being recognized by stakeholders as a trusted advisor

Elevation to consultant requires more insights and ideas into the stakeholder organisation on broader business issues and also building a stronger personal relationship. This level of relationship could be achieved through focus, time and effort.

Few people achieve the trusted advisor relationship, where there is a comprehensive understanding of all the stakeholder needs and they look up and reach out as first person to help them tackle the difficult issues they are facing.

As the procurement function changes, it will need people with new skills. Apart from being comfortable with data, future procurement professionals will need to be prepared to lead rather than simply serve their business.

CPO’s should fundamentally rethink regarding their organisation and capabilities both of which needs to be reshaped over time. Companies have to create new job profiles such as buyer for new categories, contract experts on intellectual property or Data scientist for data maintenance, analysis and mining. Only if the procurement personnel are digitally capable can a company fully benefit from opportunities provided through digitalisation.

Procurement functions must follow Seven fundamental steps to manage Talent – Plan, Attract, Recruit, Assess, Develop and Retain.

The team must be digital savvy, ability to collaborate and build relationship with internal stakeholders as well as suppliers from diverse array of geographic and cultural backgrounds.

Negotiation skills and market insight will continue to be the fundamental skills but TCO across product lifecycle, cost structure analysis and game theory will emerge highly important skills in this field.

The professional credentials will be measured by their ability to influence, persuade, and provide vision, the mind set must be strategic, global, collaborative and above all commercial.

Conclusion

Shifting the procurement team from being tactically devoted to strategically focused can be a long journey for a company. But this journey can literally make the difference between company’s definite success or failure. There are still several actions to be tackled in order for procurement to gain deep business insight, react quickly to the changing needs, drive higher overall value and greater stakeholder satisfaction. Investing in activities to elevate the role of procurement within an organisation, moving beyond the traditional role of gate keeper and cost hunter will definitely bring added value to the organisation.

Procurement in Twenty 20 will mean developing new value propositions, meeting new business needs, and integrating data across functions. It will call for using data pro-actively and intelligently. Perhaps more important, it will require fundamental reshape of procurement organisation and its capabilities to take on new challenges.

This article was written by Kumaralingam MC, Director, Global Procurement Centers – IBM. It was orginally published on Shared Services Forum. 

Megatrends Shaping the Future of Finance

Disruption, innovation, transformation, change – the watchwords of modern business. But how do these apply to Finance and Procurement? What are the trends that are likely to shape your role? And how do you prepare to adapt to the opportunities that these bring?

Barely a day goes by when the headlines aren’t doom-mongering about “the machines taking over” and displacing human labour. But modern-day fears associated with the rise of disruptive innovations such as artificial intelligence and automation barely differ from the objections of workers at the turn of the 19th century whose jobs were threatened by the machines of the industrial revolution. Change can be scary, or it can be exciting, but the one thing it is for sure is inevitable.

Sir Jack Welch, whose tenure as CEO of General Electric spanned 20 years, famously observed: “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” So as the mega-trends of RPA, AI and Blockchain make it into everyday language, all of us need to pay attention to what’s going on beyond the four walls of our business rather than hoping they are merely passing technology fads.

“If the rate of change on the outside exceeds the rate of change on the inside, the end is near” – Jack Welch, Former CEO, GE

Robotic Process Automation

RPA is the use of rules-driven software ‘robots’ to perform high-volume, manual, repetitive tasks by mimicking the actions of a human being interacting with the user interface of a computer application. For example, they can scrape structured data from a PDF document to speed up transaction-matching.

Robots are tireless, completing their activities faster than people with zero errors. However, their role is not to eliminate the need for human capital, but to free up humans to focus on higher-value, more purposeful activities. In fact, RPA is touted as “helping humans become more human at work”. RPA isn’t AI – robots have to be explicitly programmed with instructions and can’t “think” for themselves. And RPA is not the answer to all of your problems, either – you can’t fix a broken business process simply by giving it to a robot. That’s where business process automation (BPA) should be applied to overhaul and streamline processes for maximum efficiency and value.

Artificial Intelligence

AI is the new electricity. You’re already experiencing AI at work whenever you use social media, search engines, online shopping recommendations or virtual digital assistants like Siri and Alexa. There are four different levels of AI.

Level 1 – Reactive machines are rules-based and simply recognise patterns – they have no ability to form memories or to use past experience to inform current decisions. Examples of level 1 functionality in Basware AP Automation include automatic coding templates, recurring invoice recognition and best-fit matching.

Level 2 – Limited memory systems can look into the past. This is where machines start to get smarter, building on rules-based information by applying context, such as identifying specific objects and monitoring them over time. An example of this is the self-driving car, which observes other vehicles’ speed and direction, and decides when to decelerate or change lanes. But this information is only transient and isn’t saved into a library of “experience” the way a human driver learns. Smart coding of invoices is an example of level 2 functionality in Basware AP Automation.

Level 3 – Machine learning enables computers to teach themselves without being explicitly programmed, using algorithms that grow and adapt when exposed to new data. While learning, they collect further data to expand their insights and use these to formulate predictions.  Basware Predictive Analytics is an example of level 3 capability.

Level 4 – Systems that learn can execute processes much more dynamically, creating their own algorithms and taking decisions based on these self-developed algorithms in a similar manner to humans. They apply what they’ve learned from existing data to forecast future behaviours, outcomes and trends and make better decisions. At Basware, we’re currently working on Insights-Based Guidance, which falls into this category.

Blockchain

Blockchain is a digital medium of exchange that involves sharing a distributed ledger database – a common version of the truth – which is updated simultaneously to all members of the Blockchain, accelerating the consent and validation of work orders and invoices. It was designed in the aftermath of the financial crisis of 2007/8 to deliver transparency, security and efficiency in transactions, particularly international payments.
Today’s P2P processes require a ton of back-and-forth interactions and opportunities for the process to break down. With Blockchain, the steps of validation and authentication, purchase order management, invoice processing and settlement are vastly simplified, enabling instantaneous transactions, diminishing the need for enquiries and process status follow-ups, and providing a tamper-proof audit trail.

Capturing data (lots of it!)

Whatever digital technologies you propose to adopt, the bottom line is that you have to capture data – and lots of it – in a centrally architected manner. Not just your own transactional data, but complemented by that from other organisations along with publicly available data. Machines cannot learn or predict without data to draw on, and worse than no prediction at all is taking the wrong direction based on incomplete data.
The key to realised value throughout the chain is not simply to have an integrated source-to-pay system, but to get everyone using it and everything going through it. That means:

  • Adopting 100 per cent of your suppliers – from big corporations to Mom ‘n’ Pop businesses
  • Capturing 100 per cent of your spend – you can’t just repeat the mantra “no PO, no pay” so the solution must be the path of least resistance for all users
  • Automating 100 per cent of your invoices – not just invoices that match against indirect POs, and everything must run through one unified system

Only once you have achieved this holy trinity, can you make 100 per cent of activity visible through analytics. An example of this working in practice is a Basware customer that manufactures heavy machinery. Having grown through organic and inorganic means, they had accumulated a patchwork of ERP and AP systems and were suffering from all the classic AP failures and frustrations. Now, with Basware, they have every single invoice from 50 different countries flowing through the system, and 100 per cent spend visibility, which has not only allowed them to meet their cost savings business case but, more importantly, gain competitive advantage.

To learn more about how Basware can help you gear up for the future of finance, get in touch.

Five Best Negotiation Scenes In Film And TV

How much can you learn about negotiation by sitting on the couch watching movies? Plenty.

Want to become a better negotiator? You could diligently read up on the subject or attend some negotiation training courses, but for the couch potatoes amongst us, you might just learn more by watching some of your favourite films.

Negotiation scenes come in many varieties in film. Often they’re in the form of a hard sell (think Leonardo DiCaprio selling dodgy stocks in The Wolf of Wall Street), or a hostage situation (Tom Hanks negotiating for his freedom in Captain Phillips) or other life-threatening situations such as Mel Gibson trying to talk a suicidal man down from a ledge in Lethal Weapon.

But when it comes down to the nuts and bolts of haggling, the following five scenes give illuminating examples of how to win – or lose – in a high-stakes negotiation.

 

  1. Sticking to your final offer – Nightcrawler (2014)

Jake Gyllenhaal’s character Lou is trying to sell a video of a crime scene to Nina, a TV news manager. Watch for:

  • Lou being willing to haggle down to a certain level, after which he refuses to budge.
  • The power shift in the negotiation from Nina to Lou (aided in part by Lou’s creepy intensity).
  • Lou throwing in a number of extra conditions when he knows he has Nina beaten.
  • Best line: “When I say that a particular number is my lowest price, that’s my lowest price, and you can be assured that I arrived at whatever that number is very carefully.”

 

  1. Doing your homework before a negotiation: True Grit (2010)

In this Coen Brothers film, 14-year-old Mattie Ross (played by Hailee Steinfeld) shows what horse-trading is all about – literally. In order to raise money to hire a Deputy U.S. Marshal to help her track down her father’s killer, she approaches an auctioneer named Stonehill with two demands – that he buys back the ponies he sold he father, and that he pays her $300 for a horse stolen from his stable. At first, Stonehill laughs in dismissal, but Ross’s perseverance and detailed knowledge of the relevant law wears him down until he yields to her demands – plus a little bit more. Watch for:

  • The moment Stonehill mentions the valuation of the horse and hence kicks off the haggling process.
  • Mattie’s threatening to walk out on the negotiation and go to the law, causing Stonehill to adjust his offer in panic.
  • Best line: “I do not entertain hypotheticals – the world as it is is vexing enough.”

 

  1. Negotiating across cultures – Snatch (2000)

Warning: strong language.

When boxing promoter “Turkish” and his partner Tommy approach Irish Traveller “One Punch” Mickey O’Neil to ask him to participate in a fight, the prospect seems simple enough. The only problem is, Mickey (played by Brad Pitt) has an almost unintelligible accent. His price is the purchase of a fancy caravan “for me Ma”, and then proceeds to list off all the features he wants included in the deal … while Turkish and Tommy can’t understand a thing. Watch for:

  • Mickey’s impossible-to-understand list of caravan features. The video clip below includes subtitles, but cinema audiences had no such assistance when this film was released.
  • The bewilderment on Turkish and Tommy’s faces as they realise they don’t know what they’ve actually agreed to. The cultural barrier between the Irish Travellers and the other characters in the film is a running theme that goes far beyond the tricky accent.
  • Best line: “Did you understand a single word of what he just said?”

 

  1. Coercion – Ocean’s 11 (2001)

“Frank”, played by the late Bernie Mac, has been tasked with sourcing the transport needed for the team to undertake the crime of the century. The dealer names his best offer, and Frank appears to accept. So far, everything seems to be going smoothly … until the handshake. Frank extends the grip to a full 60 seconds, apparently crushing the car dealer’s hand while chatting amiably the whole time. The car dealer, desperately uncomfortable and in pain, abruptly drops his price before freeing his hand. Watch for:

  • The range of emotions playing over the car dealer’s face as he realises he can’t free his hand.
  • Frank’s feigned surprise and gratitude when the dealer drops his price.
  • Best line: “If you were willing to pay cash, I’d be willing to drop that down to seven-SIX-teen each.”

 

  1. The power of silence: 30 Rock (TV series 2006-13)

By simply sitting in near-silence and looking stern, grumpy babysitter (Sherri) is able to make Jack Donaghy so nervous that he doubles her pay for working half the time. Donaghy (Alec Baldwin) comes into the negotiation with his usual swagger, but Sherri’s silence causes him to blabber and rapidly cave. Appalled at his own performance, he confronts Sherri a second time. Watch for:

  • Sherri’s tactical silence when Jack pauses to let her speak.
  • Jack rolling his eyes when he realises how badly he came out of the negotiation.
  • Best line: “I made every mistake you can in a negotiation. I spoke first, I smiled … I negotiated with myself!”

Want to suggest some other films or TV shows with great negotiation scenes? Leave a comment below!

The ‘Why’ Behind the Drive for Retail Process Efficiency

Process efficiency is good. In fact, it’s one of the most frequently cited objectives for the procurement profession. But it can’t have a real impact unless we understand the bigger picture…

As we expand the impact of procurement beyond savings, one of the most frequently cited objectives is process efficiency. In theory, if procurement can help the company execute internal processes more swiftly they can… something, something, something (?). Process efficiency is good, and savings are good. But neither will have any real impact if we don’t understand why we are driving them.

The retail industry is a perfect case example for the need to understand the big picture impact of process efficiency. When you work for a B2C company, customer satisfaction is the answer to every question. In retail, the benefit of every project must be traceable all the way to the store.

The wholesale goal of retail: customer experience and satisfaction

Sourcing project teams usually sit down and articulate their goals and objectives at the outset of the process. Too often they are focused on the impact of the product or service on the company and its employees when they should trace that efficiency forward to the value it creates for customers. This perspective provides the context for many of the decisions made during the sourcing process:

Why should office supplies need to be easier to order? 

So marketing doesn’t have to interrupt their work on the new ad that will drive shoppers’ grocery lists this week.

Why are we going through a lengthy equipment testing process?

To prevent customers from being inconvenienced at the deli while we repair the slicers (again).

Which supplier should we award the fixtures and millwork contract to?

The one whose product best evokes a farmer’s market, ultimately increasing produce sales.

In a retail environment, one of the most dangerous lines procurement can draw is between direct and indirect spend. This division is practical enough, especially for categorisation purposes, but it creates the impression that indirect spend matters less than direct spend does. Even indirect spend must create value for the end customer. Every dollar the organization spends – whether it is an investment in inventory or to buy copy paper for headquarters – should efficiently advance the interests of the customer. That is what defines valuable process efficiency in retail.

Placing a value on retail intangibles

Case in point: Kemper Freeman is the owner of Bellevue Square, a multilevel mall in Seattle, Washington. He is a bricks and mortar king in an increasingly digital commerce world. Despite the lacklustre performance of retail chains like Macys, J. Crew, Sears, Charming Charlie, and J.C. Penney, his business is booming. He characterizes his approach to customer attraction as “emotional fulfilment”, and it is something eCommerce businesses can’t compete with.

As was recently explained in a Wall Street Journal article about Freeman, emotional fulfilment is “the joy customers take in seeing, touching, sniffing and testing the product before they pull out the credit card.” For a retail business to be driven by the creation of emotional fulfilment, every employee – from store clerks to corporate procurement to janitorial staff – has to buy in and place the customer at the centre of every effort they make.

Given this context, what does process efficiency mean in retail?

Procurement-enabled retail process efficiency removes barriers between demand and supply so that value can be created for customers. Process efficiency is not getting to the end of a sourcing project faster and it is not about making corporate roles easier. Efficiency ensures that the flow of products and services are not interrupted, and they certainly don’t take customer-facing roles away from their primary focus. Even in procurement, the customer should remain the central focus, and the goals for every project should be tied to a barrier removed or a benefit advanced. These are the only efficiency gains that matter.

This blog was orginally written for Determine by Kelly Barner .