Category Archives: Generation Procurement

`Our People Are Our Greatest Asset.` Erm… Really?!

Our people are our greatest asset - Sigi Osagie

This is a guest post by Sigi Osagie – Sigi is a leading expert on effectiveness in Procurement & Supply Chain Management. He helps organisations and individuals achieve enhanced performance growth to accomplish their business and career goals.

A recent post by Stephen Ashcroft reminded me of a point I raised at a leadership round-table discussion a while ago. I smiled to myself as I remembered the looks on the faces of my co-panellists when I started talking about the ubiquitous phrase, “Our people are our greatest asset”. 

It’s one of the most common statements found in company annual reports and regurgitated by many senior executives. Yet, as soon as those same companies hit financial difficulties their people are the first thing they jettison, typically through redundancies, plant closures, etc.

Strange. And interesting.

Why would you get rid of your “greatest asset” so readily in difficult times?

It’s a bit like me being in a canoe on a river, paddling along merrily with my super-duper 4K-UHD TV and my wife, who I claim is my greatest asset*. And then I discover that the canoe has a hole and is taking on water – we risk getting submerged and drowned with the weight the canoe is carrying. I need to reduce the weight quickly for any chance of survival!

What do I get rid of: my 4K-UHD TV or my wife? Hmm… she does weigh more than the TV… but she’s my “greatest asset”

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Financial difficulties are often complex challenges for most organisations. And I’m sure quite a few resort to headcount reductions only as a last resort. But, perhaps, it’d be better for more companies to be more honest and say that their people are their “most dispensable assets”.

Actions do speak louder than words. So if people are really companies’ greatest assets, companies must demonstrate this not in words but in actions: let your corporate mandates and leadership actions show what you truly think of your people.

CPOs may not be the executives who make such “greatest asset” claims in company annual reports. But they face the same challenges of balancing ethical leadership sensibilities with the realities of organisational life. Procurement leaders at all levels must ponder key underlying questions, like;

  • Are my people really my greatest asset in my Procurement function?
  • How vital are my people to my personal success and the success of the enterprise, relative to other things like strategy, processes and systems?
  • How do I show that I value my people and their contribution to our collective success in my everyday leadership style?

These may be difficult probes for some Procurement leaders to contend with. Others may feel confident and justified in their personal modus operandi. Whatever the case, it’s a truism that most of us will spend the majority of our lifetime at work. So finding our mojo, or bringing out our best selves, in the work we do is a big part of our fulfilment and success.

Leaders have a unique role to play in helping people reveal their abilities to excel and succeed. This holds true for whole enterprises as for functional areas like Procurement. Yet, sadly, but in truth, majority of organisations don’t do enough to expose and leverage the capabilities of their people.

When we manage Procurement functions, or any other organisations, in ways that don’t release people’s enthusiasm, energy, excitement, emotion, effort and expertise – what Charles Handy called the ‘E’ factors – we fail the individuals and we fail the organisation. An effective leadership approach that nurtures individuals’ talents and provides opportunities to grow is one of the critical conduits to sustain the psychological contract between employee and employer. It’s a vital mechanism to foster staff motivation and engagement, which, ultimately, fuel performance success.

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Procurement organisations that are able to unlock the performance capabilities of their people are always places of great effervescence. They fizz with the collective passion of the purchasing people, the same people who do the work and deliver performance outcomes that enhance Procurement’s enduring success.

People are indeed the greatest asset of any Procurement organisation. And their harnessed talent is the lifeblood of the function. But ask yourself this: Does our approach to managing our Procurement function bring out the best in our people?

NOTES

*In truth, my wife is not and never will be “my asset”; she’s my co-pilot in life.

We’ve identified Sigi as one of procurement’s key influencers – he will be appearing at our inaugural Big Ideas Summit 2015 on 30 April in London. We hope you can join (digitally!) – catch all of the day’s action here on Procurious and get access to exclusive interviews, video content and discussions. RSVP now and get ready to submit your questions.

Behind the supply chain curtain: 5 questions procurement needs to ask

The five questions Procurement need to ask to avoid a Nanna’s frozen berry issue

Lessons that procurement needs to learn to avoid a Nanna Berry issue

It’s a tense moment in the Emerald City. Dorothy, Tin Man, Lion and Scarecrow stand trembling before the giant visage of The Great and Powerful Oz as he thunders and roars, complete with jets of flame and billowing green smoke. Toto, Dorothy’s little black terrier, slips away unnoticed to the side of the room and pulls back a curtain to reveal that the terrible Oz is in fact a short, grey-haired gentleman frantically manipulating a control panel and speaking into a microphone.  

We’ve all been guilty of accepting the facts presented to us by an organisation without pulling back the curtain to confirm them ourselves. As customers, our powers of investigation are often limited – there’s only so much you can glean from scrutinising the ingredients and country of origin labelling on a box of cereal and you’re unlikely to get very far by interrogating a uniformed teenager stacking the shelves at Woolworths or Coles. A business, however, has the opportunity to gain a great deal of visibility and control over its supply chain, but only if we are willing to do the hard work and get to know their supplier.

The recent product recall of Nanna’s frozen berries across Australia was a very public demonstration of how badly things can go wrong in the supply chain. In mid-February this year, over a dozen cases of Hepatitis A were reported by people who had consumed frozen berries sourced from China via Chile. The company immediately issued a recall but the impacts were enormous: financially, the parent company Patties Foods suffered a 12 per cent fall in share price, while $1.7 million worth of unsaleable inventory sat in their warehouses. The blow to the company’s reputation and customer trust was even more serious, with daily headlines, a class action being threatened and furious comments flooding social media. Red Cross even voiced concerns over potentially infected blood donors.

In January 2013, UK supermarkets including Tesco, Iceland and Lidl were engulfed with a similar supply chain scandal involving meat. Frozen burgers and frozen ready meals labelled as beef sourced from Romania and Poland were found to contain horse and pig meat, leading to a huge customer backlash that saw Tesco drop €360 million in market value, burger sales tumble by 41 per cent and ready meals fall by 15 per cent.

In fact a snapshot of a recent 30 day period identified 47 product recalls in Australia alone. So why did these companies make such poor sourcing decisions that left them vulnerable to risk?

Well firstly, the evaluation team may have put factors such as price and availability above equally-important factors like reputational risk. In an environment where every dollar is a prisoner to its owner, snap price decisions are made without thought to total cost, including risk. The leading procurement managers measure risk by how much it would cost the business if the worst happened, making the total cost argument even more persuasive.

Secondly, have we accepted the Oz-like visage presented by the supplier without taking the important next step of delving a little deeper? Who supplies your supplier? And, in turn, who supplies your supplier’s supplier? Investigating your supplier’s suppliers can be a courageous decision – in many cases, a company may be justifiably worried by what they might find.

So, how can businesses both large and small ensure that a frozen berry or horsemeat-type scandal doesn’t happen to them? The answer lies in taking the well-known financial services compliance mantra of “know your customer” and adapting it into “know our supplier”.

Procurement professionals need to be able to confidently trace the elements used to create their product back to its source, secure in the knowledge that risk mitigation and regular auditing is in place to protect the company’s profits and reputation.

Some typical due diligence questions might include;

  • How financially stable is the supplier?
  • What quality systems are in place to ensure the products or services supplied are of a consistent and high quality?
  • Who owns the supplier?
  • Where does the supplier obtain their goods from?

The first three are typical questions to ask, and ask them we do, but it’s the last one that we need to spend more time and to “look behind the curtain” to find out more about the supply chain. So when we do draw back the curtain what do we need to find out? A good place to start is;

  • Has your supplier done the same amount of due diligence with their suppliers as you have done on them

The walk free foundation http://www.walkfreefoundation.org/ discusses the obligation and opportunity for procurement and supply chain to eradicate modern slavery, a huge and noble venture. One of the ways it advocates this is to audit continuously your supply chain to ensure its slave free. This should be part and parcel of what we do and whilst we are ensuring it is slave free, we should check that the suppliers through the supply chain can actually deliver what the value that each stage brings

To summarise, here are the five vital questions that procurement should be able to answer:

  1. Who, exactly, is the supplier?
  2. Who are the supplier’s suppliers? And who are the supplier’s suppliers’ suppliers (and so on)?
  3. What are the risk factors associated with using this supplier?
  4. What systems are in place to minimise or eliminate risk?
  5. What systems are in place to ensure the product or service is of a consistent and high quality?

So don’t wait for Toto to pull back the curtain, get to know your supplier and pull back the curtain yourself. 

Unfortunately the threat of risk looms large over our profession… In 2015 we’re facing ongoing political instability, increasingly extreme weather conditions, as well as newfound threats from hackers in the digital landscape. We’ll be expanding on these at our Big ideas Summit held in London on 30 April (and digitally – on Procurious, for those wanting to join the discussion online).

We’ll be tackling all the Big Ideas that are set to shape procurement now and in the future with a goal to inspiring a new generation of business intrapreneurs – people who can think outside the box – to drive innovation and lead change in large organisations. For all of the details, to see who’s speaking and how to get involved head to www.bigideassummit.com – don’t forget to RSVP on Procurious here.

Order and procurement progress in Brazil

Procurement in Brazil

We quizzed Procurious members Luiz Paganini and Elaine Santana on the state of procurement in Brazil. Here is what they had to say…

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

Luiz: I believe that procurement in Brazil is still in its early stages. Our business culture is not used to have a person dedicated to Strategic sourcing and another person dedicated to spot processes, what we see most in companies is a person responsible for both jobs, which in my opinion, affects the performance in both cases. Saying that, Brazil does not have a good logistics infrastructure, despite its great potential to have it. Besides that, the experience you gain working in this area is really unique, because, you can work with many types of materials, in many types of industries and basically, if you have experience in procurement, you are able to work with many different materials and products.

Elaine: Brazil is now looking for strategic sourcing specialists, which was not something considered important about 5 years ago. And it seems that only the major companies are looking for this specific skill…

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

Luiz: It really depends on the importance companies give to procurement departments, the company’ size and the material’s complexity. As an example, I have worked in teams with almost 60 buyers and contract managers, and I currently work in a team with 3 buyers, which manage contracts and issue POs.

How did you get started in procurement?

Luiz: My first internship was in a chemical company and I was the international purchasing intern. The funny thing about it is that I really wanted to get a job where I could use my English, because I really enjoy speaking it. When I started I used English every day – what made me fall in love with procurement was my first manager, who explained to me the importance of procurement for a business and what benefits can be reached by doing an efficient job in this area.

Elaine: I was in an automotive company as an assistant in Logistics. The role evolved to Foreign Trade and then Purchasing.

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

Luiz: I reckon that Brazil is moving forward regarding procurement techniques and tools and I suppose that this movement will lead to a huge transformation where we will see more contract managers, giving the necessary quality and generating better results in companies all over the country.

Regarding social media, I believe that it has strengthened our relations with another professionals all over the word, which results in exchanging and sharing experiences, updating these professionals and making them to want change (which in my opinion, is a really good thing).

Elaine: I’ve noticed that Engineers are being targeted [specifically] in this area – and mainly those in the automotive industry. So it looks like people are looking more and more for technical skills in this area.

Why did you join Procurious?

Luiz: Being able to connect with other procurement professionals from many different countries has been really good to me, because it makes me see that I can be the change needed in this area. Besides the fact that I really would like to build an international career, so I reckon that building a strong network in the procurement area is a huge step for me to achieve it.

What are you hoping to get out of the network?

Luiz: Knowledge, contacts, jobs opportunities and partnerships.

Elaine: I hope to get to know more people and learn how procurement works in other countries.

If you’d like to be featured in a future instalment and are keen to fly the flag for your country, why not drop us a line here?

Realising spend savings can leave you wide of the mark

saving money in procurement

It might be seen as a radical point in some quarters, but the first objective of procurement is to save money…

There are clearly other objectives but the primary task remains the same, to deliver cost-effective solutions from third party spend for the business, this is something of a dilemma for procurement and the major customer of procurement – finance. Why is this a dilemma, well, in many cases the finance community do not recognise the savings reported or identified by procurement because they do not actually get to the profit & loss statement. This very simply leads to a disbelief in the claims and ultimately the value of procurement to the organisation.

When CFO and CEOs are polled about what they want from procurement they will in my experience (and various surveys) state three main things:

  1. effectiveness (savings)
  2. efficiency (lower cost of procurement)
  3. risk management / alleviation

Procurement Performance Metrics: Which metrics does your organisation use to measure procurement performance?

Procurement Performance Metrics:

Source: From Data to Profit The Financial CPO – Jonathan Webb 03/12/13, in association with Bravo Solutions. First Published in Procurement Leaders.

This has not particularly changed during my 28 years in the profession across line procurement, consulting and procurement outsourcing. At the same time procurement professionals as well as the Chartered Institute of Procurement (CIPS) the professional body for the profession continue to press for the function to be taken more seriously and strategically.

In my opinion procurement is not recognised in many organisations as a source of competitive advantage for the following reasons:

  1. procurement and negotiation is not understood as an area of competitive advantage
  1. the perceived ROI from investing in procurement is not high enough
  1. other corporate activities / strategies are more important and generate a better return
  1. a general disbelief that the suggested savings can be actually delivered in the business, and ultimately to the P&L statement

It is clear (to me) that the savings opportunity from the effective management of third party spend can be high with the application of the right approaches, and the savings opportunity is of the order 15% on the total external spend of the enterprise.

If procurement is to be treated more favourably it needs to ensure that the benefits are delivered, captured and flow to the P&L. In the same way that profit delivered from new sales flows directly to the income statement. But the question is why do the savings not materialise?.

From my experience across every industry sector the answer lies in the detail, and specifically the common impediments to savings realisation. These are:

  • Institutional lock out
  • Contractual lock out
  • Content compliance by suppliers
  • Budget reduction inertia / budget flow down
  • Lack of knowledge / skills in best practise
  • Cost of delivering savings (overhead)

In simple terms all businesses can save money on the cost of goods and services from third party (external) suppliers, however there are a series of factors that limit even the best businesses from achieving, and more importantly realising, the maximum savings they can.

The total typically that any business can reduce these external costs by is 10-20%; the average company could save 15% from a standing start. So taking a business spending £100m externally could deliver a £15m gross reduction.

However this is often not realised for a variety of reasons. These are:

  1. Institutional or internal cultural lock out – for instance spend areas like legal services, audit, consultancy are controlled by senior stakeholders who will not allow procurement to interfere. This might relate to 8-10% of the saving opportunity. Thus reducing the £15m by £1.2-1.5m.
  1. Contract lock out – these are contracts already awarded and in term, that are felt to be locked out to the end of the term. This might be 10 – 15% of the saving – reducing the £15m by £2.25m.
  2. Contract compliance by stakeholders / users of the deals – not everyone in a business will take up the deals that are put in place. This might be deliberate or because their is a lack of knowledge (i.e. no systems to highlight the deals). This might range from 5-10%.
  3. Contract compliance by suppliers to the deals agreed – this is where suppliers charge rates higher than the agreed contractual rate to different divisions / stakeholders / depts. This might range from 1-5%
  4. Budgets are not reduced to reflect the savings achieved (most permanent in indirect goods and services), resulting in budget holders spending the saving on more goods and services. This is typical in almost every business (except for direct goods and services). It will often range from 33.3 – 50% on average.
  5. Lack of knowledge / skills to apply best practice thinking to the purchased goods or services, thus failing to get the full value of cost savings available (as might be enjoyed by other buyers in other companies). It will typically range from 5-10% of the saving opportunity.

The final element to consider is the cost of procurement. The list above suggests that potentially the best case for savings getting to the bottom line of a business i.e. fully realised would be 67.3% and worst case none (0%) getting through. The cost of procurement to a business will typically be 1-3% (as a proportion of spend). i.e. a spend of £100m, might need staff, overheads and systems totalling £2m p.a. (average of the range 1-3%) to manage. Thus a 10% or greater impact on savings realisation, or put another way a significant decrement to the savings at a net benefit level.

Cost of Procurement in Relationship to Spend Managed 2014

graph2Source: CAPS Research July 15’ 2014

Putting this in in the most simple terms means that for the worst performing function procurement is a negative net cost to the business and in the best only half of the savings opportunity is impacting the P&L.

The critical question is how do we ensure that the savings impediments are overcome, and the savings are realised?

There are a range of factors that can support overcoming these barriers, however one stands out for me – people TALENT or expertise knowledge enshrined in subject matter experts. Clearly there are a whole range of other factors encompassing change management to technology to mandate – oh, mandate the golden ticket, or so some believe amongst procurement professionals.

The reality is that very strong capability will overcome institutional lock-out for example through the deployment of SMEs who really understand how to manage complex spend used and managed by executives. Similarly locked out contracted spend can be unlocked and re-negotiated by specific category experts who know which levers to pull. Knowledge of leading edge technologies and their application will enable the capture of best practise approaches to spend management, budget reduction and communication that ensures deals are adhered to.

The topic of how to remedy the savings impediments could, and may be another paper in itself.

However the answer lays in talent, people talent, the application of subject matter experts whether from within the business or from expert external talent – career interims, for example having made their career from their expert procurement knowledge – will go a long way towards overcoming savings delivery impediments.

So how do you secure and keep up to date talent in your business?

Don’t neglect your technology and analytics boffins in procurement

Big Data! It’s the catch-cry of 2015 and the movement shows every sign of gathering momentum. Article after article has been written on why your business can’t afford to ignore it, and the term has even earned itself a capital B and D, demonstrating just how excited everybody is about the concept.

Yet our benchmarking exercise shows that Australian procurement functions may need to recalibrate their thinking about the skill levels required by the two job-families every team needs before attempting to harness Big Data – technology and analytics.

As part of The Faculty’s 2014 research into capability assessments, research champions from 19 organisations participated in workshops to establish competency benchmarks for six job families within the procurement function: Strategic Sourcing, Category Management, Analytics, Operations, Supplier Relationship Management (SRM) and Supply Chain. The participants were asked to benchmark the competency levels (Awareness, Functioning, Skilled or Mastery) that they believed should be held by different levels of seniority across the above-mentioned job families. The results were then validated by The Faculty Roundtable, consisting of CPOs from 30 of Australia’s largest blue-chip organisations.

Neglect technology skills at your own risk

Two surprises came out of the results. Firstly, there was an anomalous gap at the principal level for the key competency “utilising technology and tools”. Have a look at the radar graph for Category Management (yes, I know the shape in the middle looks like a bird’s head):

Hugo1

Competency levels

1 – Awareness      2 – Functioning     3 – Skilled     4 – Mastery

Out of the six job families, only Operations had a mastery-level benchmark flagged for this competency. In practice, this means that the most senior staff across five job families in the procurement function were content to have no one in their team who were expert users of procurement-related tools. In the case of the SRM job family, the highest competency level for tech was only “Functioning”.

So, what are the possible reasons for this gap, and what are the risks of having a comparatively low benchmark for technology and tools?

Well, one reason may be that most organisations have a dedicated IT team to whom you can outsource your IT-related projects. The trouble with relying on this crew is that the IT team are not procurement experts. Having a scattering of tools-and-tech gurus amongst your own procurement team would be infinitely more valuable than working with an IT generalist, as the marrying of tech skills with procurement know-how can open the door to a potential flood of efficiency and innovation.

The second reason may be generational. At the risk of sounding ageist, we can assume that, generally, the most senior role-holders in your procurement team have more years under their belts than others and may be unwilling to engage with rapidly-changing technology. The tendency, then, may be to leave the usage of technology and tools to junior role-holders, with the risk that critical business tools are operated by staff who lack the experience (and seniority) to make informed decisions. Leaving the mastery of such skills to junior role-holders also means you are reliant on the advice of inexperienced staff or outsourced expertise when deciding on major technology investments, an area in which mistakes can be very expensive.

If the problem is indeed generational, then the good news is that the competency gap will resolve itself in time as technically-savvy members of Gen-X and Y step into senior roles. In the meantime, you might consider “reverse-mentoring”, where the junior in the relationship takes on the role of mentor to provide their senior colleague with up-to-date information and advocate the benefits of new procurement technology and tools.

Don’t neglect your analysts

A highly-skilled team of analysts is worth its weight in gold, yet the results from our benchmarking exercise didn’t reflect this:
hugo2

Competency levels

1 – Awareness      2 – Functioning     3 – Skilled     4 – Mastery

Even a brief glance at the above chart shows that Analytics has a lower level of expected competency almost across the board, with the exception of “cost leadership” and “determining customer need”. This is concerning, given the vital role of this job family and the potential involved in harnessing big data to generate innovation. In practice, the chart above suggests that the most senior analyst in a procurement team is not expected to demonstrate leadership and only expected to have medium- to low-level competency in supply strategy and managing supply chain risk. To me, the benchmarks are more reflective of a non-specialising analyst (much like the IT generalists mentioned above) rather than a member of the procurement function who specialises in analytics.

The strong potential of a high-performing analytics team was demonstrated at the 54-hour “Unearthed Hackathon” in early 2014, where competing teams of number-hungry analysts were given access to Big Mining Data – specifically, transport, logistical, geospatial and geological proprietary data. One of the teams worked out a way to integrate technology into tray trucks that detects when boulders are too large for rock crushers and sounds an alarm to prevent potential blockages. The organisers estimated that this idea alone would save millions for Rio Tinto and other miners – yet it took these boffins only 54 hours to analyse and solve the problem.

We need to master both soft and hard skills

A recurring theme to come out of The Faculty’s capability research was the need for procurement teams to develop those hard-to-define “softer skills”; that is, leading, influencing and negotiating. At the same time, we cannot afford to neglect the “hard skills”, even at the most senior level when leaders step into a more strategic role. An enormous amount is expected of 21st-century procurement teams and we can’t be expert at everything, but if you’re going to neglect one competency to focus on mastering another, do your best not to neglect procurement technology, tools or analytics.

Finally, if you’re an up-and-coming procurement professional who also happens to be a master of tools and tech or an analytics whiz, I’d say you’re in a very good position for a stellar career.

Time Zones and Advanced Planning – What’s Procurement Like in Russia?

With the revelation that Russia’s dreaming of constructing a superhighway that will span the circumference of the globe – Procurement consultant Natalia Urazova and FMCG Procurement Specialist Vladislav Mandryka have got together with their fellow professionals to tell Procurious about procurement in Russia.

What's procurement like in Russia?

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

Commercial procurement only came into being in Russia in 1991, with purchasing previously based on central planning activities. Procurement in Russia is now growing rapidly due to the increasing numbers of multinational corporations in the domestic market. Comparatively, it’s fair to say that procurement in Russia is at the same stage now as it was in the USA in 1999-2000.

Only around 10 per cent of all Russian companies have a defined procurement strategy, nearly all of which are large companies. Small and medium-sized companies tend to view procurement as a ‘passive administrator’ of production orders. As a result of this, these companies tend to lose 25-45 per cent of their spend value in procurement activities.

Leading Russian companies, those with active procurement strategies, are able to save billions of rubles annually through a number of initiatives like reconfiguration of procurement departments, P2P optimisation, category management, tenders and SRM programs.

These organisations have also understood that centralisation of procurement function provides benefits, so, in most cases, the procurement of key commodity categories with sufficient spend is centralised. However category management, Total Cost of Ownership and standardisation are not widely used concepts.

There’s a bit of a mix too when it comes to Supplier Relationship Management and supplier development. Some companies have made an effort to master lean thinking and create cross-organisational cross-functional teams to reduce losses in the value chain. However, there are many that still view supplier management as a method of aggressive negotiations, in order to achieve their own short-term aims.

Some organisations have a level of automation in their procurement activities, although this tends to be a ‘patchwork’ of ERP and MRP systems. Where systems have been implemented, there have been positive results. The same can be said for e-Procurement and e-Auctions for the most part, although in some cases, the focus on minimum prices has caused major mistakes. In one example, an organisation managed to lower the price of an auction item by 42 per cent, but left themselves with 15-years worth of stock!

Procurement is also complicated by the size of Russia and the extended time zones in the country. For example, if you have a regional office in Ust-Ilimsk (essentially in the centre of the country), it requires 2 flights and a 5-6 hour car journey to get there from Moscow. Equally, if you have an issue in a subsidiary in Khabarovsk (nearly the Eastern most city in the country) that requires an answer from a business unit in Voronezh (in the far West), at 9 a.m. you only have two hours for a solution, because there is a 7-hour time difference.

How did you get started in procurement?

In 1999, I was asked by my business to find a specialist to train the procurement department. There was a lack of such specialists in the market at the time, so I designed a small workshop myself. I have adored procurement since then – it’s the most interesting and best part of the business!

I’m now involved in the implementation of lean thinking in procurement activities across all my research and consulting projects.

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

Procurement professionals are increasingly becoming change leaders in organisations and have the ability to dramatically increase the efficiency of the entire value chain.

Social media isn’t used as much in procurement at the moment. But I hope that we can use it to get involved in conversations with procurement professionals from around the world and share information and experience about procurement best practice.

Why did you join Procurious?

I rarely use social media in my day-to-day procurement activities and to share procurement best practices and I saw Procurious as an opportunity to change that.

What are you hoping to get out of the network?

To get involved in conversations with other procurement professionals and share information and procurement best practice.

How are you going to get your peers involved?

By inviting them via my network, particularly those who shared their experiences in order to help me write this article!

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.