Category Archives: Procurement News

Is Your Technology Serving Up Greater Procurement Performance?

To what extent is your organisation using technology to improve the performance of procurement?

Wisiel/Shutterstock.com

Procurement’s adoption of technology has been surging in recent years, and it’s showing no signs of slowing down.

But what is the best way to transform the processes and performance of your Procurement organisation, while facing up to the need to restrict budgets and generally tighten up on spending?

Next week, Procurement professionals from all over Europe will gather in Amsterdam at ProcureCon IT Europe to discuss exactly that, as well as a host of other transformational topics.

In advance of the event, we asked 100 IT Procurement executives from some of the world’s largest organisations what they are doing to drive performance using technology. Here’s a preview of the results.

Procurement on Cloud 9

ProcureCon IT technology improvement

Technology is serving up Procurement teams with a wealth of tools with which to enhance their ability to add value to their business.  From social media to the cloud, automation and the Internet of Things, the list is growing ever longer.

Our research identified the cloud as one of the biggest areas of adoption today. Almost half of surveyed procurement organisations are already heavily invested, and a further 30 per cent are currently experimenting.

However, Procurement organisations will have to learn on their feet to get the most out of this new technology. Poorly implemented systems can end up being little more than expensive white elephants.

In addition, procurement professionals need to evaluate how to best implement transformational systems and processes, while reducing costs. One solution is to avoid hiring permanent new staff with the requisite skills, but instead to find strategic external technology partners who can manage the supply chain cloud on their behalf.

Adapting to these kinds of tectonic shifts in the procurement landscape is done best by the nimble. And to the victor will go the spoils.

The Future’s Bright, The Future’s Digital

Cloud technology is just one element of the digital transformation of procurement. Another important area of investment and focus for procurement teams is harnessing the power of big data.

More than 35 per cent of respondents to our survey are already heavily invested in big data, and more than half are currently experimenting. Going hand-in-hand with big data is spend analytics, another huge investment area for procurement organisations according to our research.

However, big data means different things to different people. Procurement’s approach needs to be moderated by a focus on desired outcomes.

Without a set of clear objectives, the insights offered by analytics will be limited and difficult to put into action. Once you have decided your goal, you’ll be better placed to select the ranges of data which are most appropriate.

Join Us at ProcureCon IT

ProcureCon IT is all about finding practical solutions to the challenges which IT procurement pros face on a daily basis. It’s the only truly peer-led conference of its kind in Europe.

Not only will you meet hundreds of people who are successfully taking their IT procurement technology strategy to the next level, but it’s also a superb opportunity to meet with some of the most innovative solution providers in the market place today.

To get industry-leading insight on the issues mentioned here, as well as lots more, join us on the 5th and 6th of December at the Mövenpick Hotel Amsterdam for ProcureCon IT.

Take a look at the full event agenda and download the research on procurement technology here.

Top 10 Trends for Spend Control & Procurement Automation

With the final months of 2016 fast approaching, it can only mean one thing – planning for 2017 is fiercely underway. In this article, we look into next year and share insights into how Spend Control and eProcurement Automation will evolve.

These are not the macroeconomic trends you’ll hear from the large consulting companies. Nor are they the ‘who’s going to buy who’ predictions from the technology analysts. These are the trends that PROACTIS is seeing and hearing in our customer base, and in the companies we’re talking with every day.

We are participating in some of these trends, and we are even leading the charge on a couple. Some are not really even trends yet – some are just growing topics of discussion.

But these are all things real procurement professionals and real finance managers are thinking about, and doing today, as they move forward in their quest for world class Spend Control. Below is a summary of the top 10 trends for 2017.

  1. The Rise of Procurement 2.0

Procurement is rapidly moving away from what was once a personality-centric function where senior procurement professionals did a lot of the work themselves, did a lot of the work manually, and did a lot of the work using mainly the knowledge they had amassed from years in the profession.

  1. End-to-End eProcurement – Plugging the Gaps

Driven by the changing expectations of Procurement, there is now a growing vision of what ‘end-to-end’ procurement looks like and a conscious effort to move toward that vision. More organisations are moving to ‘source-to-settle’ solution suites to achieve maximum Spend Under Management.

  1. A Growing Focus on Supplier Collaboration

Few organisations really have the breadth, depth and quality of supplier information needed to do all the things they need to do.

As procurement organisations move through the Spend Control journey, they are recognising that one of the fundamental requirements for success is to have a solid, sustained handle on their supplier base. They are realising that supplier information is the lifeblood of Procurement.

  1. A Stronger Requirement for Buyers to be ‘Easy to do Business With’

Organisations that have put in place a solid Supplier Management cloud framework (which typically includes a supplier portal) are seeing that they can leverage this new capability to improve supplier interaction and commerce. This makes it easier for buyers and suppliers to do business.

  1. Cloud-Based Procurement will Remain – and for Good Reason

After looking at the options, the more organisations are opting for cloud-based options to solution licensing, deployment and management. Traditional software licensing, on-premise installation, and in-house technical management just don’t make sense anymore.

  1. Blurring the Line Between Software and Services

We have started to see more organisations combine software-as-a-service and associated people services into a broader solution to meet particular needs. For example, cleaning supplier records, sourcing specific categories of spend, and turning paper invoices into eInvoices.

  1. A CPO Mantra: Think Strategically, Act Tactically

Even procurement leaders with a clear end-to-end Spend Control vision are recognising that the war against excess cost and risk is generally won one battle at a time. Nothing big is ever accomplished in ‘one fell swoop’ and world-class Spend Control is a big thing.

  1. A Growing Recognition of the True Cost of ‘Shelfware’

Many larger organisations have made the move to one of the mega Enterprise Resource Planning (ERP) or Financial Management systems. However, often the procurement modules aren’t fit for purpose and become ‘shelfware’ – software that’s just sitting on the shelf unused to any meaningful extent.

Organisations are recognising that if they are going to be successful, they must insist upon getting the right tools. And if they have to branch out from the ERP mother ship to do so, they will.

As a result, more companies are taking action and adopting integrated best-in-class applications.

  1. A Better Understanding of the Limitations of “Simple Self-Service Shopping”

Everyone agrees that employee adoption is a key factor in the success of a purchase-to-pay roll-out. The faster and more intuitive the experience, the more spend that’s likely to go through the system.

The problem is that it doesn’t do a lot of good to put spend through a P2P system if that system does not lead employees to purchase from approved suppliers using negotiated pricing and service agreements.

More organisations are now looking closely at how their solutions are going to help with all aspects of increasing Spend Under Management.

  1. The Importance and Value of Integration

No eProcurement system should exist in a vacuum. And no existing information systems environment is a blank sheet of paper.

More organisations are integrating their eProcurement solutions with a wider range of systems in order to create a single Spend Control umbrella over all aspects of enterprise-wide spend.

To find out more, download the full paper ‘Procurement Automation 2017: Key Trends & Hot Topics’.

Procurement Isn’t Done Innovating

Changing the close-minded nature of a stakeholder to the value of procurement is a big challenge. But procurement isn’t beaten yet.

Have you just started following this series of posts? Don’t miss the first two! I’ve been sharing my perspective on procurement productivity and efficiency from over four decades worth of experience in the field. Catch up here on Part 1 and Part 2.

If you’ve ever met me, you’ll know it is in my nature to look forward. I’m always trying to figure out what is likely to come next for a profession that has already seen so much change.

Although most of the time we consider savings as the primary procurement performance metric, our core focus should actually be on spend and what it can accomplish.

In my first post, I suggested that the total number of annual procurement hours is a fixed resource that must be maximised if we are going to approach our full potential. The same is true of spend.

A company’s total annual (or budgeted) spend is fixed. Simply shrinking it is a limited view of procurement’s impact, and one that has gotten us in trouble in the past for being overly cost-conscious.

Expanding View of Spend Management

In order to really influence spend under management, we need to back up or expand our view of the spend management process. Starting with eSourcing and moving forward is too late. By then, a significant opportunity to impact the category has already been passed.

The supplier discovery process – as reimagined by the team at tealbook, for instance – contains all of the value potential uncovered in downstream processes. While it might seem like more work to broaden the pool of prospective suppliers, it’s actually procurement’s best change to affect results by more than a shade or two at a time.

All measurements (savings, spend under management, etc.) need to drive meaningful improvements in results. They can’t just capture activity, and no measurement exists for its own sake. Because of the seemingly contradictory nature of the metrics in play, procurement is sometimes in the position of having to reconcile long term strategic value creation with short term business requirements.

In the face of this challenge, we have to make working the ‘right way’ so easy and intuitive that people don’t have an incentive to fall back on their old habits.

Importance of the Right Price

Procurement has successfully overcome a savings-driven mindset. It is time for us to help our internal stakeholders overcome a status-quo mindset. I have been in situations when an internal stakeholder tells me something along the lines of, “This is an area where we aren’t really concerned about what we pay.”

And while we need to be careful not to alienate someone by beating the ‘savings drums,’ this is a prime opportunity to educate, and to explain why it is important to get the right price regardless of what is being bought.

Each dollar spent has the potential to create varying levels of value. Not being worried about what you spend in a particular category or on a specific product is one thing. But what if you could accomplish more with that same dollar? Maybe there is a more innovative supplier or a next generation product available?

If a company’s doesn’t open their mind to what is possible, and investigate qualified alternatives, they condemn their potential to the bounds of the past.

tealbook allows companies to pursue inquiries like these without holding up the project timeline. In fact, an internal stakeholder can search the suppliers themselves if they like. They may even uncover new potential sources of supply that match their definition of desired value.

Shifting the Stakeholder Mindset

This mindset-shift is a challenge that the procurement community as a whole can stand up and address together.

Procurement pros are notoriously conservative in their sharing habits. While this makes a lot of sense in specific cases, any opportunity to contribute to, or benefit from, aggregate industry intelligence may be just the cure we need to closed-minded stakeholders and the frustration they create.

I have been around a lot of different procurement and purchasing groups, and they get all worn down. I’ve seen unbridled energy and excitement degrade to the point of becoming a lack of professional engagement.

When we don’t set up the true mission of procurement right – maximising the value of every dollar spent – it’s not a fun place to work. But hope is not lost. Procurement is not done innovating.

Catering to business clients is a big role for procurement. We need to draw those clients into the process and make it easy for them to understand the real meaning behind differentials in cost. Not just in terms of savings, but also in terms of what the spend can accomplish for the company. Ultimately, this will carry procurement forward to the next phase of our development.

And that is something I can hardly wait to see play out.

Gregg Brandyberry is a recognised pioneer in procurement and sourcing technology. He has over 40 years experience in industries such as automotive, textile, manufactured goods, electronics and healthcare.

He is the former Vice President of Procurement – Global Systems and Operations for GlaxoSmithKline, and a Senior Advisor for A.T. Kearney’s Procurement and Analytic Solutions organisation.

Why Procurement Needs to Open the Door to Supplier Diversity

Procurement is under pressure to engage more in supplier diversity. But help is at hand from organisations who can help make connections.

In May 2015, the Australian Government set out Indigenous company contract targets for federal departments and agencies. Starting from 0.5 per cent, the targets were set to rise to 3 per cent by 2019-20.

The joint message from the Minister for Indigenous Affairs and Minister for Finance claims, “the policy will ensure that Indigenous businesses have the chance to compete and showcase the products they have to offer.”

Supply Nation is the Australian leader in Indigenous supplier diversity. The organisation exists to connect Indigenous-owned businesses with the procurement teams of government and corporate organisations.

Supply Nation has worked closely with government to collaborate and influence the evolution of procurement policy that is now represented by the Indigenous Procurement Policy.

We sat down with Supply Nation’s CEO, Laura Berry, to talk more about the importance of this benchmark, and how organisations across Australia can strive to meet it. 

Why is engaging with Indigenous-owned businesses and suppliers so important for organisations across Australia?

Supply Nation strives to increase opportunities for Indigenous-owned businesses to supply their goods and services to large organisations. Supplier diversity puts under-represented businesses on a level playing field with other qualified suppliers when it comes to competing for the supply of quality goods and services.

One of the major benefits of opening the door to additional markets and engaging in supplier diversity, is that it facilitates the growth of Indigenous businesses. This results in increased economic activity and employment, and channels greater social value back to Indigenous communities.

In addition, data clearly shows that supplier diversity drives significant and measurable long-term business benefits, aside from the goods and services, which can ultimately provide a unique experience to customers. The addition of Indigenous-owned businesses can bring increased competitiveness, innovation and savings to the supply chain.

What qualities and capabilities have you built that supported you in achieving better procurement outcomes?

Creating an environment where our members and suppliers can connect, develop relationships and identify future procurement opportunities is integral to the work of Supply Nation.

Supply Nation assists our government and corporate members with tools and strategies to embed supplier diversity within their supply chain through a tailored account management model.

We also provide support for business matching, opportunity briefings, supplier promotions, external training opportunities and networking events.

What are the biggest challenges Supply Nation faces in procurement at the moment?

As a not-for-profit organisation, the procurement challenges facing Supply Nation itself are not significant. However, for our Indigenous suppliers, the challenges are the same as those faced by small businesses across Australia.

These include the difficulty in breaking into established supply chains and conventional procurement processes, or in developing relationships with buyers.

With the Federal Government’s Indigenous Procurement Policy, there’s more pressure for government buyers to find and engage with Indigenous-owned businesses. We see a real challenge – and a real opportunity – in facilitating the connection between the businesses and procurement professionals.

What’s the first step for organisations looking to alter their processes to meet new supplier diversity requirements around Indigenous suppliers?

Step 1 would be to become a member of Supply Nation (if you’re not already)!

Take the opportunity to search for goods or services through our directory, Indigenous Business Direct. You can engage with a Supply Nation Relationship Manager who can help you navigate the process.

We can help with changing internal policies and procedures, connecting with businesses that meet your requirements, and setting up established and sustainable supplier diversity practices that are modelled on world best practice.

How can attendees benefit from attending GovProcure 2016 (where Laura is speaking)?

We have some amazing, successful and diverse Indigenous-owned businesses that are growing fast and delivering incredible products and services. I’d recommend everyone comes along to understand how they can engage not only to hit their targets, but also to get some insight into the benefits these businesses can bring to your supply chain.

Among other Australian procurement leaders, the event will also feature Ian Rudgley, CPO for the City of Sydney, a council that despite not being subject to the federal targets, has award-winning engagement and mentorship of Indigenous suppliers.

For more details on the agenda please download the brochure.

Does Insurance Against Failure Really Keep You Covered?

Is it really worth taking out insurance against system failure? Is the true value in a system that works first time, all the time?

Download ‘Parting the Clouds‘, Smart by GEP’s latest whitepaper, to understand the difference between Cloud Solutions and SaaS Software.

There was a debate in the office that ran for a while when we were putting together the white paper that’s associated with this post.

“Yes,” said one camp, “we understand that there are technical, operational and architectural differences between Cloud and SaaS, but so what?”

In other words, why should Procurement care how their software “solution” is delivered to them, as long as it works?

“Fair point” said the others, “but if we believe the cloud model is inherently more secure, robust and future-proofed than the other, should we not call out that distinction?”

“Again,” came the response “if a SaaS implementation is backed by the necessary service level agreements from the supplier, what’s the difference?”

And that is when the subject of insuring space launches came up.

Bear with me.

Can Insurance Really Cover Everything?

Insurance is what we’re talking about, of course. Ensuring your Procurement operation can carry out the business at hand without interruption or disruption is a primary goal of selecting the right software system. The SLAs in the contract with the vendor are what comprise that insurance policy.

As is the case with everything in the insurance world, the greater the degree of protection you want, the higher the premiums.  But there is also a matter of the risk.

Seven per cent of satellites and spacecraft fail at launch. Recently some fairly dramatic launch failures have made the news. The ones that really make the headlines are those that involve the destruction of a payload that teams of scientists have been working on for years.

You can almost feel the despair and horror of watching a decade’s hard work destroyed in mere seconds.

Usually, but not always, these payloads are insured against multiple possible eventualities. Launch failure, failure on deployment, failure on landing – as in the case of the recent ESA Mars mission. Naturally the premiums are immense to insure an interplanetary mission. Often the insurance by no means covers the ultimate cost of the failure.

The many millions paid out after a launch failure may cover some of the financial stake invested by the agencies funding the project. However, there is essentially nothing that can recover the loss of the science that was to be delivered. The physical and material can be replaced, but the loss of the results is absolute.

Don’t Insure Against Failure – Do It Right First Time!

A far better form of insurance for space launches is a system that doesn’t go wrong. This is in fact the calculated risk taken in many projects. Catastrophic failure cannot be mitigated with cash, so better to spend the insurance premiums on building something that won’t explode.

And this is why it seemed an appropriate metaphor for the kind of SLA insurance under discussion. It’s all very well having the on-paper insurance for failure coverage, but that’s of little consequence if the financial value of the pay-out can do nothing to mitigate the real cost.

This is why, then, we feel there is a clear distinction between different interpretations of what “cloud” actually means. The fundamental underlying scalability, security, robustness and other forms of risk really should be considered when making a genuinely informed decision.

Comparing vendor contracts like for like you may see the same SLAs – system availability, uptime and access. But without a doubt the benefit of an SLA is in never having to rely on it.

If your procurement technology fails, are you really covered against all the potential losses? What risks should you be considering when adopting new Cloud technology?

Download Smart by GEP‘s latest whitepaper, ‘Parting the Clouds to find out all you need to know.

Could Brexit Cloud have a Silver Lining?

The Brexit result upset the apple cart. It also left many people searching for a silver lining to the clouds on the horizon.

This article was written by Daniel Ball, Director, Wax Digital.

Marmite – you either love it or hate it as they say. Well, Tesco for one was probably agreeing with the second of those sentiments recently when its rocky relationship with the brand’s owner Unilever hit the press.

As you’ll remember the food giants’ spat was triggered when Unilever stated it would need to raise its UK prices. This was in order to offset the impact of the pound’s post-Brexit weakness against the Euro in its supply chain.

Tesco retorted by removing Unilever products from its shelves. A bold move considering the food manufacturer owns many leading consumer brands.

Weakening Sterling

To recap, in mid-October the pound fell to a value below €1.10 for the first time since March 2010. The pound had generally been on the slide ever since the UK’s EU referendum back in June. It was also performing weakly against other major currencies including the US dollar and those in most emerging markets.

In many ways this is bad news for UK consumer and business to business purchasing. Both as individuals and organisations we’re pretty heavily reliant on global supply chains, meaning that it will cost domestically-based organisations heavily.

UK manufacturers sourcing parts and materials from overseas to make products locally, will pay more due to poor exchange rates.

Equally retailers and wholesalers buying end products from other countries will pay more to put them on their shelves or fill their warehouses. These cost increases will inevitably be passed on to UK business customers and consumers alike.

Returning to Domestic Focus?

However the situation may not be all bad and there could be a silver lining in this post-Brexit cloud. One potential positive outcome from this situation could be some British supply chains choosing to return to a more domestic focus.

Weighing up the options in a less than favourable global financial position, it may make sense for some UK businesses to explore the cost benefits of buying locally. This will help to remove exchange rate risk, even if local supply is not the cheapest price book option.

After years of decline, UK manufacturing may actually receive a boost and resurgence of ‘Buy British’ standards of the past. However this will be fuelled by necessity, rather than a Brexit campaign.

Admittedly it’s an ambitious scenario. Imagine the impact of Tesco commissioning UK food producers to come up with viable, locally made alternatives to replace Unilever’s full range. Especially considering its brands comprise around half of the worldwide grocery market share.

Secondly, consider how a weak pound may also drive overseas buyers to look to British suppliers for pound-based pricing. This will allow them to realise the benefit when the Sterling costs are converted back into their own stronger currencies. UK suppliers could see new market openings and opportunities to trade overseas that once didn’t exist.

British supply may suddenly become in vogue.

Silver Lining in Currency Battles

For procurement teams choosing to buy domestically, a move such as this will mean significant focus on supplier sourcing and close inspection of supplier relationships. Necessary checks and due diligence would have to be built in, in order to ensure any changes in supply didn’t leave the business at risk.

Equally procurement professionals working supply side in the UK should seek to advise the business on how to make the most of new opportunities and negotiate effectively in supply relationships.

Brexit is rather like Marmite in that it divided the nation. But while there are fears about the UK’s future after Brexit, recent currencies-related battles have highlighted a potential silver lining.

Now could actually be the time where we see both onshore and offshore buyers eyeing up UK supply options over going overseas or opting for their foreign domestic choices.

Procurement would need to ensure necessary checks, due diligence and information management in new sourcing activities. There would be a need to ensure swift and effective onboarding. New contracts and relationships would have to carefully managed to minimise ongoing trading risk with new partners.

But if procurement can pull this off, who’s to say this cloud couldn’t have a silver lining?

What Can Procurement Learn From 2016?

From politics to procurement – 2016 has changed our outlooks. But what can the profession learn as we head towards the new year?

politics of change

I’m not a political person, never have been, but maybe 2016 has put paid to that. It could be my advancing years or the direct relevance the events of 2016 have created, but politics has now piqued my interest.

Furthermore, as a business owner, parent and amateur investor, it’s beholden on me to be well informed and to put in place risk mitigating strategies should the worst happen.

Different Outlook

To anyone who knows me, I think I’d fairly describe myself as a cautious optimist. Someone who believes in the enduring power of ‘doing the right thing’. I must say this outlook has been tested to its limits these last three months.

And with the result of last Wednesday’s US election now a reality, I find myself having to re-evaluate this mantra.

I think it’s fair to say that few people in business expected the UK to vote for Brexit. Even fewer expected the US to elect Donald Trump as President. To say that the pollsters who predicted strong contrary outcomes have been wrong-footed is an understatement.

As BBC correspondent Mark Mardell wrote on Wednesday, “it is perhaps ironic that our two countries, with a reputation for stable political systems, have declared political revolutions of such importance”.

Ironic or inevitable, if find myself asking. As Trump put it, his path to victory was ‘not a campaign, but a great movement’.

Undoubtedly from these 2 cataclysmic events there is the notion that globalisation has given folk a raw deal. There is a belief that the gap between rich and poor has widened. This is clearly nothing new.

But the events of 2016 are now showing us that people are willing to express their desire for change in a manifest way, and that the UK’s referendum and US elections have facilitated this expression. Clearly the belief that ‘we need people who change the world, rather than describe it’ has never been more true.

Politics & Procurement

So aside from emotive connotations of such seismic change, what can the Procurement profession learn about these events?

I’ve always read with interest the term ‘Force Majeure’ in contracts, essentially the common clause that frees parties from legal obligation when an extraordinary event occurs. Is 2016 now the year of Force Majeure?

As organisations have historically rushed to globalise their supply chains, are we now going to see a reversal of this and a more localised, protectionist approach to markets? The challenge for Procurement Leaders will be how to predict these events and to mitigate the risks associated with global change.

Without doubt we are entering an era that favours a less politically correct approach of yesteryear, one that rewards forthright opinions and direct action. The new breed of procurement practitioner will need to build this thinking into category plans, sourcing strategies and contracts.

I, for one, will be watching with interest.

How 9 Technologies Will Drive Global Supply Chain Disruption

Cloud corporations, supertrends, and potentially procurement without lawyers and auditors. Are you keeping up with technologies driving global disruption?

Last week, Procurious attended the ProcureCon Europe conference in Berlin. You can read about our experiences, keynote highlights, and more on our Blog.

One keynote caught our attention enough that we felt it needed delved into in more detail. Professor Leslie Wilcocks, Professor of Technology Work and Globalisation at LSE, spoke about how procurement needed to prepare itself for digital disruption.

If you are a regular reader of the Procurious Blog, then you will be aware that we have a keen interest in future technologies. From drones and last mile logistics, to blockchain, we’re aiming to keep up to date with the impact on global supply chains.

So with this in mind, we revisit what was a fascinating keynote.

Prepare for Disruption!

Professor Wilcocks kicked off with the following statement: “Technology will disrupt pretty much everything between now and 2025.” This isn’t just the world of business, though that will see a massive change. But it’s also everything we do, see, touch, and encounter in our daily lives.

According to the GEP Procurement Outlook 2016, there are 5 so-called “supertrends” we need to be on the look out for. These are:

  1. Heightened impact of geo-politics
  2. Shift of economic power to the USA and emerging economies
  3. Continued decline in global commodity prices
  4. Increased impact of climate change
  5. Push to Digital

It’s safe to say that all five have been highly visible during this year. We’ll be keeping an eye out for 2017’s “supertrends” with great interest!

However, it’s the fifth trend that Professor Wilcocks focused most on. He believes that much of the interconnectedness and innovation being seen in procurement comes from the application of technology.

As we have frequently stated, procurement cannot afford to ignore technology. If it does, it cannot deliver true value to organisations, and faces redundancy, or obsolescence, in a fast-changing world.

Rise of “The Cloud Corporation”

Happily, the assembled procurement professionals were given a list of technologies to watch over the next 4-5 years. These fell into an easy to remember acronym, SMAC/BRAID.

  • Social Media
  • Mobile Technology
  • Analytics (Big Data)
  • Cloud Service
  • Blockchain
  • Robotics
  • Automation
  • Internet of Things
  • Digitisation or Digital Fabrication

These technologies all link together to help the emergence of digital businesses. Or as Professor Wilcocks put it, “The Cloud Corporation.” They also provide a number of opportunities and challenges for businesses. They need to be more agile, and manage on a ‘micromultinational‘ level, but it also opens up the potential for major process innovation.

However, Wilcocks did give one caveat on technology and innovation. No-one knows how to fully maximise the potential of technology. The only way to do this is by learning by making mistakes, something less agile organisations have proven themselves to be less good at in the past.

Transforming the Supply Chain

So how does all this fit together with disruption to the global supply chain? For the most part, the disruption has already started, and, as a result, organisations are playing catch up. However there are some tactics that can be used.

  • Organisational – realigning organisations strategy for supply chains on a functional, geographical or regional level.
  • Technological – ensuring supply chains are integrated to work best through better connectivity.
  • People – traditional pyramid structures aren’t optimised for the digital era. Human talent in the digital supply chain should be organised as a diamond, providing a more streamlined hierarchy, and better training opportunities at the lowest levels.

Switching the focus to the benefits of automation showed how the technologies could impact productivity. Traditionally, organisations have used five methods to transform their supply chains:

  1. Centralise
  2. Standardise
  3. Optimise
  4. Relocate to Low Cost Region
  5. Technology Enablement

However, there is a sixth that can, and is already, increasing productivity in supply chains – automation. It’s estimated that by automating, an extra 3-4 per cent can be added, on top of the efficiencies found in the other measures, by automating processes.

Final Word on Blockchain

There was one final word on blockchain before the end of the keynote. The disruption being caused by blockchain is, in itself, a protector for organisations from being disrupted. And organisations can leverage the technology to aid transparency, governance, and authentication.

Blockchain can also help with the evolution of “smart contracts”. These contracts can have rules set for automatically storing data, and executing commands.

Could it help to disrupt the disruptors? Probably, yes. Operating the technology at its most effective level could remove the need for banks, lawyers, credit cards, and even auditors, in the procurement process.

Whatever the challenges that exist, surely that’s something to aim for. Isn’t it?

Do Labels Matter? The Debate That Just Won’t Go Away

Purchasing? Procurement? Strategic Sourcing? Supply Management? As the profession continues to evolve, old labels tend to come unstuck and peel away.

Getting Out of the Back Room

It started in the 1990s. Like drab caterpillars transforming into magnificent butterflies, purchasing professionals left their brown cardigans draped over the backs of their uncomfortable chairs in dimly-lit back offices and emerged, blinking, into the bright hub of the business.

No longer a service department, we were suddenly business partners. We talked strategically rather than tactically, proactively seeking to understand what the organisation was trying to accomplish, and find ways to contribute to its competitive advantage.

But, what did we decide to call ourselves?

Almost thirty years later, the only thing that has really been agreed upon is to leave the term “purchasing” behind. Perhaps if there was one global, all-encompassing professional body, the decision would have been made for us, but unfortunately this isn’t the case.

In the U.S., the National Association of Purchasing Agents (founded 1915) changed its name to the National Association of Purchasing Management (1968). It finally became the Institute for Supply Management (ISM) in 2002.

In the UK, CIPS changed its name from the Chartered Institute of Purchasing and Supply to The Chartered Institute of Procurement and Supply as late as 2014.

Across private businesses and government departments there’s a bewildering array of labels and job titles. This, of course, makes the standardisation of job descriptions and salary levels unnecessarily difficult.

Getting Out of the Box

I’m half-way through ISM’s “Fundamentals of Purchasing” guided learning (e-learning) course under the tutelage of Dr Wade C. Ferguson, President, Erv Lewis Associates, LLC. The course begins with some of ISM’s definitions around Supply Management and what the profession actually entails. It led to one of the class (me, actually) asking Wade’s opinion on the term procurement versus supply management.

His reply: “Changing definitions represent the evolution that the profession has gone through. In the company I worked at for over 30 years, we changed our name from “purchasing” to “procurement”, but it didn’t really change anything, as procurement is basically a subset of supply management.

“It’s a necessary and important subset, but if you want to be more encompassing, we prefer the term ‘supply management’. It underscores the recognised breadth of the modern supply chain and the need for coordination and value optimisation.”

Wade argued that the reason for dropping the old label was a profession-wide effort to, “Get out of the box. Out of the myopic purchasing view, to understand what the organisation is really trying to accomplish. When we can do that, we’re perceived as being strategic, not just a tactical cost centre.”

Pigeon-Holed by Labels?

This argument makes sense when you look at ISM’s definition of responsibilities under the Supply Management umbrella:

  • Purchasing/Procurement
  • Strategic sourcing
  • Logistics
  • Quality
  • Materials management
  • Warehousing/stores
  • Transportation/traffic/shipping
  • Disposition/investment recovery
  • Distribution
  • Receiving
  • Packaging
  • Product/service development
  • Manufacturing supervision.

If you wanted to keep things in separate boxes, then I’d estimate that roughly half of the components above belong to Procurement, while the other half belong to Supply Chain.

This separation of responsibility might work in a company where, say, you have a Chief Procurement Officer working closely with a Chief Supply Chain Officer. But why not combine those two roles into one? It’s all interconnected, and it makes sense. And Head of Supply Management could be the label that encompasses the whole picture.

Here’s the thing – maybe, just maybe, the narrowing effect of “Procurement” labels is one of the contributing factors holding Chief Procurement Officers back from that coveted spot at the boardroom table.

Even for those CPOs out there who do in fact have responsibility for the supply chain as well. It’s possible that their very title means that this vast part of their role isn’t actually recognised by the people that matter.

Don’t Abandon the Progress We’ve Made

In a previous article, Procurious founder Tania Seary also called upon the profession to stop worrying about what we call ourselves:

“In my opinion, re-branding procurement is a distraction, especially since we’ve made enormous progress in educating businesses about what procurement does. Rather than having to re-educate the C-Suite about what a Commercial Director or Chief Relationship Officer does, that energy could be better spent actually showing people what we have and can achieve.

In line with why we created Procurious to begin with, we know that the procurement and supply chain profession has struggled to overcome outdated stereotypes, so it’s time we join forces to become collectively valued. By empowering future procurement leaders, we can change the face of the profession from the inside out, rather than worrying about the label itself.”

Things Certain to Change Again

“The only constant in life is change.”

…just as the only quote that the Greek philosopher Heraclitus will be remembered for is the one above.

The Procurement/Supply Management/Whatever-you-want-to-call-it profession has changed so much in the past thirty years that there’s no reason why it shouldn’t change again. By the time we’ve settled our current labels debate, it may already be outdated.

Can Procurement Lead the Fight Against Protectionism?

Protectionism will never produce a win-win situation. And it can be a huge wall for procurement to work around.

Few procurement professionals view their role through the lenses of either protectionism or free trade. But the protectionism-free trade dimension is a crucial topic for procurement, so it is certainly worth thinking about the impacts on procurement the world over.

The Oxford English Dictionary defines protectionism as, “the theory or practice of shielding a country’s domestic industries from foreign competition.” Further, protectionism is a mind set as much as formal policy; it is the intentional or inadvertent preference for domestic industries over foreign industries.

Free trade meanwhile is “international trade left to its natural course without tariffs, quotas or other restrictions”.

The translation into procurement is fairly simple. Protectionism is limiting access to domestic procurement markets to foreign suppliers, and the preference for awarding public contracts to domestic rather than foreign suppliers. Free trade is the absence of this.

Protectionism is largely, or partly, illegal between numerous countries with free trade agreements (FTAs), such as the North American Free Trade Agreement (NAFTA), or are part of a trade bloc such as the European Union. But protectionism includes more subtle biases.

Ideas around boosting the local economy, creating local jobs and protecting the local environment are all protectionist when preferred over equal boosts to an economy, job creation, or the environment elsewhere.

Protectionism – A Zero Sum Game

The first strand of this article is that protectionism harms economies, jobs and prosperity, locally and globally, for two reasons.

Firstly, it is intuitive to think that sourcing goods and services locally has positive impacts, creating jobs and economic growth in the local area. But this is a zero sum game.

Protectionism is normally reciprocated. If one country has policy preference for domestic businesses, then other countries respond in the same way, offsetting the benefit. Protectionism may allow Country A to create more local jobs by awarding contracts to domestic businesses. However, when Country B does the same, export jobs in Country A are lost.

No more jobs are created and no additional economic growth is produced by procuring from domestic suppliers. Domestic industries get some short term benefit and exporters lose out.

Should We Really Favour Our Own Country?

Protectionists argue that public procurement in their own country should favour domestic businesses. In the UK, the contract for a large rail project in London was awarded to Germany’s Siemens, ahead of UK-based Bombardier. Cue outrage at job losses in the UK factory because the government awarded to a foreign business.

Unless protectionists believe they deserve double standards, this logic dictates that Bombardier should not have won contracts with Trenitalia, Italy’s main train operator. Nor should British architects have been awarded the contract to build the dome for the German Reichstag.

These created British jobs from German and Italian taxpayers. Hundreds of thousands of British jobs rely on British businesses winning public contracts outside the UK through non-discriminatory competition.

In the USA, incoming president Trump has riled against other countries “stealing” American jobs. However, he does not seem to oppose German, Japanese and Korean car manufacturers employing hundreds of thousands of workers in American factories. But surely the British and American governments’ obligations are to their own workers and businesses?

Maybe so. A country having an obligation to help domestic businesses and workers more than the rest of the world is understandable, but there is not actually any gain. Protectionism also makes British and American citizens and workers worse off.

Reducing Choice & Raising Costs

This leads onto the second reason. Protectionism gives citizens fewer choices of what they can buy and increases their living costs. The belief that protectionism helps local communities at all is flawed.

Free trade allows consumers to have the best goods, regardless of location. In the developed world, the UK is bad at growing bananas and the USA makes expensive toys, so free trade enriches citizens by allowing better bananas and cheaper toys.

Free trade allows businesses and citizens in the developing world to access the best technology and equipment that is not or cannot be effectively produced locally. In essence, protectionism limits the goods that citizens can buy, to everyone’s loss.

Hamstrung by Protectionism?

This has the exact same impact on procurement and the second strand of this article is that the procurement industry is hamstrung by protectionism. Protectionism harms both the procuring entity and ultimately the users of public services.

If a hospital needs new radiotherapy machines, it should procure the machines with the best combination of quality and price. In a world of 7 billion people, the best radiotherapy machines will probably not be made locally, and maybe not domestically.

Basing buying decisions on nationality rather than value for money and effectiveness of the radiotherapy machines hurts cancer patients and increases costs for taxpayers. As protectionism is reciprocated, it decreases consumer choices and increases import costs. This is without even a net benefit for domestic industries or workers.

This conclusion that should therefore be reached is that every protectionist move has pros and cons, but the pros are directly and equally offset by counter-moves, leaving only the cons intact and everyone worse off. Hardly a desirable outcome.

So in the context of the Brexit vote, Trump’s victory and the stagnation in global trade, the case needs to be made now more than ever that protectionism on net harms prosperity. Procurement functions have a large role and responsibility to their organisations, countries and the world to avoid it.