Category Archives: Procurement News

How Does it Feel to Be a Supplier to You?

Being a customer of choice in procurement is important. Ensuring your supplier feels part of the team is also important.

Supplier to You

As procurement professionals we care about the quality, delivery, cost, innovation and sustainability performance of our suppliers. These are usually wrapped up in Key Performance Indicators (KPIs), a key tool within the procurement community.

Now that we as a population are facing resource scarcity, what sort of questions should we start asking ourselves to ensure that we continue being the ‘customer of choice’, and make the supplier feel that they are a prime source of value to our organisation?

Why ‘Customer of Choice’ is Important

Every day, news headlines and scientific reports reflect a world increasingly impacted by unsustainable trends and catastrophic climate events.

Oceans are becoming more acidic, with devastating results on coral and connected ecosystems. The air in major cities is full of dangerous particulates. Crop-growing regions for key commodities are shifting. Sea levels are rising.

All this could potentially lead to resource constraints and risk in the supply chain which procurement, amongst others, should mitigate.

The essential questions procurement should be asking itself are:

  • How can organisations possibly develop a ‘single point of truth’, which is reliable and up to date?
  • How can they manage contracts and monitor KPI’s?
  • How can they handle data and information and avoid rework and duplication and look at the relationship from the supplier’s perspective?

Key Questions for Your Supplier

It starts with the sourcing process where the supplier is evaluated, perhaps even audited, and then at the end when a contract is developed with them. Suppliers will evaluate whether these selection processes run fairly and competently.

In the on-boarding and the execution part of the relationship, the supplier will most probably evaluate how the communications went, how easy it was to create and implement changes to the administrative routines, and how the on-boarding was tackled.

When the relationship starts out, the evaluation will typically be how time consuming or complicated it is to deliver goods and services, and whether the same information is requested by different people.

When it comes to the strategic relationship, a key question to ask yourself is whether you ask your suppliers their opinions about issues that might affect them, including issues around risk.

And then, when you ask them, are you then open to new ideas, new products, and new ways of doing things?

Organisational Benefits

How would this benefit organisations? The time it takes to manage the relationship should become more effective. So should the visibility from spend analysis to sourcing exercises to strategic relationship management.

As a result it should help drive better relationships and help achieve competitive advantage for both parties. And this should of course be linked to your company’s sustainability journey.

Maximising Scientists’ Most Precious Resource – Time

Latest Enterprise Reagent Manager (ERM) system streamlines procurement processes and user interface, freeing up scientists’ valuable time.

ERM - Scientist Time

In the pharmaceuticals and life sciences business, time is the most precious resource. The more time available to be spent on research, the more ability scientists have to innovate. To support this, procurement processes need to be accurate, swift and robust.

Mid-way through their Next Level 2016 event, SciQuest announced the release of the latest version of Enterprise Reagent Manager (ERM).

ERM is a chemical inventory management software module that gives researchers and scientists full control over research inventory, from sourcing and purchase, through tracking and disposal.

Differentiated by it’s offering as the first and only triple-federated search functionality, SciQuest’s ERM is used by 8 of the 10 top global pharmaceutical companies.

Dynamic & Responsive Interface

According to SciQuest, ERM allows users to check material availability from suppliers in real-time, and to search across all internal and external sources simultaneously.

“ERM 9 is up to 90 per cent faster than previous versions,” says Raj Aggarwal, SciQuest Product Marketing Manager. Aggarwal adds, “Users can only search chemicals not only by supplier, or text description but also by molecular structure.”

So what has customers excited about the new version? Raj explains it’s all about the new user interface, speed and the three-way search.

ERM’s speed comes via a more dynamic and responsive user interface. Raj explains, “One-click tiles speed up navigation to important tasks, while status icons display user actions, like items in a shopping cart, or requesting a container for use from inventory.”

Bruce Cherrin, Chief Procurement Officer at the University of New Mexico confirms this. He believes the new look and feel of the system will, “Drive higher adoption among users campus-wide and streamline our procurement processes.”

Fast, Real-Time Availability Checks

In addition to the search feature, the upgrade includes the following features:

  • Real-time material availability check from suppliers: Users can now search across all internal and external sources simultaneously.
  • Web service integration: External inventories and catalogues can now be incorporated into ERM’s search function.
  • To Do List: Researchers can checkout and manage items from labs or self-service areas, and conduct a transfer of ownership and update usage without a scanner.
  • Held Cart: Allows administrators to control purchases of high cost and/or hazardous materials from non-authorised personnel.

“Since ERM closely integrates with procurement, pharmaceutical manufacturers can control complex inventories with reduced general spend and disposal costs, optimised inventory use, and increased regulatory compliance while managing the risks associated with hazardous materials,” said Stephen Wiehe, President and CEO of SciQuest in their announcement.

SciQuest NL 16

Aligning ERM with Unlocking Value

It’s these sorts of enterprise wide business challenges that are driving SciQuest’s product strategy. We asked Raj how the new release of ERM aligns with this mission to unlock more value. Raj offered four reasons:

  • Expense Optimisation – The inventory system allows users to order from stock, rather than placing new orders for expensive reagents from scratch, and efficient, safe disposal.
  • Compliance – Scientists often deal with hazardous materials. Certification is required to purchase, store and use many of the reagents used. The system provides for more than just internal compliance. ERM also allows research institutes to ensure suppliers are meeting their certification and storage obligations
  • Safety – Maintaining safe labs is a paramount concern in the life sciences industry. With greater visibility, users can see what’s coming in before it arrives and make plans to safely store and manage their liability.
  • Compliance and Approvals – ERM has a robust permissions system which allows users to lock access to different levels by putting reagent requests into held carts. Approvals can then be granted based on spending limits that get put in workflow.

Regardless of the industry, leveraging information more effectively for the business is a clear mandate for the product team at SciQuest.

Raj concludes:  “ERM will help get inventory information out where users can see it, create ad hoc reports, and use this to anticipate, plan and mitigate. And most of all, it puts time back in researchers’ hands to innovate.”

For more information about Enterprise Reagent Manager, please visit SciQuest website or contact SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

The Big (and Alarming) Procurement Disconnect

Chris Sawchuk reveals an alarming disconnect between the most pressing issues for Procurement, and our ability to address them.

Big Disconnect

The number one priority for Procurement leaders this year? “Reducing Costs,” says Chris Sawchuk, Principal and Global Procurement Advisory Practice Director of The Hackett Group.

Before you stifle a yawn and declare this a no-brainer, it’s actually the first time since the depths of the Global Financial Crisis that Cost Reduction has been back at top of the heap in The Hackett Group’s annual Key Issues Survey.

“For some years now procurement’s top priorities have been about growing the top line, increasing influence and becoming a trusted advisor to the business,” explains Chris. He notes a clear shift in 2016. “It’s back to basics and the enterprise needs help to remain cost competitive in an ever volatile world.”

Speaking at SciQuest Next Level 2016, Chris doesn’t find it surprising to see Cost Reduction back at the top of the list. Particularly when more than half (55 per cent) of companies have a major enterprise cost reduction initiative planned this year.

However, Chris is quick to note the second highest priority for procurement leaders is driving top line growth. This is also consistent with the fact that nearly half of all enterprises have a major sales and marketing strategy optimisation initiative planned for the coming year.

Within The Hackett Group’s top priorities, the big mover is tapping supplier innovation. This has taken a significant leap up the list of ‘must-dos’ for procurement leaders this year.

“Increasing spend influence is always fairly close to the top, but more and more innovation is being looked on as an enabler for driving top line growth – as well as cost competitiveness,” says Sawchuk.

The Big Disconnect

So far its been a compelling whirlwind of data points, but it’s Chris’ next slide that has me concerned. This is where the disconnect lies.

It shows those priorities Procurement leaders think are most important to address, mapped against those which we also think will be most difficult to do.

These are the priorities that alarmingly fall into Chris’ ‘Red Zone’ – that dangerous, “Important, but rather tricky to do” box:

  • Tap supplier innovation
  • Improve agility
  • Increase spend influence
  • Elevate role of procurement as trusted advisor

Undoubtedly these are tough issues to address, not only for their complexity, but because they require Procurement to look well beyond it’s traditional value lens. They demand more than the ‘bread and butter’ cost-analysis and sourcing skills for which procurement is renowned.

So with a deep breath and a can-do attitude, Chris walks us through how Procurement leaders can get a handle on these important ‘Red Zone’ priorities.

Chris Sawchuk
Chris Sawchuk

Enough buzz words! What does it take to be a Trusted Advisor?

First up, Chris addresses what it actually means to be a ‘trusted advisor’. According to The Hackett Group’s annual survey, the top criteria determining what makes a trusted advisor are:

  • Consistently deliver on the basics (77 per cent)
  • Hire and retain high caliber staff (64 per cent)
  • Increase agility (61 per cent)

The main point to note here is there has to be consistency to this. “Procurement needs to do what it says it’s going to do,” says Chris. “Building trust takes time.”

When it comes to identifying high calibre staff, Chris doesn’t so much see a problem with the depth of the talent pool, but more with how we engage and retain top talent.

Chris also linked back to a concept discussed during Sigi Osagie’s earlier SciQuest keynote. Putting people at the centre of your strategy, really engaging them and helping create an environment where people thrive, is the real challenge.

Improve Agility  

Next up, agility. This has been a key thought leadership theme for Chris and The Hackett team over the past 12 months. “Procurement can’t be a hammer going about looking for a nail, we need to listen to our customers. What do they need? And if what they need is outside our portfolio, find out what we can build to help them.”

Again, drawing on Sigi’s presentation, Chris reminds us it’s all about ‘delighting the customer’.

Undoubtedly future leaders must be able to deal with ambiguity, provide differentiating intelligence to the business, make and implement decisions quickly and forecast and plan continuously to mitigate future risks.

“We need to think about how we weave agility into every aspect of what we deliver back to the business,” challenges Chris.

Hear more from Chris about Making Agility Core to all procurement activities.

Increase Spend Influence

Chris keeps this point brief. “As Procurement leaders, we cannot continue to fish in the same pond,” he explains. “We need to find new ways to source of value.”

A classic case of diminishing returns, if you will. To this he adds that we also need to improve the quality of our influence, not just the quantity.

Tap Supplier Innovation

As the biggest mover on the list of procurement priorities, Chris believes that the best way to encourage innovation is to make it part of the job and reward contributions.

Finding ways to support and encourage intrapreneurs – those people inside your business who can drive innovation and lead change – is how the most successful businesses of the future will steal a march on their competition.

Naturally Chris also advises that Procurement leaders need to be aware and up-to-date with innovations and trends occurring in the market place. “Get knowledgeable about big data, robotics, cognitive computing, mobility, cloud and social media, if you want to get ahead.”

Like anything that’s new, it’s going to require courageous leaders to address this gap between procurement priorities and preparedness. Chris suggests a good place to start, “Ask yourself, are these things we’re focused on? Should they be? And if not, why not?”

SciQuest Next Level takes place from August 21 – 24 2016. For more information on agility and the big procurement disconnect, visit www.sciquest.com or Tweet SciQuest via @SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

Uber: The Great, Untold Procurement Story

Addressing 800+ delegates at SciQuest Next Level 2016, Stephen Wiehe’s enthusiasm for design, disruption and innovation is infectious.

Overcrowded Uber

Stephen Wiehe, CEO at SciQuest, is clearly a man who likes to ‘make stuff’. A tinkerer, a designer, an ideas-man, maybe a little bit of a tech-head.

Opening Next Level 2016 with a take on ‘Procurement’s Future in the Era of Disruption’, Stephen starts with some alarming, if increasingly familiar, facts and stats:

  • We are experiencing the fastest technological change the world has seen
  • Interest rates are at their lowest since records began
  • Market volatility has doubled
  • We are seeing unprecedented, rising geo-political instability
  • 40 per cent of companies will be extinct in 10 years

It’s not long, however, before he pivots towards his passion for design, innovation and customer connectivity.

Stephen points to GE’s First Build R&D facility as an example of how businesses are going straight to the customer for their next great innovation.

A darling of the corporate crowdsourcing movement, First Build aims to invent new home appliances by creating a community of home enthusiasts, designers, engineers, and makers who share ideas, try them out, and build real products.

“Once upon a time, R&D facilities were hidden and process driven,” says Stephen, “Today, GE have flung open their doors to anyone who has a good idea. Customers with an idea can quite literally walk-in, use the machines and GE will help you build it.”

No Industry is Immune to Disruption

As a London local and 4.8 star rated Uber user, it still comes as a surprise when I meet someone who has never used this global phenomenon before. For me, Uber has transformed the way I move about the city, track payments, and even the amount of cash I need for a night out.

So when Stephen flicked up a slide of yellow taxi cabs, I must admit my first thought was, “Ok, here we go, Uber. Heard this before.”

But Stephen takes the analogy much further: “Uber is not a technology story, it’s a procurement story.

“The whole process of getting an Uber is really a procurement process. First you request an Uber – not dissimilar to filling out a requisition form. Next, there’s a sourcing event – Uber drivers, armed with your passenger rating, your location and destination, bid to win the job.

“Then, the passenger accepts the job, confirming they are happy with the driver’s rating and location. A contract is formed – we accept the job and the mode of payment is agreed. And finally the AP process occurs seamlessly and conveniently with your stored credit card details.”

Uber in a Traditional Procurement Lens?

Uber even provides a handy Spend Management Tool allowing the user to see their complete driving, payment and ‘performance’ history. Particularly handy for parents of teenagers, as Stephen points out!

The penny drops. I’ve not thought of Uber in this way before – a fully automated Source-to-Settle process.

But Stephen pushes us to go one step further. “Imagine if Uber had approached their business from a traditional procurement lens.  We’d have the lowest vehicles, more passengers per vehicle and cheaper drivers.”

True – Uber’s open network has flipped the transport industry on its head. Stephen explains that Uber looked at the cab industry from the customers’ perspective and wondered what total transparency, real time data, and an open and connected network could deliver.

And I for one am thankful they did.

disruption
Stephen Wiehe – CEO, SciQuest

The Disappearance of the Back-Office

Just like Uber, which has automated the entire administration process of booking and paying for cabs, Stephen predicts the concept of procurement administration will disappear in coming years.

The issue for most businesses is that they are trying to do the same things over and over, and (not surprisingly) seeing only incremental value delivery.

Stephen told delegates that businesses will only see a step change when they start to simultaneously use procurement automation, collaboration and insights to drive decision making.

When it comes to procurement, our customers want a simple, straight forward way to connect with suppliers, get what they need, and make a payment. Fairly or not, Procurement is all too often accused of being slow, cumbersome and hard to deal with. Not the ideal adjectives for a ‘Business Partner’.

Maybe Stephen is right. Maybe the key to unlocking innovation and value will come from the customer. Just like Uber and GE, is it time to put sourcing in the hands of the customers and people who need the products? It’s certainly time to think differently.

SciQuest Next Level takes place from August 21 – 24 2016. For more information on procurement and disruption please visit www.sciquest.com or Tweet SciQuest via @SciQuest.

Lisa Malone, General Manager Procurious, is reporting live from SciQuest Next Level 2016 this week.

Your Must-See Agenda Picks at Next Level 2016

In a packed conference, you need a cheat sheet, a list of must-see keynotes and sessions. Here is the pick of the pops at Next Level 2016.

SciQuest Next Level 2016

Before attending a conference, I like to put together a “cheat sheet” so I can stay on track and use my time efficiently to fully maximise my conference experience. And Next Level is no different!

With such an extensive role-based agenda, top notch featured speakers, plus fun Nashville activities, there is something for everyone, from the CPO to administrators.

To help you make your choices, here are some of my must-see Next Level sessions to include in your itinerary!

Next Level – Monday, August 22

Spend Analytics in State Purchasing: The Georgia Experience (Hermitage E, 11:00-12:00pm)

Join the State of Georgia, who will take you through real-life Spend Radar experiences, and how to get to those golden nuggets of spend wisdom.

Walking through the purpose behind the analysis, the panel will explore massaging the data to be more useful, how to find meaning, and what the end results can accomplish.

Reverse Auctions in Sourcing Director: The What, Why and How (Cheekwood GH, 1:30-2:20pm)

Reverse Auctions let buyers conduct fast-paced competitive bidding events where multiple suppliers place bids on one or more items.

During the auction phase, suppliers receive feedback on the competitiveness of their bids in relation to bids submitted by other participating suppliers.

This session will review when a reverse auction should be used, the configuration details critical to the construction and administration of the event, and how a buyer can track key bid data while conducting a Sourcing Director reverse auction event.

Putting it all Together in the Real World: A S2S Case Study (Tennessee B, 2:20-3:30pm)
Fred Hutchison Cancer Research Center
Fred Hutchison Cancer Research Center

Inspired by business process optimisation concepts used in the military, Mark Burch, Director of Materials, has applied them to procurement at the Fred Hutchinson Cancer Research Center, where they are waging a war on cancer.

In a nutshell, materials management is about getting everything that’s needed at the right place at the right time. Whether you’re fighting a disease or just the inefficiency gremlin, Mark’s ideas and processes can help.

Come see how the implementation of SciQuest’s full source-to-settle suite is helping to optimise processes, gain insights into the organisation’s spend and deliver a high return on investment.

People, Process and Technology: A Real-World Case Study (Tennessee B, 4:00-5:00pm)

Georgia Institute of Technology procurement team will discuss their approach to managing both spend and spend systems by following this mantra: people, process, technology. They’ll discuss challenges and processes around initial roll-out, expansion into new modules and growing users.

They’ll share key performance metrics used to determine ongoing system performance, as well as to measure overall return on investment.

Tuesday, August 23

NAEP Innovators Forum: Strategic Supplier Relationship Management (Tennessee A, 1:30-2:20pm)

Procurement and supply chain teams invest considerable time and energy negotiating exceptional contract terms with key suppliers. Many teams consider their work complete when contracts have been executed.

However, there is evidence that much of negotiated value will leak away unless it’s carefully managed over the contract life. This places a premium on the ability to manage supplier agreements. But who has this responsibility and what goals and objectives should be pursued?

NAEP Director, Doreen Murner, and University of Colorado’s CPO, Sandy Hicks, examine this topic, which was first presented in the NAEP Innovators Forum: Strategic Supplier Relationship Management White Paper.

Real World ASO War Stories (Cheekwood ABC, 2:30-3:30pm)

Illinois Tool Works

Illinois Tool Works (ITW) is a Chicago-headquartered diversified manufacturer with 49,000 employees and 90 divisions in 57 countries.

In this session, ITW’s Strategic Sourcing Center of Excellence team will discuss their journey from a single-person pilot to a powerhouse for sourcing events with more than 200 events and hundreds of millions of spend competitively bid through Advanced Sourcing Optimizer (ASO).

If you’ve ever wondered what makes or breaks a COE in global, multi-business unit organisations, this session is for you.

Analysing eProcurement Business Success – Building Your Business Case & ROI (Hermitage B, 2:30-3:30pm)
Pierre Mitchell
Pierre Mitchell

No-one recognises the need for a strong business case and ROI analysis when considering large dollar purchases more than procurement professionals.

Whether you’re considering the purchase of a full source-to settle or P2P solution, or simply want to demonstrate to your leadership the value of your existing solutions, you will find this session to be beneficial.

Pierre Mitchell, Chief Research Officer and Managing Partner at Spend Matters, will explore several facets for building successful business cases. This includes knowing your approval process and audience, key items for consideration in the business case, and methods for demonstrating success following implementation.

P2P and Beyond (Hermitage B, 4:00-5:00pm)

PayStream Advisors Research Director, Jimmy LeFever will moderate a panel featuring representatives from Florida International University, University of Colorado, Ball State University and Liberty University.

This all-star panel have implemented a procure-to-pay solution and are looking to go beyond eProcurement and accounts payable. The session will start at the beginning of their journey and discuss the individual drivers that ultimately led to implementing a P2P solution.

Topics will include panelists’ experiences before, during and after implementation, benefits achieved, ways to benchmark goals and tips for achieving post-implementation procure-to-pay excellence.

The second part will focus on the future roadmaps of these innovative organisations. Panelists will discuss what their organisations are planning in terms of strategic initiatives, including:

They will focus on planning for strategic change, increasing stakeholder buy-in and ensuring success in change management.

What sessions are you looking forward to at Next Level 2016? Tweet us and use #NL2016!

What Procurement Needs to Know About Robotic Process Automation

Just what is Robotic Process Automation? And what should procurement know about it before putting anything in place?

Robotic Process Automation

Robotic Process Automation (RPA) vendors emphasise their product’s capacity to replace human operators, using phrases like “digital workforce.” In simple terms, RPA is a software application that runs on an end user’s computer, laptop or other device, emulating tasks executed by human operators.

Its purpose is to integrate or automate the execution of repetitive, rule-based tasks or activities. RPA does not require development of code, nor does it necessitate direct access to the code or database of the applications.

Current Robotic Process Automation Use

Most current RPA implementations are in industry-specific processes such as claims processing in insurance, and risk management in financial services. These processes, and their associated tasks, are usually high-volume, structured, repetitive and implemented on old technology.

Normally, the processes are extremely stable. There is no technology migration or modernisation roadmap involved, and IT-led integration would be difficult and expensive.

At present, the leading non-industry-specific RPA application is the financial close and consolidation process. According to our purchase-to-pay research, 23 per cent of companies are at the earliest stages of adoption, i.e., either in a pilot or with the technology partially rolled out (Fig. 1).

Robotic Process Automation
Fig. 1 – Robotic Process Automation Trends in Purchase-to-Pay

The remaining 77 per cent have no immediate plans for Robotic Process Automation adoption. Despite the low take-up level today, 45 per cent of purchase-to-pay organisations believe RPA will be one of the areas with the greatest impact on the way their work gets done in the next decade.

The Best Processes for RPA

It is not the type of business process that makes for a good candidate for RPA, but rather the characteristics of the process, such as the need for data extraction, enrichment and validation.

Activities requiring integration of multiple screens, as well as self-service inquiry resolution, are also ripe for RPA. The key is that RPA is best deployed in a stable environment where no changes to the systems are on the horizon.

Other possible choices include processes requiring multiple software applications to execute different, but repeatable, activities and tasks.

RPA Pricing Trends

The pricing model for RPA is still evolving. Today, vendors are pricing RPA based on the cost of the full time equivalent (FTE) staff member it is replacing. For example, an RPA vendor may quote a price per robot that is one-third the cost of an offshore resource doing the work.

Onshore FTE pricing is being quoted closer to one-ninth, or 11 per cent, of the cost. This pricing model, developed to compare the cost of outsourcing a process versus automating it with RPA, essentially positions Robotic Process Automation as a service, not a software solution.

In our view, this model is inconsistent with industry standards governing the way software is typically priced. Therefore, we encourage buyers to seek an alternative gainsharing model where possible. This will both mitigate the risks of early adoption, and provide a strong incentive to the supplier to deliver results.

Patrick Connaughton is the Senior Research Director, Procurement Executive Advisory Programme at the Hackett Group. He has published groundbreaking research in areas like spend analysis, contract life cycle management, supplier risk assessments and services procurement. You can contact him via email or on Procurious.

You can also learn more about Hackett’s Procurement Executive Advisory Program here.

How Procurement Will Get Its Mojo Back At Next Level

Today’s procurement space is rapidly changing, yet something is amiss. Join us as Next Level keynote speaker Sigi Osagie describes how Procurement will get its mojo back.

Sigi Osagie

Procurement is rapidly evolving from what was once a manual laden process, to one where technology is enabling practitioners to deliver enhanced value contribution to overall business success.

Becoming a value creation function involves change. So how does Procurement manage change successfully and gain a better reputation across the wider enterprise?

To answer this question, SciQuest selected leading procurement effectiveness expert and writer, Sigi Osagie, for one of the keynote sessions at Next Level 2016.

Sigi knows a thing or two about procurement success. He wrote ‘Procurement Mojo – Strengthening the Function and Raising Its Profile, where he shows how to get a Procurement function firing on all cylinders.

Roberta Patterson checked in with Sigi to get a preview of what he will be talking about during his presentation.

I love the name of your book, Procurement Mojo. Has Procurement lost its mojo?

From the perspective of Procurement’s positioning in the enterprise way back when a move into the “Purchasing Department” was, in effect, a relegation to the backwoods of organisational existence, you’d have to say Procurement has come a long way.

Today, some Procurement functions are doing a fantastic job supporting the profitability and strategic goals of their organisations.

But if I aggregate my experience with clients, discussions with Procurement people in different regions and insights from trade articles, online forums, blogs, etc., it’s clear that many Procurement functions are still struggling.

Quite often the difficulties that hinder their success are “soft” issues – organisational challenges like senior executives who just don’t “get it,” territorial stakeholders, or ineffectiveness within the Procurement function itself.

Such Procurement functions lack a credible “Procurement brand.” Unless they change their approach, their Procurement mojo will remain a mirage.

During your Next Level session, you are going to speak about change management. That seems like a tall order. Do you have any tips on how a Procurement department should start?

The most fundamental requirement is effectiveness; which is more important than efficiency. You can be very efficient at the wrong things. A bit like the guy who’s very fast at climbing up a ladder, only to get to the top and discover that the ladder is leaning against the wrong wall.

Focusing on Procurement effectiveness forces us to think about what the department wants to achieve and the requisite actions to attain those end-goals.

Getting from where you are today to where you want to be is where change management comes in. Many of us in Procurement are versed in the technical aspects of the job but often lack change management know-how.

Our ability to navigate our way through change, against a backdrop of the organisational dynamics I mentioned earlier, is crucial for Procurement’s success and reputation in the wider enterprise.

So Procurement functions must centre their efforts on effectiveness and leverage robust change management. It’s impossible to do this without sound leadership. A fish rots from the head down; so having an effective Procurement leader is key – leadership is the glue that binds everything else together.

How do you build a Procurement brand?

In Procurement Mojo I use real-life examples to explain the four foundational actions Procurement functions must take. The first is building an effective organisation. It’s paramount, because people are the fundamental creators or destroyers of performance success.

The other key actions are deploying enablers (processes, systems and tools) that are fit for purpose, managing the supply base robustly, and applying an appropriate performance management framework. Everything we get right in these four areas helps nurture our Procurement brand.

Additionally, it is imperative to foster positive perceptions of Procurement in stakeholders’ consciousness, through effective communications, good (internal) customer relationship management, and smart PR.

Combining the four foundational actions with these stakeholder management approaches is how we build and sustain a great Procurement brand.

What are your suggestions for making the case for technology investment and getting executive buy-in?

Sigi MojoA solid business case is vital, but it’s not just about data and facts. It’s really about selling, and being organisationally savvy. You’ve got to read the organisational landscape and identify the right “hooks” that will resonate with executives.

Getting executive buy-in is part of good change management, thus getting your Procurement mojo back! I’m looking forward to sharing more about this at Next Level 2016.

Sigi Osagie is a featured speaker appearing on Monday, August 22 at Next Level. Follow him on Twitter!

7 Key Objectives for Procurement Success

Global procurement professionals are attempting to find new ways to create cost savings, as well as create value. Help is at hand with these 7 key objectives for success.

Key Objectives

ProcureCon Europe is back for it’s 17th consecutive year, answering your challenges in procurement and the future direction of the industry.

As businesses emerge from the recent recession into a fragmented ecosystem, a normal approach to creating value through cost saving is no longer relevant.

Instead, businesses are tasking procurement to effect enterprise-wide change, including implementing process improvement, and operating beyond the contract with suppliers to co-create value, and exploring payment innovation.

ProcureCon Europe has put together seven key procurement objectives you can’t afford to ignore, in order to create an efficient, cost saving and interactive procurement department.

#7: Talent Development

Talent development obtained the least amount of votes in our survey. However, there are few procurement executives who would argue against the importance of having a plan in place to develop the procurement leaders of the future.

#6: Responsible Sourcing

How is this made, and where does it come from? These are important questions on the lips of both procurement professionals and the general public.

Although perhaps less in the spotlight than it was 18 months ago, especially in the public sector, responsible sourcing remains a central pillar for Indirect Procurement.

#5: Taking Advantage of Digitisation

Organisations are rapidly digitising across the board. Procurement is attempting to make the most of the operational advantages implicit in this change.

The move to digitise in many cases means completely overhauling established business processes. This presents a significant opportunity for improvement, and is an essential element of a successful future for Indirect Procurement.

#4: Innovation in Services

Procurement seeks to lead innovation in the way that an organisation uses services, from HR, to IT, Marketing and beyond.

This is an area in which Procurement has the potential to add real value. The fresh availability of external services can mean easy, and comparatively cheap, solutions with minimal risk, which is great for growing companies.

#3: Operational Efficiency

While driving down costs can be done by negotiating better deals, there is also some considerable importance placed on increasing operational efficiency. Doing so means making better use of available resources and ultimately saving money.

#2: Value Delivery

Just like beauty, value is often in the eye of the beholder. That being said, those with a progressive approach to indirect procurement increasingly look to consistently add tangible value to the categories in which they work, and actively measure themselves on their ability to do so.

#1: Cost Leadership

Perhaps unsurprisingly the number one area of importance for Indirect Procurement is in the area of cost leadership. A strong stance on cost leadership can help to drive significant improvement to the bottom line. This is key when Indirect Procurement is expected to demonstrate its ability to drive meaningful savings.

Agility and Technology

These 7 key procurement objectives provides companies with guidance, in order to have an effective procurement department.

However, procurement must stay agile. Factors such as innovation and digitisation are constantly changing. Procurement professionals, particularly those in growing companies, should be taking advantage of available technology to further their reach.

The ProcureCon event series brings together a unique blend of Procurement, Purchasing and Supply Chain experts from across all industries to share their experiences and knowledge with a team of people who truly embrace the strategically important field of Procurement.

Find out more about how ProcureCon Europe is helping procurement professionals to solve their main challenges at on the event website. You can also follow ProcureCon Europe on LinkedIn and Twitter.

Throwback Thursday – How to Avoid Procurement Corruption and Fraud: The Fraud Triangle

Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” When preventing procurement fraud, the Fraud Triangle is an organisation’s key tool.

The Fraud Triangle

The Petrobras scandal in Brazil has shown the potential for corruption and fraud in procurement. In light of this, our Thursday throwback takes us back to Hillary Ohlmann‘s article on preventing procurement fraud and corruption using the Fraud Triangle.

Corruption & The Fraud Triangle

In light of the Petrobras corruption scandal in the headlines this week, our Thursday throwback this week

Donald Cressey is credited with creating the fraud triangle, which outlines the theory behind why people commit occupational fraud. Cressey identified the three legs of the fraud triangle as pressure, opportunity, and rationalisation.

The Fraud Triangle

Let’s take a look at steps your organisation can take in order to address these three areas and avoid procurement corruption and fraud.

Pressure

The pressure factor is essentially what motivates someone to commit fraud. Usually the motivation is financial in nature, and falls under one of two categories: personal or professional.

Personal pressure examples:
  • unpaid personal debts
  • desire for status symbols (money, house, car, etc.)
  • inability to pay bills
Professional pressure examples:
  • need to meet productivity targets
  • need to prove financial gains
  • feeling job is at risk

How to mitigate pressure:

1. Adequate compensation

While adequate compensation will depend on the organisation, country, and individual employee, procurement employees should not be at the bottom when it comes to compensation.

Procurement professionals, at all levels, require a specific skill set to effectively do their job, and their compensation should reflect the value they bring to the company.

2. Realistic performance KPIs

This requires good communication with all stakeholders. Set KPIs and then review them frequently to make sure your procurement goals are realistic.

3. Adequate procurement budget

One way to avoid procurement corruption and fraud is to make sure your procurement department has sufficient funds for staffing, tools, and training. Being forced to cut corners can quickly lead to unethical decision-making.

4. Company-wide no gift policy

Suppliers often give gifts to procurement as a way to build relationships and show goodwill. Yet, these gifts may make it hard for procurement officers to remain entirely neutral. If Procurement is not allowed to accept gifts, enact the same policy for all departments as a way to reinforce a company-wide ethics policy.

In some parts of the world, it may be difficult to go 100 per cent no gift. If you do decide to allow Procurement to accept certain gifts, such as lunch or small tokens under a specific dollar amount, make sure the policy is crystal clear and communicated to all employees.

5. Recognise employee value

Adequate compensation is one way to recognise employee value, but other signs of appreciation can also go a long way. If your company has a no gift policy, perhaps set aside a portion of the budget for a procurement dinner, or event to celebrate when certain objectives are met.

Opportunity

The opportunity to commit fraud has to meet two basic standards. The person must have the technical know-how to take advantage of the system, and the ability to keep it a secret. You can decrease the opportunities for fraud by:

1. Implementing a transparent procurement process
  • Adopt an e-procurement solution – E-procurement software is the best way to make sure your procurement data is transparent and easily accessible for audits. You can also assign permissions within the tool, making it easy to allow top management access to all processes, while also limiting who can add suppliers, change supplier contact information, make awards, etc.
  • Educating your employees about the process and how to identify red flags – While it may be a given buyers within the procurement department understand the sourcing and purchasing process, buyers on the outside may not have such a clear understanding. Anti-fraud measures require all hands on deck.
  • Monitor the data in the system – Implementing e-procurement software is just the first step to a transparent procurement process. You’ll need to continuously monitor the data in your chosen e-procurement solution and the ERP to look for any irregularities.
2. Segment purchasing responsibilities

Divide responsibilities to keep any one person from having too much power over purchasing decisions. You may also find it beneficial to rotate responsibilities on a regular basis, but when you do so, make sure to update any employee permissions in your e-procurement solution.

For example, some companies rotate procurement employees between categories to avoid any one person having too much close contact with suppliers.

3. Adopt a four-eyes rule for approvals

Schoolyard bullies use “four-eyes” as an insult, but when avoiding corruption and fraud, the four-eyes strategy is best practice. More eyes on decisions means it’s harder for would-be fraudsters to keep their crimes secret.

4. Perform regular and surprise internal and external audits for all purchases

Audits are not a sign of mistrust. Consider them more like a doctor’s check-up. You should hope that everything checks out, but if you note any irregularities, you can take action to straighten them out before significant damage is done.

5. Manage both suppliers and their subcontractors

Your supply chain doesn’t stop with your suppliers. It’s likely they’ve hired subcontractors. The business practices of these subcontractors will reflect on your business.

Unfortunately, many companies have learned this the hard way. Your company should have a Supplier Code of Conduct, and signing off on it should be mandatory for all suppliers and their subcontractors.

Rationalisation

Rationalisation is the process of excusing one’s acts, and finding ways to justify behaving in a way that you know to be unethical or criminal.

It can take a number of forms:

  • An exaggerated belief in one’s value (e.g. I’m entitled to this because I work hard.);
  • A belief in a greater good (e.g. I’m doing this for my family.);
  • Dissatisfaction with the company (The company is cheating others, so I can cheat the company.);
  • Or comparisons with others (Everyone else has nice things. Why can’t I?).
How to avoid the pitfalls of rationalisation
1. Hire ethical employees

This one looks like a no-brainer, but it’s easier said than done. However, if ethics are important to you (as they should be), they need to be discussed from the very first interview. Research your potential employees like you research potential suppliers. Step away if anything looks fishy.

2. Model ethical behaviour at the top and reinforce it through company-wide policy

It’s all about company culture. How can you expect employees low down on the ladder to behave ethically if the top management is constantly cutting corners and making ethically dubious decisions? Don’t fall into a “do as I say, not as I do” mindset. Give your employees a good model to follow.

3. Adopt a zero tolerance policy for fraud and corruption

There’s the carrot, and then there’s the stick. Just as you would outline expected behaviour, so, too, should you outline punishments for breaking the rules. Also, don’t make idle threats. If you have a zero tolerance policy, then it should be zero tolerance. If you’re not prepared to follow through, adjust your policy to reflect the true consequences for fraudulent actions.

Part of procurement corruption and fraud prevention should be based on the realisation that, yes, it can happen to your organisation. No company is immune.

However, those companies with the lowest cases of fraud and corruption have taken steps to prevent it before it happens. If you’re waiting for a big scandal to break before mitigating this risk, then you’re already too late.

Loud and Proud: Displaying Accreditations on Social Media

Displaying your accreditations on social media? It’s a tribal thing.

Tribes and Accreditations

I’ve noticed recently that more people are displaying professional accreditation after their names on social media.

At first, I was confused by those jumbles of letters that mean so much to people in the procurement world, but so little to anyone else. On Procurious alone we have hundreds of MCIPS, FCIPS, CPSMs and CPPOs. But why do people put their credentials up in lights?

Pack as Much Information Into Your Name as Possible

There’s a lot of information available about optimising social media profiles to make them attractive to potential business partners, recruiters, corporate headhunters and so on.

LinkedIn has a pretty sophisticated profile builder that guides you through the steps to raise your profile to “superstar” status. This includes adding all sorts of detail, ranging from experience and education, to recommendations, skills and even influencers.

The reality is, however, that unless there’s a good reason to do so, people aren’t actually going to click on your profile very often. In fact, you can ‘connect’ with people on LinkedIn, and here on Procurious, without even visiting their profile. Simply clicking on their face does the trick.

This means there’s not much value in diligently adding your accreditations to your profile page if you don’t also display it next to your name.

A Picture Says a Thousand Words

So, if people aren’t going to see your profile, what do they see?

Well, first (and arguably foremost), they’ll see your profile picture. It’s important to have one, and it needs to look professional.

Secondly, they’ll see your name. On Procurious that’s all, though LinkedIn shows a very brief job and company description. It’s not much – and you’d really be flattering yourself if you think people will want to view your profile just for your good looks or interesting-sounding name.

You need to pack more into the limited space available, and an accreditation does the trick.

Why? Because, for those who understand what accreditations actually entail, it says so much about you.

It signals that you’re backed and accredited by a respected professional organisation. It means that you’ve got industry experience, up-to-date qualifications, and are engaged with peers in your profession. It’s like a shorthand version of a CV, which you can expand into more detail in your profile itself.

Professional Accreditations Trump Academic Qualifications

As any frustrated job-seeker knows, experience is everything when it comes to getting hired.

You might be academically qualified up to the eyeballs, but your average recruiter is more likely to be interested in the practical skills you learned as Junior Shift Manager at McDonald’s. And this (sadly) is what the interview will focus upon.

This experience ‘Catch-22′ has led to the situation where unpaid internships have become almost mandatory in many professions, in order to get some experience under your belt and improve job prospects.

That’s where professional accreditations come in. As a general rule, they can’t be gained without having spent at least three years in the industry. They therefore flag to colleagues (and potential recruiters) that you do at least have a few years’ experience.

Some accreditations require both experience and tertiary qualifications. ISM’s CPSM, for example, requires three years “full-time, professional supply management experience, with a regionally accredited bachelor’s degree,” or 5 years’ experience without a degree.

This seems fair to me, as it gives some level of recognition to the bachelor degree (not a completely worthless piece of paper after all!), while still leaving the door open to those who choose not to attend tertiary education.

That being said, there’s a fair share of Bachelors, Diplomas and especially MBAs on display after people’s names on social media.

You’ve Earned It, So Why Not Flaunt It?

Why not? It’s good to be proud of your achievement and important to visibly support your professional association.

Jim Barnes, Managing Director for ISM Services, agrees that displaying your accreditation sends a signal to your peers. “ISM’s CPSM certification helps others identify that the person displaying the credential has deep knowledge, and can apply it.”

There’s also the tribal factor. People love to identify with different ‘tribes’ or groups. Having your professional membership or accreditation on display helps others identify you as “one of us” – a group of professionals who have all been through the same accreditation process, and therefore have the same knowledge and experience to draw upon when dealing with shared challenges.

Procurious itself is one such large ‘tribe’ of connected procurement professionals, further broken down by the members themselves into groups and sub-groups.

On a side note, accreditations have been proven to translate into real-world rewards. ISM produces a salary survey that consistently shows CPSM-accredited professionals earn salaries approximately 7 per cent higher than non-CPSM’s.

“The higher salary demonstrates that having an accreditation carries practical benefits, as well as credibility”, says Barnes.

Show Your Currency

Imagine you’re a recruiter. You’ve been trawling social media for the ideal candidate, and you hit on what looks like a perfect fit. They’re in the right industry, their experience looks good, and they have a postgraduate degree in supply chain management…completed in 1989.

You’d be hard-pressed to find someone who will agree that procurement is the same now as in 1989. And if you can’t find any evidence of more up-to-date education, you click on the next candidate.

Accreditations highlighted on social media profiles (and indeed on CVs) would have reassured the recruiter, because most credentials require recertification. This means that you’re forced to stay up-to-date and valid.

The CPSM, for example, has to be maintained. It automatically expires every three years unless holders complete 60 continuing education hours, which may include sitting exams, conference attendance, corporate training or contributions to the profession.

Do you think a comment posted on social media by a professional with their credentials on display has more “weight” than other comments? Share your thoughts below.