Category Archives: Procurement News

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.

Management of a Global Supply Chain in Emerging Markets

Managing a global supply chain is complex, and fraught with risk. So what tactics can you use to minimise this risk?

Global Supply Chain

This article was written by Rob Barnes, Founder at PrimeRevenue.

In many ways, sourcing goods and services internationally is easier than ever, with the internet making it possible to research, source and communicate with global suppliers from the comfort of your desk.

But in reality it isn’t always that simple. Setting up and managing an global supply chain is a complex, and often risky, business. Without careful planning, local expertise and meticulous management, there’s a lot that can go wrong.

Not only are you dealing with numerous rules, regulations, taxes and constantly fluctuating currencies – all of which have the potential to significantly impact your bottom line. You also have cultural and language differences to contend with, which, in the world of business, can be daunting and confusing to say the least.

On the other hand, getting it right can give you a huge competitive advantage, with cost savings and higher quality or unusual products just a couple of the potential benefits.

So how can you make sure your global supply chain works effectively, while minimising the risks to your business? Here’s a few pointers:

Strategic Planning  

Planning and management of a global supply chain affects the whole organisation, not just certain departments. That means ownership must come from the top, and involve all areas of the business, from procurement and finance, operations and logistics, to sales and marketing.

Don’t allow teams and decisions to become siloed. Make sure there is transparency across the business. Otherwise you’ll be missing important pieces of the puzzle, and find that your supply chain isn’t delivering the value you need, either for the customer or the bottom line.

Local Expertise

Knowledge of the local market is crucial to ensure you understand what to look for in a supplier and how to handle local business practices, from taxes and duties, to employment law and health and safety regulations.

If you don’t have this local expertise internally, consider hiring somebody who does. Or look to bring on a consultant who can guide you through what, and who, you need to know.

Prioritise Relationships  

The foundation of a successful supply chain is building strong relationships with as many elements of the chain as possible. While the internet can help you at the research stage, it’s crucial to visit suppliers regularly, to make those personal connections, scope out their operations in person, and discuss ways of maximising efficiency and collaboration.

In many countries, personal relationships and networks are even more important than in the UK, so it’s in your interest to prioritise this valuable bonding time.

Sales Forecasting

Forecasting is crucial when sourcing products globally, to avoid ending up with too much or too little inventory to deliver on what you need.

This is partly due to timing – your goods are going to take longer to arrive from far flung locations – but there is also a cost element, with taxes and duties to pay every time you move your goods.

Accurate forecasting means that you’ll be transporting the right quantity to arrive at the right time, to deliver on projected demand. You’ll also avoid wasting money on warehouse space by over-ordering.

Technology

Technology is your friend when managing a global supply chain, helping you to streamline processes and minimise unnecessary administration.

Look for a supply chain management solution that works across the different markets you’re operating in, so you don’t need to work with numerous systems.

You can also streamline your invoicing and payment terms using a supply chain finance platform, avoiding the need to negotiate these on a case by case basis, and improving consistency and transparency across suppliers.

Performance Tracking

Just one disruptive link in the chain can impact your whole operations. Make sure you implement a system to measure the success and efficiency of each supplier regularly – delivery times or product quality for example.

By doing this, you can spot any warning signs early on and be ready to replace an underperforming supplier if necessary.

Have a Plan B

Even with top notch processes, you can never be sure what’s going to happen, so have back-up suppliers ready to go in case of any unexpected disasters. This will keep your supply chain running smoothly and avoid lots of unhappy customers.

Focus on Long-Term Sustainability

To minimise risk in the chain, look for ways that you can support your suppliers both financially and logistically. Make sure your lines of communication are always open, so any potential issues can be aired quickly and easily.

You can also help your partners manage their cash flow through supply chain finance, allowing them to choose to be paid more promptly if and when they need. This is particularly useful for suppliers in emerging markets.

This reduces the need for them to take out expensive bank funding or overdraft extensions, minimising costs and risk in the long-term.

Supply Chain Finance from PrimeRevenue and AIG caters to thousands of mid-market, non-investment grade companies, by providing financing, with the credit risk insured by AIG’s market-leading trade credit insurance. It enables suppliers to take early payment less a small discount, while enabling buyers to standardise and potentially lengthen their payment terms.

Adapt and Thrive – Success in Cross-Cultural Negotiations

Adapt and survive is often a key strategy in business. It turns out that it’s just as important in cross-cultural negotiations too.

Adapt and Survive

In our previous articles on cross-cultural negotiations, we had heard what our experts had to say about preparing for cross-cultural negotiations, and the importance of building relationships before negotiations even start.

In the final article in this series, we hear from our experts on how to adapt for negotiations, and how best to handle negotiations with people from their own nationalities.

Preparing for a negotiation – Middle Eastern Challenges

More and more companies are heading to the Middle East as part of their primary business and supply strategies.

However, the cultural differences between Europe and, in particular, Saudi Arabia are stark. Getting to grips with these differences is key to creating good business relationships, and having successful negotiations in the region.

The Roundtable were asked for their thoughts on how to prepare for a first cross-cultural negotiation in Saudi Arabia. They shared what information they would aim to collect, and how they would collect it.

One key element mentioned was to understand the hierarchy and power dynamics of the organisation. Thierry Blomet talked about needing to understand how the organisation is mapped out, and how it fits with the various stakeholders in the country. As Saudi Arabia has a very different, rule-driven, culture, it’s important to understand the dynamics of the organisation and the people.

This view was echoed by Jonathan Hatfield, who added that it’s important to have diversity in your own teams, to help prepare for going into different geographies. The more diversity in your team, the better prepared you are for the global market.

The conversation then turned towards how individuals could better adapt to different cultures by being more aware of their own behaviours, and how to change behaviours to be in line with local customs.

The importance of “cultural mirroring” was put forward by Carine Kaldalian, in particular regarding dress code especially when dealing with a country with strong rules like Saudi Arabia.

Giuseppe highlighted the importance of knowing some etiquette elements that may offend the other party, like which hand to use to hand over your passport, and not showing the soles of your feet to others.

Adapt Your Behaviour

In the modern, digital world, collecting information on other cultures is far easier than it was in the past. Ali Atasoy suggested using both two common websites as prime source of information.

First Wikipedia, to understand the country, social conventions, and recent history. Then LinkedIn, to understand the individuals you would be meeting and have some ‘icebreakers’ prepared.

However, once the information has been collected, it needs to be put to good and effective use. The extent to which individuals should adapt their own behaviour was subject to some debate.

Bérénice Bessiere argued that Europeans frequently underestimate the capacity of Asian business people to adapt to European culture. The common thinking is that it’s them who will have to adapt their behaviour.

The importance of avoiding stereotypes was raised again by both Matthias Manegold and Jonathan Hatfield. Both highlighted the potential mistake in thinking that all the people in a single culture will be the same.

The different norms of different generations, and the constant evolution of cultures, mean generalisation should be avoided. However, by being aware of this, adapting behaviour and building up trust, you will create a better relationship, and any hiccups will likely be forgiven.

Negotiating with Nationalities

The final part of the Roundtable discussion focused on the participants’ views on the key advice for negotiating with people from their own countries.

It was a lighthearted way to end the discussion, but the points raised were both interesting, and highly applicable.

  • Turkey (Ali Atasoy)

Be prepared to explain why you have chosen to do business with this supplier. Any uncertainty, or lack of a valid reason, may lead to the supplier being offended by the approach.

  • Switzerland (Stéphane Guelat)

Punctuality is a huge thing, so be on time. Also, negotiations will frequently focus on product, quality, and other factors. Price is unlikely to be a key focus.

  • United Kingdom (Jonathan Hatfield)

Don’t arrive at the negotiations and be very aggressive, because you will lose your audience. Also don’t assume that you will become a business ‘partner’ immediately – this is something that has to be earned.

  • Lebanon (Carine Kaldalian)

If they have the upper hand, expect the other party to be late. It’s all part of the power play in the negotiations. Expect to be invited to dinner, even before a tough negotiation. The social side of business is very important in Lebanon.

Also, expect some heavy bargaining, as Lebanese are natural born traders.

  • Germany (Matthias Manegold)

Be on time, be credible, and be trusted by the other party. You need to demonstrate that you are interested in the other party’s well-being and outcomes, not just your own.

Small talk is unlikely. Germans will only ask “how are you?” if they are interested. It’s not a throw-away line, like in the UK or the USA. You must walk the talk – doing what you say you will is very important.

  • China (Xin-jian Carlier Fu)

A smile doesn’t necessarily mean that they agree with you, they might just not want to let you down. Don’t make assumptions about the deal or how the other party is feeling about it.

Also, don’t over talk. Know that the other party is listening, but maybe are just looking for the right way to respond.

Beach vs. Coconut

The final comment fell to our facilitator Giuseppe, who showcased the difference between the peach culture and coconut culture. A beach culture, often associated with Americans, is easy to get into, but difficult to in-depth, while a coconut culture, often associated with Germans, is hard to get into, but once you are in it is worth the effort!

And with that, the Roundtable was complete. It provided a fascinating insight into cross-cultural negotiations, cultural diversity, and how procurement professionals can best prepare themselves for cross-cultural interactions.

If you want to find out more, you can get in touch with Procurious, or with Giuseppe Conti at Conti Advanced Business Learning.

This roundtable was organised by Conti Advanced Business Learning (www.cabl.ch), a Swiss training company that specialises in Negotiation & Influencing training. Giuseppe Conti, has over 20 years of Procurement experience and 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

Why Elon Musk Thinks Supply Chain is “Tricky”

If Elon Musk describes something as tricky, then you know that it’s something organisations should be paying close attention to.

Elon Musk

When someone who:

says something is “tricky”, it means something!

“Tricky” Supply Chain

Elon Musk, founder of a number of high profile companies, including Tesla motors, PayPal and SpaceX, was interviewed recently at Code Conference 2016.

In the interview, Musk tells a couple of stories and anecdotes about Tesla’s Supply-Chain that highlights how things can derail fast and put your production to a halt.

It helps to illustrate the role that procurement can, and must, have in anticipating and preventing such situations. Also, in minimising impacts, and if the worst happens, to react quickly, and get back to normal as fast as possible.

You can watch the whole interview below (I recommend you do). If you prefer to go directly to the part I am referring to (1 hour 10 min into the interview), it is here.

Plants (Nuclear) and Treehouses – Growing Procurement at UPMG2016

With an eclectic agenda ranging from a keynote on nuclear energy, to a discourse on treehouses, UPMG2016 is shaping up to be a highly informative conference.

Treehouses UPMG2016

The 85th Annual Utility Purchasing Management Group (ISM UPMG) is just on the horizon. The conference has grown significantly in the past decade, and has come to be recognised as one of the premier educational events within the utility supply chain industry.

As ever, the agenda is an eclectic mix of topics. As well as some fascinating sounding keynotes on nuclear power and treehouses, attendees will be discussing issues from sustainability to leadership, politics to human behaviour.

Here’s a small taste of the line-up in store at UPMG2016.

Industry Trends and Nuclear Delivery

Much like ISM’s annual conference, it’s not all about procurement and supply chain. There are plenty utilities-specific sessions to visit.

  • Power Industry

An important session, and one of the main reasons the UPMG conference exists. This session will cover industry trends and how they will affect power industry spending and resource demands over the next 12 to 24 months.

Britt Burt from Industrial Info Resources will also explore spending within industry segments for gas, coal, nuclear, and renewable generation, along with transmission and distribution projects.

  • Human Side of Power Generation

Similarly, this session will look at the human side of power generation. Experts from Associated Builders and Contractors, Alabama Power Project, and TVA, will explore the demand outlook for skilled craft labour supporting the US Power generation fleet.

This will include the cyclic demands of outage seasons, and the unique solutions utilities, contractors and labour are putting in place to meet peak requirements.

  • Delivering the Nuclear Promise

Anthony R. Pietrangelo, Senior Vice President and Chief Nuclear Officer of the Nuclear Energy Institute, will present a session on how the industry is advancing safety, and its reliability and economic performance.

Pietrangelo will also speak about the key role nuclear power has to play in environmental sustainability.

Essential Knowledge and Skills

Sessions that cover essential knowledge and skills relevant to the wider profession include discussions on:

  • mergers and acquisitions
  • inventory analytics
  • the changing source-to-pay technology landscape
  • vendor rationalisation
  • leveraging data
  • best-practice contracting and channel strategies.

Presenting organisations include Oniqua, SAP Ariba, IBM, PwC and leading utilities providers.

Leadership & Treehouses

Alongside the industry and sector specific keynotes, there are a few others that are sure to capture attention.

  • “The Treehouse Guy”

“The Treehouse Guy” Pete Nelson is the star of Animal Planet’s ‘Treehouse Masters’. With a reputation for limitless imagination and incomparable skills, Nelson is known as the best treehouse builder in the world. He lives by the inspirational motto “if you dream it, you can build it”.

  • The Science of Leadership

Huffington Post columnist Vanessa Van Edwards is the lead investigator at Science of People, a human behaviour research lab. Her session, “The Science of Leadership”, delves into the latest neuroscience, behavioural economics and phycology research to uncover whether leaders are born or made.

  • Political Climate – Campaign ’16

Hawthorn Group Chairman and CEO, John Ashford, will give a veteran political insider’s look at the 2016 US election campaigns and victory prospects in the race for President, Senate, House and Governor.

Build Your Network

As every conference-going procurement professional knows, one of the most exciting aspects these events is the opportunity to build your network.

Attendees will rub shoulders with colleagues, industry experts, thought-leaders and suppliers on the golf course, in Nashville’s bars and restaurants, and at the conference itself. 

Are you planning to attend UPMG2016? The Procurious community would love to hear from you after the conference about your key takeaways from the event.

The Utility Purchasing Management Group’s 2016 conference will be held in Nashville from 11th – 13th September. You can register here.

Beyond Stereotypes – Building Cross-Cultural Relationships

Don’t assume everyone in the same culture has the same norms. Getting beyond cultural stereotypes, and seeing the individual, is key to good cross-cultural negotiation preparation.

Stereotypes

In our previous article, we kicked off our recap of, and insight into, the intricacies of cross-cultural negotiations.

In the second part of the series, our negotiation experts discuss cultural dimensions literature, the importance of moving beyond stereotypes, and why time should always be on your mind.

Hofstede’s Cultural Dimensions

The participants were asked to reflect on the landmark research on cross-cultural negotiations of Geert Hofstede. Hofstede identified six key cultural dimensions, which would vary from culture to culture, that all need to be considered as part of negotiation preparation.

These are:

  • Individualist vs. collectivistic
  • Power distance (i.e. egalitarian or hierarchical)
  • Masculinity or femininity (focus on task vs. relationship)
  • Uncertainty avoidance (related to taking risk)
  • Long term vs short term orientation
  • Indulgence vs. severity (the attitude toward enjoying life and having fun).

Each culture will approach these dimensions differently, taking a spot on a sliding scale between the two extremes. Knowing where cultures sit can be a huge assistance when going into cross-cultural negotiations.

Understanding Cultural Differences

Three of the Roundtable participants discussed their experiences in negotiations when taking these dimensions into consideration. Bérénice Bessiere, Director, Procurement and Travel Division at World Intellectual Property Organization, discussed the different approaches to gender between European and Chinese companies.

Bérénice visited China to lead a negotiation. Although she was the senior buyer, she was assumed to be junior to her younger, male colleague. During the trip, it became clear that the supplier treated its female employees in a way that wouldn’t be acceptable in Europe.

The supplier didn’t win the business in the end (although for reasons other than this). Bérénice admitted she had wondered how the relationship would have worked if they had.

Another example was offered by Xin-jian Carlier Fu, Strategic Sourcing Commodity Manager at Honeywell. She highlighted the cultural differences between Chinese and Americans in business negotiations.

While many Chinese organisations operated with a very traditional, reserved culture, the Americans projected a very over-confident, talkative image in negotiations. Such was the difference to how business was conducted in China that it actually worked as a negative in negotiations between the two groups.

Finally, Carina Kaldalian, External Supply Governance Specialist at Merck, shared her experience based on her own cultural differences. In her home country of Lebanon, being an hour late to a social event is entirely acceptable.

So when Carina arrived for her first social meeting in Switzerland 10 minutes late, she thought she was doing ok. However, it was seen as unacceptable by the people she was meeting with.

This helped her make changes to her own behaviour, while giving her a better understanding of punctuality in different cultures.

Going Beyond Stereotypes

Giuseppe Conti made the point that cultural averages and stereotypes don’t necessarily apply to all individuals. Individual culture is instead influenced by a number of factors including work experience, upbringing, family values, and education, amongst other things.

When negotiating in a cross-cultural situation, it’s important to get past stereotypes, and uncover specific traits of the individuals you are dealing with.

The participants had a number of ways that this could be done. Thierry Blomet, Senior Vice President at Kemira, suggested an informal discussion over dinner the day before the negotiation. This would allow people to avoid entering negotiations without having ever met the other party before.

Other participants highlighted the importance of building relationships, and getting to know the other party better. This was especially important when dealing with Asian counterparts.

Other good strategies were identified as building information through local agents, creating an emotional connection, and building trust in the early stages. With high value placed against trust by many cultures, it’s key to get it right. Participants even highlighted instances where contracts had been signed on the basis of trust alone.

All Down to Timing
Laurence Perot
Laurence Perot

Time was also a factor mentioned by the Roundtable. Laurence Pérot, Director of Global & Strategic Sourcing at Logitech, recommended planning for time, as it’s likely to be treated differently in different cultures.

Laurence recommended planning for more time than you think you will need. This will help ensure you have good conversations, and get what you need. It will also help to show the other party that you’re not just rushing to close the deal.

However, there were also warnings that suppliers might try to use time to their advantage. Ali Atasoy, CMO Operations Manager (Intercontinental) at Merck, stated that the other party may be deliberately slowing the negotiation down, as efficiency may not be at the top of their agenda. He advised patience in this situation, helped by knowing that there were no major time limitations for your negotiations.

Finally, the reputation of an organisation was also highlighted. Matthias Manegold, Head of Procurement and Supply Chain Practice at Kinetic Consulting, advised that procurement professionals need to be consistent in their negotiations, and make sure the other party feels good about the outcomes.

Outcomes will drive what people say about you, and negative comments could harm your reputation with the wider supply base.

In the final article in this series, we’ll look at discussions on how individuals can adapt their behaviours based on information that is gathered, as well as the experts’ advice on how to negotiate with people of their own nationality.

This roundtable was organised by Conti Advanced Business Learning (www.cabl.ch), a Swiss training company that specialises in Negotiation & Influencing training. Giuseppe Conti, has over 20 years of Procurement experience and 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

5 Key Trends Driving Supplier Management and Due Diligence

Can you afford to take the risk? We assess the key drivers behind increasing supplier management and due diligence activities in supply chains.

Supplier Due Diligence

This article was first published on Greenstone.

First, we would like to take the opportunity to thank the Procurious members who took part in this survey. Your input is very much appreciated.

In the current non-financial reporting landscape there is a heightened focus on understanding your supply chain. As a result, organisations are increasingly evaluating the performance of their suppliers against a wide spectrum of non-financial criteria and monitoring the associated risks.

In order to better understand what is driving this behaviour and how companies are identifying and mitigating supply chain risk, Greenstone conducted the ‘State of Supplier Management 2016 survey.

We asked 1000 senior decision makers from mid-to-large organisations about the perception of supply chain risk and due diligence at their organisation. We also asked about the drivers for collecting supplier information and key factors in shaping their supplier engagement programmes.

We have identified five key insights into the state of supplier management from this study. These are listed below and expanded on in this report.

  • Supplier due diligence processes are a growing requirement for most businesses.
  • The majority of businesses are collecting non-financial information from their suppliers at some level.
  • Regulation and reputational risk are the strongest drivers for collecting supplier information and help to shape supplier engagement programmes.
  • Procurement teams are much more likely to be responsible for the collection of supplier data than Sustainability teams.
  • There is a growing trend of companies adopting online solutions to gather and analyse supplier management data.
Supplier Due Diligence

As you might expect, given the increasing global focus on supply chains, more than three quarters of respondents see supply chain risk, and the resultant need for supplier management and due diligence processes, as a growing requirement in their business.

Supplier Management Survey - Fig 1

In line with this perception, 72 per cent of responding companies are already trying to address supply chain risk by collecting non-financial information from their suppliers.

Supplier Management Survey - Fig 2

Data Collection

The necessity to collect non-financial information from suppliers appears to have become accepted across multiple sectors. However, the level of detail, method, and frequency of data collection differs greatly.

It was found that 43 per cent of respondents only collect supplier information as part of a tender process, or in the initial stages of supplier contracting. Therefore, these organisations are not conducting ongoing supplier due diligence. They cannot be sure that suppliers remain compliant throughout the period in which they deliver services.

However, a similar number of organisations do keep track of ongoing supplier performance. 17 per cent are sending out questionnaires by email or post, and 22 per cent are using an online supplier management tool.

Where supplier information is being gathered, there are common topic areas of compliance focus. Environment, health and safety and commercial information (e.g. insurance certification etc.) are the top three areas covered in supplier questionnaires.

However, what the study also shows is that a wide range of information is being requested.  As a result, increasingly diverse areas of both the buyer and supplier organisations are required to engage in the process and have access to the data. 

Supplier Management Survey - Fig 3

Drivers for Supplier Engagement

The research demonstrated that non-financial supplier risk and compliance have become key topics for organisations but what is driving this shift in behaviour?

When asked which factors are driving the collection of supplier information, 43 per cent of all respondents point to regulation and legislation being the strongest motivating force, followed closely by reputational concerns (32 per cent).

Supplier Management Survey - Fig 4

When asked what factors were important in shaping the structure and focus of organisations’ supplier engagement programmes, risk reduction, corporate sustainability, reputational risk and regulation were all sighted as significant motivating forces.

Specific legislative and reporting framework drivers mentioned by respondents included: Bribery Act, the UK Modern Slavery Act, UN Global Compact and ILO Core labour Standards as the top four frameworks or guidelines used to inform their supply chain practices and reporting processes.

Responsibility for Supplier Risk and Compliance

While non-financial reporting has long been the responsibility of CSR or sustainability teams, the increasing momentum of supply chain reporting is engaging new areas of organisation.

This is partly due to the outward looking nature of this issue and the need to engage with multiple supplier organisations. It is also due to the breadth of topics covered by the requests for information.

The study shows 83 per cent of respondents stated that procurement is the area that manages the entire process, from contacting suppliers, through to analysis of the data.

This is most likely due to the fact that procurement ‘own’ the relationships with the suppliers, have a clear idea of contract status and the commercial scale of the contracts and can therefore identify which suppliers meet the buyers defined risk and compliance criteria.

The level of resource allocated to supplier programmes varied significantly with 40 per cent saying that managing this process was the part-time responsibility of a full time employee and 38 per cent saying that multiple individuals in the business have full time responsibility.

What this does show is that there are clearly defined responsibilities within organisations for identifying third party risk and dealing with non-compliance.

Moving Beyond Manual Processes

The complexity and scope of collecting, analysing and reporting supplier information often calls for solutions beyond the manual processes and repository functions of lifeless spreadsheets.

For those organisations that have not yet automated the process, 61 per cent say they are considering adopting an online solution to gather and analyse supplier information.

It is evident organisations recognise the need for automation in the process, as it is not feasible to manually evaluate hundreds or thousands of supplier responses, and monitor their ongoing compliance.

In addition, the increasing legislative and reporting requirements place an additional emphasis on transparency and audit capabilities.

For more on the ‘State of Supplier Management 2016‘, visit the Greenstone website.

Greenstone’s SupplierPortal solution enables buyers to effectively manage supplier risk and compliance through a secure and private online platform. Buyers have the flexibility to distribute standard framework questionnaires, as well as proprietary questionnaires, to their suppliers and can then manage and analyse this information through a comprehensive suite of analytical tools.

Why Wait? Come to Training in Your Pyjamas

Have you ever had that nightmare where you’re wearing your pyjamas in class? With new training from ISM, your nightmare can be a reality (in a good way!).

Training in Pyjamas

I’m in training. I’ve got my laptop open on the table in front of me, a nice warm drink, and I’m waiting for the trainer to appear. A striking-looking instructor comes into view, walking slowly and deliberately in heels.

She’s wearing her ginger-coloured hair pulled back in a ponytail, quite a lot of blue eyeshadow and vivid red lipstick. She appears to have had eyelash extensions.

I sit up a bit straighter in my chair, before glancing down and realising with a shock that I’m wearing my pyjamas.

What is Micro-Learning?

But that’s okay, because it’s 9pm and I’m comfortably ensconced in a warm study in my own home. The kids have finally gone to bed and the dishes are done, so I’ve taken the opportunity to squeeze in one of ISM’s Just-in-Time Learning sessions, led by a flame-haired, animated instructor.

I’ve chosen a session called “Sourcing Strategy based on Forecasted Data”. At 8 minutes and 30 seconds, it removes my usual excuse about being too time-poor to invest in training. According to ISM’s Senior VP of Programs and Product Development M.L. Peck, this is what micro-learning is all about.

“People are craving content that address specific needs at specific times”, says Peck. “Micro-learning takes a ‘just-for-me, just-in-time, and just-enough’ approach”.

Training Essentials

This works for me, as my attention span seems to be diminishing rapidly as I grow older. The animated instructor’s voice has a slightly robotic quality, but she’s convincing enough.

She moves around the screen, gesticulating with one hands with the other resting on her hip. She (I’m not sure if the instructor has a name) even blinks and waggles her eyebrows as she drives each point home.

The instructor rapidly takes me through the advantages and disadvantages of the various types of sourcing – spot buying, buying to requirements, forward buying and speculative buying. As she talks, animated graphics appear and disappear next to her.

The content itself is drawn from ISM’s impressive global network of subject matter experts, who have created a remarkable library of digital knowledge.

The animation is interspersed with a video of Kevin from ISM, a (human) instructor who gives a real-world example of a restaurant owner who uses each of the four buying types as circumstances demand.

Sharing Essential Skills & Knowledge

Each Just-in-Time learning video has a different style. Some feature animated characters such as this, while others are led entirely by real instructors.

There are whiteboard animations, live interviews with executives and leaders in the profession, short lectures from industry experts, fun activities, games and flashcards.

This style of learning isn’t designed to be a deep-dive, but is a fast and effective overview of essential procurement skills and knowledge. Viewers can choose to explore further through eISM’s Guided Learning and Self-Paced learning options.

This particular video, however, is packed with fast facts, statistics, definitions from the ISM Glossary. It also includes real-world examples about sourcing strategies. By the end of the eight-and-a-half minute video, I have three pages of notes.

And what’s more, I even have time to sneak in another training video before my drink goes cold!

Learn More (in Pyjamas if you Want!)

Procurious now hosts three of the eISM Just-in-Time learning videos here on the website. Simply click on the “Learning” tab, or follow the links below to view:

For the full suite of eISM learning options, visit the ISM website.

Taking the Global Pulse of Procurement

How do you take the global  pulse of procurement and understand key current trends? Here’s a survey that helps do just that.

Global Pulse of Procurement

Zycus recently published their 2016 Pulse of Procurement report, an annual survey and report that highlights key procurement trends around the world.

The report draws on the thoughts and inputs of 650 procurement leaders worldwide, helping to draw valid, statistical conclusions across a number of topics.

The key areas of discussion in the 2016 report include:

  • The present state of procurement
  • The role of procurement technology
  • Hot current trends of procurement
  • The future of procurement

With participation in the survey increasing year on year, and the consumption of the report also increasing, it’s becoming one of the key information sources for procurement leaders. Procurious caught up with Richard Waugh, VP Corporate Development at Zycus, to talk through some of the key messages in 2016.

Procurement Technology 
Adoption vs. Satisfaction

One of the key findings Richard highlighted in this year’s report was the disparity between the high adoption of, but low satisfaction with, procurement technology.

In European countries all of the components of procurement technology have more than 50 per cent adoption. Core technologies such as P2P, eSourcing, Contract Management and Spend Analysis above 70 per cent.

However, only 1 in 5 survey respondents believed their technology solution was best in class or state of the art. One of the key reasons behind this, is that procurement are often left with a version of a legacy system, leading to low satisfaction.

Richard stated that, “These ‘best of breed’ procurement systems do exist, but it’s really only in the e-Sourcing area that state of the art tools are more prevalent.

“There is still a pent up demand for these best in class tools. These would help organisations make a step-change in performance, but many organisations are forced to make do with what they have.”

Supplier Performance Management

Richard believes that having the tools and technology available to enable closer collaboration with suppliers, will in turn drive innovation. These tools can help to measure the value of contributions that suppliers can bring to the table.

Richard stated that the more advanced procurement teams are already using technology to get closer to their supply base, and bring forward the best ideas for profit enhancement.

In addition to this, automation and procurement technology can help to significantly reduce manual, transactional activities, helping procurement get more from their resources, and at the same time enable the profession to be more strategic.

Spend, Perception & Risk
Spend Under Management

The Pulse of Procurement report also highlighted encouraging signs in the management of enterprise spend by procurement. In 2016, 26 per cent of the respondents have achieved an average of 80 per cent of spend under management.

These best in class performers have gone down the path of better stakeholder management and involvement. This allows them to access traditional ‘sacred cows’ of marketing, legal and IT spend.

However, according to Richard, there is still room for improvement. “The weighted average is only 57 per cent spend under management. If you’re average, you’re barely getting over 50 per cent of your spend managed.”

Perception

The report supports the idea that procurement is more of a strategic partner for the business now in many regions. This positive perception, and better visibility with stakeholders is more important, particularly in light of budget pressures.

In Europe, 9 out 10 leaders highlighted a positive perception of procurement by the C-suite. However, this region also has the greatest budget pressure. The majority of European respondents said that procurement budgets for 2016 were either flat or declining. This has led to teams being asked to do more with the same, or more with less.

In Asia-Pacific, the strategic role of procurement is still developing. Richard said, “There is an opportunity for Asia-Pacific to catch up this lag. As you start to manage the spend, the possibilities for savings are better. In fact, the savings goals for procurement are actually highest in this region as they address these categories for the first time.”

Risk

For the first time, supplier risk management fell out of the top 5 priorities for procurement in North America, although it remained in the top 5 in Europe. While this is probably reflective of the current macro-economic conditions in Europe (Brexit; political instability), it does show a potentially short-sighted approach in North America.

In better economic conditions, it’s easy to let risk fall down the ladder. And with less volatility in America, even with a Presidential election coming up, organisations may have changed their focus. However, as Richard states, now is not the time to take your eye off the ball on risk.

“The more mature procurement organisations are doing a better job of managing supply risk. They realise the cyclical nature of risk and the potential for a downturn, and understand the need to be more prepared. However, there is still a significant component who are tactically focused, and dealing with the current reality, rather than looking ahead.”

Pulse of Procurement

Finally, we asked Richard why procurement professionals should download the Pulse of Procurement report. For Richard, it was as simple as saving yourself time with data analysis, and getting a better view of the world outside your organisation.

“For most organisations, everyone is stretched, doing more with less. People tend to have a myopic view of what’s going on in their organisation, without seeing the bigger picture. They can’t readily benchmark themselves against the wider function.

“The Pulse of Procurement report gives you the chance to have data synthesised for you, and to gain some context as to how you compare to the function overall. This then allows you to see where you are leading and lagging in comparison.”

You can download the Pulse of Procurement report on the Zycus website. For more information on how to be involved with the next Pulse of Procurement survey, contact Zycus.

Is Indirect Procurement Really So Complex?

You could be forgiven for thinking the management of indirect procurement is akin to rocket science. Is it really so complex?

Indirect Procurement Rocket Science

Sourcing and contracting indirect goods and services in categories like I.T., consulting, HR and travel is important to keep the business running.

You could be forgiven for thinking that the procurement of such services is akin to rocket science, especially if you listen to those many external “solution providers” whose income stream may depend on you.

It may be tempting to consider outsourcing some or all of the management of your indirect spend. In many organisations it is often poorly recorded, loosely managed, widely dispersed, and, generally, messy or neglected. But first let’s consider the issues, and how this indirect spend could be managed internally.

Direct and Indirect Procurement 

Direct (or core) procurement traditionally focuses mainly on the sourcing of goods, and some allied services, that are used in the manufacturing or production of goods for sale. These items are usually clearly specified, often with a pre-defined supplier base.

Indirect procurement is different. It is essentially the sourcing of services (and maybe some goods) to support day-to-day operations.

The indirect spend may make up around 30 per cent of all third-party spend, but there are significantly more suppliers and the buying community is more decentralised. Add to that, a higher potential for maverick spend and sensitive stakeholders, and there is the added complexity.

What is happening now is that the percentage of indirect spend-under-management is growing in many companies. Difficult areas such as advertising, insurance and consulting fees are slowly being brought into the category structure.

It is often said that indirect procurement is not strategic. However, some high spend categories, such as sponsorship and employee benefits, could definitely qualify.

Key issues in Indirect Procurement
  • Buying decisions are often dispersed throughout an organisation into diverse and competing business units or locations.
  • Stakeholders can, and will, resist any changes on which they have not been consulted.
  • Managing an indirect category such as marketing services or consulting requires assembling the historical data and providing reliable spend information. Often transactions are miscoded – sometimes on purpose – which creates the wrong picture.
  • Suppliers can only be a resource for continuous improvement if the communication channels are open in both directions.
Strategies for Indirect Procurement  

The first step in a category strategy should be to aggregate the spend and understand it and its sub-categories. Next, present this information, in a digestible form, to stakeholders to elicit their input.

It is never too early to talk to stakeholders about the data or the proposed Scope of Work. After the Request for Proposal has been issued, it is too late.

Two of the success criteria in indirect procurement are a robust Scope of Work and a detailed Service Level Agreement with workable measurements.  Without these, any contract can fail.    

Indirect Procurement as a Career Choice

The requisite technical skills for individual success in procurement have been well-documented. One of the key skills of the future is to be numerate and have analytical ability, but not necessarily be a mathematician.

Managing indirect categories requires a different skill set from that which is needed for working in direct procurement. Behavioural skills, which can also be acquired, come into the spotlight here.

Particularly important is the need to collaborate with stakeholders. An aspiring category manager needs Influencing and listening skills, empathy, and the ability to take the initiative as well as being decisive when the need arises.

Indirect categories (when the tail-end spend is excluded) do not easily lend themselves to automation or the use of the e-procurement tools, such as e-catalogues or vendor management systems.

This creates a dilemma for external service providers who have these tools, but readily admit that there are nuances and emotions at play that may be beyond their control.

The organisational culture and landscape on the indirect side has many nuances that do not exist on the direct side. Procurement executives will therefore need to traverse the waters of indirect spend with unique strategies to ensure success.

Indirect procurement is all about building trust with stakeholders and suppliers to ensure continuity of supply and smooth operations.

Just try to procure the same make and model of smartphone for everyone, or change the catering company without considering end-users.