Category Archives: Procurement News

Why Instant Supplier Information Access Can Fire Productivity

Procurement needs to maximise its productivity if its going to meet business needs. Having access to real-time supplier information is a step in the right direction.

supplier information productivity

When I started my career in procurement over 40 years ago, we used notebooks to store all of our supplier information.

Go ahead – be shocked or have a little chuckle about how ‘primitive’ we were! But guess what? Things haven’t changed nearly as much as people like to think.

Today, most procurement teams have modernised their supplier information management by using some type of a shared database. These solutions, while centralised and searchable, still rely on internal team members manually entering and then searching for supplier knowledge.

And while most companies are doing the best they can with scarce resources, it is important to remember that it is possible to make progress without actually resolving any key business issues, or becoming the slightest bit more strategic.

Value in Scalability

We had notebooks and you have a database. But if the information isn’t (a) current and (b) fully leveraged, it doesn’t really matter where it sits.

The true transformative value of any technology is its scalability. How much of an effect does it have on the amount of work each person can accomplish?

tealbook, a platform that centralises supplier provided information, internal supplier knowledge, data from Dun & Bradstreet, and aggregate intelligence from industry peers, has set this challenge of scalability as their target.

Making it possible for procurement to accelerate the discovery process through instant supplier recommendations, and improving the match between business needs and prospective suppliers, gets at that need for scale.

With better suppliers available sooner, procurement can achieve a step change in their productivity. This also helps to move the needle on the all-important metric of spend under management.

Productivity – Focusing Your Efforts

Let’s say you’ve got 20 people working 40 hours a week, 50 weeks a year. That gives you a maximum of 40,000 procurement hours per year. You’ve got to ask yourself how many of those hours the team spends looking or searching for something to satisfy an information need. Every hour not spent on value-added activities is an opportunity to improve productivity.

When we look at procurement’s productivity in the context of supplier discovery, we have to focus our attention on how much time procurement spends searching for the right suppliers before a sourcing project can get off the ground.

In order to decrease the time required for discovery – and increase the quality of the suppliers invited to participate – we need to make sure we’re searching a resource dense with suppliers and supplier information, preferably using a common language search rather than archaic codes.

Whether you’re looking at a supplier discovery platform or a more traditional supplier marketplace, the point is to focus your efforts where they are most likely to generate positive results.

There’s a huge advantage in somebody being willing to take the time to centralise the right information and maintain it. The resulting resource will make a dramatic improvement to what procurement is able to deliver, how often we can deliver those results, and just how BIG those results are.

There aren’t many companies adding employees, so if you can find a solution that dramatically changes the amount of work each employee can do, you’ve really got something strategic.

Meeting Real-Time Supplier Information Needs

Today, an increasing number of corporations want to believe that their procurement teams operate strategically. As that reputation spreads, more and more projects will come from the business.

In order to handle the increased demand for our time and skills, procurement has to be really good at making decisions about how to spend time and allocate scarce resources.

If we are going to facilitate purchases, strategically source every category, AND meet the real-time needs of the business, technology has to be capable of actual heavy lifting, not just function as an electronic supplier notebook.

In my next post, we’ll go beyond the supplier information modernisation process to look at the strategic value of a marketplace approach.

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

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

5 Biggest Challenges Facing Public Sector Procurement

Public sector procurement managers face a different set of challenges to their private sector peers. But which are the biggest challenges?

challenges public sector procurement

The procurement profession is increasingly becoming a core component of an organisation’s innovation and process-driven strategies to reduce costs, increase efficiencies and make advancements. As a result, procurement managers are feeling the pressure to remain agile and at the forefront of change.

When it comes to the public sector, however, there are numerous and unique roadblocks to successfully implementing these strategies, systems and processes into existing operations.

Procurement managers in the public sector often have a specific framework within which they are required to work. Generally these framework have an increased focus on probity, and lack the traditional supply chain model.

However, public sector procurement departments are responsible for some of the highest levels of spend in any given economy. In most countries, state and federal departments and agencies are responsible for purchasing for public services, including healthcare, infrastructure, and education.

In recent years, the spend by public sector agencies in both the UK and Australia has been measured as over 40 per cent of national GDP. With scrutiny over how money is spent, and any inefficiencies open to public criticism, public sector procurement professionals face a tricky balancing act.

As such, the public sector can both be a source of great knowledge and best practices for those in industry. Yet, they also face their own particular set of challenges.

Key Challenges for Procurement

In July, GovProcure launched a survey aimed at finding out, directly from government procurement managers, what their biggest challenges are for 2016 and beyond.

After analysing the results, the 5 main challenges have been identified so far as:

  1. Realising true benefits from data and analytics in the procurement division
  2. Ensuring the benefits of embedding sustainable procurement practices are fully realised
  3. Balancing outsourcing with maintaining high quality internal capacity
  4. Getting the most out of suppliers
  5. Developing strategies to engage effectively with Indigenous suppliers

Do you have any challenges to add? There’s still time for you to get involved and have your say in the survey. You can complete the survey here.

The final results will be shared with the audience at the GovProcure 2016 conference later this year. The event will host a panel discussion specifically designed to address the challenges identified in the survey. The session will also give procurement managers tangible ideas for improvement in the areas that matter to them most.

Let’s stop just talking about the challenges we face, and work together to overcome them.

The GovProcure 2016 conference in Sydney brings together public sector procurement managers from all levels of government each year to focus on in on opportunities to improve, collaborate and ultimately deliver more value to their organisations.

To find out more, download a GovProcure brochure here.

How Procurement Can Support SMEs in Tendering

SMEs can provide formidable USPs to procurement. But procurement first needs to take steps to support them in the tender process.

smes

99 per cent of all businesses within the UK are small and medium enterprises (SMEs) – those companies which are made up of 250 employees or less.

At the end of 2015, the total number of companies this size in the UK stood at 5.4 million.

Recently, within public sector procurement, there has been a noticeable increase in the number of contracts awarded to SMEs. Given that SMEs have long since made up the majority figure of all businesses within the UK, it is interesting to see that only now are they being brought to the forefront of the bid and tender process.

Wave of Change

A recent study has shown that nearly three quarters of public sector procurement contracts have been awarded to smaller organisations. This is in contrast to a few years ago, where just over half of contracts were awarded to SMEs.

Historically, larger businesses have been able to gain competitive advantage on SMEs in the contract bidding wars. They have been able to provide extensive financial data, as well as time and money, to work through the complex tender processes.

However, the wave of change has arrived. Public sector organisations are helping make that tender process a lot easier in a bid to support local businesses. With less red tape, SMEs are able to provide an enhanced USP to procurement. This includes access to local products/services, innovation, ethical trading and overall a more competitive offering.

Simplifying the Procurement Process

Leading the way, some organisations have already begun by standardising tender documentation. They require less financial information about the company, and are setting up electronic portals to help make the process as efficient as possible.

All of this is in aid of simplifying that bid process for SMEs to encourage them to apply and succeed in winning contracts.

For procurement professionals, this simplification of the tender process not only supports local SMEs, but also helps to cut out inefficiencies in day-to-day procurement jobs.

When it comes to reviewing bids now, procure have less financial data to wade through, and a more comprehensive tender document to look over. Plus, taking advantage of technology is also helping save time and money.

Procurement Heads is all about getting to know great Procurement people and recruiting Senior Procurement professionals.

Procurement Heads understands the value of working in partnership, both in helping people develop their careers and in supporting organisations to build world-class teams.

Defining & Defeating Maverick Spend

Is maverick spend an issue for the UK public sector? Is local government adhering to procurement practices when spending taxpayers’ money?

maverick spend

It’s not uncommon for businesses to suffer from high levels of uncontrolled procurement, often known as maverick spend. These levels can often reach 80 per cent of total spend, a figure likely to send shivers down the spine of any procurement professional.

To elevate its role within an organisation, procurement must extend its reach. A CEO is unlikely to take a function seriously that only influences 60 per cent of the activity for which it’s responsible.

Yet that is the situation of the average procurement team. No other function would allow this: Legal, HR, Finance, Compliance, Public Affairs – all insist their writ runs broad.

Maverick spend is a major obstacle to extending procurement’s influence. However, decades of setting policies and rolling out enterprise systems have had limited impact in reducing it.

Maverick Spend in the Public Sector

While it’s often easy to see the figures in an individual organisation, actively tackling this spend is another matter. Solutions range from improving reporting to enabling other functions to see the benefits proper procurement processes bring.

Today, Applegate PRO has released a whitepaper on maverick spend via Procurious. The paper will showcase data on procurement practices gained via a Freedom of Information (FOI) request to all local councils in the UK.

This is one of the largest FOI requests relating to procurement processes that has ever been conducted in the UK.

We hope that this research will provide a valuable snapshot of how local councils weigh up in the use of their allocated budgets on a national scale.

Applegate PRO are exploring further areas of research to analyse the maverick spend in public sector bodies, including the Ministry of Defence and NHS.

What the Whitepaper Offers

This white paper uses a case study of local government procurement to explore the varying levels of maverick spend across a set of comparable organisations. It reveals startling differences in levels of uncontrolled expenditure and explores the ramifications for this.

Findings from the 276 councils that responded from across the UK include:

  • Definition of maverick spend.
  • The top three councils that reduced levels of maverick spend between the financial years of 2012 and 2016.
  • The councils whose maverick spend increased the most between the financial years of 2012 and 2016.
  • Local council with the most maverick spend.
  • Local council with the least maverick spend.
  • The percentage of maverick spend undertaken in their council from each financial year from 2012 to the present day.
  • The sanction systems in place for non-compliance to procurement practices.
  • The percentages of transactions that require a purchase order.
  • The number of procurement professionals that have a CIPS or other professional procurement qualification and how many are currently undergoing procurement training.

If you are interested in reading the full report, you can sign up to receive your copy here.

Applegate PRO is a free-to-use eProcurement system that streamlines request for quotation and purchase order processes, enabling buyers to submit a request, receive up to ten competitive quotes and raise a PO in a matter of hours.

Submit your request for quotation today with no obligation to buy at http://www.applegatepro.com/

5 Imperatives for Creating Greater Procurement Agility

Is your procurement organisation world-class? Improving agility is a key step in this journey, according to new research.

world class procurement

New benchmarking insights from The Hackett Group have revealed that world-class procurement organisations now have 18 per cent lower operating costs than typical companies. They also operate with 28 per cent fewer staff, and generate more than twice the return on investment.

How are they doing it? Here are the five key strategies identified in Hackett’s latest research paper.

  1. Embrace digital transformation

World-beating procurement organisations have shifted to a complete digital experience for their business users, according to The Hackett Group Principal, Sourcing and Procurement Practice Leader Robert Derocher.

“This includes a true move to a paperless environment and the ability to work from anywhere on any device. Companies are implementing new, integrated source-to-settle technology platforms, primarily in the cloud, and adopting new capabilities that enable the agility required by their customers and the marketplace,” says Derocher.

Added to this is a convergence in software advances and wider use of new technologies. Cloud-based infrastructure, and virtual business and technology networks make up the first parallel. The second comes from rapidly transitioning user bases that are increasingly adept with new mobile technologies and business models.

The research found that world-class organisations spend 23 per cent more on technology per person. The investment yields real productivity gains, including 71 per cent lower cost per order than typical companies.

  1. Reallocate resources from transactional focus to value adding

A high level of automation also allows staff to devote more time to talent development and business performance-related activities. Digitally-enabled processes reduce errors, and make information easier to access, freeing procurement staff for higher-value work.

In addition to operating with dramatically fewer staff, leading organisations also allocate their people very differently. They dedicate a significantly larger percentage of the overall staff to sourcing, supply base strategy and planning/strategic roles.

They also have a much smaller percentage of people focused on operations and compliance management.

Top organisations spend 13 per cent more on outsourcing than typical companies.

They selectively outsource in areas such as procurement system support, supplier help desks and market intelligence to tap into greater expertise, augment knowledge, and leverage the capacity and capability of third-party providers.

This helps to increase agility by providing resources that can scale to demand and frees up procurement to focus on anticipating and responding to critical business needs.

  1. Leverage analytics-based decision making

Increased investment in cloud-based infrastructure and applications is creating tremendous new opportunities for procurement organisations to apply digital technologies to transform service delivery.

Increasingly, this becomes the platform for delivering a whole new class of services, such as information and predictive analytics to guide decisions.

According to the report, the hallmarks of information-centric world-class procurement organisations are:

  • Having a sophisticated information/data architecture that makes effective data analysis possible;
  • Planning and analysis capability that is dynamic and information driven;
  • Performance measurement that is aligned with the business.

World-class procurement organisations also invest a greater proportion on systems and tools to enable analytics capability.

  1. Adopt a stakeholder/customer-centric service design and delivery

The customer must be the focal point of all key activities and functions within procurement. With this approach, services are designed based on users’ wants and needs, rather than forcing them to change their behaviour to accommodate procurement’s internal processes.

World-class organisations are service-oriented and customer-focused in their approaches to procurement delivery. They design services and processes from the customer perspective or outside in rather than from the inside out.

According to the report, two mainstays of a formal service delivery model are global business services/shared services units and centres of excellence (COEs).

Overall, 39 per cent of all procurement organisations have some form of COE in place today. 

  1. Re-skill the procurement function

The report recommends the following steps to enhance the skills sets of procurement staff:

  • Invest in Talent Development

Hire or train procurement staff with the skills and business acumen required to meet the business needs of senior executives. Recruit staff from key business units in your company, and have them mentor and coach other business partners who have come up through the procurement ranks.

  • Increase your Team’s Business Acumen

Assign staff to cross-functional teams to provide exposure to different parts of the organisation’s operations. Make sure that having an understanding of business fundamentals is a requirement when hiring new staff.

  • Build Analytics Skills

Create a dedicated analytics group to fully leverage skills and tools across all areas of procurement.

  • Create a talent retention plan

World-class procurement organisations are nearly twice as likely to have talent retention planning in place, and see turnover rates that are more than 50 per cent lower than typical companies.

You can download your copy of The Hackett Group’s research here.

The Hackett Group is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies.

The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology.

How to Stay Ahead of the Curve with Process Automation

Traditional supplier relationships are under scrutiny as organisations assess capabilities for the future. Could process automation help procurement teams stay ahead of the curve?

process automation
Image courtesy of Opus Capita

ProcureCon Europe 2016 is rapidly approaching! The ProcureCon team has been investigating some of the fast-moving issues which are affecting CPOs across Europe today.

Perhaps more than any other factor in the industry right now, process automation and advanced analytics are having a huge effect on the ability of Procurement teams to deliver improved cost performance.

This changing landscape calls into question traditional supplier relationships. Of the CPOs and Heads of Procurement we interviewed in advance of the event, 76 per cent told us that they are concerned about the ability of their existing supplier base to serve their business needs in future.

At the same time, more than half of our research participants think that implementing automated procurement is a high priority for their business. This raises questions about how best to manage your supplier network to make sure that you’re ahead of the curve when it comes to process automation.

We spoke to Kelly Babbit from jCatalog and the Opus Capita Group to find out more.

ProcureCon: How is digitisation and process automation affecting CPOs today?

Kelly Babbit: In the digitised, networked economy, companies find themselves in a changed competitive field. The game is no longer primarily based on unique business relationships.

The success of a corporation is premised on the performance of its network of supply chains – its entire business ecosystem. Corporations are looking to strengthen relationships, and create new forms of collaboration – and gain control and compliance over their extended business processes.

It is significant that more than half of respondents to this research gave high priority to the implementation of automated procurement processes. Furthermore, we expect a future adjustment to the demand drivers and criteria used for selecting P2P service providers.

This trend is due to a far-reaching shift in business priorities toward digitisation and automation.

What kind of processes are we talking about?

Progressive solutions cover the complete process from sourcing to payment – from managing the first request for quotations (RFQ) to optimised working capital management and supplier settlement.

This is where the traditional view of P2P processes needs to be expanded. Enterprises will no longer evaluate the quality of solutions with a sole focus on basic procurement functions. Solutions need to be part of a global strategy and based on pivotal interconnections between buyers and suppliers.

As a result, the responsibilities of the CPO and CFO functions will begin to converge. Cloud based SaaS solution providers will need to support this interconnection with a global perspective and inclusion of diverse company stakeholders.

Connecting and automating processes from sourcing through to payment will become the expectation of leading companies.

What features should CPOs / CFOs be looking out for in a source-to-pay solution?

Cloud-based business network solutions must support effective sourcing, procurement, invoice, and payment automation. This includes implementation and adoption across their global business.  Some of the key features to look out for are:

  • Complete transparency, real time control and compliance with full audit trails across the entire source to pay process.
  • P2P automation and integration of the purchasing department with the accounts payables department. Plus full visibility to all purchasing and accounts payment data.
  • Visibility to company spend with total cost monitoring and supplier performance tracking as well as contract improved contract compliance.

Thanks very much for your time, Kelly.

To read the full results of our research amongst 100 CPOs and senior procurement executives, download the Procurement Challenges report here.

ProcureCon Europe, now in its 17th year, is Europe’s most strategic procurement conference for CPOs and senior procurement executives. See the full range of topic and speakers at the event here.

Cloud, Not Laughter, The Best Procurement Medicine

A spoonful of Cloud makes the medicine go down. Healthcare patients in England could benefit from a move to Cloud eSourcing.

laughter medicine

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

Healthcare organisations are under constant scrutiny to deliver high quality care to patients. In England, it’s The Care Quality Commission which regulates all health and social care services to ensure fundamental standards of quality and safety are met.

The findings of its reviews are published to the general public. This puts organisations not coming up to scratch at risk of suffering from a negative public reputation.

Improving Quality of Care

However, help is at hand from The Healthcare Quality Improvement Partnership (HQIP). The organisation works with healthcare organisations to identify areas where quality of care can be improved.

The HQIP is an independent organisation responsible for managing clinical audit contracts on behalf of NHS England. It was launched to promote quality in healthcare, and, in particular, to increase the impact that clinical audits can have on healthcare quality improvement.

Commissioning and managing clinical audits means having to source a range high quality external experts to carry them out. To do this, HQIP recognised that best practice procurement tendering processes were needed to to run an audit.

HQIP saw the value in moving to an eSourcing platform so that it could speed up the procurement process. It knew that if it was able to source experts quicker and do away with paper-based, manual tender processes, it could save itself valuable time and resources.

Moving to the Cloud

HQIP decided to go with Wax Digital’s cloud based web3 eSourcing. This allows the organisation to publish tenders electronically and make use of existing templates. It also enables suppliers to submit responses online.

The system also offers a mix of automated and manual scoring facilitates, with subsequent contract awards also taken care of electronically via web3.

Its project management function also allows HQIP to plan its eSourcing activities so that all relevant information is stored in one central place, which can be easily accessed by system users.

Judith Hughes, interim Head of Procurement at HQIP said: “As we’d aimed for, Wax Digital web3 has greatly improved our processes. Moving away from paper-based tendering has significantly reduced the time it takes to review and award teams for projects.

“It has also helped further ensure our quality guidelines are upheld and we now have a much more efficient way of engaging with our suppliers and them with us.”

An increasing number of healthcare organisations can benefit from the speed and efficiencies offer by cloud-based software. Innovation starts within the supply chain. By rolling out eSourcing technology, HQIP enjoys a more efficient supply chain for audit management. This in turn can aid healthcare organisations meet required care standards, and improve the quality of service for patients.

Do You Know a Rising Supply Chain Star?

Judges are looking for your nominations for a rising supply chain star for ’30 Under 30′ 2016. A multi-talented, young professional who is an influencer and trailblazer in their organisation.

rising supply chain star

ISM and THOMASNET.com’s 30 Under 30 Rising Supply Chain Stars recognition programme returns for its third year, with nominations opening this week.

The programme was first launched to address a worrying lack of Millennials choosing Procurement and Supply Chain as a profession. This was particularly an issue in an environment where an entire generation of Baby Boomers were expected to retire in the next three to five years.

Together, ISM and THOMASNET.com are celebrating and broadcasting the achievements of young professionals in an effort to bring more Millennials into the profession, while also preparing them to step into senior roles earlier than expected.

Going Global

The big change this year is that the competition has been scaled up to the international level. This means we’ll see even more diversity in personalities, professionals and organisations represented by the 30 winners.

According to THOMASNET.com’s Director of Marketing and Audience Development, Donna Cicale, opening the programme up globally is an acknowledgement of where the supply management industry has been in the past, and where it’s heading in the future.

“Many supply management professionals today are managing global suppliers, responding to global issues, and thinking ahead for global growth. Young professionals all over the world are facing enormous challenges and accomplishing a huge amount.

“It makes sense to extend this fantastic recognition opportunity to these talented individuals, and learn as much as we can from one another.”

Who are the Millennials?

Research organisations and government bodies can’t seem to agree on the age range of Millennials. Typically, however, the term refers to anyone born between 1980 and 1995.

This means the youngest Millennials turn 30 in 2025, when they will make up 75 per cent of the global workforce. They’re followed by Generation Z, the oldest of whom turn 20 this year. They are now beginning to filter out of educational institutions and also enter the workforce.

What does it take to become a Supply Chain Star?

According to Cicale, judges will look for three main characteristics in the next batch of Rising Supply Chain Stars. Individuals need to be:

  • Multi-talented: “We look for people who demonstrate and excel at a wide range of skills beyond business acumen. We’re searching for fast learners, effective communicators, quick thinkers and natural leaders.”
  • Influencers: “Supply chain stars must be ‘movers and shakers’ in their organisations. They need to be skilled in getting others engaged, bringing colleagues on-board, and working towards common goals.”
  • Trailblazers: “We’re looking for individuals with ‘firsts’, or accomplishments not previously realised by their organisation. A ‘first’ can relate to timing, budget, initialisation, integration or adoption.”

Procurious caught up with inaugural 30 Under 30 winner Nick Ammaturo for his view of the essential attributes needed to win.

“When I look at the previous years’ fellow winners, I see a ton of common traits between us. There’s definitely a shared level of passion for supply chain and procurement, coupled with the motivation to advance skills and careers through challenging roles and continuous learning.

“Most importantly, 30 Under 30 winners all display curiosity. They all have a genuine interest in how their roles fit into the bigger picture.”

What prizes will the 30 winners receive?

30 Under 30 winners all receive a complimentary one-year ISM membership, as well as free admittance to ISM2017 in Orlando.

One lucky “Megawatt” winner will also have an all-expenses paid (up to $5000) trip to the same conference. Each winner also receives a THOMASNET.com Supplier Discovery and Evaluation “lunch and learn” session for their teams, and any other teams in their organisations.

Most importantly, the winners will gain widespread recognition from managers, companies and peers, as their achievements are celebrated and broadcast through industry journals, blogs, magazines and newspapers locally and globally.

Essentially, the programme identifies 30 “ones to watch” every year. Make sure you keep an eye out for the winners. They could be a future procurement leader in a company near you. And soon.

Do you have a Millennial supply chain star in mind for the 30 Under 30 awards? Nominations are now open – visit THOMASNET.com for more information.

Stimulating Competitive Bidding With Traffic Light Feedback

What does a traffic light have to do with the sourcing process? When you’re considering sharing information, it might be a good way to retain a balance.

Traffic Light

RFX processes can be frustratingly opaque for suppliers, particularly in the private sector.

Submitting a bid can be like trying to play a game of darts in the dark. After the dart leaves your hand there’s simply no way of knowing if you’ve hit anywhere near your target. And frequently there’s no response until the buyer informs you that your bid hasn’t been successful.

Don’t Give Away Too Much

Why are buyers typically so hesitant to give feedback? It may be due to a perception that knowledge is power, and giving away too much information will cause you to lose your advantage. To a certain extent, this is true. Too much granularity might allow the supplier to determine the target price necessary to win.

Similarly, giving away too little will cause your supply base to become frustrated and disengaged with the sourcing process. What buyers need to achieve is a balanced response, giving just the right amount of feedback to stimulate the supplier into giving a further discount.

A little bit of ambiguity can go a long way towards stimulating aggressive bidding behaviour, especially for suppliers who are aware that they’re in second or third place.

In a thoughtful article on the pros and cons of supplier transparency, Charles Dominick explains that a high level of transparency (through feedback) will help suppliers focus on what your needs are, instead of having to guess.

Transparency fosters open communication, collaboration and continuous improvement, and will help build your reputation for fairness and impartiality.

Finding a Better Way

Speaking at SciQuest’s Next Level Conference in Nashville, solution consultant Jason Hochreiter explained his organisation’s “Expressive Feedback” feature, which is a part of the Advanced Sourcing Optimizer module.

“Buyers need to get into the mindset of suppliers during the RFX Process”, he says. “Greater visibility of how their bid compares may actually help stimulate competitive behaviour and potentially lower bid prices during a sourcing event.”

SciQuest’s Expressive Feedback is named as such because it’s highly configurable, meaning that the buyer can choose when, how and what feedback to give suppliers during the sourcing event.

For example, the buyer may choose to only give feedback after the second round of bids, either sending out specific comments or using a green, yellow and red traffic light system to show at a glance if the bid is competitive, non-completive or significantly non-competitive.

Using the Traffic Light For Fast Decisions

Colours are a powerful tool to show suppliers at a glance how competitive they are, and if used intelligently, can encourage suppliers to make an impulsive decision to lower their bid.

Green: Consider what you need for the traffic light to show “green” – what does this actually mean? It could signal that the supplier’s price is within 10 per cent (or whatever percentage the user configures) of the target price. Or it could mean that they’re within the top five bids, without giving away their actual ranking.

Keep in mind that you wouldn’t want to alert a supplier to the fact that they are the cheapest, as it would almost certainly stop them from putting in a lower bid.

Yellow: This is where the psychology of feedback comes in. Hochreiter explains that it’s human nature to care about the loss of something (such as moving the traffic light from “green” to “yellow” status). This may prompt a fast decision to attempt to regain that status.

A supplier, seeing that they’ve slipped from the green bracket into the yellow bracket, may quickly submit a cheaper bid without considering the longer term implications of this action.

Red: Hochreiter cautions against using “red” for a supplier that you are interested in retaining. “If they see red, it’s likely that they won’t update their bid but assume instead that they are out of the race. Adjust the range as needed, so they’ll see yellow and will be more likely to compete.”

For more information about Advanced Sourcing Optimizer, please visit SciQuest website or contact SciQuest.

Lisa Malone, General Manager Procurious, was reporting from SciQuest Next Level 2016 last month, bringing you all the best bits.

Reliance on Outdated Tools Hamstrings International Growth

An over-reliance on outdated tools and processes in the supply chain is harming growth, and cutting competitive advantage.

Outdated Tools

Today’s international business environment is more complex than ever. As this complexity, and volatility, continue to grow, companies need to ensure that processes and tools are up to date. Without doing this, they risk cutting their growth prospects, and erasing their competitive advantage.

Growing global risks, evolving supplier networks, and economic difficulties in key, and traditionally stable, markets all must be factored in. Businesses not taking advantage of Advanced Planning & Scheduling (APS) systems run the risk of much increased costs.

Failure to adapt to new technology also means that companies will be left with limited flexibility to respond to changing market conditions.

Responsiveness and Agility

In the past twelve months, the global economy has suffered from a period of unprecedented, and unheralded, volatility. Events like Brexit, ongoing civil unrest, and the rise of extremist terrorist organisations, have left global supply chains in jeopardy.

Organisations can no longer rest on their laurels and bank on continuing success. Ensuring success in this environment requires robust scenario planning, the ability to adapt quickly to change, and the capability to deal with changing suppliers and business partners.

As many experts have highlighted, procurement and supply chains need to be agile in order to adapt to external changes.

Outdated Tools and Systems

Global supply chain consultancy, Crimson & Co, recently conducted research into the tools and processes organisations were using in their supply chains. At a majority of respondents, they found a continued reliance on outdated tools, and legacy systems.

The research found that over two-thirds of those surveyed still relied upon ERP and spreadsheet systems.

The findings also showed the benefits that an effective APS system could deliver. Respondents highlighted a potential 20 per cent reduction in working capital, 5 per cent increase in service level, 6 per cent reduction in logistics costs, and 3 per cent reduction in the cost of goods sold.

This research has gained more credence in recent weeks, with the bankruptcy of Hanjin shipping, and the associated issues for US retailers.

Failure to Rise to Challenges

Dave Alberts, Director at Crimson & Co, explained:

“A continued reliance upon outdated planning tools like Enterprise Resource Planning (ERP) systems, bolstered by an array of spreadsheets, prevents many businesses rising to these supply chain challenges.

“If supply routes need to change following disaster, or old trade agreements can no longer direct freight transport, businesses leaning on ERP systems can find themselves on the back foot and unable to take advantage of such changes.

“All in all, these outdated tools can result in significantly increased capital and service costs in the case of any changes to the supply chain status quo.”

Alberts also highlighted the need for businesses to update their planning tools in order to remain competitive. Legacy systems inhibit the ability to innovate and improve supply chain processes.

Alberts argues that these companies will likely fall behind more reactive and agile businesses supported by more flexible planning tools.

“There is a clear incentive for businesses to adopt a robust APS system. Through benchmarking of planning and scheduling solutions, companies can quickly work out the systems that need updating and the practices that need improving. They can then work to develop these areas where necessary.

“In most scenarios, the adoption of an APS system can result in reduced overall supply chain costs and greater ability to deal with complex business decisions,” Alberts concluded.