Category Archives: Procurement News

Digital Economy, Disruption and the Future of the Payments Industry

Faster payments and customer demand is disrupting the payments industry, but PayPal say that the future is bright.

Digital Payments Industry

It may have been a boring space 20 years ago, but now the payments industry is undergoing major disruption and innovation, Libby Roy, Managing Director of PayPal, told the 9th Asia-Pacific CPO Forum in Melbourne.

The payments industry covers everything in to the end-to-end process that powers commerce, and is involved in all aspects of our lives. PayPay is involved primarily in the B2C space, which moves incredibly fast due to the proliferation of new players, and the integration of new technology powering our payments.

The innovations unfolding in the payments space is being driven by increasingly demanding consumers wanting the ability to make quicker payments.

Please the Consumer

Roy used an analogy to explain that everyone in the room was the consumer that PayPal was working to please.

“Think about it. Do you wait for your favourite television show to be scheduled and aired on television, or do you download the entire series, or live stream, because you can’t bear to wait? That desire to have access to thing immediately is higher than ever before, and we are leading the way in beautiful, frictionless payments,” Roy says.

Australia is fast becoming a cashless society in the consumer space, with the vast majority of payments using cards or contactless technology.

PayPal is continuously working toward new innovations to solve the pain points of consumers in a more seamless way, with new payment gateways and partnerships being constantly explored. This will result in a number of flow-on effects that will impact upon various industries, including procurement.

Social Payments

“Payments in the near future will become social, which lets you buy something at the moment of discovery. Consumers will be able to decide whether the good or service will work for them, and then be able to transact that very moment. Payments will be attached to any device, which will add billions if not trillions into the economy.”

For example, payment options will be attached to the household fridge, and connected to the local supermarket for re-orders.

“These innovations are being driven by the tremendous amount of investment occurring in the fintech space, though not all of the startups in this space are successful. It’s not surprising, it’s a complex space.

“Meanwhile, we’re seeing a number of new payment players aside from the banks and financial services companies entering the payments space, including Apple, Facebook, Amazon, Google and Microsoft,” Roy says.

Roy also told the audience that PayPal has started lending limited funds to small businesses to help them grow.

Why the Entire Procurement Profession Needs to Get Social

Tania Seary tells delegates at the Asia-Pacific CPO Forum that procurement needs to get social to drive the profession forward. 

Tania Seary - Get Social

Procurement professionals need to claim their rightful place on the Internet, and get social, by actively participating in social media and blogs for the benefit of the broader industry, the founder of Procurious told a conference in Melbourne yesterday.

Tania Seary, who founded Procurious to connect, promote and support procurement professionals across the globe, told the 9th Asia-Pacific CPO Forum that online visibility has several benefits, but that it’s everyone’s responsibility.

Large portions of the procurement profession are working in isolation, unaware that there is a whole universe of knowledge available to help them do their jobs better and learn, Seary told the audience.

In fact, there are more than 2.5 million procurement professionals in the world, but probably less than 500,000 that the industry can readily connect with, she says.

Share, Share, Share

Procurious was launched two years ago as the world’s first online business community dedicated to procurement and supply chain professionals.

“The procurement profession must share, share and share online to build our collective muscle, amplify attention to our impact, and tackle our thorniest issues together,” Seary says.

This can start by simply sharing your social media profile, your business photo, and by broadcasting your everyday successes.

“Think about what it would mean if a newly-minted company CEO who wants to understand what we do, takes the time to Google ‘procurement’ and sees overwhelmingly positive language in their search results. That CEO can’t help but be inspired and energised by the hype and positivity around procurement,” Seary says.

She also urged all procurement professionals to ask questions and share what they don’t know, saying that without sharing the things you’re concerned about, no action can be built, and there can be no moving forward. Giving back to enrich the wider community, by understanding that everyone has something valuable to share is important too, she says.

Big Ideas 2016

The highlights of Procurious’ Big Ideas Summit, held last month in London, were also shared to the 50-strong audience of procurement leaders. Keynote speakers included IBM, Coupa, ISM, Facebook and The Economist.

“What happened in the conference in London was only a small part of the story. What makes Big Ideas truly unique is that it is a digital conference that is amplified to procurement professionals around the globe.”

For example, the #BigIdeas2016 hashtag was tweeted 1,500 times, reaching a potential audience of 4.3 million individuals, all around the world, in just over 24 hours.

“Let me tell you that the message in the room was clear. Procurement needs to think the unthinkable and certainly rethink the possible,” she told the audience.

The UK is now auditing Supply Chain Purity in the fight against slavery, while Social Procurement is on the agenda in Australia.

Get Social Enterprises on Board

Social Enterprise UK CEO, Peter Holbrook, announced at the Big Ideas Summit the ‘Buy Social Corporate Challenge‘, which will see a group of high profile businesses aim to spent £1 billion with social enterprises by 2020.

The founding partners include heavy hitters like Johnson & Johnson, PwC and Zurich.

J&J are taking action and supporting people often termed ‘furthest from employment’, with the ‘Social Impact through Procurement‘ initiative aiming to create at least 150 jobs for these people by 2020.

“Here in Australia, Social Procurement has been a concept we have been talking about, trialling, but the big ideas summit confirmed that this is now firmly on all major corporation’s agenda.

“Not only is this the right thing to do, but this is the sort of thing that the C-level, annual reports and what Procurement could be famous for. So where are we with Social Procurement in Australia? I will be interested to hear.”

Leading Australian Political Journalist Unravels Political Landscape

Australia’s political landscape is a complex beast. We ask senior Fairfax political editor Laura Tingle to unravel these complexities for procurement professionals.

Political Landscape - Laura Tingle

No matter which political party you back, there’s no doubt that the political landscape can have major ramifications on the procurement function within your business.

So, we asked Fairfax Media‘s Political Editor, Laura Tingle, to unravel the elements of politics, as Australia wades through this longest of all election campaigns, and try to understand what sort of government it faces after July 2.

“It’s Complicated”

Laura explains that Australia heads into the upcoming election with Labor currently holding a ‘notional’ 57 seats and the Coalition – after Tony Abbott’s big victory – holding a ‘notional’ 89 seats.

“The national polls currently suggest – on a swing of about 2.5 per cent against the Coalition since the last election – that we have started the election campaign in the realms of an outcome where the government would just get back into office, or where there might be a hung parliament.

“That is, there are 13 Coalition seats held with a margin of less than 2.5 per cent, just one seat less than would need to change hands for the Coalition to lose its absolute majority,” Tingle says.

But, as the saying goes, ‘it’s always complicated’, and in fact, at this election it is particularly complicated, she says.

“And I can’t think of an election where there are so many unknown factors at play, which could create some quite wild outcomes.”

Election Zeitgeist

Speaking at the 2016 9th Asia-Pacific CPO Forum in Melbourne to an audience of about 50 leading procurement professionals, Tingle spoke swiftly, explaining how she saw things.

Another complication, on both sides of the political fence, is the unprecedented number of retirements of sitting members (21), meaning the loss of personal margins of longstanding MPs.

Laura explains, “My apologies for bombarding you with numbers. But they all play in to the zeitgeist of the current election campaign, and the unprecedented uncertainty around the likely outcome.

“When you say ‘uncertainty’ in politics, people think that that is, by definition, a very bad thing – that the country is heading in to some unknown period of terrible instability in the political landscape.

“When I say uncertainty, I mean it in the sense that, more than is usually the case, we really don’t know what the election outcome will be if we judge it purely by the numbers. If we judge it by gut instinct – do voters think one leader has nicer teeth – and other less scientific outcomes, there actually seems a little bit more certainty.”

“The questions comes down to whether the electorate really wants yet another change in prime minister? And whether Bill Shorten created – or can create in the next two months – a sense of momentum for change, as well as a strong relationship with voters who, until very recently, utterly dismissed him?

“And has the electorate’s view of the Coalition become so firmly entrenched in the negative that it just wants to get rid of the government?” she says.

“Think about the election result in those terms and your gut says – well at least my gut says – ‘no’ to all three questions.”

Policy Towards Business

Bill Shorten deserves full credit for leading a team that has gone on the front foot on policy and who has managed to bury the perceptions of disunity within the Labor Caucus, Tingle told the audience.

He’s a good campaigner and has started the formal campaign well. The more voters have seen of him in the past couple of weeks, in particular, the more they have liked him, she says.

Tingle told the audience that the Coalition has been thrown off course in the past couple of years, first by its utter political incompetence and lack of policy savvy. The 2014 budget has become the byword for this, but there was much that proceeded it in terms of policy towards business even before the budget was brought down.

“Having made such a mess of things, and then under intense political pressure, the government – still under Tony Abbott – tried to clean up, for which you could use the 2015 budget as the guide.

“But there was still a lot of mess, a lot of conflicting signals, and a lot of policy that is still on the books which is bad or politically untenable,” she says.

“Issues like health funding, schools funding, universities funding are massively complicated now for both sides of politics. They involve the goodwill and assistance of the states in all cases.

“And I have to say that, while I perhaps have more reason to be cynical than a lot of you, having spent 30 years to close to the political action, I actually think we have got a better bunch of competent people – professional politicians who are actually interested in policy as much as just winning – than we have had for a very long time.”

Tingle finished by warning that a number of things could go pear shaped in the world’s political landscape in the next three years.

“I would like to leave you today with the optimistic message that I believe both candidates for the prime ministership are capable people, with capable teams, not driven by ideology but by pragmatism,” she says.

In Search of Influence – What the Literature Says

Searching for the true meaning of influence, and how procurement professionals can, and need to, become better doing it.

Influence

I have recently completed my masters, and my dissertation looked at influencing within procurement and how to develop these skills.

This article looks at the published literature around influencing. The next article will review the opinions of top influencers and consider what their key traits are, and how these skills can be developed.

Much has been written about the need for the professional skill sets required by procurement professionals to change. According to CIPS over the last 5 years, the skills required have changed as the table below: [i]

Skills Table - GD

For Procurement to achieve its goals, more work needs to be done to align to key stakeholders and understand the business operations, in order to become a true strategic partner.

This means moving up the value chain to ensure that the function is involved much earlier in the decision-making processes and clearly demonstrating how active involvement adds tangible value to both the bottom and the top lines.

In order to do this, Procurement as a function needs to expand its ability to influence, and procurement practitioners need to expand their own personal influencing skills (along with other soft skills).

So what do we mean by influencing and what are the different ways we can influence?

What is Influence?

Influencing skills, have been defined as the ability to get people to do what you want[ii], or changing people’s behaviour to act in your favour through the use of persuasion[iii], or wielding effective tactics of persuasion[iv].

How can we Influence

We all have differing influencing styles which generally will fall into any of the following:

  • Asserting – where you insist on your ideas being heard, and you challenge the ideas of others.
  • Convincing – where you put forward ideas and offer logical reasoning, which convinces others of your point of view.
  • Negotiating – where you look for compromises and make concessions, in order that you can reach an outcome that satisfies your greater interest.
  • Bridging – where you build relationships and connect with others, using listening and understanding to build coalitions.
  • Inspiring – where you advocate a position and then encourages others to come round to the idea by sharing a sense of purpose.

Dale Carnegie[v] wrote, that in order to become effective influencers, we need to influence people at an individual level. He also argued that the steps for effective influencing are:

  • If you want to make a good first impression, smile.
  • If you want others to like you, don’t criticise them.
  • If you want others to gladly do you favours, show your appreciation frequently.
  • If you want to be interesting yourself, be interested in others.
  • Show your appreciation for others by talking about what’s important to them.
  • We like people who show their appreciation and remember things about us, like our names.
  • Avoid all arguments – they cannot be won.
  • Never tell others they are wrong, they will only resent you.
  • Whenever you are wrong, admit it immediately and clearly.
  • To be convincing, get others to say “yes” as often as possible.

Emotional Intelligence

Emotional intelligence is the capacity of people’s ability to recognise their own, and to understand and recognise others’, emotions, and use that information to guide behaviour and therefore influence.

Daniel Goleman argues that just having one persuasion skill alone, and deploying just one, may not be good enough to gain influence. He argues that being influential is having the ability to sense what other kinds of appeals will persuade key decision makers.

Critically, Goleman argues, it is noticing when one tactic isn’t working and when to switch to a different one which adds impact to an individual.

So what are the persuasion skills?

Persuasion

Manningham and Robertson[vi] identified 6 persuasion strategies from their research:

  • Reason – the use of logic or facts to justify a request
  • Assertion – making a direct request and using emotion to underline our need
  • Exchange – the trading of one thing for another
  • Courting favour – being friendly or positive with people
  • Coercion – the implication of negative outcomes on not agreeing
  • Partnership – gaining the support of people both within and outside the organisation.

In developing this research on persuasion tools, Reynolds developed the Persuasion Tools Model[vii], based on work by the psychologist Kenneth Berrien. It links negotiation and persuasion style, to emotional intelligence (EI), and in some ways echoes the work of Manning and Robertson

The Persuasion Tools Model
The Persuasion Tools Model

In this model, the horizontal axis represents influencing, which Reynolds states is a measure of your overall persuasion capability. The vertical axis represents the level of intuition required.

Summary

Two main thoughts are drawn from this research:

  1. That deploying one persuasion tactic as part of a plan is not enough; and
  2. Influencing, when it happens, happens with one person at a time.

In the next article, we will identify the traits of top influencers and how we may develop these skills.

[i] CIPS (2015) Advanced Diploma in Procurement and Supply; Chapter 4 Skills for Category Management

[ii] Mullins, L. (1996). Management and organization. 4th ed.  Pitman

[iii] Manning T; Robertson B; (2003),”Influencing and negotiating skills: Part I: influencing strategies and styles”, Industrial and Commercial Training, Vol. 35 Iss 1 pp. 11 – 15;

[iv] Goleman D (1998) Emotional Intelligence: Why It Can Matter More Than IQ; Bloomsbury Publishing

[v] Carnegie D; (1937) How to win friends and influence people: Simon and Schuster

[vi] Manning T; Robertson B; (2003),”Influencing and negotiating skills; Part II: influencing styles and negotiating skills”, Industrial and Commercial Training, Vol. 35 Iss 2 pp. 60 – 66;

[vii] Reynolds, A. (2003) ‘Emotional Intelligence and Negotiation,’ Hampshire: Tommo Press

Less is More – The Power of a Good KPI

It is not every day that procurement can learn from a fashion icon, but in my (and Coco Chanel’s) view – “less is definitely more” when it comes to a good KPI for procurement.

Coco Chanel - Good KPI

Think about your role in procurement. Think about the huge number of outcomes you work hard to deliver every day, from the repetitive (but necessary) daily tasks, to the huge projects with looming deadlines. Now, I want you to distil your entire, complex, multi-faceted role into just five KPIs.

That’s right – five KPIs only.

Passion for KPIs

I didn’t realise how passionate I was about KPIs until the conversation came up on the agenda at The Beyond Group’s “Productivity in Pharma” (PiP) Think Tank in Basel last month.

The room was full of heavy-hitters from the big pharmaceutical houses, including Novartis, Roche and Bristol Myers Squibb. Not necessarily CPOs, but heads of indirects, clinical research and engineering procurement. The facilitator, Sammy Rashed, led a spirited debate on what a good KPI should look like, how KPIs should work, and how they can benefit a business.

Wow! As the conversation evolved, I realised I had some strong views on how my beloved profession should be measured.

I shouldn’t have been surprised. Just after I finished my MBA, I spent a couple of years working with Alcoa’s corporate finance team on how we should measure procurement’s value, and then educating the procurement team globally about how to report the calculations. I’m also married to the global CFO of a FTSE 10 company, so I know the kind of metrics that he deems as solid, and those that are “fluff”.

What Gets Measured…

On that point, let me tell you a little bit about what I know about the mind of a Finance Director. It goes without saying that they are absolute geniuses: kind, considerate, and definitely make the very best life partners.

BUT, as I am sure you have witnessed in your own organisations, the mind of a CFO is fairly mono-dimensional. Value has to be defined and quantified in hard terms.

I put in a quick trans-Atlantic call to my husband to ask his opinion on KPIs, and was rewarded with this gem: “You can’t improve what you can’t measure”. It’s actually a variation on a common saying of his, which is “what gets measured, gets done” – but there you go. CFOs are full of surprises.

KPIs can be lagging, leading, soft, or hard – but whatever you do (according to this CFO) they must be linked to the corporate objectives, which is where I will start with my five rules of thumb for a good KPI.

1. Each KPI needs to be clearly linked to an overall business objective.

This is one of the most important issues for procurement to consider. You see, if procurement KPIs aren’t linked to the business strategy, then your team’s activities will not be seen as relevant to getting the business to where it wants to go.

I think this is why I get fired up on this topic. We talk about a ‘seat at the table’ and ‘speaking the language of the business’ – well, in the c-suite, KPIs are the language of the business. As a procurement professional, the KPIs you choose actually define your role in the business. Don’t underestimate the power of a good KPI to secure your seat at the table.

We were all in agreement at the PiP Think Tank that for procurement to be relevant and valued, it must be aligned with the business strategy. Your KPIs are the ultimate reinforcement to senior management that your team “get it” and understand how they can contribute to the overall business success.

KPIs that deliver profit (through cost-downs), free up cash, contribute to top-line growth through innovation and protect the corporate reputation will resonate strongly with your senior leadership team.

There is another important reason for linking your KPIs to the corporate objectives. Shared objectives help create teamwork and a sense of connection for everybody and the greater organisation.

2. Your KPIs need to be uncomplicated and measurable (ideally in hard dollar terms)

Procurement receives a lot of “constructive feedback” (I’m trying to be positive here) for using too many unique terms and not speaking the language of the business. Make sure your KPIs can’t be criticised for the same reasons!

A good KPI can be measured relatively easily and understood by the business. There’s no problem with spending some time with Finance to make sure you are a little creative in defining how value is being delivered, but the end result must be something that is widely understood and helps build credibility rather than undermine it.

You will also open yourself up to criticism if your team, or other parts of the business, need to spend a lot of time on calculating KPIs, so be careful and keep it simple.

3. KPIs should measure outcomes, not inputs or internal processes

Number of meetings, number of ideas, strategies being developed – none of these count in my book. They are all measurements of the inputs your team will make with the objective of achieving an outcome.

Your KPIs should capture the value this type of activity will actually deliver to the business. They have to resonate with the senior level by measuring outcomes rather than cataloguing your own activity.

4. Don’t have too many KPIs

Going back to what I said at the beginning, this should be a maximum of 5 KPIs. It takes courage, real discipline (and a lot of debate), but try to get your KPIs down to a small handful of measurable outcomes. It will give everyone clarity and focus.

5. KPIs must be achievable

More than anything, your team will need to believe that they can actually deliver on their KPIs. In a way, they need to be inspirational. They should engage the team to focus on the results that will make their function truly valued!

What is your criteria for a good KPI?

The Productivity in Pharma Think Tank brings together a conclave of senior procurement leaders from the Pharmaceutical industry, creating a unique, mini-MBA style environment, where the most pressing issues facing the function are explored in detail and, from which, key insights and applicable takeaways are derived.

You can find out more about this event at The Beyond Group website, and connect with the event hosts and facilitators Giles Breault (@GilesBreault) and Sammy Rashed (@RashedSammy) on social media.

Supply Chain Sustainability: A Strategic Responsibility

Supply Chain Sustainability is in the spotlight, thanks to the influence of social media. Companies realise that they must lead the way in this area.

supply chain sustainability

The supply chain function has evolved significantly over the past decade, becoming a key strategic pillar of business. Going beyond its core role
 of delivering goods on time, in full, it has a vital role to play in customer experience and brand perception.

Supply chain now has a seat in the boardroom in many organisations. Barely a week goes by without a supply chain issue – be it supplier failure or reputational risk – hitting the headlines and the share price.

The proliferation and influence of social media has put supply chain sustainability and risk firmly in the spotlight. Companies are publicly held to account for the actions of all tiers of their supply chain. This is why companies must lead the way on sustainability issues.

Supply Chain Sustainability

The sustainability discussion evolved from companies purely focusing on taking from society and wanting to give back, to realising there are risks to reputation from non-compliance.

Sustainability issues are often supply chain issues. For example, the introduction of the Modern Slavery Act aims to ensure that slavery and human trafficking is not taking place in businesses or supply chains.

Today, however, organisations are now seeing supply chain sustainability as a strategic opportunity that can increase competitive advantage.

Two main streams have emerged:

  • The risk dimension: what do companies have to do to avoid risk of brand damage?
  • The aspiration dimension: what is the strategy for the long-term survival of the  business?

Creating a Positive Impact

Supply chain sustainability is increasingly seen among senior executives as essential to delivering long-term profitability. A sustainable supply chain captures value creation opportunities and offers significant competitive advantages for early adopters and process innovators.

At the same time, supply chain is one of the key components for organisations 
to create a positive impact in the world, with an estimated 80 per cent of global trade passing through supply chains. Many large corporations, such as Nestlé and Nike, want to do good business and do the right thing.

A recent study on the global supply chain community saw three current trends emerging on supply chain sustainability in 2015/2016:

  • Industry collaboration is the biggest opportunity
  • Eliminating supply chain risks is the main driver
  • Traceability and environmental concerns are the biggest risks to watch out for

Industry Collaboration

Starting with ethical and responsible sourcing, supply chain professionals have begun to understand the importance of building long term relationships with suppliers. Having a win-win partnership is crucial. Companies who are a valuable customer to their vendors will have a considerable competitive advantage.

Organisations are demanding more 
from their suppliers. Traceability and transparency are key requirements. Companies sharing their big picture vision with their suppliers, and their role in the long-term strategy, will get more from their partners. Too many businesses are still failing to achieve this. Partnering with suppliers empowers them to unlock innovation quickly.

Working on more collaborative partnerships helps to minimise the risk factors too. Companies are liable for all tiers of their supply chains. Increased collaboration with others is vital to be
 able to efficiently assess all layers of the supply base.

Organisations can never 
be too informed if they want to prevent risk. They also need to demonstrate they have acted responsibly when risks are exposed. Companies must start with themselves, and build open and transparent relationships with their suppliers.

Codes of Conduct and Audits

Some pharmaceutical organisations,
 like Takeda, have recently established
 a supplier code of conduct in line with
 their international business ethics. They proactively audit and monitor their vendors to review performance in line with this code. It helps Takeda to have a much stronger supplier selection process, as they are able to build stronger relationships and reduce risk exposure.

Collaboration with other industry leaders can be very valuable in sharing information when it comes to supplier audits. Takeda recently joined the Pharma Supply Chain Initiative, composed of 20 companies. It has a supplier audit program and engages with the suppliers on behalf the member companies to make sure they comply. It also raises awareness from an environmental and ethical point of view.

Collaborative Platforms and NGOs

However, collaboration between businesses from the same industry is not widespread. Many companies fear a loss of commercial control and competitive advantage by working closely with others. As a result, there is an emergence of collaborative platforms. One of these is EcoVadis, which works with many global brands to provide supplier sustainability ratings for global supply chains.

Collaboration can also take the form of partnering with NGOs. They can help and guide organisations on environmental
 or ethical issues. Greenpeace is one such organisation. In the past they have worked with Kimberly-Clark to practice responsible forestry management, as well as Unilever and others on palm-oil sourcing. In building those partnerships, the willingness to talk is key, particularly when there is a history of conflict.

Supply Chain Sustainability can also be a source of competitive advantage for organisations. Stay tuned for the second part of this article to find out more.

Challenges Ahead for Buyers Making Late Payments

Few buyers are aware of changes to late payment regulations, as well as the potential penalties for making late payments to suppliers. 

Late Payments Main Image

In the modern procurement world, there are many hurdles to timely payment that exist on both sides of buyer-supplier relationship. Overcoming these, and ensuring that organisations are not making late payments, is a key way to build good relationships.

New Hackett Group research has found that nearly one-quarter of all supplier invoices are paid late (Fig. 1). Despite the working capital benefits, only a very small percentage of respondents to The Hackett Group’s Payment Practices Poll, intentionally pay suppliers late.

Fig 1: Common Reasons for Late Payments
Fig 1: Common Reasons for Late Payments

Most payments are simply delayed by slow approval processes, late receipt of invoices, or technology problems. That being said, there is a continuing trend for larger organisations to extend their payment terms, or make unilateral contract changes aimed at slowing the payment clock.

Well over half of procurement organisations surveyed by The Hackett Group were not aware of legislation and government initiatives to encourage faster payments to suppliers. Further, because it is uncommon for suppliers to charge interest or fees for late payments, 76 per cent have no plans to pay suppliers for late payments.

In general, late payments have a proportionally higher impact on smaller suppliers’ financial positions. These may be the very same companies that buyers have committed to help grow as part of their diversity and supplier development strategies.

Why is there such a large disconnect? And what needs to change?

This disconnect has become an important economic issue for several reasons. Banking regulations like Basel III have tightened bank capital requirements and financing costs, thereby reducing financing funds available for smaller companies.

There is also a belief that money unnecessarily caught up in the supply chain counteracts growth in the economy (e.g., missed business opportunities, financial distress), causing additional concern.

Given the higher risk of financial penalties being incurred for late payments, companies purchasing goods and services from SMEs need to resolve any process issues to enable a more efficient payment program.

What can buyers do to avoid late payments?

Not only do late payments cause operational issues and loss of discounts for early payment, they can also hurt relationships with suppliers and result in financial penalties due to contractual obligations and government regulations.

Buyers should start by looking internally to ensure better communications, processes, and automation around the payment process. Payment organisations can also look externally, to their suppliers, to improve the payment process.

Although buyers are ultimately the main driver, suppliers can still influence the timing of payments through the use of various strategies. Buyers should work collaboratively with suppliers to implement both internal and external changes spanning from people to process to technology.

Learn more about Hackett’s Procurement Executive Advisory Program here

Laura Gibbons is a Research Director for The Hackett Group’s Procurement Executive Advisory Program. She has industry and consulting experience in areas such as purchase-to-pay, strategic sourcing, payment strategies, manufacturing operations, economic impact analysis, and organisational and process design. You can contact her via email at: [email protected].

What is the Biggest Challenge Facing Procurement?

From talent management, to ethics and transparency, there are some major challenges facing procurement in the current environment. But which is the biggest challenge?

Biggest Challenge

When considering the potential issues and risks that procurement professionals need to be aware of in their day to day work, it’s difficult to single out one in particular requiring greater focus than the rest.

In fact, if you were to ask the question of what is the biggest challenge currently facing procurement, the chances are high that you would get a considerable number of topics listed. However, that is exactly what Deltabid did with a survey of over 500 procurement professionals. More on this shortly.

Blind Spots

During the Big Ideas Summit 2016, Procurious asked its delegates to tell us what they considered to be procurement’s blind spots, and major areas of risk, in the coming years. Our panel of experts highlighted these areas:

  • Too great a focus on savings
  • Dealing with the wider business
  • Talent attraction and management
  • A lack of ambition in procurement
  • Working with legal teams

A contributor to the Procurement Leaders blog commented that, “CPOs face one of the most complex roles in an organisation”, and highlighted skills required for the future including a focus on strategic relationships, management of global supply chain risk and use of big data.

At the 9th Annual Asia-Pacific CPO Forum, The Faculty will be discussing the need for procurement to leverage supplier-enabled innovation, and a focus for procurement on SRM in order to make this a reality.

And when you consider the prevalence of stories and news reports on sustainability and supply chain transparency, it seems we are reaching a point where not only can we not reach a consensus on what the biggest challenge is, but also facing a lack of understanding about how we tackle these challenges.

Making Progress?

The other issue to consider is whether or not the procurement profession is making progress dealing with its biggest challenges. A quick search reveals a number of articles from the past couple of years asking a similar question of procurement leaders, including this one from Spend Matters.

In it, the top 5 challenges for CPOs are highlighted, including mitigating spend creep, the visibility of realised savings, compliance, technology, and procurement skills and capabilities to deliver on strategies. Starting to sound familiar?

What procurement must do is set out to tackle these challenges, and actually make some progress on them, instead of moving on to the next thing. And also to realise that these challenges don’t go away – it’s going to be a continuous process.

Biggest Challenge

This circles back to being able to identify the biggest challenge facing the profession, and perhaps assessing an order for them to be in, and a plan of attack for meeting them head on. This is where Deltabid’s research can help.

A survey of over 500 procurement professionals found that the biggest challenge was supplier-related issues, including finding and qualifying suppliers and maintaining consistent supply, with strategy selection, and cost reduction making up the top three. You can see the full results in the infographic below:

Procurement Biggest Challenge

While the results may not be surprising, they go some way to helping generate a consensus on the biggest challenge facing procurement. It’s now down to the profession as a collective entity to work out the best way to tackle these challenges.

One of the best ways of doing this is by collaborating openly, sharing knowledge, information, and lessons learned, and flexing our collective muscle in order to change the profession for the better.

If you have any comments, ideas, thoughts, or anything else you would like to share, please let us know in the comments below. If you have also had successes in dealing with any of these challenges, then we would love to tell your story!

Creating Community Empowerment With Football

How taking an interest in football can help put community empowerment at the heart of public procurement.

Community Empowerment

Lots of public bodies at national, regional and local level like to talk about community empowerment don’t they? That’s because promoting community empowerment is perhaps the holy grail of participatory democracy.

Many politicians and policy makers believe that getting communities more involved in what public money should be spent on and, more importantly, why, will lead to improved outcomes for people and their communities. And there’s plenty of evidence to back this up.

For procurement, tasked with delivering more for less, increasing community empowerment could also mean that the ever-decreasing pot of cash available to spend on public services could actually be deployed in a much more effective way.

Empowerment and Football?

So what we can we do in procurement?  How could we promote community empowerment and what benefits could that bring?  When I was searching Google for examples, strange connections started to occur.  Wherever I found a good example of procurement and community engagement, great football, or soccer to those of you on the other side of the pond, was also evident too. You don’t believe me? Well read on…

Let’s start in the home of sexy football, Brazil.  They’ve been doing a thing called Participatory Budgeting there for a number of years, and it’s a great way to do community empowerment at the front end of the procurement process. Participatory Budgeting in Brazil is an approach which gives local people a direct say in how, and where, public funds can be used to address local requirements.

It started in a place called Porto Alegre in southern Brazil over a decade ago. The first phase of participatory budgeting was to get people together to prioritise how money should be spent, and where investment should go. Should it be parks or water supply, or schools or roads? People at the grass roots of the community were asked to come together in neighbourhood assemblies, and make those decisions.

As the process matured people were able to take decisions at an increasing lower level.  From choices between thematic areas, to choices between services within a theme, to choices about what the specification for that service should be.

So people at the front end determining priorities. Something perhaps we already get involved in from a procurement point of view through User Intelligence Groups, particularly when we have service users involved in that process.

Community Empowerment

What they’ve done in Brazil is a start, but how could we shift control even more directly to people’s hands and empower communities through procurement?

To have a look at how this might be done I moved on to another football hotspot – Spain. I zoomed in on a city which features on a daily basis in my house, and probably every household that has football crazy kids in their midst. Now the football club might be having a great season, but the real reason why Barcelona is a great place isn’t the sublime football of Messrs Neymar, Messi and Suarez.

It’s their approach to procurement using open problems that was the real wow factor for me. Instead of coming up with a specification for a service, they’ve specified the problem, and then gone to the market and asked suppliers to solve it.

They asked people from geographic communities, or communities of interest, to identify what needs they have, and then turned it over to the world’s entrepreneurs to solve them.

Barcelona’s approach was successful. They had 50,000 views of their contract notices, and ultimately let six contracts in this way for issues ranging from tackling bike theft, to systems to tackle social isolation, and empowering local retailers using technology. The thing to understand here, is that communities don’t always know the answer to what they need at the outset – they just know they have a problem.

This method of empowering them to say what they want to change and then enabling them to choose what the answer should be from a range of options, some of which they might not even have considered, is very powerful and procurement is right at the heart of it.

Going Remote and Rural

But is it just in big cities and the regions where these community empowerment approaches might work? Could we use them in remote and rural locations?

My final destination is in one of the great footballing heartlands (well we like to think so anyway!) – Scotland, and my own organisation in the Outer Hebrides.

We wanted to improve community empowerment and link it to a procurement process and so we gave a combination of Brazil and Barcelona a try.  We used a bus service contract but flipped the requirement on its head so we went out to the market to seek travel solutions for people without cars – the problem we sought to solve.

We engaged with the community to identify needs, drive specification development and score the tenders. We embedded community engagement the length and breadth of the procurement process.

To make this happen we assembled our squad of players. The Transport Team in defence, yearning to retain the old ways of doing things, community workers in midfield being creative with their consultation techniques, corporate policy playing in goal making sure we didn’t make any strategic blunders, and finally our strike force, the procurement team, taking all the needs, creativity and service requirements, and converting this into the winning goal by putting a great procurement process and contract in place.

With a 5 per cent budget saving delivered over the lifetime of the contract we clinched the trophy with no need for extra time.

Footballing metaphors aside, promoting community empowerment as part of the way we do things gives those of us in public procurement a real opportunity to shine.

It’s a chance to showcase our talent – getting the right people to have the right input into the procurement process at the right time.

It’s a chance for us to stretch ourselves and learn new techniques. To work with different types of people, using different engagement techniques, at different points in the procurement process.

And it’s the chance to deliver more for less, to provide real answers to the challenges of austerity, and to score that winning goal!

Supply Chain Transparency: Why We Need It More Than Ever

As scrutiny over supply chain practices increases, organisations need to ensure supply chain transparency, from Tier 1, all the way down.

Supply Chain Transparency

This article was first published on Greenstone.

As non-financial reporting frameworks and requirements for organisations evolve, so does the need for transparency throughout supply chains. There is an ever increasing emphasis within current, and upcoming, regulations on being able to demonstrate a deeper understanding of your suppliers and vendors.

Most recently we have seen evidence of this advancing mood through the UK Modern Slavery Act, the EU corporate disclosure directive, and, of course, the Dodd Frank Act covering conflict minerals.

Last summer UK Prime Minister David Cameron further clarified the criteria surrounding the UK government’s commitment to anti-slavery and supply chain transparency in a speech in Singapore.

The prime minister stated: “From October [2015], we will also require all businesses with a £36 million turnover or above to disclose what they are doing to ensure their business and supply chains are slavery free. This measure is one of the first of its kind in the world, and it will be a huge step forward, introducing greater accountability on business for the condition of their supply chains”.

Legal Requirements

Guidance for compliance with the Modern Slavery Act was published in October 2015. And businesses with a turnover of greater than £36 million have some work to do. This includes involving internal buyers and procurement departments so that they are aware of any potential implications of the Modern Slavery Act, and can prepare to embed it in their processes. As well, as including the requirements into any current audit practices.

Supply chain transparency is also being driven by EU Directive 2014/95/EU, relating to disclosure of non-financial and diversity information. This requires by 2017, that all companies concerned (all companies based in the EU with over 500 employees) disclose in their management report, information on policies, risks and outcomes with regards to the following:

  • Environmental matters;
  • Social and employee aspects;
  • Respect for human rights;
  • Anti-corruption and bribery issues; and
  • Diversity in their board of directors.

Even though there are already mandates around CSR reporting in some EU countries, and many large enterprises already report on their environmental and social impact, the new directive will demand further commitment, as it also requires disclosure on the supply chain.

Placing Responsibility on Companies

The Dodd Frank Act, also known as the conflict minerals law, has been in operation for over two years. Under the law, over 1000 U.S. listed companies report their conflict minerals status to the Securities and Exchange Commission.

The law is designed to reduce the risk that the purchase of minerals from Central Africa contributes to conflict or human rights abuses. It places a responsibility on companies to be able to trace the designated minerals throughout their supply chain. This is something that can only be achieved through increased transparency of information at all levels.

Companies have struggled to accurately disclose information through their conflict minerals reports. They may also struggle with the Modern Slavery Act and the latest EU Directive. Like organisational level, non-financial reporting before it, supplier information disclosure and supply chain transparency is a new way of working for many businesses.

Those that address this area now will be creating robust processes that ensure a competitive advantage, as well as being well positioned for future legislation.

Role of Software

At Greenstone, we are increasingly seeing organisations turning to software solutions. This is not only to drive supply chain transparency, but to enable organisations to handle the burgeoning reporting requirements, and stakeholder expectations, efficiently.

Previously, supplier compliance has been a box ticking exercise for organisations. The processes of data gathering were ill conceived and incomplete, and information gathered was rarely interrogated, and almost certainly not used for reporting purposes. This lead to disillusionment amongst suppliers, and even lower levels of engagement.

However, we are now seeing that users of SupplierPortal are utilising the analytical tools available to manage suppliers and their data. The increasing emphasis on transparency and reporting means that organisations are no longer ticking boxes, but adopting new processes and procedures in order to identify and manage non-compliance.

What is more, is that this doesn’t have to consume a great deal of additional resource, but rather for organisations to acknowledge a new way of working, and realign current practices.

Gyles is Head of SupplierPortal at Greenstone, a non-financial reporting solutions company providing software and supporting services to clients in over 100 countries.

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.