Category Archives: Procurement News

In Search of Influence – The Traits of Influential People

With an understanding of what influence is, and how procurement can leverage it, we can now look at what the common traits of influential people are, and how to develop them.

In my previous article, I reviewed some of the available literature on influence and influencing skills, in this article we look at what the key traits of influential people are, and how to best develop these skills ourselves.

These key traits and ways to develop have been identified following a range of discussions with a variety of procurement leaders.

1. Excellent Communication Skills

The most important trait to of influential people was the ability to communicate effectively. An example of effective communication was described as, “when they spoke to a room, it felt as though they were personally being addressed”.

This ability to communicate to many people, and make each person think that the message is for them, was identified as a key communication skill.

The research identified that there are different aspects of excellence in communication skills, which can be summarised as:

  • Develop and adapt communication plans based on the listener

When developing communication plans, it is imperative to consider how the person being communicated with likes to receive that communication. This then drives the method of communication – be it face to face or electronic, as well as the actual content. This adaptability of communication is again one of the key traits of influential people.

Goleman[i] suggested that effective planning specifically for the individual is a critical success factor for effective communication.

  • Make persuasive arguments

This links to making points in specific language that the listener understands. In other words, when making persuasive arguments, influential people spoke the language of the listener, rather than their own procurement language.

  • Listen to the responses and read the room

Listening and active listening is a key trait of an effective communicator. That it is more than what is being said that makes an effective listener.

2. Delivered results and built trust

The need to deliver on the promises that have been was seen as a ‘ticket to entry’ to a wider discussion. Therefore the ability to keep ones promises, i.e. contractual trust[ii], was identified as a non-negotiable to build trust both for the individual and the function.

The leaders influence increased within their businesses the more they delivered either on bottom line savings or on specific projects that they were asked to deliver.

3. Top influencers have empathy (and not sympathy)

Sympathetic listening is defined as how we care and show we care about the other person, and that we pay close attention and maybe share their feelings. Whereas when we listen empathetically, we go beyond sympathy and attempt to seek a fuller understanding of how others are feeling.

Empathetic listening means listening to the responses and asking more questions to understand the points made, which requires excellent questioning and close attention to the nuances of emotional signals.

4. The best influencers have great knowledge and great passion

Top influencers need to have credibility in order to be considered influential. When reviewing top influencers, all of those people had “been there, done that”, and were able to bring a huge amount of experience and credibility.

This referencing of credibility has an interesting link to the French and Raven work on expert power[iii].

Having passion in the field in which the influencers excel, be it procurement, or other topics, allows the influencer to demonstrate knowledge about their subject matter, which will increase the ability to deliver great outcomes.

5. Network and built great teams

The idea of networking with other senior leaders and influencers is an important leadership development tool. Harvard Business Review identified networking as operating at three levels, Operational, Personal and Strategic.

In order to be an effective influencer, the procurement professional needs to operate at all three levels.

How to Develop Influence

So if these are the key traits of influence, how do we go about developing these skills?

  • Observation is king

The number one thing that influential people do to develop their skills is the observation of others, especially those that they felt were influential.

This is then internalised by the individual to consider what it meant to them, and whether they felt it was something that they could do themselves, or something that they did not wish to do, or could not apply to their own style of influencing.

Top influencers have stated that they learnt as much from bad influencers as good ones, as this leads to things definitely not to do.

  • Training programs can add value…but need to be linked to on the job development

Attending a specific training program can provide lightbulb moments in terms of developing influencing skills. Many top influencers stated that this was unlikely to be a “learned skill” from a textbook, but more of an acquired skill through observation and mentoring.

This seems to add credence to the 70-20-10 learning methodology[iv], its application for active learning programs, and the use of formal mentoring or coaching activities.

  • Feedback loops from trusted and diverse sources

The requirement for an independent person to review performances and give detailed feedback on what was done well and not done well was considered to be a key ingredient to developing these skills.

The trusted sources could be a mentor, either formal or informal, potentially someone that the individual trusted or rated as a top influencer. Some have also mentioned that having a different diverse perspective in giving this feedback was a great way to develop skills, both in general and in relation to the topic of influencing.

  • Practice makes perfect

The need to practice the new skills when they had learned them links back to the earlier identified method of more on the job based training, or more planned activities following specific training programs. Top influencers have stated that the more they practiced and prepared the better they got.

Summary

  • There is a need to identify who you are trying to influence and decide on the best way to influence that individual.
  • This means that the practitioner needs to have multiple ways to influence rather than rely on the same approach for all.
  • If you want to develop your influencing skills then there is a key need to understand the way you process information and learn new skills.
  • Observational skills are paramount to increasing your influencing skills.

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

[ii] Sako M; Does trust improve business performance? London School of economics 1997

[iii] French, J. R. P., Jr., & Raven, B. H. (1959); The bases of social power. In D.Cartwright (Ed.),Studies in Social Power (pp. 150–167). Ann Arbor, MI: Institute for Social Research

[iv] Kajewski K, Madsen V, (2012), Demystfying 702010. Deakin Prime

Selling While Shy: Introverts in Sales

While it sounds counter-intuitive to declare introverts make the best salespeople, their characteristics may truly make them a perfect fit for a sales job.

Last month, Procurious looked at the work of Susan Cain, and assessed whether introverts could thrive in procurement. Now, on the other side of the coin, with help from College Match Up, we look at why introverts actually might be the best sellers too.

Best Sellers

Introverts make up 50.7 per cent of the personality types in the United States. An illustrated chart of the introverted personality types shows the percentage of different introverts in the general public.

Sales jobs are expected to increase by 5 per cent in the next decade, and by 2024 there are a projected 778,000 new jobs to be created. As these jobs are created, new people will be searched for to fill them, and industry specialists will be looking for a particular skill set for a good salesperson.

Traditionally, the most defined skills for people in a sales role have included:

  • Assertiveness,
  • Self-awareness,
  • Empathy,
  • Problem-solving skills,
  • Optimism.

Not exactly a set of attributes that you would associate with introverts or introverted people. So why would introverts be useful, and potentially better, in these roles?

Key Attributes

Well, introverts are often quiet and thoughtful which works well in a sales setting, because customers are often put off by the high-energy assertive employees.

Introverts themselves prefer to be helped by other introverts, and at the same time, introverts communicate best one-on-one, which is great for a sales role, because they can really connect with their customers.

Introverts are known to form few deep attachments rather than many, shallow friendships. In a sales environment, this works because they can form deeper relationships with their customers than extroverts, leading to people trusting them more.

Finally, introverts are known for being reflective. This again ties into the sales environment, as they will be looking back on their performance and working out how they can do things better next time.

Need Convincing?

So, what kind of career options are there for introverts who want to try working in sales? Introverts might try out being advertising agents, real estate brokers, sales engineers, or travel agents to name a few.

If you still need convincing, you can check out this infographic from College Match Up:

Introverts in Sales

So what do you think? Do you think that introverts would make better sales people? Could there be a way to leverage an introvert relationship between buyers and suppliers? Tell us your thoughts in the comments below.

Technology Will Expose Supply Chain Deficiencies in Near Future

In the not-too-distant future, technology will reveal everything about products, and expose all the supply chain deficiencies that exist.

Smartphones, embedded with the technology that enables consumers to scan items in the supermarket and see the entire supply chain process, will happen sooner rather than later, according to Fairtrade Australia and New Zealand CEO, Molly Harriss Olsen.

“We’re getting to the point that we can build these technologies. Mark my words, it’s on the way and it will be instantaneous. The world of connectivity isn’t coming – it’s here,” she told the room.

Cleaning Up Supply Chains

While the procurement industry well and truly knows about the challenges of cleaning up the supply chain, the fact that the technology that would automatically expose supply chain deficiencies was met by furrowed brows. As she made the statement, you could literally hear a pin drop in the large conference room.

Fairtrade assists marginalised producers (mostly in the agricultural space) and addresses issues like child labour, environmental issues, water usage, waste management, ensuring the employment of women and helping these farmers to have profitability in their farms and a robust foundation upon which they can succeed.

This includes the 30 million coffee farmers around the world who are at the mercy of speculative financial markets.

She impressed on the procurement professionals in the room that they had the power in their hands to either resolve the problems the planet faces in the future, or contribute to it.

“The biggest leadership decision you need to make as a procurement leader is implementation. Once you make that, you can’t even begin to imagine what the impact might be.”

Moving Away From Economics

Harriss Olsen was asked by a major Australian food brand representative, whether Australian businesses were embracing the initiatives implemented by Fairtrade.

“On the whole, I’d say we’re on the edge of embracing it. I’d urge you to take the next step. We need to stop making every decision based on economic grounds. We are either part of the solution, or we’re part of the problem. All our decisions are based on improving the planet. Virtually everything we can buy is traded on the stock market, and value the farmer gets on a daily basis,” she says.

“It might come as a surprise to you that while we got rid of slavery some time ago, there is still an extraordinary amount of it going on today. And until is blows up in your face, you often don’t know what you’re dealing with it.”

Reap the Benefits of a Structured Approach to Responsible Procurement

You are about to set out on the journey to make Responsible Procurement more integrated into your procurement processes.

To reap the benefits – and win recognition – you will have to be well prepared, implement the right tools and processes, and communicate every achievement. But where to start? In this article, I share some things you should consider.

Define your commitment

Corporate Social Responsibility (CSR) is a major item on a CEO’s agenda. No annual report is complete without making reference to CSR performance, including the performance of an organisation’s suppliers. CSR is set to be the most influential mega-trend affecting the procurement function by 2020.

Many companies have worked towards Responsible Procurement for a while through a Code of Conduct. A Procurement Leaders CSR Survey in 2012 highlighted the following reasons for pursuing a Responsible Procurement approach:

  • Reduce reputational risk: 71 per cent
  • Moral obligation: 49 per cent
  • Create business opportunities: 36 per cent
  • Legal obligation: 34 per cent
  • Respond to consumer demand: 34 per cent
  • Satisfy investors: 23 per cent
  • Reduce cost: 18 per cent
  • Satisfy the management: 8 per cent
  • Repair reputational damage: 3 per cent
  • Other: 7 per cent

However, in order to reach new heights with your approach to Responsible Procurement, it is time to become more specific. You need to be able to communicate your commitment. This includes your approach to Responsible Procurement, as well as all the achievement targets that you have set out.

Focus on What is Relevant to You

I know of a lot of companies who have copied what everybody else is doing, only to then realise that the massive amount of data that they had collected was a massive waste of time – for both the company and the suppliers – as they had no system or processes in place to handle it, or react to it.

End-users and consumers are demanding. They read your website before they buy from you, and they’ll likely do the same before applying for a job in your company. The mistake many companies make is continuing to focus on everything – environmental, social and economic aspects. Are they all relevant to your business?

Start by asking some of the following questions:

  • You want to take your approach to new heights. Which heights?
  • What is it exactly that you would like to achieve with your Responsible Procurement approach?
  • Where would you like to be in 3, 5 or 7 years time?

You could also:

Conduct a workshop – Gather your most important stakeholders and try to find out how you will combine your company’s CSR, Procurement and Business strategies in one vision. Make sure outcomes are measurable and actionable. Use your own words and your company’s DNA, and don’t be afraid to prioritise. A brand needs a stand. What is your stand?

Gather a fact pack – Understand your company’s drivers, which industry sector standards your company needs to comply with, and what ‘footprints’ you and your suppliers are leaving behind. Most importantly, do some benchmarking.

What kind of approach do your competitors have to Responsible Procurement Management? How does it fit into your current supplier base? I often see that companies forget to look at the supplier base and try to apply a ‘one size fits all’ approach. For example, if you are a bank you don’t want to answer questions on animal welfare.

Develop a strategy  In order to create a strategy, it is important to define your expectations towards your suppliers and procurement professionals. Turn it around and look at what expectations they could have of you as a company. How will you communicate your approach? How will you measure on your progress? What kind of training will you conduct (if any)? Which kind of processes and tools will have to be “reworked”?

Develop a Code of Practice – Right now you might have a Code of Conduct. A ‘Code of Practice’ is a document which not only indicates what your commitment is, but also a document where you indicate what you want suppliers to do in order to meet your requirements.

You need to be much more specific, because that is what consumers expect you to be. And understand that this will show on the bottom line, because the more you share your ‘best practice’ with your suppliers, the more return on investment you will see.

One Last Piece of Advice

Do not underestimate the change management part of implementing a Responsible Procurement approach. Make sure that the top management, not only from your company, but also from your procurement organisation, is involved. You are starting out on a journey which will change your company over time.

Coupa Inspire: Rethinking the Possible with Rob Bernshteyn

Lights, music, action! Hugo Britt recounts his experience of the spectacular opening keynote at this year’s Coupa Inspire conference.

The Faculty’s Hugo Britt recently attended Coupa Inspire ’16, a dynamic conference bringing the Coupa community together in San Francisco, California. 

Doof, doof, doof, doof.

I’m sitting in the Grand Ballroom of San Francisco’s stunning Westin St Francis hotel and the place is packed. The Coupa Inspire ’16 conference is just about to be launched, and all the seats are taken. People are lining the walls and spilling into an adjoining hall, complete with a big screen set up to cope with the numbers.

Outside the hotel lies San Francisco’s famous Union Square, most of which is taken up by an enormous pavilion bearing the Coupa Inspire logo. This is where the exhibiters spruik their products, and also where the 2000 or so delegates gather for breakfasts, lunches and networking.

The tent itself is generating a lot of interest among the locals – I was stopped by onlookers on more than one occasion, who asked me what the tent was for and what was going on in there. You could even hear the word “Coupa” shouted by tour guides from the top decks of the red buses regularly cruising past the square.

In the tent it’s dark, with spotlights flashing around the room, and the music is turned up LOUD. I can feel my ribcage vibrating: doof, doof, doof, doof. The guy at the sound desk receives a cue and, unbelievably, doubles the volume. Into this buzzing, clubby atmosphere, walks Coupa CEO Rob Bernshteyn, and the crowd roars.

Cultural Buzz

Coupa has to be applauded for the vibrant culture it has created. The 600-strong Coupa team’s enthusiasm is infectious, and the marketing is superb, giving the whole conference the atmosphere of a celebration. This celebratory buzz can be felt in the brilliant ‘Freedom‘ video, featuring the team lip syncing and dancing around their head office and Union Square.

Bernshteyn stresses that Coupa isn’t a technology company. Rather, it’s a “value as a service” organisation. Simply put, it’s about discovering, realising and optimising the value for its customers.

The numbers are impressive. Coupa has been adopted by hundreds of businesses globally, representing millions of users, and over two million suppliers on its open business network. Together, Coupa users conduct tens of millions of transactions per year, with approximately $200 billion in spend under management.

Building on Data

All of this activity on the system generates a vast amount of data, and the developers at Coupa take full advantage of its potential. “Think about what can happen”, says Bernshteyn, “when we combine the insights around the billions of dollars running through our system”. Customers have access to real-time benchmarking that shows how you are tracking against the entire Coupa community.

Bernshteyn also takes the opportunity to launch Perfect-Fit Benchmarks, which enable users to understand savings, invoice cycle time and more by industry and by category. This vertical application means the AI can predict the right time to buy specific products and services based on historical data.

Bernshteyn circles back to Coupa’s catch-cry: rethinking the possible through measurable value creation.

The software’s popularity comes down to the platform’s simplicity, efficiency and ease-of-use, designed to gain maximum visibility of what you’re buying and who you’re buying it from. The phrase “suite synergy” (at first I thought they were saying “sweet” synergy), is used constantly at this conference, referring to the single unified platform that has vanquished the decades-old frustration of software products not speaking with each other.

As Bernshteyn leaves the stage, the DJ enthusiastically takes the opportunity to rattle our eardrums again. I walk past him on the way out, and he has an excited gleam in his eye – he knows that we’ve got a huge event ahead, with more inspirational keynote speakers (including Sir Richard Branson), more exciting product launches…and plenty more opportunities to turn the volume all the way up.

Stay tuned for more from Coupa Inspire in the coming days!

Unlocking the Hearts and Minds of Millennials

A Millennial warned a room full of procurement leaders that they need to rethink their mindset if they’re ever going to win the hearts and minds of Millennials.

Too many Australian leaders overlook the fact that 50 per cent of the world’s population is aged under 30, and have no idea how to effectively communicate with them.

Holly Ransom is the CEO of Emergent Solutions, which works with leaders, organisations, and governments, globally to set the benchmark, and be frontiers of change and innovation.

It helps challenge their thinking, evolve their strategy and build their capability to engage with market disruptions head-on, unlocking new opportunities, outcomes and value.

Trusted Sources

The room full of procurement leaders collectively leaned in while Ransom spoke, captivated by her high energy talk despite it being the last session of the 9th Asia-Pacific CPO Forum, held in Melbourne last week.

Ransom outlined some research around purchasing decisions among Millennials that found that 1 per cent of Millennials trust advertising, 30 per cent trust blogs, while the majority are looking for some sort of online reference before making a purchase. And 65 per cent of Millennials are judging companies and businesses based entirely on their digital presence.

“Sometimes we seem to forget that half of the world’s population is under 30; probably because we spend so much time talking about the other end of the spectrum – the elderly.”

She urged the room to bear in mind that the average American male has spent 10,000 hours gaming by the time they reach of the age 18, which is exactly the same amount of time they’ve spent in school.

“It’s about thinking about how you can leverage that to your benefit,” she says.

Feel Connected

The procurement sector needs to understand that trust is manifesting in new ways, citing the fact that people are prepared to jump into a car with an Uber driver they’ve never met, and appear to feel safe.

“This younger generation wants to see, connect and feel. They want authenticity from our brands and businesses, and they want to see that footprint extending to something far more than just shareholder returns.”

Ransom also touched on the changing face of the workforce, explaining that Millennials with a laptop and a few clients much prefer to work from anywhere.

“Freelancing is a reality and it unlocks the global human capital pipeline, which presents huge opportunities for businesses. You can hire someone to handle a project for you, rather than having to hire a new employee.”

The benefits of being able to outsource to a freelancer includes allowing leaders to think more laterally, and spend more time on their leadership approach, she says.

“Through leadership when dealing with consumers and suppliers, we need to make sure that Millennials can see, touch and feel what we’re trying to get across to them. They want to come on the journey with you.”

The ‘Why’ in Communications

Ransom also spoke about her initial cynicism toward Rotary International when invited along to a meeting, but the statistics prompted her to get involved to bring about change.

“When I thought about Rotary, I thought of pale, stale and male. I couldn’t believe it when I was told that there were 1.2 million members, and yet only 12 per cent of that were women, and 2 per cent of that were under 30. Hearing that was enough for me to want to get involved.”

Ransom has helped Rotary lead with the ‘why’ in their communications to help build engagement, and better explain what they’re about.

“We realised that Rotary focused too much on the youth message. It’s a classic example of how easy it is to assume that our why, is someone else’s why. And that wasn’t the case here.”

Ransom ended by giving an example of innovation that involved a young girl who was given $10. She used the cash to hire two DVDs, which she played them in two halls, and charged everyone a few dollars to come and watch the movie. She turned that $10 into more than $300, in a clear demonstration that innovation doesn’t have to be expensive.

“I challenge you to think about what that $10 could do to build engagement in your business in the next two weeks. We need leaders to stop thinking that innovation needs to be hugely expensive, and that you need entire teams to drive innovation. That’s just simply not the case.”

Why Is a Project Procurement Strategy Absolutely Necessary?

An effective project procurement strategy is based upon a shared understanding of the role and purpose for the procurement process.

Frequently, there are different perceptions of this at senior management, project management, end-user, and supplier levels.

A shared focus needs to be built upon an alignment of perceptions and understanding around what the project requires from a well performing procurement process, which is consistent with the agreed aims and objectives.

A procurement strategy that is successfully integrated, and implemented, within the Project’s cascade of objectives and performance measures, is recognisable by the following five characteristics:

  1. Clear “buy-in” from senior and broader project stakeholders to the benefits of embracing an agreed role and purpose for the procurement process, and how people need to interact to ensure that outcomes are achieved in a satisfactory manner.
  2. Competent, professional commercial people playing a key role in the process, at the right interaction points, to ensure delivery of clear solutions from supply markets that meet project needs.
  3. Key suppliers and contractors who treat the project as genuine ‘preferred customers’.
  4. Processes, systems, measures and enabling structures that support delivery capability along the entire procurement process cycle.
  5. Capacity and capability that’s available at the right pressure points.

Setting out the Objectives, Goals and Guiding Principles

Strategy documents need to outline two key facets — the objectives of the strategy, and the goals which are necessary to achieve these objectives.

The goals describe what will actually happen, and objectives describe what will be achieved as a result. The guiding principles reflect the core values on which the strategy is based, and which will inform all the actions which are planned as a result.

Procurement will:

  • be transparent;
  • be driven by desired results;
  • create the most economically advantageous balance of quality and cost;
  • reduce the burden on administrative and monitoring resources;
  • lead to simplified or routine transactions;
  • encourage open and fair competition; and
  • follow all appropriate regulations and legislation.

These values in turn translate into key performance indicators that can be used to assess the quality of results.

Setting the Objectives 

There’s no short, definitive list of subjects to include in procurement strategy objectives. Priorities change over time – strategies need to be reviewed and revised to reflect changes in circumstance and focus.

Subjects to consider include:

  • Operating Structure – is it fit for role and purpose, influencing where it should and as it should in a devolved environment? Do end users know what’s available to them by way of contract access and the procedures that they must follow, and are these procedures benchmarked against best practice, reviewed and updated as required? Is there clear project leadership of the procurement process?
  • Expenditure Analysis – is project expenditure on bought-in goods and services analysed in such a way that amounts spent, with whom, on what, and by whom, are understood, under control and spent optimally?
  • Maximising Value – how is it intended to maximise value through procurement activity, the use of competitive tendering and established collaborative contracts, and the deployment of procurement professionals?
  • Supplier Strategy – does the project have a strategy for dealing with suppliers and markets, such as buying local and compliance with relevant Regulations? Is there available guidance to suppliers on elements of the procurement policies (sustainability, SMEs etc, key contacts and signposts), and core values?
  • Social Responsibility – how does the project plan to take account of its social, economic and environmental responsibilities through procurement e.g. sustainability, health, safety and welfare, environmental management, equality, ethical procurement, working with the local business and social communities?
  • The Use of Procurement Tools – is there a strategy for operating the most appropriate, efficient and effective Purchase to Pay systems and procedures including use of procurement cards, e-tendering, e-auctions and an e-procurement platform and are the benefits of such use – reporting, planning, measurement and cost control – clearly explained and understood?
  • Supplier/Contract Management – are key suppliers identified and, if so, who are they and why are they key? What is the Project approach to supplier and contract management and what are the plans for monitoring supplier performance and managing improvements?
  • Performance Reporting – are there mechanisms/indicators in place whereby performance monitoring within the procurement process is routinely reported to senior management? Do such mechanisms include benefits and savings reports, customer and supplier feedback on the effectiveness of procurement performance?
  • Risk Management – are key risks and dependencies relating to procurement process, legislative and regulatory non-compliance identified, understood, monitored and appropriately communicated across the Project?

ACTION: develop and adopt a clearly documented procurement strategy in terms of measurable and managed contributions to the achievement of procurement, and ultimately Project, objectives.

Stephen Ashcroft BEng MSc MCIPS is a procurement learner stuck in the body of a procurement veteran, and with over 20 years’ experience still sees the glass as half full. Check out this article, and more, on ThinkProcure.

Should We Stop Using the Term ‘Strategic’ in Procurement?

No other profession puts the word ‘strategic’ on their business cards. Why do we do so in procurement?

A high-powered panel at ISM2016 drove a spirited debate about the use of the term ‘strategic’ in the profession. Chaired by Joe Sandor (Professor of Purchasing and Supply Management, Michigan State University), the panel included:

  • Hans Melotte (ISM Board Chairman, Senior Vice-President and CPO, Johnson & Johnson);
  • R. David Nelson (procurement veteran and Chairman, Dave Nelson Group);
  • Jeff Smith (Global Sourcing Director – Indirect at DuPont); and
  • Beverly Gaskin (Executive Director Global Purchasing, General Motors).

Actions Not Words

Actions speak louder than words. That’s the message from Hans Melotte, who argued that it’s unhelpful for the profession to continually emphasise how ‘strategic’ we want to be.

Overuse of the term dilutes the concept, especially when having a conversation with sceptical stakeholders. “Procurement needs to be strategic”, says Melotte, “rather than just talk strategic.”

Being strategic comes down to having the right people in procurement, who can talk the language of the business, define their value contributions in a way that resonates with stakeholders, are forward thinking, proactive, and focused on the future.

Historical Overuse

When did procurement start to use (and overuse) this term?

R. David Nelson, who started out in an enormously different procurement landscape in 1957, has watched the profession grow from a back-office function to a highly-influential business partner.

As any modern professional knows, there are plenty of stakeholders who still remain unconvinced, and it’s very possible that our constant repetition of the term ‘strategic’ was a somewhat ham-fisted attempt to convince these sceptics that we do indeed deserve a seat at the table.

Interestingly, none of the major organisations represented on the panel use the term any more. Hans Melotte explains: “At Johnson and Johnson we abandoned the use of the word strategic, because you shouldn’t label yourself who you want to be – you should be who you are. The whole notion has passed its expiry date”.

Divisive Term

The other problem with the term is that it’s divisive. By calling half the population “strategic”, you’re implying the other half of the function is non-strategic. This sends a negative signal throughout the organisation, and breeds resentment around job titles.

Beverley Gaskin agreed: “Strategic buying is like an oxymoron. If you’re doing anything in the buying field that isn’t strategic, you shouldn’t be doing it.”

Even the term “purchasing strategy”, says Gaskin, is misleading. “There’s no such thing as a purchasing strategy. There’s a company strategy and you have to understand your role in getting that done.”

The same concept appliers to how we talk about strategic and non-strategic suppliers. Again, it’s our responsibility to move away from divisive language. After all, you’re never going to tell a supplier that they’re ‘non-strategic’.

Definitions are important. Melotte reasons that if you define ‘strategic’ as something that serves the strategy – a choice wisely made, based on facts and intelligence – does that mean ‘non-strategic’ is defined as the opposite of this? No CPO would want any resources who are not aligned with the company strategy or value mission.

This isn’t to say that the term ‘tactical’ is the opposite of strategic. Professor Joe Sandor provided a valuable reminder that the word ‘strategy’ comes from the military, and simply means planning. ‘Tactic’ means execution, and a plan must be executed. Tactics, therefore, are strategy in action.

Jeff Smith of DuPont summed up the sentiment of the panel: “It’s time the profession moved away from the term”, he said. “If you behave strategically, you’ll always be invited back”.

Risk Mitigation – Hope Like Hell It Doesn’t Happen to You

Organisations can plan and strategise for risk mitigation in their supply chain, but ultimately a lot of it comes down to luck.

Risk mitigation

In the words of one member of The Faculty’s Melbourne Roundtable, “There’s a lot of risk out there – you can mitigate all you like but in the end, you just hope like hell it doesn’t happen to you.”

Risk-experts Aaron Cleavely-Millwood (Market Development Manager – Regulatory, Market and Operational Risk) and Nathan Lynch (Head Regulatory Analyst) of Thomson Reuters, visited the Melbourne and Perth Roundtables to take members through their organisation’s global research findings on risk and disruption.

While the Thomson Reuters research focused on disruption to financial services, Roundtable CPOs drew some key learnings from shared challenges around governance, risk, compliance and regulatory drivers.

The Faculty ran its own snapshot survey among its Roundtable members, providing some interesting comparisons between Thomson Reuters’ global, cross-industry study and our local, procurement-focused findings.

Supply Chain Risks

Thomson Reuters’ top four disruption risks revolved predominantly around price:

  1. Raw material price fluctuation
  2. Currency fluctuation
  3. Market changes
  4. Energy fuel price volatility

The Faculty’s findings revealed that CPOs have a slightly different set of concerns:

  1. Supplier monopolies
  2. Market changes
  3. Climatic or natural disasters
  4. Emerging technologies

Risks and Impacts

Price risk is an obvious and ever-present danger and a key part of strategic planning. Cleavely-Millwood gave the example of the 2015 drought in Russia, which saw the price of wheat rise by 41 per cent, and create a huge impact throughout Europe. Spikes such as this (and of course the drop in oil price) cannot necessarily be forecast, but it is possible to plan for and hedge against these events.

Interestingly, social activism was placed at the bottom of both lists. This is surprising given some of the recent disruptions driven by environmental activism in the Australian coal and coal seam gas industries.

The Thomson Reuters presentation focused on fraud risk. This has been identified as a high area of concern for Australian organisations despite increasing regulation. CPOs have to be continually aware of the risks around supplier, contractor and employee fraud, and have plans in place to minimise the damage when fraud takes place.

Increased regulation is a double-edged sword. It will effectively lower the chance of fraud risk and other potentially damaging issues, but will mean CPOs need to spend more time and resources ensuring compliance.

Roundtable delegates were taken through various major pieces of regulation including the UK Bribery Act, the Australian Senate Review of Bribery Laws, the Dodd-Frank Act, and the upcoming Unfair Contracts Act.

The key takeaway – communicate regularly with your internal legal counsel to ensure you keep track of regulatory change.

Effective Risk Mitigation

Our snapshot survey asked members to nominate the most effective risk mitigation measures, with the following results (1 being the most effective):

  1. Building strong supplier relationships
  2. Creating a risk-aware culture
  3. Improving market intelligence
  4. Improving IT and data analytics
  5. Increased sharing of information

The Faculty’s advice for managing risk:

Due diligence can take place through three levels of risk assessment:

  • Ensure you thoroughly investigate new vendors.
  • Regularly perform risk assessments of existing vendors to check if anything has changed.
  • Ensure you have visibility of your suppliers’ suppliers, and their suppliers, and so on, until you’re confident that there are no major risks several layers down the supply chain.

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.

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.