Category Archives: Procurement News

Why Automation Can Help Procurement Achieve Its Goals

Automation is frequently talked about in manufacturing, but rarely in the field of procurement. Could it be the key to helping procurement achieve better outcomes?

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Download GEP’s white paper on achieving P2P Excellence through Procurement and Finance alignment here.

Czech writer Karel Čapek was the first person to use the term “robot”.  In his 1920 play “Rossum’s Universal Robots”, he conjured the image of synthetic humans, carrying out the tasks that original humans no longer cared to do, yet remaining largely happy in their work. For a while.

Inevitably things went South, so to speak, and the robots learned to resent their drudgery.

Stories of automation leading to unforeseen misfortune are at least as old as Goethe’s 1797 poem, “The Sorcerer’s Apprentice”. Yet automation remains a goal, if one that is not without challenges.

Automation in Procurement

Automation is often seen as a good thing, because it accelerates processes (sometimes) and frees up valuable human resources (sometimes). In the context of manufacturing, introducing automation has been hugely successful because of the requirement for a production line to continually repeat identical tasks within exact specifications. Automation is therefore understood to be just that, the effective ‘robotisation’ of a process.

In a sense this is also desirable in Procurement because a good percentage of the tasks and processes are repetitive and of the same type. However, that is not the same as being identical, and it is often less than desirable to force a range of different variants into a single model.

Thus, what we need is the acceleration of the process and the reduction in administrative overhead but still maintain the unique aspects of each event in the process. This is where automation gets tricky.

Importance of the ‘Right’ Process

From the perspective of software design, the practitioner must be able to automate those parts of the process which are identical time after time, and permit the customisation of those parts that are unique, whilst accelerating the whole.

This is where an understanding of Procurement (and associated processes) is key in the design and implementation of the software.  As one of our senior project managers put it, “It is not a good idea to use automation to accelerate a broken process.”

What he means by that is this: whereas in manufacturing, the process of machining a particular widget by hand is already the ‘right’ way to do it, and automation simply repeats the task; in Procurement it cannot be taken as read that the sourcing methodology, contracting process or requisition-to-invoice workflow, are in any way the ‘right’, most efficient, or best, way to go.

In reality, then, for procurement software to provide a solution it must involve not only automation, but transformation. Using the imposition of an automating technology to review where the challenges in the current manual processes lie is a vital part of any such program. That way the eventual automation of the task will be more accurate and, ultimately, more useful.

Accounting for Whole Process

Another key consideration is best made with a manufacturing analogy again. If the entire process from raw material to finished goods is automated, then the rate of arrival of the end-product at the packing and shipping station will be considerably greater than in the pre-automation set up. If account hasn’t been taken of the impact ‘downstream’, then one can foresee the conveyor belt of products backing up and overflowing.

In Procurement this can be a real issue. Accelerating the order-to-invoice process is all very well for purchaser and supplier, but if Accounts Payable are periodically swamped with invoices to be paid, there can be significant impacts on administration overheads and, indeed, cash flow.

Furthermore, an accelerated sourcing process only works if the suppliers are on board, and a super-efficient bid-to-contract process will only work if the company’s attorneys buy in to it.

Thus automation is far from being a matter of “install software, use software, improve efficiency, get ROI”. Get it wrong and it can be a matter of “install software, use software badly, make matters worse, stop using software, can project, start again”.

But get it right and the “automation” program can see dramatic impacts on time to reach savings goals, supplier engagement and performance, and cash flow management downstream.

GEP have produced a white paper on the challenges facing the marriage of convenience between Procurement and Finance which explores these ideas further. You can download it here.

Is It All About The Money?

Money has been at the heart of business since the beginning. But as more start-up businesses take shape, we have to ask, “Is it all about the money?”.

pathdoc/Shutterstock.com

This article was originally published on LinkedIn.

Being at JP Morgan, the annual conference where the worlds of biotech and investment collide, gave me the opportunity to catch up and bump into many colleagues and friends. Everyone had a chock-a-block schedule, trying to squeeze in as many meetings as possible with current and potential partners, and money was a top conversation subject.

Of course money is needed to build and grow businesses, but does it define success? Being in San Francisco and talking to many people over the past week has made me think about purpose. All this talk about money made me wonder if it was really the driver. If it was, I am not sure success would be possible.

One could debate that money equals success or success equals money, but I really believe that it takes a lot more than the desire to make money to be successful.

What Drives Individuals?

For example, I caught up with a CEO that recently made an exceedingly large amount of money, but within just a few days of acquisition is already building another biotech company. I spoke with a VP of sales on his fifth successful startup who is working around the clock to grow yet another company’s revenue.

I met a successful physician that has been developing a product for the past 10 years, with a dream to see it approved and change the standard of care. I met with an investor with a very successful track record, diligently meeting with multiple prospects to identify his best new investments. Even without knowing each individual’s personal situation, I can safely say that the main driver is not money.

So what drives them?

I think it is passion. For some, it’s the rush that comes with seeing businesses grow. For others, it’s a desire to see their idea change the status quo. I can easily identify with that feeling.

I could have been satisfied with Matchbook, my successful and growing nine-year-old consulting business focused on providing procurement and sourcing support to fast-growing small biotech companies. I could have also chosen to be home with my three daughters. Although I have other options, I have chosen to work around the clock for the past 18 months to build tealbook.

Supporting Passion

What drives me to make so many compromises and remain so focused on building this business? It is passion for seeing tealbook come to life and become a market leader in providing supplier information. This passion is supported by many factors, and every crazy entrepreneur has his or her own list.

Here are a few of mine:

  • I believe in the idea: I strongly believe that tealbook can help clients significantly reduce time spent identifying the right suppliers and increasing cost efficiencies.
  • I want to solve the problem: I’ve seen firsthand the challenges of inefficient supplier information while supporting sourcing needs for large number of pharma and biotech companies. There is a solution!
  • I see the market opportunity: So many software companies have focused on developing Procure to Pay solutions and back end financial analytics. But compliance of the tools and user experience has not been done successfully. Technology is only as good as people using it and its data. User experience and compliance is at the top of our list when it comes to gathering and accessing supplier intelligence.
  • I want tealbook to be a market leader: We have developed smart and user friendly technology. I know we can give clients access to supplier information better than anyone else – we have talked to enough people to validate this statement both in the life science industry and beyond. We can own this position and easily become the most used front-end platform to significantly reduce the time spent identifying the right suppliers.
  • I made a commitment: I have made a commitment to myself, clients, suppliers, my team and the rest of the industry. Once I decided to launch tealbook, I made a promise to see it come to life, change the industry and make it a success.

One day, I hope to spend more time with my girls before they get too big. But, I can’t see myself stopping with tealbook. What drives me comes from inside and continues to grow with each interaction and success, small or large.

Although money certainly allows us to properly support our customers, grow our technology, generate more visibility, provide employee security and remain  attractive to potential investors or partners, I strongly believe that if we are truly passionate and motivated about growing a company, money will be an outcome.

You can’t put a price on the exhilaration of success!

ISM & Procurious: Leveraging Social Media in Procurement

Ahead of his keynote address at the Procurious Big Ideas Summit 2016, ISM CEO Tom Derry discusses ISM’s new partnership with Procurious, as well as the power of leveraging social media in procurement.

ISM and Procurious recently announced a new partnership, as ISM became a Procurious Foundation Partner. This will increase Procurious members’ access to ISM’s highly regarded research, events and educational offerings, from certification programs to the newly launched ISM Mastery Model™. ISM members will also benefit from the rich educational resources and networking opportunities on Procurious.

Leveraging Social Media

Over the last several years, social media has become crucial for connection professionals in all fields — especially procurement and supply chain. I honestly don’t see how anyone can expect to be successful in this day and age without leveraging social media.

Social media gives you access to a broader network than could ever be obtained face-to-face. You have the opportunity to tap into the global repository of procurement knowledge. Why would anyone choose to miss out on this competitive advantage?

Not only that, social media can serve as a news channel providing real-time updates and alerts. How powerful is it that you can be updated on market trends, natural disasters, geopolitical events and much more — all with a tool you keep in your pocket. It’s the agile organisation that survives and thrives in today’s environment, and you can’t be agile if you’re not plugged in to real-time events.

Procurious and ISM

When I first learned of Procurious, I felt it was a no-brainer. Procurious enables the supply management professional to leverage the immediacy of a social network in a in a professionally appropriate medium.

With the focus solely on supply chain, this platform connects professionals working on similar projects and initiatives globally. This adds value in two distinct ways: your building your own knowledge base, but also your personal professional brand.

When I tell colleagues about Procurious, I often hear, “How is it different from LinkedIn?” While there are many similar features, Procurious provides additional advantage for procurement and supply chain professionals. In addition to connecting you globally with those in the field, it gives you the upper hand through education, blogs, event calendars and my favourite — the Discussion board.

Discussions and Communication

I think we have all experienced our work being halted by a roadblock we have not faced before. As procurement professionals, we are often the experts in our organisation, making it feel like this is our mountain to climb alone. Instead of banging our head against the wall, we have somewhere to turn.

Whether you are looking for the right SRM system or a need career advice, the discussion board immediately connects you with others who may have the answer you need. There is strong, practical value in the communication on the discussion boards. One recent post was looking for advice on how to manage stakeholder expectations on procurement lead times.

Professionals from around the globe weighed in with advice on how to communicate the value procurement adds beyond simple considerations of speed and price. It’s just one example of how practitioners can leverage the experience of their peers to facilitate real results.

Looking to the Future

ISM is becoming more engaged with Procurious. We will be launching an ISM group this month. This group will add another place for those connected with ISM to go for networking and and for those new to ISM to discover and connect with us.

I am looking forward to watching the ISM community grow and develop on this platform. I see this being a great place for our members and nonmembers to connect. With more than 50,000 ISM members globally, there is a great opportunity to be had from potential collaboration.

Life Changing Technology to Save You Time

When time is money, making sure you’re spending it on what matters is a key metric to profitability.

Do you know how much time you’re spending on certain tasks? Do you know how your teams are spending their work day? And more importantly, do you know how your finance teams are spending their time?

Where Does Time Go?

APQC, a Texas-based research firm, recently conducted a study of some 832 companies’ finance departments. Using data from APQC’s Open Standards Benchmarking database, they found out what finance teams really get up to at work.

Things like transaction processing, decision support and management activities were all looked at as part of the study and APQC found that no matter how big or small the company was, roughly half of finance teams’ time was spent on transaction processing. Half.

Instasupply-Life-Changing-Tech

Source APQC

In plain English, this means highly paid finance staff spend the time equivalent to Monday AM through to lunchtime on Wednesday making sure invoices are being processed, bills are getting paid and fixed assets are accounted for.

Shifting the Balance

Now, ask a CEO what he’d like to see his finance team doing and he will tell you he’d like them delivering fast, reliable information about the economic implications of specific tactical business moves. When the year is halfway through and performance needs improving, a CEO wants to know the monetary impact of the decisions they plan to make. What the potential revenue and operational implications are when it comes to investing company resources.

When the finance team spends nearly 50 per cent of its time on transactions, plus a few more hours per week going through internal approvals and putting together financial reports, it equals not much time left to offer that critical decision support.

A finance team therefore needs to constantly juggle providing key financial information to support company growth and getting those bills paid. Reducing paperwork and minimising manual labor are an absolute must when it comes to shifting the balance.

Away from Paper-Based Methods

Based on research from bodies such as The Hackett Group, we know that just under 70 per cent of vendor invoices globally are still in paper form. That means someone within the finance department needs to manually enter all of that paper-based data into a computer based program, either straight into the accounting software, or in a spreadsheet first and then into said accounting software. This means there is a hell of a lot of paper clogging up the system, costing time and money in training, execution and management.

Further still, the software in use was generally built circa 1995 and fails to offer transparency on transactions, clarity in reporting or intuitive processes. Since the main aim here is to deal with transactions quickly, in a minimum amount of time, whilst minimising errors, having such software in place is nonsensical.

Finance departments need their working hours back to focus on their actual function in driving companies forward. Understanding costs, revenue streams and operational cost pitfalls is where their true value comes into play. Pushing paper around is a waste of time.

Be Sure to Choose Wisely

As the digital trend has been making its way into B2B (finally), larger companies have pushed for greater finance efficiency and invested resources into implementing digital tools to facilitate electronic information flows. Merely investing in something branded “cloud” though doesn’t mean it will solve all problems.

The choice needs to be made wisely. It needs to be made with the end user in mind. If it seems too complicated, it IS too complicated. And that means your staff won’t use it, or certainly won’t use it properly. You will be buying an Aston Martin, and it will be driven like a Ford.

Smart companies able to recognise the importance of user focused tech will instantly reduce the time spent managing transactions. This will enable them to direct finance talent away from repetitive tasks and back towards company growth.

What could your finance team do with more time?

How to Avoid Procurement Corruption and Fraud: The Fraud Triangle Analysis

When Benjamin Franklin said, “An ounce of prevention is worth a pound of cure,” he was referring to fire prevention, but even so, the saying holds just as true for procurement corruption and fraud prevention.

Iconic Bestiary/Shutterstock.com

This article was originally published on Delta Bid.

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

The Fraud Triangle

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

Pressure

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

Personal pressure examples:

  • unpaid personal debts
  • desire for status symbols (money, house, car, etc.)
  • inability to pay bills

Professional pressure examples:

  • need to meet productivity targets
  • need to prove financial gains
  • feeling job is at risk

How to mitigate pressure:

1. Adequate compensation – While adequate compensation will depend on the organisation, country, and individual employee, procurement employees should not be at the bottom when it comes to compensation. Procurement professionals, at all levels, require a specific skill set to effectively do their job, and their compensation should reflect the value they bring to the company.

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

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

4. Company-wide no gift policy – Suppliers often give gifts to procurement as a way to build relationships and show goodwill. Yet, these gifts may make it hard for procurement officers to remain entirely neutral. If Procurement is not allowed to accept gifts, enact the same policy for all departments as a way to reinforce a company-wide ethics policy.

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

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

Opportunity

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

1. Implementing a transparent procurement process

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

2. Segment purchasing responsibilities – Divide responsibilities to keep any one person from having too much power over purchasing decisions. You may also find it beneficial to rotate responsibilities on a regular basis, but when you do so, make sure to update any employee permissions in your e-procurement solution. For example, some companies rotate procurement employees between categories to avoid any one person having too much close contact with suppliers.

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

4. Perform regular and surprise internal and external audits for all purchases – Audits are not a sign of mistrust; consider them more like a doctor’s check-up. You should hope that everything checks out, but if you note any irregularities, you can take action to straighten them out before significant damage is done.

5. Manage both suppliers and their subcontractors – Your supply chain doesn’t stop with your suppliers; it’s likely they’ve hired subcontractors. The business practices of these subcontractors will reflect on your business. Unfortunately, many companies have learned this the hard way. Your company should have a Supplier Code of Conduct, and signing off on it should be mandatory for all suppliers and their subcontractors.

Rationalisation

Rationalisation is the process of excusing one’s acts and finding ways to justify behaving in a way that you know to be unethical or criminal. It can take a number of forms: an exaggerated belief in one’s value (e.g. I’m entitled to this because I work hard.); a belief in a greater good (e.g. I’m doing this for my family.); dissatisfaction with the company (The company is cheating others, so I can cheat the company.); or comparisons with others (Everyone else has nice things. Why can’t I?).

How to avoid the pitfalls of rationalisation:

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

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

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

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

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

South African Public Procurement – A Work in Progress

Despite some leaps forward in recent years, South African public procurement is still suffering from the same issues.

“Despite the reform processes in public procurement and the employment of Supply Chain Management (SCM) as a strategic tool, there are predicaments in South African public procurement practices”.

This was one of the observations in a report by two leading academics at the University of South Africa in 2012. They noted, “For example, there is non-compliance with procurement and SCM-related legislation and policies as well as tender irregularities.”

You could say that not a lot has changed, South African public procurement still has some predicaments.

The Last Few Years

Since 2012, we have seen the appointment of a Chief Procurement Officer, Kenneth Brown, who is responsible for overseeing the entire SCM operation. His role is to ensure that the procurement of goods, services and construction works is fair, equitable, transparent, competitive and cost effective, and in line with the Constitution and all relevant legislation.

This in itself is a big ask as there are many laws, guidelines and regulations to adhere to. His portfolio includes central and provincial governments, municipalities and state-owned enterprises.

A new initiative is an e-tender portal and the creation of a centralised database of approved suppliers. This is a noble effort to fight corruption and make government procurement more efficient and cost-effective. The system, where all tenders are advertised, is also designed to electronically verify a supplier’s tax and black employment equity status, as well as to uncover any government employee attempting to do business with the state.

In the 2014-2015 tax year, the public sector spent >R500-billion on goods, services and infrastructure. The Government itself has admitted that at least R30-billion of this was lost to corruption. In 2015 the Treasury took a bold step of undertaking a Supply Chain Management Review on the status of SCM in South Africa and found it wanting.  This was the first attempt at assessing the situation since 2004.

The 2015 Supply Chain Management Review

The Treasury should receive kudos for highlighting its own shortcomings and imperfections, and providing some glimmer of hope of improvement.

The Review acknowledged that:

  • SCM across South Africa is highly fragmented. This makes it difficult for government to obtain maximum value from the purchasing of goods and services.
  • It needs to improve skills, processes and systems which are critical for a well-functioning SCM system.
  • It is dogged by “constant allegations of corruption and inefficiency”.
  • Key problems are: inexperienced leaders, high staff turnover rates, confusion about roles and responsibilities, political interference and the red tape for small and medium businesses.

So what is the plan?  

The big plan is to replace all the legacy systems, more than 30, with just one. This will be an integrated financial management system (IFMS) which will include the central supplier database. This will make data mining possible, and will provide more transparency into bid awards, a concept that has not been well understood in government circles up to now.

The intention is to centralise government contracts for categories such as:

  • Banking services;
  • Information Communication Technology (ICT) services;
  • Infrastructure;
  • Consulting services;
  • Security services;
  • Air travel and accommodation;
  • School textbooks and stationery;
  • Healthcare equipment; and
  • Leased buildings.

Technology will take us part of the way

Investment in technology, especially an e-procurement solution, has the potential to improve SCM efficiency and effectiveness considerably. Currently, the different systems result in fragmented and unreliable data, inconsistent processes, varying compliance levels and ineffective results.

It is not straightforward though. South Africa has a complex and unique system of preferential procurement policies to protect and advance previously disadvantaged people. These variables have to be integrated into any decision making software.

The many challenges can be grouped into these categories:

  • managerial, compliance and monitoring issues
  • lack of knowledge, skills and capacity
  • inadequate control systems
  • fraud and corruption
  • fragmented spend and lack of transparency

Comparisons with other countries

South Africa is not alone in its aspirations to do better. The UK has just implemented the Public Contracts Regulations which adds another dimension and complexity to Government procurement in UK, and brings practice into line with European Union regulations. One objective is to make procurement across EU countries easier and increase transparency.

A bill was introduced recently to promote the appointment of a Chief Procurement Officer for the United States. However, it was not passed into law due to the start-up costs, despite projected savings of 10 times the investment. It just goes to show that even developed markets have their problems.

Dynamic Purchasing Systems and the Death of Frameworks

Will the use of Dynamic Purchasing Systems grow as a result of amendments to EU Procurement Directives? And will they provide a solution to problems of both buyers and suppliers?

As procurement professionals we are familiar with the use of frameworks as a contracting mechanism. The 2015 amendments to the EU Procurement Directives have sown the seeds of change, but will this result in a growth in the use of Dynamic Purchasing Systems (DPS) and a decline in framework agreements? Could DPS be the panacea to the problems of both buyers and suppliers?

Dynamic Purchasing Systems are a relatively marginalised process and have been under used due to their complexity. The up-dated EU Regulations have seen four changes around the use of the DPS, which has simplified the process.

Benefits

Use of a Dynamic Purchasing System seems to offer several benefits and, as we operate in an ever-changing environment, it seems perfectly sensible to adopt increasingly dynamic procurement methods. Many of these benefits could lead to savings and supplier growth, which are high priorities on the government’s agenda.

  • Gives Suppliers Another Chance

DPS gives suppliers another bite of the public sector cherry if at first they are unsuccessful. Many contractors are not poor suppliers, they are poor tenderers. The use of frameworks unnecessarily locks these suppliers out of the market for up to four years. DPS offers a solution where if they don’t succeed at first they can try, try, try again.

  • Increased Competition & Competitive Pricing

As the mix and number of suppliers on the Dynamic Purchasing Systems evolves, it is likely that this will lead to an increase in competition. A report by PWC in 2011 noted that ‘Dynamic Purchasing Systems are the most successful type of procedure in terms of attracting a large number of bidders’.

Direct award also isn’t permitted, so the decision on best value can only be decided at tender stage. This is likely to result in more competitive pricing from suppliers.

  • Development of Long-Term Relationships

A dynamic purchasing system can now run for more than four years. A review of ‘live’ Dynamic Purchasing Systems found examples with a proposed duration of a decade! As austerity measures remain in place, and procurement professionals are constantly required to do more with less, DPS could be a solution to expensive re-procurement exercises.

It has been said that the EU regulations can make developing long-term, value generating supplier relationships difficult due to strict time limits on contracts, and the mandatory competition required over the threshold values. However, if suppliers are no longer looking over their shoulder at a looming re-procurement, DPS could support the development of these relationships with key suppliers.

  • Fully Electronic

As DPS is conducted solely through electronic means, the various advantages of e-procurement are present here. However, it is imperative that the infrastructure is there to support the process. The maturity of systems and the change in the EU regulations may serve to create an environment where DPS can flourish.

Current systems can also be adapted to run a DPS so there should be no significant change management or training required unless new systems are adopted.

  • Bridge Talent Gap

Currently public sector purchasing is experiencing a talent gap. Greater use of DPS could go some way towards alleviating this, as it could potentially reduce the number of full EU processes an organisation is required to undertake. Further efficiencies could be made if dynamic purchasing systems were used as part of collaborative or consortium purchasing.

  • Spreading & Minimising Risk

The public sector has been branded as a risk averse creature. Therefore, one may imagine that the use of a variant on a procurement procedure may strike fear into the hearts of procurement professionals. Public sector professionals are becoming far more innovative, but the risk averse nature of the public sector could be a reason why, despite the simplification and flexibilities added, the DPS may remain under utilised.

Risk of challenge to a procurement is never far from the minds of  procurement officers. One wonders that if suppliers knew that they would be able to re-apply to join the DPS, whether this would reduce the number of unsubstantiated challenges that contracting authorities have to fend off.

Finally, a DPS is likely to have more suppliers awarded into the system than a framework agreement. This would serve to spread the risk for authorities.

Drawbacks

Conversely, there are a number of reasons why the changes in regulations may not result in an increase in the use of DPS.

  • Administration of Suppliers

Although there are efficiency savings found in not having to re-procure every four years, these could be eroded by the fact that buyers may have a regular stream of suppliers requesting to be accepted onto the DPS. This is likely to be exacerbated in certain markets and by the fact that documents have to be evaluated within ten working days.

The authority also has no possibility of restricting the maximum number of operators. Constant applications by serial tenderers could be mitigated by providing detailed feedback on the reasons why they were unsuccessful.

  • Risk of Obsolescence

If a DPS has been running for too long it may become obsolete. Over the course of several years the requirements of an authority may change significantly. However this could be overcome by good contract and category management as well as an annual review.

  • Up-Front Costs

There are likely to be additional costs the first time that an authority uses this process in the form of e-systems development, training and preparing the market. Procurement policies and internal processes will also need to be up-dated. However, removing the four year limit should go some way towards alleviating these costs, as they will be spread over a longer contract term. Up-take may also depend on how DPS is viewed by internal customers.

Have you worked with a Dynamic Purchasing System in public sector procurement? What were your thoughts? If you’re looking for evidence of benefits in DPS use, make sure you keep a look out for the second article in this series.

Stories from The Source – Part Two: Sanne Gruter

The Source Recruitment Consultant Sanne Gruter gives Hugo Britt her top tips for procurement professionals to excel in their next interview.  The Source Interview Tips

Read Part 1 of this series here.

In more ways than one, Sanne Gruter is the international face of The Source. As part of her portfolio she looks after the fast-growing international sourcing part of the business, reaching out to potential candidates in markets including the UK, China and Singapore. Sanne is also ‘international’ in that she hails from Holland, has a partner from Uruguay, and has found a fulfilling and exciting career here in Melbourne, Australia.

Sanne’s academic history is impressive – she holds a Bachelors degree in Applied Psychology, and an International Masters of Culture, Organisation and Management which integrates anthropological, sociological and psychological approaches to identity, politics and cross-cultural co-operation with management and organisation theory. She enjoys the challenges involved in recognising, qualifying and nurturing top talent.

What made you decide to come out to Australia?

I love to travel, and still take every opportunity I can to see the world. I was out here in Australia travelling as a tourist, and of course I loved the sunshine. Melbourne, in particular, really appealed to me as the home of the Australian Open! So when the opportunity came up to join The Source, I took it.

How do you use your qualifications in your day-to-day role as a recruitment consultant?

My knowledge of psychology helps me be aware of the subjective element in almost everything I do. Recruiters need to remember that they’re dealing with real people, who have emotions and agendas. When I work with candidates I always let them know if they’re coming across as too aggressive or lacking in energy. Usually, people don’t know they’re doing it. Basically, I try to teach people to be convincing in interviews.

Is there anything unique about recruiting for the procurement profession?

Absolutely. I’ve found that procurement professionals are master negotiators – candidates want a lot, and they play hard on the salary negotiations. The clients we recruit for are excellent negotiators as well, and we generally find that they’re prepared to wait for the right talent to become available.

Where do you find your candidates?

Mainly through headhunting and networking. We reach out to people we believe are relevant for a specific role to have a very general career discussion. Usually people are happy to be courted and to join our network even if they’re not ready to move until the right opportunity comes along. This ‘hidden market’ has proven to be very valuable, since the focus is on the candidate.

We’ve also found quite a few people through Procurious, both inside and outside Australia. So be sure to log onto Procurious and connect with me! One of the exciting trends we’re starting to see is more and more people making a conscious choice to come into procurement from other professions, such as finance and law. Procurement functions can always use these diverse skill-sets.

What are the challenges in Australian procurement recruitment?

There’s a huge amount of change going on amongst our client companies. Restructuring and redundancies take place all the time, which means we have to keep on top of what’s happening in a fast-changing environment. Another challenge is that Australia is a relatively small market, which is why it’s important for procurement professionals to know the right people and reach out to organisations like The Source.

What sort of salary levels do you recruit for?

Personally, I mostly look after the mid-level space, which could range from $80,000 to $130,000 (AUD), but The Source team works collaboratively across all salary levels. And of course there’s the international recruitment angle too. UK professionals are in high demand in Australia, along with candidates from China and Singapore.

Can you share some tips for creating a winning resume?

Don’t just describe your role when you write your resume. Make sure you keep track of your achievements, and back up your claims with hard figures. Procurement employers like to see proof. For example, if you’ve achieved some excellent cost savings, make sure you include the dollar figure or percentage.

Start with a succinct personal introduction explaining your background, key strengths, and what makes you stand out for the role. You’ll never be shortlisted if you don’t communicate your strengths.

Frequently changing roles can indicate a lack of commitment, so try to stay in a business for a minimum of three years. Of course, sometimes it’s out of your control. If you are made redundant, don’t be afraid to put it in your resume – recruiters and employers won’t penalise you for redundancies because they’re so common.

Can you share some interview tips?

Make sure you’re well-presented. Read up about the organisation and find out about the people who will be interviewing you on LinkedIn. It’s important not to over-prepare and create a “script”, because it comes across as fake.

Remember to back everything up with examples. Think about the key competencies you’ll be asked about, and be prepared to talk about how you’ve demonstrated these in the past. You need to be able to explain what you do.

Do you have any stories of disastrous interviews?

We had a candidate who was asked to give an example of how she can balance priorities. Unfortunately, the example she gave was how she was juggling three boyfriends at once!

Another candidate took the advice to provide clear “evidence” of her achievements much too literally, and turned up at the interview with an enormous stack of printed-out reports and emails. She’d rummage through the pile to find evidence whenever she was asked a question.

Did either of them win the role?

Unfortunately for them, no!

What’s your advice for graduates considering procurement as a career?

Procurement is a good career. It’s growing fast, with heaps of opportunity to add significant value to a company. It’s a really diverse job. From the analytical side of things, to the sourcing experts, stakeholder relationship management experts, risk gurus – there are so many aspects to being a procurement professional.

The Source - Sanne GruterThanks Sanne, and all the very best for an exciting career in procurement recruitment at The Source!

 

 

The Source is a boutique mid to senior and executive recruitment and search consultancy with national reach specialising in the procurement market. For more details, visit The Source.

How to Get the Most from Your Training Budget

During the financial crisis, many organisations slashed their training budget, classifying this business requirement as ‘discretionary spend’.

Tashatuvango/Shutterstock.com

The classification of training as ‘discretionary spend’ is certainly a topic for further investigation on another day. However, as companies began to re-emerge from the cost constraints that governed their businesses in the years following the financial crisis, we are, thankfully, seeing a marked increase in training budgets.

Forbes outlined that corporate training budgets in the US grew by 15 per cent in 2014, the steepest increase in the last seven years, to over $70 billion USD.

Many organisations have cited skills and competency gaps as the key inhibitors to corporate progress. The severe cuts to training budgets during the Global Financial Crisis recovery period have surely contributed to this problem.

Maximise Your Training Budget

However, as training budgets start to creep upwards once again, how can procurement teams ensure that they are getting most bang for their buck when it comes to corporate training?

1. Determine your budget

It’s important to start with some pragmatic goals around what your organisation is looking to get from it’s training program. Once you have done this, you can then set a budget that will allow you to achieve these goals. Setting a firm training budget and objectives also eliminates the possibility of scope slippage and increases in unplanned spend.

2. Determine where to focus

Successful training is targeted training. There is no point in delivering high-level category management training to a workforce that lacks a sound understanding of the basics. Training needs should be identified at a personal level and should make up part of a broader development and HR planning process. Once the focus areas have been determined the task of prioritising can begin.

3. Before going external, look internally

There is likely a wealth of knowledge that lies within your procurement team. Facilitating and promoting knowledge sharing sessions benefits your firm in two ways. Firstly, you save precious money for other training initiatives. Secondly, at the same time you give your team an opportunity to show their skills and expertise to their colleagues.

4. Understand the external offerings

This one seems simple, but you need to do your research. There are numerous procurement training providers out there. Some are good, others not so good. It’s important to understand what your goals are and search for the most effective and well-regarded providers to help you meet these needs.

5. Train one, teach many

This process involves sending one staff member to a training course and holding knowledge sharing or training session when they return. This way, the lessons learned by one staff member can be amplified to your entire team. It’s a lot more cost effective than sending everyone on the same course.

6. Consider the benefits of eLearning

If your training budget is tight, then you need to look for a way to maximise Return on Investment. There is a wealth of training available on online platforms such as Lynda.com and Procurious. Most of this training is free and comes from some of the top names in education. There is also a potential saving when it comes to time out of the office for employees, and on travel and expenses.

7. Measure what happened

Do you want your training budget to increase next year? The quickest way to make that happen is to prove the effectiveness of the training you undertook this year. Investing in people is the quickest route to success, but if you are unable to track and measure these improvements, promoting the benefits of training becomes a far harder task.

These are just some easy steps you can take to ensure that you are getting the most out of your budget, while still providing the required level of training for employees.

Many employees now cite development opportunities as a reason for looking for or starting a new job. It’s important that your organisation isn’t the one missing out, and by ensuring the availability of quality training, you can work to keep hold of your star players.

The Quarterback’s Code for Strategic Sourcing

When it comes to strategic sourcing, organisations shouldn’t have to choose between standardisation and flexibility. Good technology should allow for both.

Vasyl Shulga/Shutterstock.com

Download GEP’s white paper on the role of procurement in the mobile revolution here.

“Omaha!”

A familiar cry to many, but maybe not to those not especially interested in the sport of Football in the USA (aka American Football back home in the UK). “Omaha!” is the often used pre-snap call of one of the sport’s greats, two-time Super Bowl winner Peyton Manning.

But what does “Omaha!” mean? And if it means something specific, how have the competition not worked it out after all these years?  And how come Manning’s former team are as much in the dark as the rest of us?

Context Is Everything

The truth then, clearly, is that it doesn’t mean anything, at least not anything consistent – either from season to season or game to game or even play to play.  As a placeholder, as a piece of gamesmanship, as a way to test the sensitivity of the hair trigger of the opposing defence, it has proven extremely effective, time and again.

Constantly switching up the sequence of calls and preparations and communications to keep the competition on the back foot is smart game play. But to do that without changing the vocabulary is sporting genius.

Without the need to constantly reinvent the language of the game, the effort can be fully devoted to implementation and execution.  Context is everything, and so by using a standard set of tools, a well-prepared team can snap-to and address each play successfully.

This is, in many ways, a model which is familiar to everyone. From Lego bricks to document boilerplates to groceries, we are very much aligned to the concept of creating a range of different outcomes from a standard kit of parts.

Standardised vs. Customised

It is also a model that business processes aim to emulate, but with varying degrees of success.  Sourcing and contracting are cases in point.  It is always a “nice idea” to have a standard set of processes or questions or clauses or whatever, but the reality is that changing circumstance forces a change in approach and time and again RFPs (and the Ps that result) are created from scratch with little reuse and standardisation.

That’s not without good reason, of course. Too much standardisation is a constraint.  A “take it or leave it” attitude to contracts is rarely a workable strategy in the long term. The need to be flexible, and adapt to changing circumstances, is important.

Nevertheless, there is a happy medium between “out-of-the-box” and “bespoke”. Your choice of procurement software should give you the ability to both select from a standard set and customise what you need – at the same time.

It shouldn’t be a question of having to choose between a boilerplate and a custom-built document. You should have the freedom to select which pieces you want to remain standard and which pieces you want to personalise.

Best of Both Worlds

So far, so obvious, I think.  But if that approach is adopted end-to-end in the procurement operation, enabled by the software, such that each sourcing wave, each program of supplier management, and each category are all consistently structured and arranged, then there emerges a common basis on which success can be measured and best-practice shared and transferred from team to team.

Thus a consistent approach and process needn’t be prevented by the requirement to change strategy or tactical game play. At GEP we develop procurement software that is designed around the principles of simplifying the processes and yet permitting maximum flexibility; two aims which can be seen as mutually exclusive. But we don’t believe they are.

If the software is smart enough we think you should be able to get the best of both worlds – a consistent common vocabulary that allows you to communicate effectively with your team mates, but with the ability to react swiftly and specifically to win every play.

Learn more about state-of-the-art procurement software at www.smartbygep.com.

GEP have shared a white paper on procurement’s readiness for the mobile revolution with the Procurious community. Download it at gep.procurious.com.