Are you heeding good career advice to continue your upward trajectory, or worn-out myths that will grind your career to a halt? Here are the most common myths that may prove a hindrance.
When it comes to career advice, some of the most successful people say you can never get enough of it. But what about if the advice you’re given is not quite right? Or worse, what about if it actually sabotages your career? A lot has changed in the world of work, but sometimes the career advice of yesteryear just doesn’t change with the times. Here are the most common career success myths, and how they might actually be sabotaging your success:
Myth 1: Long hours is the only way to the top
We’ve all heard the old adage before: the quickest way to the top is to arrive before your boss, and leave after her. Employers want face time warriors, we’re told. The best employees are always working, always available, and always on.
So it’s fair to say that long hours will not lead you to the top, but it may lead you out the door.
Myth 2: Dress for success
The notion of ‘dress for the job you want, not the job you have’ seems to have been passed down the generations, and still echoes around many offices today. But will this get you the promotion you’ve got your eye on?
Secondly, the very best workplaces know to value someone’s performance over superficial considerations such as how they dress or look. So as much as it’s important to make an effort, trying to be the best dressed in your office is simply not that important.
Myth 3: You should leave if you get a bad performance review
For anyone who has ever received a bad performance review (which at some point, is most of us!), it can be a soul-crushing and highly embarrassing feeling. So awful is it that most of us will believe that there’s no coming back, and that we should immediately update our resumes and start hitting the job market. But should we?
Companies are increasingly waking up to the fact that annual performance appraisals aren’t as effective as many originally thought they were. In fact, BBC Worklife goes as far as to say that they are pointless for most people. Increasingly, businesses are realising that they are not the be all and end all of performance, and looking at other factors instead.
That being said, a bad performance review can still hurt. But instead of rage quitting, try to focus on what you can do to improve. Steering yourself out of a bad situation can show your boss that you’re in possession of the most important quality any employee could have: resilience.
Myth 4: Your IQ is more important than your EQ
Are you one of those people who rolls their eyes at all of our peers because you know you’re just so much smarter than all of them? At school, it’s the most intelligent people who succeed, but in work, it can be a different matter entirely.
In the workplace, a high IQ can mean that you’ll succeed at certain jobs and be valued for your skills. But if your IQ Is high but your EQ is lacking, you’ll likely be sidelined to roles as an individual contributor, as leadership and management require a healthy dose of EQ.
Your EQ, far more than your IQ, will determine whether or not you’re promoted, and will help immensely throughout your career, assisting you to build relationships and influence others.
When it comes to career advice, not every piece of advice is created equal. Don’t let these career myths stand in the way of your success.
Are there any other career myths that you’ve felt have held you back? Let us know in the comments below.
Even the greatest plans can come crashing down if you haven’t weighed up the risks! What will be the chief risks threatening your plans in 2021?
As 2020 draws to a close, the question is no longer what we could have done better this year, but instead, what can we – and do we – need to do next year to ensure we’re better prepared?
The answer to that is complex, but the essential first step is to understand what the top supply chain risks will be next year. Tony Webster-Smith, Regional APAC VP at Avetta, believes that the following five risks will be the most important for next year:
1. Cash flow
It’s been a tough year for businesses big and small the world over, but what is even more frightening is that we’re yet to see the true effects of the hardship. In many countries, governments have introduced temporary provisions to help businesses (especially small ones) temporarily weather the economic impact of the virus. Yet in 2021, we may see many of these changes wound back or cancelled altogether.
What this means, says Tony, is that many smaller businesses may go into administration. It’s more important than ever, he says, to monitor the risks associated with the financial health of your suppliers.
2. Reputational damage
With the world distracted by the pandemic, many less-than-reputable suppliers may think that their discretions will go by unnoticed. Not so, says Tony. In 2021, reputational damage will continue to be as important (if not more important) than it has been in the past, and customers will increasingly expect transparency as to how and where their products are made. Modern slavery will continue to be an issue, with some of the world’s most famous companies, including Mars, Nestle and Hersheys, still unable to eradicate child labour.
As concerning as modern slavery is, though, there are many other reputational risks caused directly by the pandemic that we all need to be aware of. These include, but are not limited to, project delays, non-fulfillment of contracts, and a lack of business continuity planning that naturally follows a business disruption as all-encompassing as the pandemic.
3. Regulatory environment
While it’s hard to say what will happen with the business regulatory environment in the US next year, in Australia at least, a number of new regulations will come into force that may represent a significant risk for businesses.
The first one of these regulations is the new Labour Hire Licensing Scheme. The scheme was introduced to protect workers from exploitation, and means that suppliers need even more oversight into their contractors, and even their contractor’s contractors.
On the topic of oversight, another piece of legislation that will be introduced in Australia is around the chain of responsibility in the transport industry. In a nutshell, transport providers will have more legal responsibilities when it comes to driver fatigue and maneuvering heavy vehicles.
All of these changes will mean increased risks and costs for suppliers.
The coronavirus pandemic has changed the world as we know it, but one change that hasn’t been all bad has been increasing focus on building reliable and sustainable supply chains. This change, Tony believes, represents a great opportunity for all of us to build better supply chains where we’re even more focused on customer centricity, a commitment to reducing CO2 emissions, and an increasing awareness of our environmental impacts.
But of course, where there are opportunities, there are risks, and the risk with sustainability is that some companies and suppliers simply won’t keep up, and will be penalised by the market as a result.
5. Natural disasters
They were always something we planned for, but now they seem to be happening with increasing frequency. Outside of the coronavirus pandemic, this year has seen the Australian bushfires, which cost the economy $100 billion dollars, as well as the California ones, which cost the US economy $10 billion.
And there is no sign that these disasters will let up in 2021. In fact, the frequency and severity of storms, floods and bushfires is expected to increase, representing a very real risk for suppliers and businesses alike.
2020 has been an extremely challenging year with many unexpected risks. But as the business environment we operate in gets more complex, so do the risks associated with it. Although the five categories of risks detailed above will feature in 2021, what is more likely is that the risks we face will not fall into neat categories. As Dawn Tiura, CEO of SIG, reminds us, risk events very often cascade from one risk category to the next, and can, at any one time, be strategic, compliance-related, financial, reputational or operational.
What we know for sure is that 2021 will represent a unique set of circumstances, challenges and risks for every business. But as the old adage goes, if you fail to plan, you plan to fail. Risk management planning for next year should start now.
We successfully leveraged the COVID-era attention we got – now how does Procurement remain relevant and authoritative in the long term? Alex Saric shares how to build the influence to make your presence felt.
The pandemic has had widespread adverse effects, from health to finances to education. Yet for procurement leaders it has also been an opportunity to shine. As supply disruptions, cash flow and protecting margins became boardroom priorities and front page news, procurement was called upon to save the day. And for the most part the function has risen to the challenge. Companies and citizens should be thankful.
Yet to capitalise on their moment in the sun and remain on the board meeting agenda, CPOs must demonstrate how they can contribute long term value as well; how they can help companies restore growth via innovation; how they can improve the brand by driving CSR improvements; and much more. To do so, CPOs have to build their influence within the organisation.
Influence is Essential
There are a couple of reasons for this. First, the more strategic objectives procurement can support increasingly involve other departments and/or suppliers. Supporting company cash objectives requires collaboration with finance. Driving innovation requires collaboration with production, sales and suppliers. Sustainability often must be aligned with related departments and involves supplier collaboration. For that alignment and collaboration to take place, influence is key.
Second, increasing procurement’s impact requires transformation, with accompanying investments in people and technology. Digital transformation helps free capacity via automation, improve decision-making with better access to insights and scale collaboration by connecting stakeholders. The number one obstacle identified in a Forrester Survey to getting a digital transformation off the ground is executive buy-in / budget. Influence is essential to overcoming that initial obstacle.
The successful path to building that influence will certainly vary based on the organisational culture, individual personalities and other factors. That said, there are some common factors I have found to be important.
Sell the Vision
Too many organisations don’t comprehend how procurement can add strategic value and contribute to many objectives. It is essential to craft and clearly articulate a compelling vision for procurement and the various ways it can add value. And not just the what, but the how and the path to get there, including tangible benefits that can be achieved at each stage. Particularly in times of crisis, there will be resistance to any vision that requires years of investment to see the results. Explain precisely how procurement can deliver on or contribute to each objective, what’s needed and the timeframe.
When presenting the vision you should be simultaneously making the business case for necessary investments. You are selling your vision: remember that the best sales people understand how to speak to (after first listening to) their audience. There are a few “tricks” I’d recommend. First, build the case from the bottom up. The ROI on procurement investments is often tremendous and leaders naturally balk at a large top level number. But by explaining each value driver separately, each with a small contribution that seems logical and is easy to accept, you can build up the overall number in a way that leaders understand and accept. Show the typical range of benefits for each driver (vendors or consultants can help you with this information) and lean towards the low end on most, to avoid setting goals you may not achieve and increase executive confidence in the overall ROI.
Second, focus on value drivers that will resonate based on your current organizational pains. If cost containment is top of mind for the board, explaining how investments will bring more spend under management and the typical savings on each dollar that is managed is a logical place. For others, minimising supply disruptions or compliance costs may be top of mind. This helps the message resonate.
Lastly, back up the business case with example of companies (ideally competitors) that have achieved this. That plays on human emotion – anecdotes resonate and no one wants to feel their competitor is outdoing them. Together this approach is very likely to result in a convincing business case supporting your vision.
Show them the Money
Painting that clear vision is essential, but can damage your influence if not followed through. Hence, it is key that you deliver quick wins to demonstrate the potential, thereby building organisational support and credibility. Be sure that is built into your plan. What those early wins should be will vary by organisation. For some, it may be key to drive some quick savings. For others it might be improving visibility in the supply chain so they’re not disrupted and dealing with some of the issues they’ve had during COVID. By showing early progress against your vision, you will gain tremendous credibility as a trustworthy partner. You can then scale up over time, to more processes, objectives, spend, etc.
I have found that demonstrating certain values is as important as demonstrating results – you need both. Top of the list for me is ownership. If procurement is to build its influence, it needs to take ownership of objectives. Naturally, procurement will rarely be able to control everything required to succeed. That lack of control is often an argument against taking ownership. Resist any such pushback. Yes, there is risk to taking ownership of a result you can’t fully control. But the real risk is failing to deliver because of internal confusion. I’ve seen far too many initiatives fail because no one felt ownership and hence no one stepped up to steer the effort and course correct when needed. Building a culture of ownership, in procurement or any other function for that matter, is key to building influence. Your team won’t lead if they don’t feel a sense of ownership. If they do, you will establish yourself as the go-to team for strategic initiatives.
Less controversial but equally important, is demonstrating integrity. The more success depends on others, the more integrity is key. We may have moved to a heavily virtual workplace, but relationships are still key to success in many areas, especially building influence. Unless your team demonstrates integrity in every interaction, you will struggle to build influence. This depends more on your people than any policy of course, so it’s harder to fix if an issue exists, but leaders must insist on it and jump on any potential shortcomings.
Building influence is an art, not a science. If procurement is to make its move from the backroom to the boardroom permanent, CPOs will need to master it. For all its horrors, the pandemic is a rare opportunity to elevate the function. By painting a clear, compelling vision, effectively executing against the first stages and demonstrating the right values, CPOs will be well positioned to do just that.
A little innovation never hurt anyone. But whilst Maverick Spend may cause us to re-evaluate our processes, it can wreak havoc and cause long-lasting damage. Georg Roesch outlines 5 ways you can prevent it from happening and keep it under control.
Being a maverick isn’t all bad. Just look at Steve Jobs and Sir Richard Branson. Their outside-the-box ideas drove innovation and resulted in enormous successes. But for companies trying to manage spend (and let’s be honest, who isn’t?) rules-are-meant-to-be-broken behaviors such as maverick spend can wreak havoc on processes and, ultimately, your company’s bottom line. The upside is that it creates opportunities for procurement managers to re-evaluate processes, identify shortfalls and tighten spend gaps. But if left unchecked, it can – and will – end up costing your company money in the long run.
What is maverick spend?
Maverick spend is defined as buying from suppliers without following the company’s pre-established procurement policy. Purchasing goods or services out of contract or from non-preferred suppliers means that your company doesn’t benefit from the preferred supplier discounts that you worked hard to negotiate. Even worse, it can harm vendor relationships, affect future contract terms and open the door for underhanded business practices.
So why do employees “go rogue” and, more importantly, how can you stop it?
Here are five tips to maverick-proof your procurement processes.
1. Identify maverick spend.
Spend visibility is key. After all, you can’t save or fix what you can’t see. Do you know how much maverick spend costs your company? Or the work areas and spend categories where non-conformity occurs? A thorough spend analysis can help you identify gaps across all spend data sources. From there, you can pinpoint the who, what and where and put an action plan into place.
2. Determine why maverick spend occurs.
Most employees don’t “go rogue” on purpose or with ill intent. They simply may not understand the procurement process. Or they may find it cumbersome and time consuming. eProcurement software can be intimidating, especially to employees who don’t use it regularly. Or they may see better prices elsewhere, not understanding the costs associated with invoice and payment processing or expense reimbursement.
Whatever the reason, regular efforts to explain the “why” and share the value can go a long way in gaining buy-in. Consider hosting (bring your own) lunch and learn sessions, recognising outstanding department or individual accomplishments, and providing a forum for employees to recommend vendors and give feedback.
3. Review the entire procurement process.
If you find your procurement process difficult, simplify with a more user-friendly solution. There are a lot of affordable and easy-to-use automated eProcurement options on the market.
The key is to find a solution that’s easy to use and all-inclusive (one that sees all direct and indirect spend) that integrates with your enterprise resource planning (ERP) system. This ensures that all employees have access to the right information at the right time.
4. Hold people accountable for their expenses.
While creating processes is your job, spend management is everyone’s responsibility. Every manager in your organisation should know exactly what’s being spent in his or her area, who’s spending it, and how much spend occurs outside of contract or supplier network.
If you have a coupon at home for Papa John’s pizza, you’re probably not going to order Domino’s and pay full price. While this is a simplistic example, the same holds true at work. It just may be that employees don’t know what discounts exist or aren’t being held accountable for purchase price variances.
5. Close the gaps in your procurement process.
Additional measures to consider to reign in maverick spend include:
Limiting or eliminating P-card use to only certain vendors, merchant categories and / or dollar amounts. P-card usage can be difficult to monitor and measure which is why some companies are eliminating use altogether.
Limiting who can set up new vendors. Do you have a well-defined process for onboarding new suppliers? If not, you should.
C-level review of all non-contract or outside supplier network spend.
In the end, maverick spend and not playing by the procurement rules costs organizations BIG money. By digging deeper into the purchasing experience and the challenges and frustrations your employees encounter, you’ll better understand why maverick spend occurs, where it happens most often and, most importantly, what solutions you should implement to stop it.
Maverick spending is just one of the six challenges listed in our white paper on transparency in indirect spend. Read about the rest here.
How can a few tips in the short term fundamentally change not just your long-term plans, but the way you plan altogether? Our Principal Advisor Helen Mackenzie writes.
Are you starting to plan for 2021 and what the next phase could be for your category or your team? Are you pondering what the future might hold and how to prepare?
Planning in time-horizon chunks, being in a “perpetual state of beta” and measuring your performance twice a week are just five of the ideas a group of senior US procurement leaders recommended for guiding your 2021 strategies at a recent Procurious Roundtable.
1. Time Horizon Chunks
Terence Mauri, founder of the Hack Future Lab urged us to think in time-horizon chunks. “Think about what’s probable for your business, suppliers and supply chains in the few next years? What could be plausible in a decade’s time? And then stretch that time horizon still further to envisage what could be possible in 20, 50 years’ time.”
2. Perpetual State of Beta
Mauri believes that our default mode of operation needs to be “a perpetual state of beta”. Referring the 4-24 Project, a movement seeking to encourage a questioning mindset, Mauri issued a challenge, “What’s the bravest question you can ask right now?” Could we start to prepare effectively for the post-Covid world by asking:
· why are procurement processes complex not simple?
· what do our stakeholders really need from us?
· can we collaborate with our suppliers in a more effective way and build trust?
But being more disruptive in our thinking requires practical application on the ground. And that’s where insight from Alex Saric, Ivalua’s Chief Marketing Officer at the Roundtable was invaluable.
3. Measure what Matters
“If we measure what matters”, advised Saric “that means we won’t let near term pressure derail long term direction.” He cited evidence from research undertaken by Ivalua and Forrester earlier in 2020 to prove his point:
The majority of high performing procurement organisations measure key performance indicators twice a week.
Not once a month, not quarterly, but bi-weekly. And the reason is that those KPIs are used to measure success and – importantly – to course correct when targets linked to long term direction aren’t being achieved. A great way to operate whether the pandemic is with us or not.
4. Strategic Not Tactical
And thinking about the way ahead, forward-thinking CPO Gareth Hughes from UK based Whistl, urged us to put the strategic, rather than the tactical, at the heart of our team structure. Gareth’s version of the perpetual state of beta is to dispense with category management, and “do the procurement that the business needs”.
By deploying a team with commercial focus, a curious nature and fine-tuned stakeholder engagement skills. Hughes urged CPOs to stay strategic, “Measurement needs to focus on commercial outcomes and increasing speed.”…
People remember you for the 80% of things you do well so make sure they’re the things that matter!
5. Promote and Measure Diversity
And keeping the focus on teams and people, our final speaker Naseem Malik, urged a focus on promoting and measuring diversity as a way to demonstrate procurement’s value post-covid.
Observing that procurement and supply chain continues to have the C-Suite’s full attention Malik urged CPOs to “Leverage your team’s supplier diversity expertise to help guide your organisation’s wider diversity efforts”. And, of course, measure the impact.
So preparing and navigating through the post covid period may be more a question of how we do it, rather than what we do. And whether it’s the quest for the perpetual state of beta, high performance or being more diverse, the key as always is to measure it and to measure what matters.
If you would like to find out more about Procurious Roundtables and the 2021 program email [email protected]
The tools exist – and are affordable – to utilise Procurement data throughout the organisation for actionable intelligence. So how do you make that transformation? IBM Procurement’s Laura Beth Hirt-Sharpe writes the definitive guide to clearing the myriad hurdles.
A Procurement organisation’s success relies on transformation from standard spend visualisation tools to a comprehensive strategy to monitor, maintain and utilise Procurement data throughout the organisation. With the advent of inexpensive, efficient and reliable data collection and curation capabilities, many Procurement executives have the opportunity to efficiently create actionable intelligence from their data. Though a myriad of tools, methods and services are available to support this work, a significant hurdle remains for organisations: leaders must determine the best tools and services and curate an appropriate data strategy and data-driven culture to drive the change necessary to remain competitive. All this, while cutting costs and reducing complexity.
As leaders embark on their Procurement analytics transformation, they face three major considerations: data and data governance strategy, data cleansing and curation, and skill gaps in core analytics and data science skills. In this blog, I will provide suggestions for each consideration based on my experience with global clients at various levels of maturity.
1.Data and data governance strategy
Many Procurement organisations begin their digital transformation by thinking that data strategy and technology strategy are one and the same, when in reality these are two distinct, codependent pillars. A best-in-class approach to data strategy is to begin with the outcomes you are looking to drive from your Procurement data. These outcomes can range across various domains beginning with traditional spend analytics, risk and compliance monitoring, to AI-based trending of key metric behavior within your environment, and many more in between. Once you have a clear view of the outcomes you want to drive, begin thinking through important questions like:
· What data needs to be captured and what level of structure is required within those elements?
· Is this data captured today, and if so, how?
· What data gaps are present against target outcomes?
· Does reasonably consistent master data exist across various source systems?
· How can data completeness, accuracy, and meaningfulness be assured over time?
· What is the best way to collect and curate data over time? (This is not a “one and done” event!)
· How can Procurement processes be optimised to ensure efficient and effective data capture?
These types of questions will help shape your data and data governance strategy. It is important to understand that there will always be a trade-off between speed of execution and granularity of data capture. Finding the right balance is key, and ensuring you have the right technology and innovation partners in place is crucial to optimising this balance.
2. Data cleansing and curation
There are two primary factors to consider with regard to data cleansing and curation: determining who from your organisation should be involved and maintaining value drivers in your dataset.
Who should be involved?
Procurement data teams within an organisation typically lean toward one of two strengths: data science or Procurement. Some organisations focus on pulling data experts from other parts of the organisation to Procurement to help curate an accurate merge of their datasets into a “source of truth” dataset. However, through this method, Procurement subject matter experts (SMEs) have a limited stake in the data cleansing activities. Knowledge of Procurement is essential to rapidly increase the data return on investment, such as supplier name normalisation and logic flagging. If those knowledge assets are not brought into the process early, the path to monetisation will be slow and spotty.
Alternatively, some organisations choose to assemble a team of Procurement professionals who can educate themselves on data techniques and procedures and curate the source of truth data. For these organisations, technical issues and lack of repeatability of process steps ensure the source of truth dataset will require a similar pruning process again in the future. This also has drawbacks in that data architecture is best left to data professionals – especially data that will be used for AI and Cognitive algorithms. Merging Procurement SME talent with data design in a Procurement environment is tricky. Couple that with the reality that top data and Procurement talent have “day jobs” makes this investment in talent critical, complex and expensive.
What are the key value drivers?
Organisations that pull their data into a central repository and want to utilise it to its fullest should maintain two value drivers within their dataset: 1) Procurement-specific categorisation and 2) knowledge-infusion based on outside information.
Cleansing data to support a Procurement taxonomy cannot rely alone on a set of off-the-shelf tools built for classification of natural language – sentences and paragraphs – but will need to be curated for terms and phrases specific to Procurement’s categories. Furthermore, high-accuracy categorisation of spend data hinges on multiple fields such as supplier name, GL classification and rich line-item text fields.
Utilising these Procurement-specific fields in classification requires more advanced algorithms to decide between potentially disagreeing field content. To further complicate categorisation and curation, data experts are regularly tasked with combining non-structured information into the source of truth dataset. This work requires technical knowledge and industry acumen to execute as well as regular refreshes of data and terminology. For example, these data points could include diversity supplier type, occupancy and building information as well as market intelligence purchased from third party providers. This work requires an in-depth knowledge of the source of truth dataset and supporting datasets which may be unstructured. These fields must be updated and verified with Procurement stakeholders. Categorisation work and additional field inclusion require a significant investment by Procurement organisations to create and maintain.
Determining the right team and the value drivers within Procurement-specific data is a task that takes dedicated individuals, time, and effort. However, the size and forethought of this effort will determine the return on data initiatives.
3. Core analytics and data science skills
A pervasive issue I see with organisations that hire data scientists from top schools at high salaries is that they struggle to extract value from the data that already exists in their systems due to lack of Procurement acumen.
Another common issue is that an organisation’s current team cannot afford incremental budget for the aforementioned data resources, and therefore leans on its existing Procurement and IT staff to monitor, maintain, and report utilising spreadsheets and visualisation tools.
Both approaches leave a significant amount of value unrealised for the business. Instead, I recommend cross-collaboration across the organisation, designating analytics champions and emphasising grassroots training. Without these, the value of your data will remain untapped and will require a significant amount of future investment to digitally transform your business.
A successful data-focused organisation is one that is fully integrated within your Procurement function. The data team cannot be a siloed organisation, building point solutions for the loudest stakeholder’s pain point. There needs to be an agile approach to daily activities, with a robust backlog and tasks prioritised for highest return to the business.
Analytics champions are an important, yet often overlooked, position. Data Translators are another name for this role, as organisations need to treat data as another language with certain speakers of the database and statistics “dialects.”
For example: if an executive has a short turnaround project that is important for continuing operations, they need to meet with their function’s analytics champion before they meet with the data team. The intent of this role and meeting is to vet, assess and format answers to the rudimentary questions that often derail otherwise productive data initiatives. Potential topics to cover include data availability, awareness of the project backlog, agreement on fair timelines and investment, and blockers.
Analytics champions need to be cultivated internally first as functional experts and grow as the organization evolves. There are positives to hiring versus training, but as discussed earlier, without the proper functional understanding you will likely see a lack of results without the proper structure in place.
Your current functional team knows your business, processes, industry, and supply base best, so enable them to make decisions and give structured guidance to the data experts, even if a data translator is required.
Meaningful transformation through modern Procurement
Analytics is at the forefront of high-impact Procurement organisations as a trusted business advisor role, as a supplier relationship reference source, and as the foundation of effective compliance management. Through analytics, modern Procurement can be predictive in their actions and trusted throughout the broader business. To produce the granular level data required for actionable intelligence, source data has to expand beyond basic accounts payable and purchase order elements. New sources of information, such as demand, consumption and compliance data from a variety of internal and external sources must be linked. This process appears daunting, but we have seen meaningful transformationhappen over small, structured, prioritised steps with a focus on data as the foundation for meaningful transformation.
To solve for this complex need, Procurement Business Process Outsourcing services are innovating through AI-based technology infused with an influx of new and re-purposed Procurement talent skilled in data science, mathematics, statistics and computer science. Ensuring the correct mix of skilled data resources with Procurement experts has proven to be an expensive challenge for CPOs, and an opportunity for market-leading specialists such as IBM Procurement Services. These services assist Procurement organisations to meet their analytics demands while empowering their sourcing practitioners to focus on taking action based on the analytically discovered opportunities. Incorporating knowledge built across clients and industries, these services allow Procurement to adjust focus around high yield data and statistically verified opportunities.
Category management is still misunderstood as a specific function in procurement. While understanding the category is important, the focus should be on the word “management”: managing internal stakeholders, understanding their needs, and managing suppliers by understanding their needs to find win-wins, generate value and ensure continuous improvement.Jaggaer’s Georg Roesch explains.
Category management is not a difficult concept to grasp. Really. Just answer the following question: Which do you prefer: a) shoddy or mediocre goods and services at high prices, or b) excellent value? When it comes to execution, however, things get a lot more complicated. Category management is a technique used to understand markets, analyse spending, and make good purchasing decisions that save you money while securing quality goods and services.
If you are new to the subject, there are many tactics, but a common one is to start with bundling items to take a bigger deal to market in order to be in a better position to negotiate a better price. One of the most popular and accessible books on procurement poses the question that goes to the heart of category management, and very simply: Why are hot dogs cheaper in IKEA than in the supermarket?
That’s all well and good, but IKEA sells a standardised range of products through near-identical superstores all over the world. It makes total sense that it bundles everything it buys from hex keys to drapes to hot dogs and gets a fantastic deal. What’s not so easy to understand is how that works for a company whose products are highly sophisticated and/or non-standardised. Take, for example, the Swiss company Bühler. Each day, two billion people enjoy foods produced from raw materials such as grain, coffee and rice processed on Bühler equipment; and every day one billion people travel in vehicles manufactured with parts produced with Bühler machinery. But the important point here is that every single machine that Bühler produces for its customers is unique. In that sense it is the absolute antithesis of IKEA.
Yet in another sense, it faces a similar challenge. The global orientation of the company’s products, its presence in 140 countries worldwide with 20 business units, 30 manufacturing sites, 100 service stations and 25 application sites mean that sourcing is a global operation – and for Bühler, category management is crucially important to business success. And it is incredibly complex because, whether Bühler is producing air pressure systems, silos, compressors or steel constructions, the company always sources for specific projects, which means there is a huge range of differentiated categories.
Of course, companies like Bühler want to minimise spend, but for companies that believe “you cannot put a price on quality”, category management has many other dimensions.
A misunderstood term
Category Management remains a largely misunderstood term. The confusion arises in the fact that it was originally coined by marketers in the retail industry: Nielsen defines it as “a process that involves managing product categories as business units and customising them [on a store-by-store basis] to satisfy customer needs”. Others define it as managing a line of products as a business unit, as opposed to individual brand management.
Only later did the term get adopted by procurement, where it is defined as “a strategic approach to procurement where organisations segment their spend into areas that contain similar or related products, enabling opportunities for consolidation and efficiency” (CIPS). Many procurement professionals might argue that this is what procurement has always done: understanding markets and looking for ways to strike a good deal. However, what category management as a distinct activity and organisational structure brings to the table is greater depth and sophistication.
A category is basically any group of similar items that you want to buy under a single deal: goods and services that are available from the same or a similar supplier base. Examples are stationery, fuel, travel services, transportation and logistics, advertising and legal services. But we should focus more on the management part, which is about applying robust methodologies (and a good deal of business acumen) so that you not only maximise savings (for example by designing the right sourcing events that are appropriate for each category) but also achieve other goals such as shortening time-to-market, reducing risks, increasing environmental sustainability, broadening supplier diversity or even creating new revenue streams. All of this implies a much stronger connection between the procurement function and the organisation’s strategic objectives and even its mission, vision and values.
The key to effective category management here is understanding the internal customers’ needs, as well as what’s going on in the supplier market. Category management is by its very nature a role that is normally a center of excellence, but it must be responsive to local needs and win stakeholder buy-in. To be successful and to command respect, a category manager must know how to leverage internal knowledge and expertise and must be able to work cross-functionally. In practice, this could involve, for example, involving key stakeholders such as operations and quality control managers – and in the case of strategic suppliers, senior executives – on factory or site visits to build confidence that suppliers have what it takes (human and technological resources, financial strength and resilience, physical size of the business etc.) to satisfy everyone.
Time-to-market, for example, has become a decisive factor in the success or failure of a product, and in particular, the launch of a new product. Category managers can play a critical role in reducing lead times, as long as they are involved in the production process early on. For example, the lengthy request process for customised parts can be drastically cut down with excellent supplier communication supported by the right IT tools. To ensure that the price of a material or a part is not the only deciding factor in their selection, the category specialists need to look for further streamlining potential in purchasing and striking the right balance between stimulating competitive pressure on suppliers and consolidating spend.
In practice, you might for example negotiate a bonus to suppliers for beating the delivery deadline, or a penalty for missing it. With the emphasis on the former: the best category managers treat suppliers as partners, rather than people you need to beat up on price. In a complex category such as transportation, category managers should seek to balance savings with objectives such as reliability and operational integrity. The outcome should be a win-win for buyer and seller alike. Often the best way to do that is to keep the strongest incumbents on good rates while leveraging smaller operators who offer great performance.
If category management can achieve all of the above, it will succeed in raising the profile of procurement across the organisation, changing the perception from a functional, operationally focused activity to a business process. As well as making breakthrough savings, the organisation will notice improvements in service levels, quality, availability and value for money, and a reduction in disruptions to the supply chain.
The supplier’s perspective
Understanding things from the supplier’s perspective can be approached scientifically and systematically. Just as we are accustomed to plotting suppliers on a matrix to assess their status (as strategic, tail spend etc.) so a category manager should do the same from the supplier’s point of view, which means plotting Attractiveness of Account against Relative Value of Business. Suppliers see their customers as falling into one of four basic categories:
Nuisance: The customer has driven a very hard bargain on price and is highly demanding, which gets in the way of my other business. I have no incentive to compete for their business in future and am not motivated to give them good service.
Growth:The customer is not profitable right now, but the account is worth developing as I expect bigger opportunities. So, I will show willing and “use a sprat to catch a mackerel”, as the saying goes.
Profitable:The account can bring me potentially huge gains in the short term, but I don’t see it going anywhere. I will respond to requests but get the best price, even if that means losing the account. So, let’s make hay while the sun shines.
Core: I value this relationship. It’s profitable in the long term, so I will do what’s necessary to give excellent service in order to beat off any competition. That means I have an incentive to work collaboratively with the customer to reduce costs, innovate and add value.
Whereas strategic sourcing will tend to recruit new suppliers into the “growth” segment, the job of category management should be to move them into “core”. This requires category managers to develop the ability to walk in the supplier’s shoes. And once again, this will require cross-functional stakeholder engagement across the organisation so that both parties understand each the other’s needs in greater depth, appropriate training and joint activities are arranged, etc.
In this way the initial savings secured through sourcing will not be eroded over time; on the contrary, the benefits will be extended as the relationship matures. Both parties have an incentive to look for ways to reduce costs and increase value, e.g. through process improvements, which typically drive year-on-year benefits equivalent to around 5% cost saving with each renewal.
Above all, category management is a continuous process, and one that is multidimensional. Therefore, it is not always easy for mere human beings to grasp in all its aspects. Increasingly, category managers are relying on business analytics and artificial intelligence to undertake continuous analysis of market data and supplier performance against benchmarks to deliver a range of benefits across multiple inter-related projects. The future of category management will be a matter of harnessing what advanced analytics is good at to what humans are good at. If you’re interested in hearing more on category management and how to effectively digitize the process, tune into our webinar with The Hackett Group and AstraZeneca! We’d love to hear your thoughts in the comments!
Classifying your spend data? A big waste of time, surely … or a crucial step that needs to be taken without delay? The Classification Guru Susan Walsh explains why this needs to happen immediately.
So, picture the scene: it’s budget time and as far as you can see everything is under control, the bottom-line balances out, you’re in the black and life is good. But, are you really getting the full picture? You’ll never know unless you accurately classify your spend data.
You may already be thinking about it; or can’t justify the time or resources; or it might be something that you think is just a complete waste of time or money. Let me tell you why it isn’t, and you should have your spend data classified as soon as possible…
First things first, there’s that full picture I mentioned. If you’re only using your General Ledger codes, I can guarantee that they are wrong! Now, I know that’s a bold claim, but it is based on years of experience of working with GL codes. More often than not they’re used by people who don’t necessarily understand or know what they’re logging or the importance of accuracy. The result? Items logged under random GL codes.
Now, have a think about your department budgets: Karen in marketing’s maxed hers out, but she’s just placed an order for 5000 new leaflets to be printed. How? In my experience, it’s been snuck into someone else’s budget. Think about marketing and sales, would an order for 5000 leaflets really look out of place in a sales budget? Probably not, unless you look a bit closer. And this means you’re not really getting a true picture of what’s going on at ground level or what you might need for specific areas of your business. You can’t increase the marketing budget if you don’t know they’re spending it all.
We also, unfortunately, need to mention the possibility of fraud or embezzlement. It’s not pleasant to talk about and no one wants to think the worst of their staff or suppliers, but it can and does happen. Someone may have tried to mislead or take advantage of you in some way and if the spend data is messy or they’ve been clever it can be very difficult to spot. This is why it is also a very good idea to have an external party look over it, because then nobody has a vested interest in hiding what’s in the data – they’re just classifying it!
Now, I’m not saying it is a quick and simple process, good classification can take weeks and weeks … and weeks! But it’s worth the wait when you get back your brand new, shiny data set with all this new and organised information. Then you’ll probably say to me, what do I do with this now?
Well, the first thing you do is actually look at what you really spend your money on and find out if you could or should be negotiating better rates with your suppliers because the data’s shown you’re actually spending a lot more than you thought you were or have been automatically accepting price increase when there’s much better deals out there!
Then once you’ve done that, you’ll probably want to review your processes because, as I said before, I can almost guarantee something will have been flagged up during the classification process which indicates spend isn’t being accurately logged.
Ultimately, it’s all about saving you money and that’s no bad thing for anybody. Now, more than ever, it is so important you know where your businesses’ money is being spent and I am sure every single person who has their spend data classified will find at least one hidden surprise – like a data Kinder Egg! (Sorry my American friends, they’re not banned in the UK!)
So, although you may be put off by the upfront cost of having your spend data classified, it will save you money in the long run and the benefits to your business are pretty massive.
When it comes to professional accreditation for procurement and supply chain, there are several options available. But, as it turns out, all are equally good for your professional development.
Unlike other professions, procurement and supply chain does not have one, single governing professional body. While this does make things slightly more complicated, it does provide professionals with a greater degree of choice when it comes to their professional accreditation journey.
Individual decisions may be based on geography, field of procurement, or even previous and current job roles. And while people will make different choices, it does not mean that any of these options are better than the other or will hinder career progression in the long-term.
To understand which qualification is better suited to you as an individual, we need to look at the key differences in the organisations and accreditation, and how your decision may impact your future career.
The main difference between the two organisations is a geographical one.
CIPS is headquartered in the UK and has a very strong network in its home country. It has also developed strong network bases in EMEA and Australasia, with each region having its own management structure, as well as a strong presence in Africa and East Asia. It is a truly global Institute, with over 200,000 members worldwide.
ISM was founded in North America in 1915 and has consolidated its base in this region. It doesn’t have the same global branch network as CIPS, with its networking predominantly focused in the USA. But it is starting to spread its network worldwide, including an increasing membership throughout Latin America, with over 50,000 members from 100 countries.
2.Time & Study Format
When it comes to qualifications, it’s hard to split the two bodies. Both take procurement and supply professionals from student or entry-level members and provide learning, development and examination in order to progress to accreditation. The time taken to achieve the qualification and the method of study are slightly different, however.
CIPS’ key accreditation is MCIPS, with the opportunity to become a Fellow (FCIPS) of the Institute beyond this. Depending on the starting level, experience and nature of study, accreditation can take anywhere between 3 and 6 years to complete. Learning materials and exams are all available digitally, though study can be undertaken in person where available.
CIPS also provides the opportunity to gain MCIPS via an accredited degree, a Management Entry Route or Corporate Award, all of which reduce the requirement for CIPS exams themselves.
The ISM Certified Professional in Supply Management (CPSM) qualification generally takes between 6 and 12 months to complete, depending on the method of study, time and experience. The Institute offers both self-study and classroom-based learning, but the only way to gain the qualification is to go through the three CPSM exams and have the required level of experience in procurement.
Currently there is no option to use other qualifications (degree, post-graduate degree, etc.) to provide an exemption for exams.
3.‘License to Practice’
Possibly the biggest difference in the accreditation offered between the CIPS and ISM is what is offered beyond the main qualifications.
For ISM, this is the ISM Mastery Model. The model is based around a set of 16 core competencies and more than 70 sub-competencies which are seen as critical for a successful career in procurement and supply. Further learning resources help take individuals and teams from the first level, ‘Fundamental’, right up to ‘Mastery’, helping to provide a level of standardisation in skills for the profession.
Where CIPS differentiates from ISM is in its chartership programme. CIPS’ ambition with this when it launched its chartership programme was to create a ‘license to practice’, similar to other professions. With procurement looking to achieve the same recognition as these other professions, chartership seems like something that many people may consider going forward.
So which is better?
In some areas the differences between the organisations and their respective qualifications are stark, in others they are slight. Despite these differences, it doesn’t mean that one qualification is better than the other, or that there is more positive benefit for long-term career prospects in being a member of one institution over the other.
This is because of the key thing that both have in common: international recognition as a gold standard accreditation for procurement and supply chain. CIPS and ISM have together raised the bar for procurement, providing standardisation in learning, development and qualifications, and applicable to all areas, industries, sectors and individuals involved in the profession.
Irrespective of which route you choose, by choosing to undertake professional development and further qualifications, you’re playing your part in advancing the procurement profession. The best thing you can do is look at the organisation and qualification that suits you best and go for that. If everyone takes this step, then procurement will be the ultimate winner!
In light of COVID-19, is the status quo still the best way, or is it time to move away from Globalisaton to embrace Localisation and its benefits? Tania Seary explains what such a gargantuan shift would entail and how you can master it.
The supply chain strategy paradigms we have held close and true for decades are being challenged. The questions are complex, important, urgent and without easy answers.
Consider some of the traditional supply chain paradigms such as lean manufacturing, just-in-time inventory management and extended payment terms. In light of COVID-19, is the status quo still the right way to operate? Take supplier payment terms, for example. Maximising working capital has been a top priority for as long as we can remember. Now, given the rise in bankruptcies and the clear connection between supplier viability and business continuity, many procurement leaders are taking a step back and thinking more about their suppliers’ cash flow in addition to their own.
These paradigm shifts are substantial but pale in comparison to the potential changes around supply chain globalisation.
Supply Chain Globalisation: Is It Time to Localise?
For decades, supply chain strategies have revolved around moving production and sourcing to low-cost geographies. This traditional low-cost sourcing mindset affects everything from lead times, supplier selection, production, quality, margins and more.
Today, leaders everywhere are asking if their heavy reliance on global suppliers is less strategic and more of a risk. When Procurious asked more than 600 procurement and supply chain professionals where COVID-19 had the biggest impact, 21% said logistics and transportation slowdowns or delays. Over one in four cited lack of available supply due to production downtimes and shutdowns. Ninety-seven percent said they were impacted in some capacity.
Pressure and attention are heightened when disruptions cause shortages to critical supplies such as ventilators or personal protective equipment, direct materials and popular merchandise. Beyond the headlines, there’s also a significant impact to the services supply chain. When critical outsourced services, including customer support, security and IT, were suddenly forced to go remote, we saw a corresponding rise in risks related to quality, fraud and compliance.
When a supply chain disruption occurs, it is impossible to control what is happening, especially when the product or service you rely on is thousands of miles away and completely inaccessible. What business leaders can control, however, is from where they source. That explains why over one-third of the profession is currently planning to either expand their supply base or shrink their global supply chain and depend more upon local suppliers.
Surprisingly, 27% of executives plan to stay the course and not make any meaningful post-pandemic strategy shifts. Many of them probably want to alter approaches, but recognize the inherent complexities and costs associated with doing so.
Understandably, most executives have never before experienced a supply chain disruption to this extent. While localisation seems like an appealing strategy to minimise future risks and boost the local economy, it’s far from a quick and easy fix. The obstacles are plenty.
Overcoming the deep reliance on low-cost sourcing is the first challenge. The second is production complexity. Technology gets more innovative, personalised and sophisticated by the day. It would be nearly impossible for a single manufacturer to hold all the technical capabilities and expertise to produce these products 100% in-house. To keep up, manufacturers outsource critical components to others, who outsource to sub-suppliers and so on.
Breaking this chain, while simultaneously bringing production closer to home and swaying the board to accept lower margins, will require executives and procurement teams to perform in a new reality.
Of course, there are clear benefits of going local. The end-to-end supply chain impact on carbon emissions is more than five times that of companies’ direct operations. Localisation optimises and shortens the supply chain network, lowering emissions.
In addition, sustainability performance is proven to impact the bottom-line. According to the World Economic Forum, sustainable procurement practices can reduce supply chain costs by 9 – 16%. On a larger scale, shifts toward localisation strengthen national and local economies, support the job market and, in many cases, reduce enterprise risk.
What’s to Come?
The decision to move production requires long-term planning and commitment. It won’t and can’t happen overnight.
Companies planning to make seismic strategy shifts like localisation require proper technology investments. Over 90% of companies are already using at least one Industry 4.0 technology, including blockchain, artificial intelligence, internet of things and more. While adoption of blockchain is still relatively low, the network promises to play a pivotal role in whatever changes come next.
The following 6 – 12 months will be crucial for every company and require a great amount of flexibility and adaptability. It’s impossible to predict (with 100% accuracy, at least) what’s next. Anyone that tells you differently is out of their mind. My advice to C-suites and supply chain and procurement leaders is to remain agile, invest, lean on your peers and prepare for anything.