Category Archives: Procurious News

4 Reasons To Get Your Whole Business Doing Procurement

How do you achieve effective procurement by giving all departments the possibility to purchase directly, what the risks of such an approach and how can you reduce them?

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Most mid-sized and big businesses already have a dedicated department responsible for providing a company with everything from paper to spare parts for production line repairs. Why would we offer to involve other employees in the procurement process?  

Let us explain how you may benefit from this approach, what the risks are and how they can be mitigated.

Why involve you non-procurement employees?

When you allow non-procurement employees to take a direct part in the ordering process, here are the gains you get:

1. Enhanced efficiency of the procurement department

Procurement teams frequently get ‘attacked’ with questions from other departments on order status, delivery dates as well as requests to change an order and so on. The involvement of non-procurement employees can help professionals to reduce time spent on low-value, repetitive tasks. And, even in cases when an order still requires approval from the procurement staff, this still decreases the time spent on order processing. It spares procurement professionals from multiple clarifications of order contents and duplication of effort as they don’t have to re-enter the info received from other departments via email or into an internal system to fill in the order documentation.

2. Smarter purchases  

When orders are made by people who need these products and services directly to use in their work, it’s more likely they’ll make smart choices. End users are more likely to know what product model or brand will serve longer and better and won’t require costly rework.

3. Reduced misinterpretations and errors

Misinterpretation and errors may appear when the order info comes through several departments before finally reaching its destination – a vendor. Moreover, procurement professionals often have difficulty understanding the characteristics of specific goods and materials. Allowing non-procurement employees to complete orders on their own, greatly increases the chances that their accuracy won’t be damaged and the requesters will get exactly what they expected.

4. Informed vendors  

Collaborative procurement allows for direct communication between non-procurement employees and suppliers, so it becomes much easier for the latter to get constant feedback from end users and understand what can be improved and how.  

Fears about purchasing directly

However appealing, the idea about involving other departments in purchasing activities may provoke rather disturbing thoughts, such as:  

1. It can result in maverick buying

The more people that are engaged in the procurement process, the easier it is to lose control and face violation of company guidelines and policies, budget exceeds, etc. 

2. It can distract other departments from their job

Employees from other departments may get distracted from their core responsibilities spending their time and effort on the extra procurement activities.  

Fortunately, these are not reasons enough to abandon the idea and forget to acknowledge the benefits that involving non-procurement staff can bring. There are ways to safely mitigate the associated problems with the right software choices.

How you can win with a procurement portal

One of the options worth considering is a procurement portal. A portal provides a possibility to enjoy the benefits while mitigating the relevant pain points you may face. It combines the functionality of a vendor portal and internal procurement software to allow smooth and controlled ‘extended’ procurement.

Controlled buying

To prevent maverick buying, an eProcurement portal uses various mechanisms that ensure a centralised, manageable, and efficient purchasing process. It allows procurement departments to configure the workflows to the specific guidelines and rules of the business, thereby preventing the non-procurement staff from their violation while making orders directly, for example:

  • The portal lets employees access only selected/recommended suppliers approved by the purchasing team.
  • The portal allows employees to purchase only according to the agreed terms.
  • The portal introduces access control with different rights for different employees, departments, and locations.
  • The portal sets up an approval process for either all purchases or specific situations (e.g., budget exceeds) and departments.
  • The portal lets vendors see only approved orders.
  • The portal allows setting up spending limits and sending notifications about all budget exceeds to the procurement and financial departments, etc. 

Intuitive user-centered environment

Easy-to-follow interfaces of modern procurement portals won’t require much effort, time or training to get accustomed.

Final Thoughts

It may be a good step to allow employees to take a direct part in a company’s purchasing activities in order to achieve more effective procurement and supply chain management.

A procurement portal provides good assistance for such an approach. It allows guided buying to prevent violations of the company’s policies and easy-to-follow workflows that don’t require much time and effort to get used to. Moreover, it helps to keep a clear picture of the needs of each department and avoid confusion with future redistribution.   

Yet, in no way do we mean that eProcurement should replace the procurement department. Procurement employees organise and control the procurement process using the portal as a tool for that and get more time to focus on more important activities (for example, strategic sourcing) as well as avoid mechanical and time-consuming work of gathering multiple orders, combining them, seeing to their relevance and working as a service desk for employees afterwards.

Three Ways To Hit 100% Pre-approved Spend

In a perfect business spend management scenario, all spend is digitised. You know what your organisation has committed to spend before a single dollar goes out the door…


By Roman Samborskyi/ Shutterstock

In a perfect business spend management scenario, all spend is digitised. You know what your organisation has committed to spend before a single dollar goes out the door. Pre-approved spend is a critical facet of a digital business spend management strategy because when spending is pre-approved, it means employees are buying from contracted vendors, realising negotiated savings, and complying with internal controls. With high percentages of pre-approved spend, everyone has visibility into spending against budgets and the organisation reduces risk and fraud.

So, what does this look like? In practice, the pre-approved spend process starts when employees submit a requisition and get an approved purchase order for anything they spend money on (besides recurring items such as utilities and leases). Downstream, when an electronic invoice comes in, it matches up with the PO automatically and goes into the queue for payment without anyone having to touch it.

It’s a totally digital process, which should be the ultimate goal of any company’s technology transformation. That’s why pre-approved spend is one of the key metrics we track in the Coupa Benchmark Report, our annual report that looks at performance metrics based on aggregated, anonymised data from our business spend management platform. Our 2019 findings indicate that in top-performing customer companies, 99.8 per cent of spend is pre-approved.

The long-term, positive impact of hitting that key metric goes beyond process efficiency.

It changes the way people can spend their time. Buyers can shift to managing vendors and commodities, not transactions. Accounts Payable can spend time on more strategic activities than chasing invoices. Finance has real-time visibility and control. Compliance is automated. In summary, your company can grow, without adding people to handle paper.

Eventually, your goal is get to a point where every invoice that comes in is backed by a purchase order. It’s a long-term maturity goal, and you need a plan to get both employees and suppliers on board. Here’s what that usually looks like.

1.Corralling “mavericks” by making it easy to follow the rules

Employees don’t necessarily want to be “maverick” spenders. They just want to get what they need quickly and get back to their job. If they search your system and find the right catalog and item, or they can easily find the policy that tells them where to go and what process to follow, they’ll follow the rules. It’s when they can’t find what they need, or the approval process takes too long, that they go outside the process and non-PO backed invoices start showing up.

So, the first thing you need to do is set up your system so that it’s easy for employees to follow the rules. To lay the groundwork for that easy employee experience, you’ll need to consolidate your suppliers and figure out which ones you’ll offer as preferred providers. Since some companies can have tens of thousands of suppliers, most organisations approach this project in tiers, focusing on suppliers with the highest numbers of transactions in the most common spending categories.

Next, you have to configure your policies in the system and set up your contracts and your catalogs. Catalogs go a long way toward providing a consumer-like e-commerce experience that makes it easy for people to find what they want and requisition it.

Finally, make sure that getting a requisition approved and turned into an PO is quick. This cycle time is critical to employee satisfaction and adoption of the system, which is why we also have a benchmark for requisition to PO time: 14.8 hours for best in class companies. Long approval chains are one of the biggest reasons for delays, so as you automate, take a look at your approval chains. Automation helps you increase visibility.

2. Encourage suppliers to adopt your new system

Once employees are reliably going through the purchase order process, you can shift your focus to getting more of your suppliers to submit their invoices electronically. Their participation is critical, because the more suppliers you have enabled, the closer you are to fully automating the invoice process.

Your major suppliers should be enabled in the system when you launch, but over time you will want to review the long tail of the supplier base, working through it in categories and starting with those that are submitting the most invoices in each. How deep into the supplier base you can go is usually a matter of resources. As we grow the Coupa Supplier Network and improve our Community Intelligence capabilities, our supplier enablement team is increasingly able to speed that effort by matching your current suppliers with suppliers already transacting with other Coupa customers via cXML or portal.

It’s pretty fast to set a supplier up; what really takes time is reaching out, following up, and providing any training that your hundreds or thousands of suppliers need. This change management piece is essential to obtaining supplier buy-in. You may want to bring in a partner to help you develop a communication plan around what you’re doing and why.

Explain the options your suppliers have for submitting their invoices, whether that’s by cXML or EDI, supplier portal, or supplier actionable email notification. Also make sure they understand the benefits, which are usually faster payment cycles and the ability to track the invoice status in your system without having to call anyone.

3. Benefits of Pre-Approved Spend Go Beyond AP

There’s a lot of benefit to AP from getting suppliers on board and spend pre-approved, but the best way to look at your digitisation effort is as an interconnected process that benefits procurement, finance, and the rest of the business.

You have to give users to right environment to be able to follow the policy. If the content is not there, and the system is too hard to use, you’re still going to have the same difficulty with people going around the systems, POs going to the wrong suppliers and cycle times remaining lengthy. Invoices still have to be coded and routed by AP, and you don’t get visibility into spending until after the fact.

If you get all of your employees going through the pre-approval process but you don’t have suppliers on board to submit invoices electronically, you’re still going to have a lot of manual work in AP.

When you can pull it all together from both sides, you can institute a “No PO, No Pay” policy. This is the best practice, the ultimate goal, and the reason you’re investing in an automated system in the first place. It’s a process transformation that takes time, but once it is complete it has the power to transform the way the whole company does business.

Learn more about how you can increase pre-approved spend and other KPIs you should be tracking in the 2019 Coupa Benchmark Report.

Out Of Savings Ideas? Here’s How To Unlock A New Level Of Buying Power

If you feel like you’ve exhausted every avenue for finding cost savings, a Group Purchasing Organization could be the answer to your challenge.

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There’s a gripping scene in the last chapters of Jules Verne’s Around the World in Eighty Days where the ever-dapper hero, Phileas Fogg, finds himself on a steamboat from New York to Ireland. Going full steam against hurricane winds, the vessel runs out of coal after a few days but Fogg, desperate to get to London in time to win a wager, buys the steamer from the captain and launches a desperate plan.

He instructs the crew to feed the furnace with all the wooden parts of the ship – the cabins, bunks, masts, rafts, spars were all burned, followed by the decking itself in a “perfect rage for demolition”. By the time they reach Queenstown the steamship has been reduced to an iron hull and an engine.

Procurement and supply management professionals on the never-ending hunt for cost savings can face a similar situation. Through the identification of efficiencies, negotiations with suppliers and more drastic cost-cutting initiatives, the wooden decking of the steamship (your organization) can be rapidly stripped away until suddenly you’re left with nothing but the hull.

In an immature procurement function, it’s very easy for procurement professionals to look good by posting impressive savings figures month after month. But as your function matures and savings opportunities become harder to find, your track record suddenly doesn’t look so hot.

Where to from here? Well, that’s where innovative thinking comes in. Finding further savings after all of the obvious avenues have been exhausted takes creativity and out-of-the-box solutions. If you do plan on going back to your supplier base to negotiate lower prices, you’ll need to offer them something in return for a better deal.

Volume, volume, volume

If you’re in a situation where you need further costs savings, but your suppliers genuinely cannot budge on price, there’s one sure-fire lever to reach for – volume.

Most businesses end up paying more than they need to because they only spend a modest amount in a particular category and will never unlock the power of bulk discounts. But not every organization has the resources – or warehouse space – to ramp up their purchase volume on their own. But what if there was a way to get the discounts of “bulk” without having to buy more?

Joining a Group Purchasing Organization (GPO) gives members access to savings you would never be able to negotiate on your own. Your organization joins a group of others buying the same thing, meaning you can leverage your collective purchase and buy in bulk as a group to create buying power.

GPOs help businesses of all sizes save on indirect and direct spend. The savings are found not just through bulk discounts, but through efficiencies (such as cutting down on search time and issuing RFPs) and administrative cost savings.

Collective buying decreases suppliers’ overheads, which drives further savings for the purchasing organization. Imagine, for example, a cashier who takes five minutes to process an order. 1000 single-item orders would require 5000 minutes of labor, whereas a single order of 1000 items requires five minutes of labor.

Looking for some facts and figures?

We get it – you’re a procurement pro, and procurement pros want to see hard numbers rather than fluffy promises of savings. We can’t speak for every GPO out there, but we can prove the value of GPO membership with our own figures.

UNA is a GPO with a combined $100 billion in buying power. We help procurement professionals:

  • Boost their bottom line with deep discounts we negotiate to save an average of 22% on direct and indirect spend.
  • Gain access to steeply discounted agreements (better contracts) that would typically be out of reach.
  • Unlock exclusive savings on products and services including 80% off office supplies, 26% off hotels, 20% off parcel shipping, and more.
  • Save time through pre-negotiated contracts to get started with new suppliers in 30 days or less.
  • Keep prices stable with agreements to ensure rates don’t increase.
  • We provide a free cost analysis across your highest categories of spend and offer procurement tips and support.

OK, but how much does GPO membership cost?

Every GPO is structured differently. Some GPOs charge members a fee for their services, while other GPOs, like UNA, are paid by the suppliers themselves. We, in turn, use that fee to fund our program, so that it’s always free for our members.

Membership with a GPO creates an advantage for the member that they couldn’t get on their own. If you’re running out of cost savings ideas and want to unlock the buying power driven by bulk pricing, a GPO could be the solution needed to keep your steamship sailing along.

Interested in learning more? Contact UNA to discuss the benefits of Group Purchasing.  

Make 2019 The Year Your Stakeholders #loveprocurement!

If procurement stays in its traditional role within the organisation, I believe will not achieve its potential growth.

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Last year we asked a group of our customers why they ‘#loveprocurement’, and the answers were really a great testament to the evolving role of procurement. Ivalua is a company that was founded to serve the needs of procurement departments. We are very passionate about what we do, but even we were astonished at the wave of procurement love which came our way when we asked the question “Why do you #loveprocurement?” Here are some of the highlights:

A business function in the midst of a huge evolution, moving from optimising costs to becoming the creator of value and growth

Most procurement leaders have focused on some element of cost reduction and this remains an important area of focus. However, we are now at a point where procurement needs to, and can, look beyond cost savings and move to planning for a seismic change. No-one wins the race by just being good enough. In business being as good as your competitors will not ensure your future success. If you do not innovate you will fade away. We asked professionals why they love their jobs so much, and many called out procurement as being a highly innovative and dynamic department, full of creative people adding huge value to their organisations. Does this sound like you?

Last year we worked extensively with The Hackett Group and they published two excellent reports,

State of Procurement Digital Transformation, Part 1: Value Drivers and Expectations and L​essons Learned by Early Adopters, Part 2.​ In these reports they talk about getting the basics right and procurement getting its house in order ie building a data centre of excellence, getting stakeholders onboard, The latest report from The Hackett Group, ​Procurement Key Issues 2019,​ shows how things are moving on this year. Procurement organisations can move beyond best in class, and clearly the will of procurement teams is there to do this. However there needs to be better alignment between procurement and its business goals. If there is a focus on analytical capabilities (which there is), there must also be teams and individuals brought in with the skills to make this happen, that is when procurement will move to the stage of offering competitive advantage, rather than just as good as the competition.

The future of our profession is not written in stone. It is because of this that it is a passionate adventure for creative people

In a recent blog, Ivalua CMO Alex Saric talks recruitment as being one of the top issues for CPOs and their Senior Directors. What is clear from the comment above, is that the procurement industry is attracting top talent. The comment was repeated by many professionals, and what comes across is that people working in procurement are going above and beyond what might have traditionally expected from this sector. Wolfgang Groening, Head of Procurement Sourcing & Vendor Management at Deutsche Telekom talks in this ​short video​ about the fact that he loves to innovate. Wolfgang in particular calls out digital innovation and how this is allowing organisations like Deutsche Telekom to proactively look for ways to bring more innovation, rather than sticking with the transactional elements of procurement alone.

Fannie Mae, like many other organisations, are recruiting procurement experts that can bring industry knowledge and market insight. These experts are addressing their organisations’ needs to know what are the key trends in the marketplace, who are the movers and shakers in the market and where is innovation coming into play. This is so far from the traditional role of procurement as we could get. Sylvie Noel, CPO of French insurance giant Covéa speaks plainly when she says that has modernised her organisation’s procurement function and that now internal stakeholders or customers now have all the information they need from procurement and they either go for it or they don’t (her words). In Covéa, people can no longer moan about the ‘procurement black tunnel’, because Sylvie has brought in a tool which enables highly skilled procurement professionals to interact seamlessly with their customers, cutting out precious time which can be spend on new product innovations.

A function which has a significant impact on the bottom line AND on the TOP line of an organisation. It is a window of innovation from the outside

If procurement stays in its traditional role, the organisation, I believe will not achieve its potential growth. If procurement is just there to be the police and control cost, then that’s not good enough. Each department in any organisation of a reasonable size is making decisions every day which cost the company money. I’ve worked in marketing for 20 years, and some of the decisions I’ve seen made, and no doubt have made myself, have not always been 100 per cent well thought out! Marketing people are creative, last minute merchants, and this can mean that you do not always dot the Ts and cross the Rs. ​Procurement’s stakeholders, like marketing, need help as they too are going through a massive digital growth curve. I should know – I am a procurement stakeholder. As my department, marketing, steps into the great digital unknown, in a market that is constantly evolving we need skilled procurement professionals to help us make decisions which will be strategic to the company, and we are looking for that expertise and partnership. We need help to look at the innovations in our sector, and strong leadership in both marketing and procurement to make sure we are embracing new technologies, spending the company’s money wisely and driving growth. In addition, marketing and procurement departments need to be recruiting the sorts of individuals who collaborate by nature, who see the bigger picture, who are able to dream big, and also keep the end goal in mind.

What is clear from our #loveprocurement campaign and the answers that you gave us is that many of you love your jobs and are really passionate about the direction in which procurement is going. You are also clear that procurement can make a huge contribution to the bottomline and growth of your organisations. Now you need to make sure that your stakeholders feel this passion and begin to feel your influence on the direction your organisations are going.

Ivalua are sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world.  

Accelerating Procurement With Contract-Centric Sourcing

Today’s procurement organisations are being asked to move faster than ever to source the materials needed by their companies. How can contract-centric sourcing help?

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Today’s procurement organisations are being asked to move faster than ever to source the materials needed by their companies.

It’s a difficult position to be in. Under the current sourcing paradigm, the multi-step process of securing the vendor is time-consuming, and even then can expose a company to risk and leakage.

But the good news is that there is another way. In this blog, I will introduce readers to what we call “contract-centric sourcing,” a new paradigm for sourcing organisations that can save millions in leakage and accelerate the buying process.

The current paradigm

The current paradigm looks something like this: first, the buyer issues an RFx, and then evaluates vendors who respond on two criteria: technical and commercial capabilities. The vendor’s technical capabilities relate to whether they will be able to truly fulfill the buyer’s needs. Commercial capabilities relate to whether the vendor’s price for its products or materials fit into the buyer’s profit models.

Choosing a vendor is a business-critical decision, as the wrong vendor can disrupt the entire supply chain, so sourcing professionals want to exercise reasonable caution when making their choice, slowing down the process.

Contract negotiations slow sourcing

Even after a Letter of Intent (LOI) is issued by a buyer, the actual contract still needs to be negotiated. At this point other departments will get involved, including legal and finance. Legal, for example, may recognise that the jurisdiction the vendor operates in requires extra anti-child-labor documentation, and insert a clause requiring that documentation.

Since it is a contract, these clauses will have to be negotiated with the vendor, who may respond by changing the commercial terms of the contract. For example, the vendor could come back and say that the extra documentation will force them to charge more for their product. This back and forth can dramatically slow or even derail the sourcing process.

Non-optimised contracts

After all this time-consuming effort to choose a vendor and then execute a contract, the contracts often return less-than-ideal results. McKinsey and Company estimates that about 3.5 per cent of spend is leaked in the source-to-settle business process. More than half of that leakage is due to noncompliance either with government regulation or internal company standards, both of which come down to a disconnected contract management process.

Using contracts to transform your sourcing process

While this way of doing business has long been accepted as the norm, the paradigm is becoming a major liability as the pace of commerce accelerates. Here at Icertis, we are focused on using digital contracts and AI-infused contract management software to transform companies’ commercial foundation. This includes putting contracts at the center of sourcing.

Contract-centric sourcing is a new paradigm that allows procurement professionals to both accelerate their buying processes while also reducing leakage.

Contracts: a third pillar of vendor evaluation 

Here’s how it works. Contract-centric sourcing introduces contracts at the very beginning of the sourcing process and makes contract compliance a third pillar by which vendors are evaluated, next to technical and commercial capabilities.

Before an RFx is even issued, buyers evaluate past contract data to map out a category strategy that will deliver the most long-term benefits to the company. This helps the buyer craft the right RFx for their business needs.

Then, as part of the RFx, the buyer presents prospective vendors, via a digital contract management platform, with all the contract language they would like the vendor to agree to. The vendor redlines the contract based on its own needs and requirements. Once all vendor bids are in, buyers are able to evaluate how much contract negotiation would be required before choosing a preferred vendor and issuing an LOI. With the help of AI, the buyers can compare vendor redlines and determine which redlines represent acceptable changes and which are red flags.

(Note: A vendor redlining a contract does not disqualify them. It simply surfaces all redlines before a vendor is selected, so that those disagreements don’t rear their head unexpectedly later in the buying process. It’s all about visibility.)

Capturing Negotiations 

Since this process is administered on a single contract management platform, all discussion between the buyer and the vendor about contract language is captured in a single place (as opposed to several lawyers’ email inboxes) for later reference both during the lifecycle of the contract and after.

Sourcing organisations that link contract management and sourcing have a huge wealth of data about a vendor’s past negotiation strategy and behavior, as well as how well they perform against contract language. This is powerful data that hasn’t been fully leveraged in the current paradigm.

The Approach of Leading Enterprises 

Leading enterprises are already adopting contract-centric sourcing. Daimler is using the Icertis Contract Management (ICM) platform to completely rethink how it manages 500,000 suppliers. Daimler officials determined contracts were the natural place to start an overhaul of the procurement system, since it is the contract that underpins the entire buyer-supplier relationship.

“The deployment [of ICM] optimises the source-to-contract process by ensuring best-in-class supplier evaluation, selection, contracting, and collaboration,” said Dr. Stephen Stathel, head of Daimler’s New Procurement System.

The business world is changing. It’s no longer enough for procurement organisations to balance risk with accelerating business; they need to find ways to reduce risk and accelerate the pace of business.

Icertis is sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world.  

84% Of CSCOs Say Lack Of Visibility Is Their Biggest Challenge

84 per cent of Chief Supply Chain Officers say that a lack of visibility is their biggest challenge.  How can AI help?

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Supply chains are the lifeblood of any business, impacting everything from the quality, delivery and costs of products and services, to customer service and satisfaction. Last, but not least, they have an impact on the company profitability.

Mastering the supply chain is a central element of the customer experience and the competitiveness of any company. However, until recently, supply chain management has been considered a support function.

Today, we are beginning to see that the trend is reversed, as supply chain management becomes more and more a strategic function. Artificial intelligence (AI) is being adopted by leading businesses, with application in the supply chain.

Supply chain organisations struggle to make sense of a sea of data, including multiple ERP & Supply Chain Systems, multiple data sources, both structured and unstructured, extensive supplier and partner networks and relationships.

How can AI augment supply chain organisations?

A smarter supply chain is critical to the success of the business. The ability to reconcile structured and unstructured data to generate insights is a hallmark of AI, machine learning and intelligence.

Let`s translate this, shall we?

  • Gaining end to end supply chain visibility across systems and data sources
  • Retrieving data up to 90 per cent faster
  • Proactively predicting and mitigating disruptions
  • Cutting disruptions by up to 50 per cent
  • Arming professionals with information needed to take action
  • Reducing mitigation time from days to minutes
  • Aggregating knowledge on SC disruptions and build playbooks

What is Watson Supply Chain Insights and what can it do for your supply chain?

Watson Supply Chain Insights is an AI-powered visibility and collaboration platform for supply chain professionals, which helps to deliver insights, predict and mitigate disruptions and retain organisational learnings. This innovative and global value proposition helps supply chain leaders drive greater visibility and mitigate disruptions.

Genesis

Continuing the work initiated by IBM’s supply chain teams, in our labs, we educate and teach Watson all the complexity and nuances of the supply chain world for different industries, so that it becomes operational and efficient as quickly as possible to help companies identify disruptions, predict impacts and consequences, and bring together the appropriate team for the resolution.

Watson infused into an Operations Center Cockpit

Watson Supply Chain Insights has the ability to collect and exploit structured and unstructured data relevant to the supply chain; whether the data is inside the company, such as ERPs, logistics systems, stocks, or outside the ecosystem.

What about external data?  Smarter supply chains leverage social networks, road traffic, weather forecasts or regulations.

Partner with Watson in the Resolution Rooms

Resolution Rooms allow supply chain professionals to deal with the uncertainties that inevitably occur in all Supply Chains. Concretely, when a hazard is observed or predicted, the solution generates a virtual work environment that brings together the experts of the extended enterprise. These experts define the solutions together whether it’s alternative sourcing, reorganisation of the production line or a replacement carrier. All these resolutions are documented, which on the one hand constitutes a real digital “playbook” and contributes to learning. and knowledge of Watson. Thus, progressively, Watson is able to recognise the various hazards, to bring together the relevant experts, and even to directly propose suggestions for resolution by supporting them.

In 2018, this success prompted us to market this solution created by IBM for its own needs. The solution has been packaged under the name of Watson Supply Chain Insights, and is already deploying to customers in France and across Europe.The adoption of AI in the Supply Chain is a journey and Watson Supply Chain Insights is here to accelerate this adoption.

For more on the IBM supply chain story, take a peek here.

Author : Yassine Essalih – Cognitive Supply Chain, Client Solution Professional


7 Supplier Negotiation Fails We’ve All Experienced

Every procurement professional knows that supplier negotiations aren’t always plain sailing – and we’re sure you’ll relate to these seven scenarios.

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It’s happened to even the best negotiators.  Leaving a negotiation with less than desired results might even be called a rite of passage for procurement professionals. It’s frustrating and time consuming but there are learnings to gain from every disappointing negotiation.

Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning, interviewed seven procurement leaders to find out their most notable negotiation fails.

1. Pushing too hard

Using competition to push your advantage and lock it into a contract can be counterproductive. I recall a negotiation performed for a global IT project, during which we closed what looked like a great deal secured by a complete and detailed contract. Once the project began, the vendor quickly started to lose money. Having no leverage and way out from the contract, he eventually decided to stop the project. Ultimately, to continue our working relationship, we had to sit down together, find solutions and find fair compromises to make the project a success. Olivier Cachat, Chief Procurement Officer, IWG

2. Internal alignment

Involving executive leadership into a critical negotiation can be a very powerful ‘tool’, when done in a very concerted way. Our main objective was to secure supply for this material and ideally get a price concession when allocating more volume to this supplier. We briefed the President of our BU and explained the situation. We also explained in much detail that anything beyond a three per cent price reduction is very unlikely and that this supplier would rather threaten us to stop supply. While the first part of the actual negotiation was going well, our president decided to our complete surprise to become very aggressive with our supplier by threatening him to move to a different supplier if they would not reduce pricing by at least -15 per cent. Not only was that very insulting to our supplier, but it was also a complete bluff and our supplier knew that we were not able to move away within any reasonable/manageable timeframe. As a consequence, our supplier stood up and left the meeting, stating that we have one week to think about his offer to raise pricing by +5 per cent as they would otherwise stop supplying us. It took me two months to ‘repair’ the relationship and to convince them to continue supplying us at a flat price. Furthermore, I had to make additional concessions which we would not have made if our colleague would have stayed with our plan. Matthias Manegold, Head of Global Indirect Procurement, Liberty Global

3. Clarity on agreed terms

Make sure the final terms of a negotiation are clear for both parties. I had the surprise, for a new supply agreement (over 35M Euro), to discover that we were not aligned regarding the product specifications. Our yearly demand had been multiplied by 10 and obviously, during the negotiation, the supplier did not dare confess not having the capacity to deliver our needs. We needed to rediscuss and revaluate this challenge and find a way forward to solve the issue. It demonstrates the importance of always re-confirming the terms you reached.  Christophe Schmitt, Head of Strategic Supplies, Omya

4. Safety in small numbers

At times I have walked into a room and seen more than ten people around the table. In such a situation, it is very unlikely that any significant flexibility will be shown during the following hours. By nature, most people will not want to lose ground in public. As a general guide, I find the best agreements are made in smaller meetings with participants who have been briefed in advance. Unless related to celebrations, nobody likes surprises!Jon Hatfield, Director Global Supply Management, PPG

5. Stubborn suppliers

Sometimes even if you have evidence that you could get a better price for same quality the supplier will not move. This can happen especially in the Pharma world where changing supplier is time, money, and resource consuming. I also think this behaviour by the incumbent supplier is wrong. Ultimately pressure on prices will prevail and the new cheaper supplier will be a better fit. Romain Roulette, EMEA Procurement Director, Bausch Health

6. Changing protocol

Overcoming counter-productive pre-existing relationships of suppliers can derail negotiations. My corporation acquired a company that had strong links with the local supply base. The local suppliers were working with this company for decades and had developed ineffective habits that were hard to change. When we requested the existing supply base to apply standard requirements, we were confronted with resistance and opposition from these suppliers. A few negotiations went well, however we had to change all of the other suppliers. Francesco Lucchetta, Director Strategic Supply, Pentair

7. Lack of alternatives

It was a single source supply situation. Over ten years ago, I was renegotiating an IT outsourcing agreement that was expiring. Benchmarking data indicated that our prices were well above market. On the other side, the supplier knew that we had no other alternatives and they enjoyed a strong relationship with the CIO. In spite of our efforts, we only received a very minor price decrease. The next step was to start developing an alternative supplier to be in a stronger position at the next contract renewal. Giuseppe Conti, Founder and Managing Partner, Conti Advanced Business Learning

These responses were collected by Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning (www.cabl.ch), a consulting firm that specialises in negotiation & influencing. This article is part of a series

Two Ways To Transform Your Supply Chain In A Hypercompetitive World

Tom Derry, CEO – ISM discusses how to turn your supply chain into a key source of competitive advantage and what not to do in supply chain management.

By Pavel1964 / Shutterstock

Everyone loves to talk about the romance of startups and small businesses. But today it’s becoming increasingly obvious that we’re living in the age of the corporate giants. And the big brands such as Amazon Apple, Google and Walmart are only getting bigger. There’s a whole host of reasons that these giants are repeatedly found in the top 10 places of Fortune 500 year after year. But one reason that stands out is that they recognise their supply chains are a key source of competitive advantage. We asked Tom Derry, CE0 – ISM, to outline the key elements needed to transform a supply chain into something a company would proudly put front and centre in its annual report to share holders. For Tom, it boils down to two things.

1. Last mile customisation

“[As supply management professionals] you’re serving regional customers and local customers even if you’ve got a global supply chain,” Tom begins. “And local markets demand customisation and localisation even if it’s just printing your user manual in the local language. HP did that famously a decade ago. Diageo are currently customising for delivery in Asia from a distribution centre in Singapore.

“Being able to access local markets and extract the most value from local markets is critical for supply chain professionals.”

2. Agility

Tom argues that supply chains are a form of agility. “In light of all the recent controversy around taxes and tariffs – if [supply chains] flexible and responsive they provide strategic agility to the company, which is becoming increasingly critical.”

“The most important consideration in determining how a supply chain is structured usually comes down to two economical factors- taxes and tariffs. [Last year], the US passed a new tax law, which ostensibly puts US manufacturing first. The question around tariffs is critical and the threat of them, whether they’ve been implemented or not, is already affecting the way supply chains are designed and implemented.”

Supply chains in the US have seen the impact of the steel and aluminium tariffs imposes on European exports, which has led to retaliation. Tom cites Harley Davidson, who announced that they have to shift their production to the EU in order to continue to grow its non-US sales, which are critical to company’s future growth. “The president is trying to protect the production of steel and alumninum ostensibly on a national security basis but he is actually is forcing production of goods offshore and thereby threatening jobs – and [Harley Davidson] is just one example.”

According to Tom, the old concept of money is fungible but supply chains are flexible holds true. “Some people may not appreciate the degree to which we have built in agility and flexibility over the last twenty years. It’s clear that companies can, and have to, respond to maintain competitive advantage and maintain their margin and they will flex their supply chains to meet the circumstances they face. We’re all short sighted if we think that’s not going to happen and if we think we can impose a set of conditions that cause current supply chains ,as they exist now, to be set in place. They’re going to flex and move.”

Part Eight of Tuesdays with Tom is available now. Click here to sign up and hear ISM CEO Tom Derry discuss how to turn your supply chain into a key source of competitive advantage and what not to do in supply chain management.

Good Hire Or Bad Hire? How To Know You’ve Hired The Right Person

So much is written about how to hire great people and what to look for when hiring. But that is merely the start of the journey…


By pathdoc / Shutterstock

Good hire or bad hire?

You’ve done the hard work, you’ve made the decision and your shiny new hire has finally joined the team.

Great, now what?

So much is written about how to hire great people and what to look for when hiring. But that is merely the start of the journey.

After the hiring decision is made, the work begins. Your team has grown and, at some stage, you’ll need to decide whether the person you recently hired is adding value. If not, it might be time to make some hard decisions, or even revisit your hiring methods.

Here are five powerful indicators that you’ve made the right choice.

1. Dedication

“Things may come to those who wait, but only the things left by those who hustle.”

– Abraham Lincoln

There is a lot of talk about hustling in the startup community. It’s a badge of honor. But hustling is not a skill, it’s a behavior. It is therefore a choice.

Every startup hopes its team members will make that choice every day.

You can encourage hustling by communicating your company’s vision and values, as well as creating a collaborative and fun work environment.

Without those things, even the best hustler may run out of steam.

When people buy into your company’s vision, they are more likely to become dedicated to your team. A dedicated team member is an excellent outcome, but it takes both sides to make that happen.

Making the right hiring decision isn’t just about hiring someone who is great in isolation. Rather, it’s about hiring someone who is great for your team. In other words, a great hire is someone who will eventually become dedicated to your team.

Dedication looks pretty much like hustling, but it’s sustainable. So look for sustained and purposeful effort. It’s a good indicator of both performance and engagement.

2. Initiative

“Initiative is doing the right things without being told.”

– Elbert Hubbard

Having people who can do things well without being told is a gift.

In his article, One Behavior Separates The Successful From The Average, Benjamin P. Hardy describes people who take initiative as follows:

“They don’t need to be managed in all things. They don’t just do the job, they do it right and complete. They also influence the direction for how certain ideas and projects go.”

But it’s not enough to just do things well. After all, that’s what is expected. It’s about doing the right things well. Knowing which things to prioritize requires good judgment. Initiative coupled with bad judgment can be counterproductive.

When people take initiative, productivity increases and the confidence goes up. Team members know they can rely on each other to get things done.

3. Cultural Stretch

“Knowledge will give you power, but character respect.”

– Bruce Lee

In his article, Hire for Cultural Fitness, Not Just Cultural Fit, Gustavo Razzetti argues that good hires should make the culture stretch, not just adapt to it.

That’s a great perspective.

When new hires form independent relationships with other team members, and impact them in a positive way, you can be sure that your culture is stretching. It’s evidence that they are adding something, not just assimilating.

It’s a beautiful thing to see the team growing. Not just in numbers, but in intellectual firepower and curiosity.

Any new hire that makes a contribution to the team’s growth is a leader in the making, if not a leader today.

4. Improvement

“We are all born ignorant, but one must work hard to remain stupid.”

– Benjamin Franklin

There is always room for improvement, no matter who you are.

It’s a wonderful feeling to see people improve over time and, for high performers, improvement is not an option, it’s an irresistible desire.

In his article, 76% of high-performance employees say trade mastery, not money, most important in career decisions, William Belk argues that “corporate culture and directive”should encourage team members to develop their skills in the pursuit of mastery. This will result in high levels of engagement and sustained innovation.

Improvement is therefore a strong indicator of performance. Assuming people are set up for success, strong team members will look for opportunities to hone their craft. An ethos of continuous improvement needs to be encouraged and, sometimes, leaders may even need to get out of the way to give the team space.

People with a capacity and willingness to improve their skills become more valuable over time. Rather than having their careers developed for them, improvers create opportunities for themselves. For companies who believe in empowering their teams, constantly-improving team members are obvious assets.

5. Surprise

“Surprise is the greatest gift which life can grant us.”

– Boris Pasternak

Trying to hire people who will surprise us is a contradiction in terms. We hire people to perform certain tasks and we expect them to perform those tasks very well. High performers may exceed our expectations in the quality of their work, but that’s not what I’m referring to here.

Every so often, people do things that catch us off guard. These acts of wonder cannot be found in a job description, they require skills that we don’t necessarily associate with the person who surprised us, and they are not things we would have thought to do ourselves.

It’s something intangible, and there is no point looking for it. But when it happens, we know that we have someone special on our hands. We got more than we bargained for.

Then, You Know It’s Real

“To be natural is such a very difficult pose to keep up.”

– Oscar Wilde

When I reflect on the five indicators of a sound hiring decision – dedication, initiative, cultural stretch, improvement and surprise – what stands out is just how human they are. They are, more or less, what Seth Godin would call “real skills”.

That doesn’t mean that technical skills, which Godin calls “functional skills”, aren’t valuable. Of course they are. They are the baseline, the minimum standard.

But it’s the “real skills” that make a new hire stand out. They influence how the work is done, the impact on the rest of the team and the propensity for growth.

When the time comes to assess a hiring decision, it is helpful to look beyond how individual tasks are performed and see each new hire through through a “real skills” lens. In addition to an assessment of performance right now, you’ll get a strong indication of what you’re likely to see in the future.

This article, written by Omer Molad, was originally published on Vervoe.

Do You Have The Leadership X Factor?

What are the common traits shared by the top CPOs around the world and how can you demonstrate leadership within procurement and supply chain even if you don’t have a team?

CThe best leaders in procurement and supply chain know all too well that you don’t get results without the support and hard work from a killer team. It doesn’t matter how brilliant you are at your job, you can’t do it all yourself and having the best people around you will result in a huge multiplier effect on your overall output.

ISM’s CEO Tom Derry truly believes in this ideology. “The best leaders see the whole business, which most frequently manifests itself as a real concern for their people.” These types of leaders, who we all admire, understand that they got to where they are today based on the strength of their teams. “And so they’re always focussed on their team. How they’re building them , what roles are evolving, what skills they need now. They understand the bigger picture.”

Advice for a first-time procurement and supply chain leader

Tom believes that there is one important thing people need to understand before they set their sights on a leadership role. “The opportunity to lead people flows from you. You’re not a leader if you don’t have followers.” By followers, Tom means gaining support from colleagues within the organisation, to have people gravitate towards you as a natural leader.

“We all know people [like this] in our workplaces who aren’t formally leaders of the people [follow them] but they’re respected, they’re prepared they’ve done their homework. They have data to support their arguments, they’re affable and friendly and people like being with them because they’re seen as authentic. It’s those people who get the opportunity to manage teams in my experience.”

And whats the most important thing to remember once you’ve bagged that leadership role?

“The key to first time management is listening,” argues Tom. “I spend the first period of time doing one on ones and face to face interviews with my team. I ask them in an unguided way: What’s going on? What do you like about what you’re doing? What issues are you facing? What opportunities do you have?” And once you get all of this information on the table it’s so important to take action and respond. “If you ask for input you have to show that you reacted to it and show people your plan in a visual way.” What is the outcome from all of this listening and learning you’ve done and what is the future measure of success within this team going to be?

Part Seven of Tuesdays with Tom is available now. Click here to sign up and hear ISM CEO Tom Derry discuss common traits shared by top CPOs around the world, top tips for first time team leaders in supply management and how to demonstrate leadership even if you don’t have a team.