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How to Introduce a Sustainable Procurement Strategy

Although the theory is well regarded, the practical aspects of introducing a sustainable procurement strategy are often overlooked.

This article is by Gerard Chick, Chief Knowledge Officer, Optimum Procurement Group.

About 10 years ago the UK government started taking the pursuit of sustainable procurement seriously. They established a task force of industry experts to try to define ‘sustainable procurement’, and develop appropriate standards for general deployment.

The Government’s goal was position the UK at the forefront of sustainable procurement in Europe by 2009. Their framework and recommendations have been instrumental in guiding sustainable procurement strategy, theory and practice across the globe.

What is Sustainable Procurement?

So what is this thing we call sustainable procurement? Sir Neville Simms, chair of the UK Procurement Task Force, described it as the use of procurement “…to support wider social, economic and environmental objectives, in ways that offer real long-term benefits” to organisations and the communities in which they exist.

These long-term benefits include:

  • The achievement of significant savings by focusing on a “whole life costing” methodology for procurement.
  • The incorporation of the “three Rs” (Reduce, Reuse, Recycle), to cut waste and improve the efficiency of resources.
  • The enhancement of businesses public image, by demonstrating a sustainable approach to business, and championing related environmental and social benefits.
  • The development of new markets for innovative products and services through technological advancements.
  • The improvement of management information, a focus on business and supply chain risk, and better supplier relationships.
  • Competitive advantage as a consequence of the early adoption of practices, focusing on increasingly environmentally-focussed legislation.

Developing Sustainable Procurement Practice

The UK Task Force devised a National Action Plan to inform interested organisations to adopt a sustainable procurement strategy. In 2006, Procuring the Future was published to support public and sector organisations in taking their first steps in this burgeoning area of interest.

To help you, here are the central planks of the report established as recommendations for those who wanted to develop sound, achievable, sustainable procurement practice:

  • Be a beacon: Provide clear direction for both procurement and your supply base providing consistent leadership and policy-making on sustainable procurement issues.
  • Set the standard: Fully implement existing procurement policy and standards. and ensure these are extended across all procurement activity. This will improve performance and underline expectations, including the establishment of well understood minimum standards for your suppliers.
  • Prioritise: Rationalise existing procurement standards into a single integrated procurement framework, which covers both policy relevance and appropriateness.
  • Test: Filter and select new procurement policies to ensure they are enforceable, before considering implementation.
  • Develop capability: Ensure you and your team have the requisite professional skills to support the efficient deployment of sustainable procurement.
  • Tool up: Provide the appropriate tools, training and information resources to execute these standards.
  • Be ready: Ensure you already have the appropriate budgetary mechanisms in place, and that your spending and budgeting policies facilitate your sustainable procurement strategy.
  • Be proactive: Encourage openness to innovation and look proactively for opportunities to drive social benefits through your engagement with suppliers and the wider marketplace.

There is no doubt that the UK’s lead is now being adopted elsewhere, and that the global procurement community seeks to embrace a sustainable approach with an eye on good practice coupled with other significant business rewards.

Procurement Software – Weighed Down by Unnecessary Ice?

Is the procurement software created to make jobs and lives easier actually doing the opposite? Is it all weighed down with a glut of unnecessary features?

Paul Blake leads the technology product marketing team at GEP, a leading global provider of procurement technology solutions.

Have you ever wondered how many power stations are needed to make all the ice that no one uses? Or how about this: what does the internet weigh?

These are the sort of questions that I have found coming to mind on long journeys. I know, it’s sad, isn’t it?

Another one was, what is the quickest way to transfer a really huge amount of data from one place to another?

Answering the Abstract

You’d be forgiven if such questions fall into the category of “things I never think about,” but increasingly the answers to seemingly abstract questions might indicate the kind of thinking we’ll have to do to solve more complex problems that really matter.

The journey that brought our opening question to mind was one homeward bound after a procurement conference, one where I had engaged in a fascinating conversation with some specialists in procuring energy. We all know that one firm’s indirect can be another’s direct category, and energy is a perfect example.

The power appetite of some businesses is simply staggering and the strategising and planning effort that go into managing what, for us, is such a trivial everyday concern is equally impressive.  More on energy in a moment but…

How DO you transfer a vast amount of data in the quickest way possible? The answer may surprise you. FedEx. (Other global courier firms are available.)

100 terabytes of data is a large, but not unimaginable, amount. Given that you can buy a card today for your camera that can store 960GB, then you’re pushing a terabyte (more or less) into something the size of a thumbnail. Stick a hundred of those in a padded envelope and you can have it anywhere within a 25 mile radius within the hour or anywhere on the planet within 24.

A 500-megabit broadband connection would take you the best part of three weeks to send that much data to your neighbour, let alone to your colleagues 7 time zones away.

As the complexity of business information increases and subsequent data volumes explode will we begin to see a hybrid solution to data transfer? SneakerNet 2.0?

Combatting Waste

Equally, as energy becomes more of a limiting factor, businesses may look for novel methods to combine traditional and emerging technologies into a solution that works for a new era. Some years ago I was surprised to find, in my local DIY store, a display of low energy compact fluorescent light bulbs on sale for, if I recall correctly 30p (50¢) each.

As I puzzled at how they could be sold so cheaply, a fellow shopper pointed out that they were branded with the logo of a major utility and his comment was, “which is cheaper, give these away at 30p each or build another power station?”

When you do a bit of scratch mathematics on the back of an envelope, and realise how much energy is spent putting ice in places where it doesn’t need to be (a couple of kilos, for example in every hotel room in the place I’ve just stayed as part of their “turn down” service), then you start to think about a whole host of other seemingly trivial things, which add up to huge profligate waste.

Cocktail umbrellas? Sachets of salt and pepper served with in-flight meals that nobody ever opens but which all get discarded? The printing of the words “allergy advice: contains mustard” on jars of mustard (it’s true).

Makes you think doesn’t it?  All that energy adds up to a vast amount of fuel burned for no really compelling reason whatsoever. In solving one small apparent problem (like the inability to get through a night without some ice nearby), we can create another that is much trickier to solve, and they require us to be creative and develop different, perhaps non-obvious solutions.

Perhaps nobody would immediately think of using a traditional parcel service to move data about, or giving away energy saving devices instead of producing more energy.

The Foibles of Features

When it comes to developing procurement software the obvious path is to develop features and functions. Capabilities if you like.  The tools to let you do stuff.  This is natural for developers, it’s what they do.

What they may actually be doing is attempting to solve small problems that aren’t necessarily real in any significant sense (the operational equivalent of running out of ice while you sleep), and at the same time creating a much bigger, more intractable issue.

In trying to deliver every bell and whistle in order to reach feature parity with a competitor, technologists end up building monstrously complex systems that actually hinder the very process they were intended to facilitate.

But perhaps there is a different approach. How about, instead of developing an ever more elaborate set of features in some kind of arms race, we look at developing processes; processes and the means to shape them to suit a business?

What would that mean in real terms? Perhaps the future of business and procurement software is about making connections between people and groups work better, instead of creating more and more levels of complexity in the tools they use.

Shifting Thinking

My contention is that one way to dramatically improve productivity in the modern work place would be to outlaw email. Heretical, perhaps, and probably impossible to implement. But I bet most of you reading this are both shuddering in horror at the thought and, at the same time, recognising the truth of the situation – that email is the static that swamps our day, the noise that is disrupting the signal, so to speak.

Technology has the capability to drive improvements in business but it has also the capability to tie us down in thrall to evermore complex tasks and activities. When looking to what we might develop next, we should not lose sight of the human aspect that is central to what procurement is all about – establishing and managing relationships across an entire supply chain for mutual benefit.

Whilst not proposing a sudden panacea to cure all ills, this approach might start to move us towards better, more natural productivity, and away from being weighed down by increasing complexities.

But that new idea would require a shift in thinking in the customer too. The process of procurement software selection has for too long been dominated by an almost obsessive compulsion to assess suitability by ticking boxes against features and functions, instead of an examination of how a company’s problems might be solved.

Enlightened procurement pros are starting to “get” this idea. They are looking to their own operations to see what the really big problems are, and getting to grips with how to solve them using procurement software as an enabler, rather than as an end in itself.

Time to Lighten the Load

So how much does the internet weigh? Not the server farms or storage devices, or drives or memory chips involved, but the data itself? It might seem like an utterly meaningless question. Surely an acre-sized data centre weighs the same whether it is full, or as empty as the day it came on-line? Well, apparently not. Data requires energy to exist. And every megabyte of data you add to your cloud corpus, adds just a little more energy.

The world’s most famous equation tells us E=mc2. Therefore, every unit of energy you require to store a unit of data, equates to a corresponding unit of mass. A full data centre really does weigh more than an empty one, but of course only by a tiny, tiny amount.

Correspondingly, every email we receive, and every feature we add to our already complex systems, adds just a little bit more mass, literally. We’ll never notice it, of course, but every time we feel weighed down by an information overload, or stymied by ridiculously complex procurement software, at least we can comfort ourselves in the knowledge that we’re not imagining ALL of it. And one day we might work together to lighten the load.

For more high-energy thinking on procurement software, visit the Smart by GEP website.

4 Ways Procurement Should Be Using Big Data

While it might be a difficult term to define, there are a number of practical applications for using Big Data.

In our previous article, we looked at defining (or rather, not defining) the term ‘Big Data’. Now we are going to explore the potential big data analytics and computing may hold for the procurement function.

There are a number of high-profile ways in which organisations are using Big Data. For example, hospitals and public health organisations are using Google’s search trends and history to predict future outbreaks of the flu and colds. You can read the details here and see the counter argument here.

The application of Big Data in the procurement space is a little less apparent, or at least, less well publicised. With that in mind, we’ve put together four ways that procurement could be using Big Data to its advantage.

1. Understanding supplier risk

By leveraging the vast amounts of unstructured data now available to organisations, procurement teams can get a far better understanding of their key suppliers.

Previously supplier information could be found through the media, suppliers’ websites and personal relationships with the people being bought from. Data mining allows procurement to go much deeper than this and provides an unbiased, opinionated view of their suppliers’ standings.

2. Uncovering new savings

In the same way that harnessing data allows us to understand more about our current suppliers, correctly utilised, it can also help procurement understand more about its supply markets and where it sits within them.

By understanding the global supply market at a more granular level, a whole new set of opportunities to uncover savings is opened up. These savings can come about either through direct pricing improvements or through new innovative solutions.

3. Predicting negative external factors

In the past, Big Data has been used to predict unforeseen weather events with varying degrees of success. However, many organisations and governments are investing heavily in this technology.

These insights and predictions would, understandably, garner strong commercial interest, particularly from procurement teams looking to understand just how exposed their supply chains are to both natural, and man-made, disasters.

4. Opening up collaborative supplier projects

Understanding and using Big Data means understanding a category more clearly. Organisations that are able to get this level of understanding are in a position to open up conversations around innovative solutions.

The critical part of this is that transparent relationships with suppliers must exist first. The companies can then work together to solve problems and benefit from opportunities, even if some of these opportunities are not even visible yet.

In our next article, we’ll be be looking for some real life procurement examples where Big Data has been leveraged successfully. If you know of any great examples, please get in touch.

Big Data will be one of the themes discussed at the Big Ideas Summit on April 21 in London. Tell us your Big Data story and pose questions for our experts on this subject by registering today.

Creating a Strategic Procurement Function

Procurement’s Change Makers – The challenges of creating a strategic procurement function in a diverse investment company in the Middle East.

This article is part of the Future Purchasing ‘Change Makers’ series.

Cory Thwaites - Strategic ProcurementIn the second in our series of articles profiling procurement’s ‘Change Makers’, we spoke to Cory Thwaites, Executive Director of Procurement for Tecom Group, the leading  developer and operator of free zone business parks providing a home in Dubai for over 4,600 businesses & representing a total workforce of 74,000.

Cory shares his experience in the changes needed to create a strategic procurement function within this diverse, capital intensive and services orientated organisation.

Lack of Strategic Procurement

I joined Tecom Group, which is part of Dubai Holdings in April 2015. The procurement team size had dropped by 30 per cent with no clear procurement procedures or process in place. In fact, only one person had any formal procurement experience. Each individual handled purchasing, negotiation and order placement, so there was no specialisation or delegation of duties.

Lack of procurement strategy was creating problems with suppliers and stakeholders. It was also holding up the entire business. For example, the tenders committee (which approves projects over AED 1 million) could take more than a week to convene. Add this to lots of other red tape, and it was clear that Procurement was stifling, rather than supporting, the business.

Initially, I sought advice and feedback from the other senior executives. Next, I structured the procurement department into strategic sourcing and operations teams. Then I presented my plan for a sourcing and operations focus to the board. Getting sign-off on this new strategy from the CEO in June was the turning point.

Bridging Knowledge Gaps

I transformed the existing team by bridging their knowledge gaps. A six-week bespoke training programme featured a day of group training and another for one-to-one coaching. This really helped my team understand aspects like opportunity analysis and even basic spending analysis.

The big challenge came with evaluating suppliers. There had been no financial checking or reference calls and stakeholders simply worked on their own instincts. We implemented a scientific evaluation process with key metrics including pair’s analysis.

I’m proud to have kept the team together. Two colleagues were offered jobs elsewhere but chose to stay because they recognise how much procurement is transforming from a tactical to a strategic function.

Future Aims

Two of my ongoing aims are to improve CSR and to develop a supplier relationship programme, particularly within the thriving construction market.

There are a number of organisations in Dubai who are at least five years behind European procurement culture and best practice. My advice to succeed in the UAE is to be patient and recognise the potential skills shortage.

You need senior leaders to follow your vision, too – so promoting the benefits of procurement is vital. Also, be prepared to roll up your sleeves because talking a good game isn’t enough.”  

Working with Cory, we have seen how he has embraced this new role with vigour and relish. His practical attitude, ability to listen to people and willingness to roll his sleeves up to solve the little problems for his team and the big problems for his customers is key to the progress that he is making in this difficult environment.

Future-Purchasing-Change-MakersDo you have experience of creating a strategic procurement function in a diverse organisation? What works and what doesn’t work? Let us know in the comments below.. 

If you would like to appear in our Change Makers series then contact Anna Del Mar for details here .

World Sleep Day – Why Sleep is Important in Business

Today is World Sleep Day, a good excuse to grab some extra Zs. Research has found that poor sleep is impacting over 5 million UK businesses.

The Average UK employee misses 8.5 days of work a year due to poor sleep

  • 1 in 3 people in the UK currently suffering from sleep problems

World Sleep Day is today and recent research has shown that one in three people in the UK currently suffering from sleep problems. It’s time for people to wake up to the impact poor sleep is having on the UK’s 5.4 million businesses.

Not only has poor sleep been linked with mental health conditions such as anxiety and depression, but also decreased productivity and concentration in the workplace.

The Cost of Poor Sleep

Information from the World Sleep Survey by Big Health, creators of the clinically-proven sleep improvement app Sleepio, reveal that the average UK employee loses 8.5 days of work a year due to poor sleep. Sickness absence and working-age ill-health, including poor sleep, currently costs the UK economy £100 billion a yearwhile sleeping pills alone cost the NHS nearly £50 million a year.

‘Poor sleepers’ (those who rated their sleep quality as below average) missed 14.6 days of work per year. Alarmingly, 60 per cent of these poor sleepers don’t seek to fix the problem and did not consult their doctors about their bad sleep.

Sleepio help some of the world’s leading companies, such as LinkedIn and Ford, to improve employee wellbeing and boost productivity in the workplace. The app creates personalised sleep improvement plans featuring Cognitive Behavioural Therapy (CBT) techniques to help sufferers overcome poor sleep without pills.

The 2,500 British participants in the World Sleep Survey stated that the top three personal impacts of poor sleep are a decline in energy levels (60 per cent), mood (48 per cent) and relationships with others (35 per cent). These repercussions affecting their work with a reduction in: concentration levels (46 per cent), ability to complete work (38 per cent) and ability to stay awake during the day (27 per cent).  

Addressing the Sleep Issue

“Poor sleep is the unspoken productivity killer in the workplace and it has been ignored for too long”, said Peter Hames, CEO and co-founder of Big Health. “Now is the time for employers to wake up to the problem of sleep – improving employee’s sleep positively impacts workplace effectiveness and general wellbeing.

“Big Health are working with some of the world’s leading companies to help them improve the sleep of their workforces with Sleepio, and seeing huge improvements in productivity and overall health as a result.”

Colin Espie, co-founder of Big Health and professor of sleep medicine at the University of Oxford, added, “World Sleep Day is the perfect time to acknowledge the widespread effect poor sleep has on our lives.

“Sleep is not an optional extra in life, it is a fundamental requirement. The consequences of a bad night’s rest affect us not only physically but also mentally and emotionally, seriously impacting our performance at work. Physically we will feel lethargic, mentally we become slowed down with poorer concentration and memory, and emotionally we may become irritable and rather down, with bursts of hyperactivity. In terms of daily life, no aspect of daily functioning is unaffected by sleep – least of all our jobs.”

Sweet Dreams

So, what better time than World Sleep Day to start thinking about your own sleeping patterns, and what you can do to improve this. Why not check out some gadgets that might help you sleep better, or get some tips from the sleep and productivity experts?

Whatever you do, make sure you sleep well this weekend!

5 Ways Slack Can Help Build a Better Procurement Function

Charting the stratospheric rise of Slack, and investigating how it can be used to increase collaboration and conversation in procurement.

For those who don’t know, Slack is an online communication tool, built around both group and a one-to-one chat. But it’s much more than that. Unlike any other system, Slack can talk to pretty much any other tool through the magic of APIs and webhooks.

These integrations make it a mind-numbingly powerful tool, because it becomes a platform for pretty much anything you need, and can be the focal point of many aspects of your business.

It drastically reduces the number of systems you need to consult to get the information you need to do your job. If something is noteworthy, it should be pushed to Slack.

This incredible value has allowed Slack to grow very fast. We don’t have any startup in our surroundings who doesn’t use it. But it is also increasingly used in larger organisations, for example, NASA, Dow Jones and Salesforce. Plus, all the major news outlets talk about it or even use it.

Their progress is staggering. After less than 2 years there are more than 2 millions active users of Slack globally. And it’s only the beginning.

Slack usage

Does Procurement really need it?

Does Procurement need to collaborate or be more nimble? Can it use Slack as part of its digital transformation?

Yes, of course! And here’s why:

1. Collaborate, Collaborate, Collaborate

With your team, your stakeholders and your suppliers. It’s easy to create topical channels and invite people to join them. Even if they are outside of the company.

Imagine: you no longer have to ask IT to create a dedicated section on the intranet, or setup a “secure room” to exchange documents. Slack can host everything from documents to discussions, and it’s available for anyone with access to the channel. It’s the end of information trapped in someone’s mailbox.

That’s how you’ll get smooth collaboration with your stakeholders or your suppliers.

2. Make Life Easier by Knowing What Happens Everywhere

Slack has this incredible ability to integrate easily with pretty much anything.

Twitter, Dropbox, Google Docs, or anything that can respond to a URL, can be integrated with Slack. This means that when something noteworthy happens, you get a notification in Slack and not cluttering your inbox. One more step towards inbox zero!

And a new range of Procurement tools can also be integrated and send notifications to inform you about new purchase orders or new negotiation projects.

Soon, the days of email notifications and logging into 5 different systems to know if something has happened, will be gone.

3. Kill (internal) emails

This is probably the last step towards inbox zero. We have set a rule in our company that basically says, “if there is no recipient outside of the company, then don’t send an email. Use Slack instead”.

You have no idea how much this reduces the number of emails we receive on a daily basis. If the information is meant to be shared with one person only, you can use the direct messages, otherwise, it can be posted in a relevant channel. Easy!

The Per Angusta Team's Slack
The Per Angusta Team’s Slack Channel

4. Towards “Conversational Procurement”?

Recently, there has been a lot of talk about the concept of conversational procurement. In essence, people in your company would no longer visit your e-Procurement tool to buy things, but would instead talk to an automated system that would understand their needs, gather relevant information and run the process of validating and ordering.

Think of it as Procurement meets Siri, or Google Now if you’re an Android person (or Cortana if you’re…oh wait no-one is a Windows Phone person…).

And that’s exactly what bots are in Slack. An interface for the user to interact with a system in a loosely structured way. Of course, this would mean that a system in the background would have to understand your request, but at least the user-facing part is taken care of.

5. Have Some Fun

Besides all the serious things you can do in Slack, there is also the #random channel, which acts as a sort of virtual water cooler,  a place to just relax and post some funny stuff.

Again, the fact that Slack is so easily integrated with a number of services will let you post nice animated gifs everywhere.

So what are you going to do next?

We suggest you register with Slack and create a room (or possibly talk to IT first…). Don’t worry, it’s free, and you will only start paying if you have more than 10 integrations. And if you reach that point, then it probably means that you will be happy to pay for the service.

Just be aware that Procurement and Digital Procurement are already taken!

Successfully Procuring Social Value

If procurement is going to get serious about social value, then it needs to ensure that it is fully integrated into strategic plans.

Public spending through procurement practices and contracts can be shaped in a way that benefits both the economy and society – but too often this is not the case.

Since the implementation of the Public Services Social Value Act 2012, not enough has been done by commissioning organisations to ensure they are obtaining maximum social value from contracts.

What is Social Value?

Social value is a way of thinking about how scarce resources are allocated and used. It involves looking beyond the price of a contract, and prompts organisations to consider the collective benefits a contract could deliver.

Implementation shouldn’t be a trade off against cost or quality. It is possible to deliver a triple bottom line through procurement activity. A combination of three factors – social, environmental and financial – should improve the quality of delivery, which in turn will almost always result in an improvement in efficiency.

It’s essential that when commissioning services, organisations are focused on achieving the best value, as opposed to focusing solely on cost. The strategic power of social procurement can be extremely influential, particularly when decisions are aligned to a business strategy which supports an organisation’s wider corporate mission and values.

How can social value be achieved?

There are a number of ways to ensure that social value can be fully integrated as a part of procurement plans. The Public Services Act 2012 asks organisations to only consider it at the point of commissioning. However, to realise maximum benefits, social value should be considered past this point.

Fusion21 delivers procurement services for built assets to over 180 public sector members, and we ensure social value is delivered through our programmes by measuring the performance and delivery on contracts.

To date £56 million of social impact has been delivered, and over 2400 jobs have been created. Last year alone we achieved over £13 million of efficiency savings for our members.

So, at the point of commissioning, how can you ensure considering social value will make a difference? Including it within the award criteria, and assigning weighted sections as part of a supplier’s quality submission during a tender process, is one option.

Fusion21 attribute a proportion of a tender evaluation to social value – resulting in this having a direct impact on the final scoring. This approach ensures that social enterprises, SME’s and socially driven suppliers, stand a better chance of winning work through the procurement process.

It also provides an opportunity for organisations to demonstrate the added value they can deliver on a contract, and enables the commissioner to evaluate this based on project objectives.

Avoid Best Endeavours

Organisations should always avoid a ‘best endeavours’ approach to social value implementation within contracts. Instead, commissioners should stipulate how their objectives will be managed, and consider how performance will be evaluated. One way to do this includes asking successful bidders to produce SMART action plans, listing the outputs they can generate.

Once this is complete, social value performance should be integrated into standard contract management procedures.

Fusion21 also issues Regeneration and Local Economic Benefit Plans to every member who has commissioned a contract through us. These plans contain clear objectives and set targets – in addition to providing analysis and detailed progress reports.

By placing a financial figure on the value generated, our members can see the clear benefits of social value activity.

Finally, if social value can become engrained in a supplier’s contractual obligations, it is easier to ensure that goals will be met. At Fusion21, we put a contract in place between our member and supplier, which states an employment opportunity, must be created for every £500k of contract value.

It’s fair to say that procuring for social value needs to have a higher priority in the public sector – and to retain competitive advantage, suppliers should be considering their approach to delivering this.

Fusion21 is an award winning social enterprise who’ve gained national recognition for collaborative working with suppliers and members. We provide a wide range of procurement services and procurement frameworks for built assets that meet the unique requirements of public sector organisations.

Shark Warning! UK Energy Markets Explained

There are two types of shark – the ones in the water, and the ones that reside in the murky waters of the UK energy markets. It’s time to bring some visibility into these waters.

It is common knowledge that sharks are dangerous. But are they? I have scuba-dived with real sharks, and swum with the sharks of the UK energy markets for many years.

The vast majority of real sharks are harmless and will swim away if approached by an over excited diver. Sharks are curious animals and will slowly and carefully approach divers that are calm and motionless. However, there is no doubt that some sharks are dangerous, but if a diver understands shark behaviour, then any danger is minimised.

Unfortunately the sharks swimming in the UK energy markets are very different beasts. These sharks are uninformed, unpredictable and deliberately target the unwary without mercy.

There are hundreds of these sharks waiting to strike. As procurement professionals, how many calls a day do you receive promising cheaper energy and services that are far superior to any offered by the competition? 

Smoke and Mirrors

A buying group I’m working with has been investigating the potential for purchasing energy for its membership. Their first comment to me was, “We cannot get a straight answer from anyone about anything in the UK energy markets.”

My response was, “Correct! Because most of the people you are dealing with don’t understand the energy markets, and use ‘smoke and mirrors’ to hide their ignorance and substantial profits.”

Many procurement professionals see energy purchasing as a dangerous and mysterious world full of sharks, and for good reason.  If I put my cynical hat on, then is the fear of the unknown driving procurement professionals to outsource the blame by engaging an energy broker?

Clearing the Waters

OK, let’s bring some visibility into this dangerous world and start to understand the feeding habits of the sharks.

Let’s start with the basics. The electricity and gas received at your premises does not change no matter which supplier is billing for its consumption. 

What characteristics does an energy supplier need to meet your procurement objectives?

1.            Hold a supply licence.

2.            Financially stable.

3.            Bill accurately and on time.

To understand if an offer from an energy supplier is a fair price what do you need?

1.            A clear view of the cost to a supplier in providing energy to your premises.

2.            The supplier’s real profit margin. 

This is starting to look simple isn’t it now the ‘smoke and mirrors’ have been removed?

At this stage, all you need is to make sure that the supplier’s terms and conditions allow sufficient flexibility for you to decide when to purchase wholesale energy, without any hidden profit for the supplier.

There is the complication of what is happening in the wholesale energy market, but that will be tackled in a later article. The next article, “Visibility and Feeding Habits of Sharks”, will get into more detail of transparent energy purchasing.

4prime Limited specialises in bringing transparency to energy costs to ensure value for money.  For more detail have a look at our web site www.4prime.co.uk#1PRO or for more information email [email protected]

How Technology Can Drive Supplier Collaboration Goals

Supplier collaboration basically means that your goal is to communicate better, and work more closely, with suppliers for the best possible project execution.

According to Deloitte’s 2016 Global CPO Survey, one of the main goals for CPOs is to increase supplier collaboration. What is interesting, and slightly uncomfortable, is that the study also found that 60 per cent of CPOs do not have a clear digital strategy. To me, it seems that when you talk about communication and collaboration, technology is the the clear answer.

Collaborating involves many ideas that ultimately result in a partnership that works better together:

  • Communicate better, faster and more effectively.
  • Create a simpler procurement process between partners.
  • Define clear expectations from the beginning.
  • Share performance data for improvement.

Tactical solutions for these are seemingly very easy. But you can tackle these goals one by one, or face them all by considering the digital options you have. Many people believe increasing supplier collaboration can be accomplished by being more available, or just simply sharing more information. It isn’t just what you do, but how you do it.

Connectivity is Everything

There is a very real opportunity with procurement technology to solve your collaboration problems. Technology connects people in a way that was impossible in the past. Continuing to use old methods to communicate will hold you back on your collaboration goals.

Look at it this way. It’s already difficult to communicate internationally, so improve the way you communicate by eliminating the polluted email accounts. New procurement technologies are developing collaborative features such as live chatting.

What will really allow you to collaborate better is being easily accessible to suppliers and being able to connect to quickly. In turn, all your project communication is redirected onto your system rather than being spread thin in between emails, phone calls, and post mail.

Define a Simpler Procurement Process

Rather than saying “work better together”, you should be working towards making your entire procurement process simpler in order to collaborate better.

The complexity of working in procurement is extremely challenging, and even more so as CPOs try to implement new strategies to optimise operations. Organisational skills are very important for procurement professionals, so leveraging technology to help manage the complex processes can be incredibly valuable. You ultimately become a low maintenance customer to your supplier.

Even the smallest tasks, like simplifying document sharing can eliminate frustration. Create a hub for project related documents which can be updated, rather than engaging in the email document attachment dance.

You should think of the idea as redefining the way you do things to eliminate lengthy tasks and replacing them with short ones. Your team and suppliers would appreciate simpler processes, allowing you to both finish routine tasks quickly and reduce lead times.

Establish Clearer Expectations

With many options coming out into the procurement technology market, it is less valuable to try and tackle your challenges one by one. So if your goal is supplier collaboration, you should consider ones that allow you to invite suppliers to be a user.

A workflow management system that gives access to your suppliers can really close the gap. With access, suppliers can see your workflow, their role in the project, and keep track of progress.

Sometimes it is difficult to communicate compliance issues and other important information regarding the partnership and the roles suppliers play in the projects. Using technology to document clear expectations optimizes clarity on both ends. Suppliers understand what is expected of them and you can feel more comfortable knowing that. It opens the door for trust.

Data is Your Friend

Performance data is very simple to gather when automated. Giving constructive criticism should be an important component to your supplier collaboration strategy. Suppliers need to know key areas for improvement so that they are aware of your expectations and given a chance to better their service.

The most accurate and effective way to show performance is to provide data. Collecting scorecards regularly can keep track of trends that can tell you if your SRM is working. Awareness is only going to help your partnership so you need to collaborate to make sure you both are working towards improvement.

There are many options for procurement organisations, but essentially, the type of system you choose to deploy depends on your main goals. It’s time we stop looking for quick fixes and look for opportunities in technology to meet our goals.

If you’re looking to improve your supplier collaboration, Winddle is a collaborative solution for sourcing and procurement that can absolutely help make your goals a reality.

Tackling Technology and Risk: The Blockchain

The rise of digital payment systems has brought the blockchain into the public consciousness. But can blockchain be used to aid supply chain transparency?

Just shy of ten years ago, technological innovation and the supply chain might have been considered strange bedfellows. Now they go hand in hand. But as technology advances at an ever-increasing rate, it makes sense that supply chains the world-over are also becoming increasingly complex as a consequence.

However despite the numerous advantages brought about by this envelope-pushing, we must remain vigilant and alert to the increased risks such new avenues afford us.

Recent years have seen a rise in both the adoption and implementation of digital payment systems and so-called “crypto currencies”. Such innovations in payments have removed the need for traditional, physical currency, as well as the bricks and mortar institutions that process them.

Bitcoin – A New Way to Pay

Bitcoin is but one example that’s fast revolutionising the payment industry. Bitcoin is a digital currency that’s been heralded as both an innovator and disruptor in yearly tech trend reports.

Bitcoin is effectively a peer-to-peer system. Its users can carry out transactions without the need for a middleman, but all activity is recorded and verified by the blockchain. Think of blockchain as a ledger and you’re halfway there.

Bitcoin has given the blockchain an early success with its 15+ million bitcoins already in circulation. But with a limit of 300,000 transactions per day (a ceiling that’s fast-approaching), we have to wonder – is there a future for a digital distributed database format?

It’s worth noting that the blockchain isn’t owned or operated by a singular body – hereby distinguishing it from a conventional ledger system. Instead, each network node stores its own copy of the blockchain, so whenever a transaction is made it is first recorded in one place, before being transmitted to other nodes that make up the database.

The “block” comes from the name given to accepted transactions. The system checks approximately six times per hour for new ledger activity, and to determine if a bitcoin amount has been spent.

Bitcoin & Blockchain

Blockchain – Bigger than Bitcoin?

Putting bitcoin’s reliance on the blockchain aside for a moment, various figures have spoken out about its potential to transform not just payment systems, but improve the delivery of services and assure the supply chain of goods.

Nothing if not an encouraging sign, a report from Mark Walport, the UK Government’s Chief Scientific Advisor, made proposals that the Government itself should explore applications for the burgeoning technology.

Walport said: “Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services.”

Records ultimately lie at the crux of the blockchain. So a technology that serves as an incorruptible ledger, and one that can trace each and every interaction, could prove extremely valuable in areas where accountability is key.

Gordon Donovan, Procurement & Supply Chain Manager for Metro Trains, has previously been quoted on Procurious suggesting the development of a ‘supplier wiki’ in order to build knowledge of the entire supply chain.

Blockchain technology could indeed be used to increase transparency, but there would be considerable work required in advance of opening this up, thanks in no small part to the highly complex nature of organisational supply chains and the numerous suppliers involved.

Blockchain network

A Chain is Only as Strong as the Weakest Link

If this reliance on blockchain is going to come to pass, more work needs to be done around trust and security – a fact that hasn’t gone unnoticed by bitcoin’s most vocal critics.

With high visibility services like Twitter, the BBC, and both the global networks for Xbox and PlayStation, all being taken offline by distributed denial-of-service (DDoS) attacks, what crippling effect would such activities have on the blockchain?

Moreover it wouldn’t be too much of leap to suggest vulnerabilities could lead to ‘botnets’ taking control of nodes to reveal the identities of the parties involved in transactions.

But is all of this worry warranted? It would certainly seem so if the letter penned by bitcoin’s high priests is anything to by. The open letter informed the community at large of an action plan to reach a consensus on improving bitcoin security.

“We have worked on bitcoin scaling for years while safeguarding the network’s core features of decentralisation, security, and permissionless innovation” – it began.

“We’re committed to ensuring the largest possible number of users benefit from bitcoin, without eroding these fundamental values.”

In order to achieve these aims, 30-plus bitcoin developers organised two workshops (in Montreal and Hong Kong respectively) to try and carve out a scalable path for the cryptocurrency’s future.

If we’re not looking for a repeat of the Silk Road scandal, let’s just hope they came up with a solution…

Is it possible for blockchain and bitcoin technology to transform the future of digital payments and aid supply chain transparency? Let me know your thoughts.