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Let Me Entertain You (Or Not… Depending On The Party Line)

Is corporate hospitality a done thing?

Customer entertainment, gifts, and freebies are becoming a bigger issue for buyers these days. Increased ‘professionalism’, new company guidelines and a general pressure on how you spend your time is making it harder for this traditional form of relationship building to be effective. Despite this It can still be a very potent force to improve your chances of winning or maintaining business, provided it is used in the right way – and you have thought it through properly.

Having been a sales rep, sales manager, corporate buyer and purchasing director I have seen this problem form both sides of the table. As a rep I have stood in the car park of a customer wondering why on earth marketing think a tankard with our logo on it is going to impress a buyer, and as a buyer I have been helicoptered into a grand-prix (which was nice ). So I have seen the good, the bad, and the just plain naff, of entertaining and gifts. So let’s set the record straight on whether you should entertain, and if so how you can do it to maximum effect.

Across the world it has always been traditional to mark good relations with the giving of gifts. This practice certainly doesn’t appear to have held back the Japanese economy where it is a major force in business. If you don’t think you need gifts or entertainment because ‘our relationship is strong enough’ then just try telling your partner ‘…sorry darling for not giving you any presents or taking you out this year, I think our relationship is strong enough not to need those things – is that OK?’ There is a fundamental misconception over gifts and entertaining. Most people think that they are to do with persuasion, or obligation. If that is your objective then you will fail. The only real objective should be to use them for networking, and even the most ‘bah-humbug’ of buyers can probably see the benefits of that.

Many companies have policies on entertaining. Interestingly most of the big ones have totally different ones for selling and buying. They may well have entertainment days and gifts in the marketing budget, and yet corporate purchasing has a policy of not accepting any gifts or entertainment. The Chartered Institute for Purchasing and Supply (CIPS) is the buying equivalent of the ISMM, and they have a policy. It states that gifts should really be of nominal value, and that entertaining should be managed openly, and not of the type that might be deemed to have had influence on a buying decision. So this still leaves a reasonable scope. There may even be ways around the ‘no gifts’ policy at major companies which we will come back to later. So what makes entertaining both acceptable and effective?

The first rule is line-fish wherever possible. By this I mean that you are meant to be doing something that is attractive to people. Don’t offer them United tickets if they prefer opera, and don’t do a golf day if in reality its just your sales guys who like it. I happened to enjoy my day out at the grand-prix, but when I enquired why exactly they did racing it was because the MD loved it. That really made me feel special. Even if you find your customer has a passion for train spotting, then find a way to get him a day out at Crewe station. The fact that you cant ( indeed would not in any circumstances ) boast about this to your colleagues is irrelevant. Most sales people I met worked on an ‘invite first, ask questions later’ principle, and because of that much of the entertainment these days is ineffective.

The next rule is make it easy to accept. One company I knew had a factory near Verdun – not exactly a romantic location. However to get there from the UK you do have to drive through champagne country. They put on a ‘Quality and Product Development Seminar’ to be held at the factory – mmm, fascinating. There was in fact some real content to this, and at the same time the schedule did call for an overnight stop (both on the way there and on the way back) in the heart of Champagne. They got a good uptake and everyone was (literally) very happy. This probably even got around the ‘no entertaining’ company rules.

If you do have gifts, and your customer is wary of accepting such things, then suggest a charity auction, which even the most hardened would find hard to resist. The process is simple – you give them a load of gifts (NB not ties with the company crest on…) and they then run an auction, or a tombola in-house, with the money going to charity. You get great kudos, they are happy, and a charity makes some money.

If you are able to get some key contacts to come to event then make sure you maximise your time to broaden and deepen your knowledge of your customer. I have been to events where sales guys spend more time networking with their own senior management than the customers. This is great for buyers, it lets them off the hook to go and network with others in your organisation who will probably be less guarded than you after a glass or two of Chablis.

The last key rule is don’t talk business. Entertainment should be just that. Use it to get to know people, understand them, even befriend them. Business should be done later. Not only does it put the customer in an awkward position (they mustn’t be seen to let the event affect their judgment) but also it is rare for these events to pass without someone having a drink. Many have lived to regret deals done after too much wine.

Entertaining and gifts can be great sales tools. They can be great relationship builders. The challenge is to take real care and focus on how you pitch them and how you deliver them. In the same way that a gift to your partner bought at a service station, or an entertainment of two tickets for your own favourite sports team does not hit the mark. As the old adage goes, it’s the thought that counts.

How Can Procurement Increase Health And Happiness?

By delivering social good, procurement has the ability to increase health and happiness.

How can procurement promote health and happiness?

Procurious has been attending the CIPS Annual Conference in London.

Professor Olinga Ta’eed, Director – The Centre for Citizenship, Enterprise and Governance, who spoke at our own Big Ideas Summit back in April 2015, said that although financial value is still wonderful and still king, we’re more interested in social value. It is essential that procurement (as a function) converts sentiment into financial value.

The Social Value Act was passed in 2012 and allows local and national government to consider the social good offered by bidders during procurement exercises in addition to monetary value.

The Act has been designed to make it easier for charities to win public sector contracts, applies only to procurement exercises worth more than £113,000 if awarded by central government and the NHS and £173,000 if awarded by local councils.

But what do we mean by social value?

“Social value” is a way of thinking about how scarce resources are allocated and used. It involves looking beyond the price of each individual contract and looking at what the collective benefit to a community is when a public body chooses to award a contract. For instance, social value asks the question: ‘If £1 is spent on the delivery of services, can that same £1 be used, to also produce a wider benefit to the community?’

It is now becoming increasingly necessary for social enterprises to report on their social value. Social value should equal happiness – but in order to promote the good you’re going to need happy people, a happy company, and ultimately a happy world. We have to look at ourselves, and how much value we bring to the table as both individuals and as businesses.

 

Is there a true and fair view of social value?

Olinga points out that there are lots of handcrafted metrics out there, but you need to have a model T Ford. You need a benchmark – the benchmark is critical. It has to matter. You can be doing great things, but you need to be able to articulate it.

Hugh Chamberlain – EMEA CSR Procurement Head, Johnson & Johnson, followed Olinga and explained how his organisation was helping people to live happier lives through the products they bring to market.

Johnson & Johnson has the lofty ambition of ensuring people live longer, healthier, happier lives, it is estimated that around a billion people use its products every day.

Johnson & Johnson’s Credo (a common set of values unifying diverse business) states: “We are responsible to the communities in which we live and work and to the world community as well”.

Hugh wanted to highlight the measurable social impact through procurement Johnson & Johnson was making. For instance it buys the goods and services it needs from organisations that would otherwise struggle to get a foot in the door – and also targets those organisations that employ people who are furthest from the job market.

What you need to know about social enterprises

Social enterprises are businesses that trade for a social and environmental purpose. At the time of writing there are 70,000 social enterprises in the UK, collectively contributing £24 billion to the economy. health and social care, but also in housing.

Social enterprises are growing faster than most SMEs, with more women leading and taking charge.

In-fact research from 2014, showed that that 38 per cent of social enterprises are led by women compared to 19 per cent of SMEs and 3 per cent of FTSE100 companies – and that 91 per cent of all social enterprise boards have at least one female director, compared to 51 per cent elsewhere.

Do you know how much social value can be achieved through buying your organisation’s services? How much emphasis (if any) do you put on delivering social value?

86% of UK Sales & Marketing Teams Say Procurement Hinders Progress

Sales and marketing fails to see importance of negotiating deals with suppliers.

Sales and marketing teams fail to see importance of negotiating deals with suppliers

According to new research from eProcurement software company – Wax Digital, sales and marketing is the department least likely to get the best deal from its suppliers, with a massive 86 per cent saying procurement hinders their progress.

The CPO Viewpoint research, surveyed by Redshift, on behalf of Wax Digital, found that over one in three sales & marketing functions place orders and spend budgets with suppliers without any procurement involvement. And only 24 per cent in sales and marketing said that they use formal supplier tender processes managed by procurement, far fewer than other departments such as IT and finance.

The problem seems to be sales and marketing’s negative perception of procurement with only 12 per cent of sales and marketing respondents describing the relationship as ‘very close’ and only a quarter of procurement respondents saying the same.

Sales and marketing appears to view procurement the least favourably, with only 28 per cent regarding it as value adding or critical, compared to 44 per cent of finance having the same view. A significant 86 per cent of sales and marketing describe procurement as hindering progress, and 1 in 5 view it as a ‘necessary evil.’

Dissimilar procurement priorities suggest why the two departments fail to work collaboratively. Procurement sees ‘handling supplier negotiations’ as the top way it can help other departments, but this scored the lowest with sales and marketing – only 4 per cent of them prioritising it.

The two departments also disagree over sales and marketing’s spending priorities. While sales and marketing are focussing on creative communication activities such as advertising, website and branding, procurement prioritises marketing fundamentals such as analytics, data and CRM.

Daniel Ball, director at Wax Digital, said: “Businesses need to bridge this gap between procurement and sales and marketing but it’s often a difficult challenge as the two departments function uniquely. This often places an importance on different areas such as creativity and personal relationships versus best price and supplier risk and compliance, which clearly leads to them clashing and being poles apart.

“Through better communication, sales and marketing could perhaps learn from procurement the importance of negotiating worthwhile deals with suppliers, and how damaging maverick spend with suppliers who are not adequately vetted can be. This could also help procurement better understand what sales and marketing value, hopefully leading to a more balanced set of priorities between the two departments.”

4 Key Strategies for Tackling Today’s Most Prevalent Supply Chain Risks

Marketplace and operational risks akin to aiming at a moving target.

What is the biggest single risk facing your supply chain? Chances are, it’s impossible to name just one. Global supply chains are inherently complex, making the task of identifying, let alone addressing, marketplace and operational risks akin to aiming at a moving target. If you’re like many of today’s supply chain and procurement professionals, you’re under constant pressure to reduce costs while increasing operational efficiencies—and hard-pressed to effectively balance business needs with risk management efforts.

Survey Reveals Common Challenges

Findings from a supply chain survey conducted by global professional services firm, The Smart Cube, shed light on today’s most formidable supply chain risks. Of the senior-level supply chain and procurement executives surveyed, over two-thirds (69 per cent) consider the financial health of suppliers to be one of their largest risks in the next quarter. Respondents also cited geo-political instability (46 per cent); ethical risks, including environmental, social, and reputational risks (31 per cent); and political risks (38 per cent) as key factors with the potential to adversely affect the integrity of their supply chains.

What’s more, the majority of the executives surveyed also predict that the regulatory environment will have a high impact on their supply chains. And they expect outsourcing to substantially increase, due in part to a lack of internal expertise and resources. These factors, taken together, show that global supply chain management is a collection of many moving parts—and the risk management component is becoming even more critical to survival in the global economy. One cost-cutting decision made to affect just one point in the supply chain can lead to vulnerabilities in your entire system, resulting in unexpected costs or delays that derail the company’s ability to reach business goals. Likewise, the introduction of a new industry regulation could increase your supply chain’s overall volatility if you’re unprepared to manage the aftermath of change and its impact on your processes and supplier relationships.

Forward-Thinking Solutions

Innovative leaders are seeing that the challenges can be transformed into opportunities through the strategic integration of risk management into supply chain management. This makes it more important than ever for you to understand your organisation’s supply chain risk profile and take steps to strengthen and safeguard what makes it resilient and fortify areas in need of attention. Additionally, you need to know how risks (and various points of failure) could impact your organisation on the whole. Based on their recent research and consulting expertise, the Smart Cube recommends the following four key strategies to combat, if not mitigate, risks along your supply chain:

  1. Avoidance

When the risk of operating in a particular market, or with a particular vendor or customer, is extremely high, it might be necessary to take drastic action in order to prevent or sidestep calamities. This might include discontinuing business in certain geographical markets, ceasing relationships with established suppliers or customers, and even dropping operating segments of the organisation.

  1. Control

Here, an organisation tries to take charge of the situation through specific manageable actions, typically to abate short- to medium-term risks such as supply disruptions due to human error. Examples include adjusting inventory and production capacity to better manage product movement and implementing easier-to-audit contractual structures with suppliers.

  1. Cooperation

In this strategy, an organisation tries to mitigate short- to medium-term risks by cooperating with external stakeholders, especially its suppliers. Strategic initiatives may include the preparation of joint business continuity plans and collaborated efforts to improve supply chain visibility. Your goal is to protect your interests and those of your business partners, in the spirit of solidarity.

  1. Flexibility

Building flexibility into your business practices and processes can improve the overall, long-term efficiency of your supply chain. Multi sourcing, for example, may help companies tackle multiple challenges—such as those pertaining to geo-political instability, supplier-related risks and financial risks—in one go. By engaging multiple suppliers to deliver quality, price, and reliability requirements, companies can mitigate risks such as supplier bankruptcy or performance deterioration for strategic categories that are critical to operations.

Committing to Proactive Risk Mitigation

Aside from developing a plan to identify, assess, and monitor the various risks impacting your organisation’s supply chain, putting a plan in place to proactively address them can ensure the health of your bottom-line and provide competitive advantage. Knowing that there are different strategies you can employ to help you manage your supply chain risk factors puts you ahead of the game—and in front of potential failures, rather than behind them. Practicing avoidance, control, cooperation, and flexibility in your risk management plan may not remove the element of uncertainty or eliminate the consequences of unfortunate events, but it can give you peace of mind that you have strategies on deck to protect your supply chain and the business it supports.

Omer Abdullah is The Smart Cube’s Co-founder and Managing Director.

A New DNA for Public Sector Commercial Activity

DNA is the material that identifies a living thing and determines how it looks or functions. But can it ever be altered?

A new DNA for public sector commercial activity

Thanks to the East of England Local Government Association for permission to republish this article. Procurement lead for the East of England Local Government Association Eddie Gibson talks through plans for “a complete reversal of the commercial DNA in the public sector” and looks at ways in which this can be achieved.

When Cambridge biologists Watson and Crick unravelled the double helix structure of DNA in 1953 their research was labelled groundbreaking.

But even though the discovery would go on to shape genetics, forensics and the medical, legal and scientific professions, nobody could have imagined back then how great an impact this tiny molecule would have on our everyday language.

These days successful sports teams have “winning DNA”. Musicians perform because it’s “in their DNA”. Even actors want to get “inside the DNA” of the characters they portray.

In March 2014, when Sally Collier, Chief Executive of Crown Commercial Service (CCS), announced that the new EU Public Contracts Regulations would require “a complete reversal of the commercial DNA in the public sector”, it seemed that Watson and Crick’s great discovery had even wormed its way into the sometimes impenetrable language of public contracting and procurement.

But what did she mean? And could the DNA of anything really be given a makeover?

Shaking up the system

Collier stressed the need to “fundamentally change the shape of the commercial landscape in central government.”

And those who attended the first round of CCS training on the new regulations during Summer 2014 were given a good indication about how this could be achieved.
The session opened with a slide representing the “new DNA”.

It showed a public sector placing far greater effort and resources into pre-tender activities (identifying needs, market research, supplier engagement) and into post-tender activities (contract management, continuous improvement, negotiation), instead of focusing large amounts of attention on the actual process of “The Tender” itself.

What happens next?

The UK Public Sector has been living in the brave, new world of Public Contracts Regulations 2015 (PCR2015) since 1st April 2015.

And critics would say that the profession’s somewhat predictable reaction to PCR2015 has been to obsess about the disruptions to process.

This included the additional requirement to advertise contract opportunities on “Contracts Finder”, the abolition of the Pre-Qualification Questionnaire (PQQ) for procurements below the EU tender threshold and the need to adopt the government standard PQQ for those tenders above threshold not using the Open procedure.

Martin Reeves, the Chief Executive of Coventry City Council and National Procurement Champion for Local Government, told the Society of Procurement Officers National Conference in February 2015 that, although the procurement profession had an excellent reputation for compliance, procurers needed to be innovative, risk-taking, adventurous and even disruptive.

And, with local government procurement spend estimated to be about £57 billion, he argued that the profession should prepare to behave differently in future – a message which backs the DNA changes Collier is striving for.

It also underpins a lot of the thinking stated in the Local Government National Procurement Strategy, published by the LGA in July 2014, the four key strands of which were: Making Savings, Supporting Local Economies, Demonstrating Leadership and Modernising Procurement.

Changing the game

So how do local government procurers need to change and what skills do they need to make best use of?

Well firstly, I think the profession needs to be bolder.

If we can see opportunities or scope for improvement, whether in the specification or contract management stages, then we need to be braver in pursuit of these.
Procurement professionals are often the most commercially qualified officers in a local authority and they need to demonstrate repeatedly where they can add value through the best use of this commercial capability.

Secondly, there needs to be a recognition and maximisation of the use of relevant expertise where it exists.

Too often in the past, the profession has had a reputation for fragmentation and internal disagreement.

With limited and shrinking resources available, there needs to be a collective recognition that focused expertise acting on behalf of the many will give a better result than being isolated and acting independently.

Following on from that, the profession needs to be much more open with each other to promote beneficial sharing and collaboration.

There is still a limited amount of commercial intelligence shared between organisations and we are generally not good at celebrating and sharing our procurement and contracting success stories.

Putting it into practice

The National Advisory Group for Local Government Procurement, convened and run by the LGA, is working hard to tackle some of these issues.

It has been developing national category strategies in key areas of spend, having a “national conversation” at the highest level with some of the key suppliers to local government and through collation and sharing of best practice on the LG procurement web-site – http://www.local.gov.uk/web/lg-procurement/home

At a regional level, the East of England LGA supports a network of procurement professionals and brings them together on an annual basis for a Master Class event to showcase some of the best and latest thinking across the procurement community.

This year, we are working with a number of key partners, including Crown Commercial Services, the International Association for Commercial and Contract Management and Procurious.com.

All these organisations have something to offer procurement professionals looking to develop their skills.

And what’s more, with their help, we really could see a new DNA for the sector emerge.

Eddie Gibson is a Senior Manager at the East of England LGA and the regional representative on the National Advisory Group for Local Government Procurement.  Get in touch with him at [email protected].

The regional Master Class will take place on 16 October in association with Procurious.

Being At The Table – A CPO’s Tale Of Woe

Being at the Table – A CPO’s tale of woe

This article was originally published on LinkedIn. You can find it here.

Some days ago while having a business lunch the topic of “being at the table” arose. It was our client’s fervent hope that as a newly appointed CPO, (a move that presumably underlined the importance of procurement) he one day would sit as a peer at the EXCOM table contributing to the strategy, growth and performance of the business. Well, thinks I, what a wonderful place to consider the notion of being at the table, while being at a luncheon table myself. It got me to thinking of the roles and responsibilities of those at and around the table.

The Options

Of course there are those whose knowledge, experience, and position, earn them a right to 1) be at the table and direct the actions of others, but there are also others at work in this community. There are those who 2) serve the table and whose unique knowledge and skills answer the call for action from those seated. Then, there is 3) the chef whose specialised skills provide the provender for consideration, and lastly there is that which is 4) to be eaten (a role that I vaguely felt myself as having held a few times).

I further reflected on how many times I heard this same refrain from many CPOs whose pre-dominant career objective was to be recognised for contributing to the business at the highest level and ultimately report as a board level peer.   Moreover, I thought back on the many organisations I have come across where the “vital” role of procurement was often tucked way neatly in the CFO shop or Business Services shop where the chance of ever getting a seat at the executive table was remote at best. Given the fact that procurement is now recognised as a key stakeholder in organisational performance, what is holding it back from somehow being fully accepted into the community of senior leaders? While no answer is fully sufficient in a short blog, a couple of themes have emerged over the years in our work with organisations going through their own procurement transformation.

While business knowledge and acumen are the principle differentiators between those around the EXCOM table and those not, there is something more fundamental that is separating the procurement leader from the full approbation of their business colleagues. To put it back in the frame of my table metaphor,

you don’t belong seated if you still sound like a waiter”.

And that is the essential point.

The Prerequisites

Two major things must occur that help propel procurement organisations to the senior level of strategy. Firstly, procurement must lose the connection to purchase orders. I hear some of you shouting “Heresy!”, but what I mean is that the procurement leader has an extraordinary difficulty of representing him/herself as a strategic player when the next topic of conversation is; “What is your order placement efficiency?“ Every effort should be made not to own any portion of the operative procurement cycle.

Secondly and most importantly, is the fact that procurement organisations often make a vital error by creating a separate strategy for themselves that does not altogether align with the strategy of the business. What is more, is that the strategy is often unclear how it contributes to the business in a way that satisfies more than just the finance manager. We often find that procurement leaders speak a different language from that of other senior business leaders. While they speak of category strategies, the business is interested in how real projects bring value to their organisations. While they speak of vendor management and control the business is seeking out how external innovations can help fuel business growth.

The Solution

We advocate two distinct approaches to these dilemmas.

Firstly, develop a strategy that links to the business and directly connects benefits generated to your internal clients. We call these the pillars of successful strategic procurement and the steps are broadly as follows:

  1. Create a procurement strategy directly linked to the company’s goals
  2. Embed the annual procurement cycle into the company business cycle
  3. Drive “Lighthouse” projects directly supporting internal business clients
  4. Pull value through by having the ability to directly influence team actions
  5. Ensure that reporting is visible to your customer and ideally conducted by an organisation other than procurement

Secondly, develop an improved process of understanding the needed innovations required by your ultimate customer and significantly improve the way innovations are sought, collected, evaluated and ultimately adopted from the supplier base. We call this call the Trading Relationship Management process, and Procurement has a natural home at the heart of it.

While there is no guarantee that armed with these dual capabilities, there will be instant recognition of procurement as a future EXCOM member. However what is certain, is that Procurement will begin to demonstrate that it is not just generating business wide savings but can show where and how that value is generated and most importantly how such benefits accrue directly to internal stakeholders. Likewise other business leaders will also recognize procurement’s role as the conduit to supplier enabled innovation. Taken together, these elevate the strategic language of the function.

I explored these ideas with my lunch guest who understood and recognized how important it was for his team to strategically transform, but like so many such discussions it had to be cut short due to pressing issues at the client’s facility (I think he had to go check how many requisitions had been placed that day).

Temporary Worker Costs: Top Tips For Boosting Value For Money

Temporary worker costs: Top tips for boosting value for money

This is a guest post from Jamie Eaton – Head of Marketing & Insight at Comensura.

It might come as a surprise to some, but the cost of temporary workers goes beyond their salary or hourly rate. From ensuring that you have acceptable pay rates and costs in place to standardising expenses, there are a number of steps that organisations can take to ensure they’re getting value for money and they’re not presented with any hidden surprises each month.

By implementing the following measures on pay rates and costs, organisations can minimise costs incurred by a temporary workforce:

Ensure transparency

Recruitment agencies inform you on the pay rate for each temporary worker, and it’s important that you make this information visible to managers within your organisation. Look at the pay rates for temporary workers across the organisation and ensure they are consistent with those of workers performing similar tasks, and align them with that of permanent workers. This will help reduce any anomalies that might exist, and standardise pay rates to prevent workers demanding a raise based on how others are paid.

Benchmark against local employers

Probe into the pay of temporary roles in the area. Local sources such as recruitment agencies, competitors or the Jobcentre Plus may give you access to how much people are typically paid in the types of temporary jobs that you provide. This will give you a better idea of suitable pay rates and prevent you from paying over the odds.

Align with your employer brand and strategy

Your organisation may look for specific traits in candidates to fill certain roles, which you should abide by when procuring temporary staff. Vacancies are then more likely to be filled by a type of worker that has previously performed well in a similar role. Ensure that you’re offering a pay rate that will attract this kind of person.

Implement authorisation processes for inflation

It’s inevitable that you’ll need to uplift pay rates from time to time, particularly as a response to changes in the job market. The most efficient way of doing this is by using an approval process that consults all the relevant people and ensures that the rise is reasonable.

Standardise expenses

Temporary worker expenses such as travelling costs and accommodation can sometimes be forgotten about, even though it collectively amounts to a considerable cost. Determine what constitutes acceptable expenses for your organisation and apply it as a standard rate for every temporary worker.

There are many benefits to reap from the use of temporary workers, such as flexibility and the ability to cover permanent worker absences. But without maintaining the overall costs, you risk it being a drain of resources. By putting processes into place that determine acceptable pay rates and costs, you can ensure that you’re getting value for money when procuring temporary staff and that you’re carrying out the process cost-effectively.

Talking S&OP with Patrick Vialle of Parmalat

Understanding S&OP

Based on a recommendation I got from Julie Egonidis of The Faculty off the back of its recent procurement roundtable series. I caught up with Patrick Vialle of Parmalat Australia to discuss an interesting S&OP (supply and operations planning) project the company has been working on.

Patrick has had a truly international supply chain career, having worked in France, Italy, New Caledonia and now in Australia where he’s employed as the National Demand & Supply Planning Manager for the dairy producer.

For those of you that are unfamiliar with the term, S&OP, put simply, it involves understanding the demand profile for your organisation’s end product and closely linking supply chain (and other functional) activity to mirror this demand.

It’s not just for FMCG

I was keen to get an understanding of how Parmalat was able to connect the dots between its market place demand and the supply and production of its own products. I thought, naively, that due to short shelf lives; S&OP was something that was unique (or at least more common) to the food and FMCG industry. But after chatting to Patrick I began to understand that S&OP is a solid business practice whatever industry you’re in. As Patrick points out, it’s all about being responsive rather that reactive.

Patrick explained how the theory of S&OP can be used by firms that don’t even produce a physical product. If Google, for example, is able to understand the demands that its network is likely to come under over the coming weeks and months, the company can start to make arrangements for the required storage and data processing capacity (their supply) to match these demands, hence avoiding an oversupply or worse, a crash.

Cross Functional by Nature

Speaking of his own experience at Parmalat. Patrick discussed the need for S&OP to be addressed from an organisation-wide perspective. “S&OP is, by definition, a cross functional process” he said. It might make sense that procurement or supply chain lead the project because they have close relationships with the supply base, but stakeholders from every area of the business need to be involved if the project is to be a success.

Patrick explained how the Parmalat team responsible for delivering the project was comprised of a mixture of professionals from Sales, Finance, Marketing, Engineering and Procurement. He also said the team was made up of ‘believers’ (those who were sold on the benefits of S&OP) as well as staff that needed some convincing of the project’s merit. This led to strong debate within the team and gave the group vital preparation for the sort of resistance they would face in the implementation phase.

Patrick went on to discuss that Parmalat rolled out the program initially to one category as a sort of pilot project; this process took about six months to get operational. Once the initial program was returning positive results, the firm looked to roll S&OP out across the business.

It doesn’t have to be Lean

I also questioned Patrick on the ‘lean’ aspect of S&OP projects. I feared that closely linking supply and demand could leave organisations exposed should something untoward or unplanned happen. Patrick explained that S&OP doesn’t need to be lean; you can plan for risks and have buffer stock just like before. “It’s all about being responsive to the different scenarios your business might face and having a plan to manage the impact of each of those situations,” he said.

The Benefits

Parmalat’s program has reaped huge benefits for the organisation. Numerous customer surveys have shown that customer service has improved drastically across the business. Supply is now faster and more reliable. Parmalat has not only become a better supplier, but the firm has become a better customer to its suppliers as they are now able to provide a clearer picture of what they will require and when they will need it.

The S&OP program has improved forecasting accuracy at Parmalat by a remarkable 60 per cent. This has been hugely beneficial in terms of reducing waste and optimising resourcing solutions.

Patrick’s story is another example of the truly innovative procurement work that is being discussed during The Faculty’s Roundtable sessions. If you are based in Asia or Australia and would like to get involved in their upcoming discussions, contact Max Goonan at The Faculty.

Construction & Transport Industry Facing Effects Of On-Demand Economy

The construction and transport industries are beginning to feel the effects of an on-demand economy.

constructionaccounting

According to popular jobsite Indeed.com, employer demand is now outpacing jobseeker interest in the construction and transport sectors.

While job growth in the construction industry has increased 10 per cent in the last quarter, jobseeker interest in these positions has remained stable since the beginning of 2015.  Similarly, Transport has seen a 13 per cent increase in job availability compared to last quarter, while jobseeker interest in these roles has fallen  2 per cent in August from its peak in March.

The figures suggest these industries are amongst the first to feel the impact of an economy that is increasingly reliant on contractors and temporary hires, with an increasing number of tradesmen and drivers branching out to start their own businesses or work on a contract or freelance basis. This trend is more evident for electricians – job searches for electrician including the term self-employed has grown 61 per cent since Q4 2014.

Gerard Murnaghan – VP EMEA, Indeed, commenting on the market, said: “The tightening labour market in the UK coupled with the prevalence of self-employment is likely to accelerate this trend in the run up to and following the introduction of the new minimum wage, which will come into force in April 2016.  SMEs and micro firms are major contributors to growth in both of these sectors and the backbone of the UK economy. The wage increase may discourage them from taking on additional, junior staff.

This is a particular concern in the construction sector, which is grappling to attract young talent in an industry which does not generally appeal to the new labour force. For an industry that is reliant on boosting its ranks with new trainees, it is also noteworthy that two thirds of construction apprentices are currently trained by micro firms – a talent stream the industry cannot afford to lose.” 

U.K. Industry Employment Trend Highlights – August, 2015

Top Growth in Job Openings (compared to previous quarter)

Transportation   +13 per cent
Media   +11 per cent
Construction   +10 per cent 

Lowest Growth/Decline in Job Openings (compared to previous quarter)

Education – 10 per cent
Human Resources   -8 per cent
Healthcare   -2 per cent

Paul Dobing of NSW Procurement – Moving The Profession Into A Complex Future

Paul Dobing NSW

One of the highlights of last week’s CIPS Australasia conference was, without doubt, Paul Dobing. The Executive Director of NSW Procurement at the Office of Finance & Services is a familiar figure to those of us involved with The Faculty Roundtable Program, of which he’s a very active member.

Paul’s bursting with energy, and strides up and down the stage rather than standing behind the podium to deliver his insights. He has recently been motivated and inspired (and tanned) by a trip to the Garma Festival in far north-east Arnhem Land and is passionate about Indigenous constitutional recognition.

Paul’s on stage to talk about the future of the profession. He takes the audience through a list of CSIRO’s “Global Megatrends”, including planetary pushback, the pivot to Asia, longer life expectancy and digital immersion. Each of these topics could generate enough material for a conference in themselves, but Paul is making the point that to create competitive advantage for your procurement organisation, these are the sorts of longer-term “horizon themes” you’ll need to be engaged with to support your push into the future. CPOs need to think about what these Megatrends mean for procurement, how we can redesign our models for the future and importantly, what capabilities we’ll need to meet these challenges. Paul points out that just about every audience member is in the midst of some kind of change/transformation program, and asks how we can operate in an increasingly “VUCA” world (volatile, uncertain, complex and ambiguous).

On his own journey to bring his procurement function into the future, Paul has:

  • created a consulting advisory practice for the wider sector
  • created a data and analytics team.
  • introduced a research capability for longer-term thinking, and

None of these reflect “traditional’ procurement functions, but Paul believes they’ll be integral to providing ongoing support to the public sector into the future.

Emerging models:

Rather they viewing change with suspicion, Paul’s enthusiastic about emerging organisations that are disrupting traditional business practises. CPOs, he says for example should be embracing the sharing/collaborative economy and seizing upon the opportunities it creates in this space he has recently been working with Tu Share and Sendle CEO James Chin Moody to identify new models of service a delivery supporting government. We should keep ourselves informed of future trends, work out how we can start to engage with them and make sure we’re well-positioned in that conversation to drive competitive advantage. His advice:

  • Think ahead to the next wave of disruption.
  • Think about how procurement can tap into disruptive models of supply.
  • Build the capability required to embrace change.
  • Shift the risk-averse, rules-based culture traditionally found in procurement teams to a flexible, interpretive culture that can engage with new opportunities.

Hiring the next generation of procurement professionals:

Hiring is increasingly about the values and behaviour rather than technical skills. Members of Generation Procurement, as we like to call Gen-Y here on Procurious, and going to be:

  • Purpose driven
  • Values aligned
  • Diverse
  • Connected
  • Agile
  • Disruptive, and
  • Adaptive

What are you doing to move your procurement function into the complex future?