Category Archives: Trending

Don’t Bore The Board

Struggling to get business leaders interested in procurement? You’re doing it wrong! 

The dashboard that Lara Nichols built in her first weeks as SVP of Procurement at NFP was, she thought, a masterpiece. It had everything a procurement professional could wish for – sourcing strategies, savings programs, vendor and risk management targets, governance plans – but it simply wasn’t getting the cut-through she expected outside of the procurement team.

“I’d find that people simply didn’t want to have procurement conversations with me – nobody cared about the typical procurement metrics I was focusing on. I realised that I needed to change my approach to my work to become less of a procurement professional, and more of a businessperson with procurement expertise.”

Now, Nichols’ dashboard is built around what she calls meaningful business drivers. “The underlying data is the same, but I’ve had to re-jig how I talked about it.”

How do you identify your organisation’s business drivers? For Nichols, she took a dual approach:

Connect with the team operating at the heart of the business: “This will be different in every industry, but in insurance brokerage and in many financial services companies, the top-line team is the lead force in our business. I made an effort to become tightly connected with the business development team. We have a huge sales force, so I’ve deliberately familiarised myself with their sales strategy and focused on finding ways to provide support for what they do.”

“My advice is to seek out the people that deliver on the heartbeat of the company’s success, and connect yourself with that team.”

Connect with the CFO: “There’s a reason the CFO is always in the top three roles of a company. Finance influences the whole organisation in so many ways”, says Nichols. “I’ve spent a lot of time with the entire finance team, including my CFO, which has helped me re-align procurement’s contribution in the context of NFP’s numbers, and not the other way around.”

Nichols says that strong financial know-how is therefore vital to any CPO’s success. “The ability to influence the numbers equates to company performance. Procurement and Finance should build a deep and mutually beneficial relationship to truly delivery value we all know is intrinsically there.”

Getting involved in ISM2017

Nichols is Chair of the ISM2017 Conference Leadership Committee, and co-leads the Bottom Line Learning Track.

“Personally, I’m excited to attend the Signature Session run by Amazon Business, called Is Your Tail Spend Putting You In A Tailspin. It’s an important topic. Another session I’m looking forward to will be run by Brooks Brothers, featuring a conversation between a CFO and CPO on How Does the P&L Work, Anyway. It will provide the grounding in Finance that’s so important for success in our profession.”

Nichols is proud of the fact that the Committee has built a program with a diverse range of speakers. “We challenge ourselves to recruit first-time speakers, people who have never had an opportunity to present. Brooks Brothers, for example, have never attended an ISM conference before, but we’re expecting some very valuable insights from their session. On the other end of the spectrum, you have your solid contributors who have been attending and supporting ISM for a long time. They bring an incredible level of insight, experience and wisdom to the conference.

Network, network, network

Two of Nichols’ last three appointments were made possible with the help of her personal network. “In both cases, friends of mine knew the hiring managers. There’d been a discussion at some point about what the business was looking for, and my connection has said ‘That sounds like something Lara would like to do – would you like me to introduce her?’ In both cases, I was hired into an exciting, newly-created role.”

Outside of moving roles, Nichols’ network is invaluable when dealing with what she describes as “wicked problems”. “I ask myself who can I talk to in my network who would have some insights into my problem. The network sustains me – usually it starts with an instant message, which leads to a phone call where we explore ideas and – eventually – the solution presents itself.”

Plan ahead to get the most out of ISM2017

There’s so much choice at ISM’s major event of the year that it can be overwhelming, particularly for first time attendees. Nichols says that this will be the case particularly for people who haven’t prepared.

“Chart a course through the sessions. Read ahead, and think about how to spend your time. Plan it out like you would do before going on vacation! If you’ve done some pre-planning, you’ll have filters in place to help you pick well when you’re presented with a choice.”

ISM has provided plenty of tips to guide attendees through the maze of session, including the Learning Tracks, information on how each session is aligned to certain competencies in the Mastery Model, and proficiencies based on years of experience.

“Be present” says Nichols. “Don’t skip the social activities such as the receptions and networking events. That’s where the real magic happens. Visit the Exhibit Hall – that’s where you can access new information and innovation that you can take back to your office.”

There’s still time to register for ISM2017, taking place in Orlando, Florida from May 21-24.

Planning to attend ISM2017? Don’t miss out on Procurious Founder and CEO Tania Seary’s tips on how to Network Your Way To The Top on Tuesday May 23rd, 3.45pm.

How To Survive a Social Media Storm

Media personality, author and columnist Bernard Salt weathered a social media storm last year after his provocative article about the spending habits of millennials went viral. Today, he shares his top tips for businesses under attack on social media.

Six months ago, Bernard Salt wrote a tongue-in-cheek article about what he called the “evils of hipster cafes”. The article lightheartedly poked fun at hipsters’ apparent preference for low chairs, hard-to-read fonts on menus and thumping music. But it was this paragraph that ignited a storm:

I have seen young people order smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop and more. I can afford to eat this for lunch because I am middle-aged and have raised my family. But how can young people afford to eat like this? Shouldn’t they be economising by eating at home? How often are they eating out? Twenty-two dollars several times a week could go towards a deposit on a house.

What followed was nothing less than a nation-wide reaction. Inter-generational battle-lines were drawn between the over and under-40s, a flurry of rebuttal articles were published in competing newspapers, and the issue of housing affordability – a major problem in Australia’s capital cities – was thrust firmly into the spotlight.

“The smashed avocado article was written to highlight the division in cultures”, says Salt. “And certainly, it did that. Everyone over the age of 50 thought it was terrific, and everyone under the age of 40 thought it was terrible. It exposed divisions, and prompted a discussion that will hopefully lead to a better solution.”

But it was online that the brunt of the storm took place, with critics and trolls lining up to attack Salt in 140 characters or less. Having experienced it first-hand, Salt now has some advice for other individuals – and businesses – who find themselves getting smashed on social media.

Hold fast, don’t panic, and wait one week

“It’s all about getting through the first week”, Salt says. When something happens – whether through misadventure or entirely by accident – and there’s a reaction on social media, my advice to businesses is to hold fast, don’t panic, and wait.”

Salt has broken down the lifecycle of a social media storm:

Day 1: The first day will be quite impactful, as the issue – whatever it may be – begins to trend on social media. This is when the storm front is approaching.

Days 2 to 4: The worst part of the storm. “From days 2 to 4, people will come out of the woodwork to throw petrol on the fire. The trolls, the haters, and any enemies you may have will jump at the chance to further their own interests at your expense. Hold fast! The thing to remember is that this is NOT the mainstream community – these are fanatics and social media warriors. Don’t mistake their opinions for the common sense of the majority.”

Days 5 to 7: At this stage, the main storm will have passed, and more reasoned voices begin to come to the fore. People who are more qualified to comment on the issue don’t put their hands up to contribute to the debate immediately – they generally wait, and take some time to produce a well thought-out response, either in support or otherwise.

Six months later, Salt’s smashed avocado article has been warmly embraced and is frequently referred to in discussions around housing affordability. It may have even influenced federal policy. The article has also, undeniably, helped Salt’s own career and propelled him into the role of one of Australia’s leading social commentators.

Consider starting your own storm in procurement

What can CPOs learn from Salt’s experience?

The lack of attention paid to procurement and supply management across many organisations is an ongoing frustration, illustrated every time we have to explain to people what procurement actually does. There are some lessons to be drawn, therefore, from Salt’s very successful method of grabbing attention and getting noticed.

A savvy CPO could consider putting out a deliberately provocative statement within the business that will force their colleagues to pay attention, kick-start the conversation about a particular issue, and put procurement onto peoples’ radar.

If there’s an issue that’s troubling procurement but isn’t a priority in the wider business, Salt’s advice is to “expose it, and bring it onto the agenda”.

Bernard Salt will deliver a keynote speech at PIVOT: The Faculty’s 10th Annual Asia Pacific CPO Forum.

Talk About A Revolution: The Smart Factories of The Future

You say you want a revolution? Well, you know, all procurement pros want to change the world… Perhaps that starts with the smart factories of the future, which will need to embody innovation. 

Revolution is in the air. Smart factories of the future will need to be innovative, nimble and smart; constantly changing and improving on the back of intelligent use of data. Professor Robert Harrison explains the challenges and opportunities for forward-thinking manufacturers.

If you haven’t heard of smart factories yet, you’ve probably heard of Industry 4.0 or the fourth industrial revolution. Smart factories are the next big predicted change to affect manufacturing, causing a new revolution in industry.

By integrating technology and information in real time, traditional factories will turn from cost centres into profitable innovation centres. Cyber-physical systems (CPS) will monitor the physical  processes within modular structured factories, and a virtual copy of the physical world will be mined for data in real time, enabling decentralised decisions.

What’s all the smart factory fuss about?

These new systems could, for example, identify run-time optimisation by feeding back information related to product, process and production resources, or identify best engineering re-use. We will be able to be ‘smart’ in our manufacturing choices, from product design and evaluation, right through to manufacturing, the supply chain and service provision.

The increasing availability and use of distributed industrial CPS devices and systems, if aligned with the Internet of Things (IoT) and Internet of Services (IoS), could radically change the nature of manufacturing and provide new opportunities to develop more-effective, finer-grained, and self-configuring automation systems.

To achieve this, manufacturers will need to make changes. To realise effective CPS for industrial automation implies the need for engineering tools capable of supporting distributed systems. This is coupled with a major shift in emphasis from traditional monolithic, specialism-based, isolated engineering tools and methods, towards integrated, cloud-based infrastructure based around an IoS and associated data.

So what’s the problem…?

Current automation systems engineering methods are frequently criticised for their poor performance in supporting re-use, and are often unable to effectively validate automation solutions across supply chains. Integration between real and virtual systems is often less than ideal, which makes it difficult to plot an efficient automation system lifecycle from specification and design, through to commissioning, validation, operation and reuse of systems.
Simply put, the engineering process we have at the moment is disjointed and it could be so much smarter.

Another oft-cited problem is that the majority of the automation tools currently at our disposal are vendor-specific and support largely closed control environments. While they may offer good point-solution functionality, are well supported, and can deliver robust operational systems, they often have limited agility.

These factors lead to delays and ultimately to poor lifecycle uses of information, with lessons learned not being fed back into subsequent iterations of the system.

… and the solution?

Cyber-physical systems are distributed, heterogeneous systems connected via networks, and usually associated with the concept of the IoT. The vision for the new CPS lifecycle is one of seamless integration between engineering build and operational phases.

The digital model continuously updates to and from the physical system, and lessons learned are fed back into subsequent refinements of the system, making them ever smarter.

At WMG, we focus on the design and implementation of automation, systems engineering tools and methods adapted to the specific nature of CPS. Part of a new engineering software environment – vueOne – is currently being used to support Ford’s virtual engineering activity in powertrain assembly in the UK. vueOne is also being used to support engineering of battery and electric motor make-like-production systems in partnership with a range of automotive companies.

Properly supporting the full manufacturing lifecycle is important if we are to maximise the business benefits for the smart factory. At a simple level, once a digital model of a production station has been created, this information can be utilised via apps on mobile devices to enable support for production systems on the shop floor. This may be in the form of viewing digital data for monitoring and maintenance purposes.
However, in more sophisticated scenarios, augmented reality can be provided, overlaying key system information visually over physical views of the production system, and to support this we’re currently developing a suite of mobiles tools.

A key aspect of smart factories that will ensure they are truly successful is having a pipeline to progressively develop and then maximise the impact of innovative automation systems. For example, developing proof-of-concept systems from bench-top demonstrators, through full-scale pilot implementations, make-like production lines, and ultimately to factory installation, working closely with industry partners at all phases of this activity.

This article was originally published on The Manufacturer, via the THOMASNET Blog

Fancy Sharing The Procurement Workload With AI?

Technology will help procurement pros to do their jobs faster and more efficiently, lessening their workload. What are the key AI trends we can expect to see in the coming months?  

MielnickiStudio/Shutterstock.com

Nearly every day we encounter stories and predictions about how artificial intelligence (AI) will fundamentally change a variety of industries. The challenge is explaining what this type of technology could do to improve certain functions and jobs. Let’s take a look at the trends we can expect over the coming months.

Artificial intelligence will expand in analytics, intelligence gathering and visualisation

We’ve already seen speculation about the industries who will benefit the most from AI, and we’ll continue to see improvements as more and more companies adopt the technology. We will further see the expansion of the way humans in the workforce interact with AI-based solutions.

When it comes to the analysis of data, especially unstructured data, AI can be taught the nature of words and sentences and string together concepts and gists within the text. This goes far beyond the basic keyword search functions most people are familiar with. AI can then present the information to business users, and not just highly trained data scientists, in a format suitable for them. In understanding the contents of extremely large numbers of documents, AI can take a huge workload off human reviewers and help them do their jobs faster and more efficiently.

Through the use of AI, companies will have an advantage on a competitive global stage, without sacrificing the well-being of their employees, and these applications alone will be the first area of widespread use this year.

M&A activity in 2017 will rebound with a record year

Last year was a disappointing year for mergers and acquisitions. Between the broken deals with Allergan and Pfizer, Halliburton and Baker Hughes, and many more, investors and companies alike were starting to panic about the future of the economy. This year things will quickly change and we’ll be on the rebound with a record M&A year.

According to a new Deloitte report, 86 per cent of private equity and 71 per cent of corporate dealmakers are expecting to close more deals in the next twelve months. While many people feared the uncertainty of major events like Brexit, it will present a whole new opportunity for M&A deals in 2017.

Contract intelligence solutions can help to alleviate some of the challenges M&A brings. By gaining a much stronger insight into the contract portfolios of companies they are targeting for acquisition in the due diligence phase, they dramatically reduce the risk and liabilities they may be acquiring. This insight is fast and efficient, and provides significant transparency in to contract obligations while keeping the deals on track.

Contract Management – CLM will need to change

Contract lifecycle management (CLM) vendors manage contract processing through technologies such as document repositories, workflow, and authoring. It has been recognised that the utilisation and ROI provided by these CLM technologies is not where it needs to be, and they are lacking in the management of contract data. These systems provide user defined fields, and users must manually input this data to manage obligations and run analytics on key fields such as term, renewals, counterparty information, pricing and incentives. The data manage with CLM is generally inconsistent, error prone, and inefficient, and organisations with CLM systems will clearly struggle with understanding the data in their existing contacts as they go into the CLM, but also new contracts.

This year, organisations will realise CLM only solves part of the problem they are working to solve, and complement CLM with contract discovery and analytics tools — based in AI technologies. The combined solutions will create the needed efficiencies in the contract lifecycle, but also allow them to dynamically extract the data they need from contracts, when they need it, allowing for deeper analytics and increased insight into critical business relationships. The old way of data management with contracts will be considered obsolete this year, and richer analytics will become the norm.

Contracts – the “new source of Business Intelligence”

Right now, businesses spend a lot of money and time extracting insight from structured data. The current “big data” solutions process sales data, manufacturing data, financial data, social data, etc., but not the data buried in unstructured documents. Solutions exist now to analyse data from large quantities of documents and provide very valuable insight that can be used for effective decision making.

This is especially important when it comes to contracts. Instead of legal teams reviewing contracts to ensure an organisation is complying with the law or with new or changing regulations, contracts will be seen as a valuable new source of business intelligence.

Dashboards are now being created that bring together structured and unstructured data to provide new views into the business that were not possible before. Contracts will be appreciated as a new, and untapped source of business intelligence that a new generation of technology can now mine in a very intuitive and cost effective way.

This article was guest-written by Seal Software, a leading provider of contract discovery. Seal Software uses artificial intelligence and natural language processing to help companies efficiently uncover what’s in their contracts.

Data, You’re The One That I Want – I’m Just Not Sure Why!

When it comes to managing data, we all know we need it. But it’s important to note that the quality of your output is entirely dependent on the quality of the planning. 

criben/Shutterstock.com

Register for  free webinar, Innovative Data Leveraging for Procurement Analysis, on the 28th March. 

In the information age, data is everything. With our ability to store swathes of that binary gold, and to pull it from scores of different sources, we have access to more information than ever before. What’s more, by using analytical tools, we can blend datasets and create rich insights that were previously impossible to do (or at least incredibly arduous!)

At the heart of this utopia is the premise that data is ‘great’; if we’re not measuring something, then we’re missing out.  After all, data tells the ‘truth’…right?

Well actually, that depends on what you mean by ‘truth’. After all, the ‘truth’ can be subjective and open to interpretation – and the same goes for data; the conclusions you draw ultimately depend upon what you’re looking at and how you’re looking at it.

Have a roadmap before embarking on your analysis

An important consideration when working with data is that the quality of your output is wholly dependent on the quality of the planning at the start – specifically the aims of any analytical outputs.

Having a clear roadmap for the aims of your analysis in the first instance is important in providing direction for the project, allowing you to ask the right questions and draw on the appropriate datasets. There’s a lot of information out there and it’s easy to find yourself in a sinking quagmire of sources that bear little relevance to your intended analysis.

Whilst scoping the aims of a data analysis project may seem daunting, there are three simple steps that you can follow to ensure you give yourself the best hope of arriving at a meaningful outcome:

  1. Decide on a purpose – what, in a general sense, is it that you’re trying to achieve with any analysis?
  2. Pitch to the right audience – Who is going to consume the information? It may be at many levels of seniority (from Analysts to Executives), and each will require and expect different things.
  3. Define the questions to be answered (and then the supplementary questions that arise from that) – these are not just the pure data questions but rather the business question – i.e. the reasons for conducting the analysis in the first place.

Leverage your data in innovative ways

With the above three areas documented and the information acquired, the next step is the exciting bit – making it work for you to answer your questions.

Again, there are three considerations to bear in mind for making the most your data:

  • Create quality visualisations – Choose your visualisations carefully and with the audience and questions to be answered in mind. Data visualisation, as with all visual communication, requires thought and discipline to present it in the most meaningful way (don’t just include a bubble or other fancy charts because it looks nice – it needs more justification than that).
  • Make sure the data has context – Bring in those external metrics that help you make sense of it all. Having worked with data for my entire career it’s fair to say I’ve seen good data, bad data and everything in between. When it’s bad (and anything short of ‘good’) you’re going to struggle to get any ‘truth’ from your analysis – remember, “garbage in, garbage out”. However, one of the trends that I’ve noticed more and more is that even with the good stuff people are quick to justify it – reaching for a readily accessible context; and that’s normally the context of their business or organisation. This is context, and context can take many forms. It could be measuring your procurement against a commodity index or allowing for the impact of currency fluctuations, or indeed measuring against many others.
  • Blend your procurement data for greater insight – Data is an incredibly valuable resource for any procurement team and its wider organisation. By pooling your internal data for spend, sourcing, contracts and projects (to name a few) and combining that with external metrics and benchmarks, you suddenly open up another level of insight into your data. Better yet, that insight can then be used to inform strategy across the organisation, increasing efficiency, improving savings and identifying opportunities for further innovation that yields yet more value for your organisation.

“If we have data, let’s look at data. If all we have are opinions, let’s go with mine.”

Jim Barksdale, former CEO of Netscape.

In the digital era, every procurement team has access to an invaluable source of strategic insight in the form of its data. By using technology to prod and probe that data, Procurement has the means to draw informed action plans that deliver innovation and value to the function and, more importantly the wider organisation. However, knowing the research questions to ask of your data and applying the right context to it is essential to realising this potential.

If you are interested in learning more about the kind of questions you need to be asking when looking to gain greater insight from your data, then please register for our free webinar, Innovative Data Leveraging for Procurement Analysis, on the 28th March. In it, distinguished US professor, Dr Robert Handfield will be taking a more in-depth look at pooling datasets to perform innovative procurement data analysis.

No More Excuses: Procurement Needs To Take Ownership Of CSR

Supply chain is one of the most critical areas of CSR. So why aren’t more procurement teams taking greater ownership when it comes to establishing policy?

CSR, ethics and sustainability – three topics that it’s hard to get away from in procurement. The greater focus enabled by the Internet and social media means there’s no hiding place for organisations. And there’s certainly no acceptance of organisations burying their heads in the sand.

Organisations are now including these activities in strategic objectives. And as procurement’s strategic influence grows, the profession has greater responsibility for its role in CSR objectives as a whole. In light of this, it’s hard to understand why procurement and supply chain aren’t taking ownership of CSR activities in their organisation.

The Expert View

Gaining better insights into the current situation means speaking to the people on the ground. And that’s exactly what has been done by the ISM Committee for Sustainability and Social Responsibility. The Committee surveyed its members exclusively for Procurious on three questions relating to current CSR practices.

While the responses highlighted a wealth of knowledge in the profession, they also showed that there’s still plenty of work for procurement to do to take more ownership. Happily, there were also some practical suggestions on how procurement can help their organisations improve their CSR efforts.

Here’s what the members had to say:

To what extent do you think that Procurement and Supply Chain professionals “own” CSR?

The responses highlighted that procurement’s ownership was very much dependent on the organisation in question. However, there was a consensus that, in all cases, procurement and supply chain professionals needed to play an active role in the development and execution of CSR policies and initiatives.

While some aspects of CSR strategy are not supply-chain related, the majority of risks and opportunities are. Both social and environmental ‘hotspots’ exist within the extended supply chain, leaving it exposed in the event of any issues. Members stated that most organisations started with a materiality assessment. This assessment was usually focused on mitigating, or improving, financial and reputational loss. Importantly, supply chain was frequently seen as a critical area.

As a result, it was felt that procurement and supply chain professionals needed to be engaged in the process.

What is the real damage of a CSR breach?

The general consensus was that a CSR breach caused major damage in three key areas:

  • Shareholder Value
  • Brand
  • Human Cost

Consequences of a major or public CSR breach include:

  • An inability to recruit and retain top talent.
  • Losing the ability to differentiate the firm by its products, services and values in the marketplace.
  • Losing the opportunity to create an internal culture of commitment founded on ethics and a broader view of the firm’s role in the marketplace.
  • Financial loss through litigation, high cost of supplier replacement, brand, disruptions from labour disputes, etc.

Brands can be quickly damaged. A firm’s exposure can be quickly played out on social networks, within hours and minutes. However, one member of the Committee made an interesting observation on where the impact fell. “If the supplier has brand recognition, the buyer gets off the hook more for a CSR breach in the supply chain. If the supplier is unknown, (e.g. the contractor running the BP Deepwater Horizon rig), then the big brand takes the full brunt.”

This highlights the importance of strong policies, regardless of the size of the organisation.

What are your tips for professionals looking to improve CSR in their organisation?

Each member was asked to give three tips on how professionals can help make improvements in their organisation. There were so many good ones that we’ve been able to come up with a list of 8!

  • Understand the premise of sustainability – it’s not just being good, but meeting the needs of stakeholders impacted by decision. Any resulting actions by investors, business partners, employees, regulators and civil society will be of consequence. Top-down support is key.
  • Establish “rules to live” by and measure compliance across the entire organisation.
  • Create internal incentives for professionals to engage in sustainable purchasing. It’s important to use carrots as well as sticks.
  • A supplier code of conduct – with teeth – is considered best practice.
  • Collaborate with other parts of the organisation – procurement shouldn’t operate in a vacuum.
  • Use data to build the business case for sustainable supply chains.
  • Develop processes to identify risks in the supply chain and teach your suppliers these tools, so that they may employ them in sub-tiers.

Take Ownership Now

With CSR being such a critical activity for organisations, procurement can’t afford to be left behind. It’s time to step up to the plate, put procurement in the spotlight and take greater ownership of policies, processes and outcomes. With a wealth of supporting knowledge out there and so many professionals willing to help shape a robust CSR program, there’s really no excuse any more!

Five Reasons Supplier Diversity Matters

We’re often told that supplier diversity is important for any business. But are you able to articulate exactly why this is?

Ink Drop/Shutterstock.com

Here’s a cheat-sheet to help you next time a business stakeholder asks why your organisation needs a supplier diversity programme.

1. Supply managers created a lack of diversity, so it’s up to us to fix it

There’s now a level of recognition that the historical underutilisation of diverse businesses is the fault of supply management professionals.

Contributing factors include a narrow focus on cost over other value, restrictive criteria for suppliers, inflexible and non-scalable policies. Underpinning these is a tendency for big business to be most comfortable working similarly sized entities.

A 2009 study from Pew Research has found that while minority-owned firms made up 41 per cent of all companies in the U.S., they only took in 10.9 per cent of overall revenue.

Here’s the good news. Procurement and supply managers are leading the charge to address the issue, with diversity spend now firmly on the agenda and rising every year.

Reversing the contributing factors above has led to a more inclusive focus on overall value (including social benefits) over cost, flexible and scalable policies and criteria for suppliers. There is also a recognition that the strongest business relationships are often made with smaller, more diverse suppliers.

There’s an impressive array of conferences and organisations dedicated to improving supplier diversity, including:

2. Customers are increasingly expecting diversity

Simply put, your customer base is diverse, so your business needs to be diverse as well. Partnerships with diverse suppliers will give your business a competitive advantage when facing changing customer demographics.

For example, if you operate in an area with a rapidly-growing minority population, your key relationships with minority-owned suppliers will become more important than ever.

While the public relations aspect shouldn’t be the prime reason for having a supplier diversity programme, it’s still important to track, measure and report on your diverse supplier base to win recognition from your customers for the work you have done in this area.

3. Diversity drives innovation

A study by CHI Research determined that small businesses generate 13-14 times more patents per employee than large firms. Since diverse suppliers tend to be small businesses, many companies use their supplier diversity programmes to tap into new and varied creative resources and the innovation that is occurring at these firms.

The fierce competition for business amongst diverse suppliers is another driver for innovation. Essentially, diversity brings a number of different backgrounds and life experiences into your supplier mix to overcome homogenous thinking with fresh new perspectives.

4. Diverse suppliers are often more flexible

Similarly, because most diverse suppliers are small businesses, they are usually able to offer greater flexibility, better customer focus and lower cost structures than larger businesses. Smaller, diverse suppliers are less likely to be tied down by restrictive policy, red-tape or innovation-stifling bureaucracy.

5. Well-known organisations are leading the way

Finally, some of the world’s leading companies are moving ahead with impressive supplier diversity programmes. Microsoft, for example, has recently exceeded $2 billion in annual spend with M/WBE businesses.

Another technology giant, Google, launched a best-practice supplier diversity programme in 2015. It brings key partners into the Google Academy for shared learning opportunities that will drive further innovation.

AT&T celebrate their suppliers as one of their “four pillars of diversity”, the other three being the organisation’s employees, community and marketing.

If your organisation’s supplier diversity programme is still only in its infancy, it’s important to increase your focus on this area or risk being left behind.

Interested in learning more about Diversity in Procurement? Register for ISM Diversity 2017, taking place March 1-3 in Orlando, Florida.

Supply Chain Risk Management: Not a Procurement Priority

This article was first published on My Purchasing Center.

Procurement teams struggle with supply chain risk management. They are aware of  the consequences of not managing it, but often they don’t have the resources to focus on it as much as they’d like. Even when they do, managing supplier risk poses a challenge: Most often the best metric of procurement performance at risk is when nothing happens.

A new report, Is Your Luck Running Out? Managing Supply Risk in Uncertain Times, by A.T. Kearney and Rapid Ratings International, describes the current state of procurement involvement in supply chain risk management activities, potential risks that could affect the supply chain, and ways procurement can begin to better manage risk.

Report co-authors Carrie Ericson, Vice President at A.T. Kearney Procurement and Analytic Solutions, and Rose Kelly-Falls, Senior Vice President at Rapid Ratings, did a presentation on the study for procurement and supply managers at ISM2016 held recently in Indianapolis.

Describing the report in an interview with My Purchasing Center, Ericson says she and Kelly-Falls started with the hypothesis that there’s risk along the supply chain that procurement teams simply aren’t managing. “They’re taking a kick-the-can approach,” she says. Asked if managing supply chain risk is procurement’s responsibility, Ericson responded:

“Procurement plays a big role in terms of vetting and onboarding suppliers before they even enter the supply chain,” she says. “Then, typically it’s procurement’s responsibility to put in supplier performance management programs to monitor and track behavior of suppliers throughout the course of the relationship or contract.”

The Is Your Luck Running Out? Managing Risk in Uncertain Times report, referring to the A.T. Kearney Assessment of Excellence in Procurement, states that companies are not effectively managing supply risk and that their risk management approaches are ad hoc at best. What’s more, just 40% of companies report having key performance indicators (KPI) or metrics for supply continuity and supply chain risk mitigation.

Most cite lack of bandwidth and budget as the biggest roadblocks.

Overlooking risk management—or, rather, getting by with that “kick-the-can” approach—leaves procurement teams especially vulnerable in today’s tenuous geopolitical and economic environment, according to the report.

The report also cites A.T. Kearney’s Global Business Policy Council (GBPC)  study, Divergence, Disruption, and Innovation: Global Trends 2015–2025, which analyzes trends shaping the world today and in the decade ahead. It identifies macro trends that play a role in the current and future operating environment for businesses and global supply chains. Among the trends procurement teams are advised to watch are: geopolitical realignment, continued global violent extremism and accelerating global climate change.

Understanding these trends and how they could affect the supply chain is the first step in anticipating and planning for the future,” reads Is Your Luck Running Out? Managing Risk in Uncertain Times.

Supplier Risk: A Closer Look 

The report also demonstrates how procurement teams can use the Rapid Ratings proprietary FHR® (Financial Health Rating) to analyze the health of public and private companies globally, with comparison across industries and regions. 

According to Kelly-Falls at Rapid Ratings, this is the first time such a study shows how combining macro trends analysis with a micro bottom-up company and industry analysis provides procurement teams with relevant industry insights to make informed risk management decisions.

Is Your Luck Running Out? Managing Risk in Uncertain Times shows the financial health of U.S. public firms peaked three years after the beginning of the global financial crisis in 2008, with an average FHR of 61.0 in 2011. Since then, they have declined to an average of 59.2 in 2015, a drop of 3%.

The peak for non-U.S. public firms (61.9), on the other hand, came in 2008 as the global financial crisis was beginning, while the low point was 58.4 in 2009 and again in 2015, a decrease of 5.7%.

While a two- or three-point change might not seem like much, it represents a very significant change based on the algorithm used to determine FHRs, the report states.

Over the same period, the financial health of non-U.S. private firms peaked in 2010 at 63.6 and deteriorated by 6.8% through 2015. U.S. private firms exhibited a decidedly different pattern of behavior. Their rating peaked in 2014 after achieving a 9.6% improvement from 2008 to 2014 and demonstrates a resilience quite unlike the other three groups. U.S. private firms declined slightly in 2015 to 64.2 but still led the others by a wide margin, indicating U.S. private firms have had an edge in terms of minimizing sourcing risk since 2012.

The report also drills down into the health of individual supply markets (by industry). For example, it shows that deteriorating financial health is evident in non U.S. firms in the aerospace and defense industry and in U.S. firms in the chemicals and computer technologies and services industries.

What is Procurement to Do?

A.T. Kearney finds that 90% of procurement teams expect they will have more responsibility for managing risk in the next two years—and they see a growing need to implement a risk management strategy within the next three years. As a result, they are starting to invest in risk management practices that link procurement, category and supplier management strategies.

Is Your Luck Running Out? Managing Risk in Uncertain Times looks at research on developing supply risk management strategies at the category or supplier level and risk and supply base segmentation.

The report finds there are multiple points in the sourcing life cycle where procurement can use risk mitigation strategies—especially in the early phases. This is when supply or category managers conduct the most comprehensive analysis, evaluating alternative suppliers and supply scenarios.

“At no other time does a procurement team spend so many resources on developing suppliers than when it selects, negotiates with and screens potential new partners,” Ericson tells My Purchasing Center.

After that, the report states that procurement’s most important tool for identifying and mitigating ongoing risk is access to robust, relevant and current data.

Kelly-Falls adds that, “procurement teams should not be shy about starting to engage suppliers they’ve been doing business with for years in risk management. It’s going to have to happen. It’s inevitable procurement will need a monitoring system for the supplier. Maybe not every supplier, but we can’t let incumbents know they’re okay.”

As for tier-two and three suppliers, she says, “We know as we get deeper in the supplier chain, it’s possible to lose touch with some of the smaller suppliers. So, it’s a matter of having good practices and making sure to cascade them to tier-one suppliers then hopefully they will take them and cascade them down to their supply base.”

5 Hot Topics on Social Media for Procurement Professionals

Social media makes it even easier to keep you finger on the pulse. But what topics are global procurement professionals discussing right now?

Procurement colleagues around the world are increasingly embracing social media to share their views, concerns, and (most importantly) their success stories. This sharing has the positive effect of broadcasting the value our function brings to any organisation.

As you know, social media runs rings around traditional media in terms of early access to news. We have access to unadulterated commentary from diverse sources, as well as an interactive forum for discussing, rather than just reading about, the biggest issues facing our profession.

From enduring topics such as risk management to disruptive events such as Brexit, this list will give you an idea of what’s keeping CPOs and their teams chatting on Procurious and other social media platforms.

1. Brexit and what it means for procurement

It takes a truly momentous event to catch the attention of procurement professionals all over the world. Brexit was one such event. It generated so many comments, articles and questions posted on social media, that it deserves top spot on this list.

ISM CEO Tom Derry told Procurious that his organisation received hundreds of queries about Brexit’s impact in the US. This prompted them to survey their members to cut through the speculation with hard facts.

Their supplemental “Brexit Report” found that despite the hype, Brexit will have a “negligible” impact on US business decisions in the short-term, with the main concern being currency fluctuations.

We’re still seeing a high level of chatter about Brexit and its potential impacts, but thanks to ISM’s leadership in this area, resulting business decisions in the US are more likely to be based on facts, not fear.

Other political events are also taking major prominence in conversations. However, we anticipate that Brexit will continue to hold everyone’s attention for many months to come.

2. Risk – Managing the unmanageable

Risk is one of those enduring topics in procurement that will never go away – and nor should it. Questions abound on the Procurious discussion board about measuring, managing and mitigating risk, all tapping into collective knowledge and experience.

The discussion board is simply buzzing with questions and answers about risk in procurement. We’ve had members getting their questions answered across a variety of topics, including:

  • Balancing supply chain efficiency versus risk;
  • Segmenting suppliers by risk profiles;
  • Governance and risk management;
  • Travel risk management;
  • Risk and resilience;
  • Avoiding “unknown” risks; and
  • Risk-mitigation KPIs.

The disturbing frequency of disruptive events such as natural disasters, labour strikes, cyber crime and brand-damaging scandals in the supply chain keeps risk firmly in the spotlight for procurement professionals in the US and elsewhere.

3. The e-procurement debate

Choosing the right e-procurement system to support your business’ objectives and targets is a big decision. It’s for this reason that a lot of procurement professionals reach out to their colleagues online for advice on this very topic.

Discussion boards regularly feature recommendations, warnings and also (we’re sorry to say) complaints about the various options available.

Recommendations have focused on the importance of going with a cloud-based system. We’ve also seen debate on whether having multiple “best-of-breed” systems is preferable to the convenience of a single, unified solution.

Procurious members regularly share their challenges around implementation, struggling with overly-complex functionality and looking for advice on winning stakeholder buy-in.

The big systems developers are becoming increasingly aware of the discussion going on online, and are jostling for social media users’ attention to win their business.

4. Capability and training

Hard skills, soft skills, core skills, essential skills…the list goes on. Capability is another of those enduring topics that will always feature in social media discussion in our profession.

Again, the burgeoning choices around what kind of training is required, and how it will be delivered, leads many people to ask for recommendations on social media. There’s plenty of discussion around which certification provider to go with, and also a steadily rising level of interest in eLearning options for procurement.

One question that frequently crops up on Procurious is “What are the most important skills needed in Procurement?”.

This demonstrates that we’re still debating this question as a professional community, despite the training providers out there who claim they have the definitive skill-set. There’s no ‘right’ answer, of course, as capabilities will always need to be tailored to circumstance and industry. But the frequency of this discussion really highlights that the skills needed to be successful in Procurement are in a constant state of evolution.

5. Social procurement

Corporate social responsibility, and the role procurement can play in building a sustainable future, has well and truly entered the mainstream and is now a significant part of every procurement professional’s role.

Social media users are sharing articles and discussions on the many aspects of social procurement, including:

  • Environmental sustainability;
  • Slavery;
  • Diversity; and
  • The role innovation can play in creating change in this area.

Social procurement is one of those topics that tend to be driven by champions such as Alis Sindbjerg-Hemmingsen. They quickly gain a following of like-minded people on social media, and come to be known as experts in their fields.

Hemmingsen is adamant that sustainable procurement is worth fighting for. She has argued passionately that it can be achieved through greater transparency to drive change, having regulators and first-movers showing the way with best-practice collaboration, and integrating sustainable supplier innovation.

Keep your finger on the pulse

Procurement leaders are using social media to stay ahead of the game when it comes to the latest thinking and development in the profession.

Perhaps the most exciting aspects of social media – which you can’t get from reading an article in a traditional industry publication – is the ability to ask a question and receive a solution from someone halfway across the country (or the world) who has experienced and overcome the same challenge as you.

What is the Future of Knowledge Management in Procurement?

Knowledge management is becoming critical for organisations as the current generation retires. So how can procurement leverage technology to ensure knowledge isn’t lost?

Maxx-Studio/Shutterstock.com

Introducing Watson Supply Chain from IBM. Get to know Watson here.

“Knowledge is power,” proclaimed Francis Bacon, the English philosopher whose advocacy of the scientific method fuelled the scientific revolution. Centuries later, Dale Carnegie, the American philosopher and writer, and perhaps the father of corporate training, responded, “Knowledge isn’t power, until it is applied.”

Bacon’s and Carnegie’s time may have passed – our economies and businesses are exponentially more global and complex – yet, their words still ring true.

Trends Influencing Talent and Knowledge Management

For a global business, managing procurement essentially means tackling the enormous challenge of managing information and knowledge. Today’s complexities emanating from globalisation, dispersed workforces, and massive amounts of data make information and knowledge oversight critical.

Further, demographic and talent management trends make the issue even more pressing:

  • Key personnel are retiring

Baby boomers, the experienced core of procurement and supply chain teams, are retiring at a record pace. Replacing their knowledge and experience is a hefty task.

  • Replacements are inexperienced

The millennials who make up the bulk of new hires, although tech-savvy, often lack procurement and supply chain experience and knowledge. They also are hard to retain – averaging less than two years in their positions.

  • Teams are expanding

Procurement teams are expanding in line with the maturation of the profession and the greater, more strategic responsibilities and objectives put on procurement organisations.

  • Teams are dispersing

Further, with globalisation and growth, procurement teams are increasingly decentralised and located globally, making it harder to pass knowledge and expertise through day-to-day personal interactions.

Amidst these trends, how do you retain, build, and share procurement and institutional knowledge not just within the organisation – but across the globe and across systems?

Technology Trends and Evolution

This is all occurring at an interesting time from a technology standpoint. Procurement has seen technologies evolve over the past 20 years from point solutions, such as spend analysis and sourcing solutions, to suites that span the entire procure-to-pay and source to-pay process as well as the larger strategic supply management process.

This really has been an evolution focused on ever-greater automation and connectivity across the global procurement organisation. Increasingly, their goal is to centralise procurement and supplier data for the sake of efficiency and to get the entire enterprise on the same page.

It’s led to tremendous advances in sustainable savings, risk mitigation, and supplier management and innovation.

Now we’re at another technological inflection point. From the procurement point of view – and talent management point of view – it’s coming at an excellent time.

That next big evolution is cognitive solutions. Or, as it’s also popularly known, artificial intelligence.

The Emergence of Thinking Technologies

Cognitive technologies are now being regularly used by forward-thinking procurement organisations at Fortune 1000 companies to tackle specific tasks, such as assessing risks or profiling suppliers.

In the months and years to come, these cognitive technologies will be weaved into procurement and supply chain enterprise solutions. Cognitive technologies go beyond information management and process automation; they are solutions that can understand, reason, learn, and interact like a human.

They can analyse data, both structured and unstructured, from internal and external sources, at enormous scale and speed. This allows for deeper analysis and insights.

Cognitive technologies are an evolution of the first order. They are more in line with the advent of enterprise software, mobile phones, or the Internet, than the progression from point solutions to suites.

IDC estimates that, by 2020, 50 per cent of all business analytics software will incorporate some cognitive computing functionality.

Additionally, the Pew Research Center notes, “By 2025, artificial intelligence will be built into the algorithmic architecture of countless functions of business and communication, increasing relevance, reducing noise, increasing efficiency and reducing risk across everything from finding information to making transactions.”

How do cognitive technologies impact talent and knowledge management?

From a knowledge management perspective, cognitive solutions enable an organisation to retain institutional and supply chain information and experience. They offer the power to elevate personnel by providing thinking solutions that inform, speed, and improve day-to-day actions and decisions.

These solutions can extend or expand the knowledge of global personnel.

With cognitive technologies, knowledge sharing becomes automated. For example, a new millennial team member – in Mumbai, Shanghai, or Austin – can access the professional knowledge of a 20-year procurement veteran. Or a procurement professional who has worked his or her entire career in Boston can tap into specialised knowledge about markets, practices, and suppliers in Brazil.

Cognitive solutions provide personnel with deep insights and experience, collected over time, drawing from sources inside and outside the organisation. These technologies learn and operate by organisational preference – developing a “supplier playbook” – and can provide actionable recommendations to personnel. Further, cognitive technologies can foster collaboration across the company and with suppliers.

In sum, cognitive technologies elevate and empower both individual employees and the entire team.

Indeed, we’re amidst a knowledge revolution – where procurement personnel proactively advise the business, offering smarter insights, deeper analysis, and greater strategic value.

If knowledge is power, organisations are risking losing power if they don’t have effective knowledge management processes. But technology, such as IBM Watson Supply Chain can help retain this knowledge and pass it to the next generation. Find out all your need to know here.