Category Archives: Trending

3 Ways the IoT Can Benefit the Supply Chain

We’ve heard about the IoT disrupting our personal and home lives. But where will these technologies really stand up in the supply chain?

iot in supply chain

We’ve come to know the Internet of Things as a technological phenomenon that is revolutionising many ways of life. The idea is that devices and computer systems can communicate and work with each other, and make things easier. And we’re starting to see applications in all manner of places.

The IoT is making exercising more intuitive, making homes more secure, and making offices and hospitals more efficient. But these benefits are only scratching the surface. There are also many IoT benefits that are less visible to the general public. One that is becoming fairly interesting is the effect on business supply chains.

This may not be the sexiest application of the IoT, but it’s one with significant potential to change the nature of big retail companies and even lower costs for consumers. Here’s how it’s happening.

IoT In Production Plants

IoT sensors are allowing manufacturers to collect key data from various physical spaces within production plants and manufacturing facilities.

Sensors can be used to monitor machine temperatures and send automatic alerts to problems by way of changing lighting. They are also able to monitor the use of safety equipment (and the condition of that equipment) automatically.

Additionally, factory conditions such as temperature and humidity can be tracked and controlled. Individual pieces of inventory can be tagged the moment they’re created, so as to be kept track of in the future. Other functions more typical of ordinary office environments can also come into play, like security and communication measures.

It’s easy to see how basic IoT sensors can help to automate some of the trickier aspects of production that kick off the supply chain process.

IoT On The Road

Perhaps the most fascinating impact of the IoT on supply chains is occurring on the road, in shipping vehicles. Tracking sensors on individual pieces and crates of inventory help companies to “watch” those materials until they arrive at retail locations or other points of sale.

However, there are also IoT measures being put in place to keep fleet vehicles operating safely and on schedule.

By outfitting fleet vehicles with high-end GPS and WiFi, companies can provide managers with real-time sharing of vehicle diagnostics and more important data. These devices can keep track of vehicle performance, driver activity, and routing information, effectively automating the management and scheduling process that was once a headache for everyone involved.

Vehicles can be repaired precisely when needed, and be directed on the most efficient routes. Plus drivers can be kept on reasonable schedules, and held accountable for their own tendencies on the road.

IoT In Stores

Finally, once the product has been shipped to retail locations, there are also IoT-related technologies in place to monitor that selection for the sake of restocking inventory when necessary.

The IoT has the potential to drastically alter numerous aspects of the retail experience. However, when it comes to the supply chain, “smart shelves” are making the biggest difference.

These are shelves that can recognise when inventory is getting low and send automatic alerts to store managers, or even directly to production facilities, communicating orders and keeping the store in supply.

That about covers an overview of how the IoT is changing the supply chain in retail businesses. On the business end of things there’s no telling how much these changes can cut costs and improve the speed and accuracy of production.

And for consumers, those same benefits should ultimately translate to fair prices and consistently stocked store shelves. All in all, it could be one of the more impactful mainstream IoT developments.

Blaine Kelton is a programmer and freelance writer currently living in Beverly Hills. From technological advancements to new albums by favourite artists, he’s eager to just write and get his work out there.

The Business of Procurement’s Cultural Evolution

The business could benefit from seeing procurement’s value in a new light. The challenge is getting people to accept the change.

time for business change

In my previous article, I discussed the struggles procurement faces with the perception of its value. One of procurement’s key issues is that, in most cases, the cultural focus is on cost savings.

This driver is linked to the four key stakeholder groups that procurement must answer to – the CEO; business leaders; the supply chain; and the CPO.

Because culture is handed down from the CEO, the culture of savings flows down through the business and the supply chain. This can lead to business leaders and the supply chain attempting to bypass procurement. This is where the perception of value of procurement is critical.

However, all is not lost! With the stakeholder requirements in mind, we can propose an alternative cultural model that will drive benefit for all four groups, plus procurement itself.

Procurement’s Future Culture

The key change in the future culture, from the culture we have now, is that it turns the key drivers on their heads.

  • In the new structure the number one driver for procurement is the supply chain.

Procurement focuses on collaboration, innovation and becoming a customer of choiceThe relationship is built upon mutual benefit and trust. It involves procurement becoming a business partner and promoting the suppliers capabilities and successes.

  • The number two driver is the business leaders.

Procurement brings new ideas and opportunities into the business from the supply chain, resulting in procurement being recognised as a trusted advisor to the business. The business supports procurement’s focus on mutual success, collaboration and becoming a Customer of Choice.

  • The third driver is the CPO

The business leaders complement the CPO on the great value their team brings into other business areas. The business leaders desire procurement’s involvement in their areas of business and identify them as trusted advisors.

  • The final driver is the CEO

The CEO has heard about the added value procurement delivers into the business and the success it is achieving. The CEO’s main focus for procurement is to retain the value they are bringing into the business from the supply chain.

The Procurement department is still a cost centre, but cost takes second priority to the value being generated for the business.

By re-aligning priorities, we have created a culture that meets the needs, and addresses, all four groups. The new culture also takes procurement away from the perception of being price focused, to becoming a value add for its stakeholders and customers.

It is what, for many, has become the nirvana of what they desire procurement to become.

Where’s the Evidence?

The next question you may have is, how do we know this is the right direction?

Some of you may already know of Johanne Rossi who won CPO of the year 2016. In an article posted on Procurious website in June, Johanne talks about what she did to make her Procurement department a major success within the business.

Here are a few extracts from the article for you to think about:

  • “re-structuring…teams in new ways to better partner with stakeholders and supply partners” – we are seeing the first evidence of partnering with the business
  • “A procurement innovation manager has been hired to achieve benefits…such as finding new, mutual value with supply partners through innovation and efficiencies.” – the key word is mutual
  • “Building internal and external relationships, and developing stronger business and commercial skills.” – a focus on developing procurement’s commercial skills
  • “The entire focus for us is to become the customer of choice for our suppliers” – this is the killer quote. It underpins a model of building trust, collaboration and promoting joint success.

Johanne’s full article on Procurious can be found here.

Re-aligning Attitudes to Change

We have outlined a culture where many procurement individuals find themselves trapped today and offered an explanation why it occurs. We have gone on to provide an alternative model for driving culture and value, one that could bring significant benefits to both procurement and the organisation.

To undertake this re-alignment, it may require attitudes to change and potentially re-building supplier relationships. For some people this may be a step too far.

An alternative path is for procurement to remain as it is, but then don’t be surprised if your department becomes fully automated and you’re out of a job. You were warned!

To undertake this journey requires a re-assessment of procurement principles and drivers, with a greater focus on the desired outcomes from the engagement with all stakeholders.

Procurement has a magnificent opportunity to become a critical business function for an organisations success within 21st century markets. The question is, do you want to be a part of it?

“It is never too late to change. The issue is deciding if you want to.”

POD Procurement is a consultancy and advisory for Procurement Transformation. For more information, and to read more about the POD Model, visit our website.

The Evolution of Procurement Culture

Procurement often struggles with the perception of its value. But could the issue be traced back to the culture expected by its stakeholders?

evolution of culture

What is Procurement’s business value? Is it doing a great job and does the business agree? If the perception of procurement is less than we desire, it is possible to change it?

These are the tough questions we explore within this article. Warning…this article may offend some people! Yet, if we are to make progress, it’s time to be honest.

Procurement’s Perceived Value 

If you ask a procurement person if they are doing a great job, most will agree. They might say they are working to tight deadlines, complying to complex processes with limited resources and information, they do the best they can. Generally, it’s a fair assessment.

However if we ask the business the same question the response can be brutal, “No, they are not.”

The feeling is that procurement is driven by price, that they are reactive, and that procurement never brings new ideas into the business. Frequently procurement are used out of necessity, but their involvement is not desired.

This revelation can be upsetting to many within Procurement, especially when their is a clear desire to be considered as a trusted advisor, pro-active and a business capability that adds value.

If a negative perception of procurement is something you face within your organisation then we have some good news! It isn’t your fault, and it is possible to change it. 

Stakeholders & Customers

“Why is there such a disconnect?”

To help us identify what might be going wrong with the perception of procurement, we need to identify the main business areas involved.

There are four main groups that are important customers and/or stakeholders to procurement:

1. Head of the Business/CEO/CFO

This individual is responsible for budget approval, business strategy and might even decide if there is a procurement department. Their ability to decide Procurement’s future makes them a critical stakeholder for the function.

2. Business leaders/Budget Holders

This group are responsible for bringing requirements to procurement, and procurement needs their business. Losing the support of the business leaders could see a drive to outsource/automate the procurement department.

3. Supply Chain

The suppliers provide the solutions to the business leaders requirements. No suppliers means no business solutions.

4. Head of Procurement/CPO

This individual is responsible for employment, pay rises and promotions within the procurement team. As this person holds the career of the Procurement Practitioner in their hands, they are a key stakeholder. 

Procurement’s Culture Today

If we accept procurement’s culture largely remains focused on price, then we need to know why. Even will all the evolution in procurement, it’s clear that this is still prevalent. Here’s why:

  • The number 1 driver for the current procurement culture is the CEO (or CFO or equivalent)

Traditionally, to this individual procurement is principally a ‘cost centre’. The greatest value procurement offers them is keeping their costs to a minimum.

  • The next driver for procurement is the CPO

The CPO wants to ensure they meet the needs of the CEO/CFO. This is critical in ensuring they retain the support from the senior stakeholders.

Therefore maximising cost reductions are critical, realised through contract savings. This culture is amplified further by attaching procurement salary bonuses for achieving contract savings.

  • The third driver for procurement culture is business leaders

The culture is already firmly established on reducing costs/price to achieve a procurement agenda. The business leaders can struggle to identify any real business value in procurement engagements, resulting in a strained relationship.

  • The final group driving procurement culture is the Supply Chain

The culture of the engagement is based on a drive to reduce supplier margins. With no real focus on collaboration, promoting success, or becoming a customer of choice, it is a one way relationship focused on procurement success. This results in an engagement with little or no trust.

To recap, because the culture is coming down from the CEO/CFO it creates a culture focused on savings, which continues to flow down into the business and the supply chain and can result in the business leaders and the supply chain trying to by-pass procurement.

Culture From the Top

But all is not lost. In the second part of this article, we’ll propose an alternative cultural model that will drive benefit for all four stakeholder groups, plus procurement.

This will also help optimise procurement practitioners’ individual value, an aspect critical for attracting the best talent and talent retention.

“Perceived value can be in response to how you engage, which is a result of your culture, and is influenced by your drivers.”

POD Procurement is a consultancy and advisory for Procurement Transformation. For more information, and to read more about the POD Model, visit our website.

3 Reasons Why Supply Chain Professionals Are Excited About Industry 4.0

The Industry 4.0 revolution is firmly under way. And it’s something for supply chain professionals to be excited about.

industry 4.0

Over 200 years ago, the first industrial revolution was ushered in by the roar of the steam engine. Now, thanks to advances in automation and computerisation, a new revolution is underway – Industry 4.0.

Also known as the fourth manufacturing revolution, Industry 4.0 marks the convergence of physical and digital manufacturing capabilities to create “smart factories.”

These factories empower supply chain professionals and manufacturers to digitally plan and project the entire production lifecycle. This can help to increase efficiency, minimise risks and, ultimately, drive revenues.

In fact, 35 per cent of companies adopting Industry 4.0 technologies expect to generate revenue gains of more than 20 per cent over the next five years

Picking Up Steam

The revolution is already well underway in countries with large manufacturing footprints, such as the United States, Germany and Japan.

However, now it’s starting to pick up steam around the globe. That’s because more companies want to take advantage of the tremendous business opportunity presented by Industry 4.0 adoption.

So what specific Industry 4.0 technologies have the supply chain so excited? Here are the top three:

Predictive Maintenance

Big data is playing a big role in the revolution. Predictive maintenance is one example of how it is being used.

Within smart factories, sensors are installed on every machine. These sensors produce data that can be used to accurately monitor key performance parameters. This knowledge is used to assess the probability of machine failure while allowing stakeholders to prepare accordingly.

The manufacturing personnel in the factory, as well as the supply chain professionals who are relying on them, receive continuous, up-to-date status alerts.

Armed with this information, MRO employees can make more precise repair calculations in order to prevent non-scheduled outages. At the same time, procurement and supply chain professionals can identify potential risks well in advance, allowing them to be more responsive and agile.

Additive Manufacturing

Additive manufacturing is not a new phenomena. For decades, the process was used to prototype new products before they were put in production on factory floors.

Today, however, thanks to the improved capabilities and reduced costs associated with 3D printing, additive manufacturing is being conducted on the factory floor itself.

As a result, manufacturers in smart factories need little to no lead time to fulfil spare part requirements, and design improvements and upgrades can be made on the fly. Supplies that were previously too heavy or too cost prohibitive to ship can be created on-site, reducing costs and logistic headaches for supply chain professionals.

This expansion of additive manufacturing has reduced required inventory levels and provided procurement teams with greater flexibility than ever before.

RFID Tags

Intelligent radio frequency identification (RFID) tag technology helps supply chain professionals track the status and location of each piece of inventory throughout the entire supply chain.

This technology provides procurement teams with the peace of mind that no piece of inventory will go unaccounted for. It also improves efficiency by making it easier to find specific items, no matter where they are located within a warehouse.

Lastly, RFID can prevent products from being counterfeited by verifying the authenticity of goods and products as they move through the supply chain. This helps to combat a growing concern in the industry.

Just as it has in the United States, Germany and Japan, Industry 4.0 will revolutionise the supply chain around the globe. As it does, procurement professionals will be able to understand their operations better than ever before and be empowered to make more strategic, agile decisions.

Ed Edwards is Audience Outreach Manager at THOMASNET.com. He leverages his extensive experiences in engineering, manufacturing and procurement, to educate procurement and engineering professionals on how to streamline and improve their work.

Ed provides customised training to organisations’ engineering and sourcing teams and helps buyers with their challenges and finds them new opportunities.

10 Ideas to Encourage Suppliers to Go the Extra Mile

Are your suppliers willing to go the extra mile for you? What can you offer them to drive the extra effort?

Extra Mile

Buyers rely on suppliers to perform numerous requests from the very beginning of their relationship.

From the first RFx, to the laundry list of requests on tight timelines, suppliers play an integral role in the sourcing process. And having them wanting to help can make a huge difference.

What can supplier enablement do to encourage suppliers to meet their deadlines, and even go the extra mile beyond the bare minimum?

Here are ten potential ‘carrots’ to offer suppliers: 

1) Invite to Assist with eProcurement Pilots

Suppliers welcome getting as much exposure as possible. Particularly if they are a new supplier, or you’re rolling out a new eProcurement system.

You can let suppliers know that if they can meet or even exceed your requirements that you’ll highlight them during testing and User Acceptance Testing (UAT). You can include them in your test scripts, and call them out during demos, amongst other things.

2) Feature on eProcurement System’s Home Page

Some modern eProcurement systems give admins the ability to display whatever you’d like on the homepage using business enabled CMS blocks.

Offering this prime real estate to highlight suppliers who have excelled (e.g. provided an awesome catalogue or offered heavy discounts) would be a huge inspiration for a supplier.

3) Float Sales Items to Top of Search Results

Modern eProcurement systems allow admins to affect search results giving specific items more weight or even float to the top of search results.

Similar to how suppliers promote sales items on their B2C sites, you can offer suppliers to boost items they agree to put on sale for at least a period of time.

4) Invite Onsite for ‘Meet and Greet’

Most suppliers will welcome the opportunity to come in and informally meet with their end customers. Maybe even allow them to setup their trade show booth or a table in the office lobby.

I’ve seen some buyers even create some co-branded marketing material, including booth signs or posters, stating that the supplier’s products were available on the eProcurement platform.

5) Visit Them Onsite

When suppliers have to come in to meet with you in your office, it’s typically a nerve-racking experience for them. They’re probably all dressed up and a little nervous as they enter your, likely relatively lavish, corporate office building.

But offering to come to their office for an informal tour/meet-n-greet would likely be an enjoyable honour for them. 

6) Promote in an Email Blast

How every supplier wishes they had the ability, and their buyer’s blessing, to send even one email to all your employees.

Offer them the chance to promote their offerings in a company-wide email blast and every supplier will jump at the opportunity. 

7) Display an Ad on your Intranet

It’s in a buyer’s best interest to entice more employees to use their eProcurement system to make purchases. The buyer’s intranet is probably a popular place where employees go daily.

You can display an ad on your intranet to let employees know they can procure that supplier’s category via the eProcurement system. For example, “The New iPhone 7 – Now on eBuy!”

8) Offer a Testimonial

Suppliers are very proud of their relationship with their customers. They’re especially proud of being selected to tightly integrate with a customer’s internal eProcurement system after all the effort both have put in. 

When a buyer gives a supplier a testimonial that they can use to grow their business. It’s often a very welcome shot in the arm for the supplier’s marketing efforts.

9) Blessing for a White Paper

A step up from a testimonial would be a buyer’s blessing to allow the supplier to create a white paper on how they’ve helped you.

For example, getting the supplier to tell the story of how they exceeded requirements for the buyers on a new project. 

10) Issue a Press Release

While I’ve never heard of it being done, there is one absolute ultimate carrot (apart from a multi-million dollar contract) which would ensure the extra mile from the supplier.

This would be to give the supplier their blessing to issue a press release to let the world know about the partnership. Ideally the release could also include a quote from the buyer.

Admittedly, this would only make sense if it was a very strategic and unique arrangement, and that a press release would make BOTH companies look good.

Some of these may be out of the question for your organisation. But hopefully they’ll at least give you a sense of what’s often valuable to suppliers, and some ideas on how you can help them to help you.

What are some other examples of ways you’ve been able to encourage suppliers to go the extra mile?

Would You Couchsurf to Make Business Travel Savings?

Splitting travel savings with employees may be the best way to encourage travellers to treat every dollar of company money as their own.

Couchsurfing - Travel Savings

A New-York based consultant, Geoff, has to visit a client in Seattle. He logs onto his organisation’s travel management system to book his flight and hotels.

The app recommends a flight that’s within budget and suits his timeframe. However, Geoff ignores this, scrolls through a list of other options, and selects a flight leaving later for a cheaper price.

Similarly, he chooses not to go with the 4-star hotel recommended by the system. He instead chooses a slightly cheaper hotel that’s still convenient to his destination.

Upon arrival in Seattle, Geoff walks past the cab rank to the bus stop. He’s thinking about where he can get a cheap but healthy meal to avoid ordering room service.

As he makes each travel-related purchase, he’s scanning receipts into his travel app, which subtracts the costs from his total travel budget.

Geoff is behaving like he’s spending his own money rather than his organisation’s travel budget. Why? Because in essence, it is his own money. His company has an arrangement in place where employees are allocated 50 per cent of the savings if they come in under their allocated travel budget.

It’s entirely automated. At the end of his trip, the travel management system takes the difference between the budget and Geoff’s actual costs, splits the savings, and adds half to Geoff’s next pay check.

Sharing travel savings encourages a cost-conscious culture

Why aren’t more organisations sharing travel savings? Possibly, it’s due to a myopic attitude where travel managers are reluctant to part with any savings whatsoever, preferring to allocate every dollar straight back to the bottom line.

However, there’s a much bigger prize at stake. Building a cost-conscious culture and creating that critical mind-shift where employees start treating company money as their own.

Shared travel savings might also fix the multi-billion dollar “open booking” problem. In the US, for example, 50 per cent of hotel bookings and 24 per cent of airline bookings occur outside corporate travel programs. This presents a significant compliance challenge and visibility problem.

Creating a policy wherein shared savings can only be claimed when bookings are made through the approved system would provide a major incentive for employees to comply.

Where can employees save on travel costs?

Here are a few ideas for frugal travel across transport, meals and accommodation:

Flights

Even if your organisation allows you to fly business class, do you really need to? What about flying at a different time of day to get a cheaper fare? A common reason employees go outside approved travel management systems is a belief they can find a better deal themselves.

The TripScanner start-up (acquired last year by Coupa) provides a clever way around this issue. Employees can book travel options via any website they like, so long as they sync their purchases with TripScanner. The software then automatically checks each booking against the company’s travel policy.

Ground transport

Can you take the train or a bus rather than a taxi? How about Uber? There’s always going to be a trade-off between the convenience of being taken directly to your destination and having to walk from the bus stop. However, with the prospect of an extra $25 in your pocket, employees might just choose the bus.

Meals

Consider grabbing a cheap meal rather than paying inflated prices for room service. Keep in mind that “cheap” doesn’t necessarily have to mean “unhealthy”. Eating well and affordably takes planning, as room service is most often ordered when busy travellers run out of time.

Accommodation

This is where your company’s travel policy need to be absolutely clear, because accommodation (and to a lesser extent, transport) involves a safety factor.

Having an approved list of hotels will stop truly frugal employees from trying to save drastically by booking hotels in undesirable parts of town. Or even (in extreme cases) going for an unconventional option such as Couchsurfing.

Setting it up

There are some things to bear in mind when setting up a system such as this.

  • Better planning: Saving money when travelling takes planning, because needlessly expensive flights, taxis and meals are usually chosen due to tight schedules.
  • Get the budget right: Travel managers need to do their research to get the travel budget right for their organisation, as setting it too high will mean losing money unnecessarily. Fortunately, there’s software available to help with this task. A sophisticated travel management system will allocate a unique budget to each trip, rather than a blanket dollar figure for all travel.
  • Make sure your travel policy suits your risk appetite: Travel policies can vary wildly, from tightly-controlled lists of accommodation options, to a free system where employees can do as they like. Again, encouraging frugality may cause some employees to select unsafe options, which is why couchsurfing or ridesharing may need to be excluded from the system.
  • Frugal travelling isn’t for everyone: For some, saving money when travelling might not be a priority. Having a comfortable flight or good night’s sleep in a nice hotel might be much more important than winning back a few hundred dollars extra per month, and that’s fine. Again, it’s important to set the budget as accurately as possible, and be clear in your travel policy about what happens if employees go over budget.

Does your company share travel savings? What are your tips for beating the travel budget?

The Truth? Businesses Still Struggle with Indirect Procurement

The procurement industry is evolving at a rapid rate. But it still has broad issues with indirect procurement and how to determine value for money.

Indirect Procurement

No matter where you are in the world, indirect spend is a notoriously difficult area for CPOs to control. Because of this, it presents huge potential for savings for companies.

Direct Procurement refers to the act of acquiring raw materials and goods for production. Indirect Procurement is the act of purchasing services or supplies required to keep the day-to-day business ticking over.

However, there’s a consistent message out there that procurement, and indirect procurement in particular, is under-appreciated by the broader organisation.

Establish Internal Targets

Celia Jordaan is the founder of Australia’s Ichiban Commercial Solutions, which helps businesses with tendering, risk management and procurement solutions.

Over two decades, Jordaan has worked in a number of different countries, locations and cultures. She has experience across procurement, supply chain, contract management, law and risk.

The procurement function often influences the company budget, but doesn’t always entirely control it, she says. The difficulty with indirect procurement or procurement for internal use, is that it’s difficult to determine value for money.

“Indirect procurement is generally seen as soft services that aren’t adding direct value to the cost of production or core business. However, it’s a service that’s vital in order to be able to effectively make the business run,” Jordaan explained.

The downfall in many cases is a clear budget. Professionals need to establish their own internal targets around value created, and qualify what they do and the value they create.

“There’s no real crystal clear way to measure the cost avoidance elements of indirect procurement. It presents a lot of complexities.

Procurement professionals need to sell their own value, and put their own processes in place that helps them demonstrate the value they can create for an organisation, Jordaan says.

Procurement Outsourcing?

David Rae, editor of Procurement Leaders, wrote in ‘Procurement Outsourcing – Managing Indirect Spend’, that change will come when CPOs get involved and influence buying behaviour across the entire organisations, and in every category.

They must also apply the same rigour to the indirect categories as they do to direct materials, he wrote.

“The research shows that, while there is still much work to be done, CPOs are tackling this area. One way of doing so is to engage an outsourcing partner, who can often bring category expertise, greater buying power and improved compliance to an organisation’s indirect spend categories.

“And, while it continues to struggle to match the likes of HR and finance in terms of uptake, there are signs that procurement outsourcing is really taking off,” he wrote in the report.

Under-Investment in Indirect Procurement

Meanwhile, a research report by Proxima explores what procurement can do to redefine how it’s perceived by the broader organisation.

The report says that a vast majority of C-suite executives feel that indirect procurement is under-invested across the UK, Europe, US and further afield.

This prompted Proxima, in conjunction with NelsonHall, to run a research study to uncover perceptions, attitudes and desired outcomes of indirect procurement. It was hoped this would catalyse the common sense that procurement could and should play a greater role in most businesses.

Responses indicated that indirect procurement in some organisations is perceived to have a role that is tactical and administrative. Some respondents advised that it can create process blocks, and can, on occasion, even be antagonistic to specialist suppliers of the business.

Five Key Challenges

The research found five key challenges for the procurement function, impacting on CPOs’ ability to effectively manage indirect expenditure.

These include, as outlined here in the report:

1. Lack of capacity

The indirect procurement team has to focus on sourcing commonly purchased and high volume goods and services, as well as transaction processing.

2. Lack of political clout

CPOs involved in the research study tended to be quite self-critical. This was particularly prevalent in areas such as their ability to introduce process improvement, and to increase the level of spend under contract.

3. Lack of mandate

The primary responsibility for most indirect procurement categories often lies within the business units. For some categories, such as travel, it may not even be clear as to who actually owns the policy.

4. Lack of awareness and low visibility of indirect procurement

Indirect procurement is often seen as less important than direct procurement in the eyes of senior executives. It is seemingly even less important at the business unit level. Many stakeholders view an indirect procurement professional’s role as the ‘rubber stamper’ at the end of the process.

5. Organisations lack the skills required for effective stakeholder management

A common perception held by CPOs and CFOs is that the indirect procurement function has to find ways of working more effectively alongside the various business units and stakeholders within each business unit.

Procurement Goes Cloud-Based To Mitigate Risk

Many procurement professionals aren’t taking all available routes to mitigate risk in overseas transactions. Cloud-based solutions can change this.

Mitigate Risk

A high percentage of procurement professionals aren’t doing everything in their power to mitigate risk when trading with overseas countries, according to an Australian fintech startup.

Trade with international countries can be fraught with issues, warns Hugh Young, General Manager at Octet.  And while there are tools on the market to help mitigate risk, there are plenty of major companies that continue to trade without any kind of secure platform in place.

Mitigate Risk – Know Who You’re Dealing With

Young says that, to start with, it’s critical that you know who you’re dealing with. “It’s critical that anyone dealing with China and ordering meaningful volumes actually goes and visits the supplier on their own turf, which is a lot different to meeting them at a trade show,” he says.

He also adds that nothing can replace the peace of mind that comes with actually seeing the factory you plan to do business with. This helps to get get a clear picture of their production processes, something that’s paramount to mitigating risk.

Another thing for companies to consider is the importance of maintaining the professional relationship, and visiting at least once a year. Some businesses have chosen to engage quality control agents in China, or other countries, which is also worth considering.

Fraud Risk in Exports

“The other major issue is fraud risk. Quite often Chinese exporters are SMEs and they’ll require a company to pay a large balance to be able to finance the manufacturing of the goods for you.

“But we don’t recommend agreeing if they’re asking for the balance to be paid before the shipment has left China. The risk of fraud is too high. It’s also possible for these suppliers to go out of business, taking your money with them,” warns Young.

Another common issue is the exporter deliberately uses a related company bank account, which looks almost identical to the other one. This can cause confusion for procurement, and could mean money is paid into an account that isn’t the exporter’s at all.

Businesses must also be sure to carefully check bank account details, and the names on all of the invoices they’ve been sent. At all times, individuals must check the documented supplier paper trail carefully.

Don’t Get Caught With Hands in the Cookie Jar

While some companies have created their own secure online platform to mitigate risk, many others are leaving their company exposed by not utilising one of the myriad existing secure platforms on the market.

“The world is in a cloud environment. Procurement professionals need to catch up, and implement something that’s going to protect them and their company’s reputation. Everything is shifting toward a secure platform over the coming decade.”

Young says that it’s only a matter of time before something goes wrong for those not utilising a platform.

“The procurement department only needs to get their hand caught in the cookie jar once for the mud to stick,” he says.

Connecting Customers & Suppliers

Octect GM, Hugh Young
Octect GM, Hugh Young

Meanwhile, Octet has partnered with Chinese bank Asiafactor to provide SMEs with a global payment platform. The company will now connect its customers across China to more than 10,000 suppliers around the world.

The partnership means Octet can cater to both existing domestic small to medium enterprises, as well as a range of prospective exporters throughout China.

Octet has also been working with Westpac to offer Australian businesses a platform to facilitate overseas credit card payments. The platform supports 10 foreign countries, and is the first platform of its kind for Australian banks.

Octet is a supply chain management and financing platform that enables people to manage and pay international suppliers. 

The platform is utilised by more than 1,000 Australian and New Zealand importers, spanning more than 60 countries, and facilitating over $1 billion in transactions. Suppliers include Unilever, L’Oreal, Mars, BlueScope Steel and packaging giant Visy.

How The Space Elevator Could Open Up Interplanetary Supply Chains

The prohibitive cost of lifting payloads out of the Earth’s atmosphere is hamstringing humanity’s conquest of the solar system. The space elevator may soon make chemical rockets a thing of the past.  

space elevator

At the Coupa Inspire conference in May this year, keynote speaker Richard Branson announced plans to have Virgin Hotels orbiting the planet within 40 years.

Branson’s famous “anything is possible” attitude was on display, as he breezily talked of shuttle trips between his space hotels and the surface of the moon, and observatory domes where guests can marvel at the Earth from above.

Branson’s audience predominantly consisted of procurement professionals, many of whom were turning their minds to the challenge of maintaining a supply chain in space.

Considering the vast amount of goods and services that flow through any mere terrestrial hotel, the prospect of supplying a space hotel, or any other off-planet settlement, is daunting.

The Payload Challenge

It’s unbelievably expensive to send cargo into space. These days, all eyes are on SpaceX. Elon Musk’s company is leading the way in reducing the cost of payload delivery through lean operations, integrated engine production and reusable spacecraft.

At full capacity, the Falcon 9 rocket can lift cargo to low-earth orbit at US$1233 per pound ($2719 per kg). NASA is paying SpaceX $133 million per mission to resupply the International Space Station. This equates to $27,000 per pound ($59,500 per kg) of cargo delivered.

Reducing the cost of payload delivery is one of the highest priorities for Musk, who has stated that $500 per pound ($1100 per kg) or less is an achievable goal.

Even with payload cost being driven ever-lower, the expense still makes the prospect of a regular delivery service (such as a space hotel supply chain) prohibitively expensive.

Tech Insider recently published a playful article working out the hair-raising costs of some of the unnecessary items NASA has launched into space. They calculated that astronaut Kjell Lindgren’s bagpipes, for example, would have cost anywhere from $54,600 to $259,000 to deliver.

The International Space Station’s espresso machine weighs 44 pounds (20kg), and would have cost between $400,400 and $1.9 million to deliver.

The Space Elevator – A Better Way to Lift Cargo into Space

Arthur C. Clarke predicted that the space elevator would be built “about 10 years after everyone stops laughing”. That’s because at first glance, it seems like pure science-fiction. The thing to understand about how the space elevator would work is that it isn’t a tower or ladder to space, but rather a tether.

Space elevator structural diagram

The Earth-end of the tether would be attached to the surface near the equator, while the other end would be anchored to an object in space (most likely a space-station) beyond geostationary orbit, or 35,800km in altitude. The tether would therefore be held stationary under tension as the space station tried to “pull away” from the planet.

At present, no material exists with the tensile properties required to construct the tether, but teams all over the world are working on the challenge.

Recently, carbon nanotubes, boron nitride nanotubes, and diamond nanothreads have all been considered viable new materials, enabling scientists to inch ever closer to the required tensile strength.

There are many other challenges involved, but commentators agree that once the tether question has been solved, the other components of the elevator will be relatively simple to design and construct.  

A Freight Train to Space

Once constructed, laser or solar-powered ‘climbers’ would ascend and descend the tether, taking materials and passengers to geostationary orbit. Payload prices could be as low as $100 per pound ($220 per kg), with two added advantages.

Firstly, proponents predict a working elevator would be significantly safer than chemical rocket technology. And secondly, the climbers would operate continuously.

Journalists often write about the space elevator in the singular, but there is no reason why the planet would only have one. In fact, it’s likely that multiple competitive nations (and private enterprises) would insist on having their own.

Opening Up Space

With working space elevators, the enormous expenditure of fuel used in boosting chemical step-rockets up through our atmosphere will become a thing of the past.

Spacecraft will no longer be needed for surface-to-space lifts or descents. Instead they will only be needed to move from point to point in space. After an initial boost, a craft in space simply falls freely along its trajectory, with only short-term adjustments and deceleration required.

Space elevators need not be limited to Earth. Within the next century, we may “drop” shorter tethers to the surface of the moon and Mars, with regular cargo and passenger services plying their way between the space stations at the top of the elevators. The complex task of keeping a Moon or Mars colony supplied would become much more feasible.

But that’s thinking a long way ahead. In the medium-term future, Branson’s luxury space hotel may well sit atop a space elevator, supplying its every need.

In the short-term, any day now we may read that scientists have discovered materials strong enough to construct the tether. At which point – as Arthur C. Clarke predicted – everyone will stop laughing.

eCatalogues are Just Spreadsheets, What’s the Big Deal?!

How many times have you heard someone compare eCatalogues to spreadsheets? It’s time to clear up the differences!

eCatalogues on Tablet

This article was originally published on Suppliers Matter.

That’s what the owner of a small office supply company asked me back in 1999. I was an independent supplier enablement consultant, and it was taking me longer than he wanted to create his first electronic catalogue in Ariba for his largest customer.

Here are the ten things I wish I had said as to why electronic catalogues aren’t “just spreadsheets”. I’ve also added a handful of insights that some newer eProcurement solutions now have to offer when it comes to eCatalogues.

The end result may “simply be a spreadsheet”, but it’s ensuring what’s in this spreadsheet that requires due diligence.

1) Appropriate Selection

eCatalogues need to contain all things that the customer buys from you, and none of the things you’re not supposed to sell.

If you have the contract to sell office supplies, and you’ve been given explicit instructions to only include office supplies, then you can’t include the kitchen sink.

When it’s time to export item information from the back end system, it should be just for your customer’s desired items.

Some larger suppliers have been known to insist their eCatalogues can’t be filtered, in an effort to sell more stuff. You don’t want to play those games.

2) Accurate Pricing

Obviously the prices for these items has to be accurate. Sometimes the calculation of the sell price can get complicated. For example, if it’s X per cent off list for one type of item, but Y per cent off for another. Or if there’s a list of most commonly ordered items that are more highly discounted than the rest.

If your customer finds one item that is priced higher than it should be, they’ll lose trust and question all other item prices.

Newer eProcurement platforms now support tiered pricing, bundles, configurable/custom options, etc., which can help when if you sell more complicated products or services.

3) Consistent Names

The item names are the first thing that a customer sees in their search results, so it’s important that they are strong and also follow a consistent naming convention, for example: Widgets, Small, Pack of 20.

Looking at a long list of items that are consistently named makes it easier for the customer to select the right item.

4) Rich Descriptions

This is one area where the initial effort up front can really make a big difference, but it takes investment. If you want to have your items found in search results, and also help your customer make the right choice the first time, you need rich item descriptions that thoroughly describe your items. You should take advantage of as much space as the customer can support. If they allow 255 characters, use them!

Some suppliers simply export the bare minimum item information from their inventory, which is often hard to understand. And what’s frustrating for buyers is that the supplier’s B2C site has often got great rich content. However, suppliers frequently have two separate item databases – one for B2C/marketing and one for B2B/eProcurement.

If you happen to sell items from popular categories, there are now rich content providers that you can use to enrich your information.

5) Granular UNSPSC codes

There are so many reasons to make sure that the UNSPSC codes assigned to your items are granular and accurate.

Granular meaning that you can’t just assign the ‘Office Stationery’ code to all your items, even the office furniture and computer accessories.

And accurate, meaning that if you’re selling a standard office scissor then you need to use the correct code, and not just the first reference to scissors you see when searching the UNSPSC database.

The customer may have purchase requisition approval rules reliant on the codes to determine who should approve the request. IT may need to approve the computer accessory, and facilities may need to approve the furniture. Plus, your customer’s reports will be much more accurate in terms of spend reporting.

A new consideration is eProcurement systems now have browsable category trees that rely on the UNSPSC to assign the item to the most appropriate category. You want your items to fall under the right bucket and not all get clumped into one.

6) Images for Every Product

This is a no-brainer. You have to make sure as many of your items (if not all) have at least one, nice looking image. They should be professional looking, high resolution, hosted on a publicly available webserver, and assigned to the right item.

And if your customer’s eProcurement system supports multiple images, then give them more. Many suppliers don’t take advantage of this, however, and just do the minimum (if that). Make your items shine!

7) Valid Units of Measure

You don’t want to do all this work and have the catalogue not load because your internal unit of measure is “Each” and the customer’s system needs it to be “EA”. You need to ensure that all your items are using the UOMs that your customer supports.

8) Internal Part Numbers for Automation

If you want to automate the fulfilment of the corresponding electronic purchase order and have it flow seamlessly into your system, the part numbers have to be perfect.

You can’t manually create an item in the catalogue file called WIDGET and expect it to work. You need to export the part numbers out of your system, and only use those part numbers in the eCatalogues.

9) Properly Formatted File

All this has to be exported into a properly formatted file that matches the customer’s file format requirements.

  • XLS vs. XLSX vs. CSV vs. XML vs. CIF vs. ETC.
  • Field titles with correct names.
  • Not exceeding each field’s maximum length.
  • Ensure all their required fields are populated properly.

This is where it can get a little technical, but it’s a one time effort.

10) Automating the Update Process

Fortunately, we didn’t have to update static eCatalogues very often, so doing this once or twice a year was acceptable.

New eProcurement systems now support simple CSV files, and allow suppliers to upload securely. This means suppliers are now in a better position to automate the export, any mapping, and upload using relatively simple scripts or product information management (PIM) tools.

Suppliers, what else would you have told him? (Apart from go do it yourself!)