Procurement Across Borders – Understanding CQ

In the first of a series of articles, Tom Verghese introduces Cultural Intelligence (CQ), what it means and why it is so important in business today.

By StepanPopov / Shutterstock

Last year, one of my clients returned from a holiday to India. She expressed to me her dismay at the different entrance prices at various monuments and tourist site sites that she had visited. She believed that the different pricing structures for locals and tourists was unfair. and that there should be one price for all entrants, regardless of their status.

I reminded her that she was a visitor and that what she considered to be fair pricing was reflective of what she was familiar with. For example, in countries like the US and UK the pricing structure tends to objective, and having one price for all is considered to be fair and equitable. However, in many parts of the world pricing is subjective with many variables influencing price such as how well I know you, the relationship we have, the company that you represent, the links and connections that you have, and even what time of day it is.

This example serves to demonstrate how ‘culture’ can play a part in even the simplest everyday situations at both a personal and professional level. In this story, the conflict of one set of cultural norms over another highlights how cultural differences can create conflict and misunderstandings.

Let’s take a look at some of the defining features of culture so as to better understand how we interact with culture. Culture is the lens through which we view the world.

  • Culture is subjective. That means we use our own culture as a reference point. The practices in our culture are what we use as norms and we use these to compare other cultures
  • Culture is deep. Culture is mostly transmitted through stories, which provide a history of that culture. When we look at tensions or animosity and hatred that passes from one generation to another, it’s because those stories are passed on and perpetuate a view that may no longer be accurate
  • Culture is biased. This means that each one of us interprets and makes judgements by the standards inherent to our own culture
  • Culture is tacit. That is we never really consider or think about our culture until we are outside of it. Culture is important because it essentially impacts the way we think and behave and impacts our worldview.

Most people believe that they have some degree of cultural awareness. This may mean they can identify the languages, foods or traditional dress of certain countries, or other defining characteristics.

However, in our increasingly interconnected and globalised world, as organisations are being required to source talent and conduct business across multiple countries with people from a diverse range of backgrounds, a broader understanding of Cultural Intelligence (CQ) is necessary. Having an understanding of what CQ is and how to practically apply it can make it easier to navigate different cultures. For specialists in procurement, the ability to use CQ is particularly relevant. One of the biggest challenges when working across cultures is that we have expectations that people are similar to us and operate according to the same rules. This is a grave error.

What is CQ?

CQ is the capability to work effectively in culturally diverse situations. It goes beyond existing notions of cultural sensitivity and awareness to highlight a theoretically-based set of capabilities needed to successfully and respectfully accomplish your objectives in culturally diverse settings either locally or globally.

CQ can be broken into four components. These components can be both inherent and developed. These four components are:

  1. CQ Drive – The interest, motivation and confidence to adapt to a multicultural situation. It consists of intrinsic (i.e. meaningful work) and extrinsic interests (i.e. financial rewards) and the drive to learn and understand cultures, their norms and behaviours
  2. CQ Knowledge – Understanding cultural similarities and differences. This includes knowledge of the values, norms and practices in different cultural settings
  3. CQ Strategy – Awareness and ability to plan for multicultural interactions. It incorporates how we apply our CQ Knowledge insights
  4. CQ Action – The ability to appropriately adapt verbal and non-verbal communication in cross cultural situations, including how well we can adapt when things don’t go according to plan

Over the next 12 months we will be discussing each of these components, what they are and the ways in which you can further develop your own CQ and make improvements on your performance when interacting in cross cultural situations to obtain better outcomes.

Stakeholders Are Your Customers. Ignore Them At Your Peril

If you fail to meet the expectations of key influencers, projects will be delayed, will only be partially workable or at worst, doomed.

Stakeholders can and will influence the outcome of your project, especially if they are likely to be directly affected by it. If we fail to meet the expectations of key influencers, projects will be delayed, will only be partially workable or at worst, doomed.  

Who are your stakeholders?

Stakeholders are any of those individuals that can impact your activities by:

  • removing obstacles and championing  your goals
  • by slowing down or blocking your activities  
  • influencing others about your project –positively or negatively

Many of your stakeholders may not initially be obvious.   They can be:

  • End-users of the product or service
  • Line managers, executives and support staff
  • Procurement team members and co-opted subject matter experts 
  • Suppliers and their subcontractors
  • Government agencies and the media
  • Customers and society at large

Why is stakeholder management so difficult?

Stakeholders have conflicting priorities and often are not working towards the same goal. Personal ambitions may trump the company vision.  You may be the messenger bearing bad news or saying no to their proposals. Seasoned procurement people use their persuasive skills to win support from stakeholders.  This can be the difference between success and failure.

Because stakeholders will change over time, we need a systematic approach to identify and prioritize those influencers.  A stakeholder map is a simple analysis tool we can use to identify which key people have to be won over.

A simple shareholder map

This map provides a guideline on how to manage stakeholders based on their interest and their influence:

Figure 1   The stakeholder analysis grid

The Greens

Stakeholders with a high level of influence in your specific project and who also have a high level of commitment and support must attract the most focus.   They are usually easily identified and are easy to engage. They usually include line managers and end-users.  Ensure you continue to maintain their support through good communication and monitoring their needs. These people can be used to influence others.

The Oranges

This is an important group to manage and may include senior management, e.g. CEO or GM. Keep them satisfied.   Increasing their interest or commitment to your project through regular updates can be very helpful.

The Browns

These customers are your supporters. Keep them informed, their enthusiasm may be infectious and they may have more influence in the future.  Less time is needed to maintain this group. 

The Purples

External stakeholders such as the media and government may fall into this group so it is not necessary to spend too much time there. But keep them in the loop and monitor them as they may move into another group!

Identify all key stakeholders and plot them in the grid in Figure 1. 

Steps to follow to ensure success of any initiative:

  • Concentrate your time on working with key stakeholders who can make or break the initiative. Make sure every stakeholder has an appropriate way to participate and offer input.
  • Understand and manage their expectations. Identify any potential adversaries early in the process and manage them directly by allocating key tasks to them. Persuade those people who may not be immediately supportive. 
  • Under-promise and over-deliver.  Think like a salesperson.
  • Keep everyone well-informed and build strong relationships with the people who support the project.  Recognise and reward positive behaviours to preserve the relationship and buy continued support. 

Dealing with difficult stakeholders

The first step is to clearly identify those stakeholders and work out what motivates them and what is causing their resistance. Ignoring difficult stakeholder behaviour is not recommended; take time to immediately identify the cause of their objections and the underlying issues. People want to feel understood and feel that their opinions matter.

Engage directly with the person directly without others present. This leads to more clear and calm conversations. Actively listen to what they have to say and don’t close communication channels because you don’t like what you hear.   Remain fair, objective, and professional, and remember to keep the project objectives within focus. Try to find common ground by asking open-ended questions.  

Why projects fail: communication is the key

Lack of frequent and accurate communication to and from stakeholders is probably one of the main reasons for the failure of projects.   Another is not listening to the needs and concerns of the key stakeholders, both internal and external. 

When to communicate with stakeholders

  • before the launch of a project to get buy-in. Early engagement is important.
  • at regular progress meetings held to keep everyone updated. Report back on progress (or lack of it) and milestones achieved.
  • before implementation to ensure alignment with the process and the proposed solution
  • at the end of a project to establish lessons learned

Stakeholder management is the process that we use to identify key stakeholders and win their support.  We use the analysis grid to prioritize them by influence and commitment. Understanding what motivates them is the first step to getting them on board.    

7 Tips For Today’s Procurement Managers

Alex Saric shares his top tips for procurement managers in order to succeed as the profession continues to evolve.


By Makistock/ Shutterstock

As the role of procurement continues to evolve, a new approach is required. Leaders are actively transforming their organisations, with a new mindset, new processes and new technology. There is no textbook answer to all of these – needs differ based on the organisation, talent, industry and other factors. Yet best practices exist and certain approaches are clearly driving procurement in the right direction. Having worked with hundreds of leading organisations as they transform procurement, I’d like to share some tips for procurement managers that should serve them well.

1. Digitise – Automation is your friend

A massive trend across companies is digitisation, with digitization of the Source-to-Pay process a key initiative for many CPOs. The inherent automation, which promises to only accelerate as innovations such as Artificial Intelligence (AI) evolve, is viewed suspiciously by many as a threat to jobs. There is no doubt certain roles are changing or even being eliminated by automation, but fundamentally it is critical to empowering procurement to succeed. As the list of objectives continues to grow, from a cost focus to risk management, driving innovation, improving cash, increasing revenue and more, Procurement is becoming ever more strategic. But doing so much more is only possible if capacity is freed, which is a key benefit of digitisation. Don’t resist digitisation – it’s coming. Embrace it to redefine your role and become ever more valuable to your organisation. Leaders are already doing so, in some cases automating 99 per cent + of their procurement and AP processes, CACI being one great example.

2. Know your suppliers

Supply risk is hardly new, but with ever growing dependence on suppliers paired with more complex, global supply chains, it is ever harder to manage well. And with social media amplifying scandals around the world in minute, the potential impact has never been as large. Few things can strike terror in a CEO’s heart faster than a scandal or supply shortage, which we read about daily. Even compliance, take GDPR for example, often requires ensuring suppliers are compliant. Procurement leaders must ensure a solid understanding of their existing and potential suppliers. It can be a daunting task, but there is so much information now available and tools such as SRPM solutions that can bring it together, generate insights and make them available at your fingertips. Integrated action plans, flexible surveys and other capabilities let you quickly gather information, address deficiencies and ensure auditability of your actions. Leaders are going a step beyond, not just passively assessing risk but proactively helping mitigate risk, as Fannie Mae  does by notifying suppliers at risk from cyber security threats.

3. Build a solid data foundation

There is so much focus today on the latest innovations, with AI front and center of most conversations. But not many actual success stories. A key reason, as confirmed in a recent Forrester study, is poor quality data. Procurement leaders that are having success operating smarter, leveraging analytics and technologies such as AI, are addressing data quality in parallel to implementing new technologies. Integrated suites generate clean data, at least if they have a unified data model, and master data management solutions are available that can address issues in back end systems, cleaning and normalizing suppliers records for example. Embrace new technology but don’t forget to work on the basics too.

4. Believe in Darwin

Charles Darwin famously stated that “It is not the strongest or the most intelligent who will survive but those who can best manage change.” This was part of his theory of natural selection, but it has never been more relevant to companies than today. Markets are rapidly evolving with a continuous stream of new regulations. New technologies are disrupting traditional business models. New risks such as cyber security are arising. The only certainty about the future is uncertainty. Procurement is well placed to help companies adapt, meeting new regulatory requirements, shifting supply to optimise an evolving tariff landscape and much more. Successful Procurement leaders are ensuring their organisations are agile and can evolve. That means being flexible in processes and it also means ensuring technology supports rather than constrains your plans. The shift towards Cloud-based solutions offers many advantages to companies, but can also impose constraints, forcing companies to adjust processes to the software and tying your hands if your needs change. This is a key reason why so many companies switch providers – they realise too late the technology doesn’t meet their ongoing needs. Be sure any technology you implement is likely to allow you to meet unforeseen needs.

5. Care about your customers

Successful Procurement leaders are seen as helping employees do their jobs better. Increasingly, that means making the purchasing experience a pleasure rather than a hassle, as employees expect consumer-like shopping at work and home. Companies of course have constraints, such as buying off contracts or from preferred suppliers, but that should be built into your procurement process so it feels seamless to employees, who are guided to what they need and can easily track the status of orders. The more procurement can be viewed as making employees happier and more efficient, the better for the function and your career. And the more automated this process, the more time for strategic activities.

6. Engage your suppliers to innovate

Suppliers are a vast pool of potential innovation. Much talk is made of untapping that innovation but far less results. This is a tremendous wasted opportunity, and one that needs more attention. Success here can drive significant revenue opportunity and reduce costs, ultimately greatly increasing the stature of procurement in an organisation. A great example is MBf Holdings, where procurement collaborated with suppliers to develop a new outpatient services offering to not only save a strategic customer, but grow share of wallet and create significant upsell opportunities. The key to success here is making such collaboration scalable, through effective platforms that allow sharing of requirements and communication between internal stakeholders and suppliers.

7. Think beyond best-in-class

As a final tip, I feel its important to look at your end goal. procurement teams are often obsessed with benchmarking against and achieving best-in-class performance on a range of metrics. This is all good, but the most effective procurement teams don’t aim for best-in-class as their end goal but an interim step. You don’t build a competitive advantage by being as good as your competition and doing everything the same. You also don’t attract and retaining talent by forcing them to operate in a fixed, generic best-in-class process. Winners empower their talent to bring their best ideas to life and do a few strategic things differently, better than the rest. A leading Telecom provider realized they had an untapped source of revenue in used mobile devices so configured their sourcing tool to run forward auctions, generating tens of millions in new revenue. Join the upcoming webinar to hear how Meritor, a leading automotive supplier, configured a unique New Product Introduction (NPI) process to drastically accelerate launch of more profitable products, driving huge share price appreciation relative to peers. So if you rather win the World Cup than just play in the tournament, leverage technology that can both bring you to best-in-class quickly but still empower you to go beyond.  

Registrations are now open for Ivalua NOW The Art of Procurement, which takes place in Paris 10th-12th April 2019.

The event will bring 1000s of procurement, supply chain, and finance leaders together in Paris at the Carrousel du Louvre and is set to reveal technological innovations that will transform the art of procurement and empower leaders to successfully transform their functions and maximise value to their organisations.

Weaning Stakeholders off the Procurement Welfare Programme

Where does procurement’s remit start and end? As these lines get more and more blurred, it might be time for procurement to take charge and start the painful weaning process.

By RGallianos/ Shutterstock

Time and again the procurement profession has asked for a “seat at the table” and the opportunity to be seen as a strategic business partner. In some cases, requests have been accepted and change has been forthcoming. In other cases, change is proving more difficult to put in place.

However, in this ever-shifting landscape of change and, perhaps in its eagerness to be accepted, procurement may have stepped outside of its remit. That’s not to say that this is a bad thing, but there is strong argument to suggest that what procurement has done is create a rod for its own back.

Public procurement, and procurement as a whole, already has its hands full with the myriad tasks it takes to get a good tender out to the market. Research and analysis, supplier engagement and internal stakeholder management all take time. And that’s not to mention the contract management that should be carried out post-award too.

But there’s a sneaking feeling that the lines around procurement’s remit are becoming a little too blurred, and that stakeholders are getting a little too used to the procurement ‘welfare programme’. And it’s perhaps time to start the painful weaning process.

The Welfare Programme

It’s worth examining in a bit more detail what we mean when we call it a ‘welfare programme’. Traditionally, procurement has been viewed as a transactional function, responsible for the preparation, issue, evaluation and award of tenders. It was a process-driven role with little or no strategic responsibility.

More recently procurement has been moving to become more of a strategic business partner, with objectives aligned with organisational strategy. More importantly, the function also has a role in setting these overall strategic objectives. However, this is where the issue lies.

As procurement has stepped up and been involved in strategy, its remit and responsibility has spread in line with this. And unfortunately, this has led to situations where professionals are undertaking tasks that have never resided in the procurement sphere.

Procurement should absolutely be getting involved with the writing of specifications, ensuring they are fit for purpose and allow for openness and transparency in the process. But the role should be one of challenging specifications, not actively writing the whole document. The same goes for short-notice or last minute tenders. Why take on all the time pressure ourselves when we’re presented with a requirement that we know, from the start, cannot be completed in the appropriate timescales?

The Budget Burden

From a personal point of view, this issue has been keenly felt in the public sector. Budgetary issues should come as a surprise to no-one (have you been living in a cave?!) and have pretty much been talked to death. The issue doesn’t just lie within procurement, but across the whole organisation. With resources stretched, departments will look to manage their workloads and focus on the most important and strategic tasks.

This means, inevitably, that certain tasks get passed around like hot potatoes and other tasks get left until the last minute.

Procurement, keen to be involved and to remove the (most would say ridiculous) notion of being a roadblock, has become like the school kid desperately trying to get in with the ‘cool kids’. For assignments, lunch money and extra credit read short-notice tenders, reining in non-contract spend and writing specifications. In the willingness to be a partner, the profession has lost its ability to push back on these tasks.

The question is, how does public sector procurement start the difficult process of weaning its stakeholders off this support programme?

Weaning your Stakeholders

The answer isn’t an easy one, but it does actually have a positive outcome all round. It stems from being able to push back, but in a positive way. For example, for specifications, rather than an outright no, ask what help your stakeholders need, whilst making it clear that the responsibility is still on them to write the document.

To assist with resourcing, put monthly (or more regular if required) meetings in the diary to discuss upcoming requirements. Procurement will be able to bring information to the table in the shape of work coming up for retender, plus what procurement resources are likely to be available.

For the most part, it’s about helping strategically define the best route for the organisation to get what it needs. There are stakeholders who still aren’t fully au-fait with the available procurement routes and how they can potentially save time. Not every procurement exercise needs to go through a full tender, taking the 6-9 months it can do to deliver an outcome. The public sector has the ability to use things like Prior Information Notices (PIN), Contract Notices and frameworks to help reduce timelines AND still deliver a good procurement outcome.

It’s neither rocket science nor a quick fix, but it’s vital to get it right and strike the right balance between helpful and put upon. Procurement may have a seat at the table now, but it’s now up to us to earn the respect we deserve for sitting there.

I’d love to hear your thoughts on this article and the upcoming series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

The Future Is Superfinance

At our last Procurement Thought Leadership Forum of 2018, sponsored by Basware, we discussed risk mitigation, Superfinance and the future of the CPO. 

How do you prepare for those black swan events that could truly impact your organisation? 

Can Superfinance transform the procurement and supply chain professions?

What challenges does the CPO of the future face?

At this Procurement Thought Leadership Forum, sponsored by Basware, we discussed risk mitigation, Superfinance and the future of the CPO. Check out some of the highlights below.

Understand Your World

Justin Crump, CEO at Sibylline thinks that every procurement leader needs somebody to tell them the world forecast so they can figure out when they’re going to need an umbrella.

Given the rate at which technology is evolving and how global events are impacting the world, it is increasingly difficult for companies to keep up without considering risk in real-time.

The growth in media means we care about things we didn’t before, have access to much more information and can communicate instantly. And being able to anticipate and respond to events around the world allows us to be more global and more competitive.

Justin believes that every organisation can implement an intelligence process to predict and mitigate risk but argues that any risk assessment is only as good as the day you do it. You can’t, for example, say that you assessed terrorism in 2015!

Listen to Justin speaking at Big Ideas Chicago earlier this year. 

Justin Crump CEO – Sibylline Speaking at Big Ideas Summit

The Future is Superfinance 

Louis Fernandes, VP and Country Manager, UK & Ireland at Basware, introduced the idea of Superfinance. That is, the bringing together of mind and machine that empowers finance and procurement professionals to combine emerging technologies with uniquely human talents.

As Louis explained, Superfinance means:

  • Creating a unified & accurate view of all the data
  • Being able to answer new questions
  • The ability to rely on data analysis to make better decisions
  • Transforming workforces to become insights-driven
  • Being behaviourally aware and understanding human limitations

Superfinance demands data insights, the transformation of business roles to ensure that employees are working collaboratively with machines and a change partner who champions it. It’s about putting insights at the heart of everything you do. 

The roles of procurement and finance professionals will fundamentally change with the rise of automaton and technology but Louis believes “predictive analytics and AI enriches the human condition. Humans are uniquely good at everything that isn’t programmable such as abstract thinking and the ability to reason.”

Holding the right data is absolutely critical in order to harness the benefits of new technologies. If an organisation can turn all the data they hold into tangible customer value by leveraging machine learning and AI they can actually begin to benefit from these technological advances in the market. But to do so relies on having the right volume, quality and completeness of data.

Once you have meaningful and relevant financial and procurement data in place, it allows your teams to:

  • Negotiate better prices and select the right suppliers, thus reducing supply-chain risk
  • Make well-informed, strategic decisions
  • Replace manual supplier catalogue maintenance processes 
  • Ensure master data integrity
  • Work in a fraction of the time and cost

“If you don’t have a view to the future when you are evaluating automation options, not only will you not achieve your business case for today, but three years from now, your system will be obsolete,” Louis asserted.

“We have to embrace the opportunity to work in collaboration with AI. AI won’t replace people but people who use AI will replace people who don’t”

Vision from a CPO

Nick Dobney, former Chief Procurement Officer of Puma Energy and Andrew Cameron, Group Chief Procurement Officer, RSA Group led a group discussion on the challenges and opportunities a CPO must face and what their predictions are for the future of the profession.

Hear more from Nick Dobney, a speaker at Big Ideas Zurich, in the interview below:

Nick Dobney, former Chief Procurement Officer – Puma Energy speaking at Big Ideas Zurich

Procurious’ Procurement Thought Leadership Forum was sponsored by Basware.

Are Smart Contracts A Game Changer for Procurement?

Are smart contracts, enabled by blockchain, the next big thing or just a temporary hype?

What is a contract? Put simply, a contract is any agreement that is built on the logic “if…[ABC] – then…[XYZ]”. And we make these kind of arrangements very day both in business and our private lives.

  • If I’m working on the development of the Procurement department at a particular company from 8am to 5pm Monday to Friday – then I’m paid £5000 on the 25th day of every month and I earn the right to have 25 vacation days per year
  • If I pay £45 on the first day of the month – then I get an unlimited internet package for the entire month delivered to my IP address from this internet provider

This is the basic logic behind all kind of contracts.

What is the no.1 problem with contracts today?

Nobody can guarantee the implementation of a contract’s conditions on both sides.

The employee might come into the office every day, but half of their working time is spent watching YouTube in the coffee area.

Maybe you pay each month for your internet service, but the traffic is too slow and connection gets lost at the most important moments…

In business these potential problems are solved by official contracts where a breach of contract could result in legal action.

But why should I trust my lawyers, my banks and the courts more than I trust my own business partners? Ultimately we are mutually dependent on each other so my business partner should be interested in maintaining that mutual trust. Moreover, why should I pay all these middlemen to implement and monitor contracts, why should I spend my time and money on court cases if the contract conditions have clearly been violated by the other party?

Blockchain is already addressing these issues with some success. And these “if… – then…” algorithms created with Blockchain technology are called smart contracts.

Example of Smart contract logic: Purchase of manufacturing equipment

Imagine a manufacturing company, MANCOM, needs to double its packaging line capacity. They are planning to get the new packaging equipment according to their technical specification, with production output of 10,000 pieces per shift, up and running at full capacity until 1st of June 2019.

After running their request for quotation (RFQ) – they have selected a company, YOURPACK, and prepare their Smart contract.

These Smart contract can include the following conditions in the protocol:

In the best case YOURPACK delivers the equipment to MANCOM before the 1st of March 2019, and gets 50 per cent payment automatically. Then before the 1st of June equipment runs with the planned capacity, and gets another 50 per cent automatically from MANCOM’s account.

If there are delays with delivery or installation – payment is reduced accordingly. So YOURPACK’s interest is to do everything in their power to make things in time.

If MANCOM delays the payment – the equipment blocks itself and cannot be used. So it is in MANCOM’s interest is to pay in-time and in full.

Once again, the main principle of the Smart contract is to use “if…then…” logic. And to decide upon the precise triggers that will lead to specific consequences. An important aspect of Smart contracts is automation – that is avoiding the human factor after the agreement is validated from both sides.

Invest time and efforts in writing down the causes and effects, which should be clear and transparent and which cannot be misinterpreted.

After you have agreed on the principles and the “if… then…” algorithms – give the assignment to programmers who will create their codes and protocols based on Blockchain.

Blockchain: the enabler of Smart contracts

At the heart of Blockchain we need the following core ingredients:

  • asymmetric cryptography – which gives the ability to create the records and protect them
  • distributed systems – which gives the ability to transfer value by making updates to the records

And the beauty of blockchain is that is allows us to digitally sign transactions. And what is even more important – you can prove it. After the record is created and distributed to the network, no one can modify or change it without others being aware of it. The levels of security and traceability are incomparable to traditional contracts and transactions.

Today we create huge contracts with numerous clauses and appendices. We hire expensive lawyers to create these contracts and then we hire yet more expensive lawyers to protect our rights, and prove in court what we meant by all those numerous clauses when the contract was first written.

Comparison table: Smart and Traditional contracts

Smart contractsTraditional contracts
Program or protocol, which uses Blockchain technology Paper documents composed using corporate and legal standards
Based on code, written in computer language Based on legislation and written by lawyers
You need assistance with defining terms of contract and with coding You need legal assistance to compose and register contract
Contract conditions are unchangeable once approved by all parties. They are transparent and automatically checked. If contract terms are violated – certain penalty, punishment or sanction occurs automatically Can be amended or interpreted differently by different lawyers. Conditions may be partly fulfilled or poorly fulfilled. If contract terms are violated – you resolve conflicts by negotiations or in the courts
The security of the transaction is guaranteed No guarantee, most laws can be bypassed
All transactions carried out without third parties and intermediaries Transactions are made with a number of other involved parties: lawyers, banks, courts or public services…
Transactions may happen using Crypto-currencies Transactions are made using traditional currencies through banks
When the terms of the contract are fulfilled, the exchange of values takes place instantly Exchange of values occurs with delays
The contract can be concluded with a person from anywhere in the world without personal presence The contract is signed only with the personal meeting of the two parties
Protection from corruption or fraud High risk of fraud, corruption or bribery

The next big thing or just a temporary hype?

Smart contracts are facing many challenges on the way to mass application in Procurement.

I don’t know how fast it will become a common practice, or the full possibilities behind blockchain technology for Procurement and Supply Chain Management, because we are only at the beginning.

In today’s world new technology can challenge and change the status quo within a matter of years. And I advise you to be at the forefront of these changes.

Modern Slavery: Don’t Get Named & Shamed In 2019

How should procurement and supply chain professionals prevent and address modern slavery in their supply chains?

The first day of 2019 saw the implementation of the Modern Slavery Act in Australia, requiring organisations above a certain size – consolidated revenue of A$100 million – to report annually on the actions they are taking to address modern slavery.

The Walk Free Foundation’s Global Slavery Index 2018* estimates:

•  In excess of 40 million people globally are subject to some form of modern slavery and approximately US$150 billion per year is generated in the global private economy from forced labour alone

• 24,990,000 people in the Asia-Pacific Region are ‘enslaved’, which accounts for 62 per cent of all modern slavery victims

•  15,000 people are currently victims of modern slavery in Australia

As organisations in Australia begin turning their focus to understanding their risk profile, there could well be a significant rise in these figures. With the legislation ensuring access to a public register revealing all the details of the submitted company statements, we can expect more noise online about the state of the nation when it comes to modern slavery, as well as the organisations implicated.

Organisations might be named and shamed for their lack of reporting, incomplete reporting or lack of action. As a result of the public access, board directors will be acutely aware of the risks to their brand reputation and demand much greater visibility of their supply chains.

Enter the procurement and supply chain leaders who are increasingly becoming the custodians of social responsibility in their organisations. Many organisations will be ignorant as to the scale of modern slavery risks in their supply chains. Forcibly detained adults and enslaved children work in many industries including fashion, fishing, cocoa, cotton, clothing, cannabis, construction and prostitution.

Integrated, global supply chains make it hard to tell whether products, even those that are stamped “Made in Australia” have at some stage relied on slave labour or underage workers as part of the production and supply processes.

Boards of organisations will need to accurately report:

1.The extent of their exposure to risks of modern slavery in their operations and supply chains

2.The action they have taken to assess and address those risks, and importantly

3. The effectiveness of their response

Some organisations may even take the next step and act strongly and visibly to help address the issue and help reduce or eliminate the slavery issue

How should the procurement and supply chain professional prevent and address modern slavery

  • Policy and Process Frameworks

It’s important to have a policy of some description that covers all the relevant principles. Policy also needs to extend into action by embedding changes into processes that cover things like supplier due diligence and ongoing performance monitoring

  • Understanding forced labour and monitoring slavery red flags in your data

Understand the areas of your organisation’s supply chain that will be particularly vulnerable to slavery practices. Many procurement platforms have additional features that can connect you to suppliers with known issues. There is no doubt that procurement and supply chain professionals will need to conduct extensive research into high-risk areas; certain countries, regions, suppliers, suppliers to suppliers, high risk supply chains, certain industries and products. Ignorance to the issue is indefensible.

  • On-site inspections

Determining high-risk suppliers is important but it will also be necessary to conduct on-site inspections to investigate further. On-site audits are one of the key mechanisms for monitoring supplier performance against agreed standards.

  • Developing and implementing a corrective action plan

Where an audit or an on-site inspection has confirmed instances (or suspected instances) of modern slavery, it is critical that the supplier develops and implements a Corrective Action Plan (CAP). The purpose of the response should be to clearly define corrective and preventative actions for resolving any non-compliance identified during the audit or inspection.

  • Engaging Suppliers

A problem as large as modern slavery will never be effectively impacted by policies alone, setting standards for suppliers, developing action plans and monitoring their implementation. CAPs will only be effective in their remediation activities if they are combined with programs that build a supplier’s capability. The ideal is for the supplier to integrate and drive antislavery policies into their own business. Be prepared to be involved in this activity and in some cases sponsoring the necessary business changes.

  • Building supplier incentives

The key to effecting changes needed is to develop supplier incentives, which ensure that the supplier takes ownership of the process and ensures continuous improvement.  Improvements need to be measurable to support the reporting and prove that progress is being made.

Such incentives may involve publicly announcing a supplier preference, in cases when the correct steps have been taken to address slavery. An alternate incentive might be to automatically qualify suppliers that have implemented robust procedures into their second tier supply base

What is the bottom line for Procurement and Supply Chain professionals?

While these changes to the regulatory environment are disruptive there is a silver lining in that it will bring new opportunities for the CPO to ensure increased visibility into the supply chain. Larger organisations, that have invested heavily in leading supply chain practices, may find themselves better equipped for responding to these changes. For others, the legislation will mean additional investment in order to play catch up, resulting in higher capital and operational expenditure.

Ultimately, the most effective response is likely to be organisations joining forces and jointly managing the supply-side, thus building an over-whelming demand for suppliers to abolish these practices. A slavery-free catalogue or certification may become the ticket-to-play for suppliers. A co-operative response will have the hardest hitting message of all and now is the time to be working together.

Procure with Purpose

Procurious have partnered with SAP Ariba to create a global online group – Procure with Purpose.

Through Procure with Purpose, we’re shining a light on the biggest issues – from Modern Slavery; to Minority Owned Business; and from Social Enterprises; to Diversity and Inclusion.

Click here to enroll and gain access to  all future Procure with Purpose events including exclusive content, online events and regular webinars. 

Space Trucking: The Challenges Of Managing A Supply Chain That Is Truly Out of This World

We investigate the perennial deadly hazards of operating on the world’s truly most remote supply route: the ‘road’ to the International Space Station.

 Sergey Nivens / Shutterstock

Are you responsible for sending your people into danger? In a new Procurious blog series, The World’s Deadliest Supply Chains, we investigate the most high-risk supply chains out there.

The fiery disintegration of a manned Russian Soyuz rocket above the steppe of Kazakhstan on October 11 highlights the perennial deadly hazards of operating on the world’s truly most remote supply route: the ‘road’ to the International Space Station orbiting between 330 and 435 kilometres above the earth.

In this case, the Soyuz occupants, US astronaut Nick Hague and Russian cosmonaut Alexei Ovchinin, got lucky after what NASA described diplomatically as the mission’s successful “abort downrange”.

Because of a problem later identified as a faulty sensor, the launch terminated two minutes after blast-off. The men, who were to be the first members of the 58th expedition to the station, escaped in their capsule and were rescued on the ground 32 hairy minutes later.

Other ISS missions haven’t been so fortunate: on February 1, 2003 the space shuttle Columbia imploded on re-entry, killing all seven astronauts on board.

The Soyuz setback highlights an awkward rostering problem for NASA: since the cessation of the space shuttle program in 2011, the US has relied on ‘buying’ seats on the Soyuz to swap over crews on its half of the ISS.

Who said Uber pioneered ride-sharing? The US recently swallowed its pride and confirmed the acquisition of three extra Soyuz seats in 2019, amid concern that its program to replace the space shuttles was proving too ambitious.

But with a three-person crew due to blast off in a Soyuz in early December, the latest mission to the station has some chance of getting back on track.

The most expensive structure in the world – and, indeed, beyond –  the ISS was built between 1998 and 2011 at a cost of $US150 billion. To date, 15 modules have been assembled (rather like a Lego set) with a further five to be added.

The maximum crew of six performs scientific experiments, eats, sleeps and exercises as the metal orbits the earth 15.5 times a day at a speed of 29,000 kilometres an hour.

Maintaining a semblance of normal life for the crew requires a large amount of provisions – an average of 2722 kilograms per mission. The transit of any goods – anything from toothpaste to heavy scientific equipment – needs to be planned painstakingly months in advance.

When it comes to supplying the ISS using unmanned craft, the procurement controllers have more flexibility because a mini United Nations of spacecraft regularly visit the station (all with different docking procedures).

Despite the perception that the ISS is exclusively a US-Russian concern, the program is actually a venture between five agencies: NASA, Russia’s Roscosmos, the Japan Aerospace Exploration Agency, The European Space Agency and the Canadian Space Agency.

Thus, the station has been supplied by not only the shuttle and Russian craft such as the Progress and the Soyuz, but by unmanned milk runs from Japan’s H-II Transfer Vehicle (also known as the Kounotori, or White Stork).

Whether the craft are manned or unmanned, the visits are eagerly anticipated by the space station’s cramped occupants. After all, a delivery of fresh fruit and vegetables makes for a welcome respite from the everyday diet of textureless, vacuum-packed mush.

(Sadly for the cosmonauts, vodka deliveries are off limits).

So far, the ISS has been visited by more than 150 craft – an average of slightly more than eight per year – including 50 crewed Soyuz, 70 Russian Progress one-way freight vessels and 37 space shuttles.

A key link in the ISS logistics chain is NASA’s Payload Operations Centre in Huntsville, Alabama. Described as the heartbeat of the ISS research operations, the centre co-ordinates all scientific experiments carried out on the station as well as the “payload activities” of the international partners.

In space, no-one can call roadside assist. As a result, equipment requiring regular replacement – such as the antenna, batteries and pumps – are kept on external pallets called ‘express logistics carriers’ and can be put in place by robotic arms.

Despite the supply mission setbacks, on November 2 this year the ISS celebrated 18 years of continuous habitation, eclipsing the previous record of just under 10 years set by the crew of the Soviet-era Mir station.

But nothing lasts forever, with the future of the ISS under review. While NASA and Roscosmos have pledged to co-operate on a replacement facility, tetchy on-the-ground relations between the two nations means there’s a likelihood they will go their own way.

In the meantime, the US is hardly enamoured with its ‘can I hitch a ride with you, comrade?’ approach and is working on its own crewing and supply options so as to mitigate its reliance on the Russians.

Both Boeing and Elon Musk’s SpaceX have separate contracts to develop space ‘taxis’, but their timetable for crewed test flights originally scheduled for August and this month are behind schedule.

Suffice to say, there’s mounting pressure from Capitol Hill on the rival contractors to complete the new era craft sooner rather than later.

After all, in the extraterrestrial trucking game, it always helps to have a Plan B.

If you’d like to read additional related content or get involved with thought provoking discussions check out the Supply Chain Pros group – a one stop shop for all your supply chain needs.

Pizza, Medicines and Death Rays: The Future of Drone Delivery

We’re still a long way away from drone deliveries and drone-run supply chains being the norm – so what’s the current state of drone delivery worldwide?

There’s no question that the world has gone drone mad. If you didn’t receive one for Christmas (bad luck), you’ll probably know someone that did. But, despite all the hype, we’re still a long way away from drone deliveries and drone-run supply chains being the norm.  

So what’s the current state of drone delivery worldwide?

The idea of drone deliveries for useful things is a lot more fun to think about than drones being used for dropping bombs or killing people with death rays – so let’s focus on that for the time being.

Drones are already capable of being deployed for many types of delivery services such as pizzas in urban environments and desperately-needed medicines flown by drones to remote, inaccessible villages. 

In many instances, drone technology has advanced so quickly that it runs afoul of the local laws. For example, the Federal Aviation Administration (FAA) in the United States says that, without special permission, a drone needs to be flown in the line-of-sight of the operator and that a drone cannot be flown from a moving vehicle. 

Perhaps pizza-delivery observation towers could become a new industry in America?

In this article I outline some of the societal benefits of drone delivery, the risks associated, the prevalence of drone delivery today and what the future holds.

Societal benefits of drone delivery

Some of the societal benefits of drone deliveries include economic considerations, improvements in emergency response systems, overcoming delivery problems to remote areas and pollution reduction. 

  • Economics

The most difficult part of any delivery challenge is “the last mile” (metaphorically speaking). This is the portion of the supply chain pathway from the warehouse to the customer’s/buyer’s home or office. Drone delivery is faster and saves money on fuel costs, fleet maintenance of commercial vehicles and labour costs for human drivers. 

  • Emergency Response and Healthcare

In some medical emergency situations, a few minutes could make the difference between whether someone lives or dies. Delivery drones can bring first aid supplies, needed medicines, blood for transfusions, and medical equipment. For example, those suffering from a heart attack might get help from an emergency drone, which maintains communication with paramedics and can deliver a portable defibrillator.

The paramedics are able to observe through a remote video what is happening and instruct those giving aid to the heart-attack victim on how to use it.

  • Pollution Reduction

If drone batteries are recharged via renewable energy systems, such as solar power, the air flight is pollution free. The only downside to drone use is noise pollution. Whilst it might not be very noticeable when a single drone is flying, imagine a future where there are overly-active, drone-flying corridors.

To address this problem an inventor, Edgar Herrera, has developed a blade-less drone, which flies in complete silence. The drone is not yet in production but the design is spectacular; solar-powered, silent-flying, drone delivery is nothing short of revolutionary.

Drones and Privacy

Privacy is a big concern for many people when it comes to commercial drone use and the main reason that legislation came into being all over the world. In many places, using drones for surveillance is a crime. Authorities are increasingly concerned about delivery drones being used for terrorist acts or criminal purposes. In Europe, a study published by RIMMA noted that drones had been flown over nuclear power plants and used to smuggle items into prisons and carry drugs across the U.S./Mexican border

These are just a few of the reasons that legislation has been put in place all over the world – to protect critical infrastructure from unauthorised drone surveillance or attack.

Commercial drone flyers that operate a drone delivery service need to be careful not to break these laws or lose control of their drones because the penalties are harsh.

Consumers have other concerns regarding drone delivery services besides safety, privacy, and security. eMarketer reports than 72 per cent of consumers worry about problems with packages, such as theft or damage. Drones equipped with video surveillance technology can reduce these criminal risks but these cameras raise further questions about privacy and security.

This is an area of opportunity for supply chain managers and entrepreneurs to focus on providing solutions. 

Drone delivery around the world

USA

In the USAThe FAA has been slow to allow commercial drones for delivery services. Drone flying is still restricted to line-of-sight, which makes drone delivery less efficient and not possible in all areas. 

  • In 2015, the USPS starting testing postal delivery using Horsefly drones and since October 2017, REMSA, an ambulance and emergency services company partnered with Flirtey to deliver portable defibrillators for 911 emergency calls in northern Nevada. 
  • Fortune reports that Uber is testing food delivery by drones. Google, FedEx, Intel, and Qualcomm are working with the Department of Transportation on commercial testing of drone delivery services. 
  • Forbes reports that big efforts are being made by Amazon, Target, Walmart, and many others to incorporate a viable, commercial drone-delivery service in their long-term strategic and logistics plans. 

UK and EU

  • The UK is moving faster than the US to approve the widespread deployment of commercial drones, which should hit the market in 2019 or 2020. Amazon has made significant advancements in the UK. 
  • The European Union is in the process of creating laws to regulate commercial drone-flying corridors of airspace called U-Space to allow a wide deployment of drone delivery services. 
  • Since March 2017, in Switzerland, Matternet has been working with the government mail system, Swiss Post, to deliver emergency medical supplies.
  • In December 2014, the French postal service, La Poste began testing drone delivery systems. 

The future of drone delivery

If the regulators cooperate, commercial drone delivery will become a widespread reality to be enjoyed by consumers and those in need of urgent medical supplies and emergency services worldwide. 

It is most-likely that large-scale, commercial drone-delivery deployments will occur in Europe, the UK, and Australia during 2019 with Amazon and Google leading the way. In China, JD.com is moving ahead with widespread deployment very quickly and Alibaba is advancing as well using drone delivery to support offshore islands. 

McKinsey reports that the drone delivery industry in the USA alone, grew from $40 million in 2012 to $1 billion in 2017. Madison estimates the global market depends on what happens with the regulations. Ultimately, the global market for commercial drones may reach over $127 billion annually. 

This article, written by Mark Sheehan, was originally published on My Drone Authority.

3 Ways To Make It Big In Procurement and Supply Chain

Tom Derry, CEO – ISM shares his three top tips for early-career professionals who aspire to be a CPO or Head of Supply Chain in a leading organisation.

The next generation of CPOs and Heads of Supply Chain will need to be “next-level” talent.

“It’s easy to point out a few critical success factors for people who have risen to the very top of the profession,” explains ISM CEO – Tom Derry.

In this article Tom shares his three top tips for early-career professionals who aspire to be a CPO or Head of Supply Chain in a leading organisation.

1. Align yourself with the best in the business

One of most important things to do during the early years of your career is to align yourself with the best talent out there. “If you’re just getting into the field or are early on in the field discover who has the best reputation, who’s the best leader and who’s regarded as being leading-edge and running a great organisation” Tom suggests. It’s also advisable look at the company’s reputation. “It’s clear that certain companies have created an awful lot of talent in our profession, disproportionately more talent to other companies.” So find those great leaders, at those great companies and that’s going to be a launching pad for you.”

2. Be courageous

“There are a lot of metrics of dubious value that we often pay attention to in the profession that have outlived their usefulness.” Tom says. He advises professionals to try and link what they’re doing day-to-day with what’s driving value for the firm – whether it’s bringing new products online, introducing new features to new products, driving top line revenue growth or increasing earnings per share by reducing cost. “Speak the language of the business and link explicitly what you’re doing to driving those kinds of outcomes.” This will help you to gain respect because that’s how we keep score in business and those are the measures that matter the most.”

3. Be competitive

“Businesses are about competition,” asserts Tom. “It’s about competition between firms but, frankly, it’s also about competition within the firm to gain resources to win the opportunities for promotion and advancement.” Tom believes it’s important to understand that you are competing, you’re being regarded by your superiors in the firm in terms of your output and your productivity. “You’re in a competition for advancement – maybe it’s advancement within the firm, maybe it’s advancement in another firm but you have to recognise that and put your game face on every day. As they say in sport: leave everything on the field. At the end of the day someone may outcompete you if you’re not taking that approach.”

Part Five of Tuesdays with Tom is available now. Click here to sign up and hear ISM CEO Tom Derry discuss top tips for aspirational early-career professionals, how high profile leaders can become talent magnets in supply management and the latest data on salaries.