How to Keep the Supplier Love Alive

We take a look at some of the ways procurement professionals should manage, and negotiate with, their long-term suppliers when things get tricky…

Nobody said it was going to be easy. Building and, most importantly, maintaining good supplier relationships takes hard work, commitment and focus. And the longer they last, the more they require this careful nurturing to keep the love alive and the flame burning.

But what happens when one half of the partnership doesn’t hold up their end of the deal; taking advantage of a long-term contract or a presumed arrangement which has started to have a negative impact on your organisation?

What do you do when a change of circumstance means you want to re-negotiate your terms?

How do you get yourself out of an undesirable, self-destructive partnership when to change things up could be costly and difficult to implement?

We joined a recent Negotiation Roundtable organized by CABL (Conti Advanced Business Learning), a firm that specialises in Negotiation & Influencing, on the topic of long-term negotiations. We wanted to hear advice from a number of procurement and sales leaders on how to manage those long term supplier relationships.

Giuseppe Conti, the founder of CABL, introduced the subject by highlighting that in long-term relationships there is a risk that one of the two parties take advantage of the situation. He then led the group to discuss a number of different ways for procurement professionals to manage, and negotiate with, suppliers when things get tricky.

Look below the iceberg

 For procurement professionals, this is a tale as old as time – how do you manage a supplier who increases prices without warning, when you were under the impression that you had a long-term agreement. Do you cut and run?

“That depends entirely” argues Laurence Pérot, Global Supply Chain Procurement Head at Logitech, “on the nature and origin of your relationship with that supplier.

“You need to consider how you selected them in the first place. Was there a good cultural fit, what drew your organisation to them? Cost reduction is just the tip of the iceberg.”.

According to Xinjian Carlier Fu, Sourcing Leader at Honeywell, “If you can satisfy all the elements beneath the surface (i.e. risk reduction, security, protecting margins and personal requirements) you will have a much more effective negotiation.”

Believe that you have the power

 It’s easy to be intimidated by suppliers who seem to be calling all the shots in your relationship. Xinjian Carlier Fu believes it’s important to have confidence in your own procurement power. “Don’t be afraid of [your supplier] relationship. They might seem dominating and intimidating but I like to use the analogy of David and Goliath.

“Procurement professionals should think of themselves as David. Don’t underestimate your influence or give up hope for your organisation.  You do have negotiation power. Don’t give up hope.”

“Unfortunately not every supplier is willing to work with you in a partnership. Sometimes not all parties are considered equal,” explains Guillaume Leopold, Former CPO at Coty.

Look for a win-win

Ifti Ahmed, Managing Partner at Titanium Partners, described that tricky situation of inheriting an existing supplier when starting a new procurement job. “This particular supplier wasn’t my first choice but it became my job to manage the negotiations and the budget. I did look for alternatives, of which none were suitable and so I did feel like I was in a tough position from a negotiations perspective. ”

“But we prepared well for these negotiations, ensured we had a greater idea of what they valued; what was annoying for them and what they wanted from the partnership, so we were able to discuss points for improvement on both sides and the new contract ended up as a win-win”

Giuseppe Conti also highlighted the importance of using partnership tools to effectively manage the supplier. This includes a Service Level Agreement with KPIs for both parties, performance reviews, alignment of senior management teams, bonus system, audits, 360-degree feedback. 

Make your position clear

It’s very difficult to build trust in your supplier relationships when staff turnover is high. Indeed, as Alessandra Silvano, Global Category Director CAPEX & MRO at Carlsberg, pointed out “many suppliers try to take advantage of frequent rotations in the workforce. But they need to know that you are aligned. Pricing should be treated in the same standardised way, not matter who you are working with.”

Work at it like a marriage

Regina Roos, VP & Sales Segment Leader Mineral and Mining at Schneider Electric, recommends you approach your supplier relationships like a marriage. “It’s not a one off event. There are levels of commitment and you have to keep working at it. If you’re not prepared and you don’t know what you’re getting into with a supplier it’s your fault. You need to make a commitment, and stick to it.”

Paul André, Director Reduced Risk Commercial Supply at JTI, agrees, arguing that “you need to be very clear on what you’re entering into – and that you don’t have a different expectation of the relationship you are building.”

Get to the crux of the problem

What should procurement professionals do when faced with a seemingly irrational supplier who simply won’t re-negotiate terms or agreements? Xinjian Carlier Fu suggests that you “try to identify the motivations underlying these actions or attitudes. Think about the possible constraints they might be facing. Then test your theories by asking questions – ‘Are you facing pressure to cut costs?’” When you understand what’s driving the supplier’s behaviour, you’ll find it easier to come to an agreement.

Work with suppliers you like

The value of supplier likeability is not to be underestimated according to Francesco Lucchetta, Director EMEAI Supply at Pentair. “Taking company culture into account is so important when it comes to selecting suppliers, particularly if you’re forming a long-term agreement. People are very different and to work with people you like is a really good thing. When the culture is unfriendly it’s hard to build trust in the relationship.”

For more advice on managing your supplier negotiations, check out the first blog in this two-part series – 6 Ways To Prevent A Negotiation Blow Up.

Procurement is Already Awesome – Here’s Why So Many #LOVEPROCUREMENT

It’s becoming increasingly apparent that procurement professionals love what they do. And here’s why….

We have all seen how far Procurement has evolved in recent years. The process has certainly not been easy for some; most of us are still on the journey (after all, transformation isn’t a destination) and others have yet to begin. But one thing is clear, procurement has turned the transformation corner and is speeding forward.

It’s not long ago that procurement departments were shunned and dismissed as merely back office administrators. But a lot has changed and the new terminology used to describe procurement is hardly recognisable; collaborative, innovative, data-driven, agile, change agent, advisor. Much of this due is to the broader realisation that Procurement can add significant value to an organisation. But to me, there is even more to it. I believe that the passion that many procurement professionals have for their work and the fact that many of us love what we do plays a big part.

Over the last year, and before that as an industry analyst, I spent a lot of time listening and talking to procurement professionals and it became apparent that people in this function really do enjoy and love what they do. It may have something to do with the fact that procurement is now exciting and invigorated but regardless, I wanted to investigate further. So, at our annual event we asked real procurement practitioners one question “Why do you love procurement?” and the response was overwhelming and quite frankly, surprising. We received over 120 answers, many of which expressed a great passion and  love for procurement. This was enough evidence for me.

The response was so great that we felt obligated to share a few, in the hope that they:

  • Inspire those in this profession (and maybe others)
  • Show that this is not your parent’s procurement; this is a dynamic, modern and challenging profession
  • Prove that many procurement professionals are excited about their roles, what’s in store for them and the impact they can have on an organisation
  • Drive even more proclamations of procurement love (you can submit your own by clicking on the image below)

I couldn’t help myself, so I threw all the responses into a word cloud tool to highlight some of the most common words used:

Why do you love Procurement?

Above are some of the main words used to describe why people love Procurement but here are some actual responses. To see more please visit this page

My favorite one really captures the dynamic nature of Procurement and the impact:

“It gives me that spiderman feeling- middle of the web with the other players and a superhero when we get the cost out.”

Procurement is about relationship building.

“I do not source goods and services, I source relationships.”

Procurement is fun…

“Involves cost, saving, buying, innovation, suppliers and all the fun in the world.”

Who said Procurement doesn’t care about suppliers?

“I love helping suppliers innovate develop and succeed”

Procurement helps make businesses more agile.

“I’m ready to fully respond and support continuous and radial changes in a business.”

Procurement is an exciting place to be right now. It’s a dynamic function that demands a multitude of skills from the traditional negotiation, relationship management and process skills to the increasingly important sales, communication, analytics, innovative technology and more. Many procurement groups are having to familiarise themselves with emerging technologies such as AI, blockchain and IoT. The rapid innovation in these areas and potential impact means that procurement must keep pace.

Procurement is a gatekeeper to potentially the largest source of innovation any company has – its suppliers. Fostering those relationships, building new ones and becoming the customer of choice is critical in this hyper-competitive age.

All of this makes Procurement fascinating. As such, we will continue gathering these quotes from around the world and hopefully generate more interest and excitement about Procurement.

So, if you #LOVEPROCUREMENT, tell us why.

Teeing Up For AI in Procurement: It’s All About One Thing…

The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?

Over the last year, machine learning and artificial intelligence (AI) technologies have graduated from the class of “emerging tech” – they’re here now, they’re increasingly sophisticated, and their adoption will only continue to accelerate.

We’ve seen machine learning and AI go mainstream in consumer tech environments, and they are rapidly shifting from hype to reality in enterprise environments as well; however, enterprise executives are still working to understand how AI applications can move beyond specific product features to influence broader business functions and strategies.

Let’s take a look at the procurement department, for instance. Procurement and purchasing professionals have a lot to gain from leveraging AI. In fact, AI has the potential to completely transform how organisations manage their spend, from automating invoice coding based on learned criteria, to predicting potentially fraudulent transactions, and preventing rogue spending before it happens.

The benefit of AI for procurement is clear – the question, then, is what will it take to effectively put it to use?

Gartner’s report, “Start Preparing Now for the Impact of AI on Procurement,” states that “technologies’ need for data will force application leaders in procurement to ensure access to the necessary internal and external data sources.”

Essentially, the first step to getting predictions out of AI is to capture all data – internal data, external data and third-party, public data. Furthermore, procurement professionals should be asking themselves if they have the volume, the quality and the completeness of data needed to leverage AI within their department.

Ticking each of these boxes can feel like an arduous process, but a good starting point is to hone in on three particular sources of data that provide the greatest visibility into spend:

1. Supplier Data: This means capturing data from 100 per cent of suppliers in the procurement system. Not just the largest multi-national suppliers who use sophisticated EDI or XML formats, but the whole tail. This should include mid-tier suppliers that may be using online portals or emailing PDF invoices, all the way down to the smallest “mom and pop” businesses, who continue sending paper invoices. Using an open commerce network that accepts and supports all invoice formats and requires no changes on the supplier’s end enables 100 per cent supplier onboarding and captures all transactional data. To gain true visibility and power future platforms, procurement and finance leaders must aggregate as much financial data as possible beginning with supplier data.

2. User-Driven Data: The ability to capture user-driven data–specifically, buying insights that track 100 per cent of all purchasing requests that run through the system, is vital. Visibility into employee spend ultimately depends on how user-centric procurement tools, technologies, and processes are designed. The bottom line is: procurement systems shouldn’t be designed for the procurement department. They should be catered to potentially thousands of employees around the world that are buying things in their organisation.

Searching for orders, dynamic routing and approvals, and guided buying, for instance, should be easy to navigate and fit seamlessly into the way employees already work. The key is to create a system that users adhere to not because they have to, but because it’s the easiest way to get what they want from preferred vendors at the negotiated price, providing another layer of spend visibility.

3. Invoice Data. By nature, the accounts payable function is primed for intelligent automation. There is a huge opportunity to use AI for things like improving processing efficiencies and reducing costs, increasing discounts and eliminating late payment fees, for instance.

But, these enhancements can only be achieved if the invoice data feeding into AI is complete. That means procurement needs to capture 100 per cent of invoices, irrespective of format (paper, PDF, electronic) and irrespective of invoice type (PO-based, non-PO based, invoices for direct spend, for indirect spend, for facilities and utilities, etc) –  truly, any and all. Whatever the invoice, it should be captured.

These three particular sources of data can truly position a company to take advantage of all the benefits AI promises just over the horizon. Elements of machine learning, AI and predictive analytics already exist within procurement today. Forecasting budgets for approvers, alternative cost-effective suggestions during a user’s shopping experience and intelligently aggregating POs based on purchase trends are just a few commonplace applications. But to take advantage of any of these applications, and future opportunities to gain a competitive advantage, data is an absolute prerequisite. Only when armed with data – especially from suppliers, users and invoices – can procurement make the most of their investment in AI technology, enhance spend visibility and optimisation, and ultimately, boost the organisation’s bottom line.

Continue reading Teeing Up For AI in Procurement: It’s All About One Thing…

Tuesdays With Tom: Trump, Trade and Turning Disruption into Opportunity

Institute for Supply Management CEO Tom Derry compares the Trump administration’s trade policies to “self-inflicted friendly fire” in the first of our 10-part Tuesdays with Tom podcast series.

“In military conflicts, one of the outcomes we most dread are instances of ‘friendly fire’, when you mistakenly fire on your own troops. I think the current [trade] policy is almost an instance of self-inflicted friendly fire, from an economic perspective. We might be helping domestic industries like steel and aluminum (although even that’s arguable), but we’re actually damaging the far bigger industries that are consumers of those products; who make household appliances, yellow goods for construction, or automobiles. All of our exports in those areas will suffer with this trade policy.”

In the first of our Tuesdays with Tom podcast series, ISM CEO Tom Derry talks with Procurious Founder Tania Seary about the current raft of trade wars and tariffs that have come about as a result of US policy shift.

Supply management professionals do NOT like trade wars

“ISM publishes economic reports every month for the manufacturing and services sector. Comments have been very consistent: we’re seeing suppliers trying to impose price increases on buyers as they’re buying metals (such as steel and aluminum)”, says Tom. “We’re seeing people anticipating the tariffs, looking to end sourcing from China and look for suppliers elsewhere, and we’re seeing people postpone investments.

“The two most important economic factors in deciding where to locate a manufacturing facility are local taxes and tariffs. If tariffs are uncertain, [companies are] going to postpone decisions about building that next facility, which is not good for the economy in the long run.”

NAFTA renegotiations having an impact

“What’s so interesting about these policy changes”, says Tom, “is that even mere discussion has a real economic impact and causes real dislocation of supply chains. Even before the steel tariffs were imposed, people reacted to the idea of tariffs, and that caused businesses to have to change their plans.”

Historically, NAFTA has resulted in incredibly tightly integrated supply chains in certain industries, particularly the automotive industry. “We do a lot of assembly of automotive in northern Mexico for final sales here in the United States or in Canada, but before you get to that final assembly in those plants, you’ve got components for parts that move across the Mexican/US border four or five times before we get to the final vehicle”, says Tom.

“Imagine what it would be like to impose tariffs in both directions four or five times, and the inspections that would have to go with it, and the country of origin verification that would have to be performed. If NAFTA [fails], it’ll be incredibly disruptive in terms of the auto industry here in North America.” 

Two tips for turning disruption into opportunity

  1. Have a Plan B: “Every good category manger has a Strategy A for expected economic conditions, and Strategy B if there’s an economic downturn or something happens in the commodity markets. You have to have those playbooks thought through and scripted … if you haven’t done that, get to work on that immediately.”
  2. Be prepared to react fast: “If you see a dramatic change, you need to be able to respond to it in the moment. The advantage goes to the company, the organisation, or the individual who can react fastest during times of great change. If you’re late in moving, any potential benefit to be realised will be captured by someone else. Make sure you’ve got that playbook well defined.”

“The advantage goes to the company, the organisation, or the individual who can react fastest during times of great change.”

Tom tells the story of a CPO working at LG Electronics during the 2008-9 recession, who was concerned about securing semiconductors. They were aware that a recession would lead to a drop in consumer demand for electronics and hence a demand for semiconductor chips, so he visited his suppliers in Asia, then managed to convince his executive committee to buy $9 billion worth of semiconductors because the price would never be as low again. LG subsequently posted record profits for 2009 due to that CPO’s business acumen, his understanding of the spot market for semiconductors, and doing his homework. This is how you respond to disruptive events.

“[Procurement needs to] see through the common perception, recognise market opportunities and the dislocation between price and demand, and seize opportunities to turn a perceived threat into a great opportunity for a huge bottom line impact.”


Tuesdays with Tom is a 10-part podcast series featuring exclusive insights from ISM CEO, Tom Derry. Register now to receive an alert whenever a new podcast is released.

Is AI Doing Your Head In?

Seven tips for making headway with your cognitive sourcing project.

I will never forget visiting the Smithsonian National Air & Space Museum in Washington for the first time 30 years ago and seeing the Apollo capsule. Like so many others, I was amazed at how basic the technology was that took us to the moon.  I remember saying to my travel buddy, “Hey, this looks like my 1969 Toyota Corolla!” (my first car). Of course, back then, that was the very latest technology when humanity had its first “moonshot” opportunity.

My point here is that as procurement professionals, we may be sporting 30, 40 or 50-year-old hardware (our bodies!), but we need to make sure we are using 2018 software (our brains and capabilities) to get the very latest technology embedded in our organisations.

I mean, if cognitive is here, and it’s our moonshot opportunity to change the trajectory of the profession and there’s millions of dollars waiting to be saved, we don’t want to be left back on the rocket staging launch pad as an observer!

The challenge for all of us is to determine whether and how we implement this hot new capability.

Step one is to be clear about your corporate drivers. In my experience, companies are always going through one of six phases (please note the “status quo” is never one of them). Sometimes, they are going through multiple phases at the same time!

These directions are set from the top… hard coded. So if you want to get your cognitive sourcing project off the ground, you are going to have make sure your project aligns with one of these corporate objectives.

One of the key movers in the space, LevaData, is offering a hard ROI of 10 to 30% incremental cost savings, guaranteed. I asked them how we could link cognitive projects into the generic 6 corporate phases and this is what they had to say :-

  • Efficiency – massively reduce manual data validation, spend analysis, and sourcing event preparation activities
  • Compliance – engage approved vendors and qualified alternate sources of supply through auditable RFX process (vs. email and spreadsheets)
  • Transformation – elevate procurement and strategic sourcing as internal orchestrators, working cross functionally with engineering, finance, manufacturing, and sales to managing emerging supply risks and opportunities
  • Innovation – accelerate new product introduction and optimize cost and risk through the product life-cycle
  • Cost-down – improved negotiation insights lead to sustainable cost management year over year, capturing cost reduction opportunities as well as minimizing cost inflation risks
  • Growth – enable scaleability and responsiveness to forecast and market changes from months to weeks or days.

Getting BIG, innovative ideas and game-changing concepts through BIG Companies is not easy.  To successfully land cognitive technology in your organisation, you’ll need to:

1. Have courage and commit yourself. It’s important to have full confidence in your cognitive project and be prepared to put your credibility on the line and stand up for it at all costs. Once you’ve decided that it’s worth committing to, give it everything and don’t give up.

2. Do your homework.Make sure your cognitive sourcing project is closely aligned with a key corporate objective. Collect and scrutinise the data on the benefits of introducing cognitive and make sure your business case is bullet-proof. You need hard-nose, quantifiable benefits to support investing in the cognitive project and these numbers need to be backed up by the people who count (predominantly operations and finance).  Do your pre-work, build your support team. As you work your way around the organisation convincing people of the need to change, refer to your support network often: “Johnny in finance is firmly behind this, he helped me with the numbers”.

3. Think Big, Act Small, Accelerate Fast. Keeping the vision in mind, find a small representative project, experiment and demonstrate the ROI with Cognitive capability. Sell the outcome and accelerate fast. I would encourage you to think about what that project might look like and figure out ways to get it off the ground.

4. Pick a sponsor (carefully!). Think carefully about who would be the best sponsor for your cognitive sourcing project.  Make sure they have power and influence – and make sure they are supporting you for the right reasons and believe the project is important for the business. Try to avoid sponsors who are purely supporting cognitive for their own career advancement (I know this is hard to uncover at the outset). This is because your project will be dumped as quickly as it was taken up if it suddenly falls out of favour – which is another reason to make sure your project is aligned to key, quantifiable business objectives.

ONLY refer back to your sponsor when you reach a critical deadlock at an important milestone.  “Keep your powder dry” throughout the project, otherwise you will be too much of a drain on their time.  You need to make it easy for them to be your sponsor. Bring them in for the photo opportunities and the critical decision points.

5. Create a support network. I’ve often said procurement can be a lonely place, because you may be the only person in your company, or even in your industry, doing what you do! That’s one of the many reasons why I started Procurious, to help people connect and learn from each other.

Procurious is the perfect place for reaching out to others leading the cognitive journey within their own organisations. Over five thousand Procurious members visit our discussion board every month to share ideas and offer advice to their peers. Our blogs are read by thousands of professionals daily and spark debate, with members feeding their own commentary and ideas into the global community.

Our digital Big Ideas Summits, along with all the other networking, discussion and eLearning on the site, inspire a global generation of procurement leaders and business intrapreneurs, challenging them to take a more innovative professional approach.

Your network is also a powerful tool for endorsing what you are recommending, for example you can refer to your network – “I know Janie at ABC company (our competitor) and they are already implementing cognitive”.

6. Be human(!) in all your interactions. Up, down, and across the supply chain, it will be interactions between people that will be the real determinants of success and failure in an increasingly robotic era. To prosper in this next Industrial Revolution, we need to play to our human strengths – collaboration, connection, innovation, influence – the things only we humans can do.

7. When you get knocked down, get back up again. If you’re going to succeed in getting your big idea through a big company, you have to be incredibly resilient. You will have nay-sayers telling you why cognitive is not going to work, so keep going back to the data that demonstrates how this will support the business objectives. That is your strongest defence.

So, like any other project that is doing your head in, the implementation of cognitive can best be tackled by breaking it down into distinct steps. It’s going to take grit and more than a little determination, but the potential rewards are stratospheric.

Tania Seary will deliver the closing keynote at LevaData’s Cognitive Sourcing Summit on 13th September 2018 in Santa Clara, CA. Find out more.

Four Ways To Cultivate Real Confidence And Supercharge Your Career

Often we think of confidence as something that the lucky few are born with and the rest are left wishing for. But this couldn’t be further from the truth…

Think of someone who you say is confident – your boss, a colleague or a celebrity, perhaps. Chances are you’d describe them as poised, hopeful and positive. They know their strengths and they know their weaknesses, too.

Often we think of confidence as something that the lucky few are born with and the rest are left wishing for. This simply is not true. Confidence is not a personality trait or a fixed attribute; it’s the outcome of the thoughts we think and the actions we take. Confidence is learnable.

It also isn’t based on our actual ability to succeed at a task but on our belief in our ability to succeed. It is the expectation of a positive outcome – regardless of whether this relates to our belief in our ability to speak in front of a large audience, to learn new technology, to lead a team, to handle confrontation, to change jobs and careers, or to start a business.

With consistent effort, and the courage to take a risk, we can gradually expand our confidence and, with it, our capacity to build more of it. Here’s how to do that in four ways.

  1. Show up as the real you

Having the ability to show up with real confidence means you know yourself, you can be yourself and you show up as the best version of yourself. This is more than getting out of bed, splashing some water on your face and fronting up at your desk hoping you can cope with what the day throws at you.

You believe you can draw on what you are great at. You believe what you’re good at is important, and that it’s aligned with how you are working. You believe that you are valuable and valued.

Showing up as truly confident over a sustained period of time is something that needs to be built from the inside out. ‘Faking it until you make it’ only gets you so far and for so long. Trying to pretend you have the confidence needed to get the job done can be exhausting.

2. Stand up for yourself

At work, especially if you’re looking to get into a leadership position, you need to speak up when no-one else will. You need to be visible, make unpopular decisions and go slow in order to go fast. You must stand alone in a crowd and have the confidence to believe in yourself. You don’t need to be the Dalai Lama, but you do need to stand up for what you deem right, fair and important.

When it comes to building your confidence in standing strong, ask yourself:

  • What do you VALUE? To speak out, you have to know what to speak about. To stand up for your beliefs, you have to know what you stand for.
  • What is your PURPOSE? Steve Jobs once said, ‘Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful, that’s what matters to me.’ That’s a clear sense of purpose. He was clear about what he stood for and why, and you need to be too.
  • How RESILIENT are you? Inevitably, when we stand up, we are putting ourselves at risk of rejection. Building your capacity to get back up again is important in maintaining your confidence during adversity and setbacks.

3. Speak up and have a voice

A sure way to fail in today’s demanding business environment is to keep quiet when you should be speaking up!

People often tell me that they don’t speak up because they are not confident and they fear being judged. My response is, ‘So you would rather be judged on just sitting there and saying nothing instead of taking the opportunity to have a voice and potentially getting it wrong?’ The likelihood is that we are going to be judged one way or another.

Many of us also back away from speaking up to avoid conflict. We see conflict as bad, rather than being able to reframe it as healthy debate. As a result, we keep our opinions to ourselves – thinking that if we just keep doing our job and delivering the outcomes, we will get ahead.

Yet we must be willing to speak up, even when it is hard or unpopular or you feel like it will cause conflict. As Martin Luther King Jr put it, ‘Our lives begin to end the day we become silent about the things that matter’. So, use your voice!

  1. Step up your performance

You need to have the confidence and skills, and the ability to take on an element of risk, no matter what role or industry you work in. To step up confidently, you need to master your mindset, build your personal brand and have great sponsors.

Reflecting on your current behaviours and stepping up as required is critical. You often need to do things differently tomorrow from how you are today. You need to take yourself out of your comfort zone – and be confident enough to do this – and be aware of your context and what the environment requires of you because this is always changing.

If you’ve got your ‘head down and bum up’ all day long, knocking off your to-do list, how will you be able to assess what you need to do to influence and ensure the work makes real progress?

Continue to challenge yourself and ask, ‘If what got me here won’t get me there, what do I need to be doing now to step up?’

When you do this in line with all the other confidence skills, then you start to cultivate your confidence and supercharge your career.

Procurement’s Most Valuable Tool In An On-Demand World

Do you know who your non-employee workers are? Where they are? What facilities, networks, and data they have access to? If not, chances are very good that you need a Vendor Management System.

Bjoern Wylezich/ Shutterstock

For most organisations, human capital expenses constitute the largest single cost of doing business, often up to 70 per cent of operating expenses. Human capital is also a growing source of concern for executives who fear they don’t have – and can’t acquire – the top-tier talent they need to compete and succeed in an increasingly on-demand world.

Companies that have traditionally relied on internal workforces of direct employees are increasingly adopting a more flexible, extended workforce approach that lets them adapt quickly to market changes while effectively managing their fixed costs.

To manage this extended workforce, companies increasingly employ sophisticated vendor management systems (VMS). These VMS solutions can do much more than simply automate the contingent staffing process. They can source and manage all types of talent and deliver a wide range of insights to help organisations make better workforce decisions.

Where does VMS fit in your procurement picture?

Simply put, a VMS is the software that automates the hiring process of an organisation’s non-employee workforce. It is often a web-based application that helps manage and procure staffing services, from requisition through billing.

Most VMS tools are delivered through a Software-as-a-Service model. A VMS provides significant improvements in reporting and analytic capabilities that far outperform manual systems and processes. VMS tools are typically operated externally by a Managed Service Provider (MSP) or self-managed by a program office within the organisation.

This structure enables a streamlined and automated process with real-time of all contingent labor: who they are, where they are, and what access they have to your facilities, networks, and data.  A VMS allows you to see all relevant job orders and accurately assess labor services spend and performance, often leading to significant cost reduction.

Should you implement a VMS?

Typically, large organisations, or companies who employ more than 100 contractors at a time will benefit greatly from a VMS solution. Companies with non- employee workers in multiple countries and varying labor classes can also streamline their hiring, management, and payment processes with a VMS.

Below are some of the top reasons to implement a VMS for your organisation:

  • Cost savings: A VMS helps eliminate rogue buying of labor and maverick spend. You can gain hard dollar savings by consolidating suppliers and benchmarking rates to gain negotiated savings or volume/early pay discounts, as well as soft dollar savings through process improvements like consolidated invoicing, reduced timecard and invoice errors, and compliance tracking.
  • Visibility: Cost savings from a VMS are driven by the analytics and reporting, which help reveal where and how you are spending money on contract and project-based labor in order to make better decisions for the future.
  • Compliance: Transparent analysis of all stages of the procurement lifecycle provides greater control and ability to enforce procurement strategy and policies. By implementing a VMS and gaining full visibility into your staffing spend and activity, you can ensure that all labor is properly categorized and mitigate risk of potential exposure to co-employment and tenure litigation.
  • Quality: A VMS allows you to measure and monitor the performance of your suppliers and non-employee workforce to ensure there is an efficient process in place for acquiring the best talent at the best rates (through self-sourcing or using staffing suppliers) and a strong program for sourcing and managing statement of work (SOW) contractors.
  • Operational efficiency: By implementing a VMS, you can automate many steps in the procurement process.

How to select a VMS provider

There are many VMS providers in the market today, ranging from software solutions offered by MSPs or ERP providers to independent contingent workforce specialists. Make sure you choose wisely.

Here are eight things you will want to consider when selecting your VMS provider:

  1. Trusted partner commitment: It is critical to find a partner that is willing to invest in a relationship with you, to work with you, and to support your program’s changes, including geographical or labor category expansions.
  2. Financial stability: Your VMS provider should be a viable choice for today, tomorrow, and over the next decade.
  3. Flexibility: VMS providers should understand trends, emerging talent acquisition models, and how best to facilitate sourcing talent.
  4. Expandability: The tool should have the ability to accommodate all labor categories and easily expand to include SOWs, not just contractors on a time and materials basis.
  5. Global reach: Select a provider who understands the tax and labor laws in all geographies where you do business.
  6. Visibility: Robust reporting and analytics capabilities are critical to maximising the value of your investment.
  7. Ease of use: The tool should be intuitive enough so that users can learn about 90 per cent of the functionality on their own. Training, online help, online tutorials, and help desk assistance should be available for the remaining 10 per cent.
  8. Technology compliance: The vendor you’re considering should be certified by an independent service auditor to ensure they have undergone the most rigorous data security assessments and compliance

Now more than ever, contingent workforce managers, procurement teams, and human resource professionals need a significantly enhanced toolkit to address business executives’ priorities. They need innovative solutions that can dramatically lower costs while boosting productivity. They need to find and engage the right people with the right skills – quickly – to deliver better customer value in an on-demand world.

Most of all, you need solutions that will help your companies turn your workforce into a competitive advantage, differentiate your business, and set up your organisations to win. A VMS is that kind of a solution.

For information about the value a VMS can offer your business and how to build a winning business case for a VMS in six easy steps, click here.

Doug Leeby will be speaking at Big Ideas Chicago on 27th September. To follow the action live from wherever you are in the world, register as a digital delegate.

Now, More Than Ever, It’s Time For Procurement To Go Digital

At a time when technology is transforming nearly every aspect of the enterprise and its approach to buying and selling, the role of the procurement professional — already central to any organisation — has become even more strategic, more consequential, and more indispensable.

By linking together vast troves of data across enterprises and unlocking meaningful insights, cloud-based applications have freed up procurement professionals from the tangle of day-to-day tactical activities so that they can focus on strategic responsibilities such as supply chain resilience and flexibility, brand protection, and new sources of innovation.

Key Accelerators for Digital Transformation

The transformation is just beginning. As emerging technologies like artificial intelligence, machine learning, the Internet of Things and blockchain begin to take hold, procurement will become even smarter, faster and more connected. And beyond savings and efficiencies, it will open the door to innovations that improve customer satisfaction, and ultimately, impact revenue generation.

Another accelerator in digital transformation in procurement are business networks. They are driving totally new way of interacting and expanding the value that procurement can deliver across the enterprise.  Just like their social counterparts, they bring together millions of buyers and sellers and provide a community in which they can shop, share and consume. On a true many to many platform, trust and transparency are the benefits the network participants find.

Managing Supplier Risk and Corporate Responsibilities

More than ever, customers, regulators and investors hold companies accountable not only for their own ethical conduct, but for that of their suppliers and their suppliers’ suppliers. Companies with strong supply chain practices invest to mitigate any risk and respond to adverse events and recover from the any disruption faster. With business networks, companies can gain the transparency needed to ensure that they are not only in compliance with laws in every locale they operate in, but that they are upholding and advancing their own corporate social responsibility goals.

Leveraging real-time and historical purchasing data, supplier intelligence and business network content, procurement can shine a light on the materials, regions, and suppliers that are most likely to have issues or challenges with unexpected natural disaster, forced labor or conflict minerals. To drive a positive impact, companies may launch campaigns to connect diverse suppliers on the business networks in underdeveloped markets where a little assistance goes a long way.

Supplier Insights for Innovation

Take product design. Suppliers can be rich providers of design ideas, providing insights on new technologies and innovation while improving costs given their technical knowledge of manufacturing processes. Adopting the Design to Value approach, companies involve procurement organisations in the product development process far earlier.

Through business networks, procurement gain significant supplier insights quickly and potentially open the door to new, more innovative and cost-effective ways of producing products and components.  With a better collaboration with suppliers on the networks, the companies can even invent a new product or services and create a new business model. Finding new sources of supply in a global operating environment is exponentially easier with a business network.

Procurement Leading the Digital Transformation

This enhanced visibility and insights in supply chain through data may have once seemed a luxury, but business networks and the technology underlying them make it easier to achieve today. Procurement organisations that embrace these ideas can continue their digital transformation journey and lead their companies to new worlds of operational and performance excellence.

Pat McCarthy will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.  

Helping Procurement Professionals Embrace AI

Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?

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Artificial intelligence (AI) has begun to infiltrate all areas of businesses – and procurement is no exception. In fact, studies show that 88 per cent of business leaders believe automation will significantly impact the procurement space within five years.

The biggest projected impact that advancements in AI technology will have on procurement is increasing the number of activities that can be automated within this space. It’s expected that 60 per cent of source-to-pay processes can be fully or largely automated using emerging technologies, including AI.

The promise of AI technology and automation in the procurement space is exciting – it offers opportunities for increased efficiencies, greater visibility, fraud prevention, cost savings, and more. However, it also induces a level of fear and uncertainty around how it will impact the role of procurement professionals.

Given the inevitability of emerging technologies transforming businesses, how can you prepare your company for AI’s impact on procurement and mitigate employees’ fears?

1. Distinguish “tasks” from “roles”  

When AI and automation enter conversations about how work can be transformed, they bring with them a sense of fear and unease. It’s only natural that people begin to ask themselves, will there still be a need for manual and human skill? Will my role be replaced by a machine? Will I soon be out of a job?

Easing these concerns will require focusing on what exactly will change. AI, as the building block for automation, fundamentally affects how tasks are performed. That’s why companies should emphasise automation’s potential on impacting tasks within procurement, rather than looking at how roles themselves will change.

It’s hard to say which – if any – roles will go away over time due to automation. However, it is safe to say that every role will likely still exist in some capacity, but that certain tasks within each role will be automated, thus redefining existing roles and opening the door for employees to focus on higher priority responsibilities.

Rather than allowing employees to become fearful, help them prepare for change by empowering them to understand which tasks and activities in their roles are and are not likely to be touched by automation. For example, the majority of tasks within the vendor selection and negotiation process can and will be automated, meaning that role will shift to incorporate other tasks that couldn’t have been part of the role before, given the volume of manual vendor selection tasks.

Moreover, identify the skills that will be required for employees to excel in their shifting roles – such as data analytics and collaboration skills – and invest in training employees on those skills. This will ensure that employees can work effectively with AI and automation technology, and ultimately feel prepared for the inevitable shift.

2. Stress the importance of human critical thinking 

Another way to prepare your company and its procurement professionals for AI and automation is to turn the definition of AI upside down, taking negative assumptions about how this technology impacts professional roles and asserting a more positive interpretation and understanding of this change. Instead, business leaders should discuss how AI will be used to augment their own intelligence.

While employees may wonder whether they will be replaced by AI and automation, it’s important to stress to them that people will continue to play a critical a role in whether these technologies can even be successful. For instance, while AI can make recommendations around business decisions and procurement processes, the AI is not responsible for executing these recommendations – people are.

To help employees overcome fears around AI and learn to better work with this technology, companies must place an emphasis on the importance of the critical and systemic thinking. By teaching people how to recognize biases and heuristics in their own decision-making, employees will be well-positioned to critically review AI’s suggestions, and connect information from the real world to make optimal judgements. AI will not replace managers – but managers that use AI will replace those who don’t.

3. Go beyond the business case

 The business case for automating procurement with AI is already there – that’s why 51 percent of today’s accounts-payable organisations are already prioritizing the link between procurement processes and associated automated systems. What’s important now is getting your employees to buy-in and fully embrace AI to ensure successful implementation of and execution with this technology.

While initial reactions may be full of fear and skepticism, business leaders must remember to communicate with employees empathetically, helping them understand anticipated changes, investing in preparing them for these changes, and re-positioning the impact of this technology more positively so that it becomes something employees can get excited by.

By getting procurement professionals ready for AI’s impact, business leaders can empower them to do their jobs better and grow with the company as it undergoes this inevitable transformation, all the while setting their business up to reap the benefits of AI and automation.

Six Steps To Optimise Your Procurement Workforce

To become more agile, companies are re-evaluating their workforce strategies. Although strategists often talk about “total workforce management,” what their companies need most is something much simpler: total workforce optimisation.

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For most businesses, human capital is both the organisation’s most important asset and its largest single operating expense. It is also a constant concern for executives who fear they don’t have, and can’t acquire, the right mix of top-tier talent to compete and succeed.

Total Workforce Optimisation is the process of determining the right mix of employee and non-employee talent to meet operational requirements. It ensures that the organisation has the skills it needs as well as the flexibility to anticipate and respond to market changes.

What it is, and what it’s not

Total Workforce Optimisation is sometimes confused with Total Workforce Management (TWM), also called Total Talent Management (TTM), which is a much larger and more comprehensive process. TWM/TTM not only incorporates the engagement and management of employee and non-employee labor, but also issues such as training and succession planning, which are outside the scope of Total Workforce Optimisation.

Total Workforce Optimisation is also different from Total Talent Acquisition (TTA), which is a subset of TWM/TTM. However, Total Talent Acquisition is compatible with, and can be incorporated into a Total Workforce Optimisation program.

Total Workforce Optimisation is actually very simple. It is nothing more than looking at your organisation’s entire employee base and your non-employee base, putting them together, and determining the right mix to achieve your desired business outcome.

1.Focus on business outcomes

The focus on business outcomes is one reason Total Workforce Optimisation is more specific and easier to achieve than Total Talent Management. While Total Talent Management has the potential to offer great long-term benefits, which are often somewhat abstract, Total Workforce Optimisation is concerned with finding the most cost-effective, highest-quality way to accomplish specific tasks and achieve specific outcomes.

Total Workforce Optimisation is the process of modeling and sourcing the right mix of employees, contractors, freelancers, and consultants—all viable labor options—to achieve the outcomes that are important to your business.

To get there, there are six key steps you need to take.

Step 1: Get the data in one place

To implement Total Workforce Optimisation successfully, you must start by getting all of your workforce data in one place. It is all about visibility.

Most organisations are already doing a great job in terms of employee visibility. You probably have human resource platforms containing all relevant employee data. So, the missing link tends to be non-employee data.

With the advent of vendor management systems (VMS) about 15 years ago, we started collecting data addressing the contractor population. And, about 7 years ago, organisations started managing statement of work (SOW) based activity and putting that data into their systems as well.

With the advent of the gig economy, freelancers represent another large labor pool whose data must be gathered and put in one place where it can provide visibility.

This can be accomplished using your VMS or possibly another system, but the important thing is to gather this non-employee data and make it visible.

Step 2: Risk-proof the workforce

The second step is to risk-proof this workforce, both employees and non-employees. This means ensuring proper classification of every individual worker. Every organisation has a governance model in place to protect against co-employment and statutory compliance risks. To risk-proof your workforce, you must ensure that every worker is in the proper employment bucket.

You start by putting them in the right classification bucket and then ensure that they’re in the right sub-buckets—temporary staff or contractors, W-2 or 1099, outsourced labor, freelancers, interns, or retirees. Then you can confidently put them to work and not worry about what the legal, compliance, or security consequences are going to be.

Step 3: Ascribe quality to all workers

The third step is very important, and for some reason, it appears to be very elusive for many companies. It is simply the process of ascribing quality to all workers and all work efforts.

Organisations do that already when it comes to full-time employees. Virtually all organizations require periodic performance appraisals, as well as quarterly KPIs or similar processes.

So, the concept isn’t foreign, and implementing it is not a challenge. The challenge is to extend this process to contractors, to consultants, and even to freelancers. Sometimes clients tell us that they’re afraid measuring non-employee quality due to co-employment risks. We believe that is only an excuse because there are ways we can assign quality measurements to the work effort and even to individuals without getting into co-employment trouble.

So, organisations must correct this misconception internally. Once you become comfortable with ascribing quality to all workers and all work assignments, you can rate the work and tie the cost equation to the quality equation.

For years, organisations have been so focused on costs and the lowest bill rate. While this is valuable, it is also short-sighted. To optimize the workforce, it is absolutely essential to factor quality into the mix.

Step 4: Merge the data

If your organisation has good employee data, and make a serious effort to bolster your non-employee data, what is next? The next step is to merge those two together.

It does not necessarily have to be one database. Organizations have separate Applicant Tracking Systems and Vendor Management Systems. Analytics programs available today can consume data from both sides with ease. By analyzing and comparing this data, organizations can get to what is really interesting and fun, which is the modeling. Modeling leads to predictions, forecasting, and what-if scenarios. That is the next step.

Step 5: Analyse the data for decision-making

Once the employee and non-employee data is merged, the next step is to analyze and apply the data. Artificial intelligence and the spectrum of the analytics available today allow organizations to use visualisations to discern where changes in the workforce mix will produce the most benefit.

For example, you may traditionally be working with 80 percent employees and 20 per cent contractors. On a specific task that will deliver a specific outcome, what would happen if you changed the mix to 50 per cent full-time staff and 30 per cent consultants, 10 per cent freelancers, and 10 per cent contractors, based on skills? How would that compare to other possible blends of resources.

Modeling also allows you to factor in scarcity of talent, core and non-core positions, and other considerations. Once you start to bring these factors into play, you can engage in a variety of what-if scenarios to determine what would best fit your business strategy.

Step 6: Take action

Of course, the last step is to do it—simply execute a workforce optimisation program. Create a model and try it.

You are probably closer to Total Workforce Optimisation than you imagined. You already have a tremendous amount of data. What you lack—probably the performance quality data from certain elements of your extended workforce—can be obtained with a little effort and the right technology.

Of course, implementing Total Workforce Optimisation cannot be accomplished by snapping your fingers. It will take resources and commitment. But your workforce mix is critical to your organisation’s agility and competitiveness.

So, now is the time to begin to make progress toward the goal. And, frankly, the technology is there to enable you to reach it. To find out more, click here.

Doug Leeby will be speaking at Big Ideas Chicago on 27th September. For more information and to request an invitation to this leading CPO event, click here.