The Biggest Myth about Supply Chain Visibility

supply chain visibility
Photo by pascal allegre on Unsplash

Traditionally, when organisations have discussed supply chain visibility, the focus has very much been on the downstream. Why? Because common thinking is that the customer is king. And, as downstream visibility focuses on the customer, it is the first, and sometimes only, priority.

This has in turn given credence to the biggest myth about supply chain visibility, which is that downstream visibility is more important than upstream visibility. It’s high time this myth was busted, because this belief has a very narrow focus, and is not truly reflective of modern supply chain thinking. The truth is that upstream visibility is just as important as downstream visibility. Why? Because a lack of upstream visibility is just as likely to impact your customer.

Supply Chain Visibility – Upstream vs. Downstream

Before we get any further, let’s make sure to clarify some basic definitions.

Downstream visibility is a clear understanding of exactly how your products are moving down to your customer. Basically, it covers all the processes and actions that are involved in getting your finished product from your warehouse into the hands of the end user.

Upstream visibility, on the other hand, is a clear understanding of exactly how all the parts required to make your product are moving down through to your organisation. From a supply chain perspective, this covers all the processes and actions involved in getting what you need to create the finished product.

You might also occasionally hear the term “midstream visibility” to refer to what’s happening in production. From a supply chain perspective, these processes are often amalgamated into the category of downstream visibility.

Together, upstream visibility and downstream visibility combine to create end-to-end supply chain visibility.

Too Much Downstream Focus?

Let’s say, for example, that your company manufactures cameras. You need to make sure that you have full visibility of what’s happening when a camera is moving from your warehouse to your customer. Right from final testing right through to delivery to the store.

There are several processes that are available to organisations in order to track and improve downstream visibility. Depending on the complexity of the product in question, this can range from optimization of transportation and warehouse logistics and unifying ERP systems, to creating digital twins of their production, and more.

If your organisation is already looking at these kinds of projects, well done. But if downstream visibility is your only focus, you’re only doing half the job.

Without upstream visibility, you run the risk of not getting the parts you need to build your product. How are you going to get your cameras into the hands of your customers if you can’t build them in the first place? This is why upstream visibility is just as crucial as downstream visibility.

Upstream – Just around the Riverbend

So how do you get upstream visibility? A supply chain risk management programme is a crucial first step. If you’re not monitoring your suppliers (not to mention your supply paths, your own sites and your second and third tier suppliers too) for events that are going to impact them, then you have virtually no upstream visibility.

Here’s where you should start:

• In procurement: Your procurement department owns the relationship with suppliers. The department needs to have access to data allowing for all the necessary insight into any type of risk affecting your supply chain, both upstream and downstream.

• In your supplier sub-tiers: According to the Business Continuity Institute, most supply chain disruptions occur below tier one, where visibility can be even harder. You need visibility into not just your tier-one suppliers, but of all your sub-tiers. This is where good tier-one supplier relationships are key.

• With your major logistics hubs: What major logistics hubs are your supplies and your products going through? Do any of these areas represent bottlenecks? And are you aware of events there that might impact your supply paths? If not, you’re not going to be able to effectively mitigate threats.

• Your own warehouses and distribution centres: You need to monitor your own sites as much as you need to monitor your suppliers. Creating good communication lines and relationships with internal stakeholders is going to help here. The people on the ground will know best if issues are on the horizon, and then you can collectively work to implement actions and processes to prevent, or at least mitigate, them.

The supply chain visibility conversation is an important one to have in any organisation that has a supply chain. But if you’re focused on just downstream visibility, you’re missing half of the equation. And this could ultimately be the difference between success and failure.

Myth = Busted!

Find out more about upstream and downstream visibility, as well as Supply Chain Risk Management software, with Big Ideas Summit sponsor, riskmethods, here.

Critical Factors for Selecting your Suppliers

What critical factors do you look for in your suppliers? What does an organisation have to offer to get their foot in your door?

When you think of procurement, and get beyond the savings agenda, then the first thing that comes to mind is managing suppliers. While employees may be the life-blood of an organisation, suppliers are definitely the nourishment and support that keep organisations alive.

Without suppliers and their extended supply chains, organisations wouldn’t have any raw materials to make into products, any products to sell, or anyone to deliver much-needed services. That’s why a good supplier relationship (or relationships) can be critical to your daily operations.

However, one bad apple, one flawed contractors could not only stop the seamless functioning of your supply chain. It could also harm those two vital elements for all businesses – trust and reputation.

Your Critical Factors

If supplier relationships are key, then surely procurement should be taking its time selecting the right ones. And given the importance of this, procurement also needs to be applying the right ‘critical factors’ when selecting their suppliers.

As has been discussed in the past on Procurious, there are a number of factors that must be considered when selecting suppliers. The only issue is that these don’t appear to have changed very much over the years, begging the question – is procurement doing everything it can to adapt these criteria in line with the external environment?

Sure, it’s high time that procurement was looking past the traditional criteria of cost and quality when making their assessments. But the truth is, there’s no getting away from them.

However, this isn’t necessarily a bad thing if they aren’t the only factors in the equation. As procurement professionals, you are probably only too aware of the myriad of other factors that you need to be accounting for, from cultural fit and financial stability, all the way through to ethics and sustainability.

So which are the critical factors that procurement should be using? Is there a list that we should all be looking at?

Join our Webinar

Help is at hand in the form of Procurious and Ivalua’s latest webinar, ‘Critical Factors for Selecting your Suppliers’.

Sign up now to join our panel of experts at 11am (BST) on Tuesday the 3rd of September:

  • Tania Seary, Founder, Procurious
  • Stephen Carter, Senior Marketing Manager, Ivalua
  • Fred Nijffels, Accenture Operations ANZ – Procurement & Supply Chain
  • Gordon Tytler, Director of Procurement, Rolls Royce

In the webinar, you’ll hear from a panel of experts on a range of topics including:

  • The importance of cultural fit in your supplier relationships;
  • If sustainability, social value and fair working practices are becoming more prominent for procurement;
  • What your suppliers are looking for in your organisation; and
  • How to start the conversation in your organisation to move away from just cost and quality criteria.

FAQs

Is the Critical Factors webinar available to anyone?

Absolutely! Anyone & everyone can register for the webinar and it won’t cost you a penny to do so. Simply sign up here.

How do I listen to the Critical Factors webinar?

Simply sign up here and you’ll be able to listen to the on-demand. 

Help – I can’t make it to the live-stream of the webinar!

No problem! If you can’t make the live-stream you can catch up whenever it suits you. We’ll be making it available on Procurious soon after the event (and will be sure to send you a link) so you can listen at your leisure!

Can I ask the speakers a question during the Critical Factors For Selecting Your Suppliers webinar?

If you’d like to ask one of our speakers a question please submit it via the Discussion Board on Procurious and we’ll do our very best to ensure it gets answered for you.

Don’t Miss Out!

This webinar promises to provide a fascinating insight for all procurement professionals into the Critical Factors you should be considering in supplier selection.

Make sure you don’t miss out by signing up today!

Intelligent Spend Management – Your Next Smart Move

Photo by Val Vesa on Unsplash

Bringing it all together by bringing Intelligent Spend Management to the business.

If you’re just buying office supplies, you’ve probably got a good idea what you’re spending on paper and pens. But odds are your budget goes beyond a few reams of ultra-white printer stock. And while you are specifically tasked with procurement, you actually help hold the reins and hold influence on multiple categories of spend — from direct and indirect goods, to services, contingent labour — even T&E.

True, this spending is spread out across your organisation and, yes, in many of these categories, spending is more decentralised than ever with employees all over the company buying what they need when they need it. And, it’s true that all of this spending and all of these categories aren’t even in your charge.

However, the business needs you to help bring all that spend under control across all those categories, so you can not only reduce costs, but also help your company:

  • Manage supplier performance holistically
  • Diminish delivery and reputation risks across the board
  • Improve compliance and enforce purchasing policies equally in all categories
  • Increase productivity across procurement and throughout the entire company

Changing Expectations

Organisations are expecting this and more from procurement.

  • They want you to collaborate with finance and supply-chain leaders and address spend management across the business.
  • They’re expecting you to bring more spend categories under control, to unify how you manage suppliers across all categories, and to help bring direct and indirect spending together with services and T&E to increase visibility into all your spend.

They want more, and there’s an easy way to deliver and manage every source and every category of spend in delivering one, unified view.

Unfortunately, the systems most businesses use to manage all of these different spend processes can create barriers between spend categories and keep people from working together. Intelligent Spend Management, on the other hand, is a strategy designed to bring those barriers down, so you can get visibility into and control over each and every area of spend. In one place.

Why Intelligent Spend Management Matters

Intelligent Spend Management means comprehensive policy and supplier management. This gives you oversight over indirect and direct suppliers while bringing that same level of discipline to services/external workforce suppliers as well as key travel suppliers.

And, integrated with your ERP system, an Intelligent Spend Management solution creates a common set of spend data — a hub where you can unify and clarify the information. You’ll also be able to:

  • Capture and centralise once-invisible spend like p-card transactions, non-PO invoices and direct travel bookings that used to slip through the cracks in your systems
  • Apply sourcing best practices consistently to all of your suppliers across all categories
  • Centrally manage supplier risk as well as tax and other regulatory requirements

It brings you best-in-class control of each spend category. This means you can manage the entire procure-to-pay process for direct and indirect expenses from a single solution. Imagine being able to:

  • Deliver a guided user experience that makes it easy to follow policy
  • Give users a simple way to make procurement requests, plus tactical purchases directly from suppliers
  • Ensure the suppliers you source, the prices you negotiate and the terms you establish are pulled through right to the point of purchase, so policy compliance becomes everyday practice
  • Capture data from across the process and use AI and machine learning to automate mundane tasks and serve up insight-driven recommendations at critical decision points
  • Strengthen supplier relationships and, ultimately, get more innovation from suppliers to improve how you work and what you deliver

And you can bring that same level of precision, efficiency and user experience for services, your external workforce – and the same level of control.

Presenting a Unified View

You get a unified view of spend. The Intelligent Spend Management solution connects procurement spend data with data from across spend categories, giving you a single, near-real-time view — without having to piece together reports from disparate systems.

This means you, your friends in finance and your supply-chain peers can see where every bit of your budget is going, and help the organisation:

  • Ensure that all spending is in line with corporate policy and priorities
  • Get up-to-date views into your KPIs, so you can adapt accordingly
  • Manage discretionary employee spend before it gets away from you
  • Feed this spend data back into supplier management and fuel stronger negotiations

Intelligent Spend Management breaks down the silos, so companies can control spend across the board.

This is about procurement, but it isn’t simply for procurement. Intelligent Spend Management enables you to work across categories and bring all the data together — so you can bring confidence to your company by bringing certainty to your spending.

This article was written for Procurious by Drew Hofler, VP of Portfolio Marketing for SAP Ariba & SAP Fieldglass.

5 Big Procurement Challenges Addressed by Enterprise Contract Management Software

This article was originally published on the Icertis blog.

Procurement is a complex part of global business that carries serious commercial and regulatory risk. These risks are especially pronounced when a company does not have an effective way to centrally manage its contracts.

In a recent survey conducted by ProcureCon, leading procurement officials were asked about contract-related challenges they’ve faced that caused revenue leakage, increased cost or financial penalties. Here were the results:

A critical component to tackling each of these issues is enterprise contract management software, which sees contracts as live documents enshrining all risks and obligations incumbent upon an organization.

Indeed, good risk management begins with good contract management. With enterprise contract management, you can identify and manage risk throughout the contract lifecycle with proactive insights. A configurable risk model helps track risks across different categories, such as financial, contractual, performance and third party.

Let’s look at how each of the above challenges is addressed through contract management software.

Challenge: Higher operations costs

Finding: 43 per cent of respondents said higher operations costs have hurt their procurement organisation.  

Because contracts are the foundational element of modern commerce, they govern every procurement action and transaction a business undertakes. With the power of a modern contract management system with an ability to seamlessly integrate with procurement systems in place, an enterprise can gain unprecedented control over spend.

Through full visibility into all their commercial relationships, contract management software ensures that cash flow is complying with corporate plans, and allows executives to continually monitor money moving in and out of the business at all levels of the supply chain.

Challenge: Slow contract creation and approval

Finding: 46 per cent of respondents cited slow contract creation and approval as a challenge.

With enterprise contract management software, users can accelerate and optimize the contract authoring process. For example, users can self-service contracts with pre-approved clause libraries, eliminating the need for legal to get involved at every level of the authoring process but still control contract language.

Configurable notifications alert relevant stakeholders for revisions, redlines, and approvals, ensuring nothing gets missed. And robust, highly configurable rules increase flexibility while driving quicker approvals and execution.

Challenge: Unclaimed entitlements/lost or untapped revenue

Finding: More than half of respondents cited unclaimed entitlements or loss of untapped revenue as a challenge.

Best-of-breed contract management software draws on artificial intelligence (AI) tools that index and “interpret” every entitlement in each contract across the enterprise, allowing users to achieve the full potential of negotiated contracts through better enforcement of commercial terms.

The software captures the terms of products and services, prices, discounts, rebates and incentives in a structured form after interpreting the entitlements. You can then integrate the data with enterprise systems and help enforce terms for better savings and revenue performance.

You can also avoid missed entitlements or revenue potential. For example, sourcing organizations can automatically check purchase orders against agreed upon contract language to detect incorrect billings issues with regard to slabbed discounts or other innovative payout models.

Challenge: Missed obligations

Finding: 55 per cent of respondents said missed obligations have been a challenge.

Contract management software gives unprecedented insight into these contractual commitments, ensuring nothing gets missed. The same indexing and reporting capabilities used to surface entitlements also capture a business’s obligations to third parties, preventing leakage caused by lost business or penalties.

Challenge: Regulatory enforcement actions

Finding: This emerged as the most common challenge for procurement leaders, with nearly 3 in 4 saying they’re concerned with regulatory enforcement due to noncompliance.

It’s no wonder this was the number one concern, given the serious financial penalties and lasting brand and reputational implications of regulatory violations.

A robust library of clauses and templates goes a long way to reducing ad-hoc, or maverick contracts. Readily accessible templates, combined with a rules-driven workflow engine, helps support compliance throughout every stage of the contract management lifecycle.

Contract management software can cross-check country- or region-specific rules with relevant contracts. Compliance, down to the smallest supply subcontract, can be continually monitored through integrations with external software. Contract management software can even take a preventative role in compliance, via innovative contract creation tools.

Sophisticated contract management software can identify such regulatory enforcement and compliance obligations not just from their own contracting policy and authoring rules but also from customer specific contracts and cascade them to buy-side contracts used for fulfilling commitments. This makes the whole supply chain subject to internal regulatory enforcement and compliance actions.

To learn more about how a modern CLM solution can improve procurement at all levels of the supply chain, download this report from ProcureCon.

Vivek Bharti is general manager of product management at Icertis

Would you Change Your Accent to Appear More Professional?

Credit – Markus Spiske/Pexels

When you landed your first professional job, did you change the way you spoke? 

Perhaps you thought you’d sound more professional if you talked with a slightly more sophisticated accent or littered the conversation with a few long words – or maybe, you just wanted to fit in and speak like everyone else.  

Or did colleagues continually ask “What did you say?”, which made you realise that you needed to tone down your dialect to be better understood. 

You might have hoped that no one had noticed. However, when you went home, your family probably did – and perhaps they were not shy about pointing out that you were talking differently.  

One in ten people with a regional accent even say they were accused of speaking “posh” when they went back home to visit. 

The Class Divide – How You Speak Can Count Against You 

The issue is that every time you open your mouth, you could be ruining your career chances.  

In fact, even if you don’t have an accent you believe this to be true with more than half of people saying that having a regional dialect would rule them out of the top boardroom jobs.  

London accents that are considered the worst. So you probably won’t be hearing many people who sound like Dany Dyer heading for the executive offices. 

So it’s probably no surprise that nearly a quarter of professionals say that in order to be successful in their career, they’d have to alter the way they speak at work according to a survey by the Equality Group

The Brass Ceiling – Why We Hide Where We Come From 

It’s not just how you speak that matters. It is shameful that in this century, professionals still feel they cannot be honest about their socio-economic background (or how much brass they have). 

One in ten has even gone as far as hiding their hometown for fear of judgement – saying they have not been forthcoming about where they grew up because they worry that they will be unable to access particular professional/social networks if others knew their background. 

Along with gender, age, race and religion, your background this is yet another example of how we are discriminated against at work. 

However, you might not have a leg to stand on if you complain – because the Equalities Act of 2010 does not cover socio-economic class.  

It’s a big issue according to the Equality Group, a consultancy that helps businesses attract, develop and retain diverse talent. 

Three quarters of us believe that professionals with higher socio-economic status have increased access to better careers and job opportunities regardless of their experience of qualifications. Yet six in ten of the UK workforce identifies as coming from a working-class background. 

So, until things change, professionals are purposefully hiding their hometowns and regional accents for fear they will miss out on a better job.  

Better Off Do Better – Just Look at Boris 

The Social Mobility Commission backs up these findings, revealing that those from better-off backgrounds are 80 per cent more likely to end up in professional jobs than their working-class counterparts.  

This partly down to confidence. Professionals from lower socio-economic classes are less likely to ask for a pay rise and promotion due to a fear about ‘not fitting in’.  So, could your own self-perception of class be influencing your employment status? 

This even influences our choice of careers according to a report from Debut. It found that more than a third of graduates say they were put off joining a business whose workforce was perceived to be made up of mainly middle and upper-class employees. Two in three also said they had to change who they were, including how they look, to get a job. Debut calls this “professional exclusion”. 

Unconscious Bias – You are Guilty Too  

If you think it is grossly unfair to discriminate against someone just because of their accent or where they come from, then take a good look at yourself. 

Unconscious bias is something we are all guilty of. It is natural human behavior. We may rule someone out of a promotion or even our team because we perceive them to be too old (which we often equate with being unable to adapt and learn new skills). Or we may assume that a young female employee is not as bright as a middle-aged man. This list goes on…. age, gender, race, religion or even size, can all influence how we view others.  

However, it can also work the other way – we are often drawn to people or treat them more favourably if they look like us, sound like us and have a similar background. If you went to a particular university (or did not go at all) you might unconsciously favour someone who followed the same educational path. This can lead to us working with people who are not up to the job – and it could damage our own careers. 

So which category do you fit into – and how can you tackle your own unconscious bias? 

  • Perception bias: This is where you believe on thing about a group of people based on stereotypes and as a result you make assumptions that may not be true. 
  • Challenge yourself to get to know someone first. 
  • Affinity bias: You like people because they are like you. In recruitment this can lead to “mini me” hiring. Diversity is good for business so this can stifle innovation and creativity.  
  • Challenge yourself to reach out and work with people who are different to yourself. You might learn something new, change your point of view and become more open minded. 
  • Confirmation bias: None of us likes to be proved wrong. So, we try to confirm our assumptions about groups of people (or even ideas) rather than making objective judgments.  
  • Challenge yourself by stepping back and judging someone on their behaviour, merits, achievements – not just how they look or sound. Look for ways to prove that you are wrong in your assumptions. 
  • The halo effect:  A white, well spoken, well dressed, good looking man walks into the office and you automatically assume that this person is honest, capable, intelligent etc… without knowing a thing about them. That’s the halo effect. 
  • Challenge yourself to delay making judgements. Anyone can buy a nice suit, it does not mean they are good at their job.  

Navigating the Choppy Waters of the Future – An Expert’s View

Photo by Garrett Sears on Unsplash

The US escalating a trade war with China by imposing additional tariffs on Chinese goods. The ongoing debacle of European trade policies over Brexit. The perennial Middle East crisis over oil. 2019 has not been easy for global businesses and their procurement professionals.

But given that it is only one-quarter of the exhaustion, could we benefit from an expert’s insights and frame strategies such that procurement can navigate successfully through the rest of the waters?

Sure! Zycus got in touch with the CEO & President of SIG, Dawn Tiura soliciting her point-of-view on how procurement professionals can navigate through the uncertain times ahead. Dawn, a former partner in a CPA firm, focused on early-stage Silicon Valley enterprises and high wealth individuals, kindly agreed to explain her actionable list of do’s and don’ts that every Procurement leader can benefit from.

Zycus: What elements should be central to our conversation on procurement in the coming year?

Dawn: One of the important conversations that procurement teams all over the world should reflect on at the moment is their understanding that every dollar-saved might not directly translate into company’s eventual revenue objective but they do improve the bottom line when the focus is consistent. We have the unique ability to impact not only bottom-line savings but also top-line growth. We have insight into all lines of business as they are making decisions, not in the rearview mirror. And, we have relationships with suppliers who are incented to bring innovation to us. If that is not enough, why not use equivalent revenue? That will get the attention of the CFO, CEO, and Board.

Zycus: Most organizations majorly use hard dollar savings as the primary parameter to measure procurement and sourcing performance. Would it be safe to say it is a dated method of measuring current performance?

Dawn: Absolutely. We have to stop using savings as our sole barometer for measurement. Let’s look at an example:

The spend of an organization is $500 million; the cost avoidance from sourcing efforts at 12% comes to $60 million. Net profit margin is 7.5%. The equivalent revenue to generate the same value from sourcing efforts is $800 million (or $60 million divided by 7.5%)

The amount of energy required by the company to generate $800 million in revenue is massive and clearly understood by all members of the C-suite. Therefore, reporting results in terms of “equivalent revenue” instead of “savings” positions the sourcing organization in a more impactful and compelling way.

While you would assume that others will make this calculation and realize this is the case, they don’t, or can’t make the analogy to give us the credit we deserve. We must step up and change the dialogue to get the respect we have earned. 

(Read Dawn’s complete blog that talks about this issue and a lot of others here)

Zycus: So the first focus of a procurement and sourcing professional is getting the C-Suite to shift focus from savings to equivalent revenue, what would you say would feature next in their “things to keep in mind” list?

Dawn: Third party risks. Procurement and Sourcing professionals should be particularly mindful about these threats and therefore should have a foresight aided by technology that would mitigate the potential of loss. A take charge approach towards risks is what the current environment demands. Procurement and sourcing teams all over are responsible for managing goals and key relationships for the organization. It becomes vital for them to work on these objectives while taking into consideration the various risks they might be exposed to. Strategical planning and readiness will help not only tackle these risks better but also ensure the routine operations and performance doesn’t get disrupted.

Zycus: From what we’ve seen, these discussions seem much underrated, what can organizations do to ingrain this line of thought across the team?

Dawn: You make a valid point. However, that is changing. Organizations are becoming more mindful that this change in mindset is long due, and they need to adapt. This is why we’re seeing more and more people investing in education and certifications, so they have the necessary skillset to tackle these changes better.

Zycus: Artificial Intelligence has created a lot of buzz. How do you think that is changing procurement today.

Dawn: There is a breakthrough using Artificial Intelligence to manage risks in tail spend. A lot of companies are still new to the idea of AI, but the use of AI will be a game-changer.

Zycus: Gartner’ predicts, “By 2022, 75% of all B2B tail spend goods will be purchased in an online marketplace.” Do you agree with this?

Dawn: Indeed. As legacy systems continue to phase out, it is only AI that can redeem procurement an improved balance sheet.

Another aspect of change that people might miss out on is accounting regulations changing concerning leases and procurement people need to be aware of the changes and impact on their companies.  While the implementation of the new lease accounting guidance will fall within the accounting department, procurement needs to be a part of this review to provide its perspective on any proposed changes to agreements and to do the cost/benefit analysis.

Zycus: Moving forward, one thing that has always been a concern is how procurement can have a facelift from being a more tactical function to a strategic one. So what steps would you recommend teams take for this significant makeover?

Dawn: A strategic mindset is crucial to this rebranding of procurement. This transition is what will make other functions value procurement’s take on importing sourcing decisions. For this procurement, professionals need to be all eyes on various risks and opportunities. Professionals must be mindful of changing technologies. They need to prepare for it with certification in third party risk management and sourcing professional’s coursework.

Procurement and sourcing teams should consistently measure their contribution to the enterprise. An excellent way to measure one’s impact on to company’s strategic objectives would be to create a chart that cascades from the top management down to the business units, and how at each phase, the person has contributed to every success. On this note report from the Hackett Group also states, “This is a unique time for procurement organizations. Never before have companies been able to derive more competitive advantage from superior procurement capability. The function’s role is shifting from a sourcing gatekeeper to a provider of insight and decision support, made possible by improved access to digital technologies, data, and advanced analytics. World-class procurement organizations consistently get better results with 29% fewer (but higher-paid) FTEs per billion dollars of spend.”

Zycus: One parameter to measure overall procurement impact would be to track contribution in top-level business objectives, what do you think could be other benchmarks procurement teams could use to measure performance holistically?

Dawn:We need to, as proactive procurement practitioners, change how savings from procurement is measured. “Equivalent revenue,” the term will not only consist of hard dollar savings but elements like savings through cost avoidance. Anything that impacts the bottom line and contributes to growth counts!  

Another common and useful benchmark used to measure performance is FTEs. The number of full-time equivalent employees (FTEs) needed to perform a process, or a group of processes is one way to gauge process efficiency. The fewer FTEs required to process purchases, the higher the efficiency and the lower the overall cost of the procurement cycle. However, consider only those who formally report into the procurement organization.

FTEs are employees who devote all or part of their jobs to sourcing activities, and they should factor into the measurement. Meaning, if a non-procurement employee spends a portion of his time to procurement or sourcing activities, he or she is a partial FTE. Their effort will also eventually add up to that of full-time employees.

Zycus: My last question to you is, what are three things procurement should start/stop doing this year?

Dawn: The first thing that Procurement professionals must stop is being transactional and writing checks. The second to stop would be to keep talking about savings over everything else, while the last one would be to learn to communicate in the language of the CFO.

Our Conclusion from the interview

A seemingly strong inference that can be drawn from this interaction is Procurement’s transition from a transactional to a strategic function. This shift in approach has been a necessity for some time now; statements from subject matter experts and veterans advising Procurement professionals advising alignment of goals and their measurement, to learn the language of a CFO instead of focusing on operational goals, go to show how vital that shift is now.

Read our latest eBook “Procurement Experts Outlook 2019” to gain more insights into what eight other experts predict for the procurement future.

References:

–         https://www.linkedin.com/pulse/may-i-vent-lets-change-how-we-talk-procurement-dawn-tiura/

Is It Time To Get Rid Of The Open-Plan Office?

Well conducted research is beginning to appear and it does not look good for the open plan office…

By Monkey Business Images/ Shutterstock

The open plan office is the badge of the thoroughly modern work space. It’s as much a part of the office of the future as unlimited free snacks and Fussball tables in the common room.  But research is starting to pile up that it is doing more harm than good.  A lot more harm than good.

By 2014, seven out of every ten offices were open plan according to reporting in the New Yorker.  Gone were the sea of cubicles that inspired Dilbert’s creator.  Instead the typical office looked more like an aircraft hangar full of desks.  The theory was the removing physical barriers removed barriers to collaboration and communication. 

Oh, and there was the no insignificant bonus that they cost a lot less to build and fit out and employees and their work were easier to monitor.  While that theory has logical appeal there was surprisingly little empirical evidence to back it up. The research that did exist was based largely on self-reported questionnaire responses and attempted to measure largely intangible outcomes like employee satisfaction.

Open Plan – does it actually work?

Now however, well conducted research is beginning to appear and it does not look good for the open plan office.  In July last year, the Harvard Business School conducted a large study with a first of its kind methodology.  The researchers decided to use wearable technology such as movement sensors, cameras and microphones embedded in badges to accurately measure whether open plan offices actually did increase collaboration and communication.  The devices were deployed in two different company headquarters before and after a shift to an open plan design.

To ensure robust data, the researchers ensured the devices were deployed over a long time frame and measurements were taken at the same points in the business cycle.  There was no point comparing an end of quarter rush to a start of quarter quiet period.

The results were extraordinary.  Rather than increase face to face collaboration and communication, the shift to open plan massively decreased it.  People talked face to face 70 per cent less in an open plan office than in the normal office space that had preceded it.  The researchers speculated that the open plan triggered a natural human withdrawal response to large groups.  People have a fundamental desire for privacy and the open plan violated that.  Workers stopped talking in person and IM and email traffic surged by 50 per cent.

Perhaps more importantly, from a bottom-line perspective, the change also decreased productivity and work quality in both of the studied companies.  Other studies have estimated the value of this impact to be in the region of a 20 per cent decrease in productivity.

This new research adds quantitative weight to something more traditional studies have been highlighting for the last couple of decades.  Such studies have found that open plan offices had a negative impact on job satisfaction, attention spans and creative thinking, have dramatically increased levels of stress, conflict and staff turnover and significantly increased sick leave.   

And all of that is before we consider the cost of distraction.

Lack of Privacy

A 2013 study of open plan offices revealed that nearly half of the surveyed workers said the lack of sound privacy was a significant problem for them and more than 30 per cent said the same thing about visual privacy.  The same researchers in a previous study concluded that the loss of productivity “due to noise distraction” was doubled in open plan offices. 

It’s not surprising then that the Information Overload Research Group a non-profit consortium of business professionals, researchers, and consultants, estimates that distraction wastes 25 per cent of knowledge workers’ time and is costing the United States economy almost one trillion dollars a year.

Clearly the answer is to put the walls back in.  It might not create any net gains but at least it would reclaim the ground lost by the disastrous detour into communal office space. However,  if you really want to increase productivity, keep the talent happy and retain your best staff then the evidence is now suggesting that you should delete the office altogether and let employees work from home. 

The Worst of Ideas

A recent very large randomised controlled study on a Chinese call-centre operators, for example, found that working from home increased productivity by 13 per cent.  Nine of those percentage points were from working more minutes per shift and four per cent from more calls per minute.  

Home based workers also reported feeling more satisfied and the attrition rate halved. Working from home is not for every employee or every type of job but at least there are upsides and the good news for the CFO is that it saves even more on floorspace costs than the open plan office. 

The open plan office was a bad idea implemented for spurious reasons with an inadequate evidence base.  And it turns out to be a terrible idea.  All we need now is management teams brave enough to admit that and move towards work structures the evidence says significantly improve rather than degrade productivity.

The One Thing Everyone Keeps Getting Wrong About Digital Transformation

While digital technologies have made the pathway to digital transformation the opportunity that every organisation is seeking to capitalise on, what many organisations get wrong is the focus on the technology…

By Parilov/ Shutterstock

There’s no doubt that we have been in the digital revolution for a while now. It may have been a slow start as we came to terms with the power and capability of our smartphones that precipitated the customer centric, anywhere-anytime shift.

Futurists pre-empted the transformation that was coming by positioning a future of mobility, IoT and artificial intelligence, while tech savvy organisations made some early investments and experimented with analytics and automation, learning very quickly how to capitalise on technologies many of us were still trying to define.

Fast forward 10 years and we surely must have everything worked out and locked down. After all, we have had enough time to observe those who have gone before and experiment ourselves, both as consumers and as leaders in organisations, irrespective of our role or industry. It should be the very definition of a no-brainer.

The Current State

Taking a look at the current state, things seem to be a little different. Yes, there have been tech-savvy organisations like John Deere who have managed to leverage digital capabilities and redefine their business model to open up new revenue streams. And we are all familiar with the digital disruptors coming from digital natives like Google, Amazon, Uber and Tesla.

And we have all heard the catch cry of Disrupt before you are disrupted. Indeed, it has probably been the opening for many a workshop on digital transformation initiatives making their way into the leadership programs of organisations.

Is it a money question then? There’s no doubt that the global financial crises, combined with the impact of increasing customer expectations and global competition have exacerbated financial pressure on organisations.

The internet has proven to be a double edged sword for many; enabling access to markets of consumers that would have previously been impossible, while also giving the very same consumers access to competitors, feedback and reviews of others, and pricing transparency that has not previously been possible. Everyone has had to up their game.

All About the Money?

With spend in digital initiatives estimated in 2018 at $1.3 trillion, it’s a tough position to advocate that the investment and focus has not been there. Digital initiatives are defined as any digital capabilities aimed at improving customer value, new growth and monetization opportunities and driving improved efficiencies.

So the categories are pretty broad, and the digital capabilities equally so. Moving from a spreadsheet to a web based form could be loosely termed digital, as could automating a process flow, experimenting with RPA, or enabling customers to order from a website. In essence, there are a multitude of different options before we even get to chatbots, customer preference insights, predictive asset maintenance and hypotheses generation.

So why do we keep hearing about how hard it is to execute effectively with consistent research telling us that 70 per cent of transformation efforts fail?

While digital technologies have made the pathway to digital transformation, the opportunity that every organisation is seeking to capitalise on, what many organisations (70 per cent of them as noted above) get wrong is the focus on the technology.

As an innovator in the early stages of the digital era, that may have been understandable. Working with the unknown, and by definition and nature, first-of-a-kind initiatives, it was important to understand what the technology could do and its limitations.

But in 2018, why does this still account for such an overwhelming focus of an organisations digital transformation agenda? The best way to deal with that question may be by taking a look at what the organisations that are in the 30 per cent who achieve success actually do.

People and culture matter

Watching my 10 year old nephew master the iPad with a skill and confidence I can only aspire to is an exercise in amazement and humility; amazement at all the functionality he is able to access to expedite what he is doing, and humility knowing that I am not ever going to come close.

Taking the ego aside, it reflects the very important point that the technology being used has degrees of perceived value generation and productivity firstly, only when it is used and secondly, with an increasing value the greater and more extensive the use.

So when we say people matter, what we really mean is digital transformation is a change to the way a company works and for the intended value to be realised organisations must incorporate education, training, and adoption strategies that help employees understand why the transformation is happening, how it will impact them, and how accepting and adapting to the initiative will enhance the way they work and the business performs.

Process Matters

It’s very easy to dismiss the process of any function or model as the thing that happens behind the scenes. It’s not usually the subject of an extensive marketing campaign and the people in many process areas may not even have a line of sight to the end customer. 

There may be an instances where consumers may complain about steps in the process that they may need to navigate to get something resolved. I need to admit at this point to being one of those annoying customers that will challenge how something works if I am caught up in a cycle of bureaucracy with some unfortunate contact centre assistant.

But process matters because so many organisations will deploy a technology solution and not or re-engineer a process to reflect the new way of working that the technology should enable.  As a result teams end up complaining that they are stuck with a new technology which does not work at best, and creates more work at worst.

The criticism then gears towards the technology not the implementation strategy that supported it.

Challenging Fundamentals

Business models matter: How organisations arrange themselves in a digital transformation matters. Traditional models are hierarchy based and decisions are made on positional authority. Team and role structures define who does what, and everyone’s role is clear and supported by a position description. Digital transformation challenges many, if not all of these fundamentals. 

Implementing change on this scale, for at its essence this is what digital transformation is, requires different ways of working and different mindsets. It requires acknowledging that your nephew may have more experience even at 10 years old, then you do, irrespective of a long career as an executive.

It’s about who knows what, not credentials that may be impressive, however not best suited to that particular piece of work. And it involves understanding that teams are dynamic, decisions need to be made differently, and a shared focus on outcomes is how digital value is generated and how digital transformations succeed.

Is Blockchain The Next Big Thing For Supply Chain?

What does blockchain mean for your supply chain?

By Oleksandr Nagaiets/ Shutterstock

Few people working in supply chain roles have a clear understanding of how this fledgeling solution called blockchain is, or could be, applied in their organisations. There is much hype and misinformation in the marketplace and much of it is due to the unproven nature in practice and unknown long-term costs of blockchain applications.

So what is blockchain?

Without getting too technical, the underlying principle of blockchain is to provide a secure environment where encrypted business transactions between buyer and seller can happen without the need for third parties such as banks and clearing agents to intervene. According to McKinsey,

blockchain is an internet-based technology that is prized for its ability to publicly validate, record, and distribute transactions in immutable, encrypted ledgers”.

Immutable, in this case, means that each link in the blockchain is completely secure and unbreakable. Blockchain’s format guarantees the data has not been counterfeited and that information can be read by any authorized party.

There are two main types of blockchain applications, one private and the other public. In the commercial environment, the networks are mostly private, this type of operation is sometimes referred to as “permissioned”.    Read more detail about how Blockchain works here.   

The world before blockchain

This diagram below is typical of a traditional sales transaction with many intermediaries.  Currently, these intermediaries process, verify and reconcile transactions before the ownership of the goods or services can pass from seller to buyer. How many people does it take to move a container of avocados from a Kenyan seller to a UK buyer?  At least thirty, but more importantly, there are over 200 individual transaction events and communications involved. 

What traditional buyer-to-seller transactions look like today  

What supply chains could look like tomorrow  

The world after blockchain

In a private blockchain network,  the procure-to-pay process is streamlined so that documents are matched triggering payment and creating a verifiable audit trail.   Nestlé is breaking new ground in supply chain transparency through a collaboration with OpenSC – an innovative blockchain platform that allows consumers to track their food right back to the farm.  The initial pilot program will trace milk from farms and producers in New Zealand to Nestlé factories and warehouses in the Middle East.

What does blockchain mean for your supply chain?

How can this fledgeling technology be beneficial? According to McKinsey, there are three main areas where blockchain can add value:

  1. Replacing slow, manual paper-based processes.
  2. Strengthening traceability which reduces quality and recall problems
  3. Potentially reducing supply-chain IT transaction costs  (maybe?).

The answer seems to lie in its potential to speed up administrative processes and to take costs out of the system while still guaranteeing the security of transactions.  Blockchain has the potential to disrupt or create competitive advantage, but the biggest barrier to its adoption is that so few have a good grasp on how it can be of use in their operations.

The potential benefits

  • faster and more accurate tracking of products and distribution assets, e.g. trucks, containers, as they move through the supply chain  
  • reduction of errors on orders, goods receipts, invoices and other trade-related documents due to less need for manual reconciliation 
  • a permanent audit trail of every product movement or financial transaction from its source to its ultimate destination.
  • trust is created between users through using a transparent ledger where transactions are immutable, secure and  auditable

What are the obstacles?

1.The cost

Implementing a blockchain solution may require expensive amendments and upgrades to existing systems which is both costly and time-consuming. Who pays and what is the return on investment?

2. Change management

There will be a need to convince all involved parties to join a particular blockchain and collaborate for mutual benefit. More openness will be needed, the old ways of protecting information won’t work. There is likely to be some mistrust initially especially around market share and sales data.

3. Rules and regulations

Legal advice is essential to understand what regulatory frameworks must be complied with. There are no accepted global standards for Blockchain that align with maritime law, international customs regulations and the various commercial codes such as Incoterms that govern the commercial transfer of ownership.  

4. Security

Is Blockchain really unbreakable?  Hackers would not only need to infiltrate a specific block to alter existing information but would have to access all of the preceding blocks going back through the entire history of that blockchain, across every ledger in the network, simultaneously. Even with encryption, cyber-attacks are a concern and cybersecurity costs money.

Transacting using “smart” contracts

Blockchain can be used to create “smart” contracts that execute the terms of any agreement when specified conditions are met. The “smart” part is a piece of computer code that predefines a set of rules under which the parties to that smart contract agree to interact with each other. Not recommended for beginners.

What industries will benefit most? 

Industries with the greatest potential are those that deal with extensive paperwork such as freight forwarding, marine shipping, and transport logistics. 

Tracking ofautomotive parts as they move between manufacturing facilities and countries is an attractive application as interfaces between motor manufacturers and their 3PL transport partners are complex and often not well-integrated. Toyota is venturing into developing blockchain solutions for its core parts supply chain operations.

Vulnerable and highly regulated supply chains such as food and healthcare

can benefit due to their need for transparency. Real estate has great potential due to the mass of records and documents involved such as transfers of land titles, property deeds, liens etc.  

Avoiding the hype

Gartner says that although blockchain holds great promise, often the technology is offered as a solution in search of a problem. They advise that “to ensure a successful blockchain project, make sure you actually need to use blockchain technology. Additionally, much of what is on the market as an enterprise “blockchain” solution lacks at least two of the five core components: Encryption, immutability, distribution, decentralization and tokenization.”  Gartner’s long term view is that blockchain will only move through its Trough of Disillusionment by 2022. 

Will it work in your supply chain?

The jury is still out on whether blockchain will really create a competitive advantage. Also, the cost of running a blockchain in time and resources is the unknown factor. For companies thought to have efficient supply chain operations with trusted partners and reliable databases, such a complex solution may not be needed. A supplier portal that is housed in the cloud may be more than adequate when coupled with an established ERP system.   

But wait, the blockchain action doesn’t stop here! Join us on October 15 with blockchain experts Shari Diaz, Innovation Strategy and Operations Program Director, IBM Watson Supply Chain and Professor Olinga Ta’eed, Director of the Centre for Citizenship, Enterprise and Governance in this webinar brought to you by IBM and Procurious. Click here to register for Blockchain: Supply Chain’s 21st Century Truthsayer.

5 Ways To Achieve Marginal Gains In Procurement

By Eugene Onischenko / Shutterstock

At the Big Ideas Summit 2019, Justin Sadler-Smith, Head of UK & Ireland, Procurement & Supply Chain at SAP Ariba shared his view of procurement in an insightful and thought-provoking presentation.

Among the issues that Justin talked about was an ever-decreasing time for procurement to react to the changing market environment and put actionable strategies in place. Because if procurement isn’t fit for purpose, not delivering against stakeholder expectations, then there is the potential for huge, negative impact from a brand and shareholder perspective.

There is a whole mix of uncertainties which are causing people to reassess how they are doing business and then ultimately doing it in a different way. Organisations, and procurement as part of them, need to be looking at what we are doing tomorrow and reinvent ourselves to become more competitive than they have been in the past.

As part of this Justin talked about an issue that is fast becoming a key for procurement to take account of and account for in its day-to-day operations. And that is leaving behind a positive legacy. Here is Justin explaining it in his own words:

Faster Reactions, Greater Purpose

When it comes to procuring with purpose, procurement professionals around the world need to be able to react quicker to changes in order to set the foundation for the legacy we should all be leaving behind.

Justin argued during his presentation that it’s almost as if procurement is in a race. In simple terms, those who are fastest to react, fastest to respond to changing demands are those who will win. It might not even be procurement who are the ones triumphing in the race, and that could spell the end for procurement as we know it.

The issue here is that many procurement professionals just haven’t been trained to do this. Without adequate training, much like an Olympic athlete, or Tour de France rider, there is no chance of being able to meet these demands and deliver what is required.

How do procurement professionals get trained up then? There’s no use knowing that there is a need to change unless there is willingness to do so, as well as more support to implement it.

Help is at hand, however, from an unexpected source. When Sir David Brailsford became Performance Director at British Cycling, he came up with the idea of breaking down the individual aspects of a race and then improving them one by one. The notion of ‘marginal gains’, was that a number of small, 1 per cent, improvements would collectively add up to a major competitive advantage.

It was this thinking that helped British Cycling dominate on the track at successive Olympic Games between 2004 and 2012, and then Team Sky/Ineos win seven of the last either Tours de France (not to mention other events and Grand Tours).

How then do we take this concept and apply it to procurement? Justin has shared his thoughts on this, helpfully broken down into five key areas.

Marginal Gains in Procurement

  1. Data – Where is data stored within your organisation and how easy is it for you to get it? How is HR data incorporated in your function? You need to look after people – those who own the data – as this is the life-blood of the organisation and you need to make the breadth and depth of your data valuable and usable.
  2. Productivity – procurement can drive this in an organisation by looking at different areas of automation that probably haven’t been looked at before. For example, how many people are really looking at AI as a way to change their organisation, without worrying about the spectre of job losses?
  3. Innovation – this is the concept of co-innovation by working in collaboration with suppliers to building differentiation. For this you need to get closer to your supplier base and remove any barriers to working closely with the right suppliers.
  4. Purpose – what do we mean by purpose? It’s the idea of driving social responsibility through supply chains at multiple levels. This is well beyond a tick box exercise now – it’s a must for good business as well as for making a better world. The idea runs beyond risk mitigation and focuses more on building value through sustainability.
  5. Well-being – people are living in a much more stressful period globally. However, by driving these needs and having a purpose, it can change the game when it comes to how people operate and feel. For procurement, this means attracting, retaining and caring for their top talent and nurturing their people.

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 Environmental Sustainability.

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