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Progress or Perish: How to Push our Profession to the Next Level

Traditional procurement roles will perish if significant progress isn’t made. But how can the profession progress enough to deliver true value?

By @lindsayhenwood on Unsplash

By Ben Tulloch, Managing Director at Accenture

Ask any business executive in Australia how procurement has made their life easier, and they’re more likely to tell you that it’s been a roadblock.

Despite the profession’s brilliant minds, appetite for improvement, and advanced solutions from AI to blockchain and beyond, only 20 per cent of procurement tech projects down under prove successful. The issue, it seems, is something more deep-seated. The modern Australian enterprise is not geared for rapid evolution.

By the time Aussie companies have dedicated years of effort and distraction to available solutions, the market has advanced beyond recognition. What we really need is the ability to rapidly prototype and test ideas, implement them at scale and do it all again next month.

A lack of agile skills has left Australia lagging behind the EU and US. In fact, we’re probably at a 3/10 in terms of our capabilities and maturity, still using procurement tech and processes that harken to the 1970s. As we’re so late in implementing the basics, how can we even begin to place ourselves ahead of the curve?

Progress: The role of the traditional procurement manager will perish if it doesn’t change

There’s a fearmongered risk that jobs will be lost to advanced technologies. At some level, that’s correct: if a theatre nurse implemented AI to predict, trigger and record stock orders in the blockchain, they wipe out the P2P function of procurement. But this doesn’t spell disaster, it opens up new opportunities for growth.

If we can remove the administrative element of the job, procurement professionals can progress from a traditional role and take a more strategic view, rather than just buying stuff. They can leave a legacy and make a tangible difference – socially, environmentally and economically. For example, readily available blockchain solutions have the ability to eradicate modern slavery by providing ultimate transparency across supply chains.

But the skills needed to run a digital control tower or AI stock predictor are different. We’re going to need system integrators, program managers, design thinkers, full-stack engineers, mathematicians and AI experts. How do you rapidly shift engrained national mindsets – quickly and cheaply? A culture of co-design, ecosystem partners and using the success of tangible use cases to build trust are key.

‘Design Thinking’ is the Next Step

One of Accenture’s government clients had small armies of people trying (and failing) to keep up with updating pricing lists. Place an order, and it was most likely attached to the wrong stock number. As a result, buyers lost trust in suppliers and vice versa.

Now imagine if those master pricing lists were housed on the blockchain – transparent, secure and updated in real time? That technology exists, it’s cheap and takes only weeks to implement. But this isn’t a tech problem, it’s a change problem.

In the startup ecosystem, design thinking is in their DNA. Even three months is considered a long time, and products evolve continuously to keep up with market changes. These newer generations of Australian innovators would laugh our outdated tech and processes out the room, instead turning to a slick new app or platform that can be pushed to market within weeks.

But if procurement brought a startup solution to the CMO of a large Australian enterprise, it would likely be met with, “they’re not on our preferred supplier list.”

The Business Case for Innovation

The return on investment for agile solutions is not only profound, it’s immediate. We’ve been working with a major airline in Australia on using AI to predict, prioritise and elevate invoices for large suppliers, and manage changes in very complex supply chain relationships. In doing so, they’ve removed all paper processes, increased transparency, and seen a significant ROI in only three months.

Another major telco client has been tackling customer service with an omnichannel conversational platform that can replicate complex human conversation, comprehend voice, text and multiple trains of thoughts – not just spit out an answer to a direct question. Within months, the bot has compressed contract changes from 3.5 days to 8 minutes. This relatively inexpensive solution has potential solutions for the entire procurement profession.

The best part is that the platform was in live testing by week three. That’s on a live contract with live scaling and live data, three weeks after the idea was suggested. That’s design thinking in action.

The Art of the Impossible

Showcasing the impossible is powerful. If I utter the word ‘blockchain’ to an old-school Australian organisation, they’re likely to palm it off as a futuristic dream. But show them a functional, cheap and efficient blockchain contract in action and they’ll get it. Demystify advanced technology for your workforce, and take the objection off the table.

Collaborate with industry partners to forge a path forward that benefits everyone – not just your company. Start with the problem, and isolate solutions. Sure, there are technical and personal risks involved in evolution. But there are risks with everything in business. Not every idea has to be rolled out permanently across your entire enterprise. But not taking steps towards the future is the biggest risk of all.

At this month’s Big Ideas Summit, procurement professionals will be coming together to understand, challenge and solve the profession’s biggest problems. I’ll be speaking to the power of design thinking in facing the future of procurement, and how an “Industry X.0” mindset can pave the way forward.

The bottom line is that if you do nothing, people will find their way around you. The best way forward is to recognise that you’re not alone – Australia lags behind with you – and then get on the front foot and be ready to progress.

Procurement Can . . .

To focus on savings alone is to sell procurement short and miss out on its potentially game-changing capabilities.

A good procurement team can save your business money. This goes without saying. Savings are for procurement what risk mitigation is for legal, innovation is for R&D, and new business is for sales. They’re table stakes, just the very beginning of what a well-equipped and well-staffed function should offer the organisation. To focus on savings alone is to sell procurement short and miss out on its potentially game-changing capabilities.

While reducing costs remains the top priority for today’s procurement teams, it’s high time for the function to evolve its objectives and diversify its value proposition. With visibility across the global supply chain, procurement is perfectly equipped to address the monumental concerns that plague the business world. Labour violations, pollution, animal rights, and ethics – they’re all issues as relevant to procurement as cycle times and pricing.

Simply put, procurement is capable of more than saving money. It’s capable of saving lives and it might just help us save the planet.

Procurement Can . . . Save Lives

Stopping Forced Labor

It’s appalling that, in 2019, forced labor is still endemic across various global supply chains. What’s worse is that the United States imports more “at risk” products than any other country in the world. According to the Global Slavery Index, the U.S. brought in more than $144 billion of these products and commodities. They report that electronics, fish, cocoa, garments, and natural resources like gold and timber present an especially high risk.

On a more hopeful note, the nation’s score on the Government Response Index ranks behind just the Netherlands. Still, with as many as 400,000 modern slavery victims within its borders, it’s clear the United States must do more. The scope of the forced labor crisis is such that companies in nearly every industry are touched by it in some capacity. Due diligence has grown both increasingly imperative and increasingly challenging. Organizations like Rip Curl and Badger Sportswear present recent examples of what can happen when an American business fails to gain and sustain visibility across the globe.

Methods for assessing suppliers, monitoring their behavior, and addressing violations must all evolve. It’s more dangerous than ever to settle for a low price or select a provider based on an incomplete set of considerations.  Supplier capacity, for example, is a more nuanced issue than Procurement may have previously considered it. Under-resourced suppliers might partner with unscrupulous organizations if they’re faced with demand that outstrips expectations. The onus also falls on procurement to provide better, more accurate forecasts to avoid such a situation. Data won’t just provide the means to secure better pricing and anticipate consumer tastes, but to eliminate human rights violations.

Forced labor is a shared issue that requires a shared response. It’s up to organisations who purchase high-risk commodities or operate in high-risk regions to collaborate with their competitors. Joining groups like the garment industry’s Fair Labor Association or the Electronic Industry Citizenship Coalition, they can elevate industry wide standards and recognize organizations for setting particularly excellent (or particularly poor) examples.

Supporting Disaster Relief

Few things keep supply chain managers up at night like the specter of extreme weather. As an increasingly volatile climate threatens shipping lanes, roads, and storage facilities, disaster preparedness has become a year-round concern – even for organizations that do not operate in “high risk” areas. In 2018, hurricanes alone caused more than $50 billion in damages throughout the Americas.

Crucially, it’s not just the business world that suffers when hurricanes, earthquakes, and other natural disasters strike. Damaged roads and lost power leave consumers without access to necessities like clean drinking water and medications. Sometimes they’re without these essentials for months at a time. Beyond repairing their own supply chains, well-prepared procurement teams can participate in a broader, more socially responsible form of disaster relief.

Accurate, proactive forecasting makes it possible for businesses to continue serving their communities even in the wake of natural disasters. In addition to avoiding disruptions of their own, they’ll ensure consumers experience minimal disruption. Remember, supply chain hiccups are often more deadly than natural disasters themselves. This was the case when Hurricane Maria struck Puerto Rico back in 2017. Experts estimate the vast majority of deaths were caused by interruptions to the supply chain for health care and life-saving medicines. In a sense, disaster relief efforts failed because of “final mile” complications.

Evolving technologies will prove essential for extending these supply chains and mitigating the human cost of extreme weather. Unmanned aerial vehicles (drones) promise to play an especially active role. While drone-based deliveries for food or Amazon packages tend to dominate the headlines, recent pilot tests suggests they may soon serve a higher purpose. In the aftermath of Maria, non-profit Direct Relief partnered with Merck, AT&T, and other providers to test the viability of medication delivery drones. The drones provide temperature-controlled storage for sensitive materials and come equipped with real-time monitoring to adjust their flight paths as necessary. With each party providing their own expertise and resources, the pilot tests provide a case study in socially responsible collaboration.

Procurement Can . . . Do More                                                                                                                            

In the past, organisations may have neglected to invest in sustainable and responsible initiatives. The fear of higher costs and harder work likely stayed their hands. Businesses need to stop asking whether or not they can afford to behave ethically. They should ask, instead, how much longer they can afford not to. More and more, consumers are growing tired of inaction. They’ve also grown increasingly wary of inauthenticity. Where simple greenwashing might have sufficed in the past, new generations of consumer are increasingly skeptical and unforgiving when it comes to corporate behavior. The most recent Deloitte Millennial survey found that a quarter of young consumers don’t consider business leaders trustworthy, less than half consider them ethical. They’re not the only ones. Across every generation, the desire for ethical, responsible business practices has evolved into a demand.

In my next blog, I’ll look at how procurement teams across the globe can (and already do) lead the way on sustainability. Eliminating plastic, identifying sustainable alternatives, and reducing emissions, the function is equipped to set and enforce a new environmental standard.

In the meantime, why not register as a Digital Delegate for this year’s Big Ideas Summit Chicago? You’ll enjoy the chance to sit in on thought leadership presentations from some of the Supply Chain’s most thoughtful, innovative, and successful professionals – all without leaving your desk. 

4 Terms We Should Ban In Procurement

We asked a number of procurement leaders to reveal the procurement term they would most like to ban, for good!

Every procurement professional has a different opinion on the terms that should and shouldn’t be used in their day-to-day working lives. Some terms are loathed because they undervalue the huge contributions procurement make to the organisation. Others are just downright confusing to anyone unfamiliar with procurement lingo.

Because we quite like a healthy debate, we asked a number of procurement leaders to reveal the procurement term they would most like to ban, for good!

1. Cost-cutters

“This is something I really feel is doing a discredit to the profession – it’s very important we are being seen as value-adding procurement people.”

Amelle Mestari, Head of Procurement – Bouygues Energies & Services

“We’ve been spending a lot of time reeducating the business around the extra value we bring so it’s not simply about getting a better unit price it’s about the wider value we can bring to the organisation.”

Gemma Bell, Head of Purchasing – L’Oreal

2. Savings Targets

“Sure, Procurement has to reduce costs and be financially motivated but you don’t see many organisations mission statements being to save money. Nowadays it’s crucial that procurement is measured on its contribution to delivering organisational goals and not just on savings.”

Chris Cliffe, Director – CJC Procurement



3. RFP

“I think there is still a lot of confusion around RFP as silly as it sounds. It’s something we band about and we know exactly what it means but when you speak to stakeholders it’s always the first thing they ask ‘what is an RFP and what does it mean’ and it actually means different things to different people. So I would there must be a different term we could use or a different way we could articulate what that particular process is.”

Chris Emberton, CPO – Clifford Chance

“If I’m going to speak to one of my stakeholders, if they don’t understand the language I’m speaking, how on earth is that going to help me in the business.”

Lucy Bunting, Head of Procurement

4. Negotiation

“It’s what everyone assumes we do and I think it comes to a point where you always get the hospital pass at the end of the day when someone says ‘I need you to negotiate this’ – so it means you’ve done something wrong.

Matt Beddoe, Head of Procurement – Nestle

These responses were obtained from attendees at Big Ideas Summit London earlier this year. If you’re a procurement leader and you’d like to get involved with similar discussions and networking at Big Ideas Chicago on 18th September, we’d love to have you there!

Big Ideas Summit Chicago 2019

It’s never too late to take control of your procurement career. And what better way to do so than spending a day with the profession’s best and brightest minds. 

At Big Ideas Summit Chicago 2019 we’ll be joined by 50 thought leaders to discuss how to set yourself apart from the pack, the neuroscience of decision-making, the evolving relationship between human and machine and procurement with purpose. 

By enrolling as a digital delegate, no matter where you are in the word, you’ll be able to…

  • Follow the day’s action from the comfort of your sofa
  • Submit questions to our speakers and the 50 CPOs who will be in attendance on the day
  • Gain an insight into the future of procurement
  • Watch video footage from the event including exclusive interviews with our speakers and live-streams of the day in action!

The Rise of The Contingent Workforce… And How to Manage It!

Contingent Labour represents an ever-increasing proportion of our workforce, and it’s not hard to understand why. What is challenging for procurement teams, however, is effective management of their organisation’s contingent workforce… 

kurhan/ Shutterstock

“Depending on whose data you believe, the contingent workforce now makes up from 20 per cent [1] to 40 per cent [2] of the global workforce, with some analysts estimating that it will reach 50 per cent by the year 2020,” says Doug Leeby, CEO – Beeline.

Procurious caught up with Doug ahead of his keynote presentation at Big Ideas Summit Chicago to learn more about the state of contingent labour in the workplace today and to pick his brains on how procurement teams can best manage, and leverage, their ever-evolving workforce.

The rise of the contingent workforce

“It’s easy to understand why contingent labour is growing,” explains Doug.  “Most companies are under intense pressure to improve their bottom line and usage of contingent staff, contractors, freelancers, and consultants is an excellent economic model that can be deployed to both accomplish discrete projects and assist an organisation during surge periods of work.”

“There is an enormous economic benefit in being able to ramp up key areas of the workforce during heavy times and down in lighter times.  Additionally, the enterprise can complete important project work by hiring external experts rather than having to bring highly specialised skills into the organisation.  The short-term costs may appear high but the total cost to production can, in fact, be much lower.”

“Traditionally, companies have looked to the contingent labor population for work that is less strategic, saving that for FTEs.  However, more and more, we are seeing a hybrid approach.  Successful companies in which HR and Procurement are working together have figured this out.  Most of us can’t afford a team of data scientists but we can contract a team for a specific goal.  That’s a very strategic example whereas the contingent workforce can produce extraordinary value.”

The challenges of contingent labour

Employing a large proportion of contingent labour to your organisations presents a whole new set of challenges for both procurement teams and HR. But, as Doug advises, it is specifically in-effective management of contingent talent that will lead to enormous problems and risks for your organisation.

“Companies may be operating out of compliance, exposing themselves to severe penalties.  Additionally, improperly managing this talent can lead to overpayment or under-delivery of results. Metrics and KPIs are critical to ensure that the program is properly managed. Everyone has heard about the now-infamous ‘war on talent.’  It isn’t subsiding.  Not having a smooth-running program to manage contingent labor invariably leads to losing great talent to those who do have solid programs.”

Part of the difficulty with managing contingent labour is procurement’s failure to work constructively and efficiently alongside HR departments.

“Asking the two departments to take time to think about optimising their workforce is a tough ask,” explains Doug.

“This is not a small undertaking nor is it something that can be accomplished in one meeting, or even a series of meetings. It is transformational, which means it requires a significant investment of time and resources, but I believe it will happen as the focus on talent comes into greater view at the C-suite. HR has an outstanding opportunity to look at talent holistically and work with Procurement to ensure that it is sourced and managed properly. This will deliver tremendous value to the organisation.”

Using tech to manage contingent labour

“Technology today is an enabler,” Doug explains.  “However, with the progress being made in AI and machine learning, it will soon become far more than just an enabler – it will become an advisor.

“Technology shouldn’t just be about workflow and reporting.  Rather, it should act more as a subject matter expert or concierge helping procurement and HR to analyse their workforce and make strategic decisions.

“The challenge with this transformation is that it depends on organisations getting all their data into the technology and most still have a way to go. At a minimum, they need get all of the contingent labor into the system – complex, statement-of-work (SOW) based, milestone-based services as well as contingent staff.

“VMS technology can manage not only who the contingent workers are, where they are, what they are doing, and what facilities and data they have access to, but also how well they perform their assignments.”

The future of the workforce

“The workplace and workforce model that has been in place since the Industrial Revolution, designed for stable markets and long-term business planning, is giving way to a new model based on constant change and adaptability,” Doug believes.  We asked Doug to outline what he believes will be the key features of the workforce of the future…

1. Talent first

Over time, I believe organisations will adopt a “Talent First” approach that will be led by HR.  Procurement will remain a solid partner, but HR will need to lead the initiative within the organisation. They will work, proactively, with department heads and finance to figure out the best way to achieve desired outcomes.

2. The human touch

Some outcomes will be handled via artificial intelligence and robotic process automation, but much will still depend on people.  Competitive organisations will focus on optimising their workforce.  They will then focus on how to source this talent holistically.

3. Talent pools

Talent sourcing won’t be done in silos anymore.  Organizations will establish private talent pools and work to attract talent, both FTE and non-FTE, to their pools.  Then, they will be able to hire/engage known talent which leads to a higher propensity for success.

4. Self-sourcing

Companies will make use of functionality like our Self-Sourcing.  In other words, they will go directly to the contingent talent rather than through intermediaries.  This is already being done with freelancers, but we will see more of this with contractors and consultants.

Doug Leeby will be speaking at Big Ideas Chicago on 27th September. To  hear more from him and to follow the action LIVE from wherever you are in the world, register as a digital delegate (it’s free!)

Continue reading The Rise of The Contingent Workforce… And How to Manage It!

Making Sustainable Procurement Work

Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.

AYA images/ Shutterstock

Daniel Perry, Global Alliances Director – Ecovadis believes that the role of procurement is evolving. Evolving from being “primarily focused on cost savings and operational efficiency, to a more strategic and central player in risk management and value creation.”

Now, more than ever, it’s important for the profession to put sustainable procurement at the front and center of business.

“Stakeholders, including end consumers, B2B customers, shareholders etc. are demanding that businesses take responsibility for practices all the way into their value chain. They’re driving transparency and, ultimately, a positive impact by working with high-integrity partners. And it’s procurement teams that are in the ideal place to meet these higher stakeholder demands.”

“The power of the spend that procurement controls (often between 50-70 per cent of turnover) puts procurement at the crossroads of not only risk management and brand protection, but also as internal partners for driving value creation. Of course they want the value chain to be resilient – to avoid interruptions or damage to their company’s reputation – but they also want to provide supplier-driven innovation and support for transformative business models and offerings. –

“Procurement teams focused on sustainability do this by selecting and working with the best suppliers in a way that goes far beyond price, quality and delivery, to include performance around environmental, social and labor and ethics practices.”

The value-add of sustainability programs

It’s all too common to hear an organisation defend their lack of commitment and lack effort in this space. “It’s too expensive”, “it’s too difficult”, “it’s too time consuming” or “we’re just not ready” are typical refrains.

The benefits and ROI of sustainability include not only operational savings, but strategic outcomes. A well-developed Sustainability and Corporate Social Responsibility (CSR) program that is integrated into the company values, and is driven with executive support, can drive key business performance metrics such as:

  • Sales and reputation: A burgeoning wave of consumer sentiment is cresting. More and more customers are comparing the sustainability details of products and services, and it is changing their purchase decisions. Companies making the right sustainability investments can realise a possible increase in revenue of up to 20 per cent.
  • Employee morale and productivity: Sustainability programs can do wonders to improve employee satisfaction, reducing a company’s staff turnover rate by up to 50 per cent and increasing employee productivity by up to 13 per cent. Integrating CSR practices in your company and brand also has a hugely positive impact on recruiting.  If your company has a better sustainability reputation, it often generates more interest from applicants, allowing you to be more selective and choose higher quality candidates.
  • Increased market value: Sustainability programs can increase a company’s market value by up to 6 per cent.
  • Innovation: With more power comes more responsibility…and more options. Many companies are pursuing sustainable procurement strategies in order to find innovative suppliers that will help them differentiate their product or service offering.

Dupont, for example, changed its innovation strategy to embrace a “sustainable growth” mission, saying “If we bring the solutions to the market sooner than our competitors do, we will be more successful in continuing to grow the company.”

Making sustainable procurement work

“One of the biggest challenges companies face in sustainable procurement is measuring and understanding current performance within their supply base, in the context of global standards and benchmarks. It can also be challenging to engage suppliers as collaborators in their mission. And to get there requires a mix of expertise, the right technology, change management and process integration backed by executive commitment.

“First, the organisation needs a clear mandate from the executive team, which makes the sustainable procurement program an integral part of the function’s mission and values. This is embodied by investing in change management and communication programs and taking steps towards implementation and company-wide adoption.

“Success also requires reliable, agreed-upon indicators for sustainability performance that both buyers and suppliers can understand, and that are actionable. Many companies collect lots of unvalidated data, but buyers rarely have the CSR expertise or time to validate or interpret it – and this is where a standardised, evidence-based, and analyst-generated rating – like EcoVadis provides – comes into play.

“Additionally, CSR criteria and performance indicators must be integrated across the procurement function and include the use of clear and enforceable codes of conduct, contract clauses and tender criteria. Buyers need to believe in and leverage these criteria in their supplier development and sourcing activities.,  And, procurement groups should agree on, measure and reward on the critical CSR / sustainability KPIs in the same way they track cost savings or other key metrics. These all drive adoption in the organisation and make sustainability inherent to the procurement role.

“Increasing the benefits to a single company, a mutualised platform can make it much easier for suppliers to share the same scorecard results with all their customers, enhancing transparency and collaboration to drive network effects for maximum improvement and impact.”

Daniel Perry will be speaking at Big Ideas Chicago on 27th September. To  hear more from him and to follow the action LIVE from wherever you are in the world, register as a digital delegate (it’s free!)

Read more on this subject from EcoVadis in  Beyond Compliance – The 5 Pillars of sustainable procurement value creation

Procurement with Purpose – Not All Rainbows and Fairytales

Procurement with purpose is often perceived as rainbows and fairytales. But it only sounds that way when we fail to connect purpose with real business results.

Most procurement and supply chain professionals initially gravitated towards their profession because they like to understand how things work; they like to figure out how to make things work better and because they like taking the complex and making it simpler.

Perhaps comparatively few professionals embarked on these careers thinking that they would change the world.

But times have changed. As digital technologies reshape the world around us procurement has brand new opportunities to make the world a better place and many procurement teams are seizing these opportunities.

Indeed, procurement and supply chain pros are starting to ask more of their suppliers:

  • Does my supplier have the governance structures in place necessary to root out forced labour from the supply chain?
  • Does my supplier follow an ethical, sustainable approach to the environment? Is it a good neighbour? Is it responsible in its stewardship of natural resources?
  • Can my supplier verify the provenance of conflict-free minerals?
  • What steps does my supplier take to embrace diversity and inclusion in its workforce and supply chain?

These questions, and hundreds more like them, are now so much easier to answer thanks to digital networks, transparency and accountability. And this is important because shareholders, analysts and customers are increasingly demanding that the brands they support, and invest in, actually stand for something.

How Technology Can Democratise Procurement

Digital networks offer the breadth and scale necessary to monitor these things adequately, helping us to get our arms around ethical business practices from all the organisations that we do business with.

For most organisations, keeping track of the first-line suppliers is difficult enough. Tracking the full supply chain of their suppliers, and their suppliers’ suppliers,  would naturally seem impossible. But technology has changed all this.

Take the following example scenario as an example. Imagine you’re a category manager and you want to know if there is a high risk of forced labor anywhere in your supply chain. You log into your dashboard and can see all of your suppliers globally and where you might be exposed.

If you wanted to look specifically at North America you might zoom in and see that Carbo Ceramics, a critical supplier, has risk exposure.

Further investigation would reveal that two of the categories you source are indeed at high risk for forced labour: electronic fuse and electronic display unit. The proximity of forced labor to your source of supply is high, and there is also a high likelihood of exposure to the supplier you source them from.

So now you’ve got the insights and the transparency you need to take action. You can ask further questions of the supplier, make a site visits and even consider finding an alternative partner.

In less than two minutes, you’ve gained all the information you need to detect and mitigate slavery in your supply chain and make a major impact; not only in your supply chain and business, but to the lives of others. There’s incredible peace of mind in that.

Digital procurement also extends opportunity to historical underrepresented groups of business owners. On a network, you size up a supplier based on the data, based on the value it can lend your supply chain, not based on gender, race, national origin or sexual preference.

Technology can be incredibly democratising. It democratises opportunity and extends it outward from the few to the many.

Journey from Chief Procurement Officer to Chief Purpose Officer

It used to be that CPOs who embraced purpose-led procurement as a core part of their job description were the exception. Now we’re seeing the role of the Chief Procurement Officer evolving into the role of the Chief Purpose Officer.

Procurement with purpose is often perceived as rainbows and fairytales. But it only sounds that way when we fail to connect purpose with real business results. It happens when we neglect to point out the measurable outcomes for our customers.

We need to do a better job of explaining procurement with purpose, of spreading awareness that, through transparency and accountability, supply chains can meaningfully improve people’s lives. Procurement professionals can markedly improve people’s lives.

Thanks to digital networks, procurement professionals are spending less time chasing down data, and more time acting on it. We can let go of the traditional tactical tasks to focus instead on creating value for our organisations and propelling them forward.

That reality, that authenticity, aided by AI, blockchain and other emerging cloud based technologies reinforces what an organisation stands for. It deepens an organisation’s positioning and it widens an organisation’s visibility and sharpens its competitive advantage.

This is what digital procurement is capable of.

Pat McCarthy will be speaking at Big Ideas Chicago on 27th September. To  hear more from him and to follow the action LIVE from wherever you are in the world, register as a digital delegate (it’s free!)

The Three Pillars of Procurement Risk Management Strategy

What are the three essential factors for  effectively addressing the shifting conditions of sustainability risks and opportunities?

rawf8 / Shutterstock

This year has provided plenty of examples of why organisations need to better manage or participate in more effective sustainability and CSR initiatives to better manage risk, and purchasing and supply chain managers are finding themselves at the forefront of these initiatives, as keepers of the risk management keys. While hot button issues like worker safety and reputation risk are only increasing in importance, transparency and sustainability are reshaping consumer demand, and intelligence trumps data in supply chain risk management.

Luckily , this  emphasis on sustainability and CSR is breathing new life into purchasing and supply chain teams, giving them a renewed sense of urgency to establish  or expand supplier assessment programs and position themselves as greater strategic assets to their organisations and industries.

After reflecting on the variety of new supplier sustainability programs EcoVadis has helped launch or evolve, our experts have discovered three key factors as essential for effectively addressing the shifting conditions of sustainability risks and opportunities.

1. Program Reach and Depth

When setting up a supplier monitoring system, the assessment methodology should cover all key themes in sustainability and Corporate Social Responsibility. It’s common for homegrown or initial assessment programs to start by tackling just one issue, like environmental sustainability or human trafficking. To truly have an impact and effectively manage risk, however, the system should cover criteria across environment, labor and human rights, ethics/anti-corruption, and the supplier’s own sustainable sourcing practices.

Geography is also a significant factor when designing and implementing a program. Most modern supply chains span over 100 countries, so the assessment methodology should be appropriately adapted to cover this spread, engaging and supporting suppliers in local language wherever possible and taking into consideration variances in regulations and culture, at least for the top regions.

Finally, the size of the suppliers/third parties you are working with is another important dimension to examine. Many of them will be small- or medium-sized enterprises (SMEs) that are not listed on any stock exchange, and with little required reporting or public information. The monitoring system and methodology should be adapted accordingly to measure these SMEs.

2. Seamless Integration: Change Management and Processes

To make sure your teams and partners have the best chance of success with a new or changing sustainability and CSR initiatives, the methodology and processes used to both collect data and adopt performance indicators must be integrated into current, familiar processes and workflows.

There are two elements to this:

Change management

It is essential that the supplier sustainability monitoring solution vendor be able to support you and your team in the required change management program that will drive adoption of the initiative. This could include consulting on strategy and rollout, program branding, communications and supporting content development, training, support/helpdesk, onboarding services and reporting.

System and process integration

A key enabler to maximizing the impact of sustainability criteria on purchasing behavior is to integrate the assessment system into the current supply chain management platforms such as e-Sourcing, e-Procurement, CLM, SRM or similar platforms.Supplier monitoring solutions that come with an API that can be used to integrate the CSR indicators to other platforms are a huge advantage here. This way, you can give buyers and category managers access to current and complete sustainability data within the tools they are using today.  

For a deeper dive into these criteria and checklists, get this free Ebook covering “Five Essential Criteria For Selecting A Supplier Sustainability & Risk Monitoring Solution.”

3. Creating Measurable Value

No matter how thorough or amazing the assessment solution, it will only be effective with supplier participation. Here are a couple key ways sustainability monitoring programs can provide value to suppliers, which is vital to engagement and the ultimate success or failure of the initiative:

Alignment with relevant labels, certifications and standards

Suppliers will always care about compliance and a core feature of any monitoring system is to ensure suppliers adhere to the relevant global, regional and/or category-specific labels, certifications or standards. Examples might include FSC for fiber-based products, REACH registration of chemicals in Europe, or EnergyStar for appliance makers in North America, and so on. There are thousands of such labels, certifications and standards across the 120+ countries touched by global supply chains. A comprehensive supplier assessment program must take into account all  relevant assessments and maintain an annually updated list in each major region/country. In doing so, suppliers can ensure that their efforts are “valorized” in the monitoring process, making it more efficient for them to participate.

Actionable results, benchmarks and feedback

The results of a sustainability assessment should be digestible and actionable by both the buyer’s side (procurement and supply chain, EHS&S, risk), but also for the supplier.  Visually exhausting spreadsheets of checkmarks, or a list of documents from a supplier is often hard to understand and thus not actionable by a purchasing or category manager. These roles want instead to understand how suppliers’ sustainability performance compare to their peers and what the norm for the industry or geography is. Also, being able to also clearly understand performance over time is another vital part of any system. Solutions that make the short list should provide actionable results and indicators, benchmarks for comparing performance, and feedback on areas of improvement.

Continue reading The Three Pillars of Procurement Risk Management Strategy

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.  

To Appreciate the Value of Digital Networks, Look to the Skies…

How are digital networks providing greater visibility and helping to achieve savings by making risk more manageable? 

On route to a recent conference on how procurement networks are reshaping the aviation industry, I realised how amazing it was to be arriving in the historic city of Athens, the cradle of Western civilisation. My enthusiasm owes not only to the city’s timeless beauty, though that’s reason enough to visit. Athens, it turns out, is ideally suited for such a gathering because it holds a unique place in the imagination for all of us who’ve ever wanted to fly.

When you’re fortunate enough to have as many Greek family members as I do, you learn about the ancient legends. So the fable of Icarus is well known to me.

Icarus, of course, was an early aviator. He looked to the birds and thought, “Why not me?” So he constructed a set of wings using wax and feathers. But his father warned him not to fly too close to the sun as the wax would not tolerate the heat. As we all know, Icarus declined to follow his dad’s advice — and, as he soared skyward, his wings began to melt. Icarus crashed back down to Earth.

What’s the moral of the story? Some people say Icarus was too ambitious, too proud, too single-minded. They say he flew too high.

But I believe Icarus had a different problem. Now, I may not be an expert on classical antiquity. Yet I believe Icarus could have been much more successful — he could have built much stronger, sturdier wings — if he’d only had a better supply chain!

In all seriousness, when it comes to aviation in our own time, there’s no mythology about it: The industry faces immense opportunities but also enduring challenges. High demand and low interest rates have fueled significant growth in recent years. Air transport has doubled in volume every fifteen years, with no end in sight. Aircraft keeps getting more reliable, more efficient, more technologically advanced. But high fixed costs and fierce competition are facts of life for airlines.

That’s why controlling costs spells the difference between success and failure, in every economic climate. To control costs, airlines are turning to technology to improve operations and the customer experience in four main ways: increasing real-time visibility and control, optimising efficiencies across business functions, enhancing service offerings, and deepening customer loyalty through personalisation and rewards programs.

In aviation, we’ve moved from wax and feathers to variable-intake turbofan engines and intelligent avionics. Yet in other respects, the industry remains largely unchanged. After all, the very same factors drive profits year after year:

  • Revenue per passenger kilometer flown. How do airlines engage with customers to generate revenue premiums? Data, of course, plays a key role. What do they know about the passenger in seat 11C?
  • Load factor. How do airlines optimise their routes, aircraft and services to ensure maximum lift per weight? Here again, data proves essential.
  • Unit cost per available seat kilometer. How do airlines maximize efficiency and minimise costs? As with the other factors, the right data leads to the right outcome — for passengers, shareholders, and the environment.

Meanwhile, as airlines seek to optimise value, safety and support while improving the passenger experience, they need to be able to track and manage every part and every piece of equipment. Naturally, it helps to do so when airlines can also track and manage the suppliers of those parts and equipment.

In an industry like aviation, where risk management is so crucial — risks ranging from weather to regulation to commodity prices to exchange rates — savings become essential. Digital networks achieve savings by making risk more manageable. By providing visibility into the interconnected operations of airlines and their suppliers, cloud-based procurement platforms help to identify and resolve issues before they arise, aided by machine learning and artificial intelligence applications.

In addition, digital networks enable trading partners to collaborate on product design and service delivery, thus creating mutual value, extending competitive advantage for their organisations, and empowering them to reimagine not only the airline industry’s future but procurement’s role in shaping it. In the aviation business, real-time collaboration with one’s suppliers unleashes innovation and spurs growth. More often than not, success arises through partnership.

Seldom do we succeed when flying solo.

Continue reading To Appreciate the Value of Digital Networks, Look to the Skies…