Tag Archives: big ideas in procurement

New Goals for Procurement – Driving Revenue Growth Through Supplier Collaboration

Procurement professionals need to think in more innovative ways about how we can drive competitive advantage and shareholder value for our organisations.

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In my recent article, I talked about “the Art of Procurement”, and suggested that the time is right for procurement to move beyond our traditional focus on transactional improvement and basic cost reduction. Whilst remembering those are still important aspects of the role, we need to think in more innovative ways about how we can drive competitive advantage and shareholder value for our organisations.

Revenue growth is one key factor that determines shareholder value and organisational health generally. While profit is of course important, and the procurement goal of cost reduction plays a key role here, “you cannot cut your way to growth” (or ultimate success), as the saying goes. Growth is vital, and stock markets arguably value growth more than absolute profit levels or even margins.

So, firms can grow revenue through a variety of activities, for instance;

  • Finding new customers for existing products
  • Improving existing products (so the firm sells more)
  • Introducing new products – either totally “new”, or line / range extensions and additions
  • Improving the efficiency and effectiveness of sales and marketing activity

In every case here, it’s clear that procurement has a potential role to play. Even in terms of the “improved sales / marketing” route, there are possibilities – maybe procurement can work with the marketing team to find innovative suppliers in areas such as digital marketing? 

For one European bank, the capability of their internal procurement team has become a customer benefit that is winning new revenue.  Potential business customers – particularly small and medium sized firms who may not have much internal capability – are offered access to a set of procurement tools, templates and good practice guidance developed by the bank’s procurement team, who are also available for telephone consultation if the clients want that too. In a market where the core banking service on offer from every competitor is very similar, this has proved to be a differentiator that has won new business for the firm.

When it comes to improving existing products (or services), suppliers are often better placed than the business itself to identify opportunities. Procurement can really come into its own by supporting that supplier-driven innovation and improvement. But in many cases, it is not simply about identifying the innovation or improvement – it may well be that the firm gains revenue and advantage through the speed to market compared to the competition.  

That was highlighted in a recent webinar I enjoyed, which featured my old friend and ex-colleague Jason Busch of Spend Matters as well as KPMG and Ivalua. But the highlight was hearing from Mark Gursky, Director of the Procurement Center of Excellence at Meritor (a $4 billion global manufacturer of automotive components). He explained how procurement in that business was contributing towards ambitious targets for growth via new product launches.

The key was (and is) enabling more effective working between Meritor and key suppliers, who are supporting the drive for growth. That change in the whole working relationship between buyer and suppliers, needed to support Meritor’s goals, has itself been supported by technology (that’s where procurement technology firm Ivalua comes into the picture).

It struck me that the technology achieves two goals. First of all, to really make the most of what your suppliers can offer, you need to manage the basics of supplier management well. That means supplier master data management; spend and contract analytics; risk management and so on. Putting it simply, if you don’t have a grip on who your suppliers are, what they’re doing with you, where in your organisation they are already working, and how they are performing, then impressive sounding “supplier innovation programmes” will be built on sand.

Then, having got the foundations in place, technology can support the actual collaborative development work. Gursky talked about using the Ivalua platform to manage all the work between the firm and key suppliers. Information is captured in one place rather than emails flying around between lots of different people. Complex requirements can be quickly translated into bills of material, then suppliers can respond rapidly to requests and questions. Projects can be tracked, data and information exchanged securely between the parties, and outputs tracked and monitored via the platform. Information is easily shared, but proper controls are managed too, important when we’re talking about potentially innovative new products.

You can still access the webinar here to find out more about the Meritor story; it’s a great example of procurement looking beyond the norm, and really contributing to those wider goals such as revenue growth.  And at the Ivalua Now “Art of Procurement” conference next month, I’m expecting to hear more examples like that of procurement moving beyond our traditional heartland of cost control and transactional management.

You can book for that here, and join the firm, key clients such as Total, Suez and Deutsche Telekom (and me) in Paris for what should be a stimulating couple of days – maybe see you there!   

Ivalua are sponsoring today’s Big Ideas Summit in London. Sign up now as a digital delegate to follow all the action wherever you are in the world.  

Procurement Pros: You’ve Got A Friend In ROI

How does an organisation know that the procurement initiatives, projects, efforts really result in a quantifiable benefit to the business?

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As both a former CPO and consultant, I’m often asked about the strategies I have employed to grow, reach and deliver results. Yes, I can tell you stories from past lives of wooing reluctant stakeholders and setting savings records year over year. Actually, the secret to my success in procurement is much less glamorous, and I’d like to share that with you: 

Effectively planning and prioritising initiatives and meticulously tracking ROI through a rigorous project benefit validation process and governance framework are the best ways to increase your organisation’s credibility, dependability, and recognition.

Procurement plays a critical role in the cost management of an organisation.  This is why many organisations are quick to tout the cost savings and bottom line benefits generated by procurement’s efforts. Procurement’s maturity journey, when done right, can last months to years, and often requires significant investments – consultants, technology infrastructure, headcount, and support services. How does an organisation know that the procurement initiatives, projects, efforts really result in a quantifiable benefit to the business? Furthermore, how can the organisation fully appreciate procurement’s value? When the results are not tracked, reported, and kept as the focal point, procurement’s full impact can be overlooked, or underappreciated at best.

ROI is your friend

Procurement intersects across the business’ most strategic functions: operations, finance, legal, while managing critical external supplier and partner relationships. This broad exposure is combined with well-honed skills in cost control, analytics, process, research, contracting, and negotiation, as well as a deep knowledge of the business and company culture. Yet, we are often not given the respect we deserve as a key trusted business partner. Why is that?  Procurement teams tend to sell themselves short by not forecasting ROI and tracking quantifiable benefits for all value-add initiatives.

Identifying project benefits and estimating an accurate return on investment (ROI) can be very challenging for organisations. There are several possible reasons why ROI often goes unmeasured:

Being satisfied too early

Some organisations are satisfied with the general improvement in their financial statements after formalising a procurement strategy, because now a methodology in which to quantify “savings” or “value” has been defined.  When this journey begins, controls are strengthened, initiatives are defined, “low hanging fruit” is addressed, resources are deployed, and as a result, the organisation performs better as a whole. 

Focusing on tactics

Some companies focus intensely on training resources and executing projects in the early stages of a procurement journey, and place secondary emphasis on measuring ROI, believing that the benefits will come.

Can’t find the right formula

Some companies attempt to measure ROI, yet they are unsure how to quantify project benefits generated from procurement, especially if there are multiple ways to measure a successful procurement effort. It is evident that, even considering how well-known or understood the procurement function is to the world, there is still a significant knowledge gap. How can procurement quantify project benefits and truly link them to a company’s financial performance?

The well-reported results of industry pioneers that are more mature in their procurement function, as well as the pressing need to reduce costs and improve productivity, have encouraged company leaders to push their teams to undertake even more procurement initiatives. Sometimes, after an initial burst of enthusiasm, these efforts languish over time, or procurement becomes less engaged than they once were. This can often be because benefits have not been accurately estimated or verified as impacting the bottom line. In some cases, benefits can be reconciled as tangible contributions to the income statement; but in others, benefits may not be so evident during a reconciliation process.  A critical key to success is to ensure that procurement does not miss an opportunity to bring true credibility to their efforts is to implement a process that directly reconciles project benefits to the company’s accounting and reporting systems.

The tools you need: project selection, benefit validation and governance

A strong project governance process is key to the successful project execution and results. A comprehensive project governance process encompasses how projects are identified, selected, executed and reported. However, in most project governance processes, a key element is often forgotten: benefit estimation and validation.

While most organisations recognise the value of properly vetting project ideas and opportunities prior to launching a project, many fail to follow the process religiously for every initiative. Some may launch projects before a proper prioritisation effort has taken place, or others may spend too much time in the idea generation phase. Often, organisations fail to estimate potential benefit prior to project chartering or prioritisation of projects.

Experience has shown that the pressure to get started, or to drive quick results, pushes teams to launch projects without taking the time to adequately plan or determine probable benefits. This ineffective approach to project selection and prioritisation means that projects are often executed without being fully linked to the organisation’s overall strategic goals, and as a result, too many projects are chartered, and few are completed to the company’s expectations.

Not only does a project benefit validation process help with initial benefit estimation during project selection, it adds rigor during project execution by defining project benefits with more accuracy and clarity. This facilitates credible benefit reporting, and establishes a foundation for post-project benefit reconciliation, where benefits can be reconciled to the organisation’s financial statements. Simply stated, the benefits driven by the procurement effort can now be fully understood as to their impact to the business.

A strong project benefit validation infrastructure can support the procurement function as it matures an evolves to take on more challenging value-add activities for the business. It provides not only the basis for identifying and approving projects, but also serves to maintain the momentum and retain ongoing management and stakeholder support to build the brand, extend your reach, and deliver better results year over year.

WNS is sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world.  

Accelerating Procurement With Contract-Centric Sourcing

Today’s procurement organisations are being asked to move faster than ever to source the materials needed by their companies. How can contract-centric sourcing help?

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Today’s procurement organisations are being asked to move faster than ever to source the materials needed by their companies.

It’s a difficult position to be in. Under the current sourcing paradigm, the multi-step process of securing the vendor is time-consuming, and even then can expose a company to risk and leakage.

But the good news is that there is another way. In this blog, I will introduce readers to what we call “contract-centric sourcing,” a new paradigm for sourcing organisations that can save millions in leakage and accelerate the buying process.

The current paradigm

The current paradigm looks something like this: first, the buyer issues an RFx, and then evaluates vendors who respond on two criteria: technical and commercial capabilities. The vendor’s technical capabilities relate to whether they will be able to truly fulfill the buyer’s needs. Commercial capabilities relate to whether the vendor’s price for its products or materials fit into the buyer’s profit models.

Choosing a vendor is a business-critical decision, as the wrong vendor can disrupt the entire supply chain, so sourcing professionals want to exercise reasonable caution when making their choice, slowing down the process.

Contract negotiations slow sourcing

Even after a Letter of Intent (LOI) is issued by a buyer, the actual contract still needs to be negotiated. At this point other departments will get involved, including legal and finance. Legal, for example, may recognise that the jurisdiction the vendor operates in requires extra anti-child-labor documentation, and insert a clause requiring that documentation.

Since it is a contract, these clauses will have to be negotiated with the vendor, who may respond by changing the commercial terms of the contract. For example, the vendor could come back and say that the extra documentation will force them to charge more for their product. This back and forth can dramatically slow or even derail the sourcing process.

Non-optimised contracts

After all this time-consuming effort to choose a vendor and then execute a contract, the contracts often return less-than-ideal results. McKinsey and Company estimates that about 3.5 per cent of spend is leaked in the source-to-settle business process. More than half of that leakage is due to noncompliance either with government regulation or internal company standards, both of which come down to a disconnected contract management process.

Using contracts to transform your sourcing process

While this way of doing business has long been accepted as the norm, the paradigm is becoming a major liability as the pace of commerce accelerates. Here at Icertis, we are focused on using digital contracts and AI-infused contract management software to transform companies’ commercial foundation. This includes putting contracts at the center of sourcing.

Contract-centric sourcing is a new paradigm that allows procurement professionals to both accelerate their buying processes while also reducing leakage.

Contracts: a third pillar of vendor evaluation 

Here’s how it works. Contract-centric sourcing introduces contracts at the very beginning of the sourcing process and makes contract compliance a third pillar by which vendors are evaluated, next to technical and commercial capabilities.

Before an RFx is even issued, buyers evaluate past contract data to map out a category strategy that will deliver the most long-term benefits to the company. This helps the buyer craft the right RFx for their business needs.

Then, as part of the RFx, the buyer presents prospective vendors, via a digital contract management platform, with all the contract language they would like the vendor to agree to. The vendor redlines the contract based on its own needs and requirements. Once all vendor bids are in, buyers are able to evaluate how much contract negotiation would be required before choosing a preferred vendor and issuing an LOI. With the help of AI, the buyers can compare vendor redlines and determine which redlines represent acceptable changes and which are red flags.

(Note: A vendor redlining a contract does not disqualify them. It simply surfaces all redlines before a vendor is selected, so that those disagreements don’t rear their head unexpectedly later in the buying process. It’s all about visibility.)

Capturing Negotiations 

Since this process is administered on a single contract management platform, all discussion between the buyer and the vendor about contract language is captured in a single place (as opposed to several lawyers’ email inboxes) for later reference both during the lifecycle of the contract and after.

Sourcing organisations that link contract management and sourcing have a huge wealth of data about a vendor’s past negotiation strategy and behavior, as well as how well they perform against contract language. This is powerful data that hasn’t been fully leveraged in the current paradigm.

The Approach of Leading Enterprises 

Leading enterprises are already adopting contract-centric sourcing. Daimler is using the Icertis Contract Management (ICM) platform to completely rethink how it manages 500,000 suppliers. Daimler officials determined contracts were the natural place to start an overhaul of the procurement system, since it is the contract that underpins the entire buyer-supplier relationship.

“The deployment [of ICM] optimises the source-to-contract process by ensuring best-in-class supplier evaluation, selection, contracting, and collaboration,” said Dr. Stephen Stathel, head of Daimler’s New Procurement System.

The business world is changing. It’s no longer enough for procurement organisations to balance risk with accelerating business; they need to find ways to reduce risk and accelerate the pace of business.

Icertis is sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world.  

Forget Procure-to-pay – The Future Is Procure-AND-pay

How can virtual card payments improve the procurement experience?

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Traditional card-based solutions link one card to one individual. Virtual card solutions, on the other hand, link one ‘virtual card’ to one transaction. It’s a technology that has the potential to add real value to corporate payments – especially as controls on credit limit and dates of use can be set per transaction – but it’s one that is yet to be implemented across the entire corporate environment.

Integrating for efficiencies

The key to unlocking the full potential of virtual card solutions is about partnerships with existing procurement systems, especially in meeting the needs of multinationals.

“In B2B payments, we’ve had good traction for [our solution] in mid to large corporates, but utilisation for the very largest multinationals has been limited, and that’s because of their significant investments in sophisticated procure-to-pay (P2P) software,” says David Price, Managing Director of Client Coverage at Barclaycard .

Those systems allow businesses to procure in a compliant and cost-effective way, and provide a good experience for the user, except when it comes to payments.

The impact on buyer experience

Previously, procurement teams had to step outside the P2P environment to complete payment through a separate portal. Now virtual card platforms are being integrated into procurement systems including Coupa, adding ease of use and another option for users within a technology that is already trusted and familiar.

“From procure-to-pay to procure-and-pay”

“As soon as transactions are authorised, virtual card payments are triggered automatically so there’s no need to leave the environment or to process payment manually,” says David. “The common terminology is procure-to-pay; through integrations, it’s a move towards procure-and-pay.”

Integrated solutions have the potential to improve the buyer experience further, bringing additional benefits to the business such as greater efficiencies, control, data insights and cash flow flexibility.

Onboarding efficiencies

End-to-end procurement costs are often high because of bureaucracy and paperwork, with efficiency gains made elsewhere in the process lost at the point of payment. That’s especially the case in the tail-end spend of large volumes of small-value transactions. When suppliers are paid using a virtual card platform, there’s no need for a business to run lengthy due diligence checks or set them up on internal finance systems – typically saving them 3-5 hours per transaction for a new supplier.

“Virtual card platforms can help to streamline a business’ payment system.” They can also be used to make payments directly into suppliers’ bank accounts meaning they can be paid using the platform even if they don’t accept card payments.

“That’s the through the card piece in procure-to-pay that we are addressing,” notes David. “Precisionpay, [Barclays virtual card platform] helps to streamline a business’ payment system and also allows payments to be automatically reconciled to invoices and purchase orders, creating further efficiencies.

Flexible controls

Authorisations and controls are fundamental to the procurement department, as it looks to avoid uncontrolled or rogue spend. The result can be over-engineered and over-complex control policies, with a bias towards the buyer rather than supplier benefit. Such an imbalance can make it challenging for procurement to negotiate the best deal.

“Objective advice to create sustainable long-term relationships.”

“Therefore, what we suggest is adjusting your policy so that your authorisation and control strategy is reflective not just of a desire to create control but is also proportionate to the supplier you’re working with. As procurement functions start to implement appropriate, supplier centric payment strategies, that’s when some of a virtual card platform’s capability becomes even more valuable.”

Moreover, by using a virtual card solution, companies can flex cash flow, much as a consumer equipped with a credit card could. Payments made today, for instance, can be repaid as per the billing cycle, plus an additional 28 days after the equivalent of a credit card statement has arrived.

Building a strategic partnership

It’s unlikely a virtual card platform would be the right payment vehicle for all suppliers. It’s important to figure out where best to deploy virtual card technology. By analysing a client’s account payable file and understanding their business strategy, it can provide recommendations for different categories of spend and which result in the greatest benefit for the buyers, such as where to quickly drive efficiencies through volume.

Barclaycard are sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world.  

The Science And The Art Of Procurement

As we move towards a new decade is the emphasis in the procurement world changing – are we going to see a new age, where the Art of Procurement comes to the fore?

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Much of our focus in the last twenty years or so within the procurement profession and within our specific procurement functions has been on what we might call the “Science of Procurement”.

The huge growth in the use of technology has been the most visible part of that developing picture. Over the years, we have moved from the first spend analysis initiatives, laboriously building Excel-based “spend cubes”, through to today’s automated, cloud-based, AI-driven, integrated, holistic (add your own buzz-word here…)  procurement platform. Technology has radically changed procurement activities and procurement roles across virtually all our spheres of activity.

Outside the technology field, we have also seen “science” come to the fore in terms of codifying processes such as Category Management. There may be different models in use, but there is a pretty well-accepted logical methodology behind how organisations approach their management of major spend areas. Professionalisation of the function, logic and analysis has also extended into other areas, with a growth in relevant qualifications, all the way through to procurement and supply chain MBAs and even Doctorates.

But, as we move towards a new decade, perhaps the wind is shifting, and we may see a different focus in the next ten years.  Is the emphasis in the procurement world changing – and are we going to see a new age, where the Art of Procurement comes to the fore, alongside the scientific approaches?  I first saw this term used a few years ago by Philip Ideson, as a title for his website and excellent series of podcasts, and it feels like this may be an idea whose time has come.  

However, we would stress that doesn’t mean forgetting the science and (of course) the technology. After all, we’re only just beginning to see what AI and machine learning might do to revolutionise procurement and supply chain management; the possibilities are endless and hard to predict.

But we are also seeing increasing focus on issues such as;

  • how procurement can successfully influence, engage and collaborate with internal stakeholders to drive value;
  • procurement being asked to support development of unconventional business models that move beyond traditional buyer / seller (partnerships, JVs, large firms running start-up incubators, etc); and  
  • capturing and exploiting innovation from supply markets and individual suppliers becoming a top priority for organisations and therefore procurement functions.

When we look at that sort of activity, we can see that it is very different to the standard procurement processes – spend analysis, competitive sourcing, purchase to pay management. Now those core tasks and issues are not going to go away, and we would not want to suggest procurement leaders take their eyes off those particular balls or stop trying to execute this work as effectively as possible! But adoption of technology, automation, and best practice process is not the ultimate objective; it is a means to an end. 

The emerging strategic priorities for our organisations require different approaches from procurement, different skills sets amongst staff, and critical success factors such as creativity, flexibility, adaptability and even imagination really start to come into play. In addition, our expectations and requirements of technology must evolve as well, to support not just rapid deployment of standard best practices, but the ability to bring our best ideas to life and promote agility.

So, this talk of creativity, agility and innovation all starts sounding and feeling much more like “Art” rather than pure “Science”, and it is interesting to see that technology firm Ivalua has titled the Ivalua Now 2019 conferences this spring (in Chicago and Paris) the “Art of Procurement”.  To support that, the firm hopes to challenge the speakers to go beyond the usual “journey to best in class” descriptions and include their reflections on how procurement is embracing change in their organisations. How will procurement leaders contribute to generating real competitive advantage, to growing business revenues through innovation – supporting the top-line as well as the bottom line, as it were.

I’ve argued elsewhere that actually, if procurement doesn’t change and widen its scope, we in the profession may face existential issues of survival, as technology advances further. So, in our next two articles in this series, we’ll look at case studies that demonstrate the sort of innovative approaches procurement organisations are taking and how considering the Art of Procurement might secure our future. And finally, you can register for the Ivalua Paris event here if you want to participate in what should be a stimulating couple of days, from April 10th-12th.

Ivalua are sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world. 

Can You Make Decisions Under Fire?

Are you struggling to lead or motivate your team through difficult times and under extreme pressure? We’ve got some top advice from someone who knows a thing or two about making decisions in extreme conditions…

Register now  as a digital delegate for The Big Ideas Summit Chicago!

“There are only two types of leadership.” begins Andy Stumpf “good (effective) and bad (ineffective).”

In today’s world, senior managers often struggle to effectively  respond and adapt to change. But the world is full of change and it’s crucial that our procurement leaders are flexible enoughto respond to the unexpected, to “read the tea leaves and meet the challenges of the real world.”

Andy  began his U.S. military career at the age of 17, transitioning from the position of an enlisted soldier, to an officer, and then,  in 2002,  he joined the most elite counter terrorism unit in the military; SEAL Team Six.

The unit, which is tasked with conducting the nation’s most critical missions, has become the inspiration for a number of Hollywood movies and books.

If you ever needed a man who knows how to plan for and adapt to change, Andy Stumpf is your guy! He’s strategised and executed hundreds of combat operations throughout the world in support of the Global War on Terror.

At Procurious’ Chicago Big Ideas Summit, Andy will draw on his wealth of leadership experience to talk about the intersections between business and combat, decision-making and empowering procurement teams.

Building the greatest leaders

“Business and combat are defined by their similarities, not differences and the theories of successful military leadership and successful business leadership are identical” Andy believes. It’s possible to apply the same principles and philosophy to your procurement teams because it’s really only the arena that differs.

“60 per cent of the time, organisations want me to talk about leadership. In fact, the definition is always the same. What can change is the way in which you approach leadership.”

So, how do the military build strong and competent leaders?

“Leadership is about empowering your people. From day one in the military we are taught, and it is enforced, that in the absence of leadership you must stand up and take control.

“Instead of creating individuals that think reactively in nature, we instead create individuals that think proactively.  You don’t have to be in a leadership position now to think two or three steps ahead.  In doing so, when a decision presents itself you’ll already have an answer for it.”

Does Andy believe these skills can be taught or are natural leaders exactly that?

“neither successful teams or leaders occur by accident, these are skills that must be learned, practiced, and refined. Navy SEALs are successful because of how we select, train, and lead our teams.

“Nothing in that process happens accidentally, everything is calculated. We demand leadership and accountability from each individual starting from the first day of training. We prioritise the individuals to our left and right, and the goal of our team over personal success. This philosophy is diametrically opposed to what is often found in society, and requires a structured approach and prioritisation from leaders to be successful.”

And Andy has some strong words of advice for any over-confident leaders out there. “The 1st leadership principle within the SEAL Team is ego; if you have a massive ego you’re more concerned that your ideas and strategy is being used as opposed to striving for success of the team. You can’t meet the challenges of the real world this way!”

Plan, plan and plan some more!

“We plan for everthing in the navy. We often say that if you want to shut down the military, you simply need to shut down powerpoint!

“Every stage of a plan gets one slide and there might be between five and seven slides on the ‘what-ifs’, the contingencies. Where will we land this helicopter? Where is the nearest location for medical treatment and what alternate options do we have?” When, as Andy points out, precisely 0 per cent of planning goes as expected, contingencies are everything!

“You make primary, secondary and tertiary plans because you don’t want to have make snap decisions in a crisis. You need to be able to fall back on stable procedures”

And of course, it can’t hurt that contingency planning makes you look like something of a genius! “It’s really hard to make difficult decisions in a crisis because you’re in a time compressed environment and you may have people’s lives depending on you.  We plan for 24 -72 hours and there are 5 phases per plan. Each phase has 5-7 ‘what if‘ contingency plans because, at the end of the day, you don’t want to make decisions in a crisis, you want to be able to draw on a branch diagram.

“It’s the contingency planning especially in the SEAL teams that makes the difference between success and failure in moments of crisis.”

What can our procurement teams learn from this? Spend a lot more time planning, for starters! But Andy also reinforces the value in having baseline standards to fall back upon. “Businesses should always fall back on standard procedures so people can come together, with a clear knowledge of the protocol. This is especially crucial when you’re working under restrictive time constraints.”

Andy’s final words of advice? “Don’t get attached to your plan -get attached to success!”

Want to hear more from Andy Stumpf or submit your questions for him? On 28th September, Procurious is bringing The Big Ideas Summit to Chicago.  Register now  (It’s FREE!) as a digital delegate to gain access to all of the day’s action and LIVE video from our speakers and attendees. 

4 Cognitive Tools That Are Advancing Procurement

Don’t let yourself be overwhelmed by the magnitude and potential of cognitive technology. The greatest journeys start with that all-important first step and, when it comes to AI, you just need to get started!

We’re live from the Big Ideas Summit Chicago! Register now as a digital delegate to follow all of the day’s action!

There’s a lot of buzz around how ready our industry is to start using some of the newest cognitive technologies. But the time really is now for CPOs and procurement organisations to put a stake in the ground on where they want to go in the future with regards to digital and cognitive capabilities, to put the roadmap in place for how they want to get there.

We feel your cognitive pain!

Graham Wright, IBM Vice President, Global Procurement and Cognitive Procurement Services, fully understand procurement’s pain points and challenges when it comes to implementing cognitive technology and digitising the function:

  1. Outing the analog!–  Many procurement teams are still working in a reactive and transactional world without digitised processes to automate transactions.
  2. Powering the marketplaces!– From Graham’s experience, he sees very little in the way of supplier catalogs and automation driven from those catalogs. “In a digital world we should be leveraging marketplaces – ensuring   we make content available to all of the users so they can find what they need, click on it, and drop it in their shopping basket easily.
  3. Predicting demand – Current practice is to look at the spend information from historical data in order to make decisions. Nowadays, there are ways to anticipate and predict demand so procurement can look forward, instead of back.
  4. High value contribution – Lack of digitisation and lack of insight means that key personnel in strategic sourcing and category management are not able to focus on stakeholder management, interaction with the user, and negotiations with the supplier

4 cognitive tools you can use…NOW! 

But in spite of these challenges, and whether you like it or not, cognitive technology is coming to change the world.

Not everyone will be ready to jump into the cognitive capabilities. But it’s not an all-or-nothing proposition; you can plug in cognitive at any step. Many of these tools are proven and in use through IBM Procurement today and are being prepared for a broader market. Graham took us through four of these cognitive tools.

  1. Supply Chain Risk Insightscognitive solution fetches unstructured data from social media and creates alerts ahead of time for category managers who can take preventive action to reduce or eliminate impact from such challenges. Effective demand forecasting and proactive risk management is critical to a responsive and cost effective supply chain.
  2. SupplierIQcombines data gleaned through unstructured sources (e.g. social media, news feeds, competitor websites, corporate social platforms, blogs and forums etc.) and contrasts that with other data sources to generate insights that were earlier not accessible. A category manager could actually stumble upon a new supplier for a category that was not being considered; or actually drop an existing supplier because of the potential risk an existing supplier by connecting performance with market information.
  3. PricingIQ can save category managers millions of dollars by tracking contract prices in contrast with dynamic market prices rather than sticking to contract prices that are struck for a number of years. This tool allows IBM Procurement Services category managers an additional 3 – 10 per cent in savings in key spend categories over and beyond what’s already been saved. Pricing IQ was awarded Most Innovative Use of Technology by CIPS in 2017.
  4. Cognitive Buying Assistant(CBA) drives user adoption and spend under management and ease of use. IBM are designing superior user experience by applying cognitive tools on a mobile app that can recommend most relevant items to buy based on user profile, usage patterns as well as sentiment analysis gleamed out of feedback from other users. Ordering something in your professional capacity will soon be as easy as ordering products in your personal life. This is a critical driver of user adoption since a better buying experience will lead to better compliance and better savings for the user and business.

Your path to cognitive 

Everyone’s roadmap will be different and every procurement organisation comes into this maturity scale at different points. Where some larger procurement teams are already embracing technologies like Blockchain and Dynamic Marketplaces, others are not quite there.

If you’re of the latter group, start by asking yourself how you can get more out of the data you’re sitting on. How can you gain better insights and advanced analytics from all the spend and transactional data that flows through procurement?

Lastly, consider whether you have the right talent to help you along on your journey.

With more robust data and insights, the more you will free up your people to do what they are meant to do!

Live From The Big Ideas Summit

Want to hear more from IBM’s Graham Wright? On 28th September, Procurious is bringing The Big Ideas Summit to Chicago.  Register now  (It’s FREE!) as a digital delegate to gain access to all of the day’s action and LIVE video from our speakers and attendees. 

 

Procurement Shines Brightest On A Burning Platform

Economic woes, political uncertainty and digital disruption might trouble your CEO, but it should delight the CPO. After all, procurement can perform best on a burning platform.
There has never been a better time for procurement.  A combination of the economic cycle, global politics, and digital disruption has brought ambiguity to the marketplace.  If, as a CEO, you are uncertain about your top line, wrapping your arms around the things you can control – costs – is the pragmatic approach to profitability. Costs incurred with suppliers represent the majority of for the average large corporate, overshadowing even labor expenses. How will uncertainty impact each shift.

Economic Cycles

We have been experiencing slow economic growth for a while now. Financial crashes are typically succeeded by over ten years of slow growth, which means a new downward cycle may be imminent.  In the context of record Dow Jones levels and the FTSE not far off its high, it might seem strange to be pessimistic. But when Warren Buffett holds over $100bn of cash, it seems to be an anecdotal indicator that we are nearing the top of a cycle. Being agile with your supply chain is now more important than ever, as you don’t want to get caught with high priced goods and services, or the wrong inventory altogether as your market evolves.

Global politics

Politics shape and reshape the global economy. More so now than ever, economic policies of the Democrats and Republicans, and Labour and Conservative represent a vast divide.  Whether it is Trump or Brexit, coalition politics and political decisions are having a big impact on both the polity and the economic prospects.  Questions about trade, tariff barriers, regulation and corporate tax are now subject to divergent positions and disagreement.  The answers could go in multiple directions, and so politics and electoral results are back to having a bearing on business certainties.  Resolutions to these questions can take many different shapes and will bring some turbulent swings in the stock market and broader business marketplace.  Since these issues are central to the way business is conducted, long-term cost discipline strategies aimed to give cover for the political uncertainty are warranted.

Digital disruption

While not everything is going to be digitized or robotized (I hope a robot isn’t my next barber), the digital age has descended upon us.  Some industries are further down the maturity curve than others – both retail and finance, for example, have substantial legacy infrastructures which impact the incumbent ability to compete cost-effectively, and with agility.  All industries, however, need to optimize digitally; managing processes, metrics, and data to inform short-term and long-term strategies to stay competitive and manage costs. With the emergence of cutting-edge technologies and the disruption of traditional business models, every company will require a hard look at their strategy to ensure they are embracing both the challenges and opportunities that come with advancing supplier provided technologies and their effect on procurement. Companies need to consider how the rapid rate of innovation will disrupt how their organizations work and line up their suppliers to respond. What a moment in time! Add a dash of currency devaluation leading to imported inflation, sprinkle in digital technology, and we could not ask for more ambiguity from the circumstances around us.  Setting clear, agile strategy to control costs is the shrewd response to deal with the uncertainty of our times.  Go procurement.

 

How To Turn Your Procurement Team Into A Cracking Intelligence-Gathering Organisation

According to Justin Crump, CEO, Sibylline, procurement professionals would be foolish to underestimate the value in becoming more active intelligence-gatherers.

Sarah Hipwell/Shutterstock.com

Justin Crump spoke at the Procurious CPO Forum in London, Big Ideas In Action, sponsored by Basware

In his book, Corporate Security Intelligence and Strategic Decision Making,  Justin Crump, CEO Sibylline, addresses the current void of awareness about and study of the corporate security intelligence environment. “The increasing size, scale and sophistication of corporate activities  on the world stage – coupled with increasing legislative attention is driving an increasing focus on the [topic of corporate security], and the traditional gap between “business” (which makes money) and security ( a corporate cost center) is markedly narrowing.

Procurement’s value to an organisation has long been due to it’s position at the interface between the supply-chain and the business itself.  Its external reach offers a unique insight into market trends across the globe.

But is your team sufficiently engaged with the external world to spot these trends and push them  back out to your organisation to ensure that you, the CPO, get a seat at the table.

Justin outlines Sibylline’s five tips to bear in mind for anyone seeking to build out their internal process:

Corporate Intelligence is both an art and a science, and is often misunderstood. It is, perhaps sadly, not the province of dashing secret agents and beautiful women in fast cars; rather it is a process that involves everyone in the organisation, refining the myriad data in the world around us into some sort of meaning. Put simply, intelligence is the process which delivers timely, accurate and relevant insight to decision makers, allowing them to value risk and weigh opportunity effectively for their organisation.

The state of the world at present makes the need for an effective security intelligence process in businesses more important than ever. Drivers include:

  • Legislation – duty of care, safe workplaces, negligence
  • Threat environment – scale and tempo
  • Complexity of supply chains – “just in time”, dependencies
  • Information availability – expanding, data overload
  • Global marketplace – challenges and opportunities

Research has shown that truly resilient organisations not only survive but thrive in this environment. Taking an intelligence-led approach allows for effective and efficient risk management and demonstrates clear value add. After all, if you’re not intelligence-led, then what are you being led by…?

1: Perfect is the Enemy of Good

Intelligence is an imperfect process – inherently, returns are a the function of time and resources. While we equate security forecasting to weather forecasting, the weather does not deceive or lie to you – humans do, whether accidentally or deliberately ! In this uncertain world, everything represents a “best effort” – and you more or less get out what you put in.

 2: Understand what you Care About

Understanding what you care about is at the heart of an effective intelligence function. Faced with a mountain of information, it is answering the “so what” question that matters the most – and clear requirements are the fuel for this. Thorough understanding of the organisation, including its people, its business processes, its strategy and its areas of key exposure, is a key facet of making this all work.

3: Make the Most of People, Processes and Technology

Overcoming the constraints of limited time, imperfect information and strained resources relies on a combination of well-trained people, slick processes and appropriate technology. This helps to generate the best possible results in the time and resources available. All too often companies address only one of this triad, meaning that results are imbalanced and opportunities to provide effective insight are missed.

4: Make an Impact

The best analysis, from the most perfect process, is no good at all if people are not listening. One way to ensure this is to speak to their needs; but sometimes even this is not enough. Presentation is therefore important; what suits your consumer? How much detail do they need, or can they absorb? How much information is too much, or not enough? These are the questions that the practitioner must answer in order to ensure that they make a meaningful impact.

5: Manage Intelligence as a Project

Introducing an intelligence function need not be complex, but needs to be managed as a project and with rigour. As the function begins to build a head of steam, it will start to generate more client interest and greater demands will be made, requiring a steadily evolving approach in order to satisfy expectations. It is therefore best run as a project, within a coherent framework that allows it to grow in a controlled fashion.

We at Sibylline earnestly believe that the best decisions are taken on the basis of intelligence, and an intelligence-led process helps make organisations resilient – allowing them to cope with the challenges of the modern global marketplace. This is a minor investment that returns a great deal, often requiring little more than enforcing things that are already happening within a more effective and disciplined system.

The process of examining yourself and examining the world, within a cohesive framework, gives a stable way to reference what is changing in your environment and therefore highlights both risks and opportunities. Procurement functions in particular are well placed to understand the world and the organisation, and so have a vital part to play in making sense of it all – however crazy the world threatens to get, and well know that there are opportunities amidst the doom, gloom and fake news!

Real Relationships Really Matter

It doesn’t matter what technology your organisation adopts, or what digital transformation you endure; procurement relationships will always be essential for success. 

At the Big Ideas Summit 2017, we once again challenged our thought leaders to share their Big Ideas for the future of procurement. Chris Cliffe discussed why relationships really matter.

The world around us is changing. You can’t turn anywhere these days without hearing the phrase ‘Digital Transformation’. Everyone’s writing about technology and the race to automate and use augmented intelligence in business.  IBM’s ‘Watson’ is soon expected to be in regular use within procurement teams across the globe. But, the reality is that the vast majority of organisations, be they Private, Public or Not-for-Profit Sectors, are only at the start of this adventure.

Of course, it is crucial that our organisations do focus on adopting technology. The role of the CIO, for example, is at least equally important to that of the CPO. Yet the technology focus cannot be at the expense of the human focus.

Relationships really matter.

In fact, in the next decade or so, relationships will increasingly be the differentiator as ‘process’ and ‘transactions’ become automated and ‘value adding’ activities become the sole human focus.

Buyer Supplier Relationships

It might seem an obvious place to start but buyer supplier relationships are so often overlooked.  I think we can, in the main, agree that a ‘tender’ process in itself delivers zero value. Value for Money can only be obtained from good performance of the resulting contract. If we put ‘procurement’ theory to one side for a moment and look at ITIL Service Management, it clearly states that “good people can make a bad contract work, equally, bad people can make a great contract fail”.

Having the right relationships, between the right people, on both sides of a contract is how you get best value. Investing time and effort into building, nurturing and maintaining good relationships between buyer and supplier teams will facilitate far more value from contracts. It doesn’t pay to   let and forget!

Let’s assume a big problem happened last week.

Scenario 1: You call your account manager to complain, having not spoken to them in months, because ‘someone’ messed up.

Scenario 2: You call your account manager that you spoke to recently. You know they’ve just returned from their first family holiday in five years. They’ve had an awful couple of years for various personal reasons and, in fact, they’d even booked a restaurant you recommended. Whilst they were away, a junior member of their team was covering and they may have dropped the ball.

In both scenarios, the same issue has arisen and it needs fixing.  But I suspect the majority of us will approach those two calls differently and outcomes from these calls may also be different. Think about whether you could start both calls with the phrase, “How can I help you fix this problem?”

Stakeholders

Stakeholders: An increasingly over used, catch-all term to dehumanise people who we go to work with day in, day out. Investing time and effort into establishing relationships with the key individuals within our businesses will pay you back in spades. Ask questions. Be interested. Get under the skin of the challenges your colleagues face. Don’t be constrained by the perception of silo’s.

We must always remember why we do what we do. The purpose of Procurement is not to further the cause of procurement. Of course, a very happy side effect of an effective, modern, highly engaged and enabling procurement team is that the reputation of the profession will increase to everyone’s benefit, but that cannot be the motivation. The role of Procurement is simple. It exists to facilitate and enable the organisation(s) it supports in achieving its vision, mission and goals.

In human terms, we are there to help our colleagues enjoy work through enabling their success and in achieving their objectives. This is a differentiator between good and bad procurement in my mind. Establishing relationships with stakeholders based on a genuine interest in understanding their challenges and seeking to support them overcome obstacles proactively, will lead to game-changing relationships rather than relationships based on reactively promoting procurement process, policy and procedures.

Career Development and Credibility

Relationships really matter for professional development, career development and credibility. Take a look at the Deloitte CPO Survey 2017, or any recent recruitment agency survey. There will always be analysis pointing out how the procurement profession is dogged by a lack of soft skills and how there’s a real talent shortage with regards to interpersonal capabilities. I believe we all need to take  responsibility for learning and development; it is up to individuals to own the preparation for longer term career aspirations.

Relationships really matter with those in your network. The aim isn’t to collect as many LinkedIn connections as you can, but it is to connect to as many people as you can. Connect in this sense means to talk, ask, listen, learn, impart knowledge and most importantly follow up on conversations. Being market aware and having your finger on the pulse is an incredibly important part of being a credible professional in terms of managing contracts and suppliers and with developing productive relationships with colleagues.

Investing time and effort into building, nurturing and maintaining productive relationships really matters.