Tag Archives: procurement research

Don’t Discount the Outliers – Steal Knowledge From Them!

Outliers are frequently discounted in statistics. But in procurement, it’s worth being more open minded – they may have great knowledge to share.

outliers

The Faculty is excited to share its “Outliers” Best-Practice Case Studies paper here on Procurious.

Stealing from your peers may sound ethically questionable at best. However, in today’s fast-paced and increasingly frenetic business environment, individual CPOs simply do not have the time or resources to develop their own solutions to every challenge.

That’s why peer groups such as The Faculty Roundtable exist. They provide a forum for collaborative learning and knowledge sharing around best practice procurement.

Identifying the Outliers

How do we identify best practice? In statistics, an “outlier” is defined as a data point that is a considerable distance from the rest of the observation points. Depending on circumstances, statisticians often choose to exclude outliers from the data entirely so they do not skew the results one way or another.

At The Faculty, we take the opposite approach. We see outliers as an opportunity to celebrate success, set the standard for the industry and, most importantly, learn from best practice.

The Faculty Roundtable’s recent Benchmarking report measured performance across multiple procurement practice areas, including:

  • Corporate Sponsorship,
  • Strategy,
  • Team Structure,
  • Communications,
  • Environment,
  • Innovation,
  • SRM,
  • Systems, and
  • Training and capability.

Our latest research paper contains a series of case studies highlighting some of The Faculty Roundtable members’ approach to common challenges across many of these practice areas.

Case study participants were selected due to their “outlier” status in specific benchmarks, or because they have taken an innovative approach to problem solving, demonstrating excellence in one or more areas.

Learn from the Best

The six case studies cover best-practice solutions to the following shared challenges for CPOs and their teams:

  1. Influence is Everything: Executive Support in Action at Broadspectrum

Learn how Broadspectrum CPO Kevin McCafferty ensured that Procurement gained recognition at the highest levels of the organisation as a team that creates shareholder value.

  1. A Partnership of Equals: Procurement and Environment at Australia Post

Australia Post’s Head of Environmental Sustainability, Andrew Sellick, explains why a partnership with Procurement is the most impactful way for the Environment team to meet and beat the organisation’s carbon reduction targets. 

  1. Taking the Leap: Moving from Operational to Strategic SRM at Energex

It’s easy to get bogged down in the detail. Brett Mann, Group Manager Procurement & Supply at Energex, explains why you need to have the right people in the room to facilitate a strategic level of discussion with suppliers.

  1. Do CPOs Even Need a Communications Plan? Rethinking Stakeholder Communications at Santos

Santos CPO David Henchliffe argues that a communications plan is only required with stakeholders whom Procurement doesn’t have a working relationship with.

If Procurement is intimately involved in the business, then senior executives (and their teams by extension) will know all about your function’s value contribution, upcoming projects and challenges.

  1. Planning for Success: Executing Locally Crafted Strategies in a Globally Owned Enterprise at BP Asia-Pacific

Even in an internationally-owned business with global category strategies, local planning is more important than ever. This is the view of Lauren Feery, Asia-Pacific Strategy and Performance Manager for downstream procurement at BP. Find out how to connect parallel local and global planning processes. 

  1. Keeping Your Eye on the Prize: Working Towards a Unified P2P System Across 30 countries at Australia and New Zealand Banking Group (ANZ)

ANZ has taken on the challenge of unifying, streamlining and simplifying P2P systems in its offices across the entire Asia-Pacific region. From Melbourne to Auckland, Singapore to Manila, the rollout has required best-practice change-management to ensure every end-user is on board.

The purpose of these bite-sized case studies is to enable CPOs to learn from the region’s best-in-class procurement teams and take proven methodologies back to their own organisations.

  • The Outliers Best-Practice case studies are available to download now from Procurious > Groups > Benchmarking.
  • The Faculty Roundtable’s full Benchmarking report is also available here on Procurious > Groups > Benchmarking.

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About The Faculty Roundtable

The Faculty Roundtable is comprised of an influential group of procurement leaders in the Asia-Pacific region. These leaders gather to share their experiences and insights, to achieve greater commercial success for their organisations.

Through The Roundtable, members have access to leading-edge thought leadership and commentators, a ready supply of valuable expertise through exclusive market intelligence, as well as networking and professional development opportunities for themselves and their team members.

Meetings are held throughout the year in Melbourne, Sydney, Brisbane and Singapore.

For more information, please email info@thefaculty.com.au or call +61 3 9654 4900.

Procurement Innovation Personas Revealed: Which Are You?

Are you an ‘innovation visionary’? Or one of the other innovation ‘personas’ in procurement? Well now you can find out!

procurement innovation personas

By Daniel Ball, Director, Wax Digital.

Recent research Wax Digital has conducted has revealed that 80 per cent of procurement professionals are seeking to challenge the status quo.

However, for many their use of innovation is evolving. Fewer than one in five are seen as ‘innovation visionaries’, and many others are taking different paths.

The research shows that procurement professionals value innovation, with most working towards becoming more innovative in their role in a bid to drive the business.

Procurement Innovation Personas

However, what it also shows is that there are four distinct ‘personas’ that define how procurement professionals are driven by innovation and change.

The four different personas defining procurement innovation are:

  • High-level Visionaries

18 per cent are committed to the use of technology and using data insights to influence business innovation.

Very much about the bigger picture, they use their procurement expertise to influence top level innovation and growth, rather than being personally and practically hands on in driving that change.

  • Enlightened Activists

At 36 per cent, the most common of the ‘personas’ and the most likely to be directly driving innovation.

This group is successfully driving change and delivering business value through high technology adoption. They are focused on solving real business issues rather than departmental processes. They don’t stand still and are always on the lookout for what’s next.

  • Early Strategists

30 per cent are still sowing the early seeds of procurement innovation but realise that they have many opportunities ahead of them. Innovation is a priority, but they have some way to go before they fully embrace it.

  • Pragmatic Professionals

This final 20 per cent are less innovation focused, but still open to using it practically, to improve procurement processes. Their primary focus is on savings to the bottom line and following clear business mandates.

Seeking Value in Innovation

It’s really positive that these findings show almost all procurement professionals seeing value in innovation and involvement in it. Whether this is through changing the way they do things, or, as is increasingly the case, influencing how the business as a whole should adapt too.

While early innovators tend to be dealing with more fundamental changes, such as implementing technology for the first time, they have the biggest ambitions for innovation in the near future.

At the more experienced end of the spectrum we see a mix of procurement working hands on to drive business innovation, and senior procurement advisors consulting on the business big questions around future change.

What’s interesting is that these findings ring true with what we see working with procurement teams on a day-to-day basis. The function is shedding its stuffy and administrative reputation. It is investing in technology that integrates the whole sourcing and purchasing process, delivering valuable insight, and enabling them to be bolder in showing the business what it’s capable of.

Procurement’s path to innovation is not perfect however. There are tell-tale signs that its innovativeness could be hampered and restricted by its inherent aversion to risk.

To become real innovators, procurement professionals must foster the right business relationships, nurture the correct set of new skills and seek to break ground in their approach to technology.

If you’d like to find out which persona you are and how you can best apply innovation in your role we have created a simple quiz – What type of procurement innovator are you?

The personas are based on research conducted by MORAR Consulting with 100 senior UK procurement executives commissioned by Wax Digital.

European Business Abandoning Manual P2P Processing

New research has revealed a move by European business towards a completely digital P2P environment.

automatic p2p european business

Canon, world leader in imaging solutions, recently announced that just 3 per cent of Western European businesses believe that manual P2P processing will continue into the future.

The finding originates from The Future of Purchase to Pay (P2P) 2016, a Canon trends report compiled by ICM Unlimited. The report asked finance and procurement leaders how they believe the world of P2P would to evolve over the next few years.

The study, conducted by ICM Unlimited, and developed in conjunction with Purchasing Insight, is the result of 706 online interviews with business influencers and decision makers spanning 12 European markets.

The respondents were sourced from board level directors within corporate finance and procurement functions, and from businesses of varying sizes.

Spend Under Management?

Most businesses report that they have yet to fully control spend using Purchase Orders (PO), while half say they have less than 50 per cent of their spend under control. Despite this, however, there is almost universal agreement that the P2P process will be automated in the future. Over half of the European companies have already begun that journey.

The report found that while there are concerns around cost and productivity, businesses seem motivated to explore how P2P technology can help. Half of finance decision makers (50 per cent) feel their department productivity is below average, while 42 per cent of procurement leaders feel their department is operating below the desired level of productivity.

However, the trend towards automation in finance sees no sign of slowing down. 23 per cent of European decision makers are saying that their businesses will achieve full digital transformation for P2P in the next two years.

It seems businesses view manual processing of P2P as wholly or partly to blame for the situation. This is shown by 10 per cent of businesses in Europe saying they have already achieved full digital transformation of P2P.

Increasing European Collaboration

Rachel Griffiths, Business Process Consultant, Canon UK, comments: “In this challenging market, European businesses clearly feel that they need to get a better grip on P2P. They want to be able to access and pay for goods and services in the most cost effective and efficient way possible.

“Efficiency and productivity are key elements to any successful business. And technology is seen as the best platform through which to improve in these areas. In order to boost these factors through technology, businesses will need the support of trusted partners.

“At Canon, our expertise at providing cutting-edge technology not only solves business challenges, but supports the delivery of superior results in any business function, including P2P,” Griffiths said.

This view was echoed by Pete Loughlin, Managing Director at P2P consultancy firm, Purchasing Insight.

“The selection of a partner for P2P is very important and European businesses want to collaborate directly with solution vendors for this challenge.

There is a remarkably strong sentiment towards working with a single vendor across the entire P2P spectrum, rather than cherry picking point solutions. This ability to work with a single partner is what will provide end-to-end P2P solutions and services, under several delivery models. This will be crucial to the successful transformation into a P2P excellence organisation.”

5 Imperatives for Creating Greater Procurement Agility

Is your procurement organisation world-class? Improving agility is a key step in this journey, according to new research.

world class procurement

New benchmarking insights from The Hackett Group have revealed that world-class procurement organisations now have 18 per cent lower operating costs than typical companies. They also operate with 28 per cent fewer staff, and generate more than twice the return on investment.

How are they doing it? Here are the five key strategies identified in Hackett’s latest research paper.

  1. Embrace digital transformation

World-beating procurement organisations have shifted to a complete digital experience for their business users, according to The Hackett Group Principal, Sourcing and Procurement Practice Leader Robert Derocher.

“This includes a true move to a paperless environment and the ability to work from anywhere on any device. Companies are implementing new, integrated source-to-settle technology platforms, primarily in the cloud, and adopting new capabilities that enable the agility required by their customers and the marketplace,” says Derocher.

Added to this is a convergence in software advances and wider use of new technologies. Cloud-based infrastructure, and virtual business and technology networks make up the first parallel. The second comes from rapidly transitioning user bases that are increasingly adept with new mobile technologies and business models.

The research found that world-class organisations spend 23 per cent more on technology per person. The investment yields real productivity gains, including 71 per cent lower cost per order than typical companies.

  1. Reallocate resources from transactional focus to value adding

A high level of automation also allows staff to devote more time to talent development and business performance-related activities. Digitally-enabled processes reduce errors, and make information easier to access, freeing procurement staff for higher-value work.

In addition to operating with dramatically fewer staff, leading organisations also allocate their people very differently. They dedicate a significantly larger percentage of the overall staff to sourcing, supply base strategy and planning/strategic roles.

They also have a much smaller percentage of people focused on operations and compliance management.

Top organisations spend 13 per cent more on outsourcing than typical companies.

They selectively outsource in areas such as procurement system support, supplier help desks and market intelligence to tap into greater expertise, augment knowledge, and leverage the capacity and capability of third-party providers.

This helps to increase agility by providing resources that can scale to demand and frees up procurement to focus on anticipating and responding to critical business needs.

  1. Leverage analytics-based decision making

Increased investment in cloud-based infrastructure and applications is creating tremendous new opportunities for procurement organisations to apply digital technologies to transform service delivery.

Increasingly, this becomes the platform for delivering a whole new class of services, such as information and predictive analytics to guide decisions.

According to the report, the hallmarks of information-centric world-class procurement organisations are:

  • Having a sophisticated information/data architecture that makes effective data analysis possible;
  • Planning and analysis capability that is dynamic and information driven;
  • Performance measurement that is aligned with the business.

World-class procurement organisations also invest a greater proportion on systems and tools to enable analytics capability.

  1. Adopt a stakeholder/customer-centric service design and delivery

The customer must be the focal point of all key activities and functions within procurement. With this approach, services are designed based on users’ wants and needs, rather than forcing them to change their behaviour to accommodate procurement’s internal processes.

World-class organisations are service-oriented and customer-focused in their approaches to procurement delivery. They design services and processes from the customer perspective or outside in rather than from the inside out.

According to the report, two mainstays of a formal service delivery model are global business services/shared services units and centres of excellence (COEs).

Overall, 39 per cent of all procurement organisations have some form of COE in place today. 

  1. Re-skill the procurement function

The report recommends the following steps to enhance the skills sets of procurement staff:

  • Invest in Talent Development

Hire or train procurement staff with the skills and business acumen required to meet the business needs of senior executives. Recruit staff from key business units in your company, and have them mentor and coach other business partners who have come up through the procurement ranks.

  • Increase your Team’s Business Acumen

Assign staff to cross-functional teams to provide exposure to different parts of the organisation’s operations. Make sure that having an understanding of business fundamentals is a requirement when hiring new staff.

  • Build Analytics Skills

Create a dedicated analytics group to fully leverage skills and tools across all areas of procurement.

  • Create a talent retention plan

World-class procurement organisations are nearly twice as likely to have talent retention planning in place, and see turnover rates that are more than 50 per cent lower than typical companies.

You can download your copy of The Hackett Group’s research here.

The Hackett Group is an intellectual property-based strategic consultancy and leading enterprise benchmarking and best practices implementation firm to global companies.

The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology.

Procurement Faces Balancing Act as Business Uncertainty Rises

According to new research from the Hackett Group, procurement faces a balancing act in 2016 thanks to rising business uncertainty.

Business Uncertainty

  • Key issues research shows budgets and staff expected to rise slightly in 2016
  • The Hackett Group recommends that to improve agility and reduce cost, procurement must harness the value of Big Data and control tail spend

According to new Procurement Key Issues research from The Hackett Group, Procurement leaders expect operating budgets and staffing to increase slightly in 2016. This comes at a time as they attempt to balance the need to reduce costs, with the desire to become a better strategic business partners and other priorities. 

Increased business uncertainty and risk are driving a resurgence in traditional cost reduction strategies, according to research. At the same time, the research identified critical development gaps in four key procurement strategy areas:

  • Becoming a better strategic partner to the business.
  • Increasing spend influence.
  • Improving agility.
  • Tapping supplier innovation.

These are seen as important targets for capability development.

Harnessing Big Data

To improve agility, The Hackett Group’s research recommended that procurement organisations become more information-driven and harness the value of ‘Big Data’. Unfortunately, the research found that over half of the study respondents currently lacked a formal market intelligence program, or were only in the earliest stages of adoption.

Study respondents also identified predictive analytics and forecasting as the trend with the greatest transformational impact for procurement over the next decade.

Finally, The Hackett Group’s research recommended that, to unearth new sources of savings, procurement examine tail spend. This is­ the 20 per cent of spend that is spread thinly across up to 80 per cent of suppliers.

This is an area where most procurement organisations have not focused heavily.  But with effort, The Hackett Group estimates that savings of 3-5 per cent for less mature sourcing organisations is possible, in part by identification of high-dollar maverick spending that should have been strategically sourced.

A complimentary version of the research is available for download, following registration, here.

Cost Reduction Pressures

According to The Hackett Group Global Procurement Advisory Practice Leader, Chris Sawchuk, “For 2016, companies are expecting to see business uncertainty and risk increase, along with greater struggles to grow revenue. So the pressure to reduce costs is increasing. At the same time, procurement leaders need to balance this with other more strategic priorities, like becoming a better strategic business partner.

“This is challenging, because for 2016, procurement operating budgets are expected to increase by just 1.1 per cent, and staffing will only grow by 2.2 per cent. So procurement can only afford to fund its highest-priority initiatives. One clear differentiator we saw in the research this year was the recognition of the value of improved market intelligence.

“Procurement leaders are realising that higher-quality information can help them drive greater business value. Big data has been a game changer when it comes to customer analytics, offering an unprecedented ability to quickly model massive volumes of structured and unstructured data from multiple sources. But procurement’s lack of maturity in market intelligence is a significant obstacle that must be overcome,” said Mr. Sawchuk.

The Hackett Group’s 2016 Procurement Key Issues research  is based on results gathered from executives from nearly 180 large companies in the US and abroad, most with annual revenue of $1 billion or greater.

Chris Sawchuk is a keynote speaker at the Big Ideas Summit on April 21st. Chris will be talking about how procurement is applying key agile capabilities in the areas of leadership, talent, service placement and information-driven performance.

If you’re interested in finding out more, visit www.bigideassummit.com, join our Procurious group, and Tweet your thoughts and Big Ideas to us using #BigIdeas2016.

Don’t miss out on this truly excellent event and the chance to participate in discussions that will shape the future of the procurement profession. Get Involved, register today.