Tag Archives: sam walsh

Are we the golden children of procurement?

When the CEO of one of the world’s largest resources businesses, Sam Walsh, says he believes procurement has entered a “golden age”, it certainly makes you think – could this really be one of the most prosperous periods of our profession’s history? And, if so, what are we doing to capitalize on this opportunity?

Remind yourself what Sam Walsh said on Procurious

Are we the golden children of procurement?

From the perspective of my 15+ years in the profession, I am confident in saying procurement professionals are in the midst of some very exciting times… and here’s why: 

  1. Our roles have never been so complex and therefore as interesting.  Today’s procurement professionals must manage all the expectations of their 360-degree stakeholders, up-skill and engage their teams, deliver an advantaged supply base, and all the while, keep their own careers prospering.
  2. Our old tools still work. Even though our roles have become more complex, most of the tools we have developed and used during the last decade are relevant today – strategic sourcing, category management, SRM etc. are all valued by the business and deliver outcomes. Everything old is new again, and most importantly, it still works.
  3. Digital is already disruptive. As customers, we are already online and procurement is about to explode into this space – drones, social media, 3D printing etc. are all transforming the way we think about everything from supply and demand; professional development; collaboration and sourcing.  The challenge is to ‘digitalise’ our ancient tools for this brave new world.
  4. We are a rare breed. Couple demand for our expertise with the rate the profession is growing, and you’ll see there are procurement opportunities exploding all over the world. Go and grab them!
  5. Our image is golden. As more talented people enter the profession and we are called on to tackle issues of core business importance, our image as a profession has grown stronger than ever. Gone are those outdated aspersions that find procurement stuck in the “dark ages”. That’s where Procurious comes in – Procurious is reimagining the image of the modern procurement professional – with the core of its members proving themselves to be a smart, upwardly mobile, and commercially savvy breed. 

“Study the past if you would define the future.”
― Confucius

History of Procurement

Procurement is one of the fastest growing professions in the world. For those of you new to procurement, here’s a “short history of the world” which may give some perspective on whether we are indeed in the “golden age”.

The Dark Ages

OK, so we all know our forefathers started in the backroom.  Clad in their brown cardigans, they executed contracts, processed purchase orders, accepting the odd bottle of scotch from suppliers at Christmas time.

Enlightenment

The forefather of modern procurement is widely accepted to be Gene Richter, who worked at IBM in the 1990’s.

The major US companies soon followed IBM by leveraging their global volumes and introducing standardized procurement processes. Not so long ago, the seven step sourcing process was being implemented, centralized procurement teams were formed, followed by supplier relationship management, and more recently category management.

The dot-com boom

The dawn of the new millennium was a time of rapid organization and maturation for the profession.

Many large companies made significant investments (such as $1M+ board approvals) to invest in cross-company procurement exchanges.

Now referred to as Procurement’s dot-com boom, these group-buy investments got procurement quickly on and then just as quickly off the Board agenda. Investments in group buying (and the associated technology) all “became a bit too hard”.

Despite these high profile, public failures, procurement continued to flourish and today, the “dot.com boom” represents the time we moved from the back room – in our brown cardigans – to the boardroom, where our Chief Procurement Officer’s increasingly find themselves either sitting, or at least contributing, today.

Globalisation and the extension of the supply chain

Once all the large companies had leveraged their spend globally, the hunt was on for the most cost-effective country to manufacture goods.

All of a sudden we were managing suppliers and their suppliers in foreign and often remote, locations. This is where the profession became, and continues to be very exciting…

Globalisation has brought with it significant advances, and made our profession  much richer as a result.

Today, its universally accepted that procurement has moved beyond just cost – we now play an integral role in areas of risk management – including supply, quality, innovation and mergers & acquisitions (M&A); new product development; and corporate social responsibility.

The Digital Age

As if our jobs weren’t “interesting” (aka challenging) enough, now we have to account for social media too… Not only are we expected to manage a worldwide network of suppliers and contractors – we are exposed to dangers like customers or shareholders posting a “Tweet” or “status” about how we are managing the supplier.

Yet, this is why working in procurement today is so incredibly interesting and why the profession continues to flourish. We’re working at the interface between the business and all its stakeholders – be that the community, customer, shareholder, supplier, and employee. We need to manage all these stakeholders with the highest integrity in order to protect our brand.

How to make the most of the golden age

If Sam Walsh is right, and we are in the ‘golden age’, how do we take advantage / don’t let this golden opportunity pass us by:

  1. Market yourself and your ideas!  You are your own brand, and nobody knows YOU better. Leverage your good name and use your influence to promote the profession.
  2. Stay connected. With the world and with your peers. Identify risks and opportunities, learn from others.
  3. Keep learning. Every minute of every day we are learning. Whether that be learning from our peers, our customers, and suppliers. And by doing this we are able to identify issues for procurement as they emerge.
  4. Enjoy!  Make the most of being in this profession at this prosperous point in history.  There are so many career opportunities right now – you should be grasping every opportunity to learn and grow.

Conclusion

Although an unlikely comparison for our profession, I use Madonna as an inspirational metaphor/analogy for managing your career.  Even though she’s been in the same role for more than 30 years, she keeps “reinventing” herself for her target audience.  She’s still a pop singer, but she is constantly changing her branding to ensure she stays relevant. As professionals we need to be doing the same!

And that’s what I believe Procurious can bring to the profession – a place to stay current, and stay connected. A place where all procurement professionals can get ahead and thrive in this golden age and beyond!

The term Golden Age (Greek: Χρυσόν Γένος Chryson Genos) comes from Greek mythology and legend and refers to the first in a sequence of four or five (or more) Ages of Man, in which the Golden Age is first, followed in sequence, by the Silver, Bronze, Heroic, and then the present (Iron), which is a period of decline. By extension “Golden Age” denotes a period of primordial peace, harmony, stability, and prosperity

Stay up-to-date with Procurious




Are we in the Golden Age of Procurement?

Rio’s CEO says it’s time “to meddle in the middle”

Rio Tinto’s CEO Sam Walsh put a spotlight on the value that can be delivered by both the C-level and procurement shifting their focus from the top and bottom-line to the “middle line”, when he spoke at the CIPS conference in Sydney last week.

Sam Walsh - CEO Rio Tinto

He said most companies were not making the most of the possibilities of procurement. In fact, research showed that when it comes to procurement, 50% to 90% of companies recognise that they do not employ best practices. This is despite research also showing that companies who get their procurement operations to the standard of the best – can increase their profit margins by 15 per cent.

“Shift your perspective.  Instead of spending your whole time obsessing only about the top line, and the bottom line, focus on the middle line as well.”

Even though turnover and profit are critically important, you don’t hear many people talking about the cost of sales or improvement in their working capital. Have you ever turned on Bloomberg in the morning and heard them say, “Today, Unilever’s cost of sales went up by 3.5%?”

“The middle line is frequently where you can make most difference, securing your competitive advantage, proving your value, showing your mettle,” said Sam.

In encouraging the procurement profession to seize the opportunity, he said “And if the middle’s in a muddle? Meddle! You won’t regret it! You might just make a tonne more money.”

In his speech “The golden age of procurement“ Sam shared some of his thoughts about the importance of procurement from the perspective of a global chief executive. In opening, he mused that there has never been a more exciting or important time to work in procurement. Sam cemented the fact that a lot has changed since he first started out, and went on to praise today’s women and men that are pushing forward, making businesses more innovative, productive, and creating the partnerships that will see us into the future.

One of the areas highlighted for “meddling in the middle” was to focus on innovation.

“You need to collaborate to compete,” said Sam.

Rio Tinto has a whole raft of strategic partnerships that are incredibly beneficial. Strategic partnerships with academic bodies, research institutes, as well as suppliers.

Working closely with key partners, Rio Tinto has established a great record in innovation. Its ‘Mine of the Future’ programme has been developed working with companies like Hitachi, Atlas Copco, Komatsu, Bridgestone, and General Electric. All of which are producing stunning results.

“You might have read about driverless cars in the papers. Rio Tinto already has 53 driverless trucks operating in the Pilbara. Collectively they’ve driven 3.9 million kilometres, and are all operated remotely using GPS,” Sam said.

Another area recommended for “meddling in the middle” was sustainability.

“So the saying goes, we are what we eat. In business, we are what we buy,” he said.

Rio Tinto spent around US$26 billion dollars last year. The decisions it make about where and how it invests this spend can have a huge impact. An important part of its approach is to source locally, and it applies this same approach in other markets as well. For example, at Rio Tinto’s new mining lease area in South Africa’s KwaZulu-Natal region, the company is investing time, money and skills as one of the major employers in the region to develop lasting community businesses that can supply the mine.

Sam reminds us however that all of this doesn’t come without effort; that it’s about getting the skills right too. He says that today’s procurement professionals require a much wider skills-set than was needed when he first started as a trainee buyer at General Motors Holden.

“Today’s procurement professionals need to work smarter, harder and faster.  Procurement used to be predominantly focused on achieving security of supply. Today, we’re operating in a business environment that is far more volatile, uncertain, complex and ambiguous than it was when I started out,” he said.

“We’re getting increasingly used to economic, political, and environmental shocks. As procurement professionals we need to be on top of these changes as and when they happen, we need to negotiate contracts that can withstand sudden and dramatic economic change.”