Tag Archives: stakeholder management

No More Guessing Games! Time To Use Innovative Data Leveraging

There’s no longer a need for guessing games when it comes to  driving value! Innovative data leveraging is possible in any environment and can help to lead organisations towards an analytics enabled procurement.  

 

Join BravoSolution’s webinar, Innovative Data Leveraging for Procurement Analysis, which takes place on 28th March.

Many purchasing executives are looking to drive procurement transformation but this is reliant on three major factors:

  1. Level of stakeholder engagement
  2. Ability to align with the overall business strategy
  3. Use of advanced tools and technologies

My research suggests there exists a noticeable gap between procurement executives’ explicit intentions of driving value for the business, and documented results in these three areas.

These gaps can be attributed to a lack of critical data and analytical insight that can support a truly meaningful conversation with the business about spend, supply base, and supplier performance.

Annual budgeting becomes a guessing game, with little input solicited or provided by procurement. It might be due to a lack of data. Or, it could be procurement’s inability to take the lead in order to anticipate and gather the data required. This disconnect is causing significant challenges for businesses.tech

BravoSolution is running a  webinar on the 28th of March, Innovative Data Leveraging for Procurement Analysis.  I will be  discussing a common process that every executive we met with cited as critical for engaging stakeholders and building analytical insight. We call it “innovative data leveraging” (IDL).

Innovative Data Leveraging (IDL)

Innovative data leveraging is a fact-based, data-driven approach to driving change and influencing stakeholders to create procurement value for the business.

The IDL process was described in different contexts, but the common thread was that cross-functional engagement was powered by stakeholder influence through analysis and presentation of data. Of course, leveraging analytics is difficult without some prior investment in procurement systems such as transactional spend analytics, contract management, and supplier performance measurement. However, our analysis also showed that innovative data leveraging is possible in any procurement environment.

The process starts with procurement executives conducting working sessions with business stakeholders to develop a deep understanding of their business strategy, the challenges they face in executing this strategy, and the role that procurement can play in helping to shape and support this strategy. Successful procurement leaders are the ones who can effectively articulate the questions that need to be answered and pursue the data requirements to provide analysis, insight and advice in order to address stakeholders’ business concerns.

Several additional insights emphasize the importance of innovative data leveraging.

  1. IDL was found to be important during any stage of procurement transformation maturity.
  1. The development of IDL capabilities depends on successful initial business engagements, especially when reliable procurement systems and data are lacking.
  1. Advanced analytics in the form of predictive capability is the most highly evolved form of IDL.

What are the benefits of IDL?

At the earliest stages, preliminary insights on spend may provide opportunities for deeper involvement in functional sourcing initiatives, creating a platform for further engagement and integration. In emerging stages, organisations can drive significant insights into total cost of ownership and working capital improvements that go above and beyond simple price leveraging capabilities. In advanced stages, predictive analytics (using both structured and unstructured data) that produce insights into revenue forecasts, supplier risks, emerging market opportunities, and other value drivers begin to emerge.

The innovative data leveraging approach can help organisations at all maturity levels to build a solid path towards an analytics-enabled procurement, in their pursuit of value and excellence. This does more than bridge the gap between procurement’s goals and the overall business strategy.

When you start by leveraging data analytics, no matter what stage your organisation is in, you can build a foundation for innovative capabilities for procurement excellence, like predictive analytics and cognitive computing.

You’ll  learn more about all of these issues in BravoSolution’s  upcoming webinar!

Sign up to join BravoSolution’s webinar, Innovative Data Leveraging for Procurement Analysis, on 28th March

Procurement Isn’t Done Innovating

Changing the close-minded nature of a stakeholder to the value of procurement is a big challenge. But procurement isn’t beaten yet.

Have you just started following this series of posts? Don’t miss the first two! I’ve been sharing my perspective on procurement productivity and efficiency from over four decades worth of experience in the field. Catch up here on Part 1 and Part 2.

If you’ve ever met me, you’ll know it is in my nature to look forward. I’m always trying to figure out what is likely to come next for a profession that has already seen so much change.

Although most of the time we consider savings as the primary procurement performance metric, our core focus should actually be on spend and what it can accomplish.

In my first post, I suggested that the total number of annual procurement hours is a fixed resource that must be maximised if we are going to approach our full potential. The same is true of spend.

A company’s total annual (or budgeted) spend is fixed. Simply shrinking it is a limited view of procurement’s impact, and one that has gotten us in trouble in the past for being overly cost-conscious.

Expanding View of Spend Management

In order to really influence spend under management, we need to back up or expand our view of the spend management process. Starting with eSourcing and moving forward is too late. By then, a significant opportunity to impact the category has already been passed.

The supplier discovery process – as reimagined by the team at tealbook, for instance – contains all of the value potential uncovered in downstream processes. While it might seem like more work to broaden the pool of prospective suppliers, it’s actually procurement’s best change to affect results by more than a shade or two at a time.

All measurements (savings, spend under management, etc.) need to drive meaningful improvements in results. They can’t just capture activity, and no measurement exists for its own sake. Because of the seemingly contradictory nature of the metrics in play, procurement is sometimes in the position of having to reconcile long term strategic value creation with short term business requirements.

In the face of this challenge, we have to make working the ‘right way’ so easy and intuitive that people don’t have an incentive to fall back on their old habits.

Importance of the Right Price

Procurement has successfully overcome a savings-driven mindset. It is time for us to help our internal stakeholders overcome a status-quo mindset. I have been in situations when an internal stakeholder tells me something along the lines of, “This is an area where we aren’t really concerned about what we pay.”

And while we need to be careful not to alienate someone by beating the ‘savings drums,’ this is a prime opportunity to educate, and to explain why it is important to get the right price regardless of what is being bought.

Each dollar spent has the potential to create varying levels of value. Not being worried about what you spend in a particular category or on a specific product is one thing. But what if you could accomplish more with that same dollar? Maybe there is a more innovative supplier or a next generation product available?

If a company’s doesn’t open their mind to what is possible, and investigate qualified alternatives, they condemn their potential to the bounds of the past.

tealbook allows companies to pursue inquiries like these without holding up the project timeline. In fact, an internal stakeholder can search the suppliers themselves if they like. They may even uncover new potential sources of supply that match their definition of desired value.

Shifting the Stakeholder Mindset

This mindset-shift is a challenge that the procurement community as a whole can stand up and address together.

Procurement pros are notoriously conservative in their sharing habits. While this makes a lot of sense in specific cases, any opportunity to contribute to, or benefit from, aggregate industry intelligence may be just the cure we need to closed-minded stakeholders and the frustration they create.

I have been around a lot of different procurement and purchasing groups, and they get all worn down. I’ve seen unbridled energy and excitement degrade to the point of becoming a lack of professional engagement.

When we don’t set up the true mission of procurement right – maximising the value of every dollar spent – it’s not a fun place to work. But hope is not lost. Procurement is not done innovating.

Catering to business clients is a big role for procurement. We need to draw those clients into the process and make it easy for them to understand the real meaning behind differentials in cost. Not just in terms of savings, but also in terms of what the spend can accomplish for the company. Ultimately, this will carry procurement forward to the next phase of our development.

And that is something I can hardly wait to see play out.

Gregg Brandyberry is a recognised pioneer in procurement and sourcing technology. He has over 40 years experience in industries such as automotive, textile, manufactured goods, electronics and healthcare.

He is the former Vice President of Procurement – Global Systems and Operations for GlaxoSmithKline, and a Senior Advisor for A.T. Kearney’s Procurement and Analytic Solutions organisation.

The Evolution of Procurement Culture

Procurement often struggles with the perception of its value. But could the issue be traced back to the culture expected by its stakeholders?

Kevin Renes/Shutterstock.com

What is Procurement’s business value? Is it doing a great job and does the business agree? If the perception of procurement is less than we desire, it is possible to change it?

These are the tough questions we explore within this article. Warning…this article may offend some people! Yet, if we are to make progress, it’s time to be honest.

Procurement’s Perceived Value 

If you ask a procurement person if they are doing a great job, most will agree. They might say they are working to tight deadlines, complying to complex processes with limited resources and information, they do the best they can. Generally, it’s a fair assessment.

However if we ask the business the same question the response can be brutal, “No, they are not.”

The feeling is that procurement is driven by price, that they are reactive, and that procurement never brings new ideas into the business. Frequently procurement are used out of necessity, but their involvement is not desired.

This revelation can be upsetting to many within Procurement, especially when their is a clear desire to be considered as a trusted advisor, pro-active and a business capability that adds value.

If a negative perception of procurement is something you face within your organisation then we have some good news! It isn’t your fault, and it is possible to change it. 

Stakeholders & Customers

“Why is there such a disconnect?”

To help us identify what might be going wrong with the perception of procurement, we need to identify the main business areas involved.

There are four main groups that are important customers and/or stakeholders to procurement:

1. Head of the Business/CEO/CFO

This individual is responsible for budget approval, business strategy and might even decide if there is a procurement department. Their ability to decide Procurement’s future makes them a critical stakeholder for the function.

2. Business leaders/Budget Holders

This group are responsible for bringing requirements to procurement, and procurement needs their business. Losing the support of the business leaders could see a drive to outsource/automate the procurement department.

3. Supply Chain

The suppliers provide the solutions to the business leaders requirements. No suppliers means no business solutions.

4. Head of Procurement/CPO

This individual is responsible for employment, pay rises and promotions within the procurement team. As this person holds the career of the Procurement Practitioner in their hands, they are a key stakeholder. 

Procurement’s Culture Today

If we accept procurement’s culture largely remains focused on price, then we need to know why. Even will all the evolution in procurement, it’s clear that this is still prevalent. Here’s why:

  • The number 1 driver for the current procurement culture is the CEO (or CFO or equivalent)

Traditionally, to this individual procurement is principally a ‘cost centre’. The greatest value procurement offers them is keeping their costs to a minimum.

  • The next driver for procurement is the CPO

The CPO wants to ensure they meet the needs of the CEO/CFO. This is critical in ensuring they retain the support from the senior stakeholders.

Therefore maximising cost reductions are critical, realised through contract savings. This culture is amplified further by attaching procurement salary bonuses for achieving contract savings.

  • The third driver for procurement culture is business leaders

The culture is already firmly established on reducing costs/price to achieve a procurement agenda. The business leaders can struggle to identify any real business value in procurement engagements, resulting in a strained relationship.

  • The final group driving procurement culture is the Supply Chain

The culture of the engagement is based on a drive to reduce supplier margins. With no real focus on collaboration, promoting success, or becoming a customer of choice, it is a one way relationship focused on procurement success. This results in an engagement with little or no trust.

To recap, because the culture is coming down from the CEO/CFO it creates a culture focused on savings, which continues to flow down into the business and the supply chain and can result in the business leaders and the supply chain trying to by-pass procurement.

Culture From the Top

But all is not lost. In the second part of this article, we’ll propose an alternative cultural model that will drive benefit for all four stakeholder groups, plus procurement.

This will also help optimise procurement practitioners’ individual value, an aspect critical for attracting the best talent and talent retention.

“Perceived value can be in response to how you engage, which is a result of your culture, and is influenced by your drivers.”

POD Procurement is a consultancy and advisory for Procurement Transformation. For more information, and to read more about the POD Model, visit our website.

Emotional Intelligence in the Supply Chain

Emotional Intelligence can be a powerful tool for procurement in dealing with both internal customers and external suppliers.

There has been a lot of talk recently about the concept of emotional intelligence.

According to Wikipedia, it is defined as “the capacity of individuals to recognise their own, and other people’s emotions, to discriminate between different feelings, and label them appropriately, and to use emotional information to guide thinking and behaviour.”

The concept was pioneered in the middle of the 20th Century, but only popularised in the late 1990s. Following an increase in popularity, Emotional Intelligence was quickly moved across into the business world.

Developing Internal Relationships

Although they may not have known it as Emotional Intelligence, most procurement and supply chain professionals will have used its facets. This may have been fairly common, and both with internal customers, as well as with suppliers.

A good Supply Chain Manager must not only understand the motivation and needs of customers and suppliers. They must also develop strong and lasting relationships, based on mutual respect and trust.

With these relationships, over time (and assuming a good job is being done), internal customers will respect the manager’s role, relying on their decisions, and their judgement, in day-to-day work.

Gradually, the lines of thought from both sides will become aligned, potentially reaching a perfect strategic synchrony. If this happens, fewer explanations will be required for procurement to understand, and satisfy, internal customers’ needs.

Such coordination is the best example of the optimisation between these areas, resulting in great efficiency for a company.

Good Listeners

In addition to this, similar relationships should also be developed with suppliers. While keeping the primary company goals in minds, procurement should be able to guide the supplier approach in line with their organisation’s, and get them working in the same direction.

As Artur Osipyan explains in his excellent article, when dealing with suppliers, “you need to be a good listener to ensure you capture opportunities of doing things better and can connect the dots together.”

Companies must not impose their conditions, but look to build a partnership with the vendor, for both parties’ benefit (the famous win-win).

Perhaps the most critical use of Emotional Intelligence is where the internal customer demands and supplier offer fail to match up. It presents a situation where procurement needs to play ‘Good Cop-Bad Cop’ with both sides.

Using diplomacy and Emotional Intelligence will help create common ground for both parties, and transform this into a mutually beneficial relationship. This will also enable the parties to work together in the future.

Creating Mutual Wins

There are few things that create a stronger partnership than working together to overcome issues, and finding a satisfactory, and mutually acceptable, solution.

There are advantages to the so-called ‘cold negotiations’, where hardly any contact is made with suppliers prior to, and during, the process. However, any effective medium- to long-term strategy will need a foundation of common agreement, and understanding of mutual professional development.

To achieve this foundation, procurement and supply chain managers will not use negotiation skills, but Emotional Intelligence. This can then create the first pillar of a professional relationship between the two companies that could produce plenty success in the future.

Why Is a Project Procurement Strategy Absolutely Necessary?

An effective project procurement strategy is based upon a shared understanding of the role and purpose for the procurement process.

Frequently, there are different perceptions of this at senior management, project management, end-user, and supplier levels.

A shared focus needs to be built upon an alignment of perceptions and understanding around what the project requires from a well performing procurement process, which is consistent with the agreed aims and objectives.

A procurement strategy that is successfully integrated, and implemented, within the Project’s cascade of objectives and performance measures, is recognisable by the following five characteristics:

  1. Clear “buy-in” from senior and broader project stakeholders to the benefits of embracing an agreed role and purpose for the procurement process, and how people need to interact to ensure that outcomes are achieved in a satisfactory manner.
  2. Competent, professional commercial people playing a key role in the process, at the right interaction points, to ensure delivery of clear solutions from supply markets that meet project needs.
  3. Key suppliers and contractors who treat the project as genuine ‘preferred customers’.
  4. Processes, systems, measures and enabling structures that support delivery capability along the entire procurement process cycle.
  5. Capacity and capability that’s available at the right pressure points.

Setting out the Objectives, Goals and Guiding Principles

Strategy documents need to outline two key facets — the objectives of the strategy, and the goals which are necessary to achieve these objectives.

The goals describe what will actually happen, and objectives describe what will be achieved as a result. The guiding principles reflect the core values on which the strategy is based, and which will inform all the actions which are planned as a result.

Procurement will:

  • be transparent;
  • be driven by desired results;
  • create the most economically advantageous balance of quality and cost;
  • reduce the burden on administrative and monitoring resources;
  • lead to simplified or routine transactions;
  • encourage open and fair competition; and
  • follow all appropriate regulations and legislation.

These values in turn translate into key performance indicators that can be used to assess the quality of results.

Setting the Objectives 

There’s no short, definitive list of subjects to include in procurement strategy objectives. Priorities change over time – strategies need to be reviewed and revised to reflect changes in circumstance and focus.

Subjects to consider include:

  • Operating Structure – is it fit for role and purpose, influencing where it should and as it should in a devolved environment? Do end users know what’s available to them by way of contract access and the procedures that they must follow, and are these procedures benchmarked against best practice, reviewed and updated as required? Is there clear project leadership of the procurement process?
  • Expenditure Analysis – is project expenditure on bought-in goods and services analysed in such a way that amounts spent, with whom, on what, and by whom, are understood, under control and spent optimally?
  • Maximising Value – how is it intended to maximise value through procurement activity, the use of competitive tendering and established collaborative contracts, and the deployment of procurement professionals?
  • Supplier Strategy – does the project have a strategy for dealing with suppliers and markets, such as buying local and compliance with relevant Regulations? Is there available guidance to suppliers on elements of the procurement policies (sustainability, SMEs etc, key contacts and signposts), and core values?
  • Social Responsibility – how does the project plan to take account of its social, economic and environmental responsibilities through procurement e.g. sustainability, health, safety and welfare, environmental management, equality, ethical procurement, working with the local business and social communities?
  • The Use of Procurement Tools – is there a strategy for operating the most appropriate, efficient and effective Purchase to Pay systems and procedures including use of procurement cards, e-tendering, e-auctions and an e-procurement platform and are the benefits of such use – reporting, planning, measurement and cost control – clearly explained and understood?
  • Supplier/Contract Management – are key suppliers identified and, if so, who are they and why are they key? What is the Project approach to supplier and contract management and what are the plans for monitoring supplier performance and managing improvements?
  • Performance Reporting – are there mechanisms/indicators in place whereby performance monitoring within the procurement process is routinely reported to senior management? Do such mechanisms include benefits and savings reports, customer and supplier feedback on the effectiveness of procurement performance?
  • Risk Management – Efficient risk management is a key best practice for project managers. Are key risks and dependencies relating to procurement process, legislative and regulatory non-compliance identified, understood, monitored and appropriately communicated across the Project?

ACTION: develop and adopt a clearly documented procurement strategy in terms of measurable and managed contributions to the achievement of procurement, and ultimately Project, objectives.

Stephen Ashcroft BEng MSc MCIPS is a procurement learner stuck in the body of a procurement veteran, and with over 20 years’ experience still sees the glass as half full. Check out this article, and more, on ThinkProcure.