Tag Archives: supplier management

Procurement Is Everywhere But It Wears Hundreds Of Disguises

When procurement wears a mask, layers of stage make-up or one of its other many disguises, you might find it tricky to identify. But, as Daniel Ball explains, procurement is everywhere and in all of our organisations- it might just be presenting itself in a different way…

It’s fair to say that, as a concept, procurement tends to be associated with large businesses.

However, any organisation from the smallest to the largest buys things that they need from chosen suppliers. And, however small the organisation, they face much of the same procurement challenges that we all do. So why do we not consider them all to be ‘in procurement’?

The many disguises of procurement

In reality, the entry point starts when a business begins and evolves in sophistication and complexity with their growth. Although we think of procurement in terms of an established function, role or set of rules, much of the practical procurement going on out there is actually in a formative or evolutionary stage, depending on the maturity and needs of the organisation in question.

This is a vital insight for those of us working to support the procurement profession. We have to remember that we’re not dealing with a perfect procurement-badged world, nor one which conforms to all of the industry buzzwords and ‘best practices’.

In most cases, we’re dealing with people in a state of flux, who might well not call themselves procurement professionals; after all, there are hundreds of different guises in which procurement presents itself. This is particularly prevalent in high growth mid-sized businesses who are feeling the pain of change or ‘growing up’ more severely than most.

What challenges do mid-sized companies face?

Wax Digital wanted to find out what kind of challenges mid-sized companies are faced with during expansion.  We asked 200 senior business management and procurement professionals at fast-growth, mid-sized UK businesses about the pain points they have experienced as their organisation has grown.

Without giving too much away, here are 3 of the key highlights our research uncovered; demonstrating the kinds of procurement-related issues hampering their ability to support business growth.

  1. 83 per cent of respondents surveyed said they didn’t challenge their suppliers on cost or performance adequately, whilst 78 per cent struggled to control spend, citing departmental purchasing autonomy as a problem. Three quarters also said that they don’t have sufficient purchasing technology or systems in place to keep up with the pace of growth.
  2. UK mid-sized businesses have a broad range of growth challenges that are all linked back to both upstream and downstream procurement needs. Even though they’re not yet talking procurement these businesses are dealing with procurement’s problems and need a solution.
  3. In fact, mid-sized businesses are perhaps the segment of the UK economy most in need of professional procurement practice. Their reasons for, and rate of, change are so extreme they must get their house in order before it becomes too unwieldy and difficult to control.

The results of the research will be revealed in full next week via Wax Digital’s website.

What are your media consumption habits?

Wax Digital are conducting a quick survey to understand more about how procurement professionals use media for work. If you’ve got a few minutes spare to tell us how you stay on top of latest industry news and trends, we’d love to hear from you!  It’s just a few simple questions on your media consumption habits. And, to say thanks, we’ll put your name into a draw to win a £200 donation to a charity of your choice.  Complete the survey here.

Why “Free Help” With Buying Decisions Costs More

As consumers, we’re wary of so-called “free” products and services as there’s always a hidden cost. Why, then, are procurement teams willing to accept free help with supplier selection?

Businesses often seek help with their buying decisions, especially in complicated categories such as telco or energy. Preparing an RFP requires a willingness to trudge through data swamps, while analysing supplier responses requires more than a strong coffee to do properly.

When a third-party broker says that they’ll help – for free – the temptation is to say yes, if only to avoid data swamps and caffeine addiction. However, you need to keep in mind that the people who help “for free” are still going to get paid, just not directly by you. They’ll collect their pay from your suppliers who are willing to pay a commission to get the opportunity to service your organisation. In turn, those suppliers recover commissions from their customers (you), either as a line item on the bill or through higher prices. In the end, you’re still paying for the service, just not up-front.

For large businesses with lots of cost centres, this can be a good way to share the cost of getting help. Branch stores pay their bills and, without realising it, pay for the help you received through higher prices. Procurement managers who use this approach can look like heroes because they claim savings and a successful outcome without having to win broad company endorsement for using expensive 3rd-party assistance.

Selecting suppliers for the wrong reasons

The danger of commission payments is that different suppliers pay different amounts. Some commissions contain a ratchet mechanism with longer contract terms, while higher contract values generate higher commissions.

Unfortunately, brokers who offer their services for free are incentivised to select the suppliers who pay them the most, rather than those who deliver the greatest value to the customer. The usual outcome is long-dated contracts with a single source supplier. At least the billing is easy, but your business will end up paying more in the long-term due to lack of value.

Up-front payments

Paying brokers up-front changes their incentives. Instead of focusing on supplier commissions, they now focus on demonstrating their value to you in a bid to win further business from your organisation. “Brokers” go upmarket and call themselves “consultants”, working harder to realise the greatest-possible savings and service levels. Customer and consultant incentives align.

The positive consequences of fee-for-service payments are shorter contract terms and more suppliers. Shorter contracts reflect a balance between testing market prices with the logistics of changing suppliers. Having more suppliers means you are able to split your requirements across the lowest priced suppliers to get the best possible price for your portfolio of demand, rather than being herded toward a single-source supplier.

“Free” services in IT

For software companies, “free” represents a gateway product, or a way of demonstrating the value of a software product to the customer. It means the software provider doesn’t have to employ a slick-suited sales person and can scale the work of their t-shirt clad developers. Salesforce, one of the leading dealers of enterprise SaaS, costs their customers on average $45,000 per annum. The entry level CRM package is $5 per user but customers quickly pay more to satisfy their needs, getting more value from the base CRM product as they buy additional features and capability.

Our approach at Kansoly is the same. We’re a cloud-based telco procurement platform for businesses running RFPs and reverse auctions. Our base product is free, where we offer to run a telco RFP for you for nothing. What’s in it for us? We gain customer insights and supplier engagement, both vital for making our product better and delivering more value to our larger, fee-paying customers. Our free customers get competition for their services and cost analysis that they would otherwise have to invest in.

Brokers and consultants have always been part of the procurement landscape, but their incentives are defined by the way they’re paid. However, the development of Saas procurement platforms increasingly means that free offers aren’t always related to low-value outcomes.

Bruce Macfarlane is the founder of Kansoly, a telco procurement platform for business. Kansoly runs RFPs and reverse auctions for data, mobile, or fixed line.

Five Reasons Supplier Diversity Matters

We’re often told that supplier diversity is important for any business. But are you able to articulate exactly why this is?

Here’s a cheat-sheet to help you next time a business stakeholder asks why your organisation needs a supplier diversity programme.

1. Supply managers created a lack of diversity, so it’s up to us to fix it

There’s now a level of recognition that the historical underutilisation of diverse businesses is the fault of supply management professionals.

Contributing factors include a narrow focus on cost over other value, restrictive criteria for suppliers, inflexible and non-scalable policies. Underpinning these is a tendency for big business to be most comfortable working similarly sized entities.

A 2009 study from Pew Research has found that while minority-owned firms made up 41 per cent of all companies in the U.S., they only took in 10.9 per cent of overall revenue.

Here’s the good news. Procurement and supply managers are leading the charge to address the issue, with diversity spend now firmly on the agenda and rising every year.

Reversing the contributing factors above has led to a more inclusive focus on overall value (including social benefits) over cost, flexible and scalable policies and criteria for suppliers. There is also a recognition that the strongest business relationships are often made with smaller, more diverse suppliers.

There’s an impressive array of conferences and organisations dedicated to improving supplier diversity, including:

2. Customers are increasingly expecting diversity

Simply put, your customer base is diverse, so your business needs to be diverse as well. Partnerships with diverse suppliers will give your business a competitive advantage when facing changing customer demographics.

For example, if you operate in an area with a rapidly-growing minority population, your key relationships with minority-owned suppliers will become more important than ever.

While the public relations aspect shouldn’t be the prime reason for having a supplier diversity programme, it’s still important to track, measure and report on your diverse supplier base to win recognition from your customers for the work you have done in this area.

3. Diversity drives innovation

A study by CHI Research determined that small businesses generate 13-14 times more patents per employee than large firms. Since diverse suppliers tend to be small businesses, many companies use their supplier diversity programmes to tap into new and varied creative resources and the innovation that is occurring at these firms.

The fierce competition for business amongst diverse suppliers is another driver for innovation. Essentially, diversity brings a number of different backgrounds and life experiences into your supplier mix to overcome homogenous thinking with fresh new perspectives.

4. Diverse suppliers are often more flexible

Similarly, because most diverse suppliers are small businesses, they are usually able to offer greater flexibility, better customer focus and lower cost structures than larger businesses. Smaller, diverse suppliers are less likely to be tied down by restrictive policy, red-tape or innovation-stifling bureaucracy.

5. Well-known organisations are leading the way

Finally, some of the world’s leading companies are moving ahead with impressive supplier diversity programmes. Microsoft, for example, has recently exceeded $2 billion in annual spend with M/WBE businesses.

Another technology giant, Google, launched a best-practice supplier diversity programme in 2015. It brings key partners into the Google Academy for shared learning opportunities that will drive further innovation.

AT&T celebrate their suppliers as one of their “four pillars of diversity”, the other three being the organisation’s employees, community and marketing.

If your organisation’s supplier diversity programme is still only in its infancy, it’s important to increase your focus on this area or risk being left behind.

Interested in learning more about Diversity in Procurement? Register for ISM Diversity 2017, taking place March 1-3 in Orlando, Florida.

Carving Out a Niche in the Supply Market

Large organisations are no longer a closed shop for small, niche suppliers. In fact, they are now being actively sought out for their skills.

carving a niche

Procurious is at ProcureCon IT in Amsterdam this week. Stay up to date with what’s happening on Procurious, and by following us on Twitter.

The procurement profession has started to come to the conclusion that bigger isn’t always necessarily better. This is particularly the case when it comes to suppliers. Larger suppliers may be able to offer lower costs, and greater security but when it comes to agility and innovation,  niche suppliers are the ones for the job.

Traditionally, these smaller suppliers have been bunched into the ‘tail spend’ classification. However, procurement has realised that by allowing the tail to wag the dog, as it were, opportunities are being missed. Niche vendors have creative and unique methods of communicating and innovating that procurement should be tapping into.

Identifying and managing niche vendors was the topic of a very informative panel discussion at ProcureCon IT this afternoon. Chaired by Procurious founder, Tania Seary, the panel also included:

  • Soren Mølby Henriksen – Head of Procurement Innovation, Danske Bank
  • Claire Tapping, Head of Sourcing & Commercial – IT and Business Process Outsourcing, Rolls Royce
  • Samantha McCarthy, Global Procurement Manager IT, Reckitt Benckiser

Niche Suppliers a “Source of Innovation”

The question for procurement often isn’t finding smaller suppliers, but how to engage them. Traditional procurement processes are set up for larger suppliers, and it’s a much too onerous process for suppliers without similar resources.

But, as the panellists pointed out, large organisations are now turning an increasing amount of attention towards niche suppliers and adapting their contracts accordingly to be less risk averse.

Soren Mølby-Henriksen  noted that, within five years, banks won’t exist. The future of banking is digital, and it might take niche vendors to help this evolution.

Danske Bank recently stepped into the start-up market to source innovative suppliers. Mølby-Henriksen discussed why start-ups were such a big focus for Danske Bank’s procurement team. The set up in the procurement team is to address specific “pain points”. The bank has brought together a variety of suppliers, including start-ups, to conduct a dialogue on solving these issues.

Once solutions are found, they are documented, and then matured to see how they can be implemented. Although the process is relatively new, it’s found some solid support amongst Danske Bank’s suppliers.

Another positive for the procurement team is that it’s also helped to reduce negotiation time, as many discussions are happening up front.

Engagement a Mindset Shift

While Danske Bank appears to have found a way to engage niche suppliers, it’s still an issue for many organisations.

Claire Tapping discussed how there can be some initial pushback when it comes to engaging smaller companies over concerns that it might be too risky to do so.

But she believes it is often proven easier to negotiate with niche vendors who aren’t restricted by a hierarchy of governance and teams of lawyers trying to mitigate risks. Another benefit of niche vendors is that they have a smaller focus. As such, they tend to do what they do to a higher standard than a larger organisation.

Leveraging competencies, while keeping suppliers engaged can also be a challenging proposition.

The panellists agreed that the impact of disruptors, such as blockchain and bitcoin, on the Financial sector was driving a need for change. But, this change involved a serious mindset shift for many of the financial organisations.

Procurement needed to shift it’s business angle to fully understand what they were doing before they entered the market. The vendor space in IT and technology is a completely different beast, where suppliers might not work with you if your business isn’t trendy enough.

Agility & Responsiveness Key

The final tips for engaging niche suppliers was the key role that agility and responsiveness played for procurement. Claire Tapping highlighted the issues procurement faces in keeping pace with business changes.

Relationships and engagement with the suppliers would rely on procurement becoming a “customer of choice” for the smaller suppliers. Without staying more agile, procurement could face a situation where the supplier is brought in by the business. If this happened, procurement is left playing catch up, and its value is diminished.

For procurement in financial services, niche suppliers open up a whole host of possibilities. As Tapping reminded us today, many organisations bring in the smaller vendors because they don’t know what they want!  Once the suppliers are on board, there’s more new thinking in order to ensure great engagement.

How this plays out will be interesting to see, as procurement in other industries will need to do likewise, probably in the very near future.

How to Change the Game with Sole Suppliers

Sole suppliers – you might think you’re stuck with them in procurement. But once you know the why, you can plan a change for the better.

sole suppliers change game

This article was first published on Future Proofitable. 

In the first part of this series, I discussed how sole supplier situations can occur. From monopolies, to high exit barriers and business attitudes, there are a number of reasons procurement might find itself in this situation.

But now we know how these occur, the question to ask is how we can do something about them.

Sole Suppliers – Can you do anything about it?

Definitely – yes. What you can do depends on what you are dealing with, and which stage in the process you are in.

1. Product Selection

If you can avoid buying the product in question, you should. You can also head off the sole sourcing situation by being involved in a process as early as possible. Making products in house is an option too.

You may also be able to find a provider who offers similar services or products, and convince them to adjust their offering to your requirements. Integrate vertically by buying your supplier and making them your internal provider.

2. Tender or Category Strategy Review

Assess the full lifecycle of the product or service. Analyse what, if any, additional costs are related to object you are purchasing.

Study alternative sources of supply, or look at the make vs. buy decision again. Even if you choose to buy, when the time comes to create negotiation leverage, you will have done half your homework already.

Choose the right way of buying. If it is possible, could you buy machines and servicing or maintenance separately? Or, on the other hand, could you bundle the products and service together?

Prepare a good contract in advance, and communicate it upfront. Build in price review mechanisms and no-penalty exit clauses. Alternatively, invest time in developing a full SLA, and ensuring this lasts for the whole relationship.

Share the information (technical, legal, commercial) early in the process with all suppliers. Cross-validate information and responses with specialists or 3rd party service providers. Finally, analyse proposals with the purpose of identifying “unique” solutions.

3. Analyse Sole Suppliers Business Needs and Decision Drivers

What time of the year is it and when does their financial year finish? Is there a reason to believe that tendering on a specific time frame might give you better or worse conditions?

  • Like buying grain just after new harvest data is clear and not based on assumptions
  • Or negotiating with software companies closer to their financial year end, when they are likely to be more aggressive with pricing.

Consider geographical aspects. If you are negotiating with a large multi-national, perform a market test of their pricing policy in different countries. You might be surprised that a branch, located somewhere further away from the central function would get a better group deal purely because of the location.

What sales strategy are they using? Are they more aggressive with the pricing of new solutions or new technology? Are they interested in growth? Market entry? Stopping their competitor entry? Can you invite someone new, who is not yet in the market? Does the size of the contract matter?

Do not forget to negotiate small value adding add-ons and other benefits to the contract. You can ‘sell’ positive references, feedback and referrals. You can help to reduce the supplier’s risks and become a better customer (implementing electronic ordering and invoicing tools, consolidating POs).

Or you could threaten them with moving to an alternative supplier, or bring one in.

4. Business Strategy

One thing to think about might be a change to your business strategy. Could you move the location of your HQ (for a critical product), or give up certain markets or products?

You could invest in in-house R&D, work with laboratories and universities. While doing this, educate business users. Challenge old ways of working, and help to eliminate all pseudo-sole suppliers.

Re-evaluate short term switching costs and compare them against long term business losses, if you decide (once again) not to change anything.

Should you do anything at all?

That is the question, too. The saying goes “nothing personal, just business”. Procurement should also be business oriented and invest its resources where they matter.

Should you start any project? Well, that depends. If this is something that you must do routinely (review a category or contract), you might consider how much time and effort to invest. And similarly, if the prize you are after is big enough, it’s probably worth spending time on it.

Based on the situation your business is in, you should perform opportunity analysis and evaluate your expectations. It’s not only about the size of the spend.

With sole suppliers, there is another level of complexity to be evaluated – the nature of the business situation. You can do this for single supplier situations, too.

For the categories mentioned above, approximate ratio of effort to success are shown in the graph below. Required effort is a relative number and can vary in units of measurement (days, weeks, months, people involved).

roe

It’s only one part of the equation in that it performs a sense check from Procurement’s perspective.

Weighing Dissatisfaction vs. Change

Another key part in projects like this is implementation. In many cases, it can (and will) end up in a change project. If you don’t want Procurement’s credibility to suffer, you must make sure that savings promised and savings achieved are as close as possible.

If the dissatisfaction with the sole supplier situation outweighs resistance to change, and if you have a plan on how to act, you increase the chances of success.

At the same time, it suggests what you can do if any side of the equation is not favourable. You can increase internal dissatisfaction among key stakeholders (clearly communicate risks and losses of the situation to finance people), or reduce resistance to the project (get the buy-in from engineering, technology, sales and other departments).

Supplier Engagement – The Advent Calendar Challenge

This Christmas, why not turn your advent calendar into a supplier engagement challenge? Sorry, there’s no chocolate involved…

advent calendar challenge

An idea came to me during a recent commute. With the shopping days to Christmas rapidly counting down and as we start to look forward to the season’s festivities, I thought about my son’s advent calendar and the treats he’ll find behind each door.

Then I thought about a way to turn this into a powerful and productive challenge to build, reinforce and develop relationships with suppliers.

Here’s my idea. There are 17 working days this December – 17 doors. Behind each day’s door could be opportunity, problem resolution and innovation!

The challenge is simple – to call a different supplier each day and have a conversation. Simple. Too simple perhaps. So there’s a Beginner, Intermediate, and Advanced challenge depending on how comfortable with supplier engagement you are.

Beginner Level

The easiest suppliers to speak to ‘should’ be the ones you currently do business with.

Call one of your current suppliers each day during December. Thank them for their help this year. Tell them what they’ve done well, how they’ve helped you and your business. Also, tell them what you’re looking forward to improving on with them in 2017.

Practically too, this is a great opportunity to find out what the supplier’s business hours will be over the festive period to ensure that contact arrangements and any contingency plans are in place if required.

Be interested in their plans for the festive break. Finally, make sure there’s something in the diary for 2017 to continue the conversation.

Intermediate Level

The intermediate level is to call a supplier you’ve never spoken to before (but which might be relevant to your business of course).

Find out what they do and how they do it. What have been their biggest achievements this year and what have they got planned for next year.  By this stage you are likely to have either ruled them in, or out, as interesting for the future.

If of no interest, that’s fine – but maybe they’ve got something very relevant to offer you in 2017 and they could help you. If that’s the case, book a follow up meeting for January! And yes, Public Sector friends, this is ok!

Advanced Level

The hardest group of suppliers to pick the phone up to might be those that have responded to your RFx and Tender processes this year, but which have not secured any of your business. Or suppliers whose contracts have expired and you’ve gone your separate ways.

Call one of these suppliers each day during December to thank them once more for their participation in your process or previous contracts. Find out how business has been for them this year, and whether the feedback you gave them has been useful to them and how they have developed or improved.

Ask them what they are looking forwards to next year and think about whether there might be an opportunity to re-engage in future.

Reward

Whilst an advent calendar themed challenge is a bit of fun, the benefits of this challenge I hope are obvious.

From practical information like opening hours over Christmas through to discussing, and potentially solving, real business problems. From identifying potential innovation opportunities to just finding out what your account manager is doing for Christmas, these conversations could add real value to you and your organisation.

Remember, as you walk past shop windows at this time of year, that you are your own personal shop window. And you are your company’s shop window to its suppliers, past present and future.

These conversations will build your personal brand and your company’s brand too. You might even have a list of ideas and opportunities to look forward to on that difficult first working morning after New Year too!

Share your Stories!

As it is the season for sharing. Please comment or reply and share your feedback on this challenge and on some of the conversations you’ve had. No one is going to check you’ve made 17 calls, but if everyone makes some calls, I’m sure there will be some direct value from it.

Enjoy connecting, and Season’s Greetings to you all!

How Can Procurement Break the Chains of Sole Sourcing?

Whether its design specifications, or traditional attitudes, sometimes procurement gets painted into a sole sourcing corner.

single sourcing

This article was first published on Future Proofitable.

I am jealous of those who have never had to deal with true sole suppliers. I think IT buyers will understand me best. It’s just not that much fun. Let’s take a closer look at what sole or single sourcing is, and how best to deal with it.

I will cover the subject in two articles. The first one covers what it is, and the second will contain tips and hints how to deal with these situations.

Spot the Difference

If you there are a few suppliers in the market who you could buy from, but you choose to stick with one supplier (leaner supply chain, eliminated duplicating logistics and management, administration costs), you have a classic single source situation.

If there is only one supplier in the market, and no alternatives, you have a sole sourcing situation.

Real-life Examples?

There are many office cleaning services providers out there in the market. However, for a list of very good reasons, you choose to outsource it to one service provider. That would be single sourcing.

Now, imagine five different suppliers working on your ERP system creation and implementation at the same time, doing the same job for the same part of scope. Not fun.

Or imagine that your supplier comes up with exactly the product you need for your manufacturing process, but patents it and keeps on increasing the price at every opportunity. Even less fun.

How Does It Happen? 

For single sourcing, the option is deliberate choice. There are many advantages to it:

  • You keep the competition, because the supplier can be easily replaced. Negotiation leverage is at its maximum level like this.
  • At the same time, you spend less time for supplier management and supply chain administration.
  • You have consistent quality of items or services delivered. Or, if not, deal with it in one go.
  • You eliminate all non value-adding activities (some examples here).
  • The supplier will be more willing to work with you on various cost reduction or services improvement initiatives.
  • The threat of losing business in the future will be a big motivator to not overcharge you.

There are a variety of reasons why a sole supplier situation can form. Some are more to do with perception and resistance to change, while others are truly sole supplier situations. They can be categorised in three ways.

1. True Sole Sourcing

Where your company might depend on one supplier without any escape routes. For example:

  • Market monopoly – utilities (water, gas, electric); Governmental services.
  • Patents – technical designs; chemical formulae.
  • Lack of supply alternatives.

2. High Exit Barriers

There are situations when due to various barriers (most often financial – switching costs) competitive situations turn into sole supply situations. For example:

  • Equipment investment – when supplier provides plastic granules storage and supply systems; cleaning chemicals’ supplier provides funds for equipment.
  • Digital solutions (and their switching costs) – you may have had big leverage during first negotiations, but once the initial contract period is over you find yourself dependent. The supplier is technically not sole source, but switching costs are so painful that it gradually turns into one way street of constantly increasing maintenance bills.
  • Manufacturing supply chain integrations – this can often happen naturally, or through pre-existing relationships between different tiers of suppliers. Along the way, one supplier is sold to another, or bought out, and a partnership is ended even though production lines are tied together.
  • Industry regulations (or agreements) – for instance, in order to be able to insure cash in a safe, an insurance company might require a specific quality certificate from a very specific certification organisation. In this case, there is really only one option for supply.

3. Pseudo Sole Sourcing Situations

Frequently, evaluating the situation in the business is more about perception and will, rather than based in fact. Identifying these can bring big benefits.

  • Business users’ preferences – surprisingly, there are quite a few categories of spend where business users are permitted to have preferences. Next time you complain about resistance from stakeholders, consider the number of colleagues who work with particular safety equipment, or similar. And yes, over time, people tend to form preferences for brand name products. Implementing any change might be challenging.
  • Historical heritage – the classic “we’ve always done it this way” situation. It always been bought from this supplier, and only this supplier.
  • Business’ requirements – technical specifications, prepared by engineers. Delivery requirements, set by business users. Packaging requirements, defined by operations or logistics or marketing.

 So now you know how these situations may occur. The question is, can you do anything about it? And how? You’ll have to come back to find out more!

Why Some Supplier Relationships Are More Equal Than Others

All suppliers are equal, it’s just that some supplier relationships are more equal than others. It’s just one of the challenges facing procurement.

some supplier relationships more equal

Procurement in the public sector can provide its own set of unique challenges. Learning from the experts is one of the best ways that professionals can aim to overcome them.

Marea Getsios is the Coordinator of Procurement at Kogarah City Council in New South Wales, Australia. Marea has worked with both Local and State Government departments in Australia over the past 20 years.

This has given her an in-depth understanding of the procurement process from a strategic leadership perspective, as well as what it takes to drive procurement success.

Ahead of her appearance at the 3rd annual GovProcure 2016 conference, Marea highlighted some of the key challenges she faces in her current role, and the ways she has overcome them. She also shared some tips on the practical side of procurement, including best practice in supplier relationships and risk management.

What qualities and capabilities have you built that supported you in achieving better procurement outcomes?

I’ve used my sales and marketing background to communicate, and engage, with stakeholders more effectively, in order to achieve better procurement outcomes. It’s been important to educate stakeholders on the differences between a procurement and a purchasing role.

By communicating the procurement cycle, and discussing the importance of good procurement practice, it’s been much easier to achieve better governance and practice amongst my colleagues.

The other area I focus on is the importance of planning your procurement program. It is important at the beginning of every project to sit down with key stakeholders and work out the key objectives and risks of the project.

It sounds like you are really harnessing your strengths and experience to minimise setbacks at your organisation!

What would you say the biggest challenges you and your organisation are facing in procurement at the moment? Do you feel that these challenges translate to local government at large and why?

At the moment the most challenging aspect of my role is amalgamating two very different frameworks into one. You have to methodically go through each process and work out which method is going to work best for the new entity going forward.

It’s a good opportunity to look at what has worked in the past for both organisations and decide what will be the most effective in the new framework going forward. Many Councils are presently going through this process, and its not any easy one.

In addition to trying to amalgamate the differing key procedures and policies, the most challenging factor is the culture, and trying to break down the silo mentalities of individuals who are adverse to change.

Interesting you mention the change adverse cultures that exist in business. We know that procurement operations within local government can have far-reaching, visible impacts on the community.

Can you tell us a bit more about the key procurement trends that might impact procurement and supplier relationships at the local level? How you can make the most of these challenges and opportunities?

Obviously we are embracing cloud-based networks to streamline ordering processes. We also have lots of new technological platforms that can automate certain procurement functions, including spend analysis, contract management, and saving trackers.

I don’t believe local government has embraced enough of these opportunities, but they are beginning to play in this space. There is opportunity now to start implementing some of these platforms and managing the workflow more effectively.

The other area I believe could also be embraced better is social media, especially where the engagement of both the community and suppliers is involved.

Procurement technology with built-in social collaboration tools can encourage innovation through improved collaboration with suppliers and other stakeholders. At the same time it can minimise risk, and enable effective decision making.

Moving outside your business to your external suppliers. Do you have any advice or key lessons learned from your supplier relationships and risk management strategies?

I believe if you are fair and transparent, and allow all suppliers and contractors the same opportunities, you will be successful in developing good supplier relationships and managing any potential risk to your organisation.

I try where possible to give suppliers the best insight to the business and our requirements in order to allow them to work out if the organisations requirements are a good fit for their business. This way they don’t waste their time or our time.

It’s important to be clear at the beginning of any relationship, and to set expectations at a realistic and achievable level. I have found that problems arise if suppliers feel they have entitlements, or are basing their livelihood on anticipated revenues.

As long as the communication is clear, it enables the supplier to work out whether they are able to service or supply your organisation accordingly. If they feel they are building their business fairly, then they will do whatever they can to grow their business and in turn provide a good service to your organisation.

It’s important not to treat suppliers and contractors with contempt, or as if they owe you. This can create issues and open up the organisation to unnecessary risk.

It’s been wonderful hearing from you, your insights are extremely useful and there are many thought starters here!

How can attendees benefit from your panel participation at the GovProcure 2016 conference?

The GovProcure conference is a good opportunity for procurement professionals to get access and exposure to a variety of principals and processes that operate across the three levels of government.

It’s interesting to see where there are alliances in the various government sectors and it’s a good opportunity to share ideas and network with other likeminded procurement professionals.

My contribution will have a strong Local government focus, but I also try and talk about how my sales and marketing background has helped me promote procurement in my sector. Much of my procurement practice focuses on the engagement of stakeholders, which I believe is the foundation for success in the procurement sector, and all other sectors for that matter!

Too find out more or to download a brochure, visit the event website.

The Human Side of Procurement Decision Making

No matter the sources available, procurement professionals trust above all else peers when it comes to information and supplier intelligence.

Peer Recommendation Supplier Intelligence

Earlier this year, I participated in research that explored current trends in supplier intelligence. More specifically, tealbook wanted to know what sources of information are the most trusted when finding new suppliers.

Here is what they learned:

Procurement professionals trust their peers, whether internal or industry colleagues, over any other source of information or intelligence.

In fact, 83 per cent of the survey participants held this opinion. Not only does this finding indicate that procurement should find and invest in efficient ways to access and centralise the knowledge of their peers, it offers procurement a secondary lesson about our own stakeholders and the best way to reach them.

Procurement can be an ‘acquired taste’ for some functions and business units. We can put out mission statements, tie our objectives to theirs, and endlessly share positive results and sometimes they still don’t come around to our way of thinking.

Are We Effective Message Carriers?

Maybe the problem isn’t the thought process. Perhaps, as we learned in the research about trusted sources of supplier intelligence, the issue is the messenger.

If that is the case, how can procurement go about finding other, more effective carriers for our message?

I am a huge fan of the town hall meeting format. Town halls are an effective way to speak to the organisation at large about strategic sourcing and procurement and emphasise that we are a collaborative partner ready and willing to add value.

About 6 months after I joined FORMA, I had a procurement town hall I presented as a ‘Lunch and Learn’. People either called in, participated via video conference, or sat in the auditorium area.

Our main messages to them were: “Here are some of the things that procurement has done. Here is how you can engage with us. Here is how you work with procurement.”

The Power of Testimonials

By far, the most impactful statements in the town hall were not made by procurement at all. They were testimonials made by procurement’s key internal stakeholders directly to their peers.

I had invited five key stakeholders at the VP level and Senior Director level, very high level representatives in the organisation, to come up and talk about what their experience had been with procurement.

They shared where they had found benefit, how had procurement helped them, and under what circumstances they would actively engage us again.

Those testimonials spoke louder, and reached further, than anything that I, or my team, could have said to help us with stakeholder engagement.

Once the audience members began to hear and understand the different ways procurement was able to provide support, they became more creative in their thinking. “Well, you know what? I have this project that’s coming up next week, or two months from now…”.

Or, “Here’s an initiative I never thought you could help me with, but I guess you can…”. It created a lot of momentum and opened a lot of doors. It was an extremely positive way of enticing engagement from our stakeholders.

Trusted Sources of Supplier Intelligence

Mary Kachinsky
Mary Kachinsky

When a town hall meeting isn’t a possibility, technology can often be called in to bridge the gap. This is why platforms such as tealbook fill a unique gap for many procurement teams. They offer a place where teams can store supplier provided information with their own notes and opinions.

This sits alongside commercial data from Dun & Bradstreet’s global database and aggregated intelligence on suppliers from industry peers. Having all of this information in one place is like being able to call a town hall to order anytime and any place. And there’s the additional bonus of not having to provide lunch!

The fact of the matter is, people want to get information and opinions from the people they know and trust. It is true in the case of procurement and it is also true with our internal stakeholders.

At the end of the day, we are all people that put more faith in recommendations from our peers than we do in a distant process mandate or firm that says, “This is the supplier to work with” or “Procurement has your best interests in mind – trust us”. We ultimately want to hear from our peers.

If you are interested in more about tealbook’s research into supplier intelligence, knowledge and discovery, you can download it here.

Mary Kachinsky is a member of the tealbook Advisory Board, and Vice President of Strategic Sourcing and Operations for FORMA Therapeutics

She brings over 25 years’ experience as a strategic partner and business leader in the research, development and manufacturing procurement functions spanning across the pharmaceutical, biotech and consumer electronics industries. Mary is a Certified Professional in Supply Management (CPSM) and a Lifetime Certified Purchasing Manager (C.P.M.).

How Does it Feel to Be a Supplier to You?

Being a customer of choice in procurement is important. Ensuring your supplier feels part of the team is also important.

Supplier to You

As procurement professionals we care about the quality, delivery, cost, innovation and sustainability performance of our suppliers. These are usually wrapped up in Key Performance Indicators (KPIs), a key tool within the procurement community.

Now that we as a population are facing resource scarcity, what sort of questions should we start asking ourselves to ensure that we continue being the ‘customer of choice’, and make the supplier feel that they are a prime source of value to our organisation?

Why ‘Customer of Choice’ is Important

Every day, news headlines and scientific reports reflect a world increasingly impacted by unsustainable trends and catastrophic climate events.

Oceans are becoming more acidic, with devastating results on coral and connected ecosystems. The air in major cities is full of dangerous particulates. Crop-growing regions for key commodities are shifting. Sea levels are rising.

All this could potentially lead to resource constraints and risk in the supply chain which procurement, amongst others, should mitigate.

The essential questions procurement should be asking itself are:

  • How can organisations possibly develop a ‘single point of truth’, which is reliable and up to date?
  • How can they manage contracts and monitor KPI’s?
  • How can they handle data and information and avoid rework and duplication and look at the relationship from the supplier’s perspective?

Key Questions for Your Supplier

It starts with the sourcing process where the supplier is evaluated, perhaps even audited, and then at the end when a contract is developed with them. Suppliers will evaluate whether these selection processes run fairly and competently.

In the on-boarding and the execution part of the relationship, the supplier will most probably evaluate how the communications went, how easy it was to create and implement changes to the administrative routines, and how the on-boarding was tackled.

When the relationship starts out, the evaluation will typically be how time consuming or complicated it is to deliver goods and services, and whether the same information is requested by different people.

When it comes to the strategic relationship, a key question to ask yourself is whether you ask your suppliers their opinions about issues that might affect them, including issues around risk.

And then, when you ask them, are you then open to new ideas, new products, and new ways of doing things?

Organisational Benefits

How would this benefit organisations? The time it takes to manage the relationship should become more effective. So should the visibility from spend analysis to sourcing exercises to strategic relationship management.

As a result it should help drive better relationships and help achieve competitive advantage for both parties. And this should of course be linked to your company’s sustainability journey.