Tag Archives: supply management

Critical Factors When Selecting Your Suppliers

Procurement exists in a dynamic, fast-paced, constantly changing environment. So surely the reasons we use to select our suppliers and supply partners would change over time too? Wouldn’t they?

It’s been over three years since the Procurious network was canvassed on what critical factors they look for in their suppliers. The world has moved on a-pace in the intervening period and it’s interesting to take an inward look to see if procurement has developed at the same pace, particularly in its supplier selection processes.

Gone are the days of the cheapest price (or at least they should be!). Gone, and consigned to a very dark part of history, are the days where supply decisions were made over lunch or in private meetings, and related more to who you knew than what you knew, which golf course or members’ club you were part of. Or even (sharp intake of breath) what you might be offering the buyers in return.

Even the list below, the key factors highlighted last time out, may have been superseded. So what are the new criteria? Or, if they are still the same, why is this the case?

Cost and Quality vs. Social Value and #MeToo?

If we take a look back at the responses from the network in 2015, we find ourselves looking at a list with a number of the usual suspects on it:

  • Cultural Fit – including values
  • Cost – covering price, Total Cost of Opportunity/Ownership
  • Value – value for money and value generation opportunities
  • Experience in the market and current references
  • Flexibility
  • Response to change – in orders and products
  • Quality – covering products and service quality and quality history

In addition to this, some that didn’t make the top 7 as it was included trust and professionalism, strategic process alignment and technical ability. There’s nothing that looks out of place on the list. In fact, they’re all eminently sensible and fair criteria to be considering.

The problem is it that it reflects a very traditional view of procurement.

Given the changing environment that procurement operates in, wouldn’t we expect to see these criteria changing too? In the past couple of years, geo-political instability has dominated the landscape and shows no sign of disappearing soon with Brexit and a potential trade war between USA and the rest of the world just two examples.

But what about the other factors we need to be considering? Social value has jumped to the top of many organisations’ lists, increasing work with SMEs and Social Enterprises. And let’s not forget an increased focus on harassment, discrimination and equal opportunities following #MeToo and campaigns like Procurious’ own ‘Bravo’.

What Does the Network Say?

When asked their opinions on what the critical factors were, the Procurious network highlighted the following:

  • Previous Safety Performance
  • Service Delivery
  • Efficiencies
  • Cultural Fit
  • Price/Cost
  • Flexibility
  • Ethics
  • Quality and Consistency
  • Supply Chain
  • Financial Stability
  • Environmental Policies
  • Communication

I’ve highlighted in bold the criteria that appear in the previous list that also appear in the new one. As you might expect, they are the common criteria that procurement are known for, and may be expected to deliver as standard.

It doesn’t appear that other factors in line with Sustainability, Social Value and Equal Opportunities (to name but a few) are getting much of a look in. However, we’d need a much bigger sample to be sure. And that’s where the wider knowledge base comes in.

Procurement’s Response

Having a trawl through the latest articles on supplier selection and key criteria two things struck me. One, there were very few articles, blogs, thought leadership posts or even research papers from the past couple of years. The most recent one I found was from early 2017 and even using a broad range of search terms, it was difficult to find anything relevant.

The second, and perhaps most surprising/concerning, thing was how few mentioned any different criteria for suppliers. Only one article I could find mentioned Social Responsibility or Environmental Performance/Sustainability. The remainder still focused on the criteria commonly found in a Commercial or Technical/Quality evaluation. The most common criteria still were:

  • Years in business and financial stability
  • Price/Cost
  • Quality and Delivery
  • Reliability
  • Communication
  • Cultural Match

What does this say about procurement? Is the profession still falling back on the old favourites when it comes to supplier selection? Or could it be that traditional “thought leadership” is no longer leading the way, and organisations are working differently without shouting it from the rooftops?

For me, it’s a combination of all of the above. There’s no denying that it’s hard to separate procurement from cost and quality (after all, it’s what we’re there to do). And why wouldn’t professionals use criteria that are both reliable and easy to measure, particularly when time and resources are tight?

Getting our Message Across

Speaking from experience, however, there are areas in which overall value is much more prevalent. In the Scottish public sector, organisations are mandating Community Benefits for contracts above a certain value. These can cover everything from creating apprenticeships to financially supporting community projects.

In addition, Local Authorities have started to mandate evaluation of ‘Fair Work Practices’ in all procurement exercises. Again, this can cover a multitude of elements, such as paying the living wage, no zero-hour contracts, equal opportunities and good training and development. Suppliers are being forced to consider these criteria to the benefit of their employees and the wider society.

There is good work going on in procurement, but maybe we aren’t making the most of communicating our message to the wider market. And if communication is one of the key factors in supplier selection and subsequent relationship management, it’s high time the profession started telling suppliers what is important to us and seeing what they have to offer.

A New Role Emerges: Supply Chain Scrutinisers

Any increase in transparency is good news for the supply management profession. That’s why the rise of the 3rd-party Supply Chain Analyst is a development that the profession should welcome, rather than fear.

How many articles have you read about Apple’s supply chain? Dozens, no doubt. Tesla’s is similarly scrutinised, along with McDonald’s, Walmart’s and a handful of other household names.

The reason for the growing popularity of this news is twofold.

Firstly, increased transparency in reporting means that researchers have a lot more to work with. For example, a recent Forbes article from Jonathan Webb reports that recent legal changes in Taiwanese corporate law means analysts can now take advantage of mandated monthly earning reports.

Secondly, corporate supply chains are finally being recognised as a key factor that contribute to commercial advantage – such as risk levels and speed-to-market – or commercial disadvantage. As such, top analyst firms such as Bloomberg now employ supply chain research experts whose insights can affect a companies’ share price just as dramatically as a surprising result in a quarterly earnings report.

What does the role look like?

Here’s an example of a supply chain analyst role currently being advertised with Bloomberg:

https://careers.bloomberg.com/job/detail/62154

The role calls for someone who is capable of “researching and analysing business relationships on over 23,000 companies globally, “providing a roadmap for clients to view supplier and customer relationship networks, helping them identify and manage supply chain risk and generate investment ideas”.

The researcher is expected to interact with analysts, fundamental and quantitative portfolio managers and news agencies. In other words, the data uncovered by a supply chain analyst is much-anticipated and eagerly consumed. Gartner’s annual Supply Chain Top 25 Rankings, for example, make a splash not just within the supply management profession but within investment circles too:

Cleaning up the supply chain

Valuation and investment insights aside, another major role of supply chain analysts is to uncover malpractice such as human rights abuses, corruption, and environmental breaches. The biography of the aforementioned Forbes contributor, Jonathan Webb, says it all:

“I’m focused here on the murky world of supply chain corruption, looking at commercial bribery, supplier compliance and other nefarious goings on in the supply chain.”

And this is where the really interesting part of the supply chain analyst’s role begins. Once the domain of investigative journalists, supply chain malpractice is now being uncovered by experts who travel to hotspots to reveal and report on issues ranging from conflict minerals in the Congo, sweatshops in Bangladesh, and toxic waste in China.

Again, the big-brand household names are those that come under the most scrutiny for supply chain sustainability and human rights abuses, with subsectors such as clothing manufacturers and chocolate makers receiving the highest level of focus. Reporters and political enemies of Ivanka Trump, for example, continue to probe her clothing brand’s supply chain as a likely area of weakness. In response, the company has apparently made public information harder to find than ever.

What does this mean for the next generation of procurement pros?

The emergence of the supply chain research analyst opens up a new career path for procurement and supply management professionals. If you’re currently working as a data analyst for a single organisation’s supply chain, in the future you may consider scaling up your role to pull trends and insights from the supply chains of tens of thousands of organisations.

In other procurement news this week…

Procurement Fraud Is Costing NHS

  • The NHS Counter Fraud Agency (NHSCFA), launched 1st November, has estimated all types of fraud cost the health service a total of £1.25bn, with procurement fraud the second largest contributor after patient fraud
  • One of its aims is to identify problem areas in preventing – and increasing reporting of – invoicing and procurement fraud
  • This is the first time the health service has released an official estimate of the cost of fraud to the NHS. The total figure is roughly 1 per cent of the NHS budget

Read more at Supply Management

Stephen Hawking’s warning on AI

  • Stephen Hawking is concerned that artificial intelligence could replace humans. The world-renowned physicist fears that somebody will create AI that will keep improving itself until it’s eventually superior to people
  • “If people design computer viruses, someone will design AI that improves and replicates itself. This will be a new form of life that outperforms humans”

Read more on The Independent 

Weetabix sets out new supply chain vision

  • Milan Pankhania, who was appointed head of supply chain for operations at Weetabix, has just completed three months in the role and he has been identifying areas where the company could make efficiencies or cut waste
  • “My role is to help drive efficiencies across the supply chain process, while striving for excellent customer service,” he said.
  • “The focus for my strategy will absolutely include cost control and proactive risk management. It isn’t about cutting costs though, it’s about doing the right things to manage risk”

Read more at Supply Management

Rising Stars: I Fell Into Procurement (With Style!)

Did the ISM and ThomasNet 30 Under 30 Rising Stars always have a burning desire to embark on a procurement career or were they late converts? Procurious investigates….

Last month, THOMASNET and ISM announced the 2016-2017 winners of the 30 Under 30 Rising Supply Chain Stars award, presenting the profession with an inspirational batch of role models who are sure to attract more Millennials to the supply management profession.

Procurious has been lucky enough to sit down with many of the winners to find out what the award means to them, what it takes to be one of the  30 Under 30 Rising Stars and the key skills needed for a procurement and supply chain career.

But how did these rising stars first embark on their careers? Were they passionate about procurement from the offset or did a chance encounter or inspiring internship inspire them to “fall into” procurement later down the line?

Andrew Bagni, Procurement Manager at General Dynamics Mission Systems recalls that “ten years ago supply chain wasn’t as hot a topic as it is today. Specific supply chain degrees weren’t offered at my college at the time but this is now an option for students.”

Perhaps it’s not surprising, then, that 66 per cent of this year’s 30 Under 30 Stars didn’t plan a career in procurement.

The Slow Burners

Bagni applied for an internship with General Dynamics “in the hope of gaining some of the business experience l was lacking at 18 years old! I  worked the internship for the summer, which went really well and carried on throughout college whilst I was studying business management. It’s not been a lengthy career so far but the whole of my career has been spent working in supply-chain despite having fallen into it completely by chance.”

Nick Imison, Subcontract Administrator at Northrop Grumman Systems Corp, had a similar experience to Bagni: “I fell into it sideways. I was a finance major. I went to job trade fairs, interviews, and just wasn’t passionate about finance. One day I stumbled on a supply-specific career fair, which was put on by the University of San Diego who push undergrads and postgrads to the supply chain field. They were very convincing and introduced me to the many sides of the business, giving me a holistic view. That piqued my interest and, from there, I enrolled in a few supply-chain courses.

Corey Gustafson, Senior Buyer at Deluxe Corporation initially attended school in Wisconsin to train in engineering, ” I went on a programme  that focused on the printing industry including graphics and communication management and eventually  started taking a procurement and supply-chain management course. The instructor happened to be the program director for the supply-chain programme and it was the best course I’ve ever taken. I was interested in the way the function  impacts the business and wanted to continue with to focus on that.

The Die-Hard Procurement Pros

Not all of the 30 Under 30 winners came to procurement by accident, however.  Barbara Noseda, Global Sourcing Associate at Johnson & Johnson, has a particularly notable passion for, you guessed it,  shipping containers! “I know it might sound random” she says, “but I swear it’s the truth! I did my bachelors degree agree around shipping and logistics in Hong Kong and  then went into supply chain.  Even  today, every time I can get on a project about shipping containers I jump on it.”

Matthew Montana, Category Lead at Pacific Gas and Electric Company, was also interested in supply-chain at the offset, “supply-chain really caught my attention. I liked the analytical aspect and qualitative aspect. There’s a good balance between creative thinking and working with numbers. It’s the balance of quantitative and qualitative that really drew me to supply chain.

And Matthew has another reason to be passionate about procurement. His father also works for Pacific Gas and Electric. “He’s been in supply chain for several years now. Growing up and seeing him work there and seeing how good the company has been to him and his good career influenced me. It’s a good company and a good industry. I had inside info and insight from him so he was one of my mentors early on.”

Amanda DeCook, Sourcing Associate A.T. Kearney, knew exactly where her career was headed, “I knew which University I was going to and I knew I wanted to pursue a Business Major. Michigan State University’s Eli Broad College of Business has the best supply chain program in the USA, and I loved the tangible,  practical skills involved in the course.”

Indeed, several of the 30 Under 30 stars credit their colleges for propelling their careers. Jeff Novak believes his “college had a lot to do with [his career choices]. I went to Penn State Uni,  which is one of the top supply-chain schools in the states, if not the world. It seems that however your procurement or supply-chain journey starts out, you could have a vibrant and successful career ahead of you- take it from the 30 Under 30’s!

The 30 Under 30 Rising Supply Chain Stars will meet for the first time as a group at ISM2017, where ISM and THOMASNET.com will roll out the red carpet to celebrate the winners’ achievements and broadcast their success stories to other young people considering a career in supply management. 

Big Ideas Summit 2017: Pay Your Bills

It’s not about the money, money, money… except that it kinda is. Barclays Chairman, John McFarlane, reminds us that we need to pay our supplier bills on time!

At the Big Ideas Summit 2017, we once again challenged our thought leaders to share their Big Ideas for the future of procurement.

Our attendees spoke about everything from creativity to politics, from cognitive technology to workplace agility, current affairs, economics and the future. Whatever your industry and wherever you are in the world, there are some top tips to takeaway!

If You’ve Got Bills You Gotta Pay – Pay Them!

Barclays Chairman, John McFarlane, has a simple but utterly  fundamental Big Idea to share for 2017:  Procurement pros must pay their bills on time!

John acknowledges that  it’s a  great time for people working within procurement. There are now global marketplaces, the online arena continues to grow exponentially and power has transferred into the hands of consumers. This is a truly unparalleled period for the function.

But despite all the changes  that are occurring, John was keen to remind procurement professionals that suppliers really matter and the importance of paying bills on time should never be underestimated. If you don’t pay  when you should,  you’re accountable for endangering a perfectly good customer.

Looking after your  long-term interests and nurturing your relationships is more valuable than always thinking in the short-term.

Want to find out more about Big Ideas 2017? Join the group on Procurious.

You’ll find all of the Big Ideas Summit 2017 videos in the learning section on Procurious. If you enjoyed this Big Idea  join Procurious for free today ( if you haven’t done so already).  Get connected with over 20,000 like-minded procurement professionals from across the world. 

Do Labels Matter? The Debate That Just Won’t Go Away

Purchasing? Procurement? Strategic Sourcing? Supply Management? As the profession continues to evolve, old labels tend to come unstuck and peel away.

Getting Out of the Back Room

It started in the 1990s. Like drab caterpillars transforming into magnificent butterflies, purchasing professionals left their brown cardigans draped over the backs of their uncomfortable chairs in dimly-lit back offices and emerged, blinking, into the bright hub of the business.

No longer a service department, we were suddenly business partners. We talked strategically rather than tactically, proactively seeking to understand what the organisation was trying to accomplish, and find ways to contribute to its competitive advantage.

But, what did we decide to call ourselves?

Almost thirty years later, the only thing that has really been agreed upon is to leave the term “purchasing” behind. Perhaps if there was one global, all-encompassing professional body, the decision would have been made for us, but unfortunately this isn’t the case.

In the U.S., the National Association of Purchasing Agents (founded 1915) changed its name to the National Association of Purchasing Management (1968). It finally became the Institute for Supply Management (ISM) in 2002.

In the UK, CIPS changed its name from the Chartered Institute of Purchasing and Supply to The Chartered Institute of Procurement and Supply as late as 2014.

Across private businesses and government departments there’s a bewildering array of labels and job titles. This, of course, makes the standardisation of job descriptions and salary levels unnecessarily difficult.

Getting Out of the Box

I’m half-way through ISM’s “Fundamentals of Purchasing” guided learning (e-learning) course under the tutelage of Dr Wade C. Ferguson, President, Erv Lewis Associates, LLC. The course begins with some of ISM’s definitions around Supply Management and what the profession actually entails. It led to one of the class (me, actually) asking Wade’s opinion on the term procurement versus supply management.

His reply: “Changing definitions represent the evolution that the profession has gone through. In the company I worked at for over 30 years, we changed our name from “purchasing” to “procurement”, but it didn’t really change anything, as procurement is basically a subset of supply management.

“It’s a necessary and important subset, but if you want to be more encompassing, we prefer the term ‘supply management’. It underscores the recognised breadth of the modern supply chain and the need for coordination and value optimisation.”

Wade argued that the reason for dropping the old label was a profession-wide effort to, “Get out of the box. Out of the myopic purchasing view, to understand what the organisation is really trying to accomplish. When we can do that, we’re perceived as being strategic, not just a tactical cost centre.”

Pigeon-Holed by Labels?

This argument makes sense when you look at ISM’s definition of responsibilities under the Supply Management umbrella:

  • Purchasing/Procurement
  • Strategic sourcing
  • Logistics
  • Quality
  • Materials management
  • Warehousing/stores
  • Transportation/traffic/shipping
  • Disposition/investment recovery
  • Distribution
  • Receiving
  • Packaging
  • Product/service development
  • Manufacturing supervision.

If you wanted to keep things in separate boxes, then I’d estimate that roughly half of the components above belong to Procurement, while the other half belong to Supply Chain.

This separation of responsibility might work in a company where, say, you have a Chief Procurement Officer working closely with a Chief Supply Chain Officer. But why not combine those two roles into one? It’s all interconnected, and it makes sense. And Head of Supply Management could be the label that encompasses the whole picture.

Here’s the thing – maybe, just maybe, the narrowing effect of “Procurement” labels is one of the contributing factors holding Chief Procurement Officers back from that coveted spot at the boardroom table.

Even for those CPOs out there who do in fact have responsibility for the supply chain as well. It’s possible that their very title means that this vast part of their role isn’t actually recognised by the people that matter.

Don’t Abandon the Progress We’ve Made

In a previous article, Procurious founder Tania Seary also called upon the profession to stop worrying about what we call ourselves:

“In my opinion, re-branding procurement is a distraction, especially since we’ve made enormous progress in educating businesses about what procurement does. Rather than having to re-educate the C-Suite about what a Commercial Director or Chief Relationship Officer does, that energy could be better spent actually showing people what we have and can achieve.

In line with why we created Procurious to begin with, we know that the procurement and supply chain profession has struggled to overcome outdated stereotypes, so it’s time we join forces to become collectively valued. By empowering future procurement leaders, we can change the face of the profession from the inside out, rather than worrying about the label itself.”

Things Certain to Change Again

“The only constant in life is change.”

…just as the only quote that the Greek philosopher Heraclitus will be remembered for is the one above.

The Procurement/Supply Management/Whatever-you-want-to-call-it profession has changed so much in the past thirty years that there’s no reason why it shouldn’t change again. By the time we’ve settled our current labels debate, it may already be outdated.