With digitisation focused on Operational and Tactical aspects of function, and the next wave predicted to focus on technology that enables Strategic work, what are the implications for our future Category Manager’s skillset? Gregory Romney shares his expertise.
In a recent post, I made the observation that in large part the Procurement digitisation that has happened over the years has been focused on the Operational and Tactical aspects of the function (i.e. Buying, Sourcing). I also made the prediction that the next wave of Procurement digitisation will be more focused on technology that enables the Strategic work that organisations still struggle to prioritise. If I’m right, this will have significant implications on the skills that will be required to be successful in the role of a Category Manager and poses a fundamental question:
What is the future role of a Category Manager and what skills will be most important?
I’m not sure the answer to this question really differs all that much from what we would see on most aspirational job descriptions today, however, there won’t be any room for compromise. Future success in the Category Manager role will be dependent on the ability to closely mirror the skillsets of 3 roles: Strategist, Advisor, and Broker.
Similar to a game of chess, a strategist has a well defined plan in where he/she knows the the steps necessary to win the game, or in this case to bring the most value to the organisation both from a traditional bottom-line perspective, but top-line as well. As a Strategist, deep understanding of strategic frameworks will be required and their practical application for the category the CM supports. Additionally, sharpened data analytics capabilities will be increasingly important. However, the most important skill the Strategist will have is the ability to interpret the analysis, “connect the dots”, and then effectively communicate this internally to key Business Partners & Stakeholders. This leads me to role #2.
I recently read the book The Trusted Advisor by Robert M. Galford and it expounds upon 3 core skills that are key to becoming an Advisor: earning trust, giving advice effectively, and building relationships. I believe it sums up perfectly how to transition from playing the Strategist role to the Advisor role. The activity of “advising” may sound more familiar when you use it in the context of engagement with internal Business Partners. According to a study conducted by CAPS Research, only 24% of organisations consider their advisement or engagement Strategic, meaning it is highly collaborative and proactive, there are shared dashboards between Procurement and the Business Group they support, as well as aligned metrics. Despite such a low percentage of Strategic engagement, the study did find that 72% of engagement was Transitional, meaning engagement was increasing, and Business Partners were engaged with the category strategy. This certainly is a positive trend. The reason I believe achievement of Strategic engagement or advisement with our Business Partners is still so low is due to the fact that this work looks very different from the Tactical and/or Operational work that Procurement teams have been tasked with managing historically. However, if we are able to make the transition to “Advisor” successful, it will open the door to significant opportunities that Procurement is already well-suited to help deliver due to role #3.
Most Category Managers play this role decently today and in most cases have sufficient skills to broker deals between the company he/she represents and its suppliers. We have tools and well-defined processes to help us in this role, however, most of the deals that CM’s are brokering today are focused heavily on delivering value in form of cost reduction and less in the form of supplier innovation that can impact the top-line. In order to capture this form of value from the supplier base, a Broker needs to truly be willing to learn from the supply market and foster an environment within his/her own organisation so that they are prepared not only to receive, but act upon the supplier-led innovation. The skillset required in this type of deal brokering is different from what we have traditionally done when playing this role and so will the tools that we leverage to enable this activity (hint: eSourcing will not be the optimal tool from the toolkit for this kind of brokering). A perfect example of this is found in the recent announcement from Coca-Cola European Partners (CCEP) in regards to the introduction of CanCollar, a sustainable paperboard packaging solution, for multipack cans in Spain. Through collaboration with its packaging supplier WestRock, the company projects that the new solution will save more than 18 tonnes of plastic annually and has invested €2.6 million in its Barcelona plant in order to support the initiative. Hats off to the Procurement team that I’m sure was intimately involved in brokering this deal!
As I mentioned earlier, these roles at face value are not a drastic shift from what Category Managers are being asked to play today, but if we are honest with ourselves and the members our organisations, there are very few that excel in one let alone all three. This is the capability gap that Procurement faces and in a parallel there is a Technology gap to help enable it, both of which will require an overhaul across a myriad of current mindsets, practices, and investments.
This is why I predict the future wave of digitisation will be focused on empowering the Procurement function across these 3 roles and I’m confident that the function, as well as the supply market, will rise to the occasion and make the necessary changes to address these gaps. In doing so, I’m hopeful Procurement will become a profession of choice not mishap.
Agree? Disagree? Please share and let me know your thoughts in the comments section!
What are the essential skills you need to possess or develop if you want to become one of tomorrow’s supply chain leaders? Is it enough to have a business-related degree and a little supply chain experience, or is supply chain leadership a vocation for which you must work hard to acquire specific qualities?Rob O’Byrne from The Logistics Bureau shares his expert advice.
In reality, it’s probably a little bit of both. Indeed, many elements of supply chain leadership can’t effectively be learned through academic channels alone.
In any case, an excellent place to start is by knowing what the most vital supply chain leaders’ skills are and, of course, why you need them.
That’s what you’ll find in this article, so you can check which essential skills you already have, and which ones you might wish to enhance with some pragmatic supply chain education.
These Are the 7 Supply Chain Leaders’ Skills You’ll Really Need
1. Information Technology and Automation Knowledge
Before getting into this first section proper, I want to make one essential point, which I’ll expand on later in this article. Supply chain leadership is all about people using technology as a tool. Nothing is more important than working on your people skills if you want to be a successful supply chain leader.
Nevertheless, few supply chains run successfully today without the support of sophisticated technology tools, like warehouse management and enterprise resource planning (ERP) systems. For that reason, you need at least a modicum of IT understanding to work in a supply chain environment, particularly if you intend holding a leadership position.
To be a supply chain leader, you will need to be familiar with the use of enterprise software applications like WMS, TMS, and ERP, not to mention analytics software, which is increasingly becoming a staple source of leadership decision support.
Enterprise IT Skills at User-level
There was a time when supply chain leaders could rely on subordinate employees to do the hands-on work with business information systems, and be content to receive reports and Excel spreadsheets containing data for decision-making.
Those days are gone, however. Today you’re expected to find your way around the modules of your company’s ERP and business intelligence applications on your own. Furthermore, your need for technology understanding extends beyond hands-on use.
Understand IT as a Buyer
As a supply chain leader, your input into IT procurement will be crucial, and you must know enough about your company’s technology needs to discuss them with vendors. You’ll need to understand the relationship between ERP workflows and physical processes, for instance, to help prevent classic mistakes from being made, such as applying new technology to outdated, inefficient processes.
It will help if you know automation technology, too, since more and more companies are applying automation in distribution centres and warehouses.
Ultimately, strong interpersonal skills still trump technological expertise as a supply chain leader’s forte. However, a career at the head of your company’s supply chain is not one to consider if you don’t have some affinity for technology and its application in business.
2. A Grasp of Economics and Market Dynamics
The supply chain world is changing rapidly and sometimes unpredictably, in line with the market dynamics across many industries, all of which are being affected by rapid shifts in customer and consumer buying-behaviour.
Many markets that used to be purely local or regional have become global, as have the supply chains that serve them. As a supply chain leader, you will need to focus on what lies ahead and, to some extent, predict it. That can only be possible with a thorough understanding of the market dynamics relating to your industry and your company.
Of course, each industry and the niches within them are subject to unique and specific market dynamics. Supply chain leaders can work in any industry as long as they know their stuff, but this does mean that a change of employer can require some in-depth study, especially if the market is unfamiliar.
As a basis to quickly adjust to supply chain career moves, it will help a lot to be familiar with economics’ basic concepts.
To see ahead and lead a supply chain team effectively, you’ll need to understand what drives demand, supply, and pricing for the goods and services provided by your organisation and its competitors. These forces impact a variety of supply chain management elements, including the cost of goods sold and the cost to serve your company’s customers.
3. Understanding Cost-to-serve
Supply chain leaders play a very active role in the profitability of their employing companies. If you’re running a supply chain operation, your decisions impact the costs involved in supplying your organisation’s customers.
You will have a huge advantage and the potential to shine as a leader if you can quantify how your supply chain leadership decisions affect your bottom line. For instance, too few companies focus on the real costs involved with serving customers.
The result of this inattention is often a one-size-fits-all approach to service, inevitably leading to the over-servicing of some customers and the under-servicing of others. A single service offering can even impair profitability, perhaps creating a situation where logistics costs cause some sales to generate losses instead of profits.
If you understand the cost-to-serve concept and can apply it to your company’s supply chain activity, you’ll be able to identify unprofitable customers and products.
By developing a thorough cost-to-serve understanding, you’ll even be able to make decisions that improve the profitability of those customers and products instead of taking knee-jerk measures to cut losses.
Every company wants supply chain leaders who can make direct and positive impacts on the bottom line—but not every company has such leaders. That’s why familiarity with cost-to-serve is one skill that can help you stand out as a competent supply chain professional.
4. The Skill of Flexibility
The one thing you won’t find on this list of supply chain leaders’ “must-have” skills is innovation. You don’t have to be an innovator to be an outstanding supply chain leader, but you do have to support and drive innovation. Flexibility is the skill that will help you to do that.
Flexibility gives you the ability to let others do the innovative thinking. Your flexibility will give those creative thinkers the confidence to present their ideas, since they know that you will adopt them if it makes sense to do so.
Flexibility will keep you from feeling too comfortable in the status quo ever to let it go. Flexibility will ensure that change (often termed the only constant in supply chain management) will not faze you or cause you undue stress. In turn, your team will be encouraged to embrace, rather than resist, change.
Flexibility is one of the soft skills that differentiate successful supply chain leaders. That’s not only because of the changing nature of supply chain operations, but also because things don’t always go to plan—far from it if truth be told.
For example, during supply chain improvement projects, it’s not uncommon for things to crop up, requiring plans to be changed. An inflexible leader may doggedly try to drive through with the original strategy, becoming ever more frustrated in the process and hampering, rather than helping the situation.
Inflexibility often manifests in the belief that changing a plan is an admission of poor planning, but in many cases, that is an erroneous presumption.
Don’t fall into this trap. Work on your flexibility as a leader. Accept that plans should always be work-in-progress, and adapt your approach when required. You can’t plan for every eventuality, and while flexibility is a virtue for supply chain leaders in general, it’s an absolute essential in project management.
5. Project Management Skills
Aside from flexibility, there are many other project-management skills that you’ll need as a supply chain leader. Of course, a lot depends on what leadership role you are in, but if you are headed to the top, you’ll probably hold several management positions on the way up, most of which will see you leading projects from time to time.
If you make it to the C-suite or, indeed, to any senior leadership position, it will help you and your managers do a better job if you understand the fundamental principles, pitfalls, and challenges inherent in project management.
The most crucial project management skills to acquire as a supply chain leader are as follows:
The ability to negotiate successfully for resources, budgets, and schedules
A high degree of personal organisation
A proactive approach to risk management
Of course, the above-noted skills are also valuable for supply chain leaders generally, not just as part of a project-management skill set. I’ve simply noted them here because they are the carry-over skills most likely required in a supply chain leadership role. To elaborate:
Personal organisation will be vital for keeping track of numerous projects for which you are likely to be a sponsor and meeting your obligations toward them.
You may sometimes be called upon to support project business cases, hence the need for negotiation skills.
When deciding if you’ll approve a requested project, knowledge of risk management will help you ask the right questions about the proposal and business case.
6. The Ability to Get the Best from People
So how about those people skills I briefly mentioned earlier?
I can’t put it any more plainly: the ability to lead, manage, influence, and inspire other people is the number one fundamental, essential skill that all supply chain leaders and managers should possess.
It is entirely possible to learn the necessary skills, but a word of caution is due. If you don’t enjoy team building and developing professional relationships with lots—and I do mean lots—of other people, don’t choose a supply chain leadership career.
On the other hand, if you love working with people but just don’t see yourself as a great leader, you probably have exactly the right mindset to succeed in a supply chain leader’s role.
There is nothing wrong with being self-critical, as long as you have the will to learn what you need to learn, and the energy to commit to your personal development. Being passionate about teamwork and enjoying interactions with others is half the battle in succeeding as a supply chain leader.
The 3 Cs of Supply Chain Leadership
Communication: First and foremost, you need to communicate well … to articulate sometimes complex concepts in a way that anyone within your company can understand, regardless of whether they have supply chain knowledge or not.
Dependent on whether your company operates internationally, you might benefit from communication skills that extend beyond your native language. It’s becoming ever more common for enterprises to give preference to bilingual or multilingual leadership candidates.
Collaboration: Secondly, you will need to be able to foster collaboration, a critical element in any modern supply chain.
It won’t always be easy, because sometimes you’ll be asking teams inside and outside of your business to collaborate and work together despite competing priorities and expectations. To ensure these parties collaborate, you’ll need to draw on communication, persuasion, and relationship building skills.
Change: Change management is another people skill in which you might wish to receive some special education or training. If you are planning to graduate from a role where you’ve been used to participating in, but not leading change efforts, experience alone may not be sufficient to help you take people through challenging changes. Resistance to change can be hard to overcome.
The impact of changes within your supply chain can affect employees on a very personal level. You’ll need to know how to empathise and to listen actively to what people are telling you. Without these skills, your leadership can quickly be rejected during periods of change, purely through fear of the unknown and a sense that you don’t appreciate employees’ concerns.
Get the Best From Yourself
Finally, while the need to interact effectively with other people might seem obvious, you shouldn’t neglect the development of the person most impacted by your skills and abilities—yourself.
Supply chain leaders should be able to conduct regular self-assessments and identify their areas of weakness.
We never stop learning and developing, but by having the ability to self-appraise your skills honestly, and work on those areas that need it, you can acquire new expertise at a rate that keeps pace with the ever-changing supply chain environment.
Getting the best from yourself also means having the ability to curb your ego. Learn to recognise when somebody else in your team exceeds your aptitude for a specific task or responsibility.
Let that individual take the lead, and be happy to follow and learn from her. Not only will that free you to play a part in which you can use your strengths, but you’ll also be empowering the other person and helping her to reach outside of her comfort zone.
7. The Know-How to Negotiate
As a modern supply chain leader, it won’t only be your reports and colleagues that you need to interact with effectively and skillfully, but also those outside your organization. Moreover, both internal and external interactions will often involve the need to negotiate.
Supply chain leaders must negotiate often, and even if you’re not doing so on a one-to-one basis, you’ll probably find yourself in scenarios where you’re part of a team of people trying to broker a deal or arrangement.
Negotiation Scenarios for Supply Chain Leaders
Some examples of possible negotiation situations that you might get involved in, and in many cases, lead, include:
Procurement of IT services and solutions
Contracts for logistics services
Brokering deals with product vendors (for direct or indirect supplies)
Putting together contracts or service level agreements with customers
Negotiations with employee groups or trade unions
Business merger/acquisition negotiations
Why do Negotiation Skills Matter?
Negotiations are typically transactional, but often take place between entities or teams engaged in long-term business relationships. Whether you are the lead or a mere participant in the negotiation, your skills will influence the transaction’s outcome and the trajectory of the broader relationship.
It’s easy to make mistakes during negotiations, but with relevant training and education, you can hone your skills to avoid some of the most common errors.
For example, skilled negotiators know that the process does not have winners or losers. They don’t go into a negotiation aiming to win as many concessions as possible, and they don’t feel that they have failed when they have to give ground to arrive at a settlement.
A win/lose type of attitude will lead to negotiating mistakes. Even if you come out of a negotiation feeling that you have won, you might find further down the line that your “win” has done nothing to strengthen what might be a vital partnership.
Mistakes that Skilled Negotiators Avoid
If you have developed your negotiation skills, you will always enter into discussions looking for an outcome that will satisfy both parties. You’ll also be able to avoid other common mistakes such as:
Failing to prepare by identifying what the deal-breakers are, which outcomes are essential, which ones are useful to achieve, and which ones don’t matter in any concrete way.
Asking only for as much as you expect… It is better to ask for more than you expect.
Modifying an offer you have made before getting a response to the original. It’s important to understand that the other party may use silence to bait you into relaxing your conditions.
Offering compromises before you have heard all the demands of the other party. By getting all the facts first, you can be selective in identifying where compromise may be possible.
Focusing too much on your party’s input and achievements. Strong negotiators pay close attention to the opposite party’s behaviours, ask plenty of questions, and take time to understand and analyse the answers.
How to Boost Your Supply Chain Leader’s Skills
Your business degree and/or hands-on experience in a supply chain role will undoubtedly help you gain and maintain a supply chain leader’s position in your current company—or in a new organisation if you should be planning a move.
However, supply chains have become so complicated that an extensive toolkit of required skills is required if you want to thrive and make a difference as a supply chain leader.
Some of the skills in that toolkit can be difficult to attain without many years of supply chain experience, simply because they are rarely taught outside of the workplace. Your best option might be a program of specialised supply chain and logistics education.
Our Supply Chain Secrets program, for example, was developed and designed by people who work in the industry. It can help you learn about each supply chain area pragmatically, using real-world problem-solving and relatable examples of commonly made mistakes—and methods to avoid them.
If you’ve read this blog post, perhaps you’ve been searching online for ways to enhance your supply chain leader’s skill set. If so, you don’t need to look much further. Join Supply Chain Secrets today, and access the skills you need to be a supply chain leader of tomorrow.
What does it take to be Super Normal? Here are the 5 must-have traits to get ahead in 2021 without driving yourself crazy.
There’s no turning back. There’s only the here and now. And whatever you call it – the new normal, now normal, the end of the world, or as we’re labeling it, the Super Normal – it no longer matters. What matters is how you adapt, move forward and make a difference.
There’s a lot of difference-making that still needs to happen. Procurement and supply chain must lead the way, just as we’ve done in the past. According to McKinsey, “in the five years immediately following the 2008 financial crisis, total return to shareholders for companies with top-quartile procurement capabilities was 42% higher than for companies whose procurement operations were in the bottom quartile.”
That’s a significant impact. Clearly, we have what it takes to succeed. But this is not the same environment as the global financial crisis. The game has fundamentally changed and we need a new playbook to win, manage stress and get ahead.
The Super Normal: Start by Owning Your Vulnerability
Resilience is core to the Super Normal. We’ve been talking about it since March, which begs a deep discussion: What actually makes us resilient?
It has nothing to do with our age, gender, ethnicity or nationality. Instead, according to a Harvard Business Review study, there are two driving factors. The first is exposure. The more exposed you are to the suffering or event, the higher your resilience levels are. As HBR puts it, “this strongly suggests that we discover our resilience only when we are forced to meet unavoidable suffering full in the face. It’s when we face that reality, and see ourselves and how we respond to it, that we find the basis for resilience.”
The second factor is the extent of the threat. The more tangible, the more resilient we become.
An HBR survey asked how many people had experienced workforce changes as a result of COVID-19. There were 11 possible changes to select, such as sheltering in place, layoffs and furloughs, and changing use of technology. Ninety-six percent of respondents globally said they’d experienced at least one issue. This is similar to our business study, which found that 97% of organisations experienced a supply chain disruption related to COVID-19.
This isn’t surprising – so why does it matter? Because as leaders, we need to own our vulnerabilities. Our Super Normal requires us to be open, transparent and direct. You can’t force a return to normal just to calm anxiety and stress. We have all suffered to some extent and glossing over the potential implications – whether it be layoffs, longer work hours, hard conversations with suppliers and customers, a demand for new skills, or changes at home – is counter-intuitive.
Instead, own the vulnerability, be clear about your team’s exposure and communicate what needs to change. When people understand what’s at stake, they are remarkably resilient.
The Super Normal Playbook: Heart, Brain and Vision
Resilience amidst chaos requires evolution. We need to change and adapt, even if we don’t know what the future holds. While there’s no easy button or universal blueprint, we’ve learned a lot in 2020 about how to be Super Normal.
1.Super Normal Professionals Think the Unthinkable
If we’ve learned anything in 2020, it’s that anything can happen. Pandemic, trade wars, recessions, natural disasters… the list goes on.
Being Super Normal requires us to come to terms with an inherent truth: Uncertainty is certain.
We need to engrain this mindset into our team, decisions and actions. Once we see that the big picture is cloudy and unpredictable, we can better prepare ourselves for success, and quickly overcome the shock factor when everything abruptly changes. Being ready for sudden change – and having a plan of action – puts you ahead of nearly everyone.
2.Super Normal Professional See Limitless Opportunity
Don’t let the state of our world get you down. Instead, get up, make a plan and get going. Be positive.
Changemakers see opportunity in crisis. They understand that the dynamics have completely changed, and there are limitless opportunities to improve your reputation, get noticed, move up and make an impact.
We know that procurement and supply chain operations are intrinsically linked to organisational survival and success. Whether you are at the beginning of your career or leading operations for a Fortune 100, there’s a greenfield opportunity in front of you. Thriving in the Super Normal requires you to see it and take advantage.
3.Super Normal Professionals Invest in Themselves
Warren Buffet put it best. “By far the best investment you can make is in yourself.”
This advice isn’t relatively new or unique, but it’s a game-changer for those that take advantage. What skills do you need to thrive in our Super Normal? What about the Next Normal? How will your day-to-day job change in the next 5 years?
Our recent survey found that the majority of organisations (93%) are investing big to propel procurement forward. The top three investments they are making in procurement are in data and analytics, talent development and technology.
Soft skills matter as well. According to LinkedIn, the top five most in-demand skills in 2020 are “creativity, collaboration, persuasion, adaptability, and emotional intelligence—all skills that demonstrate how we work with others and bring new ideas to the table.”
If your organisation isn’t providing the necessary training or experience you need, make the time to get it yourself. The pandemic has accelerated the global tech transformation and heightened the need for modern skills, expertise and experiences, like analytics, digitisation, emerging technology, emotional intelligence and leadership. Super Normal leaders see where the world is going and stay ahead of the transformation by investing in themselves and their teams.
4.Supper Normal Leaders See the Big Picture and Know How to Focus
Where is your organisation going and what does it need right now? Super Normal leaders are always in the know, and when they aren’t, they are confident and proactive enough to request an immediate alignment meeting with leadership.
We only have so much time and resources and need to spend them where it counts. Today, for most procurement and supply chain teams, that means cost savings, supply chain risk and business continuity. But your actual goals and priorities may be different and could change suddenly. Going above and beyond your day-to-day supply chain and procurement operations to stay fresh on the strategic priorities of your organisation is paramount to success. Similarly, bringing modern and fresh thinking to the table that breaks through traditional results and delivers compounding value on key projects, like cost containment and savings, will make C-suite stop and take notice.
5.Super Normal Leaders Have a Heart
They put people first – and recognise that success starts with teamwork and human connection. They recognise that vulnerability – financial, mental, physical and social – is very real, and that people need time, space and support during difficult times. They know that talent wins 100% of the time.
While putting people first may sound simple, that’s not always the case, especially amidst the chaotic nature of our world today. Super Normal leaders are intentional about it every single day, with their decisions, actions, engagements and relationships. People are core to what they do – and why they succeed.
You Have What It Takes: Embrace the Super Normal
Life is chaotic and stressful. And you have everything you need to be successful now and in the future. Everyone’s Super Normal will look a little different – but if we continue to learn from each other, share our successes and look ahead, we’ll all be more than alright.
And finally, wherever this Super Normal takes us, always remember to make time for yourself and your family. Find something you love and embrace it. We are all tired, stressed and anxious. Happiness helps solve all three. If you are looking for more inspiration, check out what your peers say it means to be Super Normal.
Is your organisation working with ‘dirty data’? How would you know? And, what impact is it having? This article has everything you need to know about doing a quick spot check, spotting procurement problems, identifying savings, and more importantly, making sure your data has its COAT on.
We all think we know what dirty data is, but it can mean very different things depending on who you speak to. At its most basic level, dirty data is anything incorrect. In detail within procurement, it could be misspelled vendors, incorrect Invoice descriptions, missing product codes, lack of standard units of measure (e.g. ltr, L, litres), currency issues, duplicate invoices or incorrect/partially classified data.
Dirty data can affect the whole organisation, and we all have an impact on, and responsibility for the data we work with. Accurate data should be everyone’s responsibility, but currently across many organisations data is the sole responsibility of a person or department, and everyone trusts them to make sure the data is accurate.
But, they tend to be specialists in data, analytics and coding, not procurement. They don’t have the experience to know when a hotel should be classified as accommodation or as venue hire, or what direct, indirect or tail spend is and its importance or priority.
How many times have you been working with a data set and noticed a small error but not said anything, or just manually corrected something from an automated report, just get it out the door on time? It feels like too much of an inconvenience to find the right person to notify, so you just correct the error each time yourself, or you raise a ticket for the issue but never get round to checking if it’s resolved.
These small errors that you think aren’t that important can filter all the way up to the top of an organisation through reports and dashboards where critical decisions are being made. It happens almost every day.
How does this affect my organisation?
There are many ways, but one of the most widespread and noticeable impacts is around reporting and analytics. If you’re in senior management, you will most likely receive a dashboard from your team that you could be using to review cost savings, supplier negotiations, rationalisation, forecasting or budgets.
What if within that dashboard was £25k of cleaning spend under IBM? I can already hear you saying “that’s ridiculous” – well, it is obvious when pointed out, but I have seen with my own eyes IBM classified as cleaning. It can happen easily and occurs more frequently than you might think.
Back to that dashboard that you are using to make decisions, you’ll see increased spend in your cleaning category, and a decrease in your IT spend, which could affect discounts with your supplier, your forecast for the year, monitoring of contract compliance etc… It could even affect reporting of your inventory, it appears you need more laptops, and unnecessary purchases are made.
When there are tens or hundreds of thousands of rows of data, errors will occur multiple times across many suppliers. And for the wider organisation, this could affect demand planning, sales, marketing and financial decisions.
And then there are technology implementations. Rarely is data preparation considered before the implementation of any new software or systems, and there can even be the assumption that the software supplier will do this, which may not be the case, and if they do provide that service it might not be good enough.
It can be very far into the process of implementation before this is uncovered, by which time staff have lost faith in using the software, are disengaged, claim it doesn’t work, or they don’t trust it because “it’s wrong”.
At this point, it either costs a lot of money to fix and you have to hope staff will engage again, or the project is abandoned. In either case, this can take months and cost thousands, not millions of pounds/euros/dollars in abandoned software or reparation work.
You might also be considering using, or engaging with a 3rd party supplier that uses AI, machine learning or some form of automation. I can’t emphasise enough the importance of cleansing and preparing your data before using any of these tools.
Think back to the IBM example, each quarter the data is refreshed automatically with the cleaning classification, that £25k becomes £50k, then £75k the following quarter, it’s only when the value becomes significant that someone notices the issue. By this stage, how many decisions have been based on this incorrect information?
How can this be resolved?
Truthfully, it’s with a lot of hard work. There’s no magic bullet or miracle solution out there to improve the accuracy of your data: you have to use your team or an experienced professional to get the job done. Get your team to familiarise themselves with the data. If they are reviewing and maintaining it regularly they will soon be able to spot errors in the data quickly and efficiently.
If you think about data accuracy in terms of COAT, this will help to manage your data.
It should always be Consistent – everyone working to the same standards; Organised – categorised properly; and Accurate – correct. And only when you have these things will it also be Trustworthy – you wouldn’t drive around in a car without a regular inspection would you?
How to spot procurement problems and identify savings
Accurate data is important, but in its raw state, it’s not the whole story. As a procurement professional you’re tasked with ensuring the best prices for products or services, as well as ensuring contract compliance on those prices, along with cost reductions and monitoring any maverick spend … to name but a few!
Accurate data alone will not help achieve this, I strongly recommend supplier normalisation and spend data classification to help quickly and efficiently manage spend and suppliers, monitor pricing and spot any potential misuse of budgets.
How do I get started?
With a spreadsheet of spend transactions over a period of time such as 12 to 24 months, the first step should be Supplier Normalisation, where a new column is added to consolidate several versions of the same company to get a true picture of spend with that one supplier. For example, I.B.M, IBM Ltd, I.B.M. would all be normalised to IBM.
Data can be classified using minimum information, such as Supplier Name, Invoice/PO line description and value. To get more from the data, other factors can then be added in, such as unit price. Where unit price information is not available, the quantity can be divided by the overall value.
A suitable taxonomy will then need to be found to classify the data. It can be an off the shelf product such as ProClass, UNSPSC, PROC-HE, or a taxonomy can be customised so it’s specific to your organisation or industry.
This initial stage may take months if you are working with large volumes of data. It might be worth considering outsourcing this initial task to professionals experienced in this area, who will be able to complete the project in a shorter time, with greater accuracy.
Avoiding common pitfalls
There are a number of ways to classify the data> However, to get started, look for keywords in the Supplier Name and then the Description column. The description of services could include ‘hotel, taxi, cleaning services, cleaning products, etc., however, it’s important to carefully check the descriptions before classifying, or errors could be introduced. A classic example is “taxi from hotel to restaurant”, depending on which keyword you search for first, it could end up being misclassified as transport, or venue costs.
I wouldn’t advise classifying row by row, as it could take more than twice as long to complete the file using this method. Start with keywords, followed by the highest value suppliers which you can get from a pivot table of the data if you’re working in Excel.
Once classified, charts can be built to analyse the data. The analysis could include, ‘top 80% of suppliers by spend’; ‘number of suppliers by category’; ‘unit price by product by month’; ‘spend by category’; or ‘spend by month.’
Patterns should start to emerge which could reveal unusually high or low spend in a category, irregular pricing, higher than expected use of services, or a higher than expected number of suppliers within a category.
Why you should strive for data accuracy and classification?
Data accuracy is an investment, not a cost. Address the issues at the beginning: while it might seem like a costly exercise, you will undoubtedly spend less than if you have a to resolve an issue further down the line with a time-consuming and costly data clean-up operation. And by involving the whole team or organisation, it will be much easier to manage and maintain the most accurate data possible.
Spend data classification shows you the whole picture, as long as it’s accurate. You can get a true view of your spend, allowing improved cost savings, better contract compliance and possibly the most important – preventing costly mistakes before they happen.
So, does your data have its COAT on? What does ‘dirty data’ mean to you? Let me know below!
A new survey of 500+ professionals reveals where procurement must focus to establish leadership and earn executive trust.
Procurement: it’s your time to lead. New research from Procurious and Coupa, released today, reveals that nearly two thirds of professionals have seen trust increase with the c-suite over the past three months. Similarly, more procurement leaders report having a seat at the executive table today compared to May, when we asked the same question as part of our Supply Chain Confidence Index.
“Procurement leaders continue to step up and executives are taking notice,” said Tania Seary, Founding Chairman of Procurious. “Procurement plays a critical role in navigating the uncertainty we face today. The function’s stellar performance opens the door for more – more recognition, trust, and opportunities to lead. It’s time to take advantage.”
Procurious and Coupa surveyed over 500 procurement and supply chain professionals in July to assess the state of the function and what’s on tap for the second half of 2020. Reflecting on procurement’s strategic position within the organisation, just one-fifth (21%) report that they are still being viewed tactically internally. While that number is still higher than we’d like, most would agree that for a function that’s historically struggled to stand out and get the recognition it deserves, we’re moving in the right direction – in a big way. Consider that over the past three months, only 7% said they did not see trust increase between procurement and the c-suite.
“Procurement today has a clear opportunity to capture our seat at the table. The findings of this survey highlight how important it is for us to think strategically and ensure our objectives are aligned to the board and our peers in the c-suite,” said Michael Van-Keulen, CPO, Coupa. “We must step up to help our organizations not only control costs, but also mitigate risk, maximize value, and increase the agility needed in today’s business environment.”
These results build off Procurious’ research findings from earlier this year. “In June, we uncovered clear indicators that the c-suite was paying more attention to procurement and supply chain. This trend is accelerating as executives recognise procurement’s unique and essential position in the ongoing recovery,” said Seary.
Procurement leaders looking to capitalise on this newfound opportunity should focus on delivering results that increase resiliency and continuity, and improve the bottom line. According to our research, the top three areas the c-suite wants procurement to contribute to are mitigating supply risk (70%), containing costs (69%) and driving business continuity (64%).
“At first glance, we’re seeing a back-to-the-basics approach for procurement teams, with a laser focus on savings, spend visibility, resilience and risk mitigation. However, when you step back you quickly realise this approach is anything but traditional. The desired outcomes may be similar, but companies are investing more strategically, aggressively and intentionally,” commented Seary.
Second Half Procurement Priorities: Controlling Costs and Risk
Procurement’s top three priorities for the second half of 2020 are similar to what we referenced above: containing costs, mitigating supply chain risk, and supplying the products and services needed to maintain operations.
Naturally, managing supply chain risk remains front and center for organisations across the world. But risk takes on many different forms. What are executive teams most concerned about right now? The top five areas, in order of concern, are:
· Operational risk
· Supplier Risk
· Business environment risk
· Reputational risk
· Cyber risk
Interestingly, the most prominent risk differs geographically. In North America and Asia Pacific, executives are most concerned about cyber. In Europe, the primary concern is operational risk. Either way, stronger investments in supply chain risk management will undoubtedly become one of the lasting marks of COVID-19. Mature procurement teams will never take supplier health, collaboration and risk lightly again.
When it comes to business risk, there’s often more than meets the eye. The survey also found that more than 80% of organisations have significant gaps in spend visibility, which is its own risk. This finding poses an important question: How can procurement teams lead and control supplier risk if they lack full visibility into where money is being spent?
Equipping Procurement to Lead and Thrive
Looking at the next 6 – 12 months, economic uncertainty was the number one concern for survey respondents, followed by cash and risk. Given the stakes – and procurement’s proven ability to add value in business-critical areas, including risk, resiliency, and cost containment – the majority of organisations (93%) are investing big to propel procurement forward. The top three investments organisations are making in procurement leadership are:
· Data and analytics
· Talent development
“COVID-19 continues to act as an accelerant for procurement transformation. The business case is right in front of us, and organisations are investing accordingly.” said Seary.
While organisations are finally stepping up to fund procurement initiatives, the function still has an important role to play to shape the future.
“We need to ensure the investments are strategic, and not tactical. We need to set the agenda, and ensure the c-suite’s vision for procurement is aligned with what we know is possible. It’s our time to lead, and we need to do it right,” said Seary.For more insights – including details on procurement priorities, operational gaps, investment strategy, supply chain risk and more, join Procurious and get the full report:Procurement’s Time to Lead.
Do you want to leverage big data in procurement but are unsure how to article the benefits? Here are four ways data analytics is changing the procurement profession.
1. Supply Chains Will Be More Transparent
Data analytics will make it possible to have visibility of more factors than humans could ever analyse on their own. With customers demanding the country of origin and the practices surrounding the acquisition of everything in the products they buy, data can help track products through the supply chain. Additionally, procurement professionals can find ideal suppliers with predictive data. Doing so will make it easier for products to adhere to a specific code of ethics throughout the supply chain.
2. Risk Focus Will Shift
As more information trickles through the supply chain, the timeline of risk will shrink. With more visibility, you’ll be able to concentrate on immediate disruptions in the supply chain and respond to those.
Tracking weather, traffic conditions and other disruptions that could affect your supply chain will allows for more rapid adjustments, which will in turn lead to fewer disruptions in the supply chain and of the business. Planning for these factors becomes easier with data analytics that can juggle far more pieces of information than humans can.
3. Procurement Professionals Will Become Knowledge Leaders
The information procurement professionals will use will make them knowledge leaders for the entire company. For cost savings, the data used in procurement will be invaluable. To take one example, a commercially sold multivariable freight optimisation program saved one industrial company 25 per cent on its air freight costs. The marketing department may consult with the information procurement professionals gather from social media to determine demand.
4. Automation in the Supply Chain Will Gather Pace
The Internet of Things (IoT), which combines sensors and data analytics, will ramp up automation in the supply chain. Automation will ease the supply management professional’s job, as much of the ordering becomes part of the system. Sensors on store shelves can measure how fast a product is selling, then alert the manufacturer to adjust the amount to deliver to individual stores — or even the total number of products to produce. The head of JDA Labs, an operations planning software company, describes big data and sensors as answering manufacturers’ demands for product placement information. The sensors show where stores place products on their shelves, and informing manufacturers of their product placement is the first step toward automation of meeting consumer demands.
Charles used such a team to work with $12 billion when he was at Kraft Foods and had a similar group for $10 billion in work at Kellogg’s. Ernst & Young, EY, suggests the team members know how to work with quantitative data since quantitative risk management will become a critical part of procurement. With the right people and software, you can make data analytics a reality for your business.
Analytics will make use of unexpected data. Ernst & Young predicts that by 2025 social media, mobile technology, big data and the cloud will be the primary sources for data analytics in procurement. Analysing this information will be necessary with the right software and people to unpack it.
Security and Big Data
Part of using shared information in the cloud and big data will be keeping the information and your company secure. You cannot ignore the problem, so make sure you always have updated virus screening software. Additionally, keep a firewall for your business. When in doubt, hire a trusted IT security professional to keep your information secure.
Is Data Analytics the Future of Procurement?
Data analytics will become an integral part of the future of procurement and the supply chain. If you don’t start the process of implementing it in your operations today, you could be behind tomorrow. The information from this process will save you money and make your business more efficient. Data analytics is one investment where the ROI will continue to benefit your business for years.