The Point

One of the interesting things about consistently reading and hearing content from quality sources is that you start to notice trends. It is amazing how often the same topics arise at the same time in different places. We use this blog as a way to help you stay on top of the major themes in procurement and supply chain management.

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    “As supply chain complexity increases, so do the services which logistics providers are asked to perform. No longer is logistics seen as a tactical activity, where the gains made are purely measured in terms of transport or warehousing cost savings. Instead, customers become more engaged in the transformational impact on supply chain competitiveness which a logistics provider can achieve.” –Manners-Bell, p. 23

     

    Global Logistics Strategies provides the characteristically thorough and thought-provoking coverage we have become accustomed to from author John Manners-Bell. In his acknowledgements, he mentions that his father set up a transport company in the 1970s. Logistics is clearly in his blood.

     

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    “To succeed in business is more complex than it used to be - it is no longer economically desirable to control all the components of your customer value proposition.” (p. 6)

     

    Strategic Procurement by Caroline Booth (Kogan Page, November 2014) is a second edition, updated from its original release in 2010. Before I even get into the book’s content, I think it is worth reflecting upon the pace at which the procurement profession is changing. In the four years since Booth first released this book, there have indeed been significant changes in economies and business dynamics, requiring equally significant adjustments in procurement. In the preface, Booth calls out her increased focus on risk and the improved position of procurement, as well as enough changes in M&A involvement to add a whole chapter on it.

     

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    “Although procurement has certainly evolved from its early roots, it still faces challenges in terms of executive recognition, talent management and organizational challenges. Modern enterprises are faced with a massive set of new challenges, including the forces of globalization, increased risk, complex supply chains, and the spread of government regulation on decision making, not to mention the tremendous strain of man’s presence on the earth’s natural resources.” (p. 1)

     

    The Procurement Value Proposition (Kogan Page, December 2014) takes on some of the most pressing challenges facing procurement today and makes them seem both more comprehensible and realistically addressable. As acknowledged in the quote above, taken from the book’s introduction, procurement has evolved significantly since the early days when we got our start in the railroad industry. The problem we must own today is that the organizations we support have evolved faster and more dramatically than we have. What procurement needs is a better understanding of how to fuel our development.

     

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    “When you prepare an RFP, your goal is to elicit responses that meet all of your requirements so that you can move efficiently to awarding the contract and implementing the systems you need. But only a quality RFP will get quality responses. Not surprisingly, bad RFPs bring in bad responses.” (p. 13)

     

    The Art of Creating a Quality RFP (PSM Advantage, 2014) serves as a valid reminder that if we don’t approach every task we undertake as valuable, we deprive ourselves of the opportunity to do our best work before we have even begun. This book, written by career practitioners and consultants George Borden and Steve Jeffery, captures the ups and downs of decades in procurement. By focusing almost exclusively on the Request for Proposal (RFP) they are able to achieve clarity of purpose and message and cover a lot of ground in a compact book.

     

    Tagged in: Book Reviews RFP
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    “Procurement’s role shines particularly when strategic cost management receives the highest priority for many executives.” (p. 197)

     

    Leading Procurement Strategy (Kogan Page, 2014) is a group study of the ‘brave new world’ of procurement. The three primary authors, Carlos Mena, Remko van Hoek, and Martin Christopher (and three guest authors), address an ambitious list of trending procurement and supply chain subjects. Rather than causing problems with voice or style continuity, this large group of contributors makes it possible for the book to cover a wide range of information in depth without losing momentum or focus.

     

    Although the authors have decades of experience in procurement, they are not mired the ways of the past. In fact, they discuss many of the new approaches being considered by procurement (e.g. agility, supplier collaboration, non-savings performance metrics). They also acknowledge the objections procurement is likely to face in response to attempts at evolution and provide methods to constructively overcome them.

     

    According to Martin Christopher, who wrote the chapter on Global Sourcing, procurement can expect an increased emphasis on agility. This translates into a shift in how supplier relationships are built and how contract management strategies are executed. In fact, agility may provide an escape route from the savings trap that confine many procurement organizations. When operational agility is prioritized over cost savings, supplier selection and agreement terms must change. “The guiding principle should be that the best sourcing decisions are those that keep the most options open. There will usually be a price to be paid for these options but that price should be seen as an investment in supply chain flexibility.” (p. 90) In other words, if the entire organization can see (and quantify) the opportunity associated with agility, they will not only request for procurement to change their priorities, they will demand it.

     

    Helping other functions focus on total cost rather than price elevates the perspective of the entire organization and brings the internal implications of supply decisions into greater focus. For instance, procurement may want to start initiatives by demonstrating the relative costs associated with non-flexibility or lost opportunities in research and development or new product introduction. “Strategic cost management should be part of new produce and service design, so that the most cost effective highest-value products and services are introduced in the marketplace.” (p. 104)

     

    If procurement expects to expand the perspective of their internal stakeholders, they must be willing to do the same themselves. More procurement activities should be tied to consumer and market demand. Just as wanting to collaborate with a supplier is not enough to make the effort a success, wanting to bring procurement into closer contact with the consumer side of the business will not make it so. The organization must be open to the idea and positioned to benefit from the resulting changes.

     

    In my opinion, the best quote from the book is a definition of complexity, found in the chapter on Supply Chain Risk Management:

    “‘Complexity’ describes a condition of inter-connectedness and interdependencies across a network where a change in one element can have an effect on other elements – often in unforeseen ways.” (p. 134)

     

    The role of complexity, and procurement’s ability to make positive contributions to how the organization handles it, will be a primary driver of how much access procurement will be given to customers and whether or not it therefore makes sense to take a less cost reduction focused approach.

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    “The skills for becoming a champion caliber negotiator are acquired skills. Nobody is born with great negotiating skills. You are born with the skills of crying and breathing, all other skills you acquire throughout your life.” – Soheila Lunney

     

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    “The skills for becoming a champion caliber negotiator are acquired skills. Nobody is born with great negotiating skills. You are born with the skills of crying and breathing, all other skills you acquire throughout your life.” – Soheila Lunney

     

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    Good old Kenny Rogers, he gave us some great advice through the lyrics of the ‘The Gambler’: advice that stands true beyond the gaming table. Sometimes the best advice comes from the least expected place, and I have some advice for procurement professionals – from sales(*).

    Every week, I take a break from supply management topics to learn about sales through webinars, white papers and blogs. Officially, I do it for ‘The Flip Side’, a Buyers Meeting Point resource that helps procurement professionals better understand their sales counterparts. Unofficially, I do it because creativity and objectivity can be elusive, and listening to sales’ perspective helps.

    This perspective has changed the way I see the role of the individual procurement professional, the role of the department, and how we should leverage non-traditional approaches in search of better than usual results.

    We are all in sales.

    I used to see sales people as professionals compensated for closing deals. But contracts are a side effect of an effective sales process. The core of the sales process is quickly and accurately diagnosing opportunities for improvement and then winning over prospects to the recommended solution.

    Procurement does this all the time – or at least we should. We ‘sell’ finance on a new opportunity to drive efficiency. We ‘sell’ the executive team on the strategic advantage we represent as an in-house dedicated function. We ‘sell’ internal stakeholders on the merits of a new supplier or a standardized specification that will save money.

    The key is to be a quick study, sometimes adapting mid-meeting, in response to organizational requirements. We must prove we understand the challenges at hand, sometimes to colleagues that don’t have a clear perspective themselves. Once you accurately articulate a problem, brainstorming can begin on solutions to be ‘sold’ to internal customers.

    Sales people believe buyers have the advantage.

    I benefit the most from the Q&A that takes place during sales webinars. What do sales people really think of procurement? What kind of advice do they get from their mentors?

    I’ll over-generalize to make a point: sales people see procurement professionals as a steely cold bunch. (One webinar participant commented that procurement conference rooms and offices are the coldest places on earth…) Our poker faces have apparently done the trick, because many sales people would like to check our backs for control panels to make sure we are human.

    Sales believes procurement holds all the cards in the negotiation process. I have heard our advantages repeated multiple times from different sources: “Procurement already has access to so much information that we struggle to appear well-informed about our own market.” “We can’t enter the sales/buying process until they decide it is time for us to start participating.” “Procurement is so active in their use of social networking during the purchasing process that we are outpaced by our customers.”

    Sales can compete on value creation.

    We know that negotiating cost savings is no longer enough. We need to create value for the organization. We hear it from executives, associations, publications, and thought-leaders. Knowing how to get started is a challenge because every situation and opportunity is different.

    Successful sales organizations evolved in response to the need for value creation a long time ago. With strategic sourcing came apples to apples comparisons on price alone. Suppliers couldn’t refuse to provide pricing, so they tried to influence the decision-making process by proving themselves of such value that they broke the mold.

    The time has come to recognize supplier innovation. The increased focus on value by our corporate leadership, and the ability of sales to speak their language, will either open a door for procurement or clear a path right past us. If a sales person sees an opportunity to bypass procurement and reach the right execs, they will take it. Capturing value does not mean surrendering in the battle over price, just balancing costs and benefits. In that scenario, I want to be the one holding the scale.

    Looking back and ahead.

    The big-picture realization from my year of visits to The Flip Side is that the procurement/sales relationship is not about us v. them but about all of us. They feel the same stresses we do, and often see us in the driver’s seat when we think they are driving. They aren’t terrible people (mostly) any more than we are bloodless cost reduction zombies.

    We can’t fully collaborate with sales in every category, but when the conditions are right, partnering with a supplier is the only way to a better solution. It goes against most of what we know about creating competition and harnessing the forces of the market, but recognizing opportunities for collaboration can be the difference between tactical and strategic category management. After all, ‘Every hand’s a winner, and every hand’s a loser … the secret to surviving is knowing what to throw away and knowing what to keep.’

    (*) Note: This post originally appeared as a guest post by Kelly Barner on Procurement Inisghts.

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    If you watched Peter Faulk play the character Lieutenant Columbo in the thirty years ‘Columbo’ was on television, you undoubtedly saw him break a case by turning back at the last moment and asking, “Just one more thing…”, a question which always ended up breaking the case.

    Maybe procurement need to stop and ask another question or two as well. In a recent blog post, ‘What Questions Should Your Clients be Asking’, sales blogger S. Anthony Iannarino talked about the challenges sales people face when they are not able to communicate the value of their solution because the buyers they work with are not asking the right questions. His advice provides some techniques for redirecting the conversation or asking the missing questions so that the necessary information gets across.

    While we want to have a complete picture of each solution so that we can accurately compare our options, we’ve all made the mistake of asking questions that are so open ended that sales people talk ad nauseam about something we can't compare across the suppliers in contention. But that doesn’t mean there aren’t pieces of information we are missing out on.

    Buyers Meeting Point’s long time advisor The Sales Guy has always advocated asking sales people something about their compensation package or their company's business development priorities so those factors can be brought into a thorough evaluation. What else should we ask?

    Here are a few questions that The Sales Guy suggests working into your face-to face supplier meetings. Some are relevant for incumbents and some for new companies you are evaluating, but all of them will allow you to put together a better category management strategy and contract.

    1. “If you are selling to my competitors what products and services are they buying more of and what is the value provided?”  “What are they buying less of?”
    2. “We are spending $XXXK dollars with your company on an annual basis.  If I was to spend that same amount differently what changes would you recommend and why?” 
    3. “What can our companies collaborate on that would help your company bring new products to market and provide competitive advantages for my company?”
    4. “What business model changes is your company introducing and how might they be advantageous to my company?”

     

    If you have a question for The Sales Guy, click here to submit it and we will get you an answer!

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    “Reverse auctions are loved by corporate purchasing managers, loathed by suppliers, and rarely discussed publicly by anyone involved.”

    – Max Chafkin, Inc. Magazine

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  • Along with corporate services, capital procurement is often the last part of the procurement organization to mature.

    It’s an opaque category that doesn’t immediately get attention for a number of reasons. It’s usually non-repeatable spend. It’s often decentralized and managed by folks at the site level. It’s sometimes assumed by management that these folks know this technical category best and meddling in their business will cause problems.

    Because it’s often the domain of engineering, procurement must sometimes wedge themselves a seat at the capex table.

  • Sustainability is a word you seem to hear everywhere today, as consumers become more conscious of the environment. As you would expect, sustainability plays a significant role in the food supply chain. As an example, the commercial fishing industry has ramped up their focus on providing a more sustainable product. Sustainable seafood suppliers employ methods that simultaneously reduce bycatch, promote both small and large business distribution, and improve seafood quality. All seafood harvested within the United States is, in fact, sustainable, as the U.S. has developed a comprehensive process to ensure quality as well as monitor and improve the programs fisheries have in place.

  • There are approximately 80 million people in the United States between the age of 18 and 30, a group known as the millennials. Many believe that millennials bring a unique perspective to business as compared to other generations because of their tech savviness. Technology is one of the biggest drivers for globalization, but it also allows disparate locations to connect and communicate on various topics such as current events, special causes, and marketplace trends. Millennials have already started to drive major changes in the sourcing and procurement industry, such as green purchasing, the push for free and collaborative information, and updated workplace abilities.

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    This is second in a two-part series. Part 1 can be found here.

    Purchasing leaders must not only be great at managing the complex functions of their department, but they must also become savvy communicators who know how to demonstrate the strategic value that the department lends to their organization. In a world of competing budgets and the struggle to hang on to resources, knowing how to market your purchasing organization to power stakeholders is a skill that you must have.

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    This is the first in a two-part series. Part 2 will run on Thursday, September 11th.

    These days, with tightened budgets and enlarged job expectations, it’s important for CPOs, purchasing managers, and buyers to know how to prove their strategic value to the organization. This can be a huge challenge for most people. Knowing how to market yourself is extremely important, particularly if you want to move up in your career. We’ve all seen less talented people get promoted, simply because they are better at managing their image to supervisors and internal stakeholders.

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