It is Halloween and we had a fun day. We dressed in costumes at work, had a great luncheon and of course we consumed some candy. Sounds like the perfect day for anyone!
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.
“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.
We live in a technology age. That is not big news. In some areas, the electronic record is considered official and binding. For example, for the last 4 or 5 years we have filed our taxes electronically and that has been adequate and official. In other areas, they still want an original signature on a paper, with multiple copies. I know when we have gone to refinance our house, the banks require paper copies.
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.
As our children grew, we gave them chores that were appropriate for their age and capabilities. As toddlers, they could put clothes in the hamper and their toys in the toy box or closet. As the years passed, they could take on dish duty, mowing the lawn, laundry and so on. The big projects, such a painting the house, was a full court press for everyone.
This week’s webinar notes are from a October 15th webinar sponsored and hosted by Nipendo and featuring Pete Loughlin (Purchasing Insight) as moderator, Pierre Mitchell and Jason Busch (Spend Matters), and Ed Berger (Nipendo’s VP of Sales). The webinar is available on demand in its entirety here.
“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.
I love the “For Dummies” books. We have used them many times. What a wonderful way to simplify everything from travel to home improvements to technology. Obviously it has become quite successful along the way so they must be doing something right.
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.
Recently, there was a task that I was to follow up on. I missed it and several months passed. The customer was quite agitated. I contemplated how to respond and repair the situation. I decided the best option was to accept responsibility and sincerely apologize.
This week’s notes are from an October 16th Procurement Leaders webinar featuring the results of their latest research into procurement talent. It is not yet available on demand, but it should eventually be listed here.
This absolutely fantastic webinar was presented by PL Research Director Maggie Slowik. We all know talent is an ongoing issue for procurement contributors, managers, and executive leaders. In my recommendation of the event on Blog Talk Radio, I shared two sadly common views of procurement talent taken from the books I have reviewed:
“Some executives used to think of procurement as the place you send staff away in order to never see them again.” – Leading Procurement Strategy, Carlos Mena, Remko van Hoek, and Martin Christopher
“You see, many procurement departments have been staffed in the same manner as the Island of Misfit Toys; when an employee did not perform elsewhere in the organization and the management didn't have the heart to dire him or her, that employee was sent to work in the procurement department” – The Procurement Game Plan, Charles Dominick, Dr. Soehila Lunney
“Crate training uses a dog's natural instincts as a den animal. A wild dog's den is his home, a place to sleep, hide from danger, and raise a family. The crate becomes your dog's den, an ideal spot to snooze or take refuge during a thunderstorm.”
I returned from a 3 day business trip to a day with back to back meetings. It can make anyone dizzy. Does that sound familiar to you? Thankfully, not every day is like that. Sometimes I actually have a full day with no meetings….shhhhh ….don’t tell anyone!
“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.
For a very long time, procurement has been challenged with keeping costs down, finding a quality product or service at the best possible price. The impact to the bottom line was the critical measurement. And it still is, but there is more we can do!
This week’s webinar notes are from an event run on September 3rd by Spend Matters EU/UK, Selectica, and IASTA. The event is available on demand here.
Once you get this classic Pink Floyd tune stuck in your head, it is likely to stay, and maybe that was the idea with this event title. Far from being a strategic sourcing solution ‘add on’ contract lifecycle management requires its own program considerations, including its impact on global supply chains, corporate strategy, and enterprise wide implementation and leadership. In other words, not allowing your next executed contract to be just another brick in the wall.
As Jon Hansen and I work our way through our joint book on the future of procurement, we get the opportunity to consider what other thought leaders in the space have to say on the topic. In this week’s #FutureBuy resource spotlight, we will consider the major take-aways from KPMG’s whitepaper, FUTUREBUY: The Future of Procurement, which you can download here.