Here are my recommendations for the best way to spend 1 hour of thought provoking professional development time this week. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
As a procurement professional, I am frequently tasked with conducting a spend analysis on behalf of current and potential clients, but for those outside of the industry, this may be an unfamiliar exercise. In this post, I will attempt to provide a crash course on spend analysis, answering some of the most commonly asked questions about the topic: What is a spend analysis? Why should I do one? And finally, how do I do it?
A spend analysis is a very broad term that refers to… you guessed it! Analyzing the spend of an organization with the objective of understanding where money is being spent and where there may be opportunity for cost savings or process efficiencies. Spend analyses are conducted by procurement professionals in an attempt to get a comprehensive view of all of an organization’s expenditures and they are frequently the starting point for beginning the strategic sourcing process. There are a number of benefits to conducting a spend analysis, but the most important is transparency. A spend analysis provides a holistic view of all spend (indirect and/or direct) in a given time period, typically during a fiscal or calendar year. By doing this, you are able to gain visibility into where spend is being allocated, who the top suppliers are, how many suppliers you use for certain services, and areas of opportunity. For decentralized organizations, a spend analysis may reveal potential service redundancies across departments/brands and provide insights into areas of consolidation across supply bases. Along the same lines, a spend analysis provides organizations with the information needed to increase spend control by showing where and how spend/budgets are being allocated. Although there are many reasons why an organization would conduct a spend analysis, the benefits are consistent.
The events count is back up as we return to a full five day workweek, and the calendar looking forward shows no evidence of a quiet summer! Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
This week’s webinar notes are from an event presented by Bertrand Maltaverne, Senior Business Consultant at Pool4Tool, and hosted by Procurify. You can view the webinar on demand here. In the meantime, you may enjoy listening to a recent BMP Radio podcast with Bertrand and “Sourcing Doctor” Michael Lamoureax. Bertrand also has a great blog on Medium: check it out here.
It is not uncommon for procurement to receive a bonus payment based on the savings the department has achieved. In this post we discuss if procurement would benefit more from being on a salary plus commission payment structure.
AFTER READING, TAKE OUR TWITTER POLL: Should procurement be paid commission?
The traditional approach for calculating pre-contract savings is to obtain a minimum of three supplier quotes, select the mean as the base point then count the additional savings achieved above the base point. The challenge for the CFO is because the savings are subjective, they are unable to truly identify tangible and quantifiable savings from procurement’s impact, therefore the level of bonus they might apportion directly to procurement is limited.
Assessing bid submissions based not just on initial costs but total forecasted end to end costs is becoming more prevalent as businesses take a wider view of the true cost of ownership. However, since the model for encouraging procurement to strive for savings remains focused on the bid submission, applying this approach to determine bonus compensation has a high likelihood of conflict. The bonus payment approach could arguably be stated as outdated, thereby creating an opportunity for procurement. An alternative approach might be to replace the bonus model with a commission structure, based on the end to end total contract savings.
Procurement benefits would include:
- Ability to be recognised for the full business value a team/individual delivers.
- Encourages and rewards end to end contract ownership and relationship management.
- Encourages post-contract collaboration, ultimately leading to the possibility of generating post-contract savings within the same contract term.
The potential benefits for the business include:
- Maximises pre and post-contract savings. Post-contract savings is an area currently underdeveloped as the main focus remains on pre-contract savings, which is understandable given it is the main area for bonus achievement.
- Creates a catalyst for procurement cultural change, focused on supplier collaboration and successful implementation. This unlocks the supply chain and drives innovation and collaboration across the business to increase bottom line profits.
- Ensures operational costs are kept to a minimum.
- Encourages and rewards end to end contract, maximising contract savings
There are many people within procurement who have “fallen” into the role rather than pro-actively sought to become procurement professionals. Even those who have deliberately sought after the role, few may still believe it was a good career choice. The change to commission based compensation has the potential to raise procurement salaries to new levels, provide a catalyst for change, and enable procurement to reflect their full business value, which could in turn could attract new talent and retain experience that is sorely needed.
Like all new ideas, there is an upside but also a downside. Moving onto a commission structure based on the overall savings from successfully managing the contract could quickly lead to some personnel being identified as under delivering. The key to gaining business support in this initiative is by demonstrating greater profitability for the CFO in undertaking this route. The central question is: does procurement want to undertake this direction?
Even with the holiday Monday in the U.S. this week, there are still a couple of events worth catching. In fact, one is a ‘don’t miss’ webinar. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
“Supply chain legal disputes don’t start out as legal disputes. They typically start out as badly written contracts, poor communication with supply chain partners, and an inability to resolve conflicts.” (Authors’ Foreward)
Legal Blacksmith, by Rosemary Coates and Sarah Rathke, is an interesting mix of two perspectives the procurement community is all too familiar with: supply chain and legal. They combine their experience – Coates on the supply chain side and Rathke on the legal side – to provide a view that seems better suited to supply chain professionals looking for an improved legal understanding than vice versa. Interestingly, they met during a court case where a manufacturer was sued by a customer.
There are a full dozen events taking place this week – with no repeats in the mix. If the three events below don’t catch your interest, there are plenty more in the calendar. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
In a new effort, announced this week at ISM2016, ThomasNet is looking to put their considerable weight behind one of the trickiest cross-products in all of supply management – the attempt to align demand from corporate procurement and with the innovation and agility of small suppliers. In advance of their announcement, I interviewed Ed Edwards, Manager of Audience Outreach, and Travis Sherbine, Vice President of Marketing and Product Management, from ThomasNet about the realities of making a formal SMB program work.
Let’s face it, there is something unnatural about the fit between big (or even medium sized) corporate procurement and small businesses (hence my labradoodle reference above). But, just like lovable, low-shed labradoodles, there is huge upside for procurement AND small suppliers if they can invest the additional effort required to make their interaction a success.
If you were to review your own procurement team’s achievements and capabilities from the perspective of a customer, would you buy from you?
The principle of using an internal business function which is currently a cost centre, and turning it into an revenue generating business proposition, is not new. Examples can be found in most areas ranging from IT through to Finance. The principle is based on creating such a leading business function others will pay to use.
In addition to the events below, Jon Hansen and I are presenting an IACCM webinar on Thursday on an unconventional topic: Picture of Dorian Gray, Procurement Pro. Hopefully you can join us! As to my other recommendations, click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
In addition to the events below, I am the speaker at the May SIG Townhall Teleconference, taking place this Wednesday at 1pm ET. I’ll be talking about Supply Market Intelligence in the ‘Real World.’ Click here to learn more about the event and to register. (Buy side only attendees, please.) As to my other recommendations, click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
How often can you find 80% savings in your telecom bills? When it comes to legacy services, more often than you’d think!
In all industries there are mergers and acquisitions: Telecommunications and Technology being one where M&As occur more frequently than most. These changes can have significant impacts on the products and services customers are purchasing in terms of the actual technology being offered and the prices they are paying for it.
I recently completed an audit for a customer in the healthcare industry where I was asked to review their telecommunications invoices and look for more cost effective solutions than their current voice services. The first thing I noticed was how high their bills were for basic voice services - almost 480% higher than normal industry standards! The customer had not really looked at their bills for years and simply continued to pay the same monthly charges thinking all was right as rain. Understandably, patients are the priority for them - not the cost of their phone service. For this specific customer, the technology they had in place was a legacy service where the underlying carrier had recently been bought by a global industry leader, who had subsequently developed more cost effective products offering the same functionality at a much lower price. Unfortunately, carriers do not always offer up the insight into technology changes and lower cost options when it is in their best interest to keep the higher price bills in effect.
Presented below are some quick tips for reviewing your telecom bills to determine if a change in service is viable, beneficial, or more cost effective:
- Recurring Charges: How long have you been paying the same price? Pricing changes are common with technology-driven services. If you have had the same price for 3-5 years and under multiple contract terms, it is time to take a look at the market with fresh eyes. There are always compelling reasons or special circumstances for contracting a fixed price for longer terms such as newly implemented networks and systems; but for basic voice services…I don’t think so.
- Time Passed Since Last Going-to-Market: As mentioned, most telecom companies are continuing to develop new innovative ideas and upgrades to their technology; most likely within 3 years of their current technology. If you have the same service in place for more than 5 years, it is probably time to take a look. I know “if it ain’t broke, don’t fix it”; but why not just get a feel for what is available and for a potentially lower cost? After all, it may be up to procurement to determine when something is ‘broke.’
- Contract terms: When was the last time you looked at your contract? Do you (really) know what your current terms are? If you cannot answer these questions, chances are the answer is probably too long and you are month-to-month or under some ridiculous auto renewal clause. It is important to read the small print in your contract as you could be committing to an unrealistic term length with no out...unless of course you are planning to spend more money with the same supplier for an even longer term.
When we presented the opportunity assessment to our healthcare client, they were understandably shocked. We moved forward by leveraging the market-competitive offers to contract a new technology at almost one fifth of the current cost. The soft dollar costs of implementing the new service were eclipsed by the overall savings, making this a huge financial and technological success.
As I encourage you to review your bills more closely, let me add that the idea of tracking down wasted spend and going to market for legacy products and services is not limited to the telecom industry. It can be applied to any business commodity and begins with simply questioning the products and services you’re paying for.
Leadership is a rare and valuable attribute that will separate a good professional from a great one. A leader will possess a unique vision and the ability to transform this into a tangible reality. Most importantly, a leader should inspire others to do the same.
A united, forward-looking outlook is the best way to continue to propel the logistics industry forward. As a fast-growing sector affected by globalisation and advancements in technology, innovators must be a driving force. Having access to new ideas will play a fundamental role in building each leader’s influence and unique impact on the organization.
Check out these five key signs of a logistics leaders to enhance your own professional standing.
This week’s recommendations are all focused on the very latest in procurement technology, and – more importantly – what it allows the organization to accomplish. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
This is an incredibly busy week for webinars. In three days there are ten events – all of which look promising. I won’t go so far as to ‘self recommend,’ but I am presenting a webinar for the Precision Metalforming Association on Wednesday: Become a Procurement Action Hero with Supply Market Intelligence. Please join us if you can! As to the other events I recommend this week, click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
Finance is the topic of the week – with two events looking at the impact of digital business / digital technology on finance organizations. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.
April 19th at 1pm Eastern
There is no question about the fact that the ‘digital economy’ has put more methods for purchasing directly into the hands of enterprise buyers – very few of whom actually work inside of procurement. With the trend being towards more flexibility and freedom, companies need to be prepared to handle the downstream effects of this more expansive approach. In this webinar, Aberdeen’s Bryan Ball will discuss how two key resources – people and data – allow companies to protect their bottom line.
April 21st All day (online)
Not exactly a webinar and not exactly a conference, Procurious’ BIGIDEAS Summit combines the power of social media with a networking platform dedicated to procurement. Digital attendees will be (and in some cases already have been) participating via social media and video, becoming a virtual think tank for procurement BIG IDEAS.
April 21 at 11am Eastern
Ironically similar in concept to the Aberdeen group webinar earlier in the week, this HfS Research hosted panel webinar will focus on how digital technologies are changing the shape of finance organizations. The panel will look at typical ‘digital journeys’ to date, lessons learned, talent implications, and the challenges expected by digital pioneers.
According to TechInsider, there are warehouse robots currently in place that could potentially boost productivity up to 800%. Yes, you read that correctly: eight hundred percent. With huge boosts in productivity, it comes as no surprise that companies such as Amazon are taking automation to the next level, but what impact will it have on their employees? If the numbers stack up, the robot takeover could be imminent, but that does not necessarily mean human warehouse employees will become obsolete.
As with most technological advances, employees must adapt. Remember when basic computers were introduced to the workplace? Let’s take a look at some of the robots being used today, how they’re being utilized, and most importantly, what it means already or is going to mean for their human ‘coworkers.’
Scenario 1: The supplier contacts you in writing to state they have submitted the wrong pricing in the bid…what is your first response?
- Tough luck you submitted it
- That’s typical of suppliers, always trying to trick you
- Expect the price is going to increase
- Interested to see if they are submitting a lower price
Scenario 2: The supplier approaches you and states they think they have a solution to deliver the contract more efficiently...what is your first feeling?
- They are looking to upsell
- I don’t believe them
- They are trying to make me look bad
- Want to discuss in a supportive and engaging manner
Scenario 3: The business reduces its requirements 2% in the contract and understandably do not want to pay for what is not required. Do you;
- Tell the supplier to “suck it up” and not re-negotiate the contract
- Re-negotiate the contract to ensure they are fairly compensated
Unfortunately we all know the responses because it is an attitude that is the default towards suppliers; confrontation & mistrust. For many within procurement it is a justified attitude because in the past any leniency has been abused by suppliers.
All three of this week’s webinar picks are extremely interesting – if I had the time (or if I could be in two places at once) I would attend all three. Click on the title of each event below to view the full description in our events calendar and to connect to their registration pages.