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!
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.
“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.
In The Living Daylights movie, James Bond and his most recent female companion are escaping the “bad guys” by sliding down a snow covered mountain on a cello case. As they cross the border into Austria, the customs agent asks “Do you have anything to declare?” James Bond’s response is “Only this cello!”
We are in a small project of replacing our shed which is over 30 years old, had a major patch job about 10 years ago and now it is time to start over. Like any project, it is more involved than you plan. Surrounding the shed on two sides is a lot of brush, saplings and infiltration of the forest bordering our property. Today we ‘pushed back the tundra’ to make room for the bigger, better shed.
In essence, we had a deforestation project on our hands. With that on my mind, I came across this article about sustainable practices on the Supply Management website, Its time for all Businesses to Adopt Zero Deforestation Policies.
This article discusses that consumers are requiring companies to utilize sustainable practices while providing quality goods at a reasonable price. It suggests that in order to maintain a sustainable consumer base, organizations must adopt sustainable business practices throughout their supply chain. One major practice revolves around zero deforestation. Asia Pulp and Paper is highlighted as one organization that has stopped forest clearance for the last 18 months. That is not an easy task for a paper company.
This week Cargill announced at the United Nations climate Summit that it would extend their deforestation policies to all product lines. Previously, it was only for the palm oil line that it produces. Now it is for sugar, soy, cattle and cocoa as well. This policy will lead the charge for improving the environment and fighting climate change.
What has your organization done for sustainable practices? Have you instituted a zero deforestation policy?
Share your thoughts by commenting below or tweeting us @BuyersMeetPoint.
Supplier Relationship Management (Kogan Page, available Oct. 28, 2014) is the third book I have reviewed by Jonathan O’Brien, a Director and co-owner of Positive Purchasing with over 20 years experience in purchasing. As we have come to expect of O’Brien’s work, this book provides an extensive look at the metrics, relationships, and change management considerations associated with supply base collaboration.
It is true that supplier relationships, innovation, and collaboration are among the topics du jour in procurement, but O’Brien proves himself well versed in the associated opportunities and challenges.
Alibaba launched on the NYSE Friday which was a much anticipated event. They hope to be larger than Amazon and eBay combined. It is quite a story about an English teacher starting this company in 1999 from his apartment. Now they employ over 25,000 people.
When you look at Alibaba, they are changing the face of procurement. They offer services around sourcing, supplier research, as well as negotiation and purchasing. The sourcing professional can reach a broader network for their supplier and market place knowledge. It also reveals options from additional geographic regions that may not have been available in the past. The pick of the week is a page from Alibaba's site where they describe all their services that sourcing and procurement professionals can utilize.
They are promoting themselves as a one-stop-shop. You can purchase an individual item or in bulk. It can be used for personal purchasing or B2B commerce. The flexibility of offerings is amazing.
It is the number one mobile app in China and growing throughout the European market. The ease of use and accessibility adds to their success.
As a procurement professional, have you used Alibaba for your market research? How about getting pricing and transacting purchase orders? What has been your experience and has it become a major part of your toolkit?
Share your thoughts by commenting below or tweeting us @BuyersMeetPoint.
This week’s event notes are from the September SIG Town Hall Teleconference. In this open mic event, Dawn Evans, SIG’s President and CEO, led a discussion about the metrics procurement can put in place to drive meaningful results from suppliers. These events, held monthly, are open to buy side members. SIG also welcomes first time buy-side non-members so they can experience the open nature of a SIG Town Hall Teleconference. These events are unsponsored and are never recorded in order to encourage open participation. For more information on SIG Town Halls, click here.
Spend analysis solutions have long been critical enablers of procurement organizations. Over the last couple of years, however, the term analysis has gradually been replaced by analytics. In order to gather information on this transition, I reached out to Rosslyn Analytics, a company that has operated under the ‘analytics’ label since their founding in 2005, long before it was the prevailing term. I'd like to thank them for their help in putting this post together.
Let me begin by giving working definitions for both terms. According to BigDataCraft.com,
“Analysis is the examination process itself where analytics is the supporting technology and associated tools.”
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.
You can lead a horse to water, but you can’t make them drink. This is a very common phrase often used to describe a ‘change management’ situation. You can give someone all the resources but you can’t make them use them.
In procurement, we often have processes and technology to help complete our tasks effectively and efficiently. However, some of the staff may not be utilizing it as best they could to get the most out of it.
With new technology, people fall into four buckets. There are early adopters who wait in line for hours for the next generation of the iPhone. Then there are the early majority who probably get the new phone within the first month or two, the late majority and the laggards who may not even have a smart phone yet. As a procurement professional, your goal is to get your team through this curve quickly and have the organization reaping the benefits of the esourcing technology.
In the Tejari Blog, With best practice tools comes best practice use, they review the reasons that some are lagging behind in adopting the technology and give suggestions on ways to overcome it.
The first one has to do with change management. In many organizations, the staff is quite content doing their work the same way it always has been done. The author recommends gaining some internal ‘experts’ to help all the others understand the benefits and value. Offer a great deal of support so that over time, the new system becomes the ‘comfort zone’.
Another difficulty is when the staff waits until the last minute to load the Rfx into the tool. There is frustration and they give up. The recommendation is to create drafts a week or two before and put them in. Then you can always modify it as the time gets closer.
What have you experienced for obstacles and how did you resolve them? Do you have your 'team of horses' feeling refreshed after having reached the oasis and utilizing the new technology?
Share your thoughts by commenting below or tweeting us @BuyersMeetPoint
This week’s webinar notes are from an August 27th webinar hosted by the Next Level Purchasing Association and featuring Steve Burns from the Maxwell Team. Although only premium members of the NLPA have access to the event on demand, you can hear an exclusive audio excerpt in my September 8th weekly update on Blog Talk Radio.
The focus of the webinar was how to build influence for the purpose of becoming a more effective leader. Since leadership affects so many people, you might expect it to be a collective sort of topic, but it was the exact opposite.
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.
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.