Professors Michelle Steward and Jim Narus at Wake Forest University in North Carolina are learning about the B2B buying process. In particular, they are interested in the buying process that you find fits your current job. Please select one of the six models (below) that best fits your buying process. Feel free to note any differences or customized aspects if what you see does not match your job exactly. The collective findings from the study will be used for academic journal articles that are aimed at explaining how the buying process has changed over time. All participants will be sent a copy of the final paper. No names (personal nor company) will be used in the publication, only general findings will be reported.
In May I covered the first chapter of Xchanging’s 2015 Global Procurement Study. (You can read my notes here). The primary take aways were that capacity is more of a constraint than capabilities, KPIs are very diverse, and that practitioners may be getting the wrong idea about the field from media coverage that steers them one way when they need to take another.
The new chapter: External Threats Plaguing Procurement (available for download here after a brief registration) looks into global risk factors. The report couldn’t have been more timely, given how much coverage the Greek banking crisis has been getting.
It is the worst question Procurement ever faces. C'mon – you know what question I'm talking about. That horrible, terrible question from Finance for which there is no good answer…
If Procurement worked so hard and saved all of this money, WHERE IS IT?
The problem is that the space between negotiated and realized savings is full of pitfalls: unexpected requirements, inaccurate demand, and budget holders who see an opportunity to unofficially reallocate savings elsewhere. Even when additional value is created, many times by the end of the year the savings have all but evaporated.
This is a problem that has to be handled by the top level of the organization. If the strategic vision of the leadership team requires that all uncommitted funds be returned to a central account, they have to be willing to support Procurement by issuing a mandate. Declaring that all funds saved by Procurement are to be removed from line of business budgets is a tough love decision. But all that really matters is whether or not it is the right decision for the company as a whole.
This week our audio comes from the ThomasNet and ISM 30 Under 30 Supply Chain Rising Stars program. They hosted a panel-style interview and discussion with some of the 2014 award recipients at this year’s ISM conference. The full hour-long conversation is available on Sound Cloud if you want to hear it.
The podcast starts with each of the participating recipients and program mentors introducing themselves and then moves on to a press-conference style question and answer session with some of the most recognizable names in procurement media – including the Hackett Group, Manufacturing Talk Radio, and Spend Matters.
The excerpt I selected to share starts with a question from Supply Chain Management Review’s Editorial Director, Bob Trebilcock, as he asks how these rising stars ended up in supply chain.
Guest Post on Design News: Understanding the Differences between Strategic Sourcing Goals, Objectives, and Requirements
Early in the course of a product design and manufacturing organization’s strategic sourcing project it is common to have a kickoff meeting that includes the engineering team. It is the opportunity for the sourcing project team to lay the groundwork for the rest of the effort. One of the most critical discussions that should be a part of the kickoff is around the goals, objectives, and requirements for the project.
This is an effort to be taken seriously by both procurement, which should facilitate the discussion, and engineering, which provides critical inputs. Unlike a mission statement, which is often dismissed as being an overly soft (and largely meaningless) feel-good expression of early-stage enthusiasm, goals, objectives, and requirements are tools that will be used actively in the sourcing project once it reaches the decision-making stage.
When I worked as a consultant at a procurement solutions provider, I held workshops on kickoffs for the procurement teams I coached, as part of their project management skills development. There are two tricky lessons to be learned about goals, objectives, and requirements: how to formulate them and how to tell in which category an idea belongs.
On Tuesday, the Food & Drug Administration (FDA) announced that by 2018 all partially hydrogenated oils (the primary source of trans fats in the American diet) must be phased out of the food supply chain. The many costs associated with this change will give procurement an opportunity to have a positive impact at a time of transition. When you add up the costs of experimenting with replacement oils and reprinting/redesigning packaging and labels, Roger Clemens, a pharmacology professor at USC, estimates it could cost companies as much as $200K per product.
Sometimes the best ideas are right in front of us. This can be evident when you look at a situation with fresh eyes, much like what the United States Postal Service recently did.
The USPS is a large organization facing unprecedented changes that are challenging long-held assumptions about how to operate efficiently and effectively. Ideas to improve their declining financial situation were mostly variations on past strategies: closing branches, stopping Saturdaydelivery or raising prices. Not surprisingly, those approaches did little to improve the situation.
But the tide may be about to change. On May 21, the Inspector General of the USPS issued a report with some bold new ideas such as exploring ways to better leverage an under-appreciated asset: their national network of localized offices. Rather than pursue tired old approaches, they are exploring ways to increase the financial services they offer and create new revenue streams without making significant additional investments into infrastructure or personnel.
Guest Post on the Social Contracting Blog: Whole Foods Markets Shifts Their Cost Model as They Target Millennial Shoppers
In March, I wrote a post for this blog about the Whole Foods grocery chain in which I asked the question: "How Much Can Procurement Change on Their Own?" I looked at how Whole Foods has defied the low margins commonly seen in grocery retail by employing an operational strategy that merges brand reputation, consumer identity, and high-quality products in justification of higher prices. Their procurement team is part of a top to bottom approach to creating the right value proposition for their customers.
Although they have been successful to this point, Whole Foods has found it difficult to expand their market share beyond their existing customer base. Whole Foods has never professed to be the supermarket for all shoppers, or even for most shoppers. They choose their markets carefully, making sure that the demographics in each area fit their business model. They do, however, need to find a way to build loyalty in other shopper segments that can later be channeled into the primary chain.
The funny thing about podcasts, or any content based on creative interaction, is that there is always more good content than you get to use. Sometimes the most interesting detail or insight ends up buried deep in a less-consequential part of the dialogue. I had exactly that experience with Diego. There was a lot of back and forth in preparation for the podcast. In one revision of the notes we were all working from, a single statement jumped out at me:
“Although it may seem obvious, it is not until recently that many companies realized that their supplier base can propel them to the next level (strategically speaking) or be their demise. The reality is that more frequently than not, suppliers are given a lot of power by their customers, and unfortunately many times companies’ simply don’t know it, or they don’t understand how much they rely on some suppliers, who may or may not be looking after their best interests.”
While people may talk about the procurement process, the procurement discipline actually encompasses a number of different processes. They include spend analysis, supplier relationship management, and contract management, just to name a few. If you have ever worked with procurement, there is a good chance that it was during the strategic sourcing process. Strategic sourcing touches many other stakeholder groups in an organization, such as engineering, as well as supply partners -- both current and prospective.
For engineers, if you are asked to be part of a strategic sourcing project team, you will probably learn early on that there is a standard, defined project management approach just like any other discipline would have, including product design and development. The process that guides this approach may include six steps or more, but it clearly divides the project effort into phases such as the identification of a need through the contract award as well as supplier performance management. Starting at a very high level, the process gradually narrows down the potential outcomes as more is learned and the company better understands the requirements that will ultimately guide its final supplier and sourcing decision.
It’s been a good couple of weeks for research in procurement. Late last week, Proxima Group released their findings around how consumers perceive companies that find themselves entangled in supplier-related controversies. Then on Tuesday, Xchanging shared the first results from research they did with input from over 800 procurement decision-makers spread evently across the U.S., U.K., and mainland Europe.
While the complete research will be released one chapter at a time (starting with the New Role of Procurement), the high level findings suggest that the sources of procurement’s challenges aren’t what we previously thought.
Late last week, Proxima Group revealed the initial findings of research they commissioned into how consumers – American consumers specifically, feel about companies that find themselves on the wrong end of a supplier scandal.
According to the release, “
In my PI Window on Business Podcast this week (listen here), I shared audio of Mark Hager, an author and a professor at Arizona State University, talking about why people join professional associations and how that is changing.
The interview was loosely based on a paper he wrote on the same subject (you can read it here) and which digs deeper into the idea of private (individual) versus public (collective) motivations for joining an association.
This week at ISM, my Supply Market Intelligence for Procurement Professionals co-author Jeanette Jones presented a session on supply market intelligence specifically for risk. I couldn’t be in Phoenix this week, but I wanted to contribute to the session, so I committed to making a 10-minute intro movie. After all, I do a podcast every week - and I have a Mac - so how hard could a video be?
If you are at ISM2015 in Phoenix this week, you may have seen Deem unveil their new Shopping application Monday morning. I got a sneak peek at it, and my primary take-away was that Deem Shopping is a highly visual experience. You can learn more on Deem's site.
Shopping, which is primarily intended for use by the buying (rather than sourcing) colleagues in your organization, was designed to incorporate some of the key user-friendliness aspects of B2C shopping sites, including machine learning focused on tracking the frequency of use of templates and items. It also involves something I didn’t initially recognize the importance of – the space between graphics. Apparently, the amount of white space you incorporate into a display is connected to how user friendly an application is. And we all know what user friendliness leads to: ADOPTION.
For the last couple of weeks, Jon Hansen has been covering the unfolding story involving Periscope Holdings/BidSync and Perfect Commerce. You can access the entire string of posts here, but I’ll give you the Readers’ Digest version now…
In early 2015, the State of Missouri, awarded a contract for an eProcurement provider. Perfect Commerce and Periscope Holdings/BidSync were both in the running, but Perfect Commerce was selected. On March 11, Perfect Commerce received a letter from NIGP saying that their sublicense agreement for NIGP (the public sector categorization system) was being withdrawn. The problem here is that Periscope Holdings owns NIGP. In other words, the categorization structure is owned by one solution provider in the market.
For those of us in the private sector, this may not seem terribly interesting, and it might seem even less relevant. But it is an important story for all procurement professionals in all sectors to pay attention to. And here is why:
On Tuesday, we ran a guest post from keelvar’s founder and CEO Alan Holland. In the post, he challenges many of the traditional notions procurement practitioners have about the solutions they use, what to expect from those solutions, and how to select which solutions to implement.
It is natural to follow the developments at the larger solutions providers in the procurement space. Acquisitions, especially notable ones, always result in an interesting news cycle before dying back down to become part of the new status quo. But there have been equally interesting changes and developments taking place at smaller solution providers. We owe it to ourselves to be as aware of those changes as we are of the big shifts.
In my view, there are several niche companies deserving of attention, and they represent not only a new or alternative take on what we currently have available to us, but also a new way of looking at the solutions that support procurement. As long as there are visionary entrepreneurs who are willing to apply themselves to the procurement space, we should encourage them and do everything we can to support them in their efforts – because in the end, we are the ones who benefit.
Listen daaahlings, let me tell you a little something about negotiating. Talking about money is so… GAUCHE. No no no, that won’t do at all. Today, enlightened procurement professionals collaborate. We innovate. We partner. We strategize. I do for you… you do for me… we have a relationship. No ugliness, no shoving. After all, there is no need to stoop to talking about dollars and cents. We have people for that. Right? Yes, well, have your people call my people: we’ll do lunch.
We can’t say that procurement no longer needs strong negotiating skills just because many spend categories are now being managed in a more relational way. Making that assertion demonstrates a fundamental lack of understanding about what it means to negotiate. Negotiation is a phase, not an action. There are a myriad of skills required to be an effective negotiator, and they are different for each set of circumstances.
Earlier this week I had the opportunity to speak with Dr. Alan Holland, CEO of Keelvar. Based in Ireland, this relatively small company reminds me of the way CombineNet used to fit into the overall solution space – before they were acquired by SciQuest that is. CombineNet was never intended to be the solution that addressed 80-90% of categories, but rather to be high performance enough to handle the requirements and scale of the largest or most complex 10-20%. But I think, to be fair to both companies, that is where the comparison must end.
Holland and I spoke about the Keelvar solution, not in terms of the number of line items it can handle, or the combined data points it can analyze as a result of the umpteen suppliers, items, and bid fields of a large event. We mostly talked about how it might change the way procurement thinks about optimization. After all, there are many more opportunities than just freight or location-based retail that would benefit.
Right at the end of 2014, I received a copy of report based on ThomasNet’s Industry Market Barometer (IMB) survey. As you might expect, given ThomasNet’s long-standing relationship with the manufacturing community, a large focus of the report was the recent trend towards reshoring. In some cases it is for the sake of moving final production closer to the source of demand, in others to shorten supply chains, trading cheap labor for reliability and agility.