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  • The Good, the Bad, and the Ugly of the CEO Pay Ratio

      The Good The CEO pay ratio is being touted as a source of valuable information to investors as well as consumers. In a time when the minimum wage is a regular part of the public discourse, there is interest in having a single figure that represents the difference in compensation at the highest and median levels. When procurement represents a company that is B2C, they have to be very careful about the risk of negative public sentiment. Companies may be held responsible for the negative reputation of their suppliers, especially when the partnership is high visibility. In cases such as these, procurement may want to look at the CEO pay ratio as a way of staving off potential sources of negative publicity or reputational risk.   The Bad Although there is a lot of interest in the new ratio, it is not without its detractors. Some claim that at best the ratio misrepresents how companies feels about employees, and at worst creates negative press without actually offering any ...

    by Kelly Barner
    Wednesday, 26 August 2015
  • Procurement Perspectives Podcast: Panel Discussion on The Politics of Procurement

      One of the points that was made earlier in the discussion was the idea that public sector procurement is not about cutting costs or building competitive advantage. It is about solving social problems, and the first step to solving problems is identifying them. The fact that these teams start by bringing everyone together around a problem – something we heard in the audio excerpt just now – strikes me as really smart. There is no shying away from the fact that there is a problem or concern that defining the problem up front starts the project in a negative place. The group captures the problem and then works together to become part of the solution. I think this is an approach more private sector procurement organizations can get behind as well. And in particular, we should put a methodology in place for finding problems. Although private sector procurement often feels chained to savings and spend under management metrics, when we start to feel pressure to create greater val ...

    by Kelly Barner
    Monday, 24 August 2015
  • Best Procurement and Supply Chain Webinars August 24-28

      Supplier Risk Management -Identifying & Managing Critical Risks (NLPA) August 25, 11:30am EDT In this month’s Next Level Purchasing Association webinar, we’ll hear from Ernest G. Gabbard, JD, CPSM, C.P.M., CPCM, about the idea of progressive supply chain management. It is no longer enough to focus on having a good response plan ready if something goes wrong. Now the emphasis is on being proactive, not through a one-off approach to risks, but through a carefully crafted methodology designed to identify, monitor, and respond to disruptions as they occur or are averted. While the letters after Gabbard’s name are impressive, I think its more important that he has over 25 years of supply management and contract management experience and recently retired as Executive Director of Strategic Sourcing for a Fortune 1000 corporation. His perspective on risk management is worth hearing.   Pulse of Procurement 2015 (SIG, Zycus) August 25, 2:00pm EDT It is hard to resist a t ...

    by Kelly Barner
    Sunday, 23 August 2015
  • Webinar Notes: The End of Outsourcing? RPA is Here to Stay

    Low cost labor, such as is provided in the ‘BRIC’ nations of Brazil, Russia, India, and China, is more likely to be affected by RPA than high-margin knowledge based economies. And yet, those countries, and India in particular, have been seeing non-linear growth, meaning that profits and revenues are growing while headcount is not. Many of the positions that will be affected by RPA have been problematic for years because they are tactical, low satisfaction roles naturally resulting in high attrition and turnover. The cost to keep those positions filled, and to compete for available labor, is significant enough to change the value equation for companies looking to outsourcing there. For teams that are looking to augment their own in house capacity or capabilities, RPA presents an opportunity to continue completing tactical responsibilities without any additional headcount. It also creates new opportunities as process automation leads to increased data for analytics and complex decis ...

    by Kelly Barner
    Friday, 21 August 2015
  • Book Review: The Lean Supply Chain: Managing the Challenge at Tesco

    The basis of the book is the result of joint research done by Tesco and Cardiff Business School in the U.K. Author Barry Evans worked for Tesco’s supply chain organization for a decade. There is clear admiration for Tesco on the part of the authors, resulting in a book that is more of a calm investigation of a complex supply chain’s strengths and weaknesses than a post-crisis exposé. The authors start by clarifying that their (and presumably Tesco’s) definition of supply chain is broader than usual, inspired by Michael Porter’s ‘value chain’ approach. The grocery retail industry is highly competitive and operates on razor thin margins. Since, as pointed out in the book, the products offered are effectively commoditized, Tesco has had to differentiate on services, the environment in their stores, and the end-to-end consumer experience. Their investments into improving consumer sentiment are central to their business strategy. The other core element of Tesco’s strategy is simplicit ...

    by Kelly Barner
    Wednesday, 19 August 2015
  • Procurement Perspectives Podcast: Trusting Internal Team Members and What That Should Teach Us About Supplier Partnerships

    By comparing the kind of relationships we have with our suppliers and employees, Acquire Procurement makes an interesting point about the need to become more collaborative with some of our suppliers. This is especially true given the increased percentage of corporate revenues being spent with suppliers. According to research by Proxima Group in 2014, in a trend they have labeled corporate virtualization, companies are spending an average of 70% of their revenue with suppliers – and not all of it is being spent on materials. As a result, we are outsourcing ever larger percentages of our revenue – even when we don’t call it outsourcing. There are lots of different reasons to outsource. Third party service providers may specialize in a given process or service or they may be able to perform it more cost effectively. Regardless of the reason, you are taking a function that used to be performed in house with full communication and oversight and putting it on the other side of a wall, exp ...

    by Kelly Barner
    Monday, 17 August 2015
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“When you are open to share what you know with other people, good things will happen for you.” –Soheila Lunney 

Throughout the month of May, Buyers Meeting Point is covering ‘The Procurement Game Plan’ through a series of interviews with Charles Dominick and Soheila Lunney – both about our questions in response to the book and the trends they observe in supply management as a whole. Our original intent was to interview them about the book, but as we got further into conversation, we found that it was impossible to separate the content of The Procurement Game Plan from their ‘day jobs’. This book is not a retrospective look back or an encapsulation of their careers, but a snapshot from two very dynamic contributors to the procurement community. I highly recommend it as an addition to your professional library.

Our review of the book is available, and last week we shared a Q&A with both authors specifically related to our questions about the book. This week we’ll share the first half of our interview with Soheila Lunney.

SLunneyIn addition to being an author, Soheila is president of the Lunney Advisory Group, a provider of coaching and mentoring for procurement professionals in various industries to improve their processes and practices, to significantly reduce the cost of acquiring products and services, and to contribute to the bottom line profitability of their organizations.

Buyers Meeting Point: As a procurement educator and coach, what is your perspective on the typical character or personality of purchasing/procurement professionals and how well that is suited to the future requirements of the role?

Soheila Lunney: As more and more universities are offering Procurement and Supply Management courses and degrees, I see the character of procurement professionals is changing with much higher caliber individuals in various industries.  Procurement employees are truly becoming a group of professionals who are gaining the respect of top-level management.  Leaders of the organizations must support creating an environment that their procurement staff can grow, learn new and emerging best practices, and expand their horizon.  As economy is improving allocating funds to provide training for procurement staff should become a high priority for management.

 

BMP: How did a background in the pharmaceuticals industry prepare you to help procurement professionals in other industries learn to manage supply chain risk?

Soheila Lunney: While it is true that pharma may be ahead of other industries in their assessment and handling of risk potential (due in part to government regulation), industry does not matter. What matters is interaction with the outside world, while includes the health and safety of customers and associates as well as the reputation of the organization.  Whenever possible, tap into tax, legal, and treasury (for example) for their guidance. Come up with approaches that bring safety, security, and contingency plans to the organization. Keep abreast of what other organizations are doing, benchmark against them, and implement practices that can safeguard your organization against unexpected events.

 

BMP: It seems that one of the barriers to procurement having an established seat at the executive table stems from a lack of financial knowledge. Do you see that in the companies that you work with?

SL: Yes – I do see groups and individuals struggling with their lack of comfort with finance. I think it breaks down to two issues: the first is a genuine weakness with financial topics. If this is your situation, you need to acknowledge the weakness and take a class that  can satisfy your needs. The other issue looks at negotiating cost savings v. reporting those savings to the rest of the organization. The most common mistake procurement makes is reporting project savings in one big number. It is critical to itemize results as much as possible to establish procurement’s credibility by creating opportunities for explanation and demonstrating knowledge of the product/service in question.

It is also important to understand the methodologies that your finance group or controller will buy into and structure results reporting to match them. Each company or industry is different, and contract results may change over time due to M&A activity or leadership’s decisions. It is also important to make sure that multi-year contract savings hit the budget for all applicable years. This will require a joint internal effort, but will bolster procurement’s relationships with other departments.

Next Thursday we will share the rest of our interview with Soheila, and on May 31st we will finish up our series on ‘The Procurement Game Plan’ with our interview of Charles Dominick.

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