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  • Webinar Notes: The Pulse of Procurement 2015

      Top Priority ‘Others’ Although the top procurement objectives were the usual suspects (savings, efficiency, supplier performance management, compliance), Zycus also provided a chart of ‘others’. Assuming most of the responding organizations picked one or two of the usual objectives, that left room for a less common objective as part of their top three. When Zycus combined all of the top ‘other’ objectives, a very interesting picture of procurement emerged: innovation (23%), cash flow (20%), reduced cycle time (20%), revenue growth (18%), market intelligence (13%), global reach (11%), outsourcing (9%), market share growth (8%).   Addressable Spend One of the webinar attendees submitted a question about half way through about addressable spend. In the resulting discussion, the speakers distinguished between out of scope and non-addressable spend. Out of scope spend is held beyond procurement’s reach and influence (think marketing or legal), while non-addressable spend ...

    by Kelly Barner
    Friday, 04 September 2015
  • A Deep Dive into the Cost Drivers of a Direct Mail Program – Part 2

    Postage is one of, if not the most, significant cost driver for a direct mail program. Industry trends indicate that postage costs can represent an estimated 40 to 70 percent of the overall program costs. Despite knowing that postage encompasses such a large portion of the total program budget, many consider it to be non-negotiable. One of the main reasons for this assumption is because postage rates are controlled by the US Postal Service. However, as we saw with mail lists, there are ways of managing the costs associated with postage to achieve cost savings. First, let’s discuss the factors that influence postage costs. The type of mailing – postcard, letter, large envelope, etc. – will have an impact on the cost of postage. Of these mail types, postcards have the least expensive postage costs. There are a number of different classes of postage with the USPS that can be used to send a direct mail piece: priority, first class, standard, every door direct, etc. First class mail (or ...

    by Megan Connell
    Thursday, 03 September 2015
  • Three Things ‘Rock Star’ CPOs Know About Procurement Influence

    In Procurement at a Crossroads, the book I co-authored with Jon Hansen (coming out this fall), we took a hard look at procurement’s longstanding desire for a greater presence in the C-suite. For many ambitious procurement professionals, the fact that CPO is not a standard executive level position is an indication that we have not ‘made it’ yet. For me, it is proof that we have been seeking the wrong thing. Rather than chasing status, something awarded by others and affected by a number of factors outside of our control, procurement should invest in influence – and no, the two are not synonymous. It is possible to be influential without rank. There is always room for strategic movers and shakers between the traditional lines of a corporate org chart. Since Xchanging’s research was based on responses from over 800 CPOs, I took the opportunity to ask Bowen about influence. How are the leaders Xchanging spoke with, building it and maintaining it? Here are some things that procurement ...

    by Kelly Barner
    Wednesday, 02 September 2015
  • Procurement Perspectives Podcast: Where should procurement report?

      It comes as no surprise that there is not one definitive answer to where procurement and supply chain should report relative to each other. What I find interesting are the variables and criteria Franca shared that help an organization make sure they have the proper reporting alignment and hierarchy. The three variables I came away with after listening to Franca’s response are: The role of cost cutting in enterprise strategy The role of suppliers in the core business The line between internal operations and external services/supply The role of cost cutting is not necessarily consistent. While in small margin businesses and industries, cost cutting is procurement’s bread and butter, for other companies or industries this approach only comes up in the face of external downturns such as the ones we saw in 2008. When cost cutting is key in the long term, procurement is likely to have a higher visibility position in the enterprise. The close tie between the need to aggress ...

    by Kelly Barner
    Tuesday, 01 September 2015
  • My Recommendations for Procurement and Supply Chain Webinars August 31 – September 4

      Key Trends of Advanced Analytics (Gartner) September 2, 8:00am EDT and 11am EDT You have two shots at this week’s first recommended event as Gartner looks at current and expected future trends in analytics. Since knowledge – or as we more commonly call it today, data – is power, procurement should be prepared to do anything we get the opportunity to with analytics. In this webinar, Gartner will take us beyond the basics of analytics to look at advanced capabilities in technology and skill sets. I actually think it is an advantage that this is not a procurement analytics event – the more generalist the better. Looking at analytics as a broad approach will help widen our horizons about what is possible and what we need to know to harness the power.   Enhanced supplier due diligence: the implications for supplier risk management (Supply Management) September 3, 8:00am EDT While we don’t have a lot of information on this webinar, I’m giving it the benefit of the doubt ...

    by Kelly Barner
    Sunday, 30 August 2015
  • 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
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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 this week we’ll share the second half of our interview with Soheila Lunney. You can also read the first half of our interview, or a Q&A with both authors.

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: Risk management is an area where many supply management teams are seeing increased attention and responsibility. Is risk management (or assessment) a specialized skill set or is it something that any well trained procurement professional can learn with the right tools and processes?

Soheila Lunney: Any well-trained procurement professional can assess risks and take the necessary steps to mitigate them.  Additionally, procurement professionals need to team up with their counterparts in other functions such as Finance, Taxes, Treasury, Legal, … to address risk management. Procurement professionals often forget about their internal resources!

BMP: Obviously, procurement understands the rationale behind preserving their role as the gate-keeper to the organization, putting themselves between business users/stakeholders and suppliers. If a supplier sees procurement as more of a wall rather than a gate, they may be willing to bypass procurement in pursuit of a sale. Do you have any recommendations for getting (and keeping) internal stakeholders on board?

Soheila Lunney: Educating the stakeholders is the key.  Members of sales force are trained on “back door selling” concept.  This is a practice that hurts the buying organization if the end-users/stakeholders are not educated.  Procurement professionals need to raise awareness and educate their counterparts in various functions about this practice and the harms that it brings to the organization.  Speaking with one voice should be the motto of every employee.

BMP: With regard to consciously developing relationships in the organization to increase respect, much thought has been given recently to the need for better dynamics between procurement and finance. What other less covered functions benefit from procurement making an active relationship investment in?

Soheila Lunney: Legal dept, Taxes, Engineering, Treasury, HR, ………..

BMP: You have mentioned that procurement often forgets to leverage internal resources. Can you give us an example or illustration?

Soheila Lunney: This is a lesson that many procurement groups learn the hard way; they put a contract in place for the organization that represents good savings but still get criticized by of other stakeholders such as the controller. Usually the cause of this is bringing stakeholders into the process late or not at all. For example: one Lunney Advisory Group client negotiated a new contract for copiers. They negotiated savings for the organization but did not bring finance into the loop until after the contract was signed. When finance finally got involved, they questioned not only the cost analysis but also the negotiated results. Further consideration revealed that the contract offered a short-term impact but created longer-term issues. 

Procurement should try to address all projects in a cross functional manner from the earliest stages so other departments can provide input and have the opportunity to ask questions and provide solutions. As a result, the final contract will be accepted by larger part of organization, positively impacting implementation and compliance. Even when stakeholders in other departments are not interested in taking an active role in an ongoing project, it is important to keep communicating so they stay in the loop.

When I am working with a company, I always ask for other departments to be included in discussions. It is important to see the interaction between procurement and other departments in order to understand the culture of the company. If it is evident that they don’t get along, then a lot of additional work needs to be done. It is important for companies to act as one and speak with one voice in order to realize the full benefit. This requires not only top down communication and support, but also training for anyone who will come into contact with suppliers. This extends beyond the sourcing teams to top level management, administrative assistants, and even building security personnel.

On May 31st we will finish up our series on ‘The Procurement Game Plan’ with our interview of Charles Dominick.


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