Category Archives: Best Practices

After Two Series on the Future of Procurement – What Have We Learned II

In our first post we noted that, after two series, fifty (50) posts, and almost seventy five (75) pages on the “future” of Procurement, we learned that while the majority of trends being positioned as “future” trends weren’t future trends at all, they were trends that your organization will encounter as it matures and grows and the sooner your organization ploughs through them, the sooner it can get to the real future trends.

We then reviewed our series and noted that most of the requirements for dealing with these trends fall into a baker’s dozen plus one of high-level categories. Today we will break the first seven categories down into the most important sub-categories:

Cost Control

  • Life-cycle Costs need to be modelled and true TCO understood because all that is accomplished with T-CAP modelling is opportunity capping
  • Should Cost Models need to be developed for all custom manufactured products so that an organization can do a proper bid evaluation
  • Optimization needs to be done for any buy of any complexity as costs and opportunities often mix in unexpected ways
  • Supply Chain Finance with respect to DPO vs Discounts vs. Alternate Value for Money needs to be understood

CSR

  • recycling, design for since rare earth minerals are becoming expensive and hard to acquire and dangerous materials in some countries have to be safely recovered by your organization by law
  • renewable energy as energy costs are going through the roof and coal and oil generates too much pollution
  • renewable materials whenever possible to keep long-term costs down
  • responsible supply chain from a people and environmental perspective
  • waste reduction where natural resources and food are concerned (especially given recent all-time lows in global food reserves)
  • workers’ rights as no supply chain should contain slave-labour conditions

Home vs Near vs Out Sourcing

  • product development / production which has to consider the best decision given transportation and time-to-market options as well
  • procurement, back-office, and front-office functions which has to be balanced against cost-savings, expertise, knowledge, and reaction-time

Knowledge Management

  • Capture because knowledge can’t retire with your employees
  • Distribution because everyone needs to be able to tap into organizational knowledge
  • In/Near/Out Sourcing Management needs to be knowledge based
  • Master Data Maintenance as good decisions require good knowledge and good data
  • Value Generation as the IP is an asset that should be tapped into

Market Knowledge

  • New Emerging Markets because it’s not the BRIC anymore, it’s the MIKTS
  • Emerging -> Emerged Markets as every BRIC country is now a top 10 country with respect to total GDP
  • Hyper Competition in Developed Markets due to high jobless rates, slow GDP growth, and other factors that are making for intense competition in traditional / home markets
  • Opportunity Identification in different markets from a source/sell perspective as the markets arrive
  • The New Silk Road because the new China – Germany – Russian trade partnership is a game-changer and if the EU goes all-in, that’s over 40% of Global GDP participating in a new, non-North American trade partnership

Market Intelligence

  • commodity market data as this greatly influences should-cost models
  • consumer & public markets as this provides the baseline for off-the-shelf CPG and services spend
  • labour rates as this greatly influences should-cost models
  • energy rates as this greatly influences should-cost models
  • supply vs demand as this influences sourcing decisions
  • should cost models to understand what the organization should be paying
  • trends to understand if prices have been rising or falling
  • predictive analytics to take different factors into account and predict future prices and availability of labour, materials, and energy

Organizational

  • Center Led / Control Tower / COE to make sure the organization is on the path to being Best-in-Class
  • Stakeholder/Shareholder Management to keep stakeholders happy and the shareholder monkeys off your back
  • Strategic Focus to make sure the organization is aligned on the right way of doing things
  • Transition Management to take last year’s processes and technology to next year’s processes and technology

Tomorrow we will break down the remaining seven.

After Two Series on the Future of Procurement – What Have We Learned I

After two series, fifty (50) posts, AND almost seventy-five (75) pages on the “future” of Procurement, what have we learned? Besides the fact that most futurists are backwards-looking attention-seeking historians who will happily sell you snake oil past its expiration date, we’ve learned that they are able to sell this snake oil because they are addressing issues that not all organizations have encountered yet.

Recognizing that certain issues and trends are only encountered when an organization reaches a certain level of maturity and/or size, these futurists have figured out that when they target those organizations that are below a given level of maturity and/or smaller than a certain size, they look like they are visionary when, in fact, they are just selling knowledge they acquired by keeping a close eye on the leaders.

In the end, what we learned is that the trends they are telling us about are the trends that, if they haven’t hit you yet because your organization hasn’t matured or grown enough, you have to plough though in order to get to the true future trends.

We’ve mentioned three. We’ve discussed the Top Ten Trends for 2015. And maybe, if the LOLCats let us, well discuss a few more future trends. But for now, we need to focus on the trends that won’t end and what your organization needs to do to get these trends under control and out of the way. If we review all of the trends, we find there are a (core) set of (common) categories of common and related issues that must be addressed to deal with the trends. The fourteen categories that are the most important with respect to the futurist anti-trends that we examined are:

  • Cost Control
  • Corporate Social Responsibility
  • Home / Near / Far Sourcing
  • Knowledge Management
  • Market Assessment
  • Market Intelligence
  • Organizational Insight
  • Regulations
  • Risk Management
  • Supplier Development
  • Supply Chain / Inventory Flexibility
  • Talent
  • Technology
  • Transportation

In our next post we’ll break out the sub-requirements in each category as they provide a guide that helps you target your learning and organizational advancement.

A New Year Will Soon Be Upon Us? Are You Ready for The Coming Changes?

Where Procurement is concerned, the more things change, the more things stay the same is one thing you can count on. Very little changes year-over-year, and that’s probably why the futurists keep pushing the same trends year after year, including those trends old enough to be in many historian’s ancient history books. (We’re not joking. Take globalization, governmental regulations, and supply chain risk for example. These have been issues and trends since “global” trade began between Egypt and Mesopotamia, which occurred over 5,000 years ago. What’s “future” about that?)

Moreover, a best practice, even if its only been adopted by the leading organizations, is not a future trend. It is an ongoing trend if it started a few years ago, but if the leading organizations adopted the practice ten years ago, then it is not even an ongoing trend. It is a past trend that, either due to lack of maturity, resources, or relevance, didn’t cross the chasm. A current, ongoing, trend is something that just in the last few years and is just reaching the point where it will cross the chasm and a future trend is one that has only recently been identified and still in the process of being adopted by the early adopters, which, in Procurement, would be the Hackett Group top 8%.

However, while the changes may be small and few and far between, they do happen, and over time they accumulate and occasionally lead to big breakthroughs which launch new trends. These trends, in the early stages, are the ones you care about. Not trends that were forming ten years ago, because everyone already knows about them, including every competitor you have, and not possible trends ten years out, because, in the interim, the future could diverge significantly from the future required for that trend to materialize. Trends that are in the early stages of formation today. Trends that, if you start preparing for them, put you in the Procurement Leaders camp and keep you there.

Those trends, and only those trends that make you a leader, are the trends that Sourcing Innovation talks about in its latest white-paper on Top Ten Trends for Supply Management Value Generation in 2015 (registration required). Two years ago, SI told you about the top ten things that an organization could do to reign in rapidly rising costs before hyperinflation in key categories put its profitability at risk in its white paper on The top Ten Things to Do in 2013 to Control Costs (registration required). Then, one year ago, SI told you how to mine the goldmine of savings potential an untapped organization is sitting on through the proper application of The Top Ten Technologies for Supply Management Savings Today (registration required).
Now that your organization has its costs are under control and a proper technology infrastructure in place for leading-edge Supply Management, it’s ready to tackle Top Ten Trends for Supply Management Value Generation in 2015 and get processes and programs in place to capitalize on opportunities before the competition.

To find out what the Top Ten Trends for Supply Management Value Generation in 2015 are and what to do about it, download this new Sourcing Innovation white paper, sponsored by BravoSolution, today!

On The First Day of Christmas

My SI gave to me

A glimpse into the eventuality …

Download SI’s latest white papers (registration required) on:

  • Top Ten Trends for Supply Management Value Generation in 2015 sponsored by BravoSolution
  • Optimization, What Comes Next sponsored by Trade Extensions
  • The Procurement Marketplace and The Power of Compliance sponsored by Vinimaya
  • The Benefits of an Integrated Source-to-Settle Platform sponsored by ivalua
  • An End-to-End Invoice Automation Framework sponsored by Nipendo

And start preparing for what might lie in your organizational future!

Driving Stakeholder Engagement


Today’s guest post is from Diego De La Garza, a Senior Project Manager at Source One Management Services and a regularly sourced pundit for sourcing issues in Latin America. As Senior Project Manager, he leads a team of internal resources in the development of strategies to reduce costs and increase service levels for clients.

When organizations undertake new sourcing initiatives, much is said about setting clear objectives for the parties involved and establishing attainable timelines. However, stakeholder engagement is often neglected. Regardless of their business unit, stakeholders will only participate when they clearly understand the process and appreciate the value that strategic sourcing can deliver. However, unlike a timeline or objective, stakeholder engagement may be volatile and cannot just be monitored. It needs to be driven. How quick and how much all stakeholders engage will be paramount to maximize the success of the initiative.

So how, do we drive stakeholder engagement in general? First of all, the expectations need to be adequately communicated to all stakeholders, and their feedback must be requested upfront. The stakeholders’ needs, concerns, and requirements are unique and must be understood. Empathizing with the stakeholders will allow them to see the engagement as an opportunity to drive results, and a clear chance for them to add value that otherwise would be limited due to resource constraints.

The key with communicating with stakeholders is speaking their language. In other words, we cannot engage stakeholders in the finance department by speaking in the terms of the marketing team, and IT will not understand why an initiative is important to Finance. Ongoing communication is the only way a stakeholder will understand his or her requirements are being accounted for.

Stakeholders should also identify the parties involved. In cases where strategic sourcing consulting firms are employed, stakeholders can be offered information, expertise, additional resources, or access to data that will support a successful sourcing engagement. All stakeholders involve must be able to understand what this external party brings to the table, how to collaborate more effectively with that third party, and how to utilize these resources available at their disposal.

Another key ingredient for stakeholder engagement comes from the higher levels of the organization and entails strong sponsorship. Sponsorship drives stakeholder engagement because it acts as the voice within the organization. When senior leadership establishes a deep commitment within a sourcing initiative, it validates efforts and aligns departments. Even when expectations are clear, and roles are well defined, stakeholders who perceive low levels of sponsorship will not engage to their full potential or will lose interest quick.

Stakeholder engagement is essential because it creates collaboration across business units, even in cases where sponsorship is lacking, or other stakeholders seem disinterested. When stakeholders are engaged, they become loyal supporters of the sourcing initiative. Driving shareholder engagement is a dedicated effort. As needs change and evolve, checks and balances should be managed throughout in order to increase the success of the initiative.

Thanks, Diego!