Category Archives: Procurement Innovation

The Purchasing Leader’s Guide to a More Successful Team

Recently, Next Level Purchasing (now the Certitrek NLPA) published “The Purchasing Leader’s Guide to a More Successful Team” that outlined Seven Steps For Improving Skills and Getting Better Results. Noting that many organizations only have one or two superstar team members that can handle the most challenging projects, that a purchasing department should be the organizational center-of-excellence, and that there’s no reason your entire team can’t excel, Charles Dominick, President & CPO of Next Level Purchasing put together a simple seven step process that any organization can follow to improve their team. The document might not cover every possible thing that one could do, but it’s a great start as any department that effectively implements and masters the steps provided will certainly be above average as a result.

The seven steps outlined by the document are:

  • Document Departmental Goals
  • Identify the Necessary Skills
  • Develop a Methodology to Assess Skills
  • Determine Skill Gaps
  • Define a Skills Development RoadMap
  • Improve Skill Levels
  • Measure & Sustain Improvements

They are important because:

  • It’s hard to identify necessary skills without goals.
  • Once you’ve identified the skills, you can identify who should have them.
  • You need to know how competent your people are with respect to each required skill to assess gaps.
  • You need to know what the gaps are in order to identify appropriate training.
  • The roadmap helps you identify which skills are important.
  • Skill level improvements are accompanied by improvements in sourcing results.
  • Measurements let you know how effective each skill level improvement initiative was and helps you select the “training” that is most appropriate for your team.

And you should definitely download “The Purchasing Leader’s Guide to a More Successful Team” because:

  • It gives you some examples of the right way to state measurable goals.
  • It outlines common skill dimensions that you should be sure to consider.
  • It defines three different skill assessment methods.
  • It tells you what’s important when it comes to skill gap identification.
  • It describes five different ways you can prioritize professional development.
  • It outlines different ways you can improve skill levels.
  • It gives you some ideas for measuring skill improvements in a manner that can be communicated to management.

A State Gets Smart

Today’s guest post is from Mark Usher of Treya Partners and originally appeared on the 1 Procurement Place blog on July 31, 2008. It is reprinted with kind permission.

Those of you who follow the public sector space may know that the State of Georgia recently selected SciQuest’s e-procurement tool. State agency employees in Georgia who need to buy anything from pens to asphalt will shop in SciQuest’s web-hosted electronic catalogs which will be populated with pre-priced goods and services from the State’s existing supplier agreements. This decision by the State of Georgia is notable for two reasons – (i) it is another example of an organization electing to carry out its purchasing transactions in a best-of-breed e-procurement tool as opposed to the purchasing module its existing ERP system (numerous Fortune 500 companies have gone the EP route following sunk ERP investments and the State of Georgia already has PeopleSoft) and (ii) it is also an example of another state government that is moving ahead strongly with a strategic procurement initiative (other states moving to transform their procurement function include Virginia and Indiana to name just two).

The shunning of ERP’s historically much-maligned inbuilt purchasing functionality in favor of e-procurement is a trend that I would expect to continue both in the private and public sectors. Not so much due to application functionality (a gap that that I would say doesn’t really exist anymore since the ERP vendors have refined the workflow in their own e-procurement modules) but due to the fundamentally different way that the best-in-breed providers and ERP vendors handle catalog content. All of the e-procurement providers utilize web-hosted catalogs pre-populated with many of the vendors and products that most buying organization will need (and with the capability to have the organization’s specific contract pricing built in). And if a customer has vendors that are not already in the pre-populated catalog it is a simple task for the e-procurement provider to request product and pricing from those vendors and load them into their web catalog. With an ERP provider’s e-procurement solution, however, you are most likely going to have to build your catalogs behind your firewall, involving considerably much more time and expense. And now that the best-in-breed e-procurement providers all integrate so perfectly with ERP (e.g. with accounts payable to enable payment reconciliation), why would you ever go the ERP purchasing route? I wouldn’t.

As regards Georgia’s general procurement transformation initiative, expect to see a lot more of this from state governments in the next 2-5 years. State governments have long presented a massive challenge for creating value from procurement due to their extreme decentralization. Often hundreds of state agencies within a state making their own procurement decisions and developing their own price agreements with suppliers. To complicate matters even more, agencies usually have their own financial and purchasing systems meaning there is no centralized store of data from which to build a consolidated picture of total state spend by category, supplier and agency – key information for identifying and developing aggressively discounted price agreements with suppliers. Rounding out the challenges for states in the this area are a lack of a strong mission/vision/strategy for a center-led approach to procurement and a shortage of strategic sourcing skills among current state procurement staff.

As regards my state procurement crystal ball I would expect to see (or would HOPE to see) state governments address the following five areas:

  • Develop and broadly communicate a center-led strategy for procurement in the state with the centerpiece being a strategically focused, “center of excellence”-based central procurement group
  • Conducting a best practice spend analysis to develop a consolidated cross-state picture of spend by agency, supplier and agency
  • Based on the spend analysis, develop and implement a sourcing roadmap with the objective of maximizing the amount of state spend under cross-agency (“state-wide”) leveraged price agreements
  • Upskill the central procurement group with the required training in best practice strategic sourcing methods (or hire where needed)
  • Implement a state e-procurement system with web-hosted electronic catalogs to drive maximum spend through the new price agreements

Thanks Mark!

Twenty Reasons Why All Retailers Should Use e-Procurement Tools Now

Today’s guest post is from Ron Southard of Safe Sourcing and originally appeared on the Safe Sourcing Blog on July 29, 2008. It is reprinted with kind permission.

Sometimes the detail gets lost in translation, so for those of you that are following on a daily basis here is a simple list. These are certainly not all of the benefits that retail can drive from the use of e-procurement tools, but it is a good starting point.

Since this is not Late Night with David Letterman, our list is not ranked in order of importance although many might argue that not much is more important than improved earnings.

1. Guaranteed to improve net earnings
2. Guaranteed to improve safety
3. Guaranteed to improve Corporate Social Responsibility
4. Guaranteed new sources of supply
5. Retail has less spend assigned than any other industry
6. Streamlines the procurement process
7. Holds suppliers accountable to your standards
8. Improves quality
9. Coast avoidance in a volatile market
10. Creates a competitive environment
11. Drives reliable market pricing
12. Maintains a reliable history for future comparison
13. Educates suppliers as to how retailers wish to procure products
14. Supplier training eliminates questions
15. Improved and consistent product specifications
16. Improved negotiation
17. Improve carbon footprint
18. Simple award of business process
19. Frees up time for other tasks
20. Works for procurement of all product categories

This author is not sure why a derivative of this list could not become the mission statement for any procurement department.

Thanks Ron!

Innovate – It’s Death or Glory

A few months ago, Industry Week ran a great article by Blake Glenn of ?What If! that noted that US manufacturers must make a fundamental shift in the way that innovation is perceived and delivered if they are to regain the competitive edge that they need to keep from falling behind. Furthermore, it also noted that while innovation is seen as important in most organizations, the components to drive innovation are often lacking, in need of refinement, or misunderstood altogether. I’d have to agree. There’s not enough innovation out there today. We need more!

The article also listed some of the fundamental and damaging misconceptions that are all too common, and that need to be corrected. Beliefs that “innovation is about process”, “innovation requires significant investments of time and money”, and “innovation lies solely in the hands of R&D” are incorrect and will halt innovation before it has a chance to begin. The fact of the matter is that “innovation is about inspiration and perspiration”, “innovation requires significant investment in the willingness to innovate”, and “innovation lies in everyone’s hands” and that if you don’t accept this, you don’t have much of a chance of becoming an innovative leader. (And considering we’re in a recession, you definitely don’t want to make any innovation mistakes.)

And, most of all, as the article points out, it’s a deeply complex multivariate phenomenon and at its heart lies a single subject: people. People who must think differently, who must be encouraged, who must be empowered, and who must be rewarded for their ideas. They must be encouraged to change and take risks. And to constantly look for better ways to do business as a whole – be it accounting procedure improvement, logistics streamlining, or new product introduction.

Furthermore, new product innovation does not stop with the product – it goes beyond to include everything that has to do with the product and includes packaging, production processes, and distribution. It also covers the entire product life-cycle. It involves designing for efficient manufacturing, designing for minimal packaging requirements, and designing for disassembly and recycling.

It’s a behavioral shift … and possibly the only one that could save your company if times get tough. Winners persevere and evolve. Losers … well … when was the last time you saw a dodo?

The Physical and Financial Supply Chain Integration Struggle

If the two supply chains could be truly interwoven, there is the potential to shorten the procure-to-pay cycle, reduce the costs of goods sold, and free working capital. And this is just the beginning, as noted in a recent Global Logistics & Supply Chain Strategies article in Supply Chain Brain on how “Companies Struggle to Integrate Physical and Financial Supply Chains”.

However, this is easier said than done because organizational barriers often prevent these two disciplines from working together harmoniously. And even if the walls come down, there’s still the issue of integrating the disparate and unconnected systems that run procurement and finance. As a result, billions of dollars are trapped in corporate supply chains, and opportunities to reduce costs through better financial management are unavailable.

As Jonathan Heuser, VP of Supply Chain at JP Morgan Chase astutely notes, while the purchasing discussion typically is around getting the lowest unit cost for goods and the supply chain discussion is around meeting delivery dates, these discussions don’t take into account the ramifications that associated payment terms and methods have on a company’s working capital. Similarly, financial managers don’t have the visibility they need into the physical supply chain, which only serves to magnify the inefficiencies.

Furthermore, as Kurt Cavano, CEO of TradeCard, notes, product cost savings can be offset by operational expenses associated with managing global transactions, financial risk and the requirement of additional, more expensive capital. In addition, late payments come with penalties when the company could have taken advantage of discount opportunities that many companies will offer for quick payment.

If the two systems are integrated, which makes sense since they both need to work off of the same fundamental information, procurement professionals could see the true costs of buying from a supplier in China, which would include all import and export tariffs, capitalization costs, and associated risks. In addition, finance professionals would see when capital was needed, where there are savings opportunities in the forms of discounts or favorable exchange rates, and when there is free capital to invest in short term opportunities for profit.

In addition, since there are a large number of redundancies between the information needed for purchase orders and invoices, the information needed for global trade documents, and the information needed for financing and payment, integrated systems can reduce the administrative overhead and associated costs. In addition, it would be much easier to apply real-time risk management since each group would understand where a project was in the process.

However, that’s not likely happen as the majority of buyers and suppliers still struggle with Supply Chain Finance (SCF) and the significant opportunities that it offers if done correctly. Most companies that are currently pursuing SCF are doing so not because they have a good grasp of what it can do for them, but because they are under substantial pressure to lower the costs of goods sold as raw material and energy prices continue to skyrocket and they are grasping at anything with the potential to save them money.

However, before companies can truly save money with SCF, they have to be ready for it. For a company to be ready for SCF, they first have to address automation, total cost modeling, and working capital management. If a company is not comfortable with e-payment, automated trade document creation and e-document exchange; is unable to use modern modeling and strategic sourcing decision optimization to make true total cost of ownership decisions; and doesn’t understand the different options it has available for capitalization, investment, and supplier payments, it will be unable to fully implement and take advantage of supply chain finance and all that it has to offer. So brush up on your e-Procurement, dust off your global trade, and master your strategic sourcing decision optimization and you will be ready to take the supply chain finance leap.