Category Archives: Talent

Procurement Staff Augmentation: What’s the Approach?

While scanning the weekly news, the doctor encountered an article in the Technology section of HackRead on Strategic IT Staff Augmentation: A Roadmap for C-Level Executives, which outlined key considerations when choosing an outsourcing service provider (as all of them have pros and cons) as well as five essential steps that are required to make a good decision.

But what do you do in Procurement? Whereas there are dozens of big providers with oodles of talent sitting on a bench to help you in Tech, it’s not so in Procurement. Just like organizations struggle to find experienced and knowledgeable Procurement talent, so do consulting agencies, group purchasing organizations, and vendors who want former senior buyers and CPOs to help guide them on creating useable solutions. So if you can’t get talent, and they can’t get talent, what do you do?

It’s a damn good question, and it has a good answer, but not one you’re gonna like. Because you can’t get enough talent, you need to get better tech. The reality is that even if the market improves and your budget for headcount and technology improves, you’ll still have to do more with less because you won’t find the talent you need. So take advantage of the fact that you’re constantly expected to do more with less and set yourself up to be able to do that by getting the right tech.

More specifically, the tech that lets you:

  • automate and streamline tactical tasks
  • define your strategic processes, automate data collection, define validations, and automate standard analysis and insights retrieval
  • integrate 3rd party intelligence including, but not limited to, metrics, ratings, benchmarks, market insights, etc.
  • enable third parties to do sourcing events, negotiations, supplier development, detailed analysis, etc. on your behalf
  • allow self-serve integrations to third party tech used by third parties who do Procurement projects for you

Those last two capabilities in particular are critical for organizations who need Procurement staff augmentation because:

  • they won’t be able to hire more senior staff internally,
  • they won’t be able to secure them from consulting companies for more than short periods of time, and
  • they will only have access to shared resources on a regular basis (i.e. short term engagements from consultants who will engage to provide expertise / leadership on specific projects, short term engagements from vendor staff who will do a specific project / negotiation, etc.)

So, without the tech that will allow a third party to

  • quickly customize the process they will follow
  • automate all the tactical steps and data collection
  • automate the analysis needed for augmented insights
  • use their tools and push the appropriate data and results to the client
  • use the client tools and get the functionality and data they need

A third party cannot take on the work an organization needs it to take due to lack of experienced staff. Thus, the answer to procurement staff augmentation is one that starts with better, more modern, Procurement tech, which is quite different than IT staff augmentation, which starts with firm qualification and then resource qualification. Due to the drastically different market dynamics — an abundance of talent vs. a dearth, the approach has to be entirely different.

PostScript: Please note not ONCE did we say AI. We said better tech. That’s totally different!

If You Want Good Procurement People …

TRAIN THEM!

A common problem among all Procurement departments is their ability to find good, educated, experienced people. The reason for this is simple: there just aren’t enough good, educated, and experienced people to fill all the Procurement positions that should exist among corporations world-wide.

Why?

1. Procurement isn’t Sexy

People go into careers that are attractive. These are careers that are held in high regard (like doctors and lawyers), careers that pay well (like finance and tech), careers that are currently in high demand where unusually high premiums can be found in the right locations (like nursing or remote mining/O&G positions), or careers that bring fame (like acting, entertaining, and professional sports). People don’t go into careers that no one’s heard of, careers that have a negative stigma, or careers that don’t pay well. Guess what bucket(s) Procurement falls into? The latter three. No one’s heard of it (who even advertises their world class Procurement, yet alone makes it sexy — that’s right, no company on earth). It’s still thought to be the Island of Misfit Toys. And many people think back office purchasing pay scales are akin to entry level AP clerks.

2. There are No Real Procurement Programs

Prestigious Universities have prestigious business schools. These focus on executive management and basic operations. The best of these will also teach classic logistics. There are only a few Supply Chain Management programs globally, and none of these teach modern Procurement platforms and processes as a general rule. A few have brief introductions to modern spend analysis or e-Auction or RFP platforms, but that’s literally two decades old tech in our field. No one coming out of University has any real understanding of modern procurement processes, best practices, or platforms.

3. Most Procurement People Have Very Narrow Skill Sets

When you’re in Procurement because you get put there, fall there because there was nothing else at the time and you needed a job, or voluntarily move there to help the company because you demonstrated a knack for buying certain categories and without you, the company would be suffering and possibly have to layoff your friends, you didn’t go there because you had the right education and experience and knew it was the best job for you. Furthermore, when companies don’t invest in the education you need to learn end-to-end processes, best practices, and category specifics outside of the area you came from, you end up developing, usually by trial and error, a very narrow skill set in terms of applications you can use, processes you know, and market interpretation to determine if the offer is reasonable in current market conditions. This makes it very hard to jump to another job and be a good buyer in another category, or even a similar category where you would have to buy a whole new set of parts from a whole new set of suppliers in a whole new geography.

Thus, it’s going to be very hard, for any intermediate position, to find the right person who can walk in and do the job at market average performance day one.

However, Procurement is not rocket science, open heart surgery, or CPU design. It’s not hard to find very smart engineers, mathematicians, technologists, pharmacists, chemists, etc. who can, with focussed training in best-practice procurement processes and platforms, very quickly pick up the basics of Procurement and use their deep knowledge of products and R&D/Engineering/Manufacturing needs to identify the best products, suppliers, and partners for the organization. These highly educated individuals will also have a decent background in mathematics, algorithms, and logic to learn the spend analysis / market intelligence platforms and quickly identify market average prices and costs for products and parts and be able to analyze bids against current organizational prices, market prices, and should cost models to identify those suppliers offering fair quotes as well as additional service-based value.

With a few weeks of focussed training on key processes and platforms, these resources can often be up and running effectively, and with a few months of training over their first few years, quickly progress to a top-tier performer. All you have to do is bring back the Learning & Development budget and train them by hiring appropriate analysts and consultancies to design/deliver the courses they need to be effective for your organization. And even though custom courses can cost considerable up-front dollars, 10K is nothing if it helps a top-tier resource identify a 10% savings on a 10M contract, as that’s literally a 100X return on your investment. (Remember this the next time someone considers cutting the training budget for Procurement as the return on proper training for a good resource will always exceed the investment many times over.)

Sourcing and Supply Chain Jobs CAN NOT Be Automated

Raconteur recently published a great article that noted that the next big shortage to watch [is] supply chain skills, and they were entirely correct when they noted that it’s ironic that the profession struggles with its own supply of talent. They were even more on the money when they said walk into a meeting of supply chain managers and you might wonder whether you’ve stepped back in time several decades because the statistic published in 2021 by Logistics UK that 89% of people working in logistics and supply chain are men.

Furthermore, they scored the hat trick when they noted that employers are struggling to find talent, and that is because not enough talent is entering the industry. Why is this? That’s a good question, and unfortunately Raconteur stopped with the hat-trick because the rationale they gave for lack of new entrants is only part of the problem.

According to Raconteur, the reasons for the lack of recruits are:

  1. Procurement is high on the list of roles at risk of being automated to extinction
  2. The recent slew of media reports highlighting failures in important supply chains may be deterring potential new entrants away

And while constant claims of procurement automation and constant reports of failures are unattractive, it is not the core problem (but merely the manifestation of the problem).

The real problems are the continuing:

  1. Lack of Marketing by the Profession (and why a Procurement/Supply Chain Manager is someone who’s cool)
  2. Lack of Education in most/leading University programs

Corporations who value engineers do great advertising on how cool it is to be an engineer working for them (think Siemens). Oil & Gas and Mining industries who need geologists and specialists to find new deposits do great advertising on how cool it is to be an explorer in the modern world. SaaS / Social Media companies that need great software developers do great advertising on how it is super cool to be a techie. Have you ever seen any corporation ever make it super cool to be in Procurement or Supply Chain? Even Apple, which won on supply chain management, never advertised how cool it would be to be a supply chain manager for them. As a result, Procurement and Supply Chain only recently entered the general vocabulary, and most people only paid attention as a result of the massive failures that came to light under the pandemic*.

Most University programs, two decades after we needed courses on modern Procurement and Supply Chain Management, still only teach classical Operations Research and Logistics. Logistics is important, but the age of Logistics was two decades ago. As Will Smith told us back in 2002, no one wants to be in the old and busted driver’s seat (see the clip). They want to drive the new hotness, but all Universities want to teach them is how to drive the same old and busted processes and practices the Professors learned in the 1980s (which were taught to them by the Professors who invented them in the 1960s).

Since Universities aren’t modernizing, no one graduating understands what Procurement and Supply Chain really is, so when all they hear from the media is failure, why would they want to even look into a profession that is apparently as high stress and fraught with risk as a surgeon or a defense attorney? Furthermore, since companies aren’t even spending a dollar on promoting how cool it is, and how much they need these people, it’s not a stretch to believe that the companies aren’t promoting it because they plan to automate it.

But Procurement cannot be automated. Technology can automate tactical procurement tasks such as:

  • regular restock reorders
  • auto-PO generation and delivery
  • auto-invoice matching / auto-correction requests
  • third-party supplier data validation through APIs
  • auto-supplier discovery from third party networks
  • auto-supplier risk profiling from third party data feeds
  • etc.

because technology is good at the “thunking” — the semi-mindless processing of electronic paperwork to make sure the i’s dotted, the t’s crossed, and the request valid as per business rules. However, technology, especially technology powered by Automated Idiocy, is NOT good at the thinking. You need Procurement Professionals, Sourcing and Supply Chain Superstars for those tasks, which permeate the entire Source to Order and Order to Delivery supply chain cycles. For example, as a counter to the above, technology cannot

  • adequately adapt to highly dynamic demand changes (especially when it doesn’t know why)
  • determine when new products or services NOT in the system will need to be ordered to support one time projects, replace products that will not arrive on time due to supply chain disruptions, replace services where the provider loses the resource with the proper training and certifications, etc.
  • handle the negotiation on the 1% to 5% of invoices where the provider won’t correct the missing information or the pricing on an auto-request
  • be able to validate the API where a human has to call another human to get the necessary information
  • find new, innovative, suppliers NOT in the connected network
  • customize the risk-based vetting to the specific need and acceptable thresholds
  • etc.

So, yes, some of the accounts payable paper pushers are going to lose their jobs as the thunking takes over, but that’s NOT Procurement, and definitely NOT Strategic Sourcing and Supply Chain where a human IS desperately needed. And yes, you will need to be familiar with the best of modern technology as a new professional in our field, as the job will soon be impossible without it, and you will need the augmented intelligence it provides to be efficient, but the technology cannot replace you.

So join us. And run the modern world.

* Not brought on by the pandemic as it was bad supply chain design and management that resulted in the pandemic breaking supply chains. Had the supply chains been properly designed, all the pandemic would have done was slowed them down. So don’t blame the pandemic. In fact, if you want to place blame, then blame McKinsey and their peers which started the ridiculous outsourcing craze instead of helping us improve the home-source and near-source supply chains we had that were working great, and put us in the situation where we have to reconfigure global supply chains all over again.

How Many Employees Should You Have in Procurement

Those of you who have been around for awhile will know that AQPC, Hackett, Gartner, and, going way back AMR, and Aberdeen, among others, have been benchmarking and telling us for years how many employees your Procurement Organization should have based on organizational revenue.

Furthermore, those of you who have been paying attention will know that they’ve been telling you for years that the better you are, the less employees you should have.

And you probably believe them. But, THEY ARE WRONG!

Why?

All of these employee count recommendations were based on two fundamental assumptions.

1) You can automate your way to baseline, as every improvement in automation will allow you to shed employees.

2) Baseline is sufficient to maximize Procurement value.

The first assumption is true. As you automate the thunking, more and more tactical processing that requires no actual thinking is offloaded entirely onto the machines, and those resources are no longer needed for those tasks. At this point, you can redeploy them, or you can follow the crowd and reduce the headcount (while remembering that the true wisdom of crowds is that none of us is as dumb as all of us). (We’re not saying that you shouldn’t let the employees go. It all comes down to whether or not they have the skills to be redeployed in a value generating role. But more on that later. We are saying that you should think twice before reducing the headcount target. More on this later.)

The second assumption is false. Baseline is considered to be enough for an average organization to source the top 80% of their spend over the average contract window and sufficiently manage the critical suppliers.

But simply having enough headcount to do baseline sourcing events and manage a few suppliers is not necessarily enough to guarantee value. And that’s what it comes down to. Value.

If the buyers barely have enough time to setup and run the events, but don’t have any time to discover or qualify new suppliers, negotiate beyond initial bids, or work with existing suppliers to identify additional opportunities for cost saving (such as minor design/spec changes) or value creation (such as new value added services), then are they really providing any value (beyond simply adopting a bleeding edge sourcing platform that can automate an entire sourcing event and reducing headcount even further)? No, they aren’t.

Now that inflation is back with a vengeance, in any managed category, savings is out the window. The absolute best case scenario is you keep costs flat, but most of the time the best you will be able to do is reign in increases less than the market average increase (and less than your peers). So if you want, or need, savings, you need to redefine the category, the product, the service, the delivery, the network, etc. That takes a lot of expertise, creativity, focus, and time from true Sourcing professionals … focus and time they won’t have if they have to launch a new sourcing event every week because you are measuring Procurement success based on how low the headcount can go and not how much value Procurement can generate.

Similarly, if all buyers have time to do on the supplier management side is deal with critical issues and the fires that arise because of them, you’ll never get real value out of the relationship, never build the relationship to the point where you co-innovate and jointly take cost out of the supply chain, become a true customer of choice (and not a fake one based on standard contract rhetoric which only guarantees they won’t screw you in pricing more than any other customer), and never discover capabilities in your supply base that you never new existed (… capabilities that may allow you to offer new products and services with a greater profit margin).

Plus, if you’re only tackling the top 70% to 80% of spend and the top 10% to 20% of suppliers, what opportunities for significant spend reduction, or at least control, are you missing. There’s often more overlooked opportunity in the tail than the middle categories. And you’ll never know the true extent of the potential in your supply base if you only ever talk to 1 in 10 suppliers.

The right amount of headcount is the number of professionals that add value and an ROI 3X to 5X their fully burdened FTE cost. the doctor would hazard a guess that the right number is probably 2X what AQPC, Hackett, and Gartner would have you believe. Look to these reports to understand what percentage of tactical headcount can be redeployed with the right automation, not for the right number of strategic headcount to retain. (Based on the current numbers, you should be able to redeploy 80% of your tactical head-count as you go from the bottom to best in class, but you only start redeploying headcount out of Procurement when adding more strategic resources doesn’t increase value at a 3X to 5X ROI.)

There’s Some Really Awful Procurement Job Seeking Advice Out There — Truly Awful!

On a weekly basis, the doctor scours the internet for recent developments and news in sourcing, procurement, and supply chain that major publications, analysts, bloggers, and the major LinkedIn trolls … errr … influencers might have missed. If you follow a half dozen thought leaders, analysts, major sources, etc., you won’t miss much, but deep searching can sometimes dredge up interesting tidbits, and other times can dredge up decaying waste that really should be left in the deep.

Recently, deep searching for procurement news dredged up one of the worst Procurement job seeker interview questions and answer articles he’s ever read. (These are bad in general, but if I was hiring, and you gave a single one of these answers, I’d end the interview then and there. You would have clearly demonstrated you do NOT have what it takes to survive one of the hardest back-office jobs there is, with new, unforeseen challenges arising daily.)

I’m not going to link to the article in case the author is a real person who was assigned the grisly task by the publication of writing about something they clearly had no clue about and not auto-generated by a BS OpenAI tool trained on the worse mush it can find, because they don’t deserve the embarrassment if they are a person assigned to write about a subject they were clearly clueless about. However, I am going to quote the first three questions and responses and point out why any Procurement Director worth their weight in any commodity would quickly judge you as unworthy and show you the door, before it had time to finish closing, if you rattled off one of these extremely poor canned responses presented to you.

Q1: Describe your previous experience.

Not a bad question (but the interviewer should ask you about unique aspects of your relevant experience). But

With a background of over 10 years in procurement, I bring comprehensive experience spanning various aspects of the field. My expertise includes sourcing, supplier management, contract negotiation, and administration. Throughout my career, I have consistently delivered noteworthy cost savings and streamlined processes. Additionally, I possess in-depth knowledge of both local and international procurement laws and regulations.

Is NOT a good answer.

1) Presumably if you are applying for a senior procurement role, you have significant relevant experience, how many years you have is going to be clear from your resume, and if you don’t meet a baseline, you don’t get the interview. More meaningful is related experience that brings unique insights to the role.

2) Buzzwords are meaningless. If you don’t have any experience in sourcing, supplier management, or contracts, you’re not Procurement. This is super obvious. If you don’t have any specific skills, or deep knowledge of certain processes, back to the sea with you.

3) If you didn’t deliver savings or process improvements, you would have been fired. Multiple times. It would show on your resume, and you wouldn’t get the interview.

4) What local and international laws? There are 195 countries. These all have laws and regulations that affect Procurements in, from, and through their countries. These could be finance (post-audit/clearance, anti-bribery, etc.), human welfare, sustainability, or other laws. Get specific. If you spent a decade buying fruit from South America but the company wants you to buy semiconductor chips from China, Taiwan, and Japan — how does that help?

Q2: Tell us about your qualifications for this job.

Again, not a bad question (but the interviewer should focus in on your strongest or most unique). But

I hold a bachelor’s degree in business administration with a specialization in supply chain management. Over the course of 5 years, I have actively worked in procurement, honing my skills and expertise. My experience spans the management of both direct and indirect spend, granting me a comprehensive understanding of procurement operations. Moreover, I possess proficiency in various procurement software systems and boast a solid comprehension of contract law.

Is also NOT a good answer.

1) Obvious from the resume, but I can, and probably will in a later article, argue that most business / operations / supply chain programs are NOT (on their own) qualifications for Procurement. (Future article, because this rant is more than an article in itself.)

2) Repeating an answer, inconsistently (10 to 5 years), is useless and adds nothing beyond the resume (except confusion).

3) Again, buzzwords are meaningless. Indirect to one company is direct to another and vice versa. What did you buy? And what insights did you glean (that the average schmuck has no understanding of)?

4) Various systems. Do you mean email and Excel? A 20 year old version of SAP Ariba? A modern suite like Coupa or Jaggaer? Or BoB solutions like Anydata, Bonfire, ContractPodAI, DecideWare, EC Sourcing, etc. etc. etc.

5) Contract Law? Great! But what countries, states/provinces, and contract types are you most adept with. (And remember, expertise in contracts is NOT expertise in contract law. It’s pretty easy to be an expert in contracts if you do them enough, but without a solid legal understanding, it’s pretty hard!)

Q3: How would you describe your procurement process?

Finally, a good question. But

The procurement process typically starts with the receipt of a request for proposal (RFP) from a potential customer. This document outlines the customer’s specific requirements for the desired product or service. The procurement team will leverage this information to compile a comprehensive list of potential suppliers. Subsequently, they will issue a request for quotation (RFQ) to these suppliers.

Is NOT a good answer. It’s actually even worse then the answers above!

1) If you worked for a make-to-order / build-to-order organization, that’s typically the process. If you make off-the-shelf CPG, then the process starts with a forecast and an assignment to “get ‘er done“.

2) If the interviewer doesn’t know what an RFP is, you should run for the door.

3) You can’t procure without suppliers, so this is a standard step in every 5/6/7/8/9 step process out there!

4) DUH!

Not once does it get into any specific, unique, best practice details that show the deep understanding you possess of Procurement processes.

At this point in the article, the questions got slightly better — but the answers continued to be bad or even worse than this one.

It’s sad. None of them address what a Procurement Director / Chief Procurement Officer (CPO) is looking for.

The relative priority of desires will vary from CPO to CPO, but these are the big ones that all CPOs have in the back of their minds.

1) Education – a university degree; relevant to what you are buying is typically preferred if you are junior, any degree if you are senior; how does your education relate to the position you are applying for?

2) Experience – relevant experience in what you will be buying, not necessarily as a buyer, possibly as an engineer, depending on the expertise needed to do the job (just like you can teach a mathematician accounting but you can’t always teach an accountant advanced mathematics, you can teach a trained professional Procurement but you can’t always teach an average buyer the fundamentals of technology or engine engineering).

3) EQ (Emotional Quotient) – you will have to work in a team; how did you work in a team in previous job(s) for complex procurements

4) TQ (Technology Quotient) – you will have to use technology, and hopefully continually improving and evolving tech; what modern tech have you used?

5) Think-on-Your-Feet Adaptability – nothing will ever go according to plan, and you will have to fight fires on a daily basis and find solutions quickly to prevent minor bumps leading to major derailments

6) Strategic Thinking – how should you approach a category or a problem; how could you improve current processes based on current learning; what did you do that improved a process in the past or solved a difficult problem?

7) Risk Management Mindset – you can’t eliminate all risks, but you can mitigate many and manage others; how do you embed this in your process

8) Sustainability – both environmental and corporate; you often have to find a delicate balance; what requirements did you have and how did you meet them without skyrocketing costs

9) Mathematics and Cost Modelling – a quote is not a cost, it’s a quote; you need to understand core cost drivers to judge quotes; demonstrate this in at least one answer

10) Independence – you will need to continually learn and continually self manage; your boss won’t be available 24/7 and definitely not when you need to make a critical decision quickly to keep a project moving