Author Archives: thedoctor

Where’s Our McClelland Report?

Given the combination of expenditure levels, complexity, vulnerability and criticality to operations, it should be expected that extremely high priority be given to procurement by the most senior levels of management and others responsible for governance within public sector undertakings.


In addition, it is obvious that those involved in the day-to-day conduct of procurement operations have an important and highly professional role to perform. The procurement function and its organisation should be regarded as one of the most important in the undertaking and its status should rank with that of other professional functions such as finance. Indeed, given its dynamism, variability and external perspective, not only should those involved have the backing of professional training and accreditation they should preferably have interpersonal skills which support their externally facing roles as the delegated legal and commercial representatives of their organisations as they place business with suppliers. Also, there is a growing requirement for knowledge of and ability to satisfy legal and other corporate and social responsibilities such as sustainability.


I believe that one of the keys to progress is the definition and pursuit of a vision of the ideal model for procurement including its optimum characteristics.

Truer words, as penned by John F. McClelland in his 2006 Review of Public Procurement in Scotland (known as the McClelland Report), could not be said.

But what I can’t understand, is how these words, spoken for over a decade, by Procurement visionaries, were taken as inspirational by the Scottish people and turned into the success story recounted in the recent CPO Agenda Executive Debate. As per “Cuts from the Centre” over on the “CPO Agenda”, which documents the success of the Public Procurement Reform Board ( PPRB ) in Scotland (which is centralizing Procurement in the Public Sector), which was formed in recognition of the importance of procurement by the administration in response to the McClelland Report, In the first two years of the programme, as independently reported by Audit Scotland, there was £327 million attributed to the program itself, and there were further efficiency savings, in
terms of the way we would understand efficiencies, reported through efficient government returns of about £200 million. Given that public sector spending on goods and services across Scotland amounts to about £9 Billion, that’s a saving of over 5%, which isn’t bad at all for a new program in the private sector (which is getting compliance of almost 90% without a mandate).

The public procurement world needs more success stories like this. How do we get them?

Is “Low-Cost Country” Inflation Driving Manufacturing OnShore?

There’s a lot of noise out there about how inflation may be forcing manufacturing back on-shore (to South America, Mexico, and even the Good Ol’ USA), but how much of it is noise and how much of it is (about to become) reality. Leaders want to know, and so does the Hackett Group.

As a result, the Hackett Group has just launched a new complimentary study designed to assess whether inflationary pressures are driving manufacturing out of China, India, and other low-cost countries. It is trying to answer the relevant questions, which include:

  • What impact are rapidly changing cost drivers having on manufacturers?
  • What strategies are manufacturers using to offset these costs?
  • Are manufacturers bringing production closer to customer markets?
  • What are the critical success factors for optimizing the supply chain footprint?

The study is open until September 16 (2011) and all participants will receive a free copy of the research report and an invitation to the presentation of key research findings. As always, responses from individual participants will remain completely confidential and will be used only in combination with those of other study respondents to develop a composite picture.

The study on “Optimizing the Supply Chain” can be found on the Hackett site.

Procurement Mastery in 2015

While far from a complete picture of what Procurement Mastery will look like in 2015, Accenture’s outlook for 2015 in their recent “Compulsive Contributors” report, identified three areas of emerging excellence which are among the foundations of Procurement Mastery for any organization that wants to make it to Next Level Supply Management. In brief, they were:

  • Excellence in Risk Management
    Disruptions are becoming more common by the day as supply chains increase in length and complexity. If there was ever an appropriate use of the term “the new normal” (there isn’t, by the way), this would be it. Masters have to be very adept at identifying, predicting, detecting, and mitigating risks before they turn into full blown, costly, disruptions.
  • Closed Loop Spend Management
    Leading Procurement organizations work closely with finance, manage supply and demand, and “close” the loop on the end-to-end spend cycle.
  • Analytics
    Using data to understand what you are spending, with whom, on what, from where, what is being obsolesced before it is used, and what might not even be needed in the first place. Using data to understand supplier performance. And using data to predict what might happen next. The masters will embrace, and get value from, predictive analytics long before the contenders.
  • A Transformed Workforce
    There is a talent management process in place that manages the full lifecyle, from recruitment through development to retirement. And the caliber of the talent, as a result of this program, is above the norm.

Risk Detection Can Not Be Automated

No matter how many impressive white papers, including this recent one on “Uncovering Surprising Supplier Behaviours Creating Organizational Risk” by Atlantic Software Technologies, Inc. (an IBM Software Value Plus Business Partner). This white-paper recommends automation of inbound data classification to expedite throughput because automation of this function enables the organization to redeploy up to 40 percent of staff while increasing processing throughput as much as threefold. This is important because one cannot assess the true business value of a supplier relationship unless one understands his or her own personal relationship with the supplier. And, in order to really get a handle on the quality of the relationship, an organization has to
be able to collect and analyze data points from the multiple impact points throughout [its] supply chain, both internally and externally, not just the ones that are easily visible and retrievable.

This is true. And, as the paper points out, if one does not understand the nature and quality of the relationship, one may never know that:

  • a supplier delay, just communicated to one of your employees, will impact multiple customers,
  • new international suppliers are being tapped to avoid single-sourcing risks, which might be causing quality risks, or
  • foreign nationals are handling sensitive information prohibited by export control laws (and this last risk could put an officer of the company behind bars).

But automating the processing and classification of unstructured data is not going to reduce risk. In reality, it’s going to increase risk. In a nutshell, here’s why.

Let’s say that external testing found lead paint on a children’s toy. If you’ve identified “lead paint” as a risk and set up a rule that alerts someone in Quality Control that a review is required, then you might feel you’ve mitigated the risk, as the document will come in, be sent to quality control, see that lead levels are present and well beyond tolerance, and tell Procurement to refuse the shipment. Problem solved. Right? Wrong!

What happens if the test was performed by an individual who speaks English as a second language, who trusts that all misspellings will be handled by Microsoft Word, and who mistypes “lead paint” as “led pant” in the report. Both are legal English words, and if you turn grammar checking off, Microsoft Word will not complain. Is the automated classifier going to catch this? Not likely. While you may remember to program in one or two misspellings, like “led paint”, or an abbreviation, like “ld pnt”, you are not going to come up with every possible misspelling, and you’re not going to want to because, if you include too many, you’ll get a lot of false positives (and misclassifications). If this is a product where tolerance is 0, and the test results are not acted on in time, not only could you be stuck with a multi-million dollar inventory that can’t be sold, but if a product makes it onto shelves, gets bought, and someone gets sick, that’s a lawsuit that could cost more than what it cost to develop and manufacture the first batch of products.

Now, there’s nothing wrong with deploying such technology to scan documents to look for documents of interest that should be reviewed, but it should not be the foundation of any risk management strategy. Good risk management entails identifying relevant risks and having a mechanism for anyone to report when a risk of interest may be materializing. Then someone knowledgeable about the risk reviews the situation and makes the call.

Food Costs are Still Spiking – Are You Ready for the Risks?

As per this recent FAO Food Price Index, food prices have surpassed the 2008 highs, and there is no end in sight.

Right now, the world is on the verge of riots around the globe, and this includes developed countries like Japan (where food riot fears [are] on the rise [wealthwire.com]). The riots in Tunisia and Algeria in January and Mogadishu from earlier this month are just a start. Over half of the world lives on US $2.50 a day or less. The lucky ones can barely afford to eat as it is. If food prices keep rising, they won’t be able to. Talk about political risk. We’ve even seen riots in England and Canada this year … imagine what will happen if a significant number of poor people in the developed world can no longer afford to keep a roof over their head and eat.