Category Archives: Procurement Innovation

Virtual Procurement Centers of Excellence: The Next Level of Complex Direct Procurement

We have already discussed Value-Based Sourcing in Complex Direct Supply Chains and how it can generate an ROI well beyond what cost-savings focussed Procurement can generate on its own. We also indicated that a key requirement of success for value-based sourcing was a platform designed for complex direct procurement, and outlined the basic requirements for such in previous posts.

However, the right platform not only allows Supply Management to extract more value from every event than it would otherwise, but, when properly implemented, also provides the foundation for a Virtual Procurement Center of Excellence — a VP-COE if you will. A VP-COE is the next phase of Procurement Evolution for leading Procurement organizations that have evolved from decrentralized models through centralized and center-led models but which now need another evolutionary transformation to excel in today’s increasingly sophisticated global supply chains.

Today’s leading Procurement organizations are center-led. These Centers-of-Excellence are focussed on the identification of appropriate supply chain strategies, strategic categories, best practices, and knowledge sharing and often leave individual buys and tactical execution to the individual units in an effort to get the best of both worlds.

These centers of excellence typically build cross-functional teams to tackle strategic categories that represent all of the key divisions and business units, allow for the creation of flexible supply chain processes and commodity strategies through collaboration, and find ways to fully leverage strategic category spend across the enterprise. They, theoretically, give the organization the best of both worlds and many organizations that employ this model have evolved to be leading Procurement organizations, often recognized in the Hackett Group Top 8%. But is this as good as it gets?

Not even close. The view painted by consulting organizations offering to transform your Procurement organization into a COE is one shared through rose coloured glasses. First of all only high dollar “visible” strategic categories will make the cut due to the limited manpower and additional time required to manage global communications and project teams. A lot of spend will go unmanaged, and a lot of opportunities left untapped. This does not sound like the definition of a true center of excellence to us. Does it sound like a true center of excellence to you?

The long and short of it is, in order to get all spend under appropriate management in a large, distributed, global organization, a virtual procurement center of excellence is required.

So what, precisely, is it and what, precisely, do you need to enable it? Good Questions! And you will find the answers in Sourcing Innovation’s latest white paper The Benefits of a Virtual Procurement Center of Excellence for Complex Direct Procurement, sponsored by Pool4Tool. Download Now! [registration required]

Procurement Sustentation (Collected Links)

Procurement Sustentation Prologue

  1. fiscal crisis
  2. Bank Failure
  3. (un)employment rate
  4. Gen X, Gen Y, and Gen Z
  5. Currency Conservation
  6. mega global corpos
  7. the 1%
  8. outdated financial models
  9. Oil & Gas Price Shocks
  10. Mini Trends and Macro Trends
  11. Postal Services
  12. Airlines
  13. ports & labour strikes
  14. roads
  15. Waste, ROHS, WEEE
  16. PETA
  17. Greenpeace
  18. Natural Disasters
  19. Water
  20. Oil & Natural Gas
  21. Climate Change
  22. Natural EMPs
  23. Food Shortages
  24. Rare Earth Minerals
  25. Government Actions
  26. WTO
  27. UNCLOS
  28. Customs Acts
  29. Trade Embargoes
  30. TPP & the Poison Pill
  31. China and the New Silk Road
  32. Political Unrest
  33. Taxation
  34. Tariffs
  35. Health & Safety
  36. Labelling
  37. Industry Associations and Standards
  38. The Sharing Economy
  39. Brand
  40. Crime & Piracy
  41. Fraud & Corruption
  42. Pandemics
  43. Urbanization & Mega Cities
  44. Education Quality
  45. A Lack of Match Competency
  46. Mass Hysteria
  47. XaaS
  48. Workers’ Rights
  49. Gamification
  50. Talent Tightness
  51. Talent
  52. Project Management
  53. Engineering
  54. Marketing
  55. Sales
  56. Legal
  57. Finance
  58. Logistics
  59. Warehouse Management
  60. Human Resources
  61. Leadership & Fiefdoms
  62. Shareholders
  63. Board of Directors
  64. Major Activist Investors
  65. Solution Partners
  66. Tier 1
  67. Tier 2
  68. Carriers
  69. 3PL Firms
  70. Outsourced Providers
  71. Government
  72. Corporations
  73. Individual Consumers
  74. Demand Planning
  75. Mobile Movement Madness
  76. Cybersecurity / CyberAttack
  77. e-Currency
  78. e-Privacy
  79. Big Data / Data Scientists
  80. The Cloud
    & The Cloud, Part II
  81. Social Media
  82. The Secret Seven
  83. Spreadsheets
  84. Dashboards
  85. Apps
  86. Template Mania
  87. OLAP
  88. Computing Leap
  89. IP Patents
  90. Open Source
  91. Proprietary Madness
  92. Data Loss
  93. Technological Disasters
  94. New Industrialization Era
  95. Competitors
  96. Consortiums
  97. Traditional Analysts
  98. Pundits/Futurists
  99. Conferences
  100. Bloggers

Give Your Procurement Practice Some Backbone! Part II

Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their Procurement expenditures.

In Part I, we discussed how as an organization moves from decentralized/departmental procurement decisions to a centralized procurement and strategic sourcing department, there are bound to be some growing pains when it comes to working with departmental stakeholders and that transitioning to an effective central procurement and sourcing model will require changes. We discussed two preventable gaps that undermine the transformation process and in today’s post we discuss two more.

  • Lack of management tools or processes.Procurement needs to be equipped so that once spend and suppliers come under purview, they can effectively manage each component. This doesn’t have to be a full software solution, but Procurement should be setting up some standards so that stakeholders can feel comfortable with handing off pieces of contract and supplier management to Procurement. This may start as a simple Excel sheet tracking contract notice and term dates, and can evolve to full contract management and compliance departments. With Procurement handling these components, stakeholders can reallocate their time to accomplishing departmental goals as opposed to tracking performance and dealing with contracts, SLA, and pricing issues. Having Procurement involved in supplier management can actually help the working relationship between suppliers and end users as stakeholders can rely on Procurement to play “bad cop” and push where necessary without putting the day-to-day relationships in jeopardy.
  • No clear way to provide feedback.When a business moves to a centralized model, there are sure to be some bumps in the road. It is key to have two-way communication between Procurement and other business units to continually improve and refine the process. Positive communication (e.g. sharing success stories) is a great to share how Procurement is benefiting the company and other departments (e.g. reducing costs, improving service, etc.), but be sure to also open a forum for constructive feedback. I have seen positive feedback shared through company announcements, newsletters or quick “blurbs” in departmental bulletins. Procurement departments can solicit feedback from something as simple as a quick email survey when projects close or by establishing more formal project debriefs to talk about what went right and what could have been improved with the stakeholders involved.

As Procurement professionals, it is key understand from a stakeholder perspective the challenges with letting go of control and autonomy for project and purchasing decisions. Procurement and executive-level management need to ensure that the Procurement department is being set up for success by establishing company policies and processes that will give Procurement the authority and standing it needs to be truly effective.

Thanks Torey!

Give Your Procurement Practice Some Backbone! Part I

Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their Procurement expenditures.

As an organization moves from decentralized/departmental procurement decisions to a centralized procurement and strategic sourcing department, there are bound to be some growing pains when it comes to working with departmental stakeholders.

Two of the main drivers for this are that:

  • Stakeholders are used to making decisions.End users and department personnel feel they know what is best to support their needs and may have had free reign in the past to make purchasing decisions for department-specific needs as well as more general categories (e.g. office suppliers, laptops and desktops, IT accessories, etc.).
  • Stakeholders are used to managing relationships with the suppliers with whom they work.Because stakeholders are making their own purchasing decisions, they are also typically managing the negotiation, contracting, and ongoing relationship with the supplier.

To transition to an effective central procurement and sourcing model, changes will be necessary within the organization to support the new structure. As someone who has helped clients transform (or build) their procurement operations, I have some seen some preventable gaps that undermine the transformation process and cause frustration for Procurement and the business units they support.

  • No standard procurement process.One of the first steps for establishing a central procurement department in an organization is to ensure that those in Procurement are singing from the same sheet when it comes to process. If you have a mix of past (or no) experience, each person is likely to come to their role in Procurement based on their past processes (or lack of processes) in mind. Begin by defining what the standard sourcing process looks like for your company and communicate that process to the organization as a whole. Reiterate Procurement’s role and the stakeholders’ role within that process; the goal is ensure end users are familiar with and are able to embrace the process, not to cut them out of it. Certainly not every project and/or purchase may follow the same process, but having a standard and communicating this to end users provides a familiarity with how procurement works and what the stakeholders can expect. Having a standard process allows stakeholders to feel comfortable working alongside Procurement and not feel as if decision-making is being stripped.
  • No defined (or enforced) Procurement and Contracting policies.Many times I have seen organizations start pushing centralized purchasing decisions and procurement support without any organizational policies that establish this new standard within the company. Without clear organization policies (and management support of those policies) for where, when, and how Procurement should be involved in departmental purchasing decisions, stakeholders are bound to continue to work in a vacuum.Any policies put in place should cover at a minimum the procurement process, how and when procurement needs to be notified of a purchasing need, and authorization levels (e.g. who can sign for what, spend levels that require certain level of sign off). Many times, part of that process includes a legal component in terms of who is actually authorized to sign agreements, purchase orders, etc. Many companies employ a checklist or agreement cover sheet that requires multiple sign-offs that may include review by the stakeholder, legal, procurement, and others before the final signature on the agreement is completed by the authorized party. Without a clear and communicated (and backed by management) policy, contracts typically continue to be signed by business units without any Procurement knowledge or oversight. While this may threaten the autonomy of some stakeholders, Procurement and management should be explaining the benefits of this oversight, especially for high value agreements or purchases, and the pitfalls these policies help prevent.

If only these were all of the gaps. These are just the beginning, In part II, we will discuss two more gaps that need to be prevented.

Thanks Torey!

3 More Terrible Reasons NOT to Use e-Procurement

Over on Procurement.World, the procurement dynamo gives us 3 Terrible Reasons NOT to Use e-Procurement, which, sadly, are still used by many organizations in the bottom 40% to 60%, to fight the implementation and adoption of e-Procurement systems.

If the reasons given in the procurement dynamo‘s post were the only reasons, that would be bad enough. But these are just a few of the reasons that Procurement organizations don’t use e-Procurement. In this post we are going to discuss other reasons, and, in particular, reasons that are a bit more believable — which are the worst kind of reasons.

1. Our Processes are Not Supported in the New System

While it’s true that the processes used by organizations that are still operating like it’s the last century are not supported out of the box, modern procurement platforms come with adjustable workflows that can be tailored to support just about any process the organization needs, good or bad. This may have been an excuse with first generation systems with fixed rules and workflows, but it’s not an excuse anymore.

2. The system won’t work with our current ERP or AP system

Most organizations require that all POs get in the ERP, all invoices in the AP, and all goods receipts in the inventory system. Because no recommended e-Procurement system will integrate with these systems out of the box, anyone against the implementation of such a system will insist it won’t work. And, again, wile this may have been an excuse with first generation systems that were almost impossible to integrate with anything, it’s not an excuse anymore when most e-Procurement vendors realize that their systems have to integrate with other systems and have published data models, open APIs, and middleware that enables the easy integration with such systems.

3. We don’t need Supply Management System X, we need Supply Management System Y.

Sometimes, knowing that a system they don’t want is inevitable, an opposing employee will suggest that a system is needed, but the system under consideration is not the right one and a totally different system is needed. For example, you are looking at a P2P and they will insist that a S2C is needed, or vice versa. Or they will insist that the ERP needs an upgrade. Or so on. But it will all be a distraction.

Systems will always be opposed, but when they are needed, they need to get implemented. The key is to select the right one. But with proper homework (and many posts on this blog will tell you how to do it), the right one can be selected.