Last week, I got the heads up from my colleague, Andrew Bartolini, that he was going to leave the Aberdeen family to pursue other opportunities. To me, this seems like a very newsworthy event, as Andrew was the face of Supply Management for Aberdeen and will not be easily replaced. I also do not think that Abderdeen was expecting this, so there will likely be some large gaps they need to fill quickly. Knowing Andrew, I am sure he will be involved in some type of cordial transition.
From a personal perspective, I could not be more happy for him. I have to believe that he is making this move to redefine his role in the supply management industry. He is not going to a vendor, so I would put the money down that he will be launching his own vision of how analyst content should be generated and distributed. It would be a bold move, and one that I think the market would embrace.
From a professional perspective, I think it could usher a new era in analyst coverage for sourcing and procurement. Andrew has a deep network and strong knowledge base. By creating his own model, it might generate interest in a new way for analysts, vendors and practitioners to collaborate and improve. With the recent market consolidation around Gartner/AMR, there is certainly an opportunity for a start up to succeed in this area.
I truly look forward to seeing what Andrew ends up doing. It might end up being a big win for everyone.
I originally wrote this post for the Sourcing Innovation series for this month. You can follow the link and see the other efforts, or just take my word for it and know that this was the best guest post.
As any one who has been around e-Sourcing technology for any amount of time knows, the greatest sourcing and procurement successes are directly tied to properly managing adoption and continued usage by both the sourcing and stakeholder communities. The best software in the world is only marginally effective if only a tiny fraction of spend is under management and being executed through a strategic sourcing process. To be truly successful, companies must bring more spend under management.
In this Sourcing Innovation series which highlights strategies companies can utilize as the global recession slowly releases its grip, I will focus on a critical strategy that consistently drives success. It is not a theoretical concept that requires the use of the latest-and-greatest functionality, but one that works in the real world with tools most companies already have in place.
The critical strategy I refer to is Sourcing Execution, the tactical operation of strategic sourcing performed by a third party for a procurement organization. Most people are familiar with procurement outsourcing from years of experience with very large entities such as IBM or Indian BPO providers handling the P2P process in a remote call center. What a number of organizations are beginning to learn, however, is the same tactic can be done within the sourcing department. Automating transactional driven functions within the sourcing process increases the efficiency and impact of sourcing teams which will, in turn, increase spend under management and savings.
As clearly outlined in the example, there are very distinct areas labor can be divided. The outsourcing of tactical data management can increase the effectiveness of the local resources. Another compelling strategy for Sourcing Execution is to identify and outsource the “block and tackling” of the competitive bidding process. Companies can use different methods to achieve this goal:
Tactical Execution:
Support from the partner is generally remote and process oriented. Internal stakeholders prepare the bid data and deliver it to the partner to be executed in a pre-determined way as designed by the procedure team/steering committee. For example, taking the RFP elements and building the online sourcing project and inviting suppliers to participate. The third party makes no sourcing decisions, but the time line is dramatically compressed, thus allowing the organization to focus on the more strategic objectives of the category.
SME Assisted:
The next level of “on-demand” support makes Subject Matter Experts (SMEs) available on a short term basis, to offer strategic input during the most critical phases of the sourcing process. These SMEs might be experts in supply markets, risk/financial analysis, e-Sourcing or specific category expertise that is valuable. For example, developing a complete RFI/survey or relevant lotting strategy.
Category Implementation and Compliance:
A sourcing project is only as good as the implementation rate. If a company identifies 20% savings for a category and implements 5%, the actual delivered savings is zero. Category compliance services provide tactical support for tracking and following the implementation of awards by managing reports that highlight compliance areas that need attention. The service can also distribute repetitive information to suppliers and stakeholders as it relates to new contracts.
Category Management:
Full blown sourcing advisory services at a category level where a qualified sourcing professional manages the most of the sourcing lifecycle — from spend data collection through award analysis and negotiation. This is the traditional X-step process, depending on which management consulting firm got their first. The SME is an extension of the procurement team for 8-14 weeks on average. This period can be extended if implementation and compliance are required.
A shared service approach to outsourced strategic sourcing delivers numerous benefits. A normal sourcing lifecycle can be reduced to 2-6 weeks from a standard 2-6 months. This allows internal category managers to focus on strategic initiatives, supplier development and core Tier-1 sourcing opportunities. Allowing indirect and “C” Level items to run through collaborative management, increases the amount of spend under management and reduces costs dramatically without adding head count.
Two resources on this topic that are worth exploring in more detail are the previously mentioned AMR Research (specifically Phil Fersht and Mickey North Rizza) and TPI. Bill Huber at TPI is very wise in these topics as he has implemented and researched outsourcing for years.
Simply outsourcing for the labor arbitrage is a short term plan which will not have sustained results. Simultaneously leveraging a technology, process and people strategy enables you to realize sustainable objectives.
2008 brought many issues to the procurement table such as supplier risk, resource constraints, and diffusing uncertainty.In an Aberdeen report, Andrew Bartolini offers several procurement strategies that will help organizations streamline their processes in comparison to the goals and initiatives being employed by Best-in-Class.
Perform spend analysis on a regular basis- Departments with limited or no level of visibility into spend unknowingly restrict their strategic contribution to enterprise performance.
Develop and track a pipeline for spend under management- This pipeline should include a detailed plan that targets specific categories and devises an approach to engage specific budget-holders.This pipeline should be revisited on a regular basis.
Incorporate savings quotas in the staff’s incentive plan- Target behaviors and results should be clearly identified and justly rewarded and, should also be quantifiable and measured.
View strategic sourcing as a holistic process and leverage process automation wherever possible- While e-sourcing solutions provide the key capabilities required to automate the sourcing process, contract lifecycle management and spend analysis systems should be viewed as a part of a comprehensive strategic sourcing approach.
Enhance supply risk management capabilities- Aberdeen recommends the development of a program that establishes clear ownership of supply risk within the enterprise and incorporates training for those involved in it.
Conduct regular contract compliance audits- Higher contract compliance rates usually translate into greater implemented savings, improved spend control, and a higher percentage of spend under management.
Lead your team and defend it- While an effective CPO must be a strong leader and a highly capable manager, in times of duress, the staff will seek, and ultimately prize, leadership above management.
Engage the CFO to develop case management strategies- Cash or liquidity is valued in today’s market since it provides greater assurances to investors, employees, customers, and supply chain partners of on-going solvency and an ability to perform against current and future contracts.
Hire category experts from industry (i.e. energy, steel, chemicals, services)- Many enterprises are being forced to make deep cuts in a labor market that is both volatile and soft.This presents a unique opportunity for CPOs to reach out and hire seasoned professionals with deep category expertise.
Although the role of Chief Procurement Officers (CPO’s) is becoming more widespread, the challenges they face in maintaining consistent execution and transformation is increasing.“…two-thirds of this study’s participants believe that the economic downturn has positively impacted the role of the CPO within the enterprise.”The CPO’s who succeed during these tough economic times are those who formulate strategies that aim to achieve procurement transformation and competitiveness.
As a sponsor of this report from Aberdeen, E-Sourcing Forum readers can download this report for free.Please click here learn more about CPO challenges and strategies.
Denali Consulting as a very good e-whitepaper available, which I thought was tremendous for getting results from strategic sourcing initiatives. They surveyed over 50 sourcing professionals and came up with a very interesting Top 10 list, and who doesn’t love a list.
Ten Best Practices
1: Begin with an End State in Mind
2: Prepare Prior to Launch
3: Focus on People From Day One
4: Plan Early for Savings Tracking
5: Standardize Your Sourcing Process, But Be Flexible
6: Put Strategic Sourcing Into Context of a Holistic Category Management Process
7: Formalize Your Change Management Approach
8: Maintain a Commitment to Total Cost of Ownership
9: Use Holistic Measures to Track Success
10: Don’t Shortcut Market Assessment: Use External Market Intelligence
First off, for any one that has been involved in these issues, the list brings back many memories, both positive and negative. All of the points are excellent, and I was very interested while reading 3 and 5. Having the proper team assembled when launching a new process is critical. Denali points out:
Be up-front about expectations regarding time commitment to avoid bottlenecks in the future.
Use a formal, collaborative knowledge management program to capture and share sourcing process, category, and market information across the organization. Follow with a knowledge transfer program for future initiatives.
Consider an organizational structure that enables the new processes associated with Strategic Sourcing and supplier development.
Ensure team success by putting the right people, with the right skills, in place from day one, beginning with recruiting, through training and redeployment.
Standardization of process for repeatable success, was listed as the 5th item in the survey results.
Learning from past sourcing teams and implementing a standardized, documented Sourcing process can guarantee repeated sourcing successes, improved processes, and quickly adopted new best practices and technologies. Some of the best organizations we’ve seen with regard to standardized sourcing processes use a web-based “Sourcing toolkit” that gives step-by-step instructions for each sourcing phase and includes standard templates for key activities.
Obviously, this point is where we are doing the most to help companies. We get to see a large number of companies make the transition from no e-tools, to some type of implementation. The ones that are getting the most value are also following many of the other concepts listed in this list. This is not a coincidence.
As usual, Denali has done a very comprehensive job of addressing the issues and offering good recommendations. This article is worth saving in your archives.
Add commentApril 16th, 2009Charles Dominick, SPSM - Next Level Purchasing
In Part I of this series, I shared some interesting statistics on the qualifications of today’s Procurement Vice Presidents and Chief Procurement Officers. In this Part II, I’ll share with you some additional findings on CPO qualifications.
These findings were gathered by examining 13 of the most publicized CPO hirings in recent years. Specifically, these are the CPO hirings we looked at:
Company | Date
BP plc | 2005
Chevron | Jan. 2005
Sara Lee Corporation | Mar. 2005
Tyco International | Jan. 2006
Dean Foods | Dec. 2006
Constellation Energy | Feb. 2007
Nortel Networks | Apr. 2007
Comcast | Apr. 2007
United Airlines | Sep. 2007
Goodyear Tire & Rubber | Sep. 2007
WellPoint, Inc. | Jul. 2008
Bristol-Myers Squibb | Jul. 2008
Chrysler | Dec. 2008
It should be noted that these 13 companies account for over three-quarters of a trillion US Dollars in annual revenue. So, they are leading companies and we can learn a lot from them.
We looked at three characteristics of the CPO’s that were appointed:
1. Whether they were promoted from within (came from the same company);
2. Whether they held a procurement position immediately prior to being appointed CPO; and
3. Whether they came from a similar industry
Please note that those who were promoted from within were considered to have come from a similar industry.
Here is what we found…
• Six of the 13 were promoted from within
• Eight of the 13 held a procurement position immediately prior to being appointed CPO
• Ten of the 13 came from a similar industry
• All who switched industries had a procurement background
• Only 1 who switched companies lacked a procurement background
• Four of the six who were promoted from within were not in a procurement position immediately prior to being appointed CPO
So what conclusions can we draw?
1. Like the transformational leadership skills described in Part I, industry expertise is very important
2. It is certainly possible to be promoted from within to the CPO position
3. When senior management gets to observe excellent leadership skills on a first-hand basis, that will lead senior management to considering promoting you from within to the CPO position, even if you don’t come from a procurement background
4. When senior management recruits you from another company and, therefore, did not have the opportunity to observe your leadership skills on a first-hand basis, a track record of procurement results matters quite a bit
2 commentsApril 14th, 2009Charles Dominick, SPSM - Next Level Purchasing
The most recent Next Level Purchasing annual survey of over 1,900 procurement professionals revealed some fascinating results on many topics. One of those topics was the college education and procurement experience required to get to the chief procurement officer level of an organization.
We categorized our research according to five levels on the procurement chain of command: junior buyer, buyer, procurement manager, procurement director, and CPO/Procurement Vice President.
First, let’s explore how important a master’s degree appears to be as one ascends through the procurement chain of command. Here are the percentages of individuals who have a master’s degree for the first four levels:
Second, let’s explore how important procurement experience is for rising through the ranks. Here are the average years of procurement experience for each of the first four levels:
So, what percentage of CPO’s/Procurement VP’s have master’s degrees? And how many years of procurement experiences does the average CPO/Procurement VP have?
You probably are thinking that the pattern that you just saw would be followed with the CPO/Procurement VP position having a higher percentage of master’s degree holders than any of the other levels. And you probably think that the average CPO/Procurement VP has more years of procurement experience than the other levels.
And you’d be wrong.
Only 27% of CPO’s/Procurement VP’s have master’s degrees. And the average CPO/Procurement VP has only 9.7 years of procurement experience. In both cases, these are lower numbers than not only the procurement director level, but also the procurement manager level!
You might be thinking: are these findings counterintuitive? Well, we were a little surprised by these results at first blush, too.
But as we digested the results and shared them with experts in the field, we found very little surprise among those experts, including CPO’s themselves. While “paper qualifications” mean quite a lot in terms of promotability up to and through middle management, they mean less when you get to the point of reporting directly to the CEO.
What does matter when rising to the CPO level?
Transformational leadership skills do. Transformational leadership skills translate to the ability to drive change and improvements throughout an organization in the face of challenges. Transformational leadership skills are arguably the #1 career accelerator for getting to the C-level.
That’s not to say that other qualifications aren’t important. They are. And that’s not to say that you can skip four levels in the organization overnight if you simply have leadership skills. You can’t.
But what these results are saying is that transformational leadership skills can get you to higher levels faster than other qualifications.
Stay tuned for Part II, which shares our analysis of the most highly publicized CPO hirings of the past few years.
On Friday, Jason Busch on Spend Matters had excellent coverage of the latest effort from Forrester, the 2009 eSourcing Wave, which is conveniently available from Emptoris. Unfortunately, the blog from Jason is infinitely more interesting than the actual report. If you were wondering, it should be the opposite.
These have historically been done by Andy Bartels. However, this Wave was done by Duncan Jones with help from Christine Ferrusi Ross, Antonin Shanahan, and Philipp Karcher. Much to my disappointment, a new crew has done nothing to enhance the Wave for its value to practitioners. In fact, I waffled on whether to even address this “analysis” but in the end, decided that Iasta must have a public response, since this report will exist on our shared airwaves for the next four years. To not do so would be a disservice to the procurement community. Moreover, it would be a disservice to us and the decade of hard work that has resulted in a very accomplished company and product line.
Before beginning, a quick housekeeping item: it will not be a coincidence when you see my content densely packed with proper names, titles, tags and descriptive terms for eSourcing (like spend analysis, contract management, reverse auctions and optimization). I want to make sure that when any one does a Google search for The Forrester Wave™: eSourcing, Q1 2009 by Duncan Jones, they also have easy access to other sides of this story.
The latest Wave begins with retread benefits of eSourcing – that have existed in Powerpoints going back to FreeMarkets days. Fair enough, I guess some readers are new to this and need the 101 class. It continues on with more basics like deals are getting done in SaaS, suites are expanding across other functional areas, and ERP are becoming players in the market. Spoiler Alert: the rest of this analysis is basically a forty-something ex-model trying to latch on top a sixty-something, moneyed retired divorcée (large vendors pay Forrester into the millions every year for research and “access”). Spoiler Alert II: this is not the portrayal of ERP solutions in the new report coming out by Andy Bartels about the ePurchasing market. I saw an advanced preview and it has got a lot of good impartial information in it and is especially candid about SAP and Oracle in the market.
Aside: Page 4, Figure 1 of the eSourcing 2009 Wave, shows that the total market (using revenue projections for sourcing, contract management, spend analysis, and spm) for eSourcing is $2,043,000,000 and roughly half of the entire ePurchasing market. If this is the case, why would you pick 9 vendors and call it a day? Does not this topic deserve a true “deep dive” with in depth product reviews, surveys, interviews and audits?
The truly troubling part of this effort, was the arbitrary criteria used for inclusion: current offering, annual revenue, strategy, market presence. I am not sure how these were actually graded since we were only asked four questions via email about our revenue and general value proposition and we never did a product demo or serious benchmark. These artificial parameters around the qualification have nothing to do with the product, additional services offered, quality of support, client base or price and do a disservice to practitioners by shot-gunning the research.
As far as what results these parameters developed: a sourcing product that is specifically designed and sold to the retail industry, a company in Europe that I have never heard of and we certainly have never competed against, a product with the acronym PLM right in it, that practically requires you to use the advanced search box to find the one web page about SRM, and an ERP product that actually gets people to laugh out loud at its miserable value. As far as Siemens goes, they probably still have the old eBreviate code jammed into some dark corner but they aren’t competing on any sourcing specific deals with the ATKPS application. And, correct me if I am wrong but Agentrics at least used to use Emptoris – unless they’ve now created their own platform? Would that not a be a violation of Rule #1: (a vendor must have its own e-sourcing product)?
Hmmm, I am losing confidence in the vendor inclusion process…44% of the best vendors have serious issues with their qualifications. Back to Iasta for a moment, which one of these criteria did we not qualify for? We are not $15m in revenue (this is true) but no one ever asked or requested our audited financials.
Moreover, I just do not understand what Forrester is trying to accomplish with this. Is it an intense global review, hence they were impressed by i-faber? If so, where are IBX, Synertrade, Portum and others that have significantly more presence? They even explain that Agentrics and Siemens are vertically targeted tools. So, is there a weighting benefit by only serving one category of client? What does $15m in license revenue have to do with happy customers that renew contracts and quality software that performs incredibly advanced functionality? And, as Jason points out, how is an analyst best qualified to judge a vendor’s strategy and assign 50% of his ranking to it to boot?
At the end of the day, I believe that these reports only do a disservice to the entire community. I got my first inbound query about Iasta not being included at 10:30am Thursday morning following the publication of the Wave. It came from Europe, from a very important prospect, at a very large company, that is strongly considering our tools. (Pay attention class: that’s more than one platform and an international presence, but we are not on the grid). I had to go into Code Red emergency response mode for the rest of the morning, just as I always do when the Wave or Magic Quadrants come out with their predictable results.
I am not mad because these reports are schlock. I am mad because they seriously impact our business and cause irreparable harm to our reputation and growth efforts. Countless companies will now use this report as their short list for evaluating solutions. We will never be contacted. I have no problem with practitioners trying to take the shortest path to the correct decision; everyone is very busy and needs help. However, passing this off as qualified unique research, when it is merely a 4 year refresh to a branded report, is counterproductive to the innovation which is really occurring out here – at Iasta and other vendors who did not meet someone’s arbitrary inclusion criteria.
I started getting my AMR newsletters again last week, after an extended outage, probably blamed on spam filters. Of course, the first one I read was by Mickey about procurement transformation in a recessionary environment. It was very informative and mirrors what we see and numerous institutions.
Evaluating your people, processes, and technology to understand where you can find greater value and cost savings as well as improve procurement process acumen and assessment of the appropriate skills to develop your procurement model is paramount in today’s world. Chances are you will need to engage external assistance to reach your desired procurement end state.
Here are three procurement transformation delivery approaches that can be used in the development of your global procurement strategy:
Procurement technology
Consulting and staff augmentation support
Business process outsourcing (BPO)
These are areas that I agree with completely and have seen amazing results from simple technology deployments, small and large consulting teams and full scale outsourcing. All of which, we have been key pieces of with different organizations. On sourcing technology, in particular:
Sourcing technologies automate the processes of RFX, auctions, optimization, and award. Sourcing suites have emerged in the last few years with the additional value of spend analysis, contract management, supplier performance management, sourcing compliance, project management, and product lifecycle management (PLM). These technologies can bring immediate savings of 15% to 20% in real money because of data aggregation and visibility of negotiation information as well as provide weeks of analytical cycle time reduction. With suite functionality, they enhance the workflows of actionable information to contract award, identify real savings opportunities, and provide cost-value tradeoff visibility across the organization.
Fortunately, AMR are big proponents of many of the solutions that we propose. Clearly, we are big believers in them too and have many different client engagements to prove the business case and hone our skills with people, process and technology.
Spend Matters Perspectives recently released its latest coverage of topics in the procurement world, this time the focus was on the value of certifications. As usual, Jason Busch does a fine job of writing comprehensive and comprehendible content to examine the landscape of talent in procurement. The research starts out with some very unexpected information:
Indeed, across industries, procurement skills are falling short of what organizations need to fully address the demands placed upon this increasingly slimmed-down function. Our research suggests that fewer than 10% of the procurement workforce in North America has a procurement certification or has gone through a formal degree program in supply management or a related field (e.g., operations research, supply chain management, etc.). And for many, on-the-job training is insufficient. As a result, many hiring managers cite the challenge of finding enough qualified candidates.
From what I read, it seemed that the interviews yielded a consistent result that the certification side of things had greatly improved over the years. Both the SPSM and CPSM had highly useful content that practitioners could use to build their knowledge base in supply management. I also agree with the report that increased salaries and certifications might not be directly related, because people that pursue certifications will be the groups more highly motivated to succeed and grow professionally. Of course, diversity of skills and capabilities will also improve your ability to do these things, as well.
The report also mentions training that is available from groups like ATK and Denali. I am sure these are very useful. It is the mixture of both that I believe will bear the real fruit for practitioners. When we do training for SmartSource, some of the most important time spent is building skills for category management and market making. The dynamics of a supply market mean everything and the collaborative (or singular) task of correctly assessing these factors are critical to developing a bid strategy that results in a positive sourcing outcome.
But, apparently it is one that most people lack understanding of the costs associated. In this recent article by Supplychainbrain, which is highlighting a study by Kewill.
..found that three-quarters of respondents who awarded logistics contracts included sections on environmental compliance in their tender documents. However, most (54%) failed to make provision for the extra costs that could be involved.
In the survey, 70% of companies awarding contracts said that environmental compliance was either ‘reasonably important’ or ‘very important’. Survey respondents were also probed about whether their companies’ environmental enthusiasm would change in the coming years, given the chances of an economic slowdown. The overwhelming sentiment seemed to be no–but according to two-thirds of respondents, that is largely due to the ‘win-win’ of implementing green initiatives which bring operational efficiencies and also cut costs. The number who said they would continue to pay more for an environmentally friendly alternative (17%) was balanced by the proportion who said they would base their sourcing decisions on cost alone.
It seems surprising that the basics are being missed here. These are admirable and achievable goals for sourcing, but procurement should always be asking questions about the impact on costs. I suppose the moral of the story is always understand the total cost and if you suspect there are things you do not know, ask the questions. That’s what an RFx engine will do easily.
I really enjoyed an article that I read from Tomkins Assoc on Supply Chain Brain. The primary focus was to understand the disconnect that appears between buyers and suppliers, especially when it comes to global supply chains. Simple things that we take for granted, like email, are not even close to ensuring adequate communication. More important than the message, is who is accepting that message and their ability to act on it.
Mr Tomkins states, “In the North American business arena, SRM is perceived as a software approach. But when crossing the ocean, that can no longer be the case. There is some technology that is useful for facilitating communication between suppliers and companies, but true SRM is a one-to-one process. SRM is simply not about a company lining up all their suppliers and forcing them through the implementation of software.”
This is very true. Although software companies are very opinionated about the value of their respective SRM software, there is no responsible company that would ever profess that the software replaces the people, it just enhances the process to maximize the results.
Mickey North Rizza gives very good summary advice,
“It’s obvious that cost containment and reduction may be derailed, at least in the near term, based on current economic conditions. While guarantees are not available, understanding the baseline, gauging the market, slowing down the arrival of an increase, reducing inventory, and increasing cash can mean the difference between profit and loss.
Successful supply management teams partner with finance to deploy many of these practices in a series of contingency plans, which are put in place and used based on the company’s expected performance, future revenue, and profitability requirements. The contingency plans become an enterprise risk mitigation strategy that ensures the success of organizations through even the toughest of times.”
This brief is very interesting and AMR always does a nice job of explaining concepts, but backing it up with case studies. In this one, there are many to relate to. I was particularly interested to read the parts about establishing base lines and using market indices. Both are valuable concepts to be reminded of while trying to identify savings or containment.
In the interview, he highlighted four areas the procurement leaders can differentiate themselves.
“If I see how some of the leaders are really differentiating themselves, I would highlight four elements. First, they are looking at cutting non-working money in a strategic way, refer to it as strategic cost management. I also see that they are preparing for winning the war on talent, so that you can prepare for recession by getting very good talent instead of focusing on cutting procurement headcount like some others would be doing.
“Third, I see a lot of investments in analytics; so a lot of business insights. A struggling economy also means uncertainty, so you wonder ‘how can I get the best insights for my category managers’. Last, and not least, it’s a real opportunity to tighten the relationship with suppliers for innovation, because we see leaders accelerating their innovation agenda and breaking away from the pack during the recession by tapping into innovations through their suppliers.”
Its not surprising to see talent being an area of focus, he goes on to say that adding headcount with superior talent is a great idea. (I agree, but that sounds like turning around a aircraft carrier). He also brings attention to investment in technology, specifically spend visibility, as I interpret it.
I think getting ideas from experts like Kris Timmermans is a very good idea. Companies such as Accenture get visibility into all kinds of strategic ways to conquer challenges. In recessionary environments, it is essential to find quick methods to improve results, and listening to people that have seen many different approaches, will be very prudent.
KPMG and the Economist Intelligence Unit, recently released a study on the state of the procurement profession, which was shared with the readers of Procurement Leaders (not available online). The key findings were segmented in to 6 main areas:
Procurement will only win a seat at the strategic table if it can demonstrate its value across the business.
Procurement is becoming more centralized and gaining more control over corporate procurement.
Large technology investments are under used.
The tax implications of procurement are not considered strongly enough.
Procurement has a huge sustainability challenge.
Procurement is less visible in Asia-Pac countries.
Tax planning was considered one of the primary areas of focus in best in class companies. This strategy also has very little impact on suppliers, so it is surprisingly easy to achieve and sustain. Also mentioned, was the lack of focus on technology spending and proper implementation. Specifically discussed was the value of spend analysis, which has a very clear and defensible return on investment.
Finally, they discuss some interesting statistics. For instance, 20% of procurement execs think their teams lack sufficient talent and understanding of procurement challenges, while 34% of the other executives (CEO, CFO, COO) feel this is a problem in the department. From a communication level, 44% of the procurement respondents felt there was not enough consultation given to them, where the rest of these organizations scored 32% on the same question.
Its sounds like an interesting study that these groups issued, but I missed the point of the title of the article. The delta from 44% to 32% is not that big and is naturally skewed by those that responded. Of course procurement wants to be consulted more and, of course, every one else thinks they do enough. All things considered, I think those percentages are pretty close.
On the heels of yesterday’s post, about the SCM market expanding in times of economic pressure, Supply Chain Brain had another summary from an analyst about the looming crisis. This one is very frank about the current situation we are in and has some concerning conclusions.
Per Kevin O’Marah – AMR:
At our recent Supply Chain Executive Conference in Scottsdale, Arizona, Dow Chemical addressed the audience on the same day an across-the-board 20% price increase made front-page news in The Wall Street Journal. Dow has been a pioneer in devising ways to keep upstream costs from finding their ways into consumer prices. But, as VP of Supply Chain Jim Varilek told our audience, this game is over now. He showed how this huge price increase would just barely cover the increased costs of upstream inputs, especially oil and natural gas.
The audience had reason to care, since many were supply chain executives from consumer products (CP) companies, retailers, and logistics providers, all of whom are absorbing this price increase. What they saw sitting around them were peers wrestling with their own efficiency versus input cost battles.
He concludes, “Operations executives have been holding back the flood for far too long and it’s about to blow. Longer term, we expect productivity advances in the supply chain to keep inflation under control, but right now the risk of reigniting 10% to 15% inflation is very real. Stimulating demand with continued low interest rates is the wrong answer.”
Yikes. I will not say this is a surprise. I really believe that most people understand, down deep, that things have fundamentally changed forever. I know I used to get away with lunch under $5, no more than a few years ago. Now, its a $10 daily bleeder. However, the drum beat gets louder and more serious, with sourcing looking at front line hazard duty for many years to come.
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