BravoSolution UK Open Positions

Procurement Unplugged Q&A: Procurement Planning for 2018

During the latest BravoSolution Real World Procurement Series webinar focused on “Procurement Planning for 2018,” Guy Allen, Managing Director at Real World Sourcing, initiated ideas which all procurement professionals need to start thinking about for approaching the new year. Guy provided recommendations on how to assess your past year’s results and how to advance them into tangible goals for 2018 procurement initiatives. He also spoke about how developing a commitment process can drive engagement cross-functionally throughout an organisation, while also identifying and driving support for ground-breaking outcomes.

After the webinar, Guy engaged with the audience in a live Q&A session and answered real-world questions, like how Brexit and other global events will impact procurement in 2018, and how old-school and new-school techniques can help advance your procurement planning.

Q: How deeply involved should procurement be in the budget planning process for the organisation?

A: I think it’s a mixed answer. You want to work closely with the finance department. Whether I’d encourage the finance department to impose a 5% reduction in budgets with the instruction to use procurement to achieve that, that’s a difficult call because I think you could well be making yourself an enemy. But I think understanding how the budget process works and responding to the challenges that come out of that makes a lot of sense.

Q: With reference to Brexit, do you think business leaders across Europe will put pressure on politicians to ensure a deal gets done?

A: I think they will definitely put pressure on the politicians. But unfortunately, the politicians have other agendas, too. I’m sure they have an economic agenda, but they also need to demonstrate that leaving the EU is a painful process. I don’t think there’s any guarantee that a good deal will get done allowing free trade between the UK and the rest of the EU. There’s no guarantee at all.

Q: What is your advice for a Small Medium Enterprise (SME) on which procurement methods to adopt?

A: To me, SME implies that you have limited resources. The first thing you need to do is segment your categories, suppliers, stakeholders and your activities. If you have a small procurement department in a small company, what is that company’s key objectives? Because they probably can’t cope with as much turmoil as a large organisation. And you probably have limited resources so where are you going to have the biggest impact on what your SME needs to achieve? That’s where I’d focus.

From there, you drive the procurement methodology you want to adopt. If it’s cost savings, running four really successful e-options on materials that are really important to your company could have a huge impact. Think about what your SME needs, think about the limited resources you have, and apply what is going to have the biggest impact on what your SME needs to achieve.

Q: What is your view on the impact of the recent interest rate hike by the Bank of England and its impact on the UK export business?

A: It was well publicised that it was coming. It’s gone up from a quarter percent to a half percent, so it obviously had an impact on the exchange rate – that will have an effect on imports as well. You need to think about what you need to do, and what your contingency would be. If it’s key to securing supply at a certain price, maybe you need to forward buy or secure contract for the price. Again, I think you need to think about it, but it’s just another level of uncertainty.

Q: What is the impact of Brexit on Africa in terms of procurement?

A: A bad Brexit, from a UK perspective, will have the UK seeking other markets across the globe and there may be opportunities for Africa and other continents to either sell goods in the UK, or secure supply. So, for Africa and other places, Australia, etc., it may well be that a bad Brexit is good for them.

What it will mean, though? Of course, we’ll have even a longer period of uncertainty in terms of the UK than most people they deal with. But there is a scenario that you could paint that says, “a bad Brexit will be bad for the UK in the short term”, but actually opens up bigger opportunities in the long term. I don’t know if that’s true or not. I’m not trying to tell you that Brexit is a good thing, but I certainly could paint that scenario.

Q: What are the primary elements that need to be included in procurement planning?

A: I would say to use planning to achieve the ends in your function, or for you personally. If you want to drive toward deeper integration or involvement in capital projects, for example, make it a requirement that you’re involved in the capital approval process. And, make it a requirement that procurement has to sign off on only capital proposals. Think about what you want out of the plan because it is an opportunity for you to have a spec change, particularly in these uncertain times.

Think about what might be a burden – that’s the planning process – and turn it to your advantage. What is it you want out of it? Do you want more training for your staff? Have you not had any training for the last five years in procurement? And maybe you should put that in the plan. That’s what I would suggest.

Q: Isn’t printing charts and putting them on the wall a bit old-school?

A: Well it is, but that doesn’t make it wrong. It’s not to say that there aren’t other ways. But if you just leave your targets and their achievement on a dashboard on your desktop, you don’t know that people will look at them. You have a huge advantage of putting your printed chart up by the copy machine, or the notice board by the printer; people congregate there and it will encourage discussion. This makes it a much more social, shared set of targets than an individual looking at a website. So, I think it’s good; I think it gets discussed. I think as a leader, if you have your meetings near those notice boards, you can point to them. I think sometimes, some of the old school stuff is still worth doing.

Q: How is artificial intelligence (AI) having an impact on traditional procurement and typical buyer-supplier relationships? Is this something you should consider in 2018 planning, or is that quite further in the future?

A: I think all these things like AI are worthwhile. What we need to do is to use them to automate the routine and the things that do not make a fundamental difference to your business. But in the end, I feel that business gets done by people. Using the technology to do the mundane and routine stuff will allow you time to use your human intellect and human relationship-building on other areas that are important.

This Q&A session has been edited and condensed from the latest session in BravoSolution’s Real World Procurement Series, an established international series of online briefings designed specifically for procurement professionals, delivered by real-world experts. To listen to the full presentation on “Procurement Planning for 2018” click here.

Don’t Think Procurement Plays a Role in Defending the Corporate Brand? Think Again.

By Andrea Brody, Chief Marketing Officer at BravoSolution

If procurement leaders don’t realize they have significant responsibility to protect the corporate brand, they should watch the latest documentary from a German broadcasting station which uncovered cruel labor and animal welfare practices in the making of major ingredients in Haribo gummy bears. The investigation is called Markencheck which literally means Brand Check! You can’t get any more real about the role procurement has in protecting the company’s brand equity.

In the case of confectionary company Haribo, the German documentary called attention to the company’s use of slave labor in Brazil. Turns out that gelatin and carnauba wax, two key components of the company’s famous gummy bears, are sourced from areas involving inhumane working conditions and animal abuse.

Haribo claims to not have known about the reliance on slave labor, but the harsh reality is that unethical practices can exist in any supply chain, even those of large, well-known brands. By nature, multinationals have more supply chain complexity to manage and are less connected to original supply sources, making them more prone to sustainability issues. Household brands have a lot to lose when this happens – the negative effect of supplier scandals can impact everything from sales and stock price to PR and consumer trust. With millennials’ purchasing power increasing, and their rising demands for sustainable and ethical manufacturing practices from the brands they do business with, companies can ill afford even one mishap.

Prevention pays: Procurement’s role

Without a holistic, integrated procurement strategy that offers extensive visibility into the supply base, anticipating and mitigating unethical practices is very challenging.

Empowering suppliers, and setting them up for success, is a critical step for risk mitigation. Use tools that put supply partners at the center of the procurement landscape and make it easy for the supply chain team to gather insight into suppliers’ ethics, labor practices, business operations, and working conditions. This leads to a holistic view of performance and allows procurement to anticipate issues before they occur. The collaborative and transparent relationship also gives suppliers the edge they need to improve practices over time.

Procurement also needs to consider supplier sustainability and CSR practices when selecting suppliers. This sets the stage for future dealings and ensures both buyers and suppliers are on the same page when it comes to ethical standards. Confirming that prospective supply partners have the required legal, financial and environmental documentation in place to deliver products and services in a specific category may seem like a simple box to check during the sourcing process, but it truly goes a long way. Waiting until a formal relationship exists to talk about sustainability expectations makes it difficult to retroactively set parameters and ensure alignment. The bottom-line: to reduce the risk of CSR surprises and scandals, sustainability needs to be a key criterion when sourcing and evaluating bids.

No company wants to find out through the media or a documentary that their operations are a breeding ground for forced labor.

From the outside, it appears Haribo is taking the right steps. The company is launching an investigation into the matter and conducting an audit of its suppliers and their operations to eradicate forced labour and other issues. The takeaway for procurement teams: you are the defenders of the corporate brand and supplier relationship management must be a critical focus. The right technological solution can provide the visibility, allowing senior level decision-makers access to actionable information quickly. It can help eliminate risk and provide truly global views of supply side relationships through proper on boarding, qualification and segmentation capabilities.

Investing in Procurement with Digital Transformation

By Andrea Brody, Chief Marketing Officer of BravoSolution

Organisations are aggressively implementing new technologies to streamline processes and increase efficiency, but one department is treading behind: procurement.

The Hackett Group’s Sourcing Cycle Time and Cost Measurement Study, which surveyed procurement professionals from a variety of industries, shows that for every $1 billion in spend, companies have an average of 16 full-time employees dedicated to the sourcing process. In other words: procurement teams are stretched far too thin. There’s a significant need to automate manual tasks, increase efficiency and effectiveness, and give procurement the resources it needs to keep up with the rest of the organisation.

Digital transformation can help. Investing in modern, integrated procurement tools can enable procurement teams to deliver even more value and agility for the organization, and help the business be more responsive to changing stakeholder needs. In short: going digital delivers higher procurement and business ROI, with less resources.

Reaping the benefits of digitisation.

Total sourcing cycle times typically range from one day for tactical buys to 120 days for high-complexity events. About half of this cycle time is currently spent on supplier evaluation and contracting alone. If organisations want to be more efficient and effective, they should focus on streamlining these workflows and re-allocating time and energy to more complex, strategic parts of the procurement process. Digitising the supplier discoverye-sourcing and contract lifecycle management (CLM) processes can help teams get there. Consider the benefits:

  • A 31 percent time reduction in finding and qualifying new suppliers
  • Lowering overall cycle time by 30 percent through standard templates that reduce data-collection errors
  • Reducing the amount of time required to find a contract by 52 percent and the number of lapsed contracts by 39 percent

The good news is that many organizations are already planning for digital transformation. In fact, Hackett Group survey respondents stated that improving procurement’s business agility (61%) and supporting enterprise digital transformation objectives (42%) are top priorities for procurement teams.

This notion is supported by the fact that organisations incorporating strategic sourcing programs and technology into their procurement frameworks are starting to use less resource-intensive approaches for handling non-critical spend. The Hackett Group’s study found that 70 percent of souring resources are currently dedicated to medium- and high-complexity events and account for 56 percent of overall spend and 41 percent of sourcing staff, while low-complexity sourcing accounts for only 16 percent of overall spend and 30 percent of sourcing staff.

This breakdown signifies organizations are actively rebalancing sourcing efforts and looking for opportunities to streamline processes for more effective results – the key for successful digital transformation. Not all spend is created equally, which means different technology and strategies are necessary to address each category. When handled properly, complex approaches result in more value for the organization, so spending more time and resources in these strategic areas, and using less resource-intensive approaches for handling non-critical spend, is a crucial step.

Another finding: 33 percent of organisations said digital transformation is an important initiative, but are not sure that that means for them. Get the clarity you need: Download the Hackett Group’s full 2017 Sourcing Cycle Time and Cost Measurement Study to learn more.

Procurement – Of Course It’s Value …

By Peter Smith, Managing Director Spend Matters UK/Europe

One of the advances in terms of procurement thinking in recent years has been the general understanding and acceptance that the role of procurement goes far beyond cost and savings, and is fundamentally about value. Procurement’s role is to manage (in some sense) the organisation’s third party spend in a way which drives value – that is, it helps the organisation to achieve its goals and objectives.

In the private sector, that ultimately links back to competitive advantage, while in the public sector it is generally linked to achievement to the “policy goals” of the organisation.

That is all well and good, and there aren’t many procurement professionals who would take issue with that, we suspect. So why is it that many senior executives at board level or in other business functions don’t seem to get that? Why is it that probably the majority of senior procurement professionals still have “savings” as their primary KPI or measure?

In our upcoming webinar Peter Smith will be discussing Delivering Value, (Not Just Savings). Register Now!

There must be some sort of failure of understanding and communication here, and that has to start with procurement ourselves. We’ve got to be very clear exactly what it is we mean when we talk about “value” if we are going to be persuasive when we talk to others. Then, once we understand value, we have to think about how we communicate that in a manner that will be convincing and meaningful to the different stakeholders. Finally, we need to have some means of measuring and reporting the outputs and outcomes arising from procurement activity. That last point is particularly challenging actually!

In the last BravoSolution Real World Procurement webinar of 2017, I’m going to be talking about these issues. I will try and answer some of those questions around the nature of “procurement value” and how that relates to the organisation’s objectives.

I’m also going to look at how different spend categories require different measures of value. That’s a problem in many organisations; setting common targets across spend areas when really, the value generated by a marketing services category manager is totally different in nature to that arising from the “energy” category, for instance.

We need to understand those differences clearly if we’re going to be credible when we talk about value. I don’t pretend to have all the answers, I should emphasise, and the question of measurement will no doubt continue to challenge us. But during the webinar on December 12th, I’m sure there will be some ideas and suggestions that will help the vast majority of organisations improve the way they communicate their procurement value.

Procurement Collaboration in the UK Public Sector

62% of respondents when asked how content they are with the results of their collaborative activities scored a 5, 6, or 7 suggesting there is room for improvement.

To find out how to best increase collaboration in the public sector read this report written by Peter Smith.