Monthly Archives: September 2022

Category Management, Sourcing, Strategy

Courage in Procurement

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Given the current economic challenges, procurement organizations will face increasing pressure to improve performance and as a result will need take a ‘back to basics’ approach.

Spend data unfortunately can be outdated and flawed with inaccuracies. It however remains the main data point that is pivotal in understanding where opportunities may exist. At the heart of this understanding is the strategic art of segmenting spend categories, and engaging with stakeholders to truly understand the specific dynamics to form actionable initiatives. There will be a number of spend false positives that need to be excluded in order to form a bottom up approach – avoiding the common blanket top down saving target pitfall!

Arguably the larger challenge is tackling the non-addressable sacred cows; whether this is as a result of a lack of procurement skill-set, internal politics (its always been that way) or a continuation of operating within the existing comfort zone, procurement need courage to challenge the status-quo without the full knowledge of a successful outcome.

The essence of strategy is choosing not what to do

Michael Porter

There is no foregone conclusion, and the recommendation is not to do everything, yet seeking external advice may be the best path to open up new options. This is not an easy journey or a quick win, but represents a call to action which at least deserves investigation.

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Change Leadership, Digital Transformation, Operating Model, Project Management

The Danger of back office Digital Transformation without Balance

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With all new technologies, there is a danger that they get misapplied. misused and abused. Given the drive to digitalize the back office and deliver ROI, there can be a lack of consideration and practical understanding on how policies, people and processes are optimized.

Finance and Procurement functions measure spend managed by the team, encouraged by compliance and governance committees, to steer towards a ‘one size fits all’ approach in how the technology platform is configured. This usually leads to an overstretch of available resources, creation of process bottlenecks and a failure by finance and procurement to service the business adequately. The result is seen as an over promise and under deliver, and the technology is blamed.

This is not a technology problem, rather reflects the challenge of how the technology was implemented. Organizations must spend time to get into the detail on how the stakeholders buy; seeking to differentiate and simplify the different sourcing channels that can become configured correctly in the technology platform, and supplemented as appropriate, with complementary solutions. The output defines the new target operating model, matched with organization’s capability, to deliver value add across the end-to-end process without hampering one function over the other.

Together with investment in change management and all that it entails, digital transformation becomes a journey that starts with this first purposeful step.

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Supplier Management, Sustainability

Net Zero

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Carbon neutrality is no longer a matter of if but when. The 2021 court case against Shell in Netherlands demonstrated it is no longer about ticking the boxes but taking real action. What does this mean for your supply side? Scope 3 emissions cover all indirect emissions that are incurred in the supply chain both upstream and downstream and, for many businesses, suppliers can account for between 50% to 80% of total emissions.

Having accurate information on your supply base is imperative; this creates the first key challenge, “data” capture. With potentially 1,000’s of suppliers, businesses who have not structured or enriched supplier master data with the appropriate dataset will struggle to get to grips with net zero. There are a number of third party solutions to help businesses, however unless these tools are embedded into a robust supplier on-boarding process and regular supplier review, the process itself becomes unwieldy and less meaningful.

Accompanying this data challenge, a change of perspective and approach must be applied to ensure the net zero objective can be operationalized in a meaningful way. Importantly this action must be measurable and capable of being validated by customers. Is your sustainability goal more than lip service? What changes have you made?

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Accounts Payable, Supplier Management

Payment on Time – it matters!

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Global recession, supply chain disruption, inflation and erratic demand will continue to place pressure on businesses to improve their cash flow management. A recent UK Dun and Bradstreet annual SME report indicates that late payments have almost doubled since 2019 and invariably these delays are forced down the supply chain without agreement or consideration of any direct and /or indirect consequences.

We know organizations differentiate their customer base and prefer dealing with customers that are stable, consistent and pay on time. Organizations will penalize those customers that fail to meet these ideals – these penalties may not be transparent or explicitly communicated however they exist and will impact the customer negatively.

Examples include:

  • Addition of a risk price premium – charges are significantly adjusted to cover the risk of debt, interest and inconvenience when dealing with that customer. This addition increases cost of sales.
  • Service disruption – services may not be performed until payment has been made. Cash on delivery or advance payments may be demanded from the customer which actually worsens the organization’s cash flow position.
  • Finance charges – Letter of credit or other forms of finance guarantee, and interest payment demands add delays to the process and increase the cost of transaction for the customer.
  • Supply assurance – preferred customers will be top of the fulfillment list where capacity and material shortages occur. Knock on delays across the supply base multiples create a domino effect that destroys responsiveness.

Do not negatively impact your reputation by failing to pay on time. Take a considered approach; there are appropriate supply-side strategies that improve cash management, mitigate penalties and improve robustness.

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Change Leadership, Project Management

Chicken or Egg – Which came first?

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Organizations seeking system digitalization often want to know the sequence of steps required to set-up a project. The order is less important, there is more than one right way, but there needs to be an inherent business understanding required to determine the height and depth of the leap required to deliver business change.

The foundational understanding of what you have as a start point, As-Is, and assessing both appetite and ability, for a new To-Be process is critical in ensuring the organization can implement a successful change. It is not unusual for a software solution to be selected, and then handed over to be implemented. The challenge is then to create a strategy and plan to balance people, process and system elements in an optimal way. For example, you can have the best people, but if your process is flawed and/ or your system inadequate, then performance will be poor. Contrary, you can have the best system, but if your organization lacks the skills, and /or people are not trained to use the new system or process, adoption and performance will be poor.

As with the chicken or egg dilemma, a circle that has no beginning, a better question should be how far can we jump and what will enable us to jump further.

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Change Leadership, Operating Model

Procurement Leadership Competencies

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In this age of supply chain disruption and market shocks, what are the key attributes Procurement need to navigate these challenging times to sustain value:

  1. Understand the business and supply market
    • Without the fundamentals of understanding your business needs, Procurement cannot align its supply side strategy to support business success
    • Finding and matching the right strategy to those business goals requires procurement leaders to act and think like business managers
  2. Transformational leadership
    • Transformation and change management requires procurement leadership to have a clear vision with benefits that can be articulated appropriately across the different stakeholder groups. Communication skills are critical.
    • Walk the talk, leading by example, helps build trust with stakeholders
  3. Know the Technology
    • Technology is only an enabler – it is only one element of the success equation
    • Map and apply the right Technology based on the maturity of the function and organization
  4. Transition the Operating Model
    • Change the model – insanity is doing the same thing again and again, yet expecting different results #
    • Take small bite steps that support incremental improvements in a steady direction
    • “Sell success based on success”
  5. Collaborate with Partners to Innovate
    • External supply side resources are typically the largest single resource pool available to the organization – involve your partners in your business challenges
    • Share benefits to encourage win/win
  6. Operate flexibly and transparently
    • Open your mind to alternative approaches
    • Challenge and change to seek better ways

Food for thought. Need help. Contact Us.