The Future of Procurement Part 3

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Technology and the Procurement Skill Set 

It’s clear that we believe that the increased use of technology by procurement and supply chain presents real opportunities for the function to advance in many different ways. Based on what we hear from our attendance at various events and through the conversations we have all the time with the procurement leaders in our network, the obvious area of advancement is in the use of technology and particularly the power of the data.

So is this the area that can unlock the opportunity for procurement departments to move beyond a savings dominated agenda? Will it make their contribution more important strategically, increasing efficiency and releasing resources in the process?

We recently observed a respected leading procurement consultant saying words to the effect that future procurement teams will need to develop new skills as transactional tasks become increasingly automated due to innovation. He ventured that analytical roles will grow in importance as will the need to track the impact of the solutions otherwise “how will we demonstrate the value of the investment in the software?”

Some more thoughts from Justin Sadler-Smith of SAP Ariba on the subject of how the latest generation procurement technology/software can help facilitate the evolution of the procurement function from a savings obsessed agenda to a broader contribution for mid-market and enterprise organisations.

“Savings is the day job and still the focus for most procurement professionals. However, the actual savings reported are regularly challenged in term of P&L impact and, taken in isolation, can undermine the significant value a procurement professional can deliver. “Technology exists today to provide a single source of truth with supplier engagement across the Procurement Lifecycle.
This is either through single platform or via best of breed… the preference being the former to avoid costly and time-consuming additional integration. “It still amazes me that some organisations have still to be persuaded on the value of Cloud.

This opens up so much possibility, particular with big data and transparency. Done with the right applications, this data becomes actionable information available across the organisation to make informed decisions. This is where the procurement function can shine and deliver far in excess of questionable cost savings.

“For example, by allowing the transactional areas to be automated, Procurement professionals can now be targeted to strategic initiatives i.e. supplier risk mitigation and innovation. “Those organisations who have taken this step with utilising the latest technology have a clear competitive advantage and Procurement has a seat at the table rather than under it.”

We’ve done a lot of research on this and we believe the future of procurement is doubtless going to be shaped by data, but this means more than simply digitizing invoices. Gathering data from sources such as Aggregator, Northern Lights and SupplierIQ can allow you to build strong models when combined with your own data, but less obvious choices can have a huge impact on the efficacy of your overall forecasting too.

A good example of this is at IBM – they acquired The Weather company in order to make use of the massive amount of data they have and use it to inform clients about possible risks in the supply chain long before they become an actual issue. Utilising data in this fashion doesn’t mean replacing the whole procurement department with data scientists; at IBM they’re evolving their current procurement practitioners into consultants by making them more aware of data.

The future procurement consultant may well be a hybrid data scientist and procurement professional, and with few people in the industry with this specialism, they will be in high demand. The new generation of Chief Data Officers or Chief Digital Officers as some organisations are branding them are all about how they use the data, not just the digitising of it. Tools like Watson Analytics are going to be a big part of this and procurement needs to embrace them.

Of course procurement practitioners will still need relationship building and influencing skills as has been the case for many years, but something like AI can be hugely helpful by improving efficiency in areas like the development category management strategies. What is clear is that the procurement skill set is going to evolve further on the back of advancements in technology. There is an opportunity to use this to change the perception at board level and procurement leaders will need to decide on a strategy of how to achieve this. They will need to hire and/or train these new skills whilst maintaining a strong sense of the core skills like stakeholder engagement and strategic sourcing.

As mentioned earlier in this report, we are starting to see an increase in specialist roles dedicated to the use of data in procurement departments. It’s still a relatively rare skill set and one we would encourage ambitious procurement professionals to embrace with an eye on their professional development. We are working with The Data Science Foundation to promote procurement as an attractive career choice, particularly for their growing graduate membership. We expect our clients to benefit from this association in future as we seek out the best talent in the profession.

In case you missed it:
Future of Procurement Part 1 – Brexit
Future of Procurement Part 2 – Procurement CSR

And if you’d like to read the full Insider report you can download it here.



Procurement Leaders – The Talent Attraction Reality

We attend a lot of procurement conferences and events and as a result we hear a lot of CPOs talk about their businesses, their priorities and their objectives.One of the common themes is the attraction and retention of talent.

In a recent report on the Future of Procurement by SAP Ariba they quoted some interesting statistics: 63% of procurement leaders do not have an established talent management strategy. The main barriers to achieving organisational efficiency enabled by digital procurement are:

Lack of data – 23%
Budgetary restrictions – 19%
Lack of internal talent/knowhow – 17%
Shortage of external talent – 13%

So when you combine the two figures for talent shortage (internal and external) you get 30% which effectively makes it the biggest barrier to organisational efficiency.

So CPOs are making all the right noises about the importance of people but what is the reality?

Or to put it another way, is procurement making savings or adding value in the recruitment process?

Procurement has gained significant savings in the recruitment category over the past 15 years. The implementation of PSLs and the leverage of the company’s buying power yielded easy wins. But with many recruitment companies now operating at tight margins the opportunity for further savings seems limited.

In light of this Procurement needs to add value to the business in terms of supply of recruitment services. Rather than view recruitment as a commodity to be bought mainly on price is there opportunity to find value? Let’s not forget, barely an annual report is published without a CEO reminding us that ‘people are our greatest asset’. So why is such a business critical category reduced to the lowest common denominator?

The commonplace commoditisation of recruitment is underpinned by the binary perception that a vacancy is simply either filled or not filled. Therefore it is just a question of filling the position for the lowest possible cost. To move away from this view requires insight in to time to hire and performance of the new recruit over a sustained period of time.

The first variable is easy to measure but a little harder to evaluate, particularly for highly specialist positions where the potential candidate pool is small. For example it’s unreasonable to compare time to hire for an office based admin position, where the candidate pool is huge, to time to hire for a rare skill set position, where only a handful of relevant candidates exist in a given geographical region.

Nevertheless, the recruitment supplier’s ability to find and place candidates as quickly as possible undoubtedly has a clear value to the hiring company, therefore should be part of the supplier selection criteria.

The second variable is the performance of the new recruit over a period of time. Anecdotally, most senior managers will know who their star team members are and who are only just meeting the minimum performance requirements. However, turning this into quantifiable data is a real challenge. And how often does the senior manager trace back the origins of the high performer in terms of which recruiter sourced the candidate, and then use this information to influence the choice of recruitment supplier going forward?

The typical PSL based contingency recruitment supplier arrangement serves to reinforce the commodity view. By instructing, say, three agencies on a vacancy using the ‘no placement, no fee model’ urgency is created amongst the suppliers. This helps minimise time to hire as the agencies race to ‘win’ the fee but incentivises the suppliers to submit only candidates they can access immediately rather than seek the best possible fit for culture and performance potential which may be a little more time consuming. In other words the long term value to the business may well have been sacrificed for speed.

Much is made by forward thinking procurement leaders of supplier relationship management. By forming a true partnership with suppliers they can create an opportunity for collaboration and innovation that benefits both supplier and customer. Examples cited often come from the procurement of components or raw materials but could this extend to recruitment services?

We have written many articles on how companies can improve their talent attraction, streamline their selection processes and get a deal done with the right candidate. Our knowhow and experience has the potential to be a game changer for a customer looking to be better. Will procurement embrace that opportunity?

The Future of Procurement Part 2

Procurement CSR – can procurement be a force for good? 

Our team attended a very interesting presentation by Peter Smith from Spend Matters at eWorld in which he asked how procurement can be a force for good? Reflecting on his career  in the profession, Peter talked about various areas where procurement can influence decisions beyond cost savings that have a much broader impact on organisations. One of the opportunities he talked about for procurement to have real influence is in Corporate Social Responsibility (CSR) which is of course a vital area for many retailers and manufacturers.

Our Head of Research, Sharmina August, also attended a very informative presentation by Andy Davies of the London Universities Purchasing Consortium, in which he stressed that procurement and supply chain professionals really can have a positive influence on people’s lives if they take the opportunities that are open to them. We asked him for this thoughts for this report.

He told us: “Procurement and supply chain professionals have the opportunity to help millions of people who are trapped in conditions that threaten their human rights.“Technology allows for far greater transparency in supply chains than ever before, and ignorance of slavery is no longer a valid excuse. It’s not about cancelling contracts with suppliers who have poor employment practices, but working with them to manage the risks, improve conditions and lift workers out of slavery. Truly, procurement can and should be a force for good.”

The issue of child labour and modern slavery is actually much bigger than many of us realise. There are currently thought to be 21 million people in forced labour around the world right now. That’s double the number of people taken from Africa to be enslaved between 1698 and 1900. There are no official numbers for how many people are victims of modern slavery in the UK, but the National Crime Agency believes the number to be in the tens of thousands. The introduction of the Modern Slavery Act in 2015 resulted in all companies turning over £36M+ in the UK producing Modern Slavery Statements.

However it is fair to say that the extent of action in these statements varies significantly: at one end of the scale you have the likes of the John Lewis Group, spending thousands of pounds per product ensuring the supply chain is ethically sourced, and at the other you have the many companies who have a paragraph explaining that they’re asking their suppliers to make sure everything is above board.

Adidas is another organisation that has taken huge steps to eradicate forced labour from its supply chain by focusing on both its Tier One and Two suppliers. They been have consistently ranked as an industry leader by KnowTheChain, a valuable resource for companies and investors to understand and address forced labour risks within their global supply chains.

The role of procurement is no longer just about cost cutting, it is now about value in every sense of the word. Cynically, it can add greatly to a company’s image and manage its risk, but on a deeper level it can make a huge difference to the lives of some of the world’s most disadvantaged people. Peter Smith told us: “There are many ways procurement can contribute to these agendas – which of course can also benefit our own organisations as well as the wider world. Modern Slavery has rightly had a lot of focus recently – but whether it is issues of provenance in buying raw materials, the use of plastics, or global warming, what happens in our supply chains is critical and procurement can, therefore, have a real influence and be that force for good in many different ways.”

The future procurement practitioner will need to be able to combine their company’s procurement needs with their CSR requirements. Supply chain technology is making this an easier undertaking, and as there are few specialists in this area, it is definitely an area in which existing practitioners need to evolve to meet demand.

We asked Justin Sadler-Smith of SAP Ariba: “How can technology contribute to procurement being a force for good?” He told us: “Procurement can harness the power of sourcing and purchasing technology to ensure that when they do assess and select suppliers, they do so against clear CSR requirements.

For example, if they have access to a Supplier Network, this job is made easier both in terms of time and selection. “The more buying organisations that access the network with these requirements then create a huge surge in demand for compliant suppliers to provide transparency in their supply chains and ensure they are taking adequate steps to stop slavery, child labour, exploitation etc.“This then really shows the value Procurement can deliver… not only mitigating risk in your business, but also positively impacting the world.”

Another example of where procurement and supply chain technology can have a positive impact is the environment. Christophe Hinfray, Vice President at TK Blue Agency, which helps companies measure and reduce their environmental footprint while reducing their cost, told us: “Recent progress in Big Data and real time device tracking systems allow Supply Chain Managers to better track the situation worldwide, pilot complex activities and optimise performance as never before. Cost reduction is only one of the benefits, together with improved customer service and, last but not least, reduced pollution and CO2 emissions.”

Of course, senior roles in CSR exist in a lot of big organisations but we don’t see many examples of procurement departments employing specialists in this field. Is it time for more investment in this area?

In case you missed it, Part 1 of our Future of Procurement series of articles took a look at Brexit and in Part 3 we’ll review Technology and the Procurement Skill Set.

And if you’d like to read the full Insider report you can download it here.