This article is an excerpt from our Spring 2018 edition of The Procurement & Spend Management Insider.
At the recent eWorld event a number of the presentations attended by our team made reference to the issue of the procurement profession fighting to move on from the savings dominated agenda to make a meaningful contribution in the other areas that procurement leaders covet. This has long been a discussion topic at many procurement events. Regular readers of this report will know that Edbury Daley is passionate about working with clients who are committed to recruitment best practice. Our clearly stated philosophy is: We recruit for companies that need the best talent in procurement technology and spend management, companies that take their recruitment seriously and invest in finding the right people.
However, if we look at our own experience of when procurement departments formally drive the selection process for recruitment suppliers, a high percentage of tender processes are still completely tactical in their orientation. We believe many were poorly thought out and were clearly savings focused to the exclusion of any real opportunity to add value. There is a lot of talk about talent attraction as a priority in all the CPO surveys from the leading consultancies, but the reality is often different. This contrasts with our positive experience of working with technology companies offering procurement solutions.
Vendor management is also typically poor. Recruitment processes are often lacking agility and are rarely designed around talent attraction. The golden rules defined from our research are consistently broken by many major organisations. The reality is that it’s all about the savings for most companies. So in this section we consider three of the opportunities that exist for procurement to prove its value beyond cost savings and the skills required to do it.
2. Procurement CSR
3. Technology & The Procurement Skill Set
At the recent eWorld event Andrew Daley chaired a discussion workshop entitled “Preparing for Brexit – Changing demands, skills and supply chains.” The session was fully subscribed with delegates from a wide variety of sectors. We expected a lively discussion about Brexit contingency planning across the audience. What we actually found was that most delegates worked for organisations who had done little or no planning, and were attending to find out what everyone else was doing. Their reasoning was perhaps best summarised by this: “We are taking our lead from politicians so we’re not sure what to plan for. We are likely to get a transition period, so we’ll deal with it then.” Thankfully there were some interesting contributions from those that have engaged in some meaningful contingency planning.
Labour mobility was the area that had received the most attention so far in this particular audience. One delegate from the biotechnology sector mentioned that 70% of his organisation’s labour are EU nationals. They are understandably concerned about this. His organisation is exploring what that will mean for their ability to manufacture and distribute post-Brexit. He also talked about EU funding post 2020 – that’s their other big concern as well as losing top scientific talent to EU member states. But not that there’s much the procurement and supply chain can do about that.
Another delegate from the FMCG sector made reference to a high percentage of semi-skilled EU labour in their operations being a major concern for them. A delegate from a major financial services company talked about them working to engage EU employees to promote greater loyalty in key parts of their customer services operation. The most comprehensive planning had been done by the aforementioned FMCG company and we were fortunate to have their procurement leader in the audience. He offered the following insights into their planning.
They had analysed the various different potential post-Brexit scenarios, weighing and ranking the options in terms of the likelihood. The options ranged from a U-turn seeing the UK stay in the EU, through to a hard, no deal Brexit where we crash out onto WTO regulations. They have ranked a free trade agreement after a transition period as the most likely option giving it a 50% likelihood. Their worst case scenario was a diamond hard Brexit which they ranked at 10% likelihood. It is that particular potential outcome that has been driving much of their contingency planning. Interestingly the procurement leader in question has been attending a number of supply chain conferences to research and assess the approach by companies facing similar challenges. He concluded that those with goods coming in from the EU to be sold in the UK are doing the most planning. One notable FMCG company supply chain leader had confided in him that their planning for a hard Brexit included moving their operations out of the UK. A common view from others went something like “it’s not a problem, we’ll just hold more stock,” but it was pointed out that if you haven’t done any planning how are you going to find that situation in 2019/20. The problem with waiting for the transition period is that you’ll be at the back of the queue for things like extra storage space and it will undoubtedly cost more given rising demand.
This is an opinion backed by commentary in recent articles in the CIPS magazine Supply Management which focuses on the likelihood of suppliers raising prices in response to the crippling cost of Brexit. One survey said that 32% of firms have already increased prices whilst another survey shows that 41% of respondents plan to increase their prices “to offset the potential costs of Brexit.” In another article entitled Analysis and preparation key to tackling Brexit Supply Management observes that Mark Chadwick, director of business services for consultants Fusion 21 said: “Although uncertainty caused by Brexit had made it harder for teams to control costs, early stage analysis would help businesses prepare for any circumstances.” He is quoted as saying: “Putting a lot of effort now into understanding the wider environment your suppliers are working in and what’s affecting them and what pressures they are facing will best prepare you for what you might be asked in the future.” “We found that if you don’t do that analysis and preparation you’re often going to find that you’re on the back foot and that you’re really starting to react to situations as they emerge rather than being proactive and trying to manage those situations.”
There is a different view of course. At eWorld Andrew Daley asked one experienced procurement practitioner in the audience, who has an established consulting business, what his clients were doing to prepare. He offered the view that many aren’t sure what they are planning for so why devote resources to it? For some, they view the transition period as an opportunity to make the necessary changes and many view the whole scenario as “Y2K again” as he put it. It was fascinating to hear the views of people working for companies taking a view at either end of the spectrum on this subject and it’s something we’ll continue to monitor through conversations across our network and by attending industry events. Our view is that Brexit offers a unique, once in a generation change which is likely to have huge impacts on international supply chains. It, therefore, offers both procurement and supply chain professionals an opportunity to have real influence in areas that go beyond savings. Why not take that opportunity to move procurement and supply chain up the boardroom agenda? We also asked the audience at eWorld if procurement professionals need to develop any new skills to deal with these changes, but we struggled to generate any meaningful contributions on the subject. We have been asking ourselves at what point in time will we start to see roles that focus on Brexit contingency planning.
If or when it does happen what skills will they require? The approach of our FMCG leader mentioned above is perhaps the most interesting example so far that of modelling the various scenarios, allocating resources accordingly and then researching and preparing to act. It should also be noted that this particular leader is attending as many professional events as he can to learn as much as possible from his peers and then passing this learning onto his team.
Is it time to get yourself to the next procurement or supply chain professional conference?
In Part 2 of our Future of Procurement series of articles we’ll review Procurement CSR and whether procurement can be a force for good. And if you’d like to read the full Insider report you can download it here.