Traditionally, one of the inherently daunting challenges in Procurement and Sourcing is to quantify and report on cost savings, cost avoidance and/or cost reductions, which can be collectively referred to as "added value." One very effective way that I have been able to successfully communicate added value and metrics to many C-suite members is by positioning it in a different way. I have found that by using the terminology and calculation for “Equivalent Revenue,” it is generally better received. Since it is a much more common business term and quantification, the C-suite can relate to it and it can be directly measured against the company’s overall revenue. As such, it is more widely accepted than trying to describe such value as only cost reductions or savings.
Perhaps most importantly, it is really as simple as taking the actual quantified “added value” and dividing that figure by the company’s overall net profit. A quick example: If the total aggregate added value amount is agreed to be $10 million, and the company’s overall net profit margin is 8%, the Equivalent Revenue needed to generate the same amount of that net profit would be $10 million divided by 8%, which equals $125M. By representing the figures in this light, C-suite members can readily identify and appreciate how much time, effort and expense would be needed to generate the same amount of sales revenue, and therefore clearly recognize the importance of an efficient and effective Procurement and Sourcing organization.
Guest Blogger, Dave Gallaer, Head of Procurement and Sourcing, NatWest Markets/Royal Bank of Scotland Securities, Inc.
The build out of the “internet of things” will drive the doubling of knowledge every 12 hours, according to IBM. That means that every time you go to bed for the night, an entirely new amount of information has flooded the world. It wasn’t that long ago that robots were only part of huge factories. Now they have them available for purchase at local retailers for less than $50. Robots are more than mechanical machines…in today’s world, they are incredibly advanced tools that have the ability to automate everything, including driving.
As sourcing professionals, it is necessary that we all understand the new world we are living in, and how it impacts not only our organization, but our daily job. Do you have a knowledgeable understanding of:
How you are going to source these new products?
How you will negotiate contracts for technologies that didn’t exist last month?
How you will incorporate these products into your work?
How contracts will be crafted to protect IP?
Do you have the knowledge, skills and competencies to fully grasp the future that is here and expanding exponentially?
Education is the answer…and there are a few simple things you can do to support your own education:
Make sure you are reading a book a month. That’s an investment of only 15-20 minutes per day. If you don’t know what to read, (I have this problem) ask someone you trust, explore the internet (trusted sites) and determine what the most successful people are reading. Make sure these books are not just about your industry or current role, but about business, innovation, creativity and other areas of focus. By reading a variety of books, you will gather different insights and uncover different views on the changing world.
Teach. When you teach others, you learn. You have knowledge others want and they have insight you need. Learning is a mutual relationship.
Mark Pollack, Vice President, SIG University and Chief Strategy Officer, SIG
As a marketer, I know the value of branding. The largest and most successful companies in the world have teams of people dedicated solely to branding. Branding is no longer about using the same logo, trademark, tagline and/or color scheme on all your marketing material. Branding is composed of different components including: brand identity, brand image, brand character, brand culture, brand personality and brand essence. Marketing agencies and consultants charge anywhere between $75,000-$250,000 to develop and manage a company’s brand.
Now here’s the kicker with branding that every marketing professional will tell you – they have no idea how it impacts their bottom line. Branding is the most difficult type of marketing to measure because you can’t easily quantify it. So, why are organizations across the globe spending so much money and time on branding? Quite simply – effective branding creates consumer confidence. Establishing a brand with a clear voice and values will enable your consumers to be loyal and confident when they buy from you. People have a natural desire to evolve with a brand whose products and services help give their life or business meaning and significance.
It’s not just businesses that need to focus on effective branding. If you care about your future as a professional in the world of work, you need to focus on your own personal brand. Personal branding is critical to establishing who you are and what you represent to those around you, the equivalent of a company’s consumers. They are your employer, your manager, your co-workers, your peers and anyone else that comes in contact with you in a professional setting. I’m not just talking about ensuring that embarrassing picture from your cousin’s wedding isn’t visible on Facebook... I’m talking about preparing for the future by branding yourself as a leader in your industry now.
I’ll admit it. I was pulling for the Falcons. Even though I lived in Atlanta for six years, I didn’t really have a stake in the game—I was never a big fan. It’s not that I’m not into sports—I was a huge Braves fan when I lived in Atlanta (when they went from worst to first) and I can tell you the names of every Golden State Warrior who was traded for Kevin Durant. Seriously. But this Super Bowl for me was a little like the election—I was rooting against one team more than pulling for another.
Now picture this…we’re watching the game at a friend’s house. We wisely recorded it so we could enjoy the good commercials and skip through the bad. It’s the 3rd quarter and the Patriots finally score a touchdown. Knowing that the Pats would still need two touchdowns, two 2-point conversions and a field goal in order to TIE the game, the odds were against them. Seemingly impossible. Now fast forward to the final two minutes. Under Tom Brady’s leadership, they’ve tightened the score to 28:20 and are driving the ball. And then it stops. What?! The DVR had STOPPED RECORDING THE GAME. That’s right. One of the best 4th quarters in Super Bowl history and the only one to ever go into overtime and we missed it.
To say I was shocked by the outcome would be an understatement. Atlanta had controlled most of the game. But as I reflect on the day, I can’t help but think of the valuable lessons it reinforced:
Last week I had the honor of giving the closing session at SIG’s latest event on my side of the Atlantic: the SIGnature event in London, hosted by Mayer Brown. At that event, Peter Dickinson, global co-lead of Mayer Brown’s Business & Technology Transactions practice (and a great friend of SIG) gave a fantastic presentation in the morning on “Reimagining Sourcing for the Digital Age” where he looking at emerging technologies and services, the benefits and challenges that they provide, and why a new approach to sourcing is required when it comes to operating in this brave new world.
Sourcing and outsourcing lawyers benefit from a very useful – if hard-earned - combination of perspectives, in that they are as deeply immersed as anyone in the minutiae of specific deals while at the same time needing to maintain as broad an understanding as possible of the macro-level trends and developments driving the evolution of the space: it’s impossible to serve a client adequately, let alone superlatively, without knowing what’s happening far beyond the confines of one deal and/or partnership. Peter demonstrated to our London attendees just how potent that mix of perspectives can prove with a fascinating “state of the nation” address examining how the key emergent technologies are driving change in the outsourcing landscape, in how providers are serving their clients (and who’s doing both buying and selling), and in how corporate strategies and behavior are being transformed by an extraordinary complexity of overlapping factors – all illustrated on a micro level by well-chosen examples pulled from the extensive experience of Peter and his team at Mayer Brown.
Another year is upon us and we have 49-some weeks to implement and perfect our resolutions. You have probably already promised yourself to spend more time with family, hit the gym more often, cut your carb intake and adopt a more positive attitude. These are fantastic goals, but achieving them will be difficult if you have not also determined how to better manage your time in order to accommodate these goals. Here are a few best practices and recommendations for managing your time better.
Delete Unnecessary Email Real-time
If a message is not important or does not require follow-up or saving, delete it immediately after reading it. You do not even have to move your mouse, just a simple CTRL + D will get rid of that message (you can do this directly from your Inbox). You should also sweep your Inbox daily. Deleting unnecessary messages real-time will help that sweep go much quicker.
Categorize, Color and Document Your Tasks
Another great practice is to categorize every task you need to undertake. In Outlook, you can use the Tag feature to assign a Category (with a color code) to every email received. I have never found a to-do app that was more effective and useful than my old-fashioned handwritten list. So, as I write tasks on my to-do list, I also assign a color category to them. Regardless of how you track your tasks, as you perform each task write down how much time was spent addressing the task. At the end of the day or week (depending on the urgency of the assignment), create a color-coded matrix of how much time was spent on each task. This has really helped me understand where I waste my time and how long it really takes to complete an assignment - which is especially helpful as more urgent items arrive on my desk. This way I can project how much time I can spend on an unexpected task and still accomplish my scheduled tasks.
Take that Break
Mary Zampino, Senior Director of Global Sourcing Intelligence, SIG
In our final installment in the discussion on the importance of education and the value of options like SIG University, Jamie Liddell shares key takeaways from students who hailed from Honda North America, PNM Resources and Florida Blue.
Students Become Teachers An "enthusiasm for feedback" was highlighted by Esteban Valenzuela, a project manager with Honda North America Indirect Procurement, as a critical aspect of SIG University. According to Esteban, the suggestions made by the students as they went through the course as to how it might be improved were assessed, and solutions implemented in real time by the SIG U staff (in Esteban's words, "Throughout the course I have made many recommendations and the SIG staff have already made many changes.")
Having come to the end of the course and with the ability to look back holistically on the experience, we asked our students what other suggestions they could make to keep SIG University firmly on the continuous improvement pathway. Without revealing too much, the depth and variety of the feedback (from the structural - with Tammy Way, a Sourcing Consultant for Generation at PNM Resources, who suggested we launch two new certifications; to the tactical - with Esteban’s advice to develop workbooks, videos and enhanced interactivity) was heartwarming evidence of the degree to which the students had embraced the course and wished to contribute their own efforts to SIG University's success: exactly the kind of philosophy which SIG U and the broader SIG family seek to develop within the sourcing profession as a whole.
Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG
In our second installment in the discussion on the value of education and more specifically a SIG U education, we discuss preconceived ideas and expectations. After the first class of students completed the training, SIG and Outsource’s Jamie Liddell interviewed students from Honda North America, PNM Resources and Florida Blue for candid opinions.
Preconceptions and Prejudices Any prospective student contemplating a particular course will have preconceived ideas – however inaccurate – of that course and the institution providing it. In the case of this first cohort of students, of course, there was no existing commentary available to them from previous graduates of this specific course which could colour their expectations; nevertheless, the students could build a certain perspective on the reputation enjoyed by SIG itself – and for Tammy Way, a Sourcing Consultant for Generation at PNM Resources, this in particular gave rise to high expectations indeed: “Given SIG’s buy-side focus and collaborative knowledge sharing approach to just about everything, I fully expected the program to involve trainers from very diverse buying experiences who encouraged others to engage in discussions, share experiences and knowledge, and freely exchange tools and templates aimed at making the work a little lighter for all of us.” Thankfully, she added, “The course did not disappoint.”
Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG
“Education,” wrote John Dewey, “is not preparation for life; education is life itself.” That’s a philosophy that SIG has from its inception held very close to its heart: the idea that throughout our lives and our careers we should continue to learn and develop, not simply for the benefits that learning brings us – and our community – professionally but also because education is a good in itself. Hence the strong focus at SIG’s Summits, Symposiums and Roundtables, in our webinars and our Student Talent Outreach program – truly, in everything we do – on growing our members’ knowledge and understanding of the practice of sourcing and the environment within which we work.
Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG
Few areas of the economy have faced stronger headwinds over the past year than those occupied by commodity manufacturers. Chemicals, steel and plastics are all feeling the effects of China's economic slowdown in a highly competitive and price sensitive marketplace. Many of the top commodity manufacturing firms have reacted decisively to these conditions; however, after the first wave of layoffs are complete and excessive overhead costs are reined in, the prospects still remain gloomy. The sustained impact of depressed demand and oversupply are forcing executives to look inward for additional, innovative sources of cost savings. The positive news for many organizations is that the "good years" of strong demand and rising prices have left behind pockets of inefficiency and waste that can be structurally addressed in the interest of long-term corporate competitiveness. A few examples of such opportunities are as follows: