I have always valued the power of communication. When I entered college, I didn’t know exactly what I wanted to study. I realized that although I was “good” at many things in school, there was one thing I excelled at – communication. I was a strong writer, and an even stronger speaker. I saw that when most of my classmates dreaded speaking in front of others, that I always enjoyed the experience, and was excited by it. This was the turning point when I decided to focus my career in communications and marketing.
The power of effective communication cannot be underestimated. It is a critical component of life. I’ve seen the impact of effective and ineffective communication in many types of businesses. Ineffective communication has the ability to break businesses. If you can’t communicate effectively with your customers, your intended messages won’t be received or understood – it’s like you’re speaking an entirely different language from them.
So how can you speak the same language as your sourcing clients?
I’ve worked with many companies that provide services and solutions to sourcing and procurement professionals. It’s very clear what separates the successful providers from the rest of the pack – effective communication with their clients. In order to serve and advise sourcing clients in the best way possible, your team must be able to communicate to them through a common language of sourcing. It’s not just about being highly knowledgeable and educated on all things sourcing, it’s about effectively communicating by speaking their language.
Here’s how you can grow your business and better serve your clients through effective communication:
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.
Of the many laws that affect the international outsourcing space, one of the most important must be that of diminishing returns. At its heart outsourcing is about efficiency – a provider can only offer a decent value proposition, and turn a profit, if it can achieve a desired output more efficiently than can a would-be buyer of its services – and yet there’s only so much money in the hypothetical pot to invest in driving efficiencies: as a very basic example, if one can spend $x to achieve 10% savings, by the fifth investment of $x the savings made are only around 60% of what was achieved with the first tranche. The returns diminish. After a while, it becomes less and less worthwhile to invest $x in that project, when the same amount put into another deal can yield significantly more.
Finding the right balance between investment and returns (and knowing where is the line beyond which further investment will yield returns too paltry to justify) is vital in any business, but especially one as efficiency-based as outsourcing, where relationships have historically often featured buyers demanding constant and consistent efficiency gains and savings – and, moreover, where the necessary investments in technology and people can be gigantic. Hence the desire on the part of providers to share the value gained by any given investment across as many clients as possible – and the complications resulting from buy-side demands for bespoke work and customisation without a simultaneous understanding of why this of necessity means higher costs, which need to be passed on somewhere, somehow…
As February started, an important conversation got underway: SIG was back in the City of London with a highly engaged group of procurement professionals to explore the latest trends and topics that are shaping their world.
The role of the CPO has come a long way over the last 20 years and change is exponential; happening across the what, how and who of procurement
What: organizations are buying new products and services (everything "As A Service," digital and digital-enablers, RPA and other automation tools and services)
How: new tools and techniques are being deployed in procurement both because these new products and services need to be acquired in new ways and to drive productivity and effectiveness through analytics and better insight
Who: a growing millennial workforce and digital workforce presents new opportunities and challenges for operational management of services
A recent study from IBM shows that the highest priorities for the CPO are to contribute to revenue growth, to drive innovation across the supply chain and to protect the enterprise brand. Cost is mentioned nowhere, but more because it goes without saying and not because it is no longer a priority.
So, the CPO and their teams are making a strategic contribution to the organization but still find themselves a step removed from the centers of power as they report in through another function and are rarely represented on the board. In a period of exponential change is this procurement’s opportunity to rise to the challenge and enable safe, profitable, innovative growth to earn their place on the top floor?
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.
And like that, another one is behind us. For months we plan every little detail to make our Summit a memorable event for our delegates. We coach speakers, edit session presentations, order matching linens, create signage and think through every thing that can go wrong to make sure that it doesn’t. And then it’s over. Just like that. The delegates have gone home, the sessions have been evaluated and everything has been shipped. But the memories of the event linger and one thing has become more and more clear with each passing event…the sourcing function is no longer back-office. It has not just gone from tactical to strategic, but is also leading companies in tackling some of the biggest issues facing our members today. Sourcing has gone mainstream. These observations from the most recent SIG Global Executive Summit highlight these points.
Data is the word of the day. And I don’t just mean “Big Data” although that is certainly a “big” part of it. Data is the key to better understanding customers. It is the way we can predict future supply needs. And yes—using “Big Data” we can teach computers to replace even complex procurement functions with little to no errors. But now Procurement groups are also hiring Data Scientists to turn that data into tangible outcomes. The baseline for smart systems is getting the data right, so pay attention…you will see the Data Scientist trend on the rise.
Vying to become a world-class procurement agency? Not sure what competencies you need to become a leading supply chain organization? Here are seven ways to help you navigate through the complicated sourcing process from scratch:
With kids back in school, many parents like me are reflecting on what has become an annual ritual of buying necessary school supplies and of course an equivalent amount of not-so-necessary 'things' to decorate or accessorize school lockers, shelves, backpacks, clothing, etc. So while the leading retailers like Staples...Office Depot...Walmart...Target and other cash in on this period with attractive deals, our friendly neighborhood 'fiVeBELoW' comes in very handy for all those non essentials. Don't get me wrong, sometimes compulsive bargain hunters (once a buyer always – a buyer) like me can also find deals for the back-to-school essentials and a number of other things at 'fiVeBELoW.' I often wonder if there exists a similar pattern in enterprise spending...meaning, does a similar phenomenon (the anything and everything at places like fiVeBELoW – for cheap or let us call it really low dollar spend buys) exist in enterprise buying, especially when we are talking about indirect spend. Throughout my Procurement career, I have come across companies with annual indirect spend ranging between a couple of million dollars up to and in excess of 15-20 billion (though they are very few). Spend items/services...what in old days used to be called 'petty' cash kind of spending...exist everywhere (the $$ amount may vary from a few thousand to a double digit millions), essentially exhibiting with one or more of the features as below.
Rajiv Gupta, Head of Procurement Services, Americas, Infosys
Dawn Tiura, SIG CEO and President recently spoke on an expert panel at Coupa Inspire, and shared her thoughts with candor and authority. Coupa interviewed Dawn shortly after the event and published a blog sharing her responses which we are publishing with Coupa's permission. The original can also be found on the Coupa website.
Thanks to Coupa for the blog interview below: One of our favorite parts of Coupa Inspire are the expert panels. There's nothing we love more than getting smart people together to talk shop. If you missed Inspire, you can read excerpts of the analyst panel and the CIO panel on our blog. Today we're talking with Dawn Tiura as a follow up to the analyst panel. Dawn is CEO of Sourcing Industry Group (SIG) and has been observing the industry for 25 years from her vantage point as a CPA turned sourcing consultant. There's no one smarter on the topic of where sourcing is heading, so when she remarked during the panel that in her opinion, the term buyer should be eradicated, that piqued our curiosity. So, we got her on the phone to learn more.
Coupa: You had some provocative things to say during our panel discussion. One was that you wished the 'buyer' title would go away. We were hoping you could expand on that.
Dawn: I sure could! To me, buyer is such a demeaning title. The only time somebody is excited to say, "I'm a buyer" is if they're in the fashion industry, because that's cool and exciting and sexy.
Oil and Gas firms had a rough ride in 2014; the oil price dropped to below $50 USD a barrel, salary freezes were implemented and thousands of staff members were laid off. As the purse strings of oil and gas producers tighten, the importance of controlling costs and managing spend become ever more apparent. In order to succeed in the changing oil and gas environment, firms need to first understand how to get more from the money they spend (enter procurement). Listed below are a number of the key areas that oil and gas firms are likely to focus on over the coming 12 months. Also outlined is the critical role that procurement functions can play in helping their organization to achieve success in these areas.
Diptarup Chakraborti, Vice President, Global Marketing, Zycus