SIG University Certified Intelligent Automation Professional (CIAP) Program graduate Daryl Hammett discusses the three key questions organizations should ask when framing technology decisions in procurement functions to best suit their business needs.
While legacy resource planning systems are key to all global supply chains, they are also cumbersome, expensive and not designed to support the type of relational data businesses deal with to drive decisions.
Procurement organizations are thinking more often about innovating old processing systems. What areas have inherent risks in innovating? To what degree do we change? How do we manage it? Who do we get involved? A lot of attention is focused on getting the results from innovation and change, especially those associated with people. Most companies have implemented procedures to manage and grow innovation, but I believe one of the most under-analyzed risks in innovation, and one that could be the biggest threat going unaddressed today, is the risk of group think in implementing change in procurement teams.
As we look ahead to the rest of 2020, cutting-edge technologies will play an essential role in the innovation of procurement. New technology brings with it new responsibilities and it’s easy to become lost in the sea of digital tools available from blockchain to automation to application programming interfaces. It’s important to assess what these tools can actually bring to the organization. They are most effective when utilized with strategies closely aligned to the values and goals of the wider business. Focusing on a problem and selecting a tool that solves this problem will be vital to its success.
With this in mind, I believe there are three fundamental questions that should frame technology decisions in procurement functions.
Daryl Hammett, CSMP, CSP, C3PRMP, General Manager/Chief Operating Officer, ConnXus
Michael van Keulen is Chief Procurement Officer at Coupa. He formerly served as the Global Procurement Director at lululemon athletica inc. (NASDAQ: LULU), a $3B+ designer, distributor, and retailer of technical athletic apparel. Previously Michael served as the Procurement Director at VF Corporation (NYSE: VFC), a $12B+ lifestyle apparel and footwear company. Michael is known for leading procurement transformations that generate significant shareholder value.
You have a passion for sourcing talent and developing high-performing teams. How is your approach different than others?
I’m not claiming my approach is different or unique. When hiring, I look for attitude first and procurement experience second. I always say procurement is a seven-step process that can be taught to anyone. What is difficult (if not impossible) to teach someone is to be “naturally curious” and “passionate” about the profession. Procurement is about being bold, going outside the comfort zone and challenging the status quo. This mindset requires people who have high EQ, are agile and not afraid to make mistakes. These traits are even more important when going through a transformation from tactical/operational to strategic.
Let me start by making something clear: I’m a process guy. I started my career as an engineer on a production line. I have spent the past 20 years working in supply chain, helping clients improve operational efficiency and deliver value in more predictable and repeatable ways. If you ever need a process map for anything, school projects included, ask my kids because I’m your man. So, when my team at WNS-Denali shared the results of our recent benchmark study, I was ready to dive into operational improvement mode. Where did we find inefficiency? How can we help our clients improve performance at scale? I was surprised at what we saw in the findings.
Reading the Procurement Data
What we saw is a tremendous amount of variation. In fact, if you only looked at the findings through the lens of traditional procurement performance models, the data do not lead to very specific conclusions about procurement’s value. So, we decided to flip the analysis model on its head and examine some different correlations.
We focused on two separate benchmark rankings: value and business alignment. For value, we looked at traditional procurement KPI’s: spend under management, savings, process efficiency, and operational excellence. When measuring business alignment, we looked for more subtle trends and indicators of deep stakeholder alignment, effective change management, agile procurement, and adaptive operating models. What did we find? The responses did not point to any single “best” procurement operating model, technology package or spend management process. There was NO PROCESS MAP for best-in-class procurement! Instead, high-performing organizations had one thing in common: a mindset emphasizing tight alignment with business objectives – what we call Total Business Alignment.
Greg Anderson - Senior Vice President of Procurement Services, WNS-Denali
What is the Sustainable Procurement Pledge and how did come about?
The Sustainable Procurement Pledge (#SPP) was born out of passion and is driven by a shared sense of responsibility. #SPP addresses people, not organizations. We are ultimately the ones who constitute organizations and who are making daily decisions in our workplaces. The biggest lever to have a positive impact is therefore with us! #SPP primarily addresses those who are connected to the Procurement function, procurement professionals, academics and students, but does not exclude anyone outside this area of activity. Those who feel concerned by the #SPP messages can start and join right away!
The idea was ignited by the Global Climate Strike on September 20, 2019. Adults and children, from all walks of life, made a clear statement and we were reminded about our prime responsibility: to leave our home, our ONE planet, in the same condition as it was entrusted us.
There are many great and profound sustainability initiatives already. They typically involve companies, governments, institutions and top leaders. However, we rarely see initiatives that address individuals. And yet, we all have the power to make impactful everyday decisions and gradually change the world. We fundamentally believe that many small changes ultimately lead to a big change?
2019 was an amazing year for sourcing. We witnessed greatness as the Future of Sourcing Awards showcased some of the most innovative projects, individuals and teamwork the sourcing industry has seen. The pages ofFuture of Sourcing, SIG's sourcing and procurement thought leadership publication, gave great insight into trends and best practices of the year as well. Below are the top articles of 2019 from Future of Sourcing that you don't want to miss. I hope these give you inspiration and motivation to innovate processes and implement change inside your organization in 2020.
How Digital Technology Will Transform Talent Acquisition
Today, intelligent automation and machine learning are boosting productivity and optimizing a wide range of back-office operations. How are these emerging technologies changing the way we find talent? Helen Castor gives us some insight.
What’s keeping you up at night? CPOs today are under continued pressure to reduce costs and find new sources of value – and of course, manage risk.
At the same time, CPOs want to become more strategic advisors to the business. We’ve found the perfect opportunity to help you achieve those goals and more.
As a CPO, you probably manage millions of dollars’ worth of spend on services. Think of all the money your company spends on consultancies, IT services providers, marketing agencies, law firms, accounting firms, facilities management companies and more. These services providers operate across the enterprise, perform vital work and deliver enormous value.
You manage the contracts and rates for these services, but beyond that, how much attention do you pay to that spend? Do you know whether these services providers are delivering high-quality work? Do they hit deadlines? Is your business getting good value for money?
Most of us are guilty of under-managing services providers. That’s one of the key findings from a groundbreaking new research study published by SAP Fieldglass in collaboration with Oxford Economics, titled Services Procurement Insights 2019: The Big Reveal.
Growing economic uncertainty, geopolitical unrest, and emerging cyber threats mean that security and risk management are now critical boardroom priorities. If that weren’t enough, businesses today are not only accountable for the factors that impact them directly, but they’re also responsible for those that impact their suppliers.
Take the recent Quest Diagnostics data breach as an example. Despite Quest’s strong internal cybersecurity infrastructure, the sensitive information of 11.9 million patients was hacked through a third-party billing vendor with subpar security standards. The lesson is clear: a company is only as safe as its weakest vendor.
Many organizations continue to manage suppliers, contracts, and procurement processes manually or with outdated, clunky technology that is too complicated for efficient use. These haphazard systems are, unfortunately, perfect harbors for risk, but there is tremendous opportunity here. According to a recent McKinsey & Company report, 56% of source-to-pay tasks could be “fully or largely automated using currently available technologies.”
While automation isn’t a cure-all, it does have the potential to drastically decrease overall risk. How? By reducing the “human factor” in supplier management and allowing sourcing employees to focus on more critical projects. In addition to putting risk mitigation at the forefront, automating supplier-related processes benefits businesses in these four key ways:
Chris Crane, Co-Founder, Product, Scout RFP, a Workday company
The pressure for companies to solve society’s most pressing problems is growing exponentially, fueled by the gravity of looming issues such as climate change or social inequality. While the majority of companies have already defined their corporate commitment and social impact objectives, many leaders are struggling to implement strategies that actually achieve their aspirations. Considering that 78% of executives believe their companies are failing to deliver on their social impact pledges, there’s a dire need for companies to drive social innovation across each department and generate positive social change through their day-to-day operations.
Amid the changing business landscape, companies are required to achieve two core objectives: generate profits and elevate corporate social responsibility. Due to procurement’s immense purchasing power, more executives are turning to their CPOs to drive innovation and sustainability – all while generating tangible impacts that benefit the communities they operate in. Here’s how procurement leaders can achieve these objectives and simultaneously generate new business value by adding social impact into their sourcing and procurement process.
This is the final chapter in our tail spend series and we’ve covered some significant ground to understand what tail spend is, why it happens, and the potential issues with ignoring it or managing it in the wrong way. In this final chapter, we'll explore the ways you can find savings in your tail and how to build a strategic sourcing framework to help you manage it going forward.
To get up to speed, you can read the entire Talking to Your Tail Spend series on our blog:
Amy Fong, Principal - Procurement and Purchase to Pay Advisory, The Hackett Group
We’ve released a series of articles to answer your questions about tail spend. We started by defining tail spend, discussed how to better work with stakeholders to manage it, and now we’re diving into the potential risks lurking in your tail spend and the problem with taking a scorched Earth approach. To get up to speed, read our prologue, Chapter 1 and Chapter 2 on what this tail spend series will help you accomplish.
What is the risk exposure in my tail spend?
Risk is an increasingly important consideration in procurement and we’re right to think about the impact of risk hidden in our unmanaged spend. The tricky thing about risk is that it can differ across companies, even within the same industry. Supplier financial risk is important to most, but what about brand risk, geopolitical risk in the supply chain, and the risk of payment fraud? Depending on the spend category, IP risk or labor practice risk may also be a consideration.
The starting point, once again, is the spend analysis, with the category manager charged with determining the highest risks for their category. If a category isn’t actively managed, it can be assigned to a risk team for a basic analysis. Given that the average company only actively monitors about a quarter of suppliers for risk, there’s a lot of unwatched suppliers even outside the long tail. Risk assessments are typically driven by supplier spend or a triggering high-risk factor.
Amy Fong, Principal - Procurement and Purchase to Pay Advisory, The Hackett Group