Jeanette Nyden is an internationally recognized contract negotiation expert. She’s written and co-authored three books to date. Jeanette provides tactical, customized contract drafting, negotiation and management training, coaching and mentoring programs to both sales and purchasing teams.
Jeanette has taught at major corporations, Seattle University and the University of Tennessee’s Center for Executive Education. While no longer practicing law in a traditional manner, she is a lawyer and holds a license to practice law in Washington.
Your presentation at the Western Regional SIGnature Event is about reducing value leakage in complex contracts--why is this such an important topic?
Industry studies demonstrate contract value leakage is from 17% to as high as 40%. Typically, value leakage comes from things like low adoption rates, non-value-added change orders, lack of innovation, etc. Performance- and outcome-based contracting best practices can dramatically reduce value leakage.
Additionally, businesses are seeking greater returns from their customer-supplier relationships at the same time many younger professionals are entering the field. This is a perfect time in the market to emphasize ways to implement performance- and outcome-based principles to reduce value leakage.
It’s no secret that technology, data analytics, globalization, and other factors have completely changed many aspects of modern business. Supply chains are wider than ever, sales and procurement strategies are increasingly predictive thanks to advance data approaches, and more companies are outsourcing work and relying on contractors.
Amid all this, the C-suite has seemed relatively stable. A business might have a CEO, a COO, a CFO, or other executives, but they tend to focus on business processes within their domains of expertise. But increasingly, it looks like those widespread shifts in other departments have reached the C-suite.
Whether through collaborations or new roles, the executive level in many companies has been adapting to new realities. Here’s how they’re doing it.
The technological shifts and trend toward outsourcing have been a boom for bottom lines, but they have also made the nature of business decision-making more complex. Consider, for example, the role of a CIO. For years, information and technology managers chose and oversaw the implementation of network solutions for a company to use in-house. But now that many businesses hire outside firms to handle cloud storage, data security, and other essential IT functions, the CIO’s role has changed. Now they are having to think more about purchasing, contracts and third-party risks, like a CPO, and about strategy and long-term competitiveness, like a CEO.
As a result, the traditional walls between those positions have begun to break down. The CIO in the example above can’t move forward with new contracts or strategy without consulting their peers in the C-suite. Likewise, if a procurement officer or human resources lead want to implement new software solutions that can add value and intelligence to their departments—an increasingly common occurrence—they’ll benefit from consultation and buy-in from the CIO.
Patrick Gahagan, Director of Contract Compliance Audit Services at SC&H Group
“Impact sourcing results in a more engaged and motivated workforce for companies, and enables them to increase their global competitiveness.” — The Rockefeller Foundation
You need the work done and there are countries that are disadvantaged, war-torn or underemployed that have motivated, educated workers who can perform the work you need. It truly is the correct choice. Why continue outsourcing to developed countries or countries in which the vast majority of people already have access to the middle class?
Did you know that outsourcing to India is the number one reason it now has a thriving middle class? Are you aware that through outsourcing an entire generation was lifted out of poverty in both China and India? Do you know that when you outsource to a country, it can change the trajectory of people’s lives? In a 2003 speech, Anne Krueger, First Deputy Managing Director of the IMF stated that the impacts of globalization have benefited both India and China by lifting millions of people out of poverty since 1980 and putting tens of millions of people firmly into the middle class. In addition, China has seen their extreme poverty rate fall from 84 percent to about 10 percent largely because of trade, reports the Economist.
Ever heard of a thing called inertia? Inertia is the resistance of any physical object to a change in its state of motion, or the tendency to do nothing. In business speak, this phenomenon is often characterized as analysis paralysis. In a corporate world of business cases, business plans, strategic roadmaps and the push to constantly sell, align and achieve, it’s no wonder procurement leaders are drowning in what needs to be done, but struggle to scratch the surface. How can it be that a top procurement leader whose very career path has been the result of their outstanding productivity and accolades suddenly faces a precipice of declining performance and the disastrous stagnation of innovation? Simple. Because their knowledge impedes creativity, causing inertia.
Procurement leaders who have spent the entirety of their career in one industry, one company, or one function, namely procurement, subconsciously experience limiting beliefs—and by limiting I mean success-hindering, momentum-killing beliefs—about themselves and the procurement function. Without ever intending it, procurement leaders often poison their potential by allowing their knowledge and experience to cloud their creativity and vision of what they can imagine going forward. They often resist any change to the current state of operations because they are so focused on delivering in the here and now. Even if they manage to recall their vision for a world-class procurement organization, the age-old question emerges: where do I even begin? The path of least resistance is to simply do nothing, to change nothing; the alternative could lead to failure. To these skeptics wary of innovative change, I’d like to pose the question: isn’t the very act of doing still far more productive than the act of thinking or talking about doing something, regardless of the outcome?
In previous blogs, SIG has covered the basic concept of sustainability, including an overview of its various dimensions. In this post, I will touch on the role that sourcing professionals can have in meeting corporate sustainability goals.
Why should sourcing have a role?
Sourcing is uniquely positioned to contribute to meeting a corporation's sustainability goals because sourcing typically has expertise in:
Creating alignment to corporate goals
Building frameworks to measure success
Researching market conditions and supplier capabilities
Conducting strategic negotiations
Designing innovative methods for value creation
Ranking the priorities of stakeholders with supplier offerings
Identifying risk and mitigating responsibly
The reduction in costs after implementing a sustainability program can exceed the costs of implementation – in other words, you’re spending money up front but in the long run, you save more than you spend. For example, if an organization were to target the spend category of corporate services and facilities management (FM), capital may be invested in working with a supplier to install a new system that reduces energy consumption at the company's North American headquarters, but in the long run, the reduction in energy costs saves the company money – which of course, can then be reinvested.
In this example, procurement and sourcing are uniquely positioned to make this happen. Most likely Sourcing negotiated the original FM contract, understands the innovative capabilities of suppliers, has heard many recent pitches on new products, and is adept at performing the analysis that proves an investment can have a significant return in hard costs, and even soft costs.
Mary Zampino, Senior Director of Global Sourcing Intelligence
Given the intensity with which companies today are focusing on innovation and profitable growth, it is imperative that procurement teams drive strategies that support enterprise-level business goals. Beyond traditional sourcing approaches, strategic category management delivers a collaborative way of developing solutions that support both business and category objectives. Category management maximizes category value to the organization, delivering on critical parameters such as total cost of ownership, risk and performance, to name a few.
While procurement organizations around the world realize the significance of building an advanced category management program, getting there isn’t simple. In a number of organizations today, category management is still at a nascent stage, perhaps indicating that though there is an organizational structure for category management, it is not quite aligned with the business strategy. For many though, exhausted sourcing strategies turn out to be their biggest hindrance.
To address this issue, GEP and SIG have teamed up for a webinar with Biju Mohan, vice president of GEP Consulting, to discuss the latest trends influencing strategic category management program design and implementation by global, market-leading procurement organizations.
Key topics include:
Edie Sachs, Senior Marketing and Content Manager, GEP
Procurement has evolved to become more strategic and collaborative and has moved from an isolated, back-office function to a boardroom partner. While the procurement function must continue to drive hard savings, manage suppliers and mitigate risk, it must also pivot to look for opportunities to deliver future savings and innovation.
“Procurement is at an inflection point,” said Dr. Marcell Vollmer in a recent interview with SIG CEO Dawn Tiura. “Procurement needs to transform into a value-added function focusing on strategic tasks.” How can procurement teams do this?
For all the great advancements that technology brings, it requires people to manage the technology. Oxford Economics’ survey among procurement executives and practitioners found that the top three investment priorities include new talent recruitment, training/upskilling programs and procurement/supply-chain technology.
The concept of sustainable sourcing, also known as green purchasing or social sourcing, is nothing new. Sustainable sourcing is impacting nearly every area of corporate business and the consumer’s mindset. Everything from sourcing materials, talent attraction and consumer purchasing habits are changing because of the growth of sustainable sourcing. However, the term gets thrown around in the procurement industry quite a lot and is often misunderstood or misused. So, here’s a guide with all the basics you need to know about sustainable sourcing.
WHAT IS SUSTAINABLE SOURCING
First and foremost, we have to define the term. Sustainable sourcing is the integration of social, ethical and environmental performance factors into the process of selecting suppliers. It includes purchasing sustainably preferable products and services (products made from recycled or remanufactured materials), as well as green purchasing guidelines that might pertain to certain products or commodities.
For those who work in any area of the supply chain, diversity is a word that comes up often. Supplier diversity or diversity in contracting are programs that can be either mandatory (i.e., requirement to fulfill state or federal contracts) or voluntary (i.e., procurement/social responsibility strategy).
Whether your organization chooses diverse suppliers for advocacy and social responsibility reasons, to comply with state or federal regulations, or to simply meet your stated requirements and work scope, the benefits of supplier diversity can have lasting impacts on your community and your organization.
Starting a Supplier Diversity Program (SD Program) in your organization requires input and collaboration from various stakeholders at all levels. The SIG Resource Center has a wealth of information to help you begin the process to implement an SD Program, including how to make the business case to internal stakeholders, best practices and benchmarking studies from your peers.
Mary Zampino, Senior Director of Global Sourcing Intelligence
Situated in the southernmost part of the Brazilian state of Minas Gerais, nestled among green rolling hills, coffee plantations and dairy farms is the small town of Santa Rita do Sapucaí. A cursory glance shows Santa Rita as a charming town full of farms and churches but in reality, this picturesque little city has so much more to offer. In recent years, it has become known as “Vale da Eletrônica” or Electronics Valley because it is home to the highly respected technical school, Escola Técnica de Eletrônica Francisco Moreira da Costa and is also known as a hub for technological applications, from carpool and table service apps to toothbrushes with sensors that connect to children’s games. And Santa Rita isn’t the only city in Brazil ramping up their efforts.
Plagued by years of upheaval economically, Brazil is making a comeback and relying on the IT sector to help make their triumphant return. A $200 million joint investment with chipmaker Qualcomm, was welcomed in March by the federal government to build a semiconductor factory in the state of São Paulo where other major tech companies such as Samsung and Lenovo already have operations. Their hope for the investment is that this will be the first step for Brazil in becoming a noteworthy player in the manufacturing of high density semiconductors that are used in 4G and in the future, 5G devices, as well as IoT applications. The investment from Qualcomm is expected to bring in about 1,200 new jobs which only makes a tiny dent in solving Brazil’s unemployment rates—at 11% there is still a long way to go, but it’s a step in the right direction.