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.
As we settle into the holidays and celebrate with family and friends, we also look to a new decade. Absent a downturn economy, it’s hard for some to understand the importance of a strong procurement and sourcing organization. But we are so much more than just a cost-savings industry. While we are seen as an overhead, we really are the engine that keeps the company on course.
Rather than looking back at all the gains our industry has achieved this year, here are my thoughts on some of the exciting trends that I believe will pick up momentum in the next year.
1. Elevating the Role of Strategic Sourcing
Without strategic sourcing, we would not be able to improve cost, quality and service levels while guarding against third-party risk. Without the strength of our negotiations, contract development, business insights and supplier relationship management, we would fail on safeguarding our supply chains against human trafficking, conflict minerals and child labor.
I’m seeing more interest in third-party risk management from boards and company executives, and in my conversations with them, it’s clear that more resources will be devoted to supporting sustainability initiatives and the ability to act on business insights.
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
During a panel I hosted at Coupa Inspire on the role of the CPOs as “spendsetters,” the conversation evolved, as they often do, to the topic of third-party risk management. We quickly got around to discussing “tail spend” and the amount of inherent risk in the tail since it is fairly typical to not have done any true sourcing of this spend. Even more concerning, we don’t know who our third or even fourth parties are with any degree of background, let alone the risk exposure. An audience member during the Q&A asked a great question: If you could ask your tail spend three questions, what would they be?
This struck me funny and felt like we were putting a human face on something that is typically so intangible and unknown, almost like being face-to-face with a distant relative who you always speak about in whispers (admit it, we all have one). This made me feel like it was time to get personal and ask all the things that I had thought and whispered about, but never had the guts to ask... and this was my chance.
When I asked my panelists to comment, they did not hesitate.
“Who are you?”
“Why do you even exist?”
“How can I make you go away?”
“How did you even come to be in the first place?”
“I don’t even know you!”
The entire audience became engaged in a lively conversation. I told the person who asked the question (and I hope to find this person one day and thank him, in case you know the man in the second row, with glasses I believe, stage left, please tell him to reach out to me), that this conversation was not over. There was so much left uncovered.
Very few companies operate today without external support from third parties. Whether they are providing services, such as catering or cleaning, or specific parts necessary to manufacture products, most companies rely on outside suppliers in some capacity. For years, many organizations treated suppliers like nameless, paper-based transactions, designed to get the best price and little else. Over the past decade or more, much research has been done that supports a fundamentally different approach, one that embraces the idea that more can be gained from suppliers if the agreements are collaborative and based on output or outcomes – if they are seen as “relationships” and not “transactions.”
This article outlines seven sourcing business models that organizations should consider to improve their sourcing effectiveness and get the best results from supplier relationships.
Key Concepts to Improve Sourcing Effectiveness
Nobel prize winner Dr. Oliver Williamson laid some of the groundwork for the business models with 10 key lessons that contribute to more effective sourcing agreements.
1. Look at sourcing as a continuum, not a final destination 2. Develop contracts that create mutual advantage 3. Identify all costs, including transaction costs and their impact on risk and price 4. Understand that the greater the bilateral dependencies, the greater the need for preserving continuity 5. Use a contract as a flexible framework, not a legal weapon 6. Develop safeguards to prevent defection 7. Minimize transaction costs with shared visions and predicted alignments 8. Be credible – your contracting “style” matters (read: don’t strong arm your suppliers) 9. Build trust – leaving money on the table will come back to you in spades 10. Keep it simple
Mary Zampino, Vice President - Content, Research and Analytics
Kelly Bengston is Senior Vice President, Chief Procurement Officer at Starbucks. Kelly is responsible for enhancing Starbucks enterprise-wide functional strategic sourcing and supplier relationships, creating consistent global sourcing processes, developing a sourcing talent management program and building a values-based approach to working with suppliers across all categories of the business.
Kelly has held numerous leadership positions during her 8-plus years with Starbucks. Most recently, Kelly served as Vice President of Starbucks Global Supply Chain’s Strategy & Deployment team, a new team created under Kelly to support Starbucks supply chain’s aspirations of becoming digitized, strategically aligning resources against priorities and building capabilities through long-term capacity planning and supply chain intelligence.
Prior to joining Starbucks, Kelly gained broad experience in packaging, product development, manufacturing, and project management at Macy’s, Bensussen Deutsch, Cranium and Hasbro. She enjoys running, traveling, and spending time with her family. Her favorite Starbucks beverage is Nitro Cold Brew.
Can you share a little more about your day-to-day role and responsibilities as the Chief Procurement Officer for Starbucks?
I am fortunate to have an amazing job, working for an amazing company. My day-to-day is filled with connecting with great partners and suppliers to deliver products and services to our stores and customers.
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.