I recently dropped off my oldest son at college. It was a momentous time sending my first child out the door. Not only did it bring a flood of my own college memories back, but it also made me realize that we often wait until the last minute before we impart the pearls of wisdom that might be most helpful in a new setting. I took the opportunity to write an article (if you call a Facebook posting an "article") to him, chock full of advice on washing clothes, changing sheets, using good judgment and much much more. As I reflect on that moment, it makes me realize that often when we approach the Summit, we assume people don’t need our advice on how to make the Summit a great experience...and you know what they say about assumptions. With three new SIG employees, it occurred to me that perhaps some Summit pearls of wisdom might be in order, so here goes:
Don't miss the networking events. Most people come to events for two reasons—the first, education is what gets the approval for the plane ticket, but it's the second, networking that often gives you the most bang for your buck. One conversation can help you solve a problem...or create a lifelong resource...or even identify a potential vendor or partner. Because of that, we factor in a lot of time for networking. Our breaks are long and our evening events are lively and fun. For real energizing networking, our Tuesday evening Speed Networking is not to be missed. Even if networking is not something that comes naturally, this "speed dating" style of networking makes it easy to meet people quickly, exchange business cards and move on. On that note...
One-on-One is a new Q&A series with leaders in the SIG community. Cost savings. Process efficiencies. They're synonymous with procurement and among the terms most used to describe its role within the enterprise. And with good reason. Over the last decade, procurement has transformed itself from a back-room function to a strategic capability by delivering them. But a new term has entered the lexicon: innovation. There's no doubt that procurement today is a different game. It's more connected, informed and some might even say "social" than ever. Just as consumers tap into personal networks to learn, share and shop better, procurement is beginning to tap into business networks. To learn more on how these digital communities are transforming the function, SIG sat down with Dr. Chakib Bouhdary, President of Business Networks for SAP.
SIG: Social tools much like those used to manage our personal lives have infiltrated the enterprise. How is this changing procurement?
Bouhdary: There are officially more mobile devices than people in the world. More than a billion of us participate in social networks. Over 15 billion web-enabled devices connect us to the people and information we need to manage our daily lives. And data is exploding—doubling about every 18 months. So we are mobile, and apps on our phones and tablets give us new ways to discover and collaborate with our peers and trading partners. Just as consumers tap into social networks to keep tabs on their relatives and friends, procurement is now leveraging business networks to manage trading relationships and commerce activities.
SIG: There seems to be a complete shift in the way trading partners communicate, transact and collaborate. How are business networks driving this?
The "cloud" is allowing Procurement organizations to engage beyond their four walls with peer organizations - for benchmarking and collaborative buying - and with suppliers for new product innovations and supply chain efficiencies. Procurement organizations have long focused most of their attention on getting their own houses in order...streamlining internal transactional processes to promote efficiency, realigning organizational resources to focus more on strategic and less on tactical or transactional activities...all for the betterment of their organizations. With foundational internal platforms and processes in place, more organizations will begin utilizing the cloud to get connected outside their enterprises in a number of new and exciting ways. Cloud technologies make it easier than ever before to collaborate with external enterprises – both suppliers and their peer group. And according to Capgemini Consulting, procurement needs to rapidly shift their attention to supplier collaboration, especially early involvement in new product introduction, in order to drive innovation: "Organizations are still reluctant to involve procurement and suppliers early enough in product development and innovation. And Procurement is still viewed as a silo function with KPIs that remain focused on tactical and cost reduction activities." While 80% of more than 1,000 CPOs surveyed by Capgemini concede that suppliers are involved too late in the corporate innovation process, they recognize that suppliers contribute value beyond the products and services they provide, both in terms of the quantity, speed and agility with which they provide them:
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
I recently had a sneak peek at Dawn's "President's Message" in our latest (soon-to-be-released as of this posting) InsideSourcing newsletter. In a nutshell, she talked about the fact that SIG is not just a "membership" organization, but should more appropriately be thought of as a "training" organization — a place where professionals come to learn more about the latest best practices in sourcing, outsourcing, procurement and so much more. Read her newsletter article for the many things SIG provides in the way of training — I won’t restate it all here — but I would like to expound a bit on the benefits of engaging in professional development for yourself and your team:
We live in a networked economy. As consumers, we tap into personal networks to learn, share and shop better. And with increasing frequency, companies are harnessing the insights and intelligence of business networks to break down the barriers to collaboration and drive innovation and competitive advantage. Like social networks, business networks are an efficient, effective way to connect with a global network of partners and transact business. And they have fast become the defacto standard for a number of key processes, such as sourcing. But the real power of business networks lies in what goes on inside them – all the interactions, transactions and commentary, and the massive amounts of insights and data that they generate. And innovative companies are leveraging this information to move beyond simply transacting and engaging with partners in new ways that give them a leg up on the competition. Take MSC Industrial Supply Co., a leading distributor of Metalworking and Maintenance, Repair and Operations ("MRO") solutions, services and supplies to North American manufacturers. More than a decade ago, MSC joined a network to provide its customers with a fast and efficient way to find and purchase the products they needed. Today, the company is taking things to the next level, mining the insights, intelligence and transaction data that reside on the network to help its customers run their businesses with greater efficiency and effectiveness. When MSC learned that employees at one of its customers' locations had to walk a mile to get to a centralized storeroom where supply replacements were housed, it suggested they install vending machines to put inventory closer to where the work was being done. In doing so, MSC enabled its customer to save time and money, making it a more strategic and valuable partner. In their initial phase, networks were all about connecting companies so that they could buy and sell more efficiently.
Dr. Chakib Bouhdary, President, Business Networks, SAP
The world is in a soccer (or should I say "futbol") frenzy right now. Every day the best teams in the world are competing for their country in hard-fought matches where the team advancing might be determined in the final few seconds of a game. In the U.S vs. Portugal game, the U.S. was the only team in their group Sunday that could have advanced to the knockout round with a win. Instead, their fate is still up in the air, with a number of possible outcomes. This got me thinking about the lessons we could learn from the World Cup.
Leadership is key. It is easy to credit a coach or team captain with leadership, but if there is one thing I've learned in the past few years, it is that anyone can be a leader—it is not defined by your title. This is evident in any soccer game in the world at any given time. Just listen to players talking to one another on a field. Often it's the goalie or center back defender shouting instructions. They may have a lay of the land that someone in a striking position can't see. I think of the Procurement group the same way—it is often the only department that has regular communication with virtually every other business unit, allowing it insight at a high-level that is difficult for any other department to replicate.
There is one common, less noticed trait about all companies with successful supply chain operations; they know the value of an effective procurement organization, and have placed a great deal of emphasis in creating/transforming them around a strategic vision. However, only a small percentage of businesses globally can claim this success. Most companies lack the vision and thus have seen their procurement organizations evolve organically, developing around the needs of the time and constraints of supporting revenue growth. This blog post provides insights into what defines the second type of companies and how change at the top, supported by long-term vision, can help a firm change for the better. Businesses have developed practices of utilizing the resources and teams available to them to focus on their immediate needs. With top lines receiving a significant emphasis, procurement organizations have been asked to focus on getting the right material in time, but rarely on quality and best cost. Alternatively, when bottom line results are at risk, procurement teams have been asked to generate additional savings to meet quarterly or annual targets. It is only during times of extreme commodity price volatility and spikes in cost of goods sold (COGS), that teams are created to focus on managing commodity risks and price fluctuations. Competitive forces, lessons learned and recommendations from resources new to the firm or from consultants typically drive the situations described above. However, these are implemented as stand-alone projects and rarely translate to a long-term strategic vision. Procurement and Corporate leadership seldom evaluate a procurement organization from a holistic viewpoint.
I've read a lot lately about networking. It's a "must do" for any professional career...but for SIG, it's the difference between success and failure. SIG is defined by our ability to provide opportunities for our members to share best practices and thought leadership. How? By connecting them with other sourcing, outsourcing and procurement professionals. We offer online opportunities with Webinars, Town Hall Teleconferences and P2Ps (Peer-to-Peer resources), and of course with live events, such as Global Summits, Symposiums and Regional Roundtables. This week alone we've had one Symposium (in Toronto), a Regional Roundtable in Chicago (at McDonald's Hamburger University...how cool is that?!), a Town Hall Teleconference two Webinars and two P2Ps. It's a busy week—but it's what our members need to hear the latest industry standards and benchmark with others in this function. We love what we do and we try to make our events hassle-free and accessible. But based on some of the articles I've recently read, I'm reminded that live networking is not something that comes easily to most people. In fact, some of the best public speakers I know absolutely cringe when they have to mingle. So what can you do to enhance your networking outcome when you are at a conference or an event?
"Price is what you pay. Value is what you get." - Warren Buffett So you think you've seen it all in sourcing and procurement? Have you tried to weed out real value beyond cost savings? Just because you are saving money doesn't mean you've driven value for your organization. It might seem to be amorphous and unaccountable, but the "value" of a deal or contract is definable by the stakeholders in your organization. Find out what they want, and you find what drives "value" in your company. When you know what someone wants, you can negotiate based on that. Maybe "value" is measured in time. Maybe it's measured in contract commitments. Maybe your supplier needs goods or services you have, that can be applied in barter or through profit sharing. Procurement has matured into more than just negotiating the best contract for the best price. The creativity and innovation that can spur both value and savings comes from doing deals that exceed the simple exchange of dollars for services. Here are a few things to consider when putting together a deal: Deal summary – create an overview of the deal:
Leading procurement organizations will increasingly be able to anticipate future spending patterns rather than just analyze historical spending, and will be able to prevent supply risk failures, such as supply chain disruptions, before they occur.
When it comes to analyzing historical spend data, there already exists a major divide between world class and non-world class. Looking at a "significant amount" of spend visibility company-wide, the gap is getting bigger: 23% more world class had this level of spend visibility overall in 2012, and the gap more than doubled in 2013 to 47%, when 89% of world-class organizations achieved this mark overall. Top performing organizations also have better visibility as to how their suppliers are currently performing. In 2013, 80% of world class performers were utilizing a formal, supplier scoring methodology as compared to just 50% of the total peer group, according to Hackett Group benchmarks. Going forward, these leading organizations will seek to further extend their advantage by leveraging spend and supplier analytics in more proactive and predictive ways, for example:
Richard Waugh, Vice President, Corporate Development, Zycus Inc.