In 2018, cost reduction still tops the list of priorities for procurement. As nations engage in trade wars and protectionist policies and extreme weather continues to cause disruption in supply chains, procurement will need to adopt new strategies to meet business objectives and goals.
Procurement can efficiently manage spend and continue to achieve cost savings through the adoption of category management, which is the process of categorizing goods and services and then managing these categories as "business units" to achieve improved outcomes in the most effective and efficient way.
Category management was developed in the 1980s and takes a project management approach to sourcing to achieve improved outcomes, which is structured, measurable and drives continuous improvement. It is used in both the public and private sector, and while there is no standard categorization or grouping requirements, a general rule is to group goods and services that have similar characteristics. Organizations can use the United Nations Standard Products and Services Code to group categories or it can develop its own homegrown models.
Category Management is Not Strategic Sourcing
Category management is not to be confused with strategic sourcing, although category management evolved from the overall strategic sourcing approach. Some of the main differences between category management and strategic sourcing include the following:
Alexander Beck, PhD, is a data scientist with a demonstrated history of utilizing machine learning and data science in the financial sector, especially asset management. Alexander has a 10-year track record in business applicable artificial intelligence research, including in the fields of financial markets and customer analytics.
Data scientists analyze and interpret mountains of complex digital data to inform decision-making and strategic processes. When it comes to digital procurement and supply chains, data scientists can automate workflows and employ predictive analytics to more accurately forecast demand or disruption.
IBM predicts that demand for data scientists will increase by 28 percent by 2020, with Finance and Insurance, Professional Services and IT generating the most demand. This role often requires an advanced degree, such as a master’s or PhD. For those who are looking to add data scientists to their teams or want to learn how to best work with data scientists, Alexander shares insight into his function, how he assists the business to make informed decisions and automate workflows, and highlights some common misconceptions about data scientists.
Investors. Consumers. Employees. Suppliers. They all want—even expect—the companies they associate with to operate with transparency and trust. But lately, trust has been in short supply. In the U.S., for example, trust in institutions—government, business, media and NGOs—declined a record 23 points in the annual Edelman Trust Barometer survey, which covers 28 markets around the globe. Business alone saw a 10-point, year-over-year decline. Clearly, companies in America need to focus on rebuilding trust, but how?
Embrace Corporate Social Responsibility
Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) criteria can play a significant role in establishing or regaining trust. What do CSR and ESG entail? CSR involves implementing a business model that includes accountability—to stakeholders and consumers—on a range of societal and environmental issues. Similarly, ESG focuses on how companies tackle key issues such as climate change and human rights, which financiers increasingly consider alongside traditional financial factors when evaluating investment portfolios.
Rosemarie Subasic is a Vice President with Hines, a privately owned, international real estate firm. She is a Procurement Executive with more than 30 years of experience in corporate and government facilities, real estate and operations management. For the past 12 years, she has been responsible for facilities operations for Morgan Stanley, with an annual operating budget of over $150 million dollars. She manages over 70 sourcing activities annually.
Rosemarie will be a featured presenter at the New York City CPO Meet and Eat event on September 12 from 8 a.m. to 11 a.m. This event is a three-hour breakfast meeting with CPO-only level delegates. The event topics are focused on current events locally, nationally and globally, and allow CPOs to seek input from the group on their own top-of-mind issues. By keeping this meeting very high level, CPOs are better able to share and network with each other.
Can you talk about your background and education--how did you get involved in facilities management?
I graduated as a marketing major with a business degree in 1985. My first job after college, as an Operations Analyst for the City of New York, involved collecting, reporting and using data related to real estate and facilities operations. From there I went on to manage real estate and support services for the Department of Transportation (NYCDOT) and decided to pursue facilities management as a career.
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?
As the demand for independent talent grows, many organizations are using their own resources to directly source top independent talent without engaging third-party staffing agencies or consulting firms to perform recruiting functions. Direct sourcing affords many economic benefits such as avoiding high-priced staffing markups, decreasing overhead costs by hiring fewer full-time employees and filling project-specific roles with the right-priced independent talent.
But direct sourcing is only a small part of the picture. In order to compliantly utilize independent talent end-to-end, organizations must build a Direct Access program that encompasses finding, sourcing, engaging, paying and managing independent workers. Here are five best practices organizations should keep in mind when creating a Direct Access program to source and engage independent professional talent.
1. Drive Support from the Top Down
A lasting and successful Direct Access program begins with the right leadership support and sponsorship. This support must be driven from the top down by a senior business leader who has influence over the managers who will be sourcing and utilizing independent talent.
While a top-down approach is not the only method, attempting to build a Direct Access program from the bottom up is almost always a long and arduous path. Internal adoption is much slower and disjointed as the process relies on word of mouth and proof-of-concept in small groups.
When it comes to Robotic Process Automation (RPA) within a digital transformation project, the clear objective is to move all processes into a controllable, fully-automated workflow. This is achievable when processes need to use structured data. However, the most expensive and business-critical processes involve human workflows using complex, document-based information. Achieving the same levels of automation realized from structured RPA-enabled processes becomes much more challenging because the needed information isn’t always easy for a system to locate—much less successfully extract—from a document. Without a precise solution for getting access to document-based data, automation is adversely affected.
Finding the Right Solution
The answer is to approach cognitive RPA projects by understanding the level of “maturity” required with respect to the level of document automation your project requires and compare that with your peer’s experience within your industry.
This includes getting a solid foundation in what are current best practices regarding automation and understanding the various options for injecting document automation into RPA projects. Not all vendors approach a solution in the same way and not all capabilities are equal.
Greg Council, Vice President of Marketing and Product Management
Here at the SIG headquarters, we’re working hard to provide you with an exciting line-up of fall events and thought leadership. Whether you plan to spend July taking some much-needed time off or your goal is to wrap up some big projects, SIG is here to support you in your day-to-day responsibilities. Register for one of our upcoming webinars that cover today’s latest trends in the industry or listen to our thought-provoking podcast on your commute or a work trip.
You can stay up-to-the-minute with all things SIG by following us on Twitter, LinkedIn and Facebook. Here’s what’s happening in July:
CPO Virtual Forum
On July 19, senior procurement executives are invited to join SIG and Oliver Wyman for an exclusive CPO Virtual Forum. CPO Virtual Forums are one-hour, single-topic sessions in which CPOs gather online to openly discuss their most pressing issues. Facilitated by Oliver Wyman, the forum will generate actionable next-steps to discuss during the CPO Roundtable held at the Fall Global Executive Summit in Rancho Mirage, California, October 15-18.
This interactive presentation will be delivered in an open-mic, collaborative format via WebEx that will not be recorded to ensure candid conversations. The topic for this Virtual Forum will be "Procurement Rebranded: Leveraging the Wisdom of Brands to Produce a Star Function." Visit our website for the full session description and to register, but you must hurry – space is limited!
In my last blog, I spoke about ethical sourcing and the many benefits it can have for your company. Seems like a no-brainer, right? When attempting to put in a plan to obliterate unethical practices in your supply chain, it starts to be risky business. The best way to mitigate risk is to set up a solid plan and be diligent about following through with it.
In my research to find a clear plan to mitigate unethical practices, I found a slew of proposed methods. Unfortunately, I felt that many of them seemed too simple—basically, too easy and too good to be true. I finally came across a solid and thorough plan proposed by Declan Kearney, the founder of 360° Supplier View, who shares tips with companies to ensure ethical sourcing practices in their supply chain.
Do Your Research
Make sure you do your research on your suppliers…and their suppliers. With myriad complex regulations now put in place, go out and learn from case studies and the resources that will act as a survival guide as you attempt to research your vendors and suppliers.
Stay Away from the Fat Cat
Assess whether the higher-ups in your supplier organization are well known or politically aligned. These individuals are more susceptible to bribery or corruption.
Hailey Corr, Junior Editor and Marketing Associate, Outsource and SIG
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