Recently, SIG had the pleasure of hosting AArete experts Tyler Higgins, Gaurav Joshi and John Marchisin and Duane Elmore, Chief Procurement Officer at The Pennsylvania State University for the July CPO & Executive Virtual Series. It was a very engaging discussion that lasted nearly two hours with tons of excellent takeaways. Let’s get into it!
Adapting Your Supply Chain for Diversity and Sustainability
The team kicked off the day discussing what has driven the rise of corporate ESG priorities. There are seven areas that they highlighted to explain this increase:
Policy & Regulation
Access to Capital
These competing priorities oftentimes lead to many different approaches to accomplishing ESG initiatives. The Aarete team then walked through different approaches and experiences of ESG initiatives. They also shared successful diversity & sustainability programs. From Starbucks to The University of Penn, there are numerous ways to have success.
How to Transform the Buying Process
Companies across all industries are setting ESG goals, and procurement leaders are at the forefront of executing those goals. Procurement leaders must balance these goals along with supply chain continuity during an inflationary environment. Having a ESG framework and a supplier diversity strategy is fundamental to transforming the buying process. Most organizations are challenged to find the right suppliers that can meet sustainability and supplier diversity goals. By incorporating KPIs for procurement, suppliers and adoption, you set the ESG goals up for long-term success.
Today, procurement must not just find ongoing opportunities to reduce cost, but also mitigate risk, improve supplier performance, improve cash management, unlock innovation, support CSR objectives and a long list of other goals. Those increasingly include ensuring agility in the face of Covid-19 and the next crisis. As the list of procurement’s objectives continues to expand, continuous improvement is essential. It is not just the number of goals but their broad scope that make transformation a must, and a lengthy journey. Success requires mapping the right path, continuously tracking progress and course-correcting along the way.
As renowned management guru Peter Drucker famously said, “if you can’t measure it, you can’t improve it.” Unfortunately, all too often, procurement leaders can’t measure everything they need to or measure it in the right way. When looking at any challenge, it often helps to investigate how the very best operate and what distinguishes them from the rest. So Ivalua partnered with Forrester to take a broad look at Effective Procurement Performance Measurement across over 400 organizations globally. The study showed a marked difference between the performance of the most advanced procurement teams and the rest (categorized as either beginners or intermediates), and similarly noticeable differences in measurement.
The Best Measure More
On average, procurement teams that are most advanced measure roughly 50% more KPIs than beginners (and around 30% more than intermediates). They don’t just measure more, their performance reviews and bonuses are tied to those KPIs.
SIG University Certified Third Party Risk Management Professional (C3PRMP) program graduate Cindy Lingerfelt works at Blue Cross Blue Shield of Florida. She shares what she’s learned about third-party risk management and how her small team plans to build a stronger risk culture.
In the C3PRMP program, students focus on best and emerging practices to identify, assess, manage and control third-party risk throughout the lifecycle of relationships, and learn how to align risk fundamentals and frameworks with risk culture to develop the essential tools and controls for effective governance.
I work for Blue Cross Blue Shield of Florida on the Procurement team. My sub-team, Supplier Management, is small and we wear many hats. We were the first in our organization to implement some standardization for how critical suppliers were managed by developing a segmentation questionnaire to tier our suppliers and worked with business owners to get all Tier 1 suppliers on performance scorecards. Our role was to provide standard formatted scorecards with a library of the most common KPIs, stationary, QBR templates and more.
Due to an incident with a supplier, the board made a directive that supplier risk should have a more explicit focus. A new team called Enterprise Risk Management was formed within Corporate Affairs/Internal Audit to address supplier risk and closely partner with Procurement on new suppliers and manage risk with our current supplier base.
Cindy Lingerfelt, C3PRMP, Sourcing Specialist, Florida Blue