In what was traditionally a siloed function, separate from overall executive and organizational strategy, procurement professionals have more recently become integral to company operations and resilience. This prominence grew during the COVID pandemic, which broke down barriers between departments and raised attention to the importance of Chief Procurement Officers (CPOs) and other procurement personnel, and the work they do.
The Power of Procurement
The procurement team is at the interface between the enterprise and the extended enterprise: the organization and its suppliers. Procurement professionals are in the position to understand the risks and the wider ecosystems their suppliers operate in. They, like no other function, can make predictive connections and be able to quickly identify risks specific to one supplier or those endemic to the wider ecosystem, and quickly pivot alongside the business accordingly. And it’s not just risk, but opportunity and innovation for the enterprise, such as identifying new products, materials, capabilities and offerings.
With this greater inclusion of procurement professionals into organizational strategy, CPOs and similar roles need to begin to reframe how the function can best serve the organization, and how other departments can serve them. One key to this new way of thinking is framing procurement around holistic risk management, particularly when it comes to managing third parties, suppliers and the supply chain.
Best Practices for Taking a Holistic Approach to Procurement
While not everything in this shift can be implemented immediately, there are general aspects of agility that should be on procurement’s agenda, including:
Each business unit owns the risks associated with the contracts they decide to enter into. This is a fundamental principle built into third-party risk management (TRPM) programs. In large organizations, the program's success is highly dependent upon each Business Unit fulfilling their responsibilities.
The Business Unit Structure for Risk Management Success
The business unit needs to ensure they have a suitable organizational structure and resources to fulfill their third-party risk management program responsibilities. This includes having team members trained in specific competencies and adequate capacity based on the level of risk associated with the business unit's third parties and sufficient capacity based on the level of risk associated with the business unit's third parties.
Once the contract is set, the business unit is responsible for the activities and tasks related to owning the relationship ( “relationship management”), including communication, contract, performance, and risk management. Team Members who reside within a business unit who perform relationship management activities comprise the largest internal population of team members who should manage risk due diligence activities with third parties.
SIG University Certified Third-Party Risk Management Professional (C3PRMP) program graduate Andrea Solano discusses how taking the C3PRMP program helped her to implement the framework for her team to operate as an optimal risk management and risk mitigation function across her department and enterprise-wide.
There are different types of workstreams and specializations that have been around a long time. However, the discipline of Third-Party Risk Management is something that is in the very beginning stages of inception. Currently, it is evolving into a discipline that many organizations shall be implementing as a standard operating function in the Silicon Valley business sector I work at. Working at Silicon Valley, the term Third-Party Risk management is still somewhat foreign and not understood as a critical and vital risk management function.
Third-Party Risk Management Function
The key role that I fulfill within the Third-Party Risk Management life cycle is in the due diligence process, which is the internal audit function that serves as a 2.5 – 3rd line of defense within my organization’s Risk Management Function. The SIG University Third-Party Risk Management training that I have taken throughout these past ten weeks has been highly instrumental for me. It will help create, build-out, and develop an internal audit framework that will be customized to meet the needs of this brand-new Third-Party Risk Management function within my organization.
Andrea Solano, Global Security 3rd Party/Outsourced Audit Manager, Facebook
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 is changing because of sustainable sourcing growth. However, the term gets thrown around in the procurement industry quite often 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.
Procurement is a business function that offers so much in the way of value. However, its not always easy to showcase the full spectrum of what procurement provides to other teams or get the necessary buy-in from sponsors or stakeholders to support procurement activities. In fact, one of the common pain points for procurement practitioners is the ability to align finance.
Finance is a critical business function. So much of what guides operations is based on the bottom line and therefore it is absolutely essential that procurement align with finance. Without this collaboration, procurement teams will struggle to gain credibility within an organization and will be less able to contribute to the overall success of the business. In order for procurement to truly be successful, it needs to align with finance. Here are some tips for helping achieve alignment between finance and procurement.
Develop a reporting structure that promotes collaboration
Reporting is essential for keeping different departments aligned. It’s only logical that the department in charge of managing money and the team that handles buying should coordinate. To really make the most of your collaborative efforts, try syncing on reporting structure to increase adoption. Ideally, procurement would actually fall under the purview of finance wherein the CPO reports directly to the CFO to increase that alignment. Benefits include:
What is your role and your day-to-day responsibilities?
I have been CPO at several global companies, where I had responsibility for all procurement, sourcing, P2P automation, as well as global real estate and facilities. I’m currently the President of Collabra Consulting, providing support to clients for procurement, sourcing, cost reduction initiatives, vendor risk management, advisory projects and interim leadership.
What is something that you wish more people knew about sourcing and procurement?
It’s exciting! Sourcing and procurement are mission-critical business activities and done well, they can provide significant bottom-line impact, strategic support, and risk and governance controls to a company.
If you’re looking for an excuse to escape the summer heat, SIG has some ways to help you bide the time inside with video-based learning, industry research, webinars and Career Network updates.
There’s still time to enroll in one of SIG University’s certification programs that can be completed on-demand in five, eight or 12 weeks. Our certification courses will expose your team to leading-edge training in strategic sourcing, third party risk and supplier relationship management. SIG University faculty are practitioners who hold senior leadership positions in the sourcing space and the courses are structured for a variety of learning styles.
To enroll yourself or your team, download the course catalog to get started.
For 14 years, Zycus and Ardent Partners have captured the experiences, performances, perspectives and intentions of procurement executives. This report includes benchmark statistics, analysis and recommendations that procurement teams can use to better understand the state of procurement today, gain insight into best practices, benchmark their performance, and improve their operations and performance.
Here's your weekly briefing of the latest thought leadership, networking events and training with SIG.
New Speakers Announced for the Midwestern Regional SIGnature Event
The Midwestern Regional SIGnature Event will take place on March 6 at the beautiful Minneapolis Central Library downtown. The impressive line-up of speakers includes Nancy Brooks, Vice President of Procurement Commercial Office with Best Buy; Rohan Ranadive, SVP, Head Intelligent Automation at BB&T; Linda Tuck Chapman of Ontala; Shirley Hung, a Vice President with Everest Group; Clare Horn, Process Excellence Lead of Virtual Operations; and Dawn Tiura the President and CEO of SIG. Join us for a full-day of thought leadership and networking. This is a free event for buy-side participants and their team! Visit our website to see the agenda and register.
When critical supply chain partners are financially weak, they become more likely to be the source of unpleasant surprises. Such supplier problems can damage a company’s brand reputation and sales. To avoid surprises, companies can leverage risk management strategies and predictive analytics to gain visibility into latent supply chain risks.
SIG University continues to certify the most well-rounded procurement professionals in sourcing, supply management and third-party risk management. Take advantage of a 15 percent discount when you enroll by March 15. Classes begin on April 15.
Risk…it’s a four-letter word. And while it is not as offensive as others, it can have a far worse and much longer-lasting impact on an organization. What is most challenging though is that it can come in many forms, making risk mitigation difficult at best and financially devastating at worst. Geopolitical risk, third party vendors, hackers, terrorists, natural disasters, poorly or inadequately trained staff and other circumstances make the global supply chain vulnerable to disruption, costing businesses millions of dollars annually. This is never so apparent as it is after tragedy strikes an area. Consider Hurricane Florence or the Northern California “Camp Fire”— the damage from these devastating events will be long lasting to the communities they impacted and the businesses that supported them.
According to Resilinc’s Eventwatch report, nearly 2,000 supply chain events took place in 2017, representing a 30 percent increase over 2016. Put in context, this translates to roughly five events per day with approximately 25 percent of them requiring an impact notification. Four of the five most significant 2017 supply chain events (in terms of number of supplier sites impacted, number of parts impacted and average time to recovery) were from extreme weather conditions and include late winter storms in the northeast as well as Hurricanes Harvey, Irma and Maria. More than a year later, Caribbean islands like Puerto Rico and the U.S. Virgin Islands are still trying to recover and will likely see years pass before their economies rebound.
It's been a busy news cycle and a busy summer at SIG. We are implementing a lot of changes to bring delegates the latest news, thought leadership and professional development opportunities to help you and your team stay sharp and informed.
Here's a look at the latest news and opportunities for SIG delegates in August.
Future of Sourcing
Originally launched in 2005, Outsource Magazine has built a strong reputation of quality thought leadership among the sourcing, outsourcing and procurement community. The digital content has continued to grow through its vast collection of contributors and with it, our audience. For this reason, it was decided that Outsource Magazine needed a transformation to better represent the thought leaders in the global sourcing community.
Today we present to you Future of Sourcing, a digital publication that will continue to provide you with unparalleled insight into the trends, best practices, challenges and opportunities facing the industry.
If you're already an Outsource Magazine subscriber, your subscription will be carried over to Future of Sourcing and you will continue to receive our bi-weekly email newsletters. If you're not a subscriber, we encourage you to sign up to receive the latest articles directly to your inbox. And don't worry, we won't spam you with unnecessary emails and never share your information.
We hope you like the new look! Check out some of our latest articles in the Future of Sourcing: