7 pieces of procurement wisdom

 

Technology, cost cutting, in or out-sourcing, retaining competitiveness, the challenges facing procurement professionals are as great as ever.

While making cost critical decisions is never easy, those responsible can also find some great reinforcement and inspiration across the industry. Whether it’s making greener choices, embracing change or choosing who to work with, there are more than a few successful individuals willing to share their views.

Here is our summary of 7 key pieces of advice from the experts:

1. Don’t fear change, embrace it

David Rowan, editor of Wired magazine, is quoted as saying procurement professionals must embrace rather than fear change, particularly in technology.

Rowan: “Companies that don’t embrace this will be left behind and unable to reap the rewards that can be seized. The Internet of Things, where everything is connected and feeding data back, will give the function another layer of information about its supply chain and the products it is producing. But it will also provide more information on how customers are using products.”

2. Collaboration is key to transformation

Jane Harley, CPO of Qantas, Australia’s largest airline, is part of a low-margin industry where cost is constantly top of mind. In order to maintain and ensure air competitiveness, the company had to embark on a major business transformation in 2013/2014.

Harley commented on how she managed to develop and nurture good procurement talent during this crucial time by saying among other things: “Collaboration is key to transformation.”

Collaboration for Harley and her team meant sitting down with their business partners to understand their needs. By realising that their partners wanted procurement to work alongside them, to take ownership, and to deliver to their timeline, the Qantas team made their collaboration effort more physical by procurement hot-desking with business partners and changing the business language.

3. The environmentally sustainable supply chain can deliver cost savings and efficiencies

As well as pointing out the cost saving and efficiency benefits of an environmentally sustainable supply chain, Lisa Harrington, president of the lharrington group, advises that:

“A sustainable supply chain can also generate new sources of revenue by capturing residual value from products at end of life. Companies with the foresight to transform their view of environmental sustainability, from meeting obligations to seizing opportunities, can capitalise on this strategic approach.

“Companies are starting to realise that there is a direct link between a green supply chain and profitability improvement. This improvement stems from either direct revenues from capturing value from the recycling waste stream, or indirect savings stemming from elimination of waste throughout the supply chain”.

4. Procurement is not a sport

Saying no is not always conducive to the best outcomes, according to Paul Vincent, vice president consulting at 100% Effective:

“A great procurement professional knows that the easiest word to say during the buying process is no. However, they also understand that saying no will not always create the best commercial and contractual environment for the required business outcomes. Procurement is not a sport.

“For instance, saying yes to dialogue between suppliers and budget holders is a good thing if properly facilitated. Fuller disclosure during a bidding process might generate a more thorough proposal. Being honest about the true opportunity to win the business will ensure that the right service providers put sufficient thought into their offer.

5. It becomes very difficult to drive savings over time if you’re just doing the same things you’ve always done.

Patricia Dreghorn, global technology and strategy director at Xchanging Procurement:

“With procurement, it’s easy for companies to reach a stage where they just take the low-hanging fruit – stick with suppliers, processes and tools they know – but change is happening all around them. Procurement cannot operate in a vacuum. It affects too many parts of the business and is affected by too many global factors.

“It becomes very difficult to drive savings over time if you’re just doing the same things you’ve always done. Companies need to look at innovative ways of changing that.”

6. Councils must develop the internal market expertise

Denise Le Gal is cabinet member for change and efficiency at Surrey county council, which was named by the Government as one of the country’s top 10 councils to do business with. She is a strong believer in building expertise in-house:

“Local government must build commercial expertise. These contacts also need the flexibility so they can be effectively market tested and benchmarked. Our contracts have moved from being too rigorously specified to an outcomes based approach, particularly within our social care environment. This has fostered more innovative proposals from suppliers allowing them to demonstrate their real expertise and flexibility in a market rather than simply responding to a requirement that constrains them.”

7. Any self-employed business person should have suitable levels of insurance

Following a survey in Supply Management magazine on the need for indemnity insurance, Emma Goodwin, a procurement manager in financial services, was among the 11 to 1 in favour of self-employed procurement professionals having insurance. She said:

“Any self-employed business person should have a suitable levels of insurance. It’s part of good business practices. While the risk of a claim if you are acting as a professional is low, the cost of such insurance is relatively low but the benefits are high.”

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