Archive for the ‘Change Management’ Category

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Consumers are like elephants – Risk management and mitigation is a long term project

April 12, 2010

Reports on konsumerbehavior and beliefs are always a great source when trying to understanding, educate and open the minds of procurement professionals (or anyone involved in development and manufacturing). Most often they expose consumers as a sort of elephant – they rarely forget and once they start moving in a direction, getting them to change can be an overwhelming task.

Recently, Konsument Föreningen Stockholm – swedens largest non-profit consumer organization – opened a social media project called “Myths about Food” whereby they sought to expose and bust many of the myths that still float around consumer circles.

One of the questions in the survey was related to the use of apples in Lingoberry jam. Now anyone who’s ever been to the nordic region will have experienced the importance of Lingonberry in Scandinavian cuisine. The fact that it’s one of IKEA’s big sellers abroad is a testament to the fact if nothing else. In it’s purest form Lingonberry jam consists of lingonberrys and sugar so when your starting to mess with the recipe you’re getting into pretty deep waters.

Evenso, about 20 years ago many producers were exposed using apple sauce in lingonberry jam to make their product cheaper.

In this years survey (swedish only) – 72 percent of the respondents still believed this to be true. Even though producers stopped the malpractice years ago.

Now that’s something to keep in mind when you’re trying to balance cost with your products consumer product.

Posted in CSR, Change Management, Governance, Risk Management, Spend management | Leave a Comment »

Can one engage the supplier base to lower supply chain risks

March 31, 2010

With many car manufacturers struggling with recalls and pointing the blame at their ailing supply chains this recent piece by Peter Hunter of HumanResourcesIQ (Root Cause of Toyota’s Failure: Employee Engagement) opened up the matter from a completely different perspective.  Hunter argues that engagement is the real differentiator between East and West Toyota production lines.

Is it possible that the faults that caused the recalls did not occur in vehicles produced in the East because they were spotted and rectified by an “engaged” workforce, while in the West the “disengaged” workforce knew of the problems but never reported them to Toyota because Western managers do not know how to engage their workforces.

I shared similar sentiments in a post relating to Bianchi bicycles a while back (One Supplier Audit Question You Probably Never Asked); “…In a world where cost and volume seem to be the rule of the day; passionate businesses can surely find a niche market and exploit it to the fullest, but it also means that the business must share the same passion as the consumers…”. Passion and engagement are related emotions. And both have been out of focus in sourcing recently.

Understanding why an end-customer buys the product should be essential for procurement.

If you’re solely focused on up-stream cost reduction, chances are that you are missing the real reasons why your product is unique and why customers are attracted. In many cases it’s more than just marketing gimmicks that have driven them to the stores. It’s the pride of owning something that they can identify themselves with.

I had the chance of meeting one of the marketing and sales executives of Scania last year, and during our discussion we touched upon the subject of events where she mentioned that Scania once had put a tattoo artist in their exhibition booth. And people were queuing to have the Scania logo permanently fixated on their skin.

With that amount of customer dedication to your brand, can procurement afford to chose suppliers who are not as – or more – engaged/passionate about their job.   I would say no.

Posted in Business, Change Management, Marketing, Risk Management, Strategy, Supply Chain Management | 1 Comment »

Key success factors for public procurement

March 10, 2010

Public service procurement has taken some intense flack in the past few years – and not without due reason – but I think it’s time to acknowledge some of the great stuff that actually is happening in the area at the moment. Because it’s there, it’s just that it’s hidden under an enormous pile of bad reputation, fraud cases, contracts being overturned, administration and god knows what.

This morning I ran into Mark Masterson – the head of IBX UK – who was in town on a public procurement mission. While chatting near the coffee machine (ristretto for me, white tea for him) he mentioned an article that he had written for Supply Chain Europe recently highlighting some of the breakthrough in public sector procurement as well as proving some pointers for those who want to get on the band wagon.

With Norway and Scotland leading the way in Europe Mark points out that Norwegian users have seen “a 20-40 percent reduction in the time it takes to handle orders, goods receipts and invoices”. The Norwegian government has also made it mandatory for all public bodies to use e-invoices by 2011. Apart from these process savings the Norwegian public sector has also achieved more far reaching effects:

“A prime example is the health sector in Norway, which is going to be running a pilot scheme, as part of the PEPPOL project, where it will buy blood plasma directly from Austria, to ensure that they always have the right stocks and an optimum cost. In this case, e-procurement is literally helping to save lives.”

In the UK, results are also picking up. Since 2005, ten collaborative IT hardware e-auctions, involving 144 public sector stakeholders have led to savings of £43,8 million.

So what does the laggards in the EU have to do in order to catch up. Mark points to five keys to success:

  • There’s no time like the present – there’s no reason to wait until e-procurement becomes mandatory.
  • Keep it simple – user friendliness is the key.
  • Set clear goals – set realistic targets and timelines
  • Central funding – Scotland’s procurement success is routed in its free availability to public bodies
  • Ensure procurement and business managers work together – not only does e-procurement benefit the purchasing functions, it also helps keeping the organization financially stable

In any case, successful public procurement will be essential for the EU to regain some of its momentum especially in times when the rest of the world is betting on which country is going to be the next Greece.

Posted in Change Management, Governance, Organization, Public procurement, Strategy | Leave a Comment »

Why more women is needed in procurement – understanding the big picture, networking, communication and managing relationships are traits that define the future of procurement

March 8, 2010

Procurement Leaders big tweet chat debate on Friday focused on how procurement must change in order to attract talent got me thinking about the key traits that will define purchasing executives in the future. What we need to know, how will we conduct our work, what traits we need to pay attention to when hiring and promoting the profession. When looking at my list I admit that it is rather generic – the traits are essential for anyone in business these days and not just limited to procurement.

A broad business understanding, the ability to manage relationships, communication and using potential networks to affect and react to changes defines the modern business professional in my eyes. And it is as such that we need to look at purchasing; one of the modern business professionals.

Understanding the big picture
Purchasing is not an island unto itself. It never has been and it never will be. In our ever changing world purchasing managers must be able to understand what makes the business evolve. Business development skills should be on top of all lists.

In most cases, purchasing is the center of gravity in the full supply chain and as such it owns many of a company’s most crucial relationships. This should not be treated unlightly.

Managing relationships
As the center of gravity in the supply chain, understanding how to manage and affect all types of relationships is crucial; be it supplier-, end-user customer- or sales/marketing relationships. Purchasing managers must be able to – much like a chess player – be able to analyze the implications that may arise if and when relationships change.

Using networks
Some argue that as the internet evolves – and the power of Google increases – that using social networks will in some ways replace traditional web searching as a way to gather information. Nielsen released their findings on the subject a few months ago and found that 18 percent of all respondents used social networks as a starting point when searching for content.

Communication
As relationships evolve a multitude of grey scales replace the black and white rendering of the first impression. This stresses the importance of communication – especially across borders and when using emotion unfriendly tools such as e-mail (and in some cases social networks). Being able to speak to suppliers, c-level executives, stakeholders and end-customers alike to get their attention requires a deep understanding of the perceived value of purchasing.

When looking at the traits that define these four areas – the big picture, relationships, networks, communication – I’d argue that they are areas in which more women than men that would excel in. Yet the tradition of the profession is so male centric it is scary at times, I’ve been at purchasing events where less than five (5!!!) percent of the attendees have been female. Procurement is unfortunately – as is sales and marketing – a rather male arena.

So will the next wave of CPO:s be female?

I surely hope so.

If we manage to raise the status of procurement through whatever means – it is a fantastic opportunity for female professionals. Looking at the amount of talent that is out there (below the c-level) and the skill sets necessary for procurement excellence I’m hope that we will see a paradigm shift in the near future; off the top of my head I recall Sandra Petersen of Skanska and Christina Di Luca of BP spearheading the male confines of procurement and remember that Barbara Kux of Siemens recently made Fortunes 10 Global leaders list.

Posted in Business, Change Management, Organization | Leave a Comment »

Successfully dealing with maveric spend

March 1, 2010

Jason Busch’s Analyzing comparative claims piece on Coupa‘s Ariba-bashing marketing campaign has caused quite a stir. And not without due reason. Jason has correctly pointed out a number of shady points in the Coupa campaign as well as clearly juxtapositioning the two competitors.

But there are a few areas where the correct analysis unfortunately gets in the way of pragmatically successful purchasing; namely how we define maveric spend and which path one needs to take when tackling this dilemma.

One of Coupa’s big differentiators is the iRequest and iBuy features. In brief it enables end users to browse online-stores to requisition items. The items are then submitted for approval and the actual purchase is carried out by a purchasing professional.

Commenting on this functionality Jason Busch writes:

“…however, in larger organizations, iRequest and iBuy defeat the purpose of rationalizing spend with specific suppliers to hit volume-discount thresholds. Going to non-contracted supplier sites through iRequest and iBuy may not constitute a maverick purchase in the purest sense, but it’s certainly close to one, given the lack of a contract, price sheet, and potential discount/rebate schedule.”

And whilst he is correct in his analysis, I’ve experienced first hand on numerous occasions how exactly this type of functionality and behavior has paved the way for successful e-procurement implementation as well as development.

When I started out with e-procurement back in the dark ages before the dot-com era our free-text requisitioning was the one killer app that successfully won over a reluctant user base.

  • First, it made it possible for end-users to still use their preferred suppliers
  • Second, the purchasing department could when possible steer the purchase towards contracts
  • Third, the purchasing department could analyze buying behavior and end-user preference to optimize the supplier network
  • Fourth, skillfully navigating the above criterion, the purchasing function was able to minimize maveric spend while transferring spend towards contract suppliers

To this day – the very company that I started my procurement path within is still applying these fundaments in successfully rolling out e-procurement to a global organization (~100 countries). It eases the change management process as well as enables e-procurement roll-out to locations that are off the map in many cases.

There is a big difference between uncontrolled maveric spend and allowing end-users to show their preferences while still retaining control. And lest not forget that in the latter case, there will be a pre-approved purchase order sent out to whatever supplier, a PO that can be matched against an invoice, minimizing administration.

Call it what you will – iBuy, iRequest, free-text requisitioning – to successfully roll-out procurement you need a procurement solution that goes well beyond traditional catalog e-procurement. Jason also points this out and gives a heads up to Vinimaya which I can only applaud; from what I’ve seen, they have some great stuff up their sleeves.

Posted in Change Management, eprocurement | 8 Comments »

Asking the right questions – how to find weaknesses in your supply chain operations

November 3, 2009

Despite some of the headlines (true or not) regarding the practices of IBM’s executive management, there are still some interestion material emerging from the big blue.

In IBM Global Business Service’s recent ”Sourcing in a demanding economic environment” white paper the men in blue offer up a wide range of tactics and ideas for how purchasing departments can excel in even a harsh business climate. Though not much is new, and I personally would have emphasized exactly which skills are core when interacting with other parts of the business and taking on a leadership role in the value creation process, the authors have managed to collect a very comprehensive set of questions that purchasing managers should ask themselves when considering how to go forward with key purchasing challenges.

  • Supply base: Who are the right suppliers?
  • Commodities: What are the strengths and weaknesses in commodity coverage across growth countries?
  • TCO: How can I help ensure sustainable TCO savings? How do I build a reliable business case and estimate risks?
  • Quality and skills: How can I maintain quality levels? How do I attract and retain top-quality staff?
  • Supply chain integration: How can I most effectively manage an extended supply chain? How can I help ensure competitive lead times and flexibility?
  • Contracts and legal: What contractual and licensing issues should I be aware of? What are the import and export regulation requirements?
  • Taxation: What are the benefits or pitfalls regarding local taxation? Should I buy in local or foreign currency?
  • Language and local culture: How can I manage the local language and cultural challenges? How can I protect mu intellectual property and prevent fraud?

Though most of these questions may seem basic to more advanced purchasing professionals, I’d suggest you go through them in your next purchasing council (or board). Chance are that you will unveil unknown weaknesses in your supply chain that can be bettered.

Posted in Change Management, Governance, Organization, Procurement, Sourcing, Supplier Management, Supply Chain Management | Leave a Comment »

The problems of marketing spend – quality fulfillment

October 26, 2009

I recently came face to face with one of the major hurdles (and misunderstandings) of purchasing marketing spend; namely the definition of quality fulfillment.

Now, in most cases, marketers want superior quality – it is one of the real drivers of marketing effect – but when purchasing professionals attempt to support marketing in procuring say photography services the definition of quality fulfillment quickly becomes somewhat blurred.

  • The professional purchaser wants to buy images.
  • The marketer wants to buy superior images.

The problem is that who is to judge when an image goes from useful (it clearly displays whatever object was photographed) to superior (it displays not only the object, but also projects emotions or feelings).

The images that I purchased definitely passed any criteria set by the purchasing department (great focus, clearly displaying the object) yet I was devastated since the images were unusable due to the lack of correctly projected emotions. So what did I do?

Did I blame purchasing for supplying an inferior photographer? Well, no, on paper he was perfectly capable of doing the job (and he did, only I wasn’t satisfied with the superiority of his work) so I bit the sour apple. But next time, I’m going provide a longer list of suitable suppliers – suppliers that I as stakeholder know can bring me the superior quality I demand – and then purchasing will get to support me in the negotiations.

Posted in Business, Change Management, Procurement | Leave a Comment »

Overcoming the differences between private and public sector procurement

October 22, 2009

Over the past few years many of my colleagues and I have been on a mission bolster the notion that mindset is the key issue that separates the laggards from the top performers in the purchasing field. And this is particularly evident when it comes to understanding why public procurement so often lags behind its private counterparts.

In a recent McKinsey Quarterly article; McKinsey on Government; the gaps in performance is significantly larger in the softer dimensions – mindset, talent management and aspirations – than in the areas most often promoted by purchasing solution vendors – tools, processes and strategy. While many research organizations often stop when they’ve realized their findings, McKinsey in this instance offers a rather pragmatic explanation of why public and private procurement professionals differ in these key areas:

Two important reasons [for these differences] are that, first, the members of the [public sector] purchasing staff are typically not on a career track as attractive as that of civil servants, which makes it difficult to attract and retain the best people. Second, a culture that rewards zero errors—for instance, one dedicated to “protecting the minister”—tends to favor preserving existing processes and mandates and offers limited incentives to aim for anything more ambitious.

Unfortunately, McKinsey leaves the subject of mindset and aspirations and returns to the more familiar hunting grounds of tools implementation and purchasing process streamlining; a track that is already being centrally driven in the EU through the PEPPOL initiative. And although better processes and widespread tools adoption surely will close some of the gaps between public and private sector procurement, these gaps will always remain if the softer dimensions mentioned above are not properly dealt with.

Posted in Change Management, Procurement, Public procurement, Strategy, eprocurement | 1 Comment »

The importance of managing end-user expectations

September 11, 2009

At the IBX Purchasing Executive Summit earlier this week many wise words were spoken, but in retrospect the words that linger I my mind and won’t go away came from Gerold Carl, the Director Strategic ePurchasing at Lufthansa.

When describing the lessons learned from the very impressive Lufthansa e-procurement initiative (more on which can be learned in this Efficient Purchasing interview) he noted that end-users were reluctant to go for e-learning often pushing for the more costly in-person training approach. When asked why he thought this might be he matter-of-factly nailed answer:

“…our end-users were expecting somthing like Amazon.com, we gave them SAP…”

It just goes to show how important user-friendliness is, and how rapid e-procurement providers need to be in adapting B2C-like user experiences. If e-procurement providers can’t deliver up to those expectations, customers are no doubt heading down a path of costly training, change managment, information and expectation management.

Posted in Change Management, Procurement, Technology | Leave a Comment »

Risk management vs. Risk avoidance

September 8, 2009

As I rode my bike to the Stockholm central station this morning it struck me that the more protected you are the faster you go, and the more risks you take. Since I was travelling to the UK I had left my helmet at home (cost carriers are low cost for a reason, and extra luggage is not one of them) which is rare, so as a consequence I was taking it a quite bit easier than I normally would have. And since I was riding fixed gear, I also kept my attention as far upfront as possible, since there are no mechanical brakes on the bike to assist with the process of slowing you down.

Since I was lacking in both protective (no helmet) and divertive (less breaking power) aspects I was very aware of the risks I was taking and thus I was doing my utmost to avoid any. This of course got me thinking.

Are we less willing to accept even the notion of risk if we lack any risk management solution at all?

I’m quite sure that this is true for us as human beings. But does this mean that sourcing professionals who know that they lack the processes and tools to manage risk source more carefully than those who are secure that they can handle any problem should they arise?.

A lot of risk management vendors push strongly for the need of supplier information – preferably in real time to avoid outdated information – but I’m quite convinced that the best risk management solution starts at home with large dose of risk awareness. Carefulness might not be one of the top credentials when scouting for purchasing talent but the ability to avoid risk altogether should definitely be rewarded in one way or another.

Posted in Change Management, Organization, Risk Management | 2 Comments »

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