Archive for the ‘Change Management’ Category

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Procurement and web 2.0

September 7, 2009

There’s been a lot of chatter regarding the pros and cons of Web 2.0 technologies and their place in business in general and supply chain management in particular. And this has been particularly evident when it comes to developing end-user interfaces for IM&S procurement.

Coupa does a great job of describing some of the communication clutter that abounds in many procurement functions in their wickedly funny Coupa Sam Procurement Hero marketing ploy. But for some more hard on facts of the rise new technologies and their place in business McKinsey Quarterly might be a more secure source of information.

They recently published the results of a global survey targeting “How companies are benefiting from Web 2.0” and there are some interesting bits of information in there. The adoption rates and growth of Web 2.0 technologies is growing and though it is most evident on competence aspects, there are signs of adoption in supply chain matters as well.

  • 51 % of respondents report measurable gains in access to external knowledge (+25)
  • 49 % of respondents report measurable gains in lowered communication costs (+20)
  • 37 % of respondents report measurable gains in supplier satisfaction (+20)
  • 23 % of respondents report measurable gains in reducing supply chain costs (+12)

In times of turbulence and increased risk all of these aspects point to an increased usage of Web 2.0 technologies as communication and transparency are crucial to efficient supply chain management.

Posted in Change Management, Technology, Web 2.0 | Leave a Comment »

Unbloating IM&S catalogs

August 17, 2009

Bloated gadgets aside, this recent Economist column entitled “When Less Is More” got me thinking in more than one direction.

Especially the poignant and precise quote from Antoine de Saint Exupéry which sums up the argument: “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”

In my mind this is something that all purchasers in the indirect area should take to their hearts. It perfectly sums up why there is no need for unmanaged 5 million SKU catalogs that need to be browsed using a 25 000 node UNSPSC tree and – ultimately – forces the end user to become a maverick.

Next time you’re looking over your indirect contracts – don’t try to find stuff that is missing, try to weed away the stuff that (nearly) no one is buying.

Posted in Change Management, eprocurement, IM&S, procure-to-pay cycle, Procurement, Supplier Management, Supplier Performance | Leave a Comment »

Turning a sourcing event into a sourcing event

February 25, 2009

Getting people to buy into new ways of working may be one of the trickier transitions one has to manage. Most people are armed with an instinctive resistance against change; which often turns new process adoption into a trench war of old versus new. I’ve seen a multitude of seemingly simple transformation programs grind themselves slowly into the ground by the most illogical reasons.

Take e-auctions for instance; from an outsiders perspective they seem like the perfect tool for any purchaser; yet e-auction usage can still be a hot potato.

To overcome this resistance; some of IBXs senior category managers have introduced a concept where the negotiation really turns into a place to be (sourcing) event. All you need is a (LCD) projector, a conference room and some snacks. And to top it off; a well prepared e-auction that is shown live in real time on the big screen.

The snacks bring in the folks who may at first reject the new process yet still enjoy the company of their colleagues, the projector allows everyone to see the action – and anyone who’s ever been monitoring an e-auction knows the rush of adrenaline that comes as the bids start dropping in – and if you’ve chosen and prepared your event well enough (a select group of bidders who are familiar with e-auctions and really want the contract), the bidding and results will win over even the most stubborn of e-auction opponents.

At a recent event; an incumbent supplier was set against a very aggressive opponent who dearly wanted to gain market share, so the dynamics (and the drama) was apparent from the start. Over popcorn and soft drinks the staff followed the negotiation in real time and as the negotiation was finalized, the winning bid was more than 50 percent lower than the price paid according to the previous contract – and the difference between the two lowest bids was just about 0,5 percent, calming everyone who might be worried about switching costs or quality differentiation.

Though it may seem like a cheap trick; fact is that this cheap trick has worked time and time again and accelerated e-sourcing adoption at many companies.

Posted in Change Management, E-Auction, Negotiation, Sourcing | 3 Comments »

To kill a maverick bird

February 24, 2009

A German purchasing newsletter (einkaufs-manager –  in German) recently had a few hot tips for preventing maverick buying in the company. Could be so simple – just propagate a new policy: No order leaves the company without sign-off from the purchasing department.

While this certainly is a very hands-on approach which in itself does stop maverick buying dead in its tracks, one question remains: Does a purchaser really need to see and sign off every order? We are talking about signing off orders on everything here – everything from material to furniture to pens to post-it notes. One could imagine a professional purchaser can use his or her time in more valuable and strategic ways for the company than by signing off an order for another pack of pens or paperclips.

Instead standardized products and even non-standardized services and products can and should be called-off by the requisitioner in a spend-centric purchasing system. Either from purchaser-approved (and negotiated) catalogues or via vendor forms from purchaser-approved vendors. The purchaser can use the saved time to do actual strategic work such as vendor development and frame contract negotiations. The operative work should be limited to handling the raw purchase requisitions (which are usually without vendor assignment).

The newsletter had another tip, which was a variant of what has become known as the “No PO – No Pay” doctrine: Simply tell all your vendors that any invoice based on an order which has not been signed off by a purchaser (see above) will be rejected. The tip closes with the rather up-beat remark that the vendor then can go and altercate with the requisitioner about the issue. While this, again, certainly kills maverick buying to a certain degree it may have some unwanted side-effects such as driving your vendors mad at you (as they usually have delivered already). It may even be a new vendor which had no knowledge about this policy in the first place. In addition the company loses valuable time since the requisitioner needs to send the ordered items back, haggle with the vendor and generally clean up the mess. It’s also open to debate if the purchaser actually wants the vendors to talk directly to individual requisitioners in the company. And last but not least it’s probably not what a good vendor-buyer relationship needs in times like these.

Instead the rule should be altered slightly so that every invoice needs to be based upon an order from the aforementioned spend-centric purchasing system (the PO would be easily identifiable by an order number). Since all the catalogues and vendors in the system are pre-approved by the purchaser and even the purchaser requisitions result in an order from the system the maverick buying is practically eliminated without the rather harsh side-effects mentioned above.

Posted in Change Management, eprocurement, Organization, Procurement | 3 Comments »

The CPO dilemma – How to get more done with less

February 10, 2009

In a recent white paper, Accenture cites a survey of the world’s CPOs noting that 75 percent of those surveyed reported that the downturn has “significantly affected” their purchasing operations. More that 50 percent claim their procurement budgets had been cut, many reported that they were experiencing cut of more than 15 percent. At the same time, savings targets have increased, and nearly 20 percent report that they now need to deliver savings of 15 percent or more.

This is very much in-line with our experiences. Purchasing functions are under pressure to do more with less.

A few days ago, I touched upon this subject in a post called “Talent and competence retainment in a downsizing economy” and I’d like to expand a bit on this subject.

In times of turmoil and significant downsizing, CPOs and purchasing directors need to be very clear in they ways they lead the changes whilst manage expectations and motivation. Successful leadership can be attributed to the following three areas:

  • Visibility – Lacking information, rumours will flourish like air filling vacuum. CPOs need to keep staff informed of changes (internally and externally).
  • Engagement – Involvement in the change process is two fold. Not only does the staff see the engagement of the management first hand, they also partake in the decisions and are able to vent concerns, offer improvements and channel their energies away from distractions.
  • Value-driven – True understanding of what the real value for the company is, is vital for keeping motivation. Unfortunately, in bad times, long term goals are often obscured by the panic to save the moment, yet much research suggests that staff with an inner drive and a deeper understanding of the business model often outperforms staff whom focus on delivering the set targets.

Successful leadership is often attributed to being able to see and channel the talent of each and every individual. Everyone has the power to excel if their talent and potential can be brought into the lime light in a given situation. Being visible and transparent with relevant information, engaging staff in the process and projecting the long term goals and strategy of the business provides a foundation for bringing out this potential. Something that is vital to tap into in order to succeed with doing more with less.

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

Understanding demand is a real protectionist killer

February 6, 2009

As economic nationalism starts to gain hold of international trade many are calling to our leaders in an attempt to try to keep trade free (and fair). Unfortunately, many of the voices championing global trade are as single-tracked and close minded as their protectionist counterparts.

The strange thing is that both parties are just as far from the mark; because a one sided free-trade economy is often just as bad as a one sided protectionist economy. One side is blinded by the shiny cost per part savings, the other is blinded by local/regional opinion.

So what’s the solution?

Well, instead of joining the shouting game, purchasers can start to pave the way by focusing on the full cost of their contracts; awarding contracts to suppliers that offer best total value as opposed to lowest cost per part. It’s in line with the evolution of purchasing as a profession; and it’s in line with what corporate management is expecting from purchasing today. It’s about understanding the demand; and then going out to a global market (and let’s remember that local suppliers are just as vital a part of the global market as any other business) and getting a contract that satisfies that demand.

Given the amount of functionality available in e-sourcing software today; awarding the contract to a supplier based on more than just cost per part is the simplest part of the job. The real trick is to fully understand the real demand. Unfortunatly, this is where many purchasing organizations fail, by focusing too hard on external issues, they forget (or lack resources to manage) their internal responsibilities.

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

President Obama Pinpoints the Keys to Procurement Success

January 28, 2009

In his rather low-key (on the Obama-meter) inauguration address, President Obama was spot on when it comes down to procurement practices.

“…those of us who manage the public’s dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government…”

Taking out the fluff, President Obama is demanding that his government’s procurement practice is guided by three principles:

  • Spend wisely
  • Reform bad habits
  • Do our business in the light of day

Or in the words of a purchaser:

  • Do your spend analysis and act accordingly
  • Implement best practice processes
  • Increase spend transparency

Seems simple enough, yet in many areas of purchasing, much spend still flies under the radar. According to A.T. Kearney’s 2008 Assessment of Excellence in Procurement the top 5 percent (aka the Leaders) boast that they have 72 percent of their indirect spend under management, for the followers this number was a disappointing 42 percent. Since the leaders in this study are yielding overall spend related savings that are 2,3 times greater than their followers, not only are they outperforming their peers in the purchasing department, they are delivering a huge advantage in earnings per share versus their competitors, all accounting to getting more spend under management.

Growing up as a strong believer in smart suits, Vespa’s and the power of the crash chord I would offer this piece of advice to those that struggle with getting their spend under management (courtesy of UK mod revivalists The Secret Affair): “This is the time, this is the time for action”. Unfortunalty rock rarely speaks eloquently enough to be fitting in the board rooms, so one can borrow another of President Obama’s inaugural catch phrases:

All of this we can do. All of this we must do.

Posted in Business, Change Management, Procurement, Public procurement, Supply Chain Management | 1 Comment »

The Concerns of the CEO are the Concerns of the CPO

January 27, 2009

It’s been lying on my desk for quite a while now, but it wasn’t until recently that I actually took the time to dig into IBMs The Enterprise of the Future report. It’s an eighty page global CEO study that IBM performs bi-annually and it compiles answers from 1 130 CEO worldwide; and – from my northern European perspective – the best thing is that respondents are almost perfectly split in three – 33 percent being from Europe, 32 percent being from Asia and the remaining 34 percent from North and South America; so in contrast with many other so-called global reports, this one truly reflects the global CEO and the challenges global corporations are facing. One only needs to remember is that the answers were compiled during the first half of 2008 so the full pressure of the (down)fall of the global economy is probably not in the report.

Still, there are quite a few insights worth sharing.

I’m quite sure that we all agree that we are living in volatile times (in a “white-water world” as one of the respondents is quoted as saying) and topping the list of external/internal forces that keep the CEOs awake at night are:

  • Market Factors
  • People Skills
  • Technology Factors

While Market Factors and People Skills have been top priorities the last 4 years, Technology Factors have passed both Globalization and Regulatory Concerns in the CEO rating according to the report.

This should only come as good news to any CPO; managing a dynamic global market has put emphasis on two things for the purchasing function: success global sourcing is dependant on the proactive  purchasers with an analytical/collaborative bent (as opposed to the more traditional reactive/negotiation focus of yore) and tools that support cross-functional and increase the spend visibility across the enterprise. The concerns of the CEO are the concerns of the CPO, making it easier to align purchasing strategy to overall corporate strategy.

Posted in Business, Change Management, Global trade, Strategy | Leave a Comment »

Boosting your purchasing organization in times of turmoil

December 16, 2008

According to a recent survey performed by Svensk Näringsliv (in Swedish) 75 percent of the respondents (2195 companies in total) were expecting to face problems with competence retainment due to the layoffs caused by the current financial situation. Partly, this is due to the employment regulations in Sweden which force companies to layoff workers based on length of employment.

So how can competence be retained, or reinforced in a period of severe staff layoffs.

In IBX book Purchasing Transformation, Björn Stenecker drew up a model for mapping necessary skill sets with the skills of the current staff to visualize where there are gaps and who could fill which role in a transforming purchasing organization. Björn’s model included twenty or so skills spread across a set of four major competence areas; education, general competence, specific competence and personal skills.

While finding the perfect replacement for a lost employee might be futile; I’d like to propose another perspective to this model. While model visualizes gaps and development potential, one can also use it to expose the most significant skill and then try to replace this single vital skill instead of the full skill set. In other words, it allows you to become the Billy Beane of purchasing.

For those of you who don’t have a clue of who Billy Beane is; Billy Beane almost single handedly reshaped baseball as we know it – and is chronicled in the book Moneyball: The Art of Winning an Unfair Game by Michael M. Lewis, published in 2003. Moneyball is a book that focuses on how Billy Beane took a modernized, analytical approach to assembling a competitive baseball team despite a disadvantaged revenue situation and its well worth your while; even if you don’t even have the slightest interest in baseball.

Posted in Change Management, Organization | Leave a Comment »

Getting more value out of your e-sourcing investments

December 12, 2008

During the past year, shoes have been a topic that has been on the agenda both here at Purchasing Transformation and on Spend Matters. While both of these posts have dealt with the TCO and lack of (personal) sourcing, today media in Sweden has reported another aspect of the TCO of shoes (in Swedish) that can be used as an analogy on the business climate of today.

While shoe sales in Sweden are down (about 3 percent according to Handelns utredningsintitut), business for cobblers (who repair shoes) are up by nearly 20 percent according to some cobblers that Dagens Nyheter has spoken to. Instead of buying new shoes, it seems that people on the street are doing their utmost to get greater mileage out of their current footwear.

This trend can be analyzed from two angles; first, as one business (new shoes) falter another will step into it’s place (cobblery); and second, getting more from what you already have might be a better strategy than trying to replace or re-launch failing initiatives.

We discussed the first angle a few days ago so let’s take a closer look at the second angle. Getting more mileage from your investment.

Revitalizing your e-sourcing initiative

Many e-sourcing initiatives (well most initiatives to be frank) tend to slump after a few good years, and there are numerous reasons for this. To get a stumbling initiative back on track, one can take this four-fold approach:

  • Benchmark and best practice
  • Training
  • Revitalization
  • Target projects

While the first two are rather self-explanatory and used by many high performing organizations on a regular basis, the latter two are more interesting and are the real organization boosters.

Revitalization can be a way to challenge current methods and models by analyzing new business dynamics to establish a redefined e-sourcing roadmap. In many cases this re-charges the batteries of staff that find it harder and harder to deliver savings that are experienced to be as high and mighty as the initial results (which were often based on new approaches which increased competition tremendously thus generating savings previously unheard of – pre-e-sourcing). The re-defined e-sourcing roadmap feeds into targeted e-sourcing projects which are used to accelerate and invigorate the entire e-sourcing initiative.

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

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