The Best Practice Category

A New Perspective for Procurement: Understanding RAP

risk

Although I can’t be sure if risk-aware procurement (RAP) can rightfully claim this year’s mantle for most popular new supply chain management (SCM) acronym, it should be a leading contender. Not that it’s about acronyms, or that building a procurement-led and more structured supplier relationship management (SRM) capability isn’t meaty enough on its own, but when you add in the sizzle of supplier risk management (SRM), well, let me put it this way: Chief procurement officers (CPOs) who “RAP” are embracing one of the more powerful hooks the profession has seen in more than a decade.

Chasing After Procurement Excellence: Findings from A.T. Kearney’s Latest Report

Deloitte Global CPO Survey 2016

World-class procurement organizations see a comparatively threefold higher return on their supply management assets, according to A.T. Kearney’s 2017 Assessment of Excellence in Procurement. The firm has been conducting these assessments every three years or so since 1992, and this is its ninth assessment. A.T. Kearney divides companies into four groups based on their ability to manage external spend: Leaders (7%); Aspirants (11%); The Pack (55%); and Strugglers (27%). The “Leaders” are twice as likely to invest in supplier innovation, risk management and digital technologies like blockchain or automation.

How to Use Planning and Budgeting to Transform Procurement — and the Enterprise [Plus+]

As summer turns to fall, that time of the year that so many enterprises enjoy and look forward to is here: the annual planning and budgeting process for next year. Yes, I’m kidding. This process ranks only a few notches above root canal for most budget owners. Yet if you had to look at the single most powerful best practice within procurement, especially for indirect procurement, it would be procurement’s involvement in the planning and budgeting process to improve the effectiveness of this process for stakeholders and for procurement.

To restate this: The best way to increase spend influence and to translate it into economic benefits is to increase the quality of spend influence. Getting a seat at the table can be challenging, but this table is a perfect entry point, and it also allows procurement to set its own table and bring stakeholders to it. The beauty of planning and budgeting is that it requires some incremental capabilities that are critical for procurement and, more important, for the business. This includes analytics, benchmarking, policy setting and continuous improvement (most of it enabled by strong technology, of course) even beyond this annual process.

Such early engagement also creates a moment of truth where procurement and finance either come together to unlock this value or where they are left to their own devices. In this analysis, I will highlight the hard dollars surrounding this broader practice and how progressive organizations are creating this critical joint capability, as well as give some pragmatic advice regarding how to implement this benevolent and transformational multiheaded beast.

Centralized, Decentralized or Hybrid Sourcing Structure: How Do We Decide?

Today’s Ask Spend Matters question came from Piyush Shah, a PhD student of supply chain management at Arizona State University: “Centralized, decentralized or hybrid sourcing structure? How do we decide?” This is a classic question and one that has sparked decades of passionate debate. Proponents of centralization point to the potential for higher savings. Defenders of decentralization argue that regional procurement teams can bring about better supplier relationships.

The easy answer is “It depends” or “A hybrid of the two.” But what does a hybrid structure look like? And how do factors like purchasing category, industry and stakeholders play into the assessment?

Leveraging is Key to Procurement and Supply Chain Success, New Report Suggests

Editor’s note: “The Eggplant” is a new series of satirical posts in the style of “The Onion.” Check out the first one in the series here.

New research published this week shows that more procurement organizations are leveraging in 2017 than ever before, while the range of activities, situations and things that can be leveraged is also expanding to historic levels.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 2) [Plus+]

funding

Yesterday, we discussed the first five of 10 possible strategies to justify a spend analysis initiative to finance/IT despite the catch-22 that comes from not knowing the potential value that may come from the initial investment. Today we pick up with recommendations six through 10 and close with some final remarks and recommendations.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 1) [Plus+]

finance

Analytics are all the rage. And spend analysis is Procurement 101. So, getting some reasonable investment shouldn't be a problem, right? Wrong. The problem with analytics is that the identified value is all “option value.” You don't know how much value opportunity you will uncover with the analytics until you actually perform them (and implement the identified opportunities)! This article is designed to help you overcome this catch-22. We've prepared 10 strategies to help you get the ball rolling with IT and finance (even if the ROI isn't clear).

Procurement is from Mars and Finance is from Jupiter: How to Align Planets [Plus+]

finance

Mars might be the god of war and mighty in its own right – ready to battle any time with a combative supplier or recalcitrant internal stakeholder. But Jupiter is the king of gods: large, distant, cold, foreboding. (There is no Venus here...that's a Plus brief — nay, multipart series — for another day on working with Marketing). These gods might seem similar, and in the business world, Procurement and Finance should in theory be highly aligned and focused on cost management, risk mitigation, quantitative analysis, and other areas. For example:

  • Enterprise risk management requirements (e.g., fraud, regulatory compliance, etc.) should extend seamlessly into the supply base.
  • Working capital should be optimized alongside cost reduction and compliance.
  • The Source-to-Settle process should have an embedded P2P process that aligns purchasing and AP to each other and to broader spend category requirements.
There are many things that keep the two groups from singing Kumbaya. In this Spend Matters Plus brief, we list five important ones and give practitioners some suggestions on how to align and conquer (no lightning bolts or Holst necessary).

Scouting and Retaining Young Supply Chain Talent: A (Millennial) Recruiter’s Experience

interview

Did you know that according to the Bureau of Labor Statistics, millennials will comprise nearly 75% of the U.S. workforce by the year 2030? Yes, I’m talking about those tech-savvy, feedback-craving 20-somethings that have recently entered the workforce — myself being one of them! Even if the demographic shift hasn’t yet affected your company, I’m sure this doesn’t come as a surprise, considering how infatuated the media has been since the turn of the decade with millennials. The million-dollar question, however, is this: What are corporations doing to adapt to this change in workforce?

Picture Your Procurement Strategy as a Pyramid

Spend Matters welcomes this guest post from Conrad Smith, senior director of global procurement at Adobe.

A few years ago, a consultant introduced me to a strategy tool that changed the way I do business. The strategy we developed became the “business hierarchy of procurement needs." You may already be familiar with psychologist Abraham Maslow’s traditional hierarchy of needs. In Maslow’s model, basic health and physical safety comprise the essential day-to-day building blocks at the base of the pyramid — and the fulfillment of those needs creates the stability necessary for the understanding and fulfillment of “higher” needs, such as belonging and self-esteem, all the way up to self-actualization at the pyramid’s peak.

Must-Know Practices for Adopting Contingent Workforce/Services Procurement Technology

VMS

Many organizations are beginning to adopt new contingent workforce/services (CW/S) procurement solutions. Why now? In short, it’s because new underlying technologies are available to enable new solution approaches and organizations are compelled to make use of these technologies to address changes in talent supply, whether it’s skill shortages, generational shifts or changes in attitudes and behaviors.

Procurement as a Service (Part 2): Learning from Service Providers in Other Industries

In Part 1 of this series on Procurement as a Service (PRaaS), we outlined numerous reasons why procurement organizations should consider adopting a service-oriented operating model. In this next installment, we'll explore how procurement organizations are learning from other industries and other world-class services organizations.