The Best Practice Category

Procurement Technology Solution Selections: It’s Time to Show Your Hand to Providers [Plus+]

In this article, we make the case for letting your providers know who their competitors are early on in the selection process and why this ultimately works significantly in your favor. In prior articles, we have talked about the importance — necessity really — of sharing information about yourself and your goals with providers, all in the context of selecting procurement solutions.

Write Better RFPs: How to Get What You Want (and Need) From Suppliers [Plus+]

RFP

The typical business challenge when you go to market with an RFP centers on getting ideas for what is possible, and identifying suppliers that either already have these ideas or are willing to work with you toward that end. Targeted activities are often services or complex products where quality, service or the engineered final product will be different from each vendor responding. We've put together some fresh ideas to an old challenge: conveying your needs in ways that a supplier can relate to and that encourages them to put their best foot forward, with a proposal that goes beyond your wants and addresses your needs, as well.

The Amazon Effect: Competition for Procurement Talent

No one and no thing is now safe from what is known as the “Amazon effect.” As Bezos’s behemoth continues to expand in multiple locations, including the addition of the impending HQ2, it is disrupting hiring and retention efforts in all business functions. Top procurement talent is especially susceptible, as it’s hard not to be seduced by arguably the No. 1 supply chain company in the world, with a Gartner Supply Chain Masters honor to boot. This should rightfully strike fear in leaders of procurement organizations.

New Research: Using Collaboration in Bringing Competitive Advantage to Your Supply Chain

If your organization wants to create competitive advantages through its supply chains, collaboration is crucial, according to new research from the Global Supply Chain Institute at the University of Tennessee – Knoxville. The findings were presented in a white paper, End-to-End Supply Chain Collaboration Best Practices, written by Mike Burnette, managing director of the institute. Burnette and other supply chain faculty at the university interviewed 17 leading companies in eight industries to determine the best practices that help organizations achieve success through collaboration.

Supplier Onboarding: Linking Design With Action (Part 2) [Plus+]

You’ve defined a strategy for supplier onboarding and given full consideration to all of the elements that make your requirements unique. You’ve fully considered which internal stakeholders besides procurement need to be included in the process of supplier onboarding and management. And you’ve mapped specific initiatives to onboarding requirements. But now it’s time to define specific supplier onboarding workflows, fully linking design with action.

What if Procurement Managed Itself like a Supply Market? And Which Market?

Procurement, like any service business, should generate value. Based on widely known benchmarks, this translates on average to a 4X–5X “procurement ROI,” where the “R” is demonstrable economic value annually created by procurement divided by the annual investment in procurement, usually the annual procurement budget. Here’s an example. If total addressable spend is $500 million and the procurement budget is the general industry average of 1% of spend, the business is investing about $5 million in procurement. Most of this investment goes to labor, with only about 10% of this is allocated for technology. And of the $500,000 spent annually on technology, probably less than a third is discretionary spend for procurement, while the rest of the money is spent on ERP licenses/maintenance, custom systems, integration and IT support. That leaves about $150,000 for supporting a lot of requirements in spend analytics, e-sourcing, contract management, supplier management and P2P, to name a few.

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.