The Procurement Strategy & Planning Category

The Collective Intelligence of Supply (Part 1): Introduction

As you may have guessed by the title, this blog series is not going to be a tactical how-to guide for implementing low-level procurement techniques or comparing software providers. Rather, I’m writing this as the supply strategist’s guide to digital business.

There is a lot of content out there on digital “disruption,” including for procurement, but I personally find most of it laden with jargon, and not very instructive on what to do about it. This is a shame, because the fundamental transformation and evolution of value chains offers so many opportunities that supply professionals can seize upon if they understand the changes and how to harness them.

This series will be written as a series of short essays that will (hopefully) help readers understand these detailed drivers behind this digital evolution and what that means from a supply chain and supply management standpoint. Most important, I’ll try to give some practical insights and recommendations on how to best tap these innovations as we all evolve toward higher levels of machine intelligence.

Before we dive in, it’s important to realize that the “collective intelligence” story isn’t about artificial intelligence (AI) per se but really about a convergence of methodologies, strategies, techniques and technologies that are converging.

Read on to see this series’ outline on the successful supply professional’s journey to this collective intelligence that’s being built in the supply chain and how to begin preparing for it.

Improve Your Category Management Performance: Report and Webinar From Future Purchasing and Spend Matters

category management

The Future Purchasing Category Management survey and report is now in its third edition, and has established itself as the definitive piece of research work in its field. Future Purchasing, as a consulting firm specializing in “CatMan,” bring its own insights to the results. That means the final report is far from just being a presentation of the data from the several hundred survey respondents, representing organizations from many different sectors and countries.

Procurement Metrics: Understanding the Economic Language of Value (Part 2) — Expenditures, Expenses and Financial Reporting (CapEx, COGS and G&A) [Plus+]

finance

In the first installment of this series, we discussed the term “spend” (the noun, not verb), in the context of supplier spending, in a fair amount of detail. We discussed addressable spend, and what's included and excluded for the purposes of spend visibility/management, but also for the purposes of using spend within procurement performance measurement and benchmarking. In this installment, we dive a little deeper in terms of comparing and contrasting spend to other terms, as mentioned in the title.

IT Procurement: Strategic Calibration of Software Suppliers

IT

Spend Matters welcomes this guest post from Imaad Musvee, an associate consultant at GEP.

For many Fortune 500 organizations, the number of software suppliers leveraged each year is increasing rapidly. This post discusses how this trend may be a sign of cost inefficiencies and then proposes a few strategies that procurement can use to overcome these constraints.

Ethiopia’s Apparel Sector Beset By Land Disputes and Labor Risks, New Research Finds

apparel

As a sourcing destination for apparel companies, Ethiopia can hardly be called up-and-coming anymore. Since 2013, East Africa — and Ethiopia in particular — has been on the radar of apparel companies seeking low-cost manufacturing labor. New research from global risk consulting firm Verisk Maplecroft, however, suggests that Ethiopia’s apparel sector is likely to face significant risks in the near future, from land disputes to human rights concerns to political protests and instability.

Settling the “SCORe” with “Supply” at the Core: It’s time for Supply Management 2.0 [Plus+]

Global Risk Management Solutions

As supply networks are becoming more complex, componentized, outsourced, and global (as well as faster, riskier and more regulated), the capability of managing supply (i.e., supply management to manage a network of supply) is promoted from a siloed set of functional process to an integrated strategic one. So, if you want to “orchestrate” it, whether you provide products, services (including information services), or both, you need to collaborate fluidly in a multitier and multilevel fashion that orchestrates both the process silos and the information silos. For lack of a better term, think of this as supply management 2.0. It basically expands the vision from a traditional procurement-led sourcing process, typically managed via ERP or standalone procurement applications, to a cross-functional and cross-enterprise “platform” for orchestration of all critical supply resources in the supply network (materials, capacity, logistics, capital, etc.) across the supply tiers.

In this Spend Matters Plus analysis, we argue that it’s time to flip the traditional paradigm of supply management from not just a new faceplate on the traditional purchasing function but also from the sourcing component of the “sourcing and procurement” moniker that many practitioners use. Having strategic procurement be merely about sourcing as a serial step in an end-to-end lifecycle is a mistake.

Pharmaceuticals Need a Prescription for Procurement

pharma

Spend Matters welcomes this guest post from Pooja Pewekar, marketing manager at Zycus.

Unlike many other top-performing industries, pharmaceutical companies are still lagging when it comes to bringing in automation in their procurement process. Many have resisted adapting to newer technologies available that would make their procurement team’s productivity grow by leaps and bounds.

Procurement Value Drivers

Spend Matters welcomes this guest post from María Cecilia Siqueira, of GEP.

Formerly known as a tool for cost reduction, procurement is now changing the business game. The market’s fast pace and global competition has forced some critical transitions in companies’ structure, strategy and execution. As Klaus Schwab, chairman of World Economic Forum, puts it, “Nowadays, it is no longer the big fish that eats the small fish — it is the fast fish the eats the slow one.”

Procurement Metrics: Understanding the Economic Language of Value (Part 1) — Spend [Plus+]

buzzwords

One of the challenges that procurement faces is "speaking the same language" as finance, as well as the language of its stakeholders. A marketing department, for example, may use the term “investment” for its spending. Similarly, many procurement organizations categorize some of their added value in a category called “cost avoidance,” even though the term is not taught or recognized formally by the finance function.

Even within procurement, many terms are used inconsistently. Consider the term “addressable spend.” Is all spend addressable, as represented by cash disbursements going to external parties? Or is it supplier spending that is reasonably under the influence of procurement? If you say the latter, what defines “reasonable”?

The friction and misalignment common between various functions often results from stakeholders not having a basic understanding of terms that seem similar but yet can be very different. This problem is exacerbated when the stakes are high and you start getting measured and benchmarked on these metrics. To prevent this, procurement needs to be “business multilingual” and understand the variations of terminology so that it can best speak these languages and help the organization make the best decisions to create value.

This is what we’ll address in this analysis, with a focus on procurement and finance within the enterprise. Clearly defined terminology is the foundation from which higher-level concepts, performance metrics and benchmarks can be consistently understood — and improved.

Sponsored Article

How To Avoid Fake Spend Under Management (SUM)

Supply Chain Fraud

Savings is the primary performance measure for procurement. These key savings measures must be qualified relative to the actual spend under management to have true value. A definition that directly supports the savings KPI, however, is not always present. This leads to the illusion that spend is under management when often it is not, thereby deteriorating the overall savings results.

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).