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Procurement Findings from ISM2018: The Path Ahead

05/31/2018 By

Spend Matters welcomes this guest column from Naseem Malik and Nick Lazzara of MRA Global Sourcing.

Having attended several ISM annual conferences as both a participant and the past few years as a CLC member, I’m always struck by the energy, enthusiasm and growing excellence when it comes to this evolving function. As the quality of the conference has improved via content and companies represented, it has steadily bolstered the number of attendees every year, culminating to their highest turnout to date this year.

Digitization and People Tracks

It’s always fascinating to see how the presentation topics and speakers reflect the rapidly changing dynamics in the business world. Of the six tracks this year, the two that got a lot of buzz were the digitization and the people tracks. That’s not to say the remaining weren’t garnering interest, as they certainly held their own. It was interesting to note ISM also had innovative tracks devoted to both fulfillment and challenges.

When it comes to raising the bar in terms of world-class material via content and speakers, the digitization track should take a bow. The Google background that these track leaders brought to the party was instrumental in orchestrating the thought leadership and next generation presentations that left the attendees wanting more.  They focused on today’s game-changers in the digital world and the implications for businesses in all facets, including operation and communication planning. It’s no secret that organizations in most industries are cognizant of how digital innovation will disrupt not only current work environment but also the entire value proposition for supply management.

Lest attendees think they would be overwhelmed with the multitude of tech jargon out there (e.g., IoT, RPA, AI, blockchain, could computing) these sessions provided concrete applications that procurement professionals could relate with. With today’s age of innovation and intelligence, procurement leaders that consistently leverage new technology innovations can enjoy a significant competitive advantage and truly challenge the conventional wisdom of what is possible for procurement. All of these compelling factors were brought to the forefront and how procurement is in a unique position to help their companies stay on the cutting edge both internally with their stakeholders and externally by partnering with their suppliers.

As for the people track, this one is always in vogue and draws strong interest from attendees. The key theme of this track pertained to providing resources and solutions necessary to help optimize business relationships, with a special emphasis on stakeholder collaboration and relationship building. It was interesting to see a packed house in the session talking about creating value through strategic supplier partnerships.

The topic of procurement transformation has been a relevant one for a few years. This was presented in an interesting manner, as it was combined with procurement’s branding and recruiting efforts and had a team of three different professionals expounding on successful transformations.

The most lauded session was, not surprisingly, the one discussing empowering women in procurement. It was a workshop and presentation rolled into one where women were challenged to inpower and empower themselves as their numbers begin to grow in the function and the workplace.

And not to be left behind were the ever popular Indirect spend topics. We noticed that there were more sophisticated and non-traditional indirect categories represented this year, from legal to HR/benefits to financial services.

Finally, private equity panels seem to have become staples at these conferences, as the attendees can’t get enough of hearing these operations experts share what they think about the role of procurement in creating value in their portfolio companies — through assessing, challenging and transforming their procurement functions. Any discussion about how to enhance and deliver value through leveraging synergies and strategically managing complex categories and suppliers across a plethora of portfolio companies in a compressed timeframe is a surefire hit with those wanting a peek behind the PE curtain.

Powerful Data and the Procurement Executive View

We were fortunate enough to attend the CAPS Research presentation as a part of ExecIn, the subconference within ISM2018 with content geared toward supply management executives. Their research further proved the ongoing theme of the increased importance of the procurement function across more organizations globally.

Interesting findings concluded that supply management has increased their managed spend from 83% to 86% over the past three years, and now the CPO sits within two levels of the CEO at 80% of companies.

There’s also significant data to support the improved performance of procurement, with approximately $3 million in savings per supply management employee and ROI (reduction + avoidance / SM operating expense) of 7.2X. This is particularly true in the services industries, where indirect is king, with financial services averaging ROI of 9X and utilities at 11X.

Data analytics was identified as the biggest procurement skill gap and not surprisingly the biggest focus of hiring efforts, with 83% have hired or will hire soon to address this need.

On the talent side, the data showed an uptick in hiring of newer positions like data scientists, value chain managers and supplier risk analysts. There has also been a shift in where this talent comes from, with leadership talent often hailing from other functions and companies ranking business/technical background and supply management background of near equal importance. Furthermore, 61% of companies choose to co-locate their teams within other departments in the business.

Another exciting component of ExecIn was also related to talent, as there was an interactive discussion with the executive audience and the panelists on the topic of competing for procurement talent. Regardless of company or industry, there was agreement that identifying world-class procurement talent is a distinct challenge that shows no signs of abating.

Some key pain points were location, compensation and retention. To combat location issues, these companies are getting creative by going further back in the talent supply chain and attracting interns and vocational students by partnering with local universities. They are also much more receptive to the notion of remote work arrangements or temp workers.

As for compensation, with the economy being in full employment the common denominator was higher salaries and perks to stay competitive in this raging market. Regarding retention, this was an area of renewed focus, as it dawns on these companies how difficult it is to attract and replace an impact player that walks out their door. Everything from developing dedicated training programs and aggressively rotating top talent was on the table.

And, of course, our favorite suggestion was to establish a partnership with a specialist search firm that can put your company in contact with a steady stream of talented A-players to build your bench strength.

Looking Forward

ISM2018 was a good platform of current practices applied, and issues faced, by top-flight procurement groups and practitioners from all sectors, as well as insights into the future state of procurement. We’ve learned that there is a significant push for digitization and application of procurement technology, yet a significant learning curve in the field. Based on the beyond-capacity attendance and surrounding conversation around those presentations, we sense a growing appetite for practitioners to learn more and for companies to further invest in employee training.

We’re also anticipating continuous pressure when it comes recruiting talent. From poaching internal functions for talent, to overhauling and increasing compensation ranges, and hiring for big data analytics managers, the hiring landscape is changing. In addition, companies will likely need to stay competitive by being proactive, the way Amazon offers top MBA candidates days after starting their post-grad education, or how Walmart just announced it will pay employees’ college tuition to earn degrees in supply chain or Business. Anticipated increases in investments towards professional development and continuing education for all employees should help procurement groups with retention in a full employment market.