P@31 – Defining the Procurement Value Contribution for the company and selecting the appropriate future Procurement direction

In previous posts, in order to become more relevant and successful, we saw that we should aim for a more Scientific Procurement function. The first step is to analyze the macrophoto: industry environment, business impacts, risks and opportunities, and corresponding company strategic imperatives. With this clear picture, we can then, as the second step, define the right Procurement outputs for our firm.

To be honest, how good and courageous are we in Procurement at defining, communicating, and delivering our Value proposition? 

A self-assessment could start with a quick look at our Procurement mission statement.  Do we have a well-established, known and communicated Procurement mission? Is it motivational and accurate enough? Is it directly linked with Business issues and priorities? Is it driving our daily activities?

I have quite often read mission statements referring to ‘best-in-class’ Procurement by ‘delivering value’ or ‘business solutions’ through improved ‘business partnering’ and other worthy general objectives. This is a great aspiration. Nevertheless, we can easily ask ourselves:

- does the procurement team clearly get the right direction and priorities?

- do our stakeholders and vendors understand what it means? I guess they don’t.

- does it make sense for Procurement to focus on becoming “World-class”?

Big and very diverse corporations may not have the choice and need to be generic.  In any case, we should do our best to avoid too general procurement mission statements.

We definitely need to be more precise by accurately describing the Procurement unique value proposition. How should we do it?

In the past years, in different companies and jobs, I applied the RAQCSI that proved to be a good tool.

R: regulatory, reglementary, being responsible for corporate and social points of view, legal, cyber security

A: assurance of supply and risk mgmt.

Q: quality

C: TCO, cash flow, financing mechanisms, spend mgmt.

S: additional services like efficiency of the invoicing process, reporting, vendor’s KAM performance

I: innovation, time & speed to market, Procurement early involvement

Could you recommend any other acronym?

In each organization, at Procurement department level and at category level, we will have different priorities among those 6 chapters that will also change over the time depending on the business imperatives, the structure of the company and the maturity of the Procurement organization. Those priorities will be the foundations of the Procurement team objectives.

Several big companies like Bayer, Mars, Valeo openly publish their Procurement focus and value contribution in a clear and understandable way for their business, vendors and procurement teams. In addition, those ambitious mission statements seem to be aligned with the company strategy and their respective functional maturity level.

I am often cautious when I see pillars like Innovation, TCO, Risk mgmt. or CSR mentioned by an historically administrative purchasing function and/or on the contrary by a ‘young’ procurement organization. Do they have the right level of supply market knowledge? Did they get credibility in front of the vendors to lead productive relationships? Do they have the right level of business understanding and partnering?

As a necessary and basic step, Heads of Procurement and Category Managers should spend enough time in precisely defining their unique value proposition. Is it properly reflected in their mission statement, vision and/or objectives?

Only then, the Procurement key leaders should think about the appropriate future for Procurement, and their long term journey. Based on existing trends, we could envision a beyond traditional procurement approach with 4 potential different future models:

Global business services: this cross-domain unit is composed of several support functions (Procurement, Travel mgmt., Congress & events mgmt., Fleet mgmt., Real estate and facility mgmt. and why not any other support function like IT, HR operations, Accountancy, Legal, etc…). The main goal of this unit is to provide a wide range of high quality services to the business units aiming at standardization, simplification, efficiencies, compliance and lower costs. This model is especially relevant in sectors with a low-to-medium total 3rd party spend (representing between 10 - 50% of sales), with a rather higher percentage of indirect + capex spend vs direct purchasing (with rather short/limited supply chains). It could be appropriate for companies with different business units and a worldwide complex (often redundant) organizational set up. E.g. Big Pharma.

Spend efficiency: the function focuses on getting the best outputs while optimizing the spend base, different cost centers or company budget. Key elements are: constant usage of sourcing process, some category mgmt. approach for key categories, strong focus on demand mgmt. and forecasting, productivity mgmt., (internal) process optimization, accurate budgeting & spend approval process. This model could be relevant in sectors with a rather low total 3rd party spend (representing between 10 - 30% of sales), with a high percentage of indirect and Capex spend (limited direct purchasing, and/or limited/short supply chains). E.g. Banking.

Total cost-base mgmt.: this organization works not only on optimizing the TCO of the key goods and services procured from outside the company but also on the Total Cost of Production & Distribution of final products and services. Key elements are: category mgmt., demand mgmt., (internal and external) lean six sigma, value analysis & engineering, risk mgmt., insourcing/outsourcing-offshoring complex strategies. This model is relevant in sectors with a medium total 3rd party spend (representing between 40 - 60% of sales), with a high percentage of capex spend and technical (direct or indirect) proc. categories. E.g. Utilities.

Value chain integration: the focus is on innovation, speed and time to market, production process excellence, supply chain optimization, productivity mgmt. requiring a deep integration of many key vendors. In such environment, Procurement often applies SRM or Joint Account Mgmt. programs, co-design, design-to-cost, relationship and investment based business models with the key suppliers. This model is relevant in sectors with a high total third party spend (>60% of sales), with a high percentage of direct purchasing, technical (direct or indirect) categories, and/or complex supply chains. E.g. Automotive.

There is still a lot to think about those 4 possible models. Once again, it seems that business context and priorities, corresponding Procurement value contribution and functional maturity level are the key criteria to select the appropriate model. 

If we want our function to become more valuable for our company and more recognized, we should more precisely and courageously define our unique Value proposition and, at the same time, look for the long term destination of the function.

Does this make sense? In your company, what are the 3 most important pillars of the RAQCSI? Are the Procurement team objectives aligned? What might be the most meaningful future model for your Procurement organization? Why?

P@30 – How good is Procurement at analyzing the macro-photo (environment, impacts and corresponding business imperatives)?

 

 

Company competitiveness has become increasingly linked to the performance (and proper management too) of their extended supply network. In such context of business  / corporate virtualization (meaning increasing externalization of the different activities of a company) , Procurement has gained more attention from the top management.

 

In a previous post, I mentioned that if we want to grow and evolve as a function and finally get the recognition we certainly deserve, we need to develop a more scientific approach by especially considering and improving in 7 different key fields:

• From understanding to analyzing our environment, impacts and business imperatives
• From talking to defining the Procurement Value Contribution for the company and select the appropriate future Procurement operating model
• From implementing to truly benefiting from compliant, efficient, and friendly user Processes, Systems and tools (incl. analytics)
• From organizing our resources to properly outsourcing our Proc. activities
• From complying to driving the Sustainability agenda
• From SRM to Global Account Management Program
• From being reactive and uncoordinated to acting proactively, in an interconnected and immediate manner.

 

Let’s start with the 1st main topic: the macro photo (environment, impacts and corresponding business imperatives).

 

World and business are constantly evolving and changing so are the strategic, financial, logistic, sales or marketing priorities of the company. Procurement professionals should permanently analyze what is happening outside and inside the business in order to be able to accurately define and generate the right outputs for their organization.

 

It’s all about a robust analysis of our sector/industry, without forgetting to evaluate corresponding business impacts, allowing us to recognize current and future business imperatives that will grant the competitiveness of the company.

 

For example, PEST (Political, Economic, Socio-cultural and Technology) analysis is not new; over the years, it has been fine-tuned by adding new pillars like Legal, Environment, Ethics. We could use any other more modern or more dynamic analysis tool. It is just so important for Procurement to spend time to properly perform such sector / industry investigation, and for sure, followed by a “So What?” analysis. And I do believe that we are not good enough at it as we generally tend to remain too Procurement self-centered. A good "PESTLEE" analysis (or any other name) is not too difficult to complete: we should just ask the business or look for all the free reports from the consulting firms available in Internet. Once you have a starting point, the challenge is to regularly update it as change is the only constant parameter. 

 

That’s for the world and the industry we work in. It is about knowing what is impacting every day for good or for bad our business; it‘s about investigating the risks and opportunities out there.

 

More important is to analyze how the business is reacting and how business imperatives are shifting. Procurement should learn to make a permanent VoC (Voice of the (internal) Customer or why not call it a "Voice of the Company").
In a very simple way, to sustain wealth creation, companies have 3 options:

• Being more productive and efficient
• Increasing sales meaning in many cases 1.- internationalization, globalization and 2.- new marketing strategies and tactics (focusing for example on customer experience, digital marketing, MIM_massively individualized marketing, etc…)
• Being innovative: new products, new services as well as faster time and speed to market. In addition, for many traditional companies, this often includes a radical conversion of their core business by moving from basic product delivery to offering a wider (or completely new) service provision.

 

Considering those 3 options, it is obvious that the extended enterprise supply network has become a major contributor to company wealth creation (after all, for some companies, up to 80% of their costs, and most of their impacts, opportunities and risks lie upstream).

 

As Procurement professionals, the true questions we should ask ourselves are:

• From a pure business point of view, what are the key trends in our respective industry or sector?
• Where are the key risks, opportunities, impacts for our organization? Today? And tomorrow?
• What are / will be the corresponding company strategy and priorities?

 

Only by getting clear answers, we will be able to accurately define and consequently deliver the appropriate Procurement value and outputs to the business.

 

 

Do you consider that analyzing environment, impacts and business imperatives is a good usage of our limited time? Do you agree that it should be the first mandatory task for any Procurement professional?

 

 

In my next post, I will spend some time to reflect on Procurement Value Contribution as second field for a more scientific procurement function. I invite you to stay connected and contribute.

 

 

P@27 – The 10 Procurement Jobs of the future

Many buyers have worked hard in order to generate a bigger strategic impact within their organization. Those professionals have become experts and trusted business partners able to connect, on one side, a wide network of suppliers whose competencies and capabilities have been clearly identified, with, on the other side, internal customers whose needs have been revised, challenged and optimized. Instead of traditionally focusing on compliance, cost optimization, quality and delivery dates, they have developed and implemented more sophisticated supplier management and  integration achieving additional and highly valued benefits in term of spend efficiency, productivity, demand management, risk management, CSR, innovation.

With such constant on-going transformation, the role and daily work of the buyers have been evolving. In a near future, companies will be desperately looking for several (new) profiles in Procurement:

1.- Category Manager: we will only keep few highly specialized category managers. For example, strategic buyers experienced in IT, digital marketing, scarce and/or fully new raw materials, transport/warehousing/distribution will be in high demand in the Procurement job market.

2.- Outsourcing Manager: whatever the category may be, and in all complex cases of outsourcing, this profile is able to achieve a successful integration and management of the new partner by co-leading a large internal team through the numerous project steps.

3.- Lean Six Sigma (L6S) Proc. Manager: this expert co-leads process improvement initiatives inside and outside the company. He/she trains buyers and suppliers to L6S techniques and tools. He/she becomes a strong contributor to process efficiency/reliability and waste eradication.

4.- Supplier Performance & Innovation Manager: a small team of experts will guide and support tactical buyers and category managers in all activities related to supplier performance measurement and improvement as well as the capture and integration of innovations coming from the supply network.

5.- Collaborative Business Procurement Manager: is a highly skilled professional specialized in helping category managers in formalizing a new type in both relationship and contract between the company and its 10 to 20 most critical and strategic suppliers/partners. This will also include more and more startups. He/she helps his/her colleagues to move from a traditional “Win-Win” mentality (meaning negotiating optimal service levels, and trying to fairly share benefits and risks) to a “WE” approach (implying from both parties a common and joint focus  on the relationship and governance – and not so much on service level and economic conditions -  in order to know how to adjust activities and responsibilities of each party, depending on the constant changes that will arise all along the duration of the contractual relationship). This “WE” mindset does not only allow the parties to split benefits and risks but ensures that both parties can “increase the pie” in term of shared opportunities and results.

6.- Sustainability & RSC Proc. Manager: is in charge of defining and implementing a strong culture and a strategy of Sustainability & Corporate and Social Responsibility within the Procurement community, as well as in the rest of the organization. He/she supervises the supplier selection and evaluation process. He/she assists the key suppliers of the company in embracing the Sustainability & CSR (including sharing exonomy) challenge and journey. He/she works hard to align and integrate the Sustainability & CSR Procurement policy to the company global and competitive strategy.

7.- Risk Manager: by collaborating for example with the buyers and the SCM department, he/she supervises the process of analyzing the risks related to the company supplier panel and the extended supply chain. He/she follows the improvement action plans and reports progresses to top management.

It is quite common to combine the roles of CSR and risk Management.

8.- Communication and Social Network Proc. Manager: he/she pilots the whole process and flows of communication from the Procurement area to the company supplier network and supply markets. He/she mainly uses the social media networks to improve the image and positioning of the company in front of all other buying competitors.

9.- Operations & process Proc. Manager: considering 1.- the need for standardizing and simplifying Procurement policies and processes, 2.- the requisite to know the new actors and solutions available in the area of Procurement processes and systems including RPA, blockchain and 3.- the trend related to the outsourcing of the Procurement activities and the rise of  external procurement global service centers, this role will become more and more relevant within the big multinational corporations.

10.- Analytics, knowledge & Performance Proc. Manager: 1.- this professional looks for (inside and outside the company) and organizes all needed and required data in order for the Procurement teams to perform in their job. You include here all the topics about analytics, artificial intelligence. We will forecast more and more instead of analysing past datas. 2.- in big multinational organizations, with procurement teams located all over the world, and in front of an increasing rotation and turnover of the buyers, this expert captures, organizes and ensures an easy access to all the information generated by the buyers; encourages knowledge and experience sharing; 3.- He/she coordinates all activities related to calculation and validation of spending amount, savings, productivities and efficiencies generated by Procurement; he/she creates, updates and communicates the Procurement balance scorecard.

¿Among those 10 roles, can you state which would be the 2 or 3 most relevant roles in the future? ¿Do you see any other crucial Procurement role for the future?

The Spanish version of this post is accessible here

P@29 - The future of Procurement: progress from Art to Science

 

A colleague, Antonio Ariza, often says that Procurement is unfortunately more Art related than Science based. I agree with him. And there is today a direct link with the level of performance and the bright future of our function.

In the early (19)80´s, Kraljik and Porter developed 2 key tools for Procurement: Portfolio analysis and  5 Forces analysis. 35 years later, few companies are using them on a regular basis and several gurus have rightly created more updated approaches. Sourcing process, e-auctions, category management are now 20+ years old and there is still plenty of room for improvement in term of general deployment, appropriate use, and simplification. Some experts tell us that, for many good reasons, CatMan should be replaced.

Among our community, we are still not clear on what SRM means as we can choose among the following definitions: 1.- the Procurement IT tools and solutions (the worst choice), 2.- the whole process of selecting, tiering and managing the supplier panel or 3.- the way to specifically manage the strategic supplier relationships. Referring to the third option, experts have recently thought of a new branding and deeper collaborative mindset like Collaborative Business Mgmt., Trading Relationship Mgmt., Global Account Mgmt., Vested model, Return On Relationships, etc…

We can now find quite many other tools, solutions and Procurement (BPO) services that are punctually or partially applied.

With old concepts, tools and processes not fully implemented, with new services, applications, approaches under development and/or slow ramp-up, and as we still have a fragmented and rather weak worldwide Procurement community, it seems obvious that we can do better at sharing ideas, concepts and adopting standard naming, processes and tools.  We can do better at harmonizing, deploying and improving our ways of working.

As more and more companies need to co-create or simply get more value from their supplier network, Procurement has a key role to play. Buyers should become (select just a couple of them):

-       The guardian of compliance, ethics, corporate brand

-       The body guard of spend efficiency, productivity, EBITDA

-       The golden sponsor of sustainable business practices

-       The Captain of innovation

-       The best fan or supporter for sales and marketing

As Emmanuel Cambresy, a good colleague, wrote, we will necessarily tend to transform ourselves into integrators, business relationship builders, value architects.

Our community will make this possible if we are able to have a much more coordinated approach by sharing and working on defining and implementing a much more scientific function.

As to me, it means becoming more rigorous in 7 different fields:

-       From understanding to analyzing our environment, the impactsand the business imperatives

-       From talking to defining the Procurement ValueContribution for the company and selecting the appropriate Procurement operatingmodel

-       From implementing to truly benefiting from compliant, efficient,and friendly user Processes, Systems and tools (incl. analytics)

-       From organizing our resources to properly outsourcing ourProc. activities

-       From complying to driving the  Sustainability agenda

-       From SRM to Global Account Management Program

-       From being reactive and uncoordinated to acting proactively, in an interconnected and immediate manner.

Within the next months, I will share my views on each of those 7 points.

Do you see any other key area we should focus on in order to become a more scientific function?

I invite you to stay connected and contribute.

 

 

P@28 – Provoc@ccion Compras cumple 4 años… un imprescindible cambio de rumbo

 

4 años ya.

En Noviembre del 2011, de forma rudimentaria, iniciaba el blog Provoc@ccion Compras empezando a publicar algunos posts de forma más bien torpe.

 

En estos años, lo más complicado ha sido:

-       tener la constancia y el rigor para publicar casi cada mes,

-       mejorar en cuanto al idioma ... y lo que me queda por progresar J,

-       defender la calidad del contenido con artículos largos… en vez de optar por comprimir y alcanzar el famoso objetivo de las 250-300 palabras.

En todo caso, a fecha de hoy, son unos 43 posts y más de 25.000 visitas.

A mediados de 2014, tras muchos meses de esfuerzo, unas cuantas noches cortas, una correctora sumamente profesional agotada, publicaba “La transformación de compras: una aventura retadora”.

En ambos casos, he ido pensando y escribiendo sobre el UPGRADE de compras; en base a mi propia experiencia, he ido explicando  cómo pasar de un departamento TACTICO a una función de compras ESTRATEGICA.

No hice ningún aporte revolucionario en cuanto a definiciones, conceptos, herramientas o procesos de compras. Mi principal contribución fue la de aclarar, ordenar las cosas para crear y detallar una metodología llamada el EPPOGG (Estrategia, Personas, Pipeline, Operaciones, Gestión del cambio y business partnering, Gestionarse) que indica todos los pasos que tendría que hacer un Director de Compras o un comprador que ambiciona una “renovación” de su departamento o puesto de trabajo.

Para celebrar este feliz cumpleaños, quisiera compartir el TOP10 de los posts más leídos:

1.- Cuadro de mando y KPIs de la funciónde compras

2.- P@18 - Transformación de compras:hoja de ruta y los 6 ejes de trabajo

3.- P@17 ¿Open innovation: SRM vsCrowdsourcing? ¿Un futuro brillante para el SRM? ¿El Crowdsourcing cambia(rá)las reglas del juego?

4.- P@19Transformación de compras: Estrategia - 1er eje de trabajo

5.- P@16 ¿Hablamos de gestión deRecursos Externos? ¿Existe un paralelo entre Compras y Recursos Humanos?¿Hablamos de la Matriz de Kraljic?

6.- Fijación de objetivos en Compras

7.- P@23 - La Transformación de compras:EPPOGG - Gestión del cambio y Business Partnering - 5º eje de trabajo

8.- P@11_ ¿Hablamos de SRM?

9.- ¿Hablamos de Calidad Proveedores? ¿Scrap,No conforme, Fallo, PPM o Ventaja competitiva?

10.- P@6_ ¿Hablamos de negociación via e-auction?

Y por supuesto, aprovecho la ocasión para dar las gracias a todos los compañer@s que leen mis publicaciones; espero que lo sigan haciendo.

 

Eso dicho, tras 4 años, siento que es hora de dar un cambio de rumbo.

En mis próximos posts y con la intención de seguir creciendo, he decidido:

-       dejar ya de lado la transformación de compras,

-       para reflexionar y compartir sobre: la necesidad de más ciencia en compras y el futuro de la profesión.

Espero poder contar con vosotr@s en esta nueva etapa del blog.

 

 

 

 

P@27 – Los 10 perfiles de compras del futuro

 

Cada día, numerosos profesionales de compras luchan para lograr un mayor impacto estratégico dentro de la organización. El comprador se está convirtiendo en un reconocido experto, altamente conocedor del negocio, capaz de conectar, por un lado, una amplia red de proveedores con sus competencias claramente identificadas, con, por otro lado, los clientes internos de la empresa cuyas necesidades han sido definidas, revisadas, optimizadas y retadas. En vez del tradicional enfoque táctico (ligado a  la compliance, la optimización de los costes, la calidad y los plazos de entrega), la mejor gestión e integración de los proveedores permiten generar altos beneficios en cuanto a eficiencia del gasto, productividad, gestión de la demanda, gestión de los riesgos, RSC, Innovación.

Con esta transformación imparable, el rol y trabajo de los compradores está cambiando. En un futuro no tan lejano, las empresas buscarán desesperadamente varios (nuevos) perfiles en compras:

1.- Category Manager: los compradores estratégicos especializados por ejemplo en temas de IT, marketing digital, materias primas escasas, almacenaje/ transporte/ distribución van a ser altamente buscados por las empresas.

2.- Outsourcing Manager: cual sea el tipo de compra y en todos los casos complejos de externalización, este perfil es capaz de co-capitanear a un amplio  equipo interno a lo largo de los distintos pasos a seguir para lograr una exitosa integración y gestión del nuevo partner.

3.- Lean Six Sigma (L6S) Proc. Manager: este experto co-lidera las iniciativas de mejora de procesos tanto dentro como fuera de la empresa. Forma a los compradores y proveedores a las técnicas de L6S. Es un relevante contribuidor a la eficiencia, la fiabilidad de los procesos, y la erradicación  de los despilfarros y residuos.

4.- Supplier Performance & Innovation Manager: un equipo reducido de especialistas va a guiar y apoyar a los category managers en todos los aspectos relacionados con la medición y mejora de la performance de los proveedores así como en los temas de captación e integración de las innovaciones procedentes de la red de proveedores.

5.- Collaborative Business Procurement Manager: es el experto en ayudar a los Category Managers a formalizar nuevos contratos y establecer nuevas relaciones entre la empresa y los 5 a 10 proveedores más críticos y estratégicos de toda la empresa. Este perfil trabaja sin descanso para pasar del Win-Win (o cómo negociar unos niveles de servicios óptimos repartiendo de forma más o menos “equitativa” los beneficios y riesgos) al “WE” ( “nosotros” en inglés, o cómo centrarse mayoritariamente en la relación entre ambas partes – y no tanto en el nivel de servicio y sus condiciones económicas - con el fin de saber y poder ajustar las actividades a desempeñar por cada parte, en función de los cambios incesantes a lo largo de la relación contractual). El “WE” no solo sirve para repartir los beneficios y riesgos sino para aumentar en su conjunto los resultados y las ganancias a compartir, disminuyendo los riesgos.

6.- RSC Proc. Manager: es el encargado de definir e implementar una profunda cultura y estrategia de Responsabilidad Social y Corporativa en la comunidad de compras, así como en el resto de la organización. Supervisa el proceso de evaluación y selección de los proveedores. Ayuda a los proveedores poco cumplidores a embarcarse en el reto de la RSC. Trabaja sin descanso para alinear e incorporar la política de RSC de compras a la estrategia global de la empresa.

7.- Risk Manager: colaborando con los compradores y el departamento de Supply Chain, supervisa el proceso de análisis de los riesgos relacionados con el panel de proveedores de la empresa y la cadena de suministro extendida. Sigue el plan de acción y contigencia. Reporta los progresos a la dirección general.

A menudo se combinan los roles de RSC y Risk Manager.

8.- Communication and Social Network Proc. Manager: pilota todo el proceso de comunicación del área de compras hacia los mercados de proveedores especialmente a través de las redes sociales para mejorar el posicionamiento de la empresa frente a todos los competidores a la compra.

9.- Operations & process Proc. Manager: tomando en cuenta 1.- la necesidad de simplificar la política y  los diferentes procesos de compras, 2.- la aparición permanente de nuevos proveedores de soluciones y sistemas en compras, y 3.- la creciente externalización de la propia función implicando la gestión de centros de compras externos, este experto ganará peso en las grandes organizaciones.

10.- Analytics, knowledge & Performance Proc. Manager: 1.- este profesional busca (dentro y fuera de la empresa) y organiza todos los datos necesarios para que el equipo de compradores pueda desempeñar su función; 2.- en organizaciones multinacionales con equipos desplegados por todos los continentes, y frente a cierta tasa de rotación de los compradores, este experto captura y organiza toda la información generada por los compradores permitiendo un fácil acceso a ella; fomenta el intercambio del conocimiento y de las experiencias; 3.- se encarga de todos los aspectos relacionados con la guía, el cálculo y la validación de los ahorros, productividades o eficiencias generadas por compras; crea, actualiza y comunica el balance scorecard del departamento.

 

¿De estos 10 roles, cuales son los 2 o 3 que te parecen más relevantes de cara al futuro? ¿Por qué? ¿Ves otro rol clave dentro de compras?