In Vendor Management on March 20, 2009 by hudgeon Tagged: marketing, Procurement, sustainability, Vendor Management
Marketing and procurement
- 21:28:49: Finextra: ING launches pension peer comparison Web tool: http://bit.ly/lKc7w
- 21:26:00: There’s unacknowledged cross-over between marketing and procurement. INGs app shares common features with supplier comparison apps.
Corporate sustainability reporting
- 22:01:14: Corporate Sustainability Reporting: The Executive Disconnect But there’s a major gap between understanding and action, according to a survey released this week. http://bit.ly/3Y55HP
- 22:03:28: Survey says 90% executives say sustainability reporting is important. 50% say they do it. My bet: 10% actually do it. http://bit.ly/3Y55HP
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In Uncategorized on January 25, 2009 by hudgeon Tagged: Procurement, system design, Vendor Management
Designing a new system? The single most important question to ask is what do I not need?
Apple asked how few controls do we really need to operate an mp3 player and the iPod was born. Asus asked what does a user really need to surf the net and the eee pc burst onto the market. Oztent asked does a car camper really need their tent to fit into a tiny bag and the RV tent is the result.
When you are designing your processes and systems, ask yourself what you are trying to accomplish and what is the least functionality required to accomplish that objective. Back to the iPod example, an mp3 player needs to play mp3s so it needs a play button. You may also need to pause your mp3 player and scroll through your music collection. Apple asked “Why does that require more than one button?”
Likewise, with procurement systems, if you’re designing a procurement system, does it need anything more than a way of delivering approved requisitions to a supplier? Probably. But how little more can you get away with?
In Uncategorized on December 15, 2008 by hudgeon Tagged: agile development, Procurement, Vendor Management
I believe there’s a lot purchasing professionals can learn from agile software development; which values iterative development and process adaptability over large-scale, long-term locking down of requirements – imagine a vendor relationship that is actively managed and can be easily dismantled vs a 15 year outsourcing agreement.
The theory is that the additional effort that directed to managing the process on an ongoing basis is more than compensated for by the reduction in time and effort required to get the project off the ground and the reduction in the risk of getting it wrong and having to write off the entire project.
But it is important to keep in mind that any methodology that you adopt must be continuously evaluated for suitability to your company’s culture.
Attivio is a strong supporter of agile development yet they are quite willing to divert from pure agile development to suit their circumstances.
We all need to be as flexible – we need to keep abreast of the cutting edge thinking in procurement but we also need to adopt it to fit our corporate culture. But, like the Attivio quote below, we need to not be ashamed of diverging, we need to be proud of it and, if it works, to view it as ‘best-practice’ in our corporate context.
Note: While many of our approaches aren’t “pure” Agile, we believe we’ve created a best- practices process that embodies the “spirit” of Agile in that it has been developed iteratively, with the constant input of the engineering team based on key Agile principles.
via Agile in Practice: Managing Requirements.
In Uncategorized on December 1, 2008 by hudgeon Tagged: Procurement, sourcing innovation, spend matters, technology, Vendor Management
Jason and the Doctor are exchanging views on social networking tools in the spend management space. It’s an interesting discussion because few people have been exposed to the breadth of procurement technology that these the two bloggers have seen.
Jason’s position is that the killer app is yet to emerge but the Doctor is far more pessimistic stating
The verdict? Given the relative lack of useful content, the difficulty of identifying the sources and / or finding the content, and the over-abundance of purely social network features, for the time being, I’m definitely classifying these in the “Productivity Killer” category. When it comes to finding the relatively small amount of fresh, new, useful, and innovative content out there that is actually worth reading, I don’t see them being of any help in their current form, and actually see them as being more trouble than they’re worth. Connecting with people? Conferences, e-mail, and the good old fashioned telephone work just fine!
Despite the Doctor’s bah humbug manner of expressing this view, I’m currently inclined to agree with him. But I’ve enough respect for Jason’s feel for technology to be genuinely excited to see what he has coming in January. As Jason states in the post linked above:
But wait until January. Along with a friend who runs a procurement organization by day but is an entrepreneur by night, we might have something brand new up our sleeves, at least from a category sourcing perspective.
In Uncategorized on November 19, 2008 by hudgeon Tagged: agile development, performance measurement, Procurement, roi, Vendor Management
I’d like to see an study showing the percentage of performance measurement initiatives that last longer than a year. I bet it’s not high.
My working theory is that the designers of performance measurement initiatives are too ambitious at the outset and set up measurements that never get used and therefore eventually stop getting collected and reported.
This scenario is analogous to building features into software that never get used.
To combat the tendency to over-design, techniques such as agile development are gaining acceptance in the software development community and serve as excellent models to assist us in developing better performance measurement systems.
One of the mantras of the agile methodology is to write unit tests for each component developed. This ensures that every single component built actually works before you attempt to put them together.
A recent article reports that a study of software development projects contained the following finding:
Key message: “measuring a [SIC] over 20 projects: if you have a large number of unit tests your code will be an order of magnitude less complex.”
The key message for designers of performance measurement systems is to start small when developing and implementing measurements, test them with your audience to ensure they serve business needs, and then move on to the next set of measurements.
The approach may seem pedestrian but you’ll be further ahead a year down the road.
In Uncategorized on November 18, 2008 by hudgeon Tagged: climate change, Procurement, sourcing, Vendor Management
Looking for a change of roles? Up for an exciting new challenge? The Maldives’ newly elected President, Mohamed Nasheed, has opened the door for a potential new procurement category: the country buyer.
The Maldives are poised to be one of the first countries submerged by rising seas and are looking to buy a new country. In the President’s words,
“We can do nothing to stop climate change on our own so we have to buy land elsewhere”
Could this be the first of many such roles? The Economist thinks so. They think that now may be the time to pick up a bargain and suggest that Iceland may be going cheap.
And who better than a procurement professional to lead the sourcing exercise. Anyone who thinks the creation of Israel had unresolved change management issues has never transitioned in a new ERP vendor.
In Uncategorized on November 2, 2008 by hudgeon Tagged: demand management, Procurement, supply chain, Vendor Management, waste reduction
The current economic climate has brought an increased focus on costs across many companies. Procurement managers around the globe see this as their opportunity to step up and deliver value. But it is much more than that: It is an opportunity to step out of the box.
If we really want to demonstrate procurement leadership, we’ll take this opportunity not just to deliver value through negotiating deals but through reducing waste across the value chain. When the question is asked “How are we going to reduce costs?” and heads swivel towards the procurement manager; will we talk about reducing demand, minimising transaction costs and reducing supplier margins to competitive levels? Or will we just talk about screwing down our suppliers? The choice is ours.
In Risk, Vendor Management on June 16, 2007 by hudgeon Tagged: Cost Analysis, Procurement
Given the resource constraints of many mid-tier buyers and the requirement to show that they are purchasing wisely, if I were an indirect supplier, I’d do whatever I could to ensure that I provided my mid-tier clients with whatever information they needed to prove they are buying well when they are buying my products and services.
This is not as straightforward as it sounds because the skill with which one has purchased a product or service can only be judged relative to the price others are willing to pay. However, if I were an incumbent indirect supplier with significant market share, I would use my own customer base to provide the evidence my customers need to justify their decision to re-contract with me for another term and I’d willingly give up my ability to differentially set margins across my similar-margined mid-tier clients in the hope it would derail some of the tenders I’d otherwise be forced to participate in (assuming of course that the bulk of my profit did not arise from differentially pricing similar clients).
To do this, I’d meet with all of my mid-tier clients and, with their permission, talk about my pricing. I’d explain that I very much want to charge them all the same low price but particular idiosyncrasies in their buying patterns mean I can’t. I’d tell each of them what they can do to their own operations to allow me to service them at a lower cost. I’d summarise this in a document for each procurement manager and when she is asked to justify why she is re-contracting with me, I’d recommend that she say to her CFO, “We have been dealing with this supplier for 5 years and currently have no service issues. Our users report that they are happy with the service they are provided. I have met with the procurement managers of 5 of their other mid-tier clients and, given our idiosyncrasies, we are paying the same rates for their services as they are (and one of them took the supplier to market last year). Based on this, I recommend we focus our resources on a spend category we are less confident we are buying well.”
In Risk, Vendor Management on June 9, 2007 by hudgeon Tagged: Procurement, Vendor Management
In the mid-tier indirect procurement space, we are often not making the best use of our scarce resources, and by that I mean that we are not maximising the addressable spend per dollar spent on procurement. There are two reasons for this:
- We should be making better use of tendering platforms (which I won’t discuss as there are others in the blogging world who cover this with far more authority) and
- we far too often take suppliers to tender when we could achieve a similar result with a few rounds of negotiation.
But to negotiate well, we need information. Companies like the The Buying Triangle are on the right track in providing this information to their corporate clients. I predict a bright future for organisations who provide services to boost the negotiating throughput and effectiveness of organisations.
For incumbent indirect suppliers to companies who are not using services such as the Buying Triangle, I believe there is scope for the suppliers to better service their clients by providing relevant, high veracity, purchasing information. Perhaps they can establish a Lone Purchasing Organisation.
In Risk, Vendor Management on December 8, 2006 by hudgeon Tagged: Management, Procurement
I’ve recently put together a list of measurable procurement team activities and a suggested metric for each activity. It’s by no means revolutionary but you may find it useful in your organisation.
Listed below are the activities and metrics. Note that your team’s metrics will differ from those listed below based on the behaviour you are attempting to drive within your team, your organisation, and your supply base.
- Spend analysis: Enriched addressable spend mapped to the organisational hierarchy (as a percentage of total addressable spend)
- Sourcing: Savings, total and savings divided by the sum of procurement staff salaries.
- Ordering: Spend through Procurement-controlled channels (e.g. e-catalogues) divided by the sum of P2P staff salaries
- Deliveries: Metric: Average elapsed time from supplier dispatch to end user receipt
- Invoicing and payment: Metric: Percentage of invoices paid on the date due (or before with negotiated discount)
- Contract administration: Metric: Percentage of total addressable spend under contract
- Supplier management: Metric: Spend covered by suppliers providing simple cost and SLA reporting back to the procurement department divided by the sum of supplier management staff salaries.
You’ll have noticed that some of the metrics are ratios between the objective and the cost of staff. I find this useful in focusing staff not on the limitations of our resourcing but on the efficiency of the resources we do have, and to constantly search for ways to make themselves more efficient.
