Supplier compliance is a potential liability for procurement teams everywhere, and will undoubtedly remain to be so, given the unpredictable nature of human beings. Although it is understood that we simply cannot predict and avoid every single negative situation possible, there are many ways to minimize your business’s risk of dealing with a non-compliant supplier. At the Institute for Supply Management annual conference, associate vice president at SAI Global Kirsten Liston said: “There is a burden of proof for the company as a whole, the business unit as a function, and the people in it, to say what could go wrong? What is going wrong that I am not asking the right questions about? And how do I find that out?” Through these words, she identifies the entire company’s ongoing responsibility to think out of the box when identifying risky suppliers, and not just that of those of us in supply management.
She provided purchasers with a few helpful tips to promote healthy supplier compliance, which you can find here on supplymanagement.com. What caught my attention was the second tip listed: “Target and segment suppliers by importance and compliance risk. There are a lot of companies out there that have a pretty minor supplier in a high-risk country. That supplier is not crucial to the company, so it should think hard whether it wants to be associated with that vendor at all. Is there somewhere else we can get the goods or service that avoids this troublesome relationship?” This is an important point to consider. Your first thought in evaluating this minor supplier might be just that – that it’s minor, so why worry? But no supplier is too small, and no worry is too minor when considering supplier compliance. Liston’s advice to try and seek these goods or service elsewhere is merited. Even though the supplier is minor, why not eliminate all identified sources of potential risk, in order to be best prepared for any unknown risks that may sprout up?
Ultimately, whether or not risks like these are worth taking is entirely up to you and your business. What do you think? Would a minor vendor in a high-risk country warrant serious consideration of alternate supplier options? Or would you be content, given its non-crucial status?
Kyle Filiault |
| Tags: business
, Supply Management
I was reading an article today about how a widespread sense of urgency among employees is necessary to inspire successful changes in a company’s procurement practices. Still a bit sleepy-eyed, it wasn’t until I was three quarters of the way through the article (and halfway through my morning coffee), that I began to understand its intended message. Blogger Paul Snell writes: “He (Gregg Waterman, Coca-Cola’s VP of procurement) also raised the importance of celebrating success and making sure it is done publicly – especially when you have cross-functional teams working on a project that might not be part of their day job. And to ensure it is not just the CPO saying it, but people throughout the organisation and senior leaders acknowledging what has been done for the business.” In essence, this post is about the importance of employee morale.
It’s simple, really. Human beings are capable of some pretty amazing things. But all of our best work – and I’m not just talking about good work, but the best work; that which achieves the highest potential caliber of greatness – comes from Read more
For as long as I can remember, I’ve considered myself a reader. In high school, I solidified my “reader-ism” by way of public display; between periods, I was known to traverse the hallways grasping an open copy of Tolkien’s The Lord of the Rings, or Mario Puzo’s The Godfather. I admit that this may not have been the most practical approach to my comprehension of these texts, nor the most effectual means of travel. Regardless of the shortcomings of my methods – a reader I was. Many readers are blessed with an uncanny ability to remember certain phrases, and I was no exception to this rule. One of the first, initial lines that I stored in the vast reserve of quotes, idioms, and sayings – that I now refer to as my memory, was the common phrase: never judge a book by its cover. Despite this line’s place among a long list of English clichés, its validity has proved itself time and time again throughout my years. This morning, I was once again reminded of that simple phrase’s truth.
During my daily search for informative, original articles relevant to procurement I stumbled upon a hidden gem of a post, entitled Procurement: To Protect and Serve. After reading the title, for one reason or another, instinct beckoned me to press on with my search. Thankfully, my mind stumbled onto that somewhat juvenile phrase: never judge a book by its cover. So I decided to finish the read. To say that I was pleasantly surprised would be a gross understatement.
Through his unique perspective as a Boston native, writer Pierre Mitchell draws a strange comparison between procurement staff and members of the Boston Police Department, in lieu of the tragic bombing that took place at the Boston Marathon. He describes that during the manhunt for the alleged suspects of this heinous crime, that “The police were no longer overweight beat cops with dour attitudes and bureaucratic power. They were now one of us, and looking out for us.” Skipping ahead to avoid any potential disservice that Read more
The evolution of procurement has established itself as one the most popular topics in the eyes of many digital media providers, researchers, and bloggers, including those of us here at Spend Navigator. However, while providing no shortage of insightful speculations, educated predictions, and a few theories as to which direction the future of procurement is headed towards, there are less clear-cut examples of specific, game changing innovation – aside from the more general, technological improvements regarding the acquisition and presentation of analytical data. In short: the majority of content offered by procurement specialists has been mostly conceptual. And that’s okay; of course the nature of planning for the future demands a certain degree of abstract conceptualization. But once in a while, do you find your yearning for some kind of simple, straight-forward, clear-cut explanation as to what all of these speculations mean for the field of procurement?
Spendmatters.com began a new blog series that might quenching your thirst for this kind of blunt, practical advice, defining exactly how technology can optimize procurement. In the first installment from the series, after acknowledging the tremendous strides made in way of the visual capabilities of data presentation, author Jason Busch poses a simple question, through the brief analysis of plot points from the famous, futuristic movie Minority Report. He writes: “After watching this many times, we finally decided to ask: in an all-powerful world of predictive analytics, why didn’t he (Tom Cruise) just ask the system what would happen next? … Our takeaway question for procurement is the same: why don’t we spend more time asking for tools to tell us the answer rather than logging into the systems, drilling through dashboards, running reports, and exporting charts?”
The obvious answer to his question is this: most people do not possess the complex knowledge-set required to understand the specific fundamentals of how our technology operates. Despite the general reluctance to blindly trust a computer’s functionality, this is a definitive example of what the future may have in store for those of you in procurement. Just think of all the hours spent combing through data; hours that could soon potentially be saved and spent elsewhere! What do you think? Would you be skeptical to wholeheartedly place your trust in the capabilities of a machine? For Busch’s full article, including his list of ideal questions to ask our futuristic “procurement analytical tools” click here.
Kyle Filiault |
James McQuivey, vice president and principal analyst of Forrester Research, Inc. wrote the book on digital disruption – quite literally. For those of you who are unfamiliar with this relatively new concept, don’t fret. The term “disruption,” as applied to contemporary business practice and market trends, is defined as any type of event that causes an unforeseen and destructive divergence from an organization’s expectations common field-practices. A close relative of Clayton Christensen’s infamous theory of disruptive innovation, digital disruption “requires rethinking the entire business, not just one’s technology portfolio,” explains McQuivey, in this article, written back in January.
While digital disruption is not undeserved of its recent hype within all areas of business, Liz Herbert, another of Forrester’s principal analysts shines some light on its direct connection to those of us involved in purchasing. In a post last week, she quoted a past survey done by Forrester in which “85% of executives polled opined that Read more
Amidst the buzz surrounding an oncoming transformation within the field of procurement, a recent post on supplymanagement.com suggested that a different viewpoint be taken on how to spark this heavily anticipated and highly foreshadowed change. The crux of this contentious outlook, taken up last week at ProcureCon Indirect in London, by Paul Alexander (BP‘s Director of Indirect Procurement) was this: that “procurement cannot be transformed by implementing global strategic sourcing.” Although Alexander did openly admit that this train of thought would most likely be met with some degree of resistance, he offered three supporting arguments to help defend his claim.
Briefly summarized, he first claimed that global supply markets are actually few and far between in the world of indirect procurement; next – that “most sourcing” is not exactly strategic, and is more akin to simple purchasing; and then finished by describing the infinite complexities involved in this type of innovative, field-changing transformation, and how it cannot and will not Read more
Another emerging alternative business practice is called crowd-sourcing. Crowd-sourcing is the practice of procuring needed services or content by soliciting contributions from a large group of people (i.e. an online community). It first gained its trending popularity as a business method that focused more on collecting feedback from customers, as opposed to actually acquiring sought out and paid-for products and services. New crowd-sourcing organizations are emerging to help bridge the gap between customer based and professional based crowd-sourcing methods.
An article we found on crowdsourcing.org identifies one of these crowd-sourcing agencies as Enterprise Crowdsourcing, or ECS. “The ways in which ECS is leveraged will evolve over the coming months and years. Right now, organizations are comparing this model to outsourcing and quickly realizing and reaping the benefits. Access to an elastic workforce, that has the ability to ramp up and down based on work fluctuation or seasonality, is critical for any business, regardless of industry. Tapping into a locally relevant, globally based workforce that can execute smarter, faster, and cheaper will open up new doors for businesses trying to compete at a global scale. Finally, organizations are weighing the cost-savings and the ability to pay-per-task with less ramp-up time and finding it is critical to driving the bottom line.”
Although this could generally lead to a decrease of more permanent, salary based positions being offered to professionals, it may be the antidote to what I refer to as the ‘grass is always greener’ mentality of typical working class Americans, by adding a degree of variance as to who you actually work for. To me, this crowd-sourcing style of recruitment and sourcing seems to have a lot in common with being considered a ‘freelance’ worker – a term most commonly applied to journalists and technical writers. These methods of practice, along with improving costs, may also contribute to upping the standards of what is considered to be ‘quality work,’ as the best individual for whatever needed task will be most sought for, and less skilled, lazy individuals will quickly be weeded out from the pool of talent that is the ‘crowd.’ On the other hand, without a good editor, filtering out the ‘quality work’ from the overwhelmingly large ‘crowd’ may end up causing more trouble than it’s worth. What do you think?
Kyle Filiault |
There has been a buzz recently on the internet around the practice of near-sourcing. In a recent article posted on entrepreneur.com, Carol Tice writes “While outsourcing to far-off countries with low-cost labor remains strong, some companies are rethinking their strategies due to global political unrest, rising fuel costs, growing demand for quick delivery times and wage inflation in many developing countries. For instance, Moser says the cost of manufacturing in China is expected to reach U.S. levels by 2015 due to that nation’s wage growth and escalating fuel costs.”
First, I wanted to clear up any discrepancies that may have arisen in regards to the terminology used here. Out-sourcing is process of contracting out internal business related tasks to a third party company. Out-sourcing technically has absolutely nothing to do with the physical location of the business. In the above quotation, the process that Tice is describing is called offshoring, which means the relocation of a company’s business practices to a different country. Although the price of offshoring currently remains more appealing (in the general sense, due to lax foreign labor laws) than that of in-shoring (or on-shoring), whether or not this will continue to be the case in the immediate future remains to be seen.
In certain areas, a switch to purchasing locally may even immediately beat the costs of offshoring, and Tice’s article poses a quick batch of procurement evaluation criteria, comprised of five different points – originally recommended by David Pyke (dean of the School of Business Administration at the University of San Diego) – that are worth taking a look at.
So, hold on a minute – what exactly does near-sourcing mean? Well, for starters, given its lack of even a Wikipedia page, it’s a relatively new term. In the her article, Tice basically writes that near-sourcing is simply the business process attaining goods and services from vendors located closer to where that business’s end-products are sold. By this definition, not only does near-sourcing provide for faster delivery times, but it also can potentially support local economic stability, as it would keep local job opportunities plentiful. But without a more profitable bottom line, it is doubtful that these incentives alone will be enough to sway the minds of CPOs and other procurement decision makers.
In today’s business world, there is a gap between actualizing an effective purchasing automation system, and those that fall short of their great expectations. So how do you ensure that your business doesn’t fall into the latter category? How do you keep your procurement plans from becoming delusions of grandeur? Spendmatters.com recently posted six insider tips that may help shed some light on how to ensure a successful implementation of your company’s purchasing automation system.
Amongst some of the more self-explanatory tips (like #1: Begin with the end in mind, and #6: Stick with it), the second and forth tips peeked my attention. #2 read: “Don’t be afraid of a little discomfort.” This is an important tip, as a functional procurement system may initially seem like it’s drawing attention to all the ugly parts of a company’s spending habits; singling out all the mistakes or shortcomings of coworkers. But that just mean that the system is doing its job correctly. It is supposed to point out all the flaws and misgivings of your company’s current purchasing processes, and in order to clean out the cobwebs, it must first bring them to light.
This works in accordance with the next one I found most interesting. #4 stated: “Use the system as a way to strengthen purchasing relationships.” Further in the explanation, the post read: “Standardizing purchasing via automation is not about good guys vs. bad guys. It’s about gaining visibility into the company’s buying activities to produce a more intelligent and profitable supply chain for everyone.” I think this is an important concept to keep in mind while considering the content of #2 – that at the end of the day you are all on the same side. Procurement isn’t just about cutting cost, ie – getting the cheapest items when sacrificing quality. It’s about optimizing purchasing, so both the purchasing department and those utilizing what was purchased are satisfied. For the rest of the list, click here.
The inevitable saturation of workforce personnel with members of Generation Y – a term afforded to individuals born in the 1980′s – is demanding a general change in practice for most businesses. Outsourcing strategies are no exception to this rule. According to a recent article on ComputerWeekly.com, in which the author analyzed research done by Gartner‘s professional data-miners, “by 2025, 75% of the average businesses workforce will be made up of this group of people.”
One of the most interesting aspects of Gartner’s findings spoke of a reversal of the “not invented here” syndrome – that is, that the majority of Generation Y first seeks an already existing IT solution for any given task, as opposed to the current/dated option of businesses creating their own IT services. “Generation Y looks first into what is available on the market before deciding to build anything, especially with highly commoditised services,” Gartner claims. Being a member of Generation Y, my own personal preferences further support this claim, as I would definitely prefer to utilize an already existing IT product from the market, rather than create one entirely from scratch.
I believe this logic derives directly from Generation Y’s elaborate connection to (and dependence on) technology. The vast majority of us are at least basically familiar with the ins-and-outs of computer use, due to the constant, early exposure to computing technology in our every-day lives. Given the fluctuating nature of this type technology – the recurrent need for upgrades, the consistent changes in basic functionality of programs – Generation Y is frequently forced to adjust and to adapt to new user-interfaces, and generally more acceptant of change. Therefore, learning how to use already-existing software comes as second-nature to us, as it was an integral part of our computing experience since the beginning.
Another one of the more interesting findings from Gartner’s research is that ”the demand for speed is much higher with today’s impatient Generation Y workers.” I won’t deny that the timely completion of any work related task is important, but I was under the impression that this concept spans all generations, and would be interested in learning the specific data collection methods utilized in drawing this conclusion. What do you think?
Source: 1) http://www.computerweekly.com/news/2240181294/Sourcing-strategies-must-change-to-reflect-Generation-Y
Source 2) http://www.gartner.com/DisplayDocument?id=2413415