What Procurement Gives To A Company. Just Like Other Functions Do, Too.

I still sometimes read some posts which are asking what exactly Procurement gives to the company. I am in Procurement for sixteen years and yes, sometimes I also ask myself if being a good specialist in Procurement is enough. If I stay here, can I continue on earning and justifying my salary?

I had a look back at what I did so far as “only” a Procurement specialist. And here it is! Dear Procurement specialists, do not let anyone tell you we bring no value to a company. If you ever have doubts about what you can bring as an input for a business – here is a reminder list for you.

  1. Strategic partnerships between departments. We cannot work without other parts of the business. Someone has to prepare specifications and business needs, someone has to manage budgets, someone has to implement everything. Procurement, just like everyone else, has to take part, and, if needed, promote teamwork. Not only within the department, but cross-functionally as well.
  2. Confidence to investors and creditors. Being very pragmatic – not having Procurement function at all increases credit interest rates for your company. Procurement is one of the most important champions of transparency in the business. Even if it is not on the benefits or savings list – it is just another value that Procurement brings.
  3. Innovation. Procurement people have (almost?) the biggest exposure to the external information. Suppliers, manufacturers, exhibitions, training sessions. When used properly, such information brings direct cash benefits. I have seen quite a few KPI systems where one of the lines is “Benefits from implemented innovations” (initially, on Procurement goals’ lists and then cascaded down to supplier score cards and improvement plans).
  4. Productive workplace. Just like everyone else. It is teamwork, after all.
  5. Risk identification and mitigation. Procurement can identify risks in many ways. Risk, related to suppliers. Risk, related to non-compliance. Risk, related to market changes. General project risk. Planning in advance is an advantage, which allows to mitigate (or otherwise manage) the risks.
  6. Compliance to various laws and regulations. Import regulations, Greenhouse gas emissions regulations, quality requirements – and it is just a start of the list. Non-compliance costs money in form of fines, delays, fees. If you would really want it, you could actually quantify it. Or, if you are already having issues with the amount of fees you are being charged (for instance – delays in returning railway wagons, costing 100 Eur each day) – any improvement, done by procurement, is a benefit to the bottom line.
  7. Benchmarking. I have myself created several operational KPIs for the factories and businesses. Procurement has the possibility to ask for and get the information from supplier. More often than not they will have knowledge, various “rules of thumb”. Procurement, bringing several sources of information into one place, can create new KPIs for other departments, can adapt them to our own activity (for example – bringing in project management principles into procurement projects). Also, Procurement is in the position to obtain information and benchmark the performance of the business against industry standards.
  8. Savings – profit. Various sources of it: cost avoidance, price reductions, demand management, value engineering, budget savings, etc. Main performance indicator, associated to procurement. Not the only one, by far.
  9. Cash flow improvements. Payment terms optimisation (!!! not pure extension whatever the price, please keep in mind), inventory turns increase – very straightforward quantitative benefits.
  10. Social responsibility. By demanding the suppliers to comply with policies, which are important for the company they represent, procurement people extend the reach of good initiatives by few tiers. Not always easy to quantify, though.
  11. Agility, speed. Troubleshooters. Yes, that is exactly what procurement people are. Learning from that, they build in agility into the specifications and contracts.
  12. Diversification and business flexibility. By giving suggestions, we can fine tune specifications in a way it gives flexibility for future business opportunities. Machinery, being able to handle more than one type of material. Software, which can be applied to solve more than one business need.
  13. Automation. Linking internal systems with supplier systems. Automating internal processes. Bringing in best practices, seen elsewhere.
  14. Market insights and knowledge: suppliers, competitors, trends. Quite simple this one, right? Information from suppliers, relating directly to our company. Information from suppliers regarding our friends and competitors.
  15. Networking and PR. Could there be any better PR than award winning Procurement function, when you are trying to hire people for your company?

Everything or nothing at all. If a company chooses to employ good people – whichever department it is – they will bring benefits in all and every possible opportunities. If people are not chosen carefully… procurement or not… nothing can save the day.

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What Procurement Gives To A Company. Just Like Other Functions Do, Too.

Different Football Lessons For Professionals. Yes, That Includes Procurement

Football lessons

I know I am not going to become more popular by admitting this, but here it goes… I am not a football person. I am a basketball person. But I watched the games, enjoyed the victories and nice moments, read articles about the game. I discovered one, which made me think. We all can and should learn from football.

Here are the lessons:

 1: How to strike a ball from outside the box. No, you don’t need to strike anything. That is not that lesson. It is about performing better from less comfortable situation. Sometimes it can be decisions, made with less certainty. On other occasions – influencing a decision maker over few intermediaries, simply because the person is too far away (either geographically or on hierarchical ladders). Rarely do we get to act from the sweetest comfort zone spot.

 2: How to hit a volley. And now – in English and in a simple way: a volley means air-borne strike for goal. Slightly more difficult, more visual way to score a goal. Simply said, we all become better, more skilled. Even if you are not considered a star of your profession (that is, if others do not perceive you to be one – I am pretty sure we are all our own stars. At least it should be this way), you can still learn and use more sophisticated tools. Especially “air-borne” KPIs, reports, goals. Right?

3: How to strike a free kick. It also  proved again, that you cannot take things for granted. World’s best miss penalties. But everything evolves and something, that was once more an exception, now becomes rule. And a standard to all of us. Long time ago (pre-google era), information availability was listed as a barrier of switching between suppliers. Now, I would say, distribution or goods availability in B2B might still not be that flexible – but it is changing. Placing POs on the go, over the app is the new buzzword. Working with poorer data and getting better results. More and more often. We started setting higher goals. And we hit them more and more frequently. What’s next?

4: How to make a goal-line clearance. Sometimes it takes forever. Sometimes 22 people run around for 90 minutes with no real deliverables (goals). But sometimes you see one, who picks up the ball and turns into almost magical dancer – performer – warrior. With a ball between legs. And the person runs, twists, jumps, turns in a way only he understands in a high speed and finishes with an amazing kick and a goal. Differentiation. Between broad, structural vision and a tunnel vision. Both are good and needed – at the right moment. Seeing a goal and a way to get there. Not stopping along the way. Doing your best to really get there.

5: How to keep goal. Did nobody tell you at school that life is usually not only smiley-face stickers? Well, at least you can learn this from football. Yes, you will have attacks aimed at you. Yes, you have to be ready and prepared to deal with them. Sometimes, it is the winning point. You WILL have resistance. You will have people trying to use you. Yes, your suppliers will use every opportunity to increase their profit and your competitors will try to snitch your ideas. And you don’t get a sticker for it. Your preparation to deal with it is what matters the most.

 6: Age is just a number. Too young? Too old? Too new? Too old-fashioned? Who is the one to judge? Too inexperienced? Overqualified? We all heard most of these. Who and what did you choose to believe? Do not let others make your decisions. I know a girl who, from being sandwich bar operative dared to try and now is highway planning engineer. No, she did not need 10 years. She had all it takes and needed a little bit of trust. And four months to make her dreams come true.

7: David can beat Goliath. These days it is all about the speed in business, not about size. Your colleague might have few accreditations next to his name, and it took years to get them. These days, all you need is Google and a day to find and study latest trends, techniques, download free templates and tools. So you have a small team, even smaller budget but a big task? Relative. As long as you have brain and a will to deal with the task, there are always ways.

8: Don’t be a sore loser. That is another lesson we do not get at school. Well, we get to know that we don’t always get what we want. What we missed to learn is probability. It’s always 50:50. Every time you are on to something, you might win with the same frequency as you might lose. In fact, it is highly likely, that you will lose more matches than you will win. Again – your reaction to it is what matters. Learn and move on? Sit and cry? Moan and blame others?

9: It pays to be positive. Sometimes – quite literally. Like the guy who bet Leicester to win last football season in UK. With odds 5000:1. The Portuguese coach also believed. Even before the tournament. And, surely, throughout it. Not to mention all of the other benefits of being positive.

10: Keep going right to the end. If you are reading this, you have clearly learnt this lesson before. I would argue slightly: it is good to stick to the end, if you know when and where the end is. But otherwise… Sometimes it takes a second to score. If you create opportunities (if you really keep on creating them till the end), one of them can turn into a victory. If you really keep going till the end.

Those were the lessons I am taking with me from football. What have you learned from it?

 

Different Football Lessons For Professionals. Yes, That Includes Procurement

International Business And Every Day Life. It’s Good When Mistakes Turn Into Jokes And Not Losses

irony immigrants

One day, I swear, one of my “oopsies” will finish in rivers of tears… For today – it is just another joke and ten minutes of laughter which brings people closer.

I was dialling Portuguese mobile phone number, trying to call a sales director of a Portuguese factory for the first time. And, since all Portugal is still pretty much celebrating (or in hangover), I started the conversation by congratulating him with the victory. Smart move, you think? Think again!

The next words from him were… “Uhm… I am not Portuguese… I am French…”…

#immigrants #smallworld #irony #congratulations

International Business And Every Day Life. It’s Good When Mistakes Turn Into Jokes And Not Losses

FM and MRO strategy alternatives – a helpful presentation to download

FM FM strategy alternatives

Just finished compiling a file for FM and MRO filled with all different strategy alternatives. It is quite generic – I am pretty sure you will be able to adapt it to your needs. Please feel free to download and use the file, contact me should you have any questions and share with your colleagues – if you think this could be of any value to them. Cheers!

FM and MRO strategy alternatives – a helpful presentation to download

Demand Management: The Next Level. A Funny Story About Smart Kids

Kids are smart these days, aren’t they? Sometimes they are so smart, that it takes five minutes from explaining the subject to them, untill they outsmart you in your subject. Yes, they use YOUR weapons against you. Successfully. When they want it.

Our Afonso is smart. He is almost-fourteen-year-old, portuguese, finishing year 9 in a couple of weeks. I mentioned him previously. The conversation happened next morning after Portugal getting into EURO2016 finals. Earlier that week, the school announced about a trip to China. A trip in another 16 months (he actually counted it in accuracy of days), which he is now simply obsessed with.

We all were having breakfast. And explaining rules to Afonso, how he will need to save for the trip. Weekly allowances, special additional tasks at home. Surely, he was not convinced he will be able to save 1500 GBP only like that. I do agree with him. We definitely do not give him that much pocket money.

Then, to save the situation and to give him other tools (and a little bit of hope), I explained about demand management. For him, I explained, that would mean downgrading (in price and specifications) any intermediary gifts, giving up on just another game (ehrm… I would like to say I forgot the name of the console – but, to be honest, I didn’t even know it to start with. Promise to improve). Even, if he justifies properly, reducing frequency of haircuts could be a source of savings against target.

And then I got my lesson. Having a hippy teenager at home is not the worst one.

Conversation about savings exhausted itself. We started talking football (remember, Portugal is going to the final?). Afonso’s dad started considering trying to find tickets and going there. Afonso (very) enthusiastically agreed and even encouraged his father going through the numbers. Planes, game tickets, hotels… The number just got bigger and bigger. At the very last moment, Afonso suddenly calmed down, adjusted eye-glasses on his nose, and firmly said: “You know what? I am not going. Can you please put the number against my savings?”

I laughed for probably ten minutes. He learned my lesson very well. And even out-smarted me. He taught me, that, depending on your intentions, you can CREATE fake demand and then “give up” on it. So, if you are short on your KPIs – here is an advice for you! I am joking, of course. Don’t do it. Or, if you choose to do it – please, please do not tell anyone you heard about it from me.

It’s Friday. Thank you for reading. Today in the evening, I’ll have a glass of wine with friends and one toast will definitely be to our kids. Hope you all will have a nice day!

Demand Management: The Next Level. A Funny Story About Smart Kids

Courier services: a case study of demand management

demand management couriers

Someone clearly messed up with addresses. Parcel was delivered, Mr. Cameron opened it. Inside, there was a nicely wrapped “Exit”. There are situations, when “Exit” is undoubtedly the best thing to have. Not all of them are so obvious. I am pretty sure someone is still waiting for their “Exit”. However that subject will evolve – the world does not stop turning. The courier simply drove off to deliver next and next and then even more shipments.

Situation, one might say, quiet simple: a company with multiple locations. Some of them are production units; some of them – production and R&D; some of them – only sales offices.

Task: review courier services with a goal to achieve savings.

First step, logically, would be to analyse current situation:

  • types and quantities and locations of company satellites (collection points);
  • types of services used (product specific (ADR, frozen), service specific (standard, express, extremely express);
  • delivery points;
  • fee structure (prices, surcharges);
  • ordering processes (people, systems / tools, policies).

Next – you would have few alternatives. You can simply go out and do only price tender. Could be (relatively) fast and dirty exercise and, depending on category maturity and market conditions (fuel price), you could expect the results to be anywhere from minor price increase to 15-20% reduction (congratulations if you get that much!). And, of course, there are many tools to help you out along the way (tender, reverse auction, negotiations, etc.).

What I have seen being done previously and it paid off – big time – was to go the demand management way. This is the second, potentially, harder way. We asked ourselves questions regarding the nature of the spend.

  • is there inter-company document shipping? Can you change it with online systems? (DocuSign and similar).
  • Is there inter-company express shipments? Do they need to be express shipments? Can they be planned, consolidated?
  • Could we challenge ALL company shipments to be standard and consolidated?
  • If yes to all of the above – can we use post instead of courier services? (again – if we really need to send this way)
  • Special shipments. In our case it was frozen product samples. We challenged all intercompany sample shipping. In the end, the items were stored in the location where they were produced and shipped to external receiving party directly.
  • Non-document, not-special shipments. Those were samples of ingredients (dry products), packaging, marketing material), being exchanged between our own locations. With this subcategory we had three outcomes. Some of them remained as they were – real, genuine need. In some cases, instead of sharing ingredients between the company locations, we instructed R&D to ask for samples from suppliers. Suppliers were happy to cooperate and we got free of charge samples and shipping (YAY!). Part of shipping back and forward dissapeared.

To wrap it up, after all the exercise was done, we had 45% savings, as compared to the baseline budget. Hooray to us!

So, there you go – one more example of critical thinking and expert judgement. You can learn all CIPS, APICS, six or more sigmas – they will give you all the tools in the world to handle and manage data which you have already at hand. To improve something. But when it comes to changing (patterns, items, processes, thinking), the most important tool sits between your ears. And that means – anyone and everyone has access to it!

Thanks for reading!

Courier services: a case study of demand management