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The results of a global procurement transformation – a use case!

by | Sep 29, 2020 | Procurement Excellence, Procurement Strategy

Blog

The results of a global procurement transformation - a use case!

Introduction

Last week part 1 of the global procurement transformation was published with focus on the pre-phase and first year of the transformation.

AIE company led the transformation in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved. The whole transformation team was a colleague interim manager, a high potential of the company, strongly supported by members of the leadership team, the board and people in procurement.

Overall results, both financially and non-financially, in the first year exceeded expectations, which helped to create trust and confidence in the function and the transformation.

This week’s post is about the second year of transformation and the final results.

 

Transformation focus in the second year

Early in the second year of the program the decision was made to move to a global procurement organisation. This was part of a wider strategy and governance discussion. A business case was submitted to set up a global procurement organisation and a proposal for its geographic location. These were approved by the board and leadership team at the end of Q1 2018. A small project team with HR, management leadership and AIE company was set up to make the global procurement organisation happen in the chosen location.

Further the contracting and implementation of a procurement system infrastructure, a Contract-to-Pay system fitting to the already contracted Source-to-Contract software was decided for. This was based on the preparation (design and business case) done in 2017 and early 2018.

Meanwhile category management initiatives accelerated covering a substantial part of the international spend. The ones started in the first year started to yield and result in larger framework contracts.

All this happening on top of the initiatives running from year one: performance management on a monthly basis, executing the procurement self-assessment for the second time and to monitor overall progress of the transformation, updating roadmaps and implementing the initiatives in the country purchase plans, ongoing category initiatives in a number of selected areas.

 

System landscape: Source to Contract and Contract to Pay

Many activities were initiated in 2018 to progress the implementation and use of the Source to Contract system. The quality of the realised spend database was improved and reporting of spend data moved to a monthly frequency (from quarterly). Supplier life cycle, contract life cycle and e-sourcing were made available to all BU’s. Some already used the these actively. Vendor masterdata were defined as part of the structural implementation of the supplier life cycle module and future contract-to-pay system. Supplier and creation of supplier master data was connected to the usage of the e-sourcing module. New suppliers were onboarded to make a start with harmonisation and enriching supplier master data. Contract management and contract master data were formulated for later implementation. The new procurement organisation had master data management within the function as no centralised business services and data management was in place yet.

For the contract-to-pay system, the design of purchase channels and a plan for implementation was created. Tenders and negotiations resulted to the choice and the related integrator support, mid 2018.  This gave a 6 months preparation after contracting to realise a detailed design for a go-live in selected pilots early 2019.

 

Setting up the global team and recruitment program

Evaluation of different locations on a multitude of criteria resulted in the decision to locate Procurement in one of the larger business units. Jointly with HR and a global recruitment company a recruitment program was set up to assure diversity in all aspects. In Q2 a tender was sent out to a number of recruitment companies to support the realisation of the global procurement organisation during the summer months before the end of the year. Scope was to recruit #15 vacancies with:

  • global procurement director,
  • global category managers
  • a procurement excellence team with business intelligence, contract management, high level functional excellence managers and a master data department (decided to keep in Procurement)
  • two heads of procurement in two different countries.

Further the organisation would be strengthened locally with another 8 people in 2018 on top of the 22 already hired in 2017.

 

After approval of the plan by the Management Board a novel recruitment campaign was initiated to support the right image building for procurement in June 2018. At the core of the campaign was an employer value proposition and different recruitment channels such as linkedin, personnel networks, wechat and the channels of the recruitment company. Within 3 months 60 specialised procurement professionals were selected from a much larger number by initial screening on personal presentation in a call, resume content, renumeration wishes, diversity and mobility. All candidates were interviewed minimum 2 times after which 15 finally were appointed. The new organisation started end of 2018.

 

Transformation wisdom?

  • Top management commitment and them having a professional stake in the transformation is essential
  • Reaching out and connecting to other functions, building internal alliances with mutual benefits is key
  • Baselining and creating a roadmap will help to validate the ‘need’ and ‘direction’

  • Make sure the transformation delivers business results (financial and non-financial) for BU leaders
  • The function as ‘change agent’ is okay, with strong support of the people in the function,  but be aware not run miles ahead of the pact
  • Working on results and securing enablers need to go hand in hand to sustain the change
  • People make the difference.
  • System development, digitization is key
  • Emphasize communication and a clear value proposition, formal and especially informal.
  • Make the function attractive. Ability to attract diversity mirrors the attractiveness of the function.

 

 

Procurement Interim, transformation and advisoryOffering - procurement assessment

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Supplier Enabled Innovation – where Business, Supplier and Procurement leadership contribute to open innovation!

by | Aug 26, 2020 | Procurement Excellence, Supplier Innovation

Blog

Supplier Enabled Innovation: where Business, Supplier and Procurement Leadership contribute to open innovation!

 

This is the third article this month on Supplier Enabled Innovation.

The other two you can find by clicking on these links: Supplier Enabled Innovation: early involvement not always! and Supplier Enabled Innovation Key Success Factors.

 

Next month the topic will be on changing a procurement organisation.

 

Open Innovation Programs struggle to deliver

Open innovation programs struggle to meet CEO’s expectations. According to a McKinsey publication, 84% of the executives say innovation is important to their growth & strategy, however only 6% is satisfied with their innovation performance. What has 20 years of open innovation programs delivered to the companies running these programs? And what has been the contribution of the supply base to these results?

 

Suppliers’ companies are running similar open innovation programs like your company. Depending the industry, they invest 2-13% of annual revenue in their R&T and Innovation efforts. For sure most of this goes into improving the current portfolio, expanding markets and applications, usually >75% of budgets. However, if they can adapt, transform their businesses, they will also be looking at trends and developments that might disrupt their business. And it will be in these areas that they will be embarking on more ‘uncomfortable’ innovations which are normally described as adjacent (product + service) or transformational innovations (customer experiences).

How good is your company with an open innovation programs accessing these resources and funds of suppliers? In general we can conclude that the bulk of the companies is still not successful. Of course, there are several well-known and often quoted cases. However, most companies struggle. Why is this? Here I would like to discuss a few reasons.

 

Supply base and partnership opportunities need a larger piece on the  business agenda (albeit only resulting the COVID-19 crisis)

First, most CEO’s are customer focused and focus on top- and bottom line, M&A, asset utilization and their own core (technological) capabilities. Simultaneously this often coincides with a blind spot for what they could expect as a customer from their supply base, apart from cost reductions/increases and risks. In an increasing complexing world, the need to source capabilities, technologies, new developments from trusted business partners is increasing. The COVID-19 crisis has shown this. Business leaders need to commit themselves structurally for a mere part of their time to get involved in the relations of strategic supply partners and prospective suppliers as this would help to access the funds and resources for innovation. Value chain and network thinking also requires business managers and CEO’s to reshuffle their agenda to make sure that they also know their top 10 trusted and value generating suppliers as well as their strategies and related R&D programs. 

  

Open Innovation Programs could leverage existing partnerships more  

The second reason is that open innovation programs tend to focus on venturing, startups, scalers, universities, incubators, new business areas, licensing and of course building an open innovation culture and excellence program.  Relations with outside partners, start-ups (different stages of seed funding) are having their own challenges. Although technologies are often promising, hurdles like scaling up to regional or global roll out, IP agreements, non-matching cultures and large corporates too often engaging with a m&a mindset make these relationships in the least particularly challenging. Arguing that speed is needed, efforts to circumvent procurement are common. Engaging outside partners, jointly with procurement, including an increased focus on current strategic suppliers with focus on developing new and more strategic supply relations as an outcome might be for many open innovation programs an addition to the journey to increase success.

Procurement needs dedicated resources 

The third reason is where I address the Procurement leaders and professionals. Results of open innovation programs require strong support from procurement. Setting up a supplier enabled innovation program in any organisation and any industry is giving the speed of change an absolute necessity. Happily, we see already for years the importance of supplier enabled innovation reflected in the annual reported CPO’s top priority lists and a growing number of successful companies that embarked on this journey. Granted, not easy to do this successfully given the agenda where digitisation, talent management, complexing supply chain, daily operational issues, sustainability, driving supplier relationship management and continuing realisation of efficiency and cost reduction are already taking up so much of the headspace. Today I simply emphasis that supplier enabled innovation deserves dedicated resources, extra efforts, and x-functional resources to work with your strategic suppliers. At the same time, it needs rethinking of governance and operating models in which category management and the transactional process (even when located in business services) very often still dominate. Procurement leadership team needs to make it part of their agenda to work structurally with business leaders and the leadership of their key suppliers. Only then we shall see progress and value created from supplier enabled innovation.

 

If you are interested to discuss in detail, get support in starting up, improving  or designing your supplier enabled innovation or partnership activities, feel free to contact.

Next article will zoom in on transforming a global procurement organisation. 

 

Supplier Enabled Innovation and PartnershipsProcurement Transformation

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Fast and more agile procurement

by | Jun 16, 2020 | Procurement Excellence

Blog

Faster and more agile procurement

Introduction

Procurement organisations, like the companies they are operating in, need to respond agile and efficient to the fast changing circumstances, being it Covid-19 crisis, global warming disasters, talent management or digitisation challenges. Therefor they need to include in their design and setup the right prerequisites and conditions.

 

The current context is VUCA (volatile, uncertain, complex, ambiguous) at an increasing level. Typically, procurement organisations changing towards their next generation target operating model, with new processes and the related software and system landscape take traditionally 2 years, if not longer to get there.  The disadvantage is that by the time the changes near completion, the world around might have changed again. Adaptability and change need to be continuous and faster than ever before.

 

How do you enable an agile procurement organisation?

All 12 agile principles apply to realization of agile procurement. But there is more. Such as applying the principles to sourcing, and there are a number of key areas to look at to enable agile procurement, which are related to structure, processes, governance, people behaviors, team maturity of the organisation and an overriding drive for simplification and delivery. This article will not go into agile sourcing or purchasing, but focus more on some of the supportive behaviors and some examples and measures that can be taken to become more agile and responsive.

 

Clear Mission and purpose

First of all a clear company mission and purpose in easy to comprehend language helps. This will make it clear in all circumstances what the company and also the function strives to achieve. It helps employees and other stakeholders to identify themselves with the wider role and contribution to society of the company. It is also one of the cornerstones for the needed decentralization and empowerment of people in the organisation and to realize a common performance culture (know what is expected from you).

 

Behaviors supporting agility

Secondly, agility and resilience are not simply a change of the ‘hardware’ or ‘structures’ of an organisation or implementing weekly scrums or design thinking processes. The change is related to the behaviors displayed. This is where the change challenge comes in and where leadership needs to lead by example. Trust, collaborative attitude, information sharing, fast, quick decision making, focus on execution, empowerment to act, learning from failures, responsiveness, resilience, respect, acceptance of differences and listening are elements which are key. Teams and individuals need to grow beyond competition and self-interest (functional interest). Only when trust, respect and effective collaboration have been realized in the organisation, true delegation and empowerment of agile teams will gain momentum.

 

What can be done to make procurement more agile?

Lets try to bring the topic of agility closer to home by sharing some examples, that even might come across as ‘evident’ or ‘the usual’. The reality is that these examples also show that in practice procurement functions have a lot of ‘low hanging fruit’ to realize more agility.

This list is a start to help framing agility in procurement a bit more pragmatically and you are very much invited to share your views and experiences.

  • Procurement close(r) to the business where the delivery takes place, but with a procurement function as home for excellence, knowledge and resources both for NPR and non-NPR. True x-functional collaboration and metrics, which takes the discussion of structures beyond the de-central, central or hybrid target operating model.
  • Focus on solutions for needs and discussing suggestions from vendors in a collaborative mode instead of discussing a preset of specifications and comparing bids. Short cycle, sprints with interim results instead of full flashed ‘complete’ blueprints.
  • Processes: Relentless focus on simplification and de-bottlenecking processes. Integrated in end-to-end processes, x-functional.
  • Procurement strategy, category management: up to date and alive scenarios shared by x-functional teams for short, mid and long term transparent for main categories and suppliers and embedded in and part of the company reporting and planning cycle and scenarios.
  • Key suppliers and partnerships: a focus on ‘significant’ delivery, clearly defined projects, risk management, supply chains, sustainability, innovation, continuous improvement, managed by relationship managers and x-functional teams. With suppliers, collaborative sharing of information and data in place as well as understanding each others language (jargon) and processes. Behaviors focused on agility and simplification.
  • Procurement showing ownership for the supply base, supply chain risk, supply chain sustainability and innovation with suppliers including startups.
  • Dashboard: Real time dashboard showing metrics related to key performance areas. Monthly or even quarterly data dumps are replaced by real time data availability.
  • Meetings: replaced by quick video calls solving problems or taking decisions.
  • Meetings: Installing an effective and efficient meeting culture and skills (information, decision and execution oriented).
  • Meetings: focus on x-functional, with suppliers/customers instead of internal procurement.
  • Strategic Sourcing, category management: more focus on the quality of the cross-functional team and the member selection than on approving the steps in the sourcing process. E-Sourcing and speed sourcing routinely implemented for large part of spend and applying agile sourcing principles.
  • Flying sourcing squad of senior and experienced procurement experts, temporary sourcing critical products for a company.
  • Category and strategic supplier teams: more decision making authority for remote teams and trained in agile sourcing principles.
  • Purchase to pay: In the selection of purchase channels, the multitude of repetitive, low risk, low value orders are delegated to the businesses, departments holding the budgets. P-cards, market places, catalogs enabled.
  • Daily team check-ins, remote social events and interactions organised (coffee, breakfast, celebration, etc)
  • Communication: weekly 30-minute CPO reviews and once or twice-a-month 60-minute reviews.
  • Digitisation: pilots, trials going on and digital support implemented for main processes (creating speed, transparency, intelligence, insights, supporting processes)

Looking forward to you reactions and examples for agile procurement.

 

Other areas to consider

Besides people behaviors, culture and a clear purpose also the structure, end-to-end processes and governance are important enablers for agility and resilience.

Procurement Excellence

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Excellent Procurement teams deliver more

by | May 28, 2020 | Procurement Excellence, Uncategorized

Blog

Excellent procurement teams deliver more

Excellent Procurement teams deliver and contribute better & more to overall company results, before, during and after the Covid crisis. Moving beyond functional excellence and embedding more cross-functional advanced and business relevant practices over time remains challenging. With Covid progressing and remote practices increasing, this collaborative behavior, both internally as well as with key suppliers is increasing in importance. Areas like digital, supply chain sustainability, supply chain risk management, supplier collaboration and supplier enabled innovation are typically demanding cross functional approaches. 

Positioning and ‘air time’ are key

Procurement will need to position itself and get the ‘air time’ and ‘internal sponsoring and engagement’ for these initiatives. This is not easy. For example traditional at the core of many procurement teams, category management has shown similar challenges to become and remain cross-functional and relevant in the eyes of its stakeholders. Procurement has a challenge to move forward let alone accelerate and remain relevant on the journey of Procurement Excellence.

 

Essentials towards procurement excellence

Some essentials on the journey to become and remain procurement excellent are:

  1. Establish a culture of outside-in and an outside-in view and benchmark the function
  2. Assess your own baseline. define your ambition and strategy (within the overall company context)
  3. Set minimum ‘refreshed’ requirements for professional qualifications and experience
  4. Assure resources are provided to reach next level in procurement excellence (people, systems, processes and tools)
  5. Create a culture of excellence and the necessary change via leading by example, story-telling, example sharing and communicating (communication plan)
  6. Motivate people to ‘do their job’ effectively and efficient and provide training and coaching (academy, learning tracks and assignments).
  7. Encourage internal competition (awards, performance reviews, category plan reviews, lighthouse projects) and transparency on excellent practices
  8. Establish a dashboard, measure and report on progress of procurement excellence
  9. Continuously work on improvement and upgrading resources (people, processes, systems, tools), functional requirements, kpi dashboards based on the progress made
  10. Move beyond procurement excellence and realise cross-functional excellence

Anchor procurement excellence

All the way – from a transactional purchasing team with focus on supplying the factory and savings up to a procurement organisation with focus on value delivery via supplier relationship management, innovation, driving risk and sustainability – have procurement excellence anchored in the leadership team driving and supporting these 10 steps to anchor and embed the process of procurement excellence.

Procurement Excellence

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....