The Point by Buyers Meeting Point

Although we planned to wrap up the year’s coverage of purchasing news and events with yesterday’s webinar coverage, we had one last post come to our attention that was too interesting to pass up.

This week’s featured webinar was hosted by CombineNet: ‘2013 E-Sourcing Resolution: Create Win-Win Solutions with Suppliers’. The event is already available on demand on their website.

Earlier this year, we reviewed ‘Vested Outsourcing’, the first book in what has become a series of publications by Kate Vitasek and her colleagues on the evolving potential of mutually beneficial relationships between companies and their suppliers. ‘Vested Outsourcing’ was followed by ‘The Vested Way’, and ‘The Vested Outsourcing Manual’. Kate’s latest publication is ‘Vested: How P&G, McDonald's, and Microsoft are Redefining Winning in Business Relationships.’ I’ll include some background as well as an overview of the Vested philosophy at the end of this review. I encourage you to read my review of ‘Vested Outsourcing’ and to purchase one or all of the books in the series.

Each Monday, Buyers Meeting Point covers the coming week in Supply Management for the PI Window on Business Blog Talk Radio Program, with host Jon Hansen. We cover the coming conferences and webinars and help you decide how to allocate your professional development time for the coming week.

In addition to that review of the calendar, we present a guest sound bite – a timely excerpt that gives us an opportunity to further explore a topic of importance based on the time of year or the events being held. Most of our sound bites come from YouTube, where we comb through funny cat videos to bring you two minutes of high value multi-media procurement thought leadership.

In this week’s guest sound bite, we’re taking on one of the new ideas that we may get to hear more about in the Aberdeen Group CPO Summit recap webinar on Thursday this week – CrowdSourcing. In this video, Brian Bednarek, CEO of Mesh 01 and an Industry Analyst, speaks with CBS News Online about crowdsourcing and how it's changing the way companies work.

After watching the video, I did what Brian suggested – I put crowdsourcing and procurement into Google. I came up with a number of blog posts by the usual suspects, and their reactions were mixed. On the upside, crowdsourcing allows buyers access to the collective genius of a large group of resources they don’t have to target. The purchasing is done at will, on demand, and a la carte. On the other hand, quality may come into question, as do loyalty and continuity between projects. It’s really a question of value – you may spend less by taking the crowdsourced approach, but something beyond margin is being sacrificed to bring you those lower prices. No judgment here on good or bad – simply make sure you understand what you get for what you are paying.

Of course, that all assumes that procurement professionals will be using crowdsourcing as a way of getting the services their organization. The other possibility is that companies start crowdsourcing for solutions to their procurement challenges. We could find ourselves reaching out to the community at large in a more formal way than we do with social media sites today.

In this week’s webinar notes we’ll feature two webinars that addressed the idea of empowering CPOs through data or business intelligence: ISM with the Aberdeen Group and IASTA with Forrester Research.

Both events addressed the need for procurement to have sufficient analytical capabilities to support the CPO’s efforts to develop strategies for improvement and risk mitigation, and acknowledge that even the best analytics are not actionable without external benchmarks. As a result, best-in-class companies are making investments in the technology solutions and services needed to improve procurement’s capabilities.

In this week’s procurement YouTube video, we hear a new clip from Matthew Hattersley, Commercial Partner at Clarion, as he talks about Transformational Procurement. Clarion recently hosted a seminar at which Paul Dickinson from the Olympic Delivery Authority and head of procurement for the Olympic Park shared his experiences.

In our August 6^th Weekly Procurement Update on the PI Window on Business Blog Talk Radio program we heard from Jan Matthews, the Head of Catering, Cleaning & Waste for the London Organizing Committee as she outlined the requirements for the overall catering services program.

Now that the 2012 London Olympics are done, and were by all accounts an overwhelming success, those involved are getting an opportunity to reflect on what they learned. This includes procurement, and the transformational efforts that were attempted.

According to what Paul Dickinson shared at the seminar, there are two primary reasons why attempts at procurement transformation fail:

1. The strategy in place must be clear at the executive and end user levels and be connected by clear plans that drive the implementation of the strategy.
2. Document supplier requirements, including outputs and timetables, and use objective, measurable milestones so all parties involved can track how the effort is progressing.

Click on the video below to view it for yourself (or click here to view it on YouTube if your browser does not support Flash) and then join the conversation here.

This week’s featured webinar was presented by My Purchasing Center featuring speakers from the American Purchasing Society. You can listen to the event on demand.

There were two parts to the event, as suggested by the title. The first part of the event was a review of the preliminary findings of the Annual American Purchasing Society salary survey. The final report will be out in December and is available free of charge to society members. They have been running this salary survey since 1974 and provide the data they collect to the U.S. Department of Labor.

The second part of the event was presented by Robert Menard (CPP) and gave us some advice and rules of thumb on negotiating our own salaries – something you would think a bunch of professional negotiators would be very good at, but could use some brushing up on. One of the reasons we may falter in this very personal negotiation is that it requires as much skill in selling as negotiating: whether we are selling ourselves to a new organization or selling our contributions and capabilities to our current employer. In addition to my notes below, you can learn more about Robert Menard and his purchasing negotiation seminars and consulting on his website.

When negotiating a salary, in purchasing or otherwise, start by getting a clear understanding of what they market will bear and how you compare to the other available candidates. The salary should be the final part of the interview process because you can not properly determine an appropriate salary without fully understanding the requirements of the role.

Some general pieces of advice

Leave the salary space on an employment application form blank. If you are completing an online application where the salary is required to move forward on the form, enter an average and then bring it up in the interview process as the role is further clarified.

Always remember to take into account what you know about Total Cost of Ownership when negotiating a salary – annual compensation is not the entire goal. The other pieces of the package include benefits, vacation time, travel requirements, corporate culture, advancement potential.

Procurement specific advice

If procurement professionals are considered to be good negotiators, why do we need help preparing for a salary negotiation? In a salary negotiation, the candidate is in the ‘supplier’ role and therefore needs to take a more sales-based approach. This role reversal requires the candidate to take a sales mindset – focusing on communicating the value proposition to their prospective employer before addressing exact salary.

Since there is an expectation that procurement professionals will be proficient negotiators, the salary negotiation is also an opportunity for the employer to see what the candidate’s skills are like. It is not necessary to be an aggressive negotiator to be an effective negotiator, but there is likely to be an expectation that the candidate will be familiar with how to behave once the negotiation begins – thoroughly understanding the connections between performance, responsibility and salary, asking questions as needed, looking to maximize the potential benefit for both parties.

For bonus compensation above and beyond the base salary, Robert advised against savings driven bonuses. Although it may seem to reward skilled purchasing professionals, too much of the control leaves his/her hands. Stakeholders may refuse to leave incumbent suppliers, despite potential savings, and markets may turn so that savings over historical prices are impossible to achieve.

Each Monday, Buyers Meeting Point covers the coming week in Supply Management for the PI Window on Business Blog Talk Radio Program, with host Jon Hansen. We cover the coming conferences and webinars and help you decide how to allocate your professional development time for the coming week.

Today’s eSourcing Wiki-Wednesday topic is Harnessing the Power of Community. This is the last of 21 strategies for innovation in procurement through next generation sourcing. If you are interested in the rest of the series, you can read them on our Wiki-Wednesday news page.

This topic is well timed, as the United States plans to take a short break for the Thanksgiving holiday – we stop and take a moment to realize just how many people are critical to our successes. While it has always ‘taken a village’ and there has never been an ‘I in team’ these days our communities are increasingly virtual. Associations that were previously regular meeting spots have moved online. Our personal and professional networks are larger, but we bear responsibility for making sure they run just as deep. It means very little to have 500+ connections if you don’t know who any of them are well enough to leverage their knowledge and experience.

Since Buyers Meeting Point is a virtual entity, we’ve gotten pretty good at building and maintaining productive relationships with people we will probably never meet. Here are a few of our tips for virtual collaboration:

• Book time on your calendar to join discussions on LinkedIn. This doesn’t have to mean a daily or weekly time commitment. Once a month, allow yourself an hour to browse a few of the groups that are large enough to be interesting but not so big that they aren’t being moderated effectively.
• If you have a good exchange with someone via email (or other social media channel) find an opportunity to jump on the phone. It may only take 15 or 20 minutes, but making the effort to introduce yourself ‘the old fashioned way’ will not only make an impression on the person you’ve connected with but will pay dividends in terms of what you can accomplish in email moving forward.
• Do a favor for someone. This can be as simple as retweeting something of interest or giving a #FF (FollowFriday) where you think your followers will be interested. Take the simple step of “Liking” a post or a discussion with your Facebook account. People who make an effort to put good work forward will appreciate the simple gesture and you may be able to open a door to a better connection.
• Remember to ask for help when you need it. If you find yourself stuck, look through your network to see who might be able to help you out. People love to be regarded as knowledgeable, and the fact that you respect their experience enough to ask for their opinion will make them regard you positively in return.

Each Monday, Buyers Meeting Point covers the coming week in Supply Management for the PI Window on Business Blog Talk Radio Program, with host Jon Hansen. We cover the coming conferences and webinars and help you decide how to allocate your professional development time for the coming week.

This week’s featured webinar was hosted by Sourcing Interests Group and was a special offering based on what they learned this fall by hosting a series of executive roundtables. This week’s ‘Special Report Webinar’ gave four round table facilitators an opportunity to share what they heard CPOs discussing on a number of current topics including talent retention, sourcing pressure points, risk and sustainability. I encourage you to read the highlights below and to view the event on demand on SIG’s site, as well as to read my own editorializing at the end of this post.

Simon Woodcock, Xchanging

Collaboration will take the place of negotiation as procurement looks to fully leverage the capabilities of the supply chain. Building relationships with suppliers and further integrating networks will move us away from a focus on component cost and towards outcome based compensation models. Be sure to question and restate the true purpose of procurement in the organization, adjusting the model and goals of the group as needed.

John Evans, Denali Group

The items on the forward-looking CPO’s agenda include supplier relationship management, reassessing skills requirements and finding new ways to add value for the business. From a talent management standpoint, many CPOs are starting to embrace the skills traditionally found in sales or business development professionals. This strengthens the relationship building capabilities of the organization but introduces challenges around compensation levels and models.

Colleen Tiner, Beeline

In order to build reputations, respect and recognition within the organization, many procurement teams have found that the best approach is to do a favor – managing “The Big Ugly” as she called it. The Big Ugly is any project or problem facing the organization that procurement can address, in many cases because no other group wants to make the attempt. The effort to influence business units is most effective when played as a long term strategy: “relentless pressure, gently applied.” Her take on the talent challenge required creativity and flexibility as professionals are moved in and out of the organization. Look for skills sets in unexpected places and be open to moving team members to other functions in the organization.

My own read on the roundtable findings…

When I think about the observations of each facilitator, the point that is clear to me is that procurement is changing. This is not a new idea by any means. Outsourcing of the function is gaining increased acceptance across industries and companies. While some CPOs still hold significance within their organization, many others find their positions downgraded or merged into the responsibilities of others. Procurement ACTIVITY is alive and well, and will be as long as companies remain in business.

But… as tactical purchasing work is outsourced, the use of automation becomes more widespread, skill sets in procurement become more broad, and organizations prepare to handle the increased turnover of Millenial employees, the future of the procurement DEPARTMENT is coming into question. Many of the discussions that took place at the roundtables seem to indicate that procurement is looking to evolve for defensive reasons rather than to increase our influence from a position of strength.

This week’s Wiki-Wednesday article is part of the series on Next Generation Sourcing: Empowerment. As a strategy in procurement, empowerment has the potential to change the course of a project at many points:

Which suppliers are invited?

How will we structure the RFP or RFQ?

What negotiation strategy will be the most effective?

But no other decision in a project has more of an impact than the supplier award. Which suppliers will be awarded contracts, for how much, and what will the terms be?

Depending upon the organizational structure in place, and the model of the procurement organization, their role in that decision can vary from decision maker to observer. The model may also vary from project to project, and between direct and indirect spend.

Procurement as Decision Maker

In categories where cost is the primary factor affecting a decision, the project is to get a specified good or service for the total lowest cost, procurement will work the sourcing process and notify the business which supplier(s) offered the lowest pricing. Procurement is positioned to suppliers as the process owner and the ultimate authority for the category. If there is an executive approval process for this award, it is usually an administrative sign off on the decision before a contract is signed.

Procurement as Facilitator

In direct categories where there is an active business owner, procurement manages the sourcing process (with frequent involvement of the business owner) and then presents all qualified options so the owner can make an award decision. Procurement can present themselves to suppliers as an objective party, open to their ideas, taking care not to appear as though they have no influence and allow suppliers to bypass them. Executive approval for the award will ensure that the business owner does not give inappropriate advantage to the incumbent or miss out on opportunities to innovate based on aversion to change.

Procurement as Collaborator

In strategic categories of spend, procurement and business owners may take equal roles in the sourcing process. Procurement owns the sourcing process and technology use in the project and the business owner is responsible for category knowledge. Each party is able to leverage their strengths, collaborating on the structure of the RFP, negotiation strategy, and execution. Both will have input on the award decision, with executive approval of the recommended award made by the combined team.

If you are interested in reading more about decision making in procurement, Charles Dominick of the Next Level Purchasing Association published a three part blog series on the topic on the eSourcing Forum in 2008 that still holds true. In these three posts, he looks at basic, advanced, and expert decision making capabilities across cost, support performance, and innovation.

This week’s featured webinar comes from the Global eProcure webcast library. If you are interested in viewing this or their other webinars, click here to select a webinar and provide some basic registration information to view.

In the spirit of this week being Halloween, CombineNet hosted an event that absolutely wins the award for creativity so far this year. In “Is Your E-Sourcing Process a Trick or Treat?” they walked through best practices for avoiding “rotten pumpkins” (the feeling you get when using an inefficient approach), “spreadsheet zombies” (created when you spend too much time staring at Excel-based bids), and “pitchfork-wielding mobs” (frustrated stakeholders – need I elaborate further?)

Hurricane Sandy has just battered the East Coast of the U.S. – millions of people (including the Buyers Meeting Point team) are still without power or starting to assess the damage and begin the cleanup.Our thoughts go out to everyone impacted by this massive and powerful storm.

You can’t always predict how a person or an area will be affected by dangerous conditions, but once you have notice that a storm is coming, any time left before impact should be used to prepare.

We learn a lot about ourselves in how we cope under pressure, and being prepared up front is strategy number one. Just as you have to gather the essentials for extreme weather – like water, flashlights, and non-perishable food – you have to gather the essentials before a negotiation. This is particularly true if you expect the negotiation to be high stakes or particularly challenging.

In the white paper “Implementing Strategies in Extreme Negotiations” (a free download from Harvard Business Review), based on a conversation with Jeff Weiss and Jonathan Hughes, both partners at Vantage Partners, you’ll get an overview of ways to prepare for extreme negotiations. Included in the article are a preparation checklist and recommendations on how to handle threats, how to hone your skills, and how to deal with specific situations that may arise in a negotiation.

Some of their tactics are to be used in advance and some are for while you are in the eye of the storm. All of them are intended to prepare all kinds of negotiators – not just the ones that enjoy the thrill of the storm. Once you have read the graphics and tables in the white paper, there is sure to beat least one that you will print out and hang on your cube wall.

The procurement function is going through a time of expanding expectations and responsibilities in most organizations. Depending on the structure of each company and industry, the move may be into supply chain, inventory management, finance, or raw materials management. In order to meet the challenges this presents, we need solutions that offer expanded capabilities.

Over the last twelve months, there have been several high profile acquisitions in the supply management space. These acquisitions were aimed at integrating the source-to-settle process into other corporate systems and processes. As these large players became subsets of less specialized solution providers, the opportunity was created for new solution providers to fill the need for dedicated solutions offering the right combination of breadth and depth.

One company seizing the opportunity to increase their solution footprint and fill the void is SciQuest (NASDAQ: SCI), a provider of on-demand strategic procurement and supplier management solutions. For several years they have been adding to their portfolio through the acquisition of specialized players within spend management. In December 2010 they acquired AECsoft USA, a provider of provider of Supplier Information Management (SIM), supplier diversity and sourcing solutions. Then in July of 2012 they acquired Upside Software, a Contract Lifecycle Management (CLM) solution.

Their latest acquisition is Spend Radar, a spend analysis solution provider. Although this brings them closer to having a complete end-to-end solution, the key to their success will be in their ability to integrate their acquisitions without sacrificing the flexibility or performance of any one solution. When asked about this part of their strategic plan, Eric Zoetmulder, SciQuest’s Director of Product Marketing, told Buyers Meeting Point, "It is true that we have grown our offering through acquisitions; we have been very selective, believing that any large or mid-size commercial business should now consider SciQuest as a prospective solution partner, whether they are looking for a point solution or one that spans the entire source-to-settle process."

SciQuest’s ability to harness the forward-looking creativity of the Spend Radar team will determine their ability to maintain the reputation Spend Radar has worked to build when compared with other spend analysis solutions. In July of 2011 Buyers Meeting Point interviewed Brian Daniels, former CEO of Spend Radar, now VP of Spend Analytics at SciQuest, and we were struck by his desire to expand the capabilities of spend analysis beyond reporting and analytics to performance management – providing visibility into savings realization. "We recognize that savings realization and compliance are key to the value proposition of a spend analysis solution,” said Daniels. “It is impossible to provide spend teams with actionable data on suppliers and pricing if you can't also provide them with fast, frequent, automated, and high-quality refreshes."

There is no indication that plans to enhance this part of their solution roadmap have been altered by the acquisition. If anything, SciQuest recognizes the competitive advantage this will represent once available, and wants to be sure the new relationship between the two organizations does not jeopardize it. To this end, the leadership team at Spend Radar has been left in place, and the brand will not be altered.

We look forward to seeing the future potential of this collaboration come to fruition, and how yet another provider consolidation impacts the other solution providers in this space.

This week’s featured webinar was hosted by Sourcing Interests Group: ‘Putting the “World” into World Class Procurement’. Chris Sawchuk, a Principal in the Global Procurement Advisory practice at The Hackett Group, discussed how leading procurement organizations achieve world-class performance by leveraging the strength of a global network. You can access the presentation slides from the webinar here.

This week’s Wiki-Wednesday article, ‘Shape Demand… For Services’, looks at the challenges procurement organizations face as they work to address internal demand for services. As an increasing number of non-core functions are handled by third parties, it is important to consider the management of this spend as the outsourced category model it is.

This week’s featured webinar was hosted by Supply & Demand Chain Executive and sponsored by SAP: Realizing Hard-Won Savings at H.J. Heinz.You can access the event on demand here.

“The skills for becoming a champion caliber negotiator are acquired skills. Nobody is born with great negotiating skills. You are born with the skills of crying and breathing, all other skills you acquire throughout your life.” – Soheila Lunney