Exclusive: CIPS top 10 procurement strategies
Supply Chain Digital asked The Chartered Institute of Procurement and Supply to quiz its members as to the most important skills every successful CPO needs...
1. Develop commercial skills
Commercial capability is a tool that needs constant sharpening as it is an important consideration for procurement professionals, no matter which sector they work in. The public sector can make equal use of commercial skills by sharing best practice with stakeholders such as suppliers or partners and indeed, many governments are developing commercial capability so the value is recognised across all sectors.
To understand commerciality, the first step is to establish what ‘good’ looks like, which serves as a direction of travel, as well as highlighting capability gaps.
Take a look at the start of the procurement process and ensure that any specs are accepted on the basis of end-to-end cost-to-serve, with the customer fully in mind. Sometimes under or over-specification can drive waste further down the supply chain, or are incomplete which means the contract ends up not being fit for purpose.
Having commercial acumen also means understanding what needs to be measured. Procurement can still be process-driven and transactional and all about cost rather than strategic-based, which offers true value across the supply chain. ‘Being commercial’ is often perceived as cost-cutting and driven to take excess out of supply chains, but it also means measuring non-financial elements as well as creative, innovative thinking.
2. Get to grips with financial data
Regardless of the focus on true value in the supply chain, the supply chain professional still needs to understand figures, highlight efficiencies and cut costs. Those are the measures that CEOs, boards and leadership teams understand more readily.
3. Understand big data
Companies have a huge amount of data in their supply chains so managing it and using it effectively will give you great insight and intelligence to re-use in your business. This information gives businesses the opportunity to make more informed decisions and increase accountability for why certain decisions were made.
4. Supplier, stakeholder and management relationships
Think more about developing partnerships and being collaborative rather than beating down suppliers or kowtowing to needy stakeholders. Good suppliers can help you resolve problems and key stakeholders can offer good advice at crucial times, so having strong relationships with all key partners makes sense. Think of internal stakeholders as partners too. Harness opportunities to collaborate and share insight and staff to offer that level of support too.
5. Embrace ethics and sustainability
A robust supply chain will have ethics embedded in throughout, understanding the impact of decisions and offering transparency; an important aspect to modern day global trade. Reputations are built and sustained on good ethics. The Modern Slavery Act of 2015 is an important development in the protection of human rights, health and life itself. Strong ethics and the desire to go beyond the basics enhances reputation and ultimately protects corporate business. CIPS has an ethics test which takes a few hours to complete, but offers a detailed look and training around all aspects of ethics in the supply chain. As John Ruskin said: “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey.”
6. Managing risk
The system of interconnected supply chains is becoming more complex and diverse and professionals are expected to be the experts driving the resilience in supply chains. Developing, crafting and managing markets and the security of a company’s supply chain is to mitigate against any failures to deliver goods and services, so there’s a big responsibility.
7. Search out the future of the profession and business
It doesn’t take the skills of a futurologist to know that supply chain management is likely to experience disruptive events over the next decade. Probably every profession will be affected by volatile trading environments, increasing complexity and the influence of digital technology. Product life cycles are getting shorter and skillsets are changing beyond recognition. Automation is reshaping the workforce and eliminating lower level roles. Buyers need to look to developing new skills or risk being left behind.
8. Develop more soft skills
This sits firmly under the relationship banner, but strong soft skills are an essential part of the negotiating process, whether you are an influencer with your CEO, board or even your team. Being a CPO means being a leader, so having a range of skills rather than pure procurement talent will become ever more important to gain the confidence of partners, colleagues and suppliers.
9. Digitisation of supply chains
There has already been a mini revolution in supply chains as metadata is being used to check the sell-by date of cargo, real time shipping progress and factory information regarding low stocks. Supply chains are now running on physical and digital networks and so get to grips with the latest advancements.
But before supply chain managers rush to embrace this technology wholeheartedly, it does come with a health warning: managers are exposing themselves to fraud, theft and cybercrime, so they need to develop new skills and knowledge to keep up and prosper in the digital age. Data travelling along the supply chain can be stolen at any point.
10. Artificial intelligence
Already adopted as a game changer in China, AI is transforming supply chains in a range of key sectors such as manufacturing, retail and healthcare.
For supermarkets, reliant on a fresh flow of food and other products, AI can help analyse purchasing and make predictions on future need at a really high level of accuracy. The value of this automation without human interference is that it can reduce food waste and boost consumer interest if food is plentiful and fresh.
For instance, Robin Li Yanhong, CEO of China’s largest search engine provider Baidu, has suggested that using AI in the mining industry for example, could improve health and safety by checking for product defects before the products get to steel mills.
Will Public Procurement Budgets Increase in 2021?
Procurement is more than just a private enterprise. COVID-19 reminded us that sourcing materials is an essential part of the government’s role. Throughout 2022, tiny departments sourced massive amounts of personal protective equipment (PPE), medical supplies, and emergency vaccines and testing kits. Even non-procurement professionals were pulled into the fray, as frantic timelines demanded nothing less.
According to Celeste Frye, co-founder and CEO of Public Works Partners, the crisis brought procurement to the attention of skilled employees who had never considered it. As non-procurement personnel stepped up to help their coworkers, many found that they’d stumbled upon a critical and rewarding job. “Existing public employees have seen the essential nature of the work”, Frye said. “[They’ve] gained some critical skills and possibly [grown] interested in pursuing procurement as a longer-term career”.
Small, Local Suppliers Take Charge
Frye, whose firm helps organisations engage stakeholders and develop long-term procurement strategies, thinks it well worth the effort to open one’s mind to new opportunities. Cooperative contracts, for instance, can help public departments and municipalities save money, time, and effort. By joining together with other towns or cities in the region, public procurement teams aggregate their purchasing power and can drive better deals.
These cooperative contracts have the added benefit of advancing equity. Smaller suppliers that struggle to compete with established firms for government contracts can act as subcontractors, helping big suppliers fulfil bits of the project. Once they get their foot in the door, small, local, and disadvantaged suppliers can then leverage that government relationship to take on additional projects.
Especially as governments start to pay attention to procurement resilience, public procurement departments must expand their requests for proposals (RFPs) to take into account innovative solutions and diverse suppliers. According to Frye, Public Works Partners—a certified female-owned firm—has benefitted from local and state requirements that specify diversity.
Post-Pandemic Funding Swells Procurement Budgets
And the pandemic won’t be the end of it. City governments need to build sustainable energy infrastructure such as solar panels, charging stations, and recycling plants, ensure that masks and medicines are never in short supply, and source new technologies to keep up with cloud and cybersecurity concerns.
Public procurement budgets will likely increase to match demand. As Peter Ware, Partner and Head of Government at Browne Jacobson, explained, “in a non-pandemic world, the [U.K.] government spends on average around £290 billion on outsourced services, goods, and works...anywhere between 10% and 14% of Gross Domestic Product (GDP). Post-pandemic, city procurement will only increase as national governments provide local divisions with emergency funding.
And in truth, government employees might jump at the opportunity. Frye noted that public procurement could give immediate feedback on new programmes: “[Procurement] is where new laws and policies ‘hit the road’ and are implemented”, she said. “Professionals in these fields get the satisfaction of creating real change and seeing quantifiable outcomes of their work”.