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Ten Challenges For Future Leaders In Procurement


14-Apr-15 10:14
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As part of the I Am A Procurement Leaders campaign, procurement practitioners have been invited to guest blog and look ahead to what they see as the path to becoming a leader of tomorrow’s function. In this post, Dhanraj Shah, senior buyer for Vanderlande Industries looks at key skills necessary to help realize ambition in the function.

 

The role of a procurement leader is to develop an entrepreneurial procurement team focused on investing in collaboration, innovation, maximising the opportunities and balancing the risk in external markets. CPOs face one of the most complex roles in an organisation and in order to fulfil this expectation to deliver ‘procurement extraordinaire’ within an uncertain business climate, tomorrow’s function heads will need to work on developing the following skills:

  1. Focus on strategic relationships

It is extremely important to maintain a vital relationship with suppliers. They should be treated as partners and made aware of company goals. It is recommended to form deeper, more symbiotic connections with suppliers which can be leveraged to rapidly detect and neutralize any risks before they turn into incidents. This kind of constant flow of communication can create a win-win situation and profitable relationship.

  1. Continuously look for new markets

Due to the ever-changing dynamics and landscape in business, procurement executives need to be resilient, adaptive and continuously look for new markets to source their products. If cost reduction is the most integral part of business strategy, then this cannot be overlooked. As economic circumstances shift, gone are the days when the reliance could be consistently placed on Chinese or Mexican factories, for example, to meet sourcing needs. New markets like South East Asia, Eastern Europe or South America needs to be considered and procurement teams need to be equipped to adapt that outlook.

  1. Manage global supply chain risk

Another important aspect required of procurement is to manage global supply chain risk. There is a tremendous movement of goods and containers all over the world, but strategic planning needs to be part of this process. No company wants their container held by pirates, or stuck in a war zone, or having not submitted the correct documents and used a language which is not understandable, have illegal packaging – the list goes on. Whether it’s droughts in one country or floods in another, risk is global and managing it requires a huge amount of forethought.

  1. Tracking exchange rate volatility

With corporations procuring products and services from all over the world, it is more than necessary to hedge the exchange rate risk. For some of the volatile currencies, the exchange rate needs to be fixed or the companies are bound to suffer financially by paying more for the price of the goods.

  1. Manage political instability

As political systems rise and fall, businesses have been exposed to uncertainty and risk. When procuring with suppliers from different countries, procurement (and its stakeholders) need to understand the political scenario and what impacts it can cause in case there is a political unrest. It isn’t hard to bring to mind examples of territories that, despite their importance as sourcing destinations, are vulnerable to regulatory pressures, economic collapse, or even wars.

  1. Sourcing management

It is essential to integrate risk management initiatives during supplier evaluation and there are many tools available. Procurement leaders need to undertake supplier market analysis, current supplier portfolio analysis, supplier audits, supplier scorecards, supplier process failure mode & effects analyses (FMEA), historic & forecast pricing analyses, and logistical & transportation risk analysis. Supplier market analysis is the most crucial as it involves a thorough assessment of supply, demand, industry structure, industry profitability, supplier capacity utilization, etc. in order to anticipate commodity price changes and potential supply problems.

  1. Using free trade agreements and tax havens

As countries shift their economic and trade policies, we have seen plenty of Free Trade Agreements getting signed between nations, significantly increasing trade between them. CPOs and CFOs need to be opportunistic and able to use these FTAs to their favor and devise comprehensive strategy whereby they are able to generate substantial savings to their business plans. Not only this, but they need to know the tax havens around the world. Corporations can receive major tax breaks if they manufacture goods in certain countries, use warehouses in those countries, or even use strategic trade routes in shipping. It can be quite daunting and complex to get the information, but once you have it, you can absolutely create innovative and strategic plans to make use of this.

  1. Use of big data and analytics

Procurement leaders of tomorrow will have to adapt and acquire new skills due to innovation in technology.

We live in the age of big data where plenty of information is available. It is important to know how to analyze it in order to create real benefit. Big data in itself has no value and it is only meaningful when it becomes information that we can use to generate knowledge and ultimately actionable intelligence. It should lead us to make good decisions and take appropriate actions. The vision is to be able to identify and gather data; understand, interpret and analyze it; and, ultimately, deliver superior performance.

  1. Technological innovation

A good procurement leader will incorporate use of latest technology. Technology available today quickly gets obsolete; but there should not be any excuses to embrace systems which are intuitive, integrated to every department (internally as well as externally) and provide data-rich solutions. Technology and ERP systems need to connect everyone in the business efficiently, provide real-time information, reduce manual work, have data accuracy, provide visibility, provide a dramatically improved service and create opportunities for enhanced efficiency, collaboration and ROI.

  1. Influencing skills

Top procurement professionals are brave and influential. Today, there is an increased cross-departmental working. It’s critical to have a combined vision that works towards the organization’s vision, strategy and goals. Without engagement and commitment from each department, no major procurement initiative can prosper. Therefore, procurement leaders need to change minds, sensitively adapt their tactics to the stakeholders, explain the benefits with an infectious enthusiasm, and, slowly but surely, draw them in to reach the same conclusion.

 

Are you working on the above skills to become one of the next exceptional leaders in procurement? I am continuously working on developing my knowledge and skill sets in these areas and I’d invite you to contribute your own suggestions to build on this list.

 

 

Dhanraj Shah is senior buyer for Vanderlande Industries, based in Sydney, Australia.

 

To register to become a guest blogger for the I am a Procurement Leader campaign or to find out more about the initiative, click here.

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.


Dhanraj Shah by Dhanraj Shah

 
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