At the 2017 World Procurement Congress procurement executives from across the world shared their insights and experiences on the main opportunities and pain points the function currently faces. Here are the lessons we learnt from three days of debate and discussion.
The world in which we live is changing – rapidly. Technologies such as artificial intelligence (AI) and machine learning are opening up opportunities for both procurement and the wider business to automate low-value administrative work while providing much greater insight into spend through in-depth data analysis.
Is procurement ready? It was a question that was front and centre of discussions at the 2017 World Procurement Congress in London and it was clear the function is well on its way, but must remain agile to adapt to further change.
Paula Martinez, VP and CPO at UCB, said digital disruption is unstoppable and no industry is immune from it. Blockchain technology is going to do the same thing for data that the internet did for information, she added.
Meanwhile, in a keynote speech on day one, Dr Ros Rivaz, former COO at Smith & Nephew, told attendees that when it comes to setting strategy procurement has to be “faster, leaner and meaner”.
Richard Noble OBE, director at Bloodhound SSC, an organisation that is building a car to drive at speeds of 1000mph and break the land speed record, told procurement chiefs to “keep things simple and make decisions quickly”. That way they would be able to respond to changing circumstances.
Scott Wharton, WPC chairman and executive general manager, strategy & performance, enterprise services at the Commonwealth Bank of Australia, summed the Congress up when he said that the evolution in the role of procurement is exciting but the function needs to ensure it is fit for the future. That future starts now.
The big issues
“Innovation is coming out of nowhere and at the same time from everywhere,” said Goran Cangl, director of ecosystem steering at Nokia. According to Cangl, 70% of innovations are open, meaning they are not driven internally but come instead from external sources or “the crowd”.
Procurement, he suggested, is at a point where it needs to leverage this open innovation or risk missing out on the next great ideas.
How can procurement leverage that innovation? At Nokia, procurement has developed a dedicated OPEN Ecosystem Network, which is centred around three cornerstones: data and contact democracy; technology; and a collaborative ecosystem.
At tech giant Philips, meanwhile, its open innovation strategy centres around procurement working with key stakeholders and aligning the whole organisation around specific innovation targets.
Talent and the challenges CPOs face around recruitment and retention was a key focus of the event, but there were some good examples of how different companies are trying to solve it.
Swedish communications firm Ericsson has created a ‘talent board’ to review staff across the organisation and place individuals on the right growth path.
Siemens, on the other hand, has a different approach. The German conglomerate runs a cross-functional initiative to attract people from other functions into procurement roles. Both procurement and non-procurement professionals are offered opportunities in job rotations or secondments to other functions to gain skills in a variety of roles.
The challenges and opportunities in terms of digitalisation was widely discussed and Paula Martinez, VP and CPO at UCB said procurement chiefs need to put a digital strategy in place and define a digital governance in order to secure the benefits.
Blockchain, AI and machine learning capabilities were also explored in conversation and it was suggested that they will all help gather data and ensure the organisation stays ahead of the competition.
In the past, setting a multiyear business strategy was seen as critical, however, that view is changing and it s changing quickly.
Dr Ros Rivaz, former COO of Smith & Nephew, explained that the rapid pace of change means that the concept of setting a multiyear strategy is the wrong move for procurement. What is relevant today will not necessarily be relevant tomorrow, she suggested. The focus of setting a strategy must shift and the function must broaden its strategic vision from an isolated functional view to a wider organisational approach and a global industry perspective.
- Siemens has a cross-functional initiative to draw talent from other functions into procurement roles, according to Volker Purschke, CPO, Siemens Healthineers. He said: “It is easier to train engineers procurement skills than to train procurement people in engineering skills. So we offer job rotations and opportunities for engineers to be seconded to procurement for 6 months to learn a mix of roles.”
- Meanwhile, at RWE, one of the main focuses is individuals’ professional growth, explained Christoph Quick-Timmerhaus, head of international procurement. The German electricity provider has used a competency and skills framework to create an environment in which leaders have engaging conversations with team members, find gaps in skills and build development plans to meet these needs, and offer greater career mobility across different categories and areas of the profession.
- “People need to move from being experts in one category to becoming more generalist and able to move from the category or innovation that has the biggest impact right now to the category that will have the biggest impact within the next 100 days,” said Biogen CPO Walter Charles.
- “Stability is no longer the norm,” Caltex Australia’s CPO Johanne Rossi told delegates. Procurement has to adapt its strategies to the fast-moving world around it. Training team members in “agile methodologies”, such as idea co-creation sessions with important suppliers, can help, she suggested.
Disruptive technology and data
- Certain parts of the world have clusters of change and are driving future trends: London, New York, Boston, Silicon Valley and so on. The common traits between them are that they each have leading universities and research institutes based there, said Imperial College London’s VP innovation, David Gann CBE.
- Virginie Vast, head of cognitive procurement and digital sourcing at Vodafone, explained how 30% of her time is taken up by tools and the remaining 70% is devoted to people and talent. “You need to have a vision, understand why and think about what it is you want to drive. Data is overwhelming; make sure you have a clear vision,” she said.
- The concept of setting a threeyear strategic vision for the business may not have a real place in the business world today, said Dr Ros Rivaz, former COO, Smith & Nephew. The speed of change means this is not necessarily the right approach.
- There are seven trends that define competition in a digital world, said UCB VP and CPO Paula Martinez: new pressure on prices and margins; competitors emerge from unexpected places; ‘the winner takes it all’; plug-andplay business models; growing talent mismatches; converging global supply and demand; and speed at which new business models emerge.
- Emily Galt, VP product management – sourcing & logistics, General Electric explained machine learning is a game changer. The first step at GE was to build a common, company-wide data platform. She added that the next stages involved developing a common process, and then to develop a common structure.
- “The ironic thing is that the global economy is currently doing well but the current state of politics is neurotic,” economist David McWilliams said. “Typically, the two match up but this time it is different. So how will the likes of Trump, Brexit, and Macron impact the economy and ultimately human behaviour?” The global supply chain (and possibly, procurement) is much more threatened by populists than any other business function, he warned.
- Dirk Jan de With, CPO of Covestro, explained that a five-point strategy was central to his function’s successful transformation. The focus of the strategy was: capture market growth; optimise; asset footprint; improve cost position; protect and build profitable competitive positions; and embed sustainability.
- “Being good at procurement doesn’t mean the person is also good at transforming procurement,” said Ian George, Procurement Leader’s transformation lead.“They require different skills.”
- “When going through a transformation, all internal stakeholders must be involved and aligned around the common goals,” said Michael Eyett , CPO at Voestalpine AG. Procurement at the Austrian company runs purchasing power days to connect procurement executives from across the business network so they feel involved in the entire transformation and connected to different parts of procurement.
- “We use business outcomes as success indicators – not just cost savings,” said Yorkshire Building Society’s head of shared services, Paul Howley. “The function must move from being reactive to one that is proactive to strategic.” By building the procurement engine, and mapping and delivering endto-end processes, the function has gained control in his organisation.
- Marcus Orlovsky, director at Bryanston Square, told attendees that people get reputations in the workplace for various reasons and no matter how they try to change the way in which they are perceived, it is hard to shake off a reputation. The same is true of both the wider business and procurement. One wrong move by one person or small group of people in an organisation can damage the entire company’s reputation.
Take a look at this year’s highlights and join us next year