Wednesday, 16 December 2015

Santa's procurement hoverboard hell or heaven?

Forget Santa, this could be another bad news day for the procurement profession, given that Amazon have advised customers they should throwaway hoverboards they have purchased due to safety concerns.

Behind the need for refunds will be a calling to account for those who handled the sourcing of the hoverboards and how so many have failed to meet UK, and I assume EU, safety standards. I can visualise the customer helplines of many large retailers being inundated with calls from customers looking for assurances that their hoverboards meet safety standards. Similar calls have probably already been made by CEO's and Marketing Directors!

In those situations Procurement is vulnerable if not culpable. This is an opportunity and a risk for Procurement.
  1. If Procurement were involved but the hoverboards their organisation have on the market are safe, then they need to 'strike while the iron is hot', and get the CEO seizing the opportunity to market the company as a responsible retailer while others have been seen to fail; 
  2. If Procurement were not involved in the sourcing then the case is made for future involvement and the application of procurement risk management tools, including process improvements;
  3. Sadly, if Procurement were involved and the hoverboards now need to be recalled - I hope they believe in Santa too! 

Monday, 14 December 2015

On 'Lots' within a sourcing strategy.

Peter Smith posted an interesting post a few days ago on 'Lots' (breaking up potential contracts into smaller packages). His post was a follow-up to a previous discussion on the EUs strong steer that, in their view, 'lots' should be the default strategy when letting contracts.

I have advocated the use of 'lots' for many years but that has always been as a tool in achieving the strategic objectives of the organisation, for example, ease of access to SMEs.  If 'lots' are not strategically aligned with the organisation's objectives then, to me, they should not be used.

'Lots' are just one of an array of strategic sourcing options which should be considered - they should not, however, be the default option. Nevertheless, the EU now expects public sector procurers to document why 'lots' are not used and therefore implies, they are the option of preference. The implication is that at some stage that documentation will be need to be produced as some sort of discoverable evidence in defence of a professional judgement by the CPO.

Now I am not against a CPO documenting an options appraisal which justified why 'lots' were not used, on the contrary I would like to see more procurement decisions led out in logical argument. However, I feel those documented justifications should be for internal scrutiny and not something which the EU should demand.

I also have concerns of what this could lead to. For example,

Friday, 4 December 2015

Poker Playing Procurement

In amongst the debate on bombing Syria, you have missed the news that a requirement from the Prince of Wales for TV channels to sign a 15 page contract in order to have an interview with him has possibly backfired. It has led to one interview being scrapped and some of 'the market' collaborating in a potential refusal to sign. What happens next and who is the loser in this game of poker?

In the long-term it is impossible to believe that neither the media nor Prince Charles would want a stand-off. So will the Royal Household relax the requirement or will the media simply give in? If I were an advisor to the media I would advocate that they stand their ground in the belief that ultimately Prince Charles needs the media more than  the media need him - after all the Royal Household must have a communications strategy and 'closing down' one option is counter-productive for someone with such strong desire to express personal views.

One of the things I have become more conscious of since leaving the practitioner world of public procurement is the amount of investment potential bidders put into qualifying potential bids, in other words, calculating the likelihood of success compared to the cost expended in the bidding process. It is not taken as a given that because a buyer has invited an RFI that a bid should be prepared.

Bidding is always a gamble for the bidder. Having said that, onerous conditions placed by buyers don't make the contract any more attractive, in fact more often than not the opposite. The illustration of Prince Charles pre-contracts serves well to demonstrate that sometimes preferred suppliers may just say 'no thanks' - indeed those suppliers may never know that the buyer had a preference for them.  

Let's remember that when a buyer goes to the market, they generally have a required need and the worst of situations is when the market says 'no thanks'. Yes, you can have a great brand name,  you may even have Chartered status, yes, you can have great structures and policies and procedures, and even a seat at the top table, but if the market opts not to deal with you, you may also be a loser.

Wednesday, 2 December 2015

Even ISIS have a procurement process

ISIS have wreaked havoc across the globe as we clamour to find a solution to their terror machine. Their sophisticated use of social media is far more advanced than most western businesses and governments, but what about their procurement processes?

Give some thought to how you would go about managing a supply chain which copes with the insatiable demand for bullets, guns, suicide vests, IEDs, etc. to the front line - thousands of bullets alone every day. The consequences of not getting the 'right thing, to the right place at the right time' may also have a heavy price to pay in personal accountability. While we discuss airstrikes, effective disruption of the procurement process would be a useful strategy as it would demoralise the 'frontline' and seriously degrade ISIS impact - it has to be explored and exhausted. 

Blackmarket arms dealers are 'licenced' by ISIS commanders, following approval by two members of the security services, and provided with stamped IDs which provide freedom of movement on the condition that ISIS are the sole customer. 

A 'pull' system is in place from the front line; effectively a requisitioning process. Requisitions are received by 'centres' - various tools are used to communicate the requisitions. The 'Committee' provide price lists to the 'centres' for common items. The dealers also receive  price lists.

Amazingly, they have also adopted a strategic approach in that since prices having been rising, they have issued more dealer licences in an effort to encourage competition reduce prices!

Governance of the process is a top table issue, understandable given the risk of failure.

There's something fascinating about this procurement process, isn't there: requisitions, price lists, approvals, making markets work, governance, speedier transactional processes. We can't tell if compliance is an issue or even quality control, but the next time you hear someone arguing that the procurement process doesn't work for them, spare a thought to how easy it all could be.

Friday, 20 November 2015

A procurement puzzle for the weekend - What is procurement best practice?

Our newspapers provide plenty of puzzles to pass the time and 'brain train' - my preference is for KenKen, Sudoku and finally, although I lack a great deal of success in completion, Crosswords. I am quite frequently asked 'What is procurement best practice?' More often than not I am asked by someone who is very well placed to know procurement best practice and is actually doing some benchmarking research to help shape their own organisation's procurement strategy.

Perhaps you disagree with me, but I think each organisation should concern itself with what is appropriate for them as opposed to copying what may well be right for others, but sometimes is actually no more than an aspiration.  Anyway, it is useful to have an idea of what a scorecard could look like, consider what is appropriate for you, decide where you are now, and then set out a strategy of how your going to make the prioritised journey to 'best for you'.

So, with all that in mind, here's a puzzle for you for the weekend.  Below is a view of procurement best practice: What's missing and what's wrong?

No need for answers on a postcard - a comment will suffice!

  • Centre Led Action Network with Internal Consultancy service
  • C-level procurement leadership
  • Clarity of Vision for Procurement
  • Contribution beyond CQID to Strategic Goals
  • Aligned procurement strategy
  • Top table performance management
  • Top Table procurement risk management
  • Legal Compliance including, Bribery Act & Modern Slavery Act
  • Strategic Make/Buy leadership
  • Participation in NPD with Supply Innovation harvesting
  • CPO inclusion in non-procurement strategic project teams
  • Programme and Project Management skills deployed
  • 100% influence over spend (from ‘Defining Need’ to ‘lessons learnt’)
  • Intelligent benchmarking (CQID x-sectors)
  • Supply Base Policy & Strategy, including Supplier Engagement, Supplier rationalisation and making markets)
  • Integrated S2P system
  • Digital Procurement Strategy & implementation (Cloud, Social, Big Data & Mobile)
  • Category Management embedded and moving to Market Informed Sourcing
  • Global/Regional/Local right sourcing
  • Appropriate use of power
  • ‘Right mix’ procurement outsourcing e.g ‘Tail spend’
  • Competitor partnerships in supplier development
  • Ethical & Responsible SCM
  • Global TNA and Skills development plans
  • Standardised & optimised processes with robust adherence systems.

Monday, 16 November 2015

Lessons on the cost of musical chairs at Westminster

Tucked away, understandably, in The Sunday Times was news that "MPs squander £140m on empty office" and typical finger-pointing that "a bunch of muppets" had been involved in this procurement decision!

The story in itself is easily summarised: a lease for 15 years (up until 2029 with no break clause), costing approximately £6m per year, has been taken out on a new office block on Victoria Street, less than half a mile from the Palace of Westminster, while renovations take place at the Palace of Westminster.  The plan had been that the new office would accommodate parliamentary staff currently housed in Millbank, and MPs would move to the former parliamentary staff offices at Millbank. Yet, a year later the offices remain empty and costs of £4m are being incurred for rates and services, allegedly because of fears MPs travelling from Millbank to vote in the House of Commons  could be vulnerable to attack.

(There is no mention of what the decanting costs associated with the musical chairs would have been or why the MPs couldn't move to the new Victoria Street office as opposed to Millbank!)

Now part of the solution appears to be that Department of Health staff move to the new offices, presumably so that the MPs can move to the DoH current HQ.  I assume there has been some risk assessment that suggests the journey up Whitehall is safer that the the journey along Victoria Street.

I certainly recognise, particularly in the light of the barbaric attacks last Friday in Paris, that there is a risk to MPs safety, but is it not true that MPs always have to travel to and from the Palace of Westminster, and also that they spend a lot of time in their constituencies 'out and about', so why is this particular journey so risky and ultimately costly?

There are some interesting questions which procurement could answer, for example:
  1. Why was the contract signed and long before the MPs had agreed to move?
  2. Why is there no 'break clause'?
  3. What was the business justification for securing the new office accommodation so early?
  4. Was there a risk assessment which recognised and mitigated against MPs reluctance to move to Millbank?
  5. Is the contract for the Palace of Westminster renovations already signed and does that contract anticipate a completion date of 2029, allowing for the further decant of MPs back from their temporary locations? 
  6. Is it reasonable to assume that a completion date of 2029 represents good practice - it seems a very long contract for renovations?
  7. What contract management arrangements and contingencies will be put in place for the required complete date?
  8. Prior to signing the lease, were all the relevant stakeholders consulted, including those responsible for MPs security? 
  9. If effective stakeholder consultation took place, are "the muppets" not those who said the MPs journey from Millbank carried a manageable level of risk?
  10. Had the Finance Committee, some of whom now find the contract "completely outrageous", had any scrutiny of the proposals before they were committed to?
The whole thing looks like a remarkable mess, yes, but perhaps it serves as a cautionary example of why procurement needs to be involved in this type of decision, and that a full options appraisal is required and risk assessment, prior to signing a contract.

Wednesday, 11 November 2015

How to minimise the risks of Conflicts of Interests in Clinical Commissioning Groups

It was really only a matter of time until we had some significant exposé on the Clinical Commissioning Groups and Conflicts of Interest. Indeed it is no surprise, since we discussed this very risk many months ago.  Today The Times and BMJ informed us that GPs have awarded at least £2.4bn to their own companies.

I don't think there is much to be gained from revisiting the previous discussion but I think the Department of Health may want to consider their response to The Times and BMJ findings.

There is little mileage in asking for evidence that there was a conflict of interest in the award of the contracts - let's just start with a presumption that there will be. But isn't the real test to be found in whether or not subsequent value for money is delivered? Therefore I would suggest the Department of Health adopt three policies:
  1. Create a benchmarking service which publicly shows the table of rates paid across the various CCGs;
  2. Place an obligation on providers to demonstrate how they provide on-going value for money, not unlike the previous local government Best Value for Money obligations;
  3. Place an obligation on CCGs to publish how they are performance managing their contracts to ensure the required quality of service is maintained, if not improved.
Not rocket science but may help overcome the downsides of Conflict of Interests.

Monday, 9 November 2015

Let Procurement's internal customers drive eProcurement Strategy

For a number of years I have seen P2P briefs which include reference to internal stakeholders desire for an 'Amazon like' user experience. Exposure in domestic life to how easy the 'electronic shopping experience' can be through the use of Amazon has raised individuals expectations of what the procurement process could be within the business environment. Having said that, even with that domestic experience, it still surprises me when Procurement staff tell me that the 'AsIs' process for Requisition to Purchase Order takes on average two weeks - my response is "Why aren't you aiming for two hours max?". What I see and feel on the ground is evidence that internal customers are pushing for change as opposed to Procurement staff shaping driving the change.

I have also met opposition from Procurement staff to the use of eAuctions. However, when you ask the individuals concerned if have they used eBay - the 'lights go on' and you can start to help them understand how eAuctions could deliver benefits in a business environment. In parallel, I've discovered that internal customers of Procurement have a greater appetite for the use of eAuctions than their Procurement Team.

Tonight I was delighted to see an advertisement on television for MyCarNeedsA. Perhaps some of you have been aware of this site for some time, regardless, it is a domestic electronic RFP solution. The domestic car owner specifies what work is required for their car and bids are then invited. I'm sure, given what I have outlined above, you will not be surprised that I have experienced opposition from Procurement Teams for the use of eSourcing tools. So I am delighted that internal customers of Procurement will now have an opportunity to experience eSourcing within a domestic environment and then hopefully push for their adoption within the business environment.

We have recognised for many years that individual's domestic experience influences their work expectations.  Of course there are many understandable reasons why Procurement staff may want to oppose the use of eProcurement tools but I find it disappointing that Procurement are not pushing harder for improvement and adoption of what are now basic tools.

Procurement should encourage internal customers to cry louder for the transfer of domestic eProcurement tools into the business environment. Procurement should see the domestic tools as part of a skills development plan. Yes, why not let Procurement's internal customers drive hard for an eProcurement Strategy. Would that not help Procurement?

Monday, 2 November 2015

My 10 Desert Island Books on procurement

A number of blogs (for example Stephen Ashcroft's) have appeared on favourite procurement reads. Often the books which have really influenced my thinking aren't mentioned. So, I thought I would take a slightly different line and list the 10 books I would take with me to a Desert Island to read again based on the assumption that I plan to return and be better at procurement - something I've been working at since 1973.

When I started to think what the Desert Island list would look like I realised that it to a certain extent it reflected my own journey too. Don't be surprised that this spans a long period and that some of the books are probably out of print as I have included my 'golden oldies' too'. Here's my choice and why:
  1. Purchasing Principles and Management
  2. It's a Deal
  3. Beyond Partnership
  4. Strategic Procurement Management in the 1990s
  5. Revolution in Purchasing
  6. Profitable Purchasing Strategies
  7. Business Success
  8. Transform your Supply Chain
  9. Strategic Procurement in Construction, and 
  10. Complex Contracting.

Tuesday, 27 October 2015

You need to get suppliers on board for your S2P journey (4) - Closing thoughts

Over the last few weeks I have discussed the need for supplier engagement in implementing a S2P. In this, the last post, I draw together the main points.
Effective S2P implementation cannot be viewed as something which the implementation organisation has ultimate control over, as it relies on the supply market also choosing to own the solution too. Implementers of S2P solutions need to understand that implementation is a boundary spanning challenge and can represent major change to suppliers.
Since S2P implementation is a change initiative, ensure it is used as a opportunity to contribute to wider strategic objectives, for example, responsible procurement and supplier rationalisation.
The lack of supplier engagement and ownership represents one of the greatest risks to any S2P implementation and requires significant management. Supplier engagement also needs to start early in the implementation – waiting until ‘go live’ is a serious under-estimation of the work required.
Successful implementation is dependent on creating a solid foundation, which includes budget allocation for supplier engagement and the designation of an empathic champion.
While there are many approaches to supplier profiling a simplistic approach, profiling suppliers as either ‘Users’, ‘Converts’, ‘Willing Novices’ and ‘LateAdopters’ can prove to be just as effective and fits well with the communications and training and skills development plans.
Suppliers will be faced with new training and skills development needs. These shortfalls will impact on the implementing organisation and can be reduced through the useof a Skills Framework, a Training Needs Analysis, and agreeing who hasresponsibility of the specific elements of training and development.

I hope you found the posts useful. 

Tuesday, 20 October 2015

You need to get suppliers on board for your S2P journey (3) Comms & Skills Development

In previous posts I highlighted that the lack of supplier engagement is one of the highest impact risks with a S2P implementation. To mitigate that risk a strategic approach is required which includes creating a sound foundation and taking a wave approach to supplier engagement.  In this post, I discuss the need for a communications plan, and a training and skills development plan aimed at the supply base.
The communications plan needs to be considered as soon as discussion on the potential implementation of a S2P solution is mooted. There needs to be some flagging that change is anticipated and that the organisation intends to ‘work with’ the market as opposed to ‘doing it to suppliers’. That early reassurance will pay dividends later and signal that the organisation has a strategic approach.
In a previous post I advocated that a categorisation of suppliers as ‘Users’,‘Converts’, ‘Willing Novices’ and ‘Late Adopters’ could be applied. That categorisation flows from the first stage of a Change Impact Assessment – identifying what the implementation of a S2P solution will mean to suppliers. If suppliers are unclear what the changes could mean to them, then it is not possible for them to make the necessary commitment to those changes. The change readiness assessment will draw on the change impact assessment and statement of technology requirements to contribute to the categorisation of suppliers as ‘Users’, ‘Converts’, ‘Willing Novices’ and ‘Late Adopters’.
Regardless of suppliers engagement with S2P it is unlikely they will not have some level of training needs to match the new ways of working. Therefore it makes sense to complete a Supplier Training Needs Assessment.
Categorising the supply market is an acknowledgement that each category of suppliers will have fundamentally different needs. The Communications Plan therefore

Monday, 12 October 2015

You need to get suppliers on board for your S2P journey (2) - A wave approach

In the previous post I discussed the need, when planning a S2P implementation, to createa sound foundation for supplier engagement. Now we move on to the supplier profiling and development of waves for supplier engagement.
Using a ‘big bang’ approach to supplier adoption is unlikely to be effective. It will demand a lot of resources and loses the benefits of lessons being learnt which can be transferred quickly. Most of all it frequently fails to recognise that not all suppliers are starting from the same position and tailored journeys to ownership are necessary.
A phased approach is therefore recommended with suppliers being on-boarded in waves.  Of course, that begs the question, ‘What does the wave choreography look like and what sequencing of suppliers should apply?’. 
Some advocate the use of spend analytics and detailed mapping.  But those approaches fail to recognise that a frequent justifications for the implementation of a S2P solution is that it will provide clarity of spend – in other-words, the reality is that spend analytics are unlikely to be available. Secondly, even if the data were available, is the investment in time required justified, given that the objective is to develop a wave plan which will lead to maximum adoption as opposed to a comprehensive scientific approach to ‘who and when’.
Don’t mistakenly think that the wave approach focuses on just one wave of suppliers before moving on to the next wave. Like waves hitting the shore as one wave hits the shore the next wave is already building up, so all waves are worked on simultaneously albeit with differing emphasis. A simple approach to wave designation is to categorise suppliers as ‘Users’, ‘Coverts’, ‘Willing Novices’ and ‘Late Adopters’.
1.     ‘Users’ are existing users of the chosen S2P solution who need to be on-boarded but with will face minimal change to their existing ways of working;
2.     ‘Converts’ are existing users of a S2P solution although not existing users of the chosen Solution;
3.     ‘Willing Novices’ are businesses which see the merits of using the proposed S2P Solution but as yet have no experience with S2P; and,
4.     ‘Late Adopters’ are those who lack enthusiasm to embark on the use of S2P.

It should also be noted that the wave approach advocated is based on an assumption that contracts are not currently in the process of being renewed. If however, contract renewals and re-letting are taking place, those sourcing strategies should be used as a parallel first wave means of ‘winning commitment’ through the award process. Equally, wasting resources on on-boarding suppliers who are unlikely to gain future business will ultimately lead to a perception that the organisation lacks a coherent strategy.
Some ask how many suppliers should comprise each wave and how long should be required? There is no simple answer to those questions as it depends on how large the supplier base is and the supplier state of readiness.

In the next post I shall discuss the need for a communications plan and a training and skills development plan.

Thursday, 8 October 2015

Fifa's "Unfavourable" contract should be a warning for all Board members

I'm sure many of you heard the news this morning of the latest PR disaster to befall FIFA, namely, that its President signed a contract "unfavourable to Fifa" and in doing so "violated his fiduciary duties and acted against the interest of Fifa...".

I have to admit this is the first time I have heard such a phrase used so I'l have to watch as the story unfolds to learn more.

I assume a contract can be unfavourable to an organisation under the following circumstances:

  • Contracting for something which is not required;
  • Contracting on contractual terms which place more power than is necessary with the supplier;
  • Contracting on commercial terms which do not represent value for money;
  • Contracting for a longer term than makes commercial sense.

However, the news reminded me of one of my early jobs which included the signing and sealing of contracts - way back in 1974 when I was a mere 17 year old.

Let me first tell you about 'the Seal'. The was stored in a strongroom. The key for the strongroom was kept in a safe. That key was used to open the main strongroom door - which was really heavy to move. Then a separate key was used to get through the next door which looked like prison bars. Then  a further two keys were used to unlock what looked like an enormous vice. Only then could you seal the contracts by placing each of the signed contracts in the gap between the vice and closing the vice - the contract then had the imprint of the seal embedded on it.

However, prior to sealing the contract, I first had to get the contract signed by the Town Clerk. I'd make an appointment, fold and mark each of the contracts so that the place for signature was clear and then place each of the contracts before the Town Clerk while he signed, in all probability multi-tasking by drinking a cup of coffee or reading other papers. Success, for me, was minimising the amount of time spent by the Town Clerk signing the contracts.

The contract signed by the Town Clerk then had to have the Lord Mayor's signature too.  Once again an appointment was made, I sat with the Lord Mayor and we made small talk as I placed each contract before him for signature. The objective: get in, get the contracts signed, and out as quickly as possible!

That's a lot of formality for a reason (and from memory the threshold at which contracts had to be sealed was as low as £15,000) but yet there was virtually no scrutiny. The contracts were signed by both the Town Clerk and Lord Mayor without their reading on the assumption that those in the Town Solicitor's Office and Purchasing had spent time making sure everything was in order prior to signature.

I wonder will Sepp Blatter use a similar argument as his defence, that he was merely completing a formality on the assumption that the due diligence was completed by others as part of their 'day job'?

But let's remember that those who 'sign on the line' do so for a reason, only they have the authority to commit the organisation to contracts. They are representing those who placed them in power and gave them the authority to commit on their behalf. Whether or not Sepp Blatter manages to exhibit the skills of Houdini is secondary, the allegation that he signed an unfavourable contract should serve as a reminder to all those Board Members who sign contracts of the need to protect themselves, if not their organisations.

Tuesday, 6 October 2015

You need to get suppliers on board for your S2P journey (1) - A sound foundation.

There is a need to think about supplier engagement when developing the S2P business justification – the lack of supplier engagement is one of the highest impact risks with a S2P implementation. Supplier engagement is a change management issue and needs to be managed as such. First create a sound foundation, then a concurrent three-strand approach is merited, namely, identifying the waves for targeted adoptions, a communications plan, and a skills development plan. In separate blogs each will be addressed.
Without a sound foundation the probability of an effective implementation is seriously compromised and, at worst, highly unlikely.
Be clear what the  future will look like and any organisational restructure, changes to processes and procedures before starting a discussion with the supply base. An absence of clarity will contribute to a lack of supply market confidence and reluctance to embrace the proposed changes. 
Critical to success is ensuring that the business case has recognised that one of the key risks to a successful S2P implementation is the failure to gain supplier ownership of the proposed new systems and processes.  Suppliers are one of the main stakeholders of any procurement change initiative, particularly a S2P implementation.
It is understandable that many suppliers will adopt a ‘wait and see’ approach with a S2P implementation and delay commitment.  After all, ‘what’s in it for them’, especially if ‘no change’ also means no loss of business? 
A S2P system is a two-way communication system and suppliers have to make a conscious business choice that they are prepared engage in that system and with the new ways of working.  Those new ways of working can be both new systems and new processes. For suppliers this could mean new investment in both technology and skills is required without any contribution from the customer organisation.
Part of mitigating the risk of a lack of ownership is the need for the implementing organisation to allocate a budget for supplier engagement. A second mitigation is to be clear which suppliers ‘need to be on-boarded’ to build up a critical mass which will enable the S2P implementation to be justified. It is a mistake to assume that there will ever be 100% supplier adoption of the new ways of working but there needs to be clarity of what the breakeven point of supplier uptake is.
Another critical success factor is the designation of a senior level champion who will be the public face of the initiative.  That person needs to be credible, empathise with the supply market and ensure their ‘voice’ is heard.

In a future post I will discuss Supplier Profiling.