Expert view: the latest procurement trends in your region
Efficio’s sector heads highlight the latest trends and developments in their operating regions, with supplier relationships, procurement skills and innovation topping the client agenda.
Patrick Traynor, Vice President
The implementation phase of a contract can be challenging. Historically, clients would focus our efforts up to the contract award stage, but more and more of our US clients are now seeking help to manage the performance of their suppliers — a trend driven by the bottom line.
Tracking savings is always a key focus. Invariably, every CEO and CFO wants to know whether the savings identified are realized, so setting up the right measures for performance and supplier value that can then be monitored and reported on is crucial.
A potential pitfall is when procurement doesn’t take the time to fully understand which performance levers and measures really matter. Too often, companies implement KPIs because they feel they should, rather than to derive any meaningful benefit.
Another common occurrence is to set KPIs or SLAs that are unrealistic or too easy. If they don’t have any bearing on the actual work or aren’t linked to the economics of the process then the supplier is likely to ignore them. A robust sourcing process will help to identify what matters to the client and which measures are most relevant in managing supply performance.
Where there is no standard technology system for measuring performance, custom analytic and performance tracking solutions are required.
Each supplier relationship has a different dynamic and different underlying data. This should be reflected in the supplier measurement process by customizing solutions for clients and helping them to manage it. It’s a key way of enabling clients to become smarter in their performance measurement.
To find out more, please contact Patrick.
Automated workflows mean less time wasted on fiddly tasks like scheduling supplier meetings and follow ups, and more time devoted to strategic goals and value creation.
Toby Munyard, Vice President
We now live in a world of political and economic uncertainty with change cycles that are much shorter than they have ever been. Organizations may not be able to control the outcome of political elections, shifting policy or currency fluctuations, but they can ensure their supply base is set at the right cost, delivering to the right quality and offering best value.
A noteworthy trend over the past year has been the requirement for procurement departments to take an active role in supplier relationship management (SRM). Rather than treating the SRM process as an administrative activity, procurement teams can use it as a lever for creating additional value — a significant opportunity for them. To realise this value however, SRM needs to begin at the sourcing or category management stage, with appropriate KPIs, metrics and incentives in place to drive performance.
Technology is accelerating the pace of change in this area, as firms explore the potential step-change in insight, efficiency and commercial benefit.
Real-time figures can be readily tracked against the baseline sourcing data to build a clearer picture of supplier performance over time. KPIs and dashboards provide better insight for both internal stakeholders and senior management, leading to faster, more confident decision-making. And automated workflows mean less time wasted on fiddly tasks like scheduling supplier meetings and follow ups, and more time devoted to strategic goals and value creation.
In such uncertain times, it’s not sufficient to source services or products then simply leave the contract to run. It’s crucial to actively manage suppliers if organizations are to get maximum value and the best service. Businesses will need to be robust if they are to stand up to the test of change.
To find out more, please contact Toby.
Middle East and Africa
David Mooney, Director
The micro and macroeconomic impact of low oil prices has led to a major shift in public procurement processes within the region. Countries are now focused on developing local content to create long-term sustainable economic growth, and increase the volume and quality of jobs available to nationals.
Many have set significant targets to achieve this including the Kingdom of Saudi Arabia which, as part of its Vision 2030 strategy, is asking public sector organizations to drastically change how public procurement is managed in order to incentivize local content.
It’s important to note that local content isn’t just about jobs — it’s also about research and development, infrastructure, training and development, and other factors that yield a high return in local content. This will also include a focus on foreign direct investment that will bring manufacturing and services to the Kingdom, but it takes time to develop capacity and capability in this area. So today’s investment may only bring results in five or even ten years’ time, which is why governments are taking a long-term view.
Developing local content too quickly can increase supply chain costs and risks, particularly around quality and security of supply. Local suppliers need to be able to work to the international standards and quality required by global businesses. They also need to guarantee their supply chains will not be interrupted.
We have been working with governments and major industry leaders to identify where the greatest opportunities lie for local content development which helps to create a baseline for improvement. We are also working with companies to design and implement successful local content rich supply chains.
Our first stage service offering includes training and development for C-suite executives, local content managers and procurement professionals. This can be followed up by simple baselining and local content analysis to help companies identify the opportunities and set future long-term goals.
To find out more, please contact David.
Discussions are moving beyond mere contract delivery to greater collaboration with suppliers, enabling organizations and suppliers to generate value through the exchange of innovative ideas and suggested improvements to the supply chain.
Jesper Schade, Vice President
Delivering savings is still a key focus in the Nordics, but clients are also looking to get more value from the supply base by tapping into it as a potential source of innovation.
Discussions are moving beyond mere contract delivery to greater collaboration with suppliers, enabling organizations and suppliers to generate value through the exchange of innovative ideas and suggested improvements to the supply chain. This is a relatively new approach for suppliers who have typically not been engaged in this way — despite holding potentially valuable information.
Organizations should make it easy for their suppliers to collaborate. For example, one of our clients in the financial services industry is working with its key suppliers on innovative projects. It has set out what it wants to achieve but allowed suppliers the freedom to structure and manage the work themselves — within financial limits. They are encouraged to continue contributing new ideas.
Organizations are maturing in their approach to the supply base. Easy access to data has improved the way they work with suppliers, as we are now seeing.
To find out more, please contact Jesper.
Tim von der Decken, Vice President
We are currently seeing an increase in demand for the management of procurement services, particularly in the SME sector where a gap in procurement capabilities has meant businesses have not been able to realise the full benefits of investing in strategic sourcing programs.
This management model is also gaining popularity because of the time limits typically associated with consulting projects. In the past, consultants would complete a sourcing project and gradually hand over to the organization to drive it forward. This is no longer the case.
Consulting projects typically last 6 to 12 months, which can be too short a timeframe to upskill the procurement team to a level where it can successfully sustain the cost-savings identified while effectively managing future spend. This can leave a skills and resourcing gap in the procurement operation, with the in-house team quickly reverting to less-than-optimal ways of working.
Our model takes full ownership of the strategic sourcing program a client is trying to deliver — and for its lifetime. We complement consulting resources with additional purchasing staff so that the process is more sustainable, plus we manage the entire team.
Over three to four years, using an experienced and knowledgeable team supported by robust technological capabilities can potentially generate savings that are four to six times higher than if the client were to manage this work themselves.