Best Practices in Supply Management Journal

76th Edition, April/May 2016

Articles In This Issue
Founder Appearances and Articles and Job Opportunities for Our Readers:

Tuesday May 17th, ISM 2016 Conference, Indianapolis IN.  Mark Trowbridge is co-presenting with Pierre Mitchell of SpendMatters the topic of "Buying Everything As a Service". Session "ID", 4:15 - 5:15 p.m.  ALSO, drop by the Strategic Procurement Solutions booth in the Exhibit Hall.  We'd enjoy meeting you!

May 16th - June 24th, our online training program titled, Practical Procurement Management will be presented over a 6 week period to a global audience. Hosted by Strategic Procurement Solutions' eLearning partner, this program combines videos of Mark Trowbridge with powerful educational slides, exercises, and exams. This is a great program to learn about leading procurement techniques while earning Continuing Education Points for professional certifications.  Click the following link to view more information at Online Training Course.

June 9th & 10th - Mark Trowbridge will present The Negotiator Challenge workshop in Wilmington, Deleware USA at the headquarters of DuPont USA for any interested attendees. Sponsored by the ISM Delaware chapter. Click the following link to receive more information at Negotiation Workshop.

June 10th - Mark Trowbridge is the featured speaker for ISM Delaware's monthly lunch meeting. His topic will be Navigating Through Mergers & Re-Organizations, a topic of great interest to the members affected by the nearby DuPont/Dow and Pepco/Echelon mergers. Click to receive more information at Merger Presentation.

July 13th - 15th - Mark Trowbridge will present the Strategic Procurement Management Training workshop at the Singapore Holiday Inn Atrium Resort. Click for more information at Singapore Conference Information.

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Modern Materials Handling Magazine featured an article by one of Strategic Procurement Solutions principals titled "Swamps, Alligators and MRO".  Click the following link to view that article on their website Article Link.

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Job Opportunities with Strategic Procurement Solutions' Clients can be viewed below.  If interested, please email your Word resume to us at...
 
* Senior Sourcing Specialist, Service Sector Company, Pleasanton, California.  Base salary $140,000 to $150,000, plus excellent bonus and benefits packages.  Experience with Information Technology sourcing/contracting. Relocation negotiable.
  
* Technology Sourcing Specialist, Financial Services Company, Phoenix, Arizona.  Base salary $140,000 to $150,000, plus excellent bonus and benefits packages. Relocation negotiable. 

* Manager of Procurement Services spanision, Governmental Organization, Central Valley, California USA  Base Salary $105,000, plus strong benefits package. 10 years of governmental experience and 4 year degree required. 

* Supervisor of Public Works Contracting, Governmental Organization, Central Valley, California USA. Base Salary $85,000, plus strong benefits package.  8 years of governmental experience and 4 year degree required.






 

























































This electronic journal is distributed bi-monthly to 
nearly 14,000 Supply Management Professionals around the globe. We hope you enjoy this edition. Feel free to forward to your SCM colleagues!  
 
"Category Management - A Full Circle Approach to Strategic Sourcing" - by Mark Trowbridge, Principal, CPSM, C.P.M., MCIPS
A sourcing concept being employed by many procurement groups is that of "Category Management"; which embeds "Strategic Sourcing" and "Supplier Relationship Management" as a more-holistic  process into organizational spend segments.  But what is Category Management, and how does it differ from traditional sourcing?  

The concept of Category Management originated in retail marketing (not procurement).  Retailers took to heart Jane Austen's quote that, "Too many cooks spoil the broth."  They realized that having too many company process owners and personnel being involved in bringing to market, and managing the lifetime of, retail products was rendering their company agility less than effective.  Their concept was to bring teams of contributors together into one group to cohesively manage the product lifecycle.  The category owners were assigned responsibility and accountability for segment profitability, performance, and impact. This reduced time to bring products to market and improved profitability related to the assigned categories.

This concept was "morphed" into the procurement realm when executive leadership began to observe how supply management was becoming similarly-complex and inflexible.  In my opinion, this has been partially-due to large consultancies swooping in to conduct "Waves" of Strategic Sourcing initiatives that drive product and service costs to reduced levels, and then galloping off into the sunset ("Hi Ho Silver") leaving behind the debris of their efforts. [Yes, I've just quoted Jane Austen and the Lone Ranger in the same article...].   In some cases, internal "Sourcing" groups have themselves created the problem; by focusing only on scoring "savings" and then failing to help impacted stakeholders manage the resulting supplier relationships to create and capture even more value.  

The broader scope of Category Management was described in a 2012 article by Pierre Mitchell (then with Gartner and now with Spend Matters), who wrote, "For the most part, differences between category management and strategic sourcing center on the former's longer time horizon and the broader scope and scale of its activities. Category management is aligned with the life cycle of the processes which consume the products and services in those categories. It involves not only a more comprehensive internal customer management and supplier management approach, but a broader, more facilitative way of constructing solutions that support both category and business objectives."

Some organizations are transitioning to this concept called Category Management to correct the deficiencies of a short-term approach to Strategic Sourcing which failed to explore benefits through the entire Supplier Relationship Management cycle.  For some of us who have been in the field since before Strategic Sourcing became a trend, this is a return to what procurement should always have been. In a "Category Management" model, teams are assigned to manage groupings of organizational expenditures, such as Information Technology, Professional Services, Castings, Forgings, Circuit Boards, Processors, LCD Screens, Construction, Facilities, Employee Services, Marketing, Business Process Outsourcing, etc.   These teams are aligned under a Category Manager who has responsibility both for sourcing AND managing relationships with internal customer departments AND key suppliers which apply to their spend categories.  In its purest form, responsibility of a Category Manager includes performance aspects associated with Product/Service Development, Strategic Sourcing, Contracting, Transactional Purchasing, Supplier Relationship Management, and Supply Chain Operations for an assigned category of organizational expenditures.  

But is a "Category Management" approach the best for all procurement groups to use?  I would suggest that a "Category Management" approach makes great sense for organizations which have rapidly-changing (fluid) product or service categories that require nimbleness and agility in order to optimally-manage.  These categories reflect dynamic change that must-be pro-actively planned, sourced and orchestrated to meet competitive market factors and operational requirements.  Category Management also fits nicely in spend categories where key portions of the cost model are below-the-surface; i.e. benefit most-highly from strategic-collaboration in optimizing Total Cost of Ownership (TCO) elements. Finally, Category Management is a logical step-change for an organization which has already "sourced" expenditures across its entire footprint. 
 

But when does a non-imbedded approach to "Strategic Sourcing" make better sense for an organization?  Actually, in a large-portion of cases.  That is because in many companies and governmental agencies, strategic sourcing of key category spend happens only every few years.  Once sourced, the products and services being acquired in those spend categories remain largely static (non-changing).  In between, internal departments bear responsibility for the continued contract/supplier management of the "sourced" relationships.  This format works ideally where skilled "sourcing" professionals support can rotate across spend optimization opportunities.  Other procurement groups provide ongoing support to business stakeholders after the "sourced" supplier relationships have been set up. 
 

We modeled this approach in my sourcing group at Bank of America nearly 20 years ago, by creating a SWOT team of sourcing experts who would rotate across companywide expenditure categories.  Our delivery of a Quarter Billion Dollars in cost benefits during my last two years with the company illustrates the benefits of this methodology.  But this approach will not work well unless supplier management personnel are trained in 'best practices' and if a regular communication modality between relationship owners and the sourcing group is not established.
 

Category Management is one great way to employ Strategic Sourcing.  But it is not the only way to structure an effective spend management organization.
 

Strategic Procurement Solutions' 360 Degree Supply Management Efficiency Review reviews all aspects of supply chain performance (Employee Skills Diagnostic, Organizational Alignment, Spend Analysis, Sourcing Impact, Contracts Management, Use of Technology Tools, Supplier Relationship Management, Customer Service/Influence, Policy/Procedure Governance, Supply Chain Alignment) and recommends practical ways to achieve greater results.  A detailed report can be prepared within a few weeks for your organization, and recommendations are designed for the client to implement themselves. Information can be requested at Info@StrategicProcurementSolutions.com
 


About the Author - Mark Trowbridge, CPSM, C.P.M., MCIPS is one of Strategic Procurement Solutions founders. His 30 years in procurement leadership began in the Manufacturing, Airline, and Financial Services sectors...culminating in a role leading three-quarters of the strategic sourcing activities, and all of the contracts management responsibilities, for Bank of America (then, the USA's third most-profitable company). During his final two years with Bank of America, Mark's areas of responsibility delivered a Quarter Billion Dollars in cost reductions. During the last 16 years, Mr. Trowbridge has worked in the consulting field with many leading corporate and governmental clients. His business travels have taken him throughout North America, Europe, the Middle East, and Asia. He is a frequent author on supply management topics, with articles appearing in publications like Supply Chain Management Review, Inside Supply Management, IFPSM's eZine, eSide Supply Management, and Strategic Procurement Solutions' own Best Practices in Supply Management Journal.  Mark's  is among the top 1% Most-Viewed LinkedIn profiles.
 "Trends in Procurement Staffing - Challenges in Finding & Keeping Skilled Talent"... by Robert Dunn, MBA, C.P.M., Principal
Companies and governmental organizations are being increasingly-challenged in finding and retaining a skilled workforce.  A research paper by Peter Cappelli of the University of Pennsylvania's Wharton School titled Skill Gaps, Skill Shortages and Skill Mismatches was recently-published by the US National Bureau of Economics.  Cappelli's paper shows how, post-recession, the number of job openings posted monthly by leading employers has risen by 120%, but the number of hires rose by just 25%

His research in the world's largest economy reflects an increasing shortage of qualified professionals in the workforce.
 

Globally, the ManpowerGroup similarly reports in their 2015 Talent Shortage analysis that 36% of global employers are having difficulty finding candidates with the right skills, a 2% rise from 2014. 
 

In the field of sourcing, procurement, and supply chain management, the shortage of talented professionals is even more significant.  Several studies highlight this:
 

 

- The 2015 Salary Guide and Procurement Insights Report published by CIPS (the Chartered Institute of Purchasing & Supply) and Hays says that 73% of respondents experienced challenges in finding relevant talent.

 

- KPMG conducted a 2015 Procurement Advisory Pulse survey and reported that there is a rising shortage of talented procurement professionals globally, and that the situation is expected to worsen. 

 

- The Deloitte Global CPO Survey in 2014 showed that 57% of Chief Procurement Officers felt their staff did not possess sufficient skills to execute their firms' procurement strategies. 

 

- A February 1, 2016 article by Amy Clark in Supply & Demand Chain Executive Magazine says, "Between 2010 and 2020, the number of available jobs in supply chain will grow by 26 percent.  Currently, the demand-to-supply ration of jobs is six-to-one.  In a few year years, that could be as high as nine to one.  Most of the openings exist in middle management positions, in which there is a current shortage of 54 percent."


So why is finding skilled talent an increasing challenge for procurement leadership?  I would suggest several factors have been, and will continue to be, contributing factors...
:
 

First
, the art of finding skilled sourcing and procurement professionals is not as straightforward as some other categories of recruiting.  Strategic Procurement Solutions provides staff augmentation services to client companies (project placements and contingency search), and we've used the analogy of finding a Platypus (a mammal with a duck bill and tail, webbed feet, and which lays eggs). 
 

Finding the right procurement professional is often similarly-complicated, as requirements for level of education and years of experience are combined with the need for industry-specific experience AND particular spend category management expertise.  You just can't hire someone who has worked in a governmental organization sourcing construction services to work for a large retail store chain sourcing HR benefits categories.  You need to find the right Platypus
 

Second
, unlike Baby Boomers, today's up-and-coming Gen-X and Millenial professionals just aren't going to stick with one employment relationship.  The 2012 Kelly Global Workforce Index reported that a large majority (59%) of Professional/Technical workers believe that "changing employers is the best way to develop necessary skills in their career".  This same report said that 54% of workers are "actively looking for better job opportunities".
 

Third
, a massive exodus of skilled leaders is leaving the workforce as the Baby Boomer generation has reached retirement age.  But the severity of this exodus has been delayed due to a large portion of the Baby Boomer generation extending their work life beyond typical retirement age (a result of continuing recessionary trends).  When coupled with the younger generations' desire for promotions and willingness to leave for other opportunities, this is creating an advancement backlog in many organizations affecting their skilled sole contributors.  A study by the Society of Human Resource Management titled, "When Workers Won't Retire, Workforce Challenges Arise" reports that this trend will drive skilled sole contributors in the workforce to look for other opportunities.
 

So what can companies and governmental groups do to attract, and keep, top procurement talent?  The trends mentioned in this article identify two methods which should be part of leadership's arsenal:

 

Method 1 - It's time for organizations to return to apprenticeships, mentoring, and training to build skills within their supply management ranks.  As Mark McCormick wrote in his book, What They Don't Teach You At Harvard Business School, "Today, I believe in the importance of training more than the importance of hiring."  Procurement groups need to again begin investing back into their employees to develop and enhance skills.  But this is not the direction the trend is going


 
Between the 2005 and 2014 editions of the CAPS Cross-Industry Benchmark Report, the average amount that employers invested into annual training of each supply management employee dropped a whopping 46.7% (dropping from $1,200 to $641).  Peter Cappelli, the researcher quoted in the beginning of this article, wrote a prescient article which appeared pre-recession in the Wall Street Journal (10/24/2011) titled Why Companies Aren't Getting the Employees They Need.  That article pointed out the mismatch of employer expectations compared to workforce candidate qualifications.  Cappelli wrote, "But I believe that the real culprits are the employers themselves.  With an abundance of workers to choose from, employers are demanding more of job candidates than ever before.  They want prospective workers to be able to fill a role right away, without any training or ramp-up time... Unfortunately, American companies don't seem to do training anymore...the amount of training that the average new hire gets in the first year or so could be measured in hours and counted on the fingers of one hand...Companies in [some] other countries do things differently.  In Europe, for instance, training is often mandated, and apprenticeships and other programs which help provide work experience are part of the infrastructure."


Interestingly, salespersons attend far more training than do their procurement counterparts.   As one of my colleagues used to say, "It's like sending a one-legged man to a butt-kicking contest".  

Method 2 - The old expression says, "It's not what you know, it's who you know".  When looking for procurement talent, use your best resources to assist with the search.  Job boards can sometimes be helpful in finding people who are in-between jobs.  So can your own HR recruiters help in advertising for candidates (but HR staff will rarely contact employed persons to recruit them away from other employment situations).  So are unemployed candidates the best candidates to consider?  Challenging searches for a skilled Platypus often require knowing the right contact person...someone who is skilled in searching for procurement talent and who has a network of connections...


Strategic Procurement Solutions provides top quality skills testing and training services to our global clients.  We also provide both project staffing and direct recruit contingency search support utilizing our network of several thousand supply chain candidates.  Contact us at Info@StrategicProcurementSolutions.com for a PDF brochure about any of these services.


About the Author:  Robert Dunn, MBA, C.P.M. is one of Strategic Procurement Solutions' founders.  His 40 years in procurement leadership covered management positions in the Government, Technology and Financial Services sectors; culminating in a role directing all of BankAmerica Corporation's procurement operations.  He has served as President of two ISM/NAPM affiliates, and taught supply chain management at the post-graduate level for California State University - Hayward and St. Mary's College - San Francisco.  He has also worked with major corporate and governmental clients in the consulting industry for the past 18 years, and was one of the founders of Strategic Procurement Solutions.   Robert has worked on major procurement initiatives in North America, Latin America, Europe, and Asia. 
 He is a noted author, with articles published in publications like eSide Supply Management and Strategic Procurement Solutions' own Best Practices in Supply Management Journal (the latter of which is now distributed to over 13,000 readers).

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