5 milestones to Sourcing Excellence

September 13, 2014

“Sourcing excellence = professional knowledge + market knowledge + product knowledge” Jonathan Dutton

As per a recent study conducted by IACCM, 88% of Contract Management professionals indicate that improvement of the quality of the Requirements was the number one factor to improve contract performance in their organisations (IACCM – Contract and Commercial Management – A Operational Guide).

I have discussed the importance of understanding and clarifying the scope with your vendor as part of the Iron Triangle (here).

As we all know, having incomplete, erroneous or unexamined specifications for a product or service category lead to confusion, rework or simply sub-optimum  results.

To be successful, you first need to fully understand the scope and alternatives yourself i.e. what the business really needs and different possible ways to achieve it.

Let’s see some practical tips on how to do so.

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The 5 milestone Road to successful Requirements’ Identification and Sourcing Excellence

1) Know your stakeholders

First of all, you need to know your own stakeholders.

Anyone, the project affects directly and indirectly is a stakeholder.

Some of them are affected more than others and some of them will have a greater influence in determining the success of the project. So, if during the procurement process, you miss out on engaging with a stakeholder, you then risk project failure.

HOW to: Brainstorming and looking at the process and usage of the product and service should reveal who you need to approach.

2) Know you business objectives

You also need to know your business objectives.

You should embrace a different approach if the business objective is a strategic one e.g. entering a different market, rather than a tactical or an operational e.g. improving a process or removing cost.

Moreover, different stakeholders will have different motives and will probably target different outcomes in order to consider the project outcome successful. These need to be identified and defined.

Hence, the stakeholders need to know and sign off on the final defined business objectives.

HOW TO: Use interviews and questionnaires to define the requirements, needs and expectations from each one. Then ask them to review and sign off on the final result.

3) Understand the Specification

This is self evident. If you cannot articulate the functional and technical specifications then you probably do not have a good grasp of the project and would not know how to evaluate the suppliers.

Try defining this using AMPP technique (Ask, Mirror, Paraphase and Prime) and see that you have a good understanding of it and its implications.

Moreover, check that the functional and technical requirement are aligned with the business objectives and that at the end of the process all stakeholders have a high level of confidence of the final defined results.

HOW TO: A number of effective communication techniques can be found in the book Crucial Conversations by Kerry Patterson et al.

Phrases like e.g. “Please let me know if you see this differently….. If I understand correctly……. Is this what you mean…… In my mind this means that ……..” can help.

Moreover, make use of a requirements checklist, questionnaires, interviews, roundtable discussions and brainstorming sessions. Research and benchmarking are tools you can also employ.

4) Agree the acceptance criteria

After the 1-3 steps are complete you can crystallise from the feedback provided the acceptance criteria. These can be categorised in three categories:

i) Hurdles (the Must Have criteria) e.g. ISO certification, Insurances’ cover, No accident record.

ii) The Essential Requirements (for which the vendors can be graded on a scale) e.g. quality, price level…

iii) The Good to Have (additional attributes that may not be immediately required but an extension of the service) e.g. operations in another state or territory that may be a target for your company in the future.

Moreover, the project team needs to have a clear idea of

A) What is the procedure of picking a bid
B) What are the quantifiable, measurable criteria and
C) How assessment and grading will be made.

5) Change Management Process

Scope creep, the process of evolving and ever-changing requirements, is a major cause that many projects fail e.g. run over-budget, over-time.

However, ignoring that there may be changes is not an option.

So, especially for complex and longer on duration projects, a clearly defined practical change management process needs to be defined in order  to have a good chance of been successful.

Based on mutual trust a clearly defined process for approaching changes identified (which can be clearly linked to the business objectives) is key.

HOW TO: An effective way to do this is to agree to change control documentation and a sign off process.

Moreover, great tips on the 5 levels of building trust can be found in the book The Speed of Trust by Stephen M.R. Covey

 

The Speed of Trust - 5 Waves

The Speed of Trust – 5 Waves

 

In essence, working on your internal and external relationships is the only way that will provide the necessary trust that is the bedrock on which any change management process can be based on.

 

RELATIONSHIP MANAGEMENT

The Requirements specification  as well as the overall Procurement and Contract Management process are heavily reliant on good relationship management skills.

Ron Larimer in his article My three issues with the Seven Step Model has made this very lucid in the Procurement model he supports:

The Sourcing Wheel

The Sourcing Wheel

 

So, in thinking about Sourcing Excellence I suggest that Jonathan’s quote needs to be modified a little to include the key element of trusting relationships.

Sourcing excellence = professional knowledge + market knowledge + product knowledge + well established trusting relationships

 

What are the successful ways you use to define requirements in your Procurement process?

 

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Filed under Category Management, Contract Management, Procurement, Sourcing Tagged with , , , ,

In pursuit of Best Practice – Intrapreneurship

August 6, 2014

This article first appeared on Procurious.com as a guest blog contribution. You can find the original blog post here.

 

“At its simplest, Best Practice means we are doing our job better than others. …that might translate to closing deals faster, achieving consistently good negotiated results, establishing terms and change processes that support high-performance relationships or realizing results that regularly exceed expectations. So we want to be better, faster, contributing greater value, making fewer mistakes” Notes on “What do we mean by Best Practice” by IACCM

As already elaborated here, an essential aspect for becoming successful in the future, is Creativity.

The term, Creativity, most probably conjures up images of successful Entrepreneurs that have a vision and the courage to pursue their dreams.

Outstanding Entrepreneurship is a well-defined quality behind every successful organisation.

Entrepreneurs like Richard Branson are followed and their ideas celebrated in the public domain.

However, it would most likely be better for an organisation to not only try to maintain its competitive edge on the ideas of one or even a handful of forward thinking individuals, but also find ways to tamper into the creativity and ideas of every one of its employees.

Hence, organisations should also look into the promotion and support of Intrapreneusrship.

Read on if you want to find out more about this idea, as well as, get to learn about one way to harvest the concept of Intrapreneurship as a means to pursue Best Practice within your own organisation.

Outside the box

Intrapreneurship

Jeroen de Jong and Sander Wennekers explored the concept here.According to them:

“Intrapreneurship refers to employee initiatives in organizations to undertake something new, without being asked to do so.”

There are a few companies that actively promote intrapreneurial behaviour e.g. Google  allows its employees to spend up to 20% of their time to pursue projects of their choice.3M and Intel appear to have programs towards similar promotions (see here).

However, intrapreneurship is not only about the pursuit of new products and revenue streams.

Intrapreneurship contains an element of innovation. Innovation refers to the production and implementation of useful ideas, including the adaptation of products or processes from outside an organization. As Antoncic and Hisrich highlights (here)

“Intrapreneurship is about “emergent behavioural intentions and behaviours that are related to departures from the customary ways of doing business in existing organizations”

In other terms Intrapreneurship is about the pursuit of Best Practice.

In parallel, it is also important to note that the support of the practice of Intrapreneurship also helps maintain engaged teams that always challenge themselves and evolve the organisational practices, processes and results (read more about team engagement here and here).

Ideas Charter (a simple and practical way to pursue Best Practice)

As part of an effort to promote employee engagement and Intrapreneurial behaviours, I developed the Ideas Charter.

This is a simple process which ensures that all new ideas are captured, evaluated, and then through a process that promotes and supports undertaking innovative projects, implemented.

The Ideas Charter Process works like this.

i) A champion is assigned to capture all ideas that can enhance processes or contribute to efficiency and effectiveness in a simple spreadsheet called the Ideas Charter (see template here). This is done on a non judgmental way to the perceived value of the ideas i.e. following Edward De Bono’s six hat definition – by wearing a green hat.

ii) The ideas are then evaluated and validated by a selected committee and approved or not approved for further development.

iii) If an idea is approved, then that idea is made available as a potential candidate for a future side project to be done by a team member or a team.

iv) Every two months the team is asked to select a side project to work on. Each team member is encouraged to pick one of the Ideas in the Ideas Charter and work on it. A due date is allocated.

v) At the end of the allocated period each member presents his/her side project along with a benefits analysis.

vi) The side project outcome is placed into production. This outcome  could be a change in process, a development of a business case i.e.  it could be anything that promotes efficiency or effectiveness.

vii) After 3 side projects are completed and presented, the team is given the opportunity to vote for the best one. The winner is celebrated.

This is a simple but effective way to work towards Best Practice in small teams. From personal experience this concept has the power to engage the team and also to elevate the level of efficiency and effectiveness as delivered by its outputs.

Finally, it works towards Yves Morieux’s vision elaborated in his presentation about “How to Develop a Winning organisation” – see here . Yves eloquently summarised his position as below:

“The real battle is not against competitors. The real battle is against ourselves. Against our bureaucracy, against our complicatedness” – Yves Morieux

What systems do you have in place to promote and support the pursuit of Best Practice?

 

 

 

Image courtesy of glendale inquiry

 

Filed under Future Trends, Innovation Tagged with , ,

How to perform a mid-year Procurement review!

July 5, 2014

Constant reviews are part of every effective system. As Peter Drucker mentioned, every so often, it is crucial to do the “Feedback Analysis” in three steps:

1. Whenever you take a key decision or action, write down what you expect to happen.
2. Review results at regular intervals and compare them with expectations.
3. Use this feedback as a guide and road to reinforce strengths and eliminate weaknesses.

                                                                                                                         Peter Drucker

The end of the Financial year (in Australia) and reaching the mid-calendar year point in other parts of the world, makes for a great opportunity to review the progress made so far, look afresh at your personal, team and/or departmental KPIs and goals for the year and review any new opportunities that may have come up.

Having an appraisal review once a year may have been effective in previous generations but not in the modern post-GFC fast paced marketspace.

Read on if you want to learn about a scheme for performing a General review and a comprehensive checklist to go through during a Procurement specific one.

 

Alexander Knight

GENERAL REVIEW

So, utilise the One-on-One meetings (or other frameworks, some of which I mentioned here and here) sit down with your staff and/or book a meeting room for a space free of distractions and revisit:

  1. Your KPIs
  2. Your team’s or department’s KPIs
  3. Opportunities that may have come up
  4. Challenges that have occurred
  5. Projects in development that may need your contribution or that you can contribute to.

 

PROCUREMENT REVIEW

Especially, for Procurement, there is a more specific list of things to do.

As Richard Waugh, VP of Corporate Development at Zycus, mentioned in his recent post titled “Spring Cleaning time in the Procurement household:A Checklist” in spendmatters.com below are some key areas every Procurement professional should look into.

Based on the article I put together a checklist which I thought I’d share. For more information please refer to Richard’s article which makes a compelling read:

CHECKLIST for EFFECTIVE PROCUREMENT REVIEWS:

Contracts

  1. Look for contracts that have expired or are due to do so soon. Update your Contract calendar.
  2. Review at least one auto-renewal of an evergreen agreement.
  3. Look for maintenance agreements on long discarded assets or not used software licenses. 
  4. Review that rebate provisions are up to date.

Spend Analysis

  1. Refresh your spend data to evaluate changes in spending patterns.
  2. Analyze for purchase price variance i.e. paying different prices for the same item.
  3. Analyze for Payment Term Rationalization – standardizing on contracted payment terms with preferred vendors.
  4. Look for Supplier Rationalization opportunities i.e. root out “supplier creep”

Supplier Management

  1. Look for duplicate and inactive vendors in your vendor database.
  2. Ensure that insurance, quality, diversity, or other certifications are up-to-date.
  3. Update the Supplier segmentation matrix (categories: strategic, critical, important or tactical).
  4. Ensure Supplier Managers are allocated to strategic, critical and important suppliers.

Category Management/Sourcing

  1. Review category strategies taking into account commodity price trends and forecasts.
  2. Look for opportunities of hedging through longer term contracts where price increases are projected.

Performance Management

  1. Refresh your scorecard including value offered by Procurement and Contract Management in recent gains in “spend under management, realized cost savings, increased user adoption, cycle time reduction, contract compliance, supplier enablement” etc.
  2. Benchmark your performance against the market. 

 

Image courtesy of Alexander Kaiser, pooliestudios.com / www.flickr.com

Filed under Category Management, Continuous Improvement, Contract Management, Procurement, Sourcing Tagged with , , , , , , , ,

Stoicism and Stephen Covey – You don’t need to worry anymore!

June 21, 2014

“What upsets people is not things themselves but their judgments about the things” The Enchiridion, Epictetus (translation by William R Connolly)

How would you feel if you did not have to worry again? Is this attainable? The Stoics certainly thought so.

More recently, Stephen Covey revisited this theme and provided a mental model to approach about such situations.

It becomes amazing how, sometimes, key tenets of Ancient Philosophy find their way into modern popular handbooks and practical how-to guides.

It is useful to occasionally revisit and embrace the transformative nature of these tenets, in combination with their modern variations, in an effort to lead more meaningful, productive and fulfilling lives (professionally and in the private sphere).

Let’s look at one of these tenets and mental schemes in action.

 

Marcus Aurelius

Marcus Aurelius

 

STOICISM

Stoicism is a movement that started with Zeno of Citium at the early 3rd BCE. Other major philosophers involved in this movement were Cicero, Seneca, Epictetus and Marcus Aurelius (you can find more information here).

The basic tenet of the movement was “apatheia” (equanimity). Stoics posit that one way to attain this state of mind is by recognizing what lies within our power or influence and what is outside. Thereafter, come to terms with this realization.

Meric Casaubon elaborated on this thought in his translation of Marcus Aurelius’ Meditations as follows:

“Two points in the Stoic system deserve special mention. One is a careful distinction between things which are in our power and things which are not. Desire and dislike, opinion and affection, are within the power of the will; whereas health, wealth, honour, and other such are generally not so. The Stoic was called upon to control his desires and affections, and to guide his opinion; to bring his whole being under the sway of the will or leading principle…..” (Meditations by Marcus Aurelius, translated by Meric Casaubon)

 

Stephen Covey

 

STEPHEN R. COVEY

Stephen Covey mentions more or less the same theme but expands on it providing a mental scheme enabling us to better visualize how to go about this basic idea.

His mental scheme consists of concentric circles that portray our circle of influence and our circle of concern (see picture below).

CIRCLE OF INFLUENCE

Stephen contends that we should first reflect on “where we focus our time and energy” and then consciously refocus our efforts to what we can influence, in an effort to increase our effectiveness.

Specifically, usually, we tend to worry or be concerned about many things such as, our health, our children, problems at work, the national debt, nuclear war. These concerns can and should be separated based on our mental and emotional involvement but also based on those for which we have some real control over and those that we cannot influence at all.

Thereafter, by focusing our time and energy in influencing those that we have some kind of control over we succeed and hence, we may also increase our circle of Influence further. We see people who embrace this behaviour being positive and empowered.

CIRCLE OF CONCERN

On the other hand, we see others that focus their time and energy on things they have no real influence over. These tend to blame and accuse circumstances or people and use reactive language. Eventually, the Circle of Influence of these people will shrink. I am sure you can think of a few people who embrace the one or the other behaviour and can possibly reflect on the consequences of their stance in life.

Like the ancient Stoics, what Stephen rightly highlighted is that we have to look at our attitude towards these situations and change our perspective so we can be “highly effective” in our lives. This happens if we do not waste time and energy on worrying about things we cannot control or influence but instead focus our energy to influence those that we can.

You can read more about this mental scheme here.

 

SCIENCE ABOUT THE HEALTH BENEFITS OF A POSITIVE ATTITUDE

Until recently this could have been described as a feel good and  useful belief. More recent scientific studies though have started to test even such esoteric beliefs.

I have written here about an insightful talk from Kelly McGonical which details a recent study that looks at the link between attitudes and cardiovascular disease.

In particular, this study links the attitude we have against stressful situations to specific responses our body has and the associated risk for development of cardiovascular disease.

 

CONCLUSION

People respond to different challenges in a different way and develop their own defense mechanisms to deal with the vicissitudes of life.

Practical philosophy such as the ideas described in this blogpost provides an extremely useful guide to think about things and be-free oneself from behaviours that damage productivity, happiness and the attainment of fulfillment in life.

A great resource to continue this journey with is Alain De Botton’s The Consolations of Philosophy (an easy to read and immensely entertaining book or DVD).

Maya Angelou who recently passed away put it succinctly when she said:

“You may not control all the events that happen to you, but you can decide not to be reduced by them”, Maya Angelou, Letter to My Daughter:

What are the tenets, beliefs or thoughts that help you to get through the day?

 

Filed under Continuous Improvement, Leadership, Philosophy, Productivity Tagged with , , ,

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