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Posts Tagged ‘strategic procurement’

U Buy I Buy?

In The United States, there have been over 200 sites, led by Groupon, offering discounted deals to the public over volume buying.  The leader Groupon is rumored to have rejected numerous buyout offers from Yahoo and Google offering as much as 6 billion US dollars.  Now the trend has blown to Hong Kong and China and some of those newly established sites are also rumored to be approached by Groupon itself (the tackily named local site UBuyIBuy).  It all sounds like a promising new shopping phenomenon.

In the States the targeted demographics is supposedly young, educated female customers.  I would say it is probably similar in this neck of the woods.  The deals I hear are largely focused on health, fitness, beauty and dining areas.  There are a lot of vacationers here and so I also see a whole lot of travel and hotel deals as well.

One common sociological drawback of buying coupons is that customers are always tempted to buy without really needing the merchandise.  The deals and coupons are so tempting that it feels stupid not to take advantage of them.  These bargain hunters fall into traps where they are stuck with expiring coupons and unwanted products.  In a highly competitive city like Hong Kong, I see people lining up for sales all the time, and more often than not, the need of not missing out on any opportunities shared or overheard from their friends and colleagues far outweighs the need of buying exactly what’s on offer.

No wonder why merchants see these portals as fantastic business partners to boost sales.

On the corporate side however, suppliers hate to recognize how much collective buying power we have, even within the same group of companies.  They can make more money by selling separately to different business groups, departments or users.  They will also try to differentiate as much as possible the requirements so that every sale appears to be a standalone product or service.  When we come on board, the number one task we perform is to go through the company’s spend records and run a full list of spend by suppliers.  With that we can approach each of them and negotiate the lowest price that benefits all cost centers of the company.  That also explains why we are now sourcing regionally if not globally, so that we can cover the biggest volumes possible.

So when I know my customers do check with their friends and relatives for bulk bargains in their personal lives, I do not understand why they wouldn’t pick up the phone and call us for assistance in the work place.  Well, is it just because it is the company’s money and not theirs?

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“You don’t look like a procurement person!” is what I hear time and time again from my clients and end users.  Since I am shameless I usually take it as a compliment.  Tell me the truth, if you are one of the rare few who actually know what procurement is, ninety percent of the time you would be expecting to run into a dull, stone-faced, old-fashioned man or woman in his/her 40s or 50s.  Quite honestly, this fits most of the physical characteristics of professionals I have seen in this circle across the globe, except perhaps in Mainland China.  In China, the average age is a lot younger since the number of low-cost sourcing positions is the fastest growing in the world.

Don’t tell me dressing the part makes no difference.  Don’t tell me you never judge the book by its covers, or publishers won’t spend millions of dollars researching for the right design, illustrations, fonts, colors and catchy titles for their books.  Don’t tell me you give people more than 5 minutes to make a first impression. 

The same goes for my profession. 

Just because we work behind the scenes with spreadsheets and calculators and putting our noses to the 68-page contract and request for proposal drafts 13 hours a day, there should never be an excuse dressing like a 60 year-old history professor.  If you are indeed a strategic procurement professional, you are likely to spend plenty of time in front of suppliers, departmental users, CFOs, CIOs, lawyers, auditors and regulatory officials.   You need to represent, negotiate, convince and argue all at the same time.  We need to armor up with facts, strategies, baits and bullets.  Dressing the part is increasingly a make-or-break situation.

 I dress to meet with the savvy senior business development teams from IBM, Accenture and WPP.  I dress for site inspection trips to China Mobile and China Netcom in Beijing meeting state officials.  I dress to go over the new year’s budget plans with the SVP of marketing operations.  I dress when I meet the lawyers.  I dress when I conduct trainings.  Hey, do I need any reasons not to dress for the part?

It’s not only the dress as well.  I also care about posture.  I know, this is no America’s Next Top Model contest, but we need to project professionalism and confidence – all the time.  Otherwise, no one is going to entrust you with the millions of dollars worth buying decisions.  No one is going to take you seriously at the negotiation table.  No one is going to give you a raise (though we all sadly know this is out of our hands most of the time).   No one is going to believe that you take the laws and regulations seriously.  Have eye contact at all time.  Speak clearly and decisively.  Use the right gestures to project approval or doubtfulness.  Head up, shoulders back and walk straight ahead.  Be fierce and let people know you mean business.  Gosh, this does sound like something Tara Banks would say.

Dressing well and projecting confidence sends a clear silent signal before I even start to speak up:  I respect what I do.  I respect you and your time.  I am above the topic at hand and I focus on the long-term objective.  I don’t have time to waste.  I am not the type that would take bribes.  I am not going to take no as an answer.  I am not to be fooled.  I am secure enough to say what’s right without worrying over repercussions from my boss, colleagues or people with devious motives.  Most of all, I am a brand of my ownand I will bring credibility and efficiency to the company.  So, listen up!

Sounds narcissistic?   No, if you want to send at least one of the above signals across.

Time to start thinking about what your personal brand is, stand up, refine your speaking techniques, check your posture and switch on Tara!

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Professionals Anyone?

Every Tuesday, Thursday and Saturday I have my routine workout at the gym, for the past 7 or 8 years.  My friends are always astonished to see me working out with a personal trainer and they all think that it’s an utter waste of money.  Well, I won’t exactly say it is affordable and all but it adds discipline to an otherwise lazy soul.  Besides, I am leaving it for the pros so I can concentrate on pulling, pushing, lifting and breathing without counting the laps or remembering what weights I lifted the last time.  Is it worth the extra hourly rate I pay?  For me yes, but for many others, it seems not.

Fine, but I believe in professionals.  Of course they have to be true professionals to earn my respect.  A personal trainer better knows all there is about the physical body, nutrition, sports injuries, and human biology.  I expect the sweet lady who sells me fruits at the local hawker stand to know all there is about seasonal fruits and how to pick them.  I expect the butcher to recommend me cuts of meat which I like, and the seafood vendor to teach me how to cook the fresh shrimps that I am about to buy.  I trust my tailor to give me advice on what fabric to pick that does not wrinkle as easily, and I always leave it to the sommelier to recommend me the best wine to pair with my entrée selection.

Yes when it comes to topics that I am not as knowledgeable of, I trust the professionals.  Or I should say I expect them to behave and treat themselves like professionals in their field.  The same goes for all service people at all levels.  I will never look down upon other people’s professions because I swear I will never be able to do their jobs at their proficiency or efficiency levels. 

There is so much knowledge around us that no matter how smart we think we are, we should always be humble enough to consult the professionals simply because we don’t know it all.  I do not feel insecure asking for help.  Time and time again it proves that if I respect people around me as professionals, they feel respected and dignified and will become extra accountable in whatever they do.

On the other hand, if I see below-par service performance bad enough for me as a novice to voice out, I protest but I will not do so in a condescending way.  Instead, I question their professionalism.  If you are not committed or passionate to what you do, no one deserve to be ill-treated by you.

That is exactly the same level of standards I am holding on to myself.  I do not think that procurement is trivial, as some customers or executives choose to believe.  I don’t think anyone can do my job in sleep, although sometimes I echo we are not rocket scientists.   I hold on to high moral and ethical standards to help the company gain efficiencies, cut down on wasteful spending, and improve profitability.  Well not everyone may see that right away, but my results will become proof soon enough.  You may not agree with my priorities, objectives or sometimes even the tactics I play, but I am asking you to at least respect me and let me work together with you.  Of course, I need to earn that trust and make sure I will not mess up any of your valuable relationships with internal partners, management and outside vendors.

Whenever I see fellow strategic procurement colleagues struggling to get a seat at the decision table, I usually advise them not to see themselves as only support people.  Speak up, build a case with evidence, have an opinion, and be humble but strong.  Even if your suggestions are going to be turned down anyway, make it a point to speak out and have yourself heard.  Give your stakeholders some credit.  They may not always agree with you, but at least they should respect you.  The pre-requisite of course is that every point and suggestion should be fact-based and consistent.  People are going to remember what you said earlier.  If you have been yelling compliance on the top of your lungs all along and this time you are proposing flexibility, you may lose your credibility as a professional, unless you have a really good case for it.

Whenever I make hiring decisions I always ask myself whether I can see the candidate going solo with the President or CEO of the company.  If I can see him or her having the passion and stamina without easily intimidated by seniority or ranks, our procurement organization will be in good hands. 

 

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I can certainly sympathize with people in my profession who think they are in dead-end jobs.  However it does not have to be this way.  It depends on what you are specialized in or which end of the spectrum you are located.  If you are more of an operations professional, the work is definitely going to be a bit more repetitive.  Yet for those who go for stability and domain excellence, they are in no better place.

With all due respect to my colleagues, I prefer to meet new people and lead new projects.  That keeps me on a constant learning mode.  Some headhunters questioned whether I would run out of “excitement” after the variety of projects, commodities, companies and industries I have been working in, and I told them not to worry.  We are living in an ever-changing global economy where the products and services we buy and sell are evolving.  Who would have thought that companies can now advertise in digital media and social networks like Facebook 10 years ago?   It’s never more fulfilling working with your colleagues on brand new ideas and challenges which is very much what a management consultant would do on a daily basis.

Therefore whenever I am asked what kind of career future there is for a strategic procurement professional (note that I have added “strategic” to mark the difference), I usually paint the following possible scenarios:

1. Climb the corporate ladder.  Easiest and most natural thing to do is to excel and position yourself in your bosses’ jobs.  Make sure you acquire broader domain knowledge by rotating yourself across different teams before you can become leadership material.

2. Go into the businesses.  Only if you have built up your credibility within the procurement arena and you have been regarded as a trusted partner by your internal customers.  Check the internal job posting site for roles that could leverage your existing skills and expertise.  If there is a role that needs constant dealings with external business partners, or daily management of outsourced providers, you could be a good fit.  Although it may be a bit risky for the businesses, it is still probably better to pick someone who have been with the company for a while who understands the company culture and already liked by the teammates.  This is not easy of course, but being considered or shortlisted is already a huge honor to the procurement team.  If you feel that you are already in a respected company that you can see yourself staying for a much longer time of your career life, don’t rule this possibility out.  Start knowing more people and build a network not only professionally but socially.

3. Be a consultant.  Academic background and soft skills are vital.  The assets of a consultant is his brain, and his problem solving skills.  You need to be very independent.  You may not have anyone report into you meaning you need to roll up your sleeves to lead a project from start to finish.  You need extremely high EQ.  You need to work extremely long hours and may hardly see your wife and kids.  Sorry I don’t mean to scare you off, but those who make fun of consultants should re-assess what they have to work with in the first place.

There are spend management or corporate turnaround consultancies which smart aggressive strategic procurement professionals could consider.  It is a very rewarding experience.

4. Sales.  In my previous post I mentioned that all of us are very good salesmen or we won’t be successful in negotiating or securing that last production quota.  Companies like to know how procurement think so that they can adjust their selling strategies ahead of time.  I have seen time and time again where procurement professionals joined the sales force because of the wealth of experience they carry.  You just have to figure out what kind of companies you want to get into.

5. Public Sector.  Well, this is not exactly a different category, but with increasing scrutiny over how our government is spending and the pressure from public policy watch dogs, this is an area worth investigating.  Not everyone has the stomach for opportunities like this.  Nevertheless, the screening criteria is fierce.

Obviously there are other possibilities out there.  If you know of any, do share!

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On Measure Me This, one of the many measurements of procurement people is how much cost savings we can bring to the company.  Another common scorecard item is how much of the overall spend we get ourselves involved in.  It would make us redundant if we deliver fantastic results but over a very small fraction of the entire spend is unaddressed.   There  is of course a distinction of in-scope or out-scope spend as identified in almost every procurement policy in most established global companies, but we as strategic procurement professionals always strive to push that boundary further.

The key is whether we can add value.  There is no point of getting involved in things that we will only drag down the process.

If we are convinced there are value-adds to bring to the table, we need to bring our strategies, similar successful case studies, potential solutions as well as our execution plans and knock on our internal customers’ doors.  That is very much like a salesperson. 

I recently came across an article on CPO Agenda (CPO stands for Chief Procurement Officers, an executive role that is gaining prominence over the last decade), “Face it, we are salespeople” by Paul Snell, which includes a quote from Roy Anderson, CPO of financial services firm State Street.

“… the ability to implement change was primarily down to the staff you employed.  Do you have people in your organization who are intelligent enough and confident enough to drive change and can be the authority in that category?…”

“… do your staff have the skills to explain change and innovation throughout the business?  They might be a great negotiator or market analyst, but for this, they needed to communicate and sell.  Face it, we are salespeople.  Procurement is definitely long gone.  We sell concepts to internal customers, we sell to our supplier base to be more innovative in their solution set and we sell to the internal customers to explain what the changes need to be…”

Personally and especially in this part of the region, I am seeing very few procurement professionals who do this well.  They are either too boxed-in to their comfort zones of negotiating and bidding, or way too customer oriented that they end up being “corporate servants” which they do not deserve to be.  Striking the balance is a lot harder than it looks, and therefore whenever I hire in my specific area of strategic procurement, I look for these soft skills which are much harder to be groomed comparing to product knowledge or negotiation techniques.

If you are interested, more of Paul Snell’s articles can be found on his blog

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The American dollar is so weak right now that it makes me think twice about traveling abroad.  Hong Kong dollar is pegged to the USD meaning that as long as I stay in between these 2 places, I shouldn’t be too less well off.  Wrong.  The recent quantitative easing round 2 by the Fed is pumping $600 billion artificial money into the US economy to stimulate business and creating jobs.  It however has a gigantic ripple effect to the global economies and I can already see huge inflation in this region ranging from grocery to property prices.  With all these uncertainties in personal purchasing power and a could-be volatile stock market, I better be more cautious about my vacation traveling plans.

Like most people I love to travel.  I particular have a thing for traveling on company trainings.  No I am not attending training seminars, but delivering them.  I never knew I had this passion of being a trainer until I was in consulting and a big part of my job then was to teach corporate clients how our reverse auction applications work.  Usually these are one to two-day workshops with not only technical transfer but also strategic procurement contents.  Then soon after I was asked to deliver purely knowledge courses specifically on the topics of strategic procurement, commodity and supply market positioning, project management and communication planning, negotiation skills, opportunity assessments, and the list goes on.  These trainings are by far the most fun and rewarding because they are highly interactive and engaging.

Conducting trainings is not all about getting messages across.  I see incredibly talented professionals who cannot present themselves or their ideas across precisely, not alone chairing workshops.  Making use of a room full of industry experts with varying levels of expertise and experience is exciting and challenging.  I love the challenge and I love to turn the floor over to get more participation.  It’s the sure-fire way to get everyone in the mood from just another boring seminar to one candid sharing and learning sessions which is about them and not about me.

I travel to many cities of Mainland China, Taiwan, Singapore, Thailand, India, Vietnam, Philippines and Korea to deliver trainings and I get excited every single time.  The people are different every time and if you add-on the different industries and cultures to the equation, I have to constantly adjust myself to make sure the scale is even.  It’s about playing the part well and playing the part based on people and circumstances that you can hardly prepare for until you are at the training hall at 8am.  It’s like waiting for the curtains to open and you have no idea whether the audience is a bunch of 80 year olds or die-hard heavy metal rockers.

Put yourself in my shoes for a moment.  What would you do if you find your training audience:

1. Dozing off

2. Seemingly bored and kicking himself thinking why he was forced to come in the first place

3. Extremely argumentative and outspoken which is interrupting  the progress of the class

4. Stone faced and authoritarian, maybe even feeling insulted from listening to a younger trainer

5. Fiddling with his blackberry or laptop the whole way through

6. Receiving and making calls as he pleases

Sounds fun huh?  Remember these are not school kids.  They are on average in their 30s to 50s and rank high in their organizations.  They usually come together as a team so the leaders may want to exert their authorities throughout the training.  Similarly the subordinates are shy to speak up with their bosses in the room. 

I’ll let you ponder over the above scenarios for a while and please share your comments with me.  I shall continue with my stories of each of these scenarios in my later posts.  So stay tuned…

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Negotiation skills in my opinion are nothing too technical.  Sales people today are already well prepared for intensive bargaining by the buyers and sometimes even the users themselves.  I refuse to believe that we achieve fantastic results because of our expert negotiation skills, unless we are talking about business partnership deals where there are lots of variables to trade mutually.  The latter takes strategic planning, homework and role-playing.

More often than not,  the users or stakeholders do not even know what they want in the first place.  They are confused over why they need what they are buying.  In turn they end up buying things expensively, and sometimes even buying things they don’t need.  It sounds silly, but also ironic that it appears the more “educated” people make more of these mistakes – just because they think these trivial matters are just not worth their valuable time.  Well, that’s why I am paid to help them.  I often spend a considerable amount of time interviewing my users and find out what is the current stage and where they want to go from there.  They will usually have some strong ideas about what they want to buy or may have received proposals already from suppliers.  I help them pin down to what are the necessities and what are the bonuses.  I try to put a limit to customized  requirements in hope to broaden the supply base from a few niche players to a more commoditized market.  This may not be practical at times and I may actually approach it the other way round and look for players that provide me with solutions rather than cookie cutter off-the-shelf products.  This takes experience and I of course need the help and expertise from the users as well.

If you keep asking questions like a 5th grader, you are already half way toward success.

 Pinning down what we want and identifying our true needs is quite a significant milestone.  Sales people love ambiguity because they can pad hidden costs and allowances into their product offering.  I want transparency, accountability and fairness.  With these simple principles, it does not take a genius to drive pricing down.

Some of my colleagues use good old traditional “threat” as their negotiation tactics.  I respect everyone’s individual negotiation styles, but it’s just not my cup of tea.   Today’s suppliers can be larger and more powerful than my employers.  We may actually need to depend on them though we are paying the bill.  When I pick people in my field of strategic procurement, I always go for talents who have expert communication and problem solving skills.  Critical thinking is a must.  The low hanging fruits are long gone, and we are presented with new unprecedented and complex problems.  I need  people who are fast learners, innovative and eloquent.  I used to be told that people who possess these qualities will put procurement jobs as their last resort.  True.  Good people are in demand everywhere.  However, just because such qualities are so rare, they can become truly niche players in the field, and the opportunities are endless.  To raise the bar and professionalism of strategic procurement is partly the objective of me starting this blog.

Cheers!

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It’s not like we are devious.  Yes we get measured by how much cost savings we achieve for the company, and that’s what the company hired us for in the first place.  Some people, however, are just plain reckless.  Just because it does not come out of their own pockets, they would just spend it out on anything imaginable, perhaps as compensation to their perceivable below market pay or uncalled-for bullying by their bosses.  If only everyone treat the company’s money like their own, we would be jobless.  Oh yes, thank goodness we have you guys around.

So if you come to me complaining about worsening business traveling perks, I hate to break it to you, you are just so behind the times.  In this day and age of diminishing revenue and profits, top management has already been cutting traveling and operating expenses long before any procurement people was born.  It’s all top down.  It’s all policies.  They want to take away your printers.  I don’t even give a damn.  We are just so lucky to be the ones executing the policies to keep our jobs, and so stop complaining about how underprivileged you are.  Grow a pair and stop whining.  At least you get paid.

Those who protest against procurement people having special treatments and getting themselves upgrades or even freebies, get proof and report them to management.  Don’t let them get away with it.  They are the ones who hurt our brand and community and I don’t want any of them smearing my name.  Procurement people should assume the highest ethical standards because aside from technical skills and subject matter expertise, credibility, impartiality and ethics are the only pillars of who we are.  I fight for my company and my users / stakeholders.  Despite drastic budget cuts by top management, I strive to get the best value for the diminishing dollar.  If I am not doing my job right, the matter could be a lot worse.  In today’s markets of ever-increasing inflation, avoiding price increases or maintaining buying power is as important as getting discounts.

I hate to break it to you, these are challenges of procurement perhaps 10 years ago.  Every major company is done with cuts in traveling expenses, IT budgets, or office equipment spend.   In order to keep meeting ongoing cost savings targets summing up to millions of dollars per year, we have to continue looking for new and un-ventured areas for cost savings opportunities.  Business process outsourcing, recycling, above-the-line marketing buy, consulting, transportation, training, headhunting, health coverage, energy and utilities, professional memberships, private clubs, event planning, leases, corporate cards, and the list goes on.  I even once led a project in India selling company owned condos using reverse auction tools, for cash.  In another scenario I sold off tens of millions of dollars worth written-off customer debts to investors for immediate cash benefiting the company.  I go where the money is, period.

So you now get a better picture of how I am measured.  Like any salesmen, I need to deliver a set upon ROI (Return of Investment) to my employer.  Hypothetically, if I am paid a million dollars, my job is to help the company save at least 7 million.  In this case, the ROI is 7 fold.  Of course, there are procurement colleagues whose jobs are to process purchase orders and ensure timely receipt of goods and services.  They are equally important and they shall be measured a bit differently.  I am, however, more specialized in running projects that require more strategic planning and the collaboration of multiple stakeholders, and more often than not, extremely powerful suppliers.  I need to make sure my project outcomes are implementable across the region, but I am expected to keep building a cost savings pipeline to meet my targeted ROI.  That means I also need to convince my fellow procurement colleagues to support my initiatives and in turn help me implement the change in respective local markets.

If you look at it this way, I am very much a sales person as well.  I need to be humble, open, a good listener, resourceful, efficient, a good communicator, and entrepreneurial.  Better yet, my results are completely measurable.  In my opinion, these skills and attitudes will soon become the pre-requisites of strategic procurement professionals everywhere.

Next time when you have the honor to run into a procurement person, try to see which breed they are. 

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It’s not an easy word, or at least it’s not a word that you will use in your daily life.  I do not hear friends saying “I’m going to procure for furniture tomorrow for my new apartment.”  So it’s not surprising when it was like 17 years ago when I just started working as a distribution officer for the China lubricants team in Shell, my colleague had to look the word “procurement” up in his Oxford dictionary.  Yes folks, there wasn’t Google then.

Turned out there was this young (but still older than myself at the time) executive whose title is procurement manager.  My colleague was embarrassed to go to this manager for a description of his title so he started to make fun of his search results.

“Hey it is something about prostitution!” 

Well we shrugged about it because we both knew Shell wasn’t into the China prostitution business, but it shows how alien we were to the word particularly as a second language.

I still remember my boss at FreeMarkets (now Ariba, a spend management consultancy) talked about increasing the awareness of our profession by putting more spotlight on the buyers.  Why? 

“Who wants to grow up to become a Buyer?”  The teacher asks.

I cannot imagine anyone would have raised their hands.  We are no policemen, firemen or doctors.  No one studied or aspired to be one of us, at least in my time.

I had been working in the oil and chemical industry for about 6 years after school and my last job was a regional business planner for the adhesion industry business unit of ExxonMobil.  I was working 16-hour days crunching reports, tabulating stock inventory while heading the Hong Kong office safety committee which was a very worthy cause but extremely time-consuming.  I was too stretched and wanted to try something new.  I naturally looked at similar business analyst jobs and applied to a few from the weekly Classified Posts. 

The interview was smooth but I didn’t expect to get a call from HR a few days later saying that the lady whom I interviewed with had me in mind of another post in her department.  HR told me it was actually a more senior post.  Sensing my hesitation and disbelief over the phone, I was invited to go for a second meeting with the lady boss.  Turned out she was the Asia head of operations procurement, and she wanted to mentor me as the next strategic procurement manager in her team.  The business analyst role that I applied for was already out of the picture.

“Why me?”  I obviously had no prior experience of the subject and the words strategic procurement meant nothing to me at the time.  I only remember one of the reasons she provided was that she thought I was very “articulate” and would be a perfect candidate for the role.  It was like riding a bicycle, or learning how to swim.

I have to say, now that I am 10 years into this,  it’s not exactly rocket science either .

And that was the beginning of my days with Agilent Technologies (a spun-off from Hewlett-Packard), the birth place of my procurement career.  This Director still remains to be one of my most respected mentors to date.

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