CPOs around the world may have some sleepless nights in 2015 as they defend themselves and their companies against powerful disruptive forces.
In the true spirit of social media, I’ll highlight just five of these disruptive forces and have created the convenient “METOO” acronym to cover – Markets, Ethics, Transparency, Optionality and Organisational alignment.
2015 is the time to make sure you have your bases covered in these areas:
Markets – We would be naïve if we didn’t expect more market volatility in the coming year. In 2014 we saw interest rates remain low, the Rouble depreciate 50 per cent, the Australian dollar depreciate 20 per cent, oil prices drop 50 per cent, iron ore prices drop 40 per cent and Chinese growth at its lowest since 2009. As we are all exposed to the instability of global markets, CPOs will need to decide how to either protect or profit from this volatility.
Ethics – Some leading global retailers had their public reputations shattered last year with revelations about unscrupulous and bullying behaviour towards their suppliers. CPOs will need to have a clear conscience that they are using squeaky clean negotiation techniques and are taking demonstrative actions to ensure their team, and the entire organisation, has a healthy and ethical approach to managing suppliers.
Transparency – Discovering that one of your third or fourth tier suppliers is involved in corruption, using child labour, unsafe work practices, or substituting lower quality ingredients or parts will be the stuff of nightmares for CPOs in 2015. A focus on supply chain transparency will see a whole lot of quality assurance consultancies, and other intermediaries, busy in this booming sector of the services economy. As one of my mentors has always said, “better to know you’re right, rather than hope you’re not wrong”.
Optionality – Talking recently with a federal government defence advisor and the CPO of a leading European telecommunications company, really brought home to me the dilemma of developing and managing suppliers as we move to operating in an era of the “Internet of Things”. More than ever, we are actually buying technology more so than the actual product or service (think driverless mining trucks – we’re really buying the technology to manage and maintain these vehicles, more so than the trucks themselves). As technology increasingly becomes the product, we need to keep our options open in order to take advantage of the frenetic pace of change. Our tenders and contracts will need to more broadly define the functionality and utility we require of a product or service, rather than the exacting specifications we know today. We will also need to ensure we keep our minds, doors and sourcing processes open to engage new suppliers with break-through technologies. With most contracts being around 3-5 years long, CPOs will need to build optionality into their contracts to ensure they have the agility and can be opportunistic in adapting and adopting new technologies.
Organisational alignment – Procurement teams today are well-versed at “finding the money” and negotiating great deals that should result in bottom line savings. That’s 101 stuff – our traditional raison d’etre . The trickier challenge has always been to “keep the money” and make sure that contracted savings actually make their way to the bottom line. Today’s CPO has to work harder than ever to make sure “everyone is on the bus”, utilising negotiated contracts and treating every dollar as if it were their own. Creating cost-conscious cultures is a huge change management exercise that requires a vastly different skill-set from the CPO’s traditional tool kit. This challenge, teamed with frequency and voracity of carpet-pulling and direction-changing that will go on in the boardroom and C-suite this year, will require a lot of creative thinking and schmoozing by leading CPOs.
Anyone need a Xanex? (Is that a sleeping tablet?)
If you agree with my thoughts or have want to comment on the forces impacting procurement in 2015 – please tweet #metoo #bigideas @taniaseary or just respond “me too” on LinkedIn or Procurious.