In my pervious post here on the ELP blog, I examined how improving  imposing policy, process, and system changes to ensure compliance is the second most prioritized supply management strategy for the next 24 months, as reported by my recent survey of nearly 300 supply management and business executives. I also shared insights into how Qualcomm had leveraged new regulatory and competitive pressures to securing funding and support for improvements in these areas.

Today, we'll conclude this compliance tale by looking at Qualcomm's approaches for launching and expanding its contract lifecycle management (CLM) initiative.

While Sarbanes Oxley Act and litigation helped speed alignment for contract standards and systems, Debbie Adams, Senior Project Manager at Qualcomm, identified the following as critical success factors:

• Independent project management: Adams and the contract organization were not tied to any one team or IT. Instead, Qualcomm aligned the contract management group and initiative with an influential sponsor: corporate legal. “Having the General Counsel driving this initiative really helped get the businesses in line,” says Adams.
• Strong relationship and capable software tool: “Ensure that the [CLM] solution provider you select is configurable to your company’s processes and that your solution provider is responsive to your enhancement requests.”    
• Consensus through Steering Committee: Qualcomm drove and maintained support for the contract management initiative by ensure that all business units and multiple functional groups had input into the program structure and improvements. “We realized that people would be much more likely to support [the program] if they have a voice in it.”
• Mentor power users: Qualcomm’s contract group trains and advises power users within each business unit to speed responsiveness to stakeholders and alleviate pressure on the primary enterprise administrator. “Internal customer service and support can make or break a program’s success,” says Adams.
• Centralized oversight with decentralized ownership: Qualcomm’s contracts group and steering committee provide program vision, contracting and process business rules, system management, auditing, and training. They also manage the relationship with the company’s CLM solution provider. Leveraging the visibility and controls of the CLM system, Qualcomm affords business units and functional stakeholders the latitude for decentralized data entry, contract administration and management, unique reporting, contract negotiations, and customer and supplier relationship management. “We put a reliance on internal customers to provide the functional expertise to provide the unique language and terms required to ensure best value agreements that limit risk to the company,” says Adams. This “center-led” structure is becoming more popular, thanks to the visibility and control afforded by improved information management and reporting. This organizational structure has been examined in previous Supply Excellence posts.
• Audit and measurement: Qualcomm ensures corporate goals and system adoption through standardized and periodic auditing and measurement. Adams says such standards also help Qualcomm quickly report on overall program performance and benefits.

Moral of the story: the quickest way to get a contract or supply management initiative or technology investment funded is to attach it to a crisis. For Qualcomm, SOX and patent litigation were crises senior management and frontline employees could rally around.

Is there a crisis that you can use to curry support, resources, and budget for supply management initiatives at your company?

The first phase of supply management improvements focused on developing new processes and deploying Web-based tools to automate existing processes and to identify cost savings. The current phase is all about compliance.

That’s why imposing policy, process, and system changes to ensure compliance is the second most common supply management strategy, as reported by my recent survey of nearly 300 supply management and business executives. (Improving spend visibility was the top strategy. See my post on this subjec here. And get the whole Top 5 list here.)

To be sure, compliance is a broad and overused term. The types of compliance that keep supply managers up at night come in three flavors:

1. Supplier compliance – are suppliers complying with agreed upon pricing and service levels?
2. Regulatory compliance – are my company’s supply decisions, reporting, and procedures compliant with the changing array of financial, operational, and environmental regulations?
3. Operational compliance – are my supply team members, frontline requisitioners, and partners complying with corporate goals, supply contracts, and buying procedures?

Considering that more than 70% of supplier relationships are governed by formal contracts, improving visibility and control of contracting and contract management activities has become the chief compliance initiative for supply organizations.

Just ask Qualcomm. Pressures to respond to internal audits, support Sarbanes-Oxley Act compliance, and mitigate litigation drove this leading provider of digital wireless communications devices to launch a contract management improvement initiative. Debbie Adams, Senior Project Manager at Qualcomm said “corporate goals, such as SOX compliance, really helped accelerate and expand our original program into a company-wide initiative.”

Qualcomm adopted a contract lifecycle management solution from Procuri (my current employer) to automate and standardize the contracting and contract administration process. Initially launched as a divisional project in 2003, the program took off when the company transitioned to a hybrid contract management model.

Under this “center-led” model, the following activities were centralized under a common contracts group: program vision, business rules, steering committee ownership, CLM solution and vendor management, record auditing, and training. Data entry, contract administration, reporting, contract negotiations, and supplier relationships are managed by more than 600 employees in various functions across multiple business units. All contracting and contract admnistration and compliance activities are managed and monitored through the CLM system.

Today, Qualcomm uses a common CLM system to manage over 30,000 contracts — from basic supplier product and service contracts to complex customer, partner, and intellectual property agreements.

Tune in my next post here on the European Leaders Network Blog to learn Qualcomm's secrets to successfully launching and expanding a contract management and compliance program.

For those of you with a memory for UK politics, ‘back to basics’ was a somewhat poisoned chalice for John Major’s leadership campaign in the 1990’s, but it’s a theme I thought would be appropriate for the notion of talent. Yes, procurement’s most perennial issue.

Attracting the right people has been a challenge for traditional buyers, and it has taken the considered approach to go back to definitions to make the function more appealing.

Surpassing the transactional purchasing role, procurement is now more aligned with strategy and has a clear vision up the corporate ladder. Of course aimed to better identify the scope of the job, it’s also a good lesson in covert branding, acting as a net to capture the right people.

But it’s not just getting the people I want to address. It’s also the retention, and that draws me to a key basic; training.

I have no doubt the ‘talent’ is out there. Possibly sitting in your very office. But, are people getting the right investment? Do those at the top really recognize the need for training? And, where do you really go to get it?

ELP Magazine recently published an article on The Skills Gap, the upshot of which refers to the point, ‘poor procurement costs money’. Anyone thinking training costs are high would be wise to look at the costs associated of people not doing the job properly.

As another reference, I would point you to Tim Minahan’s post at Supply Excellence that outlines some of the findings from Aberdeen’s recent CPO research, in short "Today’s top supply risk is recruiting and keeping top talent". It’s a recurring theme.

Of my own observations it is interesting having spoken to many CPOs that there is not one recognized training centre, programme or body. And it begs the question why the main institutes, for example the BME in Germany, or CIPS in the UK, haven’t formed a united European programme that can be adopted by everyone………..just a thought.

I just returned from an 8-day visit to India organized around the theme The Future of Work. We traveled with a group of  executives from North America of which many were from the areas of talent sourcing and HR. The visit was organized by the Human Capital Institute in Toronto and DNL Global in Dallas. It was fascinating even for one who grew up in India. The delegation visited the EDS BPO center, Microsoft’s largest development center outside Redmond, various schools and attended the National HR Conference on the Future of Work.

What does this have to do with Procurement, you ask? The operative word is ‘sourcing’ as in sourcing of talent. This word seems to have entered the HR vocabulary as a broad substitute for ‘recruiting’. I like the usage. It implies having to actively search for a source of a company’s primary asset – its people – rather than simply greeting them at the front door when they apply. Sources are increasingly diverse – internal markets, passive candidates, alumni, overseas workers, headhunters, contractors, free agents, staffing firms, part timers, shift workers. It seems logical to think of recruiting as, at least, partly a sourcing activity.

Notes from the trip:

• The central equation of employment has changed, perhaps forever. In the old equation, employees offered their loyalty in exchange for security. Now they offer their talent in exchange for meaningful opportunities. This is a Daniel Pink (“A Whole New Mind”) observation and oft quoted at the conference in New Delhi. I believe that sourcing this talent will go far beyond traditional notions of recruiting. It will extend to the redesign of jobs to maximize their appeal to the knowledge workers everyone is trying to attract.
• Anything that can be done at the end of a wire will probably be outsourced sooner or later. This includes voice and data dependent processes. We visited the bustling EDS/Mphasis BPO center in Mumbai. The range of outsourced processes handled here has grown far beyond simple call center support. Work increasingly doesn’t have a specific location.
• What’s good for the goose... Many firms that previously spent huge amounts on third party outsourcers are setting up their own captive offshore shops in India and other low cost locations. This is putting a huge premium on attracting and retaining the right types of workers. Turnover in some places runs 60-70% a year and some multinationals are resorting to mutual non-poaching agreements to stem the tide.
• Progressive companies are creating positions such as ‘Chief Talent Officer’ to acknowledge the changing nature of HR. One such executive from a major multinational pharmaceutical firm was traveling with us.
• Microsoft’s largest development center outside Redmond is in Hyderabad, India. We toured the beautiful campus with its pristine buildings, a standout in the Hyderabad landscape. No formal office hours, people in the gym mid-morning, energetic people everywhere - a lot like what you’d expect at a startup. This type of energy was typical at the places we visited; a palpable sense of excitement at the possibilities that the country is just discovering.

Whilst reviewing the latest edition of World Business, I was pleased to read Noshua Watson's article about a low cost supplier who has got their CSR programme right. MAS holdings is $650 million dollar apparel manufacturer based in Colombo, Sri Lanka, supplying the likes of Nike, Gap, Marks & Spencer and Victoria ’s Secrets.

MAS have set the standard for compliance in the apparel industry by developing 'Women Go Beyond', a programme to educate and empower its 92% female workforce.

At each of its sites the Go Beyond champion is required to offer English, IT and financial management, and any other offerings that fit within the framework. “Go Beyond helps individuals enhance their own skill set and empowers them to feel that their careers are not limited to stitching a garment,” says Deepthi de Silva, director of human resources. “It gives people the ability to take more responsibility and make more decisions on behalf of the company and customers.”

MAS provide transport to work, free meals, and on-site banking at all plants and base operations near villages so that workers do not have to leave their families and move to the cities. Additionally the business has a policy of not employing people below the age of 18 and restricting the business week to 60 hours in their factories.

The company has seen double-digit annual growth while avoiding the sweatshop conditions and spending 3%-4% of costs on employee and philanthropic programmes. Leading brands have turned to MAS to protect their margins and reputations, by avoiding the stigma of being involved with unethical suppliers which could tarnish their brand.

With all the negative press low cost suppliers get about their work practices it is a refreshing change to hear of a supplier in the developing regions investing in such good practice and being rewarded for it. I am sure the procurement community would much prefer all suppliers have such a high level of ethical consciousness, wherever the geography.

By now, what I once coined “Corporate America’s dirty little secret” is a secret no more. Poor visibility is as pervasive as Janet Jackson; and it’s wreaking havoc on supply management performance everywhere from L.A. to Tokyo.

Lack of visibility into timely, detailed, and accurate spend data limit spend leverage, hinder compliance, and cause supply managers to develop sourcing and supplier strategies in the dark. Throw in tightening supply market dynamics and tougher scrutiny from CFOs and regulators, and the spend deficiency syndrome is now more exposed than Miss Jackson at halftime.

Considering these factors, it’s no surprise that the nearly 300 supply management and business executives participating in a recent global survey listed improving visibility into timely and accurate spend data as their top initiative for the next two years.

I’d like to share a true story of one company’s journey to spend intelligence. For the purposes of this story, the company, whose name will be protected to avoid divulging their competitive edge, will be referred to as Global Tech Co.

Once upon a time back in the last century, Global Tech Co.'s IT leadership assured the supply management group that the spend analysis challenges would be resolved when the company standardized on a common ERP system.

After the fact, the supply team quickly realized that ERP systems are built for high-level financial analysis and lacked the detailed, line-item attribute data needed for meaningful spend analysis. For example, ERP standardization reaffirmed what the supply team already knew – Global Tech Co. spent a lot on hardware. But the ERP data didn’t help commodity managers determine how much was being spent on high-end SPARC stations versus laptops. Nor could it shed insight into whether these items were being bought for development engineers or office administrators.

Global Tech’s next strategy was to assign standard part numbers to the items it purchased. This led to a proliferation of part numbers as well as differences within the part numbers. To continue our example in the area of hardware, part numbers were difficult to assign due to different models and configurations.

Global Tech’s next move was to dump spend data into a data warehouse with a snazzy reporting tool on top. This allowed the supply team to slice and dice spend data and create reports to impress their boss and friends. However, this approach still didn’t solve the core symptom: Global Tech lacked spend data detail that could support accurate classification and meaningful analysis. (Garbage in, garbage out, anyone?)

As a result, the supply team spent their time pulling spend data from the warehouse into spreadsheet pivot tables so they could sort it by attributes. But with key detail – like processor speed or memory – buried in the description, this information was hard to dig up. This lengthy and labor-intensive process forced Global Tech to continue to conduct spend analyses on a project basis. Worse yet, time and resource constraints limited analyses to Global Tech’s big-ticket spend categories.

Finally, Global Tech Co. adopted a solution that automated spend data extraction, classification, and analysis. Through the use of a business-rules engine the tool rapidly accessed and evaluated the line-item spend attributes and classify these to a common schema.

This automated attribute-based classification gave Global Tech the detail required for meaningful analysis, enabling the supply management team to improve spend leverage and develop informed sourcing and supplier management strategies. For example, the company has been able to change its hardware buying policies and practices, assigning approved hardware types and configurations for each role in the organization. (No more SPARC stations for the receptionist!) It also uncovered more spending power, such as hardware purchases that had been misclassified under office products.

Such insight and detail enabled Global Tech Co. to achieve additional 5% - 15% cost savings – depending on the spend category – through improved spend leverage, supplier rationalization, and new buying rules.

This automated spend intelligence approach enabled Global Tech Co. to be more systematic about spending analysis. The company auto-refreshes 100% of its spend data pool on a monthly basis, arming its supply team with the intelligence required to make and execute informed sourcing and supplier strategies across a much broader portion of Global Tech’s spend.

The moral of this story (in case you missed it) is that even if most of your spend data is captured within your ERP system (for it won't all be there), unlocking the secrets of that data requires you to access and make sense of more detailed attributes of your spend. This requires having the proper, knowledge-based tools to extract, cleanse, classify, and enrich spend data at a detailed level – all on a repeatable basis.

To hear first hand how one multi-national company -- Alliant Tech Systems -- has tackled the spend analysis challenge, tune into a live webinar, Wednesday, December 6th at 11:30 a.m. EST. Click here to register.

Check back here for ongoing commentary on the Top 5 Supply Strategies identified by supply management executives.

In my last ELP blog post, I reported the top challenges to success cited by 300 supply and business executives. Topping the list were continued pressures to reduce supply costs, new scrutiny for better compliance, and heightened supply risks.

Below are the Top Five Supply Management Strategies executives said their companies would implement within the next two years. I have also listed the approaches executives will use to achieve each strategy:

1. Improve visibility into timely & accurate spend data: Adopt technologies to automate spend data aggregation, classification, enrichment and analysis.

2. Impose policy and process changes to ensure compliance: Align metrics and incentives to support compliance goals. Automate contracting and contract administration processes.

3. Adopt technologies to enhance strategic sourcing performance: Adopt or extend technology to automate the complete strategic sourcing lifecycle, standardize processes, enhance knowledge transfer, and enable best-value negotiations and awards.

4. Adopt technologies to improve supplier performance management: Standardize metrics and automate supplier registration, performance scorecarding, and corrective action or improvement plan management.

5. Transition to centralized or center-led organizational structure: Establish cross-functional and -divisional teams, leverage category or process centers of excellence, process and policy standards, coordinated metrics and incentives, and an integrated supply management system infrastructure.
 
In the coming weeks, I will issue a series of posts that examines each of these strategies in more detail and review real-world examples of these strategies in action.

In the interim, ELP readers are encouraged to learn about these initiatives first hand from industry experts and experienced practitioners in the Top 5 Supply Strategies Web Seminar series. Tune into the first series this week to hear supply management executives at Alliant Tech Systems share their secrets on Jumpstarting Spend Analysis Success. Get more information please click here .

Reducing supply costs remains the top challenge and focus for supply management executives, according to a survey of 300 supply management and business executives. Cost-cutting angst has been fueled by the long-held run up in energy costs and the inflationary issues it sparked. Economists expect that the recent downturn in fuel prices will take months to show up in lower supply costs. And news that OPEC could curtail production could cause another run up in oil prices right before the holiday shipping season and the home-heating crunch.

Confusion over the future of supply markets was evident when the Institute for Supply Management (ISM) released its latest Manufacturing Business Survey earlier this month. The survey of supply managers provides an aggregate index of orders, inventories, supply prices and availability. The index was down to 52.9, indicating that the economy was expanding, but at a slower rate. Supply managers continued to report price increases and supply constraints for key commodities, including copper, plastics, electronic components, and chemicals

I sat down with Norbert Ore, Chair of ISM’s Manufacturing Business Survey Committee, last week, in part to better understand future predictions for supply prices and markets. Norbert said, “It’s just too early to tell. Changes in fuel prices take months to impact [commodity] prices and manufacturers are unsure whether fuel prices will stabilize. Most inventories have been worked off and [suppliers] have been more cautious about building up inventories.” Upshot: Commodity prices will remain inflated until the energy supply stabilizes.
 
However, driving compliance and managing supply risk as challenges were the fastest-growing challenges reported by supply management executives. Compliance pressures have increased in recent years due to heightened financial and environmental regulatory scrutiny (e.g., SOX, RoHS, WEEE, etc.) and CFO’s tougher stance on measuring cost savings reported from strategic sourcing and supply management initiatives.

Supply risks have grown in tandem with the increase in globalization and outsourcing, both of which have expanded supply chains and introduced new challenges in the form of governance, visibility, and compliance. Mark Hillman, AMR Research’s supply risk czar, reports that supply chain risk management is emerging as a dedicated focus at many enterprises. In his recent research, nearly one-third of supply managers said their companies have dedicated budget line-items for supply chain risk management, and 54% expect spending on resources and technology to monitor and manage risks will increase this calendar year. (Hear Mark's predicitions and advice on supply risk management in an exclusive podcast by clicking here)

In the survey, sponsored by Procuri, Inc., respondents also rated securing executive support for supply and contract management initiatives among the top challenges they face today. Luckily, Dave Anderson, partner at Supply Chain Venture and former head of Accenture’s Supply Chain Management consulting practice, has shared tips for developing the perfect business case for any supply management initiative – whether it’s securing new category experts or deploying sourcing automation.

ELP readers can access a complimentary copy of Dave’s white paper on How to Make the Perfect Pitch by clicking here.

Check back here soon when we identify Top 5 Supply Strategies supply management execs have prioritized for the next two years.