Supplier and Contract Management Sourcing and Category Management Procurement Role and Metrics Organization and Culture Cost Risk and Innovation

The IPSERA 2018 conference started during the festivities of the Greek National Independence Day. A sunny day in Athens, still a bit fresh but with spring in the air. That was a distinct and very welcome difference from the bleak season in the more Northern European countries. (April is the cruellest month – breeding lilacs out of the dead ground. T.S. Elliot, 1922).

IPSERA is the International Purchasing & Supply Educators & Research Association. This year the conference was hosted in Greece and attracted some 200 participants. This blog selects some findings, mixed with other recent literature and some personal observations.

DISCLAIMER: The research presented at the conference can represent work-in-progress and hence I can at best draw preliminary conclusions. Moreover, those researchers would be cautious to see their names connected to this blog. Hence I mostly state findings from a more general perspective. For those interested: Google mentions approx. 20 publications on IPSERA 2018. Researchers presented over 140 papers.

ON THE FUTURE OF PROCUREMENT

From some papers it is clear that new technologies as the Internet of Things, digitalisation, additive manufacturing will have an impact on the procurement profession as we know today. (See also one of my earlier blogs). It will transform product supply chains. Currently zillions of containers traverse our oceans and continents to provide businesses and consumers with the latest. Additive manufacturing is already changing the spare-parts supply chains and will also affect finished goods supply chains. Procurement professionals must then source raw materials and consider Intellectual Property aspects when their organisation uses such materials to 3D print components.

So far KPMG and others have produced scenarios on the future of procurement. Louise Kight and Joanne Meehan discussed somewhat different scenarios developed with CIPS UK These scenarios are that either large corporations (Titans) will become the dominant actors in supply chains, with dependant suppliers mutually engaged in stiff competition. This would stimulate supplier innovations at a low price with purchasing focussing on cost. Another scenario is that negotiation power between buying organisations and suppliers (Networked) is more evenly distributed. For the sales or purchasing professional this would seem a kinder version of capitalism, but this scenario could also imply lower innovation levels.

ON SUPPLIERS AND INNOVATIONS

Several interesting papers discussed innovations from suppliers. Organisations that focus on their core competences often lack skills for innovations. Up to 80% of innovations in B2B relations may come from suppliers. A basic distinction seen during the IPSERA was on incremental versus radical innovations: this could have an impact on selecting and managing suppliers.

Another study mentioned that purchasing and engineering departments do not appreciate each other’s roles, and can have conflicting performance measures that inhibit collaboration on product development with suppliers. Also, R&D departments often take the lead without considering typical procurement aspects. This can limit an adequate level of competition with potential suppliers and decreases maneuvering room for negotiations.

Small suppliers could take a design role and can have an important role in pre-commercial public procurement projects with radical NPD. When such small suppliers have difficulties in scaling up, this could be supported by larger suppliers. A study on information exchange in buying – selling relationship sees a role for contracts, but much more for relational governance (cf also De Vries e.a, 2014). Another very interesting study investigated four different organisational models on how large manufacturing companies scout start-up companies from outside their normal supplier network. My guess is that we will see more on this bit of research.

WITH RISKS COME OPPORTUNITIES

Traditionally the focus of the procurement professional is (Van Weele, 2010, p. 55) on managing costs and risk, and adding value for the top line. (See Figure below). In industry practices this often translates into a strong focus on cost reductions, trying to minimize risk and trying to add some value. (See also older the CPO surveys of Deloitte). However with the current economic boom, Deloitte (2018) sees a shift towards also sourcing for innovation and value. Some of the research presented at IPSERA 2018 would (abeit indirectly) suggest that an entrepreneurial mindset (cf. Lumpkin & Dess, 1996) could become more important for the (senior) procurement professional who is confronted with radical supply chain changes, is involved with supplier innovations, or who tackles sustainability issues downstream.

Besides the commonly-used factors of risk taking, innovativeness, looking for opportunities with suppliers, factors such as motivation, ambition, persistence on a personal and group level could make a distinct difference. Following the construct of Lumpkin & Dess these latter factors could be coined as aggressiveness towards supplier markets. Nevertheless, a large part of purchasing professionals may still act in a more traditional role, as Klézl e.a. (2018, p. 12) also suggested from their analysis of 432 job postings on websites in the Czech Republic. This is in line with other IPSERA research suggesting that purchasers score high on Conscientiousness in the Big Five test.

Following the old saying Nothing ventured, Nothing gained (attributed to Chaucer, 1374), I would argue that procurement professionals should become more entrepreneurial. This is to the benefit of the organisation, the wider community, and also the procurement professional’s pay check.

ON THE FUTURE OF PROCUREMENT EDUCATION

The IPSERA gave us fresh insights into the PERFECT programme on defining a harmonised procurement curriculum. (See link for results). The complexity in our profession increases due to regulation, technology / digitalisation, markets, internationalisation, and networking. AND, we not only manage costs and risks, but also sustainable and innovative supply chains. This research conducted at several European universities suggests a set of new purchasing competencies. Hence the programme has identified key skills for good purchasing performance, and has developed a self-assessment test, a complete harmonised purchasing curriculum at the bachelor’s and master’s level, and some MOOCs.

Some important future procurement competences found in the research are: sustainability, holistic supply chain thinking, strategic thinking, technology skills, strategic sourcing, innovation sourcing, and process optimalisation.

Newly found interpersonal skills are passion and open-mindedness. (Needed to tackle our current & future challenges, I guess). The study will have an impact on teaching at universities (such as Hanze) who train procurement professional at a bachelor’s or master’s level. The closing event of this interesting programme is planned 15th of June at the Dortmund University of Technology, Germany. (Click here if you want to attend).

ON SUSTAINABLE PROCUREMENT

Some good news: a second revised edition of the text book Purchasing and Supply Chain Management with a Sustainability Perspective will appear later this year. (Keep an eye on the Routledge website). Together with the new ISO 20400 guidance on Sustainable Procurement this will help students and practitioners to move forward on this important aspect. (Click here for a free brochure on the ISO standard).

Related to this: at Hanze University of Applied Sciences we start a pilot with a scan and benchmark based on the ISO guidance with 10 regional organisations and with the Dutch Association of Purchasing Professionals (NEVI).

Research @IPSERA would suggest that factors beyond the control of the average procurement professional can inhibit effective sustainable procurement. (E.G.: infighting within MNCs; no governance in public organisation; no long-term commitment; no regulation; supplier market not ready; economic barriers). Again, besides the normal skills in project and risk management, we could need more entrepreneurial skills.

During one of the IPSERA days, I briefly visited a small Byzantine church in Athens. I was attracted by solemn hymns and found an amazingly pale blue ceiling with tiny stars. The Aberdeen Group (March 2008, 2017) and many others have found a positive relation between sustainability and company profits. Additionally, Professor Dan Krause had an interesting keynote including a reference to this topic. He paraphrased the observation of the late astronomer Carl Sagan: As a small planet, we are nothing but a pale blue dot. The above picture shows our earth and the moon from a distance of 1.445.858 billion kilometres. The picture was taken from outside our solar system, hence from outer space. (Source: NASA, 2018).

Additional to financial benefits of sustainability in business, there is a more philosophical stance to be taken. Together we are less than a pixel in a wide black ocean of space. We have nowhere to go to, and hence should preserve this tiny planet and the people on it. That is my basic rationale behind sustainable procurement.

Sustainability is a given for most business leaders and increases the complexity of the purchaser. From a scholar’s perspective, this tiny blue dot should be our unit-of-analysis.

Finally, some other pracademic titbits

* In 60% of buying projects, the buying decision is already taken before a supplier is contacted. This impacts the efficiency of a direct sales force.

* It is difficult to match innovative start-ups with large buying organisations. The organisation faces the dilemma to explore possible supplier relations and at the same time keep an overview of the bigger supplier market. (Dr Hervé Levengre).

* Application of big data is witnessed in assessing supply risks, sourcing & selection, spend management and decision making. (We are beyond the peak of the Gartner hype cycle).

* Our research needs flexibility at the theoretical level, and reproducibility at the practical level (Prof. Dan Krause).

* Small suppliers can have an important role in pre-commercial public procurement projects of radical NPD.

* Heard this one before, still good: Data without a theory is a nightmare (Kurt Lewin).

* There is no such thing as flawless research. (See also Krause, Luzzini, & Lawson, 2018).

* Peer reviewed A journals have an acceptance rate of 7%. (Hence the title of the self-help book: Persist and Publish).

* Pracademics (cf. Walker, 2010, p.2) are network brokers because they are exposed to both theory and practice. They create new channels to stimulate cooperation and communication between academics and industry. They need a solid industry experience and advanced academic research skills. It seems that procurement professionals and procurement academics can benefit from this role. It also has an entrepreneurial touch…

* One last question: What is the difference between a train driver and a professor? The train driver knows when to stop. (Prof. Arjan van Weele).

Keep posted. Enjoy spring — at least here on the Northern Hemisphere 😊

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