CPOstrategy – August 2019 by B2e Media

THE SIGNIFICANCE OF ETHICS IN PROCUREMENT AND S U P P L Y O P E R AT I O N S I s sue 5 / August 2019 / www.cpostrateg y.com

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Embedding procurement excellence Musbah Abu Jarad, Senior Vice President of Corporate and Assets Management Procurement at Aldar Properties reveals how he fully utilises procurement excellence

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Welcome to a packed August issue of CPOstrategy! Our exclusive cover story this month features a procurement transformation at Aldar Properties, one of Abu Dhabi’s leading property developers. We caught up with Musbah Abu Jarad, Senior Vice President of Corporate and Assets Management Procurement to explore how Aldar Properties utilises procurement excellence. Abu Jarad joined the business in late 2018 and did so at a time of procurement transformation for Aldar. “The procurement function within the company has evolved at Aldar from a cost function into a partnership function,” he says. “What this means is that we no longer look at suppliers as just suppliers to come in and provide services or goods and then leave. We look at them as partners, and ones who share our same environmental responsibility.” Over the last year, Aldar has invested significantly into its procurement function to define a clear strategic function. Elsewhere, we have a revealing interview with Sammeli Sammalkorpi, the co-founder of Sievo, the world’s leading company focused on procurement analytics, exploring how it achieves this through AI and a client-focused approach. Plus, features on ethical procurement, AI as utilised by CPOs and a supply chain masterclass with Gartner’s Frank Vorrath. And… our essential guide to all the best conferences and events from around the globe.

I hope you enjoy the issue!

EDITOR IN CHIEF Andrew Woods CONTRIBUTING EDITORS Dale Benton Kevin Davies CREATIVE LEAD Mitchell Park SNR. PROJECT DIRECTORS Andy Lloyd Heykel Ouni PRESIDENT & CEO Kiron Chavda

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5 WAYS IN WHICH AI IS DISRUPTING PROCUREMENT

28 THE SIGNIFICANCE OF ETHICS IN PROCUREMENT AND SUPPLY OPERATIONS

38 SIEVO

EXCLUSIVE SUPPLY CHAIN MASTERCLASS WITH FRANK VORRATH: PART THREE

76 EVENTS

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Frank Vorrath, Executive Partner: Supply Chain for Chief Supply Chain Officers and Chief Operating Officers, Gartner

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el McElroy, Sales Marketing Director oud specialists CranGroup

Dr. Marcell Vollmer, Procurement Influencer and SAP Aribaâ&#x20AC;&#x2122;s Chief Digital Officer

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EMBEDDING PROCUREMENT EXCELLENCE Dale Benton PRODUCED BY H ey ke l O u n i WRITTEN BY

MUSBAH ABU JARAD, SENIOR VICE PRESIDENT OF CORPORATE AND ASSETS MANAGEMENT PROCUREMENT EXPLORES HOW ALDAR PROPERTIES UTILIZES PROCUREMENT EXCELLENCE rom its humble beginnings in 2005, Aldar Properties PJSC has established itself as the leading real estate developer in Abu Dhabi and become one of the most well-known developers in the United Arab Emirates and wider Middle East region. The company is built on solid foundations, which emanate into each and every project it delivers. Aldar Properties continuously strives to better serve itself, its customers and stakeholders and achieves this by being both accountable and responsible for its actions. Aldar is a master developer and has been responsible for the construction of commercial and residential properties throughout the UAE and Middle East and so it is crucial that the company seeks out, fosters and develops key relationships as part of a vast procurement network. Musbah Abu Jarad, Senior Vice President of Corporate and Assets Management Procurement, believes that Aldar adopts a two-pronged approach to its procurement responsibilities. He describes his side of procurement as the “second wing” of this strategy. “Wing one for Aldar lies within the project and the development, construction and completion of a project handed over to the end user, while ensuring the highest levels of environmental sustainability,” explains Abu Jarad. “This is then where I handle

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Supporting ALDAR with their E xc lusi ve b u i l d .

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all the procurement-related activity from a post-handover or post-delivery perspective.” Abu Jarad points to a shopping mall as an example. Following the completion of construction and the handing over of that project to the end-user, Abu Jarad’s procurement responsibilities include marketing, media buying, event management activation of assets and communities as well as development. Abu Jarad joined the business in late 2018 and did so at a time of procurement transformation for Aldar. “The procurement function within the company has been evolved at Aldar from a cost function into a partnership

function,” he says. “What this means is that we no long look at suppliers as just suppliers to come in and provide services or goods and then leave. We look at them as partners, and ones who share our same environmental responsibility.” Over the last year, Aldar has invested significantly into its procurement function to define a clear strategic distinction between the purchasing abilities and duties of the project and development team and the procurement of asset management that Jarad and his team are responsible for. For Aldar, this segregated approach allows greater focus and control on purchasing and procurement that Abu Jarad feels is

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necessary to the growth of Aldar. “You have a full development team and then you have a central facilities management (FM) team or an asset management team who are all handling their own cost delivery,” he says. “So, we have, in effect, restricted needs within the culture of the department. This wasn’t within the procurement function before and it enables us to look at suppliers as more than simply partners.” Aldar’s investment into its procurement function mirrors a global move from procurement as merely a cost center or purchasing role to that of a more strategic and ethical driving force. “It’s not just about delivering a service or a project to an end user, it’s about making sure that risks are navigated, businesses are added, with environmental sustainability in mind,” says Abu Jarad. “It’s about adding best value to clients and making sure we are following best-in-class policies and procedures in a dynamic way that serves the business.” Abu Jarad continues to acknowledge the significant role of procurement and how it should operate in a way that understands and delivers on the notion that the business needs things to be completed quickly, dynamically, ethically and efficiently all the while operating 14

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“ I T’S NOT A ONE-TIME DEAL AND ALDAR HAS BEEN VERY SUCCESSFUL IN WORKING WITH SUPPLIERS WHO CONTINUE TO WORK WITH US AND HAVE PLENTY OF CUSTOMER RETENTION” MUSBAH ABU JARAD SV P C o r p o r a t e A s s e t s a n d Management Procurement Aldar Properties

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under different business requirements. Aldar’s broad portfolio encompasses commercial towers and school academies to residential properties and so there is a certain degree of risk involved when looking to redefine the way in which the company works with its procurement network. “There are certain elements that you can’t risk,” notes Abu Jarad. “Take schools for example. You cannot jeopardize the deadlines of education and the deadlines of being able to hand over the buildings. In order to cope with this, you must engage with the right partners that can support us, deliver on our standards and be side by side with us. In turn, we support them. This is something we look for before any

partnership is struck. It’s not a one-time deal and Aldar has been very successful in working with suppliers who continue to work with us and have plenty of customer retention.” What is it that makes a key supplier, one that Aldar will look to work with on a long-term basis? For Abu Jarad, Aldar has a few key requirements that the company looks for. The most important part for him is the supplier’s willingness to provide Aldar with best value. “Best value to us means the quality of service, the personnel and the product,” he says. “If we achieve success with a certain partner, we try to repeat it and try to engage with them on other projects. In some cases, we have an agreed w w w. cp o stra te g y. co m

“ W E TRY TO ALIGN DIFFERENT END USERS’ REQUIREMENTS AND WE USE THE SKILL FACTOR WE HAVE TO MAKE SURE THEY GET THE BEST OF THE BEST IN THE MARKET” MUSBAH ABU JARAD SVP Corporate A ssets and Management Procurement Aldar Properties

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exit plan in place. We are engaged in a long-term marriage of sorts, but we have agreed ahead of time the terms for conditions of divorce, if required.” Make no mistake, Aldar does not set out to break a relationship with a client, quite the opposite. Aldar works in a number of ways to support its suppliers and to maintain a working relationship on a long-term basis. Through regular assessments of agreed-upon KPIs and regular service quality meetings, Aldar seeks to benchmark its supplier performance with international best practice. This approach has seen Aldar retain key supplier relationships since its early days in 2015 and is something that Abu Jarad is keen to continue to deliver on as the

company grows into the future. Given its broad portfolio, Aldar is open to a number of different suppliers in the market, both internationally and regionally. The company utilizes free market agreements as it looks to identity strategic suppliers in which it can call upon these suppliers at any time when a project comes at short notice. “It saves a lot in terms of tendering time,” explains Abu Jarad. “When you have strategic suppliers and partners on board with w w w. cp o stra te g y. co m

you and ‘at the ready’ you can rely on them when needed. This continuity works for them and for us because it creates trust and a level of efficiency in completing projects on time.” For Abu Jarad, establishing this trust, continuity and best practice comes from within the company as part of a wider journey for excellence that Aldar is implementing. “We want procurement excellence to be embedded within the very DNA of the company,” he says. “It’s not just about being a cost mentor within each department. We are a team of around 38 people all from different backgrounds with different experiences. Collectively, our experience is so different but together it adds value. We can work with suppliers and stakeholders and show that we understand their requirements because we’ve walked in their shoes and understand the nuances of what they need.” Aldar has worked to centralize its procurement team as much as possible in order to better work with its suppliers and better serve its end users, while ensuring rigid sustainability measures on all levels. A centralized procurement function allows for a greater understanding of the markets and supplier performance based on that changing 22

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market. “End users aren’t working with suppliers based on macroeconomic reasons, they rely on their suppliers and don’t know how quickly the market can change,” explains Abu Jarad. “We try to align different end users’ requirements and we use the skill factor we have to make sure they get the best of the best in the market. A certain supplier might

Musbah Abu Jarad SVP Corporate Assets and Management Procurement Aldar Properties

Musbah serves as a senior Vice President of Corporate and Assets Management Procurement at Aldar Properties. Prior to Aldar, Musbah worked at ADNOC for seven years serving different roles, including leading the commercial team in the first international/ local company merge, ADNOC Drilling, leading the Drilling Services Contracts team at ADNOC Offshore, as well as leading the first integrated drilling contract in Abu Dhabi. Musbah started his career in oil and gas as a wireline field engineer and gained experience working in different countries around the world, for the leading service contractor Schlumberger. Musbah carries a Bachelor of Science in Mechanical Engineering from the American University of Sharjah, and a Masterâ&#x20AC;&#x2122;s Degree in Quality Management from the University of Wollongong in Dubai.

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be dealing with a certain business unit in a completely different way to another, and this will not happen unless I gather the different end users, the different subsidiaries, and I sit down with them to make sure that they know what we’re doing for them is true, following strategic procurement sourcing exercises.” Strategic sourcing is the cornerstone of Aldar’s procurement transformation and Abu Jarad highlights how he and his team have worked closely with different end users to explain and break down this new strategic sourcing. “It has seen us work more as middle men between different users whose requests were borne from isolated finance completely

away from everyone else. We have introduced them to each other and tried to align their requirements as much as possible,” he says. “We have reached great values of savings across the organization through implementing the free market agreements. We are looking at a full function of supervising procurement that serves the different subsidiaries of Aldar and different entities, while at the same time, customizing the product that could serve the assets orders and our diverse clients.” Abu Jarad and his team have already experienced great successes in their procurement journey, generating w w w. cp o stra te g y. co m

significant cost savings and driving greater value for both Aldar and its end-users. For him, the key to this has been a process of continuous learning and taking each project regardless of its value as a learning experience. “We have open forums of discussion amongst us and we look at our successes and our failures,” he says. “We benefit more from our failures because it informs us of the risks that we have to mitigate and avoid in order to succeed the next time. “ “Continuous learning is a journey, and we are taking that on board all the time. We encourage all the team members to benchmark, to go outside, to get free training, to align themselves to the best of the international standard practices.” It’s a testament to Abu Jarad and his team that the company is able to look forward with confidence on the foundation of a strategic procurement network that continues to drive value, bring innovation and go above and beyond to improve and succeed. “It’s never a one-man show, it’s always the team,” he says. “Through monitoring, 360 feedback, open door reviews, regular supplier, end user and partner meetings we will grow. What’s next in the journey? You never know. But we are ready for it.” 26

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“ W HAT’S NEXT IN THE JOURNEY? YOU NEVER KNOW. BUT WE ARE READY FOR IT” MUSBAH ABU JARAD SV P C o r p o r a t e A s s e t s a n d Management Procurement Aldar Properties

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THE S I GNIFICANCE O F E T H I CS I N P R O C U RE M E N T AN D S U P P LY OP E R AT I ONS W R I T T E N B Y E m a n A b o u z e i d , G l o b a l P ro c u re m e n t

a n d S u p p l y C h a i n P ro f e s s i o n a l 28

E M A N A B O U Z E I D Global Procurement and Supply Chain Professional

nderstanding ethics and exercising good ethical behaviour are vitally important areas within the procurement and supply profession, and the procurement professional should always disclose any potential conflict of interest and follow the advice given from a person in authority. In this article, I am demonstrating the importance of the CIPS code of conduct in procurement and supply management and outline the actions and behaviours that all CIPS members must follow, as CIPS code of conduct promotes the adoption of ethical processes within procurement and supply, and encourages individuals to raise any concerns regarding unethical behaviours with a person of authority within the organisation. CIPS is the global leading organisation serving procurement professionals. As such, CIPS has a code of conduct that all CIPS members are expected to follow. The code is

current and reflects modern business environments. The purpose of this code of conduct is to define behaviours and actions which CIPS members must commit to maintain as long as they are members of CIPS. Member of CIPS worldwide should encourage their organisations to adopt an ethical procurement and

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supply policy based on the principles of this code and raise any matter of concern relating to business ethics at an appropriate level within their organisations. Letâ&#x20AC;&#x2122;s briefly survey and explain the different sections of CIPS code of conduct, in order to define what are the behaviours and actions that CIPS members must commit to maintain:

SECTION (1) ENHANCING AND PROTECTING THE STANDING OF THE PROFESSION:

This part of the CIPS code of conduct is to do with how a procurement professional should always operate in ways that both enhance and help to protect the standing of the profession. Furthermore, it ensures that CIPS members should act in a w w w. c p ostra te g y. com

professional way in both their working and personal life, and they should always operate in accordance with their organisation’s policies while being mindful of the profession they are representing – this part of the code of conduct includes the following practices: •N ever engaging in conduct, either professional or personal, which would bring the profession or the Chartered Institute of Procurement and Supply into disrepute. 32

• Not accepting inducements or gifts (other than any declared gifts of nominal value which have been sanctioned by your employer). • Not allowing offers of hospitality or those with vested interests to influence, or be perceived to influence, your business decisions. • Being aware that your behaviour outside your professional life may have an effect on how you are perceived as a professional.

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SECTION (2) MAINTAINING THE HIGHEST STANDARD OF INTEGRITY IN ALL BUSINESS RELATIONSHIPS:

Integrity is about being honest and ethical, and working to or portraying conduct which reflects strong moral values. This part of the CIPS code of conduct outlines why a CIPS procurement professional should maintain a high standard of integrity within business relationships, and includes the following principles:

• Rejecting any business practice which might reasonably be deemed improper. • Never use your authority or position for your own financial gain. • Declaring to your line manager any personal interest that might affect, or be seen by others to affect, your impartiality in decision making. • Ensuring that the information you give in the course of your work is accurate and not misleading. • Never breaching the confidentiality w w w. c p ostra te g y. com

of information you receive in a professional capacity. • Striving for genuine, fair and transparent competition. • Being truthful about your skills, experience and qualifications. SECTION (3) PROMOTING THE ERADICATION OF UNETHICAL BUSINESS RELATIONSHIPS:

Ethical behaviour is very important within procurement, procurement professionals can help eradicate unethical behaviour through not creating or maintaining a relationship with businesses that do not promote good ethics - Such eradication of unethical business practices is done by the following practices: • Fostering awareness of human rights, fraud and corruption issues in all your business relationships. • R esponsibly managing any business relationships where unethical practices may come to light, and taking appropriate action to report and remedy them. • U ndertaking due diligence on appropriate supplier relationships in relation to forced labour (modern slavery) and other human rights abuses, fraud and 34

corruption. • C ontinually developing your knowledge of forced labour (modern slavery), human rights, fraud and corruption issues, and applying this in your professional life.

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their CPD up to date and undertake a certain amount of training, reading or knowledge gathering each year. In doing so, procurement professionals can apply their knowledge within their employment and help to develop both themselves and colleagues. This can be achieved by: • Continually developing and applying knowledge to increase your personal skills, and those of the organisation you work for. • Fostering the highest standards of professional competence amongst those for whom you are responsible. • Optimising the responsible use of resources which you have influence over for the benefit of your organisation. SECTION (5) ENSURE FULL COMPLIANCE WITH LAWS AND REGULATIONS: SECTION (4) ENHANCING THE PROFICIENCY AND STATURE OF THE PROFESSION:

The code of conduct in this section asks members to bring skills, competences and a good reputation to the procurement industry. In addition, CIPS members are expected to keep

The final part of the CIPS code of conduct is related to complying with legislation and regulations through: • Adhering to the laws of the countries in which the procurement professionals practice, and in countries where there is no relevant law in place they will apply the standards inherent in this code. w w w. c p ostra te g y. com

• Fulfilling agreed contractual obligations. • Following CIPS guidance on professional practice. • Last but not least, the CIPS code of conduct outlines what is important to help a procurement professional practise in a professional, ethical, and effective way. This code is reviewed regularly to keep it relevant and is approved by CIPS Global Board of Trustees. IN CONCLUSION:

Procurement professionals who are perfectly familiar with the CIPS code of conduct and its correct standards, and follow such standards at all times can help their organisations to achieve long-term success, being more financially successful, and create and sustain a good reputation. Ethics in procurement and supply operations are a moving goalpost that procurement professionals should ensure they keep up to date with. Legislations and standards can change frequently so it is significant to always follow the current version of the employer’s code of ethics in order to ensure that procurement best practices are used. I hope this has been of interest to you and furnished you with some knowledge to consider.

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Procurement insight delivered through data WRITTEN BY D a l e B e n to n PRODUCED BY H ey ke l O u n i 38

SIEVO IS THE WORLD’S LEADING COMPANY FOCUSED ON PROCUREMENT ANALYTICS. CO-FOUNDER SAMMELI SAMMALKORPI EXPLORES HOW IT ACHIEVES THIS THROUGH AI AND A CLIENT-FOCUSED APPROACH nreliable analytics hold back the potential of digital transformation in procurement. According to a recent study by Deloitte, most CPOs view analytics as the technology area with the highest impact on business; and yet almost every one in two CPOs considers poor data quality or data integrations as the greatest barriers to effective digital procurement. Few know the challenge of analytics in procurement as well as Sievo. Founded almost two decades ago by Matti Sillanpää and Sammeli Sammalkorpi, Sievo specialises in wrangling up procurement data from a variety of sources to provide reliable and actionable insights. Data, as we know, is everywhere and there is a seemingly endless supply of it. “Clients have the perception that they have a lot of data that is of bad quality and so they are unable to drive value and create meaningful analytics,” explains Sammalkorpi. “The process with us will start with us capturing all of the data our clients have before we turn it around and translate it into actionable insights. It’s about proving to our clients that even with their most heterogeneous data, value can be created and it’s also about taking a forward-looking view on how analytics can inform

SIEVO

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STRATEGY GIVES DIRECTION TECHNOLOGY LIGHTS THE WAY

Accenture offers end-to-end services that

can address any aspect of sourcing and

procurement, from strategy, organization,

people, processes, content and technology. No

matter what issue you are trying to address, it all starts with a good strategy. As trusted advisors, we help our clients devise procurement

strategies that truly create competitive advantage. We support industry and enterprise-wide

transformations in a way that integrates business, technology and operations.

Accenture Strategy specializes in procurement

visioning and strategy definition, including the impact of digital disruption and technology,

value targeting by the function, blueprinting the

future procurement operating model, optimizing spend demand management in the context of zero-based budgeting, strategic planning and

sourcing for direct/core categories and supplier relationship management and risk strategies.

“ I N THE PAST, ANALYTICS WAS SOMETHING DONE BY FEW AND DONE SELDOM. NOW TRUE ANALYTICS CAN BE SOMETHING THAT’S ACCESSED BY EVERYBODY ON A CONTINUOUS BASIS” S A M M E L I S A M M A L KO R P I Vice President, Customers Sievo

the best course of action and key business decisions.” Sievo’s approach transcends merely the creation of data analytics; it enables continuous access to a form of data that allows for long-term forecasting and actions. Sammalkorpi believes that this reflects a shift in the procurement space, moving away from a traditional static view of analytics towards a more fluid understanding of analytics. “We want to provide tools in order for customers to be capable of consuming the data on a day to day basis,” he says. “In the past, analytics was something done by few and done seldom. Now true analytics can be something that’s accessed by

everybody on a continuous basis.” Sievo’s vast client base spreads across numerous industry sectors and allows the company to see a broader picture as to the current procurement and data landscape; the challenges, trends and opportunities present. To date, the company has worked with the likes of Carlsberg, ISS, Schindler and MTN to name a few and Sammalkorpi believes that no two industries are at the same level of maturity in this data-driven transformation journey but most importantly, there are lessons to be shared across them all. “Regardless of where they are in their journey, it’s important to realise that the journey itself will start with the building of a procurement focused scorecard like spend and savings; a basic reporting on visibility,” he says. “Once that’s in place, you can start looking at forward-looking metrics and be able to forecast and explore different scenarios. This creates a more balanced scorecard that’s not just relevant for the procurement community, but relevant for business stakeholders as well. Instead of speaking solely in procurement lingo, you can now speak in a language that is relevant for different business partners.” This in itself represents a huge change in the w w w. cp o stra te g y. co m

perception of analytics in both sales and in procurement and highlights the new order in which for companies to be proactive in their actions and to truly engage with their business partners, they must move beyond a rear mirror view of past spend and savings and look at data analytics on procurement. “This translates to being able to forecast what will happen to your cost base in multiple different scenarios, because a lot of cost is driven by procurement spend,” says Sammalkorpi. “What will happen to your cost base after a sudden change in international tariffs? How quickly can you forecast impact across different business units or even regions? A lot of clients are asking us to provide an accurate long-term forecast and I don’t think that’s feasible in this increasingly interconnected, complex world. But what we can help our clients with is providing more agility around that forecasting problem so that you can create a new view in a matter of minutes or hours, not weeks or months.” The challenge with a constantly evolving technology landscape is that you cannot focus entirely on just the one technology and while data analytics dominates the conversation, there are other key technologies 44

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becoming more present in the market. Artificial Intelligence (AI) and Machine Learning are but two of these emerging technologies and Sammalkorpi is not one to fall for hype, rather he believes the hype surrounding these technologies to be well grounded. “AI and machine learning will completely change the way the teams take actions in procurement. So I think it’s well-grounded hype,” he says. He does urge caution however; “At the same time it’s still hype, which also means that nowadays people think it’s the answer to any and all problems and challenges out there.” In this instance, he encourages w w w. cp o stra te g y. co m

W E LC O M E TO S I E V O !

clients to look at small, repetitive tasks in the procurement process that create a lot of data as applications ripe for AI or machine learning adoption. Technology and innovation equals change and opportunity, with Sammalkorpi confessing that right now is an incredible time to be alive thanks to a number of key drivers. These include the increasing number of computations when moving to the cloud, an infrastructural change that Sievo very much plays a part in. Data-driven procurement benchmarking is an example of innovations made possible by recent advances in technology. Sammalkorpi points to a single fundamental change as the biggest key driver. “It’s our capability to leverage our client data in a big data way,” he says. “Historically, we would take data from different systems and combine that data, cleanse that data, and then provide visibility to spend or savings or supply base. The new value creates an opportunity to take data from across our clients and create benchmarks based on over a trillion dollars of procurement transactions. We can provide supply identification services and suddenly the role of technology providers is not only to provide the technology to clean the data, but 48

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also to provide the content, the benchmark, the supply identification.” With all the talk of digitisation, machine learning and AI taking over certain elements of procurement, one is forgiven for wondering what will become of the Chief Procurement Officer? Will they get replaced by this technology? Sammalkorpi believes that people fail to realise just how important

Sammeli Sammalkorpi Vice President, Customers Sievo Sammeli Sammalkorpi is the co-founder of Sievo. His top focus is to help Sievo’s customers turn their procurement data into dollars. He holds a Master’s degree from the Helsinki University of Technology and has over 15 years’ experience in procurement consulting, leadership and software development. Raised in Arctic Lapland, Sammeli is the father of three, a youth soccer coach and aspiring beatboxer.

people will continue to be in the future. As organisations look to automate more and more, removing routine processes such as approvals and invoices, what will remain is a demand for the procurement professionals to think outside the box, creating innovation and managing relationships between internal and external stakeholders as well as suppliers. “When you start to have this professional profile, you also need to recognise that the difference you can make in finding the right talent, retaining the right talent and developing the right talent. So the next big challenge for procurement functions is to find the right people who fit the new role of procurement professionals,” he says. So what will this new role of procurement professionals looks like? “Knowing your procurement stuff is no longer the only crucial part of the job. A really good CPO can have a dialogue with senior stakeholders and become a true business partner. They must have a desire to embrace digital transformation, seek out the right partners who can take procurement to the next level and leverage learning and digital tools to really make a difference.” Sievo’s growth as a company has coincided with the shifting nature of the procurement landscape. As procurement 50

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has begun to be perceived as a true business partner, “moving away from being simply procurement” as Sammalkorpi notes, what drives the company to continue to navigate and in some ways steer this shift? “My position is that I want to make procurement more awesome and I believe what Sievo can provide is one vehicle in that transformation, providing analytics and analytical tools that procurement people enjoy using and can be proud of,” he says. “We are the largest and leading company focused on data analytics and we got there by growing with our clients and learning with them. When we first started, we didn’t know much about procurement and everything we have learned, we’ve learned from our clients and we will continue to operate in this way.”

“ I BELIEVE WHAT SIEVO CAN PROVIDE IS ONE VEHICLE IN THAT TRANSFORMATION, PROVIDING ANALYTICS AND ANALYTICAL TOOLS THAT PROCUREMENT PEOPLE ENJOY USING AND CAN BE PROUD OF ” S A M M E L I S A M M A L KO R P I Vice President, Customers Sievo

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EXCLUSIVE SUPPLY CHAIN M ASTERCLASS WITH FRANK VORRATH: PART THREE WRITTEN BY D a l e B e n to n

L IST E N TO T H IS P O D C A ST on any of our output c h a n n e l s b e l ow

F R A N K V O R R AT H Executive Partner of supply chain at Gartner

ne of the key things identified within your concept of a supply chain excellence operating system is two directional thinking, where you've got people working in the business and people working on the business â&#x20AC;&#x201C; could you elaborate on that please? Transformations are really driven by future growth ambitions of those organisations, or if they are looking and expanding into new areas and new business models. Lots of things are changing very fast and exponentially. If you look at that, that sets limitations for organisations to actually do the same things as they did in the past. From a structural point of view your current capabilities won't allow you to compete in the future. You have to think about how you are going to approach that.

Thereâ&#x20AC;&#x2122;s also a limitation in terms of resources. The concept of perform and transform is simple to understand, which means you still have to focus on your core business and create results and good performance, while at the same time transforming. The concept is almost like running a sprint and a marathon at the same time. If you think about what you can do with the same setup and structure you have without investing, and potentially a different set of

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excellences, then it's probably stretching your current resources to a limit. If you think about the transform activity you have to do as an organisation, you think more about what you need to do to be successful in the future. If you think about the sprints, you still have to focus on your core business and on day-to-day good performance, and you also need to think about what enables you to perform day to day, running these sprints, making sure you keep and

stay focused on delivering performance end results to your business and to your customers as well meeting their objectives and needs, but also transforming the organisation at the same time and building the new muscles you need in the future related to the capabilities. W H AT S O RT O F CH A L L E N GE DOES T H IS B A L A N CIN G A CT, B E T W EEN THE TWO AREAS, PRESENT?

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you have available in your business you may find yourself in a position that is too much a stretch for your resources: to be able to deliver on your expectations. Somewhere, you need to balance it. The question is can you balance that with your existing resources and the existing structure you have, or perhaps you have to set up a different structure - where you have people working in the business and people working on the transformation. Both are equally important to you as a business, because one is really keeping the lights on and delivering the performance you need today, which is finding the capabilities you have to build for the future. That needs to be balanced. Is it easy? Probably not. But is it required? Absolutely. WHERE DOES CHANGE MANAGEMENT COME INTO THE EQUATION?

With change management and transformations, it's really shifting the mindset and the behaviour and actions towards generating more a improved and sustainable business performance and results. It's about having clarity of the destination, and a clear understanding of why are you doing this, and what you want and need in order to transform. The next important part of change 56

“ F ROM A STRUCTURAL POINT OF VIEW YOUR CURRENT CAPABILITIES WON’T ALLOW YOU TO COMPETE IN THE FUTURE. YOU HAVE TO THINK ABOUT HOW YOU’RE GOING TO APPROACH THAT” F R A N K V O R R AT H Executive Partner of supply chain at Gartner

management is role modeling. Your leadership plays such an important role here in championing the transformation with clear and defined specific communication and milestones. Taking people along with you on this journey and having an understanding of ‘walk the talk’, and being visible and aligned on a leadership level creates the pull in an organisation. There’s also organisational capabilities, the resources I need, the financial commitment that an organisation has to make to transform, because it can be dependent on the maturity of that organisation. Sometimes you have to be

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able to invest first to generate the benefits later on. You have to be able to have a governance in that model, which is strictly focused on priorities for the business as an outcome, and is steering the organisation through that transformation. You have to have the culture and the mindset of the people, the knowledge and skills in place, and it has to be somewhere measured and sustained. You also have to be able to reinforce. How do you align your goals and objectives and your incentives structures on the two important activities, perform and transform, in a balanced way. Not just incentivising generating results today, but also incentivising transforming the organisation to be able to

compete in the future. It's not just continuous improvement. It's building an operating system, considering what drives change, creating push and pull in an organisation, and really with the mindset of the future to improve, as well as building muscle, creating sustainable business performance and end results, and meeting the never ending customer expectations in future. H O W DOE S A R OL E MODE L A P P R OA C H H E L P OVE R COME T H E C H A L L E N GE S IN CH A N GE ?

It has to start at the top of an organisation, which means you have to be very clear, very concise and compelling. People need to understand why you are

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doing this, and be very clear about the outcome, when you want to do certain things, and what itâ&#x20AC;&#x2122;s actually going to do for the organisation. Take people along the journey and bring them in a way in that they have a stake in the game, so they are able to participate and provide their input into the transformation. That's really important, when you start your change management and transformation. You also have to somewhere create an excitement factor for your people to 58

believe that the future you're going to create for them is a future where they want to be part of, where they want to be proud of, so they are excited to actually take you as an organization forward into that future. HOW DO YOU BRING THE CUSTOMER INTO THE CONVERSATION?

It's key to incorporate customers into it. Don't be shy in asking your customer how can you serve them better. How can you create more a collaborative

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joint partnership together? It's no longer about vendor and supply and customer relationship, it's about a partnership on a more strategic level. As a business, if youâ&#x20AC;&#x2122;re able to figure that out and bring your key customers in, listen to them and make them part of it, or even make them a joint development in terms of building an operating system, even better. You may want to consider joint investments into building the capabilities you need in future, especially in areas when it comes to looking into talent related to emerging

technologies, data, data scientists, etc. You really have a scarcity and you have to build and think about how you want to build these kind of talents in your organisation from a different perspective and different ways. You may want to do this jointly together with your customers, because they probably have the same needs like you have in their own business, and the same kind of limitation and challenges to find the right talents. Instead of just doing it on your own and being completely internally w w w. cp o stra te g y. co m

focused, combine the inside out with the outside in. The key in that is your customer, or your customers. H OW IM PO RTA NT I S I T TO D E VE L O P A N E N D T O END S U P P LY C HA I N I T S TR AT E GY A N D T E CHNOLOG Y R O A D M A P S O T H AT T H E T E CH N OLOG Y A N D THE P R O C U R EM E N T T R A N S F OR MATION AR E A L I G NED ?

You have to have an end-to-end view on your technology. Technology can't be seen in isolation with what you are trying to accomplish with the strategic objectives of your business related to the value proposition you have. Technology and digitalisation, you can be taken from two angles and that's what I'm seeing currently happening in the marketplace. On the one side, you see companies focusing and creating new business models through digitalisation related to their products and services, selling outcomes and solutions instead of selling products and devices. On the other side, you see a lot of activity in terms of digitalisation in the supply chain. These two things are connected, but we also know that 70% of the initiatives currently in the marketplace are disconnected. Technology is creating new business models, using data to access and provide insights to your business for better and informed decision making. Data could also mean monetising that data and creating new business models. Technology, from your business process optimisation point of view, can create a new level of maturity in terms of efficiency. That's where a lot of companies are focusing on and deploying new technologies because they want to figure out if there are 60

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business benefits they can introduce to the business and to harness new capabilities and with automated processes that reduce time, errors, cost, and also increase the efficiencies they have in their business. To be able to do that, you need to have a blueprint and an understanding of where you are at currently with your technology landscape and your applications, and also where you want to grow in the future. W HAT IS THE O V ER A L L J O U R N E Y OF THIS CE N TR E O F EX C EL L EN CE SYSTEM, W HER E I T S TA RTS W IT H

“ IT’S ABOUT HAVING CLARITY OF THE DESTINATION, AND HAVING A CLEAR UNDERSTANDING OF WHY YOU ARE DOING THIS, AND WHAT YOU WANT AND NEED IN ORDER TO TRANSFORM” F R A N K V O R R AT H Executive Partner of supply chain at Gartner

D EV ELOPING I NF R A S TR U C TU R E , BUILD ING S U P P LY C HA I N EX C E L LE NCE CAPA BI L I TI ES , A N D TH E N OF COURS E R EA C HI NG A S TA GE W HERE THAT S U P P LY C HA I N E X CE L LE NCE IS W O V EN W I THI N TH E ORGANISAT I O N 'S D NA ?

The ideas of transform and perform, and the resource constraints that organisations are having by using the same resources has been recognised in the market widely and you have seen over the last couple of years more and more organisations actually building a centre of excellence. With a centre of excellence, you have to consider that there are different centres of excellence. Now 62

you have to have a functional centre of excellence where you just focus on building the maturity in certain areas of your supply chain. You could also have a logistics centre of excellence. You could have other centres of excellence, like a manufacturing centre of excellence. The goal is to design your centre of excellence and be aligned with the main activity across your whole value chain, which means if you are a manufacturing organisation and a supply chain organisation or procurement, you would organise your centre of excellence in a way that would incorporate the strategy element into

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that. There are different ways of structuring a supply chain centre of excellence. My recommendation, if a business can afford it, would be to focus on end to end, rather than just functional, because if you just focus on functional excellence, again, your integration and collaboration across the different functions might be a bit of a challenge. IS EX CELLENCE A N EV ER -M O V I N G TAR GET?

You always have to work on that. You're never done. If you really think about your plan of a transformation, does it stop after three years? No, it's not going to stop.

What you're hoping for when you had enough momentum, excitement and generated the results, is the building of a culture and a DNA. That is probably the longest part of a transformation which is never ending, because if you think about it from a leadership point of view, when you build it with your team and operating system, you want to build something which is sustainable and not dependent on you as a leader or your team. It should be there, even if you move on. It should be part of the culture so that people and generations after can still build from what was built, to make it better.

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5 WAYS IN W HICH AI IS DISRUP T ING PROCUREMENT W R I T T E N BY D a l e B e nton

In a world awash with a seemingly never-ending list of technology buzzwords such as automation, machine learning and Artificial Intelligence (AI) to name a few, AI is one such technology that is moving away from simple hype and stepping closer to reality in procurement. Here, CPOstrategy looks at 5 ways in which AI is being utilised in procurementâ&#x20AC;Ś

EFFICIENCY AND ACCURACY Procurement, by its very nature, is tasked with handling huge quantities of spend and with spend comes spend data. Often described by leading CPOs as a repetitive task, understanding and sorting that spend data is now being achieved through the implementation of AI. Through the use of AI, procurement teams can remove human error, increase efficiency and realise greater value from spend data.

5 W AY S I N W H I C H A I I S D I S R U P T I N G P R O C U R E M E N T

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5 W AY S I N W H I C H A I I S D I S R U P T I N G P R O C U R E M E N T

CHATBOT S

One of the biggest ways in which AI is being implemented around the world is in the customer interaction space. In telcos for example, customer support can now be handled via a highly developed AI chatbot that uses legacy data and context to provide real-time, and unique, solutions for customers. In procurement, chatbots follow a similar path for both internal and external customers. With tailored and context-aware interactions, chatbots create an omni-channel user experience for all stakeholder sin the procurement ecosystem.

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SUPPLIER RISK IDENTIFICATION Procurement and risk go hand in hand and one of the biggest risks is identifying and working with the right partner. Working in partnerships, which ultimately proves to be a failure, can be extremely costly and so AI is now being used to reduce the risk of failure. Machine Learning technology, powered by AI, captures and analyses large quantities of supplier data, including their spend patterns and any contract issues that have emerged in previous partnerships, and creates a clearer picture of a supplier in order for the procurement teams to be able to identify whether this particular partner is right for them â&#x20AC;&#x201C; without spending a penny.

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BENCHM

TOP 5 PROCUREMENT INFLUENCERS

MARKING EFFICIENCY Benchmarking is key to any organisationâ&#x20AC;&#x2122;s ambition to measure and continuously improve its processes, procedures and policies. In procurement, organisations such as CIPS are used as examples of best practice in which procurement functions all over the world can benchmark against and identify any gaps. Similar to supplier risk identification, AI can be implemented within ERP systems to analyse the entirety of data that passes through procurement and present this key data in easy to digest formats. Examples include data classification, cluster analysis and semantic data management to help identify untapped potential or outliers in which procurement teams can improve their processes.

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PURCHASE ORDER PROCESSING/ APPROVING PURCHASING

5 W AY S I N W H I C H A I I S D I S R U P T I N G P R O C U R E M E N T

Procurement has evolved from its traditional role as simply managing spend into a strategic driver for a number of organisations all around the world. As the role of the CPO has changed, technology such as AI has been implemented to free up their time from the menial tasks (such as PO processing and approving purchases), allowing them to spend more time in areas of growth. AI software can be used to automatically review POs and match them to Goods Receipt Notes as well as combining with Robotics Process Automation (RPA) to capture, match and approve purchases through the use of contextual data. This contextual data allows AI to identify and make decisions based on past behaviour.

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EVENTS OF 2019

WRITTEN BY Kev i n D av i e s

Conferences and events provide industry professionals with a forum to share knowledge and best practice while gaining strategic insight into industry trends and challenges. Over the next 12 months, the procurement industry has a number of high-level events lined up across the globe, each one adding practical business value for attendees.

18.09.19

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DIGITAL PROCUREMENT WORLD Amsterdam, Holland Digital Procurement World is the largest community of digital procurement leaders and the only conference that brings together the entire digital procurement ecosystem from enterprise to big tech, startups, VCs/investors, industry analysts, media & press – representing every sector of the industry. “Digital Procurement Transformation is happening now. Don’t be left behind.”

EVENTS

24.09.19

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EWORLD PROCUREMENT & SUPPLY London, UK Since 2001, eWorld Procurement & Supply has provided a unique insight into the latest innovations and technologies for senior procurement, supply chain and finance executives. eWorld provides a highly time-effective platform to keep up-to-date with the latest developments, market trends and hot topics.

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15.10.19

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PROCURECON EU Barcelona, Spain The ProcureCon event series are the only interactive, peer- led platform for senior procurement practitioners. For over 15 years, ProcureCon has helped companies transform their programs

EVENTS

through innovative presentations, panel discussions, workshops and intimate networking sessions â&#x20AC;&#x201C; designed to take you beyond cost savings.

30.10.19

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600MINUTES SUPPLY CHAIN AND PROCUREMENT Middelfart, Denmark This event offers a unique networking opportunity to connect face-toface with top decision-makers and key players across all functions in the industry from the largest companies. 600Minutes Supply Chain and Procurement will discuss the application of advanced technologies such as

Big Data, Analytics and other innovations that are transforming the future of supply chain and procurement. Get all the latest insights on technological developments, industry trends and best practices to achieve a successful ecosystem of suppliers, collaborators, and customers for your organisation.

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31.10.19

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CIPS UK CONFERENCE QEII Centre, London At the 2018 CIPS UK Conference,

This one-day event was packed full

procurement professionals gained

of keynotes, case studies, panel

practical solutions to the challenges

discussions and debates with Q&A.

they are facing and left the confer-

The day split into three streams after

ence with the insight they need to

lunch:Â fit for purpose tech, strategy

make the shift to becoming a stra-

through people and resilient supply

tegic, collaborative function that

chains.Â There were CPOs from lead-

adds value. The 2018 speaker line-up

ing organisations speaking and a

featured the most influential speak-

large variety of content that really

ers, incorporating Procurement

served the profession and addressed

Power List winners.

our most vital concerns.

EVENTS

10.12.19

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PROCUREMENT AND SUPPLY MANAGEMENT MASTERCLASS Soho, London This masterclass looks at both the concepts of procurement and supply management, negotiation techniques, and current and future trends. It includes digital transformation,

disaggregation of supplyÂ chains, and circular economy theories. It will improve attendeesâ&#x20AC;&#x2122; understanding and expose them to cutting-edge and future thinking.

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THE #1 DIGITAL PROCUREMENT CONFERENCE ON THE PLANET