Q3 - 2020
INSIGHTS FOR TODAY’S PROCUREMENT LEADERS
Launching a Startup: a Family Affair Unpacking the Role of Procurement in Corporate Innovation and the World of Startups Cooperative Procurement: Method to Drive Savings and Efficiencies Is Catching On! Digital Transformation Powered by People-Driven Change Procurement as a Business Partner
2 Launching a Startup: a Family Affair
6 Unpacking the Role of
Procurement in Corporate Innovation and the World of Startups
8 Cooperative Procurement
12 Digital Transformation
Powered by People-Driven Change
16 Procurement as a Business Partner
Q2 - 2020
INSIGHTS FOR TODAY’S PROCUREMENT LEADERS Editor-In-Chief Andy Beth Miller
Design Laura Sawyer Messing
Writers Ronald Hedley Andy Beth Miller
Outside Contributor Tammy Rimes, MPA Executive Director, National Cooperative Procurement Partners
Advertising Branden George: 940-230-5830
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LETTER FROM THE EDITOR I have always been a fan of William Shakespeare. From Othello to Romeo and Juliet, and every literary work in-between, this Elizabethan writer’s words never fail to inspire and challenge me to delve deeper into the meaning of life, love, and humanity. Strangely enough, this week I even found Shakespeare’s words apropos to this issue’s subject matter that we are likewise grappling with. Specifically, the concept of having “strange bedfellows.” This catchphrase was first coined by Shakespeare in his play,The Tempest, when a tumultuous storm shipwrecked a lively character named Trinculo, who is then forced to seek shared shelter under the loose-fitting cloak of a deformed islander named Caliban. Bemoaning his current state, Trinculo utters the now famous line, “Misery acquaints a man with strange bedfellows!” In our case, this concept of “strange bedfellows” translates in procurement as unexpected business partners. Throughout this entire issue, every article addresses unlikely pairings in procurement, while unpacking how each results in a win-win relationship. Join us as procurement professional Martin Perminas explores how the role of procurement in corporate innovation and the world of startups can surprisingly work, and even enable your company to thrive. Outside contributor Tammy Rimes, Executive Director of the National Cooperative Procurement Partners (NCPP), then expounds upon the numerous benefits of a new relationship trend in the procurement field, known as cooperative procurement. After hearing about its numerous benefits from Rimes, we are sure you will be wooed to test the waters. Writer Ronald Hedley then pens his account of a recent interview with Nick Gunn, regarding an exciting affair…but not the type you might think. This interview involves a family affair, specifically detailing how one expert (Gunn), launched a successful startup known as The NiVACK Group alongside his son Charles. We then find ourselves exploring expert Patrick Foelck’s vision for achieving digital transformation powered by people-driven change, and hearing all about the clear vision and proactive steps he is taking to ensure that what some people may first assume is a romantic pipe dream can become a tangible reality. Lastly, expert Jonathan Townsley reveals how procurement is the ideal partner (in business, of course) by explaining how procurement can come alongside owners to help us reach our goals and improve our business from a holistic approach, thus improving our company in every aspect. Talk about a partner making you happy. After reading these articles and gleaning the wisdom therein, we guarantee that you will think twice about who you “get into bed” with on your next business venture. Hopefully, these experts have offered you advice and insights that will prove helpful as you make your way. Braving the sea of strange bedfellows alongside you, Andy Beth Miller
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Launching a Startup:
a Family Affair By Ronald Hedley
In Bram Krommenhoek’s April 2018 article entitled Why 90% of Startups Fail, and What to Do About It, he shared the four problems and the four subsequent solutions to the crash and burn world of launching a startup. One of the problems, Krommenhoek wrote, is being a one-person team. He offered the following solution: “My advice to each (would-be) founder is this: find at least one person from a different discipline to join you. Ideally, you have a combination of people that cover the holy startup triangle: hipster, hacker, hustler (aka designer, engineer, marketer).” So, heeding (subconsciously) the advice above, when Nick Gunn, former SVP of Global Corporate Services at Hewlett Packard Enterprise, buckled in and launched The NiVACK Group, he was not going it alone. He was starting his new company with his son Charles. The term NiVACK is significant. It represents what’s important in Gunn’s life, and it supports the assertion that one should not launch a startup by oneself. “I made up a name using our initials. The Ni stands for Nick. V is for Vanessa, my wife. A is for Ash, and K is for Katherine.”
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Family matters to the senior Gunn. He was born in London in 1968. His father was a plumber and his mum was a typist in a typing pool. Both were hard workers and passed down their work ethics to their son. Their house had no bathtub and the toilet was outside. Money may have been scarce, but love and humility filled their Victorian terraced home. Gunn cherishes his childhood. He asked rhetorically, “What does this upbringing and background tell you about me? ...a humble upbringing, a strong work ethic, nothing is for free, compete to be successful, and maintain humility!” Charles is the C in NiVACK and an equal partner in the company. Like his father, Charles is inspired by family, but he brings a unique perspective to the partnership. “I am inspired by some of the people I have worked with who are not great leaders. When I’m on a team, it kills me when you’re the person who does the majority of the work. I have worked for different managers in my career, so I’ve had the opportunity to pick out the helpful things and the things I hope I never do.”
new role at The NiVACK Group. “I have tremendous insights into these companies and how they work. I know that some companies do not know that they are doing things improperly,” he said. Charles shared how he was frustrated because, as an auditor, he was not in a position to offer solutions, “I think there are positives and negatives in public accounting. One of the most frustrating negatives was seeing faults in a company and not being able to address them. I was looking for a way that I could bring more value to a company.” In his new role as consultant, young Gunn can shoot straight and tell a company what it needs to improve. “I’m excited about having the opportunity to, after identifying an area of weakness, jump in and offer some insight. At the very least, I can identify an area that they can work on,” Charles said. He then offered a specific example: “In the supply chain functions, specifically around inventory management, they often have very junior people, often with just a high school education, managing their inventory day to day. There is a lot of room for improvement there to say the least.”
“ What’s really important is the ability to adapt and change and learn new things.”
– Nick Gunn
Charles shared a pet peeve that paradoxically inspires him: “Forcing physically and mentally drained employees to work into the early hours of the morning on a project is one of the worst things a leader can do.” He then offered a pragmatic solution: “When your team has a lot on their plate, a leader should come down a level and help the team with their work. A lot of leaders refuse to do it. They think that they’re above getting in the trenches. I take inspiration from the non-inspiring people in the world.” While the elder Gunn’s expertise is centered around corporate services, the younger Gunn’s expertise is finance. Charles’ experience at PricewaterhouseCoopers in the assurance function has been invaluable in his
Nick Gunn’s expertise is much different than his son’s, and so was his motivation to launch The NiVACK Group. He explained, “I left Hewlett Packard Enterprises earlier this year. It was nice being sort of retired, but I realized I needed something challenging.” Was what happened next fate or coincidence? Gunn continued, “I got invited to a large food manufacturing company by their CIO to provide the new CEO with advice around business transformation. They had questions. He thought it would be good to meet them and give some advice.”
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An epiphany followed. “On the plane coming back, I thought, Hey, this is exciting. Why don’t I do this for a job?” Gunn explained. He then made the immediate decision to start an advisory firm. Ironically, he was launching a start-up as he was literally being launched into the atmosphere. It must have been fate. Gunn brings myriad experiences to NiVACK. He stated, “When I was at HP, we had resources, experience, and capabilities. Not all companies have that, and what NiVACK brings to that is enterprise- scale experience, and strategic thinking to help the smaller and mid-sized companies be more profitable.” He added, “We accelerate business transformation because we look at where the small to mid-sized company is today, and we help them create a road map to get from where they are to their desired destination in an accelerated fashion.” NiVACK ensures that the people they are helping avoid mistakes and learn from the process. Gunn detailed what is being transformed: “All of procurement, or anything within procurement, including things like real estate, travel, car fleet, whatever is purchased by the company. It could be digitizing elements of the procurement process, such as using AI to provide insights on spend patterns, creating comprehensive demand management strategies, or even optimizing the talent capabilities of a procurement function.” Gunn exposited further on his experience, “When you work for a company like Hewlett Packard Enterprise, you do everything to scale. Everything has to be done quickly because it’s a publicly traded company and, as a result, reported every quarter. The expectation is that you can quickly create solutions and execute strategy. I learned to adapt tactically to the changes in environment. That experience is transferable to other situations.” Throughout his long career, Gunn has gained a bit of wisdom. “What’s really important is the ability to adapt and change and learn new things. In my career, things have progressed significantly. When I first started, mostly
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“ When your team has a lot on their plate, a leader should come down a level and help the team with their work....” – Charles Gunn
everything was analog, and then new technologies and new ways of thinking came about,” he explained. He added, “Experiences are valuable because they teach you the value of being adaptable, of being openminded. If you aren’t, other people will be, and that’s where competitors come along and eat your lunch.”
On Working Together Charles said, “After my dad was in retirement for a few months, I figured if I could encourage him to jump off the ledge a bit, I would join him. We are working together from the ground up. We have a very complimentary set of skills. He has a lot of experience with transformations: real estate, travel, fleet operations, and I’m eager to learn. I have an inquisitive mindset and an attention to detail. That’s what I bring to the table.” Gunn concurred, then elaborated, “I can tell you that Charles’ attention to detail is a real asset for us. It doesn’t slow us down because he works at warp speed. When Charles is analyzing data at the right level of focus and balancing it with agility, it is efficient and smart, and it’s helped me as well. We have a complementary skill set. Charles’ expertise, skills, and experience are especially valuable during the startup phase.”
On Sustainability Gunn said, “A lot of businesses look at sustainability as a cost issue. But our view is the opposite. We look at things and ask, ‘How can we positively impact your P&L, and how can we positively impact your Corporate Social Responsibility Program?’”
know what good looks like. The problem is they can be marching along thinking they are doing a great job when, the reality is, they can do more to help the P&L of the company. They can do more to create investment dollars to help grow their revenues.”
Final Thoughts
He offered an example: “At HP, our real estate budget was large. We spent a lot of money on energy. My job was to reduce energy costs. In California, with its abundant sunshine, we installed solar panels. In Bangalore, India, we used geothermal energy because geothermal was available. In Texas, we bought into a wind farm. We thought about things from a different perspective and encouraged our suppliers to think about things differently too.”
NiVACK is more than a name. It is an acronym wrapped in family values. Gunn is proud of how each family member has impacted his life and his new business endeavor. “Vanessa originally didn’t like me. She thought I was too arrogant, and that’s why she keeps me grounded. Ash is a great example of why you should do what you love and not be afraid to try new things. Kate is an example of how different views, opinions, and personalities serve to make the whole greater than the sum of the parts,” he shared. And as for Charles? He is his hipster, hustler partner in consultation.
“ We accelerate business transformation because we look at where the small to mid-sized company is today, and we help them create a road map to get from where they are to their desired destination in an accelerated fashion.” – Nick Gunn On Why They Chose a Startup Charles explained first: “We want to use our experience to help others. It’s not fun when things are not being done in an optimal way, especially when we have ideas about how they can be improved. With The NiVACK Group, I have the opportunity to advise and help companies. It’s rewarding to have a positive impact on companies and the people in them. If we can loop in procurement acumen around Corporate Social Responsibility (CSR) and help companies do business in a more responsible way, then I’m all about that.” Gunn then added, “Charles has a unique perspective. My perspective is that it doesn’t feel right to hoard all the good stuff for ourselves. I see people in the procurement space that think they are doing a good job. We look at that from an independent perspective and think, you can do a lot better.” He continued, “Why do I think that? Because I’ve seen what a lot better looks like. A lot of companies, especially the smaller scale ones, don’t necessarily
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Unpacking the Role of Procurement in Corporate Innovation and the World of Startups By Andy Beth Miller
When I first sat down with Martin Perminas to discuss the role of procurement in corporate innovation and the world of startups, I had no idea about the wild and wondrous ride that awaited. Perminas is currently the US Managing Partner of Tomorrow Street (TS), an Innovation Center that is a joint venture founded by Vodafone and the Luxembourg Government, providing startups with a base from which to be mentored to Globalize and scale their business’. So, when he talks, you listen. And listen I did. From on the button metaphors that swept me away on fishing and hunting expeditions to delving into Darwin’s survival of the fittest theory, unpacking how it also applies to procurement, there was not a single dull moment. But we will get to all of that, so buckle up. There is a saying, “You’ve gotta give before you get,” that many successful business people, including famous entrepreneur and angel investor Dan Feld, ascribe to as being a touchstone of their mantras. However, after barreling down the alleyway that is Perminas’ ingenious brain alongside him, I began to see that this expert would sooner offer a decided spin on this pithy precept, switching the verbiage to align with his own outlook regarding how it applies to procurement specifically. Perminas would most certainly say instead, “You’ve gotta ‘get’ before you ‘get.’” Allow me to explain. One of the first barriers to procurement’s success, according to Perminas, is how oftentimes procurement is pigeon-holed into a limited scope.
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Boxed in, if you will, particularly by CEOs and founders that are operating their businesses—and approaching procurement—with an outdated and ill-advised tunnel vision. These “boxes” are labeled with stereotypes and limited expectations—and equally limited freedoms—for procurement, the most popular label being “getters.” For example, the CEOs wants something, and it is the sole responsibility of procurement (the getters) to do as their name suggests… to procure… or get. Here is when Perminas would step in and educate us about the other side of the coin that co-exists by way of a double entendre, and how “getting” – Perminas can—and does— also mean mentally understanding and being aware of something. He would also divulge that in procurement particularly, you really have to “get” (understand; i.e. the business requirements) before you “get” (obtain), or at least before you can do so efficiently.
“You’ve gotta ‘get’ before you ‘get.’”
It is this understanding that Perminas pinpoints as being one of the most vital skills procurement professionals must possess in their arsenal. Simply put, you will need that understanding and intuitive acumen as you are faced with the abundance of barriers that Perminas points out are prevalent in the procurement arena, especially when dealing with startups.
Perminas highlights a few of these barriers that he has come across in his career as we continue our discussion, one of which includes the piecemeal predicament that he finds in most business ventures today. Perminas sees his previous experience in procurement as focusing on an unique niche that he dubs “procurement strategy,” involving aligning and integrating procurement with the business itself, as well as forming “procurement alliances” between all parties involved, including suppliers, for the most optimal outcome. Perminas revealed one constant rub that often prevented a smooth road to success: “These relationships were super complex and involved a lot of different people and touch points. And typically, they weren’t brilliantly coordinated because you have your procurement person dealing with an organization as a supplier, a sales person dealing with [that same company] as a customer, and then you’d have a partner manager dealing with that company as a sales channel.” The proverbial predicament of too many cooks in the kitchen came to mind as Perminas bemoaned the beleaguered situation that such collaborative spiderwebs spawned. Luckily, Perminas presented a solution for this quagmire, one which he has personally utilized often to iron out any wrinkles en route. “You had all of these factions within a company that is collectively capable of doing great things,” Perminas recalls, “but somebody had to come in and orchestrate all of that.” That somebody should normally be from procurement, particularly if the balance of the financial flows are predominantly buy side expenditures. “Procurement should actually manage these relationships and coordinate them on behalf of the group,” Perminas reiterates. “The relationships, people in the companies, have to be orchestrated and aligned with what is optimal for the business as a whole. Somebody needs to come in and make that happen in a collegiate, team working way because you are dealing with different functions and parts of the business.” I wholeheartedly agreed, bobbing my head enthusiastically as Perminas explained. However, my head slowed to a halt, and hesitation crept into my voice as I had to wonder aloud at the feasibility of such a task. “How?” I uttered. “It’s really about capability, communication, and delivering value. Procurement must have an excellent grasp of the business needs and relationship management skills. It then needs to communicate the impacts of managing or not managing these relationships, and then deliver business results. All of this has to be done in a interdisciplinary way, ensuring that both the business and personal objectives of all involved are actively managed,” Perminas says simply.
Commence the head bobbing once more, as this is something I can understand, which as we have learned is so important. But, this lesson is far from over. Perminas then continues to illustrate how not only are understanding, versatility, and multi-faceted competence must-haves for procurement professionals, but so too are possessing a quick wit and a keen adaptability. The reason for this, Perminas points out, is that the current breakneck pace at which today’s landscape is constantly changing and evolving simply does not leave room for anyone besides absolute innovators. Enter Darwin. Just as in life, those in the procurement arena must adapt or die. Simply put, you are either pushing forward and creatively innovating, or getting pushed to the peripheral. “What’s happening is that corporations are recognizing that they need to innovate, and that they need to embrace the startup world. Particularly, looking for new things to help them run their business better or support their customer better,” says Perminas.
“What’s happening is that corporations are recognizing that they need to innovate, and that they need to embrace the startup world.” – Perminas
This is exactly where procurement should be not only taking the stage, according to Perminas, but should be taking the lead role. “Effectively, these organizations are suppliers. Suppliers of tomorrow. Too often, procurement is cut out of this process, when procurement should be playing right in the middle of it, finding the suppliers of tomorrow and figuring out what, if anything, is disrupting the supply base. This will give their own organizations full competitive advantage by getting in early enough to make a real difference.” So, I have to ask, why isn’t procurement being allowed to take center stage in this corporate innovation? Perminas replies with one word: Image. He then elaborates, harkening back to the box motif that procurement often finds itself being relegated within. “Procurement is too often seen as tactical [and] non-strategic by many groups. This is a classic procurement problem. They are seen as the guys that do the contracts after the deal is done by the execs. The business tells the people what to buy and they just go and get it done, as opposed to the procurement people working with the executives to understand the business’ needs, then with their (continued on page 17)
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Cooperative Procurement: Method to Drive Savings and Efficiencies Is Catching On! by Tammy Rimes, MPA
Mary Kay Ash, founder of Mary Kay Cosmetics, acknowledged the importance of people with her oft-quoted statement, “People are a company’s greatest asset.” While the adage is true, those employees still require equipment, technology, and tools to ultimately perform their duties. Thus, procurement becomes a crucial player for any organization – private, public, or non-profit. When juggling the various needs of the organization, procurement’s role is to research and procure the best products and services for a reasonable price. Over the past decade, consumers have placed more emphasis on shopping at big warehouses to leverage more “bang for the buck” by buying in bulk. For companies and organizations, the concept known as group purchasing, or cooperative procurement, takes that same concept to a grander scale. It combines the spend of multiple organizations in a formally awarded contract, thereby creating greater savings for each of the participating entities. Endorsed by the American Bar Association, and widely adopted by private sector organizations, states, municipalities, school and hospital districts, universities, and non-profits, cooperative procurement has become a growing, contracting phenomena. In the public sector, U.S., local and state government agencies and educational institutions spend approximately $1.5T annually on goods and services, and the cooperative contracting industry has grown exponentially over the past decade to help meet that need. By watching the bottom line, savings generated
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By watching the bottom line, savings generated by purchasing supplies and services at lower costs translates to more dollars towards programs that serve constituents. – Rimes
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by purchasing supplies and services at lower costs translates to more dollars towards programs that serve constituents. At the same time, public sector procurement resources have diminished due to budget concerns, retirements, or outsourcing. With less people to handle quotes, bids, and evaluation of options, procurement needs an additional tool to meet the ever-demanding and changing workloads.
Combining Consulting Expertise with Commodity Purchases For non-profits or private universities, there is the additional fiduciary responsibility when budgeting contributions by donors or membership funds. As Pennsylvania’s only land-grant university, Penn State University (PSU) has a broad mission of teaching, research, and public service, and consistently ranks among the top one percent of the world’s universities. Across 24 campuses throughout Pennsylvania, the 100,000 students and 17,000 faculty and staff understand the real measure of success goes beyond the classroom—it’s the positive impact made on communities across the world. A challenge was presented to the Penn State team to revitalize and build out the modular and furniture needs of a student residence hall. Rather than pursue the traditional bid and award method, PSU decided to take a different approach in taking on the multifaceted needs of this project. First, specific goals were established: 1) create an area on the first floor that would be attractive to students; 2) design a fun and interactive space for gathering, socializing, studying and group work; and 3) tie everything together
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With technology progressing at increasingly faster rates, procurement teams must continuously adapt to the latest technological advances. – Rimes
with uniform flow and bring unity to the rooms. In addition, the need to utilize the latest technology, with adequate charging stations, was important for students to stay digitally connected.
The finished product of PSU’s workplace furniture transformation.
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The PSU team approached Kimball, a leading manufacturer and distributor of workplace furniture, for guidance on how to turn around the underutilized space that was filled with non-cohesive furniture types. The idea was to create a fun and interactive space, providing an area for students to gather, socialize, and study. While attractive aesthetics were desired, it was also important that the furniture products be durable and sustainable to withstand the use by large numbers of students, while allowing flexibility to allow them to move pieces around if they chose. Rejecting the prescriptive bid process, the university made the decision to use an already competitively bid and publicly awarded cooperative contract to access Kimball’s full range of product lines and consultative services. The results? Kimball was able to provide several design solutions to help PSU selectively choose and create the ideal setting for their space. PSU realized cost savings from the aggregation under a national cooperative contract, as well as soft cost savings in the form of time and resources that would have been allocated to the laborious solicitation process. Most significantly, the remodeled student hall has been transformed into an attractive and inviting, yet highly functional student space.
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Keeping Up with Advancing Technology With technology progressing at increasingly faster rates, procurement teams must continuously adapt to the latest technological advances. One prime example is drone technology, whose rapid growth and use has disrupted many other industries – agriculture, education, filmmaking, real estate and public safety. According to the Association of Unmanned Vehicle Systems International, “between 2015 - 2025, the drone industry within the U.S. will grow to $81.2 billion with over 100,000 new jobs.” And technology is not only related to those obvious devices such as phones and computers. Many commodities are now impacted by technology, such as automated meters for a water or electric utility; cameras for law enforcement; specialized bar code readers for maintaining warehouse inventory; CAD enabled tablets used by in-the-field construction personnel or specialized street lighting. Keeping up with all those specific technologies may place procurement at a slight knowledge disadvantage. With new developments across the technology spectrum, when a cooperative contract is solicited, it often provides opportunities for the responding suppliers to offer product lines that may be broader in range, or new products as technology advances are made, with locked in pricing advantages. As an example of such a cooperative contract, Office Depot offers a wide range of product SKU’s for office suppliers, technology, janitorial products and furniture that can be pre-selected into a desired “market basket” for an organization. As a new technology or “greener” product becomes available, at the request of the organization, those newer lines can be added to the shopping cart under the already solicited, broader catalog contract. This prevents procurement having to constantly re-bid for new technology items as they become available.
Suppliers as Partners Another evolution that cooperative procurement supports is the changing role of the supplier vs. procurement relationship. In the past, with strict guidelines, deadlines, and commitment to open competition, this system often creates a distant, if not adversarial positioning. When a cooperative contract is used, the solicitation process has already been conducted and contract has been awarded. Thus, the
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relationship can begin as a partnership, where the organization can further utilize the suppliers’ expertise, knowledge, and advice on more complicated projects.
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Within six months of the program implementation, patient satisfaction scores increased 11% and operating janitorial costs began to decline, eventually leveling at a double-digit savings. – Rimes
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Such is the case for a prominent Arizona medical center. Through its membership in a group purchasing organization, it formed a strong alliance with Network Services Company (NETWORK®), the largest member-owned distribution organization for janitorial, sanitation, foodservice and packaging supplies. In this flexible distribution partnership, NETWORK® offered this acute care facility a broad portfolio of products at industry-leading pricing. Although frequently ranking among the nation’s “100 Top Hospitals,” the facility was impacted by the farthest-reaching healthcare reform in more than 50 years, pressuring leadership to provide high quality care within a shrinking budget. The medical center enlisted the support of their local specialist to participate in Healthy Measures®. Offered exclusively by NETWORK®, the program is designed to improve patient and business outcomes through implementing best practices in environmental hygiene. In a collaborative three-step process, key hospital staff worked with a certified representative to evaluate current procedures in the facility. From a critical look at the cleaning process to the products being used, the potential improvements can lead to a significant reduction in operational expenses, as well as contribute to improved patient satisfaction and a lower incidence of healthcare acquired infections.
Within six months of the program implementation, patient satisfaction scores increased 11% and operating janitorial costs began to decline, eventually leveling at a double-digit savings. Nine months into the program, the team had implemented 75% of their action items and requested a second assessment, Healthy Measures score. The positive results received enthusiastic endorsement by the executive team, in which they noted that this level of success can only be gained by a trusting partnership between the organization and service-provider. The cooperative procurement route is one being pursued much more frequently by procurement teams. It makes good business sense to leverage and utilize already solicited contracts that drive greater volume discounts. Ultimately, the evolution and expansion of group/cooperative purchasing as part of an overall program can provide high impact
About the Author: Tammy Rimes, MPA Tammy Rimes served as the former Purchasing Agent for the City of San Diego, CA, and now serves as the Executive Director of the National Cooperative Procurement Partners (NCPP). NCPP represents the public sector cooperative industry across North America, focused on providing education, training, and legislative support for state, local, and educational institution procurement teams.
cost savings, and adding value.
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Digital Digital Transformation Transformation Powered Powered by by People-Driven People-Driven Change Change By Andy Beth Miller
The way Patrick Foelck, Head of Strategy and Transformation Global Procurement at F. Hoffman-La Roche, describes it, his passion for procurement was not necessarily a love at first sight kind of thing. But, it does appear that it was destined to become the stuff of fairy tales: a true, committed, and ever-evolving love. Once upon a time, after spending 13 years as a veteran consultant, Foelck was wooed to the procurement arena after consulting and leading Roche in what he calls their “procurement transformation.” Now, as he fulfills his role as Roche’s Head of Strategy and Transformation, Foelck has a dream. “I am keen to move procurement out of procurement,” he says with a light laugh. I smile at his clever play on words, while also leaning in, intrigued to know what he will say next. Then, as Foelck unravels his seeming riddle, I instantly realize that this concept of his is much more than a dream. It is a goal. What makes me say this? Far beyond a nice sounding concept or exciting flight of fancy, Foelck follows his ideation with a distinct vision. Also following? Action points and next steps. That’s right. Foelck has a vision with feet. Allow me (via Foelck’s expert insight) to explain. But first, we have to go back to the beginning. When Foelck was first starting out, he quickly realized that procurement was a function that was grossly underrated in terms of what it could do and the impact it can deliver. He backs up this assertion explaining, “They speak to all the business functions; they have a relationship with all the suppliers. All of the money technically goes through either procurement systems or processes, or is managed by procurement to some extent.”
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Hence, the influencing power of procurement cannot be denied. That is, if we do it right. And how would “doing it right” look in real life procurement? This is the portion of the interview where Foelck gets right to the crux of his vision: Moving procurement out of procurement via digital transformation, with a twist. The twist comes as this transformation is “a people-driven change,” using Foelck’s exact words, and also requires us to broaden our perspective of procurement.
“ If we continue as a profession to keeping solely doing the things that we have been good at in the past — sourcing, negotiating, purely buying — we will become redundant very, very soon.” –Foelck
Foelck is a proponent of shifting the focus to spending smarter rather than simply spending less, redefining the bottom line to include the bigger picture. This greater procurement perspective focuses on value-adding solutions that account for successfully addressing business needs, while managing key facets like speed to market, cost, compliance, risk and sustainability. According to Foelck, procurement is the only entity in an ideal position to be right there to enact all of the great things that can be done in these realms in the most efficient and wise way possible. Such astute and intuitive work simply cannot be accomplished without people who are constantly innovating and executing creative solutions and ideas for best outcomes.
Seeing this opportunity for innovation in procurement versus it being relegated solely to purchasing, Foelck parlayed his passion for the subject into his work, since which he has spent the past 10 years focusing much of his professional energies on delivering procurement restructuring and transformation programs, his main focus being the pharma industry. This fascinating background brings us to today, where Foelck is divulging details about the exciting new endeavor that he and Roche are embarking upon, introducing revolutionary digital transformation, all of which will be fueled by people and aided by technology and data. Regarding the pigeonholing of procurement into the realm of mere purchasing, Foelck bemoans the plight with a harsh reality: “Procurement does it to itself. We are coming from a background where they say, ‘Hey we need to buy X. Secure this for us, negotiate the price, and ensure the quality, then get out of our way.’ So, we are coming from a sole focus on the measure of our success being how much savings we have generated.” Over time, according to Foelck, the more this ideology was allowed to persist, purchasing became seen as procurement’s only purpose. Foelck then shares a cautionary insight regarding the future, should we allow this to continue: “If we continue as a profession to keeping solely doing the things that we have been good at in the past — sourcing, negotiating, purely buying — we will become redundant very, very soon.” But Foelck seeks to change all of this and reposition procurement. As this procurement expert explains to me how his company is taking steps to enact procurement change via digital transformation, he is clearly fired up about the possibilities that their unique approach opens up for this vital niche. Foelck first shares about how he is determined to realize the promises that digital transformation is making. According to Foelck, the bar is set quite high, as “digital transformation is promising the world.” He then poses the question: “Digital transformation has promised to revolutionize everything, but has it yet?” The unuttered answer is clearly no. Or at least not much.
Again, Foelck seeks to change all of that, sharing how, “In the past, with procurement technology accelerating and many companies investing in [it], everyone thought that this was going to be the biggest thing on earth.” In their minds, Foelck surmises, “They were thinking, ‘We have the data! We’ll automate everything! Everything will be fantastic, and procurement will finally have the opportunity to move on to do many other great things because we get out of the manual, repetitive tasks, and downstream activities and administrative burdens etc. because data and technology is so wonderful and will take all that away.”
“ I am keen to move procurement out of procurement.” –Foelck Fast forward to today, and clearly, expectations were greater than what has yet been achieved. Why? Foelck explains: “We believed big software solutions can do everything and that significant customization will help us to address all our needs, but this hasn’t really worked.” There are several reasons for this, the biggest of which is the incompatibility that arises from such “one size fits all, big and heavily customized end-to-end solutions that— on paper— can do everything” mindsets versus a portfolio of more tailored solutions. Enter Foelck’s current work with Roche. “Our Operating Model is enabled by our Digital Strategy, which involves complementing core procurement technology with digital assets,” Foelck explains. “When I think about digital and how it should apply to procurement, it’s an ecosystem. The base, the core stuff, the must-haves are covered with cloud based procurement technology. But I need to be mindful
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of how I can complement this with the other huge breadth of opportunities I have now at my disposal (e.g. RPA, AI, Startups, BPO), because not all core problems can be handled by simply digitizing or using technology.” Enter people and innovation. “That sort of agility and consciousness is often overlooked, and people think technology is a solution. To me, technology is never a solution, but is rather an enabler. Also, as much as end-to-end integration sounds perfect, sometimes it just doesn’t work.” Adopting this model, with this specific base, will enable Foelck to self-service many of the things that procurement does today. Specifically, according to him, it will “generate efficiencies in terms of sourcing, enable the business to buy in a more self-service manner, and free up capacity to do much more value adding and strategic procurement activities.” Using his niche of the pharma industry as an example, he shares, “In pharma, we very much focus on speed and patient impact. The faster we get something to market, the more patients we can impact and ultimately cure, which is our purpose.” He then reveals how this vital need for speed shifts the focus. “As a company, we are focusing on speed in order to impact and cure more people. So, from a procurement perspective, it becomes not so much about only saving money, but more about spending money wisely.” He adds, “The driver to get this thing right is to think differently.” This includes opening the door for automation and answering the age-old question: “How can I make this super easy for people to buy and equally easy for procurement to operate?” Essentially, Foelck focuses on “making procurement faster and for the business to buy ‘better.’”
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“If I finally get out of the pigeon-holed view of procurement as only for purchasing mentality, we can finally move to many other things,” he says, the excitement of a bright future for procurement evident in his voice. Roche and Foelck are adopting out of the box thinking in order to “get there,” among which include an inventive three-pronged, progressive approach, starting with brainstorming a plethora of procurement ideas via outlets like a procurement hackathon, a leadership forum, a procurement summit, and more. Foelck calls this stage Roche’s “Ideation” stage. The company then takes those ideas and sends them to an “Incubation” stage, ruminating
“ To me, technology is never a solution, but is rather an enabler.”
–Foelck
on real-world ways that they can work. The final “scaling” stage is where actual pilots and experiments are conducted based on the results of these ruminations. Clearly, it is an exciting day to be in the procurement arena, with digital transformation daily evolving and people being placed at the forefront fueling that forward motion. And as we trudge forward following the ascent of technology, with fearless leaders like Foelck navigating as we climb, we’ll not die upon this mountain.
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Procurement as a Business Partner
By Andy Beth Miller
Running a business is tough, and not just in regards to the realms of logistics or finances, but emotionally, too. It can be daunting as a business owner to determine what is the best course of action moving forward in order to keep competitive in today’s ever changing marketplace. Nowadays, the bar of success is set quite high, no longer measured by simply being able to stay afloat and reach your bottom line and target profit margins every quarter, but instead, it is measured by keeping up with the Joneses, who are constantly moving forward with each passing day, in leaps and bounds. It is exactly for this reason that the daunting aspect of it all can become overwhelming, paralyzing even, leading some business owners to simply stay stuck in the same old patterns of what they know rather than going out on a limb and changing things up, especially if they are unsure about what even needs to be addressed. In such situations, wouldn’t it be amazing if these business owners and stakeholders could simply find a business partner that would come alongside them and magically take the reins in regards to finding solutions and developing simple steps to pave the way to greater success, and even better, success that is sustainable over the long-term? I think we could all agree that the answer to this question is a resounding yes, but then we have to ask, do such proverbial unicorns even exist? Surprisingly, again, the answer is yes, and I actually had the pleasure of sitting down with an expert this week, who not only made me believe that such a magical business partnership really is possible, but explained that it does not arrive in the package that one might first imagine… Jonathan Townsley, a successful expert in the procurement field, sat down with us to give us priceless insight on how procurement can actually be a business partner of sorts, coming alongside business owners to help us reach our goals and improve our business from a holistic approach, thus improving all aspects of our company. In fact, Townsley is adamant when it comes to how vital it is to realize that procurement is not simply about placing an order or buying something. Instead, he says that it’s really about “enabling business transformation and business improvement.”
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Here is where seeing procurement as a proverbial business partner comes into play. Townsley provides some key areas where procurement can work for you in order to do just this, propelling your company forward and creating an easy flow toward better efficiency and greater success. If you ask Townsley, he will tell you that he could have very easily have gone down a different career path. “I always tell people, ‘I think I missed my calling. I should have been a teacher,’” he explains. He speaks in jest, but the more we converse, the more I come to understand that Townsley, in his procurement role, actually is a teacher of sorts, as education is one of the fundamental key elements in what he does for his clients on a daily basis. In fact, according to him, it’s where all of the magic happens, “It really is quite a bit of education, taking people through the journey, and letting them understand what is possible.” Also according to Townsley, part of that education fleshes itself out in the modality of mentorship. He brings this illustration home by pointing to a collaboration from his past, during a time when he had engaged in work with Best Buy, where he dealt with Store Operations and had constant contact with colleagues, and more importantly, customers. “Best Buy had a tagline, ‘Let’s talk about what is possible,’ and that really resonated with me because that is the way that procurement works today. You talk with people, you listen to what is troubling them and what are their challenges and opportunities, and then you figure out what is possible together,” he explains. And, it is really that sense of togetherness in tackling any obstacle that is the crux of developing a successful business partnership with procurement.
Feeling enlightened, and excited by the doors of opportunity for improvement that such an idea seems to burst open, I ask Townsley to give some specific examples on how exactly procurement can come in and take care of business, literally. He immediately provided a great example, stating, “In situations where suppliers/providers aren’t performing well and are not giving you the most value for your money spent, procurement can help get them well again.”
“It really is quite a bit of education, taking people through the journey, and letting them understand what is possible.” –Townsley Townsley continues, reiterating that there is much more to procurement than meets the eye, “Also, regarding businesses that are considering a strategic change to bring more customer satisfaction, procurement can drive that change.” Regarding specific departments, Townsley shares how procurement can help troubleshoot in those areas as well, stating, “One example would be if Engineering and HR are having trouble bringing on contract workers for an important project. Procurement can help communicate the need, the importance, and value of partnership with the right staffing agency suppliers.”
We are then pointed to an area that is critical, efficiency. Specifically, Townsley reveals how procurement can improve efficiency via streamlining. “Consider that a company’s Operations is struggling to find efficient ways to bring critical components to their manufacturing line from offshore suppliers. Procurement can help to streamline the process.” Then, Townsley points to an issue that is undeniably affecting us all, while also providing a light at the end of the tunnel via promises that procurement has the remedy for what ails us. “When technology trends are pushing engineering and product management teams to the edge, procurement can connect the most innovative suppliers to take advantage of their abilities and skills that will future proof the company’s products.” After providing such an abundance of applicable examples of just how procurement can fill that business partner role, I was left wondering with some awe, could it really be that simple? Townsley assures us that it is, while pointing out that what really is required from stakeholders is openness, as well as a willingness to change, bravely taking the leap and partnering up with procurement, committing to seeing procurement as a true business partner. Basically, Townsley’s simple request shadows the well-known lyrics to an iconic song by the same name, “Don’t Box Me In,” as procurement is, and can do, so much more than purchase.
(continued from page 7) comprehensive understanding of the existing supply market and the future supply market (i.e. including startups), to develop and execute the sourcing strategies to deliver what the business needs.” Perminas then touches on how many founders of startups especially pose problems by seeing procurement as being mere blockades beleaguering them with bureaucratic red tape versus co-partners in corporate innovation. So, how do
“It really helped create a legitimacy of procurement being involved in this whole ecosystem of startups.” – Perminas
we address these barriers and move forward? Specifically, where do we go from here? Onward, with grace and understanding, according to Perminas, who then shares
how Vodafone Procurement has forayed their intense focus on understanding into a successful endeavor that enables the current— and future— generation of procurement professionals to not only survive in an ever-changing and shifting world of supply, but to thrive. The Vodafone Procurement organization has taken their acute understanding of the procurement world to keep forging a path forward to bigger and greater success, creating a joint venture with the Luxembourg Government to keep creatively innovating in the startup world. The name of this endeavor is Tomorrow Street (TS), an apropos name for a venture that focuses on equipping startups for forward progress to becoming suppliers of the future, for tomorrow and all of the tomorrows thereafter. “It really helped create a legitimacy of procurement being involved in this whole ecosystem of startups. This legitimacy not only applies to Procurement within Vodafone, but I see it spreading to Procurement within Corporate Innovation in general,” says Perminas, his passion for the project clearly evident.
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