Procurement is often about managing risk and cost savings. But the dynamics of balancing multiple stakeholders' needs with the best available new technologies can make this function more complex and challenging.
This was one of the main messages at the American Express Inside Edge conference, in a round table discussion hosted by American Express Vice President & General Manager of Global Clients Group JAPA, Becky Cook.
Cook told delegates there is an ongoing and evolving art in managing suppliers. The role is often centralised but also involves the need for great flexibility.
“It is about managing multiple stakeholders across so many dimensions, everyone in the chain has different objectives and priorities, so it’s important in our space to understand what those are and ensure we are supporting our strategic sourcing partners to meet them," Cook says. “You have to be very diplomatic. The role of the Strategic Sourcing lead in our space is almost a sales role in itself…and we are here to help them sell!"
Nicola Winchester, EY Global Corporate Card Leader and APAC Travel, Meetings & Events Leader, agrees that a procurement role can demand constant flexibility.
“How we engage each stakeholder can be very different. We have to adapt continually. And that’s one thing that I enjoy most about my role – no day is ever the same."
Procurement as profit
One issue in procurement is its transformation into a profit centre. Winchester says cost savings will always be a focus, however value is also derived from looking at how the function can contribute towards top line revenue growth by supporting client serving teams with subject matter experience as they engage with their clients.
Nathan Morgan, Chief Procurement Officer for News Corp Australia says he believes procurement can be revenue-generating.
“We've got the expertise, we've got the knowledge about contracting, we know how to integrate contracts and we know how to work with the vendors," he says.
Bottom line savings
In contrast, Thomas Fichtenmaier, Supply Chain Manager for mining company Weir Minerals, told the audience that while new digital opportunities may be the reason he gets out of bed, his role is still essentially about bottom line savings.
Fichtenmaier's work involves buying forklifts, dealing with printers and procuring a large list of commodities including rubber and chrome. Savings is one of the drivers, he says. “But improving your cash flow and inventory returns is also a goal," he adds.
“The objectives will always remain the same. You advance from a digital point of view, you advance from a system point of view, but the overall objective is savings. You need to show it on the bottom line."
One of the themes of the conference was the potential for greater transparency to improve the management of day-to-day work across the different business groups as well as across all the different components in the supply chain.
Morgan says quality data has now become critical to this process, not just on the procurement side but on the merchant side as well. Merchant data, that tends to be used for demographic purposes in the newspaper and digital media industries, may also be neatly extrapolated to the supply chain.
Tech advances
Winchester says robotics is another key area that will bring about savings and enhance user experience.
“It's happening now," she says. “We're keeping up with the pace of it, ensuring that we're bringing it into what we do. We have to deliver savings and evolve our programs otherwise we’re not tapping the full competency of our roles."
Winchester says her team is embracing robotics and it is important to customers as well. “It's huge for us. We're now seeing our digital advisers going out and talking to clients about AI, blockchain and robotics."
In the card space, robotics is taking menial and mundane tasks in finance departments and automating them, saving time and freeing up resources. “It could be a robot sending out proactive messages to employees to ensure card balances are settled. And it's got the Chief Financial Officer's name on it. So that makes it quite actionable," she adds.
But embracing change and dealing with disruption is tricky and Winchester says it becomes harder when an organization of the size of EY continues growing.
“The fact is we have different teams comprising 260,000 people globally right now and we are still growing at pace. We are going to have 300,000 people in the network by 2020. And by the year 2020, 75 per cent of our people will be millennials.
“We will see significant growth in our contractor personnel but right now, we do not allow contractors to have cards. We are going to have to resolve that," says Winchester.
Adapting to innovation in the payment space may have potential risks but that does not preclude finance teams from looking into new systems and methodologies.
Winchester says, “Our view is that we would rather move fast to keep pace with developments in technology than plod along. The definition of insanity is doing the same thing again and again and thinking you are going to get different results."
She acknowledges that her group is at the leading practice of innovation in this space. “I'm part of a team who are educated risk takers in the travel meetings and event space. We would like to get out there with all the innovations able to be delivered to our business. But some of them are going to work, some of them aren't," she says.
Team effort
Tech implementations can be complex and challenging. They can require a team effort by businesses and their suppliers.
“You cannot always beat up on the vendor," Cook says. “It is your job to ensure you work well together. So, either have a procurement strategy that is multi-sourcing or have an operational structure that absorbs that risk."
Winchester is in favour of working through all the options up front. “Just putting it all on the vendor isn't good enough. You have to weigh up the risk and get that right and have the right risk appetite," she says.
Key Takeaways
- Constant adaptation is potentially beneficial.
- There's an opportunity to view procurement as a revenue centre.
- Digital technologies may support better procurement outcomes.
- High quality data may lead to better expense analysis.