Accounts Payable Teams are important stakeholder’s for Procurement.

As finance professionals, Accounts Payable Managers are experts in problem solving, stakeholder engagement and conflict resolution with teams that span the entire organisation.

It is a smart choice to consult their wealth of experience to develop strategies that look at the total cost of buying, the customer experience and the supplier experience.

Accounts Payable colleagues help Procurement teams to honour the contractual commitments made to suppliers around payment terms. Suppliers are more likely to view us as a customer of choice when we:

1. Pay on time.
2. Protect them from exposure to fraud or unethical practices.
3. Help them to resolve payment queries quickly.

As Procurement Professionals, we invest a lot of time in developing strategies for our categories, sourcing projects and supplier relationships. It is crucial that each of these strategy types give careful attention to the Source to Pay process. The cost of poor quality (COPQ) to the buying organisation in this area could include the consequences of contract breach, goods and services not being delivered and even reputational damage.

When Procurement professionals create strategies internal influencers should be part of that strategy and Accounts Payable are important stakeholders. Like budget holders, specification owners and supplier managers, they give us the parameters for what is desirable, practical and possible. They understand the implications of payment mechanisms in terms of the total cost to the business and the impact on customer and supplier relationship quality.

The payment mechanisms that we put in place may be very different depending on your strategy objectives. For example:

• Strategies may reflect organisational working capital initiatives. E.g. lengthening payment terms.
• Strategies may reflect a requirement to gain goods or services at short notice or with short lead times from niche SME vendors with low capacity. E.g. reducing payment terms.
• Strategies may reflect a financial performance incentive negotiated with a supplier so that your business is prioritised to receive urgent goods or services first. E.g. adjusted payment values.

Given this range of outcomes, Accounts Payable Managers are the right experts to consult to ensure a joined-up experience for internal stakeholders and suppliers.  Stakeholder engagement is just one of the topics covered within our Procurement eLearning and can drive value and lower cost by ensuring cohesive strategies for supplier management.

Even before COVID-19, there was high growth and adoption in education technology, with global edtech investments reaching US$18.66 billion in 2019 and the overall market for online education projected to reach $350 Billion by 2025. There has been a significant surge in the use of language apps, virtual tutoring, video conferencing tools, and online learning software over the last year.  Procurement teams working lives have been radically changed, working from home is the new normal but what about procurement training from home?

When the majority of your team are in an office environment so much learning is achieved organically; overhearing someone discussing a new supplier, grabbing a coffee and chatting through an issue with an experienced member of the team.  Knowledge is exchanged without us even realising, without the office environment how do you ensure your procurement team remain cohesive and driven by the overall business strategies and goals?  How do you onboard new hires and bring them up to speed swiftly?  Hopefully as lockdown gradually lifts over the coming months offices will once again open, but many feel the shape of business will change forever with remote working a more viable option.

Imagine having a syllabus of online procurement training available 24×7 for your team to access covering Category Management, Strategic Sourcing, Supplier Management, Negotiation all relevant topics at the click of a button.  New hires can quickly be brought up to speed, teams can complete specific topics within a set time frame and then discuss and use within the “real-life” situation quickly achieving results.  Topics can be covered ahead of Stakeholder meetings, significant negotiations, or preparing a sourcing strategy proposal for senior executives.

Further value from online training is the elimination of travel and accommodation costs which can be as much as 50% reduction to the traditional classroom training and CO2 emissions per student are reduced by as much as 85%.

Whenever we are all “back to normal” and let’s hope that is very soon, the ease, immediacy and value of online learning will continue to shape personal development moving forward.  If you would like to learn more about receiving immediate value for your team via online procurement training contact us to discuss your specific requirements.

If you’re confused by the new terminology in procurement training – don’t worry you are not alone!

The terms e-learning and m-learning are often used interchangeably but in reality, they are two very different modes of  learning.

The “e” in e-learning stands for “electronic.” In other words, e-learning is learning that is delivered using electronic devices – think desktop or laptop. Whereas, the “m” in m-learning stands for “mobile.” So, m-learning is knowledge that is delivered using in-your-pocket or hand-held portable devices.

E-learning is the appropriate format for learning that’s structured, formal, highly interactive and in-depth where the learner is not as constrained by time.  For example, if you want to teach someone how to use a strategic sourcing process, choose e-Learning.

M-learning is for when your learner needs quick on-the-go easily accessible information in bite size pieces. Imagine, you have 2 minutes before a hugely important supplier negotiation, you wish you could quickly access a refresh to focus your mind on how to use a specific negotiation tactic? Choose m-learning! Powerful, targeted topics, delivered immediately straight to your mobile.

For m-learning the keywords are: on demand, on-the-go and just-in-time, with the learner experience being intuitive and fast.

For e-learning the keywords are: comprehensive, detailed and interactive, with the learner experience being complex and thorough.  Staged progress with knowledge confirmation via quiz’s and interaction – the classroom delivered to your desktop.

E -learning and m-learning are not competing against each other, both should feature in a blended learning program where m-Learning would supplement the knowledge gained from e-learning courses.  They both deliver the value of knowledge.

Contact us if you would like to learn more about the value of procurement m-learning & e-learning

You don’t have to let people buy without learning the ropes first

You wouldn’t dream of flying with a pilot who had just learned the theory but had never flown.  Sensibly pilots have to combine theory and practice before taking off.  So why not adopt a similar approach with buyers too?

Now you can.  Simulation training is an immersive, competitive ‘virtual’ game facilitated by an experienced tutor that creates a realistic ‘real-life’ learning experience in a controlled environment.  The big advantage is that if there are any wrong moves, there will not be any real-world consequences that could damage the organization or harm personal or business reputations.

According to research, 70% of what we learn is on the job, 20% is from interaction with peers, and 10% is from traditional learning modes.  Simulation training emulates the real work environment, the 70%, and involves substantial interaction with peers, the 20%.  In line with modern trends the 10% can be best delivered through self-learning e-learning or instructor-led online webinars.  For example, an introduction to should-cost analysis and could-cost analysis via e-learning or webinars, followed by a 2-day simulation event will be hugely more impactful than just learning the theory.

Learning through online courses plus simulation takes your learning strategy to the next level.  Learners build their skills faster, retain it longer and, because it’s fun too, recall the concepts readily and apply them in their job.

Are you thinking about developing a training simulation for your purchasing team?  If not, you probably should be. 

For Procurement professionals applying the Kraljic matrix, leverage is the quadrant that represents spend categories with high spend and high risk or market complexity.

Typically, the approaches recommended for this quadrant include competition (or the threat of it) and assertive price negotiation.

For those of us buying in this quadrant, we know things are rarely that simple. We can’t just ‘kick out’ a supplier as a knee-jerk reaction to perceived poor performance.

Frequent switching of suppliers can result in:

Increased total cost – This can occur during switching and beyond, through internal contract management costs

Customer dissatisfaction – This is especially problematic if the supplier had direct contact with customers / users

Inconsistent quality – This is most noticeable when materials / people are swapped out or in warranty claims

Leverage quadrant strategies require a refresh in organizational sourcing models.  If we are too blunt, leverage tactics have risks, for example:

• Price-based discussions ultimately mean that we don’t know – or don’t care – about the supplier’s cost base.  This lack of transparency makes understanding the business model and negotiations difficult
• A ‘just get it done’ attitude to cost opens the buyer up to a multitude of risks related to financial health checks, sustainability, ethics and fraud
• Threats don’t segue into conversations about value-add, innovation, waste reduction and cost down

There are reliable value-based Procurement practices for consistent, proactive suppliers in the leverage quadrant.  For example:

• Business growth / reduction based on supplier performance
• Application of partnership-style behaviors and practices without shifting supplier status to “strategic”
• Avoiding supplier complacency through reward / sanction schemes tailored to each vendor

Maintaining competitive pressure is still possible, but it is best approached in the context of supply chain interdependency and the operational realities this presents.  Where leverage suppliers are genuinely providing advantage to the business, there are other approaches.  For example:

• Constantly maintain awareness of supplier profit for the contract and protect it.  Where appropriate, suppliers boost profit through productivity initiatives
• Give suppliers interesting work when they contribute to continuous improvement
• Arrange skills transfer from suppliers to in-house teams, to develop capability in up-to-date methods and enable good end of project handover
• Help internal colleagues to manage suppliers well – with regular feedback, dispute resolution tools and opportunities to develop their business

Eroding supplier profit year on year doesn’t make them hungry.  It makes them look for shortcuts.  Leverage is the right label; it just needs a little adaptation sometimes.

Covid-19 has radically altered working life – maybe forever – and procurement training is no exception.  Driven by the pandemic over the past weeks e-learning and instructor-led webinars have become a growing popular and viable alternative to more traditional classroom training.  More than that, there is a general acceptance, indeed a desire, to continue with online learning as we gradually move out of lockdown.  Clearly online learning is becoming the “new normal”.

Why is that?  First and foremost is that it works!  With new and advancing technology such as 5G there are few barriers and for the new generations in the workforce it fits in perfectly with their mobile lifestyle.

Online learning also completely eliminates the travel and subsistence expenses associated with traditional classroom training.  These costs can be as much as 50% of traditional training costs.  Costs aside online learning also burnishes your organization’s sustainability drive.  Online learning is environment friendly.  LearningIndustry.com research statistics state that e-learning requires 90% less energy and CO2 emissions per student are reduced by 85% when compared with traditional classroom training.

When you take into account these and other benefits of online learning, it makes good sense to use it whenever possible.  Now is the time to review your existing procurement training program to see whether it’s fit for the post pandemic future.

Accounts Payable Teams are an important stakeholder for Procurement.

Accounts Payable Managers are finance professionals who are expert in problem solving, stakeholder engagement and conflict resolution with teams that span the entire organisation.

It is a smart choice to consult their wealth of experience to develop strategies that look at the total cost of buying, the customer experience and the supplier experience.

Accounts Payable colleagues help Procurement teams to honour the contractual commitments made to suppliers around payment terms. Suppliers are more likely to view us as a customer of choice when we:

1. Pay on time.
2. Protect them from exposure to fraud or unethical practices.
3. Help them to resolve payment queries quickly.

As Procurement Professionals, we invest a lot of time in developing strategies for our categories, sourcing projects and supplier relationships.

It is crucial that each of these strategy types give careful attention to the Source to Pay process. The cost of poor quality (COPQ) to the buying organisation in this area could include the consequences of contract breach, good and services not being delivered and reputational damage.

When Procurement professionals create strategies with internal Procurement influencers, Accounts Payable are important stakeholders. Like budget holders, specification owners and supplier managers, they give us the parameters for what is desirable, practical and possible. They understand the implications of payment mechanisms in terms of the total cost to the business and the impact on customer and supplier relationship quality.

The payment mechanisms that we put in place may be very different depending on your strategy objectives. For example:

• Strategies may reflect organisational working capital initiatives. E.g. lengthening payment terms.
• Strategies may reflect a requirement to gain goods or services at short notice or with short lead times from niche SME vendors with low capacity. E.g. reducing payment terms.
• Strategies may reflect a financial performance incentive negotiated with a supplier so that your business is prioritised to receive urgent goods or services first. E.g. adjusted payment values.

Given this range of outcomes, Accounts Payable Managers are the right experts to consult to ensure a joined-up experience for internal stakeholders and suppliers.

Give your negotiation the maximum chance of success with these must-haves:

1. Aims.

Make a clear plan of what you need, what you want, what would be nice to have.

2. Limits.

Set strict high and low boundaries for what you want. Don’t breach them unless the facts change.

3. Plan B.

Have a back-up in case the negotiation fails. Even if it just buys you more time, a back up is essential.

4. Concessions.

You have to give to get. Know where you are prepared to be flexible and what you have to offer.

5. Creativity.

Good negotiations include many options, possibilities and hypotheses.

6. Listening.

Be prepared to listen and consider ideas that you have not planned for. Avoid a fixed mindset.

7. Influence.

Persuasion should be tailored to the personality and motivations of the other negotiation party.

8. Data.

Even if the facts do not support your line of argument, understand them.

9. Control.

Assert control by stating the purpose of the discussion, managing the agenda and keeping to time.

10. Intelligence gathering.

Understand the market conditions. Don’t let your internal commercial information leak outside.

11. Style.

Choose the right style – competitive or collaborative – depending on the environment of the discussion, the relationship you want and the outcomes you seek.

Most professionals try to spend as much time as possible preparing for their negotiations with suppliers.  However, little time is typically spent considering the supplier-side of negotiation planning.

Suppliers will prepare their own negotiation plan that is aligned to the customer account strategy and sales goals.  Whilst suppliers will not want to openly share this with their customer, it is essential that the buying organization’s negotiators takes the time to consider, not only the supplier’s negotiation objectives, but also:

• What tactics will they deploy?
• Which personnel will they involve and why?
• Which personnel will they try and engage on the buyer side, and why?
• How does their negotiation approach align with their account strategy for you?

It may seem cynical to speak in terms of supplier tactics, a term that suggests that the supplier is trying to manipulate the discussion.  Negotiation tactics can be defined as methods of persuasion and lines of discussion that support an overall negotiation strategy.  The supplier is simply doing their job properly by using tactics, just as the buy-side negotiator is. Supplier tactics include:

Tactics to open the negotiation:

There is evidence that an effective opening can sway the whole progress of the negotiation in terms of the balance of power, the extent of openness and the nature of the conditional statements made.

Tactics to influence the stakeholders into the supplier’s way of thinking:

Supplier conditioning before and during the negotiation can position them in a more favorable light with decision-makers and users.

Tactics to get the buyer to make a deal:

Subtle methods are applied to nudge the buy-side negotiator into a closing mindset.

Tactics to enhance the deal value for the supplier:

Suppliers will propose options that offer a win to the buyer but a bigger win for themselves.

To deal with supplier tactics, the buy-side negotiator must identify the type of supplier (and therefore negotiation) they are likely to have:

• In competitive supply markets, many tactics are in use by the supplier to optimize their weaker position.  The buy-side negotiator must be aware of all the tactics in use and prepare counter-tactics for implementation before and during negotiation.
• In non-competitive supply markets, the buy-side negotiator must influence the supplier to abandon the use of win/lose tactics in favor of a more open and collaborative approach to finding a solution that enhances value for all parties.

Being aware of the specific tactics that may be used, when and how is an essential part of the negotiation planning process.

You can find out more about individual supplier tactics in our Online Procurement Academy for Negotiation (OPRA).

Most modern negotiations occur using a variety of online and offline modes.  Typically, there are complex issues to discuss that require a mixture of communication methods such as:

Email: Ideal for documenting discussion, sending reference information and making written proposals.

Online:  Web meetings are useful for checking understanding, screen sharing, brainstorming options and involving multiple disparate parties.

Telephone:  Telephone discussions help to maintain interpersonal contact, supports relationship building and helps maintain momentum in lengthy negotiation.

Face to face:  In-person negotiation is often combined with all of the above and is useful when the discussion would benefit from the efficiency that a meeting can bring.  For example, using body language to check intention and comprehension, or collaborative discussion using materials or sharing tools, that can often spark more creativity when it is hands-on.

Many of us are driven to negotiate in a particular format due to time constraints, travel or budget restrictions or availability of key personnel.

However, the format of negotiations can optimize the discussion and have an impact on the outcome of the deal. Therefore, it is wise to treat the choice of mode as a business case – you should seek approval to use the mode that gets the highest return on investment.

Similarly, some negotiation formats will disadvantage the buying organization and it would be foolhardy to actively choose such methods simply because of convenience.

At their office

Advantages to the Buyer

• Better access to key data and personnel
• Combine with cost data gathering
• Demonstration of respect

Disadvantages to the Buyer

• Personal discomfort associated with “being away from home”

At our office

Advantages to the Buyer

• Control the environment
• Save travel expense

Disadvantages to the Buyer

• Burden of provision of hospitality
• Full access to information and people
• More difficult to use confrontational tactics

Neutral venue

Advantages to the Buyer

• No perceived power imbalance

Disadvantages to the Buyer

• Cost

Remote (online) discussion

Advantages to the Buyer

• Enables an ongoing discussion over a period of time
• Fosters a decision-making environment

Disadvantages to the Buyer

• Unable to use and interpret non-verbal cues

Email

Advantages to the Buyer

• A well-documented discussion that can be adapted to fit the time available

Disadvantages to the Buyer

• High likelihood of misaligned understanding, expectation and relationship values, particularly with a new supplier

Negotiation method is integral to the nature of each of these elements and deserves analysis and discussion with stakeholders before major negotiations begin.