Supplier selection typically involves a rigorous evaluation of potential suppliers’ capabilities. As well as technical suitability, suppliers may need to provide detailed information about their business operations. Yet even after supplier selection, how well do we really know our suppliers?

We expect suppliers to submit accurate pre-qualification information, but even this can be positioned into the most attractive profile. Or perhaps they were guilty of the sin of omission, concealing failures, weak management or business inefficiencies.

A visit to a (current or prospective) supplier is a great opportunity to get to know them better because so much is on display, intentionally and unintentionally. For example, you can meet a range of personnel that you would not normally meet during the bid process. This could be scheduled or unscheduled, and other functions often reveal much about the organisation’s true position e.g.

• Operational managers, keen to discuss people, equipment and business continuity.
• Quality managers, passionate about improvement and anxious about performance.
• Human resources personnel, revealing how the organisation motivates and rewards people.

Supplier visits are a chance to complete the portrait that was sketched from financial accounts.  Financial accounts may have given you some signals about financial performance such as excess inventory, low wages, complex borrowing arrangements or slow cash flow. Your observations and questions can add a why, how and when to these topics.

Most importantly, supplier visits are an insight into the true culture of an organisation. Your perceptions have been shaped by the team you know. Your visit may reveal that this is not indicative of the whole organisation (for better or worse). The supplier view of you as a customer may mean that you have been allocated a high-performance “A” team, or the lacklustre division serving only your “difficult” demands.

One good way to prepare for a supplier visit is to take part in a supplier visit training simulation. A training simulation is a pre-established case study that allows delegates to plan and execute a visit in a role-play style setting. Supporting data and props bring the simulation to life and enable delegates to explore the obvious (and less obvious) aspects of knowing a supplier. The simulation takes place in teams, which adds competition to the training each team builds a model of the supplier’s operating costs. At the end of the simulation, we find out which team created the most accurate model and got to “know the supplier” better than their peers.

In an age when many procurement professionals are leveraging long term relationships for value, it makes sense to know your suppliers well.

Corporate buyers in Britain are adjusting to a new post Brexit landscape.  Much of their supply base will be impacted by Brexit, whether directly as an EU-based organisation or indirectly if any of their supply chain or employees have an EU profile.  But expert procurement professionals are used to dealing with international procurement scenarios, so will Brexit mean new skills are needed?

Perhaps not new skills, but certainly the post-Brexit buyer should focus their 2017 competency development in the following areas:

Contracting

Discussions over which country law should apply to the legal agreement with the suppliers becomes more impactful now. The European Court is currently the ultimate arbiter of disputes between EU based organisations and EU Law prevails where two EU-based parties have made a purchasing agreement where the governing law is from either of their respective countries. UK buyers should already be considering the impact if this will no longer apply.

In the absence of the European court, another governing body such as the World Trade Organisation (WTO) could ultimately intervene in the event of catastrophic relationship breakdown.  But the comfort of having a common legal framework may vanish. Buyers should therefore evaluate their contracting strategy carefully before commitment to any suppliers.

Total Cost of Ownership

The procurement professional is used to considering the total cost of any supplier proposal in terms of purchase price, logistics costs, and on-going support and maintenance issues. In the Post Brexit world, some of these costs are difficult to calculate right now – for example, will the costs of import, export, tariffs and taxes change?

Buyers should scenario plan multiple total cost eventualities when evaluating potential relationship options with suppliers, and build contingencies into the agreement such as renegotiation or review points. This will help protect all parties who wish to maintain a long term relationship without the disruption of unbudgeted operating cost increases.

Supplier Financial Analysis

Post Brexit buyers should pay careful attention to suppliers’ financial performance. In this period of uncertainty, changes in interest rates, currency valuation and employment law can radically shift the profitability of customer accounts for suppliers. Procurement professionals typically look at financial analysis as a risk management issue (the focus being on supplier solvency). Credit checks are duly undertaken prior to supplier selection, and perhaps annually thereafter for key suppliers.

But in the new post-Brexit landscape, buyers should look at prospective important suppliers’ financial statements to understand the impact of the deal on the suppliers’ business models and what shocks may impact the viability of the deal. Buyers must ensure they are securing an agreement that is sustainable and attractive for both parties.

As Britain gears up to trigger Article 50 in spring 2017, the two-year withdrawal process of the country as an EU member state will commence. Buyers have adequate time to enhance the skills that will help maintain business continuity for their organisations.

There has been much speculation about the impact of Britain’s departure from the EU on jobs, the economy and Britain’s relationship with other nations. Many organizations with UK operations had already started ambitious procurement capability development projects when Britain voted to leave the EU in June 2016. This is our view on the impact of Brexit on procurement skills:

1. A more international outlook

Post-Brexit Britain will seek to make advantageous trade relationships directly with the EU and non EU countries. Prime Minister Teresa May described the outlook in an interview on 4 September 2016, as “an independent Britain forging our own way in the world”. Procurement professionals will need opportunity assessment skills to determine whether new trade relationships with countries outside of their current supply base represent better value for money. Their research could influence business leaders within their industry to request that the UK government supports trade deals with countries of interest.

Knowledge of international trade legislation is going to be important, coupled with skills in negotiation with different cultures.

2. Reduced travel results in greater use of online tools

It is yet unknown whether it will cost more to travel to and from the UK (e.g. due to changes in visa requirements or air passenger duties).  As the International Air Transport Association (IATA) outlined in June 2016, “broadly speaking, the closer the relationship with the EU, the less likelihood that the UK would need to amend air services agreements.”  Higher costs of transport could impact the likelihood of procurement professionals visiting the facilities of overseas suppliers which is essential for practising skills such as cost analysis and evaluation of responsible business practices. Yet reduced travel could also reduce attendance at training courses for these skills.

Online learning like ADR’s Online Supply Chain Academy (OSCA) for procurement eLearning and virtual classroom courses can enable procurement professionals to refresh these skills. Online tools can also support supplier management tasks like evaluation of vendor performance.

3. Total cost of trade requires careful evaluation

The threat of poor trade deals for importing and exporting goods and services will mean that all business professionals need to hone their skills at calculating the total costs of buying and selling overseas. The Institute for Fiscal Studies (IFS) report “The EU single market: the value of membership versus access to the UK” (August 2016) states “Estimates suggest the costs affecting services trade may be over twice those in goods”.

Corporate services buyers will need strong skills in assessing costs such as changes to import duties, labour law and vendors down the supply chain. For example, the UK currently relies on many employees from the EU with a right to work in the UK. If that changes (or the cost to work in the UK changes), suppliers could face higher costs of hiring and wages, longer lead times to recruit staff and a greater reliance on overseas workers from outside the EU who also present working visa cost implications.

Skills shortages that already exist could become more acute and suppliers of labour services could attempt to increase prices in response to these challenges. Expertise in skills such as sensitivity analysis will be required in the evaluation of supplier proposals and in contracting.

4. Long term economic stagnation makes long term contracts better value

Following the Bank of England’s August 2016 inflation report, when the 2017 growth forecast reduced from 2.3% to 0.8%, the British Chambers of Commerce (BCC) observed “While the scale of the downgrade mostly reflects the greater political and economic uncertainty in the wake of the Brexit vote, it is significant that this is the fourth successive inflation report in which the bank’s expectations for UK growth have been weakened – confirming that the UK’s economic outlook was softening long before the outcome of the EU referendum was known”.

If Brexit does mean a long period of low growth for the UK economy, tactical sourcing may yield limited results except for categories in the most competitive of supply markets. Procurement professionals may seek longer term contracts with suppliers, exchanging greater commitment for preferential terms.

Buyers will need to make themselves more attractive to suppliers to secure a quality relationship. Supplier assessment will be a key skill to identify what makes their organization attractive for suppliers.

5. Standardized capability profiles

Global teams have traditionally used a highly regionalized approach to creating job descriptions rather than an international schedule of the desired skills mix for procurement (sometimes known as a competency framework). This often results in regional pockets of procurement skills strength and weaknesses.

In future, there could be a more global approach to capability development to support greater international buying opportunities. This could result in common global competency frameworks, international qualifications and sector-specific procurement accreditation. This could facilitate easy movement and development of procurement expertise, which can elevate skills to a consistent global level.

Conclusion: Brexit means opportunity for procurement skills

More internationalization means less siloed thinking and higher aspiration to apply new skills to collaborative value initiatives. The silo approach is where procurement is overly focused on local requirements and objectives, which can result in a zero-sum game where colleagues argue over who reports overlapping project benefits.

Brexit should remind any world citizen that people have more things in common with each other than not, which is the starting point for any win-win type relationship.

Distance training is type of internet-based learning. It is typically real-time and takes place in a “virtual classroom”, often with other colleagues who could be based on many different locations. Participants require a device with internet access to attend the courses, perhaps using a headset (earphones and microphone) so that they can discreetly listen and contribute verbally as well as using the keyboard.

Distance training is popular with organizations seeking “bite size” courses, accessible to many people globally. It is useful for organizations trying to avoid the travel and venue costs associated with classroom training, but who still want learners to have an interactive experience.

ADR International expert tutors deliver virtual training for corporate groups in several languages, bringing our global insight to procurement teams. Our top tips for effective distance training are:

1.  KISS: Keep it Simple (and short!).

Ideally a maximum of 2 hours.

2.  Focus on one discrete topic.

This makes it bite-size and easily digestible in an online format.

3.  Use a virtual training tool.

These applications offer interactive elements like virtual breakout rooms, polls and collaborative whiteboards.

4.  Be human.

The internet is notoriously impersonal. Tutors should be authentic, and ideally humorous.

5.  Keep it moving.

The pace of virtual training is (necessarily) more rapid than classroom, so lots of interaction and progression works best.

6.  Exchange ideas.

Virtual tools benefit from quick capture and share of preferences and opinions without the story-telling involved in a face to face course.

7.  Adapt to cultural differences.

Culture is just as prevalent online as offline. Each group may be more or less likely to share views, challenge or work through puzzles. Amend the content and approach to suit.

8.  Reward attendance

Progress towards accreditation or a certificate of learning are always welcome.

9.  Recognise connection challenges.

Employees may have joined the call from locations with unstable internet connections, or perhaps from a device while they are travelling. Be prepared and be patient.

10.  Record it and publish it internally.

That way, it is available to learners to refresh and reinforce.

Procurement learning is changing. As younger people enter the procurement profession, they expect training methods that will engage them and enhance their business performance, such as social media, online or classroom games. ADR International delivers classroom and digital procurement training courses to corporate customers around the world, and gamification is an important theme.

Learning games are instructional tools that develop capability through “play”. The games could be in any format e.g. board games, card games, console games, simulations. In the article “Moving Learning Games Forward” (Eric Klopfer, Scot Osterweil, and Katie Salen), the authors cite the elements that constitute a game in the context of learning: rules, goals, feedback, fantasy and fun. These concepts are familiar to games learned in childhood and are essentially relevant for the digital gaming industry. Most importantly, they work in the context of games for school and business education.

Games make use of the elements that game-players find so compelling, such as:

• point-scoring or moving up levels
• collaborating to solve a problem
• time pressure
• public recognition for “winning”

The concept of games to assist learning is not new. “Serious Games” has been a learning concept since the 1970s, developing into Clark Abt’s book of that name. Education games, particularly for school use, have been available since the 1980s. A 2015 market report by Vertical (“The Serious Game Market”) predicts that the market for learning games targeted at both youth and adult learners will be worth over $5billion by 2020, fuelled by growing demand that will exceed 16% each year.

The Serious Games Initiative’s co-founder Ben Sawyer identified a range of “games with a purpose beyond play” including “games as work” and “games for training” for corporate learners. (“The Taxonomy of Serious Games” developed by Ben Sawyer and Peter Smith, 2008).

ADR’s classroom learning games make use of tactile formats like cards, board games and props for simulation. We have found these formats particularly useful for procurement training and development. Our tutors summarize the reasons for their popularity:

Fantasy elements

• Simulations allow for a variety of different outcomes, so participants can test the variables they have available and learn by experimentation.
• Role play and simulation enables the use of different identities and / or behaviors. Being able to look at things from another perspective is essential for procurement people, who spend much time trying to get buy-in from stakeholders and suppliers

Childhood elements

• Game-playing using fun design and props like cards, game pieces and game boards blends media well – focusing onto the participants’ hands and away from screens seems to switch thinking.
• “Free play” game elements like drawing evokes memories of childhood games and aims to spark creative thinking and an opportunity to look at colleagues’ perspectives in a new light.

The value of not “winning”

• Ironically, whilst games lend themselves well to competitiveness, they can also be used to take pressure off learners to “perform” against their colleagues. For example, the use of dice introduces an element of chance; and drawing games reward expressiveness, not intellect.
• Frankly, something fun is more memorable than something serious in the classroom.

Our tutors have put together their top tips for effective procurement learning games:

Top Tip Number 1: Games should be a trigger for the learning.

It is tempting to finish up a fun game on a “high” but training participants need to bring the learning back to their own working environment and discuss how the game experience was relevant, whether or not the relevance was immediately obvious. The tutor facilitates this using their observations of how the participants interpreted and adapted the game rules.

Top Tip Number  2: Many modern educational games are online, but they don’t have to be.

People like traditional game-playing elements (like cards and boards) as well as online and console gaming. For example, Mojang revealed in 2016 that they had sold over 100 million copies of their top game, Minecraft (available on PC, console, and mobile). But another one of its popular games, Scrolls, is based on collection and swapping of cards (albeit digitally, which can then be used for battle enactment). Using the most popular elements of “traditional” games provides options for using them in classroom learning, or built into eLearning and virtual classroom formats.

Top Tip Number  3: Games should reinforce effective procurement behaviours.

What is it about digital games that they so captivate young learners? Perhaps one reason is that the ability to play anywhere and anytime makes you feel good, because you can master the game quickly. Such games help you to get better because you play repeatedly. Procurement games work well when a similar logic is applied: A particular behaviour or practice learnt in the game becomes a habit that will serve the procurement professional well during their continued discussions with stakeholders and suppliers. For example, a game that helps to inspire creative thinking as part of specification development becomes a normal behaviour in daily working.

As the interest in and application of games extends further into business training, the procurement profession can demonstrate its progressive approaches by making use of gaming options to enrich their personal education. Even better, such games are an efficient and compelling way to educate their stakeholders and suppliers.

The Procurement Academy is a framework to accommodate a suite of learning and development offerings to the global procurement community of the organisation. It is often designed with a specific goal in mind e.g. further optimization of spend or driving more value for all parties from existing supplier relationships. What is included in the academy could vary from eLearning courses, skills assessment, scheduled distance learning events, or all of these and more. This “blended learning” concept is important to ensure that individual learning styles, preferences and access to online and offline learning is accommodated.

The Procurement Academy concept has grown in familiarity and scope over the last five years. The procurement academy concept was expanded out of corporate learning and development academies. Many organisations had started to create enterprise-wide online training environments that could host (typically eLearning) content. These were aimed at communicating broad corporate messages such as core values or key policy issues. The opportunity to extend this thinking into functional learning and development meant that departments such as Procurement started to adapt the format, often using the same software tools, to supply-chain specific training.

Many Learning and Development Managers are now responsible for sourcing and development of online content to push onto learning academies, but there is a risk that this reduces the academy to a static knowledge portal. The academy should be the ultimate home of the individual’s learning journey, which may include skills gap analysis and planned activities such as training and on the job learning. This approach supports the 10-20-70 model of procurement learning, where only 10% of learning is formal (such as classroom or eLearning) and the remaining elements are social and informal. The Procurement Academy can support the 20%and 70% with tools like functional social media, knowledge repositories, shared learning events and peer to peer coaching and mentoring opportunities.

The best types of procurement academy enable a match of the function’s capability development progress against the desired capability profile of the organisation, as set by the procurement leaders. In this way, it offers assistance with succession planning so that individuals who could be candidates for future roles receive appropriate interventions to progress towards them. If we neglect succession planning when building the academy, we could end up recruiting solely externally because we failed to adequately develop internal candidates.

An effective procurement academy will be the host of multiple learning modes, but most importantly will emphasise and record self-directed learning activities. It may link to human resources and payroll tools so that line managers can track the continuous professional development of their staff and the associated career progression and rewards.

What is required to start building an effective procurement academy?

• A capability framework that describes the range of skills required across the department and the different levels of proficiency that may be relevant (depending on role type, location or category). This global infrastructure ensures a common landscape for skills definitions and targets.
• A future skills profile and what achieving this will mean for the organisational objectives. For example, a profile of problem solving behaviours that emphasises financial literacy could cost analysis and value engineering skills will contribute to a goal of improved cost control.
• Expertise to build or source suitable content. Content may be a mix of internal and external originated, so it is not only “bought in” but also “home grown” by practitioners. Ideally, content development should be part of the objectives of buyers so that procurement process development is rewarded and recognised. This helps to build processes that are built on real-life category experiences rather than a third party’s generic approach.

The final key success factor for procurement academies is to recognise that the concept builds and grows as engagement and understanding develops in the user base. It is better to quickly get some content in the academy environment that is meaningful and used. It is then possible to monitor take up and understand the response, building more content and functions as required.

It was reported in November of last year that Pepsico had removed marketing procurement support from the business. This resulted in anxiety from the procurement community, in both marketing and non-marketing teams. If removing procurement support is successful (and we could debate what “success” could look like), then does this imply that the procurement function is no longer required?

The ADR Europe team recently supported a procurement effectiveness review for a public sector organization that disbanded their procurement function some years ago. In this environment, business stakeholders were specifying the need, designing solutions, engaging suppliers and contract managing. The outcomes were impressive: lean operations, rapid response to changing customer requirements and careful budget management. This would support the argument that a procurement function is not compulsory to achieve value through supplier management.

If your organisation is considering removing procurement support from one or all spend categories, I would recommend checking 3 things first:

1. Know what Procurement can and does contribute

If you are trying to figure out if your procurement team is adding value, you need to know what that value is and how to measure it. Start with the big picture – is your procurement team contributing is to your organisation’s financial performance in terms of revenue growth, operating cost reduction and capital efficiency?  Most importantly, are business stakeholders and suppliers satisfied with the value offered to them by the Procurement team?

Then consider a category-by-category review. Maybe some categories have already had the benefit of rigorous procurement effort, where application of the strategy has driven the price down through competition and then reduced total cost through collaborative efforts. Now what remains is supplier management for incremental performance improvement and innovation. Who is best placed in your organisation to do this, operational contract managers or procurement professionals? If you still have less mature categories that are still on a journey to full value realization, it may make sense to retain dedicated procurement expertise.

2. Discover if the capability of your people matches the business challenge

Some buyers are perfect for volatile market conditions, some buyers are brilliant facing entrenched monopolies. Great buyers can learn and apply skills quickly, depending on the situation. But they can only do this if they know what skills are required in that situation so managers should check if this is the case. When planning skills assessment, managers need to think 3-dimensionally to ensure that they are measuring competencies against what is really required for the category right now, not just gaps against generic job profiles. This is just as relevant in organizations where procurement is devolved. Even if supplier management is only a small part of the job, business professional needs to understand techniques to optimize that element of their work. Networking with colleagues, observation and discussing lessons learned with peers are all valuable “on the job” learning activities, but they do require advice and direction to make the most of the experiences.

3. Consider whether you have the right supplier management infrastructure

Even if you have no requirements for “buying” (perhaps because of an existing catalogue or long term contract arrangement), there always exists the need for expert supplier management. Supplier management activities include performance management; handling end customer expectation and extracting more value from your ongoing spend with suppliers. These tasks often already lie with functional stakeholders who are either unaware of the full depth of responsibility or unable to accommodate it alongside their other work. Whoever performs supplier management, the correct enablers must be in place such as analytics that support decision making and contracts that address supplier performance management.  If professionals are supported to understand and use these tools, any function can successfully deploy them.

There should be no rush to carve marketing procurement away from the main procurement team, or to question the purpose of procurement as a function.  However, procurement should not hide away from the need to identify and deliver benefits through ongoing supplier management. If organizations can survive and thrive without centralized procurement, the urgency of providing measurable value is now more relevant than ever.