Author: NovoK@Admin

Do you recognise your need to get more from your supply chain?  You already have, you’re reading this!  It is good practice for businesses to follow a procurement flow. If you’re wondering what procurement is or how it differs from purchasing, have a look at this https://www.novo-k.com/increase-profits-what-is-the-difference-between-purchasing-and-procurement/. In this article we are talking through some simple steps to get you started on your procurement journey.

The Procurement flow follows specific steps to identify the requirements of each purchase to fulfil the needs of the company in order to buy the product or service. This straightforward guide will take you through a simple process to set you on the road to maximise the value from your supply chain, reduce spend, strengthen supplier relationships and benefit from innovation.

Needs Analysis – Strategic Planning

First you need to know what are the goods or services your business is looking to buy in order for it to succeed and meet its objectives?  Remember, the most cost-effective plan is to decide whether you really need it in the first place. You will need to determine the need and demand across the whole organisation for this product or service, ensuring stakeholders are included in the budget planning for the right outcome.

Stakeholder Requirements – Hierarchy of Needs

An extremely important stage of the procurement cycle is to capture the priorities of all stakeholders of your business, making sure that you consider what is important for all the different roles within the business. It’s easy to assume you know this and that you have thought of their point of view but make sure you get everyone together and have a discussion, taking note of any specifics or anything unique to your organisation. For example, your Finance Director’s priorities will be different to those of the Marketing Director. Make sure you consider different drivers involved in the buying process such as cost, quality, innovation, services, compliance and assurance of supply. This will allow you to build a specification of requirements to go to prospective clients with.

Find a Supplier – Sourcing Against Business Needs and Requirements

Research, research, research.  It’s not just about best price, do your best to become an expert in the topic on which you are purchasing and arm yourself with questions pertaining to your specific needs and those of your stakeholders; there is no such thing as a stupid question.  Wherever possible, question the suppliers’ own supply-chains to ensure they adhere to your own company’s values and policies.  For example, is the supply chain positively supporting equal rights or EU working directive.

Depending on the size and complexity of the solution you may need or want to complete a tender process. This is something to cover separately, but as a rule of thumb, if its value is more than 5% of your turnover, you should complete a tender. You can get in touch with us for help with this.

Price and terms

The advantage of negotiating after a rigorous selection process is that you’ll understand the value to your business and be able to articulate the Return on Investment (RoI) based on the suppliers’ proposals. By now you’ll have already worked out that it’s not just about the least expensive, but about the greatest RoI, company values and strength of relationship – ask yourselves of each supplier: can you work with this company to drive greater value during the term of the contract?

Remember that the collaboration is the most successful form of negotiation. It helps you to create strong relationships built on trust and a desire from the supplier to go that extra mile on your behalf. With this in mind, keep the old adage of ‘win:win’ in mind. If you get the price you want with the terms you demand, does that mean the supplier is losing (or barely making) money on the product/service and at terms they struggle with. Could your demanding payment terms or unnecessarily strict service level agreements mean you impact their cash flow or ability to deliver the service with reduced resources?

Compromise on both sides generates trust and builds loyalty on the part of the supplier. Never forget that business is still people based and impacts lives. Be realistic and transparent about your negotiation goals without yielding on your fundamental principles for contracting with suppliers.

Document and Contract

Seek legal counsel advice to be sure you have a fair and reliable contract. If you start quoting terms of the contract at suppliers, it’s likely the relationship is already dead, so contracts are designed to protect both parties from significant risk of harm to cash flow or reputation. You should control the contract documentation during negotiation wherever possible to ensure the supplier can adhere to your values and expectations for service level agreements (SLA’s) and key performance indicators (KPI’s).

Delivery on Purchase Order

If you use Purchase Orders make sure these are set up to help your finance team and, where possible, make it easier for your supplier to understand – after all you want them to send you the correct specifications of your order, regardless of whether it’s furniture, software, utilities or IT.

Goods / Services

If everything has gone to plan, this should feel like the exciting bit, ordering the solution feels like the successful outcome of the negotiation.

Review and Invoice check

You’re not quite done yet; you must make sure that the product or service was received as expected – are the stakeholders happy? Is the invoice correct and have you confirmed with Finance? True procurement requires you to think about the life-cycle of the contract and relationship with the supplier, so thinking about the success of the process begins here. You should be organising regular periodic reviews with regular significant suppliers. E.g. IT Suppliers.

Ongoing Management

This is where Procurement really stands out as different from purchasing as you proactively manage your supply chain with regular reviews and a set of deliverables to which your own organisation can hold you accountable. Procurement is a continuous improvement cycle versus purchasing which is about linear transactions.

Being in tune with the Procurement flow allows you to prepare for challenges in the supply chain and resolve issues before they occur or be agile when the unpredictable happens. Effective procurement is important for developing a successful business that has great cash-flow and improved profits, but it is difficult to build a strategy without a clear plan.

To get started on your procurement journey, complete this free scorecard to see how you score and some straightforward advice about improving your procurement.

Businesses often use the terms ‘purchasing’ and ‘procurement’ to mean the same thing, but there are distinct differences that separate those with noticeably higher profits from those who struggle to gain control over their supply chain.

What is purchasing?

Purchasing refers to the buying of goods or services. Essentially purchasing has a passive connotation implying ‘purchasing’ is a transactional function with little or no negotiation capacity. Moreover, Purchasing does not consider the strategic importance of managing relationships with suppliers or partners and the value it can return. As a smaller business this is likely to be enough, but as you grow, the need to increase the effectiveness of the supply chain becomes an opportunity to increase profits and get more value from supplier relationships.

What is procurement?

If you google ‘What is Procurement?’ you’ll see a variation on “the process of obtaining goods or services for business purposes”.  This severely undervalues the contribution of procurement as a profession and fails to highlight the key influence to increasing profit and build stronger supplier relationships. Proper procurement is intrinsic to the strategic preparation, process and delivery of all products and services required for the business to be successful. Procurement really becomes a transformational function when involved in the budget setting process for an organisation and stakeholders will experience procurement as an aide to a successful programme of work.

Procurement offers a solution for the less glamourous requirements of an organisation (utilities and tail spend items) through to the important functional requirements with high cost attached: global travel, communications and IT. Having governance and a Procurement Plan aligned to the strategic direction of the company will ‘hard bake’ solutions into the company that mitigate risks.

Recently, GDPR was a great example of a significant regulation that placed a burden on business in the EU and acted as an important, but unwelcome, distraction. With a strong Procurement Plan, GDPR is a topic easily and comprehensively dealt with in the supply chain. More current still, Brexit can be better prepared for with a proper Procurement Strategy.

How can procurement help my company?

• Building positive supplier relationships will cut costs as negotiations for goods and services will be more manageable
• Effective procurement makes for clearer financial forecasts
• Make provisions for unexpected costs, such as instability and shortage of supplies
• Adds a competitive edge to your company, as you can invest the money saved into business improvements or leaner commercials, striving to be the best in the market
• Focus your people on growing the business and their primary tasks, not sourcing

 

You can see that acknowledging the vital differences between purchasing and procurement can bring significant competitive advantages. Often, when considering how to out perform the competition, businesses consider sales strategies and product improvements, but the secret that few will tell you about is their Procurement Strategy. Often times, implementing procurement is the equivalent value of significantly increasing sales.

Procurement As A Service

Now you’re thinking: A qualified (Chartered Institute of Purchasing and Supply) and experienced procurement professional will be expensive and counterproductive; you’ll also be wondering whether you have enough work for them. These are just some of the key questions you should consider, but here’s where there is an increasing number of businesses providing Procurement As A Service (PaaS).

It’s a highly cost effective and valuable way to design, implement and maintain procurement in your business without recruiting, training, investing and managing it as an internal function. It’s also a discipline that requires continuous learning.

If you’ve read this far, you’ll now understand that Procurement matters and has significant impact. It’s an indispensable tool for companies that are actively looking to cut down on costs, forecast future spending and stick to their allocated budgets. Just the smallest of changes to your business strategy can prove successful.

Take action: Reach out and talk to us at Novo-K about how we’ve helped other organisations to take advantage of our SMARTsupport to make procurement a reality without high cost investment.

By Paul Bates, PrimeConduct

A breach is not just about someone hacking your computer systems. In fact if you have your Cyber Essentials in place then this is the least likely type of breach.

The GDPR and UK Data Protection Act 2018 (DPA) define what constitutes a Breach and when you would need to report it.

Types of Breach?

The most common type of breach is simply not being compliant with the legislation. Privacy Policies referring to the outdated 1998 Act and charging for Subject Access Requests are classic indicators that the organisation does not have all the parts of the puzzle.

Significant changes were implemented with the UK DPA 2018, not just changes to Privacy Policy requirements.

A breach is defined in the GDPR Article 4(12) :- “breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, personal data transmitted, stored or otherwise processed;”

A breach is an incident that breaches Security, Confidentiality, Legislation or Regulation.

 

Here are some examples of a Breach:

• Security Confidentiality – accidental or intentional leaking of data, usernames and passwords to unauthorized persons either internal or external to the company.
• Data Integrity – accidental or intentional disruption or inaccuracies with data held.
• Availability – accidental or intentional disruption to system availability or access to data.
• Policy – accidental or intentional breach of company policies, procedures and standards.
• Legislation / Regulation – accidental or intentional breach of legislation and / or regulation.
• Operational – day to day access to systems and data required to fulfil role. Physical security controls such as door locks, key safes and key cards.

The Human element is the biggest risk factor for organisations, which is why training is essential. The cost to the organisation in terms of fines and reputational damage are significant. The organisation is always accountable regardless of who made the mistake.

As a Data Controller you are also liable for the transgressions of your suppliers.  Contractual arrangements, processes and due diligence review of your suppliers (Processors) is critical in mitigating the risks to your organisation.

 

PrimeConduct belong to the IAPP. Their goal is to achieve compliance with the latest Data Privacy and GDPR regulation so that rather than just being a threat, compliance is an opportunity to streamline processes and enhance the information our clients have currently stored.

This guest blog was written by Paul Bates, who has a great deal of experience in Data Privacy and Compliance. He co-founded PrimeConduct in 2017, utilising his expert skills in the field of security, data management and programme implementation.

If you want to know more about Breach processes see their Newsletter here.

A guest blog from our Programme Director, Jane.

It’s always exciting when you are moving to a new supplier. No doubt you will be itching to use them as soon as possible, but how do you make sure the changeover goes smoothly? The key to any transition is a good project manager who can ensure the plan is laid out clearly and then proactively manages the change. 

As a Programme Director with over 16 year’s experience, I’ve collected five of my best tips for managing a supplier transition project.

Make sure you understand the contracts

Often the person who is delivering the transition wasn’t involved in the contract negotiations.  In order to deliver the benefits, you need to understand why it is happening and what will make it a success.  It’s also important to be aware of any contractual dates so that the plan can factor them in.

Be clear on roles and what people are responsible for

Critical to any project success is understanding who is delivering what, and by when.  Setting this out early in the project reduces the likelihood of gaps or overlap.  It ensures everyone is clear about what they are accountable to deliver.

The incumbent supplier will most likely need to provide information and support during the changeover, it is better to get this early on.

 

Allow time for unknowns and create contingency

Once a plan has been drafted you need to check through it to ensure it is realistic. Often things take more than one delivery to get them right, so ensure you have time baked into the plan for learning and the subsequent changes.

If you have a set date for a supplier exit that cannot be negotiated, you must plan to deliver early to ensure there is no service gap between the suppliers. You can do this by ‘getting ahead’ early in the delivery by accelerating the dates which are being delivered to.  Either through more resource, longer working hours or parallel working activities. This will give you extra time to deal with issues towards the end of the delivery plan, when the trickier problems will arise.

Trial and pilot the new service / product

The best way to make sure you have what you need for the cut over is to trial it with a closed number of users ahead of the final launch.  It’s important that what you trial is the final service, so it is representative.  As per the tip above, if you need to learn during this trial you need to put time in the plan for changes to be delivered and then re-trialed.

Communicate, communicate and communicate

Communications across all the different stakeholders is critical to the success of the transition. You need to ensure that you are joined together as a project team and that your senior stakeholders understand what is being delivered when. Communications is also critical to anyone that is going to be affected by the transition and should be a key part of the launch and cut over to the new supplier. Engage early and ensure it is clear why the move is happening and what it means to them.

We hope that this article gives you some insight into planning your next supplier transition.

Today, most large enterprises have a commanding and extensive team of individuals based all around the world, helping to reduce the cost of goods & services and take control of their supply-chain. The value of Procurement to support the bottom-line is well understood, with quality control and risk management seen as key objectives of the function, it has quickly become one of the fastest growing professions in the last 5 years.

The charity sector is also seeing this trend with many larger charities starting to benefit from effective procurement. They are achieving better value for money, whilst also helping to mitigate against reputational risk and brand damage which can often arise through poorly negotiated contracts and ineffective supplier management.

However, there are many businesses and charities still questioning whether they can afford to establish in-house procurement teams or if the outsourced solution provides better flexibility and represents lower long-term investment.

The advice we often give is to simply start the journey, get out of the blocks. Initially do not over complicate your buying objectives but gain some clarity over existing behaviours and processes. Give it go.

Where to start….

Define

All strategic procurement should with start a need or requirement. The best way to save money is not to buy in the first instance; if you do, do not over engineer a basic requirement. If there is a need or requirement, then this should be fully scoped out, with all stakeholders involved, with both needs and benefits clearly defined.

Knowledge

Do your market research; technically & operationally.  Understand what is available across the market and your sector trends.  If you don’t know, it’s ok to ask! Speak to those in the know, your incumbent, other organisations and new suppliers. Many suppliers are willing to help (sometimes a little too enthusiastically) so take full advantage of their generosity and time.

Engage

Once you have a clear and concise understanding of your requirement and  identify potential suppliers you trust on a short-list, give them the opportunity to impress you.  Don’t assume an incumbent will be able to read your mind, make the same effort you would with new suppliers and equally don’t be lulled into a comfortable relationship – it’s ok to challenge them.

Don’t compromise

Work with potential suppliers to develop the solution or service further to suit your needs and deliver the desired benefits.  Be consistent with each supplier to compare their products accurately and take the opportunity speak to their existing customers.  Be prepared in advance to understand the difference between what you need and what might be on the ‘nice to have’ list.  Focus on the requirements you defined right at the start.

Test 

Have the potential suppliers understood the challenge, not just sold their product?  What is their knowledge of your organisation like?  Can they be flexible with your changing needs over time? Can they demonstrate their performance through SLA’s and KPI’s. Moreover, do their ethics, visions and culture match your & ambitions for the future

Decide

Don’t dither and procrastinate.  You’ll only delay the potential benefits and harm your organisation or a potential relationship with a supplier.  Its important that the supplier fits with your culture, ethos & ethical framework and don’t forget to complete due diligence on your chosen supplier before you sign the contract.

Manage 

Ensure you fully understand what you have agreed to and maintain an active role during its life-cycle.  Watching over the contract and any subsequent service(s) will help you when it comes to renewals and future decisions about that supplier. Build the relationship and move key suppliers into a strategic partnership role – these embed speed, flexibility and a ‘results culture’ into the relationship.

Procurement matters, the process guarantees an organisation’s purchasing is competitive, impartial, and built upon its needs and requirements. It should deliver more than just value for money or cost reduction and be an integral and valued part of any organisation.

At Novo-K we love this diligence - we know that makes us distinct – and driving the right supplier strategy for the unique needs of each and every organisation can deliver surprisingly simple and large returns. If you are struggling with procurement issues, then please contact us today info@novo-k.com / 0800 002 9025.