Ten years in a State of Flux
By Alan Day, Chairman and Founder of State of Flux
On Febraury 9th 2014 we turned ten and this year we are celebrating. Firstly, a big thanks to all of you who have worked with us over the years. It has been an exhilarating time and great fun working to solve business challenges together.
We have been lucky to work with a fantastic, high calibre team - both past and present. It has been your can-do attitude, resilience and entrepreneurial spirit that has made the last ten years so enjoyable – thank you!!
State of Flux reaching the ten year milestone was cause for reflection on what’s changed in the industry. As a profession, we have seen procurement grow in so many areas; increasingly viewed as strategic partners to suppliers and business stakeholders. However, to continue to progress there is still plenty of opportunities to improve. I thought I would share my top ten (in no particular order)…
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Improving the strategic sourcing processes – There has been a lot of effort put into strategic sourcing over the last ten years, but too often it’s a generic process not aligned to the business and other processes. It can be cumbersome and uninspiring, and because of this it is ignored or not followed rigorously. I’d love to see the strategic sourcing process more easily accessible online with templates, training, top tips, guides, videos and internal ‘social’ interaction to support it. I don’t think the formal RFP is the right tool for the job anymore - but you can read more about this in my article 'Is RFP the wrong tool for the job?'.
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Being clear on the difference between supplier relationship management (SRM) and supplier performance management (SPM) – Our annual SRM survey has given us a lot of insight into what leading practice is for SRM. Unfortunately still too many organisations confuse SRM with simple SPM, or worse, they have a series of meetings with a supplier and label it SRM. The benefits of good SRM are clear. It would be great to see more organisations looking to do it properly.
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Aligning category management, strategic sourcing and SRM – There are studies showing that 50% of all ‘deals’ done don’t translate to the bottom line, which is a pretty scary thought. Strategic sourcing can’t work without embedding SRM into the process. It should not just be ‘step seven’ in your process. It needs to be embedded across the strategic sourcing process, so we have a clear line of sight between contract, performance and relationship.
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Using technology (to support SRM and SPM) – Over the years, the procurement technology market has undergone huge change. We used to focus on ‘one stop shops’ where a technology vendor would attempt to sell an overall vision of a better procurement life. Now with the advent of mobile devices, templates and apps, we are seeing a far more ‘audience' driven focus with three areas emerging: 1) P2P software where the audience is accounts payable; 2) sourcing software (eRFx, eAuctions and spend analytics) where the audience is procurement; and 3) SRM software (SRM, SPM, risk, innovation and contract management) where the audience is the business and suppliers. It’s this last area of SRM software where I think more focus and investment needs to occur. You can read more about this in my article on 'achieving a clear line of sight between the supplier contract, performance and relationship'.
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Selling procurement’s value to stakeholders / internal customers / suppliers – There are pockets of people who have made some great progress in this area, especially in the last few years. However, we need to continue to improve the positioning of procurement’s value, being sure to align with business needs and managing expectations.
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Getting contract lifecycle management right – The simple litmus test of ‘can you put your hands on your top 100 contracts?’ is a key indicator of an organisation's contract management focus. Still too many organisations fail. Even if the contracts are loaded on a contract management system, often accuracy is poor, and the process to keep the system populated and up-to-date is often not aligned with the strategic sourcing, SPM or SRM processes. Getting this right is a key building block for procurement so it would be great to see this area get the focus it deserves.
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Centralised, decentralised and hybrid… there is no one correct model – Organisations tend to move through the different structures. I spoke to Professor Michael Lenders who for over 30 years has been studying procurement models and how they change. His view is there is no one correct model; it should move to align with the business strategy. More centralised for control (usually in tough times), decentralised for being closer and aligned to the customer need (usually in times of growth). It would be good if we could get better at recognising this and create a structure designed to change with the needs rather than be rigid.
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Getting eAuctions and eRFx’s working – It’s fair to say that eAuctions and eRFx’s were fashionable five or six years ago and we have seen a steady decline in use for most clients (with a few notable exceptions). eAuctions have especially declined as businesses have struggled to sell the value to internal stakeholders. Unfortunately, the eRFX has often become a glorified email - the RFP / RFI / tender appearing as an attached document. These tools do deliver value and I would love to see organisations investing in the training and change management to make them work properly.
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Up-skilling your team – Our research into procurement people and skills shows we, as a profession, have put a lot of effort into training the technical skills of our teams, but very little on the behavioural elements (especially compared to the training sales or key account managers get). We often complain about not getting involved early enough with the business, but don’t invest in the behaviour training to allow us to have the business or executive level conversations. Request our white paper on 'SRM: The People and Skills Agenda' for insights from our latest global SRM research report, a definition of the SRM agenda and a talent development roadmap covering four important success factors to drive sustainable organisational success.
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Stop messing with payment terms – I understand cost of capital and the accountant’s view of the world in relation to payment terms, however, I believe extending payment terms does a lot more harm than good for the business. Think about it for a minute. You pay the supplier constantly every month, you change the payment terms by 30 days, all you do is get 30 days respite, and then go back to paying them each month again. It’s a one off gain.
... Hopefully food for thought. I would love to hear your thoughts and comments on the list above - please contact me on +44 (0)2078 420 600 or email us at
enquiries@stateofflux.co.uk. And I look forward to working with you all for the next ten years and beyond.