August 18, 2014
by By Michael Power
From the August 2014 print edition—enhanced version
Delegates felt the energy at the 2014 SCMA National Conference, with delegates heading to Edmonton this year for the annual event. The conference began June 11 with a visit to Fort Edmonton Park for the kick-off celebration. Midway games, jugglers, stilt-walkers and a Ferris wheel greeted delegates before a steak and rib dinner at Blatchford Field Air Hangar. The next day, Mike Whelan, SCMA national board chair, welcomed delegates and referenced the theme of energy. “We meet today with our SCM colleagues from across Canada to harness the power of the collective knowledge that drives today’s most prosperous companies,” he said.
Ferio Pugliese, president of WestJet Encore, acted as keynote speaker. Pugliese noted the tough environment that airlines operated in. In the past decade, airlines have rung up a cumulative net loss of $50 billion, he acknowledged, and 97 percent of all airlines will fail within their first three years. Canada alone has seen 78 airlines come and go in the past few decades. “It’s a tough business,” he said.
Avoiding service contract disasters
To eliminate risk completely, no one would be able to get out of bed, said Maureen Sullivan, president of NECI National Education Consulting Inc, during her day-long pre-conference seminar. The session, How to Avoid Service Contract Disasters, touched topics like vendor intelligence and market research available to procurement practitioners. For example, a request for expressions of interest (REOI) lets the industry know what’s coming, Sullivan told the conference room. The REOI advertises a project and attract vendors while gathering intelligence and discovering who’s out there. Meanwhile, a request for information is more specific and looks for ballpark pricing, among other areas. “Market sounding” is a request for information that looks at what deal structure is appropriate. From there, procurement practitioners can formulate a draft RFP and then the final RFP.
Keynote speaker Dr. Kimberley Amirault-Ryan.
“Procurement doesn’t necessarily go through all stages, Sullivan said. And while a competition is primarily price-based, Sullivan noted, the RFP process involves areas other than price.
“If you run a competitive process, Contract A principles apply unless you’re very express about it not applying, Sullivan said. Contract A involves that the organization inviting proposals is making a legal offer to the world at large, thereby accepting Contract A. Contract B is the actual contract that is eventually signed to perform the work or provide the goods or service.
Contract A is implied unless stated otherwise. While organizations can negotiate within Contract A, they must be express about it. The bottom line, Sullivan said, is fairness and transparency make business sense: treating vendors fairly leads an organization to get better value and attracts the best options.
Sullivan also touched on the twin concepts of copyright and confidentiality. Copyright, she said, covers tangibles like books and is covered under federal laws. Confidentiality involves intangibles and is protected through common law. Copyright belongs to a product’s creator whether it’s a blueprint, report, map or software, she said. Unless negotiated, you don’t have the right to make copies of that product. It pays to think about copyright and mention it during negotiations. Confidentiality involves information like trade secrets and common law requires that information not be known publicly, of value and kept confidential by the owner. Once identified as a trade secret, anyone who receives the info is obliged to keep it confidential.
People Before Problems
Most people try to avoid conflict. It’s uncomfortable and stressful, so most people feel they aren’t good at handling it, but conference participants were ready to embrace better methods for dealing with conflict.
If companies had a budget line named “conflict” in the accounts, executives would be astounded by the money that accumulated under it, according to Pam Paquet, of Pam Paquet & Associates Performance Management, during a session entitled People Before Problems: Focus on Solutions Before Conflict Resolution. While common, workplace conflict can be obvious or subtle. It comes in many forms: gossip, avoidance, verbal abuse, sabotage, not replying, complaints, absence, theft, destruction and hostility.
Mike Whelan, SCMA national board chair, welcomed delegates to the conference.
When conflict arises, it isn’t a problem’s starting point. The problem already exists with conflict a symptom, result or end point evolving out of differences of opinion. When the difference becomes a disagreement that leads to thinking time and personalization, emotion is added, fuelling the escalation from difference of opinion to conflict.
Conflict’s three stages flow together, said Paquet. Stage one is a focus on the people and difference. Stage two sees personalization, in which an individual shifts to their own needs and the difference. The last stage is the most emotional when the difference fades and the individual focuses only on his or her needs.
A key indicator of how conflict will unfold is the strategy each person uses when emotion and personalization are building from difference into conflict. The session explored two types of people—those who try to avoid conflict and those who don’t back down from conflict.
Participants engaged in lively conversation when learning about the different personalities within those two groups and their own personality type. The energy grew further when a brainstorming session deciphered strategies on how best to manage the different types of people involved in a conflict. There was no shortage of ideas, engagement or laughter.
The session wrapped up with an exploration of conflict accelerators. These are the things people do during a difference-based conversation that add fuel to the fire to create conflict. The group made a fantastic list of accelerators which included rolling eyes; crossed arms; finger pointing, obvious signs; walking away; inflammatory words; and talking to others, among others.
Much like the signs of conflict, come of these accelerators seem obvious while others are hardly noticeable. Participants soon realized it would be beneficial to do a self-assessment and determine what accelerators they exhibit that are not helpful.
The keystone of this session was that those dealing with conflict need to acknowledge the different types of people and utilize appropriate strategies based on personality. The standard shot gun approach or a one-size-fits all model or theory will not work most times of individual uniqueness when it comes to conflict and how it is approached.
When addressed this way, it takes much of the discomfort out of conflict and allows for a more confident approach.
During his session entitled World-Class Procurement: Evolving Value Proposition, Performance and Capabilities, Kurt Albertson of The Hackett Group presented results from the organization’s key issues study on how procurement’s evolving value is changing. Procurement must focus on revenue growth, said Albertson, to avoid net margins deterioration. Many companies are looking to emerging markets for growth, but those markets haven’t returned to their pre-recession growth rates and are seeing increased risk while growth has decreased. “There’s a gap, at least from our perspective,” Albertson told the audience.
Companies must focus on innovation, he said. But while there’s a push for innovation among clients, what that actually means remains an issue. How do CPOs define it? Albertson cited Frederic Khalil; CPO at Guardian Life Insurance, saying innovation involved thought leadership and finding ways to approach services differently. Ramsay Chu, CPO at Rio Tinto, said innovation involved displacing traditional, less-efficient processes with new and creative solutions.
Albertson noted that procurement is running lean with diminishing opportunities to further reduce costs. The Hackett Group polled organizations on they’re focus going forward. The most shocking result of that poll, Albertson said, was that cost reduction had fallen to fourth place among priorities. While important, cost control is crowded out by factors like expanding purchasing’s influence—ranked number one—and innovation, at number two. Other priorities included value contribution visibility, supplier relations management programs and processes and measuring procurement performance and value.
Sustainable supply chains
Monica Ospina, director of O trade, spoke on building sustainable supply chains as drivers for development and mitigating risk. Regardless of the industry, its size or its place in the supply chain, all players must apply a great amount of trust when doing business among themselves, she said. And while some might see this as the value of trade, others might see it as the biggest risk.
Malfunctions in suppliers-buyer interactions can negatively impact the entire chain, Ospina said. If consumers lose trust, the chain can collapse. There are examples in which cases of child labor, lack of workplace health and safety standards or environmental disasters, create negative reactions in consumers and investors resulting in actions against brands and supply chain.
Risk and corporate responsibility are important, she said, with industries and consumers aware of their responsibility in turning raw material into finished products and consumption into garbage. Consumers and companies are proactive now in protecting the environment and respecting human and labour rights, resulting in what Ospina called sustainable supply chains.
Procurement is key in making this happen, she said. Buyers are strategic players and as strategists ensure inventories to keep production, forecast market trends and mitigate risks. There’s a trend towards scorecards to evaluate suppliers and contractors, Ospina said. By doing so, procurement looks to comply with industry rules and regulations, independent monitoring and evaluation of suppliers and contractors, supplier engagement, capacity building and traceability audits, among others.
Companies evaluate suppliers because their sales and market access depends on reputation and their brand’s value is linked to the respect consumers have for the company, she noted. Best practices aren’t so much a matter of good corporate citizenry as marketplace survival. Building sustainable supply chains will be part of day-to-day business practices going forward.
The conference offered learning opportunities and networking, all while taking in Edmonton’s sights and historic locations. Delegates could embrace the energy not only of Western Canada but of the supply chain management profession. The 2015 National Conference, Sailing to New Horizons, is in Halifax, June 10 to 12, 2015.