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Educating the next generation of Procurement
CG: Today I am joined by Dr Joanne (Jo) Meehan, Lecturer in Strategic Purchasing at the University of Liverpool Management School. Thanks for joining me today Jo, can you tell me a bit more about your background and the programmes you run at the university?
JM: Sure. My background is in procurement, which started after my A-Levels. I was placed in procurement at ICI on the accelerated commercial trainee programme - so I fell into it more than decided to be in it.
I spent 11 years at ICI in various procurement related roles such as buying, to contract management to stock control. My last role was really looking at purchasing development, looking how we could ramp up innovation in our supply chain (the business was being divested as it was in a bad state so there was some commercial recovery work there as well).
When the business was sold, I decided to embark on a new career and started teaching purchasing and business strategy. I completed a PhD in purchasing, which focussed on power between buyers and sellers; where that power comes from, what’s it used for in those relationships, so quite conceptual in some sense but always in the back of my mind was ‘what does this mean for practitioners?’ because I’m a practitioner at heart. This comes through my whole approach in my academic career as I am heavily involved in Knowledge Transfer work with industry to ensure my teaching and research are relevant and helping to tackle contemporary challenges.
I’m part of the University of Liverpool’s Supply Chain and Operations research group so I’m an active researcher specialising in procurement. I’m interested in a number of areas. A theme running through my work, whether that’s looking at sustainable procurement, supply chain conflict or power dynamics, is ‘so what’? How do these findings and issues impact peoples’ roles, procurement, organisations and the wider communities we operate in? The ‘so what’ question also relates to the consequences of decisions and changes – intended and non-intended which often don’t get enough consideration. Our operations management programmes at the University are accredited by CIPS so we need to ensure our graduates and postgraduates are equipped to understand their decisions have impacts – positive and negative.
CG: Over the last two or three years we’ve seen some pretty radical economic movements, natural disasters and political-driven conflicts – all resulting in an increasingly volatile marketplace. Can you give me an overview of how these macro-economic trends have changed strategic purchasing?
JM: The biggest change that I’ve seen as a result of these events is that actually procurement is now in the spotlight in a way that it’s never been before. So, interestingly, we’re now getting lots of students choosing procurement and supply chain as an option, because they’ve now heard of it in the real world. It’s not necessarily in the news for good reasons, it’s often because of some public sector crisis or natural disaster, but I think making people aware of the impact of these issues has been a huge wake up call for procurement and supply chain. Particularly in terms of risk management, people are now accepting that there are risks beyond first tier suppliers and it’s not just about payment terms. These risks are fundamental and can make your supply chain very fragile. What has come to the surface is the lack of understanding around where the fragility truly is and how you can mitigate some of that risk.
Other issues that have come to the surface also include where corporations are sourcing their goods and services from – with a growing focus on ‘local sourcing’ to avoid exposure to external or imported risk.
CG: When you say ‘local’, do you mean near-shoring your supply base or are you talking purely looking within your home country boundaries?
JM: This is a big issue, how you define ‘local’. I’ve seen many companies (certainly in the public sector) who define ‘local’ very, very narrowly (within certain post codes). So does local mean Liverpool as a region or do you extend it to Merseyside or do you extend it to North-West? Do you just have to be in the United Kingdom (UK) to be classed as ‘local’?
Some of the terminology we use muddies those waters a little bit in terms of some people say ‘we’re using local sourcing’ when actually they just mean UK or even Europe rather than global.
I think we need to be clear sometimes on what we mean by these things and more importantly what we’re trying to achieve by them. I think there is a tendency to jump on the buzzword bandwagon say ‘Yeah, we’re into local sourcing, we buy X of our total produce locally.’ There needs to be a strategy, a planned reason why you’re doing that. Is it to try and impact social change or economic change in your community that you serve? Is it to try and attain better innovation? There needs to be a strategic reason rather than doing it for the sake of doing it and the negative side of these strategies also requires consideration
I think that’s where purchasing needs to be a bit more commercially-savvy in terms of actually planning that strategic element of their sourcing - driving category change, looking over the horizon; ‘What’s new in this market? Where should we be? Where would we like to be positioned and what do we need to get there?’
CG: How are local and global sourcing trends being interpreted and fed back to your students, and discussed in teaching circles?
JM: we do quite a lot of contemporary issues in our studies. For example, I’ve given my students assignments on humanitarian supply chains - the challenge was: when there are tsunamis and natural disasters, how can the theory of partnerships and logistics actually be turned into practice. This was unfortunately at a time when there was a natural disaster so there was lots of news coverage. Students enjoyed seeing the relevance, in non-traditional contexts, of business-to-business collaboration, fast response logistics etc and it opened up to their thinking as to the limitations and political processes involved in some of these concepts. It also really helped them, and us, to understand some of the tensions between local and global issues and how sourcing fits into wider practices.
Our students are exposed to a lot of critical analyses in their studies – I don’t want to fill their heads with just content and models, I want them to appreciate some of the nuances and impact of various approaches. Local versus global sourcing is a really good example that encourages them to debate the pros and cons and helps them get to grip with the complexity of the issues it raises. We have a good mix of international and home students on our programmes so it makes for interesting debates as their cultural background and experiences are really varied. As academics teaching students we have an obligation too - to read wide and varied material – not just academic stuff on procurement. There is so much material now with opinion pieces, industry insights, public policy reviews and its openly available so we can mix material between academic articles, practitioner pieces and material and opinion pieces from other disciplines to keep a broad view of issues and procurements role in them.
CG: Do you think that the teachings at universities really equip students with the necessary skills and expertise to join (let alone add value) to conversations around macro-economics and global supply markets with senior business people?
JM: I think it’s a really important point and there is a difference between skills and knowledge. Traditionally, universities were focussed on giving students the knowledge, giving them the model frameworks that they can fall back on.
Increasingly, it does need to be more than just knowledge and particularly in a very applied area like business, students need to have the softer skills. It’s often the softer skills that determine whether something works or not.
We build skills into our programmes and it’s a trend that’s increasing in the higher education sector. Using simulations, business games, expert speakers and getting students to talk and debate all help them to increase their appreciation of both macro and indeed micro issues.
We also have placement degrees as well, so they do two years at university then they do a year in industry on internship then they come back and do their final year of study, and that’s really useful because we see so much development while they’re on that placement year and we work with them and the host company while they’re on placement.
We try to get students to think as often as possible about their work in practice. The University of Liverpool has lots of excellent links with organisations across sectors and we have regular guest speaker series for our students as well as placements, short-term project assignments in industry and some of our post-graduate students help in some of our research projects with real companies to increase their exposure to some of the wider contexts and challenges organisations face. It gives them something to hook their learning on to through real examples. Our mission statement at the University of Liverpool is ‘Learning to make a difference’ and so we’re conscious of the need to equip our students as the leaders of tomorrow – that means not just getting them to answer questions correctly, but in business it’s just as important to get them to ask the right questions. I structure my teaching around developing students to think about what I call the three C’s – getting students to Challenge (ask the right questions), Choice (think about options and how things could be improved), and Consequence (this is ‘so what? question – what are the impacts of decisions they make).
CG: How big a part does CIPS play in all this?
JM: A fairly big part. It’s quite attractive to our students, the fact they get full CIPS accreditation on their programmes can help them in be more attractive to employers. We have a good relationship with the Merseyside branch of CIPS and whenever they run events locally in the area, all our students get free entry which we encourage them to attend even if only to network and to see what professionals in this fields actually talk about. It also means that the students, and other academics, have a good network to share teaching and research ideas and CIPS are very proactive with this. They have developed a number of network groups made up of educators and practitioners so we can ensure best practice is shared and we remain relevant.
CG: If we look outward toward the community of practice, what do you think the three main areas of focus for the next 12 months will be for the CPO community?
JM: Risk I think is going to be the biggest one, specifically the broader supply chain risks driven by global economies, natural disasters or the competitive landscape.
Sustainability isn’t going away, and increasingly its more than just CSR or the environment. Sustainability fundamentally shifts what you’re accountable for as a business and I think many companies are still arguing - should they still even have this social dimension simply because others do?
The third one is about integration internally, how procurement finds its place at that board table.
I think to some extent procurement has sold itself too well internally, in terms of its potential impact, but I don’t think it’s necessarily been backed up with achievements. What I’ve seen in a number of organisations is CPOs pushing the importance of procurement and supply chain management - the business says ‘Yes, we agree. It’s too important to leave to purchasing people’.
CG: On the internal integration piece, does procurement focus too heavily on the savings element and not enough on the non-monetary, value-adding elements (such as better market visibility, improved category management etc)?
JM: Yes, absolutely. I think that’s where category management and those types of approaches come in – although I don’t think category management is necessarily where it should be. Many stakeholders still tend to see category managers as rubber stampers - they come in late-in-the-day and go ‘right, we need you to now look at this new print contract – could you look at the market and tell us who we should send the tenders to…’ that’s still very proactive, that isn’t category management.
My view of category management is very much horizon-scanning and working with the internal stakeholders to not just identify savings at the end of the process, but actually create opportunities for doing things differently - whether it’s through market creation or whether it’s through spotting potential innovation and having a genuine strategy.
There’s a tendency for some CPOs to say ‘we work in category structures’ and they become very silo-based. The problem here is that in dynamic, changing markets treating each category as a discreet unit can prevent opportunities to develop markets, suppliers and new products. If you start to make connections across categories, what you can often find is that there’s a real opportunity to develop markets and suppliers to draw out the latest innovations and increase competitive advantage. Not all categories are price-based but too many organisations still use category management purely for leveraged purchases. While that might be the most appropriate strategy for many areas, it’s not for all and again it’s about understanding your relative position commercially and where you might be able to add different forms of value through your sourcing strategies.
CG: The last question is what are your three predictions for the UK businesses and across the greater procurement world in the next 12 months?
JM: I think there’ll be some rationalisation of procurement. Structures internally are going to be looked at and businesses will decide whether procurement becomes part of a broader commercial function or does it become part of a broader finance function? With these decisions comes some skills issues.
Other things I’ve mentioned before about risk, I don’t think will go away. I think that will increase. I think the accountability for risk will start to fall more heavily on people’s shoulders ‘why didn’t you know this, why didn’t you know this was going to be a risk, what have you done to mitigate that risk?
The final one would probably be about driving cost efficiencies. I do have a particular bug-bear about procurement teams constantly focusing on savings to make these cost efficiencies. I think there’s a fine line that CPOs have to toe there and I think when the pressure’s put on them to make savings, which presents two issues.
One, they’re often less concerned with how they make their savings, as long as they make them (which can result in many individuals doing things that are not sustainable or responsible and that could have longer-term negative impact on the business). Obviously where there are savings to be had you should seek them out, but, I don’t think that’s where the biggest opportunity for cost saving arises.
Which leads onto the second issue, in a lot of cases you’ve secured these hard-earned savings, with your supplier feeling pretty bruised, which then are simply wasted by the internal stakeholder (either reinvesting them poorly or simply re-spending them). These cost savings need to be controlled and managed alongside the stakeholder so if you save money on a particular contract, how do you manage the impact on budgets accordingly? This is particularly true in public sector where people are getting more for their money, but are buying more than they need or buying over-specification. I think that’s where there’s a bit of a tension that needs to be resolved over the next 12 months for the industry to move forward.