What is Procurement?

Well, good morning or good afternoon from Dubai and good morning or evening from wherever you are in the world. My name is Sam Champong. I am the regional director of the Chartered Institute of Supply and Procurement for the Middle East and North Africa region. Welcome. in this the sixth webinar of the sips mena series in today's session we will go back to the basics, at the beginning, let's forget about the complex models or strategies that people often associate with acquisitions or even the basic concepts that people assume are acquisitions. all about today we will focus on exactly

what

this role of this profession is all about now we will have the opportunity to ask questions at the end so use the q button below to ask questions as we go if Simply type your questions in the q box at the bottom of the screen.

If you would like to ask me a question live, please use the raise hand button also at the bottom of the screen and I will do my best to interact. with you

what

are acquisitions? What are acquisitions? That's a good question because it's a moving target. It's not what it was just a few years ago and it's certainly not what it was a few decades ago or even a decade ago. The role and requirements of people doing

procurement

have changed significantly and today it is the strategic function that is at the heart of the business or is looking at the evolution of

procurement

from what it used to be to what it is now or what are they? their capabilities. certainly it is, but that sometimes depends on the organization you work for or the geographic location you are in, the maturity of the profession, those within it, and its internal and external stakeholders differ so much that a question which has certainly been done For me before this is exactly the question: Can anyone make acquisitions?

Can anyone make purchases? What is this function and what is special about it? Surely anyone can do acquisitions and that's been said several times and let's face it, it depends on what your specific perception or description of acquisitions is: can anyone do acquisitions? In this image there are some people who seem to have found a way to acquire certain goods. They are in the right place. Most likely they are getting them. goods for the right price, it seems like they are getting a good price here, so from a representative perspective, are they making acquisitions? And if they are making acquisitions, can anyone make acquisitions?

A frequently asked question, so that's what we'll look at today. We're going to go back to the basics, we're going to explore what acquisition is from a perceptual point of view and from a reality point of view and we'll answer some questions as we go, so definitions, let's go back to definitions again. What is the definition of acquisitions? Because there are many organizations that have a strategic sourcing department, some have a supply relationship management department and in some organizations a procurement team was created to negotiate and that was their main focus in some organizations. More than an audit and compliance function, other labels are assigned to procurement from supply chain purchasing category management, even cips as an organization until a few years ago was known as the authorized institute of purchasing and supplies, not of acquisitions, so the titles are just there are many. titles that are attributed to the art and science of acquisition, but they are just titles.

Let's stick with the main focus here and the main focus is that the definition of acquisition is probably a little bit simpler than actual actions. involved in obtaining goods and/or services for the lowest total cost of ownership, that's pretty much what every procurement professional or procurement department is trying to do is ensure that an organization achieves total cost of ownership. ownership or the lowest total cost of ownership in each thing to do and that involves a combination of those bubbles around the screen right now and most of the time it involves more than one of those bubbles.

No procurement department can operate effectively if all they do is negotiate in the same way that no procurement department can operate. Indeed, if your main focus is the relationship you have between suppliers or in contract management, it is a holistic profession and always has been and the way it is now makes it even more complex than it was before, so, what? what is the total cost of? ownership again, a very basic concept certainly isn't rocket science, but let's think about it for a second and separate our thoughts from a perception here because we said that procurement is the act of obtaining goods and services for the lowest total cost of ownership , not for the lowest price, and obtaining goods and services at the lowest price is something that is not and should not be in the vocabulary when talking about procurement, it does not describe anything of what this function means. represents the total cost of ownership is what we are looking for, the price is a very different thing, so if you look at what we have in front of us, you may have an interested party, whoever the head of your transportation department is or your CEO.

Who is your interested party in this case? Who says today in the name of our organization? We need you to come out, Mr. Shopping. We need you to buy a cheap car for the company. Now let's forget what the perceptions of a cheap car are from a purchasing perspective. It's very, very simple, the only thing that defines a cheap car is the specification, not the price, so the interested party asking you to buy that cheap car, by looking at the car on the left and the car on the right, it becomes the responsibility of that. professional from the procurement profession to investigate and ask those questions to find out what the specification is, so it turns out that the specification in this case is that the organization wants to buy a car to transport 10 employees per day from Dubai to Abu Dhabi and need to be there, in one hour, suddenly the cheap car on the left does not meet the specifications and therefore is out of the equation and in this example the cheap car is the one on the right because it is the only one that can meet with specifications and a basic. concept like that seems to escape the capabilities of many people many times one of the most basic concepts of total cost of ownership is the specification if your interested party asks you to establish a cleaning facility or a cleaning contract for their warehouse, you can do two things: you can participate with the lovely mop lady on the left side for Dh20 an hour or whatever the price is, or you can invest over a five-year period to buy some equipment, like the scrubber and everything else. to determine which way to go is the total cost of ownership and the specification if you need a particular area cleaned within a one hour period and that is the only window you have despite the cost difference that Ms.

Mopp maybe I can't do it. that and if you extend the period of time the cleaning is carried out, it may disrupt your operations and therefore the difference in cost you saved by employing an individual cleaner may have been eaten up by your reduced capacity production, for example. Specification is key here and that is what procurement professionals must convey time and time again to their stakeholders and ensure that the specification is fully understood and that the outcome of any procurement exercise satisfies the specification or of course you can question it. the specification now, if you really want to buy a cheap car, you can go back to your interested party and tell him if that car really needs to get from Dubai to Abu Dhabi in one hour or it can take three hours, and if it can.

Go back to the cart on the left, it's very, very simple and it's those basic principles of interrogating and questioning specifications that make procurement teams demonstrate their value as adding value to the business. You need to question the specifications because the purpose of procurement is to get the lowest total cost of ownership for the organization and there are many elements in the total cost of ownership not just the specification not just the price as we have already said but certainly not just the specification There are several other concepts that are not rocket science but also add to the exposure or economic exposure that your organization will have one of the most important parts of procurement and supply is risk management, risk mitigation is one of the things most important in procurement and supply and if we look at the On the left side, where we have an image of the unfortunate Grenfell Tower incident in London, which is a classic case of price or cost over risk, so in this case a building remodel was done using a cladding that was more economically beneficial for the project, let's say in that way, it saved the project money overall, but let's look at the risk aspect, part of the total cost of ownership is risk management and if, as a consequence of putting economically beneficial cladding on a building, that building burned down, then the TCO mandate has not been met and there are many elements of this.

I remember reading a story about fast food chain Kfc in the UK not long ago, a couple of years ago, changing suppliers, probably for financial reasons. I guess I should correct myself, but they changed suppliers anyway and within a few days of that supplier change they couldn't deliver chicken to the KFC stores in London and they had to close for, I think, three days, something like that. Now, if you think about it, any savings you made in that change of supplier and the renegotiation of any business agreement you had had certainly been erased by the fact that you couldn't serve your customers for three days, that's a loss in total cost. ownership and therefore it needs to be taken into account for many reasons, including risk, so risk is a very important part of it.

Cost avoidance also comes into the value that can be built into the specifications and the example on the right shows the London Olympic Stadium and as part of the specification or initial discussions between the procurement team and suppliers, they were able to identify a significant amount of savings in the construction phase and those savings were then used to improve the design so that the exoskeleton you can see around the stadium itself was made possible by the savings that were achieved from the initial procurement stage, so Let him know that the budget for that particular stadium has gone further by using re-engineering, redesign and specifications in alliance with suppliers mainly. that's led by acquisitions, so there are many areas where acquisitions can add significant value and it's not just about reducing the price, it's not just about getting the lowest price, it's about other elements, such as risk management.

Avoiding value creation costs and taking care of specifications, that's where you add value to your organization in a long-term sustainable way, rather than just in terms of price, and there are other areas too due to acquisition or effect . of hiring or the influence of hiring can be very, very broad in scope can be very, very broad in scope, sometimes the effect of hiring is overlooked and if we look at this example, we are exploring something called the procurement effect, now the procurement effect is the effect Procurement has or an effective procurement function has on its ability to control and manage third party costs, so if we just think about the fact that procurement on a continuous basis, that is, adding value, is to manage, reduce and safeguard third party costs, so if we look at the effect on the overall organizational strategy, it could look like this, so the scenario is that you have an organization and, If you look at the screen on the far left, you have an organization that is currently operating with a revenue of, say, a hundred million. dollars, they are making a profit of 30 million dollars, ebit profit whatever you want to call it in this particular scenario, on a very basic level, this is how the organization is functioning and from a strategic perspective, they decide that they want to increase their profits by a 20 million a year, so profits currently are 30 million, they will increase it to 50 million and they want to see how they can do it strategically as an organization.

Now let's say you're a manufacturing organization, maybe you make perfumes, let's say there are a couple of ways you can do this now are obvious and I guess the traditional way would be to increase production, advertising, marketing, sales and influence. of marketing production, in other words, they want to increase their profits from 30 million to 50 million and, if you look at In example number one, they have made it so they now havea profit of 50 million and they have done it by increasing their income by 50 million, so the income of 100 million is 150 million, but they have also done it by having to increase costs, they have had to increase their costs from 40 to 60 million , they have increased overhead from 30 to 40 million, so what have they actually done here to increase their revenue, meaning they have increased their revenue? sales, but to do that they may have had to increase advertising costs more and more ads in media campaigns, they probably have had to increase their staff to make more products increase their facilities management allocation perhaps increase storage to serve to a large amount of increased stock and all those costs have led to an overall increase in the revenue they get and has reached the bottom line, so they actually got the effect they wanted, they increased by 20 million, although what they had What they had to do was significantly increase production, they also had to spend some more money on marketing, but overall, from a bottom line perspective, they have achieved their goal.

Now, what you can do is if you look at number two, you can align it with the influence of acquisitions or savings. Now, at the end of the day, the strategic requirement for the organization was to scale up. their profits from 20 million to 50 million in example number two, they did it and their bottom line is 50 million, they just did it by not having to increase their income, they haven't increased their income at all, they haven't. they had to do that status quo, they went in there, they looked at their existing costs, they probably re-injured themselves, they redesigned them, they rationalized them by making sensible decisions, um, on a strategic basis, um, and they managed to reduce the, they actually managed to maintain their costs fairly static, they've made sure that costs don't increase, but they've looked at overhead which could include anything, could include facilities management costs, third party consulting costs, things in the sense that are considered non-essential to the business and just by doing that, they've managed to reduce the bottom line now, if we just look at overhead, we're not talking about the acquisition effect, if we look at their direct human capital, we're talking about looking at some of their overhead. costs in terms of what your marketing budget is and what your agreement is with your marketing supplier and whether it is optimal what are your facilities management costs and the cost of running your warehouse if they are optimal if there is a change in the technology things in that sense and what costs, we are talking about the impact on acquisitions and just by doing that you get the same effect which is the effect of acquisitions now in the real world, of course, you would probably do both, but it's really worth the It's worth saying that you shouldn't ignore the influence that your procurement function can also have on your business because that's what they are there for, generally speaking, what does a professional procurement department or function do?

It does a lot of things, but they fall squarely into a few main categories, needless to say, procurement is about right quality, right place, right quantity, right price, needless to say, that's basic, but really, To achieve total cost of ownership, what procurement teams aim to do is have the right balance between supply relationship management, contract management and category management and also have the necessary skills in at least these three areas because they are not mutually exclusive, so for a professional procurement team or a professional procurement function they need to be highly skilled in supply relationship management and category management and contract management. as well as all the other elements that are not exclusive or mutually exclusive, you must be well-rounded and have the skills in all those areas, so let's dig a little deeper into these three areas, what are these things, so let's provide relationship management, What exactly?

It's supply relationship management, it's mentioned sometimes, you know, I've seen it in texts, you see people talking about supply relationship management, how to treat your supplies, srm, what is that? It's another term that goes back quite a while, but what is the history of srm? simple business concept before the 1980s and late 1970s when American organizations were not doing as well compared to organizations in Japan, the usual exercise was carried out where some of the big four companies strategic consulting firms were tasked with finding out exactly why, that's why. These Japanese companies did so well that they did that research and the result was unexpected because they thought it was going to be something fundamental as to why American companies are not doing as well as their counterparts in the Japanese park.

It was discovered that the only difference between how Japanese companies were operating or certainly the overwhelming difference between how Japanese companies were operating was actually simpler than it seemed. It seems that actually what happened at the time when the managers or the operators or the senior officials in the Japanese countries cut off the companies they simply dealt with their suppliers. as partners that simply and simply by treating suppliers as partners who had a fundamental effect on the effectiveness and success of their businesses, that is how supply relationship management was born, so obviously from these strategic reviews that emerged from These consultants, the goal was to say that to achieve even better performance you need to form strategic relationships with your suppliers and that's how srm was born to have that effect on organizations, so that's what srm is.

It has a pretty long description, but essentially what is srm o Supply relationship management is supposed to be about actions related to forming a strategic and mutually beneficial relationship with your suppliers that can generate results beyond the type of results that you would achieve if you had a normal traditional transactional agreement. in other words, a contract, so if you are just going to have a traditional relationship with the supplier, put out a tender, sign a contract and continue with it, you will get a certain amount of results and success, but what is srm designed to do? ?

What we must say is that by entering into a more strategic relationship with your suppliers, you will be able to achieve a more strategic, effective and efficient relationship and, as a result, better business results. That's what it's about now, the ways to do it are obviously a broader topic. which we can address in a different seminar, but essentially that's what srm is about because there are other elements around supplier supply management per se because we all have roles where we go through supplier registration and prequalification, that's not It's srm, that's an element of this, that's the transactional side yes, you record supplies here, you prequalify suppliers, okay, that's standard, that's part of the overall srm experience in the end, you also manage the performance of suppliers, ensures that they comply with contracts.

That's part of the sourcing experience, but it's foundational to all of that. What lies in between is something called supply relationship management, where you actually intervene strategically and make sure that you develop a good strategic relationship or, at a basic level, between yourself and supply for the benefit of two parties, so it is a current partnership and, as we know, every partnership, like marriage, which is a partnership, is based on a good relationship between the two parties, otherwise, it is not a partnership, so the management of The supply relationship has the same fundamental concepts that it depends on you as an organization having a good relationship between you and the suppliers and it is proven that simply doing that leads to beneficial business results, so how do you do that?

The first thing, at a very basic level, what you have to do is just put into context, we're talking about your strategic suppliers here, so we're not talking about every supply that you deal with, but your strategic supply, so That, from an SRM perspective, the first thing you need to do is decide who your strategic suppliers will be. are and who will be subject to all the efforts in building those strategic relationships and in your srm activity, so use something like this, the standard four box matrix or the cralia matrix and you will do an exercise to decide or identify who your strategic partners who are your strategic suppliers, that could be quite a complex exercise, but they will fall into one of these boxes.

Look at your leverage providers and who they are, uh, they are, you know the organizations that you deal with that have a high impact on your profits, but there is a high availability of the items that they provide and it depends on the organization that you are in. is located, so if you work for an IT company for example, you can look for the company that supplies the case for your computers, let's say the plastic case, that has a high impact on profits, okay, it is essential and It has a high profit impact for your organization because you need those suppliers to provide you with those cases for your laptops or to provide you with the raw materials, however, in this case there are many suppliers who can do that, so They may not be a strategic supplier to your organization, they will be a leverage supplier, so they are very important, but you wouldn't necessarily have to have that. close high-level strategic relationship with them just for the fact that there are other suppliers and you can look for suppliers that are not critical to most organizations, you know that your stationary and consumable suppliers are not critical, you do not you would necessarily have a strategic relationship with your um with your consumables suppliers unless you're that type of business unless your printing company maybe your office supplies, stationery and consumables is a non-critical supplier, there's high availability of those items and there's low risk maybe and then you look at your bottleneck suppliers and who your bottleneck suppliers are um again, it depends if you're maybe a perfume producer maybe then you can look at um you know the supply of some of the commodities that are out there. natural flavors, vitamins, you can consider them as bottleneck suppliers and what do we mean by those critical items?

Yes, however, prices fluctuate, there are multiple suppliers, you will change supplies regularly based on availability at different price levels, so you won't necessarily build a very strong relationship with the supplier, but you will want to make sure you have relationships with several suppliers in order to ensure continuity of supply, so you'll call them bottleneck suppliers, but those strategic ones are the ones that you, who we would put, you know in the top right corner, and those are the ones that you would like to build a relationship with strategic and, if it is Tesla, for example, if it is the car manufactured by Tesla, then the supplier that provides you, with the batteries, the electric batteries, the lithium batteries, would probably be one of your strategic suppliers.

He would like to have a very, very solid relationship. He wants to stay very close to those guys. You want to make sure they are available. It must be maintained because that is fundamental to what it does and it cannot afford any setbacks because it will have a high impact on profits. There aren't many providers out there that you can't change overnight. They are key to what you are doing. doing because you're building electric cars, so they have the key components and those the relationship, those are the suppliers, you would have a strategic relationship with a win-win relationship, that's put into context, but there's a separate side to this. and that is, of course, the buyer's perspective.

What you have in front of you is the seller's perspective, and while I'm not going to go into this in too much detail, you should always remember that there is a seller. perspective and the vendors would also probably do the same exercise if you, like you just did, they would want to put you in certain boxes, they would put you in the top left corner, they would want to decide what you are as a customer. Are you aligned with your brand values? In which case, great, yes, they want to work with you. You're very attractive, but you're not central to what they do.

Okay, so they want to work with you. Your account. they want to develop and maybe they are open to you talking or negotiating with them about value added activities, maybe, but if you go down to the left if you are an annoying supplier if you are not actually adding any added value to the organization there's no brand association, you wouldn't necessarily know that, but if you're an annoying customer for them, one of the results of that would be, I mean, you certainly couldn't negotiate hard with suppliers like that because they don't. I have no problem losing you as a customer, sowhich again, it all depends on how the providers have segmented you in the same way that you segmented them.

Are you exploitable? There are suppliers who have goods or services that would position you as a customer. in the exploitable box they know they can get a lot of value from you they can get higher profit margins because what they have is valuable to you and they know they have an advantage over you so for example again. It will be very difficult for you to negotiate hard for supplies like that, especially if you are placed in that exploitable area, so only those suppliers who see you as a core customer will be able to organize a business. strategic relationship with in any case and if you are, as I say, if you are Tesla, then you want to make sure that you can work, that you can align with your supply of lithium batteries and that you can agree and you can position yourself so that, in In fact, it is critical to them in the same way as their strategy is to you, so know your suppliers and, more importantly, you need to know your suppliers as well as they know you because Suppliers know you as an organization. and sometimes you as a procurement professional know that you can get carried away, you can stare, you can forget that suppliers have a lot more power than we think they have and they're not going to tell you everything.

Suppliers know the cost of what they are producing now. What we have in front of you gives you an obvious choice and says that the provider is telling you that you can, you can only choose two of these, okay, these are the results that you will get, but they won't tell you that if you say you want something. that's good, cheap and fast, they may say ok, we can give it to you and they may admit they say so, but it won't be delivered on time, so remember you should only know your suppliers as well as they know you and that It is the core of the supply.

In relationship management the important thing is that you have a win-win scenario between you and your strategic suppliers so it really is a win-win scenario, that's the only way srm works and as I said, it's been shown that that was the fundamental difference between companies in Japan and those in the US at that time, so move on, I'm actually sorry, without moving beyond supply relationship management. The last final example of supply relationship management in action is this. Apple example Apple invests only three and a half percent of its revenue in research and development. Now Apple has significant revenue, as we know, and it invests 3.5 of that in R&D and other organizations in different verticals that Apple works in, as it says here, spends. much more into research and development than Apple, that's supply relationship management in action because what it says is that Apple, for example, may be about to design the new iPhone 12 or whatever we're doing now and it's probably than what they do.

What I will do is go to a strategic supplier of yours and tell them that we are going to produce the new iPhone in six months. Can you go out and develop the new battery for the iPhone? That is your task. Six months from now, the strategic supplier if you came back to them with the battery, they would have done the research and development related to the design of that battery and Apple would have developed the phone as an example and it's a win-win scenario because the supplier you know that Apple will buy the stock of the battery that they bought to meet their own demand and, uh, Apple will get what it wants because it hasn't spent the same R&D time and money in developing that particular component, so that simply doing that, simply exercising management of the supply relationship, are different aspects.

Well, what you can see is the differential between Apple saving between 10 and almost 20 of its revenue, which is not insignificant when applying srm supply relationship management concepts, which shows how important it can be because the The reality is that by using traditional procurement concepts when putting out a tender, for example, no one is going to save 10 or 20 of Apple's revenue, that amount of money by simply putting out a tender and selecting the lowest bidder, that's not going to happen, so those are the benefits of srm in action in alignment with all the other procurement concepts as well as supply relationship management, the other one we mentioned was category management.

Now, what is category management? Category management in effect is the methods of taking a bird's eye view of an organization's spending activities in a very holistic way, so all that category management means is that if you work in a large organization or small, you have complete control of all the spending categories you are involved in and let's look at a basic insight into the different departments in your organization by pens it doesn't make sense that different departments with different specifications, from different suppliers of different pens with different costs and different delivery times with different logistics methods, within the same organization in the same category spend and your category management strategy will Demonstrate that it is necessary to do it or not and your category management strategy will develop a strategy that maximizes value of purchasing that pen and it is a very basic way, but it can go further and certainly a review of the acquisition will spend some time.

A while ago the UK government looked at, for example, IT spending and found that 90 spend with a particular vendor will be unevenly distributed across many different departments, so this vendor had different contracts with different government departments at different prices, different terms for the same components, but in reality there is only one buyer. There is only one person responsible for the budget. In this case, you know the UK government, a category management structure would have looked at all of that and gone back to supply and said, "Look, why do we have contracts?" so you provide 10 laptops to these guys here, 20 to these guys here and 100 to these guys there, actually the total amount is 2,000 laptops, okay, so now let's talk about the volume for that, let's talk of the distribution for that, let's talk about the logistics for that, let's be real, so that your category management strategy uses data to collect exactly what you are spending on a particular item and then formulate it into a coherent contract management strategy, which It's contract management, contract management again seems very basic but essentially a lot of people will enter into a contract and once the service to start that contract is drawn and cancelled, which is the right thing to do, because you don't execute supply relationships. going to the contracts every day and seeing what needs to be done, but the key is that before entering into that contract it must be exactly clear and everyone must understand what the requirements are.

Are you going to have key performance indicators? Are you going to have service level agreements? Are you going to have a cleaning contract that says we want you to provide us with 10 cleaners or are you going to have a cleaning contract that says we want our building to be clean because those are two very different things that the supplier can provide? you with 10 cleaners, but how are you going to hold them accountable? How are you going to define your perception of cleanliness? So it's important that all of those things are included, what the incentives are around the agreement and what the agreement governs. and especially now, in the covit 19 scenario, the number of people have told me, we are in a pandemic, surely, that is force majeure, well, it is force, surely, what does your contract say?

Strength for jaw, it's not, it's not just an Englishman. language term is a clause and a contract have you designed it what jurisdiction are you in is it a civil law jurisdiction are you in a i are you following different forms of law where in the world are you located then those are the considerations that known? It is not just a case of force, you must surely analyze your contractual relationship and you really should, the idea is to have tried to assimilate what those results will be before entering into contracts that you should consider. all outcomes before entering into a contract because that will govern your relationship when things go wrong, so that's what contract management is, it's an important tool for procurement managers and everyone else to make sure you don't just approve a contract. not just taking a pdf format of key terms and conditions and entering into a contract without understanding exactly what the implications are when things go wrong, another tool for procurement, other areas of course, not just supply relationship management, not just contract management or category management, ethics is also a key consideration for procurement because ethics is a fairly complex area that people think only revolves around people acting unethically or accepting bribes or something like that.

It's actually a very, very key knowledge tool for procurement professionals. Because? First of all, because by looking at ethical behavior we know that 80 percent of ethical problems in a contract occur at the specification stage, so this perception of people taking bribes and, you know, awarding contracts at the end or manipulate contract evaluations is almost like the thin end of the wedge, that's not the whole problem, most ethical problems occur at the specification stage, so everyone involved in procurement and supply chain decisions They need to understand what constitutes ethical behavior so they can really protect themselves against that, and ethics is an important topic because as you can see from here, it's adding 10 to 20 to the cost of doing business, so prices, Costs of goods and services are inflated in that sense depending on where you are in the world, simply for ethical reasons.

It's a key part of procurement sourcing and it's something that procurement professionals need to understand and be fully versed in to be effective procurement sourcing professionals, so we're coming full circle on this, what does that mean? ? We talk about many things. the course, um, and we've covered a lot of ground, but essentially from where we started to what we thought the acquisition was, it actually involves a lot of things, total cost of ownership, value creation, risk management, we mentioned those asset management contracts. projects, ethics, stakeholder management, category management. and many, many things, so procurement is many things and negotiation, so because it is many things, it means that the people who work in procurement or the departments that represent you in procurement must also be fully conversant ​​​​in all these areas, otherwise it is not procurement, so these are the key areas that your procurement professionals or your procurement departments need to be fully rounded and exploited and at that point you will be delivering value when you have those skills and are able to leverage them.

All of these things are taken into account to make sure your organization gets total cost of ownership or value for money, so let's go back full circle. Can anyone make purchases? Can anyone make purchases? Yes, of course, anyone can, anyone can make acquisitions in the same way. way anyone can do any other function, anyone could do procurement in the same way that perhaps I could go into an organization and be a legal director based on the presumption that I have recognition and knowledge of certain areas of law, but that does not becoming a legal professional does it the same way it applies to any role other than becoming a car mechanic and if I had an expensive car, if I had a friend who had car knowledge, I could ask him to look at it. in the car if something went wrong, but at the annual service you would have to take it to a professional, there is no difference in purchases.

Procurements should be done by procurement professionals who understand all the concepts I mentioned above because that's what you'll get. you are the professional outcome so use that definition well yes not everyone can do procurement so procurement managers like anyone else need to be professional at what they do and probably even more so because this role involves actions of not spending your own money but spending other people's. money, the key here is that I think what there is is a trend in the evolution of procurement by many interested organizations, non-governmental organizations, governments around the world that are entering into the concept of the authorized procurement team, which which means yeah, um, we, we. will ensure that anyone who spends our or other people's money is fully qualified and trained to do so, so you have UNDP, thedepartment of the united nations, for example, already have the spirit of anyone who works on that team, the largest procurement team in the world. to be qualified to do it you have to be qualified and there are several organizations in this region that have the same concept and the same desire to work to ensure that their teams are fully qualified to do procurement and fully trained to do procurement and these are some of the organizations in this region in the Middle East and North Africa region who have also fully committed to that spirit which pretty much covers most of the things that I was going to go through, thank you Thank you very much for listening, I will go there.

There are some pings, some questions that I've seen, so now I'm going to take a look at some of these questions and see if I can address them. Thank you very much for listening, so let's ask the first question, let's take a look at these questions here. The first question I have is that many organizations give importance to acquisitions while ignoring the rest of the chain. Is there a reason why the rest of the chain? Chains are falling behind the spotlight as acquisitions. I can't really articulate that question much except to say that, well, as far as I'm concerned, when you talk about supply chain, um, or procurement, they're all labels, really, um.

They are all part of the procurement cycle and no part can be left behind. Why don't some people pay more attention to the supply chain? Why don't some people lend more elements to logistics? It depends on the industry. It depends on the company. but you can't ignore one from the other if you don't have a very good logistics framework or you don't have a very good supply chain network or you're not practicing supplier relationship management or If it's just deficient in one of those areas, then it's not getting a good total cost of ownership for your organization, so you are not purchasing at the optimal level.

I would say another question says that risk and value creation have set parameters. Savings can still be achieved even though quality and standards are met while maintaining design, quality, time and cost, yes I tend to agree with that, you are absolutely right, you need to have parameters for everything , for everything you do, next question, we have a very important role to play, but Procurement does not have that much influence in most cases, if companies get budgets from finance, they will want to spend. This has been my experience so far, so I'll agree with that, with a carrier who asked the question.

I totally agree. In some cases, yes, procurement has a role to play, but I would say it lacks influence in certain cases, so the key is that some people believe that the technical skills around procurement are the most important, and I I tend to disagree to some extent and I would say that soft skills in procurement are of paramount importance; In other words, influencing skills and stakeholder management skills are soft skills. If you are a senior procurement professional, you need to have a lot of those skills you need. To have a lot of influence skills, you have a lot of stakeholder management skills, otherwise you will not be able to improve the influence of procurement in your organization and therefore all your technical skills will almost be wasted because you won't be able to add the value you need because you can't influence your stakeholders, so yes you are right, the influence of procurement in some organizations may not be what it should be, but you can work to increase it by using of your own influence, of course, another question from Kingsley, what is the link between logistics procurement and the supply chain?

A good question, now, what can you do? You can do this at any time, visit the SIP website www.cips.org and check out our knowledge. section and there is something called the procurement cycle and really what you will notice is that the procurement cycle covers everything from logistics to the interaction with the supply chain and what I am trying to articulate here is that the link between the logistics The chain of procurement is that they are all part of overall procurement because they all contribute to the total cost of ownership. Your cost of obtaining a good from goods and services from somewhere else in another region or within the same country all have an impact on your total cost of ownership, so it cannot be removed from the equation, so The logistics supply chain is part of the overall procurement cycle.

What is the next question? Can you give us some ideas about the areas procurement professionals should focus on? In the current situation, very good question, it is from Ramesh, there are two ways of looking at this, Ramesh, there are really two areas, so are there specific areas of procurement that are relevant to the Kovid 19 pandemic? If you entered that era, then yes. You would say look, let's forget about negotiation, you know, advanced negotiation at this stage because the horse has already bolted, but certainly supply relationship management is a very key skill to have, in this current scenario, you You know you are applying SRM to its highest degree. to make sure you maintain those strategic relationships between you and your key suppliers that you're going to rely on, that's very, very key, so having an advanced understanding of supplier relationship management, having said that, there's a caveat to that. , you must have already been implementing an srm element before kovid19 happened.

If you didn't have strategic relationships with your suppliers before the pandemic hit, you will have a difficult time building those relationships in this time period. but those that have good strategic relationships with their suppliers pre-covered and then maintain them during covid will have the best results when they come out of the picture and will be the organizations that perform best because as in any economic situation. or any recession is not going to last forever, so you have to think about what your relationship with your suppliers will be when you come out of that situation. A question from Kingsley, how can a Nigerian get certified? you can drink sips is available in 150 countries around the world uh we have operations in Nigeria certainly uh send me a message um you can send me a message um on sips.org on linkedin or sam.champunga cips.org and I can I can direct you to our representatives in Nigeria.

Certainly our website is on cips.org, but if you want to contact me, I can tell you how to get certified. In Nigeria we certainly have quite vibrant operations. and events and thought leadership uh community in Nigeria, so please reach out to uh another question, can a person be successful in being a procurement specialist? are you saying: can you be a specialist instead of a generalist? um if that's the question then the answer is yes you can be a specialist or a journalist and they both make sense and so Kingsley if you want to ask that.

If you want to ask that question live, I'll let you do it, so just unmute your microphone, it could be your microphone, and you can ask that question live if I haven't articulated it correctly, so just let me know and I'll get back to you, do it , kingsley, thank you very much, you need to speak a little louder, kingsley, we can't hear, yes, okay, can you hear me now, please, yes, okay, this is the kingsley of Nigeria, I'm actually a specialist in logistics right now, but I'm not satisfied, that's why I asked that question about certification and then I raised my hand initially before you answered that question to give you clarity to read and I sent you.

I invite you via LinkedIn so I too can get more directions and try to point me in the right directions. Thank you so much. You have been a great help. Fantastic thanks. Kingsley. I'm glad the question was answered. Excellent. Thank you so much. Very careful, so, yeah, thanks for that, that clears that up for Kingsley, like I said, if anyone wants to ask the question live, just click the raise hand button, we have another question from Sebas, during the situation current, the risk of obtaining goods. and services are a challenge, our businesses are greatly affected, where 75 of the suppliers agreed to reduce the cost or offer some discounts.

What would you suggest for the coming months? Since this doesn't seem to be resolved anytime soon, it's a bit of a general question because it depends. what area you are in, so it depends if you are in food supply or professional services, it depends on where you are, but the reality here is that it is a global pandemic, so you know in some ways you could argue that Some people were more exposed to the situation in China, for example, or exposed the situation in certain parts of the world, in which case, they may give you some advice on how to try to diversify your supply chain, but that is not the case , it's a global situation at the moment and um, it's about working with the suppliers you have, looking for new suppliers as supply chains change and always looking to mitigate risk, even as this pandemic continues, that's the key, so I think what I said earlier was Maintaining those strategic relationships with your existing suppliers is important because certain supplies, depending on what they're doing, have a lot of influence now, so what you don't want to do is lose a supplier that's key. for you, uh, for for any reason unless absolutely necessary, so supply relationship management maintains those strategic relationships with your suppliers and also looks, from a risk perspective, for supply alternatives and alternative suppliers to suppliers, since the situation persists.

Another question from um rajiv, so how can you reach an agreement? balance with a strategic partner based on the perspective of buyers and suppliers, what if the supplier tends to dominate the relationship and its profit due to the monopolistic nature of the products and services? Of course, that's a great question and that's going to come back to your uh your cradlic matrix your supply matrix you just need to just need to make sure that this supply is actually a strategic supply for you and that you are critical to them now um if you're able to manipulate the relationship in that perspective then that's good, but if you can't and if the supplier really sees you as a nuisance or if they consider you to be more than just a core customer for them, then you may have to start looking for things different. suppliers to manage the risk of loss of supply or price increases, so it's about that initial segmentation of supply as to what your supply relationship strategy is.

The next question: what are the key indicators that evaluate the situation in the purchasing department and what are the achievements that any purchasing or supply manager could achieve to be successful in this job? A great question, so key indicators are necessary to have indicators that show the value you are bringing to the organization now. of people translate that as demonstrating your savings, which is fine if your organization wants you to demonstrate the savings that you have made as an organization, as a department, then okay, the important thing is that you need to make sure that the definition of what a savings is is clearly agreed upon by all parties, so that you can point out what those savings are, but in other ways you could signal that you know what value you are bringing. organization because different stakeholders may have different requirements, you may have a marketing team that is looking for extraordinarily fast speed to market from your procurement team, perhaps they want contracts to be implemented at faster times than what the procurement team did previously.

If that's what marketing does, for example, if that's their KPI, then maybe you need to be able to show them that you can improve the speed of the cycle time to market things in that sense. um question, yep do you have any plans. coming to India offering certifications uh we certainly do some things in the region the answer I'll say yes I'll say it right now is you can sip remotely anywhere you can you can do it online but yeah we currently don't have a large number of physical study centers in India, but certainly, if you contact me, I can guide you in the right way to enable you to embark on your study if necessary. and uh, we have a man, did you want to ask a question?

Ahmadullah, I'll come back to you in a second. Try it, you need to speak a little louder. I went to architecture regarding a department we worked in. A participant is part of a department and there are several departments in an organization that seek services from suppliers and these various departments have department heads who like to carry outyour suppliers to the purchasing department and you know that there are several reasons for It is like that, I will tell you as if you knew that there is some relationship that they made with the suppliers and that they want to maintain, which may be on the table or on another table, in that case our purchasing method will act, so okay, this is a good question.

I'm just going to thank you for the question, man, I'm going to meet with you again, so, great question, I think what a guy is saying is that in certain cases there are interested parties that want to maintain control over essential parts of the process. of procurement in some cases we are talking about control over the supply relationships sometimes over the negotiation part and that is true and it is unfortunate because where does that happen in the organizations where it happens? And I'd be interested to hear from people, if that sounds familiar, but in organizations where that happens, the procurement team becomes a very transactional procurement team because everything has actually been done as far as the procurement process goes and they just it leaves it up to you to make the transaction to issue a purchase order sign a contract issue a tender things along those lines which, to be honest, is not the most effective use of procurement resources, so what's the answer?

How can that be improved? and and and what I will say is that again at this time of year 2020 that we are in, if you look at the evolution of procurement, aside from imported technical skills, the most important skills that procurement professionals must have in all levels, especially at the senior level, are those Soft skills are those that influence the management skills and abilities of your stakeholders and you need to be able to influence within your organization to gain the trust and respect of your stakeholders to that they trust that you can get better results from a procurement process and they can trust you to If they do that, they could do it themselves and that's when you get maximum trust from your organization and then you can start adding maximum value.

It's not an easy process, but it takes a lot of interpersonal skills to do it over a period of time. of time now and you will find organizations of different types where the procurement of some organizations is mandatory, so if you want to acquire something, if you want to buy something, you have to go through the procurement team, okay, and then you have some organizations where the Acquisition is mandatory. It's not mandatory, so you have a procurement team and if you want, you can involve them. I prefer the latter. I prefer scenarios where you have a procurement team in an organization and if you decide to use them, you will and the reason why I prefer that.

This is because in those scenarios stakeholders actually see the value in acquisitions and voluntarily go into them because they know they could get better results. Now again, it takes time to develop that. Kind of reputational trust among the various stakeholders and credibility, but at the end of the day that's what it's all about. You can have strong technical skills, but if no one trusts you with things, then you won't be able to add value. an organization now that doesn't talk about your second point, which is about the ethical perspective, I think in your own words what you said was um, you know, money under the table, I think that was your exact description, that's one perspective. completely different that goes into the ethical perspective of procurement and I just got a call today where I was congratulating an organization that had just received the SIP ethical kite mark, so we have what we call the SIP ethics test where An an organization or an individual goes through a process and takes an ethics test and does it every year, and if you pass the test, then you get an ethics certificate and you are certified in ethics and for the organizations where all their procurement is done. team has gone through this process or in some cases the entire organization has taken the SIP ethics test, they have an organizational ethics certificate and they are also on a public ethics register that is available for anyone to see, so you will see .

Organizations including Facebook, for example, Facebook, are on the SIP ethics register because all of their procurement staff took the ethics test and passed it, so that's a completely different consideration, so again, it's influencing the rest of the organization to have a commitment to ethics. and then that makes your job a little bit easier. There was a question from someone saying how long does it take to become a certified procurement professional. Well, look if you look at this, the sip route, then they're there. There are several levels, you have to go from the certificate to the professional diploma and that is five levels, level two, three, four, five, six, the time it takes you to get there depends entirely on you, there are different paths to follow .

There are about four different options in terms of how quickly you want to do it, but I will caution that in saying that there are no shortcuts to get there, you need to learn and we can certainly guide you through that. uh through various methods to just get in touch and we will be happy to guide you wherever you are in the world, as I said there, you can, you can, you can, you can do SIP studies in more than 150 countries in the world, but we also we have regional centers um, the Middle East one is based in Dubai, but we also have an Australasian one in Melbourne, the United Kingdom, South Africa, uh, West Africa in Ghana, Chicago, North America, so we have Turkey as well.

We have regional centers where you can contact yourself or through your organization and then we can see how we can help you. Next question, can I talk about the procurement cycle? Yes, I think the procurement cycle from a holistic basis. talks about the different elements of procurement and procurement, of course, it's getting goods and services for the lowest total cost of ownership, so what does that mean? The cycle means that it begins with the identification of that demand so that someone, whether it is an organization, someone in your organization says that they want to acquire something, the first thing they must do is articulate that demand, what exactly they want, what it is the bet, what the benefit is to the organization, you need to specify how many you need, so that's the first part. and once you've done that, you'll move on to the next part of the cycle where you'll agree exactly what the specification is, so the requirement is that we need to hire a cleaning company to um, to clean a hotel, uh, so, Do you have a certain specification, uh, do you have the same cleaning specification in the front of the building and in the back?

That's where procurement can come in and challenge that and say, well, actually look, you could rationalize that. That requirement focuses on quality work in the visible areas for example, so once you have the specifications, you will need to identify the suppliers, where is the best place to do this, who are the people who can really meet this demand . then enter the market, select a supplier, evaluate the suppliers' offers based not only on what they say, not only on the price at which they are going to supply you with these goods or services, but also based on the specifications and the methods. to which they confirm that they can do this and that they can do it in alignment with a little bit of due diligence on their part as to the ability to do this and how they will serve you where they are.

What is the logistics? Are there additional costs? Are there any other complications or considerations from a legal perspective? and how and once those products are delivered to you. How do you continue a contractual relationship so that you know you can have assets? sit in a warehouse, they will supply them to you just in time, you will have a cleaning or security provider, they will supply you with people or they will provide you with the service in In other words, do they take a risk in the number of security guards they provide you, so that If the security threat level increases, is it within your contract to cover that additional risk or do you take that risk because it is an input specification and you have told them the level of staffing they need rather than what the specification is for them to the kind of elements you need to think about when you're looking at the procurement cycle what else do we have? when we work in a volatile demand pattern and the supply ends up holding huge stocks due to falling demand, you are exploiting the suppliers, you are exploiting the suppliers and not taking responsibility to stop the stock, is it ethical sourcing?

I'm not sure I fully understand this, but I think you're saying that the supplier has a large stock due to a drop in your demand. Are you exploiting the offer if not? If you are not taking responsibility for this stock. Well, I guess yes or no, I need to do it. I know this scenario, but again, this is where contract management comes into play. There are really two things you will need to be clear about what your contractual relationship is and what your obligations to the supplier are, in terms of stock. given a um you know an indication of what are the elements that are driving your demand are you using historical volumes or are you covered in a contract so you will always have to meet your obligations in a contract unless you have you?

I have a negotiated outcome that allows you to default on your obligations, so I'm not going to take kindly to people walking away from their obligations and saying, "We're in a pandemic, so we're not going to pay you or us." We are in a pandemic so we are not going to buy this from you even though it is clear that service is an ongoing service and is within the contract if you can negotiate a reduction in service from your supply and I deal with it both ways, so that makes sense, but walking away from obligations, if that's what you're saying, is not really ethical and just remember that the pandemic will end and it's probably best to keep a good relationship with suppliers. but instead of a bad one, so we had another question here of uh, those are key indicators, let me take a look.

Someone says I'm looking to get msips after completing a master's degree, should I go through level four, five, six, okay? So that's a bit of a technical question in terms of grading, but you can certainly contact me directly. The general answer is yes, if you have a master's degree in procurement or supply chain management, then there are several, uh, number of exemptions that mean you don't need to go through the full sips curriculum to get m-sips um Question: Is there any preferable approach to follow within this duration i.e. pandemic to handle difficult business units and stakeholders? who do not understand the impact of kovid 19 on the supply chain and want to meet the requirements with the same level of service.

I would say yes, I think the preferable approach is: "It's about communication, it's about articulations and stakeholder management." I don't think the situation is a surprise to anyone in any business by any means, so you really just need to communicate it to suppliers to make them understand that we are dealing with a global pandemic and depending on what supplies they are talking about, they will be affected. . There is no part of the world or any service that will not be affected by the global pandemic and certain categories will be more affected, so food supply may have unique challenges.

Medical supplies may have unique challenges: Other industries that require people to physically go to the office or physically go to the factory or physically go to the plant to fulfill their duties will also be affected differently, so it's clear that the supply chain is working. will be affected on multiple levels and I would be surprised if any of the stakeholders do not understand the following question: when is our next procurement webinar session? I will advise everyone to go to the SIP website and look at the events page so That's www.sips.org and you can look at the events page if you want to see that.

We had a question. Who is it? Did you have a question for us that you wanted to ask live? Okay, I'll be back. I'll answer some other questions in a second. Okay, okay in creative services. The question here is about creative services. So in creative services, some products that are used do not have suitable alternatives. In such a situation, the supplier is essential. your business, but the value of your business, the supplier, oh, sorry, we've already had that question, I apologize, these are monopolistic scenarios. The procurement objectives are to save costs and skew the kpi around how much they save to get a lower cost of a procurement of items agrees that the supplier opts for higher moq and the moq equals the requirements of one year or more, leading to overstocking that invites quality cheating and ultimately a lossfor the organization, it's that ethical, so, um, that's a long question, but all I'll say is I'll refer to the previous part of my presentation that says we're really talking about getting goods and services for full cost. of lower ownership and that involves several elements and do you know if that is the case?

If you are doing unethical sourcing or accumulating excess stock, that will be to the detriment of your organization and as a result you will not really be able to achieve the lowest total cost of ownership in any case, so then I would discuss whether you are getting what your organization wants you to want you to achieve, so I think at that point I really think we had a lot of questions that hit on most of the points that we talked about before. go to this point and say look, thank you all very much for attending this session.

Excellent interaction, you can interact with us again. www.cips.org or you can link to me on linkedin sam.champong or sorry just samachamp on linkedin but by email sam.champong on sips.org it was a great session thanks for your questions stay in touch and stay tuned our next webinar thank you very much