Getting your processes right is one of the axioms of the industrial (and now digital) economy. People don’t scale well – and if you come up with a great way of working, you need to codify it. If it’s reliant on people, it’s vulnerable. If you have good process, people are (to quote former US Secretary of Defence Donald Rumsfeld) “fungible”.
Just one year ago the Competition and Markets Authority proposed reforms that mandate all FTSE350 companies tender their audit services every ten years; and in April 2014, this reform was also passed by the European Parliament. The new rules also require Public Interest Entities (PIEs) to change auditor every 20 years.
As 2014 draws to a close, many of you may already be in the midst of planning your procurement function for the year ahead, and deciding how your team will be shaped in 2015. What will they achieve? What challenges will they face? And what will be expected of them?
Professional Services: what are we paying for, exactly?
As supply management evolves into a strategic business function, one of the key roles procurement teams often play is to challenge stakeholders to justify what they are paying for. In “traditional” cases this is relatively easy: you can count the number of laptops you need to buy, you can benchmark the wholesale price of utilities, you can understand the need to use a recruitment agency to find new or replacement staff.
Year end reflections are usually about the changes that will happen ‘next year’. 2015 will be the year when (insert as appropriate!) will finally take off... But this year, we first want to reflect on the year gone by. It’s hard not to make bold statements about how much procurement and the management of suppliers have come to the fore. Take three examples that have shaped the front page news.
This round-up of sought after research, articles, webinars and interviews offers some insight into the journey that procurement has undertaken throughout 2014 and offers some thoughts around what might be to come in 2015.
The traditional way to explain the role of an auditor is that they’re a watchdog, not a bloodhound. They keep an eye on what’s happening, sit up when something looks suspicious and occasionally bark when they see something dodgy. The job is explicitly not turning over every rock they can find to test ethics or legality - no bloodhounds chasing the bad guys through the woods here.
Audit services: Four reasons why it pays to be a first mover
During the original dot-com boom, the idea of first mover advantage gained massive currency. Staking out a digital domain before anyone else showed up was considered the best way to guarantee success – gaining mindshare, customers, and above all, experience and personnel that would be denied your rivals.
Financial Times: Proxima weighs in on new audit market reforms
There was a strong feeling of anticipation and suspense throughout the Proxima office in London on Wednesday, as we all waited excitedly for Financial Times City Correspondent Harriet Agnew’s article - discussing the shake-up to the audit tender process - to be published. A few weeks earlier, Richard James (Category Director for Professional and Financial Services) had been interviewed by Harriet, and asked to weigh in on what impact the changes to the UK audit tender process are having on the wider market.
Tender touches for better audits - five recommendations
Following new regulations and a deep desire to restore lost public faith in business, audit is making a conceptual comeback. The European Commission’s new rules on mandatory tendering for audit every ten years (along with increased scrutiny; demands for transparency in the audit process; and controls on what other work your auditor can do) make the process of choosing and contracting an auditor incredibly important.
Infographic: Accountants warn on audit market reforms
When analysing the current FTSE 350’s use of audit services, our research highlights the impact of the Competition and Markets Authority’s reform on the UK audit market – finding that there is more happening under the surface than meets the eye...
“The fish rots from the head”. Strong words from a recent FT article rounding up a series of accounting issues besetting large companies in the UK. Following a discussion between Proxima and respected commentator Stefan Stern; Stern argues that boards need to open their eyes to all activities in their business (from top to bottom) – but without getting involved in day-to-day tinkering.
Following my previous post, exploring the importance of social media for procurement, this post aims to address the second topic covered in the Financial Times piece - the impact of ‘big data’ on supplier management practices, and why it is essential that this concept is not ignored.
The Internet of Things - challenging human behaviour
The progress made by humanity in how we communicate has changed the very nature of how we behave – from the advent of the electric telegraph in the 1700s, to the internet being publicly introduced in the 1980s, to Wi-Fi in 1991.
3 reasons social media is important to procurement
I recently read an interesting article in the Financial Times that discussed how social media and big data are being used to help solve supply chain issues and improve supplier management practices at a number of large companies.
In 1596 Shakespeare wrote the Merchant of Venice - a play in which a young Venetian merchant, named Antonio, signs an interest-free loan to help his friend, Bassanio, romantically court (with lots of money) Portia, the woman of his dreams. The catch is that if Antonio defaults on the loan, Shylock (the financier in this scenario) has the right to take a literal “pound of flesh”.
By now you will already be familiar with our corporate virtualization research, showing that the average company now spends around 70% of its revenues with suppliers. But what does it mean for your business, and how can you uncover the opportunities that this trend encourages?
The headline on a capital markets report looking at bond yields was worrying: “Canary in the coalmine”. Canaries were useful to miners because, although small, they sing sweetly until they get a whiff of gas and then they abruptly stop singing. The miners say a short prayer for the little bird, then get out as fast as they can.
Whilst the Deloitte list highlights some of the important issues, we’ve reached out to our own network (of client teams and readers) and come up with five additional issues that are most likely to make their way to the top of the CFO’s agenda over the second half of 2014.
At Proxima, an essential part of our work is making sure our finger is on the pulse of opinion and sentiment in our clients’ markets. It means that our advice and strategic development work is contextualised correctly within the environments in which our clients operate, which in turn enables us to find the best solutions to their challenges.
There’s something a little forced about coming up with a World Cup analogy for business and procurement in light of the quadrennial football festival in Brazil. But – you’ve read this far, so it would be remiss not to give it a go.
The idea of a supply chain for a business sharing 'content' used to be so simple. But it’s not just digitization that’s shaken up the natural order of creator, publisher, retailer and consumer. It’s the way we think of middlemen.
One world, one business model – the impact of globalization
I was chatting to a management thinker the other day – a former CFO, as it happens – and he said something so compelling, yet so simple, that I was stunned. “The problem with the runaway success of MBA schools is that we’re developing a global corporate monoculture,” he said. “We’re concentrating risk in similar places around the world.”
It’s striking how many CFOs count leadership of a cost saving programme as a major part of their role. There’s nothing wrong with making procurement more efficient and streamlining the cost base, of course. But the best finance functions treat it as part of their commercial contribution, not a traditional bit of hard-nosed accounting.
Panel session to discuss HBR article; Corporate Virtualization
Following on from our recent Harvard Business Review coverage, I’d like to invite you to join us for an online panel session – discussing practical perspectives and pragmatic insights into the trend of Corporate Virtualization.
The European Food & Beverage Market is in a state of turmoil. Increasingly regular headlines are being published around deficiencies in quality standards and growing contamination cases. The reputation and financial damage of these headlines can be critical for any business operating in an already tumultuous industry (as discussed in my previous post).
New research shows that a growing number of corporates are refocusing their procurement functions away from cost and towards strategic innovation. A sure sign that corporate management's attitudes towards procurement are shifting. (We discuss this further in our upcoming webinar). But are the smart ones just copying the companies that have always understood that this is a key source of value?
Proxima clients nominated for a Procurement Leaders Award
Since our inception, Proxima has set out to change the way procurement is both thought of and conducted at organizations around the world. Today we have more proof that we are successfully moving in that direction.
Harvard Business Review recognizes today's leaders cannot afford to downplay procurement
I am pleased to bring you the news that Proxima’s research and thinking on how commerce has evolved, and the implications for modern corporations, is now being recognized at the highest level globally.
Benefits for media & entertainment companies from better supply management
With the average media & entertainment business spending twice as much on suppliers than on its own people, I thought I would share some of our industry insights on the benefits of successfully getting your suppliers under control and offer a real life example of this happening at leading video game publisher – Activision Blizzard.
As the global economic recovery gathers pace, more and more businesses are turning their sights from cost reduction to growth. How well an organization’s procurement team supports this shift will materially impact overall business performance.
Any accountant will tell you that more businesses go bust in the recovery from a downturn than in the recession itself. A big reason for this is poor risk management – because managers think they can stop worrying. They can’t.
Business has changed - driven by globalization, technology and changing consumer habits. Executives have had to rapidly adapt their business models, products, and distribution channels in response to these groundswell changes. But the implications of these unstoppable forces don’t stop there. Another impact is that suppliers today are providing an ever-increasing proportion of business activities, many of which used to be delivered by direct employees and internal operations.
Supplier management is challenging. Gaining the best levels of service, quality, performance and value takes work and relies upon employing the best in class. For marketers, it’s about employing suppliers that genuinely understand your business. And if you motivate them to perform, they will want to deliver.
2014 the year of working the profit and loss harder
CFO.com recently published an article around the Eight Top Issues for CFOs in 2014*. The number one consideration was to ‘avoid choking off revenue growth’ or put another way, focus on growth oriented cost management.
Top 5 tips for managing your virtualized/extended enterprise
‘Corporate virtualization’ has taken hold across all large businesses today - the on-going phenomenon of replacing internal functions and labor with suppliers has changed the very fabric of the modern company. It has not been a planned or even conscious decision – but over the last 20 years is has been an unstoppable force.