Managing through interesting times

1. Managing through interesting times CPOs the heroes of the economic downturn How procurement can save the day! Chris Gallagher Director of Customer Solutions The Chartered Institute of Purchasing & Supply

2. Managing through interesting times Beforewe begin… I would like you to take a moment to reflect and ask yourself: how aware am I? how flexible am I? how resilient am I?

3. CIPS 54,000 members total 26,000 members outside UK 150 countries Founded 1932 Royal Charter 1992 Managing through interesting times This is the CIPS world Focus: The Global economic downturn Relationship management Innovation Sustainability/CSR Security/vulnerability of supply Global sourcing Increased use of technology (Web 2.0) Fit with organisation strategy Capability competency of the function The development of new business architectures Revenue generation/new product development via P&SM Expectations: Deep Smarts Issues recognition Innovative products Well networked Global reach Personal contact Competitive

4. Managing through interesting times Last year CIPS CPL carried out two pieces of research into the future of procurement: • In April 2008 we commissioned a Delphi Study to examine the future challenges facing our profession over the next 5-10 years, and to explore how we might prepare for these challenges. Little did we know then, that by the late autumn of 2008 the credit markets would cease functioning normally or that governments around the world would be nationalising financial systems! In little more than 6 weeks between late September and the beginning of November 2008 everything changed. • And so in November 2008 we were exploring the immediate impacts of this change on organisations and specifically on procurement . This study was carried out by Prof. Robert Handfield (Bank of America University Distinguished Professor of Supply Chain Management) Welcome to the future!

5. Managing through interesting times Three key themes emerged from the November research, Managing Through Interesting Timeswhich are especially important to procurement: • Buyers and suppliers are all in this mess together; • Whilst most organisations are staring at a bleak situation wondering what to do - smart organisations are turning these threats into opportunities… • Procurement leaders need to emphasise that it is vital for their organisations act with urgency!

6. Managing through interesting times What should we do now? Well… 1. Start by stepping back and see what is really going on. • Contact key suppliers and customers, and have a meeting to open share what is happening in their environment. • Task key managers with building better intelligence around your supply base. • Task key account managers to better understand not just customer situations, but ultimately the market conditions around your key customers’ customers! • Review category management and market sector strategies. Task teams to revise and re-design these strategies based on updated market intelligence.

7. Managing through interesting times • Sit down with your team and ask them some of the tough questions that need to be asked; these include: • Which of our key customer accounts and suppliers are most at risk? What is the probability of economic failure on their part, and the financial and disruption impact on our supply chain? • Given these outcomes, what are the proposed contingency plans required? How quickly can these plans be put in place? • How reliable and accurate is our market intelligence on supply chain risk? What channels are available to use to ensure that our information is current? • What is a realistic set of scenarios facing our key customers? • What will be the impact on our revenue in 2009 and through 2010?

8. Managing through interesting times • Become a beacon of urgency for all around you to see. Create an environment where “good enough is not enough!” • Follow up team meetings, with meetings to validate and ensure follow-through on all plans. • Sustain momentum, and challenge your people to break out of their conventional ways of thinking and truly confront the issues. • Share updated category plans, budgets, demand impacts, and contingency plans with your senior management, particularly Marketing, Finance, and Operations. • Invite Finance to meetings to advise and provide options for non-standard AP/AR contracting approaches that can create improved working capital for all supply chain partners.

9. Managing through interesting times • A beacon of urgency (continued) • Build a business case and share this as an exciting development for all to see. • Drive a shared “risk and reward” mentality with all of your supply management team, and urge them to think creatively on how to improve contract structures and terms. • Establish updated KPI’s to drive awareness of the success of your initiatives, and publish and share these on a regular basis to sustain momentum.

10. Managing through interesting times We must lead in this era of economic uncertainty • Focus on synchronicity • Build information bridges to suppliers and your stakeholders • Seek sustainable relationships • Determine the strategic changes to make • Advance everyone’s understanding of the value chain

11. my conclusions • People need to discipline their minds and filter information, rather than blindly accepting and/or following common practice. • Smart leaders adapt their decision making approach to reflect changing business environments. By being aware of danger signals, and avoiding inappropriate reactions, leaders can be effective in totally unfamiliar situations. • It is about how we receive information and then translate it into action – and therein lies the key. • Within procurement we need pride and passion in our profession and this comes through our mindsets and how we apply our knowledge inside and outside our organisations. • The future will belong to organisations whose senior executives remain calm, who carefully assess their options, and nurture the traits needed to deal with whatever the world throws at them.

12. and finally… ourchallenge for the future? “… the gulf between how one should live and how one does live is so wide that a man who neglects what is actually done for what should be done learns the way to self-destruction rather than self-preservation.” (Nicolo Machiavelli: 1469 – 1527)

13. Thank you for listening to me Any questions….?