The third year of the Procurement Forum, themed Procurement in Times of Rapid Change, took place on the 20th of May 2015 in the National Technical Library in Prague and attracted over 200 participants. The Forum focused on the comparison of personal and professional experiences with procurement here as well as abroad, on the specification of tender criteria and on on-line procurement trends. Lastly, the interactive afternoon panel discussion session considered the topic of changing old procurement habits.
The first part of the Forum, Procurement on Three Continents or How to Buy Nationally and Internationally was moderated by Bronislav Pánek, EY. He presented the results of the Procurement Survey 2015: What Direction is Czech Procurement Moving In, which was filled out by more than 150 people. Procurement and supply are most affected by the increasing uncertainty connected to price fluctuations and by geopolitical instability. Additionally, the incessant pressure to decrease prices also plays a role. As the competition for qualified buyers and experienced procurement managers increases, the number of companies who plan to attract talented workers from their competitors rises annually. There is a continuous lack of educational university programs for procurement management. Czech businesses are increasingly becoming more aware of the strategic importance of procurement, whose various divisions – lead by the Procurement Director in top management – have, year-by-year, increased by ten per cent. The survey participants see the potential for improvement in strengthening procurement planning and increasing the cooperation between procurement and technical divisions when creating technical specifications. Almost half of the survey participants are planning to invest in purchase controlling and reporting tools over the next couple of months.
Ingrid Tocháčková, Corporate Purchasing, MANN+HUMMEL Group began the block dedicated to experiences with international procurement. In her presentation, she shared her procurement experiences from three continents. She compared purchase risks as well as company and business culture specifics in China (Shanghai), the United States (Michigan) and Germany (Stuttgart). “I am not discouraging you from entering the Chinese (Asian) market, but I strongly recommend that you carry out a TCO (Total Cost of Ownership) and financial, operative and strategic risks evaluation, and use common sense before entering the market in China. You need to thoroughly consider if Asia is the best supplier solution for your business. Do not mindlessly succumb to trends and unsubstantiated pressure from managers. Usually an overall risk analysis shows that building a supply chain in Asia makes sense, especially if your manufacturing base is there and if you plan to expand your business to this market.” In her presentation, she also included examples of successful active business development of local suppliers in the USA that were then able to compete with suppliers from Asia. The conference participants also valued her information and experiences regarding the use of open books policy in procurement.
The keynote speaker of the Forum, Justin Fabbro, Fabbro International (Ohio), has lived and worked alternately in central Europe (Poland) and the USA for more than twenty years. He presented his experiences with procurement and reconciling cultural differences in multinational corporations of General Electric: GE Transportation System and GE Supply and Textron (procurement for the Army). „Procurement cannot be done from behind a table, you have to drive to the suppliers, meet them personally and work on their development.“
The second thematic block How to properly specify the tender subject and how to lead price negotiations was lead by the conference expert guarantor, Marek Rokoský from CxO Services. Marek Růžička, Director Corporate Accounts, O2 Czech Republic presented how to properly tender telco and IT services, saying that: “The precondition for a successful tender is a mutual understanding of motivations and expectations of buyers and suppliers, their partnership.” The telco market is distinguished by the fact that it is regulated and functions on the basis of assigned licenses. It is currently open to sixty virtual operators. The bought telco services should only be used for the agreed-upon purpose; corporate services and prices should not be re-sold or further diffused to the residential market as employee benefits. Customers at O2 buy commodity products (voice, data, M2M), global services, infrastructure and other services – “Business Enabler” (GPS data, loyalty and big data, omnichannel).
eAuctions – how we use them in procurement and how to improve them was introduced by Milan Kaplan, the leader of the PROebiz project and the co-author of the books Business procurement and e-auctions and How to buy cheaper and better. The most used types of eAuctions are the english reverse auction, RFx, tendering, sealed envelopes and marginally also auctions such as NIPPON, HOLLAND or Brazil. Auctions are essentially computerized negotiations about the delivery conditions with multiple suppliers. Kaplan also presented the results of a last-year’s study on 59 users of eAuctions. In the year 2014, there were more than 4000 eAuctions and RFx requests with a financial circulation of over 3.5 billion CZK. Among the main positives are transparency, administrative ease, finding out an objective market price and financial and time savings. The auction outcome was 68% of agreements signed, out of which 90% were upheld with all of the conditions listed in the auction. The quality of the bought product did not worsen for more than 65%. “eAuction can be used for the procurement of everything but intellectual property. Holders of the auction often make a mistake by not specifying the contract subject closely enough, not controlling already-entered tenders and not communicating enough with suppliers. These suppliers then often do not read eAuction invitations and offer better terms and conditions after the end of the auction. They rely on last calls. If an auction is held in a polite way and with quality, it is purifying.”
Experiences on how to tender commodities and investments were shared in a well-arranged, information-filled presentation by Milan Tomek, Head of Purchasing, Siemens, manufacturer of steam turbines. “eAuction is a good servant but a bad master. We’ve been using it for over eight years. It is an aggressive selection of suppliers that brings significant financial savings, finding out the actual market price, time savings and a transparent selection. A precondition of a successful auction is a thought-out procurement strategy. You have to work differently with new suppliers as opposed to those who are already familiar with the eAuction system. In order to choose the appropriate auction format, you need to know the price levels (based on initial offers). The possible loss of personal contact needs to be replaced with personal visits. Another precondition is transparent cooperation and the scope of supply/evaluation of offers with TOC outputs. It is also necessary to clearly define the commercial terms. The basis is perfect communication: an open game and familiarizing the supplier with the rules. One of the risks is that the supplier can overestimate his manufacturing capacity.”
The trends of procurement computerization in Germany were introduced by František Bumba, General Manager, e-integration. His company supports computerized auctions in different branches of industry, commerce and B2B. Thirty years ago, procurement was the most underestimated business sector in Germany; today, it is a prestigious professional field with highly qualified, well-educated experts. The BME Buyers Association carries out an annual survey that shows how computerized tools are used. The most popular method of procurement rationalisation is e-catalogue, used by 75% of big businesses. eAuctions are held mainly by large corporations, small companies view them as an aggressive method and are afraid that they do not have sufficient capacities to enter this competition. In the future, the procurement paradigm will shift to demand shaping, spend analysis, and businesses will work more with eCl@ss Classification.
The afternoon part, Changing old procurement habits, was moderated by Martin Dokoupil, Managing Partner, Blue Strategy.
The possible uses of the professional social network LinkedIn for procurement professionals were summed up by Josef Kadlec Chief Recruitment Architect and GoodCall for Talent Co-founder and Milan Novák, CEO and Co-founder of GoodCall for Talent as well. “Work on your brand and your social profile, use the network for professional development, for researching information about suppliers and for recruiting new people to your team!”
The subsequent varied panel discussions of the following topics: procurement reorganization, task changes, team transformation, procurement ethics, open technical specifications and the position held by the procurement division in the organisational structure, was held by four panellists: Michaela Chaloupková, Board Member and Operations Director, ČEZ; Maroš Horňáček, Executive Director, Mediaservis; Miloš Olejník, Head of Procurement & Services, RWE Česká republika a David Toms, Procurement Director, Linet.
Michaela Chaloupková introduced the centralized procurement division of ČEZ, which includes 400 buyers and an annual purchasing capacity of 30-50 billions CZK. The company chose to tread the path of commodity procurement and their current procurement focus areas are increases in performance and effectiveness, buyer and internal customer expertise, supplier-relations management and reputation. ČEZ prefers long-term relationships with suppliers. When dealing with non-core procurement, they put high demands on suppliers, but offer good terms and conditions and timely payments. They use eAuctions for the last round of non-core procurement tenders.
Maroš Horňáček introduced Mediaservis – the only competitor for Česká pošta. He discussed why some businesses buy successfully and some do not. eAuctions should be used in those fields and instances, where it makes sense to do so based on the procurement strategy and logic. If Mediaservis does not have a given competence for a given commodity, they outsource its procurement elsewhere.
Miloš Olejník presented his vision of how to advance the already well-established procurement at RWE in the direction of strategic sourcing on the category level. Proactive means of procurement create added value. Among the necessary conditions are also a procurement plan and the implementation of a competence model in intensive strategic sourcing schooling. He demands hard skills from his procurement team and fulfils 50% of procurement through auctions.
David Toms introduced Linet, a company that manufactures hospital beds in the Czech Republic and Germany, exporting them to 110 countries. He sees supplier development as a bridge between the supplier and the buyer. A proper supplier should be flexible and processes on both sides should be grounded in common sense; it is also necessary to adapt to market trends.
The atmosphere of the entire event was pleasant, relaxed and informal. Due to the increasing interest of professionals, the organizers are planning to hold next year’s conference in a bigger space. “Unfortunately, as a result of the lack of educational programs, there is a lack of qualified procurement professionals on the market and businesses steal them away from each other. I am glad that people in procurement see this event as a professional meeting, where they can share their knowledge and experiences, which ultimately leads to higher qualifications within the entire procurement branch. I believe that the interest in this type of knowledge will continue to increase over the next couple of years,” commented the conference expert guarantor Marek Rokoský.
This conference was organized by Blue Events with EY as the main partner.