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Procurement Capability: Driving value for local councils …… Jonathan Dutton FCIPS LGP NSW Conference Sydney, 1 st December 2017
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Page 1: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Procurement Capability: Driving value for local councils ……

Jonathan Dutton FCIPSLGP NSW Conference Sydney, 1st December 2017

Page 2: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge
Page 3: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

• Population growth & urbanisation • Aging demographics • Diversity, sustainability & social responsibility • Technology – deployment & analytics • Housing affordability • Amalgamations • New legislations & regulatory frameworks• Rate‐capping and limited resources?  

Page 4: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

PROCUREMENT challenges 

• Savings tend to ZERO over time … VALUE not • Reducing supply vulnerability and RISK• Integrating SUSTAINABLE procurement & provenance • Enabling procurement as an instrument of POLICY • Baking in probity, compliance & strong PROCESS • Winning the argument for PROCUREMENT  • Defining and delivering VALUE through alignment 

Page 5: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Sources of “Value” defined

Service Innovation

RiskCost

• Defined by the Customer

• Customer complaints• Delivery / Quality• Information sharing• Instrument of policy

• Price• Cost reduction• Cost competitiveness• Compliance• Lifecycle Cost 

• New products / Growth• Systems and technology improvements

• New approaches to Category

• Continuous Improvement in cost, risk & service

• Safety• Reputation• Financial• Supply Continuity• Regulatory• CSR / Probity

P 5Source: Robert Pease 

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Measuring the value … in future 

P 6

Traditional Measure New MeasureCost Direct Savings 

Cost avoidance Extra volume 

Cost competitivenessSpend coverageProcess compliance

Risk Quality / SafetyZERO Instances 

Policy complianceMarket intelligence

Service Delivery In Full On TimeCost to ServeTime to Serve

Customer satisfaction(both internal & external)

Innovation New ideas that work  Supplier confidenceNew solutions/services 

People Skills assessment Talent Index

Page 7: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The 7 challenges facing LGP in Australia 

1. Managing AUSTERITY expectations 

2. Defining procurement’s VALUE proposition 

3. Capturing INNOVATION 4. Building CAPABILITY & confidence 5. Forging COLLABORATION & 

shared services 6. Commercial LEADERSHIP 7. Deploying TECHNOLOGY 

Silke Therhaag BLOG Nov 2017

www.openwindows.com.au

Page 8: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Do we have the CAPABILITY to match our AMBITION? 

Page 9: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT is CAPABILITY?

Page 10: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Capabilityca·pa·bil·i·ty [ˌkāpәˈbilәdē]

nounpower or ability: to perform,

synonyms: ability, capacity, power, potential, competence, proficiency, adeptness, aptitude, faculty, wherewithal, experience, skill, skillfulness, talent, flair, know-how

Powered by © Oxford University Press

WHAT is CAPABILITY?

Page 11: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT is CAPABILITY?

MORE than TALENT

Page 12: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT is CAPABILITY?

MORE than TALENT ‐ PEOPLE who are trained‐ And equipped ‐ And enabled  ‐ And directed 

Page 13: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT is CAPABILITY?

MORE than TALENT ‐ PEOPLE who are trained MORE than PROCESS – The confidence of rigour

Page 14: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT is CAPABILITY?

MORE than TALENT ‐ PEOPLE who are trained MORE than PROCESS – The confidence of rigour MORE than TECHNOLOGY – Timely INFORMATION   

People, Process & Technology – The 3 levers on procurement CAPABILITY 

Page 15: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

PEOPLE

Page 16: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

What do you want to be?A GP?

An obstetrician? A cardiologist?An oncologist?A surgeon?

A physiotherapist

Or be all of them

… be a VET

Page 17: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Building commercial capabilityThe TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen2. Legal & process knowledge 3. Project management competence  4. Strategic procurement capability5. Soft skills & relationship management expertise 6. Wider business perspective7. Technical comprehension & knowledge    8. Market awareness 9. Entrepreneurial approach – Intrapreneurs?10. Supply chain & logistical appreciation 

The CONFIDENCE to operate 

Page 18: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge
Page 19: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

ully 62% of the 324 global CPO’s surveyed declared that they did NOT elieve that their procurement teams had the RIGHT skills for future needsELOITTE CPO SURVEY 2016 

Page 20: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen2. Legal & process knowledge 3. Project management competence  4. Strategic procurement capability5. Soft skills & relationship management expertise 6. Wider business perspective7. Technical comprehension & knowledge    8. Market awareness 9. Entrepreneurial approach – Intrapreneurs?10. Supply chain & logistical appreciation 

“If you think EDUCATION is expensive, try IGNORANCE” 

Lincoln

So, why are we not training our teams? To save money?  

Page 21: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

SUPPLY ASSURANCE

PURCHASE COST REDUCTION

TCO REDUCTION

DEMAND MANAGEMENT

VALUE MGMT

Procurement is working to evolve its value proposition…

Value Proposition Role of Procurement

Safely harnessing the power of supply markets for competitive advantage

Negotiations

Customer relationship management; money management; demand/specification influence

Cost modeling; supplier/market analysis; supplier management; SRM; supply planning; project management; risk mgmt

Tactical Ordering

Right goods and services at the right time at the right place…

And at the right price…

…by reducing total supply costs (not just supplier profits).

…ultimately stimulating good demand and increasing business value derived from Spending (and supply markets) rather than just reducing Spending magnitude.

Reducing unneeded demand activity, complexity, immediacy and variability…

Incr

ease

val

ue (a

nd re

quire

d ca

pabi

litie

s)

As procurement effort matures, so focus moves from price towards value Source : Hackett Group 

Trusted advisor 

RelationsMGR

Supply Expert

Negotiator

Buyer 

Page 22: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

SUPPLY ASSURANCE

PURCHASE COST REDUCTION

TCO REDUCTION

DEMAND MANAGEMENT

VALUE MGMT

Procurement is working to evolve its value proposition…

Value Proposition Role of Procurement

Safely harnessing the power of supply markets for competitive advantage

Negotiations

Customer relationship management; money management; demand/specification influence

Cost modeling; supplier/market analysis; supplier management; SRM; supply planning; project management; risk mgmt

Tactical Ordering

Right goods and services at the right time at the right place…

And at the right price…

…by reducing total supply costs (not just supplier profits).

…ultimately stimulating good demand and increasing business value derived from Spending (and supply markets) rather than just reducing Spending magnitude.

Reducing unneeded demand activity, complexity, immediacy and variability…

Incr

ease

val

ue (a

nd re

quire

d ca

pabi

litie

s)

As procurement effort matures, so focus moves from price towards business value Source : Hackett Group 

Trusted advisor 

RelationsMGR

Supply Expert

Negotiator

Buyer 

Does our capability investment match our ambition?

Page 23: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

WHAT’s the future of corporate learning? 

• Classroom lectures• U shaped PowerPoint shows • 70/20/10 • You Tube • E Learning • Conferences & events• Peer to peer 

learning networks 

Page 24: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

SKILLS Assessment • Skills or knowledge?• Or CAPABILITY?• Free ASSESSMENTS ONLINE• Generic • Compara

• Procurement knowledge evaluation• Skills self‐assessment • Behavioural assessment 

• ArcBlue• DATA history• CIPS links & educational assessed programs• INCO solutions 

• Others • Other roles – policy, non Procurement people

Page 25: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

PROCESS

Page 26: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The FIVE RIGHTsProcurement 101 

• The five rights : 

• RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price

The first responsibility of the professional BUYER is assurance of supply 

The IRON triangleof PROJECT MANAGEMENT  

Cost

Quality  Time 

Page 27: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The SIXTH right – the RIGHT source 

• The right supplier • The right supply chain

The SIX rights • RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price• RIGHT source

Page 28: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The 7th RIGHT …The new urgency of buying in the RIGHT WAY – the right process 

The SEVENTH right • RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price

• RIGHT source… the RIGHT way 

• Right process (Our process) • Fair process• Competitive process 

• Compliance • Probity 

• Confidence • Transparency • Pressure – boards, shareholders, consumers, voters 

Page 29: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

“Shareholders and citizens alike want their organisations to do the right thing 

and be transparent enough to be seen to be doing the right thing.”

Open Windows white‐paper;  Feb 2017

Page 30: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

The right way – not the wrong way Key drivers: Commercial • RISK reduction – mostly of blow‐outs • No delays, no stuff ups …. Legal • Compliance • Probity Moral • Confidence • Transparency • Pressure – boards, shareholders, consumers, voters 

Page 31: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Do the commercial ends, justify the purchasing means?

Open Windows white‐paper;  Feb 2017

Page 32: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

More regulation, not less… 

• Federal CPR’s .. and PCP’s• The Indigenous Procurement Policy (IPP)• Modern Slavery Act 2019

• Tender thresholds• Liability management • Panels 

• Payment schedules v work plans • Compliance – safety, insurance, standards• Compulsory tendering : Few delegates 

And procurement as an instrument of policy … 

Page 33: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Better behaviour, not worse … • No supplier bullying• No spurious payment or 

rebate demands 

• No emotional blackmail• No coercion 

• No threats or anti‐competitive behaviours

• No fraud & corruption 

Page 34: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Open Windows Software

Page 35: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

TECHNOLOGY 

Page 36: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

INFORMATION  

Page 37: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

TECHNOLOGY challenges 

• The RIGHT information• In the RIGHT place• At the RIGHT time  • With RIGHT accuracy 

• At the RIGHT cost 

.. Sound familiar?

Page 38: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

E Procurement suggestions  

• A key part of the control framework • Web catalogues great for USER service speed • Link into P2P and ERP for consistent data quality • E Tendering means speed and lower tender costs • Integrate existing systems …… using the CLOUD• Data integrity & reporting capability is the key …• And solving business problems through TECHNOLOGY• Contract mgt automation ENABLES benefits realisation• Start with SPEND analysis  

Page 39: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Over 50 e procurement IT vendors 

Everyone ‘sells’ everything … 

39

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40

Efficiency over benefits 

realisation??What about solving the business problem?

SOURCE:Changing Face of ProcurementInfosys Portland Survey 2016 (Australia)

SOURCE:Procurement Challenges ProcureCon WBR Survey 2016 (UK/USA)

54% 

40%  38% 37%

20%11%

CSR

Innovation

Risk

Benefits expected by BUYERS from implementing procurement technology:

Mkt IntellCosts

Efficiency

Page 41: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Over 50 e procurement IT vendors 

Which ONE solves your business problem…? 

41

Page 42: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

What’s Missing ?

Operations

ERP

Strategic Procurement 

P2P

Contracts repository & databaseeAlerts

eTenderingOnline evaluation 

Flexible Workflow Processes Project management interfaceProject contract aggregation 

Budget – ordering reconciliationPunch‐out catalogues

Order catalogues v Receipting SRM portal for supplier input

Supply market intelligence DatabaseSupply Chain Tier management eApprovals & escalation paths 

Supplier communications & recordingCompliance library 

Risk management process Sustainable procurement protocols

Real‐time audit trails Analytics dashboard & spend analysis 

Page 43: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

A Roadmap for Digitising Source‐to‐Pay April 2017 

Today’s technology will let you DIGITISE half the Source‐to‐Pay process in most organisations Emerging technologies (RPA, ECS and AI) have the potential to overcome stubborn barriers to automation  Industry benchmark figures suggest most firms waste 3% External Spend on transaction costs, inefficiency, 

non‐compliance 

Start by identifying the end‐to‐end Source‐to‐Pay process you have automated? Build technical platforms now, that can enable emerging technologies next …   SAVE 3.5% external spend and free sourcing staff to become more strategic 

http://www.mckinsey.com/business‐functions/operations/our‐insights/a‐road‐map‐for‐digitizing‐source‐to‐pay

Page 44: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

To do any of this – the FIRST step is to gather DATA 

Operations

ERP

Strategic Procurement 

P2P

“Digitisation of the procure‐to‐pay process has brought troves of  data into the lap of the 

enterprise …  The trick is knowing what to do with it …”  

Zia Zahiri, CTO, Jaggaer

Page 45: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

SUPPLY CHAIN Digitisation

Supply Chain Digitisation

Internal

Analytics

External 

BIG data 

Robotics (RPA) 

A.I.

Bar codes, RFID & QR

Cloud & mobility

Integration & IoT

p t gDrones & 3D printing

Cognitivity & Bitcoin

Millions of APPS                          Billions of USERS                      Trillions of THINGS 

COST to Serve  

TIME to Serve 

Manual supply chains will be disrupted first 

Suppliers often have DATA

Page 46: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

FIVE key skills needed for the DIGITAL ECONOMY :1. Innovative & Adaptive Thinking

2. Virtual Collaboration & Social Intelligence3. Ability To Work Across Disciplines

4. Literacy In Different Types Of Media5. Computational Thinking & Analytics

Dr Jaclyn Lee PhD, Singapore University of Technology and Design

PEOPLE SKILLS 

Page 47: 7 Jonathan Dutton - Local Government Procurement · The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen 2. Legal & process knowledge

Jonathan Dutton, FCIPS• Independent Management Consultant & Trainer • Founding CEO of CIPS Australia ‐ 2004 to 2013• Marketing Director of two UK plc’s• Sales management roles • Professional procurement manager • Fellow of 4 Institutes: FCIPS, FCIM, FRSA, FAIM.• Degree in Economics & MCIPS & GAICD, etc...

A BUYER and a SELLER for over 30 years www.jdconsultancy.com.au


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