THE FACULTY QUARTERLY 

Summer, February 2014

2014 – Predictions

Andrew Cordner - The Market. Our Clients. The Faculty

“The future is like a corridor into which we can see only by the light coming from behind.”  While this quote from author Edward Weyer Jr may indeed be so, The Faculty’s Managing Director, Andrew Cordner, gazes into his crystal ball and offers predictions for where the market is headed and how the spotlight will shine on Procurement over the next 12 months.

FOR THE MARKET
The ‘wait and see’ continues - From a market perspective, we enter 2014 pretty much where we left 2013. The global markets are seeking direction with Chinese manufacturing numbers down, and mixed reporting results coming out of America – this despite a good US GDP report.

A vulnerable recovery - The Aussie dollar continues to head “south” (at the time of writing this it was trading at 0.8780 US cents – a drop of 15% over the last 6 months or so). Despite the fact investors are being warned about needing to absorb a “vertical cliff”, the only currency anyone wants is the US dollar. 

Open for business – Toyota’s announcement last week has sounded the death knell for Australian manufacturing.  Combined with the end of the Resources-boom, CEOs and government will work far more intently on those strategies and infrastructure necessary to transition to a knowledge economy.

Top dog – Just a few years short of when it’s predicted that the Chinese economy will surpass the US as the world’s most important, China’s growth is expected to quicken slightly after the low point of early 2013.  A bigger challenge for China will be dealing with the daunting problems of an aging population and the consequences of rapid credit growth and rising debt levels

FOR OUR CLIENTS
Results oriented:  From a client perspective, the key words we continue to hear are “productivity”, “efficiency” and “cost control”. The current market is certainly revolving around cost and risk management.

Customer is key:  Like the broader business, procurement continues to refocus on the customer, developing a deeper understanding of what constitutes ‘real value’ to the business and seeking ways to provide superior customer experiences to increase reach and deliver on the procurement value proposition.

Digital connectivity - The emergence of increasingly accessible digital tools is an opportunity for CPOs to help their organisations engage better with both customers and suppliers, attract employees and influence stakeholders. As social media’s importance in customer, shareholder, supplier and employee experience increases, CPOs will seek ways to better understand how they can leverage social media platforms to create value.

Smarter and faster decision making - The value of big data is to drive supply market insights and more intelligent decision-making that directly impacts on procurement decisions. Sales and marketing must work together to improved customer experience by enabling data-driven insight and the ability to present value in context and engage end customers where they are most interested.

Less is more: Large-scale systems transformations have been implemented and must now demonstrate return on investment.  With funding for systems tweaks exhausted, Procurement will have a role to play in delivering on the promise by ensuring process discipline. 2014 will also be a year of consolidation both on the vendor’s side (acquisitions and mergers) and the buyer’s side (buying more from fewer vendors).

Value is where it counts:  Procurement continues to be at the center of driving supplier “value” although innovation during these times may take a backseat - particularly in a highly risk averse environment. The focus remains on cost / price / risk / continuity of supply / maintaining the existing service standards and ethical sourcing – but it is also about taking a longer view in the market with total cost of ownership, social and local procurement and SRM.  Driving “value” is no longer something that only companies at the top of the ASX are concerned by – Not-for-profit, Public sector and 2nd tier organisations are also expected to drive greater value from their supply base in 2014.

And for The Faculty?
From a Faculty perspective, we continue to listen to our clients, the market and move with the times. As a result there are a couple of service propositions that we believe help to achieve your goal of “enhanced value”. Here is a sample of what is coming in 2014:

  • Smarter, more informed suppliers = greater value for Procurement. In an effort to help sales teams navigate the procurement process, avoid situations where tenders are lost and deliver a more compelling customer value proposition, we launch Procurement for Sales Teams. Learn more here
  • In consultation with the procurement community, we launch an online Capability Assessment which enables you to assess and align the right blend of technical, commercial and leadership competencies needed by your procurement function to deliver in 2014 and beyond.  Learn more here
  • 90% of cost reduction programs fail to deliver long term value. In response, The Faculty has created a world-class cost program that addresses all the key attributes that create the environment for implementing a sustainable cost culture
  • The Roundtable continues to serve as a formidable peak body for the profession, extending its reach into Perth in 2014. A National Summit, held in May, will bring together member CPOs to discuss and identify goals for the profession.
  • To meet ongoing client demand for capability initiatives, we have super-charged our Capability & Training team with the appointment of renowned Procurement Capability expert, Gordon Donovan. This will ensure we are second to none in the Australian market in developing and facilitating best-in class capability solutions for your staff.

While it’s probably too much to hope that all will be smooth sailing over the coming year, we look forward to helping you strive for excellence while achieving this concept of greater value with you.

We hope you have a great and successful year – and look forward to being part of that journey.

 For more information about The Faculty and our range of Consulting, Training and Roundtables & Events services, please contact us on +61 3 9654 4900 or via email.