The EU has certainly brought benefits to the UK. However, these benefits have come at a cost and this cost has been distributed unevenly across the UK. By cost, I don’t mean the annual contribution that we make but more the hidden costs associated with membership. In joining we have had to accept the demise of industries once at the core of UK life (fishing is an example) as well as turn our backs on countries outside the UK with which we have had historical trading ties (typically through the Commonwealth).
In addition, the introduction of the free labour movement has seen not only the useful movement of skilled labour into areas where it is needed but also the flooding of the semi-skilled and unskilled markets with cheap labour. Bringing costs down is not a bad thing, but there are inevitably social consequences when it is achieved by reducing labour costs rather than improved processes.
In communities dependent on supplying labour into these latter markets, jobs have either become scarcer (supply of labour outstripping demand) or it has resulted in a depression in the wages paid to people as employers have a bigger potential workforce from which to draw (and the appearance of zero-hour contracts). In addition, these communities have found themselves inundated with migrant labour which has not only put pressure on existing infrastructure (hospitals, schools, etc) but has also alienated some people who feel like strangers in their own communities.
Migration in these areas has been more akin to an invasion rather than a steady integration. So, in short, the hidden costs of the EU have been distributed unevenly throughout the country. Add to this the pressure of austerity measures introduced following a recession caused entirely by the greed of unscrupulous financiers and you have the potential for large swathes of the population feeling ignored and disenfranchised.
Now throw into this mix the idea that the population of the UK will be given a vote on whether to stay in or leave the EU. What do you think is likely to happen? Well, just what did happen. Those areas of the country feeling the greatest pain have voted to leave. Those areas of the country suitably blanketed from the hidden costs have voted to stay.
To steal from Stevie Smith,
If this means leaving the EU, then the short economic term pain will be worth it if the long term social benefit is to bring the disparity parts of the UK closer together again.
BTW, did you notice that I made no mention of the MPs or anyone involved in the political process?
Why? Because vested interest and party politics are driving their agendas. What I am citing here is what the people of this country need – not the politicians.
Sources – Nemo’s comment
A continuous improvement plan doesn’t need to be complex it simply needs a process that allows you to do 4 key things.
Plan – What are you setting out to achieve and how will you do it?
Do – Execute your plan
Check – measure your performance on your plan
Act – implement some actions from your review of performance.
One of the most important things (surprisingly neglected at times) is to set yourself a plan and objectives – for example this might be reducing the inventory levels – it might be improving schedule adherence or it might be to looking to reduce customer rejects whatever the objectives are documented them in a plan, with measurable targets and timescales.
You’ll also need to consider two key ingredients –
1. A standard process (that people are supposed to follow)……and
2. Measurable data.
The whole point of CI activity is to base your actions on facts and data and not just knee-jerk reactions of what you think might fix it today. Continuous improvement programs invariably get results because they follow a process
So, looking to get started? Here are 5 tips for continuous improvement in a supply chain environment.
Use KPI’s for what they are meant for –
Most (if not all) business use some form of key performance indicators. KPI’s are great but they should form part of the Check element of your PDCA process and you should not just look at them and then let them gather dust but you should look to use them as the basis for your action plan.
Listen to feedback
Another often overlooked input into improvement is to simply listen to what your supplier network is telling you. No doubt you have supplier business reviews? If so make them work for you – don’t just use them to beat up the supplier but use them to also get constructive feedback on what issues you as a customer cause and what you can do to improve the supplier’s performance. This step alone can generate some hugely significant ideas (often ones you might not have considered).
Document your processes
If you’re looking to improve – make sure you capture what you do now. Have you got your processes standardized and documented? Does everyone know what they should be doing and when? This should be seen as one of the first steps in improvement.”
Look to implement a culture of continuous improvement
Once you’ve got your processes documented and the whole team is working in a standard way the next step is to encourage improvements. Continuous improvement is not a one-man job and your whole team needs to buy into the principle. An army of improvers can achieve great things! Following simple programs like PDCA doesn’t have to be complicated and should be envelope the whole team.
It seems obvious but set yourself targets. Don’t over-reach but don’t make them too easy either. In your plan, set out what you want to achieve and by when and then religiously measure and analyze. Without targets, your department will probably drift along aimlessly chewing around the periphery of issues without ever really grasping at a coherent plan to improve. Objectives focus everyone’s attention.
There are countless other things you can do to deliver improvements but the above should get you started and is a simple enough concept to flow out to your team. As a final step, remember to be selective about your improvement steps – look to deliver on achievable improvements that will deliver results. Don’t waste your time and focus on issues that might not deliver significant improvement return. Remember it’s your time and resource you’re putting into this so you want to make sure you get an appropriate rate of return from the effort.
Once you have taken the time to complete a full spend analysis exercise that brings together your Accounts Payable, PCard and Purchase Order data, the next step is to start looking at what you can do with all that information.
12 things you can do with spend analysis dataSome of these points can be achieved with a basic spend analysis, others require additional time and effort, especially in the areas of classification and enrichment of spend data.
1) Deliver Savings
Right now everyone is being asked to do more with less. You’re being asked to deliver savings while still providing your stakeholders (internal customers and your constituents) with the same goods and services. There is only so much negotiation you can do with your vendors for the best possible deal. Spend Analysis gives you great insight over your spend data and can help you identify opportunities you didn’t know existed.
2) Improve Processes
Spend Analysis data will allow you to make an informed decision on how processes within your organization could be improved. Whether this is the implementation of an e Procurement System, better use of P Cards or consolidating invoices with individual suppliers, spend analysis data help identify these opportunities. The results of a spend analysis process can also provide needed direction when implementing a new system, both in terms of configuring that system as well as identifying the departments and people within your organization whose adoption and use of the new system will help generate an ROI on the project as quickly as possible.
3) Managing Maverick Spend
Everyone puts contracts in place, but after signature, they tend to get relegated to a filing cabinet or electronic record system, not to be looked at until there is a problem or the contract is about to expire. Greater spend analysis data will allow you to better track these and identify:
- Suppliers where the value of non-contracted spend is non-compliant either by legal or internal procurement standards
- Spend with non-contracted vendors in categories where a contract is available
- The categories of spend where there may be too many suppliers and no contract in place
- Other forms of maverick spend within your organization.
4) Managing Supplier Relationship
Generally, your vendors will know more about how much and on what you spend with them than you will. Spend analysis can help to correct that imbalance and often tip it in your favor. For instance, when it comes to the time to negotiate a new contract with a vendor, having done a comprehensive spend analysis you more equipped with insights on how much you are spending with the vendor.
5) Manage Risk
It’s easy, when you’ve worked with a particular supplier over a number of years, for your organization’s spend to steadily increase above and beyond what was originally contracted or intended. Over time, the vendor may steadily become overly reliant on your organization for their annual revenue. Too much spend with one vendor can create risk in two ways. Firstly, if they are dependent on your spend and you make the business decision to move your spend away from this vendor, they could potentially go out of business causing a public relations issue, even if the procurement decision in isolation was the correct one. There will be individuals within your organization that should be made aware of this in preparation for any negative feedback or publicity.
Secondly, if you are too dependent on one particular vendor and that vendor goes out of business for other reasons, your organization could be left without critical goods or services that you need. Enriching your spend data with information on your vendors annual revenue and credit scores will allow you to better assess your organizations overall supply chain failure risk.
6) Recover Over-Payments
On average in public sector organizations, 99.8% of all transactions are for the correct amount, to the correct vendor, and only happen once. However, this 0.2% margin of error can equate to a reasonable sum of money. Bringing together AP and pCard spend in a spend analysis can help identify erroneous transactions and begin to recover these over-payments.
Imagine the scenario where a vendor doesn’t believe they have been paid on time. They call around in your organization looking for their legitimate payment for goods or services provided and end up talking to the person who actually purchased the goods. As a gesture of goodwill, the buyer pays the vendor by pCard, but ultimately the overdue invoice winds its way through the system in parallel. The vendor ends up getting paid once by pCard and again through the normal AP method. Hopefully, your vendors would repay the duplicate payment, but it doesn’t always happen.
7) Procure Co-operatively
Many organizations are now being asked to work more collaboratively with other organizations in their local area. If you have all your spend data in one place, and in a format common to other organizations, it becomes much easier to consolidate your data together. This generally has the effect of making your collaborative efforts more strategic, rather than reactive and ad-hoc. Quickly being able to identify those common suppliers, common categories, and opportunities to collaborate can lead to dramatic savings opportunities.
8) Reduce Disparity
In addition to saving money and becoming more efficient, you may be being asked to report on diversity spend and take steps towards increasing diversity to spend. In order to effectively report on spend with various types of diverse businesses, you need a flag in your spend data that describes the vendor type and importantly, this flag needs to be kept up-to-date. And if the goal or directive is to increase spend with diverse businesses, you need to know where you are today in order to determine what that goal should be and measure progress towards it.
9) Source More Locally
‘Local Preference’ has historically been a hot-button issue. Hard numbers can help to take some of the emotion out of the discussion. Spend data enriched with geographic information enables you to understand how much you spend locally now, and then take steps accordingly. All too often, public procurement teams are criticized for not spending enough with local businesses, without anyone actually knowing how much is spent with local businesses or on what. Whatever your position on preferences or set-asides, having accurate information in hand can be instrumental in establishing your position as the credible one.
10) Ensure Legal Compliance
Public organizations operate under a myriad of legal requirements, whether it is the state procurement code or only internal rules and regulations. One example is your organization’s thresholds requiring competitive solicitation, or at least to get three quotes. Some states even have punitive legal consequences for failure to comply with those rules and breaking those rules can be no fault of the procurement or finance team. Imagine a situation in which an organization has very decentralized purchasing and a 25,000 competitive solicitation threshold. Now imagine 10 out of 100 budget holders decide that a particular piece of software is exactly what they need to be more efficient and software licenses cost $3,000 annually. As the individual budget holder is only spending $3,000, it falls into the small purchase arena and flies below the radar of the one or two members of the procurement team. All of a sudden and with no warning, the organization has unwittingly broken their procurement own code, and potentially state law. Having to spend analysis data updated over time will allow you to track these more effectively and ensure you are compliant, or at the very least not unwittingly non-compliant.
11) Benchmark Relative Position
The opportunity to benchmark and compare your organization to other local organizations or organizations of a similar type across the country can be very useful. Where multiple organizations collecting and organizing spend data together in one place, meaningful comparisons with your peer organizations are possible. The collation process enables you to answer a range of questions that it is not possible to answer using your own financial management systems such as the average number of vendors or spend by category, understanding which vendors are generating the highest aggregate revenues from other public bodies, and to set targets for improvement that are realistic and achievable relative to the average or “best in class” for other public bodies of a similar type and size.
12) Quantify Your Savings
Having multiple organizations collect and organize spend data together in one place empowers meaningful peer comparison and can help identify and isolate factors that are impeding spending more effectively. This will allow you to demonstrate the value of your procurement/purchasing team to your organization in dollars and cents, the common language of finance and business officers to whom which the majority of public procurement practitioners report.