African nations are at an extraordinary place on the world stage right now. If the current momentum in change and technology adoption continues, that long-awaited “global superpower” status will materialise faster than anyone expected. This was the observation of Toby Sparrow, CEO of Dooka, and one of the key speakers at the SmartProcurement 2022 IT Sourcing Summit in Johannesburg last month. Here he tells us more of his impressions.
This was a great event in which some interesting insights were shared. Fundamentally it was all about how businesses across Africa can use developments in technology to do what they do smarter, faster, better.
And that is not just a badge on the continent’s lapel – it is something which means a seismic shift in the balance of wealth, and the prosperity of ordinary people living on the African continent.
Whether or not this shift comes about is going to be determined to a significant degree by the procurement professionals, who attend these summits. In other parts of the world it is often consumers that drive the GDP numbers, but in African nations it is mainly businesses that move the needle in the Gross Domestic Product. And that means that a shift in efficiency makes a difference. Doing something smarter makes a difference. It means that you, the procurement professional, makes a difference.
I had the honour of participating on a panel hosted by ABSA’s Craig Vaughan discussing TBM. TBM is not one of those acronyms that everybody knows. However, Technology Business Management (TBM) is an important topic that can completely change the way that our businesses perceive the technologies that support the procurement function.
Basically, the principle is that if we can start to talk the language of VALUE instead of the language of COST within our procurement function, we are far more likely to get the financial support we need to invest further in the technologies that can enable the procurement function to run more smoothly. And when procurement runs smoothly, the business makes more money. Higher revenues, lower risks, better efficiencies, lower costs – all of the things that will get the CFO’s attention and support.
Making the shift to a TBM mindset in a business does not have to be difficult. It will require some advice, but there are plenty of advisers who can help businesses to make that transition. Deloitte, who participated in the same panel discussion this week, have long been champions of the TBM approach.
There is one particular area of the procurement function which has been getting increasing focus over recent years. The function of Indirect Procurement, Good Not For Resale (GNFR), and Tail Spend – basically that 20% of a company’s total spend that is supplied by around 80% of the company’s suppliers and which accounts for over 80% of the total number of Purchase Requests, Purchase Orders and Invoices. Not to mention RFIs, RFQs and RFPs.
The thing about these burgeoning tail-spend categories and suppliers is that they are taking an increasing amount of time and attention from the procurement and Accounts Payable teams and, because headcounts are a finite resource, it means that the people have less time to spend on the higher-value categories and suppliers where the company’s stakes are so much higher and where more time and focus should be spent on strategy and optimisation. The number of people available tends not to increase, but the volume of work always does. So this looks like one of those areas to look at more closely. Is there a better, smarter way to buy Indirect Spend and Tail-spend that will give the business better value?
It has been known for a long time that tail-spend is a “problem area” – meaning it is costing more than it should. This is the predominant reason why businesses across the globe have been looking at ways to optimise the way they do their Indirect Spend – and one of the areas gaining increasing traction is the concept of the Business to Business (B2B) Marketplace.
The idea of a B2B Marketplace is that for some of these Indirect and Tail-spend categories, the purchasing company, the Buyer, may not actually need to maintain a pool of qualified suppliers. They may not need to follow the rigid process needed for other categories. They may not even need to negotiate for prices, or maintain contracts. They could simply go to an on-line shop, browse for the product or services that they are looking for, compare prices and specs on an open marketplace, choose the best ones, and check out.
For some procurement professionals, the whole idea sounds ridiculous – because it is so alien to the way procurement and purchasing works at the moment. But with a new generation of B2B marketplaces now emerging in Africa, it may be worth taking a second look. After all, there is a lot of VALUE to be gained if you can make it work.
By Toby Sparrow, CEO, Dooka