the doctor Exposes A Few More Elephants

As the doctor mentioned in his last post, there are a lot of elephants hiding in the sourcing and procurement war room! There are so many, in fact, that the doctor is having problems figuring out how they all fit! However, as the doctor was in-depth scanning and reviewing some vendor web sites (and no, the doctor‘s not going to list names – since he’s sure most of these vendors are still upset with him for the X-emplification series, which is going to be followed by an X-asperation series in the next month or so thanks to some really great questions and suggestions the doctor received in private e-mails), he caught a glimpse of the data enrichment elephant hiding behind the door, spotted the compliance elephant under the boardroom table, and found the performance management elephant hiding in the closet.

The Data Enrichment elephant would have us believe that your data is “enriched” if it’s processed by a spend repository that applies repeatable data cleansing and categorization rules to make sure it is always in a form that can be analyzed by the solution that you have. Although accurate cleansing and categorization is important, and a necessary part of any spend analysis project (whether done by a central data administrator or an analyst on the fly using a real spend analysis tool), it’s not data enrichment. Enrichment, by definition, means that additional data, culled from other third party sources, is added to your data so that you can do analysis above and beyond what you could just with the data in your organization. For example, this could be using Equifax Austin-Tetra to append financial risk and diversity information so that you can determine how much spend is really going to diversity suppliers (versus how much spend you think is going to diversity suppliers) and how many suppliers you are dealing with have a risk of failure in the next 12 months. In other words, what the Data Enrichment elephant is selling you is important, it’s just not enrichment – it’s basically what you should be getting with any tool you buy that promises accurate cleansing and categorization.

The Compliance elephant would have you believe that just because the vendor sells a complete suite that is capable of fully automating your processes and work-flows, storing all information and award decisions in a searchable centralized repository, and managing your contracts with a solution that alerts you whenever a transaction is found off of contract or a contract is coming up for renewal, that you are compliant. the doctor would like to say he’s sorry, but he isn’t, but compliance is much broader than this. Compliance is not just compliance with internal processes, but whether the system is always being used (because automating the processes is irrelevant if the system is not being used), whether it is collecting the data required by your organization to meet the requirements of Sarbanes Oxley and the accounting standards being used, whether or not you are awarding to a company on the denied party list, whether or not the carrier who is bidding is licensed to operate in the countries that you are shipping from or two, whether or not the products you are sourcing comply with regulatory requirements such as REACH, RoHS, and WEEE, and so on. This goes well beyond the offerings of any sourcing or procurement solution on the market. Well beyond. If the vendor is telling you that they enable compliance with respect to SOX, REACH, etc., and being very specific about it – that’s great! Sourcing and procurement solutions can enable compliance. But, considering the breadth of regulations that need to be adhered to in global trade, a sourcing or procurement solution alone, by itself, will not make you compliant. So, in short, this is an elephant that likes to considerably over-promise and under-deliver.

The Performance Management elephant tells you that if you have a sufficiently complete technology platform, than you achieve supplier performance management. One vendor in particular is stating that a combination of project management, collaboration technology, assessment, and monitoring technology is everything you need for supplier performance management. Although this is likely everything you need to monitor and measure your suppliers, and thus a good foundation, there’s a big difference between measuring something and doing something about the result! The nature of performance management is that it can’t be a purely technology solution – because performance comes down to people. Technology is good at tracking tasks and, by way of benchmarks, pointing out where there are inefficiencies or problems – but you need people to identify the root causes and work with suppliers to identify the solutions and insure that they get implemented. Furthermore, for this type of platform to be truly useful, it should have an expert-system module that can be customized to each vertical to help the individual responsible for performance management to diagnose possible errors and resolutions. Without this, then it’s just an open source project management tool combined with an RFX tool for surveys and assessments and a BI tool on an ERP to produce metrics and generate alerts when something falls outside of an acceptable range. In other words, the Performance Management elephant has a really good cause, but is a little confused how to actually go about getting results.

For those of you counting, this brings the total number of elephants we’ve discovered in this room to date to twelve. In addition to the data enrichment, compliance, and performance management elephants, previous posts identified the optimization, e-Procurement/EIPP, and spend analysis elephants; the supplier enablement, contract management, and hidden cost elephants; and the RFX, e-Payment, and technology RFP elephants.

the doctor hopes you enjoyed this post, and the brief return of the blogologues, because this will be the last regular blogologue for a while. There are two reasons for this. The first reason it takes a lot of time to craft and edit a post of meaningful content (versus the first half-formed thought that comes to mind), and given that this blog is generating zero income at the present moment, the doctor, unfortunately, can only afford to dedicate so much time to it. The second reason is that the first cross-blog series of 2008 on Sustainability starts next week, and given the importance of this topic, the doctor does not want to detract from what he hopes will be a very popular, and very prolific, cross-blog series.