Daily Archives: February 17, 2010

Implementing Best Practices: The Procurement Maturity Model You Won’t Get From ISM

In the procurement profession, there is a broad set of external factors which directly affect organizational performance: customers, policy, staff, processes, vendors, tools, and organization. Regardless of whether the external factors are enabling or inhibiting, the procurement function must deliver value — usually in the form of cost savings, enhanced vendor performance, and mitigated legal and operational risk. That’s why the The Procurement Maturity Model (PMM) was developed to assist procurement professionals in implementing procurement best practices as a means to improve organizational performance.

One of the things the Procurement Maturity Model (PMM) facilitates [is] the process of benchmarking by pre-defining over 60 procurement best practices. These best practices may include:

  • the Procurement organization involved in 95%+ of spend
  • purchase orders electronically generated for 80%+ of spend
  • 75%+ of spend flows through approved vendors
  • 80%+ of contracts executed within 30 calendar days;
    95%+ of contracts executed within 60 calendar days
  • Procurement staff receives 24+ hours of training annually

The model enables a gap analysis between an organization’s performance and the corresponding performance of a best-practice enabled organization and, based on the gap, identifies measures and actions the organization can take to become best-in-class.

For more information on the Procurement Maturity Model and how it can help you become World Class, check out the presentation that Stephen Guth (of the Vendor Management Office blog) was going to deliver at ISM*1 (who I’m going to call a hot dog vendor of procurement certifications), available for download through this post.

*1 I’ll agree that the presentation is pretty basic, but you can’t tell me it’s more basic than most of the material that they publish on a regular basis, or most of the presentations they accept, or that a significant portion of their audience, unfamiliar with the PMM, would not benefit from a good introduction. Especially one from an experienced practitioner and speaker who wrote the book on The Vendor Management Office.

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Are Open-Source Data Interchange Standards for SaaS the Key to Radically Simple Supply Chains?

A couple of years ago, the Harvard Business Review ran an article on Radically Simple IT that noted that the fundamental problem with enterprise IT projects, which continue to be a headache for business leaders, is that these systems are constructed using a cathedral approach. Like the great cathedrals erected in Europe in the middle ages, enterprise IT projects are costly, take a great deal of time, and deliver value only when the project is completed. Furthermore, they yield systems that are inflexible and cement companies into functioning the way their businesses worked several years ago, when the project started.

What’s needed are systems that can be improved — rapidly and continuously — well after they’ve gone live. The systems should be built on a “path-based” approach that provides a path for the system to be developed over time. After all, it’s difficult and costly to map out all requirements before a project starts because people often cannot specify everything they’ll need beforehand.

Given the rapid escalation of supply chain systems, designs, regulation, and security requirements, it’s pretty much impossible to map out all of the requirements of a supply chain systems project before it starts. And even if it could be done, they’d just change tomorrow anyway! A new approach is definitely needed for developing and implementing systems that serve the supply chain, and I think we’re reaching the point where they will be born of necessity.

You see, even though there are now a number of big players out there that offer very broad solution suites, these suites are, still, for the most part restricted to sourcing and procurement, logistics and inventory management, or global trade and data exchange. While the footprints of each type of system is rapidly expanding within their respective domains, most systems are still not expanding beyond the comfort domains of the vendors providing the systems.

And to be honest, most vendors with expertise in sourcing and procurement, have little in logistics, inventory, or shop floor operations and most with expertise in logistics, inventory, or shop floor operations have little in global trade regulations and security requirements. The key is going to be the development of modular SaaS platforms that can interoperate using a common data language that is open and not owned by any single vendor. (Single vendor standards just build a single vendor eco-system, or a bigger Ariba Supply Network.) Just like the web was built on true open standards, next generation supply chains need to be as well. The question is, who will lead the effort and when will the major players buy in?

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