Monthly Archives: September 2014

The “Future” of Procurement: Ongoing Blues Part III: The Inflection Point

It’s taken us eight (8) days, but we’ve finally reached the point where, even though these “future trends” are already here in leading organizations, there’s still some life left in these trends and forward thinkers still have an opportunity to get a bit of a leg up on their competition if they go just a little bit further. However, true forward thinkers have been preaching about these trends for over a decade, so they’re not exactly new shoes, even if, to you, they look like they’re still in the wrapper.

11. Transparent Pricing (thanks to “the cloud” and “big data”*)

This is another trend that’s old news. With the introduction of the internet, e-RFX, and e-Auction technology, which is almost two decades old, and the proper application of database technology and should-cost modelling, pricing has been increasing in its transparency for almost two decades. And with some tools tracking this data across all public and private channels at your disposal, we’ve reached a new level of transparency. Soon the nature of the conversation will change from “what’s the lowest price you can give me” to “how can we work together to take cost out”. When that happens in more than a handful of companies, and it needs to happen, we will truly have reached the next (but nowhere near the last) level of Supply Management. So while this is still ongoing blues, as the leaders have been here for a few years, it’s at least a trend that the doctor can get behind. When it comes to this trend, he can almost stand for it standing.

10. Using e-Procurement to Integrate Sustainability

Sustainability starts deep in the supply chain, not in the retail store. Sustainability is about designing products that use recyclable or replenishable raw materials, minimizing energy requirements (and making sure renewable energy sources are maximized in the production process), and minimizing the utilization of other natural resources and, in particular, water (as fresh water is in short supply). The best place to integrate sustainability into your supply chain is in Procurement. In business, money talks and if you want to make sustainability happen, you talk with your money. And if you want to have a lot of money to talk with in the future, you get sustainable now because, even if there is an up-front premium, raw material and resource costs keep going up and, someday, your costs will be less than your competitors who didn’t get the memo and reduce their non-renewable resource consumption when they should have.

09. New KPIs

It’s true what they say, what gets measured gets managed, and this means what gets measured well, gets managed well. And this means that continual improvement in your KPIs results in continual improvement in your Supply Management. Just as it has for the last twenty years. But this old news still has some life in it. There’s still, hopefully, innovation left to come in Supply Management, and each of these innovations should be accompanied by appropriate KPI improvements. No guarantees, but here’s another trend that we can look upon positively for the time being.

08. Lifecycle TCO

Ever since the first e-Auction failed to deliver a return, which happened to every company that went e-Auction crazy — because once you squeeze the fat out of a supplier’s margins, there’s no savings left to be had on unit price alone — the conversation quickly elevated from unit cost through landed cost to early definitions of total cost of ownership because, when demand exceeded supply, it’s the only way a company could identify real savings.

But, even today, most “TCO” calculations only look at minimizing landed cost across related commodities in a category with immediate utilization costs — such as waste product disposal (from the manufacturing process), expected warranty costs (from consumer returns), expected return costs (to your supplier), etc. They typically don’t extend to end-of-life recovery and disposal costs (as required for many electronic products under various global legislations), production cost models (to help you weigh lower life-time cost vs. the lower right-now cost), premiums for sustainability (as some consumers will pay a few percentage points more for an ethically and sustainably made product), or the marketing benefit of using a certain supplier (e.g., Intel inside). And as the reach of Supply Management grows, so does the opportunity for total lifecycle cost modelling and minimization. There’s still opportunities here for the creative. Leading companies, such as those in The Hackett Group top 8%, have explored most of these, but the remaining 92% of you haven’t. That’s why this is ongoing blues, but unlike The Cloud that beats you black and blue, at least when you think about TCO more holistically, you start to think to yourself, What a Wonderful World.

It’s been eight (8) long days, but we’ve almost made it! Two (2) more days and we’ll be ready for the true “future” trends. All three (3) of them. Just two more days!

* Don’t get the doctor started on “big data” either. Just don’t.

The “Future” of Procurement: Ongoing Blues Part II

It’s been a tough slog, but we’re finally in the midst of the trends that are recent enough to be classified as “we should be mastering this” as opposed to “we should have mastered this (a) decade(s) ago”. This should be good news, but considering that it’s still going to be eight (8) more trends and two (2) more days before we get to a “future” trend that’s actually recent enough to classify as “like new remanufactured shoes”, when we look at the big picture, it’s not. We need more innovation, not renovation, or, even worse, reincarnation of trends that should have been entombed with the mummies.

But let’s get back at it. We’re not quitters here. We’re going to finish what we started. Even if the state of affairs has left us broken hearted, we’re going to tough it up and not ask for sympathy.

15. System Integration With Partners

This is a logical consequence of e-Procurement System Adoption, Better Governance Models, Business Process Convergence into Supply Management, Increased Strategic Focus, and Stronger Supplier Relationships. As more companies adopt e-Procurement systems, a trend that has been going on for over a decade, there is more need for integration. As more companies adopt better governance models, they acquire the need for more visibility, which can be obtained through system integration. As more companies converge their business processes, the supporting software platforms need to be integrated and merged to support this. As focus gets more strategic, it gets more inclusive of partners. And as the need for stronger supplier relationships takes root, henceforth comes the need for strong system integration with those suppliers for greater supply chain visibility.

14. Shorter and More Complex Product Life-Cycles

I’m not sure what industry to blame for this one — the console industry, which releases a new platform every few years, the electronics industry, which feels the need to double the output power of whatever it’s selling every two years, the cell phone industry, which has insisted on releasing newer and better phones every year, or the portable (laptop/tablet) industry which does the same. Regardless of who’s to blame, despite the fact that product complexity is going through the proverbial roof, product cycles have been steadily shrinking for the last two decades with no end in sight. It’s getting to be old news, but because the sophistication of the processes and technology required to handle these ever shortening life cycles needs to continue to increase as well, the doctor has promoted this trend to the category of ongoing blues. It might be more than it deserves, but qui ita iustus est.

13. The Cloud

The Cloud. The mega-trend, future-trend, you-must-have-it trend. The proverbial answer to all our problems. The two words that can unleash a verbal assault from the the doctor so intense that a psychiatrist might be compelled to consider diagnosing the doctor with with the worst case of Tourette Syndrome ever recorded. Despite numerous claims, the cloud is not a fluffy magic box (and we’ve told you this again and again). It’s a storm cloud that is filled with hail. And if you got cloud, I got your mail. No crystal ball (which the cloud is not) required. While the doctor doesn’t know how many more years we’re going to have to put up with the constant stream of nonsense marketers are pushing upon us where the cloud is concerned, he does know that every year is another year too many. And trying to fight it makes one feel all black and blue. It’s a flood of folly. How do you stop it? Calling it ongoing blues is an understatement. It’s a flood of despair that never, ever ends! The only positive is that when the flood of despair washes over you, you no longer care that Kim Kardashian wore the same outfit three times in a week.

12. BYOD / Mobile Procurement

Twenty-two “future” trends later and we’re finally at a trend that is almost forgivable. Almost. But only if it’s on a trend list produced by the most junior of analysts charged with a task that is way above his pay grade and competence level. And even then, its just almost forgivable. Because, regardless of it’s status, it’s been easy to predict for years that this is one trend that is going to increase in prevalence now that tablets are cheap, people expect choice, and BYOD just makes sense for many business that aren’t big enough to negotiate better plan deals than what is available to an individual. Why spend time and effort managing cell phones and plans when it’s quicker and cheaper to just reimburse an individual 65% of her mobile bill on her monthly expense report? And not have to pay for the phone. And why force an employee to carry around a cumbersome laptop that is likely to get lost or stolen if she can do the site visit on a light, cheap tablet (that you might not even have to pay for)? It just makes sense for a lot of companies, but because they have yet to wake up and smell the roses, this one actually needs to be on a few trend lists for a few more years (even though it should be old-news). Just don’t tell the doctor it’s the grand future when it’s really the right now!

The “Future” of Procurement: Ongoing Blues Part I

Wow. One week and fifteen (15) “future” trends later we’re finally getting to trends that are recent enough to be classified as “we should be mastering this” as opposed to “we should have mastered this (a) decade(s) ago”. You’d think this was good news, but considering that it’s going to be eleven (11) more trends and three (3) more days before we get to a “future” trend that’s actually recent enough to classify as “like new remanufactured shoes”, it’s not. It’s sad and almost pathetic when you think about it.

So here we go again. Or should the doctor say here I go again because, like David Coverdale, it seems, from the doctor‘s point of view, that here I go again on my own, going down the only road, and, like a drifter, apparently walking it alone. You see, instead of taking the easy way and walking the well-trodden, down-beaten path, the doctor is opting to forge a new road to see what lies on the other side of the unexplored territory, because tried-and-true doesn’t mean best-for-you.

(the doctor knows it’s harsh, but the reality is just because you’ve been doing it that way for thirty years doesn’t mean you’ve been doing it right. And if you’ve been preaching the same end-game for thirty years in the consulting world, you definitely aren’t doing it right. The world evolves and your playbook should evolve with it.)

But maybe we should get back at it as we still have a long ways to go, but before we continue, let us reiterate that these posts are categorized as rant for a reason. Just like the doctor has no restraint when it comes to rubbish, he has literally no patience for puff-pieces, which he has recently read a lot of while researching this series. As a result, the doctor is letting loose and not pulling any punches. So if you have a habit of reading, sharing, or promoting these pieces, unless you’re still up for a rumble, you might want to go hop over to Spend Matters for a few more days (and come back Thursday when we get to trends meaningful enough to at least be mentioned). The fact of the matter is that the doctor is going to continue to call a duck a duck, a spade a spade, and a poser a poser. the doctor will continue to do his very best to continue keep the language Safe for Work, but the bile will bleed through where it is well deserved, and we have to cover a couple of very hot topics that make the doctor go cuckoo for cocoa puffs. You have been warned repeatedly. You continue to read at your own discretion.

18. Improved Supply Management Skill Set & Skill Specialization

The need for improved skill sets and improved skill set specialization has been around at least since the invention of the hammer, but has probably been around longer than that. After all, the early hunters had to learn to use their spears. Every time technology or business processes have progressed, new skills were required to appropriately use the new technology or business processes. And every time new processes or technology were introduced in Supply Management, new skills and skill set specialization were required. This is really, really, really old news but has been promoted to the ongoing blues category only because, last decade, progress came fast and furious and, for the most part, the professional associations, training companies, and big consulting co’s just didn’t keep up (or come anywhere close to keeping up) — so how could you? The ISM only upgraded to the CPSM in 2008 — almost five years after Next Level Purchasing introduced the SPSM! (Hmmm … wonder where the ISM got that idea, eh?) Plus, the later half of this decade could see a few more innovations that rock the Supply Management world, decimators* permitting.)

17. Talent

Due to the steady increase in the size of the skill set required to excel in Supply Management, we’re at the point where, as SI has been stating for years, you have to be a jack of all trades and master of one. There’s a reason the traditional saying is “jack of all trades and master of none” because it’s hard to do everything and yet be good at anything. But that is what’s required to excel at Supply Management. You have to be good at dozens of different things, and good enough to combine them more effectively than your peers from the perspective of designing and managing global supply chains. This is going to be an issue for decades to come. It’s not only going to be a constant challenge to find appropriate talent, but to design and deliver training programs that elevate that talent to the top of their game and keep them there.

16. Stronger Supplier Relationships

Now that we’ve went from buying pre-manufactured third party products to outsourced manufacturing to outsourced product design, we need much stronger supplier relationships than we used to require. And when you add the constantly increasing risk of supply chain disruption, dwindling raw material supplies, and ever decreasing product life cycles, the importance of strong supplier relationships is skyrocketing. But this has been the situation since the outsourcing craze began in the 1980s. Nothing new here, except the strength of the relationship, and the frequency of interaction, has to keep increasing, and even more visibility is required.

That’s 3 more down and only 15 to go. And, most importantly, only 3 more days until we get to remanufactured shoes! We might just make it!

* The innovations will happen. Some are already in progress. It all comes down to two things. One: whether there are any VCs forward thinking enough to invest, as true innovation takes years, not quarters, and the short-term thinking of Wall Street has conditioned us that it’s all about next quarter, not next year, or, more importantly, next decade (and this has resulted in the end of long term strategic plans and put a big damper on ground-breaking innovation). Two: whether the patent trolls will let it happen. There are a number of 800 lb gorillas that haven’t invented anything in almost a decade and their only chance at maintaining superiority in the space will depend on squashing the competition and putting them out of business. In order to support this anti-progress strategy, these companies have built up war chests of patents (which, even if garbage, can be used to get multi-year injunctions until the case is decided) and big bank accounts (to buy, and subsequently bury, the willing).

The “Future” of Procurement: Old News Part V

We know that we have already pushed out four full posts since we started discussing old news, and that we should be done, but we’re still not done! Not even close! So if you were wondering why the doctor is still ranting and raving like a mad man, it’s because he is still very mad. So far we’ve exposed 12 “future trends” that are so outdated that Astroturf is revolutionary. And we’re not done! Not even close! We have three (3) more to cover today. It’s beyond insane! There’s no word for it! I’m betting, if he were still alive, even Einstein would have difficulty comprehending how so many hog manure “future trends” still see the light of day. And that’s why, once and for all, we have to bust them up — one by one — until they all fall down.

21. Increased Raw Material Scarcity

We’ve been dealing with raw material scarcity issues for centuries. Some as a result of unfettered demand. Some as a result of limited production. Some as a result of gross incompetence. For example, take the oil crises of 1973 and the rapid rise of oil prices in the 1990s. Or the gold price spikes between 1933 and 1948, 1973 and 1977, 1979 and 1981, and the almost unparalleled rise between 2001 and 2011 (somewhat balanced by the myriad of gold rushes between 1800 and 2000 around the world that, eventually, caused the price to drop significantly because of the influx of gold). Or the plethora of famines that have occurred around the world over the last few millennia since the first famine was recorded in the history books in Rome in 441 BC*. The only difference is now, thanks to computer, laptop, tablet, and cell phone proliferation, the scarcity has shifted to rare earth minerals. And when you consider that the Earth’s population is rapidly increasing, as it is now four (4) times what it was 100 years ago, and that the planet, and the resources it contains, is finite — it doesn’t take an Einstein to put 2 and 2 together and come to the conclusion that, as time goes by, more and more raw materials are going to be in scarce supply.**

20. Increased Strategic Focus

Isn’t this essentially what Drucker preached for the entire course of his academic and business career? When you get right down to it, strategy is not about numbers, it is about using what the numbers are telling you to do something right. And that something right is something that is done by your people. Drucker was all about building relationships, bringing out the best in your people, and making them an integral, happy, productive part of your community so that together they could do something better than each individual could do on their own. In other words, helping your people help you do something right, and grand, and wonderful. If this isn’t one of the best pieces of strategic advice ever, the doctor doesn’t know what is. So don’t tell me strategic focus is new. Drucker was preaching better management (which is key to organizational success) since he started working with IBM in the 1940s. That’s before most of us were even born!

19. Service Providers Excel (and surpass in-house ability)

No one in their right mind*** outsources a back-office function to an outsource provider without a reasonably strong belief that the outsource service provider can do the function at least as well as the company can at a cost that’s at most what the company is currently paying to get the job done in house. In the early days when the outsourcing craze hit full tilt back in the 1980s, this wasn’t always the case, and some providers did so bad they actually flopped. But many didn’t, and some of these got very good at what they did. Very good. And in the 1990’s you had a large number of providers who could do back office functions at least as good as their clients, if not better. And then with the introduction of e-Sourcing and e-Procurement systems in the noughts, a few of these outsource service providers really took off and became so good at transactional procurement or sourcing of select categories that they can run circles around their clients. Depending on the function, there have been service providers that have been better than the majority of their clients for at least 10, if not 20 years, in Supply Management and related functions. So, like the fourteen (14) “future trends” that precedes it, this prediction is really old news. And the doctor, for one, is tired of reading about it.

* There is biological and recorded evidence (in the form of hieroglyphs and hieratic) of famine in Egypt around 2200 BC during the collapse of the old Kingdom, but as the remaining records are few and the biological evidence minimal, it’s hard to precisely date the famine, which was a relatively rare occurrence in Egyptian history. The Egyptians were the agricultural masters of their time and only on rare occasions where the Nile flooding was considerably more or less extensive than usual was food limited and famine a real possibility (if over or under-flooding of the Nile happened multiple years in a row).

** Maybe we should be more forgiving considering that less than 1 in 7 American adults are “proficient” at math? Hell no! When we lose basic logic and reasoning skills and care only about whether or not Kim Kardashian has the same look twice in one week, the world will go to hell in a handbasket so fast that we won’t even have time to blink — so you will get no lenience or forgiveness from me. [We didn’t make this up! A headline on Daily Mail, yes, Daily Mail, was That’s unlike you! Kim Kardashian wears the same look for the THIRD time in a week ….]

*** the doctor knows being in one’s right mind is not a pre-requisite for an executive job in some countries, including the United States, but we’re going to assume it should be and move on.

The “Future” of Procurement: Old News Part IV

We know it’s been three full posts since we started discussing old news, but we’re still not done! Not even close! So if you were wondering why the doctor is ranting and raving like a mad man, it’s because he is mad. So far we’ve exposed 9 “future trends” that are so outdated that original bell bottoms seem new. And we’re not done! Not even close! We are going to cover three (3) more today. It’s insane! Even with a genius IQ it’s hard for the doctor to comprehend that so many hog manure “future trends” still see the light of day. And that’s why, once and for all, we have to bust them up — one by one.

24. Better Governance Models

Either you’re a vertical, horizontal, or hybrid organization structure with centralized, decentralized, or some form of hybrid governance. That’s it. the doctor doesn’t care what sort of new-fangled buzzword you come up with to describe your organizational structure or governance, those are your options. No more, no less. And Big 5/6 Consulting Co’s have been preaching better governance since well before what was supposed to be Indiana Jones’ Last Crusade was revealed to the world (even though it was during the 1980s that these same consulting companies started shouting the need for better governance from whatever rooftop they weren’t locked out of). In fact, these companies have been preaching better governance in some shape or form since their founding and AA (the LLP, not the sobriety help group) was founded over 100 years ago; the partnerships that evolved into KPMG over 140 years ago; and Deloitte & Touche, the partnerships that merged into E&Y, and the partnerships that merged to form PWC were each founded over 150 years ago.

23. e-Procurement System Adoption

To again be fair, e-Procurement System Adoption is still limited to the top half of enterprises that should be adopting systems and there’s still plenty of room at the top, but the reality is that ever since Coupa came onto the scene, and revolutionized the e-Procurement space, the availability and affordability of e-Procurement solutions increased dramatically over the coming years and now every business, large or small can afford an e-Procurement solution, not just ones with a Million dollars in their bank account. So, even though more businesses need to adopt e-Procurement, adoption has been steadily rising since Procurement Independence Day eight years ago. As a result, this has been a front and center issue for the last five years and is last decade’s future trend. Not this decade’s!

22. Business Process Convergence into Supply Management

While technically this belongs in ongoing blues, because, depending on which business process we are talking about, convergence into Supply Management might still be in the early stages, the reality is that once you go beyond buying office supplies, you are talking about the integration of other business processes into supply management because, in many companies, the procurement guy was the office manager and, besides buying office supplies, his whole responsibility was simply doing the paperwork. He’d negotiate for whatever part manufacturing wanted, cut the paperwork, and then deal with the invoice when it was received. He had no authority or control. He was on the bottom rung of the corporate ladder and if there was too much work for him to do, he was promoted to leader of the Island of Misfit Toys and assigned a disparate team of misfits who weren’t performing in the job they were hired to do but yet couldn’t (easily) be let go from the company. As soon as Procurement achieved responsibility for buying direct materials, hiring temporary services, and, more recently, print campaigns for marketing, there was even more business process convergence into supply management. And while it will continue, it’s an automatic consequence of supply management gaining traction, and a simple application of basic logic determines this, just like globalization implies increased competition. Chalk another one up to Mr. Obvious!