Monthly Archives: April 2015

When it Comes to Procurement, Don’t Forget Finance!

Surveys regularly ask Finance to rate Procurement effectiveness, but is this the right question to be asking? Maybe Procurement should be rating Finance effectiveness? After all, is it necessarily Procurement’s fault that there are usually noticeable gaps when the results of these surveys are published? Maybe, but maybe not.

The only way the gaps will close is if the root cause of the gaps is identified and addressed. Is Finance providing the necessary funding for the platforms, training, and resources that are required to effectively address all of the categories? Is the organization evaluating effectiveness against the right KPIs? Does the Procurement agenda align with the organizational agenda that Finance has a hand in shaping?

Now, I’m not saying it’s Finance’s fault, and I’m not saying it’s Procurement’s fault, but I’m saying there is a reason for the gap and the reason needs to be identified. Sometimes it will be a lack of effort or focus on Procurement’s part, sometimes it will be a lack of effort or focus on Finance’s part, but the doctor‘s guess is that more often than not it will not be anyone’s fault but be due to a lack of alignment.

As the maverick points out over on Spend Matters in his post on What Does the CFO think of Procurement, Procurement and Finance are misaligned in numerous ways, and this misalignment is costing companies a lot of money.

That’s why the maverick teamed up with ISM to conduct a new study on Procurement and Finance Alignment to help Procurement and Finance understand all the misalignment areas and the loss of value caused by this misalignment so that Procurement and Finance can work collaboratively to realign. the doctor had a chance to review, comment on, and contribute to the study before its release and can tell you that it’s well designed and well worth your time, especially since the average company will be able to complete the full study in about 15 minutes.

I strongly encourage every company, no matter how well they think their Procurement function is doing, to take this study which is designed not to assign blame but to detect areas of misalignment where Procurement and Finance can work together to improve performance.

Taking the study is easy. Simply e-mail the maverick at pierre (at) spendmatters (dot) com and you can get the study link and first access to the results.

245 Years Ago Today

James Cook spots the south-eastern coast of Australia and his crew of the Endeavour becomes the first recorded Europeans to encounter its eastern coastline, 164 years after the first undisputed sighting of the western coastline by the Dutch in 1606, and 148 years after the first English sighting. (Ten days later Cook’s expedition makes landfall at a place he called Botany Bay, now known as the Kurnell Peninsula, and made contact with the Gweagal.)

Cook’s expedition is significant because, 125 days, he took possession of the whole Eastern Coast, which he called New South Wales, in the name of the Kingdom of Great Britain which, thereby, became the first European power to officially claim any area on the Australian mainland. And then, a mere 18 years later, the Kingdom of Great Britain started using it as Penal Colony, transporting convicts from the cold, damp, foggy miserable shores of the Northern landscape to the warm, dry, clear, sunny shores of the Southern Australian coastline. Talk about early logistics put to good use! šŸ˜‰

The Patriot Act In Layman’s Terms: The NSA Has Your Dick-Pic!

The Patriot Act is due to be reauthorized again in a mere six weeks on June 1, 2015. While no one doubts the importance of this act, or the continued need for foreign surveillance and border security, the act does contain some controversial provisions on domestic surveillance and security. Controversial provisions which, since the act came into law on October 26, 2001, have resulted in one arrest of one taxi driver who wanted to give $8,500 to a known terrorist group. (In other words, the controversial provisions never resulted in the ends they hoped to achieve.)

If no fuss is made, the Senate will just rubber stamp it back into law, as is, on June 1, 2015 and that might be the right thing to do. However, before the Senate does this, every American should decide if that is what she wants and advise the senator she elected accordingly. Because, whether she knows it or not, the provisions of the act not only allow the NSA to essentially tap and store just about every piece of electronic communication created by everyone in the US and by everyone communicating with someone in the US, but it allows the NSA to intercept, store, and view all of your private pictures, including those naked selfies the average American is so fond of taking.

In layman’s terms, if you took a dick-pic between October 26, 2001 and today, the NSA has it and there’s a good chance that someone who was not the intended recipient has looked at it. Listen to the interview below between Edward Snowden and John Oliver (who was the first to put the provisions in layman’s terms) where Snowden not only confirms that multiple sections of the Patriot act give the NSA these rights, but recounts his experience where NSA employees casually shared private pictures of various individuals’ naked parts for fun.

If you are happy with this, then by all means tell your Senator to re-authorize the Patriot act as is. But if you aren’t, tell your Senator that while you fully support the foreign surveillance and border security provisions of the act, domestically, you have a right to your privacy and you would like to see the controversial provisions amended to where the government agencies can only collect your personal, private data with probable cause and a warrant.


 

What do you think of this, LOLCat?


I iz Shocked!

Global Process Ownership: The Other GPO

As organizations seek to become more efficient and effective, one proven strategy is the ability to manage cross-functional processes using a global process ownership (not ā€œgroup purchasing organizationā€) model.
the maverick, Exploring Procurement’s Other GPO, Spend Matters

GPO is harder than it looks. As the maverick points out, it’s ultimately about having both accountability for an end-to-end process and the ability to control the strategies and resources used for the process execution. If Procurement is made accountable, but Finance and the Engineering organization controls the financial and physical resources, then Procurement cannot control the global process. And this is another reason why the full extent of negotiated savings and identified value is never realized and end results are never as expected. Because, without control to go with the accountability, Procurement cannot execute. Planning, which is just another word for Knowing, is only half the battle. And it’s a shame the CFO and the rest of the C-suite don’t remember this single lesson that they should have been paying attention to when watching G.I. Joe every Saturday morning. (It was supposed to be about more than just blowing stuff up, even though that is what is perceived as the American way.)

Of course, this assumes that Procurement even knows what to do. As the maverick goes on to explain in his next piece on the 3 dimensions of global process ownership, global process ownership is more than just process breadth / scope. It’s also, as some of the leaders recognize, organizational breadth / scope as most Procurement-based processes have repercussions and effects throughout the organization, and, more importantly, category management breadth / scope. The organizations that understand, and effectively execute against, this third dimension are the organizations that truly excel and make their way into the Hackett Group top 8%. Different categories have to be managed in different ways. There is no one-size-fits-all process or organizational framework.

And that’s one of the many reasons sourcing must be strategic.

ERP is Not Enough!


When your organization was sold its Enterprise Resource Planning (ERP) solution suite back in the 1990s or 2000s, it was probably told that the ERP suite was the answer to all of its information management problems and it would be the last suite the organization would ever buy. As the evolution of Manufacturing Resource Planning (MRP) software — which was focused primarily on product planning, manufacturing, and inventory management — ERP was supposed to address all of the weaknesses in the MRP software as well as give Sales and Marketing, Finance, and Executive Management visibility into operational status. Specifically, ERP was supposed to handle sourcing and procurement, receiving and distribution, sales forecasting and integration into production planning, and provide a solid foundation for accounting and finance. ERP was supposed to provide the organization with a real-time end-to-end view of core business processes that could be used to effectively monitor, manage, migrate, and market the business. ERP was supposed to be delivering on the single system promise that you were waiting for since the dawn of MRP. But it didn’t.
Why ERP is not Enough by b2bConnex (Registration Required)

Those of you who are regular readers know that SI rarely promotes vendor-authored white-papers, as many turn out to be more marketing fluff than solid content, but every now and again SI finds a real gem, and this paper is one of them. Not only is it a solid, factual, educational piece, but it’s echoing a message that SI has been promoting for years (and often while screaming at the top of its lungs). ERP is Not Enough, and the continued over-reliance on ERP is why so many organizations, especially in manufacturing, are struggling to find efficiency, savings, and value in their supply chains.

Even though Sourcing and Procurement platforms are now mature technology, the number of your peers that have still not adopted modern platforms is still quite high. That’s why a number of new SaaS-based start-ups are still finding success a decade later with streamlined, on-line, implementations of sourcing or procurement modules that are almost a commodity at this point. When a company finally realizes the value, SaaS allows for a quick, easy, low-cost entry point to a modern platform.

And a modern platform is needed. Just because your ERP might support document exchange, that doesn’t mean it supports online tenders. Just because it supports price quotes doesn’t mean that it can maintain detailed price history and do trend analysis. Just because your ERP can store a contract doesn’t mean that it can store all of the delivery schedules, rate tables, and agreed upon performance metrics in formats that can be easily accessed, queried, and automatically compared to invoices and time sheets. Just because it can store a PO, that doesn’t mean it can store a full requisition and approval history. the doctor is sorry to say that he knows of more than one company that has spent over a million dollars trying to implement a good e-Negotiation platform or contract management platform on an ERP, only to fail when they could have bought a best-of-breed solution for 1/10th of the cost.

One has to remember that where ERP is concerned:

  • it is still rooted in MRP & on-site inventory management
    and distribution, logistics and supply chain optimization was never in the core vocabulary
  • it is all about reporting
    but supply chain success is all about analysis and actionable data
  • it is designed around an old-school data store with a rigid format
    and not a modern, extensible, workflow-based Master Data Management model
  • it was based on the concept of an activity journal
    not around transition management for an evolving supply chain
  • it is internally focussed
    but supply chain management needs to be externally focussed

This paper addresses all of these issues in detail, outlines the shortcomings of an ERP, and helps you understand why you need, depending on your business, a modern sourcing platform, a modern procurement platform, or, particularly in manufacturing, a modern supply chain communication and collaboration platform that handles all of the communications necessary between a provider of consumer or manufactured goods and their product and component suppliers from the initial tenders through the delivery of the final goods receipt and invoice pair when the contract has been completed. Moreover, the paper does this without any reference to any particular platform or marketing spiel and really helps you understand why your ERP is not, and will never be, enough and why you have to move to modern Sourcing / Procurement / Collaboration platforms, depending on your vertical and needs.

If you are not on a modern Supply Management / Supply Chain Collaboration platform, the doctor strongly encourages you to register for, and download, Why ERP is not Enough today and spend a good deal time of understanding the issues addressed. The sooner you understand what you need and why you need it, the sooner you can acquire the right platform and supercharge your supply chain. All the technologies you need to do so are out there waiting for you. You just need to know what to look for!