Monthly Archives: May 2015

Contract Lifecycle Management I: Do You Know What It Is?

Today’s post is co-authored by the prophet.

CLM, short for Contract Lifecycle Management, is arguably one of the most snooze-inducing acronyms in the Supply Management space, but yet also one of the most important. That’s because proper CLM not only overlaps both the Sourcing (or Source-to-Contract [S2C]) and Procurement (or Procure-to-Pay [P2P]) cycles (for strategic sourcing of buy-side categories), but also influences the full Source-to-Settle (S2S) / Source-to-Pay (S2P) cycle and provides a partial foundation for risk management, performance management, change management, and supplier [relationship] management (as well as in-depth post-mortem reviews that increase organizational knowledge and effectiveness for years to come).

Moreover, good CLM is arguably the foundation for enterprise CLM, or e-CLM, which goes beyond just buy-side contract support and also includes sell-side contract support to cover the transit of goods from supplier to customer, or, as us network modellers like to say, from source to sink.

But just what is CLM? And where does it fit in Supply Management? According to Gartner, it is a solution and process for managing the life cycle of contracts created and/or administered by or impacting the company. (Source) But what does that mean? And more importantly, what does that mean to you as a Supply Management professional? (Let’s be honest — we don’t care much about sales support because there’s nothing to sell if nothing is purchased, manufactured, or created for delivery. Supply Management comes first.)

In simple terms, Gartner’s definition means that, in order to effectively manage your contracts you need the right processes and the right platforms to support those processes. Chances are your organization, which has been contracting since its inception, has, at least, a decent understanding of the right processes but needs a lot of help identifying the right platforms. But where do you turn?

Vendors? They have a great definition of their platform and how they believe it will help you, but with such a narrow view, how do you know it’s right for you?

Analysts? They have a broader definition, as each of the big firms have their own definition of a Contract Management (CM) suite, but this definition is still not a great one. First of all, it’s heavily influenced by the vendors they talk to the most. Second, and most important, their definition changes from quadrant to quadrant and report to report, sometimes arbitrarily, all based upon which vendors they believe should be in the quadrant and which vendors they believe should not, all based on size, suite, or some other half-baked definition of CM. “Should-haves” become “must haves”, “must haves” become “should haves”, and the baseline requirements for vendor consideration, such as suite breadth, vertical support, minimum customer counts, and even minimum revenue ebb and flow with the tide.

Peers? How do you know they know any more than you? Unless they are in the Hackett Group top 8% or the Supply Chain Top 100, chances are they don’t. Remember, one out of every two companies still does not have modern sourcing or procurement systems. And even if a peer has a system, and even if that system isn’t one that just happened to be bought at the word of an analyst or the salesmanship of a vendor, it still doesn’t mean it’s the right system for your organization.

Professional Organizations? Organizations like the ISM and CIPS tend to focus on process, not platforms. Members, not vendors.

The reality is that you don’t really have anywhere to turn for a good, solid, stable definition that you can bank on and measure against. That’s why, for the first time, Sourcing Innovation and Spend Matters, the leading independent authorities on Supply Management, have come together in a joint effort led by the prophet and the doctor to, once and for all, define the core Supply Management platforms, starting with CLM, the most misunderstood of the Supply Management misfits.

Starting this week, over on Spend Matters Pro [membership required], the first part of Contract Lifecycle Management 101 which introduces an in-depth eight-part series that defines CLM in detail is available for your reading pleasure. This landmark joint-authored series outlines its historical, and typical, implementations, details the must-haves, should-haves, and nice-to-haves of a core CM (Contract Management) platform, specifies must-have and should-have integrations, and provides some tips on how to find the right provider. This series is the first in a set of landmark series (which will also include series on Third-Party Management [3PM] / Supplier Relationship Management [SRM], e-Sourcing, and e-Procurement) which will define once and for all what the technology platforms should do, why the platforms should do it, and provide a standard, open, public benchmark against which all vendors will be measured. As such, the doctor strongly encourages you to head over and check it out.

Influential Damnation 99: Conferences

After SI’s recent posts that asked Are Conferences Perpetuating Supply Chain Stasis? and made A prediction from the doctor with regards to Big Procurement Events, you might have been expecting conferences to make the list of damnations.

If you were, you get a virtual fortune cookie. If you weren’t, better luck next time.

The reality is that conferences are damning for all involved parties except one. They are damming for you the attendee. They are damning for the presenters trying to educate you (or not). They are damning for the vendors trying to demo their wares. They are damning for the analysts and bloggers trying to take something away to share with your peers. The only people they are not damning for is the organizers fattening their pocket books at the expense of vendor and participant alike.

As a practitioner, you are damned because the organizers are most concerned with making the event a success, which, in their book, is profitable. As a result, if there are not enough presentations of high caliber, they will take proposals of moderate caliber, and if there are not enough proposals of moderate caliber, they will take proposals of low caliber. And if their focus is Sourcing, they will take Sourcing vendors as lead sponsors and exhibitors first, but if there are not enough Sourcing vendors, they will take Procurement vendors. And if there are not enough Procurement vendors, any Supply Chain vendor with supplier data collection capability makes the cut. And so on.

As a vendor, you are damned because some of these events can cost you upwards of $20,000, with no guarantees. There’s no guarantee that the attendees are going to be interested in your product. Even if they are, there’s no guarantee that they are of the right seniority or have any ability to make a buying decision. There’s no guarantee you’re going to get a booth in a high traffic area. And if you get a presentation slot in a multi-track conference, there’s no guarantee anyone is going to show up.

As an analyst, there’s no guarantee the presentations are going to say anything new (worth reporting). (This blogger knows for a fact that some presenters on the junket circuit give almost the same presentation year after year after year.) There’s no guarantee that the vendors are going to be presenting technologies you expect to be covering. And there’s no guarantee that the attendees are going to be willing to share anything worth covering either.

In the end, only the organizer is guaranteed to win.

Economic Damnation #10: Mini-Trends vs. Macro-Trends

Trends are the foundation of forecasting, but they are also the foundation of disruption when they change unexpectedly. When it comes to Procurement, the relevant trends may be consumer demand trends, inventory trends, market trends, or any other trend that Supply Management believes will impact its operation. Trends are damming because they are truly can’t live without them, can’t live with them. Sort of.

When it comes to trends, there are two types of trends. Macro-Trends and Mini-Trends. A macro-trend is a large-scale, sustained shift in whatever is being measured. It could be a sustained consumer shift away from landlines to mobile phones as the primary means of voice telecommunication. It could be a sustained shift from overstocked warehouses to just-in-time delivery across retail chains. Or it could be a sustained shift upwards in the value of cotton, rice, coffee, or other staples where demand, and reserves are shrinking.

Mini-trends are emerging trends, often not yet acknowledged by the media or market, that may or may not culminate in large-scale, sustained shifts in the marketplace like their macro-trend counterparts, but are still likely to have a sustained impact over a period of time long enough to be significant and have the potential, in the future, to become, or replace, an existing macro-trend. Good examples of mini-trends that do not culminate in large-scale, sustained shifts are fashion trends – such as bell bottoms, balloon pants, hip huggers, long waistcoats, or any other fashion garment that is here today, gone tomorrow. Examples of mini-trends that became macro-tends are walkmans (that helped the cassette tape industry take off), cell phones (which have migrated from business phone to home phone), and gluten-free food products. Initially, these were all small markets but all are now global.

They are at opposite ends of the trend spectrum and have opposite interpretations to the average, traditional organization. For an average organization, macro-trends can’t be lived without as they provide a foundation for operational planning, associated annual budgets, and monthly reporting. On the other hand, mini-trends can’t be lived with as they disrupt forecasts, shatter plans, and blast budgets to bits. And while mini-trends often provide the greatest opportunity to a non-traditional company that survives by identifying, preparing for, and riding out mini-trends before the competition, for a company of a more traditional mindset they are the gremlins in the supply chain that need to be electrocuted.

For an organization to to truly thrive, it needs to be able to identify, and occasionally capitalize on both — and understand the relationships between them. For example, as pointed out in a soon-to-be-classic SI post that highlighted a great article on the World Future Society site, mega-trends often drive mini-trends just as mini-trends drive future mega-trends. For example, as the aging work force remains more active, there will be a great demand for senior housing where there are nurses and support staff on site, but where the seniors still live relatively independently. Also, there will be more demand for vacation and leisure activities that are not overly strenuous to a senior — like golf, water sports, cruises, etc.

While the authors of Minitrends: How Innovators & Entrepreneurs Discover & Profit from Business & Technology Trends believe the key to success in identifying mini-trends and capitalizing on those that will be beneficial to the company starts with the following strategies:

  • Follow the Money
  • Follow the Leaders
  • Examine Limits
  • Understand Human Nature
  • Watch Demographics
  • Analyze Frustrations
  • Search for Convergence

the doctor believes that it’s not quite this easy. Just identifying a mini-trend is the first step. The next step is to figure out how likely it is to become a significant mega-trend, and, if so, how long that will take. Short-lived mini-trends can often be safely ignored by a company with an appropriate counter-strategy, but mini-trends destined to become mega-trends that will affect or displace a mega-trend the organization is relying on are a disaster waiting to happen until appropriately addressed.

For example, if a clothing company identifies that a mini-trend will be bell-bottom resurgence, they could choose to produce that product, but if they also identify that many of their competitors will be fighting for that market, that a significant number of people will still want straight cut, and only one other company will be promoting that product, they might continue to sell almost as much with no additional investment at a higher profit margin by staying focussed on their core product. But if they detect a large scale migration from nylon and rayon back to cotton in consumer preferences as a coming mega-trend, and most of the company’s line is rayon or nylon based, then there is a need to identify new designs and production houses that will use cotton as soon as possible.

Regardless of your views, where trends are consumed, you are damned with them (especially if they are mini), and damned without them (especially if they are mega) as most of your forecasts and plans depend on them.

Geopolitical Damnation 30: The TPP Poison Pill

Sourcing Innovation first brought this up back in late 2013 when it pointed out this great post by Nathan Lee that provided a simple guide to the Trans-Pacific Partnership Trade Agreement “benefits” which is an agreement being negotiated in secret that is lopsided towards the corporation and essentially gives them more rights then individuals, communities, and in some cases, entire governments. Proposals even include giving corporations the right to sue governments if laws put citizens or the environment above corporate rights. The piracy laws are so draconian that you can be criminally charged if copyrighted material ends up on your computer without your knowledge or consent. (For example, if you visit a website that was hacked and malware on that site uses your computer as part of a bittorrent network without your consent and stores part of a copyrighted file, the owner, with the backing of the RIAA or MPA, can have you charged criminally even if you didn’t ever access the file — not the hacker that created the malware and forced copyrighted content onto your computer without your knowledge or consent).

For those of you who do not yet know what this is, it’s a proposed regional and investment treaty between twelve countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam that is being conducted almost entirely in secret despite the far reaching implications that are being discussed and the considerable impact it could have on every citizen of every country participating as it covers a broad range of issues including, but not limited to, agriculture, industrial goods, intellectual property, investments, labour, services, and telecommunications.

As a result, everyone, and every supply chain, has a reason to dread, if not fear, this act. The Electronic Frontier Foundation (EFF) has a good summary of the issues corresponding to intellectual property on their What Is TPP page as the act would rewrite global rules on intellectual property enforcement. The IATP does a good job of overviewing some of the agricultural issues in its article Whose Century is it? where it notes that nearly every country involved has food safety regulations on the chopping block as the TPP proponents are arguing that free-trade and cheap food is the best thing for a country, regardless of economic or health consequences. Every year there is a new salmonella, e-Coli, mad-cow, or similar outbreak of a deadly food-borne infection — do we really want to weaken safety standards? With respect to labour, while some US negotiators are apparently demanding meaningful and enforceable worker protections, many of the other countries are not and, more importantly, most of the developed countries are claiming that increased worker mobility will encourage a disruptive inflow of low-skill workers from developing countries and pushing for less worker mobility in our globally connected world (while the less developed countries want to level the playing field).

Regardless of what gets agreed to, the sheer fact that this trade agreement will override existing law presents every Procurement organization with a minefield just waiting to be activated. Will your supplier still be able to afford its current pricing? Will it even be able to supply you? Will you be able to expect the same quality and safety standards? Will new sources suddenly become available? How will they change the supply-demand balance? Will new tariffs materialize? Will you be forced to abandon your “Buy American” policy? Will you be forced to consider suppliers you don’t want to? All of these questions and dozens of others become valid the minute this act, negotiated in secret where it is pumped full of poison pills, gets signed into law.

If the (wiki)leaks are even remotely reflective of what’s in the act, it might make the controversial, scary Orwellian provisions of the Patriot Act look like a cuddly bunny in comparison!