Monthly Archives: July 2016

Technological Sustentation 81: Social Media

While there may be a dirty dozen of risk categories that we need to address in order to adequately address the Procurement Damnations we have willingly placed ourselves in as we try to collectively forge a new frontier, the largest category of risk that we need to address is that of Technology. Almost one fifth of all damnations that plague us fall into the technology category. This is the latest technology damnation that we are going to address. Even though it’s difficult.

As we mentioned when we penned the original damnation series, social media might be the most damning of them all. Besides the obvious facts that we collectively as a society waste enough time on a single video to double the size of Wikipedia (Source), that social media is literally making us stupid (Source), and that every marketer and their dog is doing their best to convince you that your company has to be on every social network in existence (including the dozen that are literally here today and gone tomorrow as Facebook and Twitter have pretty much won the social media war in the English speaking world for the time being), there is the simple fact that social media takes more than it gives.

So how do we survive? How do we deal with the fact that despite the fact that social media was designed for people to be social with each other, and not for businesses to sell wares to consumers, and certainly not for businesses to sell goods to each other, we are constantly bombarded by social media firms that tell us we can use social media to conduct important, strategic, operations.

And if having to deal with the outside pressure isn’t enough, you are constantly bombarded with requests from marketing for information about your supply chain efficiency, corporate social responsibility, sustainability, or other operations and practices that can be used to boost corporate image, brand reputation, or product differentiation on these outlets. You’re working hard to define and implement proper category management techniques on dozens of strategic and high-value categories but all marketing cares about is which supplier will get the organization the most free press, whether the “in vogue” corporate social responsibility practice of the day is getting enough attention, or if the new product being sourced will have enough bell-and-whistle features to allow for one dozen unique messages for each social media channel of interest. It’s inane, insane, and both.

And then, to make matters worse, rather than use your supplier portal, your suppliers want to message you on the social network they are signed into 24/7, your partners are checking the never updated Facebook company page instead of the official contact directory, and eliminated vendors keep messaging your organization’s Facebook and Twitter accounts asking marketing why they are no longer being considered, rather than read the detailed explanation in the vendor management portal you provided them.

So What Can You Do?

1. Refuse to answer meaningless marketing inquiries and instead change the conversation.

When marketing asks if the new product being sourced will have lots of features to wrap messaging around, simply state that the product is being sourced to corporate specifications, and that full details will be provided.

When they ask about CSR practices, simply inform them that you have vetted all suppliers using a third party and that they should read the appropriate reports.

And when they ask if you use twitter, simply point out that is their job. Don’t get distracted.

2. Adopt Procurement tools with integrated messaging, message boards, and social media like features in the communication portal.

If your Procurement portal gives the suppliers what they want, then they won’t be constantly asking to message you on Facebook, Twitter, or the platform de jour.

3. Help Marketing select the right CRM and social media monitoring platform.

Even though it’s the last platform you should touch, it is marketing’s livelihood – so it’s critical to make sure that if they are going to be using such a platform, that they are at least using the best one available. And if you can find one that meets all of their needs, maybe they will spend all of their time on it instead of bothering you.

It’s not a perfect solution, but it will at least allow you to survive, if you are strong enough. (Because only the strong survive.)

Organizational Sustentation 60: Human Resources

In our damnation series, we noted how an overly process driven human resources department free of logic and common sense, can ruin the best and worst of plans and inspire your best talent to run to the hills and run for their lives.

Why do human resources (HR) often bring damnation to Procurement? Simply put,

  • They exacerbate talent tightness. (Societal Damnation 51)
  • They drive talent away. (Societal Damnation 50)
  • They think they know what Sourcing is.

HR will insist on owning the talent recruitment process. Now, it’s true that, in most organizations, HR should own the process because most departments wouldn’t know how to go to market for talent if the market came to them and bit them on the thigh like a boghog of NowWhat, but a good Procurement organization knows how to go to market for talent. In fact, a good Procurement organization knows how to go to market for everything the organization needs, and, more importantly a good Procurement organization knows what defines talent to the organization. So a HR department that keeps a Procurement organization at bay that can help is not a good thing.

Especially since the way that many non-best in class HR organizations go about the talent hunt. They blast a poorly written advertisement with a list of requirements no living or dead human can meet across multiple channels, collect hundreds, if not thousands of resumes, and then go through a last-man standing vetting process. They create a ridiculous checklist, a set of arbitrary rules for checking the boxes (because they don’t understand what the boxes are), and then eliminate every resume that doesn’t check every box. They then interview the last men, or women, standing, eliminate those that they feel won’t be a good organizational fit (based on gut instinct), and pass you the candidates that remain. A process guaranteed to eliminate a large number of good candidates, if not all of them.

So what can you do?

1. Define what you really need, as general as possible.

Example. In IT, you need five years doing object oriented software development, with good knowledge of Java, not five years of pure Java. In logistics, it’s big rig training and two years of heavy machinery experience, not two years of commercial sector. Military is just fine. Etc. Don’t make it impossible for the best candidates to even qualify.

2. Help in the selection of resume evaluation technology.

You don’t want dumb “check the box” forms and dumber exact phrase matching technology. If resumes have to be automatically evaluated, you want modern semantic technology that understands coder, developer, and programmer are the same thing and driver and big rig operator are the same thing. You want advanced profile match calculations and not dumb guesstimations.

3. Look at the big picture

Look at references and connections. Yes, references from employees are good, but some are going to recommend everyone who will give them a name just for a chance to get that referral bonus. Connections are even better. If someone is applying for a developer job, how many developer connections are in their business networks, and how many recommend them — even if they work for a competitor. It’s what they know, who can confirm it, and what they want. Do they just want a job, or do they want to make a difference. And if you want someone who will make a difference, that is the person you want. HR probably doesn’t care about any of this, but you do, so stand your ground.

Millions Saved. Pennies Spent. Why Won’t They Learn?

Trade Extensions recently released a new set of case studies chronicling just half a dozen sourcing projects it did over the last couple of years for its fortune 500 clients that chronicled, on average, savings of 10% or more which ranged from 500K on a 5.5M category to 28M on a 200M category. All of these companies saved tens of millions (or more) and only spent in the six figure range for the Trade Extensions solution, which means for every penny it saved a dollar.

It is not just the magnitude of the savings that is significant though – it is the breadth of the impact. The air freight example not only identified a savings potential of 42%, with a realized savings of 21% (when the company took risk, performance, and preferred vendors into account), but also identified a scenario which improved service levels and reduced risks while delivering 21% savings.

The compliance reporting example helped an organization that, due to the scale of it’s operations, took five days to analyze the output of its Transportation Management System (TMS), reduce its retrospective analysis time to a proactive operations step that automatically executed in 30 minutes or less, and allowed the organization to, for the first time, ensure its product movements were consistent with the awarded contract scenario.

In the full truck load and global packaging examples, the companies were able to rationalize the supply bases by 25% to 40% while reducing cost and at least maintaining service levels and risk (if not increasing service and decreasing risk).

But yet these examples are rare. Every year many organizations as large, or larger, than these continue to spend close to, if not, seven figures on their first generation sourcing or source to pay platforms while generating savings that, instead of being in the 10% or more range, are in the 2% to 3% range, which means that the organization is essentially spending dollars to save dollars — which does not make good ecnoomic sense. Especially when a modern optimization (backed sourcing) platform can always be run along side existing supply management system and used as appropriate to generate 3X to 5X the savings and value than the organization would otherwise obtain.

So while the leaders have learned, why won’t the laggards learn?

Serex – Bringing Auctions Back to Procurement

At this point in time, you’d think reverse auctions would be old news in Procurement, seeing that FreeMarkets was running reverse auctions twenty years ago and the doctor has repeatedly bashed their use in strategic sourcing (because they are not strategic), but they’re not.

There are two reasons for this.

1. They have an important role to play in tactical Procurement.


2. Companies new to strategic sourcing are still convinced by first generation solution providers with great marketing teams that they are still the greatest thing since the spreadsheet and that the historical savings opportunities are still there.

And while the doctor would like to think that the majority of buyers of these solutions fall in group 1, the reality is that the majority of buyers fall in group 2, and, once acquired, will treat every strategic sourcing event as a nail and use the auction tool as a hammer. So if that is the case, then the buying organization better get the best damn auction tool out there (since they will still need the auction for the tactical procurement nails when they figure out there is a better way to do strategic sourcing, and will actually need the auction tool more).

And these organizations will need a useable solution. The reality is that while just about every suite and point-based sourcing and procurement vendor offers an auction tool, not all of these are good auction tools against modern standards. Many first generation tools have no way to bulk select suppliers, bulk select products, bulk upload starting bids, import historical data, bulk upload attachments, etc. — ease of use capabilities you would think that would be standard. In fact, for the most part, only the newer reverse auction tools from smaller best of breed vendors targetting the mid-market tend to have the usability one would expect.

Usability and efficiency capabilities in an auction tool is key. I’ve heard countless stories about big organizations taking 1 to 3 weeks to set up a large global auction for large bill or materials or global category in a first generation tool when that same auction could be set up in a modern tool in 1 to 3 hours.

And this is where Serex comes in. Serex is an interesting entrant in the e-Procurement space. Originally founded 23 years ago to help clients select, implement, deploy and effectively use CRM and marketing automation systems, something it still does to this day, a few years ago, after a routine meeting with a client that asked if it had systems to support buying, it decided to enter the e-Procurement space when it found out that its client had tried, and passed on, over a dozen auction and sourcing platforms because not one met its need. (Serex was shocked at this as it knew there were a lot of solutions and assumed some were good, but figured it one Global 3000 couldn’t find a useable solution, then there must be other companies in this group that couldn’t find a useable solution either.)

So, after securing beta customer support (and a commitment for monthly guidance from the CPO with over two-decades of cross industry experience in large mid-size and Global 3000’s as well as weekly buyer availability), they began development of a new auction solution that would be developed by buyers, for buyers, and used by buyers. (And it is. Serex’s first customer saved 6M in year one and since full launch this year, its first few clients have logged over 14M in savings. And this is one reason why all of its prospects are large mid-size and Global 3000 organizations, despite the fact that the solution best fits the mid-market, which they have traditionally served on the CRM side.)

The reverse auction solution was designed to enable buyers to quickly set up and run auctions through quick bidder search and selection, quick product search and selection, quicker selection of which suppliers can bid on which products, and default auction parameters (which can easily be overridden). Complete product specs can be defined or uploaded as attachments if needed. Suppliers can send detailed messages during the auction to request or offer alternate delivery dates or substitutions for quicker delivery, and a buyer can update the auction specs as needed. In addition, all auctions are saved and new auctions can be created as copies of old auctions, and then updated as needed, allowing repeat auctions to be setup in just minutes (which is valuable if a product sells better than expected and an auction needs to be repeated on short notice to meet demand). (The auction platform has a built in attachment viewer that displays standard web formats.)

And that’s the solution. With the exception of a product manager sub-component and a bidder management sub-component, there isn’t even an RFX, which is probably the biggest short-coming of this new e-Negotiation tool — because sometimes you just want a simple tool to collect bids and make a decision. This is the biggest weakness of the tool. But Serex built it in a little over a year, and can easily build it out considerably in the next year. SI expects that in two years it will more or less compete on par with the other best-of-breed e-Negotiation mini-sourcing suites aimed at the mid-market along with adding capabilities that will cause larger organizations to adopt it onside their first generation Source to Pay platforms that they are locked into (but which are not useable enough to use on the majority of procured categories).