Monthly Archives: July 2016

Assessing A Procurement Team’s Skills

Special thanks to Charles Dominick, SPSM3 of the Next Level Purchasing Association for this guest post.

You have a procurement team. It isn’t performing quite as well as you’d like.

You instinctively know that there has to be mismatches between the skill levels required for each position and the skill levels possessed by the occupants of those positions. You know action is required. But you can’t exactly put your finger on a way to solve the problems that are preventing you from maximizing procurement performance.

Where do you start?

Well, you can’t solve a problem unless you identify it. And you can’t effectively go to war without knowing what weapons you have. So, at this point, you need to assess the skills of each member of your procurement team.

Now, conducting a world-class procurement skills assessment is a pretty involved process. For the brevity required by a blog post, we will have to cover some parts of the process by simply stating what tasks need to be done and not necessarily how to do them. For example, before you assess procurement skills, you need to determine which competencies are required to achieve organizational goals. That’s an hour-long seminar in and of itself. Let’s assume that you already know what competencies are required for success and, therefore, what skills you need to assess. There are many options for assessing procurement skills, so we will spend more time on that process.

There are three ways of assessing procurement skills. The following is an excerpt from a Next Level Purchasing Association white paper entitled, “The Procurement Leader’s Guide To A More Successful Team: Seven Steps For Improving Skills & Getting Better Results.”

Skill Assessment Method A — Self-Assessment

One commonly used approach is to have each team member complete a self-assessment. For example, you may list your desired competencies and ask each staff member whether their skill levels in that competency are high, moderate or low. While this can get the job done quickly, it is not likely to be accurate.

First, the assessment is inherently subjective. Any skills assessment should be able to challenge a skill level claim with the questions “according to whom?” and “compared to what standard?” The answer to these questions for this method would be “according to the individual” and “compared to that individual’s opinion,” respectively. Not the strongest benchmarks.

Second, there is a risk that a self-assessment might be completed defensively. Individuals may feel that the reason for the assessment is to identify candidates to be downsized or to award promotions or raises. Therefore, individuals may rate their skills higher than they truly are in order to avoid punitive measures or to achieve rewards. Attitudes of individuals in these situations may be characterized by statements such as “If I don’t recognize my skills, how can expect others to recognize them?” and “If they knew my real skill levels, they wouldn’t be asking me to do this self-assessment, so why be modest?”

Skills Assessment Method B — Manager Assessment

Another approach is to either

(i) begin with a self-assessment and validate it with a manager’s review and update of that assessment or

(ii) to simply have the manager assess each staff member’s skill levels independently.

Of course, this approach is still subjective and “inside the box.” An internal assessment does not compare skills with best-in-class procurement professionals — it compares it with internal expectations, which often can drift to one of two extremes:

(i) the current team has inadequate skills or

(ii) the current team has been here a long time and the team members know their jobs inside and out.

When it comes to mastering all aspects of procurement, you should always lean towards the mantra of “We don’t know what we don’t know.”

Skills Assessment Method C — Third-Party Assessment

Yet another approach is to have the skills assessment performed by a third party. A third-party assessment can provide the most objective data. And you may be surprised that, depending on the provider, you can have a procurement skills assessment performed at little to no cost and little effort.

Regardless of the method chosen, you need to have an idea of at least two tiers of skill level in each competency: acceptable and unacceptable. A graduated measurement with data between these two tiers is better, but you must at least know the demarcation point between acceptable and unacceptable.

Using Assessment Results

Once you have assessed the procurement team’s skills, you need to do a gap analysis. Again, that’s one of those things that I could write on and on about. I’ll simplify it by saying you’ll document which team members lack adequate skills in which competencies.

Once you have your skill gap analysis, then can develop a roadmap for training in order to close those gaps. That topic deserves plenty of attention, so I will dedicate my next guest post to that topic.

Stay tuned!

Thanks, Charles.

SpendHQ: Revving Up Visibility Into Your Supply Base

When we last dug into SpendHQ back in 2014 (Part I, Part II, Part III, and Part IV), we noted how this solution has grown from a simple spend reporting tool into a fully featured spend visibility tool that tracks all of your spend over time — by category, department, and user; a category management tool that lets you dive into category spend and filter down to the items of interest, see managed vs unmanaged spend, and track compliance; and, as of the next release later this quarter, track contract meta data and do basic contract lifecycle management.

We also noted that while it was not the most powerful (ad-hoc) spend analysis solution on the market, it was a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needed to get one up and running quickly, accurately, and usefully (as the solution has more power and capabilities than the average company needs to get great results). Within 4-6 weeks, a company with no spend analysis capability can be up and running 100% and be making useful, informed decisions.

Since then, they have been hard at work improving the contract module; adding a new compliance module in the visibility engine that allows the user to instantly see, for the selected categories, the addressable spend, the managed spend, the compliance rate, and the impact rate; and a brand new vendor detail module that sits on top of their brand new supplier database that contains information on about 20 Million entities that was formed from the fusing of their database of over 7.5 M entities that they built up over 12 years of operation and InsideView’s database of over 15 Million entities. The database has basic vendor information (address, ownership, status, industry, revenue, etc.), insights (on products, services, strengths, etc.), family tree (which contains ownership, subsidiary and sibling information), and financial data. A user can also see all associated contracts in the contract module and click into the details of each one as required.

One of the gems of the platform is the new and improved Category Management module with greatly enhanced savings management capability. On a category basis, this module summarizes spend, managed spend, core list compliance, and pricing accuracy — where each unit purchased is compared against the contract price. This allows an organization to identify maverick spend and overspend during the contract (on every refresh) and address issues as they arise. Within a category, they can drill into each item and see total spend and drill into spend by location and/or buyer, allowing them to zero in on maverick spend and spend that is priced off-contract. The pricing accuracy can drill down from a category to an item if need be and track inaccuracies, undercharges, overcharges, and overall error rate (as well as overall loss).

In addition, the particular interface customization and support for MRO, T&E, shipping and small parcel spend categories, often overlooked “tail spend”, is far superior to an average product and lets a buyer not only figure out what is maverick or going to on-contract suppliers (but being billed at off-contract rates), but how the spend breaks down across base charges, fuel charges, surcharges, and so on. This allows you to drill into the cost drivers of categories and products, and attack the real cost drivers in a strategic engagement. The specific capabilities built for shipments in particular are quite good. The shipment analytics breaks costs down into accessorials, zones, and fuel surcharges so that an organization can see precisely how the spend is breaking down, where the bulk of the charges are, and where any overspend are.

SpendHQ was built for the sourcing organization that wants a best of breed spend analysis and visibility tool and support maintaining and interpreting it, with the option to engage the right expert at the right time in the right categories to maximize savings. Its more of a “savings as a service” offering than the majority of other spend analysis players, and the best results come from augmenting it with ISG’s sourcing expertise that can help identify the right category to source to maximize savings at any given time. It’s a vendor that should definitely be kept on your radar.

For a deeper dive into SpendHQ, keep an eye out for the upcoming in-depth Spend Matters Pro review [membership required] by the doctor and the prophet that will appear later this summer.

State of Flux: The Flux Capacitor is being designed for the Future … of SRM!

State of Flux is a provider of Supplier Relationship Management (SRM) software and services that was founded in London (England) in 2004 to focus on an overlooked area of supply management, supplier relationship management. When it was founded back in 2004, most companies were just starting to offer supplier information management (SIM) solutions, which were a pre-cursor to the KPI / scorecard-based supplier performance management (SPM) solutions that followed. Only a few companies had SRM in their mind’s eyes, and State of Flux was one. What started as a very simple system for supplier information, performance, and supplier (corrective) action planning and development has grown into a full fledged supplier relationship management solution that encapsulates supplier information management, performance management, risk management, governance and relationship management, CSR (corporate social responsibility), contract, and innovation management.

In addition to their SRM services, focussed around consulting and executive staffing/managed services, and software (which was branded Statess), they have also been producing the Global SRM research report (which was covered in State of Flux has the Treatment for your SRM Ailments Part I: The Need and Part IV: The Business of Supplier Relationships) for the last seven years which provides very deep insights into the state of supplier relationship management and what the top performers do. (Last year’s report was focussed on the customer of choice, and companies that are their suppliers’ customer of choice get [significantly] more value than their peers and this year’s report will be focussed on technology, and the value it can provide, and the annual survey will be out soon.)

As we have covered the platform fairly extensively in the past (in Statess Part I, Part II, and Part III and State of Flux Part I and Part II), this post will simply focus on major improvements since the last series.

In our last series, we discussed the developments in progress, namely:

  • Prospective Suppliers
  • Contract Management Enhancements
  • KPI Templates and Drillable Scorecards

Since then, State of Flux has completed these enhancements.

  • The prospective supplier module is based on questionnaires with dynamic workflows that ensure a supplier only provides the information that is required, and cannot participate in open challenges until all necessary information has been provided.
  • Contract data and meta-data definition is now highly granular, and the version comparison feature allows a buyer to quickly identify any changes between versions.
  • The KPI templates have been completed and augmented with a wizard that makes it really easy to replicate KPIs across suppliers and organizational units, and make the minor tweaks and modifications (to the weightings, data fields, etc.) that are necessary to have the most accurate and meaningful supply possible.

In addition to this functionality, State of Flux has also added:

  • Single Sign On: that integrates with the organization’s native LDAP (or other single-sign on mechanism) to allow a user to sign-in with an existing account
  • Deep CreditSafe Integration: that integrates all of the credit safe financial and risk data across the application (including the risk and performance modules) with quick access to a supplier rating from the supplier screens
  • Automatic Risk (Severity) Calculation: that automatically computes the severity (and RAG — red, amber, green — status) of a risk as soon as the probability and potential impact of a risk are defined
  • Excel Export which enables every piece of data in the application to be exported to well-formatted Excel spreadsheets and workbooks (for import into other systems and analysis/reporting tools)

The system gets better each year, and when you combine it’s end to end completeness with the fact that there are only a handful of providers focussing on best-practice SRM, State of Flux is definitely a provider to consider. For a deeper dive on State of Flux and their platform, watch out for the upcoming Spend Matters Pro piece (membership required) co-authored by the doctor and the prophet that will take a deep dive into the platform, it’s strengths, and its opportunities for improvement.

Analytics8 SpendView: An Affordable New Mid-Market Spend Analysis Solution

While the analytics marketplace, like the e-Sourcing marketplace, might be well established with most Procurement organizations able to name half a dozen likely providers off the top of their heads and most analyst firms able to name two dozen, the fact remains that less than half of Procurement organizations use real analytics and only the leaders go beyond basic spend reporting to index tracking, what-if savings estimates, or predictive trending.

There are numerous reasons for this lack of adoption, but a big reason was that early analytics solutions often came with a hefty six figure price tag. And that was just for the initial project. Then there were quarterly data warehouse refresh fees, report update fees, maintenance fees, and consulting fees to help interpret the patterns and identify the biggest opportunities. Many early adopters ending up paying seven figures annually, often for a limited return. Why? Because by the time the warehouse was refreshed, the reports run, the analytics done, and the spend opportunities identified, the business demand changed, the market dynamics changed, the prices changed, and the analysis was of limited relevance.

However, as newer solutions, like Spend Radar and BIQ came on the scene, spend analytics became much more affordable, and useable, as analysts could refresh data on monthly, weekly, and daily basis and obtain the solution in the five figure range. Plus, they had a fair amount of control over what data was loaded, what cubes were built, and what reports were available — with the ability to generate their own cubes and reports, sometimes on the fly with solutions like BIQ. Analytics stated to take off. And so did the e-Sourcing suite providers that gobbled them up. As a result, there are now few analytics solutions that are affordable by the mid-market and fewer still targetted there.

This is where Analytics8 SpendView comes in, built on over a decade of big data analytics experience and over 15 years of spend analytics experience by the solution designers, SpendView is a new analytics offering designed to bring modern easy-to-use spend analysis capability to any organization with over 10M in annual spend at a price tag it can afford, but good enough to satisfy even large multi-nationals with unique needs. What kind of price tag? A price tag that starts in the low five figures for a perpetual license (with low annual maintenance fees). (This is a price tag that can allow an average mid-market organization to obtain at least a 10X ROI every year.)

The new Analytics8 SpendView suite is a set of 4 integrated modules that allows an analyst to family and normalize suppliers, identify preferred and manage suppliers, categorize spend, and create and drill into spend reports. The vendor normalization module allows the analyst reviews all supplier records and maps all duplicates to one master record. It’s got a very simple interface, search, filter, select, and associate with a single click. The supplier assignment allows the analyst can select all unmanaged or un-preferred vendors, choose whether or not to manage or prefer them, assign suppliers to parents, and quickly see what percentage of spend is with preferred and/or managed suppliers. The categorization module allows the analyst to categorize transactions to categories by defining rules. The interface, currently supplier or description driven (but which should also be department and / or GL-code driven), allows a user to drill into uncategorized transactions, filter for similarity, and define rules that map groups of transactions to categorized spend. The rule is added in numeric order, but can be re-ordered as needed. And the reporting module ontains a set of canned widget-based drill down reports that allow an analyst to drill down into spend data, by supplier, department, category, geography, or other attribute and extract a report on the data, and only the data, they want to see it — which could be invoice data, payment data, or purchase order data. It’s built on QlikView and has the full capabilities thereof.

It’s power and usefulness to the average organization is more-or-less on par with its more established primary competitors — which SI sees as Rosslyn Analytics, Sievo, Spend 360, and SpendHQ (especially since BIQ and Spend Radar, named above, were among the acquisitions of the previous generation of best-of-breed stand alone analytics providers) — and it is a quick entry into spend analytics for any enterprise already using QlikView for other analytics needs.

SI recommends you check out the deep dive on Analytics8 SpendView by the doctor and the prophet over on Spend Matters Pro [membership required] that goes deep into strengths and weaknesses, corporate SWOT analysis, and the market landscape. (Part I, Part II and Part III now available) You won’t be disappointed.