Monthly Archives: March 2017

Is UNSPSC Really the Best Route? 3 Reasons ‘For’ …

Today’s guest post is from Brian Seipel, Spend Analysis lead at Source One Management Services focused on helping corporations gain a clear view of their spend data to derive actionable budget optimization strategies.

A common question many organizations have when delving into a spend analysis project is, “which classification taxonomy should I be using?” There are plenty of options on the generic end of the spectrum, UNSPSC being a popular choice. These standards certainly have their advantages, but choosing whether to use one of these standards or something entirely different is ultimately a matter of what will work best for the task at hand.

So, the real question is – What is your primary goal, and which taxonomy will best help you reach it?

Defining Goals

Before we begin, it is important to define what, exactly, our goals are for our spend analysis project. In this case, the spend analysis will be directly supporting the identification of strategic sourcing projects.
Certainly, we want to view our organization-wide supplier base and spend profiles using a commonly understood model so all stakeholders, departments, and C-suite executives are on the same page. One problem many organizations face is that different departments or offices speak different languages when it comes to defining supplier relationships. Add a merger or acquisition to the mix, and chaos can easily ensue.

But this isn’t our end goal – this is just a single, albeit crucial, step in the process. Our true end goal is to provide the ammunition needed to best identify opportunities for cost saving initiatives. No taxonomy, no matter how thoughtful or detailed, can be considered valuable if it can’t help promote change. As such, we should select a taxonomy based on two key parameters:

  1. The taxonomy must be universally applicable to all company spend.
  2. The taxonomy must aid in developing actionable information for future cost saving initiatives.

The Benefits of a Standardized Taxonomy

First, let’s discuss the key reasons to choose a standard model, such as UNSPSC. There are a few great aspects to these model that make them a good starting place for your taxonomy development:

  • Standards are pre-developed and ready-to-use
  • Contain a *good* degree of built-in granularity
  • Wide availability of data enrichment options exist

Right off the bat, one of the largest draws of using a standard taxonomy is that the structure is already in place, ready-to-use. UNSPSC has you covered for any spend your organization is likely to see, from office supplies (commodity code “4412”) to graphic design (“8214”) and beyond. Additionally, there is already a level of granularity at your fingertips: The telecommunications media services includes 10 immediate sublevels with greater detail, from local and long distance service, to mobile communications, and more.

You’ll note my asterisks here; while this granularity is great in many cases, it isn’t always up-to-task across the purchasing spectrum – more on that later. In any case, if you’ve been tasked with the herculean job of collecting, cleansing, and ordering a vast set of spend data covering your entire organization, being able to pick up and implement a taxonomy immediately is one less task on your plate to worry about.

What’s more, this hierarchy is both well-known and heavily utilized. There are plenty of organizations you can turn to that, for a fee, can append your spend data with appropriate categorizations. The appeal here is obvious – one of the more time intensive elements of performing a spend analysis is either developing and validating a rules-based system for categorization or slogging through the process manually.

Jump in feet first, hit the ground running … Pick your action-packed metaphor; a standard taxonomy gets your project started faster – and that’s huge.

But is it all sunshine and roses? Stay tuned for Part II!

PRGX – The Biggest Analytics Provider You Don’t Know!

For those that do not know it, PRGX would appear to be one of a select number of dominant services provider in the niche market for recovery audit services — a market that unlike other procurement services faces tremendous price pressure for its core recovery, statement and related auditing and profit recovery services.

the doctor and the prophet, PRGX Intro on Spend Matters Pro (membership required)

In particular, PRGX would appear to be a recovery audit specialist for the global retail sector. And that is what they are, but that is not all they are.

PRGX has started to remake itself quietly from within — out of necessity, given these broader market trends — building and acquiring technology capabilities in the spend analytics and supplier management areas, both to expand its relevance and to start driving automation and scale in its core business.

PRGX has built the most complete, and in many ways the most advanced, analytics and recovery solution for the retail sector and, in doing so, has built one of the most complete and advanced analytics and recovery solutions for just about any sector that buys and relies on goods. Pharma, Manufacturing, and Aerospace and Defense, just to name a few, could all benefit intensely from the out-of-the-box PRGX solution.

This is because it has evolved it’s application from a simple recovery analytics application to a full featured analytics solutions with modules for:

  • Payment Analytics
  • Spend Analytics
  • Product Analytics
  • Recovery Avoidance Analytics
  • Supplier Information Management

With the latter two coming through its recent acquisition of Lavante.

It can analyze what you paid (payment analytics), what you should have paid (recovery analytics), what you are spending (spend analytics), how much that is costing you and profiting you on a product level (product analytics), and what suppliers are supplying that product and how they are performing (SIM with a hefty dose of SPM).

And it can do this analysis end to end around a product or category, and allow you to simultaneously see what you ordered, spent, overspent, took in on sales, lost on returns, and profited when all was said and done. It’s one of the most powerful analytics solutions you don’t know about. Stay tuned — there is more to come!

BREXIT Has Officially Begun

‘Nuff said.

Actually, there is no room in a blog to say all that needs to be said, so we’ll keep it brief. Time to start planning for change. And the only way to do that properly is with an advanced sourcing platform — the kind SI has been promoting for almost 11 years. New here and not sure what that is? Time to catch up on the archives. Start with optimization, analytics, and risk management first.

PRGX, Prologue

Download and Sing Along! (Midi player required)

Buyer, there’s no need to feel down
I said, Buyer, pick yourself off the ground
I said, Buyer, ’cause you’ve got a new tool
There’s no need to be stressed-out now.

Buyer, there’s a tool you can tread.
I said, Buyer, when you’re short on the bread.
You can rock it, and I’m sure you will find.
Many ways to save a cool dime.

It’s fun to save with the P.R.G.X.
It’s fun to save with the P.R.G.X.

They have all the reports for Buyers to enjoy
You can save cash like the big boys …

It’s fun to save with the P.R.G.X.
It’s fun to save with the P.R.G.X.

You can get your data clean, you can get some insights,
You can report on what you like …

Buyer, are you listening to me?
I said, Buyer, what do you want to be?
I said, Buyer, you can make real your dreams.
But you got to know this one thing!

No one does it all by himself.
I said, Buyer, put your pride on the shelf,
And just find them, find the P.R.G.X.
I’m sure they can help you today.

It’s fun to save with the P.R.G.X.
It’s fun to save with the P.R.G.X.

They have all the reports for Buyers to enjoy,
You can save cash like the big boys …

It’s fun to save with the P.R.G.X.
It’s fun to save with the P.R.G.X.

You can get your data clean, you can get some insights,
You can report on what you like …

Buyer, I was once in your shoes.
I said, I was down and out with the blues.
I felt no one cared if I could survive.
I felt the whole world was so jive …

That’s when someone came up to me.
And said, Buyer, take a a walk up the street.
There’s a group there called the P.R.G.X.
They can start you back on your way.

It’s fun to save with the P.R.G.X.
It’s fun to save with the P.R.G.X.

They have all the reports for Buyers to enjoy,
You can save cash like the big boys …

P.R.G.X. … you’ll save it with the P.R.G.X.

Buyer, Buyer, there’s no need to feel down.
Buyer, Buyer get yourself off the ground.

P.R.G.X. … you’ll save it with the P.R.G.X.

Buyer, Buyer, there’s no need to feel down.
Buyer, Buyer get yourself off the ground.

P.R.G.X. … just go find the P.R.G.X.

Buyer, Buyer, are you listening to me?
Buyer, Buyer, what do you wanna be?

It’s Not an AI Hype Cycle – It’s an AI Hype Wave!

Is it yet another AI hype cycle? This question was posed by Vinnie Mirchandani over on deal architect and it’s a good question.

AI has been the dream since the 1950’s when computing was just beginning and Alan Turing defined the famous Turing test (which is, sadly, not necessarily enough anymore because parallel computing and wide-scale sampling of real conversations can be used to pass the Turing test in many situations), but we’re not there yet. Enhancements to computing power, storage, and algorithms have made automated reasoning programs exponentially more powerful than they were sixty years ago, and today’s predictive capability is essentially unmatched … with many algorithms outdoing the best human experts.

But they are still not intelligent. They’re all based on data and trends which, for the most part, are predictable, and that’s where they excel — but where they are not, or where those trends can change on a dime, they still fail … some times spectacularly. Plus, if the data is incomplete or bad, they don’t always see this … and predict a wrong outcome. Human experts, on the other hand, can see missing data, outrageous trends, and when trends are inflecting in unexpected ways.

We’re nowhere near the point where we can even truly start using AI with a straight face, and, as per a quote from Yann LeCun, the director of AI research at Facebook, as quoted by the deal architect, despite these astonishing advances, we are a long way from machines that are as intelligent as humans — or even rats. So far, we’ve seen only 5% of what AI can do. And I’d say that 5% is an overstatement.

But, as the deal architect has indicated, we are seeing a huge increase in they hype about AI. As indicated by the deal architect, IBM has been marketing Watson since before it should have been announced, technologists are claiming that AI can replace entire fields, and Cambridge University has created a Center for the Study of Existential Risk to study extinction-level risks that can emerge from technological advances (like AI). Apparently, the hype is back … but the reality is that it never went away. It’s a continuous wave that crests and troughs and crest and troughs … it never goes away. The believers, for better or worse, won’t let it. There hasn’t been a decade where the hype hasn’t increased unnecessarily since the 50’s, and we’ll never see the end. Because until someone makes a true quantum leap, it will continue to be gradual progress, decade after decade, and the hype will continue ad-nauseum.