Monthly Archives: July 2017

Procurement Tomorrowland …

… could be here sooner than we think, but are we ready for it? For over a decade, everyone has been talking about Procurement 2020 and how advanced and great it would be, and 2020 is fast approaching. It’s less than two and a half years away. But what will it look like. The short answer is not much different than today. That’s why the new date is 2035, because we haven’t gotten to where every big consultancy, and vendor, proclaimed we’d be 10 years ago.

So, the big question is, what does Procurement 2035 look like? Well, last year KPMG said the future is likely going towards one of four scenarios:

  • Procurement Primacy where democratic co-existence between man and machine is common
  • World of Project Economy where companies become decentralized and most of the work is done by free-lancers and there is no central procurement department with procurement the responsibility of project managers
  • The Creative Agency where procurement becomes the primary source of business and finance model development and not only purchases for, but defines the organizational projects

or

  • R.I.P. Procurement because the age of cognitive procurement has ushered in fully automated processes that have replaced buyers

The most likely scenario now is the last scenario because the cloud has eliminated the need for tactical procurement people who buy on someone else’s behalf. Office supplies, janitorial supplies, and simple electronics? Amazon for Business. MRO — Grainger and Home Depot — punch-out online. Electronics, Best Buy, Dell, HP, Apple, etc. Point, click, and order. Custom uniforms, a few dozen suppliers can take your RFX, easily found on half a dozen procurement networks. And so on.

And if you think knowing how to set up an auction will save your job, you’ve got another thing coming. It’s not only very easy to setup and run an auction with a modern platform that makes it eBay easy, but with today’s platforms it’s just as easy to push a category to a platform with demands that can automatically invite all the approved suppliers, send them the specs, get e-Signatures on acceptance and guarantees, run the auction, make the award, send out the draft contract, get a response, analyze it, send it to legal, who can put the finishing touches and it’s off to the races with no human intervention whatsoever. Modern platforms can be set up to automate RFXs and e-Auctions with no human intervention whatsoever.

Similarly, your job is not safe if the extent of your analytics prowess is running the canned reports; identifying the top n categories, suppliers, and geographies; identifying those not under contract, and queueing those categories for sourcing and suppliers for contract negotiation. This can be easily automated too. Who needs a buyer?

In this scenario, not the organization! For Procurement, Tomorrowland is a wasteland …

The UX One Should Expect from Best-in-Class Spend Analysis … Part II

Now that we’ve taken a deep dive into e-Sourcing (Part I and Part II), e-Auctions (Part I and Part II), and Optimization (Part I, Part II, Part III, and Part IV), we are diving into spend analysis. And this time we’re taking the vertical torpedo to the bottom of the deep. If you thought our last series was insightful, wait until you plow through this one. By the end of it, there will be more than a handful of vendor’s shaking in their boots when they realize just how far they have to go if they want to deliver on all those promises of next generation opportunity identification they’ve been selling you on for years! But we digress …

The key point to remember here is that there are only two advanced sourcing technologies that can identify value (savings, additional revenue opportunity, overhead cost reductions, etc.) in excess of 10% year-over-year-over-year. One of these is optimization (provided it’s done right, useable, and capable of supporting — and solving — the right models). The other is spend analytics. True spend analytics that goes well beyond the standard Top N and report templates to allow a user to cube, slice, dice, and re-cube quickly and efficiently in meaningful ways and then visualize that data in a manner that allows the potential opportunities, or lack thereof, to be almost instantly identified.

This requires extreme usability. As noted in our last post, not everyone has an advanced computer science or quantitative analysis degree, and first generation tools were so hard to use that once all of the categories in the top n report were sourced and all the suppliers in the top n suppliers put under contract, there was no more value to be had. And the tools sat on the shelf when they should be used weekly, if not daily. If a hunch can be explored in an hour, and every tenth hunch uncovers a 100K+ value generation opportunity, that’s a 10X return that would never be realized otherwise as the analyst would never have time to explore ten hunches otherwise.

But, as with optimization, it’s hard to create the right UX. It’s not just a set of fancy reports (as static reports have been proven to be useless for over a decade), but a set of capabilities that allow users to cube, slice, dice, and re-cube seven ways from Sunday quickly, easily, and repeatedly until they find the hidden value. It’s innovative new reporting and display techniques that makes outlier identification and opportunity analysis quicker and easier and simpler than its ever bin. It’s real-time data validation and verification tools that insure that a user doesn’t spend a week building a business case around data where one of the import files was shifted by a factor of 100 because of missing decimal points, destroying the entire business case in 4 clicks. And so on.

That’s why the doctor and the prophet are bringing you an in-depth look at what makes a good User eXperience for spend analysis that goes deeper — far deeper — than anyone has ever gone before. In a time where there seems to be a near universal playbook for spend analysis solution providers when it comes to positioning the capability they deliver and when many vendors sound interchangeable, and when many vendors are fungible in a way that is not necessarily negative, this insight is needed more than ever. And if a few vendors quake in their boots when this series is over, so be it. Last week, over on Spend Matters Pro [membership required], the doctor and the prophet published our second piece on What To Expect from Best-in-Class Spend Analysis Technology and User Design that continued our in-depth foray into this critical, but often ill-explained, technology.

So what is required? As per our first post, dozens (upon dozens) of innovative and unique capabilities, including the next generation dynamic dashboards that we discussed in our last post. In our deep dive, we explore four more core requirements, one of which is dynamic cube and view creation “on the fly”. Given that:

  • A cube will never have all available (current and future) data dimensions
  • Not all data dimensions are important;
  • Some of the essential data (referenced in the previous point) will be third-party data updated at different time intervals
  • A user never needs to analyze all data at once when doing a detailed analysis.
  • We have not (yet) encountered a system that will have enough memory to fit enough of a true “mega cube” in memory for real-time analysis.

One cube will NEVER be enough. NEVER, NEVER, NEVER! That’s why procurement users need the ability to create as many cubes as necessary, on the fly, in real time. This is required to test any and every hypothesis until the user gets to the one that yields the value generation gold mine. Because, as this blog has previously published (in why data analysis is avoided), if it is too difficult or costly to do an analysis, a gut-feel assessment as to the value that will be yielded will be done. And if it looks like the cost to value ratio will be too high, the analysis will be avoided. The end result is that the organization will never truly know if the potential value was low or high.

In other words, success requires cubes, cubes, and more cubes with views, views, and more views. With any data the user requires, from any location, in any format. But more on this in upcoming posts. In the interim, for three more requirements of a spend analytics product for a good user experience, check out What To Expect from Best-in-Class Spend Analysis Technology and User Design over on Spend Matters Pro [membership required].

The UX One Should Expect from Best-in-Class Spend Analysis … Part I

Our last series, which was a doozy at four parts, covered The UX One Should Expect form Best-in-Class Optimization (Part I, Part II, Part III, and Part IV) and while it probably left even the best-in-class optimization vendors quivering in their boots (as no vendor meets every criteria on our list, and the majority don’t even come close), it had to be done. No other advanced sourcing technology can identify, and capture, as much value year-over-year as optimization and with costs risings, budgets shrinking, competition escalating, and global conditions changing constantly, this technology is becoming a must-have for every sourcing organization period. But, as the Brits like to say, the maths are hard and you can’t expect an average buyer without an advanced degree in math, engineering, computer science, etc. to know this stuff, so it has to be useable. Very useable. It has to be stupid easy to select a cost model, pick and choose english constraints, import the costs, enter a few parameters (like maximum number of suppliers, preferred award split, etc.), and run the model. And if it’s unsolveable (because it’s over-constrained or data is missing), the reason, and the fix, has to be made crystal clear to the user.

But it’s not the only important advanced sourcing application that every sourcing organization should have. The other is spend analytics. It’s the only other advanced sourcing technology that can identify year-over-year value of 10% or more. (And while it can’t always capture that value as you will need to do a sourcing event to capture it, if you’re not doing the right sourcing events on the right categories at the right time, you’ll never realize the full extent of value that can be realized. It’s not uncommon to realize a cost reduction of 30% or more on your first appropriately designed optimization-backed multi-level global services event where you bid out at the global, national, regional, and local levels and get the right mix of the right providers in the right places for the needs at hand.) You need spend analysis, but not everyone has an advanced computer science or quantitative analysis degree, and first generation tools were so hard to use that once all of the categories in the top n report were sourced and all the suppliers in the top n suppliers put under contract, there was no more value to be had. But with an easy to use tool, the true value of analysis is exposed, and your top analysts will be finding new opportunities every day, week after week, month after month, and year over year.

But, as with optimization, it’s hard to create the right UX. It’s not just a set of fancy reports (as static reports have been proven to be useless for over a decade), but a set of capabilities that allow users to cube, slice, dice, and re-cube seven ways from Sunday quickly, easily, and repeatedly until they find the hidden value. It’s innovative new reporting and display techniques that makes outlier identification and opportunity analysis quicker and easier and simpler than its ever bin. It’s real-time data validation and verification tools that insure that a user doesn’t spend a week building a business case around data where one of the import files was shifted by a factor of 100 because of missing decimal points, destroying the entire business case in 4 clicks. And so on.

That’s why the doctor and the prophet are bringing you an even longer and more in-depth look at what makes a good User eXperience for spend analysis. In a time where there seems to be a near universal playbook for spend analysis solution providers when it comes to positioning the capability they deliver, when many vendors sound interchangeable, and when many vendors are fungible in a way that is not necessarily negative, this insight matters more than ever. Last week, over on Spend Matters Pro [membership required], the doctor and the prophet published our first piece on What To Expect from Best-in-Class Spend Analysis Technology and User Design that begins our in-depth foray into this critical, but often ill-explained, technology.

So what is required for a best-in-class spend analysis user experience? Dozens of things, but one key thing is integrated dynamic dashboards. Unlike the first generation dashboards that were dangerous and deadly (as the doctor has written about dozens of times on SI over the years, including rants here, here, here, and here), true, modern, next generation dynamic dashboards are actually useful and even beneficial. They’re ability to provide quick entry points through integrated drill down to key, potentially problematic, data sets can make sharing and exploring data faster, and the customization capabilities that allow buyers to continually eliminate those green lights that lull one into a false sense of security is the key to analytics success.

For a deeper dive into what an integrated dynamic dashboard is, check out the doctor and the prophet‘s initial description of What To Expect from Best-in-Class Spend Analysis Technology and User Design over on Spend Matters Pro [membership required] and stick around for the remainder of the series where all will become clear.

Procurement Wasteland!

Down here in the crypt
I search for a script
I put my soul into my living

I constantly fight
To prove I’m right
Management is not forgiving

Don’t cry
Don’t raise your eye
It’s a Procurement Wasteland

Buyer, take my hand
We’ll analyze spend plans
Put out the fire
And don’t look past my shoulder

The exodus is here
Our downfall is near
Let’s band together
Before we get much older

Procurement Wasteland
It’s a Procurement Wasteland
Procurement Wasteland, oh yeah
Procurement Wasteland
We’re all wasted

Why Can’t We Get No Satisfaction?

A few days ago we lamented, in song, that we can’t get no satisfaction. Why? Because buyers rarely get satisfaction. Rarely. Why?

Stakeholders are never pleased.

You save them money, they moan and groan that you changed suppliers. You stay with the same supplier and work with them to improve quality, they complain and lay the blame on you for the cost increases. You split the demand across preferred suppliers across geographies to mitigate risk, they lament that now they have to work twice as hard with logistics. And so on.

Management is pushing for savings today at the expense of cost tomorrow.

As we indicated in our post on Once Upon a Time, Not So Long Ago … the primary goal of Procurement should not be short term savings but long term value generation as the name of the game is long term cost control. Besides, savings that are too good to true really are too good to be true and the savings that comes out of one budget category from chasing a pipe dream just inflates another budget category.

They are never enough tools for the job.

Let’s face it, almost 40% of Procurement departments still don’t have any modern Procurement or Sourcing solutions, and of those that have these tools, the number that don’t have a modern spend analysis solution is greater than 40% and the number that don’t have a modern optimization (-backed) sourcing solution is greater than 80%. And let’s not talk about a modern Contract Lifecycle Management (CLM) solution with contract analytics, a modern Supplier Relationship Management (SRM) solution with true relationship and innovation management, or a modern category management and planning solution.

The tools they have are often out of date …

Many companies that acquired on-premise tools last decade are still using the on-premise versions of those tools almost ten years later. While these first generation tools were great at the time, in many ways we are now entering the third generation of Sourcing and Procurement solutions with advanced functionality, advanced usability, machine learning, community intelligence, and other innovations that are the foundation of what will be required to take performance to an 11!

… or provide a bad user experience.

As you might have guessed from our recent onslaught of posts on UX, both in general and specific to e-Negotiation in general, e-Auction, and optimization, many, if not the majority, of solutions out there are lacking in UX to some degree (and many of the older solutions don’t have any semblance of a modern user experience at all!). The most significant barrier to adoption, which is critical to success, is the user experience, so if it’s bad, you would have been better off spending that money on beer-filled Friday pizza parties because at least then your team would be happy one day a week.

In other words, Procurement is a tough job which often offers little, if any, comfort to the seasoned professional trying to make the best of a bad situation. So the least you can do is get them some good tools, use your head and put long term success ahead of short term cash savings, and realize that everything is a trade off and that if you demand Procurement increase the value along a certain dimension, another dimension will diminish. It’s life. Just like you can only ever control two out of three when it comes to time, resources, and cost when doing a project, trade-offs are a reality of life. Procurement will do the best they can, but every hard constraint will hurt you. Remember that.