Monthly Archives: December 2017

I WILL SURVIVE!

An ode to vendors who need to be forgotten!
Confused? See our piece on Technical Debt

At first, I was afraid, I was petrified
Kept thinking I could never live without you by my side
But then I spent so many nights thinking how you did me wrong
And I grew strong and I will learn to get along

And while you claim brand new function
I just walked in to find you here with the same old dysfunction
I should have changed my phone number
I should have blocked your web domain
If I’d have known for just one second you’d be back with the mundane

Go on now go, walk out the door, just turn around now
’cause you’re not welcome anymore
Weren’t you’re the one who tried to lock my data down?
You think I’d crumble? You think I’d turn my mind around?

Oh, no, not I, I will survive
Oh as long as I know how to buy, I know that I will thrive
I’ve got my wits to give, and I’ve got my years to give
And I’ll survive, I, I, I will survive

It took all my strength to deal with the distress
Trying with all my mind to mend a broken process
I spent so many nights feeling just incompetent
Oh, I cried but now I know I will ascend

And you see me, somebody new
Not that desperate little person still stuck with you
Now don’t come promising features you can’t implement
Now I’m saving all my time for a vendor who is competent

Go on now go, walk out the door, turn around now
You’re not welcome anymore
Weren’t you’re the one who tried to lock my data down?
You think I’d crumble? You think I’d turn my mind around?

Oh, no, not I, I will survive
Oh as long as I know how to buy, I know that I will thrive
I’ve got my wits to give, and I’ve got my years to give
And I’ll survive, I, I, I will survive

Your Supply Base Is Too Big – But That Does Not Mean You Should Consolidate

You should right-size, but right-size doesn’t mean down-sizing the supply base like consultants in the 90’s used the term right-size when they wanted their customers to down-size their work-force. It means identifying the right number of suppliers for the category, and the right suppliers to fill those slots. If you are sole-sourcing or dual-sourcing a category, and the one or two suppliers are risky or in at-risk regions, you might need more.

The right number of suppliers is not a magic number, it’s the right number of suppliers you end up with after you have identified the right suppliers for each category. For a large organization, that has 60,000 suppliers, that’s probably a substantially smaller number (by a factor of 2 or 3), but it’s not consolidation and cutting across the board.

The reality is that most of the unnecessary supplier proliferation is in the tail spend, not the strategic spend that is analyzed every few years. There are a few extra suppliers in the strategic spend, particularly when organizational units or individual buyers go rogue and don’t buy off of contracted or preferred suppliers, but the majority of needless supplier sprawl is in the tail spend. (Where, as we noted earlier this week, you should be auto-buying.)

So how do you go about right-sizing? First of all, for each product or service in the tail spend, select preferred suppliers and make sure that they are only suppliers available in any and all solutions the buyers can use. Then, make sure that the organization puts in place a no PO, no pay policy and communicates that to all suppliers, and, in particular, the suppliers that are no longer preferred suppliers. This will minimize the suppliers who will respond, especially if the organization refuses to pay invoices that are unmatched to POs.

Then, use auto-class solutions on the transactions to try and identify products or services that could come from the same supplier and try to reduce the supply base further by eliminating those suppliers that can only supply one product or service when there are enough suppliers that can supply that product or service that can also supply other products and services.

And then stop there. While this won’t necessarily get down to the optimal number of suppliers, or ensure the optimal supplier is in each category, it will likely reduce the number of suppliers in the tail by a factor of 2 or 3 and make the tail a lot more manageable. And that’s what’s key – manageability, especially when you want your auto-buy to work quickly and efficiently and eventually consolidate enough volume that you can negotiate with the supplier in the future if you need to.

Scared of AI? Just Start with Auto-Buy.

Specifically, start with auto-buy on your tail-spend and non-strategic spend.

Seriously. If you’re a relatively mature organization using SSDO (Strategic Sourcing Decision Optimization) on your higher dollar or strategic categories, using auctions and RFX for mid-dollar and somewhat strategic categories, and GPOs or catalogs for significant spend categories, there’s still one category of spend that’s costing your organization a small fortune. That spend is tail spend. Up to 30% in some organizations, the average overspend is typically 15% or more (and can be up to 20% or 30%). Do the math in the typical case. Fifteen percent of thirty percent is 4.5%. If you’ve tackled your strategic sourcing categories two or three times now, chances are you’re trying to eek out 6% savings on the top 33% of spend. That’s about 2% savings.

What’s costing you more? If you’re an advanced or leading organization – the tail spend. But it’s not something you can do much about — it’s tail spend because you don’t have the manpower to deal with it. Yes, you can put a GPO or catalog in place, but it only works if you can force buyer to not only use it, but always select the right product when there are multiple options — not something most platforms can do (well). Especially if the preferred option is temporarily out of stock and something is needed tomorrow. (And the what’s the second preferred option? The third? And if it’s common, shouldn’t it be in inventory?)

And, more importantly, since most tail spend consists of individual requests, some of which should be aggregated, if the requests are directed to different buyers, how will they ever know if there are requests that should be aggregated? (They won’t. And that’s how it is.)

So why are your people even trying to manage parts of the tail-spend when, in fact, a modern AI platform can do it much better. It can amalgamate all similar requests, analyze usage trends, gather market prices, scour and compare options in your catalog and your GPO’s master contract, identify third party options available on the network, analyze usage and feedback reviews and data, determine the options that best meet your users’ needs, and select the one that offers the best value (lowest cost against reliability against organizational need) at a cost that doesn’t exceed market cost. So even if it doesn’t get the best deal, it at least ensures you don’t pay more than market price across your tail spend, which is 15% better than you are doing today.

So now that we have systems — including, but not limited to, Dhatim, LevaData, and Xeeva — that can auto-buy, it’s time to find one that works for you and get the tail spend under control. (And use them to recommend options for higher-value and more-strategic buys that you might not come up with on your own.)

Going Digital. Digitization. Digital Transformation.

Do you know what any of these terms mean? Are you sure? and I’ve been “digital” for three and a half decades — and I’m not sure I’m whatever “digital” is when it’s spoken by someone who hasn’t been digital since before it was cool. I had a TRS-80 which, supposedly, understood the BASIC programming language (it did, but even if you think you know BASIC, unless you had the joy of Level I Basic, you don’t … especially if you haven’t experienced the joy of only three error messages … which, I will admit, was better than the one error message I got on the VAX) and that was followed by an 8088 … remember that? Probably not … it was long before it was all about the pentiums … but, like the TRS-80, it was digital. (And if you don’t understand any of this, all you need to know is I’m the One That’s Cool.)

The thing is if you’re using a computer, you’ve already went digital. It works on bits, not analog signals. So what does it mean to go digital? Since there isn’t a business these days that doesn’t use computers, there isn’t a business that’s not digital. The only question is how much is done on the computer. And, more importantly, how much is done entirely on the computer. This is, simply put, a meaningless bullshit phrase.

Now let’s talk about digitization. Technically, this is just the process of converting an analog signal to a digital one (by selecting a sampling frequency, such as every second, tenth of a second, hundredth of a second, etc.). Or, more generally, converting something in the analog world to the digital world. In the back office, this usually means converting paper to documents. But this can just be the process of scanning paper documents to image files, which can not be searched, automatically indexed on key meta-data, etc. That requires (advanced) OCR, and machine learning to take corrections and improve the OCR so that future digitization of faxed documents (sent as images) or PDF documents can be automatically converted into searchable, indexed, text formats with accuracy. So while this isn’t as much of a bullshit term as going digital is, it’s a pretty ambiguous one. A software provider doesn’t have to do very much to honestly say they support digitization given the multitude of (rather weak) definitions that exist.

So this takes us to digital transformation. This is supposed to imply that you dramatically improve all of your business process through the implementation of a new platform that transforms the way you do business to a process that is faster, better, cheaper … and delivers more value. But if you think about this, pretty much any platform you implement is going to transform the way you do business … but is going to be for the better?

So before you fall into the “digital” craze, think about what it really means!

Just like infinite scroll websites aren’t new (that’s what we sorted with before we could frame and tab and paginate, for those that don’t remember), neither is digitization!