Monthly Archives: July 2019

Two Hundred and Twenty Nine Years Ago Today …

The first foundations were laid for the patent pirates with the introduction of the first U.S. patent to Samuel Hopkins for a potash process. While patents are a necessary evil to protect the investments of real inventor and corporations that have to spend millions upon millions (sometimes to the tune of hundreds of millions) to produce a truly new technology, software patents are an unnecessary evil that allow the pirates to plunder millions upon millions of dollars from rivals with fundamentally different products (but covered under an interpretation of a sufficiently abstract description) and prevent true innovation in our space.

It’s been a downhill trend ever since the first software patent was issued 51 years, 3 months, and 8 days ago as it was a mere 4 years before the software patent pirates saw an opportunity when the first software patent case went before the courts a mere four years later.

That’s right, we’ve had almost five decades of pirates in cyberspace, and you thought malware was the big problem?

Knowledge is Power

So why would you want a platform that doesn’t embed any knowledge?

There is not a product or service in existence that cannot be made more valuable with information, and in technology, there does not exist a solution that cannot be made more valuable through embedded information. So why would you ever want a platform without it?

In fact, if the platform has enough embedded information, and can use it to power adaptive workflows built on top of robotic process automation, you’ll find that you might not even need any AI at all (especially if all it equates to is Applied Indirection). If the platform comes embedded with leading market knowledge for the majority of your categories, and you can define, and embed, rules with the help of experts to cover the rest, then you have the majority of what you need.

Because, at the end of the day, the best value comes from not only getting Spend Under Management, but making the best Sourcing / Procurement decision possible for the organization — and that can only be done if the organization has the right information. No organization has expertise in more than a few categories, and it definitely doesn’t have all the information. So having a platform that comes equipped with the best should cost models out of the box, integration to current market data feeds, and historical data on previous events (anonymized if necessary) to help organizations select the right type of even tfor current conditions is very beneficial — versus just a piece of dumb software that executes a canned one-size-fits-all workflow.

At the end of the day, the more you know about your raw materials, your components, your assembly / manufacturing options, your products, your shipping, the import and export restrictions and costs, and the inherent value of each product versus your other options, the more accurately you can model your options and make a good decision. The more accurately you can model your options, the better chance you have of determining the solution with the lowest cost, the lowest risk, the highest value, and the best value (defined as risk reduction, profit generation capability, etc — whatever makes sense) to cost ratio.

This is how leading Supply Management organizations can save 12%, off-the-top, in an optimization-backed information-enabled sourcing event — and even more if they collaboratively work with their peers to identify all of the options that may be available and all of the associated tradeoffs.

Plus, good, timely, information allows an organization to:

  1. constantly improve products and services by way of the fact that they are able to
  2. collect more relevant, timely, accurate, detailed, and integrated data.So get an information enabled platform – at the end of the day, it’s better than all the platforms with the fake “AI” that do nothing more than automate static, dumb, one-size-does-not-fit-all, workflows!

How to Get Past Applied Indirection

As per our recent series here on SI, when most vendor sales rep start to claim they have AI, they are really just telling you to your face that they are trying to mislead you into thinking their trivial automation, simple fixed ruled-based workflow, and/or classic statistical projection capabilities are much more advanced than they really are, hoping you won’t ask what AI really stands for when they use the acronym.

Given that your number one priority is to get more spend under management (SUM) and that this priority is only realized with the help of modern platforms, you’re going to be dealing with a lot of sales reps for years to come, especially since, at best, you’re on a generation 2 platform (and, to be honest, if you have anything, odds are it’s really generation 1), and that just doesn’t cut it anymore. So you’re going to have to find the right platform for you.

Now, the good news is that you have help narrowing down that shortlist with the help of Spend Matters Solution Map, co-designed and, in core areas of platform technology and Strategic Procurement Technology, scored by the doctor, and that as part of this narrowing down, we can help you identify vendors with the foundations for real AI, as well as, if we’re lucky, select capabilities that fall in the domain of assisted intelligence.

But just because we can give you a partially pre-qualified short-list (which can be tailored to your specific organizational needs by way of the Customer Map offering), that doesn’t mean that the vendor sale reps still won’t try to stretch the truth or, in some cases, even lead you astray on aspects of the solution we don’t score. So you will still have to deal with some level of applied indirection even if you’re proactive enough to take our advice and start with the right short-list. (Which can also be based on unbiased customer scores as well as in-depth analyst scores across up to 700 discrete platform capabilities to make sure you start off with the best candidates, among which will be the right solution for your organization.)

But if you’re not one of the lucky supply managers able to convince your boss to let you spend the money on this exercise (which can be carried out by your favorite consulting partner who will help you properly weight the various capabilities given your organizational maturity and need), then you’re going to not only get hit with quite a few sales reps stretching the truth, but a few outright lying (because they know you don’t have any validated data points to go off of), and not feeling a tinge of guilt because they told you up front they were selling you with AI (which you didn’t ask them to define) that really stood for applied indirection, and not the assisted, augmented, or artificial intelligence that you mistakenly assumed it stood for.

So how do you spot it? And get past it?

Here are some tips and tricks to do just that.

1. Ignore their claims, get a demo and ask them to walk through through how it supports your organizational process, which you will lay out the day before

Yes, some vendors have become quite good at combining (robotic process) automation, rules-based workflows, and statistical algorithms to fake AI, to the point that you might think there is actually some machine learning under the hood and, at the very least, they have assisted intelligence technology in the worst case, and probably augmented intelligence that will take your team to the next level. But not very many vendors fall here (and in the grand scheme of things, the reality is that very few vendors fall here), and very few demo masters can pull off a faked end-to-end process demonstration.

2. Have your own data files ready to go!

If they are claiming auto-contract parsing and clause extraction, have some contracts in the correct format (PDF, Word, etc.) ready to go at demo time, that you did NOT give the vendor advanced knowledge about, and ask them to upload and walk you through the process live. Or if it’s a 3-way invoice match process, have matching POs, goods receipt, and invoices in whatever standard they support (cXML, EDI, indexed PDF, etc.) ready to go as well and ask them to suck them in and process them in front of your eyes.

If they survive this, even if it’s not real AI, it’s very advanced automation and an extensive knowledge-base supporting the rules-based workflow, which may be all your organization needs to advance its SUM and get success.  (For example, you don’t need AI for spend categorization – an expert can map your spend to 98% accuracy in 3 days with the right tool even if you are an F500 and then as exceptions come in, you have an expert create overrides, which get fewer and further between over time. Plus, unless we are far, far into the tail, 2% of spend in the category doesn’t even make a dent.)

3. Get a real data scientist / tech expert in on the demos.

Someone who has utilized real AI technology to ask tough questions about algorithms, platform foundations, data stores, and so on. If the provider can’t furnish good answers, there’s probably not too much under the hood.

4. Talk to mature customers.

You want customers who have been with the provider 3+ years, implemented and worked through the full platform offering, executed difficult Sourcing / Procurement projects, had a few failures the provider needed to respond to quickly, and so on. They can give you an idea of how advanced the system has been in practice and how good the provider has been on improving it. And if they give you a good recommendation, even if the system is not as advanced as the vendor claims, there’s probably something there.

It’s easy to not get fooled if you remember that the proof is in the pudding, and if the pudding is good, there are repeat, happy eaters of it.

The Supply Management Paradox

The best supply chain is invisible, but an invisible supply chain gets no recognition in your average company.

This is the one lesson they don’t teach you in Operations Management or Supply Chain 101, probably because they don’t want to discourage you given the upward battle we still face in our chosen discipline of Supply Management.

The sad reality is that your average employee in your average company, and even your average C-Suite executive in too many companies, has no knowledge of this paradox. Just like your average person is unaware of Bernoulli’s Paradox or even the Birthday Paradox.

At an average company, the majority of the supply chain function is invisible from most employees. Good show up at the warehouse, then get shipped to the office / store locations. When an employee needs a new laptop, tablet, or phone, s/he logs into the company portal and selects one of the pre-approved options and the item is on her desk within 2 business days. The sales guy places the order, and the customer gets it when promised. No one knows how much research and time goes into identifying appropriate suppliers, negotiating contracts, signing contracts, placing purchase orders, negotiating change orders, receiving goods, performing quality spot-checks, receiving invoices, matching everything, making sure the right goods get to the right locations, coding restock alerts / automated orders, handling returns (and ensuring credits are received and replacements arrive on time), handling switch overs when a new source of supply needs to be brought on, ensuring industry regulations are not violated, ensuring sustainability goals are met, ensuring there is no third party child labour in the supply chain (or anything else that could tarnish brand image), and so on. Hundreds, if not thousands, of hours have to go into making that “one click laptop replacement” work as desired.

Plus, in a well researched, planned, and smoothly executed supply chain, raw materials and components show up almost just-in-time (JIT) at the plant that is producing your goods. Then the boxes are waiting at the other end to package them, and as soon as the boxes are filled, the palletizer is there to pallet them. As soon as the pallets are full, the pallet jacks are waiting to load them unto the truck that just pulled up to take them to your distribution centers. Etc. Etc. Engineers don’t have to worry about raw materials or components being late or in insufficient supply. Loading dock personnel don’t have to worry about needing extra temporary storage as the trucks are there when the order is complete. Etc. Etc. Not only do they not have to worry about supply chain functions beyond their jobs, but your job looks like it’s the easiest job in the world because, like magic, everything (and everyone) is there when they need it. As a result, the better your supply chain runs, the less respect you get in an average company for doing a “hard” job because you make it look so easy.

That’s the supply management paradox, and one of the reasons many of us still don’t get No Respect.

Driving Procurement Visibility: Why & How


Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in sourcing, and brings some unique insight on the topic.

Nobody ever suffered from too much clarity in their personal lives, and the same is true from an operational standpoint. Procurement teams that run most efficiently typically have a high degree of visibility – they use this view to identify cost cutting opportunities faster, and communicate them more effectively to get the job done quicker. They also don’t suffer the lost opportunity cost of letting maverick and tail spend savings slip through the cracks.

But I’m not telling you anything you don’t already know. For most organizations, the business case is already clear for increased visibility – the challenge is attaining this increase and using it to improve Procurement practices. So, how do we do it?

Keys to Better Visibility

Strategies for improving visibility can be broken down into three groups: Focusing our efforts on People, Process, and Technology will set the stage for the improvements we need.

Are Our People Set for Success?

The first step we must take is ensuring our human resources are up to the task. There are plenty of skillsets your team already has in place that are mission critical – strong negotiating skills, relationship management, and the ability to drive change are our bread and butter. What about data analytics, statistics, or tech-based skills needed to interact with the latest data management and visualization toolsets? These aren’t skills every Procurement team has readily available.

Closing this gap may mean bringing in outside hires. On one hand, we can quickly assimilate the skillsets we need by bringing in data scientist and analyst roles. On the other hand, this can be a tough sell internally, especially if you’re building a brand new data practice. The ROI will certainly be there in the longer term, but it may take some time to get to that point.

Another direction is to grow internally. Review the members of your team and assess their ability to pick up data analytics skillsets. At the same time, work with your IT team to understand what building up this practice will mean, and utilize their expertise to do so.

Do Our Standard Processes Encourage Visibility?

The best resources will still get hamstrung if they have to stick out outdated, cumbersome, or bureaucratic SOP. If our processes aren’t built from the ground up with visibility in mind, odds are good that they’ll pose a challenge down the road.

How many steps are there from the time a purchase is requested to a PO being generated to a supplier getting that order? I’ve seen some complicated processes built around this staple of Procurement activity, requiring the input and effort of multiple team members, stakeholders, and ultimate product/service users. Despite the heavy lift, everyone’s actions are siloed, with visibility only to the point of their own sign-off.

We need to rethink SOP – simpler processes requiring the effort of fewer resources (yet open and visible to many) is key. This is especially true any non-critical, easily standardized purchases. Anything we can do to automate these purchases or implement catalogs to support buyers is a win.

Do We Have the Right Tools in Place to Succeed?

Lurking behind both our People and Process goals is the set of technology tools we need in order to function. As with traditional processes, technology platforms and practices built without visibility in mind could become a bottleneck.

Before even considering the tools, themselves, think of the data they are used to marshal. It isn’t uncommon for these data sources to be diverse in terms of physical or logical location, ownership, update frequency, and other key variables. Implementing a master data management (MDM) methodology solves this issue by establishing a centralized “golden record” that serves as a single point of reference. This way, everyone has the exact same view of data, and knows exactly where to go to find it.

As far as important tech tools go, we’ve already covered the business case for a few. Are platforms in place to establish proper Supplier Relationship Management? Do we have an electronic procurement system that supports and promotes the use of PunchOut catalogs? Have we ingrained unified communication platforms into our processes to ensure proper communication at every step? Have we built dashboards that actually act like dashboards (offering an at-a-glance look KPIs instead of cramming a bunch of numbers on a screen)?

The Benefits are Clear

It is far easier to describe the steps above than it is to enact them. The road to improved visibility isn’t short, and requires more than just process change – better visibility requires an organizational mindset change from everyone involved in the Procurement process as well as those that support it or depend on it.

Yet the benefits are clear. Better visibility is critical to strategic sourcing and shines a light on all of the dark spend that our teams would jump to address… if only we knew about it. It also helps to reduce soft costs by streamlining our process, cutting out wasted time and energy to maintain manual, opaque practices.

Laying the groundwork today will ensure that our teams move into 2020 in the best position possible to impact our organizations.

Thanks, Brian!