Monthly Archives: April 2023

How Resilient is Your Supplier Management?

Given that the state of most supply chains is still chaos, and may be for quite some time, if you don’t know, maybe you should find out!

How? Benchmark your current supplier management performance against more than 800 global organizations that participated in the 2022 State of Flux Supplier Management survey at this link (and receive a free maturity benchmark analysis for your organization).

The reality is that supplier resilience, the foundation for supply chain resilience, is becoming more important than just about any other kind of resilience as a business without the products to sell or operate is not a business, and if its suppliers are not resilient, it won’t have any sources of supply … and will not be able to operate.

That’s why, once a an organization has implemented an e-Procurement core and a sourcing core, if it has any supply issues, it should tackle SRM as soon as possible in wave 2 (and this can be done simultaneous with implementing the analytics core — after all, it’s good to have supplier data to crunch on). Plus, SRM supports end-to-end source-to-pay processes when done right, as explained in the State of Flux research publication front-material that brings you best practices from over a decade of research.

The research report, which reviews their six pillars of supplier management:

  • Value
  • Engagement
  • Governance
  • People
  • Technology
  • Collaboration

Also provides you with a four-phase action plan to guide you through your four-phase supplier management journey. At a high level, the journey is to:

  1. Explore the opportunity … with a value opportunity diagnostic
  2. Create the business case … by fleshing out the value proposition
  3. Setup and run … with supplier management in real time
  4. Scale and grow … and achieve ROI

And this is something you want to do as leaders significantly outperform on each of the pillars even compared to “fast followers” …

In a later post we’ll dive into a few of the findings, but for now, if you’re having problems (and you are), and you’re not sure how well you’re doing against peers, take the benchmark, download the report, and start planning for supplier development — even if you aren’t ready to implement a custom solution as all P2P or e-Sourcing platforms can support the basics of supplier management, and the reality is a platform isn’t a solution without a process and trained people to follow it. (And keep your eyes peeled for the State of Flux 2023 research survey which will be launching soon … responding early gets you the results early, and leaders in this space are in the best position to win!)

Rabbit Season? Duck Season?

Is it just me or does the annual return of “conference” season remind you of the old Looney Tunes Rabbit Season, Duck Season shorts with all of the competing, similar, but yet mangled and confusing messages about what you should be focussing on, what conferences you should be going to, and what you should be hunting for?

For the younger generation, the classic “rabbit season, duck season” was a “hunting” trilogy of Warner Bros shorts starring Bugs Bunny, Daffy Duck, and Elmer Fud that began with Rabbit Fire in 1951, that was the first to show Daffy as a flawed, greedy, vain character who always, secretly, wanted the spotlight (and not just a screwball comedian who wanted to make you laugh).

In this particular episode, where it is supposedly rabbit season, Daffy lures Elmer Fudd (the hunter) to Bug’s burrow and convinces Bug that a “friend” is there to see him, seemingly aiming to take out the competition. High jinks ensue until Bugs manages to trick Daffy into saying it’s actually duck season, at which point Elmer tries to shoot Daffy. Then the two find increasingly creative ways to turn the tables until the hunter decides its rabbit and duck season, at which point both realize how stupid they were and work together to make it “Elmer” season …

So why do I think of this cartoon?

Well, first of all, many vendors spend a lot of the year trying to eliminate their competition from your consideration by claiming that the competitor’s product is lacking key features you need for efficiency, value, or ROI (Daffy tricking Elmer into hunting Bugs); then, during Conference Season, the competition (Bugs) strikes back with slicker messaging that encourages the buyer to turn on the vendor that may (or may not) have led them astray; then the original vendor (Daffy) starts copying the message of the competition, with a few twists to get the attention back; and the marketing and messaging dance continues until the buyer (Elmer) gets simultaneously so confused and so angry that he wants to eliminate both vendors (Daffy and Bugs) from consideration, at which point the vendors need to team up (or at least call a temporary back-room truce) in some way to trap the buyer back into buying at least one of their solutions, and if there isn’t complete overlap, preferably both!

As far as the doctor is concerned, this misses the point of conference season, which is supposedly to educate you about the offering and the value you can get from it. Which would be great if that was what the majority of events did, but over the years, I found that less and less of a reality at the bigger shows by the bigger vendors and conference players. Starting with the latter half of the last decade, the events at many of these players have become less about education and more about how spectacular of a show the vendor or conference group could put on as vendors, professional organizations, and conference groups tried to show value by showing how successful they were, instead of just keeping it simple and showing how successful you could be with their technology, education, processes, or platforms (built up from the technology and processes of their sponsors).

I don’t know about you, but I’m a little bit saddened by it — I know it’s been a staple in the enterprise software world for a while, going back to the old trade-show mentality where if you couldn’t afford the poshest venue and the biggest suite, then obviously you weren’t successful … but isn’t Procurement supposed to be about your success and not theirs?

Although it means regular work is less guaranteed, the doctor is actually quite happy to be independent now as it means he can pick and choose what conferences and events he does, and more importantly, does NOT have to even consider going to as, this year, he’s only seen ONE event by a top suite vendor he’d actually like to attend. (Compare this to the early and mid teens where he was quite interested in going to almost all of them … )

Now, I should say, this viewpoint, which is the doctor‘s and the doctor‘s alone, is lobbied primarily at a subset of the big vendor conferences and the big conferences / trade shows and not the smaller vendors or smaller workshops. There are still plenty of smaller and best-of-breed vendors putting on great educational events, many of which even us analysts don’t hear about until it’s too late, that are more than worth your time and money to attend.  (Heck, sometimes even us old dogs and cats who’ve been in this for over two decades will learn a new trick.)

In other words, given that your time, money, and patience is limited, don’t fall for the hype and instead look for the education that you need to make the right decision as to what platform, product, process, or service your organization needs next and whom you should buy it from. And enjoy the fact that you know you don’t have to go to everything or anything if it’s not relevant!

How Can Indirect Spend *NOT* Be Well Managed in 2023?

the doctor gets a lot of press releases. Some of them contain a lot of BS (which is good, he writes best when he’s on an angry rant), others contain a lot of “findings” that, if true (and the findings usually are for the right for the right subset of the market), are simultaneously scary and ridiculous. In this particular case, as the doctor writes this, he received a press release that said the research finds that 82%+ of procurement leaders say their indirect spend is not well managed, leaving substantial cost savings on the table.

The question is, how is that number so high? We’ve had source-to-pay suites for a decade (which were originally designed to source indirect products and services, create catalogs of those sourced selections, support purchase orders only for items in the catalogs, and ensure invoices matched the item prices in the catalog. And for those willing to do custom integration, it was possible to integrate a best of breed sourcing solution and a best of breed catalog management solution and a best of breed e-invoicing solution and achieve this in the late 2000s.

Now, in a mixed solution, there was no guarantee that the sourcing event would choose the best mix (since early solutions generally didn’t support optimization or advanced analytics), that the catalog would force the lowest cost (or even preferred) selection when there were multiple options, or that the invoice management could detect when shipping costs were too high or handling fees shouldn’t be there, but there was still management and any overruns were not substantial (at least compared to pre-solution overages in indirect; an organization could easily cut out 80% of the fat, which could be as high as 30% in some categories; so if the overage went from 30% to 6%, that was well managed — and solutions have only become better over time).

What’s even worse is when the expected reality is put into hard numbers. According to the press release “two-thirds of suppliers (68%) report increased demand for their offerings compared to the past year and nearly half (43%) are planning to increase prices in 2023“. Thanks to global inflation, prices are going up as demand does (which is still pent-up post-pandemic), and we know it, but knowing costs will be uncontrollable to an extent is a tough one.

Of course the press release says that the key to cutting cost is to implement (autonomous) technology that saves on day one, which you should know by now, but the question is why have so many companies not yet implemented basic S2P functionality, either as a suite or as BoB integrations, as such technology would have ensured indirect was well under control, and reduced a likely organizational overspend by (85% of 15% of 35% =) 5% (est. realization * avg. savings * avg. indirect spend) of total spend, which would go straight to the bottom line! No autonomous tech needed!

For those interested, the press release came from a third party PR firm and was based on Globality’s 2023 Research Insights for CFOs.

Do You Have a Data Foundation?

Last week we asked Where’s the Procurement Management Platform as the future of procurement is a platform that allows Procurement to build up, maintain, and evolve the solution it needs to be successful over time, over time. Such a platform needs to be the foundational data source for Procurement, but not necessarily the data hub that is used to integrate all of the organizational and external data into the core data source (which is either the internal data store or the data store supported as the platforms foundational data source).

While a procurement management platform could be the data foundation, since it’s primary purpose is process based procurement solution integration, it isn’t necessarily … after all, an API / Integration Engine focused on process doesn’t need to support every data source out of the box, nor does it need to make integration with arbitrary data sources easy, and, most importantly, it doesn’t need to support advanced data processing and transformation features, which is key when trying to integrate multiple data sources into a foundation that can be universally processed by the platform and support true end-to-end spend, and risk, analysis.

Like a Procurement Management Platform, which we may see four (4) of by year end, Data Foundation solutions are also quite few and far between. The reason? Most “data” solutions are focused on BI [Business Intelligence], Spend Analysis, or Contract/Document management, etc. and most “data” feeds on risk data, supplier data, catalog data, etc., which means they are built for certain data types and processing operations. This means that they will support a straight-forward integration for any data source with similar data types, or data types with compatible processing operations, but not any others.

When you look across Source-to-Pay and the broader Supply Chain spectrum, there are a lot of different applications that support a lot of different processes that need a lot of different data requirements of different types and formats. You need a modern MDM [Master Data Management] solution that works on web and cloud data, can pull in and process data on the fly, and push it back out enriched as needed. And support any data format and standard, not just flat files or relational tables in text (like old school MDM).

This capability is a lot rarer than you think. Most suites are built on transactions, most supplier networks on relational supplier data record, and contracts on documents and simple, hierarchical, meta-data indexes. But you also need models, meta-models, semi-structured, unstructured, and media support. And that’s just a start. But there are possibilities emerging. Just watch this space.

It’s Not Just Beds Burning Anymore, it’s the Planet. What Impact Are Your Efforts To Stop it Having?

Four decades ago, when sustainability was only a concern for the environmental extremists because, thanks to industrialization and burgeoning globalization, we had other disasters to deal with (hunger in Africa, aboriginals being forced from their land [sometimes with fire], the global AIDS epidemic, etc. — see Billy Joel’s We Didn’t Start the Fire, which took us through 1989 [the year, not the 2014 Taylor Swift release], and the doctor chronicled the next 20 years here in an unofficial Part II). And even though we still have all these disasters, and many more, the planet is in upheaval with every type of natural disaster occurring everywhere all the time. In fact, climate-related disasters have tripled in a mere 7 years. 7 years! We’ve gone from disasters increasing over the span of thousands of years during natural planetary cycles to disasters increasing in the span of mere years due to global warming thanks to the rapid increase in carbon and GHG emissions as a result of 150+ years of industrialization and rapid deforestation and wetland destruction. (Forests and wetlands have historically acted as carbon sinks for all of the carbon released by life, it’s historically primitive actions, and traditional disasters that resulted in the destruction of forests [and when trees die or get burned, all the carbon they captured is released]).

Now it’s true that, on average, even the largest of corporations on its own could only make a small dent when the depth of the problem is considered, but if even ten of the largest corporations in an industry teamed up, they could make quite an impact. (And if the largest retailers teamed up, think Amazon and Walmart and Target, and insisted on a maximum carbon footprint per product — think of the impact that would make.)

For details on the impact that can be made today, you should download the new Ecovadis Network Impact Report, 3rd Ed. which points out that Industry-level collaboration is one of the best levers available to companies looking to build more sustainable value chains and scale their positive impact. EcoVadis Sector Initiatives (SIs) are a highly effective vehicle for this. Six initiatives spanning a diverse range of sectors — from chemical manufacturing to health — are using the EcoVadis solution to share best practices and collectively address sector-specific challenges across their often highly interconnected supply chains. Our data shows that participation in an SI helps buyers improve their supplier engagement and enables rated companies to improve faster than their network peers.

More specifically, companies engaged in a Sector Initiative outperform the [Ecovadis] network average by 5.3 points — not only do companies that try to better than those that don’t, but companies that work with peers on the right objectives do better still.

But this is only one reason you should read the latest Ecovadis Network Impact Report, 3rd Ed.. Another reason is because, if you don’t, you won’t see how Ecovadis, which in 2022 officially became a “purpose-driven” company under French Law, has continued to grow at a rapid rate and how it is starting to make a global impact. When your customers represent 4.8 Trillion in global spend, you are starting to get somewhere. That’s 4.5% of GDP, and if Ecovadis could grow 30% year-over-year for nine years, that 4.5% could become 49%, close to the tipping point where we’d finally start making significant progress. (Which means if we can survive until 2032, we could start making real progress on sustainability and environmental stabilization. Not as fast as we need to, as parts of the planet will literally start burning by then, but Ecovadis and its peers may still save some of us.)

And, even if you don’t think Ecovadis is the answer for you (even though 945 organizations do and the number increases every year), the report will still educate you on the five key pillars of a sustainable procurement platform. And once you understand those pillars, you can assess, monitor, improve, report, and continue the wheel.