Daily Archives: July 4, 2024

GlobalTrade Tackled Procurement 2024 Before McKinsey, But Their Suggestions Weren’t that Innovative, Part II

As per Part 1, the doctor ignored this article over on GlobalTrade Magazine on 10 Innovative Approaches to Enhance Procurement Efficiency in 2024 because the approaches weren’t all that innovative, and the article, while professionally written, clearly wasn’t written by a Procurement Professional, as most of the recommendations were so basic even Chat-GPT could likely have produced something equally as good with high probability (gasp!). He’s only covering it because one recommendation had the potential to be the most innovative recommendation of the year (because no one is recommending it) had the author got it right (and approached it the right way).

However, since we covered and analyzed the McKinsey recommendations in great detail in a four-part series over the past two weeks, we will be fair and give GlobalTrade their due. In this two part article, we’ll quickly discuss each recommendation one-by-one to make it clear most of the suggestions really weren’t innovative. In fact, the one recommendation that is innovative wasn’t even described in the one way that makes it innovative. But since it did remind the doctor of one thing many of the recommendation articles were missing, this gives us another reason to cover it and use it as an example of why you need to seek out advice written by the experts, or at least people who live Procurement and/or Procurement Tech day-in-and-day-out.

6. Use AI to Review Process.

Uhm, NO! Use analytics and automation, not AI! And use traditional process analysis tools to identify where you are spending the most (and possibly too much) time.

7. Try New Inventory Software.

And if everything written to this point wasn’t a dead giveaway this article wasn’t written by a Procurement Pro, this is. First of all, inventory is operation / supply chain & logistics, not Procurement. Secondly, it’s not new inventory software, it’s e-Procurement software that can integrate with the inventory management system to determine if a request should be (re)allocated from inventory or ordered from a nearby supplier (using a pre-approved catalog item). (Heck, the author couldn’t even get the market size increase right — it’s 4.9 Billion according to the linked study, not 4.9 million! And if you’re interested in the Procurement market, Technavio, owned by Infiniti Research, is NOT one of the leading analyst firms in the Procurement Market.)

8. Formalize the Procurement Process.

How non-innovative can you get? Are there any organizations still in business at this point who have Not formalized the process? It’s no longer formalize, it’s SaaS-back and automate as much as possible!

9. Strategize Market Analysis.

Would any Procurement department doing market analysis really be doing it off the cuff? Uhm, no! It’s not strategize, it’s automate — implement platforms that automatically collect, track, analyze, report on changes and provide predictions on costs, availability, risk, and other important pieces of information.

10. Reassess Cost Evaluation.

This is the ONE prediction that could have been the most innovative prediction this year if thought through and presented properly. The author noted that many companies are not looking at the total acquisition cost and indicated that buyers should look at this, as well as usage costs and even disposal costs, getting into total cost of ownership (TCO) territory — you know, the concept we’ve been talking about here on SI since we started in 2006!

However, in today’s economy, TCO is no longer enough, and you have to move onto the next generation of what we have been calling TVM: Total Value Management since 2007! The root of TVM was that total cost of ownership is not enough when the end goal of every product or service obtained is about value, and value goes beyond pure cost elements and includes bundled services, controlled and understood risk, and brand recognition.

So cost evaluation needs to factor that in as well, but often that’s not enough anymore either. It’s not just supply or stability risk, it’s regulatory compliance. It’s not just product cost, but carbon cost. It’s not just brand recognition, it’s brand risk if your suppliers are using slave labour, polluting the environment with carcinogens, or finding new and inventive ways to be truly evil. It’s also not just today’s price, it’s tomorrow’s price. If the product relies on a raw material currently getting scarcer by the day, can you find an alternative that doesn’t need that material, or needs less of it? And so on. Cost evaluation is not just cost alone anymore. And any organization that takes the next step here will be truly innovative.

Now, in all fairness, the doctor should point out that the article’s recommendations could be considered innovative if the organization didn’t have a Procurement department, but in today’s economic environment, unless it had a monopolistic stranglehold on a market, the doctor doesn’t see how a company of any size without a proper Procurement function could still be in operation.

Anyway, that’s all, folks!