Author Archives: thedoctor

The More Things Change …

… the more they stay the same … and the more relevant the past, and the education of, becomes.

Ten years ago today, the doctor asked are you doing it wrong?

Ten years later, the question is just as valid now as it was then. Because if you were doing it right, your supply chains wouldn’t be in such disarray.

Ten years ago we noted that, if you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity and that they have been preaching the following solutions to not only tame the risk but increase the opportunity.

1. Comprehensive Category Management

Nothing has changed here. One consulting firm is literally sending the same email newsletters they were sending a decade ago on the topic because it’s still relevant, and most firms are still doing it wrong.

As the doctor noted a decade ago, spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management, not in the least — nor is running your buys through a “magic” or “delightful” intake-to-procure platform (better called “faketake” as a colleague of mine will point out). As was said before, Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy — which could even be early renegotiation with an incumbent who might give you a great deal to keep you from going back to market. It’s taking a holistic strategic approach, not just mapping to UNSPSC or some out-of-the-box 2-level taxonomy and running with it. And not doing it is what’s resulting in stock-outs and cost-overruns. Because now, it’s not just price, it’s quality and supply assurance. Especially supply assurance. Which brings us to …

2. Supply Chain Risk Monitoring

Not much has changed here, even though the technology now exists for it to change at the majority of multi-national companies. A decade ago, we noted that natural and man-made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least. Still holds true today.

A month ago we also noted that most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. Multi-tier monitoring is key, but most Procurement departments are only now exploring supplier risk management in their supplier management module / application, which is tier 1 — even though we now have a number of great solutions that can monitor to at least tier 3, if not down to the source of each raw material in your supply chain. Considering that any good supplier information management solution will allow you to push in risk, compliance, performance, and visibility data, there’s no reason not to be monitoring your critical supply chains. Especially now that we can easily handle:

3. Big Data

What used to be the biggest buzzword-du-jour (before all this useless Gen-AI, desired only by Dr. Evil himself), Big Data is still desirable, but only to the extent you actually have valid, verified, data. Considering that the algorithms that actually work predict demand, acquisition cost, projected sales, etc. based on trends — unverified non-demand, cost, price data (for the wrong product) is NOT going to be of any help.

Get a real data analysis tool, validate the data at your disposal, and use it to your advantage, no more, no less.

Airflip: Flip it to the “S” Side

Airflip is a new, and unique, offering in the Source-to-Pay+ space that offers what they call “analyze-to-intake” and what is actually a new generation of analytics-backed category intelligence that allows a sourcing team to not only identify categories of opportunity, but identify where that opportunity is and what vendors they should be looking at.

Introduction

Airflip was founded in 2022 to help small Procurement teams in mid-sized Procurement organizations be prepared for their next deal. Billing itself as “vendor intelligence for your next deal“, it provides something that most small Procurement teams desperately need, and don’t even know how much they are missing by not having it.

Before we can dive in, we have to step back and discuss where category management is today and where it’s lacking. Today, category management is typically addressed by services vendors who bring their expertise to help you define a category, understand the market dynamics, put together a sourcing strategy, identify the appropriate suppliers/vendors, put together an RFP, put together a should-cost model, identify the evaluation criteria, and the process for selecting a supplier.

The Category Management solutions out there today are good, but they have their limitations. First of all, it is limited to the categories the services vendor has expertise in. Secondly, it is limited to the categories the buying organization can afford to pay for. (Services are costly, and if it’s a complex category, and requires a month or two of an expert’s time, that’s more than an annual license for a niche best-of-breed module in Source-to-Pay+.) Thirdly, it’s not repeatable by the buying organization the next time the category comes due for sourcing.

A technology solution was needed.

There are a few of those out there, but most of these fall into the categories of:

Savings Estimators
(Hybrid Servies-Backed) Sourcing platforms that keep track of identified savings percentages by category (at level 2 or 3 of a vendor standard hierarchy) and/or changes in average market price over time to identify an expected savings range should an organization choose to source the category (at the current time)
Specialist Category Sourcing Platforms
which incorporate market intelligence on supply vs demand, price trends, economies of scale by supplier, and logistics/supply chain costs and guide the buyer through a fine-tuned workflow for the current optimal strategy

And, outside of select categories, don’t really help a buyer:

  • identify which categories have untapped opportunities
  • get insight into current spend and potential opportunity
    (based on spend on-vs-off contract, etc.)
  • identify which vendors they currently source from in those categories
  • identify which other vendors they could be sourcing from
  • get relevant category-based insight on those vendors
  • get insight into how to evaluate the category
  • get insight into how to identify the relevant organizational needs, and what should happen before the sourcing event is kicked off

As most of this insight is limited to research reports from category consultancies or expert services providers. What is needed is a combination of the two solutions.

Airflip is one of the first solution providers to create a platform that bridges the capabilities of today’s “savings estimators” and “category insights” platforms with detailed category insight and guidance tailored to the organization’s current spend and supply base.

It does this by combining analytics (for spend insight), select contract meta data (for on vs off-contract insight), category intelligence [research] (gathered from the web and curated 3rd party data sources), and pre-sourcing category guidance [deal management] into one unified platform.

Analytics

Airflip is powered by a modern spend analytics application which allows the cube to be sliced, diced, shaped, and reshaped to your liking. While it only supports one cube (for now), the dynamic spreadsheet-like interface still puts it on par with a top 10 analytics application as a user can easily map and remap transactions and categories, create customized views using filters on any dimension, and drill down into the individual transactions if necessary.

Like every good analytics application, it has a dashboard that displays standard spend breakdowns by department, category, supplier, and cost center. Standard filters are date, thresholds, category, PO, contract, requester/department, payment method, domain, etc.

The standard spreadsheet view is a split view with the category hierarchy on the left and the transactions on the right, displayed in standard row/column spreadsheet format where the rows can be resorted and the columns reordered and hidden. For easy manipulation, the user can bring up a configuration view on the right that allows the columns to be hidden and unhidden and rows to be grouped in any order, based on any arithmetic formula.

One of the more unique capabilities is their semantic spend classification that uses all of the transaction data, their augmented supplier / vendor profiles, and third party data feeds to classify a transaction to level 3, and even level 4, if there is sufficient data, or to a higher level if there isn’t, with high accuracy. (Unlike traditional neural nets which tended to max out at 80% or Gen-AI which tends to max out at 70% or worse.) For example, they can often classify an implementation down to a CPQ software implementation (level 4 under software implementation, under IT Consulting, under Professional Services) vs. web development vs. translation and localization vs. generic implementation services. It’s a level of classification not found in most providers.

Associated with each transaction is a generated vendor overview based on retrieved profile data from the vendor website and any available third party data feeds.

Contracts

As noted above, it’s not a contract management platform — all it can do is integrate with a contract store, suck in all the contracts, process them with semantic AI, extract defined clause types, extract products and services, extract costs and obligations, and use that data to augment transactions and help the user answer questions as to whether or not a contract contains a clause or term.

Right now, it’s a very simple repository where you can sort and filter contracts by supplier. Drilling into a contract brings up the meta-data and key details associated with the contract, and a link to the uploaded pdf.

Research

Their “research” centre provides the category intelligence by subcategory, for example sales/marketing software in back-office software in software. The market research category intelligence provides deep insight into:

  • business area (sales acceleration, workforce management, intelligence, quotes, and contracts)
  • description
  • market leaders
  • (sub) categories (engagement, email, dialer, demo management, etc.)
  • … and in each (sub-) category, with the right license level,
    • the business impact,
    • overview
    • market details
    • key features
    • the (sub-) category leaders and organizational suppliers,
    • the recommended sourcing strategy
    • category risks
    • the related categories,
    • the relevant evaluation criteria,
    • the internal worksheet (for eliciting the necessary information from internal stakeholders)
    • a (starting) vendor questionnaire (that can be extended by the customer)
    • relevant links
    • … and, for each vendor, with the right license level, a research report that specifies
      • what the vendor does
      • who the solution is for
      • why the vendor is different
      • the funding the vendor received
      • known integrations
      • recent product/service launches
      • acquisitions the vendor has made
      • other key facts on the vendor

In most indirect and services categories, it will be more than enough information to identify the right suppliers to invite to the RFX. For direct, where custom goods are required, it will at least allow a buyer to identify those suppliers who make similar products in the (sub) category and get the buyer close to a short-list.

Deal Management

Deal Management is the final part of the application and provides the pre-sourcing category guidance for the product or service being sourced based upon the built-in category research.

The deal management capability walks the category owner through the business owner requirements, the evaluation workflow steps, the necessary compliance considerations, an evaluation of the business impact, an overview of the alternatives (for comparative baselines and negotiation ammunition), the recommended negotiation strategy, an outline of key steps in the strategy (and progress tracking capability), and the estimated savings potential. It can be configured with all the standard steps to help a junior buyer work through a purchase on their own, or a senior buyer expedite a process while ensuring they don’t miss anything important.

In addition, during the research phase, the application contains survey capability for the buyer to solicit the inputs required from the category or business stakeholders in order to properly plan the sourcing event.

Summary

Airflip is a great solution for mid-market companies looking to get platform-based insight and assistance into their category management. While the depth of insight will vary by category and vendor (as it’s relatively new and development is ongoing on a daily basis), it’s considerably more than the average small Procurement team in a mid-size organization will have access to, and a great foundation for success where the team doesn’t have deep category knowledge or insight across the board. So if you want better sourcing strategy support, consider flipping it to the Success side and inviting Airflip to your category management RFP.

Affordable RFPs — What Are Those?

A couple of weeks ago we penned an article on The Key to Procurement Software Selection Success: Affordable RFPs!. This resonated with those of you wanting to improve your Procurement operations who were willing to admit that you could use the help, but it also left you with one big question: where to find these affordable RFPs?

And the doctor hears you on this. You can’t just go to any old consulting firm and get an affordable RFP. Most of you have encountered high price tags, whether you went to a Big X, mid-size consulting company, or even a niche specialist. And you’re probably wondering why. Well, first you need to understand the following.

1. The Big X.

There are a number of reasons you’ll NEVER get an affordable RFP from a Big X.

  • their modus operandi is to get their people embedded on your projects and keep them there for as long as possible at 5X+ their hourly rate
  • they have agreements with a number of big suite vendors where they are a preferred implementation partner and get a big referral check in addition to YOUR implementation fees
  • they’ll put a senior resource / junior partner as lead, but you’ll never see that person, instead, most of the work will be done by a team of inexperienced, poorly educated, technologically inept recent grads “under their guidance” who will rack up the hours just trying to get the basics right (because this senior resource / junior partner will also be attached to 10+ other projects so that they can close the deals, so just how much time will that resource have to even think about your existence?)

2. The mid-size consultancies.

While it is sometimes possible to get an affordable RFP from a mid-size consultancy, the reality is that it’s a rare occurrence (and your odds are about the same as achieving success with an average technology project which, as per Gartner, is less than 1 in 5, largely because they are never scoped and planned right, starting with the RFP), and most of you never will. As with the Big X, there are a number of reasons you’ll RARELY get an affordable RFP from a mid-size consultancy.

  • like the Big X, they want to get projects that keep their people busy (usually at more reasonable 3X to 4X resource hourly rates) as long as possible as they want to grow (and they totally miss the big picture that it is delivered value that wins repeat business)
  • while they are willing to be more impartial than the Big X, they have a few partners they prefer to direct any RFPs (and awards) to as they know the systems well (and can get the implementation work) and it keeps them front and center with the vendors who need to direct implementation work to a third party
  • they can’t afford benchers, so their recent grads are not only the top of their class who have shown aptitude for their domain, but they are balanced by intermediate personnel on the projects who can guide them and there’s usually always at least one senior person, but only the senior people can do the RFPs well enough on their own, so the day rates are almost as high as a Big X as the RFPs tend to be mostly senior and intermediate personnel

3. The niche consultancies.

The niche consultancies are your best bet of getting an affordable RFP, but the reality is that it’s still, unfortunately, hit and miss and it’s likely that less than 1 in 3 of you will see a decent rate when all is said and done (where we measure RFP spend against total system spend over five years and try to maintain the right ratio).

This is despite the facts that:

  • unlike the Big X and mid-size consultancies, they believe in fair costing and keep their bill rates in the 2.5X to 3X range (enough to cover their resources’ hourly rate, overhead, and a fair profit margin)
  • even if they have partnerships with a vendor or three, they tend not to favoured by the vendors who will never direct work to them (and only allow them to implement deals they bring) due to their small size and inability to rapidly scale up (like a Big X or mid-size), which means their bias towards any vendor, if it exists, is quite limited
  • they don’t have junior people, because they can’t afford benchers and resources that don’t deliver with their cost model, and only hire (high-achieving) intermediate and senior personnel, and focus primarily on those who can do small projects entirely on their own or with limited support

When you look at this, you should be able to get a lot of value for a reasonable amount of money. And, make no mistake, you do get value for money.

However, when you look at the total system cost that you can afford as a (smaller) midsize company, and then you look at the cost of getting that good RFP, the problem is that the cost of the RFP is more than you can afford (and should be spending). This means that you end up having to cut corners on the software (and get less from a preferred vendor or go with a more cost effective runner up) or forego more than a modicum of help from the consultancy (where you just get a few advisory days and hope your team to can capture enough of the brain-dump to put together something reasonable).

Even though this shouldn’t be the case.

So why are most niche consultancy RFPs not affordable (unless you are acquiring a mini-suite or significant advanced functionality that comes with a significant price tag and are a larger mid-size with the budget for it)?

We’ll get to that in our next installment.

e-Procurement Implementation Success Goes Well Beyond The Basics

the doctor was quite disappointed with this article over on the WorldBank Blogs on 10 success factors for implementing [an] e-Procurement System because all of these “factors” were generic success factors for the implementation of any technical system. Let’s look at them at a high level (and direct you to the article for a description of what the requirements are if they aren’t immediately clear to you):

Governance Principles
all projects need to be managed and governed, so this is pretty much a “d’uh!”
Transparency on Legal and Regulatory Frameworks
any platform that processes any personal, payment, or classified data HAS to adhere to Legal and Regulatory frameworks of ALL countries the corporation operates in, so this is obvious for any platform that requires it
Strategy Ownership and Sustainability
it’s classic project management, no owner, everything goes to cr@p
Implementation and Integration Challenges
preparing for this is just a given
Technical Infrastructure and SaaS-based Systems
all technology implementations need to integrate with the current infrastructure and SaaS systems that contain the necessary data, so this is pretty much a “d’uh!”
Training & Capacity Building
well, you need the capacity and the training regardless of the system being implemented
Engage Stakeholders Actively
without stakeholder support, it will be hard to get the resources for a timely, successful implementation of any technology
Align with International Standards
technology should always align with any regulatory standards in place
Clear Communication and Change Management
necessary for the success of ANY project, not just a technology project, so this is pretty much a super “D’UH!”
Data Security and Privacy
if the data is personal, payment, classified, trade secret, etc. etc. etc. then security and privacy is of more concern than the tech, so, another ‘d’uh!”

e-Procurement success goes beyond the basics. There are too many six, seven, and, for some multinationals locked into 5-year contracts, eight figure acquisitions that have failed to deliver on the promises made. This is because the selection, implementation, and utilization of such systems goes beyond most back-office tech to get right.

Selection

In our recent article on The Key to Procurement Software Selection Success: Affordable RFPs!, we noted that selecting the right vendor was paramount to success, and a critical requirement in this selection process was a GOOD RFP.

Furthermore, that RFP needed to specify, among a host of requirements:

  • typical use cases
  • target processes
  • globalization requirements
  • data migration requirements
  • integration requirements

Why are we calling these out? Because these define the key factors for implementation success!

Implementation

Key Factors are thus:

Primary Components / Modules
… that are needed to support the critical use cases and target processes, that need to be implemented and demonstrated first
Test Cases
that must be passed, in priority order, to ensure the use cases and target processes can be accomplished
… including multi-lingual use cases
that support not only the customer organization requirements but the supplier requirements
Data Migration Requirements
spelled out in detail, as well as cut-over requirements
Cross-System Bi-Directional Integration Requirements
spelled it in minute detail, not just push to the ERP … and considerably more than just a high level holistic strategy … when it comes to tech, the devil truly is in the details and chaos emerges when you overlook even one

Utilization

A system not utilized is a failed system, even if the implementation and integration goes as well as can be reasonably expected. Utilization is critical, especially early on, or widespread adoption will never be reached. This is why it’s paramount that the functionality required for the critical use cases be implemented and tested first so that utilization of key capabilities can begin as soon as possible, leading to adoption.

In other words, the basic checklist for technology implementation is nowhere near enough for the successful implementation of procurement technology — that success requires going deep.

Procurement should NOT be reimagined!

It’s not just vendors that have latched onto the Marketing Madness that we addressed in last week’s article where we tried to help you decipher ten meaningless phrases that are polluting the Procurement technology landscape, but consultants and thought leaders as well. And while the marketing madmen fill us with meaningless messaging, these consultants are feeding us with dangerous delusions that we can solve our problems by simply redefining Procurement as something it is not.

Procurement is not something to be reimagined as it is not something that should even be redefined at the core. The purpose of Procurement has not changed since the first known Purchasing manual, The Handling of Railway Supplies: Their Purchase and Disposition was published back in 1887, nor should it change. It’s the process of sourcing, acquiring, and paying for the goods and services the organization needs, and doing it in a manner that ensures that the products will meet the needs, at the best price, and show up at the right time — and that as many orders as possible are “perfect” (or, more precisely, problem free).

Key aspects are thus:

  • Supplier Discovery and Vetting (Risk and Compliance)
  • RFP creation or Auction (Product Service Verification and Competitive Pricing)
  • Award and Contract (Negotiation and Terms and Conditions)
  • Catalogs, Purchase Orders, Pre-Scheduled Deliveries, Auto-Reorders (“Buying”)
  • Logistics Routing, Delivery Scheduling and Monitoring (Risk Management)
  • Invoice Processing and Payment (Payment Confirmation, Fraud Prevention)
  • Quality Assurance and Inventory Management (Loss Minimization)

There is nothing to imagine here. And definitely NOTHING to re-imagine here. Now that supply assurance is still near an all time low (due to geopolitical instability, rampant inflation, unpredictable demand, etc.), it’s time to double down on what is critical and get it right. Not wander off to Imaginationland searching for a magical solution to tough, real-world problems.

New and improved processes might increase the chance of success (by decreasing the odds that something is missed), new technologies might increase the level of automation (and decrease the amount of manual [e-]paper pushing), but neither fundamentally change the work that must be done, the effort that must be made, and the human intelligence (HI) that must be applied to get the job done. No amount of “re-imagining” will change this. As we’ve said before, and will probably have to say again and again and again, there is no big red easy button, and no amount of imagining (or re-imagining) will create one. So, if someone tells you to re-imagine procurement. you tell them the same thing you should tell them if they spew Marketing Madness: CUT THE CR@P!