Author Archives: thedoctor

Twenty Years Ago Today

Exxon and Mobil sign a $73.7 B USD agreement to merge and become the world’s largest company at the time, now surpassed only by Walmart, the staple of the US retail economy.

As the world’s largest oil company, it produces almost 4 Million BOE a day, is the largest refiner in the world, and despite the rise of tech, is still one of the most profitable companies in the world.

And with the continued reliance on petroleum based fuels in ocean and air shipping, most of the world’s supply chain indirectly rely on its products.

We may claim it’s the information age, but the products we use and consume still rely on the holdovers from the industrial age to get us through.

RFX Creation – Kicking You When You Are Down (Part II)

Yesterday we explained how, just from an RFI perspective, many S2P “e-Negotiation” or “e-Sourcing” platforms kicked you when you were down and reeling from an unnecessarily intensive, and painful, supplier discovery process — a process that should be mostly automated (as per our lead up articles). But, as we all know, the RFI is just the first stage of the process.

Once a supplier passes the RFI, you need to

  1. actually create the RFP
  2. determine if you are going to invite a supplier to the RFP (and monitor the process once you do)

Generally speaking, creating an RFP is no walk in the park either as the platform is even less likely to contain a relevant RFP template, especially if you are sourcing direct materials or custom manufactured products and need details on processes, raw materials, warranty, maintenance, and delivery methods as well as detailed cost breakdown models. If the RFI process was manual and painful, the RFP will be ten times as manual and painful.

You will have to:

  • identify the relevant bill of materials for each product (and possibly build them from scratch)
  • identify the non-cost information required at each level (raw material, source, quality specs, etc.)
  • identify the cost models required at each level (and possibly build them from scratch)
  • identify the roll-up models for costs and quality scores
  • identify the evaluation models that you will use
  • put all this together into a cohesive and comprehensive RFI

When all you should have to do is:

  • identify the products you are sourcing

Since a modern system, especially one built for easy direct material sourcing, should automatically, for each product:

  • pull in the relevant bill of materials
  • identify the relevant non-cost information based on the compliance requirements noted in the RFI and organizational policy
  • identify the relevant cost models based on the bill of materials (and preferred production processes)
  • build the roll-up models based on embedded intelligence in the platform and defined relationships between the different levels of the BoM
  • apply a standard evaluation model for the category to the RFI
  • … and integrate all of this into a comprehensive RFP for your manual review

Once you have this RFP, you need to determine if you still want to invite the supplier, especially if you have more potential suppliers than you really need.

And, right now, platforms don’t help you here at all.

You see, you only want to invite the supplier if there is a chance you will actually make an award to the supplier in this, or a future, event. If the quality is too low, the prices are too high, the necessary services do not exist, or the necessary culture is not present, the RFP process will be a waste of time on both sides.

Now, you might say that there’s no way to know this before going through the RFP, but is that really the case?

No.

But we’ll take this up in the next part of this series.

RFX Creation – Kicking You When You Are Down (Part I)

If you are an outside observer of the S2P space, like an enterprise software analyst that covers the more traditional enterprise spaces like (ERP, AP, CRM, etc. ), you might wonder how in this day and age a startup that just offers e-RFX, e-Auction, and basic SIM — technology that has been around for 20 years — could not only survive, but in the case of some new entrants like ScoutRFP and Bonfire (which only have a fraction of the breadth and depth of the market leaders, see their analyst rankings in Spend Matters SolutionMaps) thrive!

Well, it all comes down to usability, efficiency, and effectiveness. Most of the first, and even second, generation platforms only focussed on the third measure of effectiveness, and only measured it from a financial ROI perspective on completed events (not on adoption, categories under management, suppliers under management, etc.). Efficiency only mattered from the viewpoint of the implementation or services team (and only to the degree necessary, if billable hours was a major revenue center, and the teams were keeping up, then efficiency was good enough). And usability, well, the software was digital and that was better than paper — so whatever the platform provided was deemed good enough.

But it wasn’t. And we don’t need to offer any proof. ScoutRFP and Bonfire wouldn’t exist if it was, and niche plays like EC Sourcing would not have not have quietly grown from niche players to full S2C offerings with a constantly expanding customer base that is as large as some of the more prominent S2P players (which, despite the abundance of marketing they throw in your face, only have a few hundred customers).

So why does RFX creation in most platforms kick you when you are already down (in the mud trying to scavenge for potential suppliers, as per our last two pieces on supplier discovery)?

First of all, when it comes to basic supplier qualification RFIs:

  • most platforms have limited templates when it comes to the data you need to collect for regulatory compliance
  • you have to manually identify which templates you will need to collect necessary organizational data, regulatory data, location and production data on the supplier
  • search is limited and determining which templates, generally incomplete, you can start from is difficult
  • new template construction (to build what is not present) or existing template modification is usually painful as it is not responsive drag and drop as it was developed using old-school frameworks on older versions of HTML and not kept up to date
  • you have to manually define gating and scoring scales on each template individually
  • there is limited workflow and you often don’t have the ability to define logical, conditional, workflows which will block a supplier as soon as a mandatory requirement is not met or include a template that is only required if a certain process or restricted material is used — which means you often have to go through multiple rounds (as you can’t ask a supplier to fill out anything not necessary or they won’t even answer the first email)
  • there is limited or no auto-scoring and many fields have to be scored manually

In comparison, a more modern platform will:

  • either provide templates, a repository, or integrations to partners that have the templates you need (or make it easy to auto-build them from document or spreadsheet imports)
  • will index core data requirements, compliance requirements, and industry requirements against products and services you source and automatically identify which data and templates will be required
  • automatically search your library to suggest starting template (sections)
  • help you build templates for newly identified requirements
  • allow you to build, modify, and conditionally link templates in a workflow using drag-and-drop and responsive design
  • automatically define critical gating questions based on organizational policy and mandatory compliance requirements and make it easy for you to define additional gating questions
  • allow for the definition of auto-scoring across all fields and RFI sections
  • auto-score each RFI response for you

Complex RFIs that used to literally take days (upon days) to build in the first (and second) generation platforms can now be built in a matter of hours. (We’ve heard multiple, verifiable, stories of some companies that used to spend two days building an RFX on Industry Leading Platform X switching to someone like EC Sourcing and building the same RFX in 15 minutes. That’s why one of the industry leaders released a brand new, slimmed down, redesigned platform targeted at the mid-market last year. You might want the power of tank, but if it takes way too long to get from 0 to 60, you’ll never use it when everyone else has fighter jets that get to the destination first.)

But if only this was the whole story!

Supplier Discovery Should NOT Be a Kick in the Pants (Part II)

But, as clearly outlined in our last article, it still is. Big Time. You can spend weeks just trying to identify, and do preliminary identifications on, potential suppliers before you even start your supplier discovery project in earnest.

Why?

Well, as pointed out yesterday, today’s modern S2P platforms, marketplaces, and even supplier networks just don’t cut it.

And, as a result, you are left with the age old tedious process of:

  • scavenging potential supplier (names) from wherever you can
  • reviewing their product and service offerings to see if they might fit
  • trying to find real customer references to validate they are a real supplier and the offerings that caught your attention are real offerings
  • qualifying the suppliers for participation

Which, to be honest should be completely unnecessary more than two decades after strategic sourcing hit the market and almost two decades after the first supplier networks hit the market. By now you should be able to:

  • use a large, global network that contains relevant suppliers to you to identify potential candidates
  • use natural language processing and machine learning based similarity match algorithms to verify that they have products and services that are a close match to what you are looking for
  • use community intelligence on community forums from verified customers to satisfy yourself that they are a real supplier with real self-produced products that meet someone’s needs
  • use RPA to crawl open and accessible information sources to pre-populate as much qualifying information as you can find
  • use AI models to predict the likelihood that the missing information will be to your satisfaction
  • use embedded templates, automated workflows, and RPA to collect the remaining information from suppliers and third parties who maintain the needed information on the suppliers
  • use self-scoring gated models to validate the suppliers as candidates for your strategic sourcing event

and, moreover, you should be able to do all this with the press of a single button if you want to.

When you press “find suppliers”, the platform should

  • automatically query the relevant networks (both and in-platform and third parties, because one network is not enough) to find potentially relevant suppliers
  • automatically use NLP on their associated product and service listings (in the platform or on accessible platforms if you have access to Amazon Business, Alibaba, or a third party catalog provider) to insure potential matches
  • access built-in and third party community intelligence to verify they have verifiable customers who will verify the authenticity of their offering
  • use RPA to pre-fill as many of the RFI fields as possible
  • use AI on the RFI, similar suppliers, and public product specs to infer the likelihood of the missing fields being satisfiable (yes, high score, etc.)
  • present the list of candidate suppliers for the event
    and once you select the ones you want to invite
  • automatically manage the process of getting the RFI completed from the supplier and third parties with supplier information

And while no one platform does this yet, progress is being made on this front. If you choose a S2P platform that doesn’t lock you into its proprietary network and integrates with a provider of an open third party network like Tealbook with more advanced capabilities, you can

  • push a high-level description of your requirements to the third party network (3PN)
  • the 3PN will search the networks using its AI technology to find suppliers that a match the qualifications on tracked dimensions (based on the various types of metadata it extracts on suppliers and offerings and key fields)
  • the 3PN will then present the matches it finds ordered on the community intelligence it has on the suppliers (from validated third party network participants who have certified the supplier has offerings in key categories)
  • pull in the subset of suppliers you want to further qualify with an RFI with as much information that is available from the 3PN and the other third parties your S2P platform integrates with

It’s not perfect as you’ll still have to manually drive the RFI (as its unlikely your provider will have as much automation as you’ll like, a subject we’ll cover in another set of articles), still have to manually review the products and services used for the third party match (which will not be as detailed as your internal BoM), still have to review the community intelligence (just how “like you” were the organizations that recommended the supplier), and so on, but the level of automation provided is still substantial and can save you, in our estimates, up to 80% to 90% of the effort. And that’s substantial. For many organizations that had to spend a week finding potentially new innovative suppliers for their RFX process, they now have the answers with less than a day of manual effort.

And if they adopt a modern platform that automates a lot of the other tedious work in the strategic sourcing cycle (which is always 80% to 90% tedious grunt work that can’t even be classified as tactical), they can now overlap three or four sourcing events and triple or quadruple the events they push through a year — and that’s the real key to spend under management and value generation.

Supplier Discovery Should NOT Be a Kick in the Pants (Part I)

But, as may of you know, it still is.

Even if you just spent a cool seven figures on a brand new S2P system.

Why is this the case? Well, it’s basically because:

  • many vendors assume you already know the vendors you want to strategically source from and
  • the rest think you will be more than thrilled with their private network

But here’s the problem. The entire point of a strategic sourcing project is to identify the best supplier for your organization whether or not you know already know about the supplier and whether or not you have ever done business with the supplier in the past. This means that much of the time the supplier won’t be in your database and some of the time it won’t even be in your provider’s network, no matter how many (millions of) suppliers are in the network.

The reality of the situation is that a S2P provider’s supplier network is built from the suppliers of its customer base, and most of its customers tend to be in a small number of industries, serving specific markets, and sourcing from other specific markets — so unless you are in the same industry, serving the same markets, and sourcing from the same markets, the chances of the new supplier you need being in the network is not nearly as good as you might think it is, even if there are millions of suppliers in the network. (Some of which might not even be active anymore, and some of which might never have been active.) Fifty suppliers for every product or service you don’t need are fifty suppliers that are no good to you.

So you are left in the situation where you have to:

  • scavenge potential suppliers from wherever you can
  • review their product and service offerings to see if they might fit
  • try to find customer recommendations to validate the validity of their offerings
  • qualify the suppliers for participation

And all of this takes time.

Scavenging means you have to go out and look under nooks and crannies just to get a few names. Not just Google searches (because many suppliers aren’t listing their key capabilities in a manner you can easily search among millions of hits. Local associations. Co-opetition. Multiple on-line directories and marketplaces. Even the yellow pages. Not a very efficient method given that we are supposed to be entering the age of cognitive sourcing where tactical work is done for you and all you are left with is the strategic analysis of critical decisions.

But the time-suck doesn’t stop with the scavenge. Google, associations, colleagues, on-line directories, yellow-pages, and your mechanic (because you are desperate, after all) are going to know of suppliers in your industry that might be able to serve you, but they are not going to know your specific needs and the relevance of the recommendations will be anywhere from spot-on to miles away from what you need.

So you will have to review multiple products and service offerings to see if it’s even worth trying to qualify the suppliers for an invitation. This can take anywhere from a half hour (if the offerings are way off) to a few hours (if the offerings are close, but not necessarily close enough).

And then there’s the task of trying to find references that you can trust. Online reviews don’t count, those are easily faked. You need to find customers in your industry or, better yet, co-opetition that will at least certify the validity of their service offerings, if not recommend them.

And then the big time suck starts. You have to invite the suppliers to participate in a qualification RFI where you validate the basic business requirements for all suppliers, the basic industry and regulatory requirements, and the capabilities you require for the products and services you would consider them for. Depending on the industry, geography, and products in question, this could be dozens of pages of responses that need to be validated to meet all the business, regulatory, and product compliance requirements.

This can be weeks of manpower spread over even more weeks to complete — all before you can even start a strategic sourcing event! Ouch!

(And now you understand why we said in Friday’s post thatit’s not the marketplace or the network … it’s the facilitation, and supplier discovery is one core capability that modern platforms are not providing.)