Author Archives: thedoctor

Advanced Sourcing Will Not Disappear If You Figure It Out!

There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable. There is another theory which states that this has already happened.
Douglas Adams

Regardless of this theory is correct or not, advanced sourcing is not the universe … it’s not even the universe of enterprise applications (although it’s becoming a pretty significant part). As a result, your organization should not be scared to acquire, learn, and master it. However, given the continuing rather low uptake of strategic sourcing decision optimization and advanced hybrid spend analysis (that uses machine learning and embeds prescriptive analytics), one would think the average organization is quaking in their boots.

And the answer is not to wait until the application interfaces are simplified enough so that it’s just point-and-click to select a model, accept the default constraints, run the scenario, and accept the result. Just like a top n report in spend analysis will only identify a savings opportunity once, a canned optimization scenario will only identify a significant savings once.

Nor is it the answer to wait until your preferred provider proffers a solution to you. These are solutions you should be seeking on your own, not when your provider brings them to you because every day you wait is a day another opportunity passes you by. And with pressures mounting to generate value, how many opportunities can you afford to miss? None.

So don’t wait. Figure it out. It won’t go away. It won’t change instantaneously when you do. And you won’t have to learn it twice. So just do it.

What is Visibility?

This is a term that has been overused and abused by Supply Management vendors for years who like to claim that their tool will give you unprecedented visibility into your supply chain, but just what does that mean? If you look up the definition, the first (or second) definition you’ll find in many dictionaries is something along the lines of the state or fact of being visible, which isn’t very useful when visible is defined as that [which] can be seen. So what do we have to see?

Well, if you talk to many vendors, you have to see the data is. Specifically, the vendor might tell you that you need to see the data on where your order is in terms of production, shipment, or delivery. And this is good, but it’s not enough. While this will tell you that production on an order is three (3) days behind, it won’t tell you why. Is the plant recovering from a backlog, and about to put your order into overtime production tomorrow? Are they suffering from a worker shortage, or strike, and your order is delayed another week? Or have the components and/or raw materials not yet arrived? And if it’s the latter situation, why? Is it a transportation delay? A production delay? Or a raw material shortage that may take months to correct? So you need visibility into the status of your order and all of your supplier’s orders that impact your orders. But this isn’t always enough.

While it would be great to know as soon as a delay occurs that could potentially impact your supply chain, and give you more time to respond and potentially create and/or implement mitigations and counter-measures (such as finding an alternate source of supply or stepping in to help the supplier solve the problem), this still doesn’t give you any indication of problems that could be brewing.

That’s why other vendors try to sell you risk-focussed data solutions such as financial viability reports (from credit-based data) and activity reports (from import/export data). But these solutions only allow you to judge supplier viability, they don’t allow you to determine if an external event in the supplier’s locale (such as war breaking out or a likely natural disaster) could take the supplier out even if they are financially viable and low-risk from a business perspective.

So other solutions try to sell you country-based risk assessment solutions with data on each of the locales you are doing business with. And this is a type of visibility. As are sustainability tracking solutions which track sustainability data (with regards to environmental, legislative, and other types of compliance data) to try and predict current and future supplier health based upon a sustainability score that goes beyond pure financial data. And this is another type of visibility.

But then not only do you really need to understand your current costs, but your potential costs when doing a Sourcing event, based on current market rates and expected currency fluctuations and transportation costs over the contract term. It’s also important to know not only current tariffs and taxes, but any proposed changes and the rate of change associated with those tariffs and taxes. Some countries (like Brazil) will change import rates across categories almost weekly. Others will only change once a year or when new trade agreements are struck.

And you need to see usage. If you bought a solution for the entire sourcing department, is the entire team using it? How often? And how does that compare to how often they could be using it? If 30 categories should be put out to bid over the course of a year, but only 20 are, why? Is it because a couple of users are still giving contracts to incumbent vendors without proper bids? Is it because the old curmudgeon thinks his 3-bids-and-a-buy spreadsheet approach is superior? Is it because the tool makes it so damn difficult to create an RFX with all the necessary attachments (because your sourcing 100 line item bill of materials where each line needs its own specification attachments and the buyer has to upload them one by one) that the team only has time to do 20 categories? You need to know.

And if you had all these solutions, you could certainly argue that you had supply chain visibility, but the question is, how complete is it? The reality is that you only have data visibility, and while that’s a great start, supply chains don’t run on data alone. They also run on processes … processes used to plan the supply chains, manage the supply chains, and correct them when things go wrong. How much visibility do these solutions give you into your processes?

Think of your average sourcing, procurement, and even BoB Source-to-Pay platforms. How many of them have the ability to even design basic project management templates with workflows, milestones, approval chains, party, and counter-party obligation requirements that give you the ability to plan, track, and maintain visibility through the entire process? There’s the market research, the sourcing, the contract negotiation and lifecycle management, the supplier relationship management and development, the day to day procurement, the inventory management and replenishment, the MRO, and so on that needs to be done, process oriented, day to day. And you need visibility into that too!

And, even if you have all of the data and process visibility described above, is it enough? How much do you need to see to be confident that the chances of an unpredicted event are sufficiently low and/or the chances of you not knowing about an unpredictable event soon enough to implement mitigations are sufficiently low? It’s hard to say. It probably depends upon your operation, your risk exposure, and the strength of your supply chain and supplier relationships. But it is safe to say you need a significant amount of visibility, and that you should starting figuring out what that is today.

What Makes a Good UX? Part II “Smart Systems”

A couple of months ago, after we sang Bye, Bye to Monochrome UIs, we indicated that we were beginning a series that chronicles what makes a good UI, and more importantly, a good UX (User Experience) in a modern Sourcing or Procurement system. This is critical because systems that are not useable do not get widely adopted, and systems not widely adopted never deliver the promised value.

In our first post on What Makes a Good UI where we noted that the full series was being published over on Spend Matters Pro [membership required] as it is the result of a deep long-term multi-blogger collaboration (led by the doctor and the prophet) designed to identify what should be (and not what ay given vendor will try to promote based on what they have), and sponsored by Spend Matters, we outlined some of the fundamental requirements of a UI / UX for any Supply Management application which include, but are not limited to:

  • integrated, pervasive, guidance
  • … that is based on true expertise and historical use
  • “touch-less” automation wherever possible
  • extremely context aware
  • mobile support and mobile first in the field
  • messaging as a competitive advantage

(And if you want deep coverage on these topics, see the first instalment of our full series on Measuring the Procurement Technology User Experience: More Than Just a Pretty Screen over on Spend Matters Pro [membership required].)

But, as we stated, these were just the absolute base-line requirements. In Parts II and III of our full series, we outline the next set of core functionality that should be pervasive across any Supply Management platform that you acquire. And in future articles, we dive into e-Negotiation, e-Auctions, Optimization, Spend Analytics, SXM, CLM, Requisitioning and Shopping, Procurement and Catalog Management, and Invoicing … just to start. But we’re getting ahead of ourselves.

One of the core requirements we reveal, and dive deep into, in Part II in our article on Smart Systems and Messaging, Chat, and Collaboration is smart systems.

As per our article, smart systems drive integrated guidance leveraging new “AI” techniques -— better termed automated reasoning (AR), as software isn’t truly intelligent —- that adapt and learn over time. They do this by mixing semantic technology, sentiment analysis, key-phrase driven expert systems and other machine learning techniques with history to determine what the user is doing and what the user wants to do.

For example, a smart system in sourcing will detect if there has been a full event/process before run by a user or similar peers in an organization, and allow the user to instantiate a new instance (by copying the template or previous event). Or, in the case of one-time requisition in which competition could benefit the outcome, a smart system can detect an automated spot-buy event that can be run against prequalified suppliers hands off, which the system suggestions.

And that’s just the beginning of what a smart system could, and should, do for you. For deep insights into not only where the bar is today (as leading providers start to release first versions of these guided systems), but where the bar will be by 2020, check out our post, which also dives deep into the Messaging, Chat, and Collaboration functionality [MCC] that a modern system should support. [Hint, more than just integrated e-mail or first generation chat!]

And stay tuned for the next part, coming later this week, on the final set of core requirements that we feel a modern Supply Management System cannot be without!

P.S. If you are a vendor invited to the Sourcing, SRM, CLM, or Spend Analysis Solution Map, this is a series you do NOT want to miss!

Pay the Piper on Time or Pay the Price!

In response to abysmal payment terms of 120 days or more, which were seriously crippling smaller suppliers, the UK has instituted a requirement for large businesses to report on their UK payment practices twice a year, with failure to do so a criminal offence with unlimited fines. The goal is that the mandatory reporting requirement, which requires companies to report on the average time it takes to pay invoices for the majority of contracts (0-30 days, 31-60 days, and 61+ days), will encourage businesses to improve their payment practices as a result of transparency and public scrutiny.

It’s a shame that this requirement only exists in the UK, because not only should you know, and be prepared to report on, how fast you are paying your suppliers, but you should be striving to pay all of your suppliers within 30 days of receipt of a valid invoice, because your success depends on their success, and while a happy supplier, like the pied piper, will catch and lead the supply chain problem rats away, an unhappy one will allow those problem rats to multiply, and possibly even aid in their reproduction and spreading.

Suppliers are critical to your success. They not only provide the raw materials, products, and services you need, but often the raw materials, products, and services your customers need — and if these raw materials, products, and/or services are not of high quality, delivered timely, and supported enthusiastically, your customers will not be happy. Unhappy customers, especially those not under or nearing the end of their contracts, tend to defect.

A supplier is only likely to provide high quality, supported, timely products and services if it is happy. And believe the doctor when he tells you that a supplier will NOT be happy if that supplier is not paid on a relatively timely basis most of the time. Like you, suppliers need predictable cashflow and if you give them a cashflow nightmare, they will not be too concerned about giving you an inventory forecasting or customer satisfaction nightmare.

So don’t rely on a forthcoming guidance or industry initiative to tell you when to pay the piper. Just pay the piper and reap the benefits. (And if you not only pay on time, but pay early, you’ll be a customer of choice, and those customers tend to get all the benefits.)

The M&A Mania Ain’t Over Yet … But …


 

With one hand, pick up your copy of The Hitchhiker’s Guide to the Galaxy, with your other hand grab a Pan Galactic Gargle Blaster, have a seat, and read a few random entries while you have a nice relaxing drink. And definitely don’t panic.

In fact, don’t even give the acquisition a second thought right now. Why? The reality is that, for at least six months, nothing is going to change and you don’t have anything to worry about in the short term. First of all, takes a while for companies to figure out whether they are going to keep the tech, and then if they are going to merge it or keep it separate. Secondly, what to do with the teams. How they integrate (and who stays and who goes) and work together. Then the offices need to be harmonized. Etc.

Now, it’s a very real possibility that the company might have bought your provider just to squash the competition and/or try to get you as a customer, and that’s okay, because not only will it not happen overnight, but if you’re doing your job, you’re (re)evaluating your solution options at least once a year (before budget season) to not only identify what you are missing, but whether or not your current tech is still up to snuff. So, if the worst happens, or looks like it will happen, you already know who your likely options are and can start that RFP process.

Plus, if a company is paying 10, 20, 40, 100 million for another company, they probably don’t want to lose you as a customer (as they can’t afford to lose anyone at those prices for a few years), so even if their plan is to kill the technology and move you onto their platform (which will, hopefully be better … by the time they try to do so), they’re not going to force you overnight … they will honour your contract (which you signed and ensured had a change of ownership clause to your liking, right) and likely present you with a long term plan.

In other words, you have time to figure things out, and, to be honest, you should be moving much faster than the vendor anyway. So take another sip of that Pan Galactic Gargle Blaster and don’t panic!