Author Archives: thedoctor

Hi-ho! Hi-ho! The PO will never go!

Purchase orders have recently made the news big time, as a result of Amazon pulling the plug on thousand of vendors who suddenly had theirs cancelled.

And while this story isn’t about the latest Amazon media mess, it is about the PO. With the increase in automation since the introduction of second generation e-Procurement / Procure-to-Pay platforms that could do automated m-way invoice matching to POs, goods receipts, or contract schedules, certain vendors have argued that the need for the purchase order is declining rapidly as there are so many other ways to validate an invoice or an order, especially if there is a contract, an expected fulfillment schedule, a database of agreed upon prices, and so on.

And while they are not needed in some well defined situations, they are still needed. As indicated in our piece four years ago explaining that the dream of Hi-ho. Hi-ho. It’s Off PO We Go! is a pipe-dream.

As we noted years ago, when there is no (master) contract, or in the case of services, no agreed upon rate table, how do you verify you are paying for the right goods from the right supplier at the right time at the right amount!

Now, it’s true you won’t need it for everything that is not on a (master) contract — a T&E expense, an invoice for off-contract services under a threshold, MRO products being delivered at the previous, accepted rate, etc. — but this is not the majority (by dollar value) of the off-contract organizational spend.

Furthermore, as the prophet clearly highlighted in a Plus+ piece last year on Spend Matters [Membership Required] The Consequence of Eliminating Purchase Orders, the results of this can range from errors and mistakes to outright fraud, either supplier-driven or internal.

You see, if there isn’t another document with all of the information needed to verify an invoice, the supplier could accidentally, or maliciously, charge the wrong price. And if it’s for a new SKU, with no prior price, there’d be no way to even flag that maybe, just maybe, the invoice should be manually verified before being auto-paid.

So even if you took all of the great advice that the prophet gave you, which allows you to minimize situations where you need POs, and enable better purchase controls, implement better e-invoicing systems, allow good suppliers to qualify for discounts or early payment, etc., you’re still at a much higher risk than if you simply create, and send, a PO which, guess what, like an invoice, could, and should, be electronic.

So, while the paper should go, the PO, and what it enables you to do, will never go. So implement the right systems so it’s auto-generated, auto-sent, auto-verified, and auto-matched in all appropriate situations and then you can almost pretend it’s not there. Almost.

How Time Critical Does Your Transport Need to Be???

Expedited transport is definitely the hot topic in the consumer world, and time-critical transport is still a hot topic in the JiT manufacturing world. But just how critical is the topic of “time-critical” transport?

We addressed this topic in the past, and looking at it again (as a result of some vendors promoting real-time logistics visibility), the reality is still that, for any Procurement and Logistics organization that is with the times and using the right technology, time-critical / expedited / rushed transport is easy but should only be needed very, very rarely.

Traditionally, time critical transport was needed when something went awry in the supply chain and a shipment had to be expedited to prevent a disruption or stock-out that could be disastrous to a company’s bottom line. Otherwise, unless you were talking about perishable deliveries on a non-refrigerated truck, proper planning mitigated the need for expedited shipment. This situation, of course, worsened with the introduction of JIT (Just in Time) Manufacturing and delivery in the supply chain, especially considering that not only have natural and financial disasters been on the rise since this paradigm became popular, but, as expected, so did disruptions as there were no longer weeks worth of buffer inventory to absorb a minor supply chain shock.

But if you have good visibility, proper planning, and the right tools at your disposal, whether or not you are JIT makes no difference — the odds of a disruption being so significant as to require expedited shipping are low.

Specifically, if you have:

  • multi-tier supply chain visibility,
    like the kind multi-tier risk management or supply chain visibility providers gives you (like Resilinc or SourceMap), and know about a disruption the minute it happens three levels down in your supply chain, and not the day after a product was supposed to reach your warehouse
  • access to modern platforms to find and secure transport in real time,
    like FreightOS or TenderEasy, then you can quickly get a truck when you need a truck and
  • license to global trade document platforms,
    like Integration Point or Amber Road that handle import and export compliance, including advance notification, that help you to insure there are no delays at the border

then you will be notified of potential disruptions well in advance and in time to take appropriate actions, and in the situation where it was an unpredictable disaster (such as a fire, earthquake, or flood) at your supplier’s DC just as product was about to ship, and a new shipment has to be made immediately from another location, your immediate ability to secure a new truck almost always alleviates the need for an expedited shipment — a need which is further alleviated by your ability to get your import, export, and compliance documents in order before the product ships, preventing unnecessary delays at the border.Basically, about the only time you should have to do an expedited shipment is if you were a medical organ transport company and a new donor heart, needed halfway across the country, just became available. Other than that, with all of the options available to you to prevent the need for unanticipated (rushed) shipments, or to get them under control as soon as the need arises, there just isn’t that much of a need for overpriced time-critical transport anymore. (Unless you’re still living in the eighties and using paper and fax to manage your logistics.)

Your thoughts?

Geek Cat Still** Says

You know I never
I never heard you talk so good
You never chat the way you should
But I like it
And I know you like it too
The way that I want you
I gotta have you
Oh yes, I do

You know I never
I never ever get home late
You know that I can hardly wait
Just to ping you
And I know you cannot wait
Wait to ping me too
I gotta chat you
Cause baby we’ll be

On the Facebook
In the Farmville pen
Behind the bushes
Until I’m begging again
In the chartroom
Lock the public out
And baby
Talk qwerty to me

Again, many apologies to Poison. Many, many apologies.

* He hasn’t changed his tune in eight years!

4 Strategic Sourcing Mistakes Businesses Should Avoid Courtesy of the Strategic Sourceror (Re-post)

The best way to get out of trouble is to avoid trouble in the first place. In a recent blog entry, the Strategic Sourceror outlined four common mistakes that a company can avoid to minimize poor spend management and operational efficiency.

Overlooking the Importance of Supplier Visibility

Having a clear understanding of supplier practices is essential in evaluating the risks and possible sources of disruption that are inherent in sourcing partnerships. Blindly entering a relationship with a supplier may result in a procurement strategy that is misaligned with business goals, and this could result in slashed profits in the future. For example, the strategy could be high quality to support the brand, but the end result could be poor quality and the resultant impact to the brand from the high defect rate could result in lost sales and slashed profits.

Failing to Emphasize Results

Because Procurement resides in the back office, it is often tempting to think of it as a service function and not a driver of productivity and profit. It’s critical to focus on real, measurable, and substantial results and communicate the message to the rest of the business. Like any business process, procurement management needs to impact the bottom line. When it does, and the message is communicated, Procurement, unlike Rodney Dangerfield, will get more respect.

Overlooking Contracts

Without written contracts with specific language, businesses won’t have adequate protection if a supplier relationship goes sour. That’s why contracts should be reviewed by a corporate lawyer before being signed. But just getting the contract right isn’t enough. It’s also important to make sure the terms are followed, rebates and discounts are collected, and contracts are renegotiated and not allowed to go evergreen.

Permitting In-House Inefficiencies

An inefficient internal procurement process can limit firms’ ability to obtain the goods and raw materials they need in a timely fashion. Be sure to install the appropriate e-commerce tools that will help a company identify potential suppliers, execute RFxs, conduct auctions, optimize awards, and strategically manage the maximum number of categories.