Category Archives: Best Practices

Is it time to Plus-size?

By now, you’ve probably noticed that the doctor has been contributing on a regular basis to Spend Matters CPO and Spend Matters PLUS, the first of which, like SI and Spend Matters classic, is free, and the second of which is paid (and costs 19.99 / month).

You’re probably wondering why, as SI has always been, and has always been free, as Spend Matters basic, and the doctor will not promote any blog that is not free, because of his belief that if you’re going to have a blog with the intention to inform and educate, you make sure its accessible to all.

However, Spend Matters PLUS (a subset of their PRO business offering) is not a blog, and, sometimes blogs are not enough. Why?

Unless a blogger has a large amount of sponsorship money, or is independently wealthy, (s)he can only spend so much time on the blog on a daily basis, and only impart so much knowledge and wisdom to you. (And if a blogger does generate such a significant income from sponsorships, you have to question how complete the material is as many sponsorships come with a high price tag*.) But, as SI has clearly explained over the past year, you are in Procurement hell, facing dozens of damnations on a daily basis, and the knowledge and wisdom you need to get smarter and more efficient is much, and the amount any one blogger can impart is minimal.

When it comes time to select a new solution, define a new process, or define the next challenge, you need a lot of knowledge and a lot of wisdom, and the chances that any single blog, or blogger, will have recently written everything you need is slim.

You could go to a big analyst firm or a niche consultancy to get a customized report or recommendation, but that costs a lot of money, and if you’re not sure what you need, it could be a waste of money. But if you have more knowledge and insight on the topic, you can narrow in on what you need and if you do need to hire an analyst or a consultant, you can focus them in on your needs, spend less, and get more.

Over on Spend Matters PLUS, the prophet has assembled a team of experts who are contributing detailed pieces on technology, process, and relevant topics that you as a Procurement professional will need deeper insight on, at some point over the next year, on a regular basis. In addition to the prophet, who is an expert on P2P, marketplace analysis, M&A, and solution evaluation, you have regular contributions from:

  • the maverick who is the top analyst and supply management framework developer in the space,
  • the anarchist who is one of the leading operations research, supplier management, and process evaluators in the space, and
  • the public defender who is an expert on procurement process and public sector procurement and an international correspondent

among other experts who chime in from time to time. And the articles are deep. The average length of the articles that the doctor has been contributing on are 4 pages. That’s about 3 times the average length of an SI post. And most of the articles are part of in-depth multi-part series that give you more information on a topic than most analyst firms will.

Now, is it right for you? That depends. If you are a lucky one who works for a progressive Procurement organization, then you might have subscriptions to analyst firm research and market intelligence firm publications or training academies that provide you with a wealth of knowledge and not need much more. But, if you work for an average organization which frowns on you taking the time to even fill out a subscription for a free publication, it’s more than you could ask for given the price.

SI’s recommendation is that it’s worth it. And the recent series the doctor has collaborated on, including multi-part series on Contract Lifecycle Management (platforms), Supplier Relationship Management (platforms), Marketing Spend Management, Direct Material and Commodity Spend, among others, are among the most in-depth and encompassing series on the subjects you will find anywhere. It’s not a replacement for SI or Spend Matters (CPO), but a resource that fills in the gap when your organization won’t pay for the knowledge you need and you’re forced to acquire that knowledge yourself. As this is only the second paid resource SI has ever recommended (the first being the NLPA for new Procurement professionals who still need the foundations), you know there has to be something there.

* It’s sad to say, but some companies won’t sponsor unless they get one or more of the following: final say over what is said about them, final say about what is said (or not said) about their competition, the right to guest post whatever they want on a schedule, the right to whatever marketing or registration lists you have, and/or the right to write their copy and have you stamp your logo on it (and both SI and SM have seen examples of this on “blogs” in the past — sometimes the copy wasn’t even edited and was clearly written by an internal PR person of the company the “brief” was about who couldn’t even run a simple spell check), etc. Finding sponsors who will support pure education, and not request anything more than a simple fact check on pieces on them, is a lot harder than a reader or aspiring blogger might think.

You Might Be Getting the Basics Right, but That’s Not Enough

Last November, the public defender ran a great post over on Spend Matters UK on how “Procurement [is] Still Not Getting the Basics Right – and it’s Happening Too Often” and that’s not only why Procurement is often getting a bad rap, but why Procurement is getting a bad deal.

Case in point, the example given by the public defender where a recent tender used a complex scoring mechanism that scored “price” and “discount” separately and, even worse, weighted early payment discount higher. As a result, a tender of 100 with a 3% early payment discount got weighted higher than a tender of 95 with a 1% early payment discount! In other words, a best case cost of $97 was preferred over a best case cost of $94.05 — an overspend of almost 3%! That’s outrageous.

Another case is point, suppliers of complex services get invited to participate in electronic sourcing events with no prior engagement, and a tick-bock procurement process with no scope to include references, case studies, or suggest site visits for creative discussion. How should such a supplier expect to be judged, if they even expect to be judged at all? This is the well-known classic three-bids and a buy when you already have the bid you plan to accept. A smart supplier will not bid.

Now, as a regular reader of SI, that’s not the common practice in your Procurement department, but it doesn’t mean the common practice is good enough. Just because you know to weight all price factors in unison, that doesn’t mean that the weighting is right. If quality, reliability, delivery time, guaranteed delivery of supply, or another factor is critical, it needs to be weighted as highly. No point getting a 3% unit discount if you lose out on 20% of sales due to late shipments and stock outs. All of the critical factors need to be included and weighted, and, just as importantly, the suppliers must be made aware of the criticality of each factor so they can determine whether or not they even want to bid. If you need 15 days delivery, and a supplier can’t guarantee less than 21, the supplier needs to know that up front. Otherwise, they will get upset that they wasted time bidding on a tender they could not win.

Similarly, it’s not enough to do a proper, verbal, invitation over the phone, give the supplier a chance to include references, case studies, and suggest alternative proposals, if you know that one of the critical requirements of the bid or organizational preference (or prejudice) would preclude the supplier from getting the award. It’s not professional to invite the supplier unless you believe the supplier has an honest chance.

It’s not enough to do the process right if you want to be the BEST Procurement organization. To be the BEST Procurement organization you need the best process and the best ethics. You need to be known as the honest buyer who only invites suppliers who will be evaluated fairly and have a fair shot of winning the business if they are willing to tighten the belt buckle and make an honest effort of putting the best proposal forward. Then, when you make the award, no matter who gets it, chances are, you will be among the customers of choice from day one because you wanted to be both the best Procurement organization and the best customer.

So get the basics right. And then do one better.

Do You Have Your 2016 Supply Risk Management Game Plan?

Here at SI, the doctor certainly hopes so because you are going to get hit with at least one disruption this year, and chances are it is going to be fairly significant. (I.E. one that will result in, at least, a 3-month stock-out if not promptly mitigated, and not a 3-day stock out that, unless you are Apple launching an iPhone, won’t affect sales noticeably.)

As regular readers know, risk is still increasing, and the odds of your organization not getting hit with at least one significant disruption over the next 12 months is, at best, 1 in 10. You have better odds of winning a prize in a Lotto 6/49 draw (in Ontario, Canada where you win a Free Ticket and effectively get your investment matched on the next draw when your ticket matches 2 of 6 numbers) than of not experiencing a significant supply chain disruption over the next twelve months. Ouch!

But you’re overworked, underpaid, and not trained in risk management and probably don’t have a game plan yet. So what can you do?

Well, you can start by checking out the doctor‘s and the maverick‘s recent four part series on “Your Supply Risk Management 2016 Game Plan” over on Spend Matters Plus (membership required) which dives deep into how you can best define manage your supply risk programs. This series:

  • defines the types of supply disruption, product cost volatility, regulatory compliance, and reputation risk you need to plan for
  • explains why you have to think global and implement local to develop an effective strategy
  • gives you strategies to identify primary risks, mitigations, indicators, and monitors
  • helps you understand how you can align risk and reward to get support
  • helps you understand how to get more C-level visibility
  • and presents a scoring methodology that demonstrates business impact, which is critical to getting C-Level support

All four parts were up as of last month, and all four are a must read for anyone who needs to get a grip on supply risk and how to handle it. Don’t wait until it bites you in your backside three days after a critical order was supposed to arrive (but didn’t because the tier 1 supplier decided not to tell you when the tier 2 supplier didn’t supply the raw material needed for production, which is no longer available because a mine collapse reduced the available, limited, global supply by 10%). The bite a supply disruption can take out of your business is much worse than a boghog will take out of your backside. So SI strongly recommends you check out the following now:

  • Part   I: Supply Risk Definitions
  • Part  II: Developing Strategy
  • Part III: Risk and Reward
  • Part  IV: Measurement and Management

Marketing Mayhem Got You Down? Maybe It’s Time to Master the Marketing Way.

In many organizations, Marketing is still one of those sacred cow categories that Procurement has (very) little influence over but yet often accounts for (up to) 20% of spend. It’s also one of those categories that, like packaging, logistics, and MRO, straddles the boundary between direct and indirect (which are, as you know, two categorizations that SI despises because it’s strategy and complexity that matters). And, even though it (should) have a substantial impact on sales and revenue, the reality is that it has a much greater effect on the bottom line as an average marketing organization is overspending in the double digit percentages on a significant percentage of its spend — especially when the spend is on consumables (like print) or commodity services (like website design, social media marketing, or production overhead costs).

But mastering the marketing way is not easy — marketers, like financiers, have their own language, their own modus operandi, and their own tastes and in each aspect are often quite different than Procurement, who they tend to distrust because they tend to firmly believe you have to spend (lots of) money to make money, so Procurement’s agenda of reducing spend runs counter to everything they believe in. And, conversely, Marketing’s traditional focus of spending their entire budget to raise brand profile and sales (even if not absolutely necessary) runs counter to everything Procurement believes in.

But this is just the tip of the marketing mayhem that Procurement has to get a grip on if it wants to help the organization get a grip on marketing spend. In order to even get through the door and get a foot in the marketing department, Procurement not only has to appear non-threatening and not focussed entirely on spend reduction, but has to talk the talk (and master the marketing lingo), walk the walk (and dress for marketing success), and live the life (to the point that they are comfortable with the marketing way).

But this just get’s Procurement in the room. In order to get Marketing to listen, the “savings” message has to be buried, and the focus has to be on what marketing cares about — helping them get the best creative talent and ensuring they have as much money as possible to do this. (In other words, it’s about helping Marketing achieve “cost control” on non-value added products, like print, and services, like commodity social media campaign management, web design, or production house services.) The best value marketing can bring is a campaign that increases brand value (perception), and this takes the best talent, who want the top dollar. Procurement has to be able to convince Marketing that they can help Marketing do this by better cost control and better processes.

Then, once Procurement get’s the core messaging right, they have to bring the right process messaging. Some Marketing departments are still in fax, email, and spreadsheet hell when it comes to tenders, bids, and negotiations. They don’t have good supporting platforms, processes, or tender management support. This is the value — and power — that Procurement can bring. But the messaging has to go beyond the canned e-Negotiation messaging that Procurement was sold on. Marketing projects are not typical products or services and Procurement has to understand this to get Marekting’s support.

Procurement has to understand Agency (Lifecycle) Management, the importance of scope of work, the nature of agency search consultants, market intelligence (for marketing), and campaign management, among other critical marketing terms and techniques. When you put it all together, the education and understanding needed to even approach the sacred cow marketing spend is quite considerable indeed, and the education available to you quite limited. Until now.

Over on Spend Matters Plus, the first three parts of a new six-part series on How to Get Marketing Spend Under Management by the sourcing doctor and the spend anarchist are up for your educational pleasure. This in-depth series, which will take you through mastering the marketing way, understanding the value drivers, engaging executive support, bringing a message of structure and support in agency management, going deep on tender support, and agency intelligence, is just what you need to understand marketing and finally get marketing spend under control in 2016.

We hope that this ground-breaking first-of-its-kind series is just what you need to take your organization’s spend management to the next level. For those of you wanting to dive in, here are links to the first three posts:

  • Master the Marketing Way
  • Understand the Value Drivers
  • Engage Executive Support

Enjoy!

The Marketing Spend RFP – Everyone is debating over the death of it — I think it needs to be improved Part II


Today’s guest post is from Mat Langley, a Strategic Advisor and Procurement Executive with 14 years experience in leadership roles in strategic sourcing and category management in Europe, Africa and Asia across Finance, IT Outsourcing and Oil & Gas industries who is currently associated with Shortlist.co.

In this post I am suggesting three areas the tools we’re implementing need to change to give Marketing what they need and then I’d love to hear any more ideas/suggestions that you have.

The ideas below are based upon the fact that a significant percentage of marketers (greater than 50% according to a July study by Walker Sands2) believe that we’re not investing enough in the right amount or the right type of solutions for them.


eMarketer.com Marketing Attitudes
1. The tools we’re providing need to improve usability – day 1

A recent international survey of Procurement Executives by Ivalua shows that we are focused on transforming the toolsets we’re using today — 80% of us consider Digital Transformation an opportunity3. That’s fantastic – now our focus needs to continue finding tools that are simple for marketers to use — on day 1 — not year 1. Preferably they should have modern interfaces and be SaaS so Marketers don’t have to use one brain at home and another at work.

2. The tools we’re providing need to improve access to qualified agencies

With the significant increase in channels and the number of content components that need to be created – access to a broader set of qualified specialist agencies to meet campaign needs is required. We need to provide tools that let marketers find, engage and then partner with agencies big and small across the specialist spectrum regardless of whether they are across the street or across the globe. And no, I’m not recommending that long-term relationships or that strategic and broad partnerships aren’t important — I’m simply pointing out that Marketing needs an agile toolset to deliver against compelling (and evolving) challenges — and they need access to partners ‘on demand’. This needs to be done in a way that meets our obligations to protect the organization commercially while bringing in the best and brightest vendors.

3. The tools we’re providing need to improve the creation of Request for Partnerships (RFPs) – perhaps they could even be user friendly?

Everyone in the organization has too much work… We need to provide tools that allow Marketers to find and share best practice workflows, templates for briefs, easy access to current best practice questions and that have the maximum amount of automation built-in for comparisons, approval workflows, agreement signatures, and so on. And our tools need to integrate with other tools marketers are using to get the job done – whether that’s Dropbox for file storage, Slack for communication, Office365 for email and yes, even your ERP system! And most of all the tools we choose need to help engage agencies and build long-term partnerships – not drive them all into a single box as described by Kirk Cheyfitz in his piece on ‘6 New Reasons to Kill the RFP4:

I think the fact that you put your RFP out only to agencies you really like is a demonstration that it wasn’t too closely allied to the mass, mindless cattle calls that I rail against. Then you actually seem to ask open-ended questions that invite the respondents to define or re-define the conversation. And that puts you completely outside classic RFP territory. Even I would respond to an RFP like that.

I believe that with a renewed or for many an on-going focus on the above 3 items we can align with Marketing and let them take control of their Request for Partnerships which will, hopefully with the right tools, lead to RFPs being done in days and weeks – not months and with less frustration and pain for all stakeholders involved: Marketing, Procurement and Agencies. This should lead to more of the Marketing spend being influenceable and competitive, thereby addressing both obligations of procurement to the marketing team and the broader organization.

Thanks, Mat.

2 Walker Sands State of Marketing Technology 2016 Understanding The New Martech Buyer Journey
3 Ivalua. (2015, 3 November). “International Survey Procurement Executives”, PROCUREMENT IN THE DIGITAL AGE: Measuring the impact of Digital on Procurement Departments.
4 Kirk Cheyfitz. (2015, April 02). 6 New Reasons to Kill the RFP: Find Innovators, Not Commodities.