Category Archives: Best Practices

The Trade Extensions Event Was Different. It Needed to Be. Do You Know Why?

Those of you following Spend Matters and Spend Matters EU will have noticed Nancy’s and Jason’s posts on the recent Trade Extensions events in London and Chicago on Managing Complexity. In these posts they made a number of interesting observations (which the doctor can verify as he was at the UK EVENT) about the event and how it was different from many other customer-focussed vendor events.

Major differences included:

  • Focus of the talksSpeeches focused on real, live issues and scenarios that listeners could learn from and apply to their procurement functions and their companies’ wider strategic visions. (Optimising Your Game in “at the trade extensions user event an overview of the day” on Spend Matters UK) There wasn’t a single demo or even a detailed description of the next major release (which will be their biggest release since 2009), coming next year.
  • Make up of the crowdUsers tend to be forward-thinking and technology-savvy people, given this is leading-edge software, and there were more people in their 20s (“bright young things”) than is usual at events of this nature. It was the leaders of today and tomorrow, not the leaders of yesteryear counting the days to their retirement. (A Rewarding Day, Spend Matters UK)
  • Value to the crowd. Nancy noted that one person said that coming to the event had taught him more in one day than he could have learned from going on a £30K procurement course.(A Rewarding Day) The focus was on real-world value, not vendor messaging.
  • Key takeaways.There’s more to an optimization-based sourcing system than just product sourcing. One company noted that having changed from their existing sourcing system to something more advanced 12 months ago, has proved invaluable in two key areas: logistics activities (not surprisingly) and supplier data capture. Optimization is about total costs, goods and transportation, and in order to analyze and select the best total cost scenario, a lot of data needs to be captured. As a result, such a tool must be great at data capture. And, as a result, the tool can be used in more diverse ways and in more applications than you would expect. (A Rewarding Day)
  • Individual ThoughtJason noted how many thoughts of the attendees center on areas around the technology rather than the core solution itself. Taken together, I believe the thoughts below point to the future of where sourcing technology is headed, which centers as much on people as systems. (Brainstorming: Spend Matters) Trade Extensions is encouraging ideas and feedback, hoping to harvest the best for future development.

These were all major differences, but the biggest difference is the one that is going unsaid by Nancy, Peter, and Jason and Trade extensions. What is the biggest difference? What is left unsaid. What was left unsaid? We’ll tackle that in our next post …
after we give you a day to think on it.

Societal Damnation 49: Gamification

Gamification, a noun defined as the application of typical elements of game playing to other areas of activity, typically as an online marketing technique to encourage engagement with a product or service, as per the Oxford Dictionaries, is also a damnation that you need to contend with on a daily basis in Procurement.

Why is gamification a damnation? Especially since, as per Merriam Webster, it’s supposed to encourage participation as it is supposed to be, according to Wikipedia, enjoyable and motivating. There are a plethora of reasons, including:

Definitions Vary

There is really no standard definition of gamification. To see this, all one has to do is go to their favourite e-book store, download the five cheapest e-books on the subject (which may even be free), and read the first few pages. Some are focussed on the incorporation of traditional game elements, whether they make sense or not; others on team building, regardless if it is game-like or not; and others on getting marketing success or social media penetration at any cost.

Gamification is often rooted in RPGs or Video Games

Yes, RPGs are the classic team-building cooperation games and video games are all the rage, but not everyone likes RPGs (because they think of D&D and basement dwellers*) or video games (because they think of computer geeks and basement dwellers*), and not all RPGs and video games are the right fit for the task at hand.

Most of it is marketing or social media focussed

Which means that most of it is used by marketing and social media and directed at you by marketers to try and daze and confuse you, and does not help you do your job in any way.

Anything not marketing focussed is team building focussed

There are a number of methodologies out there for team building. Gamification provides little additional value in this regard unless you’re playing games that everyone likes that builds camaraderie.

As Procurement professionals, there’s nothing for us

When it comes to gamification, nothing has been developed for us. Nothing to help us. Nothing to teach us. And the beer game doesn’t count. It hasn’t been updated in fifty years, doesn’t capture the complexity of modern supply chains, and has over a dozen failings that need to be addressed in order to be useful. It’s primarily a logistics and inventory model that just doesn’t cut it in today’s just-in-time supply chain world.

In short you don’t know what it is, it hasn’t been used to help you, and suppliers’ marketers will be hitting you with their perverted version of it through broken social media channels on a regular basis. It’s a continual annoyance that serves as the background music of your eternal Procurement damnation.

* Stereotypes die hard.

Why You Should NOT Build Your Own e-Procurement Platform

A couple of months ago, SI ran a short series on Why You Should Not Build Your Own e-Sourcing System, which also included pieces on Why You Should Not Build Your Own Spend Analysis, Why You Should Not Build Your Own e-Negotiation Platform, and
Why You Should Not Build Your Own Decision Optimization because he heard that a few public sector organizations have this crazy idea that they can build their own and that it can, somehow, compete with best-of-breed solutions on the market today. As per that series, this is not the case.

Neither is it the case that an organization should build its own C(L)M system, as per SI’s post last week on Why You Should Not Build Your Own Contract Management System. It seems that there are (at least) a few organizations that not only think they can (which is often true) but think they should (which is usually not a good idea). Unfortunately, it doesn’t stop there.

Since basic e-Negotiation and e-Procurement is a commodity, and there are even free and open source solutions for both still available on the net (like WhyAbe and archived versions of open source by Coupa and Bupros), some organizations and public sectors think they can roll their own and, believe it or not, do it cheaper and better than just acquiring a low-cost on-demand solution (which might even cost less than the resources the organization / public sector body would require to maintain their own software and hardware, not counting the dollars they would have to invest up front to roll their own). When it comes to B2B or B2C, building your own in this day and age is, well, ridiculous. With so many options to choose from, the chances of your organization not being able to find a cheap, easy solution that meets at least 80% of your needs, and 90% with a few minor process changes, is low. Not only are there no cost savings (which becomes clear when a full total cost of ownership is done, see this classic SI post on X), there’s no value generated by building your own solution. Inflation is coming back with a vengeance, GDP is slowed to a crawl in first world countries, and risks are multiplying faster than Fibonacci’s rabbits. Wasting money on anything with no risk of value generation is just not something 99.99% of companies can afford to do.

While most P2P functionality is straight forward, and the cycle, which has more steps than pre-contract Sourcing, is simpler as it is more tactical in nature, a few requirements, while simple in theory, are actually quite complex to implement technically. In particular, the following three functions are quite demanding to implement technically.

Requisition Management

While the process of managing an approved requisition is no more complicated than managing any other e-Document, the process of approving a requisition can be quite complicated as it could require one or more approvers in one or more departments with the rules for determining who approves dependent upon the item, it’s category, it’s dollar value, it’s (un)approved status, the overall amount of the requisition, and whether or not any affected budget for the buyer, category, or department would be exceeded if the requisition was approved. The approval chain could actually consist of multiple approval chains that need to be executed in parallel, which can possibly be overruled by the last approver in the sub-chain or the entire chain (if it had to get final approval from a VP or CXO because of the amount), and which might need to be approved all-or-nothing for the requisition to help the requisitioner. This implies the need for powerful, configurable, and flexible workflow management that is rather time-consuming and sometimes tricky to implement and not always going to be available in an open source solution that you can easily integrate into a roll-your-own solution.

Purchase Order, Invoice, & Good Receipt Management

Not only do all of the these e-Documents have to be tracked, but they have to be cross-correlated in many-to-many-to-many relationships. For example, a purchase order may need to be split across multiple vendors, each of whom may ship the order in pieces due to geographic stock location and customer locations, and issue multiple invoices, and then the shipments might arrive in pieces, requiring each invoice to be associated with multiple good receipts, or which might arrive in unison, require one goods receipt to be associated with multiple invoices. Similarly, a shipment might arrive before an invoice, requiring goods receipts to be associated with one or more purchase orders. There’s a lot of cross-correlation logic here. Plus, documents can come in as XML, EDI, CSV, PDF (which need to be processed using OCR), or platform specific formats – so there is a lot of pre-processing that needs to be done as well. And then an m-way match has to occur against each line, because, otherwise, the platform is not very useful.

e-Payments & Tax Reclamation

These days, an organization that wants to go e-Payment has to support ACH and wires, and do very difficult secure integrations into a bank; Paypal, Stripe, and similar online platforms for small businesses; and credit cards so its employees can use their P-cards, and integrate into a credit card processor. It’s a lot of integration work that has to be done precisely, because if anything is not done up to Bank, Paypal, or CC Processor spec, and it gets hacked, it will be on the hook for all of the fraudulent payments that will result. And that can add up to hundreds or thousands or millions of dollars very quickly. Very, very quickly. This is one example of just because you can, it does not mean you should.

You’re not buying running shoes here. Just don’t do it.

Procurement 2020, Are we on Track?

Long time readers, including those who worked through last year’s mega series on The Future of Procurement and The “Future” Trend Expose already know the answer to this, but with only 5 years left to go, it’s worth exploring this topic that was all the rage 5 years ago but now no longer a whisper, even from the voices that were once the loudest in their great proclamations.

Why the silence? Because, to be frank, we’re not even close to their predictions, predictions which, to be honest, should have already been met by now.

While there is a lot of cannon fodder to go back to, let’s take Sourcing Innovation’s post from four summers past, which was penned at the height of the 2020 blathering, and which took us back to a report released by Hackett in 2008! In the first of the grand prophecies, which laid out the hierarchy of supply, rather than make grand projections, Hackett simply laid out a set of seven core competencies that businesses would need to acquire. And even though leading providers have offered next generation solutions for each of these since the end of the last decade, progress along these paths is still few and far between.

Business Process Sourcing

Many companies are still taking a scattered approach to process sourcing and outsourcing and indirect spend in general. Some are using BPOs, some are using GPOs, some are using both, and some are simply hiring contingent labour to handle the processes the business does not want to do, or does not have the skills to do, in house.

Supply Performance Management & Supplier Management

Formal Supplier Management is still weak, or non-existent at many companies, and fewer companies still have, or use, modern platforms to manage the performance of their supply base, even though there are a number of second generation platforms out there that have quite extensive capabilities. (The capabilities that are out there will be described in detail in the next platform-based Spend Matters Pro series on Supplier Relationship Management, starting after the CLM series concludes, which will be co-authored by the doctor, the maverick, the prophet, and the anarchist!)

Knowledge Management

According to Hackett, Sourcing will need to master content-driven analytics which integrate external data into internal data models …. We’re not there yet. Less than 1 in 2 Procurement departments are even doing basic spend analysis, yet alone more advanced content-driven analytics using multiple internal and external data sources! Knowledge is still quite poor. (Maybe that’s because only the leading sorcerors in the leading Procurement departments read Sourcing Innovation and Spend Matters CPO?)

Talent Management

After years of reducing the training budget to almost zero following the last big recession in the late 2000’s, there’s still been no sign of restoration and talent is still not getting the training they need to do the best job they could do. Until this happens, there’s no way that Supply Management will be the career path of choice for new talent.

Next Level Strategic Sourcing

Most companies still aren’t doing true TCO modelling or using strategic sourcing decision optimization, which is the only other supply management technology (in addition to true spend analysis) that has been demonstrated to find year-over-year savings. And a true next level company should be at TVM modelling and decision optimization, multi-tier analysis, trending and predictive analytics, long-term strategic supply chain redesign, and other advanced initiatives that will save money now and for years to come.

New Product Development & Introduction

As Hackett said long ago, Supply Management will have to include advanced design-for-supply support that incorporates multi-tier cost modelling, scenario planning and optimization, but seeing as how the majority of Supply Management departments are still struggling with TCO and weighted RFXs and e-Auctions, even though companies like Arena Solutions and DirectWorks (formerly Co-exprise) have been promoting this for close to a decade, this is still a ways off from being main-stream.

In other words, even though 2020 is approaching fast, we’re still a long way from 2020 Vision in Supply Management, despite the doctor‘s best efforts.

An Open Invitation to the Trade Extensions Workshop for Practitioners

Trade Extensions, a leader in Sourcing Optimization (and a sponsor of Sourcing Innovation), is having their annual user conference on October 7 (2015) in London. As pointed out yesterday by Mr. Smith in his invitation, this year they are opening it up to a small number of practitioners who want to learn more about advanced sourcing and sourcing optimization, and, Sourcing Innovation and Spend Matters UK readers in particular. (Outside of the Trade Extensions website, you won’t see this invitation anywhere else.)

Unlike some vendor conferences, that spend hours and hours demoing their new products and discussing where they are going and how great it will be for you as a customer, Trade Extensions keeps anything even remotely marketing related to an absolute minimum in their events, preferring to focus more on education and best practice then on sales. (Last year, except for a very brief “here’s what we did over the past year, here’s what we’re doing, and here’s a few screen shots of what the new capabilities look like“, the rest of the day was spent on presentations by experts and practitioners on best practices, process transformation, and advanced sourcing (including a presentation by yours truly on what comes next in sourcing optimization). (If you got in a bit late or left a bit early, you wouldn’t even know who was putting it on.)

This year, they want to cram even more education into a single day. With presentations by Sigi Osagie, who’s gonna tell you how to get your Procurement Mojo on, Mr. Peter Smith, who’s going to discuss the Future of Procurement (which, in the doctor‘s view is Doomed. Marooned. And ready to be Entombed.), and Sindbjerg Hemmingsen, a known thought leader on responsible procurement, the day is going to be jam packed with education and useful information. And if that’s not enough, it’s another opportunity to meet the elusive yours truly who will be there to …

Oops! Can’t tell you that … yet. Trade Extensions has a few surprises this year for its attendees beyond holding the event at Emirates Stadium (which is home of the Arsenal Football Club, and a known haunt of many Premiere League legends who seem to get lost in the halls and never leave) and the dinner at the British Library. Let’s just say that even the gift bag might knock your socks off.

So, if you are a practitioner (or a consultant practitioner who is not locked into an exclusive engagement with a provider) who would like to learn more about sourcing best practices and advanced sourcing, this could be your lucky day. But you need to book quickly. When the seats are gone, the seats are gone. And this is one event you don’t want to be left out of.