Category Archives: Best Practices

Are You Ready To Get Optimized But Don’t Know How? Read On!

Now that you’ve read our last two posts and understand that you need to get optimized (and analytical) if you want to get cognitive, hopefully you’re ready to get optimized but you just don’t know how.

The four-part answer is pretty easy.

1) If you are using a sourcing platform from a modern provider that offers optimization, acquire the module and start using it.

If you’re already using (SAP) Ariba, Coupa [Trade Extensions], EC Sourcing [with bidmode Inside], Jaggaer (Indirect/Direct/Advantage), Keelvar, or SynerTrade, acquire the sourcing module, turn it on, and start using it. We know that not all platforms are equal (as made clear by the Optimizer Persona in the Spend Matters Solution Maps), but all are more than enough when you are just beginning your sourcing journey. Plus, the majority of these providers are all actively developing their optimization solutions and should stay ahead of your optimization needs.

2) If you are not using a sourcing platform, get one that has decision optimization.

We gave you six names, and these six names can all help you. While we have our preferences, the right solution is utterly dependent on your organization size, industry, dominant categories, geography, and culture and which provider matches your profile the best. There’s only six names, and a relatively short RFI should allow you to quickly zero in on the 2 or 3 that are most likely the best for you.

3) If you are using another sourcing platform and it is not meeting your needs and can replace it, replace it with an optimization-backed sourcing platform.

A few of these providers have a large customer base that consist of those that have switched from another provider with a solution that didn’t meet their needs and, thus, have a lot of experiencing with change management, fear squashing, migrating your data over, and getting you up and running on the right processes quickly. Simply craft the right RFI and you will quickly zero in to the 2 or 3 providers that will likely be the best fit in this situation.

4) If you are using another sourcing platform and it is meeting your needs, can’t be replaced at the present time, or both, augment it with an optimization-backed sourcing solution just for those events where optimization is a must-have.

You just bought Source-to-Contract or Source-to-Pay Solution X a year ago and you know that Finance / Operations / etc. will not approve a new solution for at least a few years because they still believe systems should last five to ten years. In that case, you get a pin-point solution that you use to augment your current solution as a bolt-on. Two of the providers in particular that we mentioned — EC Sourcing with bidmode Inside and Keelvar — are small, mid-market focussed, pin-point best of breed optimization-backed RFX solutions that start in the six figure range (or five figures on an event basis) that can be used to augment a traditional Sourcing platform at a low cost and deliver a high value.

And, no matter what Don’t Say It’s Not That Easy. It is. Yes it’s work to create the technology RFX, reach out to the vendors, make the short-list, do the negotiations, select a (new) vendor, create a transition plan, create an integration plan, and get it done. But making the decision to get a platform that will save your organization an average of 10%+ year-over-year and taking action to do it is easy. And there’s no situation there isn’t an answer for. So, just do it. You won’t regret it.

M&A Has Been Mad. Platforms Will Disappear. But There Will Be More Than One. But Who?

We’ve been writing a lot about M&A lately, including, but not limited to, our pieces on:

because M&A is still going strong. (And, as per our recent post on The Hidden Value of SI Association, SI is acutely aware of this because this is how it loses its customers. SI works with these companies, helps them become known and successful [through a focus not on buzz but actual education, process improvement, and appropriate roadmaps], they get noticed by cash-rich firms, who then buy them, and in many cases, strip out the management teams and/or consultants.)

We’ve also noted that not only will some platforms have to disappear (to make the mergers successful) but that (in our recent piece on One Vendor Won’t Rule Them All … And One Ring Won’t Bind Them), due to the wide range of needs that organizations need and the different process that are used around the globe in organizations headquartered in different regions and run by different cultures.

But that being said, now that Sourcing and Procurement technology is starting to become more mainstream — and the majority of organizations are looking for analytics, procurement automation, and supplier program management — those organizations that are looking for their first platform (as well as the early adopters of first generation platforms that are now almost a decade behind) are trying to figure out who they should look at and, more importantly, what product lines they should look at (now that some organizations have as many as three different product lines for Procurement under one organizational roof).

This is hard to predict, especially since the Fortune 500 is in more flux than it’s ever been. It used to be if you were on the list, you were on the list for years (if not decades) and changes were subtle. Now a company can make it one year and as a result of one major disruption or media fiasco, be in bankruptcy the next year (and disappear from the list). And while most of the companies in our space are not on the Fortune 500, these companies are now being bought by the big enterprise software giants, including SAP (with a market cap over 100B), that are.

And the instability in enterprise software companies amplifies they smaller they are, and when the biggest stand-alone public company in our space has a valuation of a mere 2.5B and the largest private company in our space would likely get a valuation in the same range, you can see where we are when the average large company has revenues that you have to round up to 100M and the average BoB vendor rounds to the 10M range.

But the platforms provided by some companies, due to the immense value they offer, will survive, even if under a different name, as part of a different platform, under a different company, held by a different holding co, whose name may change three times over the next decade. And who will they be?

Simply put, they will be those platforms that are the hardest to replicate and offer the deepest capabilities that are key to value identification, like optimization, advanced predictive and prescriptive analytics, cognitive process automation, semantic risk identification and monitoring etc — whether the platform is a standalone best of breed platform in a financially stable 10M company or part of a suite of a larger 100M company or just one module in a suite in stable of suites in a 1B enterprise. So don’t try to guess which vendor will survive, instead focus on what platform will survive — and chances are you will be setting your organization up for success.

April Planning Prevents May Panning (for Gold)

Let’s face it, once May comes around, you’re under the gun to identify significant savings before the end of June when you, or more importantly, your bosses want to take some time off during the summer (and know that suppliers do the same and results will likely be limited until people get back to work full force in September).

But if you wait until May to identify those categories you are going to go after for quick wins, you’re better off panning for gold … it will have a better success rate. Even if the best method to capture those savings is identified as a reverse auction, and even though it can be run in a day, by the time you

  • run a spend analysis across categories not significantly under contract or where the contract is expiring
  • collect market / should cost pricing and demand across the categories and estimate savings opportunities
  • rank the opportunities
  • evaluate each opportunity and identify the best strategy
  • extract those where auction is the best choice
  • identify the appropriate supply base for this subset of categories
  • get the suppliers onboarded in your SRM/Sourcing system
  • send the invites and get commitment
  • run the auction
  • cut and sign the contracts

… it’s mid to late summer. But if you start this process now, limit the quick-hit projects to those where you already have most of the suppliers in the system, and get going just on those, you will have time to finish a few of them before summer hits. Otherwise, if you wait for May, you’re better off packing your pans and booking a ticket to Alaska.

Time for Spring Cleaning. Start With Your Evergreen Contracts.

The spring tradition is to clean house, and that means your house of business as well. Chances are there a number of areas of your operation that need to be cleaned up, but the place to start is your evergreen contracts. Most organizations have significant overspend in these contracts because prices have dropped, demand has increased, and/or new options have entered the market — but since the organization decided to set, and forget, these contracts, it has not been able to take advantage of new options, negotiate against the increased demand, or realize the reduced prices.

So how do you start?

First, make sure all of your contracts are in electronic form and in a central electronic filing cabinet.

How do you do this?

Acquire a good OCR solution and feed all your paper contracts through it and create a set of contract e-documents.

Then, acquire a good network drive scanner to find all of your e-contracts. Some might be part of the scanned set (as they were printed out and filed), some might be duplicates (as different users might put them on different drives), and some might be draft versions.

Finally, to get a complete (as you can) distinct set of contracts, run them through a semantic process that can identify similar documents that will group all documents that are highly similar into a set and identify the (likely) final version based on dates (and differences between similar documents).

Then, figure out which contracts are, or could become, evergreen …

How do you do this?

Acquire and apply a semantic analytic solution that can sift through the contract clauses, identify the term, and whether or not the contract is, or could become, evergreen.

… and order them by upcoming (auto) renewal date.

This is just a simple sort, which can be done by exporting the contract titles and (auto) renewal dates to a spreadsheet which is easily sorted.

Then do a spend analysis (and projection) on each category defined by the contracts, in (auto) renewal order, and when the savings percentage is significant (near double digits) or the savings amount is significant (many 3X to 5X times what a category re-sourcing would cost), provided there is enough time to re-source, you queue up the sourcing event. If there is not enough savings potential, or time, you add it to the end of the queue to be reanalyzed sufficiently in advance of the next auto-renewal date.

Eventually you’ll work your way through all the evergreen contracts, and replace them (with non-evergreen contracts) in order of priority, defined by savings potential.

And that’s how you start your evergreen contract spring cleaning.

Will the Trade Wars Be Good for Advanced Sourcing?

Trump is imposing tariffs. China is retaliating. And this is just the beginning. As a result, supply risk and the need for spend forecasting is finally becoming real. But is it becoming real enough for organizations to take action? It’s hard to say. But one thing we do know is that the only way organizations can progress forward is to better understand not only the risks, but the costs.

What are the risks? Many. What are the costs? Significant. And how can you know of either? In the first case, you need to monitor the news, the sentiment of the responses in regards to the news, crowd-source some predictions, and run some advanced analytics on all this data to determine the probability of something happening — and sticking.

And in the second case, you build should cost models with current data, and projected data, to determine the impact of a tariff on the total cost of ownership of the product. This means that a simple RFX or Auction platform is just not enough – an organization needs a platform with deep should cost modelling and the ability to create what-if should-cost models based on projected and anticipated changes.

But even that’s not enough. If the projected increases are significant, then the organization will, at the very least, need to reallocate global supply chains to insure that products, which are currently sourced from multiple suppliers and/or locations, are being exported from and imported into the most cost effective locales the organization has access to. And if this is not enough to keep costs under control, then the organization may need to even source from additional suppliers (in different locations) or re-source the entire category (to the extent possible).

But it’s hard to figure all of this out without an optimization backed sourcing platform. Hopefully this is the kicker that is needed to get these powerful analytical platforms into the hands of more Sourcing and Procurement organizations, as these platforms are desperately needed and reduce spend on analyzed categories by an average of 10%+ year-over-year, making their ROI immense.

But, alas, only time will tell. But if bankruptcy could be on the line (when a tariff wipes out the entire profit margin), maybe this time these platforms will finally take hold.