Category Archives: Best Practices

You Say You Want Success, But Do You?

This post is inspired by THE REVELATOR‘s inquiry where he asked Do You Really Want a Successful ProcureTech Initiative?

For the vast majority of you, the answer is a clear and resounding “YES” (with the possible exception of those of you who have been treated badly by your employer and want to use your last official act to stick them with an application that will make them as miserable as you are, but as far as I can tell, you are a very small minority — you didn’t get into Procurement expecting it to be easy, or to be a way to make friends).

However, you are only one cog in the ecosystem. Let’s look at the other cogs:

Vendor: as long as you keep renewing the SaaS subscription, the C-Suite at the vendor doesn’t care if they sold you a Ferrari (at a Ferrari price tag) but delivered a 2004 Mazda RX-8 …

Analyst Firm: as long as the big research subscriptions keep rolling in from the big vendors (who always feature at the top / upper right / frontal wave of their maps), the analyst firm doesn’t care if you succeed or not, and will not only happily push the hype the vendors want pushed, but happily blame you for not doing your research and not selecting the appropriate technology when you and your counterparts take their advice en-masse and then contribute to the all-time high project failure rates of 88% (two and a half decades of project failure)

Implementor: not really, because if you don’t swap out the solution at renewal time, where is their future revenue going to come from???

Big X who pushed the platform: Hell No! … they need to sell you projects to find bolt ons, do custom additions, and tweak the process for years as they need to keep their bench empty! (And some of these shops have over 100K junior consultants they have to keep busy. Moreover, they don’t make money training them on AI, they make money deploying them as your external support force. (Remember, many of these shops are effectively the new Manpower, except they have to pay their consultants on the bench, whereas job placement agencies just had to place people to keep their government grants or get their placement fee!)

And since YOU don’t take the time to do your research and figure this out (including the fact that the Big X pushed the worst fit solution from their stable on you to keep their Gold/Platinum/Sycophant status with the solution provider), that’s why YOU keep failing. Even if the salesperson honestly wanted to sell you a win (and many don’t, and the doctor can say that confidently with over 25 years in Enterprise Software and he’s sure THE REVELATOR has some stories to tell here), that’s far from a guarantee that a win will happen.

If you truly want success, YOU have to define your processes, define your problem, find the right vendor, make the vendor contractually responsible for implementation success (whether they do it or use a third party) with delayed payment (where you don’t pay for a module until it is working and passes predefined tests) and early termination clauses, identify the gaps, identify the right niche consultancy (who doesn’t have a stadium of junior consultants) to help you identify add ons and processes to fill them, and define early out clauses in case of non-delivery! You have to do all the work the vendors, analysts, and consultants claim they do for you … because they don’t (or at least don’t do it in your best interest). And while the good ones (which may take you a while to find) will help you, YOU still have to take the lead!

And the doctor knows you don’t always have the time to do it all, which is why he keeps pushing Project Assurance where you hire a niche specialist to help you, one who is not a part of the big COGs that need never-ending projects from you to stay solvent, and only cares about helping you get everything in order for success. (After all, there are so few of these experts it is literally a case of too many companies, too little time. These people or small niche consultancies don’t have to worry about running out of work, and by the time they made it through all the current companies they could handle, it would be time for their initial clients to upgrade to next generation systems anyway — and the only way they’d be available for a future project is to ensure client success with every client they take on.)

As we indicated, in our last two rants, you can no longer afford to be led by the Clueless vendors. It’s time you take your Procurement destiny into your own hands. It’s time for the Revenge of the Nerds!

Do You Have Continuous Cost Control?

If not, you should, because with tariffs rising, markets falling, inflation out of control, sales dropping (as entire markets are cut off with sanctions and trade wars), we’ve gone beyond the point where every dollar counts to the point where every penny counts on every purchase because those pennies add up as every 100 purchases is a dollar and every 100,000 purchases is $1,000 and when money is as tight as it is now, that is actually value (especially for an organization making millions of purchases a year).

And right now, organizations are wasting a lot of dollars through the entire purchasing process. From poor sourcing strategy and process, to poor sourcing and negotiation, through poor purchasing execution, and poorer logistics management, to poor invoice and payment management. Every step without good cost control adds cost to the process, at a time when you need to be taking cost out just to survive.

And we know organizations are losing across the board because the following is required to keep costs in control:

  • good processes at each step
  • (near) real time market intelligence at each step
  • good systems supporting each step
  • continuous monitoring at each stage

And we’ve never seen an organization, even a best-in-class organization, that has all of this for their Procurement department. In fact, it’s rare to find an organization that has more than half of this. It’s now at the point where your organization may not survive if it does not have:

  • well defined processes for
    • supplier discovery and management
    • sourcing
    • contract award and management
    • procurement, on-and-off contract
    • invoice management and accounts payable
    • logistics and warehousing
    • ongoing analysis
  • (near) real-time market intelligence at each step
    • current, financially stable, accessible suppliers
    • current commodity costs, average overhead costs by region, tariffs, etc.
    • current best practices, standard clauses, and insurable risks
    • market availability, quality, delivery times, remaining contractual commitments
    • current entity information, payment terms, standard processing times, community intelligence on supplier OTD
    • carrier availability, costs, surcharges, etc.
    • changes in spend trends and curves, etc.
  • good systems/modules supporting each step
    • supplier 360 module (not just SIM/SRM/SPM .. all supplier data and interactions)
    • sourcing (RFX) management
    • contract negotiation tracking, signing, and ongoing management
    • e-Procurement that supports ALL purchases through the system
    • I2P with automated invoice processing and workflows
      (85% should be touchless on implementation, 95%+ over time)
    • logistics booking and carrier monitoring
    • best in class spend and performance analysis that updates at least daily
      (and regularly re-runs best-in-class trend and outlier analysis and alerts you to unexpected changes)
  • … with built-in alerting when something unexpected happens or doesn’t happen on schedule / as expected

And you don’t. But you need this now more than ever. So, if you don’t have:

  • processes, define them; they can be basic to start; for example, classic 7-step sourcing is enough to start (even though there are some more refined 11 step processes)
  • market intelligence, get yourself some; in particular, supplier discovery as some of your suppliers will go out of business, be unreachable, or get too expensive in the days to come; cost modelling for major spend categories to understand true costs for better negotiations because even if it only shaves half a percentage point on average, that’s still 500K on a 1M category (and you can get some of these solutions for under 100K a year), and those hundreds of thousands quickly add up to millions; and major news/event monitoring to pinpoint emerging risks as fast as possible
  • modules supporting the entire S2P process, acquire them; note that most of these don’t need to be BiC; for example, all of the major suites will tout the tens or hundreds of millions their big customers have “saved” with their solution, but what they won’t tell you is that at least 90% of that savings simply resulted from the client implementing a good process supported by a tool with a decent workflow solution; in other words, you don’t need the multi-million dollar solution (to start), you’ll see the same benefit from a six figure suite that is better than average in the key modules that matter to you (especially since it will take you years to master the new processes it will support, meaning that for a big suite, it’s usually five years or more before you can see more value than just going with a basic solution given that the journey to Best in Class, as determined by Hackett in the mid moughts, is at least eight years)
  • continuous data modelling and analysis, start now; with your spend analysis and performance tool updated at least daily

you need to make a plan to incrementally acquire what you are missing, most critical need first, until you do. (Remember, don’t try a big bang implementation. No matter what the vendor or Big X will tell you, those always end in big booms.)

Stop Being Clueless. It’s Time for Revenge of the Nerds!

Last week we tried to further demystify the marketing madness for you by clarifying that spend orchestration is essentially Clueless for the popular kids.

This is really important because there is no difference between a “spend” orchestration and a plain old “regular” orchestration provider, and neither provides any value whatsoever if you don’t have any spend management (i.e. procurement) systems in place to actually process the spend. Otherwise, the best you get is intake to nowhere … which just provides your stakeholders yet another avenue to ask “where’s my stuff” and another reason to say “I thought this new system was supposed to make you more efficient” and get more impatient when their stuff doesn’t arrive any faster.

In other words, unless you have a hodge-podge of best-of-breed systems that cover most, if not all, of the source-to-pay process, that don’t interconnect, and the systems are old and don’t support multiple roles (or charge full license fees for each user, even a 99% read-only role, that access the users), there is no value in an orchestration, as we’ve said many times (including in our post on how Marketplace Madness is Coming.

What you need is not spend orchestration but spend defenestration — you need to throw any and all unnecessary spend out of the window, and that requires spend investigation, need verification, negotiation, observation, and payment verification. That requires spend analysis, demand forecasting and management, fact-based market insight, adherence to contracts and plans, proper procurement platforms, and proper payment validation platforms.

Moreover, it requires proper utilization of these platforms. And that requires Human Intelligence (HI!), skill, and deep (deep) Procurement knowledge. Geek skill and Procurement nerdiness. The nerdiness to use a best-in-class spend analysis and seek out the opportunity that a pre-packaged analytics routine will never find (because you’ve already stared at that report ten times and found nothing after the second time [wonder why?]). The nerdiness to examine the forecasts and use best-in-class forecasting techniques on real (and up-to-date) sales and market demand data. The nerdiness to pour through market cost data for materials, standard overhead costs, energy costs, water costs, differential costs for different production models, and cost models presented to you by third parties and the supplier to pinpoint the right the model, the right data to feed it with, and the true production cost at different volume levels — and then use this in a fact-based market data negotiation. Then, when you cut an agreement, the nerdiness to make sure it is encoded in the right systems and properly executed on as well as the nerdiness to follow the market over time and detect any inflections that would require you to change direction. And, finally, the nerdiness to make sure the platform is configured to properly m-way match every invoice, detect any attempts to fraudulently change the amount, terms, and payee, and only pay for goods and services received on the agreed upon schedule. In other words, if you want to truly succeed at Procurement, forget about the Clueless — It’s time for the Revenge of the Nerds!

You’re Not Doing Supplier Performance Management (SPM) Right Unless it Improves You!

This post was inspired by a LinkedIn post from Celia, founder of Vendor Score IT, who says that if your suppliers aren’t evolving, they’re holding you back.

Celia is perfectly correct in that you will be held back by suppliers who refuse to progress, but another key point that really needs to be addressed that all of the supplier performance management advocates miss is the following:

If you’re not evolving, you’re holding your suppliers back.

When you need to step up performance, you can’t put all of the blame or all of the responsibility on the supplier. You have to take some too. First of all, you selected the supplier. Secondly, you didn’t monitor the supplier closely to ensure that the supplier performed up to your level of expectation. Thirdly, you know what the customer wants, as well as the performance you expect, better than your supplier. Fourthly, you should be leading the innovation charge, as the one responsible for value-add for the end-customer.

Furthermore, when it comes to Supplier Performance Management (SPM), while it’s super easy to just drop the under-performing suppliers and replace them with better performing ones … simply adopting better suppliers doesn’t make you any better as an organization. In fact, not only will you have a new set of suppliers in the lower median who then become under-performing, but overall performance scores will go down because you are not enabling them to perform better.

You don’t want to ditch poor metrics because they are holding you back, vendor reviews to ensure they are striving to get better, or take a growth mindset to make them perform better.

You want to ditch poor metrics because they are forcing suppliers to perform sub-optimally to score well in your system, you want to do “vendor reviews” to open dialogues about how you can help them improve (because, with a three year commitment, they’ll buy a new machine, upgrade their warehouse and use new pallets to reduce breakage, improve quality control processes, etc.), and use your growth to fuel theirs as well.

How do you identify the bad metrics? How do you identify where you are holding them back (vs. them holding you back)? How do ensure that you get the growth you need? By taking the mindset that it’s at least as much your fault as there’s (and probably more), by going in with a joint improvement mindset, by listening to them (and, if necessary, reading between the lines to see how their focus on certain metrics, such as OTD or year-over-year production cost decrease [when energy costs are going up and it’s forcing them to sacrifice quality], is actually degrading their performance), and asking them to contribute to improvement plans. (i.e. You make it clear that you are going to work with them on joint improvement, not just dictate plans to them or expect them to do all the work. And that they should take advantage of that because, otherwise, you’ll find another supplier who will work with you if they won’t. A good supplier will jump at this opportunity.)

By improving your organizational performance, you will encourage your suppliers to improve their performance as well!

Why Does Everyone Believe the AI Hype?

the doctor used to love AI. He spent a decade and half actively promoting it (and wrote two extensive series on The Complete AI in Procurement, Sourcing, and Supplier Management), until Gen-AI and all the false promises bundled with it came along. (Neither it, nor its successor, will be your saviour. It’s not intelligent, not general purpose, and unless your problem ultimately reduces to large document summarization and query, will not solve your problem. Any claims to the contrary are, and, for the foreseeable future will continue to be, false.)

Recently, THE REVELATOR, who is also becoming a little jaded, decided to ask Why does everyone believe the AI hype? (Source)

Of course, the doctor needed to answer.

Why did the American public believe the administration would be any different this time?
(For that matter, why does any first world nation believe their newly elected administration will be any different this time?)

Why does the public at large still believe in the lies that have been fed to them since they were born?
(Primarily American, but Canadians are doing their best to learn from their neighbours!)

Because there is no better producer, packager, and purveyor of Bullsh!t than American Media!
(Although we try, we Canadians can only dream of producing BS that good!)

That’s what the Big AI players use to their advantage
(with their hundreds of millions to billions of dollars and their huge marketing budgets)!

The Procurement Dynamo put it best in a recent comment when he said that we are wired as humans to be lazy and it’s easier to just believe what is being pumped out to us on all the digital channels we consume everyday than do our research, understand the half truths being fed to us, and draw our own conclusions (especially when Math, where the US is now 35th in the OECD PISA rankings, is concerned).

But it doesn’t stop there, not only are we plagued with:

Laziness: Overworked workers being tasked with the nigh-impossible on a daily basis with limited TQ don’t want to design systems, especially when that’s what the vendor is being paid for.

We also have to deal with greed and stupidity making matters worse.

Greed: Investors and rich big company CEOs don’t want workers who want to be paid fair wages, as then they have to deal with worker’s rights (for now at least, but maybe not for much longer in the USA at the rate the government is being dismantled), maternity and sick leave, paid overtime, etc. when they are being promised a software robot that will work 24/7/365 without complaint for a “small” annual fee.

Stupidity: The zealots at many vendors have adopted tech as their religion and messiah and refuse to learn the domain and how to solve a problem with a human centric point of view, believing that, with just a little more development, the tech will magically get there.

And this is why we have so many people blinded by the hype and so many people buying into it.

This isn’t to say that there aren’t real vendors with real AI-backed technology that actually works (because there are, such as ForeStreet that we just covered), it just means that unless you find one of these vendors (which are now in the minority, but SI WILL cover these vendors as it identifies them), and hire intelligent, hard working people who WANT to solve problems and give them the necessary resources to identify these vendors and properly implement ad configure these solutions, you’re not going to get results. Just false promises.

Now that you have the unfiltered answer, do you need to keep asking the question? 😉