Category Archives: Best Practices

UX is More Than a Functional Experience, It’s a Program Experience

This year we’ve attacked the UX in Sourcing and Procurement solutions, and for e-Auctions, e-RFX, Optimization, Spend Analytics, and Procure-to-Pay in particular. This was great, but if you really understand Sourcing and Procurement, you know that it’s more than just a set of (integrated) modules with a great user experience. It’s a plan, a process, and, most importantly, a program.

Those organizations that are reasonably advanced in their sourcing journey know that the best success often comes from a category management program that starts with category identification and opportunity assessment, proceeds through a sourcing plan, and then the sourcing process, which culminates in a contract, that then flips over to Procurement which issues a purchase order, receives one or more goods receipts and invoices, issues approvals, and, finally payments. This is all part of a program that works against a project plan and one or more category goals.

This project plan also needs to be managed. Hopefully within your S2P suite, but if not, in another tool that, hopefully, integrates with the S2P suite or, in some cases, the organization’s mix of best-of-breed Supply Management applications. But, as one might surprise by now, such a tool must be immensely usable and provide a great user experience if it is to be used.

However, this is easier said than done because simply slapping a great user experience on a traditional project management tool is not going to cut it. This is because the types of programs that revolve around Sourcing, SRM, Analytics, and P2P are considerably different and require functionalities considerably above and beyond a typical project management application. In other words, slapping a category management theme onto a project management or sourcing application won’t make the grade.

This is why the next UX series produced by the doctor will be on Program Management UX, with the P2P posts co-authored by the revolutionary. So keep a watchful eye out for this one — it might help you understand some of the key functionality that should be included in your S2P platform, which many platforms are still missing today.

Per Angusta: End-to-End Cross-Platform Purchasing & Procurement Project Management

When we last discussed Per Angusta last year in our post on Purchasing CRM, they were a relatively new SaaS company focussing on the workflow that ties the entire Supply Management process together.

They were building a SaaS platform to manage sourcing pipelines, track savings for organizational validation, and make Procurement’s impact visible to the organization. And, more importantly, they were building a tool designed to manage the sourcing workflow by integrating (through APIs) with Sourcing, Procurement, and Supplier platforms … out-of-the-box. At the time, they were integrated, or building integrations with, Rosslyn Analytics, HICX, Market Dojo. Today, they are also integrated with Coupa, Dhatim, D&B, and Ecovadis and other integrations are in the way.

Back then, they were mainly workflow, budget management, and great project management. Since then, they’ve added (better) ERP integration; improved alerts with rule definitions that will, in the next release, also support approval management and “toll gates” for better project management capability; added better contract management and tracking support (with forthcoming DocuSign integration); added supplier (information) management capability (that can import data from existing systems); added opportunity identification and management (with some innovative capability for those that also use Dhatim); and added an overall progress management capability … with the ability to take reporting snapshots from any point in time (in the past). In this post we are going to focus on three key advancements: opportunity management, supplier management and the progress management capability.

Opportunity Management was designed as a “scratch-pad” based application that allows a sourcing and procurement team to track potential opportunities as they are identified. To start identifying an opportunity, all that is needed is a name, an opportunity type, and a category. A short description, stakeholder, scope, implementation difficulty, and expected start date can also be defined. Once an opportunity is accepted, a potential budget impact can be defined, and once the opportunity is implemented, the expected savings can be defined and then the actual savings tracked. And all of this is summarized on the dashboard that summarizes opportunities by status, type of impact, ease of implementation, and project duration. But the great thing is that if a customer also has Dhatim, they can use Dhatim’s AI to identify the likely best opportunities that can be attacked and then feed them right into the Per Angusta platform.

Supplier Management, which can take data from the ERP, organizational Sourcing / ERP / Supply Management systems, and third party systems (D&B, Ecovadis, etc.), can be use to provide a basic Supplier snapshot independent of any given Sourcing system that can merge all the relevant data and provide consistent information to all Supply Management personnel. If they integrate a supplier discovery platform, it will be quick and easy to identify the best current and new suppliers to invite to your next Sourcing or Procurement project.

The Progress Management capability is essentially a pair of operational and financial dashboards that summarize target, forecast, and actual results for the year on top of the opportunity management and tracking capability. It’s trivially simple, but when data from all the platforms is integrated, extremely powerful and useful to the Procurement and Finance organizations.

Per Angusta has come a long way in a short time and SI looks forward to see what they do next year, especially as they are now working on “finding ways to use AI to make sourcing and procurement professionals much more productive and effective”.

30 Days Left to Get Your Supply Management Solution Budget In Order …

… unless, of course, you are a government / defense contractor and on the government fiscal year. But we’ll assume you’re not, and move forward.

There isn’t an organization in existence that has a complete Supply Management Solution platform, not even an organization in the Gartner Top 25 or the Hackett Group top 8% even though they are much, much closer than the average organization. Most (average) organizations only have part of the Source-to-Pay spectrum covered, and almost half don’t even have a modern solution at all.

And, as we have indicated previously, this cannot continue. But you can’t afford everything, and big bang implementations usually go up in a big bang. So you need to start by figuring out what you need first, what the average price point is for the solutions most likely to meet your need, and get that in the budget.

And that will require a good ROI argument, which needs to be a believable one. Which means you have to understand the full impact of the acquisition, implementation, and usage cost of a new purchase, as well as the time it will take to reach the ROI the solution will achieve. For example, while an optimization-backed sourcing platform will identify 10%+ savings on the top 30% of spend, delivering at least 3% to the bottom line, if the contracts are three years, it will take 3 years to realize the savings, and not all will materialize without a proper Procurement platform that insures the contract is properly executed.

Plus, when it comes to Sourcing platforms, even if you pay a monthly SaaS subscription, there will still be the integration costs with the current platforms (including ERP), the training costs for the intended users, any customization costs that result, and delayed ROI costs as it will take a few months to get all users on the platform, which means that it will take a few months before significant savings are identified, and a few more months before savings start to materialize.

The savings will materialize, and the ROI over the long term will be considerable, but the best way to get the necessary budget for a Sourcing, Procurement, SRM, or Analytics platform is to be honest about the cost and the time to significant ROI, which will typically be 6 months to 12 months, minimum, not the first 3 to 6 months like some vendors will promise. But there was a time company’s would take the long, 5 to 10 year, view, and if you take the long view, you will save Millions, maybe Billions (if you are a Fortune 100).

And that can be true of any best of breed (conglomerate) Sourcing, Procurement, SRM, or Analytics platform. So, get your well researched, well thought out, arguments.

If You’re Still Negotiating With the Carrot and the Stick …

… you’re not getting anyone’s attention but good ol’ Bugs. And, generally speaking, giving all the hijinks he causes, it’s best if his attentions are focussed on your competition.

So how should you be negotiating? With facts. Preferably binders of facts (but they can be in e-form on your tablet — no need to kill trees unnecessarily.)

Facts that show:

  • you know what the product should cost to make,
  • you know what margin should be healthy for the supplier,
  • you know what value-add services the supplier can offer more economically than you,
  • you know what performance metrics are reasonable, and
  • you know what the market offers are right now (and whether or not the supplier can beat them).

Suppliers don’t respond to sticks if they believe you really need them and they can get away with what they want, nor do they respond to carrot if other customers seem more enticing. Plus, they will wonder what crawl-out shelter you just climbed out of because no one from a modern organization negotiates like that anymore.

Especially if they are a typical sales organization that is all about the relationship (and talking win-win even if their definition of win-win is win for the organization, win for them at bonus time) or a more modern, Gen-X led, millennial-influenced organization that’s all about the synergy.

In the first case there will be value pitches followed by claims no one can do what they do as well and lots of smooth talk to get you off guard for when they indicate that their price (even if it has a margin that is twice industry average) is really as good as it gets and the latter will try to entice a deal from the synergy.

But regardless of organization type, every organization will respond to fact-based negotiations. With fact-based negotiations, they can’t hide fat margin behind claims of high cost, high-value, or synergy as the only way they can dispute your models, metrics, and market insight is to provide their true costs (or own research from third parties if they expect their costs to rise over the expected contract term).

And the above isn’t that hard to gather. It might take some elbow grease and a category expert, but once you’ve built the proper model and identified the proper data sources, it’s quick to update.

All you need for a fairly accurate should cost model is:

  • the bill of material break down
  • the typical energy required to produce one unit (kWh)
  • the typical labour required (labourer hours by labourer type)
  • the average industry margin

If it’s a contract manufactured product, you have this, if not, you can get an industry expert to help you craft a typical bill of materials. Your current supplier, or an industry expert, should be able to roughly estimate the typical energy overhead (based on typical production process). Similarly, your current supplier (or industry expert) should know average labour requirements against the production line.

All that’s left is understanding the acquisition cost of the materials, energy, and labour. Most raw materials are traded on exchanges, so it’s easy to get an average market cost. Most countries either have electrical utilities as state owned organizations or as highly regulated private organizations with standard prices per kWh. And most countries or labour bureaus compile average labour rates. Industry insight gives you standard margins, and you can see it’s not hard to build a reasonably accurate should cost model with expertise and elbow grease. And since the only way for a supplier to challenge it is to provide their costs, you can get even the model more accurate if their costs are actually higher. (And if they don’t challenge your model, then its relatively accurate or their costs are actually lower. In the latter case, they might get a bit more margin than you want to give in negotiations, but chances are you’ve lowered your cost as well with the model.)

This just leaves an identification of what services they can likely offer more economically, which again comes down to good modelling, and performance metrics (along with cost / profit impacts), which you should be gathering across your supply base. Then you can negotiate for better performance metrics (with penalties if they are not met) with an incumbent that isn’t doing as well as they should and wants to keep the business, or baseline metrics with a new supplier that wants the business based on current average performance across the supply base for the metric in question.

So gather your facts, and give yourself a true edge in negotiations.

New Year, New Challenges … Are you Ready?

Probably not. At this point you’re trying to get through the rest of the year without too many supply chain stock-outs or digital disruptions, especially with the X-mas season just a few weeks off, winter storms on the forecast, and key personnel going on (extended) vacations.

But at the same time you need to start thinking about 2018. How you still don’t have enough modern tech. How you still don’t have enough modern best practice knowledge. How you still don’t have enough staff to get everything done.

And, despite the fact that management should just increase your budget based upon the ROI you’ve delivered, as per our post last Friday, you know that’s not going to happen just because it’s the right thing to do. If you are going to get the software, services, and support you need, you are going to have to fight for the budget. Tooth and nail. And push out Sales & Marketing who also have a history of delivering results.

You are going to have to create a presentation that makes it clear that not only will you get a ROI of at least 5X with the increased budget you are requesting, but that ROI should be seen as an ROI of 40X compared to the ROI that Marketing and Sales will net you because your savings go straight to the bottom line, but, on average, only 1 out of every 10 dollars of additional sales they get goes to the bottom line. Whereas every dollar of savings you get goes straight to the bottom line.

They have to get an additional $10 in sales for your dollar in savings. That’s significant. And that’s why Procurement is significant. That’s why you need to start building your ROI model now so you can get what you need to deliver the savings the C-suite wants. That’s how you will be ready for the new challenges in the new year.