Category Archives: Best Practices

For Most Organizations, Ain’t Nothing Wrong With Being White & Nerdy …

In a recent post over on Procurement World, the procurement dynamo asks if the Kraljic Matrix [is] Actually Becoming Obsolete? He notes that since Kraljic published his classic article 33 years ago, world trade has quadrupled, globalization has exploded, and Procurement is operating in a much faster, bolder, world than it was in 1983.
In this brave new world, Procurement has to manage ethical supply chains and practice good Corporate Social Responsibility, or its CPO could be personally convicted of criminal charges and end up behind bars. (While this is a great place for many sociopathic CEOs, it’s not where ethical and hard working CPOs deserve to be.)

the procurement dynamo notes that, in some ways, the Kraljic matrix still works well. The heart of the Kraljic matrix, segmentation into manageable buckets that can be addressed with consistent strategies, is still valid, but the degree of segmentation needs to be much deeper now than it used to be. However, even the concept of a 3-d Rubik’s cube doesn’t quite capture the level of segmentation required in today’s supply chain.

It used to be supply risk and financial risk was enough. Now there is information risk, sustainability risk, compliance risk, ethical risk. That’s significantly more than a cube can handle. (We’re at a six-dimensional hypercube, and we’re just starting.) That’s why we have to adopt Value Based Sourcing and replace TCO (Total Cost of Ownership) with TVM (Total Value Management), which is the root of all value models.

This is challenging, as the procurement dynamo points out, but not impossible, especially for the White & Nerdy. It doesn’t matter if they look like they are still in the 80’s, insist on riding segways down the hall, or shout blasphemies in Klingon while trying to solve the problem. As long as the problems get solved, which only the IQ and TQ-savvy white & nerdy can do, that’s the way forward.

ScoutRFP – Spreading their Silicon Sunlight from the Western Shore

When we last covered ScoutRFP back in 2014, they were hoping to help laggard Procurement organizations leave the dark ages (Part I and Part II) and enter the modern age. Launching with nothing more than an easy RFP solution (which was a 15 year old solution at the time), ScoutRFP has taken off like a rocket in those organizations that needed an easy, lightweight, solution for everyday events with a price tag they could afford.

The RFP solution was, and still is, 100% SaaS and designed to work with minimal inputs. It guided the user through a minimal workflow to create the RFX, select the suppliers, evaluate the responses, and make a decision. It was very flexible, allowing the user to create the RFX to the level of detail they wanted, or keep it high level (and cut and paste the instructions and questions from Word). And it gave the organization visibility into, and some control of, spend. The CPO could define a hierarchy and see what everyone was doing, the directors could see what their teams were doing, and the buyers would see their events — and all the reports could roll up as well. It was simple, but it hit the suite spot of low complexity and low price for organizations trying to crawl out of the unlit Procurement dungeons.

It was such a hit that, based on this capability and reception alone, ScoutRFP was able to secure $2.75M of funding in 2015 (from NEA, Zapis Capital, and Google Ventures) to extend the platform and raise an additional $9M of funding this summer in a series A funding round. And move west (to San Francisco).

Since then, ScoutRFP has added basic e-Auction capability, project management and savings tracking, Supplier Information Management, and an improved Supplier Portal.

The platform now has the ability to track all requested, current, and upcoming sourcing events and their associated status; categorize the events using any desired organizational categorization scheme; quickly initiate new events (RFX or Auction) from the pipeline; and even auto-include re-sourcing events when contracts are set to expire. Requested events can come from any organizational stakeholder with budget or spending authority, and all spend can be placed under (minimal) management.

In addition to this new project management capability, the savings tracking capability can sum up all savings for a period of interest, in real-time, based upon (negotiated) price differentials and (expected/purchased) volumes, or savings numbers (to date) provided by appropriate Procurement or AP reps. The data is tracked in a drillable fashion and a manager can quickly see how the totals compare across categories, departments, and employees. This allows the manager to ensure that high-value categories get sourced first and that buyers who aren’t delivering value get training (or replaced).

The SIM functionality is basic. It allows the organization to track all supplier information of interest, tag the suppliers with key-phrases of interest (for quick selection by category capability, geography, performance, etc.), and build lists for quick selection in sourcing events. There’s no scorecarding or performance monitoring, but it can be used as a supplier master and it’s easy to get data in as supplier data can be loaded from existing platforms, and updated data can be pushed back out to existing platforms, using the API. And the platform makes it easy to track supplier activity — events they participated in, questions they asked, bids they made, and so on.

In the current version of the platform, suppliers can have their own portal where all of the bids they have been invited to by all of their customers are accessible through a single log in, or, if the supplier prefers [or customer(s) demand(s)], they can have a separate portal for each customer. The suppliers also have the same collaboration features available to the buyers and can invite their peers to collaborate on bids and survey responses.

The system is shaping up nicely and for an in-depth dive on ScoutRFP, and the platform, including its strenghts and weaknesses, see the recent Pro series [membership required] over on Spend Matters (Part I, Part II, and Part III) [membership required] by the doctor and the prophet.

Virtual Procurement Centers of Excellence: The Next Level of Complex Direct Procurement

We have already discussed Value-Based Sourcing in Complex Direct Supply Chains and how it can generate an ROI well beyond what cost-savings focussed Procurement can generate on its own. We also indicated that a key requirement of success for value-based sourcing was a platform designed for complex direct procurement, and outlined the basic requirements for such in previous posts.

However, the right platform not only allows Supply Management to extract more value from every event than it would otherwise, but, when properly implemented, also provides the foundation for a Virtual Procurement Center of Excellence — a VP-COE if you will. A VP-COE is the next phase of Procurement Evolution for leading Procurement organizations that have evolved from decrentralized models through centralized and center-led models but which now need another evolutionary transformation to excel in today’s increasingly sophisticated global supply chains.

Today’s leading Procurement organizations are center-led. These Centers-of-Excellence are focussed on the identification of appropriate supply chain strategies, strategic categories, best practices, and knowledge sharing and often leave individual buys and tactical execution to the individual units in an effort to get the best of both worlds.

These centers of excellence typically build cross-functional teams to tackle strategic categories that represent all of the key divisions and business units, allow for the creation of flexible supply chain processes and commodity strategies through collaboration, and find ways to fully leverage strategic category spend across the enterprise. They, theoretically, give the organization the best of both worlds and many organizations that employ this model have evolved to be leading Procurement organizations, often recognized in the Hackett Group Top 8%. But is this as good as it gets?

Not even close. The view painted by consulting organizations offering to transform your Procurement organization into a COE is one shared through rose coloured glasses. First of all only high dollar “visible” strategic categories will make the cut due to the limited manpower and additional time required to manage global communications and project teams. A lot of spend will go unmanaged, and a lot of opportunities left untapped. This does not sound like the definition of a true center of excellence to us. Does it sound like a true center of excellence to you?

The long and short of it is, in order to get all spend under appropriate management in a large, distributed, global organization, a virtual procurement center of excellence is required.

So what, precisely, is it and what, precisely, do you need to enable it? Good Questions! And you will find the answers in Sourcing Innovation’s latest white paper The Benefits of a Virtual Procurement Center of Excellence for Complex Direct Procurement, sponsored by Pool4Tool. Download Now! [registration required]

Whenever you find yourself on the side of majority …

… it is time to pause and reflect.
Mark Twain

As far as the doctor is concerned, nothing could be closer to the truth. SI never strived to be #1 in breadth, readership, coverage, etc. for this very reason. It’s not happy with the majority that is willing to accept the status quo, the inefficiencies, the lack of progress, and, most importantly, the lack of innovation.

He’s also not interested to join the ranks of the analysts that think you can do an in-depth vendor review from a powerpoint presentation and a few customer references. SI has never covered a vendor without a live demo and never will. (At least this explains why so many tragic quadrants and product grave reports are so out of whack.)

Nor is he willing to allow “sponsored posts”. Such a slippery slope. Maybe you insist that the posts be written by the experts, and the sponsor agrees, but then you get a bait and switch where the expert was too busy, so the social media coordinator writes the post instead, it’s regurgitated drivel, but a spot was paid for and if you don’t post it, they threaten breach of contract.

Or attend half-a-dozen me-too conferences every spring and every fall and deliver the same old speech o’er and o’er again. Some analysts and bloggers like the junket circuit, but most of the people who are there time and time again fall into two categories: those that like to hear themselves talk and those that are trying to talk themselves into a new job.

Nor does he feel like towing the same-old same-old line put forth by all of the heavyweights that have been selling the same sauce for over a decade. (He has nothing against big companies that keep innovating, but, unfortunately, a few that sold out to big enterprise software companies really haven’t innovated anything since they did. Likely because integrations at these giants take so long that by the time you can get back to innovation, the boat has been commandeered by quicker competition who snuck aboard during the night and sailed it out of the harbour.)

And he definitely won’t sign an NDA to get a demo. (After all, how could you cover anything once you signed an NDA?) The rules are simple on SI — an open demo is a requirement for coverage. The vendor doesn’t have to show anything they don’t want to or answer any questions they don’t want too (but if too much is kept secretive and not enough is shown to convey the value, then the chances of coverage aren’t great as SI always wants to cast a vendor in a positive light if there is value in the solution for a subset of the market), but remain secretive at their own risk.

Is this alone enough to keep the doctor and SI out of the majority and on the innovation path? Hard to say, but that is where the doctor wishes to stay. And he hopes that you’ll stay here too and that you will …

I try not to get involved in the business of prediction …

… It’s a quick way to look like an idiot.
Warren Ellis

A new year is but six weeks away … and you know what that means (besides holiday frenzy, too much turkey, broken resolutions, and the Times Square ball drop) … prediction time is right around the corner.

Snow isn’t even on the ground yet (and remember that the doctor lives in the Great White North) and already we’re seeing “prediction” articles for 2017. For example, Labels & Labelling, trying to beat the rush, posted their predictions for 2017 where they quoted industry pros who predicted (surprise) more automation, more web-based customer interaction, the continual decline of the printing industry (traditional, not home-printer manufacturing), rapid change, and so on. But this followed a prediction from CIO that predicted cloud computing trends the 2nd of November, which should affect us all with almost all supply management software offerings being multi-tenant cloud instances. But this was over a month after Ardent Partners’ launched their tech and innovation outlook report for 2017 at the end of September.

Of course, they couldn’t get the jump on the price forecasters, like Metal Miner and Spend Matters, who have been posting price outlooks (such as the plastic resin price outlook) for a while now. Or the freight rate forecasters (including CIPS) that have been predicting rates since the quarter started as well.

And it’s driving the doctor nuts. the doctor hates predictions. Most of the good ones are based on logical assumptions that people are logical and will do the logical thing. They won’t. Not because they don’t want to, but because they work for organizations that don’t always make logical, or even informed decisions (as per yesterday’s post). If the CFO doesn’t believe the ROI claim, the COO doesn’t believe the efficiency improvement claim, or the CEO just doesn’t like the sound of it … it won’t happen. So even though it might seem logical that this will be the year this proven, successful, time saving, value generating solution will take off … it might, or, more likely, it might not.

Then there are the fake futurists who make crazy predictions (like this will be the year the printing press will die or radio advertising will end or the entire factory will be automated) just to get attention. For example: air freight will kill ocean freight, railroads will rise again, on-premise ERP will finally die, etc. We all know this ain’t gonna happen. Then there are the slightly non-obvious non-fantastic but boring predictions whose chances are near 50/50 that just re-iterates the same-old same-old until they come true. (But who wants to read the same-old, same-old again? As we’ve clearly indicated in our Future of Procurement series, it’s the same old sh!t over and over again. Please Kill It! [NSFW])

In other words, those who make predictions have two choices — be crazy, and look like an idiot, if they want to be read, or state the obvious, and bore their audience to sleep. (Let’s just hope their audience doesn’t have KLS. While it’s likely triggered by infection, medical science is not 100% sure.)

Like LOLCat, there’s only two predictions the doctor can get behind. The first is that put forward by the public defender who last year noted that, no matter what, “all predictions will be wrong”. The second, as astutely noted by the maverick, is that, regardless of what the false futurists predict, we will forever be in “the year of the Chief Buzzword Officer”. Ugh.

the doctor doesn’t mind looking like an idiot, especially if that’s what it takes to spread the truth, but please, please, please don’t ask for predictions. Please let them rest in peace!