Category Archives: Best Practices

Only an Optimization-Backed Sourcing Platform will Answer a Buyer’s SOS


We all know the importance of a good Sourcing Platform to power our Procurement Value Engine. But even after multiple posts (on Sourcing Innovation) and (white) papers on the topic, one still might not be convinced that an optimization-backed sourcing platform is truly necessary. If the organization is still getting reasonably good results from its (last-generation) sourcing suite, has a large number of templates, workflows, and processes configured for its key/strategic categories, and has a consultancy/service provider that handles its tougher events (and they use an optimization-powered platform for those few really complex or high-dollar categories), it might think that everything is fine. And the reality is that everything is fine … until it isn’t!
from How Optimization-Backed Sourcing Platforms Save Our Souls . . . Or At Least Our Backsides


One has to understand that disruptions don’t only occur in the supply chain after the contract is signed, they occur during the sourcing process, and a significant disruption can result in an evergreen contract renewing at above market prices (which is bad) or a contract expiring and the organization left with insufficient inventory and no source of supply in a tight market (which is worse). And even if the disruption doesn’t result in an evergreen renewal or a (costly) inventory stock-out (that shuts down a production line), it can still result in increased costs, increased risks, and missed opportunities.

Sourcing events need to go smoothly, but in a typical sourcing platform, as may of you know, that’s not always the case. Sometimes suppliers change the rules, and sometimes the rules just change, and everything, as they say, quickly goes to hell in a handbasket.

For example, all of a sudden at the 11th hour, a fire happens or a border closes, and a supplier offers you a backup location, or pulls out, and you need to bring in a supplier at a new location. Your transportation bids are useless, your risk profile is unuseably skewed, and maybe even your whole event setup is useless, and you have to start over. And this is just one of a dozen scenarios that can flip an average buyer’s world upside down with an average sourcing platform.

But if you had a flexible optimization-backed sourcing platform, instead of going back to square one, you’d just keep on truckin’ with an optimization-backed sourcing platform as they are designed, from the gorund up, to support dynamic, complex, cost models, dozens of what-if scenarios, and ever changing real-world requirements and made for change.

A factory and associated lanes disappears, no problem, it is just removed from the model with a single click. A new one is added? No problem, define the associated end points, the lanes are automatically populated, and a partial bid survey can be resent to all incumbent suppliers for revised bids. These are then loaded into the model, amalgamated with current bids, and the model is solved. No starting from scratch, creating new RFPs, creating a new model structure, etc. Just a few simple changes, a few new bids, and everything keeps on going like nothing ever happened.

And this is only one way optimization-backed sourcing platforms save a buyer’s behind. For more, check out the doctor‘s latest paper on How Optimization-Backed Sourcing Platforms Save Our Souls . . . Or At Least Our Backsides, sponsored by Trade Extensions, and realize that if you don’t have one, you need a proper sourcing platform today.

How to Screw Up a Procurement Job Interview

Recently we published two guest posts from Charles Dominick of Next Level Purchasing on Assessing a Procurement Team’s Skills and Training a Procurement Team, but these were not his first. Nor his only good work. Five years ago we ran this post targetted not at procurement organizations, but procurement professionals who want a better job based on a great post on 5 [Common] Ways to Screw Up a Purchasing Job Interview that he published over on his Purchasing Blog.

Charles’ must read advice indicated that the following WILL screw up your interview:

  • taking an interview late in the processas all future candidates are compared to the one once that candidate is identified
  • not being prepared for the most common interview questionwhich, succinctly, is tell me about yourself

     

  • not distributing eye contactwhen being interviewed by multiple people
  • saying anything negativeas you will not be seen as the proactive team player they want to hire and
  • using slang inappropriatelyas there is no guarantee that an interviewer is going to understand what you mean, and if you say you are hotter than a fox in a forest fire for the job, and the interviewer isn’t familiar with that phrase and a strong PETA advocate …

In addition, the following will also screw up the interview:

  • not dressing appropriatelyeven if the company has a very laid back atmosphere in the workplace, don’t show up in shorts, a Hawaiian shirt, and sandals (as they need to know that you can make a good impression in front of a supplier)
  • over-stating your skills, experience, or knowledgeas you will be interviewed by the best and brightest and they will find you out
  • not knowing the market for the common Procurement categoriesif the job is in the electronics component division and you know nothing about the state of the semiconductor market, that’s not going to look good when they ask if you have any ideas to control costs in that market
  • not knowing what the company doesif they are an engineering company that primarily makes electronic components for personal entertainment and the automotive sector, but you only know them for their video game division, that’s not going to look good when they ask how you plan to reduce costs in the automotive division
  • not knowing the competitionand this is doubly damaging if you walk into the offices with the product or logo of direct competitor anywhere on your person.

Best Practices for Agency Evaluations for Strong Client-Agency Relationships


A good agency evaluation process helps marketers improve their return on
marketing investment through better relationship management, which translates into more high-quality work at a faster output and with improved quality results.
Richard Benyon, DecideWare
Surging Ahead, ANA Magazine, June 2016

But what is a good evaluation process?

Let’s start with what marketers do now. When evaluating an agency or a potential agency, marketers collect data and then apply that information to attempt to make better decisions in agency selection using a four-step process.

  1. Identify whether or not the agency has top talent.
  2. Optimize to ensure the talent is working in the most efficient and effective manner.
  3. Then, depending on the situation, fix problems or reward success.
  4. Work to improve their processes to enable the agency to do their best work.

This is a great process, but, as Richard says, before creating a new relationship or extending an existing one, it’s extremely important to have a clear purpose as to why an agency is being evaluated and what the evaluation should achieve. As Richard says, before beginning an evaluation, marketers need to understand:

  • how they will wunderstand agency strengths and areas for improvement,
  • how they will enable the agency to do its best work, and
  • how the evaluation program will be used as a component of incentive compensation.

A good relationship, like a good Procurement Value Engine, is effective (and uses agency strengths), efficient (and enables the agency to do its best work), and sustainable (and incentivizes the agency to continue to do its best work as time goes on).

In addition, it supports the strategic goals of the marketing department — which should be known before the evaluation process begins to make sure the organization knows which strengths and processes will best support the evaluation.

This means that it’s critical to ask the right questions in an evaluation — questions that will deliver actionable information relevant to the assessment at hand. Designing these questionaries is not easy. Not only do the needs of all departments interacting with the agency need to be met, but the questions needs to be focussed with respect to the strategic goals.

So how do you balance the needs with respect to the goals without overloading the agency with meaningless questions and useless work?

As Richard puts it, you need to be

  • lean,
  • impactful,
  • relevant,
  • consistent, and
  • reflective.

And, of course, get the timing right. What does this mean? And how do you do that? That’s the focus of Richard’s latest article by Richard Benyon on Surging Ahead. Check it out.

Don’t Be Fooled. There is no SaaS. Part II

In our last post, we said there is no such thing as Savings-as-a-Service and any organization promising to deliver it (with the exception of the big provider recently valued at 1B) is making a promise they likely won’t keep. The majority of organizations that jump on this new acronym with grandiose claims of SaaS delivery will not meet up to expectations, and many will not deliver any savings at all.

The reason being is that a company is not delivering savings unless they are either delivering a product or service below market average price or delivering a product or service at market average but at a higher value than would normally be obtained (either through enhanced quality, reliability, features, knowledge, etc.). After all, anyone can go to Amazon, Staples, Office Depot, eBay, etc. and figure out a rough market average and get that price if they want to.

For a company to deliver savings, they need to (have a platform that):

  • know what the market average is for a commodity or service, and always provide options that are less or the same with additional value beyond the market norm (which means they need a modern catalog platform)
  • have a way of collecting quotes and bids from potential suppliers that can be compared in a normalized, weighted, apples to apples fashion (which means they need a modern e-Sourcing platform with strong e-Negotiation support capability)
  • have a services team to handle the negotiations and the contract process to make sure that what gets offered gets agreed to
  • have a platform capable of managing the PO, invoice, and goods receipt process (and m-way matching) to make sure that the right products are ordered at the right price, that only invoices at the right price are accepted, and that payments are only made for goods and services received (which means they need a modern e-Procurement platform with strong e-Document management capability)
  • have a platform capable of tracking obligations and supplier performance (to make sure that deliver is on time, quality is up to snuff, etc.) and handling any corrective actions that are needed and supplier development that can improve overall value (which means that a strong SRM platform is needed as well)
  • and have the expertise in the appropriate categories relevant to your business! An engineer from the direct materials world probably know squat about contingent lab or procurement or marketing agency management, which could be where a considerable portion of your unmanaged spend is.

How many providers have a full featured S2P platform with enhanced e-Catalog and SRM functionality, budget integration, analytics that support normalized year-over-year spend reporting, services professionals to support all of this as a true SaaS (Software as a Service) platform *and* the expertise to support the categories you need supported?

The answer is: relative to the number of providers in the Supply Management space, very few. Only this handful of companies can claim that they can deliver Savings-as-a-Service. And, fair warning, their services will come with a hefty price tag. (This is not to say that the price tag will not be worth it, especially since there are providers that can consistently deliver a 5x to 10x ROI year after year, but that you need to be prepared for the price tag up front and willing to work with them and follow their lead in order to realize the savings.)

Because it sounds so awesome, expect a number of companies to jump on this new SaaS acronym, and expect most of them to be stretching the truth at least a little (if not a lot). Do your due diligence and find out what it is they really deliver and what will be expected of your team to realize the ROI they are promising. Then figure out if your team is up to the challenge, can be with training, need (temporary) (GPO) (expert) augmentation, or need a services provider to simply take over part of the Procurement in an outsourcing relationship until they can be brought up to the level (and manpower) needed to realize the ROI themselves.

Everybody wants savings, but simply not paying more than you have to under normal circumstances is not saving, it’s just avoiding clearly unnecessary cost. Savings is going below the baseline, and to realize that, you need a provider that can actually help your organization achieve that consistently across categories.

Don’t Be Fooled. There is NO SaaS! Part I

That’s right — there is no such thing as Savings-as-a-Service and any organization promising to deliver it (with the exception of the big provider recently value at 1B) is making a promise they likely won’t keep. The majority of organizations that jump on this new acronym with grandiose claims of SaaS delivery will not meet up to expectations, and many will not deliver any savings at all.

That doesn’t mean that you will not see reductions in spend, because many of the offerings proclaiming SaaS will lead to reductions in unit price, but this isn’t savings. Paying less than you were spending is not saving. If you were paying more than market average, and you reduce the cost to market average, you are simply realizing a cost reduction you could have realized any time you wanted simply by shifting the spend to a GPO, (an) Amazon (or e-Bay) (reseller), or an e-Catalog provider with punch-out integrations to all the big marketplaces. That “savings” was yours for the taking any time you wanted. And, moreover, once you make the switch, and start paying market average, if you simply stay with that provider, you will never see the “savings” again.

“Savings” is what you realize when you reduce spend below market average or extract value beyond what you typically get at the price point you are paying. Thus, to deliver savings you must deliver a customer a viable option to obtain a product or service they need below market average or to obtain more value (add) when they pay market average. And, thus, to deliver savings as a service you must do this repeatedly on a regular basis.

This is NOT something you can do if all you offer is a catalog. All a catalog allows you to do is determine the market average (range) for a product or service and identify those products that meet the price (range) and document which are of the best quality or the best fit for your organization. This is a valuable “service”, and every organization should be using one for their commodity product and service tail spend, but this is not “savings as a service”. Savings comes from analysis, engagement, negotiation, and relationship management.

If you want a better than market price or value-add features and services, you have to engage a potential supplier, negotiate for delivery (based on guaranteed volume, dollars, or value-delivery — such as co-marketing, lean training, or volume-based raw material purchasing at a better rate on their behalf), and manage the relationship. Thus, obtaining savings is also more than just sending out an RFQ and accepting the lowest bid (because if quality or reliability decreases and you have more returns and stock outs, you are actually paying more), so providers that just offer RFQ/e-Auction technology don’t deliver “Savings as a Service” either. They deliver a platform that you can use as part of a strategic sourcing process to negotiate savings, but as you can see, there’s a lot more to delivering savings than just providing a platform.

And we’ll address this in Part II.