Category Archives: Guest Author

In Spite of Ourselves: Procurement’s Curious Contradictory Behavior


Today’s guest post is by Anthony Mignogna, a Director at Source One, a Corcentric Company. He provides clients with expert, end-to-end support for their procurement software investments. Leveraging years of experience working with mid-market to the Fortune 1000 companies, he empowers procurement organizations to identify opportunities to better leverage technology, assess the software landscape, select best-fit solutions, and implement them to meet their business objectives.

“Numbers never lie.” It’s a popular saying that’s also far from true. In fact, numbers are often most interesting when they call the truth into question.

You can observe a few good examples of this phenomenon in Deloitte’s most recent CPO survey. Rather than painting a clear picture of Procurement’s path forward, the survey results suggest a function that’s uncertain of how it should proceed. CPOs, it seems, are eager to use the survey (and its numbers) as a way of lying to themselves. This is particularly true where talent and technology are concerned.

Though a majority of respondents suggest these are areas of concern, a shocking few report they’ve acted on these opportunities. Let’s take a closer look.

Talent

If you’ve attended a Supply Management conference this decade, you’ve attended a handful of sessions on the ‘talent gap.’ As more and more organizations invest in managing the cost side of their balance sheet, demand for procurement talent is far outpacing the available candidates. This is complicated further by the evolving set of skills and experiences we expect Procurement professionals to leverage. Based on the survey, roughly half of CPOs don’t believe they have the right talent in-house or the resources necessary to find it:

  • 51% of procurement leaders believe their current teams do not have sufficient levels of skills and capabilities to deliver on their procurement strategy.
  • 47% of procurement leaders found it more difficult to attract talent in the last 12 months

Alone, those numbers aren’t especially surprising. What’s interesting is the way they fly in the face of logic CPOs love to employ. Procurement often stands firmly on the buy side of the make vs. buy discussion, but that goes out the window where investing in talent is concerned. Procurement seems totally unwilling to take its own advice:

  • Levels of procurement outsourcing have dropped to 10%, the lowest level in over 5 years.

If you don’t have the talent to support your organization’s goals, and you can’t find that talent externally, outsourcing to organizations capable of scaling and focusing resources seems like an obvious path forward. It’s debatable why organizations it’s still an unpopular path. Are the nearly 50% of organizations that struggle with talent simply failing to consider all of their options, or are CPOs too focused on tactical, day-to-day operations to even consider pursuing more strategic initiatives.

Technology

If one topic trumps talent, it’s technology. Conference agendas, blogs, podcasts, and whitepapers are loaded with questions and suggestions around the incoming digital revolution. The conversation is inescapable. From eSourcing to AI and everything in between, technology is on the top of minds and tips of tongues for Procurement. Identified as a solution to inefficiency, poor visibility, low ROI, and perhaps even the talent gap, software looks like a magic bullet. Deloitte’s survey results support this. They indicate that CPOs are betting big on the promise of new solutions:

  • Two-thirds to three-quarters of organizations surveyed are leveraging digital technologies along the source-to-pay continuum to some extent.
  • The rate of digital technology adoption among organizations is highest in the P2P process, followed by sourcing and tactical buying.

Again, this is not especially surprising, particularly when you consider that most of the pain points cited in the survey are closely related to technology. Two statistics, however, jumped out. Like the talent findings cited above, they suggest the numbers don’t tell the full story:

  • Only 3% of Procurement leaders believe their staff possess all the skills required to maximize use of digital capabilities.
  • Only 6% of Procurement leaders believe their digital strategy will help them fully deliver on their objectives.

Suffice it to say, there is no amount of statistical error tolerance that can make 3% and 6% look like a significant chunk of the survey’s respondents. Juxtaposed against Procurement’s enthusiasm for new technologies, these statistics are especially alarming.

Again, the paradox could point to one of a few issues. Maybe it’s just a symptom of the talent and skills shortage. On the other hand, it might simply point to flaws in the way Procurement views technology. Expecting an antidote to cure all of their ills, they’re finding something less exciting. It appears that CPOs are good at speculating about technology and even good enough at purchasing. When it comes to building the necessary ecosystem to build a compelling business case and support implementation, however, they fall flat and realize disappointing results.

The survey results suggests that 9 in 10 CPOs are opting for the status quo – and they know it. It might be time to break the trend and give outsourcing some thought once again. Maybe then our actions will match our ‘priorities’ and the numbers will start to tell the truth.

Thanks, Anthony.

The Key Reason Spend Analyses Fail (that Often Goes Overlooked)


Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in sourcing, and brings some unique insight on the topic.

Organizations that develop an understanding of their spend have an edge when it comes to strategic sourcing: They better understand where money is being spent, with who, and on what than others who enter into the process either blindly or as a knee-jerk reaction to an incumbent price hike. This is particularly important for tail spend in those spend categories on the indirect side that too often fly under the radar.

That edge isn’t a given, however. Building a spend analysis can serve as the foundation for strong opportunity assessments, but doing so won’t automatically lead to better sourcing projects. Organizations who spend time on spend analyses can and do still fail at strategic sourcing for a very big reason. We put too much faith in the front-end process of building this analysis, and forsake the back-end, leaving a critical gap in our understanding of our spend profile.

The Front-End Spend Analysis

The first steps of a spend analysis are akin to cleaning out your basement. What’s the first thing you do? Before sorting into keep-or-toss piles can begin, even before moving and opening boxes – we need to turn on the light and survey the room. “Turning on the light” is really what the front-end of a spend analysis is. Our goal is to shine a light on the spend we have so sourcing project identification can begin. How does a spend analysis accomplish this?


  • Cleansing & Consolidation. Take all of the disparate data sources that make up our profile and create a single view of them, cleaning up supplier names and other critical fields along the way. For example, referring to the supplier “Dun and Bradstreet,” with that single name, even when spend from a second set that refers to “D&B.”
  • Classification. With all spend in one consolidated set, we will now attach meaningful classifications. The discussion around the best way to do this is worthy of a discussion of its own, so let’s simply say care should be taken here. Choose a system that speaks to your organization’s process, products, and objectives.

Let’s cook up an example. Let’s say we want to look into our IT spend to see where we can cut costs. We conduct a spend analysis covering the points above and learn the following: We have four locations using four different managed IT service providers offering similar services at four different price points.

This is the type of intel that suggests a strategic sourcing initiative may be called for. Pitting these suppliers against each other in a market event will drive down costs and potentially streamline operations if we can establish a single supplier for all four locations. We can estimate these savings by building a baseline spend profile and comparing to our average savings by following this strategy within this category. Simple enough. So why do sourcing initiatives often fail to deliver?

Moving Into Opportunity Assessment

Because we just committed a big mistake: We took our initial view of the spend and jumped right to goal setting without taking the time to properly scope. We went from turning on the basement light to selling boxes, en masse and unopened, directly on Ebay without knowing what was inside.

As we go to market, our sourcing event fails each of our four locations for different reasons:


  • The first location is locked into a multi-year contract with a painful termination clause. Without scoping, who didn’t know what our contractual obligations looked like
  • The second location isn’t locked into a contract, but is locked in by a lack of competition in the market. Without scoping, we never looked beyond our own buying history into the market landscape
  • The third location is free of both of these problems, but this isn’t their first rodeo. They used the providers that locations one and two use in the past, but abandoned them due to severe performance issues. Without scoping, we can’t get a good enough view into the decision making process that led to incumbent relationships.
  • Finally, our fourth location. No issues with suppliers, contracts, or market competition. The problem here? When we dig into the spend, we realize the bulk was capex: The purchase of equipment for a new server room buildout. Now that the equipment is purchased, we won’t see this spend come back around for years to come. Without scoping, we assumed spend was annually recurring, and now we have next to nothing.

Better Spend Analysis through Better Scoping

Once our spend analysis is complete, we’ll need to bring additional stakeholders into the fold. Bring in the employees who actually interact with these suppliers and their products and work with them to develop a sourcing history:


  • Did we accurately describe how you use this supplier with our chosen classification system?
  • What are we specifically buying from this supplier, and are these purchases made regularly or only once every few years?
  • How was this supplier selected, and who chose them? Were any competitors engaged at the same time? How did this incumbent beat them out?
  • What does this supplier do well? Where are their biggest points of failure?
  • Has this category been sourced recently? How was the event conducted, and what was the result?

Beyond this interview, ask these stakeholders to provide copies of any active MSAs, SOWs, SLAs, or any other document that can help define the relationship. Of particular note will be termination clauses. What date does the agreement end, and what are the renewal terms? What steps do we follow to terminate on that date, and by when do they need to be taken? If terminating before that date, are there any penalties?

From Insight to Action

Building a detailed spend analysis takes time, and the commitment of resources that could be doing other things. As such, you need to ensure you get a good ROI out of the exercise.

The best way to do that is to see beyond the front-end of what a spend analysis is (the unification, cleansing, and classification of spend data) and consider what a spend analysis helps Procurement do (identify strategic sourcing initiatives and estimate potential impact). Scoping is a critical part of this process, and properly scoping opportunities that a spend analysis shines a light on is a great way to get that ROI.

Thanks, Brian!

Stop Paying for More Analysis than you Need


Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in supply chain distribution, and brings some unique insight on the topic.

I wrapped up a large spend analysis initiative recently. The project spanned a dozen international operating companies with over two dozen stakeholders pitching in. By the end, we analyzed roughly one million transactions from dozens of disparate systems. It was a lot of work to be sure, but it also provided an unparalleled view into over $1 billion in spend.

Despite the heavy lift, this analysis was critical. It served as the foundation for identifying strategic sourcing projects slated to save this organization millions. The benefit far outweighed the cost.

This is not always the case.

We live in an age where analytics reign supreme. Some organizations staff whole teams to churn out an uncountable (and maybe uncontrollable) number of spreadsheets, reports, and dashboards filled to the brim with data. Other organizations hire third parties like yours truly or implement state-of-the-art analytics packages to crunch these numbers. Either way, end users are left with more data points than they’d ever care to actually use in their decision-making processes.

I feel like I’ve slammed a lot of hyperbole into a few short paragraphs. Let’s dial it back with a simple statement and follow-up question: Even in this data-forward world, organizations need to ensure that we’re not wasting valuable resources on analyses that don’t warrant it. So how do we tell which efforts are worth the time?

Let’s break that down into a few more specific questions.

What direct impact are we trying to make?

This sounds like a throw-away question, but it isn’t. Think of the last ten reports you personally handed off to your boss or your boss’ boss. If I were a betting man, I’d say you could take at least one of them out of your weekly stack without the end user even noticing. Why? Because the people consuming these reports are inundated by data. They don’t have time to sift through reports generated for the sake of bureaucracy.

If you can look at a report and not know what specific challenge it helps solve, odds are good the answer is “none.” Sync up with the end user and confirm it provides the value you think it does.

How much of an impact can we expect?

A spend analysis has a clear enough direct impact on a defined challenge – we need to understand where money is going, to which suppliers, at what point in time, in order to identify projects to reduce cost. That said, some spend may not warrant the attention.

This may sound a bit like a “chicken vs. egg” issue, since we often can’t estimate value before we dig into the numbers. That said, we should have general figure in our mind before investing the time. Saving 20% on office supplies is great when your Staples bill is six figures. Drop that to a few spare thousand every year and the value just isn’t there.

How much buy-in can we expect?

Are relevant stakeholders likely to pursue the projects your analysis shines light on? If not, do you have the leverage, authority, or sheer charm and charisma needed to turn them? I’ve seen plenty of projects die on the vine because of hesitation or outright hostility on the part of key stakeholders. Investing in analytics for projects destined to fail before they start is a sucker’s game.

?There’s a decades-gone-by phrase that old timers in the IT industry will recognize: “Nobody ever got fired for buying IBM.” The elements of fear, uncertainty, and doubt that made it effective back then are still relevant today. Think of the last time your office’s internet connection dropped off, even for a few minutes. Were you thinking about the cost savings your new provider offers? Cost savings may be good, but IT knows reliable uptime is better and is what makes or breaks them.

How deep does our dive need to be?

It pays to get down into the weeds when creating a spec list or generating an in-depth market basket. Once you’ve established the value of a project, it makes sense to invest in it by pulling the devil out of the details. Ending on a detailed note doesn’t mean we need to start the same way, though.

I pick on office supplies a lot when giving an example here. Let’s go back to that six figure Staples spend from earlier. How many pens, pencils, dry erase markers, reams of paper, and other supplies make up that figure? We’re looking at potentially thousands of line items. Remember the goal of our spend analysis – identify projects that can lead to cost savings. Do we really care about each individual line item right now? Will knowing how many black ballpoints versus blue felt tips make project identification easier? No – in fact, spending too much time on this granular detail now will only waste time and lead to potential lost opportunity costs.


I understand the knee-jerk reaction to traverse that DIKW (Data-Information-Knowledge-Wisdom) pyramid, I really do. It often is the right call. At the same time, there’s something to be said for taking a step back and looking at the bigger picture.

Every action we take needs to have purpose. Don’t waste time on a report today just because you ran it yesterday. Understand how your analysis fits into your organization’s goals and, if you find it doesn’t, cut ties so you can focus on more impactful endeavours.

Thanks, Brian!

13 Reasons your RFP Scoring Sucks


Today we welcome another guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in supply chain distribution, and brings some unique insight on the topic.

The most thorough, best designed RFP questionnaire counts for nothing if Procurement can’t interpret the results. Proper submission scoring is critical, yet many Procurement Pros commit at least a few mistakes that seriously damage their ability to assess RFP responses.

I’ve seen my share of such mistakes over the years, and work with clients to clear them up before it’s too late. I’ve included the worst offenders, “The Unlucky 13”, below.

How many did your last RFP fall victim to?

Evaluating Questions

1. Questions aren’t weighted (or aren’t weighted properly).

Not every question is created equal. Consider how important one response is versus another. Critical questions should receive the lion’s share of total weight. I recommend starting at a high-level, assigning weight to each category of questions. Once done, delve into each category to distribute this weight to each individual question.

Not every question needs to be scored – some are for information gathering only. However, if you notice too many unscored questions, evaluate whether they all need to be included in the first place.

2. “Kill switch” responses aren’t treated as such.

On the subject of weight, some responses are so heavy that the wrong answer can (and should) disqualify a participant out of the gate. If an unacceptable answer invalidates a proposal, don’t bother weighting it – call out the answer as grounds for dismissal.

For example, one critical question may ask for confirmation that a respondent can handle required volumes. If any responses indicate a supplier can’t, no amount of weight would suffice – they simply are no longer viable.

3. Scoring is overly simplistic.

True/false questions are easy to understand and score, but too many of these cause problems in the long run. Odds are your suppliers will end up looking too similar if the bulk of responses fall into simple yes/no buckets.

4. Scoring is overly complex.

On the other side, some scoring systems end up too complex to be reasonably applied. I’ve seen scores range from 1 to 20. On paper, this appears to allow fine-tuned scoring. In reality, I’d challenge anyone to properly differentiate a score of “12” from “13.”

Evaluating Responses

5. Questions from participants go unanswered.

Your questionnaire may seem clear to your team, but chances are good that one or more participants either don’t understand your intent or don’t have the background information from you to properly answer.

Every RFP should include chances for Q&A with participants. If you don’t provide this opportunity, responses will hinge on assumptions made by participants – enough assumptions, and the end result may not align at all with your requirements.

6. Questions to participants go unasked.

The same is true on the other end. If a response is unclear to the scorer, then clarification should be sought. Otherwise, the scorer is left to make assumptions in order to interpret a response.

7. The wheat wasn’t separated from the chaff.

Anyone who’s ever scored a Marketing RFP will be familiar with this concept. Ever read a 200 word reply to a question, only realize at the end that the participant never gave a direct answer? Quantity does not equal quality – a detailed non-response is still a non-response.

Evaluating the Scoring Process

8. Clear criteria aren’t provided to scorers.

Simply providing a scoring scale isn’t enough. If you ask for a score of one to five, be sure to provide concrete direction on what constitutes a one versus a five and every point between.

9. Too few scorers are included.

The more stakeholders involved in scoring, the less likely results will be thrown by huge score discrepancies. The team in charge of scoring should encompass any stakeholders who would interact with the supplier or the product/service in addition to Procurement.

10. Score results are averaged blindly.

As a counterpoint to the above, don’t simply average all scores together at the end of the initiative. Large discrepancies in scores may indicate that two or more scorers viewed either the question or response (or both) differently. Use big discrepancies as a flag to ensure everyone is on the same page and revise accordingly.

11. External factors influence results.

Score only what it within the questionnaire. Don’t award ghost points to an incumbent based on their years of service. Likewise, don’t give an artificial boost to a hungry alternate because they came in competitively on pricing. There will be time later to consider outside elements – for now, stay focused on specific questions and responses.

12. Internal factors influence results.

“What? Dave’s team gave these guys a ‘nine’?!” “Don’t worry about it – just give them a ‘two’ to even the score out.” I wish I made this example up. I did not. I’ve worked with stakeholders who doctored their own scores to offset other scores that they disagreed with. Needless to say, this artificial tampering helps nobody.

13. Scoring lacks consistency from one response to another.

Here’s a fun way to screw with your team. Give them a pop quiz by asking them to rescore one of their first questions right after they finish scoring all responses. I’d be willing to bet on the outcome – the scores won’t match. Maybe by a little, possibly by a fair margin. When we’re evaluating half a dozen or more participants by scoring potentially hundreds of questions… it’s easy to get fatigued or change your mindset midway through.

Many people like to score one participant fully, then moving on to the next. I recommend scoring on a per-question basis instead. Take a question, and score the response from each participant down the line. Repeat for the next question. So on, so forth. This way, you’ll be in the same frame of mind and consider each response on the same standing.

Do your RFP justice – you worked hard to develop it and marshal participants through it to the end. Before working through responses, sit down with your team and review your strategy for evaluating the results. And make sure everyone is on the same page when it comes to avoiding the mistakes above.

Thanks, Brian!

Supply Chain & Distribution in the Age of Legalized Marijuana


Now, some readers will feel this topic is inappropriate for Sourcing Innovation. However, regardless of your personal view on the subject, it is a valid one given the continuing legalization of Marijuana around the world, and, more importantly, the fact it has medical uses. If you are personally against it, you can avoid the industry. But a healthcare provider cannot, especially once a licensed medical doctor has prescribed the drug.


As a result, today we welcome a guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in supply chain distribution, and brings some unique insight on the topic.

(Dear reader: I need you to know how hard it was to resist writing a pot-infused pun into my headline.)

There are a lot of headaches attached to supply chain and distribution, faced by distributors and their clients alike. I can list a few, not that I likely need to – most readers will be familiar with them:

  • Regulations are, bluntly, a pain in the ass. This one doesn’t need much of an explanation. From city to city, state to state, country to country, there are a lot of rules to follow, and a lot of frustration for anyone who doesn’t dot the right “I’s” or cross the right “T’s.” If compliance is key, then regulators must have some pretty heavy doors.
  • Supply chains are often pretty inflexible. Any hiccups along the way can be devastating and, while good planning can ease the pain, nothing is sure fire. Want an easy example? For those in the north, think back to the last bad winter you faced. Any seafaring shippers can point to the last hurricane that graced their shipping lanes. Probably enough said.
  • Costs are rising. Fuel for trucks and wages for their drivers have frequently been a concern. Adding some strategic creativity to your supply chain can help stretch dollars, but the rubber can’t meet the road without expensive fuel to get it there. And a driver, of course, to keep it there.
  • Forecasting can be tricky, and demand can outstrip supply. Predicting demand (and predicting the uncertainty in that prediction) are crucial to gaining efficiencies in your supply chain. It can also be very difficult, leaving many to base decisions on assumptions and gut checks. One known factor at play here is the fact that demand far outstrips supply. There’s a shortage of truck drivers out there, and that isn’t good for anyone trying to move shipments.

Again, I likely didn’t need to remind any of you of these and many other challenges your supply chain faces. One thing you blessedly don’t need to worry about, however, is committing a felony just for shipping product.

In the Age of Legalized Pot, Distribution will be … Tricky

Sorry to bury the lead, there. However, I think it was important to do so. Given all those issues above that we all face, at least we can keep in mind that “someone out there has it a lot worse.”

You think regulations on your end are bad? States can barely get their own minds made up about the legal status of Marijuana, and that’s not even considering the fact that the stuff is still illegal on a federal level, regardless of what the states decide. That brings the regulatory landscape to a whole new level. On that note, what do you think the legal ambiguity means to an already fragile supply chain? Distributors of marijuana face a level of uncertainty not seen elsewhere.

If America has a truck driver shortage, imagine adding felony charges, stiff fines, and jail time into the equations – you can’t fault the labor pool for being cautious to enter this new arena. And even if you solve these supply chain risks in the here and now, predicting the demand of a product that is legal today but potentially a crime again tomorrow would make the best soothsayer’s head spin.

Still, this is an emerging market that has caught everyone’s attention. As Procurement pros with an eye on industry news and trends, this growing industry is, at a minimum, an interesting one to keep an eye on. So let’s dig a little further.

Weed Distribution: A Brief Review

To take a closer look, let’s travel to California’s sunny coastlines. It’s weird to think of the marijuana growers and dispensaries dotting the golden state as mon-and-pop outfits. “Not my parents,” right? Still, the term applies. Most don’t have the resources nor inclination to own most of the vertical elements of marijuana industry. Many dispensaries are happy to leave the cultivation and processing of marijuana plants to growers and act simply as the retail operation. Many growers simply want to focus on producing a high quality product, and have little time for the retail side of it all.

On one hand, it makes a lot of sense for the two to meet in the middle, forming partnerships. On the other, however, it can be painful for an organization on one side to deal with a dozen small outfits on the other. Not to mention the fact that some of those small outfits may land on the weaker end of the business acumen continuum. Besides, neither end necessarily wants to deal with the tax and regulatory management or logistics of the industry.

Enter California’s Cannabis Distributor License. Organizations under this license take up this relationship, and work with growers and dispensers to not only manage the logistics of the industry, but also myriad steps along the way – before handling the actual shipments, these organizations may also take part in the processing and packaging of the products, performing required quality control measures, and deal with the regulatory hassles that come with the territory. Just as importantly, growers and dispensaries can get a range of products from a much smaller, more reputable source.

This is a win for all parties involved. So, what is the issue?

For one thing, the California supply chain is being disrupted by a – very relatable for the rest of us – greater demand for distribution than there is right now. Plenty of dispensaries stocked up on product early on to ward against disruption, but there simply aren’t enough operators being granted licenses to keep the pipeline full.

This shortage isn’t the only concern. Plenty of attention is paid to high tax rate on one side and a banking industry that refuses to get involved in an industry still illegal on a federal level on the other. Both factors are squeezing the industry from a financial perspective.

A Look towards the Future

You may be asking, “won’t all of this get better as more states legalize?” This may be true over a long term. However, the federal government isn’t budging so far, which means every state is an island in terms of marijuana distribution. It wouldn’t matter if two neighboring states were both weed-friendly. That adjacency won’t count for anything, as state borders fall under federal jurisdiction. Hell, don’t even think about getting near some state borders as a cannabis distributor – simply approaching a border crossing zone between countries could land you in hot water, even if the distribution of marijuana within that border state is legal.

So let’s look towards what that longer future could look like. The biggest “if” factor out there is regulatory. Either states get their own ducks in a row and the federal government follows suit… or they don’t.

If they do, the cannabis distribution market could be a huge industry (we already see it growing quickly, albeit not quickly enough, in California). Limit the number of hoops to jump through and clear the way for distribution from a legal standpoint, and watch an industry thrive. If they don’t, however, I can see a slide back into the black market, regardless of the legality on a per-state basis. The lack of regulation and taxation could be too much of a draw for some to ignore.

And that would be a shame – from a quality and safety standpoint for the consumer and a revenue standpoint for the state, there are a lot of reasons advocates across the industry and interested in its success.

Thanks, Brian.