Category Archives: Knowledge Management

Still No Single Starting Point for Your Supply Management Journey!

Just as there is no one platform and no one workflow for Supply Management, yet alone even S2P (although the vendors claiming to have such seem to be increasing by the day) — and the only way to make progress is to define the core workflow, identify a set of overlapping/integrating systems to achieve the core workflow, identify vendors that can provide these systems — with enough configurability to allow you to support the necessary variances, and then select those vendors that best meet overall organizational needs and move forward — there is no one starting point.

The starting point, with the ever increasing complexity of systems, processes, and global supply chains, is more organization dependent than ever. One has to take all of the following questions, and corresponding answers, into account … and more!

  • What does the organization have now for systems and processes?
  • Where is the organization in its Supply Management journey?
  • What is the talent profile — what is its average and collective IQ, EQ, and TQ?
  • What are the organization’s biggest pain points?
  • What are the organization’s top pressures?
  • What is the organization’s budget? Can it be extended? Leveraged?
  • What resources does the organization have available to support implementation and change management?
  • What resources and programs do its current, and prospective, vendors have to help?
  • What professional organizations and associations can it lean on for support?
  • What leading research and advice can it access?
  • And so on.

It’s tough. Typically, an organization makes the jump when it’s desperate to get savings, and typically, when doing a systems buy, the organization will focus on the system that is advertised to identify the biggest return. In Supply Management, that’s a true strategic sourcing system that supports complex sourcing as only decision optimization and spend analysis technologies have been repeatedly found to identify year-over-year savings in excess of 10%, with everything else being single digits. (This system will support complex sourcing workflows, decision optimization, and at least industry average analytics as well as a solid supplier master / SIM capability. Contracts can be external.)

But identification is not realization. In an average organization without the proper processes and systems to support contract implementation, as per a classic AMR series on reaching sourcing excellence, an average organization will only capture 60 cents to 70 cents of every dollar of negotiated savings at the end of the day.

If the organization is not set up to capture savings, it has to start simple. Processes. e-Procurement/I2P. SRM to get suppliers on board with processes and programs that will allow it to capture data and insure the suppliers deliver the value they promise without constant monitoring by the buyer. If the organization is set up to capture savings, but can’t identify any, it has to look at more complex platforms or options. However, regardless of the answers to the above questions, it should start simple and work it’s way up the technology and process complexity ladder. The key to success will be adoption, and that will mean not overwhelming those that will be required to adopt the new systems and processes if success is to be achieved.

Knowledge is Power

So why would you want a platform that doesn’t embed any knowledge?

There is not a product or service in existence that cannot be made more valuable with information, and in technology, there does not exist a solution that cannot be made more valuable through embedded information. So why would you ever want a platform without it?

In fact, if the platform has enough embedded information, and can use it to power adaptive workflows built on top of robotic process automation, you’ll find that you might not even need any AI at all (especially if all it equates to is Applied Indirection). If the platform comes embedded with leading market knowledge for the majority of your categories, and you can define, and embed, rules with the help of experts to cover the rest, then you have the majority of what you need.

Because, at the end of the day, the best value comes from not only getting Spend Under Management, but making the best Sourcing / Procurement decision possible for the organization — and that can only be done if the organization has the right information. No organization has expertise in more than a few categories, and it definitely doesn’t have all the information. So having a platform that comes equipped with the best should cost models out of the box, integration to current market data feeds, and historical data on previous events (anonymized if necessary) to help organizations select the right type of even tfor current conditions is very beneficial — versus just a piece of dumb software that executes a canned one-size-fits-all workflow.

At the end of the day, the more you know about your raw materials, your components, your assembly / manufacturing options, your products, your shipping, the import and export restrictions and costs, and the inherent value of each product versus your other options, the more accurately you can model your options and make a good decision. The more accurately you can model your options, the better chance you have of determining the solution with the lowest cost, the lowest risk, the highest value, and the best value (defined as risk reduction, profit generation capability, etc — whatever makes sense) to cost ratio.

This is how leading Supply Management organizations can save 12%, off-the-top, in an optimization-backed information-enabled sourcing event — and even more if they collaboratively work with their peers to identify all of the options that may be available and all of the associated tradeoffs.

Plus, good, timely, information allows an organization to:

  1. constantly improve products and services by way of the fact that they are able to
  2. collect more relevant, timely, accurate, detailed, and integrated data.So get an information enabled platform – at the end of the day, it’s better than all the platforms with the fake “AI” that do nothing more than automate static, dumb, one-size-does-not-fit-all, workflows!

Where are You on Your Master Data Journey?

You want to get cost under control. Maybe even save. You need to ensure compliance. You need to satisfy the auditors. You want to know the risks you face. And the risks you could face. All laudable goals, but all goals that are unobtainable without … you guessed it … data.

More specifically, clean, rich, up-to-date, relatively complete data … which, likely, resides in multiple systems, duplicated across each. This makes data centralization, which is necessary for any of these initiatives, complicated, and often difficult. It’s not just the last update record date, especially since some systems do the last update at the record level, and not the data element level.

Plus, how do you know which parts of which records can be combined? Especially when they conflict or don’t line up. Without an appropriate master data management strategy, and a system that can handle master data management across multiple, loosely related, supply management and enterprise, it can be downright impossible for any initiative that spans more than a few dozen providers or categories. And even that is an effort.

But MDM is not easy to define, and even less easy to implement. First of all, which systems do you use for master data when there is an argument for multiple systems that store a record, such as a supplier, to be a master data system. Secondly, when you do identify the master system, how do you manage, and approve, updates … and how do you insure they get synched to the right systems at the right time? Third, how do you integrate all the data into a single, even if only virtual, record so that you can run a spend report. A compliance report. A risk report. An audit report?

The point is that it’s not just as easy as selecting a system, proclaiming it your MDM, and believing the implementor that your MDM problems will be solved in a few months. Some companies, that aren’t heavily focussed on, and involved with, the initiative take years to integrate systems and arrive at a nearly clean set of master data.

So before you march forward on your next, data intensive initiative, maybe you should step back, ask yourself where you are on your data management journey, and give an honest answer.

The More Things Change … Supplier Intelligence

This week we’re revisiting posts from ten years ago to demonstrate that, to date, the more things change in Procurement, the more they have, unfortunately, stayed essentially the same.

Ten years ago we published a post on what you can’t afford not to know about your suppliers that summarized some key insights from Jim Lawton (who was VP of Marketing at Open Ratings until its acquisition by D&B, where he became SVP and General Manager of Supply Management Solutions).

Jim, who noted that global supplier insight can become as indispensable to sourcing and supply management as a stage is to an actor, also noted that in order to acquire this insight, an organization has to focus on:

  • supplier performance and quality management,
  • supply risk management, and
  • supplier content and connectivity

And nothing has changed. Any organization that wants to understand total landed cost from global markets and with predictability still needs these capabilities today. Considering that the the final cost of any purchased product is ultimately dependent on the supplier and its ability to delivery a product to spec on time and on budget with minimal defects, supplier performance management is as critical today as it was a decade ago.

Similarly, considering that a single disruption can wipe out the entire identified and negotiated savings on a category (as the result of a six week disruption), supply risk management still takes center stage. (This goes double when the chance of an organization not experience a disruption is 15% or less for any 12 month period.)

Finally, without an understanding of supplier policies, practices, and the providers your suppliers employ, you’ll never know whether or not they are adhering to your corporate social responsibility standards, whether or not they are implementing six sigma and other best practices to ensure quality and keep defects down, and whether or not they are buying from, or subcontracting component development to, third parties that don’t adhere to your quality, responsibility, or ethical standards.

Supplier Intelligence is as important now as it was then, and, most importantly, many organizations don’t have the depth of intelligence they should have, as evidenced on the relative lack of uptake of modern Supplier Relationship Management solutions.

Contract Lifecycle Management — Do You Have Your Platform and Process in Place?

By now you should, especially since 8 parts of the doctor‘s and the maverick‘s series on Contract Lifecycle Management (CLM) have been up for your reading pleasure over on Spend Matters Plus (registration required) since October, but if you don’t yet have it in place, now’s a good time to review the current series end-to-end and get a grip on what your platform should contain.

While contract management is not new, and many first generation platforms have been including contract management modules since the late noughts, many features of next generation contract management platforms are reasonably new, and some are much more valuable than others. That’s why the focus of this series was on must-haves, should-haves, and nice-to-haves for contract management platforms since it’s almost impossible to implement a good process without a good platform, and selecting one is becoming harder and harder as more and more e-Sourcing and C(L)M providers, including those who started in the Sales / Legal space, hit the market, and not all are created equal (or anything close to equal).

For example, while a clause library is only a should-have capability and multi-tier contract management and drafting a nice to have capability, especially for a Procurement Organization that does fairly standard direct materials and indirect services contracts, some CLM providers will push them as essential (which they may be for Legal organizations that handle commercial [building] development contracts with a lot of work being outsourced to specialist providers) for every organization, this is not the case and for some organizations these features will not be used at all. Similarly, some CLM providers without native MDM integration (which is a should-have) and, gasp, expiry and renewal management (a must-have) will try to down-sell their importance, which is critical in an organization with a lot of auto-renew evergreen contracts (which can cost the result in the organization overspending by 10% or more on multi-million category) and price data in third party systems.

Plus, with so many e-Sourcing technologies, and a plethora of acronyms which mean similar, but not the same, things (for instance, do you know the difference between S2S, S2P, and P2P — don’t fib!), it’s hard to tell where CLM even fits, why you need it, and the extent of capabilities your organization is missing out on with an outdated system. (This is critical as good CLM can result in significant year-over-year cost savings. While the percentages aren’t as high as supplier relationship management, spend analysis, or strategic sourcing decision optimization (which can tops out at an average year-over-year cost savings of 12% in the last case), annual savings from an effective end-to-end CLM process, backed up by the right platform, have been known to generate 4% to 6% savings that go straight to the bottom line (and get Procurement credibility with Legal and Sales, who can all be on the same system), and that’s nothing to scoff at!

CLM is critical as good contract management, coupled with good supplier management, is what ensures that the sourcing plan is realized, and this is key to capturing the savings that Supply Management works so hard to negotiate. It’s pointless to negotiate a 10% savings if only 6% of it gets captured due to bad contract management practices (which result in poor supplier management, maverick spend, inferior order management, expedited shipment, lost credits, etc.). And this is the case in many organizations without good contract management practices. (And has been for many years, as chronicled in AMR’s (now Gartner’s) classic series on Reaching Sourcing Excellence.)

In other words, if you haven’t, you really should read the Series to Date (membership required):