Category Archives: Knowledge Management

The Prophet‘s 2024 Procurement Prediction Number 10

A “CFA-like” Credential Emerges in Procurement and Supply Chain B+.

The Prophet says that the procurement and supply chain industries, similar to most others, excluding finance, are lacking any certifications/credentials, by those “in the know,” as a superior qualification for a job than even a top degree from a world-class or specialized university which is totally true.

The Prophet also says that organizations such as CIPS, ISM, SIG, etc., might disagree with this viewpoint which is also totally true. The Prophet does note that he supports all of these organizations, which the doctor does as well, and that he believes their training materials are highly valuable, which the doctor doesn’t across the board. (the doctor has seen some of their training materials. While some of their training materials provide a very good foundation, some of their training materials are not so good. Most of these organizations are very weak when it comes to analysis, tech-backed processes and practices, government/industry specific compliance requirements, risk management in today’s increasingly fragile global supply chains. etc. But when so many Procurement departments are struggling with the basics, understanding what their role is, and how ethics should enter the equation, we do need these organizations and that is why the doctor supports them while reminding you to do your homework when it comes to training. Use them for their strengths, not their weaknesses.)

The Prophet then suggests that in 2024, credentials will take on new meaning, and the best ones, particularly those challenging to obtain and requiring rigorous exams (which many fail), similar to the CFA in finance, will begin to take on a new significance in Procurement.

the doctor agrees with the principle, but does not agree it will happen this year, or even next year. Why? This will only happen with industry regulation, and that only happens in two situations.

  1. when an industry-led body gains enough support from the majority of professionals in an industry to make it a de-facto requirement in any employer of any size to get a high-level procurement job; no organization yet has that weight, and we’re not going to see the NLPA, SIG, APS, etc. all fold into the ISM, and definitely not into CIPS, which is pseudo-global (as it has made progress in some of the Commonwealth); this means that we’d need to see a new industry initiative that gave all parties representation and allowed them all to contribute to the standard and exam — for this to form, a certification to be adopted, and a test accepted will take years
  2. when a government forces a requirement that can only be met by a certification (and either creates their own or adopts one); governments move slow, and when we have the situation in the US where
    1. the republican focus is on ripping democrats apart for what they didn’t do, rolling back human rights to the fifties, and installing a wannabe dictator as President-for-Life
    2. the democrat focus is on shaming the republicans, selectively protecting the human rights they want, and taking up the former republican war mantle (since Trump just wants to be a dictator, which doesn’t profit the military complex) and doing everything they can to back Ukraine and Israel (including risking World War III with their Middle East bombing of Yemen vs. just destroying every Houthi vessel launched into the water)

    and the situation in the UK where

    1. the conservatives are too busy trying to keep Dishy Rishy from making them the laughing stock of the political world (as he’s so far disconnected from the common person he has no clue)
    2. the liberal (democrats) are too busy trying to counter the conservative support for the global wars and lack of focus on the situation at home by being extra woke (and we know how that fared in America) …
    3. when we look at the NHS mess and postal service mess and their apparent unwillingness to do anything meaningful about it (for longer than should be humanly possible to ignore a crisis), it seems that good procurement is the last thing on their mind

which are the two countries that would need to lead such an effort (as the EU is very focussed on climate change and AI and struggling to hold itself together now with active protests in about a third of its member states on any given day; heck it’s too focussed on attacking the farmers, already forgetting what happened when Stalin called the Farmers the enemy of the state. (See this article, for example).

Thus, while such regulation is sorely needed, it’s not likely to happen, if it happens at all, until the later part of the decade (unless, of course, The Prophet and the The Public Defender want to once again band together and take up the charge and lead the effort to bring all the necessary parties together).

The Prophet was dead on with three of the primary reasons we need it.

  • GPAs are no longer a measure of academic performance in many universities.
    The Prophet notes that, according to the Yale Daily News, “Yale College’s mean GPA was 3.70 for the 2022-23 academic year, and 78.97 percent of grades given to students were A’s or A-’s,” including the hard sciences and engineering! He also notes that the Michigan State Broad Business School (which includes the Supply Chain and Procurement degree programs) also experiences significant grade inflation, with 80% of students in 3 out of 5 undergraduate classes earning a 4.0. (Source)
    The situation is even worse in China where you don’t even get accepted to some Universities unless you are an A- or better student, and where you are under intense pressure to maintain that A, to the point where a student will drop out (or commit suicide) rather than risk being thrown out for not maintaining it. Now, this would be great except for the fact that As are often contingent on rote memorization and learning to do the work the “state way”, not always with any free thinking whatsoever. (And then graduating ONLY if they think you’ll agree to share what you learn when they allow you to go outside China for that Post-Doc/Professor position).
    The situation is better in Canada [except Quebec], but there are some Universities / Departments that are under great pressure to remain competitive to maintain grant and industry funding, and others where the professors are so overworked that they don’t even bother to confirm that a Master’s student in Engineering can manually calibrate an oscilloscope or a Master’s student in Computer Science can appropriately identify and test for all boundary cases in a simple procedure. (Remember, the doctor has been a Professor, and maintains regular contact with Professors and knows this to be truth.) How could you trust either to validate your equipment or your code? (He couldn’t!) (Regarding Quebec, the current premiere is taking Quebec’s status as a nation within a nation and essentially discriminating against anyone who is not French and willing to speak French as a first, and only, language. [See this article, for example.])
  • DEI/affirmative action preferences, which still exist (despite the supreme court ruling and their illegality if they enforce admitting or hiring a less qualified candidate), have removed objective academic criteria in both degree-based programs and industrial training programs. This has resulted in candidates who might only be a D being admitted to programs because of their minority status while non-minority candidates with Bs were excluded.
  • The best talent may no longer be pursuing traditional college or graduate programs. There needs to be an objective means of evaluating hard and learned skills for those who cannot afford or do not wish to invest time in university studies, especially those who have taken industry training programs or annex courses specific to what they need as well as obtained relevant real world experience under a mentor. (There’s a reason there used to be apprenticeships; some learning onlly happened under the guidance of a mentor.)

The only other reason that needs to be mentioned in the doctor‘s view is

  • without a certification, how can you know that any candidate, no matter how experienced and skilled they appear, knows all of the foundations you need them to know? With so many different definitions of sourcing, procurement, and purchasing; so many different thoughts on what an individual should know about analytics, supplier identification, supplier vetting/onboarding/management/development, negotiation, contracting, global trade, logistics, risk identification and management, compliance, finance / finance support, etc., how can we have a solid baseline with a (multi-level) certification program?

It would be great if 2024 is the year that we saw this certification, but while we desperately need it, the doctor believes that, unfortunately, it’s still years away. (But he will challenge The Prophet to step up and make it happen!)

A CPO Leading a Spend Management Strategy is a Key to Organizational Success

Not that long ago, the doctor gave you THE SIGN that you need a CPO which, directly put, was that your organizational spend was over 10 Million a year. No ifs, ands, or buts about it! Not long after, he found this article over on CXOtoday.com which pointed out that empowering business success was The Art of Mastering Spend Management. This article stated that companies should consider implementing a spend management strategy, regardless of their size and it made him happy (even though the article looks like it was written by a junior copy-editor* who just cut and paste standard spend management summary sentences from generic spend management publications as it was not very deep or specific) because CXOs need to hear this at a high level over and over and over again until they get it. (Note that the doctor doesn’t get happy often. Most articles just make him angry. Sometimes very angry, especially when the conscientious invoke their right to dare to be stupid and embrace artificial idiocy, but that’s a rant for another day.)

The article starts off by clearly stating that a spend management strategy plays a vital role in today’s economic reality as it enables companies to control costs, boost financial efficiency, and make informed decisions. It ensures resource optimization, agility, and long-term stability, enhancing competitiveness and adaptability in a rapidly changing business landscape.

This is most certainly true. And all one has to do to see that it is true, and it would have been so much better if the article said this, is remember the first formula they teach you in business school:
Profit = Revenue – Expense

Since Spend Management allows you to minimize expenses, this helps you maximize profit. And when you consider that
Margin = Sale Price – COGS      and that
Margin % = (Sale Price – COGS) / Sale Price      and that
Margin % for most industries <= 10%

This says that every $1 saved in expense generates at least as much profit as every $10 increase in sales. As a result, spend management is at least ten times as effective as sales or marketing and key to get a grip on early, even before you can afford the full time CPO. The CFO and COO should develop best practices for any decisions that result in spending, monitor the decisions, ensure corrections are made (and employees [re-]trained) when mistakes are made, and baselines generated for all recurring costs. Even though they might not realize the same level of success as an experienced and dedicated CPO, the baselines they generate and the knowledge they capture will be key when the CPO starts as the knowledge will allow them to dive in quickly and find near-term and mid-term opportunities for improvement (and cost reduction) and the benchmarks will allow them to not only prove it, but ensure that all bids received are competitive.

The only thing we want to note is that the important aspects of spend management, especially for smaller organizations, are:

  • strategy,
  • process (that implements the strategy), and
  • governance (that ensures the process is followed and the strategy implemented)

Technology is not critical (or even necessary), and only technology that supports the process (and collects the appropriate data) should be implemented.

This is important to note because this article is sponsored by a particular vendor in an effort to promote a particular product (which is only good for T&E spend, not all organizational spend) and you don’t necessarily need that technology (or any other instance of that technology) to have a spend management strategy and do proper spend management, especially if you are a smaller organization. (However, larger organizations do need good T&E spend management, and spend analysis, because flowers should not be $5,000 unless it’s a greenhouse.)

* but what should one expect considering it was sponsored by SAP to promote SAP Concur (and routed through their PR Agency)?

Don’t Cheat Yourself with Cheat Sheets, Kid Yourself with KPI Quick Lists, or Rip Yourself Off with Bad RFPs!

In an effort to quickly catch up on the parts of S2P the doctor hasn’t been covering as much in the past few years, when he was focussed primarily on Analytics, Optimization, Modelling, and advanced tech in S2P (inc. RPI, ML, “AI”, etc.), he’s been paying more attention to LinkedIn. Probably too much, even though he can (speed) read very fast and skim a semi-infinite scroll page in a minute. Why? Because a lot of what he’s been seeing is troubling him, and as per last Friday’s post, sometimes angering him when predatory sales-people and consultants are giving other sales-people and consultants bad advice (presumably to increase their follower count or coaching sales or whatever) that will not only hurt what could be a well-intentioned sales-person or consultant (they still exist, though sometimes it seems they are fewer by the year as more sales people bleed into our space from enterprise software, looking for the next hot software solution and the next big payday), but also the individuals, and companies, those influenced sales people sell to in the thoughtless, emotionless, uncaring aggressive style the predatory sales coaches are mandating. (Not to say that a sales person shouldn’t be aggressive about getting a sale, just that they should be focussed on the companies they can actually help and be focussed on getting the customer all the information and insight that customer needs to make the right choice, feel comfortable about it, and feel prepared to defend it. The aggression should be channeled into making sure their company does everything it can to properly educate the potential client before that client commits to a long term relationship.)

A few of the things that have been repeatedly troubling him is

  1. all the cheat sheets he’s been seeing for those looking to get a better grip on Procurement and how it integrates into the rest of the business, that supposedly summarize everything you need to know about accounting, finance, payments / accounts payable, etc. to help you make good choices about Procurement in general;
  2. all the 10/20/50 Procurement, Spend, Manufacturing, etc. KPIs that you need to keep tabs on your Procurement, cashflow plan, product lifecycle, etc.; and
  3. all the RFP outlines or guidances that are being made available, sometimes by leaving your email, to help buyers acquire a certain technology.

And it’s not because they’re bad. They’re not. Some of them are actually quite good. A few are even excellent. Some of the cheat sheets and KPI lists the doctor has seen are incredibly well thought out, incredibly clear, and incredibly useful to you. Some are so good that, as a buyer, likely with little support from your organization and even less of a training budget, you should be profusely thanking whomever was so kind to create this for you and give it away for free.

Nor is it because the doctor suspects any ill intent or malice behind the efforts (in the vast majority of the cases). Many of these people giving away the cheat sheets or the KPI lists are generally trying to help their fellow humans get better at the job and improve the profession overall. And when the RFP outline is coming from a former practitioner, it’s also the case that they are typically trying to help you out (and maybe sell their services as a consultant, but they are providing proof of value up-front).

So why has it been troubling the doctor so? It took a while and some thought to put his finger on it, and the answer is, surprisingly, one of the reasons [but not the obvious one] that the doctor hates software vendor RFPs and despises any vendor that gives you one.

Now, the primary reason the doctor despises those RFPs, which became popular when Procuri started doing it en-masse in the mid-to-late 2000s (before being acquired by Ariba and quietly sunsetted as the integration never finished by the time Ariba sold to SAP, for those of you who remember the APE circus), is that these RFIPs are always written to be entirely one sided and ensure the vendor giving them away ALWAYS comes out on top. The feature list is exactly what the vendor offers, the weightings correspond exactly to the vendor core strengths, etc. etc. etc. And don’t tell me you can start with a vendor RFP and alter it to suit other vendors, because you can’t. You’d have to know all the features as the vendor focussed on point features, not integrated functions, and you, as a buyer who’s never used a modern system, have no knowledge of how to equate features (when vendor specific terminology is used), or how to determine if one feature is more advanced than another. (That was the reason the doctor co-developed Solution Map, to help rate and evaluate technology, which is the one thing most buying organizations can’t do well. Not the things they can do well, and better than most analyst firms, like rate the appropriateness of services to them, assess whether or not the vendor has a culture that will be a good fit, define their business needs and goals, etc.)

But the primary reason doesn’t apply here. So what’s the secondary reason? When an average, overworked, underpaid, and overstressed buyer got their hands on one of these free vendor RFPs, especially when the RFP was thick, heavy, and professionally edited and prepared to look polished and ready for use, and was more detailed than what the buyer could do, they thought they had their answer and could run with it. They thought it was all they needed to know, for now, and that they could send it out, collect the responses, and get back to fire-fighting. They were lulled into a false sense of security.

And that’s why these cheat sheets and KPI guides and former buyer/consultant RFPs are so troubling. When you’ve been struggling without even the basics, and these are so good that they teach you all the basics, and more, it seems like they have all the answers you need and that when you learn those basics, encapsulate them in the tool, and start running your business against them, things will be better. Then you configure your tool to respect the basics, encode the KPIs, and things are better. Significantly better, and for once processes start going smoothly. And then you believe you know everything you need to in that area (that’s not your primary area) to interface with those functions and that those KPIs will be enough to keep you on the Procurement track and let you know if there are any issues to be addressed. And you start operating like that’s the case. But it’s not.

And that’s the problem — these cheat sheet, guides, and templates, which are much better than what you’d get in the past, can make such a drastic difference when you first learn and implement them that they instill a false sense of security. You get complacent with your integrations, reports, and KPI monitors, not recognizing that they only capture and catch what they were encoded to capture and catch. However, real world conditions are constantly changing, the supply base is constantly changing, and external events such as natural disasters, political squabbles, and endemics are coming fast and furious. If the risk metric doesn’t take into account external events, real-time slips in OTD (as it is based on risk profiles upon onboarding, and updates upon contract completion), or past regulatory compliance violations (as an indicator of potential violations in the future), the organization could be blindsided by a disruption the buyer thought the KPI would prevent. Similarly, the wrong cash-flow related KPIS can give a false sense of liquidity and financial security and the wrong inventory metrics can lead to the wrong forecasts in outlier categories (very fast moving, very slow moving, or recently promoted).

In other words, by giving you the answers, without the rationale behind them, or deep insight into how appropriate those answers are to your situation, you will cheat yourself, kid yourself, or, even worse, rip yourself off. And that’s worrisome. So please, please, please remember what these are — learning aids and starting points only — not the end result. (Especially if it’s an RFP template.)

Seeking an Analyst? Who does the doctor recommend?

In our last two posts, we asked how relevant is the analyst firm and then answered that it’s not the analyst firm that’s relevant, but the senior analysts in its rank that are relevant. (And if the firm doesn’t have any in your Source-to-Pay/Supply Chain (related) area, it doesn’t matter how many employees it has, how many countries it is in, how many Billions or Trillions its customers spend, etc. because it won’t be able to help you get your message right, hit your market, or enhance your strategy.)

So, in their honour, here are forty analysts (even if they didn’t work for analyst firms and mainly did behind-the-scenes analyst work as a consultant/advisor) that the doctor has trusted and often referred inquiries to over the years, past and present, and (some of) their (former) areas of specialty:

Present (note that many [14/25] are independent and NOT with a big firm):

Andrew Bartels Back-Office Tech-Driven Business Transformation Forrester
Andrew Karpie CWM/VMS/HCS Independent
Bertrand Maltaverne Source-to-Contract Spend Matters
Bob Derocher SC/Procurement Process Transformation Digitization Independent
Bob Ferrari Supply Chain, Manufacturing, Digitization Strategy Independent
Brian Sommer ERP, HR, & Finance (Transformation) Independent
Chris Sawchuk Metric-Based Procurement Modernization Advisory Hackett Group
Doug Smock Supply Chain Evolution Independent
Garry Mansell Entrepreneurship and Business Growth in S2P and SC / Global Supply Chain Design and Management Independent
Jason Busch Broader Source-to-Pay Market Strategy Spend Matters
Katie Evans AI Ethics Independent
Kelli Coviello Business Growth, Diversity, Work/Life Balance Independent
Lora Cecere Supply Chain Supply Chain Insights
Mickey North Rizza Sourcing, Procurement, Commerce, SRM, Risk IDC
Navroop Sahdev Digital Economy Digital Economist
Noha Tohamy Logistics, Supply Chain Digitization, Analytics Gartner
Patrick Connaughton (Ecosystem) Enterprise Applications Gartner
Pete Loughlin Purchase to Pay / Procurement / Coupa & Ariba Independent
Peter Smith Best Practices, Sustainability, Procurement with Purpose Independent
Phil Fersht Emerging Technologies, Automation, Outsourcing, Global Business, and Horses HFS Research
Pierre Mitchell Procurement and Services Benchmarking & Transformation Spend Matters
Robert Rudzki Strategic Advisory and Procurement Transformation Independent
Sigi Osagie Business Growth through Personal and Team-Based Growth Independent
Vinnie Mirchandani Enterprise Applications and Outsourcing Independent
Voitek Szewczyk Strategic Sourcing, Procurement Transformation, Eastern Europe Independent
Xavier Olivera Procure-to-Pay/LATAM Market Spend Matters

Past ([semi-]retired, out of the analyst world, and/or working for a vendor; 4 independent):

Charles Dominick Procurement and Procurement Training Independent
Debbie Wilson ERP & Finance Independent
Dick Locke Operations, Strategic Sourcing, and International Trade Independent
Doug Hudgeon Back Office Integration & Modernization / Australasia Market Managed Functions
Duncan Jones Procurement Independent
Gerraint John Sourcing, Procurement, SRM, and Risk Interos
Jon W. Hansen Procurement Independent
Magnus Bergfors Strategic Sourcing, Strategic Procurement, SRM Keelvar
Mark Perera Procurement and SRM Vizibl
Nick Heinzmann Procurement, CLM, Sustainability, Fraud Risk, and Startups Zip
Sudy Bhardadwaj Direct Supply Chain, Source-to-Supply, Entrepreneurship SAP
Tim Minahan Procurement & Supply Chain, Business Performance Benchmarks, Best Practices Citrix
Tony Poshek Strategic Sourcing Simfoni
Vance Checketts Supply Chain, Operations Built for Teams
Viktoria Sadlovska Anshu Supply Chain, Trade Finance, Analytics RepTrak Company
Vishal Patel CLM and P2P Ivalua

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.