Category Archives: Market Intelligence

Sustainability is Getting the Buzz …

… but will it get the buck?

By now it’s very unlikely that you haven’t heard the recent news about Ecovadis getting a 200 Million investment to spread its sustainability ratings to a larger audience … both directly and indirectly through its ever-expanding partner network.

And while it may be the case that momentum towards a more environmentally and societally focused economy has been building for years, that doesn’t mean that it’s here. It doesn’t mean that an organization will put their money where their data is and actually choose the most sustainable supplier for the award.

After all, the last few surveys that have been done asking buyers how much more sustainability is worth to them in real dollar terms have continued to demonstrate that while buyers want ethical and sustainable companies and products, they aren’t willing to pay much more for them. A few percentage points, tops.

And with inflationary times back, this means that companies are still under pressure to keep costs down to sell in addition to keeping profits high to keep the shareholders happy. This leaves little room for a move to a costlier supplier, even if that supplier is much more sustainable.

After all, unless the organization is willing to stand up to its investors and take a profit hit in the short term to embrace a new sustainability agenda (which WILL pay off in the long term as lack of non-sustainable resources causes everything to go up in price), all that is going to happen is that the buying organization is going to use the sustainability data to choose the lesser of two or three evils, not the most sustainable organization that will generate the greatest benefits over time.

And despite the hopefulness of companies like EcoVadis, and their investors, the doctor doesn’t think that tipping point has been reached yet, or that we are even close. However, the need to look like you’re doing good is growing, and making statements about the use of independent data on sustainability and ethics helps you look good (for now, anyway), so it is a good time to be one of the few, big, global players so the doctor does project continue growth for Ecovadis, even if the companies that subscribe to the data aren’t using it the way that they should.

One Reason Why PE-LED M&A May Be A Good Thing

M&A Mania seems to be at an all-time high! It’s crazy days and crazy nights.

But as per a classic post from 10 years ago, sometimes there’s something to be said for private equity

and the ability to tell Wall Street to take a hike!

Ten years later, the situation described in a classic piece on the intersection of Wall Street and Private Equity with the Supply Chain from the Supply Chain Digest still exists. And sometimes, the situation is even worse.

To jog your memory:

… one large retailer had the opportunity recently to save an expected $50 million from a supply chain network redesign project, included shifting from a number of smaller distribution centers to larger ones. The project had a great ROI and the capital was available — but the company delayed the project just because of the potential for Wall Street to view the project as too risky operationally and financially …

There’s wanting a good return on assets and there’s pure stupidity. And sometimes, all VCs and Wall Street care about is pure stupidity! The best returns come from a long term outlook, not a current quarter outlook.

So PE inspired acquisitions and roll-ups might actually be a good thing. But of course, only time will tell.

Dear Vendor: Your Code is Ugly …

You heard me! Your code is ugly! Butt Ugly! And if it’s not, then your UI is ugly. And if it’s not, then your functionality is ugly. But trust me. Something is ugly … and uglier than that horrendously ugly sweater you are wearing with pride this holiday season.

So just accept it — and stop complaining every time a new analyst report comes out that doesn’t put you on top. Because, first of all, only one vendor can be on top … and that’s not going to be you. (And if it is you, it’s not going to be for long.) Regardless if it’s a pure quadrant, blended quadrant, wave or some other report, the rating system used is only going to put one vendor on top — which is the vendor with the most mature, complete, and fleshed-out platform against that rating system. Unless you picked that exact path, how could it be you? And if it is you, and you’re far ahead, it’s probably going to look like the rating system was specially designed to put you on top. (We all know the story of the One Million Dollar PO — you don’t want someone thinking that you paid for your rating, do you?)

The goal is to be in the top quadrant, wave, or other leader area, not to win!

So stop complaining every time you don’t come out on top and start learning instead. (Do you seriously think complaints are going to get you anywhere?) If the rating, or at least a considerable portion of it, is objective, then, for every factor your solution is scored on, there’s a specific criteria you can access and evaluate. Generally speaking, if the analyst firm is at least worth its weight in salt, there’s a good reason for that criteria. If you don’t meet it, why?

  • is it because you just haven’t had time to implement the functionality yet?
  • is it because you feel the functionality is too simple or advanced for the market?
  • is it because it’s an area that you don’t define as core to your solution offering?
  • is it because you don’t think it’s relevant to your customers?
  • etc.

You should have a good reason, and you should re-evaluate that reason if the analyst firm considers a specific piece of functionality to be moderately to highly relevant, because:

  • the analyst firm has a reason for including it
  • the analyst firm talks to considerably more vendor companies, that collectively have considerably more customers than you
  • the analyst firm talks to customers YOU DO NOT HAVE
  • the analyst firm has a more comprehensive read on the direction of the market

Now, you can’t win them all, can’t serve them all, and can’t do everything (and definitely can’t be best at everything), so you may want to make some conscientious decisions not to go down some paths and instead go down paths where you can win and serve the majority of the market niche, and that’s okay. But if you make enough of those decisions, you need to understand that the more you have to make, the more niche the map has to be for you to win. And that’s not a very big market.

Winning is not winning the map. Winning is surviving long enough to win the market. That means being ahead enough to win more deals than average, but not being so niche you start winning less or shrinking the market available to you.

Invoices are still costing you money!

Six Years Ago we pointed out that:

  • You’re probably overpaying your suppliers by 1%
  • There’s a 2 in 3 chance you’re being defrauded of 2% of your revenue
  • Up to 75% of your AP overhead is completely wasted
  • At least 1 in 10 invoices are erroneous
  • One Million Invoices requires at least 100 standard 4-drawer filing cabinets

But things aren’t much better.

  • PRGX and other leading recovery firms still recover 0.3% of total spend on average which means the over-payment average is still the same using the rule of thirds (1/3 not recoverable because contracts expired, 1/3 goes to the audit firm in fee based recover, 1/3 goes to you)
  • PwCs recent Public Procurement:: Costs We Pay for Corruption, average loss to fraud is 3.5%, with a UK average of 4.76% … and while private companies might think they are better off, the cyber crime economy keeps reaching record highs (and is 1.5 Trillion in the US alone) and private fraud losses in the UK almost equal public fraud losses according to a CIPS study
  • Based upon recent data from the 2019 Payables Friction Index, a good portion of your AP overhead is completely wasted
  • The number of erroneous invoices hasn’t decreased

Furthermore, according to the 2019 Payables Friction Index, in collaboration with Corcentric, PYMNTS surveyed 2,570 firms on AP processes and found the following:

  • Paper Still Dominates
    • 81% of firms still use paper checks to pay invoices
    • 45% of firms still use cash
  • e-Cash is still in the minority
    With the exception of ACH, that has finally penetrated more than half at 62%, all other methods (including credit cards / p-cards) are still less than 50%!
  • e-Invoices are increasing
    but up to 34% of invoices are still paper (in organizations under 100M in particular)
  • OCR, on average, is still under 50%
    (as low as 37% in organizations under 10M) and, more importantly,
  • utilization of basic automation, ML, and/or AI is even less
    when modern RPA + ML systems exist that can automate e-Invoice processing through simple rules, m-way checks, bounce backs for correction, completion, and verification, to 98% … and
  • approval times of one or more weeks averaged between 16% and 45% across respondents, depending on the number of approvers needed and organization size … when the majority of invoices should be auto-processed and auto-approved …

In other words,

  • You’re losing money on overhead,
  • You’re losing money on early payment opportunities,
  • You’re losing money on over billings and duplicate billings, and
  • You’re losing money on fraud …
  • … when the majority of this loss is easily preventable!

So why not get a modern e-Invoicing solution, standalone or part of a S2P platform, and stem the bleeding and use that money to hire more A-class talent to identify long-term strategic savings build on a supply resilience strategy?

Talent is Scarce, but Remember EQ and TQ are not Interchangeable!

the doctor realizes just how limited the supply of top Procurement talent is, and how tempted you might be to hire any apparent “talent” that you come across, especially if you get the okay among constant (brain-dead) hiring and training budget cuts (when Procurement is one of the few organizations that can consistently deliver a return many times it’s operational cost), but when you are filling your Procurement roles, chances are that at least one of them is going to be an TQ-heavy role. And whereas you can replace Procurement knowledge with IQ, you can’t replace Technical Knowledge with IQ, at least not quickly.

This is important because, given how important it is for a new hire to fit in, a company is often ready to hire the minute a candidate comes along that:

  • has the personality that fits the corporate culture,
  • has influential charisma, and
  • has intellectual potential.

or, in other words, has the right EQ.

This is important, and should be the deciding factor among multiple candidates that can do the job, but you should first make sure the candidate can do the job she is being hired for. If it is highly technical in nature (i.e. leading the implementation and customization of a new S2P system to support organizational processes and transform them along the way), then she needs to be rather technical in her background and have a good knowledge of what the systems can do, how they do it, and what the organization will need from them.

These are not basic Procurement skills or category expertise that can be taught to any candidate with a high IQ, some common sense, and a background in the industry. These are skills that typically take years of training and experience to develop.

In other words, before hiring, first

  • clearly identify the role that needs to be filled
  • the key technical / experiential skill sets that are needed
  • what, if anything, can be made up with in-house / third party training if the candidate has the right IQ and work ethic

and limit consideration to those candidates. At this point, you can let EQ prevail (even if one candidate would take 6 weeks of training and another 6 hours, because even if a candidate required no training, the wrong attitude would prevent that candidate from ever fitting in). But not before. Remember that before you get overzealous. At the end of the day, the job needs to get done, and the perfect candidate is not the perfect candidate if he can’t do the job.