Category Archives: Market Intelligence

Let’s Get Ready To Rumble!

While these words may have suited Michael Buffer well in his role as the exclusive ring announcer for WCW main events in the WCW heyday, these are not the words you should be uttering as you begin your quest for a new Supply Management Technology Solution. However, when one considers the way that many organizations go about their new technology acquisition process, it’s the words that ring loud and true in our ears.

Consider what typically happens:

  1. Teams scour analyst and consultant reports, sometimes constructed almost entirely on impressions based on PowerPoint presentations and customer reference calls, for potentially relevant vendors and build a starting list.
  2. They do a few Google searches, followed by one or two (Bada-)Bing(!) searches just for completeness, and add a couple more names.
  3. They do a few website reviews to narrow down to half a dozen vendors that look good.
  4. They send out RFIs (requests for interest).
  5. The first three respondents are invited to an all out winner-takes-all Battle Royale.

And that’s what it is. The vendors fight it out until there is only one left standing, and then that vendor gets the deal.

Do you know what’s wrong this picture?

Besides the fact that it shouldn’t be a battle but an effort to illustrate who solves your problem best?

First of all, Step 1. Relying on analyst reports that are often based in large part on “expert” interpretation of providers, their products and users, rather than objective and transparent analysis expert of features and data (a Nobel Laureate has some curious things to say on this very topic — i.e., ask an expert his opinion on a topic, and it’s often no more accurate than a non-expert, but ask the same expert to rate a capability against a defined scale and you get a far better result)

Last year one of the big analyst firms literally said “we’re not doing demos anymore, just overviews and customer references“. That’s scary! Get a few customers where the blush has not yet faded from the rose to say “this is the greatest thing since sliced bread” and you can literally shoot decades old tech and vapourware to the top of the rankings!

Second of all, assuming all providers of a certain tech that score equal on an arbitrary ranking scale are equal for your organization needs. Every organization is different and requires different levels of technology, process, service, and focus.

So what’s the answer? Better insight. What’s the form? Spend Matters SolutionMaps.
These are different, and that’s why the doctor has been collaborating on the development, scoring, and delivery of the Strategic Procurement Technology SolutionMaps Suite (designing and co-leading Sourcing, Analytics, and SRM and supporting CLM) for the past six months.

These maps rank vendors not on subjective impressions of an analysts’ predilection to the colour scheme used in the PowerPoint, but on hundreds (and in the case of Sourcing, thousands) of technical requirements, each of which has a hard scoring scale (from 1 to 5) that is rigorously defined (by the doctor in the majority of cases) to at least 3 (if not 5) with hard and fast “must have” requirements that leave no wiggle room.

And then, instead of combining these scores into one-size fits all scores for all vendors, they are combined in different ways (and weightings) into five different scores (and in the case of Sourcing, six) that map to the different persons that are representative of many of the Procurement organizations out there, namely:

Nimble: The need for speed

Dynamic, results-focused, limited IT department involvement, risk-tolerant of new approaches and providers; Often decentralized, rapidly growing, and/or middle market

Deep: A best practice team that demands the broadest and best tools

Highly sophisticated, rigorous, somewhat complex, risk-tolerant, happy to push limits of tech to create more value

Configurator: We are unique

Moderately to highly sophisticated; Unique process requirements from unique, often complex supply/value chains

Turn-Key: We care about results … not software

Outcome-focused; TCO approach to implementations; Often risk-averse and skeptical based on previous experiences

CIO-Friendly: We need to get IT on board

Strong IT backbone, high IT influence and investment for buying decisions; Big focus on security, standardization, control, and risk/compliance

Optimizer: We eat complexity for lunch.

Large, complex, and/or sophisticate organization with truly strategic SCM and Procurement functions which has already achieved all easily attainable improvements.

Plus, instead of assuming we know all, we also get deep feedback scores from customers across a variety of dimensions, which are not only weighted to the persona, but constitute half of the ranking as the final quadrants for each persona are analyst score vs. customer score (which are not co-mingled, and this is a key point).

And the end result you get is entirely different from a typical analyst report where the A(riba), B(ravoSolution), and C(oupa) suites always take all. For example, in Sourcing, EC Sourcing (yes, EC Sourcing) comes out on top as the most Nimble sourcing platform and Keelvar (yes, Keelvar) has almost caught up to the market leader (Coupa Trade Extensions) in the Optimizer persona. And you (more-or-less) get the expected A, B, C results when you go Deep. And rankings aren’t static across the Configurator, Turn-Key, or CIO-Friendly personas either. (And similar ranking shifts exist across Analytics and SRM too.)

In other words, in SolutionMaps, we’ve done the rumbling* for you and identified not only which vendors have which solutions, but which personas they best suit to help you identify the right vendors to invite to your RFI so you can focus on figuring out which one can provide you with the most value, not which one can survive the longest in a Battle Royale.

* And when the doctor says rumbling, trust him. Some vendors who participated in multiple SolutionMaps are as weary as he is, after multiple rounds in the ring.

Sourcing the Day After Tomorrow Part V

In Part I we recapped Sourcing today, in Part II we recapped the review step, and what it entails today. Including a few of the sub-steps that were typically done sequentially in a long, manual, and drawn out process. In Part III we dove into these steps and explained while some were critical for a sourcing professional to undertake, others, while necessary, were a complete waste of time as the majority of the tasks could be automated. Then we asked if it was just the review step where this was the case. In our last post, Part IV, we discussed the second major step, Needs Assessment. So today it’s time to discuss if this step should still be entirely manual as well.

In our deep dive into the needs assessment in our last post, we discussed the following key sub-steps:

  • Detailed Use Case Review
  • Exploration of Alternative Options
  • Production Requirements
  • Support & Service Requirements

And unlike the review step, heavy sourceror involvement is required in each and every step of this process.

Sourcing professionals need to

  • clearly understand how the product is to be used to understand key product requirements
  • evaluate the potential alternative options identified in the review step against the use cases and key end user values
  • evaluate the production options to understand not just throughput and quality but efficiency and cost
  • know what support and service requirements are needed, what’s involved, and what needs to be looked for

But how much of this is truly strategic? While each of these steps is clearly strategic on the surface, many of the tasks are not as strategic as one may think. Let’s start with detailed use case review.

There isn’t much of a detailed use case review to be had if the product is for internal consumption use (like office supplies) or traditional CPG products for consumer sale (as these use cases are well defined). Nor is there much to review if the event is for a production line widget that is maintaining the same production line. If the use case hasn’t changed, there is little to review. As long as the prior review is on file and the key value factors known, and captured, in the sourcing even template, all is done. And your supply management platforms should capture this information and maintain it, and its application, from even to event. Only custom built products or products where changes are needed should need in-depth reviews on a regular basis. And software applications can query stakeholders against previous requirements automatically to get this done.

Now, the depth of review required for alternative options will be dependent on the use case step. If nothing has changed, only new options that have come along will need to be evaluated, and only if they address key value factors or changed requirements. The reality is that properly captured alternative options with key feature lists, descriptive use cases, reliability reports, and models can be automatically evaluated for likelihood using modern semantic technology and AI algorithms and eliminated if they are not likely candidates, even though most aren’t. And this step should not take near as much time as one should think, especially if it seems there are a lot of alternative options.

Moving onto production options, it might seem that this is one step that has to be manually trudged through due to the complexity and that will never change, but the reality is this is not the case. For example, companies like Apriori allow real world production processes to be modeled in extremely detailed virtual production models that can be used to analyze efficiency, cost, reliability, and a host of other factors. If the production environments are modelled, they can be analyzed and compared to the product requirements and the suppliers easily evaluated on this capability with minimal buyer involvement.

Finally, good Supply Management platforms allow key support and service requirements to be captured during the use case creation and inferred from survey responses. Plus, previous requirements can be maintained and algorithms applied to determine whether or not they need to be re-considered by the buyer. And modern service procurement platforms come with detailed templates and check lists that should be considered during requirements creation. Buyers need to be involved and strategically assess the situation, the work to do so is nowhere near as onerous, and error prone, with modern solutions as it used to be.

In other words, we again see that even strategic buyers waste much of their time on tactical processes and non-strategic considerations and Sourcing has to change. But just how much does it need to change? Let’s consider the next step of the Sourcing process in our next post.

Sourcing The Day After Tomorrow … Part I

Will not be anything like sourcing today. But, contrary to popular belief, it will NOT be accomplished by robots buying from robots to help your robots make your goods and deliver your services. (That will be the day after the day after the day after tomorrow. Which will be the day after the earth’s next massive extinction event when humanity will have to rely on robots to survive, for better or worse.)

To recap, this is sourcing today:

  • An organizational stakeholder (like Engineering) identifies a need for a non-catalog product or service and makes a request to Sourcing.
  • A buyer reviews the request and determines if a strategic sourcing event (negotiation, e-negotiation, etc.) needs to be conducted and a contract created or if it can be sent to Procurement for spot buy (and we are assuming it can’t, so)
  • The buyer conducts a detailed needs assessment
  • A strategic sourcing event format is conducted
  • Notifications / RFXs / Ts&Cs are sent out
  • Responses are analyzed
  • A preferred supplier is selected and negotiations begin
  • A contract is awarded

As part of this rather long and involved process there will be dozens of steps under the seven steps that sourcing does above. For example:

Review:

  • Product Requirements
  • Current Supply Base
  • Known Market Pricing
  • Alternative Options

Needs Assessment:

  • Detailed Use Case Review
  • Exploration of Alternative Options
  • Production Requirements
  • Support & Service Requirements

Strategy Selection:

  • Supply vs Demand Market Dynamics
  • Geographic Needs and Impediments
  • Known Supply Base Strength and Weaknesses
  • Required Speed

Communication:

  • Standard Protocols
  • Supplier e-Communication Capability
  • Level of Detail Required
  • Response timeframes

Analysis:

  • Market Pricing Data
  • Historical and Projected Spend
  • Cross-Category Materials Spend
  • TCO / TLC (Total Cost of Ownership, Total Lifecycle Costs)

Negotiations:

  • Format (online, offline, hybrid)
  • Fact Prep
  • Audit Trails
  • BATNA fallback

Contract:

  • Standard Terms and Conditions
  • Modification & Risk Mitigation to Supplier & Country
  • Key Metadata definition and obligation specification
  • Contract Analytics

And depending on the type of sourcing event, market dynamics, and complexity of the intended buy, under a current sourcing process supported by a current sourcing system, instead of dozens of steps, there could be hundreds. Is this really sourcing?

How Do You Identify The Day After Tomorrow’s Supply Chain Paupers?

Well, assuming the day after tomorrow comes and they are still around the day after tomorrow, they will be easy to spot. Not only will they still be trying to use Excel, but they will still be using Excel and will only recently have started exchanging documents using XML, using last decade’s e-Procurement technology.

They will not have advanced to modern e-Procurement applications, yet alone modern sourcing or supply chain visibility solutions. They will be in the process of simply moving from paper to e-Paper, trying to still conduct RFIs through e-mail with Excel (and just uploading the results to the first generation decade(s)-old e-Procurement solution), and generally trying to keep their outdated procurement processes in tact.

However, as we now know, first generation procurement and sourcing, focused primarily on e-document exchange, simple RFXs, the odd auction, and basic reporting is not enough. You need modern e-catalog management for procurement spot buys, analytics for opportunity identification, optimization for at least TCO management (if not TVM), and SRM for supplier information, relationship, and performance management.

But this is not enough. These day’s, there’s never enough time to sift through all the data to identify the opportunities, never enough time to collect enough market data to qualify even the ones you have identified, and certainly never enough time to construct category specific models on even a fraction of those to determine if they opportunities will be realized with an appropriate sourcing event — which can take years of experience to properly identify.

You need a next generation solution that can automatically collect, maintain over time, and trend market pricing data; run all your data through multiple types of automatic analysis and compare your spend against historical spend and market data (and look for variances); pull out the categories with opportunities; run trending algorithms to project your demand against expected contract prices based upon projected market demand, supply / demand (im)balance, and economic factors; calculate the potential savings if nothing was done; use historical data and automated reasoning (enriched with context) to (probabilistically) identify the best sourcing or procurement strategy; and then use appropriate workflow automation to automate as much of the event as possible (and if it is a spot-buy under a threshold, automatically procure from a catalog, an approved supplier under contract, or a three-bids-and-a-buy RFQ against approved suppliers).

In modern terms, the next generation solutions will be Cognitive Sourcing or Cognitive Procurement solutions. While they are not true artificial intelligence, with enough data and great models, you don’t need true AI to automate acquisitions where there is no strategic value and no significant value to investing human time. Good examples are office suppliers, janitorial services, and sometimes even laptops. Yes, replacing laptops across a large office can be in the millions, but laptops against a standard config are commodity. Just do an automated auction [with ceilings and floors] against a set of approved suppliers and let the most aggressive supplier win.

How Do You Identify Tomorrow’s Supply Chain Paupers?

They still use paper today!

This is another entry in our continuing The More Things Change … series that w began last month. Except this week we’re going back five years instead of the ten years we went back last month.

Although I don’t understand how any supply chain focussed business, and a logistics carrier in particular, could still be paper-based. It blows my mind that just five years ago the WT 100, in their recent article on “Rounding the Optimization Curve”, reports that there are still a significant number of carriers that keep their records on paper. How can you survive in today’s cost-competitive, just-in-time, value-conscious supply management landscape and work on paper?

And, more importantly, if you are a logistics provider or CPG distributor, how can you effectively still keep running on paper when Amazon is investigating drone delivery? Five years later there are *still* carriers and distributors running primarily on paper. And we’re not pranking you either, like South Park pranked your Amazon, Apple, and Google devices. This is a fact!

And while we’re at it, let’s talk about how you can identify the dead men walking of the day after. They use Excel. We’ve known for years that errors in spreadsheets are pandemic. Needless to say that it boggles my mind that Microsoft Excel continues to be the application of choice for supply chain and logistics management around the world. Fidelity lost 2.6 Billion as a result of a spreadsheet error, Fannie Mae made a 1.13 Billion honest mistake, and RedEnvelope lost more than a quarter of their value in a single day after they warned of a fourth-quarter loss due to a budgeting error that resulted in an overestimate of gross margins. How long is it going to be before someone accidentally uses a plus sign instead of a minus sign in a profit formula and forgets to uncap an inventory calculation and instead of ordering 100,000 units of a profitable product, instead orders 1,000,000 units of a product that actually results in significant losses at the target sale price, for which the market demand is weak, ties up all of the organization’s working capital, and essentially bankrupts the company? My guess, with the steadily increasing complexity of S&OP, JIT inventory management models, and supply chains, not much longer. But, maybe after a few companies are brought to their knees from spreadsheet errors, we’ll see the day when Excel is sh!tcanned along with the dinosaurs who still think it has any more use than a HP or TI calculator.

It’s time for anyone still on paper or Excel to wake up and realize we don’t live in Walt Disneyland and that the story of the prince and the pauper is a fairytale. A pauper is not going to become the benefactor of princely riches just by looking like a bigger, richer, company. In today’s uber-connected world, appearances don’t account for much. It’s not long before someone digs deep and uncovers the truth.

There’s a reason why customers are demanding end-to-end visibility of their supply chains, including those of their supply chains logistics’ partners. And a reason customers now expect all of their suppliers and business partners on the supply chain (including logistics providers) to participate in a supply chain network. It’s because they know that the only way they can accurately manage their supply chain is to keep on top of it, that the only way they can build accurate models is with accurate data gathered from partners, and that the best reports they are going to get are going to come from supply chain visibility and planning software plugged into these “networks” (where, in reality, these are “enterprise communities” that allow the necessary collaboration, not “consumer social networks” where you can poke, prod, and shake your buddy for no apparent reason).

In other words, paper is dead, and Excel will be the new paper, and then, someday, it too will be dead. So if you don’t want to be the pauper, move off of these technologies and onto solutions designed for your supply management needs. With a plethora of Best-of-Breed solutions on the market, designed for large and small providers, it’s extremely likely that there’s at least one solution that meets your needs almost exactly with minimal tweaking. If you look hard enough, the doctor would bet that there’s at least three, or will be before you can look twice.