Category Archives: Market Intelligence

With Currencies Crazy, Is It Time to Return to Barter?

This is more of a question / thought experiment than anything else, but it’s a good question.

Brexit has thrown the British pound into chaos again. (Nothing new, it’s happened before, it will stabilize eventually, but it will happen again.)

Canadian and Australian dollars have recently made substantial declines from highs that put the dollars almost on part with the American dollar to lows that put it a mere two thirds to current values around the three quarter mark.

The Greek financial crisis is still ongoing and could threaten the Euro further.

And so on.

An organization enters a long term (multi-year) contract with an international partner under the expectation of value, an expectation that is crated based upon a current and projected currency exchange rate — which can change radically overnight when a single country, or in some cases, a single bank, decides to do something extremely unexpected or extraordinarily stupid.

All of a sudden costs can double. That’s considerably more fluctuation than is in the reserve budget.

But what if there was no exchange of currency. What if it was an exchange of a raw material or service for another raw material or service, where each raw material or service came from the organization or a partner in the same country. Since the value of a product or service, adjusted for inflation, is relatively constant over time and since the relative value of one versus another is also relatively constant over time, such a contract would not be subject to rapid changes in value differences regardless of what happened in the currency markets.

Now, you’re probably thinking that this wouldn’t work — you buy from X and don’t sell them anything, but who do they buy from and what do they buy? And what do their downstream partners need? Remember, they have bills to pay too and if their supplier requires a raw material in abundant supply that could be supplied by one of your customers, that has to pay you anyway, all could work out.

For example, just because you’re buying rare earth metals for electronics manufacturing, doesn’t mean bartering is off the table. The rare earth metals provider, which provides a refined metal, might be buying from a mining company that is part of a conglomerate owned by a single company that requires specialized mining equipment on a regular basis. One of your biggest customers could be a producer of this equipment that buys all of its hardware and associated services from you. If you arranged for payment in mining equipment of your choice in today’s dollars, and the seller was happy with that conversion, you could pay in mining equipment over time, regardless of how your relative currencies rose and fell.

This might not have been imaginable years ago given all the supply chain visibility, data, and optimization models that would be required to identify the right value-generating deals that could keep costs constant over time, but with modern supply chain systems that enable visibility from the raw material to the end customer, all supply relationships, demands and spend, and multi-level optimization models, this is now a reality. And currency risk could effectively be made a thing of the past in large, critical categories. It could require more multi-party agreements, but if all parties benefit, why not? It’s not like you have to courier contracts around the world — create a secure collaboration portal, agree, e-sign, and you’re done.

Now, just like buying on behalf of the supplier to get lower costs through greater volume leverage is still only done by the leaders, SI expects that this is something that only leaders would do for at least the next decade, if it was done at all. What do you think? Will leaders catch on?

Top SI Posts: What Are You Peers Reading? Part II

SI doesn’t do many top X lists, because not many are useful — but every now and again it’s informative to look at what is being read and ask why. In yesterday’s post, we summarized the top 11 posts from the first half of 2016. In today’s post, we discuss potential reasons as to why the indicated posts were the top posts from the first half of 2016.

If we analyze the top x posts, we see the following overlapping subjects, in alphabetical order:

  • Automation
  • Marketing
  • Platforms
  • Procurement Strategy
  • SRM
  • Supply Risk
  • Tail Spend

All of these revolve around platform, strategy, risk, and spend with (strategic) suppliers. Basically, your peers, enlightened as they are, are concerned with making the right decisions when it comes to identifying products and suppliers on which to allocate spend. This right decision revolves around a combination of cost avoidance, risk avoidance, and waste avoidance. The wrong decision can cost too much, come with too much (potentially devastating) risk, and cost the organization a lot of resources and effort over the long run to manage and control. All of this wastes time, money, and effort.

A Procurement organization with the desire to (someday) be best in class realizes that the only way it can do so when it is constantly under-resourced and under-funded is to be as efficient and effective as possible. It realizes that it has to build and maintain a sustainable value engine and focus on what matters — reliable supply, quality products and services, cost control (not savings), and value generation — and that this requires the right talent, technology and transformation from a laser focus on savings to a broad value focus on the organizational goals. A focus that understands and manages risk; that forms, adopts, and implements strategy; that gets all spend under management (even if that management is simply 3-bids and a buy or automated auctions for tail-spend so that the organization never spends more than market average and never gets less than market average quality); and that realizes that platforms provide power, but not solutions. Human intelligence is still required.

In other words, what SI has been focussed on since day one.

And that’s probably why these posts rounded out the top 20.

Top SI Posts: What Are You Peers Reading? Part I

SI doesn’t do many top X lists, because not many are useful — but every now and again it’s informative to look at what is being read and ask why. In today’s post, we’ll summarize the top 11 posts from the first half of 2016. Then, in tomorrow’s post, we’ll discuss potential reasons as to why these are the top posts from the first half of 2016.

#11: How Do You Find the Right Platform for You?

In this post we proposed an introductory four step process that could be used to help an organization identify the right Supply Management platform(s) to help it in its operations. This followed our two-part series on “what is a platform”.

#10: Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset Part II

In part II of this 2-part guest-post from Brien Seipel of Source One he noted that the next step for a Procurement organization that did not want to be ditched was to realign priorities and put the “marketing” into marketing Procurement. What does this mean? Check out the series!

#09: Can Your Platform Handle Direct? Take the Direct Procurement Challenge!

In this post we discussed how the direct procurement lifecycle was considerably different from the classic indirect procurement lifecycle (which is, by the way, cost centric perfect for indirect), and that an organization that wanted to get a grip on direct needed to understand this. We also noted that for an organization to figure out what platform was right for it, it had to take the direct procurement challenge.

#08: Don’t Let Tail Spend Take You For a Tail-Spin!

Tail spend is starting to get attention, and by right it should as this bottom spend often contains an overspend as high as 30%! Getting rid of this overspend can be as effective as saving 7% on the top spend.

#07: How Does Your State of Flux Measure Up?

In this post we noted that, in many organizations, SRM — Supplier Relationship Management, is in a state of flux. Policies are undocumented. Processes are not automated. Critical interaction data is not captured. And the majority of your employees interacting with your suppliers on a daily basis cannot even identify five of your top ten strategic suppliers. (Finance might hazard a guess, but while dollars spent is an indicator, it’s not a guarantee.) Something has to be done.

#06: AI Will Not Save Procurement — Thought Leaders Will

In this post we noted that despite the fact that Procurement is at a crossroads, and despite grandiose claims to the contrary about the power of AI-powered predictive and prescriptive analytics, AI will not save Procurement. Better systems will make us more efficient and effective, and power our Procurement Value Engine, but they will never be able to make decisions for us. They never have all the data, they never see beyond the numbers, and they don’t have the insight to look beyond what they are given. Their proficiency might increase, but it will never be perfect … and automating your Procurement function with them will simply automate your way to failure.

#05: Ditch the Pepsi Blues, Already: Become a Marketing Procurement Asset Part I

In part I of this 2-part guest-post from Brien Seipel of Source One he noted that organizations don’t ditch marketing procurement, they ditch bad marketing procurement and if you’re organization wants to get Procurement spend under control, the only way to do so is to become an asset, not a roadblock.

#04: Driverless Delivery? Tantalizing Theft Target!

Everyone loves automation and everyone loves Google’s and promise to automate everything — but automating deliveries is simply automating theft. Don’t believe it? Read the post!

#03: the doctor doesn’t like lists either, but the 50/50 is as good as it gets

The title says it all — warts and all, the 50/50 is the best Supply Management Vendor List out there.

#02: Failure to Monitor a Supply Chain for Risk Can Tarnish Your Brand

Supply chains are fraught with risk, but the biggest risk of all is the brand impact from an unexpected supply chain disaster that can destroy the corporate bank account.

#01: Aligning Procurement Strategies to Business Goals, Part I

This guest post from Torey Guingrich of Source One talked about how to align Procurement strategies to business goals, a necessity for organizational success.

marketdojo Opens the Dojo to Suppliers as Well

When we last checked in on MarketDojo with our posts on how you could walk your own way and plan your own path, they were a relatively new UK company that offered a basic e-Negotiation suite with category guidance. Not much, but when you consider you could:

  • try before you had to commit to a buy with their open sandpit,
  • pay per event, on your P-card and
  • see what suppliers see with toggle view

It was a good entry point for a mid-market Procurement organization that was stuck in the Procurement dark ages and unable to obtain budget for a modern suite (because the C-suite needed to have a guaranteed ROI).

While it was a good start, MarketDojo realized that is all it is — they needed that and more to conquer the mid-market, even in their native homeland. Once a lean, agile, over-tasked, and under-resourced mid-market Procurement organization gets their hand on a tool, they want to advance fast, learn faster, and apply it fast and furious — and they want to be as effective and efficient as possible.

For many companies, this means four things:

  • minimize data re-entry
  • minimize unnecessary supplier interaction
  • track relevant documents and sourcing artifacts
  • identify suppliers with potentially innovative capabilities

That is why MarketDojo has rolled out a full-featured supplier (information) management portal, called, obviously, SIMDojo and included innovation management in their primary offering (the InnovationDojo corner).

With their new SIMDojo offering, which can be used as part of the platform or standalone, which supports supplier self-identification and self-registration, buyers can create the appropriate questionnaires, have suppliers upload the appropriate documents, and lock supplier data (from updates). When suppliers change data, their profile is invalidated until reviewed by an appropriate sourcing professional, insuring only valid and validated suppliers can be included in sourcing events. The platform is simple to use on both sides, and some customers are buying it to augment other platforms they already have.

InnovationDojo is built on the RFX/Survey functionality in MarketDojo, but allows a buyer to issue innovation challenges, collect and score responses, include that information in RFPs, and track and manage innovation projects and responses separately. It’s basic, but it works quite well for the mid-market.

MarketDojo has also made functionality and usabiity enhancements to their platforms across the board, with template management in particular being noticeably improved. With few e-Sourcing companies left serving the mid-market, MarketDojo provides a solid offering, especially to those companies without (a modern) e-Sourcing solution that need to start quick, and keep it basic (to maximize efficiency and SUM [Spend Under Management]).

Influential Sustentation 97: (Traditional) Analysts

There are a number of influential damnations, but as per our post last yer, analysts are among the worst. Why?

  • Analysts are the Gatekeepers of the Gold Seal of Approval

    Just because you have this great new product that contains at least half a dozen innovative features and functions not (yet) found in the competitors’ products, and just because you built one of the best solutions on the market, that doesn’t mean that you will even get a mention in the back pages of a local business journal until it gets a star of approval as an “emerging” solution.

  • If You’re Not on Their Lists, You’re Not on BigCo’s List

    The best way to get coverage, paid or otherwise, is to get a big win. But a big win won’t happen until a big company adopts your solution and gets a big result it wants to advertise to the world. But the chances of a big company even including you on an RFx are slim to none if you’re not on an analyst’s shortlist.

  • If You Won’t Pay to Play, You Might Never Get on the Analyst Firm’s Shortlist

    Analyst firms have two major client pools: BigCos that want to buy the best (tech) solutions and TechCos that want to supply those solutions. BigCos pay for access to the research library and analyst time and TechCos also pay for access to the research library and analyst time to help them draft an attractive roadmap. As a result, the TechCos that get the bulk of consideration are the TechCos that are (big) customers.

  • If You’re Not a Big Client, Good Luck Making the Perilous Pyramid

    Even if you happen to get the attention of the lead analyst on the research report and even if the lead analyst likes you, if your solution is too much of a threat to the research firm’s big TechCo clients good luck meeting the bulk of criteria for inclusion. Minimum revenue, core modules, absolute feature lists, etc. tend to change year to year in a manner that tends to keep big TechCo clients in and keep their biggest threats out.

So what can you do (especially if you don’t have the ability or inclination to write a cheque with a lot of zeroes)?

Be Open.

Don’t be ultra secretive. Don’t shy away from demos. And definitely don’t ask for an NDA. (Which, by the way, is really, really stupid. How can they write about you if you tie them up in an NDA?) Just like customers like a provider that is open and honest (and focussed on helping them solve their problem, not force-feeding a canned solution down their throat), so do (good) analysts.

Be Educative.

Educate them on what you do, why you do it, and why it’s important. Case studies, calculations, efficiency improvements, cost reductions, ROI(C), impact on WACC, etc. Make sure the analyst understands the value to the customer, how much comes from the uniqueness of your offering, how you will educate the customer to help them do better, and how you will continue to improve the solution.

And Be Prepared to Use the Back Door.

If the analyst in question doesn’t care about openness and education, find an analyst that covers an overlapping area in the same firm who is. Especially one that knows she needs to learn and is willing to listen. They can be your way in, and can often hold more influence over their peers than any pay check you could provide.