Category Archives: Market Intelligence

KPIs To Ask For By ProcureTech Module: Part III

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we’re partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. We’ve covered the core Source-to-Contract modules, and today we are concluding with the Procure to Pay Modules of e-Procurement and Invoice to Pay (Accounts Payable).

e-Procurement

Tanya Wade’s Performance KPIs

  • Supplier Performance:Supplier Lead Time
  • Compliance & Risk:PO Compliance
  • Operational Efficiency:Procurement Cycle Time
  • Operational Efficiency:Automation Rate
  • Spend Analysis:Tail Spend

For details on these, see our prior series.

Key Module KPIs

  • Compliance & Risk:Maverick Spend Reduction – maverick spend is out of control in most organizations without good (e-)Procurement systems; it is important to know what is the average improvement from implementing the provider’s system (no matter what metrics the vendor throws at you, if this isn’t substantially increasing, the system is NOT being adopted)
  • Compliance & Risk:Preferred Supplier Spend (Improvement) – how much of the off-contract spend is with preferred suppliers, and by what percentage is preferred supplier spend expected to increase
  • Compliance & Risk:Avg Improvement/Time-to-Value in Discount/Rebate Acknowledgement – many traditional savings in office suppliers / MRO are offered in the form of rebates if a volume is hit (because the provider knows it won’t be because all organizations without good e-Procurement/Contract Management have high levels of maverick spend and they know they can often substitute SKUS due to “temporary stockout” and the buyer won’t notice and this will help ensure that the volume is not hit)
  • Operational Efficiency:Automated Inventory Re-Order % – for regular inventory/MRO restocks or predictable volumes based on the manufacturing plan, the e-Procurement system should be able to submit the POs automatically
  • Operational Efficiency:Repeat Order Cycle Time Reduction – for standard orders such as employee onboarding kits, monthly storeroom re-orders where the amounts need to be human verified/input, etc., on average, how much faster can these be placed vs. pre-module implementation
  • Operational Efficiency:Quick-RFP / RFQ % Reduction – by what percentage does the e-Procurement system, with its integrated catalog and quote management functionality, reduce the percentage of quick RFP/RFQs that the organization needs to issue for non-strategic purchases
  • Operational Efficiency:% (Increase) Spend on PO – by what percentage is on-PO spend increased

e-Procurement is all about getting Spend Under Management, ensuring contracts and included pricing are adhered to, and using preferred suppliers (and products) as much as possible (to help with standardization). This requires making it easy for requisitioners/buyers to find what they need, buyers to issue POs, and on-contract/preferred supplier spend to be easily tracked. Metrics should be in place to make sure all of this happens.

Invoice-to-Pay / Accounts Payable

Tanya Wade’s Performance KPIs

  • Operational Efficiency:Procurement Cycle Time
  • Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

  • Operational Efficiency:Invoice Cycle Time Reduction – by how much, on average, do clients see invoice cycle time reductions
  • Operational Efficiency:Straight Through Processing Percentage – what percentage of invoices are able to be processed straight through (with m-way match) without human interverntion
  • Operational Efficiency:Average Dispute Resolution Time (Improvement) – what is the average dispute resolution time in the platform and what is the improvement over the average time reduction versus pre-system implementation
  • Operational Efficiency:Early Payment Discount Opportunity Improvement – percentage-wise, how many more invoices eligible for early payment discounts can now be paid early (that couldn’t before due to processing delays), allowing organizations to improve their working capital management

Invoice to Pay is all about invoice processing automation and minimizing the amount of time that a human needs to manually review invoices for completeness and correctness and (automated) payment according to pre-defined terms. Make sure the metrics you choose reflect this.

We don’t claim this is a complete list, or every KPI that you can, and possibly should, ask for, just that if you are non-technical, and can’t judge a solution on its technical merits, if you can at least get these KPIs and force the vendor to prove them to you, then you will at least get a solution that is bound to provide you with some improvement and that, because of the real improvement potential, may actually be used.

The best solution is to hire an independent third party who is an expert in ProcureTech and who has no stake in any provider or implementer and is solely interested in doing Project Assurance for you, but if you can’t get that, at least get something which has a history of delivering measurable value to similar organizations.

KPIs To Ask For By ProcureTech Module: Part II

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we are partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. In the first part, we addressed Spend Analysis and (e-)Sourcing. In this part, we are tackling supplier management and contract management.

Supplier Management

Tanya Wade’s Performance KPIs

  • Supplier Performance:On-Time Delivery
  • Supplier Performance:Supplier Fill Rate
  • Supplier Performance:Supplier Defect Rate
  • Supplier Performance:Supplier Rating
  • Compliance & Risk:Supply Base Risk
  • Compliance & Risk:% of Audited Suppliers
  • Sustainability & Diversity:Diverse Supplier Spend
  • Sustainability & Diversity:Sustainable Spend
  • Innovation and Collaboration:Joint Supplier Projects
  • Innovation and Collaboration:Idea Implementation Rate

For details on these, see our prior series.

Key Module KPIs

  • Supplier Onboarding:Average Onboarding Time – how long does it take to onboard a new supplier in the system; if you can’t get the suppliers in the system, it’s not very useful
  • Supplier Onboarding:Average Onboarding Approvals – on average, how many approvals are needed to onboard a supplier – every approval slows down the process, so they should be minimized and optimized
  • Supplier Onboarding:% Supplier Data Pre-populated – how much data is the provider able to import, on average, from existing systems and third party feeds to minimize the effort required by the supplier and the onboarding time
  • Supplier Onboarding:Average Supplier Data Accuracy – how accurate is the data that is used to initialize the system, i.e., on average, how much data has to be corrected
  • Supplier Discovery:Qualified Supplier Network Size (By Industry) – how many suppliers that the organization could reasonably use are in the supplier’s network; many companies will claim millions of suppliers because they index every single business in a geography, but (corner) drug stores, grocery stores, pizza shops, restaurants, corner stores, department stores, etc. etc. etc. are NOT suppliers you can use even if they are technically in the same vertical (pharma, food and beverage, CPG, etc.)
  • Supplier Discovery:Average Supply Base Net Change – after implementing and using the solution for a year, what percentage of suppliers, on average, are new in an organization’s supply base

Supplier Management is about the supplier lifecycle:

  • on-boarding,
  • buying,
  • managing,
  • developing, and
  • off-boarding.

As a result, it’s key that you have metrics that can gauge the efficiency of each stage of the supplier lifecycle until a supplier is deactivated and fully off-boarded.

Contract Management

Tanya Wade’s Performance KPIs

  • Compliance & Risk:Contract Compliance

For details on these, see our prior series.

Key Module KPIs

  • Contract Negotiation:Avg Cycle Time – what is the average time to negotiate and sign a contract in the system
  • Contract Negotiation:Avg Cycle Time Improvement – what improvement did the system bring relative to pre system contract cycle times
  • Compliance & Risk:Avg Negotiated Price Compliance Increase – what improvement is there in negotiated prices being realized on invoices as a result of the module implementation
  • Compliance & Risk:Evergreen Renewal Reduction – what percentage of (overlooked) evergreen renewals are eliminated with the module
  • Compliance & Risk:Contract Risk Score – can the system track risk scores by contract, category, supplier, and the organization
  • Contract Management:Contract Renewal Rate Change – what percentage of contracts are renewed in the system and what is the average (percentage) change vs. pre-system
  • Compliance & Risk:Obligation Rate Improvement – contract compliance is too broad, and might only measure if the contract was ultimately fulfilled; a good contract management system facilitates execution management at the milestone and associated deliverable level and tracks the rate of (on-time) milestone fulfillment to ensure contracts are managed effectively from the date of signing to the final deliverable, which could be years down the road

Contract Lifecycle Management (CLM) has three key stages:

  • negotiation and signing,
  • execution management (and compliance), and
  • renewal or termination.

Make sure you have metrics that measure the key processes and targeted results at each stage, or you’ll end up buying a very pricey, seldom used, virtual filing cabinet where contracts are stuffed and forgotten.

In our third and final part of this (initial) mini-series, we will tackle the last two primary modules of Source to Pay, the Procure to Pay Modules of e-Procurement and Invoice-to-Pay.

KPIs To Ask For By ProcureTech Module: Part I

In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we’re going to partition the performance indicators by ProcureTech module as well as indicate a few more you should be asking for (as well as the proof, which, as we all know, is in the pudding, which you cannot eat until they show you their meat, like Pink Floyd told us 46 years ago).

Spend Analysis

Tanya Wade’s Performance KPIs

  • Cost Management: (Avg.) Cost Avoidance
  • Cost Management: (Avg.) Spend Under Management Improvement (YoY)
  • Spend Analysis:All Spend Categories
  • Spend Analysis:Maverick Spend Categories
  • Spend Analysis:Tail Spend
  • Sustainability & Diversity:Diverse Supplier Spend
  • Sustainability & Diversity:Sustainable Spend

For details on these, see our prior series.

Key Module KPIs

  • Spend Classification:Typical Accuracy – especially if it’s AI-backed/first/powered/etc.
  • Spend Classification:Time to Accuracy – this is critical; if it takes 6 months, your tool will be DOA as no one will use it as faith will have been lost after 6 weeks
  • Spend Classification:Transactions Per Minute – you need a tool that can not only import new transactions in real time, but build and rebuild spend cubes in real time — the key here is CUBE there is no one CUBE (just like there is no one ring or one ping).
  • Cost Management:Year-Over-Year Decrease in Managed Categories – where the organization is spending more than necessary, how much has the organization saved by sourcing/renegotiating identified opportunities
  • Operational Efficiency:Total Captured Opportunity per Minute how much spend does the organization save and avoid w.r.t. the time the Procurement team spends building and accessing cubes, views, and filters

Remember, at the core, the entire point of spend analysis is to:

  • get your spend in order,
  • understand it, and
  • find opportunities in it.

So you’re looking for metrics that directly or indirectly measure

  • time to get your spend in order at the promised accuracy;
  • the efficiency in cube and view construction, updates, and filtering; and
  • the value the tool brings.

Sourcing

Tanya Wade’s Performance KPIs

  • Cost Management: (Avg.) Negotiated Cost Savings
  • Cost Management: (Avg.) Cost Avoidance
  • Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

  • Sourcing:Events Per Year – how many events per year are customers pushing though the platform on average
  • Sourcing:% Increase in Events Per Year – what percentage increase is this compared to pre-system implementation
  • Sourcing:Avg % Savings Identified – what is the average identified savings and, preferably, this statistic is available at the category level
  • Supplier Management:Avg % Increase in Invited/Qualified Suppliers – since the tool should allow more suppliers and bids to be considered in events
  • Supplier Management:Avg & Increase in Supply Base Diversification – as a result of events flowing through the system

You want a sourcing platform that

  • increases the number of events executed by the sourcing team,
  • increases the potential supply base you are able to engage, and
  • increases the cost savings and avoidance you are able to obtain.

Make sure you have metrics that allow you to gauge how well the modules you have selected will enable you to achieve the outcomes you are searching for.

In Part II we will continue with the primary Source-to-Pay modules of Supplier Management and Contract Management.

Procurement And Supply Chain are Drowning in Wannabes

We see it daily on LinkedIn.

Twenty-something founders on LinkedIn claiming their Configurable Agentic Gen-AI Enhanced Systems (CAGES) (with marketing messaging coming straight from the A.S.S.H.O.L.E.) will solve all your problems, although they don’t have a clue what those problems really are, and even if you told them, they wouldn’t have a clue themselves how to solve your problems because they have no real knowledge of, or experience with, Procurement or Supply Chain.

New-Age Influencers barely out of college giving themselves nicknames like the Supply Chain Sovereign or Sourcing Sorcerer and promising you best practices and deep insights in your daily email but who have never stepped foot outside of the big consultancy and don’t know anything beyond the 7 year old playbook they were given.

Advertisements from the Big X Consultancies or “Next-Gen Analyst/Services Firm” promising to replace your workforce with AI Agents, despite the 95% failure rate (as only 5% of AI projects have led to a return, which is 2.5 times worse than a traditional technology project, where a whopping 12% are now delivering a return), and somehow do so cheaper (despite the soon to be exponentially rising costs of LLMs as compute costs go through the roof due to a lack of energy to power them and water to cool them).

As so astutely pointed out by Mr. Koray Köse’s in his recent article on how our supply chains are literally drowning in wannabes who mistake theory for expertise, when the gap between their theory and reality could never be wider!

In theory, Procurement is easy. In theory, Supply Chains are smooth well oiled machines where I order X from you, and you ship it to me. In reality, nothing could be further from the truth!

Nothing makes the point clearer than when Mr. Köse points out that most of these so called “experts” could not pass his Economic Order Quantity (EOQ) exam question, which is totally correct, as I will dive into in a future post. (This is because, among other things, 1. the classic “textbook” formula isn’t always right, 2. doesn’t understand volume breaks and supplier economies of scale, and 3. requires you to be able to do actual math and logic to figure it out.)

Mr. Köse’s excellent article reminded me, as Bob Ferrari and I pointed out in a joint series in late spring on how Legacy Sourcing and Planning Solutions Struggle with Supply Chain Challenges, Direct Procurement is Failing. There are three big reasons for this:

  1. Direct Procurement CAN NOT be cut off from supply chains, as we outlined in detail in our 7-part series.
  2. Everything Mr. Köse’s addresses in his post!
  3. Most Analysts and Consultants fall into this fake “visionary” and “guru” category as well! (They’ve never worked in supply chain or worked hand in hand with experts with decades of experience trying to build useful solutions for those experts to use. One of the best example of this is when these f6ckw@ds use third party analyst firm studies to tell you that your headcount is too low or too high or your tech investment too low or too high without having an actual clue what your company actually does or what your Procurement and Supply Chain personnel actually do. [These Masters of Business Annihilation believe they can manage off of a spreadsheet when, again, nothing could be further from the truth. There’s a reason that the first Gilded Age was ruled by Engineers, they actually knew how to run a company! All today’s financiers can do is take a company with stratospheric profit potential and have it come-apart mid-flight, with Boeing being a prime example — if Engineers were in charge, planes wouldn’t be falling apart in the sky AND the revenue and profits would be a lot smoother!])

Over the summer, Bob and I reviewed over 40 recent studies from the past 5 years from big analyst firms and consultancies on the state of Procurement & Supply Chain — and they all have the same two things in common:

  1. they all tell you about the same barriers/roadblocks, risks, concerns/priorities, and talent gaps that are facing Procurement and Supply Chain
  2. they don’t tell you what to actually do to solve these issues (except, of course, “drop Agentic Gen-AI in” because that will “auto-magically solve everything“) because they don’t have a clue how to address these real world problems!

(Right now we’re trying to figure out how to write our next series, or maybe book, on how you actually address the issues with real process and real supporting technology to get results, assuming, of course, you have real talent that’s been-there, done-that and not these tech-bro AI hipsters that literally can’t create a PO [or even read a contract without putting it through faulty AI first]. It’s quite challenging because, apparently, no one has actually tackled writing something truly helpful before in our joint space and we’re struggling on how to make it useful and digestible in the age of marketing sound-bites!).

The reality is that, just like Procurement has not changed since the first handbook was published 136 years ago, neither has Supply Chain! While Mr. Köse doesn’t explicitly say this, he does allude to the fact that we’ve had global trade for THOUSANDS of years and we’ve always had the same challenges (that revolve around geo-politics, risk, cash-flow, and trust) — it’s just that we’ve replaced paper with digital bits and found new ways to make it more complicated. However, the processes, goals, and realities are the same — and you’d know that if you ever actually worked in or supported global supply chains (and not just pretended you understood what they were to try and sell your shiny new tech toy)! If you don’t understand this, you’re going to continue the 25 years of project failure (where the technology project failure rate is now at an all time high of 88%) and possibly be the next great tech-led supply chain disaster!

Finally, Mr. Köse was right again! Orchestration really is just clueless for the popular kids, selfies included!

P.S. If you haven’t figured out yet that you should be following Mr. Koray Köse on a weekly basis, then figure it out now. You might think that some of his forays into geopolitics or broader supply chain is not all that relevant to your daily Procurement tasks, but the reality is that if you don’t keep up with what’s going on in the world and how that could impact your supply chains beyond tier 1, you’ll be in for a real shock to the system. This is because, when you least expect it, a critical product or component won’t show up, the supplier will be unresponsive, and you’ll have no notice that you immediately need to find a replacement (but because that supplier controlled a significant percentage of market share, there won’t be one). Unlike Billy Idol’s shock to the system, yours won’t feel so good when this happens. (But if you keep up with major events, you can identify those that may impact your supply chain, verify or disqualify, and then start working on mitigations for those that might impact you significantly before it’s too late.)

Why Big Analyst and Big X Consultancies SUCK …

In a post on LinkedIn a while back, THE REVELATOR indicated that the real reason Gartner sucks (and that their stock dove 30%) is because, at the end of the day, they aren’t very good at tying advice to outcomes (and likely don’t even attempt to do it at all most of the time in ProcureTech). But in all fairness, that holds true of all the Big Analyst firms and Big X Consultancies. Also look at Forrester and IDC reports — it’s always the same old vendors or the hype of the day, whether or not that hype is delivering any value whatsoever. (And the answer is “very little” for intake and orchestration — because you can’t orchestrate an empty pit and if you attempt to orchestrate an elementary music class, be prepared for the migraine of your life — and essentially none for Gen-AI, with MIT pointing out that only 5% of deployments are delivering any value whatsoever.)

But it’s not just the Big X analyst firms. It’s the Big X consultancies as well! Now, I know you are saying “but surely they do better, they are consultants, they do projects, they have best practices, and they’re paid for results” and while that is all true,

  1. they’re not all experienced consultants (and the number of juniors on many projects is scary — I’ve heard too many stories about a PE firm trotting in a McKinsey or Accenture* after a big acquisition (because it’s their standard acquisition playbook) to optimize and rightsize operations who come in with a team of 20, of which only two actually provide value beyond what the company already knew. One of the biggest companies in our space literally marched them all out at the end of the day and told them NEVER to come back because when it came to ProcureTech expertise, they identified one individual (the project lead, who they’d likely never see again) who was sharp and got it and would definitely be able to add value if entrenched in their operation, one (his right hand man) who was smart, hardworking, and capable of learning fast and who might be able to add value, and 18 juniors who didn’t know anything that wasn’t in the 7 year old playbook on Procurement handed to them when they started, a playbook this company had rewrote multiple times over the years)
  2. they don’t all have deep relevant project experience in Procurement (or whatever business function you’re bringing them in for) in your Industry
  3. their “best practices” are super generic so they can be applied across the board, which means they are not tailored for your industry and definitely NOT tailored for you (so they are not best)
  4. and they are paid on promises of results, which sometimes don’t materialize

Just like I keep saying it’s not the analyst firm, it’s the analyst, it’s not the consulting firm, it’s the consultant, and the sad reality is that the bigger the firm, the smaller the percentage of senior experienced talent in that talent pool, as the best talent who don’t make partner (and then have to focus more on managing and selling than project delivery) are constantly recruited by clients, consultancies, and even tech companies or the ones able to go out and join/build niche consultancies. There ends up not being enough senior, experienced, talent to go around and you’re essentially playing the lottery that one of these resources will end up full time on your project.

Since these consultancies want to be outcome focussed, in an effort to do that with more junior people, what ends up happening is they end up writing the advisory playbooks as metric focussed — what percentage of spend is on personnel in a best in class, what percentage of spend is on tech in a best in class, and what is the typical breakdown of headcount and tech spend by module or platform. Then, they tell you:

  • your headcount spend is too low, so you need to go out and hire X people in Y roles because, well, metrics and statistics and that will help because of scripted reasons (more sourcing pros mean more events mean more savings, more supplier managers mean better quality, etc.)
  • your headcount spend is too high, so you need to fire X people in Y groups because they must be tripping over each other and/or bringing your profit margin down
  • you aren’t spending enough on tech, so go spend 10 Million on Gen-AI and that will automagically fix everything
  • you are spending too much on tech, so go out to bid for a new ERP, S2P suite, orchestration platform, etc. because you obviously didn’t go to market right when you bought your current tech

Not realizing that

  • the headcount needs differ in every industry AND every company
  • the tech needs differ by industry, company, and process
  • it’s not spend, it’s ROI per spend

and this means

  • you might only need one supplier data manager in commodity indirect because there’s always three more suppliers waiting to supply you the same thing
  • but you might need ten supplier relationship managers in direct, each managing a different supplier (pool) producing a different, custom, component for your advanced engineering or biomedical device
  • you might not need best in class optimization backed sourcing for indirect because automated auctions will get you market price every time
  • but you might need best in class optimization, analytics, and market should-cost modelling platforms to get a grip on your direct sourced custom designs
  • and sometimes spending more on headcount and tech than across-the-board “average” yields a significantly better return because your quality stays high, stockouts only occur during global disruptions, your data processing is 95% automated freeing your staff to focus on strategic issues, etc.

But what can we expect from fresh grads with little mentorship (who are rushed into Gen-AI “training”) who get all of their insights from these Big Analyst firms that

  • publish quadrants and waves that are completely unrelated to reality for the majority of companies with the same 10 to 20 large vendors every year that only work for select large enterprises (and the other 40 to 80 vendors continue to be completely ignored),
  • constantly push and promote context-free (Gen-)AI, despite one of these firms publishing a now buried/deleted study a few years ago that stated 85% of AI projects fail and the recent MIT study that tells us, no, in fact, 95% of these projects fail to deliver any value, and
  • unless you get one of the few analysts who actually gets it, employ playbook-based responses to inquiries that don’t have any context (because the analysts don’t have any time to create tailored recommendations to context because they spend too much time doing basic data collection where 80% of it could be captured in a survey monkey tool [or 95% by a well trained SLM {or, better yet, classical semantic tech with provable accuracy rates} that could map free text to standard process needs and vendor solution categories for easy verification and correction by a true human expert]).

The reality is that until

  • big analyst firms and big consultancies admit their flaws,
  • start tying actual outcomes to the standard projects/recommendations they made, and
  • start analyzing and using these results to tailor recommendations to their clients that have a good chance at actually delivering value

these firms, and their standard recommendations, are going to continue to suck and your chances of success are going to remain at 12% for standard projects and 5% for Gen-AI projects.

Sad, but true.

* not realizing that the reason the company was such an attractive acquisition target in FinTech/ProcureTech was because they already knew all the best practices that the big firms have in their playbooks and were employing them effectively; these Big X tend to do well on average companies that are not best in class or deep in modern process or technology