Category Archives: Market Intelligence

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 2

Three articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, which we covered in detail in that article and summarized in Part 1. Then, two articles ago, we noted that we know all too well that most of you are asking Affordable RFPs — What Are Those? because you’ve never seen one. So in Part 1, after reviewing the requirements of a good RFP, and pointing out why you weren’t likely to get an affordable RFP from the majority of consultancies, we told you that they were still the answer because

  1. they could be affordable if Niche Consultancies stopped thinking like consultants
    and started thinking like enhanced product-and-data-based SaaS Management Providers,
  2. they only require knowledge management and expert augmentation to get it right, and
  3. if a consultancy understood this and was willing to make the necessary investment, they could quickly become a market leader.

Today we’ll explain what that means. We’ll start with the 10 types of understanding we outlined in our first article on The Key to Procurement Software Selection Success: Affordable RFPs!.

  • Procurement Maturity: the consultancy needs a maturity matrix, along with key capabilities at each level, key questions that need to be asked, and follow on questions (and contextual knowledge) to elicit the right details
  • Process Maturity: the consultancy needs a process progression flow to pinpoint where an organization is in each process, both from a human viewpoint and a technology enablement viewpoint
  • (Critical) Use Cases: not just from a standard “procurement” (“sourcing”, “supply chain”, etc.) point of view, but from an industry point of view; the consultancy needs a large library of standard (critical) use cases to build on
  • Current Technical Maturity: not just from an organizational point of view, but based on the progression of technology in a typical enterprise organization (which, of course, requires a knowledge of the history of tech to the present day along with progression flows along architecture, standards, models, etc. )
  • Missing Capabilities: based on the process and tech maturity, but also based on industry peers and leading solutions; requires all of the above AND all of the below
  • Key Solution Types to Address the Gap(s): knowledge of the standard modular / best of breed offerings in the space and related spaces, as well as knowledge of the standard must have, should have, and nice to have capabilities of each solution type, as well as the progression of technical maturity in each area; a rather extensive knowledge base will be required
  • Key Existing Solutions to Maintain: knowledge of the core, should have, and nice to have requirements of foundational ERP/MRP solutions and companion solutions in inventory, logistics, etc. (to make sure the S2P+ solutions will be enough to go to market for or if other modules / systems [and RFPs] will be needed); a more extensive database
  • Globalization Requirements: knowledge of what the e-procurement requirements are in each country the organization does business in, what languages will be absolutely necessary, what currencies will need to be supported, what government regulations there are for the products/services being sourced/sold, what industry regulations/standards need to be supported etc; internal databases or appropriate database subscriptions will be required
  • Service Requirements: knowledge of what requirements are needed for implementation, data migration, integrations, and maintenance; and how to judge if a vendor / service provider is up to the task
  • Unique Organizational Requirements: knowledge of industries and what differentiates them from a process requirement and solution requirement standpoint; detailed, but yet curtailed, knowledge in an internal database that matrixes this by industry, process, and technology solution

In other words, it means a LOT of detailed models, knowledge bases, and standard progressions as well as a lot of detailed knowledge on:

  • metrics where most organizations lie on the maturity curve(s)
  • vendors, what modules they offer, and how they stack up
  • once all of the above is racked, stacked, and mapped, what the core questions are
  • etc.

And that, of course, requires the consultancy to step up and

  • make some up-front and ongoing investments to build these knowledge bases that will
  • allow their intermediate associates to do the baseline work and
  • enable their experts to come in and finish it up in a fraction of the time compared to if they had to do most of the work themselves (i.e. 1/5 to 1/4).

This will allow most of the work to be done by the intermediate resources at a lower day rate, who will be more efficient with a knowledge base to build on, and then the expert to come in and review the work, identify the areas of weakness, and take it the last mile.

And a consultancy who saw that and made the investments could scale up their operation by allowing their top resources to be four times as productive and support four times as many customers (as well as supporting their customers through the implementation in the project, change management, data migration, and assurance roles. (We only said that they had to be vendor neutral, and not be an implementation provider for the vendor’s software. Everything else is process or organization centric, and as the experts, that’s the work they should be doing, and the most valuable work to be done.)

Again, Affordable RFPs are the answer and maybe someday we’ll see a herd of those mythical unicorns.

How Should a Provider Qualify a Client?

Carefully.

But let’s backup.

Not that long ago, THE REVELATOR penned a post that asks what are the most important things a solution provider needs to know about a practitioner-client.

This was followed by a post that asked why are some clients successful and others not.

And the answer here is simple:

The Wrong Fit.

Which means that if the provider wants a successful client, they need to make sure the client is the The Right Fit and that they, as a provider, have The Right Stuff.

It’s not about the size of the cheque the client can write, it’s about the size of the value the provider can deliver, because if the provider can’t deliver value, there will only be one cheque. But if the provider does a great job, the cheques will keep coming year after year after year. And those cheques will get bigger over time. (A successful organization focusses on lifetime value, not one-time value.)

So, how does a company qualify a client?

In the comments, the doctor outlined a few key points that included:

  • what problems is the client looking to solve (and why)
  • what problems should the client be looking to solve (and why)
  • are those problems the provider can appropriately solve at a price point the client can afford, at a TQ (Technology Quotient) level the client can handle, and at a realistic ROI both parties can be happy with

But first, the provider needs to answer the following:

  • what problems does their solution solve, and solve well
    … and do they have successful clients they can point to
  • what processes do the successful clients follow,
    and can those processes be easily adopted by other organizations
  • what culture does the company have, and what cultures does the provider mesh with

And then, the provider needs to figure out:

  • if the problems the client is looking to solve are the problems the client should be solving
  • if not, can the client be educated into the problems they should be looking to solve (and can the provider accomplish that)
  • are the client’s problems appropriate to the provider’s solutions
  • and will the client adopt the right process modifications
  • and, finally, will the companies cultures mesh

And if any of these questions come up no, the client is not one the provider should take.

Follow the Money — To Find the Spigots that can Turn it Off!

A recent CPO Crunch article over on Procurement Leaders said to Follow the Money as a focus on profit contribution can provide a starting point for improving supply chain transparency.

The article states that having knowledge of our suppliers is one thing, but it’s quite another to have a good understanding of who are suppliers’ suppliers are … not to mention those even further beyond and in a complex, risk-riddled world, such visibility is crucial and can bring meaningful competitive advantage.

In other words, following the money can increase profitability by allowing you to optimize the flow. Which is true, but only half the picture.

The other half is how the flow can be diverted or stopped. Two important things to remember about money flows. First, if these money flows present an opportunity for you, they present an opportunity for others. Not just outright theft of money (or product), but skimming, fraudulent billings/overpayments/handling fees (or your goods don’t move), and even fraudulent good substitution (with knockoffs). Secondly, if any input to any of these flows stops (beyond your visibility), the entire flow stops. And these flows could stop 6 levels down at the source.

For example, let’s say you are in medical device manufacturing or microwave-based manufacturing. Then you need thulium, which is one of the rarest rare earth minerals in the world. If a mine closes, even temporarily, and that mine is the only source of supply into your raw material or component supplier (that produces your enclosed radiation source or manufacturing ferrites), what do you think is going to happen? Production will stop, and your inventory will disappear. Or if you need a custom chip for the control system in your high end electric car, and the one plant currently capable of producing it experiences a fire. (This HAS happened, and chip shortages have been responsible for MULTIPLE shortages in MULTIPLE automotive lines. Just Google it.)

If your only production is in a country with geopolitical instability or deteriorating relations with your country, and borders (temporarily) close, what happens? And so on. If you don’t know the myriad of ways the spigots can be turned off, it doesn’t matter how well you know, or optimize, the money flow. These days, it’s all about risk management, visibility, and quick reaction if a spigot gets turned off to get it reopened again.

Affordable RFPs – The Real Reason(s) They Are So Rare, Part 1

Two articles ago, we noted that The Key to Procurement Software Selection Success: Affordable RFPs! was critical to getting the right technology to help manage your complex supply chain. This was because a proper RFP required a LOT of understanding to get it right, including, but not limited to:

  • Procurement Maturity
  • Process Maturity
  • (Critical) Use Cases
  • Current Technical Maturity
  • Missing Capabilities
  • Key Solution Types to Address the Gap(s)
  • Key Existing Solutions to Maintain
  • Globalization Requirements
  • Service Requirements
  • Unique Organizational Requirements (less than you think, but those that exist are situation critical)

And this required a breadth of understanding across

  • the market
  • process evolution
  • use case specification
  • … including what must be technology backed
  • … and what should be technology or data enhanced
  • common module/solution types that mind the gap
  • internal foundations
  • the unique requirements, regulations, and resignations of each country you do business in
  • the services your team, and current partners, can and can’t do — even service specializations you didn’t know exist
  • what other organizations do

And most of this you won’t have in house. So you need Affordable RFPs. But we know all too well that you are all asking Affordable RFPs — What Are Those? because, as far as you know, they don’t seem to exist. And we hear you, because they rarely exist at mid-sized and larger consultancies  (because only a select few from their talent pool can do it efficiently and relatively cost-effectively and those resources with deep experience are going to be dedicated to any F500/G3000 that can afford to pay the A rates to keep them as a dedicated advisor), and unless you are a larger mid-size buying a mini-suite, they don’t even exist at the Niche Consultancies where they should be common.

We also spent a fair amount of time explaining why they don’t exist, even though one would think that they should be readily available at the niche consultancies (as this could not only make those niche consultancies true leaders in Procurement but also help them grow). In this last case, it was because it was typically only their senior resources that could do these projects, and since these projects aren’t currently quick to complete, it doesn’t take long for a senior resource day rate to add up. And, as we noted before, while this won’t be that much when you are larger mid-sized organization looking for a mini-suite or suite, if you’re just looking for one or two modules to fill a gap, this could add up to quite a bit.

So if this is the case, why are we telling you that Affordable RFPs are the answer if they’re almost impossible to find?

Because:

  1. they are the answer,
  2. they would be affordable at Niche Consultancies if those niche consultancies stopped thinking like consultants and started thinking like enhanced product-and-data-based SaaS Management Providers, and
  3. they only require knowledge management and expert augmentation to get it right.

So what would a Niche Consultancy have to do to get it right?

We’ll outline that in our next part. But it starts with investment. (And how many partners at consultancies want to invest their money? They were brought up on the Wall Street Mantra — Other People’s Money.)

 

The More Things Change …

… the more they stay the same … and the more relevant the past, and the education of, becomes.

Ten years ago today, the doctor asked are you doing it wrong?

Ten years later, the question is just as valid now as it was then. Because if you were doing it right, your supply chains wouldn’t be in such disarray.

Ten years ago we noted that, if you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity and that they have been preaching the following solutions to not only tame the risk but increase the opportunity.

1. Comprehensive Category Management

Nothing has changed here. One consulting firm is literally sending the same email newsletters they were sending a decade ago on the topic because it’s still relevant, and most firms are still doing it wrong.

As the doctor noted a decade ago, spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management, not in the least — nor is running your buys through a “magic” or “delightful” intake-to-procure platform (better called “faketake” as a colleague of mine will point out). As was said before, Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy — which could even be early renegotiation with an incumbent who might give you a great deal to keep you from going back to market. It’s taking a holistic strategic approach, not just mapping to UNSPSC or some out-of-the-box 2-level taxonomy and running with it. And not doing it is what’s resulting in stock-outs and cost-overruns. Because now, it’s not just price, it’s quality and supply assurance. Especially supply assurance. Which brings us to …

2. Supply Chain Risk Monitoring

Not much has changed here, even though the technology now exists for it to change at the majority of multi-national companies. A decade ago, we noted that natural and man-made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least. Still holds true today.

A month ago we also noted that most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. Multi-tier monitoring is key, but most Procurement departments are only now exploring supplier risk management in their supplier management module / application, which is tier 1 — even though we now have a number of great solutions that can monitor to at least tier 3, if not down to the source of each raw material in your supply chain. Considering that any good supplier information management solution will allow you to push in risk, compliance, performance, and visibility data, there’s no reason not to be monitoring your critical supply chains. Especially now that we can easily handle:

3. Big Data

What used to be the biggest buzzword-du-jour (before all this useless Gen-AI, desired only by Dr. Evil himself), Big Data is still desirable, but only to the extent you actually have valid, verified, data. Considering that the algorithms that actually work predict demand, acquisition cost, projected sales, etc. based on trends — unverified non-demand, cost, price data (for the wrong product) is NOT going to be of any help.

Get a real data analysis tool, validate the data at your disposal, and use it to your advantage, no more, no less.