Category Archives: Procurement Innovation

2023 was the year of Intake. Will 2024 be the Year of Orchestration?

Orchestrate the feeds
Pave the way for meeting needs
Phase one is initiated,
there’s no more paper chase, eh?
Set the space ablaze
Case closed, we did rephrase
Workflows for phase by phase
Gets you through the hard days

To the tune of “Orchestrate” by Eliozie
(Outtro NSFW)

2023 may have been the year of Intake with Zip raising 100M to do Procurement intake management for the layperson, but 2024 will be the year of Orchestration. The reason is that while it’s great to manage intake and give the organizational end-users and stakeholders insight into where their request is in the process at all times, allowing them to interact with Sourcing and Procurement where needed, it’s even greater to give Sourcing and Procurement the orchestration engine they need to get their job done and fulfill those organizational requests efficiently and effectively – across people, processes, and platforms.

With so many challenges for an average buyer to fulfill a request from an organizational employee or stakeholder:

  • identify potential suppliers
  • identify potential products
  • verify products
  • for suppliers not onboarded, verify supplier eligibility for onboarding
  • onboard the required suppliers for the sourcing event
  • conduct the sourcing event
  • identify the winner
  • conduct negotiations and …
  • collaboratively develop a contract for signature
  • (e-)sign the contract
  • identify and track the performance obligations
  • identify and track the compliance obligations
  • import the pricing into the e-Procurement system
  • send out the (first) PO
  • track the order acknowledgement and the shipment
  • ensure and record delivery
  • etc. etc. etc.

Doing all of this often involves

  • using a third party supplier discovery service to identify potential solutions
  • searching product specs in a third party marketplace that integrates with your catalog management application
  • using a TPRM (third party risk management) to make sure the supplier doesn’t have any obvious red flags
  • onboarding the supplier in your supplier management solution to collect organizational specific data requirements in order for you to potentially transact with the supplier
  • switching to an e-Sourcing tool to do the RFP/RFQ (as appropriate)
  • running a (weighted) analysis on the bids to select a winner …
    possibly in an analytics solution
  • conducting negotiations in a negotiation management tool (that may or may not be integrated with the CLM)
  • managing the contract drafting processing in the CLM
  • … and the signing in the e-Signature tool
  • and then run the the contract through a contract analysis solution to push the performance and compliance obligations into the governance module
  • … and extract and push the pricing into the e-Procurement system(‘s integrated catalog)
  • … where the PO is cut and the Ack received before …
  • they have to manage the invoice in the I2P (Invoice to Pay) / AP (Accounts Payable) system as well as verify the goods receipt
  • etc. etc. etc.

Furthermore, even if the organization has a “suite”, chances are it’s not that “sweet” and many of the core modules aren’t tightly integrated (as most of today’s S2P “suites” were assembled through acquisition and while the UX has been cleaned up to look consistent at first glance and there is some “endpoint” integration, chances are that it’s minimal data push and pull between process endpoints). It’s also often the case that if the required workflow doesn’t exactly match a very specific use case, the integration just doesn’t work seamlessly and it’s a lot of effort. That’s for the modules in the suite. Not all modules are in the suite. Most suites don’t have full TPRM, extensive compliance management, negotiation support, inventory management, etc. and that is through non-integrated third party solutions. A simple process that should take a few hours of effort to check all the boxes can take days of effort as buyers have to switch between multiple systems, check status, re-enter data, switch back to the intake platform to update the requester, make changes, and so on. Just like the introduction of “modern solutions” has taken onboarding from a 2-day fax and email process to a 2-week gated process with multiple, disjointed, approvals, the proliferation of disjoint, specialized, Source-to-Pay-Plus solutions has taken simple processes that take hours of person-work and days in real-time to complex processes that take days of person-work and weeks in real-time.

The solution? Procurement orchestration. Something that integrates, to the extent possible, all of the modules together in the right process with the right steps in the right seamless flow that requires any piece of data to be entered once and only once in a consistent user interface … and works for all parties, the requester, the buyer, and any stakeholder involved in the process.

It’s No Wonder SMEs Can’t Get Procurement Right!

… when everything that the vast majority of publications tell them is barely on topic at the best of times, and, as per our article on a recent USA Today article, give them horrendously bad advice that makes absolutely no sense whatsoever.

Needless to say, the doctor found yet another article that is just, well, bad. At least this article wasn’t on USA Today. It was a regional business site in the UK (but what should we expect considering all of the examples of Bad Buying that Peter Smith has been bringing to our attention in his articles for about a decade now).

This article, which purported to educate us on 5 tools to streamline your supply chain only managed to identify three (3), that’s right three, actual supply chain tools, of which one (1), that’s right, one, tool would actually streamline your supply chain.

So let’s start with the ONE good suggestion:

Digital Freight Forwarding

Global logistics is hard. Very hard. All of the different paperwork requirements for pre-clearance, clearance, post-clearance; all of the different taxes and rates to keep track of on import/export/sale; all of the parties that need to be involved in getting the goods off the ship to the cross dock to the warehouse where the last mile carrier picks up; etc. is very demanding. If you’re not a big company that can afford a logistics department staffed by a logistics team, not just a PO clerk who has it as his part time job, you shouldn’t be doing it. You should be using a partner — it will be faster, better, and cheaper for you to do so. It will streamline your supply chain.

But that’s the last good suggestion. The following are two supply chain tools that will help you, but they will not streamline your supply chain.

Data Analytics

While a good data analytics solution will help you identify issues and bottlenecks, it won’t actually help you streamline them. You will have to leave the system to examine the issue, come up with solutions, and then go into some other system to implement those solutions.

Inventory Management

A great inventory management system will streamline inventory management processes, making it quicker and easier to maintain visibility into your stock, become aware of low stock (automated alerts), maintain your catalog, find product (when you can record the location), determine actual space utilization, and even optimize your storage rooms and warehouse. But an inventory management solution doesn’t streamline your supply chain if you need 60 days lead time and get an alert that you’ll probably be out of product 30 days before the next order arrives. For that, you need a proper forecasting tool, optimized global logistics with expediting options when needed, integration with your PoS systems for daily updates (to detect unexpected changes in sales early), etc.

And then the last two options weren’t even supply chain! (And definitely wouldn’t streamline the supply chain.) Because:

  • accounting software is for finance
  • chatbots are for customer support

If you really want to streamline your supply chain, then, in addition to help with logistics, you need:

  • automated supplier onboarding (with the ability to integrate risk/compliance data)
    (get a supplier in the system in days, not weeks)
  • P2P for easy (re)ordering and quick-hit RFQs
    (buy quickly when you need to)
  • online contract negotiation, signing, and management solutions
    (get the the deal done quickly)
  • good forecasting
    (so you know how much you will need to order and when)

And there are plenty of affordable options in each of these areas for small and mid-size enterprises. Just check out the many vendor lists that the doctor included in his 39-part Source-to-Pay series.

Grading The Prophet on His Supply Chain Predictions …

Hopefully you’ve been paying attention over on LinkedIn as The Prophet has been sharing his predictions for the Procurement and Supply Chain space for the coming year as the vast majority are right on the money.

When the series is done, the doctor will discuss each prediction in more detail, but for now, he’ll just direct you to the articles so you can catch up before The Prophet completes the series and you miss possibly the best intelligence on what is coming your way in 2024 (and what you need to consider if you are going to be anywhere near prepared for it):

Current Grade: A!

It Was Nice to See Procurement Get a USA Today Headline, But …

… it would be nicer still if the article made any sense!

Last month, the USA Today ran an article on How to Optimize the Procurement Lifecycle of Your Business that gave the doctor hope that maybe Procurement would get a sliver of the just desert it deserves. But, alas, the article was yet another example of how the big publications don’t care, don’t actually verify the content, and allow whatever big company gets their attention to push their agenda.

Because SEO has no place in any article on “How to Optimize the Procurement Lifecycle of Your Business”. Sales cycle, maybe. But Procurement cycle? Not a chance!

Let’s back up.

The article starts off by noting that understanding the procurement process is vital to improving cost efficiency, ensuring quality procurement solutions, and staying compliant with regulations, which is all true, and all critical to any business (among other things, but you can’t overwhelm the average reader who’s likely not a Procurement expert). It also notes that the procurement process is fraught with complexities and challenges which is also true, and also critically important for a non-Procurement person to understand.

Then it says that optimizing the procurement process entails the use of modern technologies, insights, and strategies, which gave the doctor hope that maybe it would help an average user understand what kind of technologies the organization needed, what insights the technologies should provide, and what types of procurement strategies the organization might want to consider.

But instead of actually providing these key insights it goes on to say that inefficiencies in procurement management can lead to increased costs, delayed deliveries, and compromised quality, which, while also true, is not that helpful at this point (and should have been listed as examples of the complexities and challenges highlighted above). It used this as a lead in to how modern point-of-sale (POS) systems are instrumental in dealing with inefficiencies, WHAT THE HELL?, which is used as a lead in to a whole section on digital transformation: incorporating SEO for Procurement Optimization, WHAT THE FUCK?

A POS solution is NOT a Procurement solution, and it’s certainly NOT instrumental in dealing with inefficiencies in Procurement management. Procurement is about acquiring the product an organization needs when — and where — it needs it. While a modern POS system can push roll up data into the inventory management system which, in turn, can generate forecasts to feed Procurement, a modern POS system is not necessary because all Procurement needs is sales projections, and if the delivery timeline from the source in Bangladesh or Shanghai is 45 to 60 days, it only needs 60 days of granularity, not sales data by the hour! Logistics will need that granularity to do finer forecasts to push stock where it is needed before it is needed, but NOT Procurement.

But the cardinal sin of this article is claiming that incorporating SEO techniques into the digital transformation strategy of the business can add another dimension to procurement optimization. No NO NO NO NO! The article claims that with SEO techniques, businesses can reach out to a wider pool of global suppliers, which is completely false because THAT’S NOT HOW SEO WORKS! SEO helps people doing searches find sites that match certain keyword searches, and, thus, would only work if the potential supplier has a sales person who is actively using the internet looking for new customers, who is using the keywords that the site has been SEO’d for, and who is searching in the organization’s language and in the organization’s geography (as most search engines prioritize same language results in the region). In other words, the chances of a supplier you might actually consider finding your SEO-optimized site and reaching out to the right person at your organization is only slightly better than you winning the grand prize in a mega-millions lottery.

The proper solution for finding new suppliers is a supplier discovery / network solution like
Apex Analytix,
Graphite Connect,
MFG,
Onventis,
Promena,
ScoutBee,
Supplhi,
supplier.io, and
Tealbook.

NOT SEO!!!

So, even though Procurement is the life blood of the business, when it comes to mainstream coverage, Procurement Don’t Get No Regard, No Regard At All!

The One Sign You Don’t Have a Highly Functional Procurement Department

Recently, on Linked In, Anders Lillevik, who (once) tried to buy and drowned in paperwork (which is why he decided he needed to find a Focal Point), decided to post what he thought were the six signs your procurement efforts aren’t delivering the impact they should. In his view, they were:

  1. No spend visibility
  2. Unhappy customers
  3. Backlogs and delays
  4. Poor supplier relationships
  5. Reliance on manual processes
  6. Department is seen as tactical, not strategic

… which were signs that your Procurement department is not delivering, but not the one sign you have to look for to determine whether or not you have a highly functional Procurement department, since these are all symptoms of a single root cause. In fact, if you wanted to go down this route, instead of identifying the core problem, you could also add the following to Anders’ list:

  1. Spend is spiralling out of control while the
  2. Company is having to fire-sale / toss out expired products and outdated inventory on a quarterly basis and
  3. Your brand is in the toilet thanks to excessive carbon, poor working conditions / human slavery, and excessive waste (and wasteful practices) in the supply chain.
  4. Every department head is screaming “The Sky is Falling!”, “The Sky is Falling!”.

… as these are also signs that your procurement efforts aren’t delivering the efforts. But if you want to know whether or not you have a highly functional Procurement department, all you have to really do is answer this one question:

Do you have a strong CPO providing quarterly metrics charting success improvements over time?

Now we know this is a bit of a cheat, as it’s actually two parts, as just thinking you have a strong CPO is not enough, you need the metric-based reporting to verify, but that’s it. If you have a Strong CPO leading a procurement team charting key metrics across all relevant areas, key categories and initiatives get managed, and, eventually, improved. Moreover, you will find that:

  1. you have great spend visibility across all Spend Under Management (SUM) which will increase over time
  2. you have happier customers as your quality, reliability, and predictability improve in key areas and remain consistent in others
  3. backlogs reduce over time along with unexpected supply chain delays
  4. supplier relationships, at least for key products and services, improve
  5. process automation is employed where appropriate
  6. the department starts to assist other departments with strategy, and begins its journey from tactical to strategic
  7. spend increases are at least contained to inflation
  8. inventory management (and inventory loss) improves
  9. improved supplier vetting and risk analysis weeds out any suppliers known to be exceptionally polluting, use sub-tier suppliers that turn a blind eye to working conditions or slave labour, or be completely indifferent to CSR activities
  10. the department heads stop screaming “The Sky is Falling!” and instead scream “Why Is Everything So Bl00dy Expensive!” (even though Procurement consistently meets or beats market prices)

Not perfect, but all signs that your procurement efforts are delivering the impact they should, or at least getting there.