Category Archives: Procurement Innovation

A Truly Great Article on Transforming Legacy Procurement

If you’re a new occasional reader, you might think that one of the doctor‘s primary goals is to just rip big analyst firms and publications apart when they publish ridiculous results (based on ridiculous surveys) or ill-conceived articles with little to no good Procurement content (if we’re lucky), or wrong content (if we’re not) that, as far as the doctor is concerned, would have been just as good if they unleashed an intern with no knowledge of procurement on Chat-GPT (and you all know what the doctor thinks of that!).

However, that’s just because, as Procurement is hitting the limelight (as a result of all the supply chain disasters we’ve been facing that they have been expected to deal with), coverage has increased significantly (to capitalize on the hot topic), and most of it is, frankly, NOT that good. However, every now and again there is a truly tremendous article published under the radar, and when the doctor finds one of those, he’s very happy to bring your attention to it. Especially when it’s written by a practitioner who obviously gets it.

In her article on From Tactical to Strategic: Transforming Legacy Procurement, the author reminds us that the majority of large scale transformations fail, that a major challenge for older companies is that they have no comprehensive view into global spend, that e-Procurement systems offer many fixes, but also that if they are not optimized for your specific business needs, you could be missing out on opportunities for better supplier partnerships and cost leadership.

This does not mean that you should build your own (overly) customized system, or insist that the systems support your current processes (before determining if those processes are better than the processes supported out-of-the-box by the new systems that have been developed based on typical best practices of the industries the vendor serves), but that the solution has to be appropriate to your industry and support some customization where you need it for specific products, services, or processes that make your business unique (but only those — don’t reinvent the wheel already there where you’re the same as everyone else).

The author then goes on to outline a three-phase approach to identifying, selecting, implementing, and, most importantly, maximizing adoption of the platform — which is an ultimate key to success.

the doctor highly recommends you read this article on going From Tactical to Strategic: Transforming Legacy Procurement.

Take the Tedious out of the Tactical Tail and Autonomously Avoid Overspend with mysupply

The taming of the tail is tedious and that’s why it’s overlooked in many organizations beyond whatever a catalog can address. There are only so many strategic sourcing professionals, there are only so many projects they can handle, and only so much spend they can get under strategic management. After that, beyond what’s in the catalog, IF there is a catalog, it’s typically the wild wild west for Procurement — especially if it fits on a credit card or P-card. There just isn’t enough bandwidth to manage more than a measly modicum of the tactical tail in an average organization.

Many organizations believe it’s okay to ignore tail spend because it’s only 20% to 30%, and because they believe that overspend probably can’t be that high on small purchases. They’re wrong on both points. In most organizations, even when the strategic categories are defined to include 80% of spend, because products and services change all the time, organizational buyers and / or overworked sourcerers won’t always catch when new products or services should be included in a strategically managed category; and because p-card/T&E is never included in the initial estimate, tactical/tail spend that’s unmanaged is usually 30% to 40%. If it’s 40% that ends up being unmanaged when the expectation is 20%, that’s a lot. Secondly, spend analysts and tail spend analysts have regularly found that the average overspend in the tail is in excess of 10%, with some categories of spend routinely being in the 15% to 30% window because no one ever looks at it. And if your organization is losing out on 10% of 40%, that’s 4% that could go straight to the bottom line with a good tactical tail spend solution.

To put into perspective just how good 4% straight to the bottom line is, consider the fact that, in direct organizations, strategic events on carefully managed direct categories that are regularly sourced typically only net 2% as the categories have already been squeezed. It’s only the mid-tier categories where you will see higher savings rates, which will typically average in the 5% to 7% range at best as these categories at least go to auction or multi-round RFP regularly. So if you save 2% on the top 30% and 5% on the next 30%, that’s only a savings of 2.1% that hits the bottom line. In other words, if your organization has been actively strategically sourcing top spend for five or six years, your organization has twice the cost avoidance / savings opportunity in the tail. It may seem counter-intuitive, but it’s the truth. Let that sink in for a moment before you read on.

mysupply is the newest start-up that aims to tackle the Tactical Tail Spend space, which has been historically underserved since the first specialists popped up (and then disappeared) to tackle it in the early 2010s. Even today you can count the true tactical tail spend specialist solutions on one hand without a thumb, compared to the seventy-five plus sourcing providers, but the new generation of providers, and mysupply in particular, understands that no one wants their spend in multiple systems (as you can’t do integrated spend, PO, and invoice management otherwise, key for Procurement success) and are developing their system as an extension to current sourcing systems, not a replacement for.

mysupply, which is even available on the SAP app store for those that use SAP (Ariba) and want a quick-start into tactical tail spend management, was designed to integrate with, and feed into your existing sourcing / procurement platforms — and in the case of Ariba, will fully use the Ariba Catalog and Ariba PO system to manage all spend. mysupply allows for:

  • quick event definition for sourcerors short on time (though the App or ProcurementBot)
  • roll-out to organizational users who can do their own quick-hit RFPs/Auctions/Catalog buys (also through the app, if needed, or ProcurementBot)
  • integration with your intake platform of choice for event push to the sourcing team

While it’s not designed as a full intake (or intake-powered) platform, as it was built for tactical tail spend and not all organizational spend, it was built from the ground up with integration in mind (as their goal is not to replace any platform you might already be using, as they are going after the enterprise market) and has a lot of orchestration capability built in and could even serve as an intake platform if desired (and route requests that should be strategically managed spend to an existing strategic sourcing application or to mysupply, which can also be used for strategic sourcing if desired).

Event creation in mysupply can be super easy. Options include:

  • in-house LLM-assisted Event Creation and Management via API-powered ProcurementBot, that can be integrated through existing enterprise collaboration platforms (Microsoft Teams is in Production, further integrations are planned)
  • Existing event templates that define all of the items being sourced, data required for bids, and (pre) approved vendors (which can easily be augmented or removed) (any event can be saved as a template to kick off future events)
  • events from scratch, where the platform is very adaptive and you only need to specify as much information as is necessary to source the product/service, which, if already defined in the system, can simply be an RFP request and a due date

and, most importantly, all of these strategies can include

  • demand bundling, even if different products or services should be sourced using different strategies, which can be across buyers for a given timeframe (i.e. collect all requests for a week or a month and then source)
  • pre-selected, custom, or hybrid supplier lists
  • customized lots, as the platform allows sourcing by item (price) or lot (price)
  • multiple tender/go-to-market approaches (i.e. each lot can be designated for a different [type] of RFX or auction), where the approach doesn’t need to be selected until suppliers have confirmed interest AND initial bids are in (which is very relevant for tactical spend where you don’t know the market dynamics because you haven’t researched the market and/or don’t source the product or service regularly; it’s not like strategic spend where you know there are seven suppliers, and five will show up to a reverse auction)
  • automated negotiation via (lot-based) QuickBot or multi-line item QuickBot
  • multiple scenarios for negotiation award analysis (where the items can be broken up for further negotiation/award after an initial bid event based on total spend, number responses, etc.)

For the requester, integrated LLMs through ProcurementBot help the requester:

  • identify the product or service being requested
  • capture demand and critical requirements
  • select the category
  • be presented with the appropriate sourcing approach: catalog, self-service, or central sourcing (team)
    • for catalog, immediately make the buy by presenting the user with the available catalog options and allowing them to select one and complete the purchase (and then the bot completes the process in the source system)
    • for self service, flesh out tender specifics and select (pre-approved) suppliers and then ProcurementBot sends out the tenders and, when they are all returned, or a certain time has passed (as configured by the category manager in the mysupply platform) returns the quotes to the buyer through the initial chat channel (where they can select one)
    • for central sourcing, it collects the request and, if appropriate, bundles it with others that are then rolled up into a managed tender that is then put into a central buyer’s queue for management, which may happen before or after initial quote requests are sent to suppliers (if an event template has already been pre-configured)

Let’s dive into some key sections / capabilities for the sourcing professional.

Demand Management / Bundling

As above, the system can be pre-configured to bundle demand over a period of time for all requests for the same product or products in a pre-defined lot, but for the rest of the requests that come in, there is the demand management/bundling section. In this section, the buyer can see all of the requests, have mysupply suggest a bundling, and either pick a suggested bundle or create her own bundle. She can quickly search and filter to create custom sourcing project bundles and then immediately kick off a workflow to define a new sourcing project bundle.

When a new sourcing project is kicked off, the user is taken to a screen where they can select starting pre-defined supplier groupings that are relevant for each item requested in the demand bundle (and, of course, the system will not include duplicate invites if the supplier is in multiple supplier groups, so the sourcing organization doesn’t have to create intersection groups, just groups for each commonly requested item).

Standard Sourcing Process

Once the buyer defines a basic event through one of the workflows (kicked off from a single request or request bundle), the platform takes the user to the event summary. From there they can:

  • define the automation and starting strategy — the event can be setup to automatically select all approved suppliers, send the request out at a certain time, remind suppliers, automatically advance to evaluation when all starting bids are in or the deadline is reached, kick off automated negotiation rounds (where suppliers are given a chance to update bids based on rank information and built-in game theory negotiation strategies), and basically free the buyer until it’s time to evaluate the first round of bids and either award, or kick off another round — at this point, the buyer can change the negotiation strategy, and even split the event up into multiple parts; this is different from most platforms where the entire event structure, and strategy (single round, multi round, Dutch action, etc.) has to be defined up-front and cannot be changed — something which makes no sense in tactical tail spend sourcing where you don’t know the supplier interest or current market dynamics; note that the starting strategy can be multi-pronged based on event value (if the award can be done under 10,000, then just award the lot to the current lowest bidder; if under 25,000 use autonomous QuickBot negotiation and award to the lowest bidder on an item basis; if over 25,000, do a 2nd round RFP with the three best suppliers and more negotiation/bundling to motivate better pricing; etc.)
  • flesh out the request — quote breakdown (while it is tactical tail spend, you may still want shipping, handling, taxes, service fees, etc. broken out), basic information required, documents required, delivery and payment details that must be accepted, compliance requirements, etc.
  • invitation of the selected suppliers (where you can add or remove suppliers that were pre-populated from supplier groups appropriate to the items in the request)
  • the evaluation of the bids that come back – manually, autonomously, or a combination thereof;
    the platform supports best price strategies, threshold strategies (which allow the strategy to be dependent on the amount of the bid, i.e user-driven negotiation above a range, best price negotiation within a range, and best-price auto-award below a range), QuickBot single lot auto-negotiation, Multi-Item QuickBot, English auction, Dutch auction, ranking (based on weighted responses and costs), buyer awards (no auction/negotiation); it supports lot strategies (best distribution by single-item award or all split); it also supports multiple rounds if desired with pre-scheduled negotiation windows (for RFQs and auctions); and, finally, it supports automated awarding if strategies that permit automated awarding are selected (subject to conditions that can restrict auto-award based on LDO — Least Desirable Outcome — or MDO — Most Desirable Outcome — scenarios; however, note that this is just the starting strategy;
  • select one or more bids for negotiation and make an award (unassigned/unawarded items are summarized and the user can see, through color coding, the lowest cost among all offers, select one, and send it to the e-Procurement system; the user can even dynamically kick-off new rounds of the RFP/auction, which may have a smaller supplier set or introduce new suppliers if the responses weren’t acceptable )
  • manage Q&A with the suppliers

A great feature of mysupply is it is not built to replace your current strategic sourcing platform (which most organizations have), your existing catalogs and catalog management applications (they integrate with them through their extensive API support), or your ERP/MRP/AP system which manages your purchase orders (as they integrate with those too). It’s meant to fill the tactical / tail spend sourcing hole in most organizations and, in particular, help organizations with tactical sourcing teams and help desks become considerably more efficient so overall savings can be increased though effective category management practices that capture and encode organizational knowledge so the end users can make the right buys on their own as often as possible, ensuring that the tactical team can focus on higher spend tail spend categories and new categories (and develop the right strategies to manage those going forward).

If your organization does a lot of tactical / tail spend sourcing, mysupply is definitely a platform you might want to check out, especially since its ProcurementBot allows it to do intake through third party platforms organizational users are already familiar with (such as Microsoft Teams).

Another “think tank” article on digitizing procurement that’s off-the-mark!

A recent article in Supply Chain Brain noted that you should be seizing the opportunity for digitizing procurement and the doctor completely agrees. Nothing should be paper based in Procurement today. There’s no excuse for it.

And yes, multiple developments in supply chain are converging to create an unprecedented digital opportunity for procurement professionals. Furthermore, if you work on mastering and combining emerging and maturing technologies in strategic ways since procurement teams are in a position to reshape how they work, and create value across the supply chain, you can revolutionize Procurement and business performance.

But digitizing, by definition, means moving processes from scrolls to systems, from the dark basement to the illuminated screens. It DOES NOT mean that:

  • you use Gen-AI or even machine learning
    there may be tasks where you apply point-based ML, but that comes after the digitization of an appropriate process
  • you use cognification to illuminate (concealed) processes
    especially when it could illuminate you should never have digitized the process in the first place
  • you accelerate workflow through automation
    you automate what you can, and while that includes the acceleration of tactical paperwork processing and thunking, sometimes humans have to step back and think about the data received, insights produced, and options available before making a decision … you don’t accelerate whatever amount of time it takes a human to make a good decision (and, instead, focus on automating and accelerating any non-strategic tactical “thunking” tasks that prevent them from focussing their brain power where it’s really needed)
  • you go straight to content personalization
    when the users might not even know how to use the baseline systems (and, in the process, create a nightmare for the support personnel)

Digitizing Procurement starts by:

  • understanding what processes you are using now
  • understanding if they are appropriate or they should be optimized
  • identifying off-the-shelf best-of-breed modules, mini-suites, suites, and/or
    intake-to-orchestrate platforms and implementing them
  • identifying key points where RPA, ML, or other advanced techs can make the process even more efficient
  • then identifying the right advanced tech to use

Not starting with it. You should never try to run a race before you can walk. The only “impactful opportunity” identified in the article you should start with is

  • adopting ecosystem thinking to enhance data

At the end of the day, nothing works well without good data. So get the data right, and everyone aligned to get the data right, and that will get you further, and help you do better, than any piece of modern tech you can try to throw at the problem.

Orchestrate with ORO and Solve Your Source-to-Pay-Plus Challenges!

Yesterday we indicated that while 2023 was the year for intake, 2024 may be the year of orchestration. The reason? Including the buyer in the process and making it simple for them to get information on policies, do their own tactical purchasing, and engage with Sourcing and Procurement is only the first step to successful Source-to-Pay+ in your organization. The next step is simplifying the life of a Sourcing and Procurement professional whose job has become considerably more difficult with all the regulations they need to adhere to, the risks they have to identify and manage, the sanctions they have to comply with, the (knee-)jerk policies the organization has in place, the supply risks they have to consider, the supply assurance that has become as important as cost, and the collaborations across half a dozen departments or more just to get the job done.

ORO was built to be that next step. More specifically, ORO was built to be the orchestration platform for procurement workflows, enabling an organization to build as many Procurement workflows as needed, involving as many stakeholders as needed, while integrating as many systems as needed, to support the organization in acquiring whatever products and services it needs to do business. There are two key words here:

orchestration
as it was designed to ensure that all parties who needed to collaborate could collaborate and get the job done quickly and efficiently; and
workflows
there is no ONE procurement workflow; there is one workflow per product or service the organization needs, which varies based upon the value of the purchase, the supplier, the location (of the supplier), how the product or service is to be used, and so on; e.g. there might be a typical workflow for 10,000 t-shirts for re-sale, a quick-purchase workflow for 100 t-shirts for an event, and a lengthened workflow for onboarding a new supplier to produce the next 100,000 t-shirts you plan to purchase

In the example above, a typical workflow might be sending an RFQ out to your already on-boarded and approved suppliers and asking them for a cost and delivery date. In the second example, it might be allowing your marketer to just get 3 quotes from local print shops, verifying the quotes are valid, allowing the marketer to buy from the lowest quote on the P-Card, and that’s that. In the third example, it might be subjecting the supplier to an extensive compliance and risk analysis to ensure there is no slave labour in the supply chain, unsafe working conditions at the factory, counterfeit materials, denied party associations, and so on … and only then onboarding the supplier of interest for a full sourcing event.

ORO can do this because they have built a no-code platform with fully customizable workflows that can be built from scratch using any capability of, or data in, the product and connect with, pulling data in and pushing data out, any integrated solution through the APIs. This can be used to orchestrate intake requests (because intake is just another Source-to-Pay+ module, which they provide as part of their orchestration, configured to your liking), processes, forms, and organizational master data (which can be grouped into projects).

When an end user logs in, they see their home screen where they can start a new process (be it a purchase request, supplier onboarding, evaluation form, and so on), see all their current tasks (as well as the estimated duration and status), and an easy smart NLP-based AI-enabled search capability that can take questions and guide the user to appropriate processes.

For example, all they need to do is enter their business request in plain English, and then the platform will ask them clarifying questions to guide them to the right process. For example, if they say they want a 3D printer for pharmaceutical research, it will know that the buyer is looking for laboratory equipment and not a mass-market resin 3D printer for 3D part models for manufacturing and then ask the user if it’s small laboratory equipment (as they are doing preliminary research) or large laboratory equipment (as they are testing suitability for mass production). (If the details are sufficient, they can go down to level 4 in a category tree.) They can then identify the most likely suppliers, including those the company has done business with in the past, and if the approximate spend is known, bubble up the best fit to the top (and allow the user to click into recent transactions). If the right supplier (and product) is identified, the user can then kick off a procurement request, and based on the value, the system will either guide them through the process of purchasing it themselves or kicking it off to Procurement (because the amount is over their spending limit). It will also tell them how long the process typically takes and the steps they, or the buyer, will need to go through.

When the request gets to the buyer, they can review all of the information entered by the requester and stored by the system, see the process they need to go through, send the required RFPs and forms to the supplier, get alerted when the response comes back, if the response and price is right, kick off the order, and it’s done. Moreover, they can jump into their sourcing system if they choose to edit the default RFP or go through its built-in processes, or just wait for everything to come back through the API integration and never leave ORO for a predefined process. (This also means that the ORO platform can use the APIs to fully create the necessary event/process in the integrated tool and, if SSO is enabled, ORO can jump you right into the third party application, and if the third-party application has a fine-grained API, into the screen that is appropriate for the current process step.)

Processes are very powerful and can contain as many tasks (which can be built in-system, third party, or data collection tasks), approvals, (stakeholder) reviews, forms, documents, notifications, requests, and sub-processes as necessary, in any order. This means that as soon as an event is kicked off for a software product that may need a security review and privacy review, IT and the Data Protection Officer can be notified, they can let the buyer know if they have any particular concerns not covered in the standard onboarding processes that they want to address and data they want collected, reviews can be staggered or split so as to prevent a process from getting too far when non-compliance or unacceptable risk can be decided early, or to prevent risk and compliance analysis from slowing a process down when the perceived risk is low or a supplier can always be subbed out last minute. Processes that can be done in parallel, including approvals, can be kicked off in parallel to minimize time. And allowances for send-backs can be made to collect more information or correct situations without cancelling and restarting the entire process and losing the history. And an impacted party cannot only see their current task in each process but see the entire process at a glance and the progress to date. They can also access any associated forms, documents, and see the milestones that have been completed at various steps (which could be for future steps if they are stuck in an approval or something was sent back to them for further review).

ORO is highly configurable and in addition to typical settings you’d find in any old SaaS app, you can also configure the assets available to be used in the application by the users who have access to workflow / process construction, modification, and utilization. This means you can select the apps they have access to, the data in those apps they have access to, and so on. And it’s very easy to use with an extremely intuitive user interface.

When it comes to process creation, the conditions that can be used to drive the logic can be defined on any data element in the system, or any system ORO connects to, as well as any derived data or measure on that data element in the system, or any system ORO connects to. ORO makes it possible for you to find those data elements and statuses by grouping them into categories (custom fields, department, ERP, invoice amount, suppliers, users, working capital, assessment risks, etc.) and making selection easy. For example, if in the ERP Supplier Status Info, you might have “new supplier”, “activation required”, “currency enabled”, “new country”, etc. Furthermore, the processes can be configured to monitor the status (and data) at all times and automatically jump back to a specific step if any conditions change that would require reviews to be conducted again or new approvals. For example, if during an assessment, IT decided that additional security is required, and kicks it back to the vendor who indicates they will add it for an additional fee, and that causes the overall sourcing event to cross a certain threshold, approvals can be revoked and a new approval chain executed (if approval from the CIO in addition to the buyer’s manager is now required).

In other words, ORO is the orchestration platform you didn’t know you needed when you are stuck trying to manage disparate processes across different systems, track when things change, and ensure things get done.

 

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.