Category Archives: Procurement Innovation

For Global Procurement You Need a Global Platform

As per our post from a couple years ago, Procurement is Global. Platforms should be Global. Truly Global. in order to be of use to a truly global organization.

And, furthermore, as we also pointed out, the platform is only of use if it is adopted. This latter point is key. And we’ll focus on this in our post today as our last point addressed the key steps of a global rollout.

So, what are the key steps for a global adoption?

6. True Multi-Lingual Support
While your key business managers will speak English as it is the global language of business, your average worker won’t, or at least won’t speak it well, and since the most successful platforms are used by more than just senior buyers, you want everyone — including the warehouse worker who accepts the stock or the maintenance worker who keeps the inventory or the AP clerk that makes the local payments — to be able to use it easily. So it needs to support every language used by your organization. We know that no S2P platform supports every language out-of-the-box, but the best ones make it easy to add new languages through auto-translations and easy overrides where the translations fail.

7. Localized Workflow Support
Just like languages differ, so do workflows. Sometimes it’s due to local operating practices (with regards to how a local buyer buys, or inventory manager choose to interact with the systems), and sometimes its due to local regulations (in terms of invoice acceptance, processing, and payment processing). Either way, it should be simple to tweak the workflow by locale for as many locales as you need.

8. Varying Levels of Automation
In some offices, senior buyers and other approved users can spend up to a threshold with no approvals required, so the requisition should auto flip to a PO which should be auto-flippable to an invoice when the supplier sends a shipping notice which should be auto flipped to a payment approval when the warehouse worker records all parts received. In other offices, approvals, or at least hold periods (where managers can choose to intervene or not) will be required. Some buyers will be comfortable with auto-buys to replenish MRO and tail-spend categories (from catalogs or automated auctions against approved suppliers), others will want to manually do everything. The system should support this.

9. Fully customizeable dashboards by user by screen/module
Everyone should be able to see what they want, how they want, when the want. And they should have lots of easily adjustable templates to start from.

This isn’t everything, but it’s a key start. We’ll be talking about platforms more in the months to come, as platforms are going to get us to full Procurement 3.0 and next generation platforms will bring about Procurement 4.0 in the latter part of the next decade.

Procurement 4.0: We are Borg?

One of the more interesting talks at Ivalua Now Paris was Natacha Trehan’s (of the University of Grenoble Alpes) talk on the “Future of Procurement”. In it she said that in the noetic economy of tomorrow, Procurement’s function will be to drive complex ecosystems on hyper connected platforms that empowers a neuronal organization that values collective intelligence.

I don’t know about you, but it sounds to me like we’re going to be part of the corporate Borg. For those of you who don’t know what the Borg are, they are a fictional alien race of cybernetic organisms in the Star Trek franchise linked in a hive mind called “the Collective”. They expand by way of assimilation where they forcibly transform individual beings into drones by way of nanoprobe injections and cybernetic implants. And their motto is “resistance is futile”. Which often seems to be the case once a large enough organization embarks on a given trajectory.

So why does she think we are on that path? Which, except for the neuronal part sounds great to the doctor because Procurement does need to learn to drive complex ecosystems on hyper connected platforms that empower a knowledge-driven organization that values collective intelligence — he’s just not fond of the “neuronal” aspect that can be easily misconstrued and misapplied.

Because the biggest future challenge for Procurement, once an organization reaches and masters 3.0 (and almost no organization has), is to reinvent the business model. Once procurement has achieved its sustainability of supply, cost reduction, and risk management objectives, it needs to be able to continually create value to elevate its function and maintain its central importance to the business. Be it supplier development, new product introduction, innovation, or business transformation, Procurement will need to serve up what the business needs.

As Natacha says, Procurement will need to become more entrepreneurial and energetic and harbour the propensity to shake up routine and define innovation. After all, once you’ve squeezed the fat out of the margins, optimized the production and distribution process, and minimized the risk, the only way to find value is to truly innovate the product or service.

Plus, as resources continue to become scarce, regulations continue to multiply, and trade winds continue to change, more and more innovation and creativity is going to be needed to meet sustainability goals.

And then there’s the fact that more and more product-oriented markets are transforming to as-a-service markets. People aren’t buying, or even leasing/renting, vehicles anymore, they are switching to uber-like models in both their personal lives and their business lives. Who knows what will be next.

Plus, as companies progress on their Procurement journey, they all want the same, most innovative supplier as they admit only so much innovation can happen within their four walls. This will shift the balance of power back to the supplier unless you are the most advanced, and best, customer to work with (in which case the odds will be about even as they will want you as a customer). “Customer of choice” is going to be measured not on dollars and volume, but what you bring to the table.

In other words, the Procurement function will need to continue to change, continue to advance, continue to collaborate, and continue to connect … but let’s make sure to avoid those neuronal implants, just to be on the safe side. 🙂

It’s 2019. This is What QuickStart Sourcing Should Look Like!

As we mentioned in yesterday’s post, a decade ago the Oompa Loompas at Coupa announced the availability of Coupa QuickStart which was simply a setup wizard that visually guides purchasing mangers through the setup process for users, approval rules, payment and shipping terms, billing information, chart of accounts, suppliers, and other basic information that was required to get a purchasing system up and running in less than an hour.

But just being able to order a product from a catalogue or send out a simple RFP is not very strategic, especially for 2019. And these days, any event that is not strategic is not going to generate much value when savings are drying up, brands are falling, and spending is falling as GDP growth stagnates and we return to depression era economics.

Needless to say, not only should every system have the capabilities that Coupa had 10 years ago, and the capabilities that we outlined in yesterday’s post on what QuickStart Procurement should look like, but that’s not enough. Not for 2019. Ten years ago we were promised semi-cognitive systems, and most systems can’t even automate basic invoice processing. It’s sad, sad, sad.

So, what should a modern system have? One built this decade?

  • smart RFI creation
    that, as per yesterday’s article, can be generated purpose built for the products in question using templates and organizational data in the ERP
  • smart RFI monitoring
    that can monitor the event, send out reminders, automatically check inputs against public data, organizational data, and expected data, and send out alerts to buyers when suppliers are late, inputs are off, or bids are outliers
  • smart bid analysis
    that can compare bids to past bids, market averages, and expected costs from reasonable should cost models
  • smart award recommendations
    based on bids, delivery times, availability, and supplier preferences
  • automatic auctions
    that can auto-populate from RFIs, auto-run, auto-monitor, auto-enforce rules, and auto-award and notify winners when the auction is over (as they won’t be invited to the auction if they don’t agree to the necessary terms and conditions to be offered an award beforehand)
  • automatic default contract creation
    that uses the organizational boilerplate, terms and conditions, default category clauses, awards, and associated obligations to generate a default contract
  • automatic document comparison and change tracking
    even if the supplier sends back a signed PDF that looks like the one you sent, every character will be analyzed
  • automatic performance monitoring plan generation
    that will track, based on the contract, when orders should go out, when goods should be received, when documents should be received, when reports should be received, when other deliverables should be received, when assessments should occur, etc.
  • real-time performance monitoring
    that monitors a plan, sends out alerts to buyers when deliverables are missed, sends out alerts to suppliers when they have not submitted a document or a shipment notification on time, automatically sends out pre-defined performance assessment surveys, etc.

Quick Setup is more than a wizard, it’s an assisted intelligence platform backed by sophisticated algorithms community and market data, and all organizational data and processes to mitigate the need for the buyer to do pointless tactical data processing in the first place and focus purely on the strategic analysis of RFX responses, when the relevant data and insights have already been generated by the platform.

But how many platforms have that today? The same umber of platforms that have assisted intelligence for Procurement. Zero.

In other words, just like Procurement Leaders are stuck in 2009 (as per yesterday’s article, but so are the vast majority of technology providers. So when looking for a new solution, find one of the few technology providers on this path. Otherwise, your solution capability will be nought, and that’s the decade you will return to. Not something anyone wants.

It’s 2019. This is What QuickStart Procurement Should Look Like!

A decade ago, Coupa announced the availability of Coupa QuickStart, which was a setup wizard that visually guides purchasing mangers through the setup process for users, approval rules, payment and shipping terms, billing information, chart of accounts, suppliers, and other basic information that was required to get a purchasing system up and running in less than an hour.

Needless to say, every system should have that capability today (even though a number still don’t), but given that this was on the market 10 years ago, systems should have advanced considerably since then.

What should they have? More than we can cover in one short article, but at a minimum:

  • AI-powered normalized supplier network with community intelligence
    and out-of-the-box plugins to allow for quick import of your vendor master(s) from all standard ERP and S2P systems (as well as support for complete XML and CSV exports) and AI to allow for quick de-duplication of suppliers between the network and your enterprise vendor master(s)
  • Powerful search capability for quick supplier discovery that can take advantage of detailed product descriptions, community intelligence, and organizational profiles to find intelligent, well-rounded matches
  • HR system / standards support
    to allow for a quick import of employee profiles and organizational hierarchy direct from major systems or standard export files
  • AP/Budget system / standards support
    to allow for quick importation of budgets, approvers, and where possible, budget rules
  • ERP/IMS integration or standard export file support
    to allow for quick importation of categories and products purchased regularly, as well as demand for the past 3 years and current category suppliers and prices
  • ERP/TMS integration or standard export file support
    to allow for identification of current carriers, the categories/products they currently export, and standard LTL/FTL rates
  • AI for profile completion
    that imports the relevant organizational profile data from each of the above systems or exports to build the necessary profile that can be shared with suppliers for shipping, invoicing, etc.
  • standard category templates for RFPs that can be tailored as needed by an AI that uses past event data in the ERP and current product data in the IMS to tailor the template as appropriate

In other words, it’s 2019 and

  • an admin user should not have to define users, the platform should be able to do that automatically given a HR system (export)
  • an admin should not have to define approval rules, the platform should be able to identify the most appropriate rules given budgets, approvers, and payment thresholds defined in the AP system
  • an admin should not have to define payment and shipping terms, the platform should be able to export that information from the AP, ERP, and/or IMS systems
  • an admin should not have to define billing information, that should be automatically extracted from the AP system
  • an admin should not have to define a chart of accounts, that should be automatically extracted from the AP/Finance system
  • an admin should not have to define/import suppliers manually, those should be pulled in from organizational systems automatically, normalized, and vetted against networks the buyer has access to
  • a buyer should not have to create an RFP template from scratch, the platform should present an appropriate one for the category and products based on community and organizational intelligence
  • a buyer should not have to do an extensive, time-intensive discovery process to identify new, suitable, suppliers, an AI-backed discovery engine that runs on a community intelligence backed network should identify suitable suppliers in minutes (and support the construction of qualification scenarios in just a few more minutes)
  • a buyer should not have to manually manage the invitation, send out, monitoring, and reminders of the RFP, nor manually verify all data for reasonability and completeness, the AI should do that automatically, and automatically alert suppliers to complete missing data, check values that might be outliers, etc. and automatically alert the buyer of suspicious / missing data upon supplier submission

Quick Setup is more than a wizard – it’s using assisted intelligence backed by sophisticated algorithms, community data, and all organizational data to mitigate the need for the organization to do pointless repetitive setup in the first place! But how many platforms have that today? Unfortunately, when the holistic picture is taken into account, the answer is zero.

So, not only are Procurement Leaders still stuck in 2009 (as per yesterday’s article), but so are the majority of technology providers. So when looking for one, find one on this path, unless you want to return to the decade where a lot happened, but little is remembered. Or do you want to do something where you’ll be remembered? Like selecting a platform that could not only modernize Procurement but open it up to the entire organization. Your call.

How Do You Find Hidden Costs? Part II

Last year we noted that there is never a fixed arithmetic formula between the cost of producing, and transporting, the goods and services sold to us and the prices charged for them. Sellers charge what they can get, and if we don’t do a good job of figuring out the true cost, which can be hard to do, chances are they are building in a hefty margin. But the margin is only one hidden cost.

There’s other hidden costs baked into the COGS by the supplier, some of which even they may not be aware of. But if you want to bring costs down, you have to find the hidden costs. All of them.

In our last post we noted that one way to find hidden costs was to look at production costs, particularly:

  • raw materials
  • energy
  • labour
  • overhead costs

But, as noted in our opening paragraph, there are also hidden costs in the transportation of the goods. And hidden costs in the costs associated in the transportation of the goods — which can include interim storage, dock / port fees, extra tariffs, etc. And what costs are hidden?

  • Fuel Surcharges
    yes, these are valid if there is a contract that allows them, but if the contract is well written, they are supposed to be in line with actual fuel cost increases and decreases above a maximum cost … typically what will happen is suppliers will raise when fuel prices go up, but NOT decrease when they fall back down – that’s unnecessary hidden cost
  • Interim Storage
    some suppliers will use shippers that do a lot of cross-docking, especially with LTL, and some might even temporarily store goods to make sure they only run trucks full – this can incur storage costs and even delivery delays — if the combined costs of this intermediate storage and delay to your supply chain is more than just shipping a LTL truck direct, that’s a hidden cost
  • Dock/Port Fees
    sometimes a supplier or shipper will always blindly use the closest port, even if a port a couple of hundred miles away has half the fees and has carriers that cost less — this is also a hidden cost — remembering that the busy ports are always near capacity, the difference can often make trucking the goods an extra couple of hundred miles a profitable venture
  • Extra Tariffs
    if you are buying from a supplier that has multiple locations in Asia, which one they manufacture in and ship from matters greatly as export tariffs differ by country and import tariffs greatly differ by country; if the right location isn’t chosen based on the destination, these are extra hidden costs as well

Supply chains are fraught with hidden costs, and while it could take a lot of analysis to find out how much they are costing you and whether they are worth dealing with, the reality is that a lot of them are not that hard to find if you just trace what happens from finished good back to raw material.

Happy tracing!