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.

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.

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!