Category Archives: Procurement Innovation

Should All Service Spend Be Subject to Procurement

Last week, Spend Matters UK ran a great post that asked “why do executives employ their friends as consultants”, which noted that one of the most problematical spend categories is professional services, and in some organizations, this is even more problematic than contingent labour spend, marketing spend, and legal spend. Why? Not only do some executives in some firms often engage senior experts and big 5 consulting firms on six, seven, and eight figure (plus) deals without any notice or without any respect for the process, but they often do so without any background checks or references whatsoever.

Sometimes, as pointed out by the public defender, the consulting firm or expert is being hired because the consulting firm or expert was hired in the past and did a great job, and, more importantly, there is a need for speed.

Sometimes, as also pointed out by the public defender, the budget holder is simply lazy. He knows the consulting firm or expert will do an okay job, and that’s good enough for him.

But sometimes, as documented by the public defender, there is an emotional dependence on the supplier, and that’s a good enough reason for the budget holder not to rock the boat, and other times there is a personal relationship, which is a great reason for the budget holder but not so great for the organization.

And sometimes, as clarified by the public defender, the reason is not a good one, or even a legit one. The budget holder might be making the award on the future expectations of a favour or because of a bribe and/or kickbacks that have been, or will be, received.

But if bribes and kickbacks was the worst situation that could happen, that wouldn’t be so bad. It would just mean that the award was costing the organization more than it should (and maybe significantly more than market average). If the work is quality, and identifies an ROI, that’s not too bad.

You see, if proper process, and due diligence is not taken, the organization could:

guarantee a large minimum payment regardless of work quality, completion, or dismissal (such as a 1M payment for early termination)
hire someone with a known criminal record for fraud
hire someone with known terrorist associations who will try to steal trade secret technology protected under a defence act

And if you think overpaying an average consultant who will take twice as long to produce an inferior result is bad, imagine how much worse each of these situations would be.

So, while maybe it is the case that not all spend should be under the control of Procurement, it is the case that all spend should follow the proper Procurement process under the guidance of Procurement so that all the facts, and options, are available to the budget holder. And since the CFO and CEO can be held criminally liable for certain oversights in the business, they should support this as following a good Procurement process and policy is the best CYA defense there is.

The Song Remains the Same – So Why Can’t We Sing It?

As the world’s second oldest accepted profession (or is it the third as maybe astronomy came first, as we have examples of astronomy dating back 17,300 years), Purchasing should be well understood by now.

Even the first Purchasing Manual, The Handling of Railroad Supplies — Their Purchase and Disposition, written way back in 1887 by Marshall M. Kirkman and printed by Chas, N. Trivess, has the basic definition of the requirements of a purchaser down flat:

The purchase of goods embodies many varied talents and experiences. The ability to buy advantageously, depends largely upon the knowledge of men possessed by the purchaser and his skill in taking advantage of this knowledge. His value will, moreover, be dependent upon the discretion allowed him, and his judgment in exercising it. The position also requires technical skill. The person filling it must be experienced, otherwise his acts will not command the confidence or respect of his associates. His wisdom and fairness must be such that if he selects material contrary to the requisition made upon him, the person thus over-ruled will tacitly acquiesce therein and abide by the demonstration of its wisdom afterwards. (Pages 38 and 39).

Even though today we might write this paragraph as:

The purchase of goods requires talent and experience. The ability to take advantage of supply market dynamics depends on having the appropriate knowledge and the skill to take advantage of that knowledge. The ability to deliver value depends on having the discretion, and authority, to do so. The position also requires technical skill and the ability to use the tools, old and new, provided to the purchaser. Moreover, the purchaser must be experienced and skillful, otherwise others will not respect her decisions. Her wisdom much be such that if she selects new products or services than the ones the organization, and its employees, are used to, the organization, and employees, will understand that she made the best decision taking all of the information from all of the stakeholders, and suppliers, into account.

A few new words, but the same old wisdom. However, in addition to these few new words, now we have to deal with much more complicated words and a plethora of acronyms like:

FIFO
GRC
HIS
HTS
ITU
etc.

that will drive even the sanest of men mad as a hatter. In an effort to capitalize on a newly recognized opportunity, the consultancies have invented a new language to make the simple complex, and the practical improbable, and the vendors have followed suit. The only thing new since the introduction of the telephone is the platforms that exist to support you, powered by the internet and the latest advances in computing technology. So while most consultancies go on and on and on about EQ, you’ve always needed EQ, just like IQ, and the critical factor is TQ. Today’s purchaser requires much more than the ability to use a phone, keep a ledger, add some numbers, create a shipping schedule, and navigate trade law to succeed. Advanced analytics and optimization. Automated workflows and P2P automation. Complex cost modelling and CAD/CAM skills. Not your traditional everyday purchasing situation that existed before the information age.

So learn the tech, and your job will be a lot easier. And keep reading SI which will, as it has always done, continue to alert you to the technology platforms and skills that you need.

Influential Damnation 100: Bloggers

Wait, what? We’re the good guys, right? Yes, we are. But that doesn’t mean we aren’t a damnation. We are. And we’re the worst kind. (And that’s why we saved this damnation for last.) Why?

We seek the truth.

This is not just bad for vendors who do not want the truth exposed, but bad for you. Because what do you do when you finally come around to the dark side that the analysts and vendors claim we spread, and your eyes get opened and you realize that the solution you rushed into is not the right one. But you’re 18 months into a 36 month agreement, and getting out is almost impossible.

We don’t pull punches.

Not only do we speak the truth, but we don’t like to sugar coat it. Not even a little bit. A spoonful of sugar might make the medicine go down, but before you will take any medicine, you have to admit that you’re sick. We help you realize when you’re sick, when you need medicine, and what that medicine is, even when you don’t realize that you’re sick. And sometimes it hurts, but once you figure it out, and take the medicine, you get stronger. And that’s what’s important.

And sometimes our messaging runs counter to the message your bosses just paid a top analyst firm six (or seven) figures for.

Talk about damnation. Especially if we give you the message for free! The last thing you want to do is find out that the thick research report you paid six (or seven) figures for gives you the wrong message and, more importantly, contains the wrong research (leaving out vendors or solutions you desperately need in exchange for solutions that only partially fill the gaps). What could be worse, especially if another CXO wasted a good part of your research budget?

And because of this, some analysts or vendors will go out of their way to try and discredit us.

Trying to prove that we’re not bloggers, that we’re really independent analysts or consultants trying to spread a message that inflates our bank accounts, or really vendor reps who haven’t yet announced their affiliation. But when we are recommending an approach that has nothing to do with consulting or products we may, or may not, be selling; when we are spreading a message that inflates the bank accounts of others (but not us); or when we are talking about vendors who won’t even pay us a dime no matter how much we promote a shared cause, then those messages can’t be true. But the confusion others will cause will only bring more damnation upon us all.

When you’ve been drawn down the wrong road, sometimes a message from the right road can be the worst damnation of all.

The Marketing Spend RFP – Everyone is debating over the death of it — I think it needs to be improved Part II

Today’s guest post is from Mat Langley, a Strategic Advisor and Procurement Executive with 14 years experience in leadership roles in strategic sourcing and category management in Europe, Africa and Asia across Finance, IT Outsourcing and Oil & Gas industries who is currently associated with Shortlist.co.

In this post I am suggesting three areas the tools we’re implementing need to change to give Marketing what they need and then I’d love to hear any more ideas/suggestions that you have.

The ideas below are based upon the fact that a significant percentage of marketers (greater than 50% according to a July study by Walker Sands²) believe that we’re not investing enough in the right amount or the right type of solutions for them.

1. The tools we’re providing need to improve usability – day 1

A recent international survey of Procurement Executives by Ivalua shows that we are focused on transforming the toolsets we’re using today — 80% of us consider Digital Transformation an opportunity³. That’s fantastic – now our focus needs to continue finding tools that are simple for marketers to use — on day 1 — not year 1. Preferably they should have modern interfaces and be SaaS so Marketers don’t have to use one brain at home and another at work.

2. The tools we’re providing need to improve access to qualified agencies

With the significant increase in channels and the number of content components that need to be created – access to a broader set of qualified specialist agencies to meet campaign needs is required. We need to provide tools that let marketers find, engage and then partner with agencies big and small across the specialist spectrum regardless of whether they are across the street or across the globe. And no, I’m not recommending that long-term relationships or that strategic and broad partnerships aren’t important — I’m simply pointing out that Marketing needs an agile toolset to deliver against compelling (and evolving) challenges — and they need access to partners ‘on demand’. This needs to be done in a way that meets our obligations to protect the organization commercially while bringing in the best and brightest vendors.

3. The tools we’re providing need to improve the creation of Request for Partnerships (RFPs) – perhaps they could even be user friendly?

Everyone in the organization has too much work… We need to provide tools that allow Marketers to find and share best practice workflows, templates for briefs, easy access to current best practice questions and that have the maximum amount of automation built-in for comparisons, approval workflows, agreement signatures, and so on. And our tools need to integrate with other tools marketers are using to get the job done – whether that’s Dropbox for file storage, Slack for communication, Office365 for email and yes, even your ERP system! And most of all the tools we choose need to help engage agencies and build long-term partnerships – not drive them all into a single box as described by Kirk Cheyfitz in his piece on ‘6 New Reasons to Kill the RFP⁴:

I think the fact that you put your RFP out only to agencies you really like is a demonstration that it wasn’t too closely allied to the mass, mindless cattle calls that I rail against. Then you actually seem to ask open-ended questions that invite the respondents to define or re-define the conversation. And that puts you completely outside classic RFP territory. Even I would respond to an RFP like that.

I believe that with a renewed or for many an on-going focus on the above 3 items we can align with Marketing and let them take control of their Request for Partnerships which will, hopefully with the right tools, lead to RFPs being done in days and weeks – not months and with less frustration and pain for all stakeholders involved: Marketing, Procurement and Agencies. This should lead to more of the Marketing spend being influenceable and competitive, thereby addressing both obligations of procurement to the marketing team and the broader organization.

Thanks, Mat.

² Walker Sands State of Marketing Technology 2016 Understanding The New Martech Buyer Journey
³ Ivalua. (2015, 3 November). “International Survey Procurement Executives”, PROCUREMENT IN THE DIGITAL AGE: Measuring the impact of Digital on Procurement Departments.
⁴ Kirk Cheyfitz. (2015, April 02). 6 New Reasons to Kill the RFP: Find Innovators, Not Commodities.

The Marketing Spend RFP – Everyone is debating over the death of it — I think it needs to be improved Part I

I want to start with a bold statement — in Procurement, the most challenging group to work with is most often Marketing. Almost every other function in the organization easily identifies the value we aim to deliver. When it comes to who’s really leading, the RFP there shouldn’t be a ‘hot potato scenario’ — we guide, as Procurement experts, and collaborate in a mutual partnership. Marketing, by comparison is still evolving their views on how to collaborate with Procurement. In a late 2014 study conducted by the ANA (Association of National Advertisers), nearly half of all Marketing and Procurement respondents stated that the relationship between them needed to be more collaborative. Nearly 50% of Marketing and Procurement professionals admit that they aren’t collaborating the way they need to in order to deliver maximum value to their brands.

Now, on the flip side, my experience with Marketing colleagues is that they are passionate, energetic and constantly focused on being creative. For Procurement (or Marketing) people reading — I’m guessing you’ve had more than a few debates and I’m sure that debate often centers on how Marketing feels like they’re wearing an RFP straightjacket designed, fitting and sewn by Procurement!

With agencies currently rebelling against RFP’s and even some very high profile CMOs like Linda Boff from GE calling for the ‘death of RFPs’¹ — organizations can quickly get themselves in a downward spiral, ‘hot potato scenario’. It’s a relatively simple problem at its root: when Marketers don’t fully collaborate and provide the necessary support at the beginning of the RFP process, someone has to jump in and grab the ball (find the agencies, write the brief and RFP questions, and run the process) — that often ends up being Procurement — which doesn’t always lead to the best results for anyone involved: Marketing, Procurement, Agencies … everyone.

Hot Potato Was Fun as Kids — Not Today

To be clear, no one is at fault here. Marketing hates RFPs because they feel they are old and outdated; in stepping in to assist Marketing with their agency selection, Procurement ends up writing more of the RFP than they should, often using out of date questions; then it gets sent to more Agencies (just in case) because Marketing doesn’t have a short list or have time to find a strong and competitive agency panel; and finally, Agencies are overloaded responding to bloated RFPs and remember above – they’re also hoping that RFPs die. In the end, we’ve all played our part in proving exactly why RFPs are so terrible and ‘out of date’ – and the easy answer is just to kill them — and the tremendous value they can provide to everyone involved.

Now is not the time to kill the RFP (nor is that what we are suggesting) — it’s time to enhance our focus on improving communication, collaboration and building great internal and external partnerships. The marketing industry is changing so rapidly, with new channels and divisions, new technology, broader yet flatter reach requiring even more agility and calls for more focus on driving value out of every dollar spent. It’s an exciting time but also daunting and we need to ask ourselves, if the CMO is struggling to keep pace with this change, how are we going to support and bring value?

Time for more focus on what’s working and less ‘tossing blame around’ — Time to give Marketing the tools they want

Ok, I know that there is no perfect world where Marketing loves Procurement, Agencies love Procurement and Procurement loves procurement workloads… But there are things we’re doing really successfully that we can build upon. In Part II, I’ll suggest three areas the tools we’re implementing need to change to give Marketing what they need.