Category Archives: Procurement Innovation

If You Really Want to Make Stakeholders Hate You, Just …

Spend Matters UK recently published a 5-part series on how to make stakeholders hate you, which presented five actions you can take that, despite your intentions, will help you achieve your goal of helping stakeholders to hate you.

In order, they were:

  1. Drive them Mad with Technology
  2. Revel in Being the Gatekeeper
  3. Talk Your Own Language
  4. Insist Every Spend Category is the Same
  5. Focus Purely on Savings

From a Procurement point of view, pushing for new technology, focussing on savings, and speaking the language of good Procurement is typically a good thing (as technology helps you do your job better, savings pleases the C-suite, and the language of Procurement isn’t appreciated enough). But from a Legal point of view, technology is irrelevant; from a Marketing point of view, it’s about sales, not savings; and from an Engineering point of view, the language of Procurement is irrelevant — the product has to work, work well, and be something to be proud of (damn it). So, even if it’s delivered with the best of intentions, a push for new technology, a focus on savings, or explanations delivered in your language can turn stakeholders off.

However, insisting every category is the same or revelling in your role as the gatekeeper is definitely confrontational and will help achieve your goal of getting stakeholders to hate you, with time and effort of course. But if you really want your stakeholders to hate you, and hate you with an unrelenting passion, the best way to accomplish this, beyond a shadow of a doubt, is to:

     0.  Take all the Credit

Assuming that you can convince the stakeholders (or the C-Suite who will force them) to work with you, the best way to truly become the target of their ire is, once the project is a success, take all the credit. While it’s true that the root of the project success — be it cost savings, quality improvements, JIT delivery, value-add, etc. — will be the result of the technology, process, and supply management experience you bring to the table (which takes the good job they were doing and makes it great), you can’t take all the credit. Remember, (as far as the stakeholders are concerned), they worked just as hard as you; they brought the category expertise to the table; they have the experience with their preferred suppliers to, supposedly, determine which tactics and methodologies are likely to yield the most fruit, and they have a need to look good to the C-suite too. (Especially if their department is seen as a cost-center and not a value-creator.)

So if you stand up when the project is done, compare the greatly improved results that were achieved when the department worked with you for the first time (compared to the dismal results the department achieved on its own last year), and do your absolute best to take all the credit, the stakeholders will hate you so much that they will strive to open the gates of hell and unleash its fury upon you. It’s the only thing you have to do to gain their eternal animosity. No ifs, ands, or buts about it. No top five list needed.

Why Big Brains Will Beat Big Data in Procurement


Today’s guest post is from Ryann Kahn, Marketing and Communications Manager at Source One Management Services.

Two weeks ago, the Sourcing Innovation blog published an article about how the three cognitive traps stifle global innovation. I couldn’t help but think about how the same points could be made in procurement: data (though usually we don’t have Big Data) can help overcome some common issues, but ultimately Big Brains are more important and effective at the same job.

Take a procurement sourcing project for example.

The commonly used traditional three-bid process is data driven. It implies that if you collect enough (i.e. three pieces of) data, then you are making a good decision. Now, by collecting three bids, you know you are not getting the worst price and service out there and you are encouraging some competition. But without category expertise or a strategic process in place, can you really consider the data alone enough to justify that you have made a wise and innovative decision? Data != strategic sourcing.

But the data itself can often lead to the confirmation bias that the doctor referenced previously. Was your RFP template (or software solution) structured in a way that drove you to the conclusion that you already had envisioned? For example, if you want to remain with your local incumbent supplier, does your scorecard penalize suppliers for not having a location near you? Did you only request pricing on a specific product, which you knew your preferred supplier had the best (or only) price available? Confirmation bias in the sourcing world is real and common. Many companies effectively eliminate competition with better solutions because of the way they structure their questions.

By contrast, a true strategic sourcing process uses data in a Big Brain process.

The first step is a spend analysis of data from contracts, supplier invoices, P-Cards, supplier reports, POs, and more. (That’s a lot of data.) Then we look at market intelligence, historical trending, new products or process enhancements and benchmark data. (Now that’s Big Data!) All of this information is pulled, assessed, and analyzed. But the data alone does not give a full picture of a company’s spend. It takes the “curious, open mind” to uncover the whole story. Data may suggest inadequacies, but only through more in-depth research and thorough interviews with stakeholders and end users will one be able to identify problems and usage requirements.

The next step of the strategic sourcing process is the sourcing strategy. Again, it begins with data collection to cast a wide net of suppliers and determine their capabilities. But the bulk of the work in this stage belongs to the Big Brain: creating the supplier strategy, envisioning an RFx strategy, and planning for an execution strategy.

Even if procurement evolves to join the Big Data bandwagon, data will never be able to replace a human category expert. A category expert comes armed with nuanced knowledge of market trends, characteristics, players, and history, and uses analytical skills to apply that to plain data. Or, as the HBR article says, “When we look at markets different from our own we often have little information”. An expert who has been intimately involved with sourcing a category for years will be able to achieve better results than a novice armed with data, or the most powerful e-sourcing tool, any day.

In the final phases of the strategic sourcing process, implementation and compliance, it is entirely the work of a Big Brain. Experts must ensure that a company is actually achieving the results that were identified in the earlier phases in terms of savings and level of service. These experts may use tools to help collect the data to support the process, but the tools themselves don’t do an adequate job of capturing the data that is important to the unique organizational situation.

Data can, and does, help make good sourcing decisions, but ultimately it’s the Big Brains that lead the way. A Big Brain will always be needed to strategically apply the data (big or small), and be the “curious, open-minded researcher” to make a good decision.

Thanks, Ryann.

Still Not Convinced You Need Your Invoices Under Control?

Then, for starters, maybe you need to dwell on the following:

  • You’re probably overpaying your suppliers by 1%
    because that’s what an audit recovery firm expects you are, and why they make a killing auditing the 20% of suppliers that constitute 80% of your purchase volume, because it’s not that hard for these specialist firms to identify overpayments of 0.5% that typically generate 500K or more in a gain share agreement for a few man months of work (or less)
  • There’s a 2 in 3 chance you are being defrauded of 2% of your revenue
    and that you’ll never notice because you aren’t able to verify all invoices
  • Up to 75% of your AP-related overhead is completely wasted
    on manual data entry, supplier inquiries, and other tactical work that adds no value to Finance or Procurement
  • At least 1 in 10 invoices have an error
    which could be as simple as missing payment information or as involved as incorrect pricing on every line item for a 200 line Bill of Materials because the supplier forgot to apply the discount
  • One Million invoices requires at least 100 standard 4-drawer filing cabinets
    if you get 1 M invoices a year, after 10 years, that’s 1,000 filing cabinets — where are you going to store them all??? (With today’s Storage Area Network densities, that’s 1 SAN. Which can be replicated in 3 places at almost zero cost compared to the seven figure cost of replicating and storing 10 Million invoices at three different locations.)

SI could go on, but the reality is that, especially if your organization is growing, it really, really needs to get its invoices under control. To find out how it can do this, download SI’s new white paper on An End-to-End Invoice Automation Framework Benefits & Best Practices, sponsored by Nipendo. (Registration required.) Once you understand the requirements for a true end-to-end invoice automation solution, you will be well on your way.

Basware: P2P for the Global “E”

Basware is one of the largest players in the global procurement arena. Founded in 1985 in Espoo, Finland (as Baltic Accounting Systems) to deliver enterprise finance software solutions, the company (which is now public and traded on the NASDAQ OMX Helsinki Ltd. as BAS1V) has grown from a small country player to a global platform with over 2,000 international P2P customers that collectively do business with almost 1 Million companies in over 100 countries. Basware supports its global customer base through its operational footprint that spans over 50 countries on 6 continents and includes over 100 partners and resellers.

It’s solutions span the entire P2P (purchase to pay) process, from requisition through payment and post-transaction analysis and includes the Basware Commerce Network that enables over 425 Billion of e-commerce annually. The network currently lists 1.9 Million suppliers and processes over 60 million e-invoices annually through the 60+ e-invoice formats it currently supports, including XML, EDI, and Virtual Printer formats. The network is growing and transaction growth is currently running at 60% year-over-year, and now that they have partnered with MasterCard to provide their customers access to MasterCard’s suite of payment products, it is likely that network growth will accelerate even more now that customers have even more payment options.

One of the most unique features of the platform is the fact that it spans the full AP and P2P cycles, whereas many of the smaller P2P and e-Procurement platforms are Procurement centric, with little support for AP. However, Basware started as a provider of finance solutions and migrated to the e-Procurement space with the birth of e-Commerce, and, as a result, has a firm command of the order-to-cash cycle from both organizational viewpoints.

From the procurement side, the platform contains modules for analytics, basic sourcing (RFX), contract management, catalog management, e-Procurement, and e-Invoicing. From the AP side, the platform contains modules for e-Invoice Processing, e-Invoice Matching, e-Payment, and Analytics. All modules are integrated with a consistent look-and-feel, and all modules are available on top of Basware’s new cloud-based Alusta platform which supports (multi-)enterprise private cloud instances. In addition, the collaboration capabilities and social integrations span the entire platform and all data in the platform is available to the analytics module.

Another unique feature is that Basware has decided that they are a procurement platform, and not a sourcing platform, and that their sourcing capability will remain basic. Basware recognizes that Procurement experts are not Sourcing experts and vice-versa, and have decided that they are going to partner to delivery an industry leading sourcing solution for those customers that need end-to-end Source-to-Pay functionality. As a result, they recently announced a major partnership with BravoSolution to deliver a comprehensive source-to-pay solution that covers all key steps of the sourcing, procurement, and finance process.

In future posts, SI will dive into key capabilities of the Basware Commerce Network; the e-Invoice processing, matching, and payment capabilities; and the analytics platform.

What’s the Most Often Overlooked in e-Procurement Solution Selection?

This is a tough question, but SI knows one feature that’s almost always overlooked:

Order Automation Integration

A good e-Procurement Solution will contain, or integrate with, a good invoice automation solution because the average organization takes at least 16.3 days to process an invoice and spends somewhere between $30 and $40 on that invoice, if everything is A-OK with the invoice. If it’s not, the invoice could take months to get processed and the processing could well exceed $200. Furthermore, manual data entry of (e-) paper invoices can account for as much as 75% of overhead in an Accounts Payable department, and if the organization gets hundreds of thousands, or millions, of invoices a year, less than 10% will get any reasonable level of review or validation. (For a deeper insight into the value of invoice automation, download SI’s recent white paper, sponsored by Nipendo, on An End-to-End Invoice Automation Framework: Benefits & Best Practices, registration required.)

You’ve got your invoices under control, and this is good. But where are these invoices coming from? Your suppliers. And why are they coming from these suppliers? Because you’re issuing your suppliers hundreds of thousands, or millions, of purchase orders a year. Hundreds of thousands, or millions, of purchase orders that these suppliers have to get, process, and push into their fulfillment systems in order to fulfill the orders for you.

If you need these invoices received, acknowledged, processed, and fulfilled quickly, then the supplier has to be able to get these orders into their system quickly. And if you happen to be sending a supplier 20,000 purchase orders a day, because you’re a retail or restaurant chain with that many locations that needs product refilled on a daily basis due to space constraints and freshness requirements, you need to know that if an order is sent 30 minutes before the cut off, it’s going to be processed when it gets to the supplier.

The only way the supplier that is getting tens of thousands of purchase orders a day is going to be able to process and acknowledge the order as soon as it is received is if the order is in a file format compatible with their order automation system and is picked up by the order automation system as soon as the order is received.

This indicates that a key requirement of a good e-Procurement solution is support for the file formats used by the popular order automation systems and support for the protocols used by the popular order automation systems to transport the invoices and accept the acknowledgement, or error messages, that then need to be appropriately handled by the e-Procurement system.

Supplier Portal, Supplier Network, and e-mail delivery of orders only works if you are delivering a small number of orders to a set of suppliers without order automation who have a few days, or more, to process the orders — not a few hours.