Category Archives: Procurement Innovation

Do We Need Flexons to Adapt to Transient Advantages? Part I

Last week, in our series on The End of Competitive Advantage (Part I, Part II, and Part III), we explained that the notion of sustainable competitive advantage is now a pipe dream in many industries and many markets and the only way some companies can hope to survive the new chaos is to swiftly move from arena to arena where they can temporarily acquire a transient advantage and profit.

Last Thursday, in our post on Maintaining Competitiveness – Adaptable Supply Chain Structure, we noted that a company would only be able to deftly move from temporary advantage to temporary advantage if it had a supply chain that could keep up. This supply chain — which needs to focus on risk, use a variable cost structure, support flexible capacity, and use shared services — will have to be innovative at its core, and may require the organization, and Supply Management, to innovate radically new solutions to existing challenges.

As noted in this recent McKinsey Quarterly article on “five routes to more innovative problem solving”, today’s business leaders are operating in an era when forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made the problems increasingly complex, the tempo faster, the markets more volatile, and the stakes higher. We now have a situation where the number of variables at play can be enormous, and free-flowing information encourages competition, placing an ever-greater premium on developing innovative, unique solutions. But how can an organization do this? There’s no one blueprint for innovation that will work for every company, and no one approach that will always work.

Some problems are so challenging, that your odds of success are only favourable if you simultaneously attack the problem from multiple angles with multiple approaches. One way to do this might be to use McKinsey’s flexon approach, where flexon is short for FLEXible Objects for generating Novel Solutions. While traditional problem-solving frameworks address particular problems under particular conditions, they have limited applicability. In comparison, flexons offer languages for shaping problems, and these languages can be adapted to a much broader array of challenges.

The creators of flexons have developed five flexons, or problem solving languages, derived from the social and natural sciences, to accomodate the world of business problems. Just like the Gang of Four’s* five creational design patterns (which provide ways to instantiate single objects or groups of related objects) may not be sufficient for every object oriented system you can imagine, the authors don’t claim that their five flexons will be exhaustive, just that they are sufficient, in concert, to tackle a wide range of very difficult problems that will be sufficiently inclusive for most individuals. Furthermore, as with (object oriented) design patterns, it will often be the case that serious mental work will be required to tailor the flexons to a given situation, and each will retain blind spots arising from its assumptions, but multiple flexons can be applied to the same problem to generate richer insights and more innovative solutions.

Flexons are not the ultimate problem solving methodology, but they are a good methodology to have in your toolkit, because the more methodologies you have, the better your chances at solving a particular problem and innovating on demand. In Part II, we will describe the five flexon patterns.

* If you don’t know who the Gang of Four are or what Design Patterns are, it’s not critical to understand this post but it is worth researching, especially if you want a better understanding of how good software (which you will rely on) can be constructed.

I Am the Very Model of a Modern Global Sourceror!


I am the very model of a modern Global Sourceror,
With information analytic, subjective, and objector,
I know the rights of charter, and I quote the rates historical
From Vancouver to Singapore, in order categorical;

I’m very well acquainted, too, with matters mathematical,
I understand equations, both the lin’r and quadratical,
About scenarios optimized, I’m teeming with a lot o’ news,
With many baseline costs for the choice of the blue ocean routes.

From the Global-Sourceror’s Song, included below

And on a more serious note, Soheila Lunney, co-author of The Procurement Game Plan, recently asked a good question in her recent article over on ThomasNet.com “Are You a Member of a Modern Procurement Organization?”

A lot of Supply Management Organizations will claim to be modern, but many still have a ways to go. In her article, Soheila outlined some basics of a modern Procurement department that can provide you with a measuring stick for your own organization. If you can answer yes to the (vast) majority of these questions, then you too are the very model of a modern Global Sourceror!

  1. Does the head of Supply Management report directly to the CEO?
  2. Is Supply Management actively involved in high-level, long-term strategic planning?
  3. Is there a senior-management endorsed “Supply Management Governance Council”?
  4. Is every major sourcing process conducted with a cross-functional team that includes at least one member of Supply Management from cradle-to-grave?
  5. Does Supply Management actively manage its own organizational structure?
  6. Is Supply Management involved in the early stages of NPD (New Product Development)?
  7. Does Supply Management (co-) manage the sourcing of non-traditional and indirect spend?
  8. Is e-Commerce and e-Procurement actively used for day-to-day requisitioning and purchasing to maximize productivity, efficiency, and Spend Under Management (SUM)?
  9. Supply Management has (co-) responsibility for contract management, logistics, and inventory.
  10. The easy to use, end-to-end eProcurement system and corresponding compulsory-use policy has made Maverick purchasing a thing of the past (as the only time anything is bought off contract is in the event of an emergency or supply disruption and appropriate Supply Management authorization has been granted, keeping the Spend Under Management).
  11. Communication with major suppliers is paperless, from the first e-signature on the contract through to the final payment authorization.
  12. Collaborative relationships exist with all major suppliers and Supply Management is actively involved in Supplier Performance Management and Knowledge Transfer of best, and lean, practices to strategic suppliers.
  13. Supply Management buys globally from best-of-breed supplies and considers Total Value Management when deciding whether to home-source, near-source, or out-source.
  14. Supply Management has aggressive sustainability and corporate social responsibility goals in place.
  15. Communication is clear and concise across the board.

The Global Sourceror’s Song


I am the very model of a modern Global Sourceror,
With information analytic, subjective, and objector,
I know the rights of charter, and I quote the rates historical
From Vancouver to Singapore, in order categorical;

I’m very well acquainted, too, with matters mathematical,
I understand equations, both the lin’r and quadratical,
About scenarios optimized, I’m teeming with a lot o’ news,
With many baseline costs for the choice of the blue ocean routes.

With many baseline costs for the choice of the blue ocean routes
With many baseline costs for the choice of the blue ocean routes
With many baseline costs for the choice of the blue ocean routes


I’m very good at direct and indirect spend analysis
I know the HTS codes of products electronicalculous
In short, in matters analytic, subjective, and objector
I am the very model of a modern global sourceror

In short, in matters analytic, subjective, and objector
He is the very model of a modern global sourceror


I know our mythic history, Free Markets and Markets B2E
I answer hard acrostics, I’ve a pretty taste for oddities
I quote in elegiacs all the crimes of the major analysts
In auctions I can floor peculiarities ridiculous

I can tell undoubted RFPs from RFQs from RFIs
I know the croaking chorus from the mouths of the vendor sales guys
Then I can hum a fugue of which I’ve heard the vendor’s pitch before
And whistle all the airs from that infernal nonsense we abhor

And whistle all the airs from that infernal nonsense we abhor
And whistle all the airs from that infernal nonsense we abhor
And whistle all the airs from that infernal nonsense we abhor


Then I can write a shipping bill in Babylonic cuneiform
And tell you ev’ry detail of Custom’s CBP import form
In short, in matters analytic, subjective, and objector
I am the very model of a modern global sourceror

In short, in matters analytic, subjective, and objector
He is the very model of a modern global sourceror


In fact, when I know what is meant by “Dutch Auction” and “Japanese”
When I can tell at sight a credit letter from a guarantee
When such affairs as sorties and surprises I’m more wary at
And when I know precisely what is meant by “commissariat”

When I have learnt what process has been made in modern procurement
When I know more of tactics than a novice in an internment
In short, when I’ve a smattering of arbitration strategy
You’ll say a better Global Sourcerer had never sat a gee

You’ll say a better Global Sourcerer had never sat a gee
You’ll say a better Global Sourcerer had never sat a gee
You’ll say a better Global Sourcerer had never sat a gee


For my global sourcing knowledge, though I’m plucky and adventury
Has only been brought down to the beginning of the century
But still, in matters analytic, subjective, and objector
I am the very model of a modern Global Sourceror

But still, in matters analytic, subjective, and objector
He is the very model of a modern Global Sourceror!

For Lasting Results, Follow the Procurement Leaders … (Repost)

… but be sure to focus on the right characteristics first.


I posted this a year ago today, and I’m reposting because nothing has changed. This is still the right methodology, and, more importantly, the message has not sunk in yet at a large number of companies. The first three steps are absolute.

Reviewing a recent summary of A.T. Kearney’s 2011 “Assessment of Excellence in Procurement Study” over on the A.T. Kearney site on why you should “Follow the Procurement Leaders” that described seven ways to lasting results, I couldn’t help but notice that they had all the right suggestions, but in reverse order. Starting from the bottom of the list, and working our way up, we see that the suggestions will transform your organization from an average performer to best in class.

  1. Win the “War for Talent”.
    This is the first T necessary for supply chain success and the most critical one. No supply chain function can be happen without someone in place to plan, manage, and execute it — and for any function to be planned, managed, and executed in an optimal manner, you need world-class talent.
  2. Adopt Technology.
    This is the second T necessary for supply chain success and the next most critical one. Once you have found the right talent to take your supply chain to the next level, you need to enable your talent with the right technology to make them as efficient and effective as possible.
  3. Transition to Category Strategies.
    As the article notes leading procurement organizations use more advanced toolkits — systematically employing more than twice as many methods as the followers — to tailor their approaches to each situation. That’s why leading e-Sourcing / e-Procurement providers are now offering platforms with category templates / workflow management capabilities to allow platform customization to each organizational category and support the third T of supply chain success.
  4. Use Supplier Relationship Management.
    Suppliers are key to supply chain success, and leaders manage the relationship to get the most out of it. They use suppliers to improve innovation and growth, monitor compliance and risk management, and improve capabilities across the supply chain.
  5. Manage Risk Systematically.
    Leaders use risk-impact analysis, financial risk management, and disaster planning as ways to protect against, and mitigate the effects, of disruptions — unlike the risk management “followers” that constitute 80% of companies that are a single natural disaster away from a major supply disruption.
  6. Contribute to Top and Bottom Lines.
    It’s not just about cost reduction, but about value generation. Good Supply Management doesn’t just stop at cost reduction, but goes onto demand reduction, component innovation, product innovation, and even market innovation. This is done by managing risks, managing supplier relations, applying category strategies, using technology, and using all of the skills your talent possesses.
  7. Align with the Business.
    Leading supply management organizations support the business strategy. And while this is the most important goal from the viewpoint of Supply Management, as the goal is to increase the image of Supply Management in the organization, this can not be accomplished until all of the pieces of the puzzle, described in the first six steps, are in place.

Good e-Procurement Starts with e-Commerce Fundamentals

A recent article over on VentureBeat on how Maslow’s hierarchy can help you build a great mobile checkout process had some good advice for e-Commerce sites and some startling statistics that need to be heeded by e-Commerce providers AND e-Procurement providers alike. Consider these statistics:

  • 29% of mobile shoppers who abandoned the checkout process did so because they were requested to register before buying
  • 42% of consumers have stopped or abandoned a purchase on a web site because of a safety or security concern
  • 49% of mobile shoppers don’t shop more on their smartphone due to an awkward shopping experience
  • 63% of consumers prefer mobile commerce because they can do it while multi-tasking
  • 79% of decisive consumers would be more inclined to make online purchases if given easier and more secure payment options

This means that you need to keep the following in mind when designing your e-Procurement solutions:

  • make purchasing on third party sites a native experience – awkward punch-outs are not going to be adopted by average buyers,
  • organizations are not going to adopt your solutions if they see any security risks in using it,
  • if you’re going to build a mobile experience, make it intuitive and don’t try to do complex tasks on the mobile app as it will just frustrate your customers,
  • don’t ignore the mobile aspect because it’s harder to properly design and deliver – your customers want it, and
  • if its done right, your mobile solution will see widespread adoption by users, who will be inclined to quickly approve invoices and expense reports for payment when on the go.

As the author says, if you:

  1. Keep it Simple and meet the basic needs of your customers,
  2. Give Your Customers Peace of Mind and make the application secure,
  3. Create a Familiar Environment and make your customers feel like purchasing belongs in the e-Procurement system,
  4. Let Your Customers Run the Show and give them self esteem, and
  5. Keep Up with Your Customers and help them self-actualize

it stands to reason that your e-Procurement system will be a success.

Don’t Forget The Post Mortem in Your Strategic Category Management of Services!

A couple of weeks ago, after running our series on Strategic Category Management (Part I, Part II, Part III and Part IV), we said Don’t Forget Strategic Category Management in Your Services Categories. This was because a lot of organizations believe that strategic category management is only for direct categories or physical goods, when nothing could be further from the truth (especially when indirect spend can approach 50% in some organizations).

In this post, we outlined the nine phases of strategic category management and how they relate to services categories. Although we did not make Post Mortem a separate phase, it is still a critical part of the process. In fact, it’s one of the most critical parts – because if you do not analyze how you did, you will not improve the next time around. So why isn’t it a separate phase? Two reasons. One, it’s a required input to the first, rationalization, phase because if you don’t do a post mortem and analyze how well the last strategy worked, you can’t be sure if it was the right strategy or not. (The fact that the results were not what you expect is not sufficient to declare a strategy incorrect. Maybe the team didn’t follow though on the strategy as required in each phase.) Two, and this is the real reason, you should be doing a post mortem after each phase. Face it. If you’re procuring discovery services for the next three years, and you wait until thirty-three months in to start the post mortem, how well can you reasonably expect to assess the job you did in the supplier identification and sourcing phases three years earlier, when half of the team has changed, memories has faded, and a lot of the details of the process has been lost? Here’s what you should be doing from a post-mortem perspective at the end of each phase.

At the end of the rationalization phase, you should be documenting not only what strategy you are pursuing, but why. What are the assumptions you are making that favour this strategy? What other strategies did you rule out and why? (If it turns out an assumption was wrong, then another strategy might have been viable and you will have saved work the next time around.)

At the end of the supplier identification phase, you should document how you conducted your search and how effective you were at identifying additional suppliers. How long did it take, how many new suppliers did you uncover, what percentage were suitable to push to the sourcing phase, etc?

At the end of the sourcing and contract award phases, document the process that was followed, how long it took, what seemed to work well and what didn’t, and anything you wish you would have done (differently).

During the supplier management phase, which is ongoing from contract award until the end of recovery, conduct regular supplier assessments and thoroughly document the results against well defined metrics, any benchmarks you have, and any expectations that were included in the contract. For each issue, document the root problem, what you did to address it, and what you think you could have proactively done to prevent it.

During the procurement phase, review actuals to expected at the end of every quarter. (This will be “easy button” simple if you have a decent e-Procurement system that allows you to define budgets at the line-item level.) For all line items that are off more than 20%, do a quick manual review to identify any that aren’t easily explained (a payment slipped, you moved some work back, you ordered extra inventory as a precaution, etc.). Dig into these. If they can’t be adequately explained in five minutes, someone didn’t do a good job of budgeting or project management. This needs to be identified and documented as part of supplier management.

Then, at the end of the phase, and before you execute a new sourcing event, you need to do a more detailed analysis. At the very least you should:

  1. Run the spend reports on your complete transactional data
  2. Compare the results to your original spend analysis data (which was likely incomplete if this is the first time you are doing strategic category management)
  3. Focus on the gaps – where the data does not match, is it because you brought new spend under management or is it because there was some off contract spending
  4. Focus on the differences that are +/- 20% (adjusted for inflation or demand, as required) – for each difference that was not already detected and adequately explained, do a deep dive
  5. For each gap and each difference >= 20%, document what could be done to prevent this in the future – better forecasting, new processes to keep purchases on contract, better supplier / demand management, etc. and what changes, if any, are required to the overall strategy

This is the phase where you “close the loop” and begin to loop back to the next, hopefully better, iteration of the strategic category management cycle. If the loop is not closed, spend under management will not effectively increase and the organization will only see savings the first time. If the loop is effectively closed, then, when inflation and demand is adjusted for, the company will see savings each time through the process as efficiency, in both the buying and supplying organizations, is increased (and unnecessary fat is taken out of the margin).

During the recovery management phase, you have to document what actions you take and how well they do.