Category Archives: rants

… And Advanced Analytics Should Be a Must in 2020!

Just like any vendor can claim to have a digital procurement solution because, as we clearly explained last week, email and spreadsheets technically count, any vendor can claim to have analytics. Consider the definition:

the analysis of data, typically large sets of business data, by the use of mathematics, statistics, and computer software

And then consider the common definition of analysis:

a presentation, usually in writing, of the results of this process

This means that any software that provides a canned report summarizing a data set (average, mean, etc.) qualifies. MRP software from four decades ago had canned reports that did this and qualify. Thus, since computers are modern in the grand scheme of human history, any vendor can tell you with a straight faced that they have a modern platform with a modern analytics solution if it runs on a computer, supports bid collection in a spreadsheet, and contains a canned report summary — especially if they were an English or Arts Major (especially since we are in the post-modern phase in their worldview).

DO YOU REALLY WANT TWO-PLUS DECADES OLD TECHNOLOGY?

Think carefully about this — because if you don’t ask the right questions and use the right measuring stick, that’s precisely what you might get if you don’t get beyond this “digital” and baseline “analytics” crap.

What you have to know is that there are levels to analysis. And while the number of levels might very depending on how granular you want to get, there are at least five in today’s technology platforms, and these are the seven levels the doctor likes to use.

1. Classificative
At this level, data is classified into buckets for the purpose of basic analytics.

2. Descriptive
At this level, basic statistics are run to compute summary, typically canned, reports on the data.

For decades, this is all you got, and many vendors still try to pass this off as sufficient.

3. Diagnostic
At this level, the user is either given the ability to define their own reports to drill in and find the potential root causes of issues identified in the reports or to run more advanced statistics (beyond just average and mean) to identify correlations between data to find potential root causes of issues.

Most platforms developed or upgraded in the last five years in S2P, Sourcing, and Spend Analysis have this capability. But this is not enough any more, especially when there are do-it-yourself software packages for under 1K that can allow you to get to the next level, which has been around in specialized demand planning and analytics for decades.

4. Predictive
At this level, the platform employs statistical trend analysis, advanced clustering, and/or machine learning to identify trends and predict future costs, risks, performance, etc.

A few platforms are starting to incorporate this, but this should be a baseline requirement considering ERPs, demand planning, and advanced BI tools have had at least some capability here for close to 2 decades

5. Prescriptive
At this level, the platform is not just identifying and computing future trends, but providing advice on what to do as a result of those trends.

Leading platforms are starting down this path, but given that the foundations of prescriptive analytics have been around for over two decades and that best practices in sourcing and procurement have been around almost as long, if a platform can’t provide not only insight and recommendations what to do with that insight, it will never even achieve 3.0 objectives … meaning 4.0 will never be a reality.

In other words, any platform without some prescriptive capability is behind and not one you should be investing in.

6. Permissive
At this level, the prescriptive analytics is used to power automatic actions based on embedded rules. If the platform determines a commodity that is typically on a one year contract is at an all time low, it might initiate the renewal event two months early to lock a rate in if a rule is defined that says events can be initiated up to three months early if prices drop below contracted rates and are projected to be within 2% of the projected low.

Few platforms are here, but you should be looking for a configurable platform with rules that permit simple automation based on both entered and derived data values from the application and the data it contains. Permissive analytics is a cornerstone of the Procurement 4.0 promise so make sure your chosen vendor is building in permissive analytic capability. It can be fledgeling to start, but something needs to be there or it won’t be there when you need it.

7. Cognitive
At this level, the platform embeds machine learning and advanced AI techniques to not only make good predictions but choose the right actions to take on those predictions without any user intervention for run-of-the-mill sourcing and procurement processes and events. When we reach Procurement 4.0, such systems will not only eliminate 98% of tactical work to allow buyers to focus on the strategic, but eliminate 90%+ of strategic work identified as relatively low value (at the time) and allow buyers to focus on strategic efforts that present the greatest opportunity to provide value … truly optimizing the limited Procurement resources available.

Insight. That’s What Marketers Should be Marketing in 2020.

Because that’s what you need. In this day in age, any platform should be capable of implementing a digital process that accomplishes a basic sourcing, procurement, catalog buying, or contract negotiation process … this technology has existed for almost two decades. So if an organization is going to spend money on marketing, it should be marketing something more than just basic digital process support as dozens of vendors have that (as evidenced by the participation of over 75 vendors in Spend Matters SolutionMaps with more in the wings). And if the organization doesn’t have anything more to market, then it shouldn’t be marketing at all — and investing those pesos in product development until it has something worth marketing.

Now that we are in the third era of Procurement, we should be looking for solutions that enhance our processes, not systems that just digitize them. And for systems to enhance our processes, they need to do more than digitize them or automate them with fixed rules. They need to provide relevant insights at key stages of each process to help a buyer make good decisions in an efficient manner.

For example, when a buyer selects a category or set of products / services for a sourcing event, the system should automatically highlight current and past suppliers, suppliers who responded to previous events, and new suppliers who have matching products or services. Furthermore, if there is any risk or environmental data associated with those suppliers, it should also be highlighted. When all the bids are in, it should automatically highlight the lowest-cost award, the incumbent award, the best award with a preferred number of suppliers, and any other relevant out-of-the-box scenarios.

During contract time, if there is an appropriate template, it should present that to the project lead as well as highlight any clauses that might be missing or any clauses that might need to be addressed.

When an organizational buyer needs to make a requisition, and logs into the catalog, the system should guide the buyer to the on-contract product for requisition. If that product is unavailable, then it should guide the buyer to the next preferred option. If there is no on-contract or preferred product, then the system should recommend the product that provides the best overall value to the organization (which balances cost, quality, volume requirements on general product/service contracts, etc.).

When an invoice comes in that doesn’t precisely match the purchase order, but is within what could be considered a reasonable tolerance or has an extra charge that could be considered reasonable under the circumstance, the system should immediately point out the discrepancy and whether or not an approval should be given or denied. For example, if there was an expediting charge because the order was shipped same-day (when the contract required three days notice) that is relatively low value, or extra units were shipped and received (and billed at agreed upon rates) (and needed anyway), the system can point out the discrepancy and recommend approval. If the surcharges exceed typical amounts or a significant number of units were marked damaged on receipt, the system can recommend rejecting with a request for more information or invoice reduction.

Similarly, before an order is placed, the system should highlight any suppliers that have become more risky in the past month or performing poor on OTD.

While the talk of Procurement 4.0 might be more autonomous systems that do more of our work for us, that’s at least five, and most likely, ten years away. Right now, what we need are systems that allow us to make good decisions efficiently. And that means presenting the right information at the right time. If the system can’t do that, then don’t bother. Seriously.

Digital. Digitized. Digitization. Digitalization. Don’t Get Fooled by the New Buzzwords for Outdated Tech!

Leave it the moronic marketers to come up with the most brain-dead buzzwords to launch us into the new decade. Over the past year, these have been on the rise despite the fact that you should NOT even be looking at any vendor building an entire marketing campaign around this gibberish in 2020. (The only exception is if they open up about how useless the word is and instead lay out a roadmap which defines the many possible levels and how they intend to get there, but this is a topic for a later post.)

Why do these buzzwords make the doctor sympathize with Kuni from UHF who had to keep screaming they’re so stupid every time he got a new batch of students? Because it seems the doctor has to keep screaming it every time we get a new batch of marketers that couldn’t tell a calculator from a computer.

Let’s look at the definitions of these terms.

Digital: displaying a readout in numerical digits or available in electronic form; readable and manipulable by computer
This means that, technically, a vendor who sells you a process that can be performed on a calculator or any system that works on a computer, including e-mail and a two decades old spreadsheet, can claim to have a digital Procurement Solution. Moreover, technically, the earliest MRP was “digital” in the Procurement world. Do you really want to be stuck with four decades old technology? Because that’s digital!

Digitized: to convert (data) to digital form for use in a computer
This means that if the digital solution includes the ability to handle document scans, which may or may not be processable, then the solution is digitized. E-mail that can handle attachments and a decades old spreadsheet solution still qualifies.

Digitization: the process of converting (data) to digital form
This means that if the solution comes with the ability to integrate with the output of scanning technology, it qualifies. So, email, a decades old spreadsheet solution, and a UX for the scanner driver qualifies.

Digitalization: the process of converting (data) to a digital form that can be processed by the application
This actually brings us up to the nineties, because now you need a system that supports OCR and can convert that scan into a spreadsheet with numeric and textual values for processing in the decades old spreadsheet solution.

Just like the imbeciles who brought back infinite scroll (because it’s theoretically easier to scroll on mobile devices — but that’s only the case if the page fits in memory and, more importantly, can actually load — which isn’t the case when you put a whole website with heavy graphics onto a single page), these moronic marketers should also be tar-and-feathered. Dumbing down technology by decades doesn’t help anyone, and the doctor is fed up of this data dung and is going to rip into any vendor who continues to peddle this tomfoolery.

S2C Decision Tree …

Over on Purchasing Insight, Pete Loughlin ran a great post on the “build or buy decision tree for Purchase-to-Pay” that should not be overlooked because it gives every organization a very simple answer that even the most luddite of C-Suites can understand … NO!

You do NOT build a P2P system in-house. In fact, you should NOT have been building or maintaining a P2P system in house since the early part of the last decade — but with so many suite providers to choose from now, the fact that some organizations are still even considering building a P2P solution is almost inconceivable in-and-of itself.

As Pete Loughlin clearly states, when facing the build-or-buy question you first need to to ask yourself if the problem you are trying to address is new, uniquely different or so rare that a suitable solution doesn’t exist already. And the only reason you’d build in-house is if you could honestly answer no. In the days where there were only a couple of solutions, and they only worked well with ERPs or indirect purchases, there might have been good reasons to say no, but now that there are dozens of options, that can be focused on indirect, services, direct, or the whole kit-and-kaboodle, the only reason you’d say no is if you were completely unaware of what has happened in the space in the last 20 years — and if that is the case, you really shouldn’t be making the decision.

However, the reason SI is drawing this to your attention is not just because you shouldn’t be building P2P in-house, but because you shouldn’t be building S2C and, most definitely, shouldn’t be building S2P (or any component there-of) in-house either! But the real reason SI is bringing this to your attention is the flow-start doesn’t stop there … it continues. Not only should you NOT build in-house, but you should not formalize the short-list in-house without the help of an expert advisory partner. There are 100s of companies out there, and just shortlisting SAP Ariba, Coupa, and Oracle is not the right answer — and it’s even worse if you shortlist Basware, Coupa, Oracle, and ScanMarket for S2P. While these are all great providers in their own right, they are not all S2P and it’s not an apples-to-apples comparison. And when it comes to best-of-breed solutions, the doctor has seen even worse shortlists!

This one of the reasons the doctor worked on the development of SolutionMap — by creating a custom profile, it can be used to identify the companies that best-match an organization’s need on the tech-axis, which allows the organization to shortlist the right vendors to invite to the RFI. Vendors that can meet basic tech needs and be compared in an apples-to-apples comparison … allowing the organization to focus on finding the provider that can best serve the organization overall and match their culture, versus focusing on basic check-the-box technology features just to find out 2 of the 3 shortlist providers don’t even meet the basics. (And this usually ends up with the organization having to go with the vendor that’s left versus selecting the vendor that’s the best.)

2020 Is Here. Will we ever Get 20/20 Vision into our Technology Providers?

AI. Virtual Reality. Augmented Intelligence. Big Data. Autonomous Software. The Futurists are in a prediction frenzy and throwing around these words not only like everyone understands them but every provider has them.

Very few providers actually have these technologies, but the sad reality is that very few providers aren’t claiming to have them. obviously, this is a problem. A big problem. Because the number of providers claiming to have these technologies and actually have them is only a small percentage — making it hard for anyone to see the big picture.

But we need to — and we need to see it clearly. Very clearly — because, as we have indicated many times, there is a lot more applied indirection out there than artificial intelligence. Similarly, it’s not really virtual reality unless its immersive, and while a lot of gamers might immerse all of their focus into their games, most are not truly immersive. It’s not augmented intelligence unless the application intelligently provides a recommendation, and associated process, that is at least as good as you would come up with and, preferably, as good as a human expert. It’s not even close to being Big Data unless the application is capable of processing and working with more data than can fit in memory on an average server. (Big Data is a moving target — what was big in 2000 is small today.) And it’s not autonomous unless the application is capable of doing processes that would normally take a human to do on its own with the exception of truly exceptional situations (as it should be able to handle most exceptions, especially if the exception was handled before).

The reality is that while software is going to get more automated, and usability is going to continue to improve, we’re not going to see real AI for a while. The “Big Data” that most applications will be capable of handling will continue to be limited to user machine / browser memory. Virtual Reality is a ways off. Augmented Reality will continue to advance, but primarily in gaming.

But depending on what you are looking for, you likely don’t need AI, don’t need “big data”, don’t need autonomous, and definitely don’t need virtual reality. You just need a system that allows you, with some simple RPA, to digitize paper processes, automate common processes, and improve productivity.

And it would be nice if we could get some real 20/20 vision into what vendors actually have and what you really need.

But that might still be a pipe dream.