Category Archives: rants

M&A Mania – Will it Ever End?

As per our posts on Sourcing Innovation earlier this year, the M&A Mania has been in full swing for the past couple of years, and as per the acquisition news that came out Monday, it seems the mania hasn’t abated. But will it abate in 2019?

We hope so.

Sometimes M&A makes sense, but sometimes it’s too much too fast. The theory behind M&A is that it’s easier for the customer to have all the related solutions under one vendor’s roof than three, four or six when they need to build an end-to-end S2P support solution than to have to deal with six vendors when they have integration issues, support issues, or system errors.

It’s a great theory, but it doesn’t work any better in practice if all a vendor is doing is buying up smaller vendors to sell them under one roof. If all of the development teams are separate, all of the product management teams are separate, and all of the support teams are separate, you’re still trying to sync with six different groups in order to resolve integration issues, support issues, or system errors. What difference is it if they are under one roof, three roofs, or six? From your perspective, none at all!

The reality is that it doesn’t help you as a Procurement Practitioner at all if the solutions aren’t integrated, and we don’t just mean data-based end-point integration — where it’s easy to push data out of one tool and pull it into the next. It has to be a deeper integration that integrates process and workflow. And that type of integration doesn’t happen fast. It takes many months in the best of cases, and many years in the worst.

So when a vendor goes on a buying spree, without forethought as to how it’s going to integrate all those solutions into a cohesive platform in a reasonable amount of time, it’s just bringing the integration and support nightmare for its clients under one roof, and not adding any value.

The best M&A is when a company buys a company with a great complementary solution and then steps back, takes the time to get the teams fully integrated and the solution integrated at least at the process level with its solution (not necessarily deep workflow configuration but more than just end-point data integration), and only then thinks about the next acquisition.

Right now the big players have made so many acquisitions that the doctor thinks they are all at full capacity to manage integrations, and in a couple of cases, maybe beyond. So he certainly hopes that the M&A Mania winds down, at least until there is settling across the space.

Plus, any company that acquires too many solutions too rapidly puts itself at risk of acquisition by someone bigger still. Just look at what happened to CA Technologies — the Acquirer became the acquired … by a hardware company! The last thing we want is a big S2P play to be acquired by a big hardware or generic platform vendor that doesn’t understand the space.

One Hundred and Forty Nine Years Ago Today …

An American Legend was born when Jesse James commits his first *confirmed* bank robbery.

What does this have to do with Procurement? Besides the fact that, when you think about it, many suppliers will rob you blind on a daily basis if you are unprepared during the negotiation, during the invoice review, or during the warranty process.

Well, if you think about it, sometimes if you want to get famous, you have to take big risks.

But, more importantly, if you take risks, you can get famous … but in the case of Procurement, you don’t have to rob a bank to make money. You just have to get smart about how you buy. There are savings to be had in every category, and all you have to do is find them to bring millions to the bottom line.  And take the risk of doing something new.

And all you need to do to figure out how is to read the archives, strategy, process, and the tools you need to make it all happen.

Are You Sick of the “Digital Transformation”?

the doctor is certainly sick of the terminology. Not a day goes by that some backwoods yahoo doesn’t think this makes the perfect headline, twenty years after we were introduced to specialized Procurement tools, almost thirty years after the introduction of the ERP, and more than forty years since specialized MRP systems were introduced to the market. The “digital transformation” is now new and hasn’t been since the internet evolved to the world wide web and every software company started transitioning to the cloud (which, by the way, is just someone else’s computer!).

the doctor is also sick of all the article stating that the digital transformation will not displace (real) Procurement professionals because that’s obvious. Besides the fact that we are nowhere close to real AI systems, most of Procurement today is not number crunching. It’s fire-fights. Stakeholder-pleasing. Countering disruption blights. Supplier appeasing. It’s a lot of relationship management, which is something a piece of software just can’t do. (There are a few good SRM platforms that enable SRM, but they do not accomplish SRM — that is accomplished by the expert relationship managers that astutely use the system.)

the doctor is also sick of the futurists who are stuck in the past and still predicting a great digital renaissance to come. Our collective IQ has dropped since the renaissance started; Twitter is making us dumber than goldfish (and you wonder why the doctor despises Twitter); the more we trust the machine, the more blind we become to the risks involved; it’s creating an unparalleled digital divide worse than anything William Gibson and his Neuromancer mind can come up with; and Ready, Player One might be the best possible future if we continue down the current road (assuming a certain dictator-want-to-be doesn’t start World War III first).

For better or for worse (and its for worse if we don’t stabilize our power grids and shield the hard drives that contain all of the data that drives our economy, as a natural EMP could wipe out economies in a second), we’re going to keep moving down the digital highway at ever increasing speeds, which means pending something drastic, the next twenty years are going to the be the same as the last twenty and all this hullaballoo about digital transformation, at this point, is just unnecessary noise.

RFX Creation – Kicking You When You Are Down (Part III)

In our last two posts we’ve been arguing that the RFX process, at least traditionally, has been unnecessarily manually intensive and painful, almost taking the “strategic” out of “strategic sourcing” as so much manual time and effort is required to get it done that you can lose sight of the cost savings forest as you try to cut your way though the individual trees that continually block your way.

We indicated that much of the manual work that is typically required in RFI and RFP creation is relatively easily automated in an appropriate, modern, system — in addition to being much easier to accomplish in modern interfaces designed for efficiency and productivity — and that is why newcomers continue to rise, and profit, in an enterprise software space that should be mature and crowded enough to prevent this from happening.

We also indicated that a lot of time was required to vet potential suppliers for an RFP (even after an initial RFI round), that an organization might not be able to cull the list even if it wanted to, and that neither of these situations should be the case. Why?

First of all, it should be possible to not only auto-score the models against appropriate thresholds of suitability, defined by industry best practices and fine-tuned over time using machine learning techniques that learn the appropriate characteristics and scoring along multiple axes based upon suppliers you select and suppliers you don’t, but rank the suppliers in suitability based on the RFI alone.

Secondly, a modern platform should be able to absorb industry intelligence to predict quality, cost, and delivery and determine how likely a new supplier will fare against incumbents and market average. And then refine the rankings based on this data.

With this data, you could then predict if it’s (very) likely or (very) unlikely that a supplier would receive an award (now or in the future) and allow you to determine if you want to invite the supplier now or not.

How? RPA, ML, AR, and “AI” integration of these technologies.

How specifically? That’s a discussion for a later article, but hopefully, by now you get our point — most RFX technology is kicking you when you’re already down.

RFX Creation – Kicking You When You Are Down (Part II)

Yesterday we explained how, just from an RFI perspective, many S2P “e-Negotiation” or “e-Sourcing” platforms kicked you when you were down and reeling from an unnecessarily intensive, and painful, supplier discovery process — a process that should be mostly automated (as per our lead up articles). But, as we all know, the RFI is just the first stage of the process.

Once a supplier passes the RFI, you need to

  1. actually create the RFP
  2. determine if you are going to invite a supplier to the RFP (and monitor the process once you do)

Generally speaking, creating an RFP is no walk in the park either as the platform is even less likely to contain a relevant RFP template, especially if you are sourcing direct materials or custom manufactured products and need details on processes, raw materials, warranty, maintenance, and delivery methods as well as detailed cost breakdown models. If the RFI process was manual and painful, the RFP will be ten times as manual and painful.

You will have to:

  • identify the relevant bill of materials for each product (and possibly build them from scratch)
  • identify the non-cost information required at each level (raw material, source, quality specs, etc.)
  • identify the cost models required at each level (and possibly build them from scratch)
  • identify the roll-up models for costs and quality scores
  • identify the evaluation models that you will use
  • put all this together into a cohesive and comprehensive RFI

When all you should have to do is:

  • identify the products you are sourcing

Since a modern system, especially one built for easy direct material sourcing, should automatically, for each product:

  • pull in the relevant bill of materials
  • identify the relevant non-cost information based on the compliance requirements noted in the RFI and organizational policy
  • identify the relevant cost models based on the bill of materials (and preferred production processes)
  • build the roll-up models based on embedded intelligence in the platform and defined relationships between the different levels of the BoM
  • apply a standard evaluation model for the category to the RFI
  • … and integrate all of this into a comprehensive RFP for your manual review

Once you have this RFP, you need to determine if you still want to invite the supplier, especially if you have more potential suppliers than you really need.

And, right now, platforms don’t help you here at all.

You see, you only want to invite the supplier if there is a chance you will actually make an award to the supplier in this, or a future, event. If the quality is too low, the prices are too high, the necessary services do not exist, or the necessary culture is not present, the RFP process will be a waste of time on both sides.

Now, you might say that there’s no way to know this before going through the RFP, but is that really the case?

No.

But we’ll take this up in the next part of this series.