… like a toilet. And absolutely full of (bull)sh!t.
Back in 1990, near the end of the hair metal days, Poison released their third studio album called Flesh & Blood with a deep cut called the Valley of Lost Souls. And since Procurement is the Zombie Function of the Enterprise (it’s dying, it’s dead, but it’s still here), I am nominating this as Procurement’s new theme song. If we analyze it carefully, it fits the bill.
I hit the highway
Touch life barely sixteen
… many Procurement newbies who didn’t get moved into the organization as a pre-retirement “reward” are fresh out of college and brand new to the business world …
No angel of mercy
Coming down to save the soul of me
… Procurement is the black sheep of the enterprise and gets no regard, no regard at all …
I took a Greyhound limousine
Straight to grand central NYC
… after all, we have to practice what we preach and cut costs, to the point it hurts
It was ass, gas, or grass, living fast
Nobody rides for free
… and don’t we know it!
Living it up, giving it up
Living in the valley of lost souls
… we have to give up too much to get our savings
Wanting it all, taking the fall
Living in the valley of lost souls
… and when things backfire, even if we’re ordered to make a suboptimal decision, we still take the fall
Miss Misery come ride me
How I love her company
… we have to love her to love this job
She did Boston justice
And wronged all the right out of me
… at the end of the day it’s no wonder why some Procurement professionals accept “Japanese” auction software where a supplier can bid against itself
The devil wears a black suit
He says I’m livin’ like a bum
… and he’s being nice …
So what I’m looking like I’m half dead
A gypsy on the run
… working OT to meet an unrealistic target …
Feels like time’s running out on me
… it’s no wonder the average CPO changes jobs at least every 3 years …
But I wasn’t born to play nobody’s fool
… so gotta get out before they push me out
Ain’t nobody gonna hold me down to play nobody’s fool
Ain’t nobody gonna hold me down
… we got resolve … that’s what it takes to do this job …
I’ve got to roll, roll, roll, roll, roll, roll
… so we change jobs if we must
Somebody save me
… because, someday, it may just get too overwhelming …
Last week, Tony Bridger gave us a great two-part series which asked if e-Procurement benefits were fact or fiction because it has fallen out of favour with the academics over the last decade, with few toting its benefits as they did when it first hit the scene.
And Tony had some great points. E-Procurement was touted as the panacea for all Procurement woes, but the first generation of solutions did not deliver. Many Procurement teams use systems to negotiate great contracts, but great contracts don’t deliver improvements — execution against them does. The best spend analysis system delivers zilch out of the box — it takes an educated, trained, experienced, intelligent buyer to sniff out the true savings opportunities. And, most importantly, every single buy is just a tiny bit different. And buys that are far enough apart need different capabilities and solutions.
And, most importantly, the best platform in the world is useless if it is not adopted and use by all of the buyers all of the time.
e-Procurement platforms can deliver the benefits they promise, namely an end to maverick spend, approval control, workflow configuration, and spend under management. But only if they are properly implemented, properly adopted, and properly used.
You can search the archives here on SI and over on Spend Matters for a description of the benefits, as well as a description of necessary platform requirements to get those benefits.
But one thing that is not always clear in our past articles, and that should be made clear as a result of Tony’s posts, is that e-Procurement is more than just platform, it’s process. It’s the process of doing a proper event, recording the contract and meta-data in the e-Procurement system, issuing the POs against the contract, insuring the invoices — and shipments — match the POs, and getting approvals before payments. If there are no contracts, and the buy is not big enough for a sourcing event, but over a certain amount, then it’s critical to get proper approvals. All spend haas to go through the system, and, when necessary, get approvals, according to the organizational policies and processes. A proper e-Procurement platform automates that process, simplifies the m-way matches and comparisons and classifies the spend for easy analysis. It enforces a process that saves money, it doesn’t save money out of the box.
And maybe when the academics realized this, and that they were writing about a solution which had no inherent sorcery, they dropped it like a hot potato. Even though there are dozens of companies that have went on record saying they saved millions with proper platforms (which saved them millions because they implemented, and supported, proper processes).
If your Supply Management organization is part of a global multi-national, chances are that it has been buying from China and selling to the U.S. for years. And, for a few of you (in heavy machinery, luxury goods, etc.), chances are that your Supply Management organization is producing Made in the USA goods and selling these to China. But should it be?
Ignoring the fact that rising costs in transportation and production (due to raw materials and the inevitable rise in labor wages) coupled with the decline of the US dollar often make sourcing close to home (in Mexico) or, when possible, at home cheaper than off-shoring, especially when quality and risk-related costs are taken into account, now that Trump has brought back the trade wars, much of those savings are flying out the window faster than a Peregrine Falcon diving for its prey. (If you’re not sure how fast it is, Google It .) So, as we have been posting recently, you really need to rethink your global supply chain (and possibly look to Russia, Turkey, etc.).
And, despite the headlines being made over the move, look to copy Harvey Davidson and shift production of certain goods (closer) to the primary markets they are being sold in. (Bureaucrats can threaten higher taxes all they want, but unless laws are passed through both houses and signed by the President for the tax category they are in, nothing can be done. And as long as the move doesn’t change the structure of the company, the only result will be a lot of hot air and wasted words and a temporary drop in stock price. In other words, don’t move all your production out of a market, especially if you are selling in that market, or even the majority, without checking with your accountant and lawyer first.)
Because, if you buy and sell in a market, there are no import or export tariffs, and the way the trade wars are going, this is a big savings and an opportunity to claim more market share if you can sell an equally desired, equal (or better) quality product for a lower price due to a smarter supply chain design that keeps your costs down. For example, I don’t think anyone in Europe would mind if Harley said it was staffing its European Facility with German and Austrian trained Engineers but keeping the authentic American designs. In fact, the bikes might even become more desirable as German and Austrian Engineers are often seen to be the best in the world.)
And if you’re selling overseas, especially to China, producing overseas, or in China, makes sense. We don’t often think about it, but, due to population and wealth (around 15% of GDP now), China is the world’s largest consumer of automobiles, motorcycles, mobile phones, luxury goods, and shoes and at least the world’s second largest consumer of home appliances, consumer electronics, jewelry, and the internet (based on data that is a few years old, but all trends were rising). Thus, if you are in any of these industries, why not produce in China for China?
Remember the facts. China, which is the world’s second largest economy, is approaching 1.3 Billion people and an emerging middle class flocking to urban areas. A recent McKinsey & Company study had over two thirds of the Chinese population as middle class and predicted three quarters would be by 2022. And about 56% of the population has internet access, with most of these individuals having broadband access in their densely populated urban centers. In fact, China is estimated to have close to 100 cities with a middle-class population of 250K or more. The US and Canada combined have less than 70 such cities.
And India is growing. It’s GDP is now almost half that of China’s. And while it’s middle class population isn’t nearly as large yet (as it has almost as many people as China), at about 21%, or 270 Million people, that’s still at least 50% more middle class than in the United States!
And South Korea’s GDP has more than doubled since the turn of the millennia. In fact, an article from 2015 predicted they’ll have a better standard of living than the French by 2020, with an adjusted GDP per capita (PPP-adjusted) heading towards 50K. Right now, the average annual household income is 48K, which is only 20% less than the median household income in the US! At presents, two thirds of their households are middle class, the average household has one child and dual income, and both earners University educated. Talk about consumer marketer’s paradise!
In fact, when you look at all of this, maybe you should just relocate your company to Asia, make the US a subsidiary, streamline operations to produce just what you need for NA in NA, and focus on Asian growth. Seems to make more sense, doesn’t it?
In yesterday’s post we pointed out you need to be very, very careful what advice you take from consultancies, large and small alike, who aren’t really expert in modern Supply Management processes, best practices, and technologies.
Yesterday’s post covered a recent piece (from a mere two months ago) on Sourcing and Purchasing Transformation that provided such bad advice for weathering the rough seas ahead that we were serious when we said the advice was equivalent to sailing right into the heart of the Bermuda Triangle in the middle of a category 5 hurricane! Maybe the advice was good in the 80’s when everything was home or near-shored, innovation was slow, the economy was more stagnant, and cutting cost to the bone was the only way to survive. But that was then. This is now. Three decades later. And anyone still peddling that advice in today’s fast moving, outsourced, global economy is seriously out of it (or trying to create more work than they can handle by putting in peril any supply management organization that actually takes that advice).
But we digress. Today’s rant is about the Big 6 / 8 and their dangerously low understanding of S2P technology and their unfounded (and unfathomable) belief that you can somehow measure capability and/or innovation based upon market value, customer count, or investment dollars.
For instance, the doctor was just sent a brand-new paper by ATK on The Future of Procurement Technology and how Mediocrity is No Longer Acceptable (and it is NOT) by the way, where they correctly noted that
- Today’s Procurement Technology is a Failure
which it generally is as most solutions that have been implemented don’t give a full view of spend, don’t address many of the day to day needs, and, frankly, just don’t work
- Suites are Problematic
as most are built through acquisition and all the components don’t really talk or sync
- Most solutions are archaic, rigid, and poorly thought out
and push users into the wrong decision and
- A revolution is coming
… but not all fighters are created equal!
In particular, they name eleven (11) companies that represent the most current and advanced technologies, but their is almost no comparison between the extremes they represent.
For example, even though Scout has the fourth largest investment raise of all the companies listed, it’s one of the weakest offerings in the list. And even though LevaData is one of the lowest raises, it’s one of the strongest offerings.
And while you can barely compare the likes of Scout and Bonfire (traditional e-Negotiation based Sourcing with a much better UX than last generation systems), who have the lowest solution scores on the (deep) Spend Matters Sourcing SolutionMap, to the likes of LevaData, Suplari, Supplier.ai and Xeeva (who are bringing in the era of Cognitive Sourcing and Procurement), there’s just no comparison to the likes of tamr (with its advanced machine learning capabilities for which there are few equals) and Concord (which is in the field of contract automation).
Plus, when it comes to contracts, consider what the likes of Seal and Exari are doing. Moreover, when it comes to analytics, don’t discount Coupa AI-Classification (formerly Spend 360) or AnyData. And why are there no true optimization vendors on the list like Coupa CSO (formerly Trade Extensions TESS) or Keelvar, that is trying to apply AI to true optimization-backed Sourcing. And when it comes to Supplier Discovery, Supplier.ai is one option, but Tealbook is another.
In other words, they have some names. They have some investment figures. They have some insight that each is doing something different, that each is trying to revolutionize something about the industry, but no real insight into what the core of the difference is or the strengths they bring.
And while this may not seem too dangerous, as they aren’t really reporting each is equal, just that each is revolutionary, in the hands of a half-wit, or even worse, someone with an incomplete understanding of tech and best practice, they could take this as a guidebook to the best vendors, and, in the end, select the absolute worst vendor for them. One has to remember it’s not just about revolution, or even evolution, it’s about the platform that solves the Procurement department’s greatest needs. Today. And when the needs are met, the platform that offers the greatest flexibility and power for the organization with respect to their goals.