Category Archives: rants

Supplier Discovery Should NOT Be a Kick in the Pants (Part II)

But, as clearly outlined in our last article, it still is. Big Time. You can spend weeks just trying to identify, and do preliminary identifications on, potential suppliers before you even start your supplier discovery project in earnest.

Why?

Well, as pointed out yesterday, today’s modern S2P platforms, marketplaces, and even supplier networks just don’t cut it.

And, as a result, you are left with the age old tedious process of:

  • scavenging potential supplier (names) from wherever you can
  • reviewing their product and service offerings to see if they might fit
  • trying to find real customer references to validate they are a real supplier and the offerings that caught your attention are real offerings
  • qualifying the suppliers for participation

Which, to be honest should be completely unnecessary more than two decades after strategic sourcing hit the market and almost two decades after the first supplier networks hit the market. By now you should be able to:

  • use a large, global network that contains relevant suppliers to you to identify potential candidates
  • use natural language processing and machine learning based similarity match algorithms to verify that they have products and services that are a close match to what you are looking for
  • use community intelligence on community forums from verified customers to satisfy yourself that they are a real supplier with real self-produced products that meet someone’s needs
  • use RPA to crawl open and accessible information sources to pre-populate as much qualifying information as you can find
  • use AI models to predict the likelihood that the missing information will be to your satisfaction
  • use embedded templates, automated workflows, and RPA to collect the remaining information from suppliers and third parties who maintain the needed information on the suppliers
  • use self-scoring gated models to validate the suppliers as candidates for your strategic sourcing event

and, moreover, you should be able to do all this with the press of a single button if you want to.

When you press “find suppliers”, the platform should

  • automatically query the relevant networks (both and in-platform and third parties, because one network is not enough) to find potentially relevant suppliers
  • automatically use NLP on their associated product and service listings (in the platform or on accessible platforms if you have access to Amazon Business, Alibaba, or a third party catalog provider) to insure potential matches
  • access built-in and third party community intelligence to verify they have verifiable customers who will verify the authenticity of their offering
  • use RPA to pre-fill as many of the RFI fields as possible
  • use AI on the RFI, similar suppliers, and public product specs to infer the likelihood of the missing fields being satisfiable (yes, high score, etc.)
  • present the list of candidate suppliers for the event
    and once you select the ones you want to invite
  • automatically manage the process of getting the RFI completed from the supplier and third parties with supplier information

And while no one platform does this yet, progress is being made on this front. If you choose a S2P platform that doesn’t lock you into its proprietary network and integrates with a provider of an open third party network like Tealbook with more advanced capabilities, you can

  • push a high-level description of your requirements to the third party network (3PN)
  • the 3PN will search the networks using its AI technology to find suppliers that a match the qualifications on tracked dimensions (based on the various types of metadata it extracts on suppliers and offerings and key fields)
  • the 3PN will then present the matches it finds ordered on the community intelligence it has on the suppliers (from validated third party network participants who have certified the supplier has offerings in key categories)
  • pull in the subset of suppliers you want to further qualify with an RFI with as much information that is available from the 3PN and the other third parties your S2P platform integrates with

It’s not perfect as you’ll still have to manually drive the RFI (as its unlikely your provider will have as much automation as you’ll like, a subject we’ll cover in another set of articles), still have to manually review the products and services used for the third party match (which will not be as detailed as your internal BoM), still have to review the community intelligence (just how “like you” were the organizations that recommended the supplier), and so on, but the level of automation provided is still substantial and can save you, in our estimates, up to 80% to 90% of the effort. And that’s substantial. For many organizations that had to spend a week finding potentially new innovative suppliers for their RFX process, they now have the answers with less than a day of manual effort.

And if they adopt a modern platform that automates a lot of the other tedious work in the strategic sourcing cycle (which is always 80% to 90% tedious grunt work that can’t even be classified as tactical), they can now overlap three or four sourcing events and triple or quadruple the events they push through a year — and that’s the real key to spend under management and value generation.

Supplier Discovery Should NOT Be a Kick in the Pants (Part I)

But, as may of you know, it still is.

Even if you just spent a cool seven figures on a brand new S2P system.

Why is this the case? Well, it’s basically because:

  • many vendors assume you already know the vendors you want to strategically source from and
  • the rest think you will be more than thrilled with their private network

But here’s the problem. The entire point of a strategic sourcing project is to identify the best supplier for your organization whether or not you know already know about the supplier and whether or not you have ever done business with the supplier in the past. This means that much of the time the supplier won’t be in your database and some of the time it won’t even be in your provider’s network, no matter how many (millions of) suppliers are in the network.

The reality of the situation is that a S2P provider’s supplier network is built from the suppliers of its customer base, and most of its customers tend to be in a small number of industries, serving specific markets, and sourcing from other specific markets — so unless you are in the same industry, serving the same markets, and sourcing from the same markets, the chances of the new supplier you need being in the network is not nearly as good as you might think it is, even if there are millions of suppliers in the network. (Some of which might not even be active anymore, and some of which might never have been active.) Fifty suppliers for every product or service you don’t need are fifty suppliers that are no good to you.

So you are left in the situation where you have to:

  • scavenge potential suppliers from wherever you can
  • review their product and service offerings to see if they might fit
  • try to find customer recommendations to validate the validity of their offerings
  • qualify the suppliers for participation

And all of this takes time.

Scavenging means you have to go out and look under nooks and crannies just to get a few names. Not just Google searches (because many suppliers aren’t listing their key capabilities in a manner you can easily search among millions of hits. Local associations. Co-opetition. Multiple on-line directories and marketplaces. Even the yellow pages. Not a very efficient method given that we are supposed to be entering the age of cognitive sourcing where tactical work is done for you and all you are left with is the strategic analysis of critical decisions.

But the time-suck doesn’t stop with the scavenge. Google, associations, colleagues, on-line directories, yellow-pages, and your mechanic (because you are desperate, after all) are going to know of suppliers in your industry that might be able to serve you, but they are not going to know your specific needs and the relevance of the recommendations will be anywhere from spot-on to miles away from what you need.

So you will have to review multiple products and service offerings to see if it’s even worth trying to qualify the suppliers for an invitation. This can take anywhere from a half hour (if the offerings are way off) to a few hours (if the offerings are close, but not necessarily close enough).

And then there’s the task of trying to find references that you can trust. Online reviews don’t count, those are easily faked. You need to find customers in your industry or, better yet, co-opetition that will at least certify the validity of their service offerings, if not recommend them.

And then the big time suck starts. You have to invite the suppliers to participate in a qualification RFI where you validate the basic business requirements for all suppliers, the basic industry and regulatory requirements, and the capabilities you require for the products and services you would consider them for. Depending on the industry, geography, and products in question, this could be dozens of pages of responses that need to be validated to meet all the business, regulatory, and product compliance requirements.

This can be weeks of manpower spread over even more weeks to complete — all before you can even start a strategic sourcing event! Ouch!

(And now you understand why we said in Friday’s post thatit’s not the marketplace or the network … it’s the facilitation, and supplier discovery is one core capability that modern platforms are not providing.)

Now More Than Ever, Kill the Left-Suckers!

Ten years ago, by far the best presentation at the 41st Annual Supply Chain & Logistics Canada Conference on Creating a Resilient Supply Chain was Jim Tompkins’ (CEO of Tompkins’ Associates) presentation on Bold Leadership for Organizational Acceleration. (He also gave the keynote, which was a great presentation as well, but this was one of the best presentations the doctor‘s ever been too in his years and years of sitting through supply chain and logistics presentations.)

Not only is Jim a great speaker, and if you haven’t heard him, I encourage you to attend his session the next time you’re at a conference where he is speaking, but he’s also really good at telling it like it is. Really, really good. And in this presentation, where he gave his top three tips to bold leadership success, he didn’t pull any punches. In reverse order, his tips were:

  • Don’t Do Anything Stupid,
  • Focus, and
  • Kill the Left-Suckers.

And I couldn’t agree more! What’s a left-sucker you ask? It’s someone who can’t do his job, and pulls his manager away from doing what the manager is supposed to be doing to help the individual who can’t do his job. Why is this so bad? Isn’t that what managers are for? Well, managers are there to help, to teach, and to guide — but they’re not there to do their subordinates’ jobs. When managers are consistently pulled away from their jobs, they don’t get their work done and then their directors have to step in to pick up the slack. When the directors get consistently pulled away from their jobs, they don’t get their work done and then the (rest of the) C-Suite (in a smaller organization, where left-suckers can suck the life out of a company before you know it) has to pick up the slack. When the C-Suite has to pick up the slack, they aren’t getting their work done, and then the CEO gets pulled into fire-fighting on a daily basis — and instead of the CEO leading the C-Suite in setting strategic direction, and the firm in building the business, she’s bogged down in tactical execution while the company starts burning down around her.

As Jim says, a CEO should have three hours a day to do nothing but focus on the strategic. She needs to think about what the company is doing, what they should be doing in the short and long term, and how they are going to get there over the required time period to either reach the top or maintain their place on the top. If she’s consistently being pulled in half-a-dozen directions, that’s not going to happen. So you need to make sure that it does — by identifying, and eliminating, the source of the problem — the left-suckers!

If you can train them — great! If you can find them another role that they can do — that’s good too. But if you can’t train them, or find a role that they can do without constant supervision and hand-holding, or you just can’t make them happy, then you have no choice … you have to terminate them. Or they’ll terminate your company. (You can slowly phase them out, but they have to go. And the phasing starts the minute you identify there is no converting them.)

Bravo, Jim. Bravo!

You’re Under-Resourced and Over-Challenged, So Remember that Consultants are Cheap!

There are two schools of thought out there when it comes to catching up with crushing workload and/or crushing customer demand (which may only be seasonal).

ONE: Consultants are parasites that charge ridiculous rates, waste precious time, and present obvious conclusions so you should hire the minimum number of FTs you need to “get by” with everyone working crazy over time until things settle down.

TWO: FTs are expensive. They demand benefits. They take fixed overhead. And, if they don’t work out as well as you’d hoped or demand drops, in many locales, you can’t just fire them, or even if you can, you have to give them severance and long-term health-care or other benefits or you can be sued or fined. So just hire third parties. Sometimes consultants, but usually service organizations (who likely employ contingent workers, but not highly skilled consultants).

Both of these schools of thoughts are wrong. Why? In the latter case, for the right job descriptions, FTs are the best resource to have as they build organizational knowledge and get more efficient over time. (But not all jobs fall into the right categories.) In the first case, while consulting does draw some of the sleaziest individuals out there, it draws less than highly demanding sales jobs or executive jobs (that statistically often have more psychopaths than law firms and media organizations). The majority of consultants want to deliver ROI. The only question is how far out of their “comfort zone” can the consultant deliver the ROI you want. (But that’s the beauty of using consultants, you can find specialists for each problem you need solved and guarantee an ROI – more on that below).

As you know, the doctor won’t pay two bits for traditional rhetoric and likes arguments that are backed up with facts and numbers. So he’s going to remind you of the nice little calculations that he presented a decade ago about why you should hire consultants to not only help you with your problems today, but help you design better processes to be more efficient, profitable, and less reliant on contingent help or consulting for repetitive tasks on a regular basis tomorrow.

First of all, we need to cost a top performer.

  1. A top performer demands a high salary.
    Usually 200K to 300K for a high-performer. Let’s say $250K.
  2. A top performer demands pricey benefits.
    Health insurance (10K+), life & disability insurance (5K), 401K matching (10K), and a performance bonus of at least 10% to 20% (25K to 50K) in a good year. This will cost you another 50K to 100K. Let’s be very conservative and say 50K .
  3. A top performer comes with overhead.
    First off, there’s all the standard overhead of maintaining the nice office, the telecommunications equipment, and the IT equipment. There’s also a share of an administrative assistant’s salary, a transportation budget, and a reasonable expense account. This could easily eat up 25K to 50K (or more). Let’s be moderate and say 30K.
  4. A top performer needs a decent vacation to recharge.
    Depending on how long this performer has been with the company, we’re probably talking 4 to 6 weeks. This is a hidden cost, as it means you’re only getting 46 to 48 weeks of work, at most.
  5. A top performer needs to keep his skills up to date, and this will require good training.
    You should allow at least two weeks for any employee. For a top performer, I’d highly recommend three or four weeks of training and education related activities. Let’s be conservative and say this person is an extremely fast learner and you can get away with two weeks. Now your top performer is only working 44 to 46 weeks, at most.
  6. Training costs money.
    Whether it’s courses, workshops, conferences, or self-study guides, expect to shell out for this. A couple of conferences and a couple of courses could easily run you 15K to 25K to keep your top performer at above average performance levels. We’ll be realistic and say 20K.
  7. There will be other costs that arise with respect to raises, promotions, recognition, and performance.
    However, since you can always make them next year’s budget problem, we’ll ignore them for simplicity.

This says that your 250K top performer, that you believe is only costing you approximately 1K a day is actually costing you over 1.6K a day in a conservative estimation, and possibly over 2.1K in reality. (350K to 450K+ over 220 days, vs 250K over 260 days)

This is pretty damn expensive. And while it’s still less than a top consultant, who will charge you 4K to 40K a day (depending upon how much market intelligence she brings with her and how much of that valuable IP she is going to perpetually license or give you), we cannot forget the following:

  • Your top-performer will have most of his or her time consumed with the tactical day-to-day operation of the business.
  • If your top-performer is struggling to complete two weeks a year of training or education related activities, he or she is not going to be up to date on new ideas, technologies, and movements within the marketplace.
  • If you’re starting to run into stiff competition or problems within your business, you can be too close to the problem to make good, objective decisions.
  • Even a top-performer can only be an expert on a handful of technologies, processes, or business functions. At least collectively, outsiders will always know more about the best way to run your business with today’s technology in today’s market than you do.
  • It’s an innovate-or-die marketplace out there today. And if we’re in a recession, that’s doubly true.

In comparison,

  • A consultant can focus purely on the strategic, and purely on the problems you need help with.
  • A consultant will spend a considerable portion of his or her time keeping up to date on new processes, technologies, and advancements. Their knowledge is there to be used.
  • A consultant can be much more objective. Furthermore, a consultant probably has a better comprehension of the state of the market you compete in than you do.
  • Even though, like any top performer, a consultant can only be an expert on a handful of technologies, processes, or business functions, you are free to pick the consultant with the skills you need to advance your business.
  • When a consultant puts in a day, a consultant puts in a day. Usually 10 to 12 hours, compared to the 9-5 with a 2 hour lunch an employee will often try to get away with when he or she can. Plus, a good consultant can’t stop thinking about your problem until she goes to sleep at night, and usually starts thinking about it the minute she wakes up.
  • Consultants live by the innovate-or-die mantra.
    and, most importantly,
  • When the project is over, you can cut the consultant loose without any additional cost. In contrast, it could easily cost you six figures to cut a top-performer loose. Furthermore, if you’re smart and do a short initial engagement with a new consultant before agreeing to a long term engagement, the loss associated with hiring the wrong consultant is next-to-nothing. In comparison, the loss associated with hiring the wrong person for a director or vice president job will be hundreds of thousands by the time you add up the losses with dismissing the current employee, finding a replacement, and getting that replacement up to speed.

So, given that a consultant can bring you the badly needed 1) expertise, 2) objectivity, 3) credibility, 4) leadership, and 5) time that you need to be successful, don’t balk at standard consulting day rates. It’s a bargain compared to the value they can bring, especially when you remember that it’s not tactical day-to-day operations that bring you substantial cost savings and new markets, but strategic improvements that consultants can bring with them.

How much?

Let’s say with your current Sourcing / Source-to-Contract / Source-to-Pay platforms, your top buyer can only do 7 major sourcing events (10M + a year) a year which garner an average negotiated savings of 6% (and the total spend under her purview is 100M), which typically result in an average realized savings of 4%. That’s not a bad ROI in this particular situation, given that your organization just saved 4M on a fully burdened superstar that cost you 400K, a 10 to 1 ROI. In fact, you’re probably saying to yourself — how could a consultant beat that.

Let’s say you brought in a powerhouse consultant for a 6 week process evaluation, strategic realignment, and platform redesign project who, for a modest fee of 300K helped you design new processes and select new systems that, when fully implemented a year later, allowed this same senior buyer to handle 15 major sourcing events a year representing 180M worth of spend (not unreasonable at all — some modern platforms and processes take events that used to take 3 months of buyer effort a year ago down to 3 weeks) and identify an average negotiated savings of 8% (and then realize 6%). In other words, 300K of consultant time allowed your top buyer to go from saving you 4M a year to 10.8M a year. Even if you gave the buyer a 20% bonus, 300K more than doubled your ROI from that buyer even after subtracting the 300K for the consultant (as the ROI went from 10 to 1 to 21 to 1). That’s FRAKING cheap! So next time a top consultant proposes to help you, ignore the top line. It’s only the bottom line that counts.