Category Archives: Services

Don’t Use a Sub-Standard Sourcing Solution for Services!

If you know the Source-to-Pay software market, you know that most of the solutions out there were originally designed for indirect, commodity/finished good purchases, and most of the solutions are still targetted at those types of product-base acquisition today. (When we get to the list of sourcing vendors in our ongoing Source-to-Pay is Extensive series, you will see that this is the case.)

The reasons for this are multifold, but the main reasons [which often aren’t valid] for building, and maintaining, an indirect-focussed sourcing solution usually fall into one or more of the following:

  • for many non-manufacturing organizations and organizations that don’t require highly customized goods, indirect is the greatest percentage of external spend
    [often true, but not always the greatest savings potential]
  • it’s easier to do apples-to-apples with commodities and, thus, find the greatest savings
    [easy to do the comparison, but savings depends on the market and where the organization is overspending the most
  • services are the domain of CWM, right, so those platforms are likely covering it
    [they’re not, they’re focussed on workforce management, not project management, and that’s critical]
  • every organization has different services needs, and sourcing processes, so it would be hard to build a solution that wasn’t extremely specific to an industry and, hence, build a successful business
    [when you get specific, yes, but most organizations go outside for the same services: legal support, marketing support, tech support, facilities support, etc. and the types of work, and thus sourcing processes, are similar, its just the specific needs that differ (leasing vs. insurance vs. IP law, traditional media vs. web media, on-site vs cloud services and specific systems, etc.)]
  • it’s just too complicated and is best done manual
    [it’s certainly more work to design a solution, requires a different workflow, and most certainly the solution will requires customization on a client level, and does take more upfront build time, but services sourcing is not best done manual]

However, it’s likely that you were sold such a solution, and told that you can easily fit services into it with a bit of work, especially if the vendor also adapted it to support (limited) bills of material (BoMs) and direct (which they claimed was harder). The rigging to make it work would either be to create statements of work up front [which you should do] and getting all-in bids [which you probably should not do], or breaking the project done into phases and getting staged bids [which is good, if your stages are appropriate the time cost dwarfs the material cost], or offering it up as a time and materials and getting separate bids where you could optimize the material cost using third party market costs (and contract on behalf of the supplier) and the time cost by optimizing the resource rates against the expected hours/days, and then selecting the combined lowest cost [which isn’t bad, but extremely complicated and still leaves you with apples-to-orange comparisons later if sometimes the supplier did the material procurement and sometimes you did*]. And you can. Sort of. But it’s not a good solution, and you shouldn’t do it.

Why?

A whole host of reasons including, but not limited to:

  • force fitting square services into round holes is not a good solution
    [you’ll have to shave off the corners, and they could be important]
  • you’ll never know what part of the service is the most complex or costly if you can’t collect, and compare, the right, granular data
    [and, moreover, which suppliers are marking up the most and extorting high profits across the board because one part of the project is actually costly and complex and you have no way of knowing how big that one part is; that one part could only be 20% with the rest of the project being achievable with low-cost common cookie-cutter services]
  • when the project runs late or over budget, you’ll never really know why (unless there are a lot of change orders);
    [it might be just one of the phases or one task among 20 was considerably under-scoped or there was one part of the project in particular the supplier was just not suited for (even though they were for the rest of the project and were a stellar performer for mostly similar projects in the past, which didn’t have that one new/complex task; e.g. up until now, it was all simply enterprise system integration and installation and you used a different vendor for the security configuration and audits; but this time, the buyer baked it in to the core SoW, the supplier quoted as being able to do it, when they really didn’t have the expertise on hardening the product, configuring your firewalls, or fixing issues found by your third party security auditor)]
  • you won’t be able to build an accurate performance profile on your services providers and identify which ones typically come in on time, on budget, and to spec, while meeting any CSR/ESG or diversity targets set by your organization
    [and this is critical as those are suppliers you should be prioritizing for future projects, and those that aren’t performing as well, if strategic, are the ones that need to be the focus of development projects]
  • you won’t be able to manage, or even track, the project in the platform
    [and you should at least be able to look up where a project is with respect to milestones, whether or not it is on budget, and if the suppliers involved are involved with any other projects, and how much work a supplier has unfinished with you before you give them another award]

In other words, you should not use a sourcing solution that is substandard for services for your services projects — you should use one that is. And while this means you may have two sourcing solutions, this doesn’t necessarily mean you will need to have two data stores, SRM systems, analytics systems, etc. Modern Best-of-Breed solutions these days are being built API-first so they can plug into the solution you used for most of your sourcing and then punch out to them for specific projects, and push the awards back when you’re done. As indicated in our post last month that asked Where’s the Procurement Management Platform, you should be looking for a core solution that can serve as a platform, and then best of breed augmentations where needed, as no one vendor can do it all. And that’s okay. If they meet the majority of your need, and are willing to plug into an ecosystem, that’s where you start, especially since, as per our Source to Pay is Extensive series, you can’t implement it all at once anyway. But if you have significant services spend, you need to get it right.

* the doctor is fully aware you can compare apples to oranges, but the comparison is not very useful!

Some Additional Screen Questions for Services Suppliers

Is Your Insurance Up To Date And Can We Have a Copy of Your Policy?

Let’s face it, it’s important that you are protected. Especially if you are hiring service people that will be performing tasks that have health and safety consequences such as window washing (they fall off the bucket-pulley), installing power lines (they fry themselves or people around them), or transporting hazardous waste (which doesn’t give people super powers, but can give them acid burns or deadly radiation poisoning). You don’t want lawsuits against you for a responsibility your service provider takes.

How many people do you have with the skill sets we require? How many need to have their certifications renewed in the next 12, 24, or 36 months? How many are within 4 hours of our location?

If you need 5 contracts with a given skill set and certification to do the job, and they only have 5, and those resources are also required by their other (higher-paying) clients, what is going to happen to your timelines? They are going to be shattered.

Moreover, if the certifications need to be renewed pn a regular basis, the last thing you want is a resource that is going to be grounded in 6 months to go take a training course if that’s a critical time in your project timeline.

And if you need a guaranteed response time by a certified professional within a few hours, if the closest resource is a 4 hour plane flight away, that’s not a good situation to be in.

How many claims have been made against you in the past year? And how does it break down in terms of safety vs performance/contractual guarantees?

Face it, if the provider is large enough, something is bound to have gone wrong according to Murphy’s law, or someone is bound to have made a claim, founded or not. And even if the provider is stellar, you need to know this as claims, and lawsuits, can take up their time and resources and put a strain on them that could carry to your projects if not known or managed.

Furthermore, safety issues are paramount so if the provider doesn’t have a good track record, you will need to think twice.

What is your on-time delivery rate for projects of the type we are requesting? When you are late, what is the typical root cause?

If you get this far down the list, then the next thing is to understand when something has went wrong, why. This can allow you to devise communication and monitoring plans to possible prevent disruptions or delays through early warning and better project and service people management.

What is your approach to joint project management? They’re your people, but they need to be meeting our project timelines?

If the service people are being hired to support a long-term critical project, and lack of the right people at the right time could jeopardize that project, then you need to now you have a service provider tha twill work with you to make sure you have the right people at the right time to meet your goals.

Societal Damnation 47: XaaS

This is a damnation so damning that it was one of only two damnations that required two entire posts just to overview (and one of the few damnations the doctor could literally write an entire book on)! So just what is XaaS?

XaaS, short for Everything as a Service, is the latest craze that is going to cause your Supply Management organization nothing but suffering and pain. While it sounds really cool, because, historically, the transformation of a non-core but essential function (legal, accounting, etc.) or utility (water, electricity, waste disposal, etc.) into a service made your life easier. But, as with any good thing, it’s always possible to have too much … and with XaaS, to have too much forced down your throat even if you’re already choking on your own regurgitations.

And while the right services can provide an organization with advantages that include, but are not limited to,

  • expertise,
  • cost reduction, and
  • efficiency

for an organization that does not have the dedicated personnel, or expertise, to perform the function as good as a third party, if the wrong services (or service providers) are provided (or selected), the organization will instead be burdened with a number of considerable disadvantages that included, but are not limited to:

  • cost increase,
  • efficiency decrease,
  • loss of control, and a
  • 3rd Party Management (3PM) nightmare.

And if different business units decide to start outsourcing what they perceive as non-core functions (which are in fact core to the business or which should be managed by Supply Management or a different business unit), functions for which the service provider cannot achieve economy of scale, or functions that have not been optimized for outsourcing (which will result in an efficiency decrease as a best-practice provider will not be able to optimize inefficient workflows) willy-nilly, Supply Management will have quite a third party management mess to deal with.

In a nutshell, services are good, but, as clearly illustrated in our second damnation post on the subject, Everything-as-a-Service is a ridiculous concept and any organization that buys into it is just asking for trouble.

So what can you do when you are pushed to buy into this latest outsourcing craze?

1. Get an organizational policy in place that all services spending goes through Procurement.

This will be very hard, but unless Procurement knows about an outsourcing initiative or a XaaS buy, it can’t make sure that the organization makes the right buy, if a buy is even required at all!

2. Do your homework on each request.

Why is the service being requested. What does it do and what processes or services does it replace. Why could a third party do it better and are the third parties being considered capable of doing it better. If the process is outsourced, will the organization lose important skills or knowledge. Should a traditional product to enhance in-house be considered instead?

3. Figure out what processes are truly strategic and what process are just tactical.

Strategic processes should be kept, or at least managed, in house while tactical processes are the prime candidates for XaaS providers. From the list of tactical processes, identify those that would be best suited for outsourcing through efficiency gains or cost savings.

In other words, the key to sustentation is not jumping on the bandwagon and doing everything you can to prevent the rest of the organization from jumping on when you’re not looking.

BlueCart – Bringing Restaurants into the Modern Era!

BlueCart is an online ordering platform for small (and even mid-size) restaurant buyers in the food service industry, the distributors who serve them, and the sales representatives that manage the relationships. BlueCart is different than most offerings in that it is a hybrid freemium CRM/SRM platform designed not to help buyers identify the lowest cost, which doesn’t make much difference if you’re only ordering 10 units of something, but maximize their efficiency, allowing the buyers more time to focus on improving their business, growing their service capability, and, when appropriate negotiating their discounts with preferred distributors with a history of good, timely, service and quality. (In the restaurant industry, especially in the luxury restaurant industry, profits are highly revenue, and not cost savings, driven. The last thing you want to do is be unable to serve a potential customer, so assurity of supply trumps lowest cost, as it does in automotive where a production line halt can cost millions.)

BlueCart has made fairly fast penetration into the market, already signing up close to 8,000 restaurants and distributors, and should expand even faster when it closes its series B funding and ramps up its sales and marketing efforts and penetrates even more distributors. This is primarily due to fact that they are using a B2C freemium model where ordering is always free and secondarily due to the fact that distributors are incented to sell on BlueCart’s behalf since it makes order management and customer account management easier for the distributor than traditional phone-and-fax orders (especially if all of their customers are on the same platform).

The platform has two main components: the buyer platform and the supplier / distributor platform.

The buyer platform currently consists of basic order placement, messaging, supplier management, and simple reporting functionality as well as some new functionality around supplier and inventory management. The core functionality is the order functionality, which allows buyers to add to the cart using catalog search and custom-category drill-downs and per-level based ordering. Categories can be defined by food group (dairy, meat, seafood, etc.) or by inventory location which can make it incredibly easy for chefs and buyers to order what they need when they need it. Per-level ordering automatically computes order quantities based upon current inventory and pre-defined stock levels. Both methods add to a persistent cart that allows orders to be built up throughout the day so that both the buyer and the distributor can be sure the order is complete when it is submitted.

The supplier platform is centered around order, and catalog, management. When a supplier logs in they see their dashboard that allows them to jump into order management, catalog management, order fulfillment management, and analytics. The order management allows the supplier to see all orders, in all states, and filter by state, date, and customer. This allows a supplier to quickly zero in on the orders of relevance at any particular time. Embedded in the analytics / reporting module is the order fulfillment report that allows a distributor to, for each product (group), compile a list of all outstanding orders that need to be prepared (and put on the truck) for the day. This makes it very easy for the distributors to ensure that all orders in on time get accounted for and on the truck. Much easier than trying to compile the list from paper-based phone orders, e-mails, and faxes.

While the power of the platform is still pretty basic compared to mature e-Procurement platforms in the indirect sourcing space, it is (much) more powerful than what an average restaurant or small distributor, trying to manage orders and inventory off of ill-equipped spreadsheets, has ever had at their disposal. And, as such, deserves to be investigated. For more information, as well as a detailed SWOT assessment, watch for the upcoming Spend Matters Pro series (membership required) by the doctor and the prophet coming this week. It’s worth a detailed investigation!

Authoritative Sustenation 65: Solution Partners

In our post on authoritative damnation 65: solution partners, we noted that solution partners are their own breed of damnation and can be much more annoying than activist investors and boards of directors, that you might only hear from at quarterly or annual meetings (who will stomp their feet, bang their drum, but eventually settle down and go away for a while), as they could be a pain in the backside on a daily basis.

We said this was because you often depend on these solution partners to serve your customers, run (parts of) your organization, and bring you innovation that you can’t develop in-house (due to lack of time, money, or external ideas). As a result you can’t just tell them to sit-down, shut-up, and wait their turn … especially if their support is essential to keeping a million dollar client happy or a multi-million dollar category stocked and selling.

So what is an organization to do? Especially if it can’t reasonably meet all their demands, err, requests in a short time frame?

Include them in roadmap planning for products and services.

If you include them in roadmap sessions, where they can see all the requests and demands being placed upon you by the organization, customers, and other solution partners, they will understand better that you can’t do everything they want now and that will focus them onto platform, product, or support enhancements that they really need versus those that they think they really want. For example, they might want more do-it-yourself configuration options when they are supporting your software in their country or in their client bases, but if you can typically turn requests around in 2 business days and they see how new features could benefit the customer base more and possibly help them sell more (and earn more commission), they will quiet down about saving 24 hours on a new configuration or install.

Offer them your innovations in Procurement, Planning, and CRM.

Chances are your solution partners are great in manufacturing, production, solution delivery, support, etc. but pretty bad in procurement, project management, or CRM (and why even their best bid doesn’t match your should-cost model with a fair margin). Offer to help them innovate their processes and platforms in exchange for product innovation, production cost savings innovation, and service level improvements.

Help them sell to your customer base.

If it’s a product provider, offer to help them understand what your customer base values most in terms of product purchases (low cost, reliability, innovation, etc.) and what the supplier needs to do to win more of your business. If it’s a service provider, help them understand not only what you need of them to support your customers, but what common services your customers need that you don’t provide, that the provider might be able to up-sell to them (without violating the terms of agreement). This will be a big plus in their eyes and they will start treating you as a customer of choice (who is their favourite customer to work with) and the complaints will go away, with only the odd helpful suggestion here and there.

Solution Partners can be a pain in the backside, but inclusion and support can replae the thorn with the rose. It’s up to you.