Category Archives: Sourcing Innovation

2020 Is Fast Approaching — Better Get on Your Tech Capabilities Part II

Last week we asked what would you accomplish by 2020, which is less than 16 months away. Between 2008 and 2013, all the big analyst firms and thought leadership vendors painted a glorious picture of where Procurement would be by 2020 — a picture which isn’t even close to being a reality. Simply put, the vendors haven’t advanced technology to the point where it was supposed to be and, as a result, while you got more integrated, streamlined, easier to use platforms with friendlier, and sometimes even mobile, interfaces, you haven’t really obtained new functionality.

By 2020, our software was supposed to be smart. It was supposed to be doing most of our work for us. Tactical procurement was supposed to be a thing of the past. Paperwork was supposed to be over and done with. Data processing and verification automated. And Sourcing was supposed to be smart … not just more functional. But that’s what your average S2P platform is. More functional. All of the great advances we were supposed to have in the average platform aren’t there.

But, fortunately, if you’ll step outside the S2P marketplace and look at the best of breed players, across the entire space, you’ll see that most of the functionality you were promised is there, just in bits and pieces across a dozen or so best-of-breed players. So in addition to:

  • Invoice Automation
  • Supplier Identification
  • Automated Supplier Discovery

What else is there?

RFX Process Automation

Most RFX processes have embedded workflows, but when it comes to automation, it’s about as automated as a mechanical cash-register. You have to select the categories. Select the products. Define the lots and bid matrices. Upload the specs. Identify the suppliers. Select the qualification surveys. Invite the suppliers. Monitor their gated progress. Review their responses. Approve them for bidding. Collect and verify the bids. Evaluate the bids. Select an Award. Present a contract. And so on.

Why?

The software should present the categories needing events. It should put the products front-and-center for selection. It should use past events and category knowledge to auto-generate starting lots and bid matrices. It should be able to find the specs in the integrated ERP systems and attach them automatically. It should identify all past suppliers and bidders and all suppliers who have since (self) registered that have been associated with the product or service and present the suggested supplier list. It should identify the right surveys and qualification requirements based upon products, raw materials, geographies, regulations in force, etc. It should auto-invite the suppliers when the supplier list and surveys are locked down. It should be able to monitor their progress, send reminders, and alert Sourcing professionals when a supplier might need help. Bids should be verified as complete and within expected ranges on submissions, automatic comparisons should be generated, and lowest cost awards automatically identified. And so on. It’s not hard.

But if you consider how many platforms have even basic project management, it’s not a surprise that this basic capability just is not there. But that’s where the new breed of providers are coming in. Not only are the new breed of home-grown, single code base, S2P providers (namely Ivalua and Synertrade) working on improving this, but we have best-of-breeds sprouting up solely to offer this missing functionality. One example is Per Angusta, an open sourcing project management platform that focusses entirely on the workflow and allows any platform out there to integrate with it.

Should Cost Modelling

Theoretically, all Sourcing and Procurement software platforms should be leading edge in should cost modelling given that this is something Operation Research experts have been doing for decades upon decades, long before they had software. Engineers responsible for bills of materials know how to do this well. So why can’t our software? There’s no good reason. So why the dearth of good solutions?

Simply put, because most of the platforms were designed by simple Procurement folk for simple indirect purchases. All they were concerned about was a unit bid, a transportation cost, maybe a switching fee, taxes, and tariffs. No thought about a bill of materials or the should cost model that would correspond to it.

And among the platforms that support a bill of materials and corresponding should cost models based on the constituent raw materials, required production process (overheads), labour rates, and energy rates in the production region, most of them require manual input of all of the data — which is readily available (with conversions) from market feeds.

But, fortunately for us, a couple of providers have seen the light. Both Synertrade, the only S2P platform with mature, native direct support (but Ivalua is making progress), and Allocation, a mature direct Sourcing and Supplier Management platform with some of the best should cost modelling support on the market which has just started extending their open API capability to make it easier to integrate market feeds of all types and automatically populate should-cost models.

And that’s not all. Stay tuned for a review of additional Best-of-Breed players who can help with your S2P platform upgrade needs.

2020 Is Fast Approaching — Better Get on Your Tech Capabilities

Last week we asked what would you accomplish by 2020, which is less than 16 months away. Between 2008 and 2013, all the big analyst firms and thought leadership vendors painted a glorious picture of where Procurement would be by 2020 — a picture which isn’t even close to being a reality. Simply put, the vendors haven’t advanced technology to the point where it was supposed to be and, as a result, while you got more integrated, streamlined, easier to use platforms with friendlier, and sometimes even mobile, interfaces, you haven’t really obtained new functionality.

By 2020, our software was supposed to be smart. It was supposed to be doing most of our work for us. Tactical procurement was supposed to be a thing of the past. Paperwork was supposed to be over and done with. Data processing and verification automated. And Sourcing was supposed to be smart … not just more functional. But that’s what your average S2P platform is. More functional.

However, as per our posts last week, we were supposed to have:

  • Invoice Automation
  • Supplier Identification
  • Automated Supplier Discovery
  • RFX Process Automation
  • Should Cost Modelling
  • Automated Spot Buys
  • Guided Workflows
  • Cognitive Buying

And the reality is that we have most of this … across half a dozen or so different providers. But not in one platform, not even for one vertical. So what is there?

Invoice Automation
Nipendo has been doing a great job here for over five years. Easy integration with all electronic data streams, OCR and auto-processing, PO-flip, m-way match, auto-fill, and pretty much everything you were supposed to have. After proper implementation, integration, and training, auto-processing of 99% is not unrealistic.

And they’re not alone — a couple of years ago, Ivalua figured out what they were missing and now have built similar capabilities — integration with EDI, XML, and OCR streams. PO-flip and smart processing to detect missing data, needed data, and even expected data based on structure.

And then there’s Dhatim which is infusing Invoice Automation with AI to make sure that, over time, the number of invoices that need to be manually reviewed asymptotically approaches zero.

Supplier Identification
The best-of-breed supplier information / relationship platforms are adding advanced search capabilities across the board to make it easy to find suppliers that meet product/category requirements, organizational diversity and CSR requirements, and geographic preferences. For example, Apex Analytix makes it easy to identify suppliers in target regions with financial stability and other CSR indicators. State of Flux makes it easy to identify suppliers that meet any and all performance / risk metrics you want to define in targeted locations. ConnXus allows you to find diversity suppliers and monitor sub-tier diversity spending.

(Automated) Supplier Discovery
Lots of best of breed platforms support the identification of appropriate suppliers through advanced searches, as did lots of supplier networks, but until recently, true supplier discovery, based on the current capabilities of ML and AI was non-existent. However, now we have the likes of Tealbook which is bringing AI-based discovery to the masses.

And that’s not all. Stay tuned for a review of additional Best-of-Breed players who can help with your S2P platform upgrade needs.

2020 is Fast Approaching – What WILL You Accomplish? Part IV

As we have been discussing this week, 2020 is fast approaching and, to date, you haven’t accomplished much with respect to what the big consultancies and “thought leaders” told you that you would accomplish by 2020 because, simply put, most of the vendors haven’t advanced the technology to where it was supposed to be and, as a result, you haven’t really obtained much in the way of new functionality.

Remember that we were told that software would be smart by 2020. It would do most of our work for us. Tactical would be a thing of the past as process, and paperwork, would be completely automated and electronic. And, most importantly, the software would not only allow us to focus on the strategic, but guide us through the strategic process. But we are still in a state of affairs where we have to not only set up the RFI process, but manually work our way thought it each time — using dashboards to figure out where we left off and what we have to do. And, as indicated in our last post, work our way through RFIs where, really, the dumb computer should be able to manage it for us.

So, what can we get?

Continuing on yesterday’s theme, more than we expect if we are willing to go best-of-breed along-side our primary S2P, get good at integration, and better yet at value identification and management. We do have the ability to do the following, with specific platforms in specific circumstances.

Guided Workflows

From the minute we log in to the minute we log out, the system should be putting us where we need to be when we need to be there. If we are only doing one event, we should be taken right to the point we left off next time we log in. If there is an information request, a system notification, or alert that should take precedence, that should be front and center at the top of the screen — whichever screen that is. But we shouldn’t have to go to a starting dashboard that summarizes one event, click into the event, figure out where we left off, click-click-click to get there, and then pick up where we left off.

And if we are doing multiple events, we should log in and see the active events, a status of where they are, a prioritization of events that need to be addressed, a prioritization of alerts and notifications and requests that need to be addressed, and an appropriate interleaving of activities. And, if we want, an auto-pilot mode that will take us through each and every task in the appropriate order. All we should have to do is focus on the information, the strategy, and make the right decision. That’s what a good system should do.

Cognitive Buying

Not only should the system be capable of automated spot buys, but it should also be capable of executing significant portions of more strategic events, especially if the only reasons the buy is not an auto-buy is because the dollar value is above a threshold or the component is a critical component to a primary product line. In the first case, there’s no reason the system cannot still auto-pilot he event all the way to an award selection. If it can identify the right suppliers, validate the cost models, validate the bids are in-line with the models, validate the supplier information, and validate that a potential award meets the business requirements, then it should be able to auto-pilot the scenario to the point where an award is recommended and all the user should have to do is evaluate the award, verify everything is okay, and approve — at which point the system auto-pilots the remainder of the event. In the second case, there’s also no reason that the system can’t auto-pilot the majority of the event. All a user should have to do is approve the supplier selection (because quality, OTD, and regulatory compliance is key, and they need to have human acceptance of risk factors) and the final award recommendation. Remember, the point is to allow buyers to focus on high-dollar strategic categories, not low-dollar ones where only availability needs to be guaranteed or high-dollar ones of non-strategic importance.

And while even this is not the end of the road … it’s where we were supposed to be now … but it’s but it’s definitely the case that not all of this is in your average S2P platform, or even your average best-of-breed system.

So just where could you be?

2020 is Fast Approaching – What WILL You Accomplish? Part III

Last week we noted that 2020 is fast approaching and asked what you had accomplished, especially given all the 2020 predictions that were made five to ten years ago.

But then we didn’t wait for the answer, we gave it to you because, simply put, most of the vendors haven’t advanced the technology to where it was supposed to be and, as a result, you haven’t really obtained much in the way of new functionality.

We were told that, by 2020, software would be smart. It would do most of our work for us. Tactical would be a thing of the past as process, and, most importantly paperwork, would be completely automated and electronic. But, alas, we’re still in the situation where you not only have to manually build cost models over and over, but even manually populate them. And even then you can’t automate the RFX/Auction process when the best option is, well, completely obvious. Why? Twenty years after the introduction of this technology, why?

So, what can we get?

Continuing on yesterday’s theme, more than we expect if we are willing to go best-of-breed along-side our primary S2P, get good at integration, and better yet at value identification and management. We do have the ability to do the following, with specific platforms in specific circumstances.

Smart Cost Modelling
Here’s the deal, we’re at the point where we have well defined bills-of-materials in an ERP for just about every product ever manufactured. So we know what goes into the product, how much, and key elements of the production process (as well as estimates of energy requirements). We know how much we paid, how much average labour rates are in the locales we produce in, how much energy costs per kWH, and can estimate the remaining overhead and margin.

So, if we know all this, why can’t the system automatically create a cost model, automatically populate it with relevant (and current market) costs, and give you an accurate true should cost model that can be used to accurately identify which suppliers are on the mark and which aren’t. There’s no reason it can’t. The reality is that most systems just don’t.

Automated Spot Buys
Most of our RFIs, Auctions, and even spot-buys are small and/or for non-strategic products and services, many of which are one-time or MRO buys. The vast majority of the time all we need is the lowest cost product or service that meets our need that can be obtained in the required time frame. But still we have to spend hours and hours and hours setting up the RFI, inviting suppliers, verifying the products or services are acceptable, getting bids, comparing them, identifying an award, making the offer, getting a signed contract, and sending the PO.

But if we have approved suppliers, detailed requirements that can be qualified and quantified, gated workflows to make sure only those that meet all the requirements can bid, cost models to verify that costs are in-line with expectations, the ability to capture and verify delivery times, carrier costs, canned terms and conditions, the ability to force a supplier to agree to the conditions up-front, integrated e-signatures, and auto e-Document distribution and management, why can’t the system just run the process, make the award, get the contract, and send the first PO fully automated? There’s no reason. None at all.

And this is not the end of the road … but it’s definitely the case that not all of this is in your average S2P platform.

2020 is Fast Approaching – What WILL You Accomplish? Part II

Last week we noted that 2020 is fast approaching and asked what you had accomplished, especially given all the 2020 predictions that were made five to ten years ago.

But then we didn’t wait for the answer, we gave it to you because, simply put, most of the vendors haven’t advanced the technology to where it was supposed to be and, as a result, you haven’t really obtained much in the way of new functionality.

We were told that, by 2020, software would be smart. It would do most of our work for us. Tactical would be a thing of the past as process, and, most importantly paperwork, would be completely automated and electronic. But, alas, we’re still in the situation where you have to manually define RFX processes, manually identifier suppliers, and manually build cost models. What’s up with that?

So what can we get?

Continuing on yesterday’s theme, more than we expect if we are willing to go best-of-breed along-side our primary S2P, get good at integration, and better yet at value identification and management. We do have the ability to do the following, with specific platforms in specific circumstances.

Automated Supplier Discovery

Why do you have to manually find, identify, qualify, and select suppliers for each and every RFI you do? When the platform should know the suppliers we’re using? The supplies we invited to bid last time? The suppliers that were pre-qualified as viable options? The suppliers that have registered with the products and services you need? The suppliers in the network platform you use? The suppliers your co-opetition have vetted for you? And so on.

Based upon the RFI, your particular product and service requirements, your supplier history, your community history, and so on, your platform should be able to use machine learning and advanced AI techniques to identify the best suppliers for your AI given all of your needs, the supplier’s performance history, the supplier’s current financial and CSR status, and available community data. But most platforms today can’t even suck in a default list of suppliers? Why … it’s NOT that hard.

RFX Process Automation

Most platforms allow you to define templates that define survey questions, basic cost models, and basic gated flows on registration and participation, but that’s about it. When it comes time to starting a new event, it’s up to you to find the closest template, alter the questions, cost models, and gated flows, double check everything, and drive it. But why?

Why can’t the platform identify the right questions based upon the specific products and services? The right gated flows based upon the industries, categories, geographies, and raw materials? The right models based upon the constituent raw materials, development processes, and level of cost detail available? The right starting data from market indexes? Most of this just requires the right rules, and last generation machine learning. Very little tactical effort should be required in an average RFX process, especially if you’ve sourced a similar product before.

And this is not the end of the road … but not all of this is in your average S2P platform.