Category Archives: Technology

Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed If You Are Not Technical! Part II

If you won’t admit your TQ (Technical Quotient) is rock-bottom, you won’t spend (or aren’t allowed to spend) budget on an outside expert focussed on Project Assurance, and decide to go ahead with selecting your own ProcureTech solution, then you should make a point to focus your selection around your best practice KPIs. First of all, your management will be happy if you improve against them. Secondly, some of the best KPIs actually require you to have good platforms in place if you are to improve against them.

To demonstrate this, in our first installment, we began a discussion of the 21 Key Performance Indicators (KPIs) for Procurement that Tanya Wade shared because they are a good starting point (as you don’t want too many KPIs as THE REVELATOR pointed out in his analysis). Today, we’re going to continue with the next 6 KPIs, bringing our discussion to 14 total.

Compliance & Risk

   PO Compliance

This requires a good P2P (Procure to Pay) or I2P (Invoice to Pay) solution that can do 3-way match against the PO, the Invoice, and the good receipt to ensure that the supplier is honouring the contract pricing and the PO quantity, and ensuring this ensures that the cost savings you negotiate actually materialize.

   Contract Compliance

This requires a great P2P or I2P solution that can not only ensure the supplier is honouring the price and quantity, but also the lead time, quality, milestones and rebates that they promise. It also requires a great contract lifecycle management solution that can track the organizational’s obligations, such as hitting an order volume by a threshold to unlock a rebate or additional discount, reviewing a new product design or doing a quality test, or making investments/payments on time (to keep the supplier’s cost of capital, and your costs, down).

   Supply Base Risk

This requires a great SRM/TPRM or (spend) analytics solution that can build integrated risk cubes that allow you to determine your overall supply base risk by geography, category, or other relevant factor.

   % of Audited Suppliers

This will require a best of breed S(P/R/L/X)M+ / TP(R/C)M solution that tracks supplier audits and can tell you the percentage of suppliers who have been audited over the past quarter and year. This is especially important if you need to adhere to carbon/GHG regulations or there is a risk of labour exploitation in the supply chain.

Operational Efficiency

   Procurement Cycle Time

This requires a great P2P platform that tracks every action from requisition through RFQ through PO through acknowledgement through invoice through receipt (in the warehouse) through delivery to the requisitioner, can compute the average cycle time end to end as well as the average time in each step, because if the cycle time is longer than industry average, or not decreasing over time, it’s critical to understand which step is the problematic one.

   Automation Rate

This is key. Your automation rate for data processing and tactical tasks should be 90% or higher. There is no excuse today for anything less. And it doesn’t have to be new-fangled experimental Agentic AI that may or may not work. Classical RPA, finely tuned for various Sourcing and Procurement activities, is just fine, as long as you are not manually shuttling data from one system to another, setting up a sourcing event for something you’ve sourced before when the contract is coming up for renewal, manually doing that monthly PO to restock inventory when demand is steady/contracted and predictable, manually building those dynamic spend cubes and manually refreshing them, etc.

Come back tomorrow for the final set of KPIs that Tanya states you need to address and how they will help you select solutions that might actually realize value for your Procurement organization.

Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed If You Are Not Technical! Part I

If you won’t admit your TQ (Technical Quotient) is rock-bottom, you won’t spend (or aren’t allowed to spend) budget on an outside expert focussed on Project Assurance, and decide to go ahead with selecting your own ProcureTech solution, then you should make a point to focus your selection around your best practice KPIs. First of all, your management will be happy if you improve against them. Secondly, some of the best KPIs actually require you to have good platforms in place if you are to improve against them.

To demonstrate this, we are going to take the 21 Key Performance Indicators (KPIs) for Procurement that Tanya Wade shared because they are a good starting point (as you don’t want too many KPIs as THE REVELATOR pointed out in his analysis). Today, we’re going to start with the first 8 (even though 8 is clearly not enough).

Cost Management

These KPIs will require you to have an e-Sourcing platform in place with good reporting, and/or a spend analysis platform in place with good category management (since, theoretically, if you like the extra work and headache, you can continue to source using e-mail and PDF/Excel templates and get good results if you are guided by a good category management solution and have a good analytics platform to compare the results).

   Cost Savings

You can’t compute, track, and present the cost savings KPI in real-time without an e-Sourcing solution with integrated reporting, or a modern spend analysis solution that updates the cube on every synch with the CLM and ePro system. Both improve your Sourcing focus!

   Cost Avoidance

This requires understanding the current market price vs. the price negotiated, which might be higher than the previous price. If the price paid under the last contract was $1.00 per unit, the current market price, due to supply shortages, is $1.30, but you negotiate $1.15 per unit, you have a cost avoidance of $0.15 per unit, which can be substantial if you need 100,000 units and would have to pay market price without a contract. Without a spend analysis solution that can pull in these market prices and your negotiated prices, it’s very hard to show the cost avoidance your team secures.

   Spend Under Management

This requires a top notch spend analysis system that can suck in all organizational spend across systems, categorize it against a sufficiently defined taxonomy, link each category that is under contract to the associated contract, and then compute spend under management vs. spend available to be managed vs. all organizational spend.

Supplier Performance

These KPIs will require you to have a good supplier management system in place that goes beyond simple onboarding and relationship management system (which even the suites have, even if clumsy), and allows you to truly track supplier performance and supplier ratings.

   Supplier Lead Time

In order to track supplier lead time, you need a good e-Procurement platform that tracks the lead time promised in sourcing, the date the order was placed, and the date the goods receipt was logged in the system. This way, you can track the average lead time across all orders as well as against the promise, and if the supplier is not meeting the promise, you know you need to order earlier and kick off a supplier development project.

   On-time Delivery

You need a good e-Procurement system to track both the delivery date vs. the expected delivery date based on the lead time, but the delivery date vs. the promised delivery date in the acknowledgement, because if a supplier indicates they need extra time for a larger than anticipated order, and you don’t cancel, they are on time if they meet the promised delivery date.

   Supplier Fill Rate

You need a good e-Procurement system to compare the order to the goods receipt to track the fill rate over time. This is critical because if the supplier keeps underdelivering, you risk costly stock-outs, which become more costly if they shut down production lines in a manufacturing or cause customers to start shopping at a competitor’s (online) storefront because the competitor actually has the stock they promise.

   Supplier Defect Rate

You need a good e-Procurement system or a good Supplier Management System to track the number of defects and compare that to the fill rate to track the defect rate, which is very critical, especially if you have SLAs that you are depending on when you make your orders (as a higher than allowed for defect rate could result in stockouts and even expensive production line shutdowns).

   Supplier Rating

This requires a top notch supplier performance management solution (which is a small fraction of the supplier management platforms); a top notch spend analysis system that allows you to build and analyze performance, compliance, and risk cubes; or a top notch SXM+/TP(R/C)M solution that allows you to build Supplier 360 ratings, which is critical to understanding how well your supply base is serving you and how well you are supporting your supply base.

Come back tomorrow for the next set of KPIs that Tanya states you need to address and how they will help you select solutions that might actually realize value for your Procurement organization.

GEN-AI is Failing 95% of the time. What does this mean for you?

We’ve known for a while that

  • Gartner’s first study found 85% of AI projects were failing (and that statistic is still being quoted everywhere, including this recent Medium Study)
  • Bain’s study last year found that 88% of all IT / technology projects fail to some extent (2024 study)

And we now know, thanks to MIT, that

  • 95% of all Gen-AI pilots fail. (Source: Fortune)

So what does this mean for you (and your ProcureTech journey)?

Well, beyond the obvious that you should stop dead in your tracks when a vendor starts pushing their “Gen-AI” enabled solution and dig deep into what that really means, at a foundation it means that:

You should never, ever, ever buy or use any solution that uses third party Gen-AI / LLMs, even if wrapped nicely, in their service or product because your chance of success will be 5% if you go with that provider.

You should only select vendors who only use in-house Gen-AI / LLM solutions that are built with the following rules in mind:

  1. custom trained on an expert culled corpus
  2. for a specific problem domain
  3. and applied in a specific context with guardrails and human checks on the output.

The best AI technologies has always been focussed on a specific problem, and this iteration is no different. Focus minimizes the LLM hallucinations (which cannot be trained out as they are a fundamental function of the technology) and guardrails prevent them from automatically being executed on / slipping through.

While they are far from perfect, with more discoveries being made daily on their many (many) drawbacks (where we summarized a dozen in this post on what not to do if you got a headache, but missed the recent revelation where it can not only lie on purpose but turn into something evil), the reality is that, as we have said before, LLMs, properly trained on vetted corpuses, do have two valid uses:

  • large corpus search and summarization
  • natural language translation

since, when appropriately trained, they can be almost as accurate as last generation semantic technology systems, but provide much more natural interfaces for the average user. (However, you won’t get a failure code from them when they are wrong, you will get a hallucination which will be so well phrased you’ll think it’s true when it’s an outright lie. Hence the need for guardrails and human review.)

So, if the vendor is

  • using their own in-house LLM
  • following the rules above
  • and targeting the LLM at natural language problems LLMs are actually good for

Then you should definitely try what the vendor is selling. (Try, not buy, and definitely don’t make a decision off of the carefully crafted demo!) Put it through its paces in a typical use-case for your company, not the use case selected by their demo master. If it does the task better on average than an average team member or does it about as good but many times faster, that is what you are looking for in a tool. Since there is no real AI, you can’t be replaced. But as your bosses keep increasing the weight of your workload to hit ridiculous revenue and profit targets, you need a tool that multiplies your productivity. One that can do the majority of the tactical data processing grunt work, leaving you free to do the strategic thinking and then add in the intelligence to a process or output that no tool can possess, instead of spending 90% of your time doing data entry, processing, and summarization that computers were built for.

In something like Procurement intake, that’s not trying to mimic in text chat the old school phone conversation that took you fifteen minutes to do the monthly office supplies re-order, that’s asking one question:

What do you want to do today?

processing the first one sentence answer:

Place the monthly office supplies re-order.

to determine that the user needs to be pushed into the e-Procurement system with the monthly office supply cart pre-loaded, so that all he has to do is enter the number of units of each item, and possibly add or remove an item from an easily searched catalog if one or two items need to be changed. Not 20 questions of “what do you need”, “what quantity”, “the same supplier”, “so you want 2 cases of paper from office depot”, “no, office max”, “oh, standard printer not glossy for marketing”, etc.

When Gen-AI mania first swept our space, and every vendor was told they needed a conversational interface for buying (or no customer would consider them in their RFP), and then built one, not a single one wasn’t painful to use. Most customers upon seeing it for the first time (after insisting on it), quickly said “can we turn it off” because they quickly realized that a well designed catalog with blanket/standard orders, quick search, and easy drill down to preferred suppliers was at least 10 times faster than trying to use a dumb chatbot — especially if they could pre-build templates / carts / blanket orders for regular purchases.

It’s the same for almost every other process vendors have been trying to apply this technology to, including conversational analytics. (Which, FYI, even Gartner expects to disappear from the conversation in two years.) There’s no such thing as conversational analytics, only reporting. And while that is really useful in the right context (such as allowing an executive to retrieve some basic information with a plain English question), try building a detailed spend cube, which is the cornerstone of spend analytics, with conversational analytics! (And I mean try because you will fail.)

While this doesn’t mean that LLM technology doesn’t have uses, it does mean that those uses have to be finely tuned. So far, among the hundreds of companies I’ve seen over the past few years, only a few have both implemented LLMs and gotten it right. Let’s hope that number increases in the near future. If, not always remember, while it would be great if a few more companies would get it right, You Don’t Need Gen-AI to Revolutionize Procurement and Supply Chain Management — Classic Analytics, Optimization, and Machine Learning that You Have Been Ignoring for Two Decades Will Do Just Fine. Not to mention the fact that good, adaptive, RPA will take care of most of your automation needs!

Why Is It So Hard to Buy Software?

A recent post on LinkedIn by Robert Goodman asked Why has it gotten really hard to buy software?, which is a really good question, because, while it should be easier in the modern SaaS age, for an enterprise, it’s much, much harder.

Robert started his vent by noting that the companies I want to partner with on average do a bad job selling/explaining/connecting/not making me dislike them or generally making the process frictionless and the companies I have little interest in are incredibly responsive and almost stalkerish. He goes on to state that Most companies are still WAY too much about making their numbers at month or quarter end (a them issue, not a me issue) and this seems to dominate their “strategy.”

And I’m sad to say that he’s right. Not just because I’m hearing this from multiple buyers (on and off LinkedIn), but because, for the past year or so, most of the companies approaching me / having conversations with me are only interested in “how I can help them sell”, as if that’s the role of an analyst/product consultant. (Well, as I noted in Vendors Have Lured Big Analyst Firms Astray Because Buyers Don’t Understand They Get What They Pay For, this is probably what they expect if their only dealings have been with big analyst firms where it’s pay for promotion, and leads, and no real advice on product strategy and direction.) The majority are focussed on sales, and not on understanding what they have, whether or not it actually solves customer problems, and what is missing from their product, process, or marketing that is preventing them from selling.

The reality is that the’ve forgotten that you don’t sell by marketing, or doubling-down on the latest and greatest feature function your dev team just added, stalking your prey when they need time to digest, or threatening them that they made a bad decision when you don’t get selected (and/or trying to bypass the process by skipping the CPO and going direct to the CFO or CEO).

You sell by focussing on the customer. The successful vendors:

  1. take the time to understand the customer’s problem
  2. explain how they will solve it
  3. help the customer build the value case (especially if the customer needs help getting (additional) funding)
  4. work side-by-side with the customer until the solution is fully implemented and the customer is realizing the ROI while
  5. not making you feel like you are walking on hot coals through the entire process.

Moreover, when they reach out to an expert analyst/consultant, they would

  1. focus on understanding the market: who the customers are and what they want
  2. what they have and don’t have to serve that need
  3. how they could better position and market what they have so customers would be more interested

But the reality is that, with so many companies having taken too much money at too high a valuation during the last two M&A frenzies, we have the situation where, at many vendors:

  • their ego is through the roof (because they think they are the only option of their caliber based on the raise) or
  • they have to meet a ridiculous sales target to keep their jobs, and they don’t care about your value or experience, just getting the sale.

And that’s why we have the situation that Robert is complaining about where it’s really hard to buy software these days. We don’t have the space we had 20 years ago in ProcureTech post dot-com crash where every vendor was doing anything it could to prove value because investment (potential) was low and there wasn’t a single vendor with a ridiculous sales target … they were just focussed on survival and real growth.

Now, this isn’t to say all vendors are bad, or that you are guaranteed a bad experience … there are still vendors out there who didn’t get, or didn’t take, too much investment, have greater control over their own destiny, and will do whatever they can to make you successful. However, don’t be surprised if you end up with the experience with your initial shortlist that this is the exception and not the norm. In other words, do your best to track down the best, but don’t expect a chill experience every time.