Category Archives: Technology

Just What Does Modern Sourcing Need?

Every year vendors, analysts, and even bloggers come up with their view of what next generation sourcing is, and what is going to get us there. This year, there is a big push towards AI (Artificial Intelligence) and not just predictive, but prescriptive analytics. Apparently, the Sourcing (and Procurement) of the future will be managed by computers, and not by experts. This is not only unnecessary, but a bit scary.

Why is it scary? Because computers run on algorithms and algorithms are not intelligence. Even though it’s theoretically possible for a sufficiently powerful computing platform to pass the Turing test*, all it does is point out the insufficiency of the Turing test for assessing the intelligence of a computer program. While computers can process significantly more data than we can, and modern predictive (trend) models, given enough data, can be more accurate than our intuition, they cannot detect when they are likely to fail or there is information or factors that need to be considered not baked into the model.

For example, if the prescriptive analytics relies on predictive analytics that relies on price trend modelling that simply takes into account price history, currency fluctuations, demand for related products or commodities, and demand for commodities that are usually used to hedge against price fluctuations in the product or commodity category, it will not detect when a natural disaster will result in a supply chain disruption that will result in less product or commodity availability in two months, which, of course, will have a drastic impact on price. As a result, the recommendation to spot-buy while the price is dropping is the wrong one, because as soon as supply drops, prices will skyrocket and it will be too late to lock in the current price.

But this isn’t the worst that can happen. If the AI that monitors multiple pricing trends, expiring contracts, and supplier performance not only ignores this blip but, instead, not only directs a resourcing for an expiring contract on an unrelated,but highly strategic, category, but encourages the inclusion of a supplier (that normally does not supply that category) that is currently in financial distress, the organization could end up blindly awarding a critical category (that is currently being served by a stable, reliable, reasonably low cost supplier) to a different supplier that is about to go bankrupt and then, seemingly without warning, stock-out on a critical product for months.

As you can probably guess, the doctor still believes that Sourcing and Procurement do not need AI and prescriptive analytics. What they really need are powerful and modifiable rules-based workflows, exception monitoring, suspicious transaction identification, and event monitoring.

The true power of a platform is to automate the tactical and streamline the strategic. Every minute of a professional’s time should be spent on strategic activities or issue resolution, not electronic paper pushing. Document matching, data collection and verification, contract monitoring, automated trend computation, etc. are all tasks that should be done automatically, but no actions with any strategic impact should be taken without intelligent human intervention.

A good rules-based workflow can allow tactical tasks, such as invoice matching and marketing monitoring, to be automated according to accepted rules and ensures that professionals only need to be involved when the parameters exceed the specified norms. Exception monitoring can insure that when something is out of expected norms, or exceeds ranges, or happens too often, it is immediately brought to the attention of the right individual. A suspicious transaction monitoring system, even if statistically based, minimizes the chances of duplicate payments, fraud, audit trail tampering, and so on. And event monitoring, even though it will produce a number of false positives, will enable a human to identify events that might impact the projected supply and cost trends for commodities and products purchased by the organization, and mark those for manual review and, possibly, re-sourcing if need be.

Modern sourcing does need better technology, but it doesn’t need artificial intelligence. It needs platforms that can help the sourcing professional focus appropriately, not guide the professional down a programmed path that will only give Sourcing and Procurement a false sense of security. The solution can track best practices for different situations, but the human still needs to determine if the system’s assessment is proper. Sourcing needs a system that empowers it with the intelligence it needs to make the right decisions, not a system that makes decisions and acts on those decisions (with automated contracts, orders, etc.) without human review and approval.

* A computer that is capable of sampling all conversations archived and currently taking place in real time, finding the one that best matches the conversation you are having, and providing that answer will provide a conversation indistinguishable from that provided from a real human, but it’s not intelligent. It merely proves the infinite monkey theorem.

Sixty Years Ago Today

Sixty years ago today, Fortran, possibly the first modern computer language, is shared with the coding community for the first time. Originally developed by IBM, Fortran is a general-purpose, imperative programming language that was designed for numeric computation and scientific computing that dominated science and engineering program for decades.

Updated significantly in FORTRAN II (procedural programming), FORTRAN III (inline assembly), FORTRAN IV (logical data types and statements), FORTRAN 66 (ANSI standard), FORTRAN 77 (structured programming and character-based data), Fortran 90 (array and modular programming), Fortran 95 (high performance), Fortran 2003 (object oriented programming), and Fortran 2008 (concurrent programming), this ancient language is still in use today. In fact, due to the continued widespread use in the scientific community, the next version of Fortran (currently dubbed Fortran 2015) is intended to be completed mid-2018.

What do you think, LOLCat?

Really? Why?

Spend360 – Applying Deep Machine Learning to Spend Analysis

Regular readers will know that, generally speaking, the doctor has not been impressed with the auto-classification and mapping offerings by any spend analysis vendor he’s ever blogged about as all have failed pitifully on tail spend, performed poor on any supplier or category the provider hasn’t processed extensively, and worked poor in new geographies and even poorer in foreign languages.

However, this year, he’s been impressed by two vendors with auto-classification. TAMR, which are trying to tame the data deluge, and now Spend360. While a new name on this side of the pond, it is not a new name across the pond, having opened its doors for business in 2011, after two plus years of intense development. Plus, it is gaining reputation pretty quickly since it’s foray to this side of the pond a couple of years ago and now has over 100 North American clients, which brings its total client base to over 400 global customers, which is impressive for any company in this space. (Even more impressive is the fact that, to date, it has processed over 1 Trillion of spend.)

While it’s still not perfect, and still can’t outmatch the best human expert with a multi-level priority mapping engine, it is decades ahead of its competition and has the ability to learn and evolve and, over time, approach 98%+ mapping accuracy, leaving little that has to be mapped, or corrected, by a human user (which is quite valuable when the user is not an expert in spend analysis but still wants to reap the benefits).

Not only can its deep machine learning identify tail spend suppliers, company specific categories, and even individual items coded in obscure ways, but it can learn over time and adapt to different data models, especially since it can use evolving knowledge bases. Whereas the majority of first generation classifiers used naive statistical classification that could not learn and had to map to a fixed (UNSPSC) model, Spend360’s uses deep machine learning (based on LSTM and encoder/decoder technology) that maps to custom data models using extensible knowledge bases (which can be created and maintained by the organization) that can encode organization and industry specific knowledge (and negate the need for custom mappings or override rules).

The fact that the knowledge base can be extended anytime a mis-classification occurs negates the need for manual mappings or override rules common in so many first generation spend analysis systems is a very powerful concept. It means that every erroneous mapping need only happen once and will never need to be manually corrected again. Plus, the fact that the data model can be extended as analytic needs evolve means that the platform can continue to deliver value year over year over year, unlike most first generation platforms that only delivered top N reports and failed to deliver value after the first twelve to eighteen months.

But this isn’t all Spend360 has to offer. In addition to a powerful classification ability, which can be trained to actually work, it also has a very powerful front end that allows the user to drill through the cube using custom filters in real time, compared to first generation systems that had fixed OLAP with limited filter capability. Reports can be cross-linked and all linked reports auto-update as one is drilled into. And data can be uploaded and incorporated into the cube in real-time if additional data is required.

And, to top it off, based on the 1 Trillion in spend they have classified over the years, Spend360 also has deep spend benchmarks across all of the major verticals and categories, which is often mapped down to UNSPSC level 4. This allows an organization to quickly understand how its spend on a category compares to the average in its vertical. Simply augmenting this data with pricing trend data can give an organization quick insight into where some significant cost normalization opportunities may lie.

In short, Spend360 is a provider the doctor expects you to be seeing a lot more of in the years to come, and recommends that you check out the upcoming deep dive, co-written with the prophet, over on Spend Matters Pro [membership required] if you are able. This is one best-of-breed provider you want to know.

One Hundred and Ten Years Ago …

The second remote control was demonstrated by Leonardo Torres y Quevedo (a Spanish engineer and mathematician) in the port of Bilbao in Spain, when he used his Telekino to guide a boat from the shore. The Telekino was a robot that executed commands transmitted by electromagnetic waves. (The first remote was Tesla’s patented “teleautomation”.) Even though this was the second example, it was the most important as it was built on Quevedo’s principles for wireless remote control operation that are still in use to this day.


What do you think LOLCat?

Don't Touch My Remote!

I Luv My Remote! I Evenz Sleep With It! Thank you Quevedo!

Want an Exceptional Supply Management System? Do NOT Forget the Supplier!

Exceptional results come from the right intersection of exceptional talent, exceptional technology, and exceptional transformation. The three T’s.

And while each piece is important, and no piece can be ignored, the importance of good technology is often overlooked, and, more importantly, key factors that differentiate good technology from great (and exceptional) technology are almost always overlooked — and this is one reason why there are so few true best in class Procurement organizations (and why the Hackett top 8% is the top 8%).

So what makes a great Supply Management System?

Factors include, but are not limited to:

  • ease of use as even a junior buyer should find it natural
  • customizeable workflow as it should fit the transformed organizational processes
  • data import/export as data will need to be imported from ERPs and predecessor systems and exported to successor systems
  • templates and template customization so that RFXs/Auctions/Orders/etc. can easily be created, customized, copied and reused ad infinitum
  • multi-currency support as most Procurement organizations have to deal internationally

And each and every one of these factors should be considered, and included in the evaluation of the supply management system, and systems that do not score well against each and every one of these factors tossed aside, but is this enough to insure you get a great system? Of course not!

First of all, it has to contain all of the specific functions required of the system you are evaluating. For example, if the organization is looking for strategic sourcing, then the organization needs optimization-backed RFX and Auction capability as well as analytics and spend analysis. For Procurement, requisition management, approvals, budget integration, automatic (split) PO creation, good receipt management, invoice acceptance and m-way comparison, etc. And so on. If all functions are there, and all work well, it could be a great system — for the organization.

But will it be an exceptional one? Not necessarily. Exceptional systems need lots of data — and use — to produce exceptional results. Some needs to come from the organization. Some needs to come from third parties. And some needs to come from suppliers. And typically that data is needed in (near) real time. Which means you need suppliers to use the system — which is something they are only going to (want to) do if it’s easier for them to do it in the system, than do it outside the system (and bitterly complain if they are forced to use it to submit invoices to get paid).

This means that the system also needs to be designed for the supplier — something many first, and even second, generation systems were not, even if they had a supplier portal.

Not only should the system be as easy to use for the supplier as it is for the buyer, but it should enable their workflows, provide them with templates, make data import and export as easy for them as it is for the buyer, offer them full multi-currency support as well, and support the internationalization necessary for all of your suppliers in the countries you do business with to use it in their native language.

For example, if you want a supplier to respond to each and every RFX and auction, make it easy for them to manage their catalogs and quickly select the relevant products, update price lists, define volume discounts, and define what you get to see — and don’t get to see. If you want a supplier to use it for e-Invoicing, make it easy for them to upload, create, manage, and track invoice status not just of invoices sent to you, but of all their invoices (as chances are their AR system or sales system doesn’t do that). Make sure they have the same rights to create user accounts, set permissions, and delegate work (especially with respect to RFX responses) to the right people as you do. Let them toggle between languages. And, most importantly, before they submit, let them see what you see the way you see it.

And if the system is truly exceptional, you’ll easily be able to see what they see (with a toggle view) before you send it. Suppliers are your supply chain, so it’s as important to support them as it is to support you — and an exceptionally designed system will do that.