It Was the Most Wonderful Time of the Year. Could it Be Again?

A couple of months ago we published an article on how ‘Tis the season … to bring an end to seasonality! (And JIT!) because, while consumer shopping may be seasonal, supply chains no longer support seasonality. The pandemic finally broke globally over-stretched supply chains and with the continued issues (lack of ships, due to scrapping; containers; due to trade imbalances; lack of capacity, due to extended shipping times now that the two major canals are not available and ships have to sail around both capes), the situation is not going to be fixed anytime soon.

In the article we noted that if you didn’t want to seasonally stock out, you needed to stop trying to stock seasonally and start planning for sustained stock up over time. Stock at the rate products are normally produced and able to be shipped. And stock to what you forecast.

But don’t stop there. If, even spacing out the orders and shipments, you can’t reasonably stock to demand, or, if the demand may not be high enough to minimize your logistics costs (via full container shipments), then you need to work on demand shaping as well as demand forecasting. Don’t over market / promote / sell a product you’ll have trouble delivering, and don’t maintain a product that isn’t going to optimize your economic order quantity.

Not everyone needs the newest product, or the top of the line product, some just need a product that works, which can be last year’s product, or the mid-line product. If you shape demand properly, through targeted marketing, targeted selling, or proper account management, you can make sure that you can meet all of your demand and keep each product line you should be maintaining profitable. And while we admit demand shaping can be harder than forecasting, sometimes it needs to be done. But it needs a lot of advance planning, so it’s critical that Procurement work hand in hand with Marketing and Sales to help identify the demands it can safely meet, when, and what demand levels are optimal for each product line. But if you integrate your planning, marketing, forecasting, sales, and supply chain planning, then maybe the holiday season will, in 2024, be the most wonderful time of the year.

Thank you Vladimir Putin!

Thank you Vladimir Putin for saying what needed to be said.

(Open/Gen-) AI is dangerous. Very dangerous! And something needs to be done about it!

“Humanity has to consider what is going to happen due to the newest developments in genetics or in AI. One can make an approximate prediction of what will happen. Once mankind felt an existential threat coming from nuclear weapons, all nuclear nations began to come to terms with one another since they realized that negligent use of nuclear weaponry could drive humanity to extinction.

It is impossible to stop research in genetics or AI today, just as it was impossible to stop the use of gunpowder back in the day. But as soon as we realize that the threat comes from unbridled and uncontrolled development of AI, or genetics, or any other fields, the time will come to reach an international agreement on how to regulate these things.”

Transcript

I don’t know about you, but with respect to what has been advertised, these are the six variants of Open/Gen-AI the doctor sees:

Gender/Race-Biased: especially in HR; it’s trained on “good resumes”, but, guess what, when those “good resumes” were selected from a pool of hired candidates that have predominantly been white men, guess what the AI looks for?

Hallucinatory: too many stories to track now of AI creating fake summaries on fake articles by fake authors for which it created fake profiles; Lawyers have fall for this multiple times!

Harmful/Hateful: train it on open data which contains hate speech, just like a kid exposed to its first profanity, it mimics … non-stop

Murderous: multiple examples of self-help chat systems literally telling people to kill themselves (and then a few examples of people actually doing this) as well as self-driving systems ignoring the “shadows” of what were people RIGHT in front of them

Sleeper: the newest threat, sleeper behaviour that can go undetected for days, months, or years until a specific date or phrase is entered (in combination); the perfect sleeper agent!

Thieving: not only are these open AI plays generally trained on stolen data, but since all your queries and outputs are directly used (or indirectly influence) the network, they steal your data (even when the designers didn’t set about to do so)

The Prophet‘s 2024 Procurement Prediction Number 8

The Tech Office of the CFO is Coming … Finally A

Yes, it is.

And while The Prophet thinks the naysayers will call him a fool, all the doctor can say is, join the club! There’s lots of room … only a few of us have been correctly calling the future for almost two decades, and all of us who have been have also been called foolish, crazy, and worse. I’d rather be right than popular. At least I’ll be ready for what’s coming …

COVID started a big push into “FinTech” investments as everyone realized that no-travel, and even no offices, meant you needed online/SaaS payment systems, contract systems, financing systems (as you couldn’t walk into a bank), etc. The CFO slowly realized there was more to modern Finance Tech (FinTech) than online spreadsheets. Plus, as they realized they needed visibility into Legal and Procurement, they wanted companion contract, risk, and P2P systems and/or customized interfaces for them.

As a result, we will start to see the rise of Finance suites that, as The Prophet points out, will integrate:

  • FP&A
  • AR & O2C
  • AP
  • Treasury
  • Payments
  • SCF
  • Expense Management
  • Commodity Management
  • Risk
  • Corp Dev / M&A
  • P2P

as well as

  • Contracts
  • Spend Intelligence (with all data/reports updated at least monthly)
  • Inventory Management (with visibility into overhead costs vs. depreciation)

Moreover, as The Prophet has pointed out, each of these areas is very complex. Spend Matters considers AP alone as including the following areas: core AP workflow, dynamic discounting, e-invoicing compliance, fraud detection and prevention, supply chain finance, tax compliance, tax management and working capital management.

When you get into AR/O2C, you then get into PO receipt and tracking, shipment tracking and notification, invoice generation and transmission, invoice receipt acknowledgement, payment receipt, etc.

Expense Management may or may not include P-cards and/or virtual cards, and may or may not include catalogs, travel management, integrated airline or hotel bookings, app integration for auto-expense report generation (snap & go), etc.

Risk breaks down across multiple dimensions across supplier and supply chain risk, and for more information, see the doctor‘s Source-to-Pay series (especially Parts 15 to 20) and the first 9 parts of the doctor‘s Source-to-Pay+ series which are all on (primarily) supply chain risk.

Contract management breaks down into Negotiation, Analytics, and Governance, and each of these area has a lot of baseline functionality that is required (as covered in the Source-to-Pay series referenced above in parts 21 to 25).

And so on … it’s a mega-suite that goes far beyond your average S2P mega-suite.

However, before writing off the effort as too intensive or too expensive, one must remember that Finance is ultimately responsible for cutting the cheque, so they are going to want visibility into where the money goes and how it is supposed to be used. Not to mention, sometimes the only authority they need to cut the cheque is their own, so it might be an easier sale to sell or joint-sell to the CFO as well as another C-Suite exec. So a great FinTech Suite could be the easiest sell a new back office tech start up or aggregator could have!

The Prophet‘s 2024 Procurement Prediction Number 7

Data, Data, Data A

The Prophet has said that data will be your best friend in procurement and supply chain in 2024 if you give it chance.

And then asked Is 2024 the year you final opt to invest in [data] at the level you should?

Because it should be. As The Prophet also said, if for nothing else, do it to avoid being made the business function where fingers point when things go wrong, which they most definitely will if you don’t take every step you can make sure they don’t (and they still will, but you can be prepared for it and ensure that the disruption that happens is as minimized as possible). However, as I noted in a comment on the original article:

It’s not just better data analysis systems, it’s better data … chances are, if you haven’t been applying proper data governance, and let’s face it, there’s a 99%+ chance you haven’t, you need cleaner, richer, better organized data.

Also remember that’s not as easy as just buying some AI-based auto classifier / enrichment tool that will enrich your brake shoe database with the latest Girotti Oxfords and Montcler runners or take your incorrect supplier abbreviation and classify a denied party as perfectly safe when they are known to source from organizations that use slave labour and supply to militant groups and terrorists. (Don’t think it won’t happen if you fully trust an AI-based auto-classifer/recommender engine. It will. It has!)

Trusted data sources, such as those you get from data enrichers like Tealbook or validators like Apex Analytix will go a long way, but you will still have to manually review and fix those that can’t be auto-matched with very high accuracy (high accuracy is good enough for spend analysis, it’s not good enough for regulatory compliance or risk prevention).

And remember, have fun fishing the data lake you’ve neglected since you literally installed your first database. You never know what you’ll catch. While you’ll hook a lot of old rubber boots on your lines, you may also haul up a solid gold bar! Remember, you never dredged the lake, and there will be some priceless relics mixed in with the rancid pile of garbage.

Moreover, without great data, and the insight that comes from great data, the downside risk of the visibility, insight, predictive and actionable capability you lack today is immense and likely incalculable.

Once you have the data, you can easily install the right compliance, risk, and visibility platforms and achieve the intended results. (But without the right data, those solutions will be worse than expensive shelf-ware because if they are used, they will give the wrong results and insights that will lead to worse decisions than if they weren’t installed at all!)

2023 was the year of Intake. Will 2024 be the Year of Orchestration?

Orchestrate the feeds
Pave the way for meeting needs
Phase one is initiated,
there’s no more paper chase, eh?
Set the space ablaze
Case closed, we did rephrase
Workflows for phase by phase
Gets you through the hard days

To the tune of “Orchestrate” by Eliozie
(Outtro NSFW)

2023 may have been the year of Intake with Zip raising 100M to do Procurement intake management for the layperson, but 2024 will be the year of Orchestration. The reason is that while it’s great to manage intake and give the organizational end-users and stakeholders insight into where their request is in the process at all times, allowing them to interact with Sourcing and Procurement where needed, it’s even greater to give Sourcing and Procurement the orchestration engine they need to get their job done and fulfill those organizational requests efficiently and effectively – across people, processes, and platforms.

With so many challenges for an average buyer to fulfill a request from an organizational employee or stakeholder:

  • identify potential suppliers
  • identify potential products
  • verify products
  • for suppliers not onboarded, verify supplier eligibility for onboarding
  • onboard the required suppliers for the sourcing event
  • conduct the sourcing event
  • identify the winner
  • conduct negotiations and …
  • collaboratively develop a contract for signature
  • (e-)sign the contract
  • identify and track the performance obligations
  • identify and track the compliance obligations
  • import the pricing into the e-Procurement system
  • send out the (first) PO
  • track the order acknowledgement and the shipment
  • ensure and record delivery
  • etc. etc. etc.

Doing all of this often involves

  • using a third party supplier discovery service to identify potential solutions
  • searching product specs in a third party marketplace that integrates with your catalog management application
  • using a TPRM (third party risk management) to make sure the supplier doesn’t have any obvious red flags
  • onboarding the supplier in your supplier management solution to collect organizational specific data requirements in order for you to potentially transact with the supplier
  • switching to an e-Sourcing tool to do the RFP/RFQ (as appropriate)
  • running a (weighted) analysis on the bids to select a winner …
    possibly in an analytics solution
  • conducting negotiations in a negotiation management tool (that may or may not be integrated with the CLM)
  • managing the contract drafting processing in the CLM
  • … and the signing in the e-Signature tool
  • and then run the the contract through a contract analysis solution to push the performance and compliance obligations into the governance module
  • … and extract and push the pricing into the e-Procurement system(‘s integrated catalog)
  • … where the PO is cut and the Ack received before …
  • they have to manage the invoice in the I2P (Invoice to Pay) / AP (Accounts Payable) system as well as verify the goods receipt
  • etc. etc. etc.

Furthermore, even if the organization has a “suite”, chances are it’s not that “sweet” and many of the core modules aren’t tightly integrated (as most of today’s S2P “suites” were assembled through acquisition and while the UX has been cleaned up to look consistent at first glance and there is some “endpoint” integration, chances are that it’s minimal data push and pull between process endpoints). It’s also often the case that if the required workflow doesn’t exactly match a very specific use case, the integration just doesn’t work seamlessly and it’s a lot of effort. That’s for the modules in the suite. Not all modules are in the suite. Most suites don’t have full TPRM, extensive compliance management, negotiation support, inventory management, etc. and that is through non-integrated third party solutions. A simple process that should take a few hours of effort to check all the boxes can take days of effort as buyers have to switch between multiple systems, check status, re-enter data, switch back to the intake platform to update the requester, make changes, and so on. Just like the introduction of “modern solutions” has taken onboarding from a 2-day fax and email process to a 2-week gated process with multiple, disjointed, approvals, the proliferation of disjoint, specialized, Source-to-Pay-Plus solutions has taken simple processes that take hours of person-work and days in real-time to complex processes that take days of person-work and weeks in real-time.

The solution? Procurement orchestration. Something that integrates, to the extent possible, all of the modules together in the right process with the right steps in the right seamless flow that requires any piece of data to be entered once and only once in a consistent user interface … and works for all parties, the requester, the buyer, and any stakeholder involved in the process.