Source-to-Pay+ is Extensive (P27) … Breaking down the ORA of Sourcing, Starting with RFX

In our last post, Part 26, we noted that, after covering e-Procurement, Spend Analysis, Supplier Management, and Contract Management, it was finally time for Strategic Sourcing. When it comes to Sourcing, we have to deal with the ORA et labora. The work, and the prayer (that it gets the results we want). But at least when it comes to the prayer, we have three tools at our disposal:

  • Optimization
  • RFX
  • Auction

Today we’ll start with the most classic sourcing tool, RFX, where RFX stands for Request for X, where X could be Bid, Information, Proposal, Quote, etc. depending on the depth of response required and the terminology used in the industry and geography the RFX is being issued in. So what is RFX? What must it do? We’ll break down the basics in this post.

BASIC

Surveys
This is so fundamental and obvious that you’d think we shouldn’t even need to mention it, but we do. The platform has to support the creation of arbitrary surveys, using all of the standard HTML form elements (check boxes, multi-select, text boxes, etc.), and allow them to be created in sections that can be mandatory or optional, depending upon what the supplier is bidding on, and re-used as needed.

Cost Breakdowns / Should Cost Modelling
In the beginning, back in 1995, man didn’t know that we should use TCO, for savings strive; ERP had the parts; but spreadsheets had the bids; no one new what they was gonna do; but FreeMarkets had the news; they said “let there be web”; there was web; “let there be bids”; there were bids; “let their be portals”‘ there were portals; “oh, let their be SaaS”. And it was great. But unit costs, and even landed costs, weren’t reminiscent of the full costs associated with a buy. And even worse, it didn’t give you any insight into why a product cost what it cost.

When sourcing expensive, or complex products, if you’re trying to understand the cost, it’s not average, or lowest bid, it’s what the product costs to make, plus a fair margin. This is why cost breakdown bidding / should cost modelling capability is key to understand the cost baseline.

Templates
Having to setup an RFX from scratch every time is very time consuming and unnecessary if the RFX you need is (almost) the same as an RFX for the last product you sourced in the category. That’s why it’s critical that the platform support templates that can be used to instantiate RFX events and then modified as needed to publish the event. The organization should be able to create as many templates as they want, and even create templates off of templates (adding detail and complexity as categories warrant).

Workflow
The platform must include basic workflow support, which should be configurable to the needs of the organization and the type of event — single round, double round; sealed envelope, blind; etc. This is especially critical for the public sector which must meet strict requirements in its call for bids in many countries.

Excel Support
The platform must support every buyer’s, and supplier’s, favourite tool, Excel, for RFX completion. Specifically, any supplier, or the buyer on behalf of any supplier, must be able to export the entire RFX to Excel, fill out the Excel spreadsheet, and then upload it into the system. While one may think this is not as critical now that broadband is more ubiquitous, there are many suppliers whose sales people are not very technologically proficient and still not comfortable using modern platforms, being used to bidding in Excel for years (and years).

Reporting
The platform must support basic report(build)ing capability that will allow a buyer to build the appropriate side-by-side comparison reports as well as custom reports by supplier, product, lot, and so on. Unless the platform supports some basic capability, it will be impossible for a buyer to identify an award.

Award Creation
Once a buyer has identified the award they want to make, the buyer must be able to mark the award, store it, associate custom reports that demonstrate the savings (and costs), create notes as to rationale for the award (especially if it is not the lowest cost award), link to associated documentation, and if the organization has SXM and/or CLM modules (or systems), link to the appropriate supplier records and contract(s) in those systems.

Real Time Management
It should be possible to manage the RFX, and process, as necessary at any time. While this doesn’t require the same “real-time” nature as an e-Auction system might require for a 30 minute auction, it must be possible to pause, and if necessary extend, the RFX at anytime if an issue is discovered, add documentation and details when a supplier question indicates a weakness in the documentation, and even modify the lots if it is discovered that items were overlooked or substitutions can be permitted.

ADVANCED

Integrated Optimization
A great RFX solution will integrate with the strategic sourcing decision optimization module, automatically run an unconstrained scenario, highlight the lowest cost award; automatically run a scenario with just the current suppliers, highlight the lowest cost award for an award to the current supply base; and automatically run a min 2/max 3 supplier scenario, with each supplier getting at least 20%, highlight the lowest cost award in a risk mitigation scenario; and then show a side-by-side comparison across those 3 scenarios (or organizational tweaks to these defaults) to help a buyer understand the cost differential between different options so they can optimize price vs. quality vs. risk vs. other factors of interest in an informed fashion.

Sourcing Strategy Enabled Dynamic Workflows
A basic solution should support standard, somewhat configurable, workflows, but those will be rather rigid once the RFP is launched. A more advanced solution will allow the organization to define different sourcing workflows based upon current market conditions (supply vs. demand, current bids, potential supply base, etc.), differentials between first round bids and the prices the organization is currently paying, potential supply base shifts, and so on and, after the first round is complete, shift to a second round RFX, push to an e-Auction, or divert to strategic negotiations with the incumbent (or a new supplier that is significantly more appropriate for the buyer under the current situation), as appropriate. While such functionality may not be capable of being used in the public sector, it’s perfectly fine in the private sector, especially if you tell your bidders up front it will be a multi-round process and, based upon the first round, there may be a second round, or you may go straight to negotiations with the leading supplier(s).

Bill of Materials (BoM)
While not strictly necessary for an RFX to support a multi-level bill of materials, especially since it could be flattened into a lot, if the organization sources direct on a regular basis, then the RFX should support multi-level bill of materials, as well as allow suppliers to bid at any level they want to.

Enhanced Globalization
The platform should support multi-currency, multi-language, and be fully localizable to any supplier, including support for auto-translation of documents as required. The platform should even support customized workflows and input screens tailored to the suppliers based upon their region, their requirements, and the workflows that work for them.

Market Intelligence
A good RFX platform will integrate with market intelligence sources that give you current commodity pricing, average pricing from public sector contracts, average on-line pricing, and/or average GPO savings to help a buyer understand how good, or bad, the quotes are that they are getting.

Automation
A modern sourcing platform will also support rules-based automation, and will allow a multi-round event to run on auto-pilot all the way from launch to award recommendation, with the exception of the buyer possibly having to answer a few supplier questions. For example, if the RFX was defined as a 2 round RFX with only the top 5 initial responses going into the 2nd round, if the weightings for the responses are predefined, the system will automate the closure of the first round, launching of the second round, and the identification of the recommended award based upon the sourcing strategy defined (dual-source, 80/20, price vs. non-price factor weightings, etc.)

Of course, this is not a complete list of what an RFX platform might have, or necessarily should have, as systems continue to improve, but a baseline of what they must have to be considered a modern RFX solution.

Onward to the “A” in Part 28.

Source-to-Pay+ is Extensive (P26) … Time for Sourcing

When we started in Part 1, we noted that even though all core sourcing and procurement technologies have been available for twenty (20) years (although it is debatable just how good the initial versions of many of these applications were) … the majority of organizations still do not have what any modern analyst would consider reasonable support for the full, core, source-to-pay process.

However, now that inflation is back with a vengeance, anticipated savings is leaking faster than a bald spigot, and most organizations are in a cash crunch as a result of down sales during the pandemic (and now due to a lack of core inventory to sell), they need to update their procurement tech stack fast.

But, and this is the kicker, they can’t do it all at once. We went into a lot of the details as to why, but, basically:

  • the applications don’t work without data … and don’t work well without LOTS of data … clean, organized, enriched data … (that you don’t have now and won’t have for a while)
  • the applications don’t deliver without user training …
  • you need value out of the gate to justify the purchase … and good luck getting enough value to justify the license cost of an entire suite!
  • your users need to see results for them to adopt … and use … a solution long term

So, you need to figure out where to start. And after three posts, we figured it out — e-Procurement. We then spent a few posts discussing the need for e-Procurement, the benefits, the barriers to e-Procurement (which were not what you think), and providing you with a large list of vendors. But then we had to step back and figure out what came next again because, depending on the particular situation at hand, there were good arguments for contract management, spend analysis, strategic sourcing, and supplier management. It took quite a bit of analysis, and the answer was spend analysis because, even if all things seemed equal, or one solution looked more attractive than another, spend analysis could identify the (biggest) opportunities and the solution best suited to the most / biggest opportunities, and so spend analysis always made the most sense to adopt after e-Procurement.

After that, it was difficult. But, if all opportunities are equal, or there is no one to do the thorough spend analysis that can help differentiate the savings opportunities that can be enabled by each S2P module, there still has to be a best choice for what’s next. And that was … Supplier Management. The reason? Just like you needed to get your spend data captured for everything to function (which is what e-Procurement does), no matter what you’re doing, you’re interacting with suppliers, so you need to manage them effectively.

Then it was easier. Even though you technically need to find the products and services before you contract for them, the reality is that you are already buying products and services, you already have contracts, and chances are you can’t find most of those contracts when you need them, don’t know what the obligations and deliverables are for anything that’s not available through the e-Pro catalog, and don’t even know the pricing, permitted price escalations, etc. Furthermore, most organizations without a modern CLM don’t know how many evergreen contracts they have, when they automatically renew if not terminated or renegotiated by that date, when key contracts they need are expiring, and so on. Nor do they understand just how much excess manual effort and time the organization is taking to re-negotiate existing or negotiate new contracts. They are also completely unable to do a proper analysis of existing payment terms, key risk clauses that are required for a new regulation, and so on.

Contract Management may not identify any big opportunities, but without a good, enforceable, contract that can be easily monitored throughout its lifetime, the reality is that the identified savings will likely never materialize. Thus, Contract Management was key to have in place before you started strategically sourcing, as you want to immediately turn the bids into contract terms before the process disconnect from not having a good CLM solution causes bids to be retracted “because they were only good for 15 days” or some other excuse a supplier will come up with to not honour a bid.

But now that we are at the point we can identify the right opportunity with spend analysis, select and manage the best suppliers, manage the contracting process and the contract, cut the purchase orders (POs) for the right goods and services for the right price from the right suppliers with e-Procurement, we’re ready for strategic sourcing as we have everything we need in place to capture the identified savings and cost avoidance opportunities. (It’s true that we may still have to manually process that invoice if the invoice-to-pay or accounts payable functionality in the e-Procurement system is weak or relatively non-existent, but the fact that we have immediate access to the PO and all associated documents to verify the invoice means that we can accomplish the necessary process to ensure we pay what we are supposed to. And even if it takes $30 to manually process every invoice against that contract, if the contract captured 300,000 in identified savings, do you know how many invoices it would take to even make a dent in that? In this situation, it would take 100 invoices just to reduce the savings by 1%.)

This is key. Historically, 30% to 40% of identified savings opportunities from strategic sourcing never materialized, and the reason was that the organization didn’t have the infrastructure in place to even capture the savings and cost avoidance opportunities in the agreements they had, or the cost reduction capabilities they had through supplier development in their existing supply base. That’s why you need to build out the S2P support infrastructure before starting strategic sourcing — otherwise, you’ll identify savings that will never be realized and sometimes even spend more than if you had just stayed with your current supply base and processes. When you consider how hard Procurement still has to fight for recognition, budget and new systems, you want to make sure that you can take full advantage of every system that is implemented and deliver on every dollar. This is why the order of module implementation, integration, training, and utilization is key, and why strategic sourcing typically has to be the (next-to) last module that is implemented for maximum benefit.

Tomorrow we will start our overview of strategic sourcing, covering the ORA et labora of the technology and the process in Part 27.

Source-to-Pay+ is Extensive (P25) … And Contract Management Very Extensive … So Here Are 80 Contract Management Companies to Check Out!

And now the post you’ve all been waiting for! A partial, starting, list of 80 contract management companies that may (or may not) meet some, or many, of the core baseline capabilities we outlined in the last three parts of this series (Part 22, Part 23, and Part 24) as we discussed the Negotiation, Analysis, and Governance sides of Contract Management today. (For those of you who skipped these posts, please note that we define a Contract Analysis solution as one which supports the syntactic, semantic and numeric [spend] analysis of the contracts and that we do NOT include a vendor that focusses [just] on numeric [spend] analysis of the contracts.)

As with our lists of e-Procurement Companies (in Part 7), Spend Analysis Companies (in Part 12), Sacred Cow Companies that do, or support, customized “spend” analysis on Marketing, Legal, and SaaS (in Part 13), and Supplier Management Companies (in Part 20), we must again give our disclaimer that this list is in no-way complete (as no analyst is aware of every company), is only valid as of the date of posting (as companies sometimes go out of business and acquisitions happen all of the time in our space), and does NOT include any document management companies (that could store contracts) in our expository on how Contract Management can be a NAG.

Furthermore, as we’ve said before, not all vendors are equal, and we’d venture to say NONE of the following are equal. The companies below are of all sizes (very small to very large, relative to vendor sizes in our space), cover the baseline differently (in terms of percentage of features offered, the various degrees of depth in the feature implementations, and differing levels of customization for a vertical), offer different additional features, have different types of service offerings (backed up by different expertise), focus on different company sizes, and focus on different technology ecosystems (such as plugging into other platforms/ecosystems, serving as the core platform for certain functions or data, offering a plug-and-play module for a larger ecosystem, focussing on the dominant technology ecosystem(s) in one or more verticals), etc.

Do your research, and reach out to an expert for help if you need it in compiling a starting short list of relevant, comparable, vendors for your organization and its specific needs. For many of these vendors, good starting points might be found in the Sourcing Innovation archives, Spend Matters Pro, and Gartner Cool Vendor write-ups if any of these sources has a write-up on the vendor.

Finally, a second reminder that inclusion on this list DOES NOT imply Sourcing Innovation is recommending the vendor.

Company LinkedIn
Employees		 HQ (State)
Country		 Negotiation Analytics Governance
Aavenir 69 Plano, Texas N G
Advanced 2680 United Kingdom G
Agiloft 259 California, USA A G
AnyData Solutions 10 United Kingdom A G
Atamis 40 United Kingdom G
Aufait 114 India G
Bonfire 87 Ontario, Canada G
BrightLeaf 65 Massachusetts, USA A
Brooklyn Solutions 23 United Kingdom G
Cloudia 40 Finland G
Cobblestone Software 131 New Jersey, USA A G
Concord 71 California, USA N G
Conga 1571 Colorado, USA N G
Contract Hound 37 New York, USA G
ContractLogix 32 Massachusetts, USA N G
ContractPodAI 294 United Kingdom N A G
Contract Safe 18 California, USA G
Contracts Wise 2 United Kingdom G
Contracts 365 19 Massachusetts, USA G
Corcentric 588 New Jersey, USA G
Coupa 3674 California, USA N G
datanet 2 Colorado, USA G
Deep Stream 25 United Kingdom G
Delta eSourcing ?? United Kingdom G
DocuSign 7538 San Francisco, USA N A G
ebidToPay ?? Bavaria G
eBrevia (DFIN) 23 New York, USA A
Elcom 18 United Kingdom G
ElectrifAI 132 New Jersey, USA A
Eyvo 24 California, USA G
Evisort 234 California, USA N A G
FullStep 128 Spain G
GateKeeper 103 Illinois, USA G
GEP 4650 New Jersey, USA N G
iCertis 2263 Washington, USA N A G
Ignite Procurement 60 Sweden G
Inconto 9 Netherlands G
Intenda 111 South Africa G
Ion Wave 22 Missouri, USA G
ISPnext 59 Netherlands G
Ivalua 849 Ivalua N G
Jaggaer 1266 North Carolina, USA N A G
Juro 125 United Kingdom N G
Kira Systems 48 Ontario, Canada A
Legal Robot ?? California, United States A
Legal Sifter 31 Pennsylvania, USA A
LGX Corporation ?? North Carolina, USA G
Litera 1104 Illinois, USA A
Malbek 89 New Jersey, United States N G
Market Dojo (Esker) 34 United Kingdom G
MarketPlanet 72 Poland G
Medius 562 Sweden G
Merlin Sourcing 29 Germany G
Oalia 22 France G
Onventis 129 Germany G
OpenGov 603 California, USA N G
ParleyPro 16 California, USA N G
Outlaw 7 New York, USA G
Penny Software 35 Saudi Arabia G
Proactis 557 United Kingdom G
ProcurePort 8 Indianapolis, USA G
ProcureWare (Bentley Systems) ?? Pennsylvania, USA G
Prokuria 8 Romania G
Raindrop 27 Raindrop G
Ready Contracts 243 Australia G
SafeSourcing 10 Arizona, USA G
SAP (Ariba) 2963 California, USA G
ScanMarket Symfact (Unit4) 60 Denmark G
ScoutRFP 44 California, USA G
SirionLabs 918 California, USA N A G
Sourcing Force 4 Ontario, Canada G
Sourcing Insights 9 Indiana, USA G
SupplyOn 239 Germany N G
Synertrade 180 Germany G
Trade Interchange ?? United Kingdom G
Trakiti 12 United Kingdom N G
Unimarket 77 New Zealand G
Vortal 188 Portugal G
Zycus 1464 New Jersey, USA A G

Come back for Part 26 as we continue our discussion of Source-to-Pay.

The Procurement People-Process-Technology Pain Cycle …

Recently on LinkedIn, someone asked the trick question of which came first: process or technology. The answer, of course, was people since, when Procurement, the world’s second oldest profession, started, it was just a buyer haggling with the seller for their wares. and this is how it was for a long (long) time (and in some societies was as far as “procurement” progressed), until shortly after a culture advanced to the point where people could form private businesses that were entities unto themselves. Once these entities started to grow, and multiple people were needed to do the same job, they realized they needed rules of operation to function, and these became the foundations for processes.

But when business buying began, there was typically no technology beyond the chair the employee sat in, the table they used to support the paper they wrote their processes and records on (and the drawers they stored the paper in), the quill and ink they used to write with, and the container that held the ink. And in many civilizations, it was like this for hundreds of (and sometimes over a thousand) years. The first real technological revolution that affected the back office was the telephone (invented in 1876, the first exchange came online in 1878, and it took almost 30 years for the number of telephones to top 1,000,000 (600K after 24 years, 2.2 million after 29 years). [And it took 59 years before the first transatlantic call took place.] The next invention to have a real impact on the back office was the modern fax machine and the ability to send accurate document copies over the telephone. Even though the history of the fax machine dates back to a 1843 patent, the modern fax machine, that used LDX [Long Distance Xerography], was invented in 1964, with the first commercial product that could transmit a letter sized document appearing on the market in 1966. Usage and availability was limited at first (as the receiver need to have a fax machine compatible with the sender), but with the 1980 ITU G3 Facsimile standard, fax quickly became as common as the telephone. But neither of these inventions are what we consider modern technology.

When we talk about “technology” in modern procurement, or modern business in general, we are usually talking about software or software-enabled technology. This, for some businesses, only became common place about 30 years ago (since most businesses could only afford PCs, and even though they were invented in the 1970s, it was the 80s before they were generally available commercially, and the 90s before most smaller businesses could afford them [for the average employee]), and only commonplace in the largest of businesses 50 years ago. Once has to also remember that the first general purpose automatic digital computer built by IBM (in conjunction with Harvard) only appeared in 1944, and that IBMs first fully electronic data processing system didn’t appear until 1952, and, as a result, back office technology really only began in the fifties, and was only affordable by the largest of corporations. (Furthermore, even though he first MRPs were developed in the 1950s, the first general commercial MRP release wasn’t until 1964, and it took over a decade until the number of installations topped 1,000. [And MRP came before ERP.]) In other words, technology, beyond the telephone [and fax] did not really exist in the business back office until the MRP. And it wasn’t common until the introduction, and adoption, of the spreadsheet. The first spreadsheet was VisiCalc, on the Apple II, on 1979. This was followed by SuperCalc and Microsoft’s Multiplan on the CP/M platform in 1982 and then by Lotus 1-2-3 in 1983, which really brought spreadsheets to the masses (and then Excel was introduced in 1985 for the Mac and 1987 for Windows 2X). (And 36 years later Excel is still every buyer’s favourite application. Think about this the next time you proclaim the rapid advance in modern technology for the back office.)

In other words, we know the order in which people, process, and technology came into play in Procurement, and the order in which we need to address, and solve, any problems to be effective. However, what we may not fully realize, and definitely don’t want to admit, is the degree to which this cycle causes us pain as it loops back in on itself like the Ouroboros that we referenced in our recent piece on how reporting is not analysis — and neither are spreadsheets, databases, OLAP solutions, or “Business Intelligence” solutions as every piece of technology we introduce to implement a process that is supposed to help us as people introduces a new set of problems for us to solve.

Let’s take the viscous cycle created by incomplete, or inappropriate, applications for analysis, which we summarized as follows:

Tool Issue Resolution Loss of Function
Spreadsheet Data limit; lack of controls/auditability Database No dependency maintenance; no hope of building responsive models
Database performance on transactional data (even with expert optimization) OLAP Database Data changes are offline only & tedious, what-if analysis is non-viable
OLAP Database Interfaces, like SQL, are inadequate BI Application Schema freezes to support existing dashboards; database read only
BI Application Read only data and limited interface functionality Spreadsheets Loss of friendly user interfaces and data controls/auditability

This necessitated a repeat of the PPT cycle to solve the pain introduced by the tool:

Technology Pain People Process
Spreadsheet Data Limitations Figure out how to break the problem down, do multiple analysis, and summarize them Define the process to do this within the limitations of existing technology
Database Performance Issues Define a lesser analysis that will be “sufficient” and then figure out a sequence of steps that can be performed efficiently in the technology Codify each of those steps that the database was supposed to do
OLAP Stale Data Define a minimal set of updates that will satisfy the current analysis Create a process to do those updates and then re-run the exact same analysis that led to the identification of stale data
BI Tool inability to change underlying rollups / packaged views define a minimal set of additional rollups / views to address the current insight needs, as mandated by the C-suite create a process to take the system offline, encode them, put the system back online, and then do the necessary analysis

In other words, while every piece of technology you implement should solve a set of problems you currently have, it will fail to address others, introduce more, and sometimes bring to light problems you never knew you had. Although technology was supposed to end the pain cycle, the reality is that all it has ever done is set it anew.

So does that mean we should abandon technology? Not in the least. We wouldn’t survive in the modern business world anymore without it. What it means is that a technology offering is only a solution if it

  1. solves one or more of the most significant problems we are having now
  2. without introducing problems that are as significant as the problems we are solving

In other words, technology should be approached like optimization (which, in our world is typically strategic sourcing decision optimization or network optimization). Just like each potential solution returned by a proper mathematical optimization engine should provide a result better than the previous, each successive technology implementation or upgrade should improve the overall business scenario by both solving the worst problems and minimizing the overall severity of the problems not yet addressed by technology.

This is why it’s really important to understand what your most significant business problems are, and what processes would best solve them, before looking for a technology solution as that will help you narrow in on the right type of solution and then the right capabilities to look for when trying to select the best particular implementation of that type of technology for you.

Use IT or Lose IT!

No-bid quick buy, another overspend
You know Finance wasn’t involved again
I said hey, you, what you gonna do …
when audit comes for you?

Use it or lose it
Sweet pain is the name of the game
I said hey, hey, hey

You better use it, before you lose it
You better use it, don’t throw it away, hey
You better use it, before you lose it
You better use it, don’t throw it away, hey
Hey, hey, hey, don’t throw it away, hey

e-Sourcing, e-Procurement tools
Now online SaaSApps, subscription pools
I said hey, you, what you gonna do …
when audit comes for you?

Use it or lose it
Process is on your side
I said hey (hey), hey, hey, hey

You better use it, before you lose it
You better use it, don’t throw it away, hey
You better use it, before you lose it
You better use it, don’t throw it away, hey
Hey, hey, hey, don’t throw it away, hey

Sweet pain is the name of the game
I said hey, hey, hey

You better use it, before you lose it
You better use it, don’t throw it away, hey
You better use it, before you lose it
You better use it, don’t throw it away, hey
Hey, hey, hey, don’t throw it away, hey

Don’t throw it away.