Procurement Requires MORE Than a Platform

As a result of the M&A frenzy that continued throughout 2018 and recent investments by P&E firms taking majority stakes in a few suite players, every vendor is now all about the “platform” because apparently the “platform” is the ultimate software solution for every Procurement organization.

While it’s true that some vendors are bringing platforms to market with immense value, a platform, in and of itself, has no value. To put it into simple terms, a platform is what you build on … and the best way to think about it is like a construction platform. Without it, you can’t build anything significant … but it doesn’t do you any good, and that’s why the construction company generally takes it away when they are done. The only difference is that a software platform is, in reality, a mix of a foundation (that you build your office building on) and a platform (that is used to finish the walls, etc. on the higher floors).

The reason a platform is important is that, without it, there is no foundation for integrating new modules, integrating third party best-of-breed solutions, or integrating third party data feeds that bring facts and intelligence needed by the organization to make good Sourcing and Procurement decisions.

There’s a reason we asked why is it all about the platform when it should be all about the power last year in the midst of the M&A frenzy. A platform, on its own, does nothing, saves you nothing, but still costs big licensing fees.

Before you jump on the “platform”, make sure it has the “power” that is worth the price-tag. If it’s 100K, there better be 100K of functionality out of the box.

Plus, if it’s a real platform, it should have sufficient do-it-yourself connectivity because, as we have noted many times, no platform excels in everything that is needed to support the S2P cycle and you will have to bolt-on some best of breed solutions and integrate third party data feeds.

Always remember, despite the table pounding and cost-cutting demands, your job is to generate value. There’s only so much cost that can be cut in any category, and once it’s cut, that’s it. So you need something that can identify more value (in value-add services, differentiated/sustainable components the organization can charge a premium for, better reliability, etc.). That takes more than just a “platform”.

How Do You Identify A Truly Stellar Supplier? Part III

Assuming one exists …

Five years ago we first asked this question and a few answers we gave was a stellar supplier was a supplier that

  • actively self manages
  • measures, tracks, and even reports its own performance against SLAs and KPIs
  • accepts — and even helps to identify — the corrective actions it needs to take
  • actively works to not only meet expectations but exceed them
  • communicates as soon as something happens that could threaten a KPI, SLA, commitment, or expectation.

And if multiple suppliers met these requirements, you wanted one that is willing to

  • collaborate
  • jointly identify opportunities for efficiency improvements and cost reductions

But then last year we noted that we missed something important. Most importantly, none of this mattered unless the supplier was willing to

  • open its books
  • expose its supply chain and jointly identify tier 2 risks

But this is not everything that makes a stellar supplier. While its critical that any strategic supplier open its books and expose the risks that affect you, one more thing is critical.

  • platform adoption

If you’re using modern S2P platforms, they all rely on data to deliver their value. And a lot of the data they require is supplier (-related) data that needs to come from the supplier. And since there is no way you can enter all of the data you need from all the suppliers, you need them to use the portal you provide them. You need them to adopt your platform. If they won’t, they are not the stellar supplier you need.

Why Are CFOs and CPOs Still Delusional When it Comes to Analytics?

the doctor was recently asked if an organization needs a dedicated Sourcing Spend Analytics solution if the organization already has a generic BI tool that sits on top of its ERP or data warehouse. Well, while the answer is No in theory, it’s rarely No in practice. This is because even if the generic platform you have can support (sourcing) spend analysis, chances are it hasn’t been set up for that. And it will need to be (heavily) customized.

So you either need to get a consultancy and do a lot of specialization, or buy a dedicated solution that is ready out of the box — and, preferably, if possible, buy one that is built on top of your BI platform if you bought one (like Tableau or Qlik) that is best in class.

As we noted in our piece last year that asked why do we still have first generation ERP/Data Warehouse BI, most arguments for generic BI have more holes than swiss cheese. As the Spend Master noted himself ten years ago in his classic, but still under-read, piece on screwing up the screw-ups in BI:

  • central databases, like the kind favoured by most BI tools, don’t solve the analysis problem
  • business analysts should be able to construct BI datasets on their own
  • a governance and stewardship program, which is likely the reason for the generic BI platform acquisition, doesn’t actually put any meat on the table
  • cleansing is often the problem, not basic analysis & reporting
  • BI systems are difficult to use and set up, it is difficult to create ad hoc reports, and it is impossible to change the dataset organization … all the stuff that makes spend analysis, you know, valuable

Plus,

  • BI reports are pretty generic, and not fine tuned to Sourcing, Procurement, or Finance
  • BI engines work on one schema — the ERP schema … which is rarely suited to spend analysis
  • BI engines expect all of the data to come from the ERP. SA systems don’t.
  • The ability of first (and even second generation) BI engines to create arbitrary reports is considerably overstated.

Hopefully someday soon CPOs and CFOs alike will get the point that if you want to do proper Sourcing and Procurement Spend Analysis, you need a proper Sourcing and Procurement Spend Analysis Solution.

There is No Bright Side to a US-China Trade War

I’ve read a few pieces over the last couple of weeks that some Asian nations expect that a drawn out reciprocal trade war between the U.S. and China could have a bright side for them as they expect that they can lure more manufacturing or agricultural exports their way.

Sounds good in theory, but here are the problems with that theory.

1. A lot of outsourced production over the last two decades has become highly specialized to the point where very few nations have factories with production lines that can produce the goods.

2. The modern electronics industry relies on rare earth metals, and China is the majority producer for many of these — in fact, only a few nations on the planet produce some of these rare earth metals.

3. The only nation that can rival China in agricultural production in Asia is India.

4. A number of companies that need supply assurance have locked in contracts with Chinese (multi-)nationals that can’t be easily broken without penalties.

5. International trade requires logistics infrastructure — good roads, reliable trucking, modern ports, large cargo carriers, etc. Something that not many countries in Asia outside China and India (and to some extent Japan and South Korea) have a lot of.

In other words, there’s not a lot of outsourced production that can be easily switched to other Asian countries, and, most importantly, if China becomes unattractive to the U.S., which we must remember controls about one quarter of global GDP, then

6. Central and South American sources can be just as attractive, and can be easier to source logistically.

Trade wars are never good, and there is no bright side, especially in this trade war.

Thirty Five Years Ago Today …

Apple Computer’s Macintosh personal computer goes on sale in the United States, beginning an era. As the first mass-market PC with a GUI (graphical user interface), built-in screen, and mouse, it set a new standard for the modern computer age.

While it wasn’t adopted en-masse initially due to its high cost (compared to the Commodore 64 and the IBM clone market), it set a new standard when when Apple consolidate down to 4 models 5 years later — the Power Mac G3, the iMac, the PowerBook G3, and the iBook — with more competitive prices and aesthetic designs, Apple became profitable and started its trek to become the brand of choice for the discerning enthusiast.

Now every device, including our pocket phones, have built in screens, GUIs, and trackpads (mouse replacements). The Macintosh ushered in a computing revolution. It just took a few years longer than Apple expected.