Supply Management Technical Difficulty … Part I

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master‘s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. We’ll take it area by area in this series.

E-SOURCING – RFX

Technical Challenge: NOTHING!

I’m going to burst a lot of bubbles here, but there’s nothing technically sophisticated about the development and implementation of an RFX solution by any stretch of the imagination. In this day of age, one could pretty much implement a basic RFX application in HTML5, javascript, and MySQL with a bunch of open source libraries in a couple of days. Form elements, templates, basic branching workflow, weighting, etc. … you even see most of this in free survey tools. Even bulk file upload is just naming conventions. ( But it’s amazing how many vendors haven’t even figured this out. 🙁 )

E-SOURCING – e-Auction

Technical Challenge: NOTHING!

Again, more bubbles bursting by the dozens. Twenty years ago, implementing an e-Auction was a real challenge with relatively simple web technology, slow internet speeds, and lack of graphical frameworks that could be updated in real time. But today, there’s a host of cheap / freemium solutions that implement basic e-Auction functionality. Unless the vendor is tying in with an optimization solution in real time to create a optimization-backed auction solution, no reason you should pay much for these dime-a-dozen solutions.

E-SOURCING: Optimization

Technical Challenge 1: MODELLING

This comes in two forms.

1. Structured for “Easy” Definition

Creating one or more templates that allow a user to quickly define the entities of interest — suppliers, products, services, locations, lanes, etc., collect the bids, define the constraints, and solve unconstrained, and maybe default constrained scenarios (3 suppliers, geographic split, etc.). Making what’s hard easy is no easy task.

2. Free-Form for Custom Models

Not every model the organization will need to create will fit in a template — especially if the organization wants to optimize working capital, minimize risk, cross-optimize related categories, etc. This requires the ability to allow end users to define the models they want using a modelling interface, which will not be easy to build because how do you hand over all the power but still make it understandable by a non-programmer / non-mathematician.

Technical Challenge 2: SOLVING

It’s hard to build these models, but it’s much harder to solve them. First of all, you have to map them to a system of equations that can be solved by your, hopefully, mixed integer linear programming solver (as you want to use a solver that is mathematically sound and complete), optimize them, optimize the solver settings, and hope that everything was translated consistently and there are no conflicting or unsatisfiable constraints and the model can be solved in a reasonable amount of time. Given that solution time grows exponentially with model size, this can be quite a challenge even for moderate sized models.

E-SOURCING – Contract Management

Technical Challenge 1: Contract Analytics

A simple contract management application, which is nothing more than meta-data based contract indexing and tracking, can literally be built by a high-school student with an Access database and go head-to-head with most of the basic contract management modules out there today! In fact, most of the capabilities of most contract management modules are pretty simplistic and can be built in a matter of days with a good BPM configurator (and companies like Agiloft have done it). The exception is contract analytics (like that provided by the likes of Seal Software).

Using semantic analysis to figure out what contracts contain clauses of a certain type, what contracts are missing clauses that pertain to a certain regulation, and whether a certain clause is close enough to a required / suggested clause is not easy. Not easy at all! Semantic technology is still emerging, and trying to capture a user’s wants, even given a set of sample clauses, is quite computationally difficult!

IN SUMMARY

With the exception of decision optimization and contract analytics, baseline e-Sourcing is pretty much common fare today that can be bought off the shelf from dozens (and dozens) of providers, but, as you can see, it’s not all equal — any provider with true decision optimization or true contract analytics is leagues ahead of anyone else.

And, of course, in this series, we’re not discussing the User Experience, and in some cases, a good User Experience, while not always challenging to code, can be
very challenging to define.

Next up, baseline e-Procurement!

Will Coupa Inspire?

Inspire starts tomorrow, with what many would consider an impressive line up of speakers, including the great Wozniak, co-founder of Apple. The question is, will you be inspired, and, most importantly, will you be inspired by what they have to offer.

It’s a good question, and one each person will have to answer for themselves. But, at least in the doctor‘s view, an equally good question is what should inspire you?

In our space, most of the technology being sold is, believe it or not, (well) over a decade old. In some cases, it’s *gasp* two decades old. RFX / Auction is over two decades old, and one of the early purveyors, FreeMarkets, was founded 22 years ago. Coupa launched its core offerings on Procurement Independence Day 11 years ago, and the core technology in each of the half-dozen companies it has acquired over the last few years is over a decade too — including Trade Extensions (now Coupa Advanced Sourcing) and Spend 360 (Coupa Analytics).

So what should inspiring? Especially in this day in age? One word. One critical word that is the last word in Coupa’s one sentence event description that claims Inspire is the biggest industry event for creating real, business value. New and differentiated value that you could not obtain before. And where should one look for that value?

The User eXperience

A good user experience can’t be oversimplified. An application that takes a week to learn basic functionality and a month to do anything of moderate complexity greatly extends time to value and limits how much a user will ever be able to do. But an application that is intuitive, makes it easy for a user to do standard tasks with no training, and complex tasks with the help of user guides gets a user to value quickly. Plus, a good experience makes a user want to do more while a bad experience makes a user want to avoid the application as much as possible. And a user experience that is leaps and bounds ahead of the current standard will bring immediate, unexpected, benefits that cannot be predicted.

Multi-Functional Application

Right now, a lot of the current technology is not only narrowly focussed on Procurement but also on direct and indirect sourcing of products and basic services. There is little focus on specialized areas — such as Marketing, Legal, and Finance — or on broader applications — such as Finance analytics, Logistics improvement, MRO. An application that can also provide the same value to other departments and bring more than point-based value to the enterprise is many times more valuable than an application with limited focus and even more limited results.

An Inclusive Design

As SI has continually pointed out over the years, your success is extremely dependent upon your suppliers’ success because their failings are your failings. If their products fail, your customers blame you. If their reputation fails, so does yours. They need to be as successful as you in order for you to succeed. So tech that helps you make this happen is key.

So, in summary, when looking for inspiration, look for that which is going to really change the way you, and your team, does business. And if you find this at Inspire, then it will be a game changer for you.

One Hundred and Six Years Ago Today …

The United States Supreme Court declared Standard Oil to be an “unreasonable” monopoly under the Sherman Antitrust Act and ordered the company broken up. Given the constant M&A spree across the technology space as a whole, and not just the Procurement space, the concept of an unreasonable monopoly is again becoming relevant.

Alphabet (Google), Apple, IBM, Microsoft, and Oracle are all Fortune 100 companies, and all of these not only control massive amounts of data (that is now more valuable than gold), but massive amounts of software — and in most cases, back office software and, in a couple of cases, Procurement software. Now, only Oracle has a major Procurement offering, with SAP (Ariba), a Fortune 200, being the biggest in our space, and makes companies like Coupa (at a mere 1.67 B valuation, 1/70th of SAP’s) a drop in the bucket, but still, at the rate Coupa in particular is gobbling up companies and building a best-in-class S2P offering, it won’t be long before an Alphabet, Apple, Microsoft, or even a Salesforce take interest and gobble them up, offering an integrated inbound-outbound back-office management system at a 100B+ valuation like SAP.

At this point you gotta wonder if we’re soon going to have to worry about technology monopolies and our software companies being broken up — Alphabet has undue influence over the internet even compared to Apple and Microsoft; Microsoft has undue influence over the desktop even compared to Apple; and Apple has undue influence on the mobile market with its iPhones and iPads, and these companies all have a host of other offerings (subsidized by the insane profits their primary product lines offer) that are, or will, become hard to compete with. And if one of these companies ever gets the IBM back-office model or the Oracle one-instance model right, they will literally have an enterprise software monopoly.

And the sad thing is that while data, internet, desktop and software monopolies are bad, right now Fortune 500 / Global 3000 companies desperately need end to end solutions in order to be efficient, effective, and bring their laggard supply management programs into the modern era. We need a few apparent monopolies to define the space, get it recognized, advanced the laggards to the point where they are ready for best in class solutions, but then we need these monopolies hampered so that new best in class companies have a chance to take the space program. It’s a delicate balance that is needed, but will it be maintained?

Two Hundred and Thirty Years Ago Today …

… the British really, really got it wrong! Instead of sending their prisoners to a remote northern region (like the Russians did) or to work in the hot semi-deserts of India (that they controlled) and generally achieve the common goal (at the time) of making prisoners’ lives miserable (to deter crime), they instead decided to load a large number of their prisoners onto 11 ships commanded by Captain Arthur Phillip and send them to sunny, warm, newly discovered tropical Australia, while the majority of their population stayed behind in a climate which, for most of the year, is rainy, dreary, and just plain miserable.

Talk about messed up. Not only were they sending the message “commit a crime and get rewarded with a permanent, tropical vacation”, but they were saying it’s good to be wet and cold the whole year through! 😉

Oh well, I guess it paid off in the end. No other nationality can claim more stiff upper lips and reservation than the British, and few other nationalities are as able to endure pretty much anything. Still, I would have transplanted the British population to Australia, called it New Britain, left the prisoners behind, and controlled a landmass 30 times the size (even if 35% is unliveable, that’s still a liveable area 10 times the size of the UK).

What Makes a Sourcing Suite?

Good question, and one both customers and vendors must answer in the days ahead. Last decade, it was pretty simple. You could claim a sourcing suite if you had decent e-Negotiation support with some document management and reporting. And if, instead of document management, you had contract management and if, instead of reporting you had real spend analysis, then you were best of breed. And if, on top of all of this, you had some basic project management or category guidance, you were awesome.

But that was then, this is now. These days, if you don’t have basic S2C (Analysis, e-Negotiation, Contract Management) with decent Supplier Information Management, you’re not even a contender. Plus, given that many providers are offering some project / workflow management, expert driven category guidance, bill of materials support for direct sourcing, contract analytics (not the same as contract management), deep SRM (Supplier Relationship Management, Performance Management, Compliance Management, Risk Management, Optimization and other unique offerings that they expect to gain them market-share.

So what do you need? Hard to say because the real answer is whatever you need to successfully conduct and monitor a sourcing event that doesn’t belong in the complementary P2P suite. That varies based on the category and the industry you’re in, but there is some commonality. Specifically, while still not a mainstay of sourcing suites, every suite needs project/workflow management, every suite needs some performance tracking and management (as that should influence not only current, but future, events), a minimum of SPM (supplier performance management) and not SIM, some compliance requirement and documentation management, and better than average analytics. And any organization that does a lot of direct sourcing needs Bill of Materials Management, and while most organizations don’t know it, you’ll always find a lower-cost allocation with an optimization-backed sourcing solution. (And going back to Wednesday’s post, this isn’t savings, this is avoidance of unnecessary costs.)

In other words, you need a lot. But, fortunately, you don’t need best of breed for most of this. The only solutions that continually provide year-over-year value of 10% or more (through avoidance of unnecessary costs) are advanced analytics solutions and true optimization solutions. So you need best of breed here.

But not for most of the other components, although certain components should be better than average. The RFX in particular. It should not only be ridiculously easy to create and modify RFXs (which are typically the beginning of every sourcing event) but also to bulk upload attachments (as this can kill days in large projects when you have ten bill of materials with a dozen to a hundred items each and each component needs its own spec document), define a team for collaborative and distributed creation and scoring, and one-click integration into the analytics and optimization modules for detailed analysis.

Another component that needs to be better than average is the Supplier Portal — you need to make it as easy as possible for suppliers to provide information, response to events, create collaborative corrective action plans, offer innovation ideas, and so on. You want your suppliers to work with you and find it at least a reasonable, if not an enjoyable, experience. If the portal, and integration options, are sub-par and painful to use, and leave a bad taste in their mouth, this will eventually sour the relationship.

In other words, while the exact definition of a Sourcing Suite can be a bit nebulous, the requirements it has to fulfill, especially for your organization, are not. And a key requirement is usability and a good user experience for buyers and suppliers alike. Keep this in mind when selecting your new sourcing solution.