Five Years Ago We Told You to Blame the Bankers …

… for the biggest risks in your supply chain, as per our classic post where we told you don’t blame the lawyers, blame the bankers because they were ultimately responsible for three of the top four most likely risks to disrupt your supply chain.

(Even though the doctor can sympathize with William Shakespeare when he said the first thing we do, let’s kill all the lawyers, the lawyers are not responsible for the current state of the global economy, the bankers are. And while it’s true that the lawyers are not innocent, happily taking the bankers money to do things that disrupt entire economies, it is the bankers that were the ringleaders here.)

But do we still blame all the bankers? Well, yes, we blame them for the economic risks that continue to persist to this day. But we no longer blame them for the top three risks in our global supply chains.

That honour goes to … The United States of America. Yes, that’s right. The root cause of the three biggest risks in your supply chain is the United States of America. (And not China, although there is a massive risk there as well. And if we wait a few more years, they might get their turn on top.)

How can it be? How can the United States be the single cause of the three biggest risks in your supply chain?

To explain that, we’ll start by repeating them for those of you that have not read The Global Risks Report 2019, 14th Edition, from the World Economic Forum.

According to this report, produced in partnership with Marsh & McLennan Companies and Zurich Insurance Group, the three biggest risks are:

  1. Extreme Weather Events
  2. Failure of Climate Change Mitigation and Adaptation
  3. Natural Disasters

and, as should be obvious, these are all interconnected.

Many (if not the majority of) natural disasters are the result of extreme weather events, and many (if not the majority of) extreme weather events are, whether your choose to believe facts or not, the result of the failure of climate change mitigation and adaptation.

And why has climate change mitigation and adaptation failed? Because it hasn’t happened. And why hasn’t it happened? Because countries aren’t aggressively working toward it. And why is that not the case? Because only 175 parties, of 197, have ratified The Paris Agreement (the UN Convention on Climate Change) … and one party that initially accepted has withdrawn (and done so in a very public manner). Guess what that country is? You guessed it!

The United States of America has withdrawn from the Paris Agreement. If the country that is responsible for approximately 25% of global GDP refuses to support the most important initiative in the world (which still falls short of where we need to be to truly mitigate climate change, but would make a substantial impact on slowing climate change down), especially when it comes to preventing the three biggest risks in your supply chain, then that country is unilaterally responsible for those risks.

So next time a typhoon sinks the freighter carrying all your goods, don’t blame God, Poseidon, or Mother Earth. Blame the United States of America. Or, if you really want to, blame Trump. But don’t blame God or nature because, with the current rate of increase in the number of natural disasters annually, there will soon be a 90% chance that it the natural disaster is 100% the result of climate change brought on by the United States inaction to do anything about it.

The Value of Market Intelligence in a Down Economy

A decade ago we ran a piece on The Value of Market Intelligence in a Down Economy because it was a down economy near the end of last decade and many organizations were overlooking the importance of market intelligence at a time when it was needed most. (Because, when times get tough, organizations always cut the training budget first and the intelligence / consulting budget second, even though the only thing that will get the organizations though the tough times is their talent — which needs to be as educated and informed as possible to do the jobs that need to be done.)

But now that depression era economics are about to make a come back, SI believes its time to repeat the message in the hopes that you will do the right thing and make sure that, under no condition, do the limited market intelligence and training budget get cut when they are needed most.

Remembering that success in a down economy stems from smart sourcing, and that smart sourcing stems from intelligence, it should be pretty obvious how critical market intelligence is, but just in case it is not, let’s remind you that:

  • market cost data is market intelligence
    and without it, you don’t have enough data to know how much you should be paying (even if you have extensive should cost models because, guess what, those component costs need to come from the market)
  • expected supplier performance is market intelligence
    even if you have lots of historical performance data across your supply base, that doesn’t tell you how good a supplier should perform, just what would be better performance for your organization
  • expected product quality, lifespan, and consumer usage levels is market intelligence
    and you are only going to get so much data from your customer base, and none for a new product line under development

Plus, when you look at the big picture:

  • it’s not as expensive as you think it is
    since a lot of the data or information you need to spot trends and focus on the core issues and data points is low cost, and even expert advice at 5K a day is nothing if it saves you 50K of internal research or steers you toward a solution that helps the organization generate a 500K return
  • it enables supplier performance, and relationship, management
    which is key in difficult times — just look at the auto industry. When times get tough, the American automakers (that score dismal on the OEM-Supplier Working Relations Index [OEM-WRI]) all fail while the Japanese (and Korean), who cooperate and collaborate with their suppliers (and rock the OEM-WRI) always pull through
  • intelligence gathering is an iterative process
    not “one-and-done” and if you stop, especially when market conditions are changing constantly and could change drastically at some point in the near future, you can be blindsided by an event that could grind the entire organization to a halt

Market Intelligence is critical for good decision making – in good times, and bad. Especially in bad. It identifies risks before they materialize and insures that your contracts have appropriate risk mitigation clauses built in. It leads to savings and cost avoidance that would never be identified without it. And while it doesn’t always require multiple high six-figure subscriptions to analyst firms … it does require some spending to keep up with what you need, when you need it. But if you choose wisely, it will save you 5X to 10X what you spend or help you increase your value proposition by that amount.

So get the intelligence you need. Today.

It’s 2019. This is What QuickStart Sourcing Should Look Like!

As we mentioned in yesterday’s post, a decade ago the Oompa Loompas at Coupa announced the availability of Coupa QuickStart which was simply a setup wizard that visually guides purchasing mangers through the setup process for users, approval rules, payment and shipping terms, billing information, chart of accounts, suppliers, and other basic information that was required to get a purchasing system up and running in less than an hour.

But just being able to order a product from a catalogue or send out a simple RFP is not very strategic, especially for 2019. And these days, any event that is not strategic is not going to generate much value when savings are drying up, brands are falling, and spending is falling as GDP growth stagnates and we return to depression era economics.

Needless to say, not only should every system have the capabilities that Coupa had 10 years ago, and the capabilities that we outlined in yesterday’s post on what QuickStart Procurement should look like, but that’s not enough. Not for 2019. Ten years ago we were promised semi-cognitive systems, and most systems can’t even automate basic invoice processing. It’s sad, sad, sad.

So, what should a modern system have? One built this decade?

  • smart RFI creation
    that, as per yesterday’s article, can be generated purpose built for the products in question using templates and organizational data in the ERP
  • smart RFI monitoring
    that can monitor the event, send out reminders, automatically check inputs against public data, organizational data, and expected data, and send out alerts to buyers when suppliers are late, inputs are off, or bids are outliers
  • smart bid analysis
    that can compare bids to past bids, market averages, and expected costs from reasonable should cost models
  • smart award recommendations
    based on bids, delivery times, availability, and supplier preferences
  • automatic auctions
    that can auto-populate from RFIs, auto-run, auto-monitor, auto-enforce rules, and auto-award and notify winners when the auction is over (as they won’t be invited to the auction if they don’t agree to the necessary terms and conditions to be offered an award beforehand)
  • automatic default contract creation
    that uses the organizational boilerplate, terms and conditions, default category clauses, awards, and associated obligations to generate a default contract
  • automatic document comparison and change tracking
    even if the supplier sends back a signed PDF that looks like the one you sent, every character will be analyzed
  • automatic performance monitoring plan generation
    that will track, based on the contract, when orders should go out, when goods should be received, when documents should be received, when reports should be received, when other deliverables should be received, when assessments should occur, etc.
  • real-time performance monitoring
    that monitors a plan, sends out alerts to buyers when deliverables are missed, sends out alerts to suppliers when they have not submitted a document or a shipment notification on time, automatically sends out pre-defined performance assessment surveys, etc.

Quick Setup is more than a wizard, it’s an assisted intelligence platform backed by sophisticated algorithms community and market data, and all organizational data and processes to mitigate the need for the buyer to do pointless tactical data processing in the first place and focus purely on the strategic analysis of RFX responses, when the relevant data and insights have already been generated by the platform.

But how many platforms have that today? The same umber of platforms that have assisted intelligence for Procurement. Zero.

In other words, just like Procurement Leaders are stuck in 2009 (as per yesterday’s article, but so are the vast majority of technology providers. So when looking for a new solution, find one of the few technology providers on this path. Otherwise, your solution capability will be nought, and that’s the decade you will return to. Not something anyone wants.

It’s 2019. This is What QuickStart Procurement Should Look Like!

A decade ago, Coupa announced the availability of Coupa QuickStart, which was a setup wizard that visually guides purchasing mangers through the setup process for users, approval rules, payment and shipping terms, billing information, chart of accounts, suppliers, and other basic information that was required to get a purchasing system up and running in less than an hour.

Needless to say, every system should have that capability today (even though a number still don’t), but given that this was on the market 10 years ago, systems should have advanced considerably since then.

What should they have? More than we can cover in one short article, but at a minimum:

  • AI-powered normalized supplier network with community intelligence
    and out-of-the-box plugins to allow for quick import of your vendor master(s) from all standard ERP and S2P systems (as well as support for complete XML and CSV exports) and AI to allow for quick de-duplication of suppliers between the network and your enterprise vendor master(s)
  • Powerful search capability for quick supplier discovery that can take advantage of detailed product descriptions, community intelligence, and organizational profiles to find intelligent, well-rounded matches
  • HR system / standards support
    to allow for a quick import of employee profiles and organizational hierarchy direct from major systems or standard export files
  • AP/Budget system / standards support
    to allow for quick importation of budgets, approvers, and where possible, budget rules
  • ERP/IMS integration or standard export file support
    to allow for quick importation of categories and products purchased regularly, as well as demand for the past 3 years and current category suppliers and prices
  • ERP/TMS integration or standard export file support
    to allow for identification of current carriers, the categories/products they currently export, and standard LTL/FTL rates
  • AI for profile completion
    that imports the relevant organizational profile data from each of the above systems or exports to build the necessary profile that can be shared with suppliers for shipping, invoicing, etc.
  • standard category templates for RFPs that can be tailored as needed by an AI that uses past event data in the ERP and current product data in the IMS to tailor the template as appropriate

In other words, it’s 2019 and

  • an admin user should not have to define users, the platform should be able to do that automatically given a HR system (export)
  • an admin should not have to define approval rules, the platform should be able to identify the most appropriate rules given budgets, approvers, and payment thresholds defined in the AP system
  • an admin should not have to define payment and shipping terms, the platform should be able to export that information from the AP, ERP, and/or IMS systems
  • an admin should not have to define billing information, that should be automatically extracted from the AP system
  • an admin should not have to define a chart of accounts, that should be automatically extracted from the AP/Finance system
  • an admin should not have to define/import suppliers manually, those should be pulled in from organizational systems automatically, normalized, and vetted against networks the buyer has access to
  • a buyer should not have to create an RFP template from scratch, the platform should present an appropriate one for the category and products based on community and organizational intelligence
  • a buyer should not have to do an extensive, time-intensive discovery process to identify new, suitable, suppliers, an AI-backed discovery engine that runs on a community intelligence backed network should identify suitable suppliers in minutes (and support the construction of qualification scenarios in just a few more minutes)
  • a buyer should not have to manually manage the invitation, send out, monitoring, and reminders of the RFP, nor manually verify all data for reasonability and completeness, the AI should do that automatically, and automatically alert suppliers to complete missing data, check values that might be outliers, etc. and automatically alert the buyer of suspicious / missing data upon supplier submission

Quick Setup is more than a wizard – it’s using assisted intelligence backed by sophisticated algorithms, community data, and all organizational data to mitigate the need for the organization to do pointless repetitive setup in the first place! But how many platforms have that today? Unfortunately, when the holistic picture is taken into account, the answer is zero.

So, not only are Procurement Leaders still stuck in 2009 (as per yesterday’s article), but so are the majority of technology providers. So when looking for one, find one on this path, unless you want to return to the decade where a lot happened, but little is remembered. Or do you want to do something where you’ll be remembered? Like selecting a platform that could not only modernize Procurement but open it up to the entire organization. Your call.

We’re Still Stuck in 2009 … Why?

Five years ago, the doctor wrote a post about how the doctor’s 2014 Procurement Prediction is Going to Come True and that 2014 was going to be 2009 Part VI and

  • the focus will continue to be on cost-cutting and not value-creation,
  • valuable, high-ROI, technology will continue to be ignored, and
  • the training and new talent budgets will remain empty.

And it was a sad state of affairs. And he’d hoped that, by now, things would have changed. But if you check the latest Deloitte Global CPO Survey, 78% of CPOS are still PRIMARILY FOCUSSED on Cost Reduction!

Unless they’re Procurement team has been totally incompetent for the last five year, that’s not going to happen. We’re about to return to Depression Era Economics. We’re heading for a downturn a result of a global slowdown in GDP growth. China can’t keep building empty cities. The US can’t continue to build (defence) debt and grow without an immigrant workforce that will do the jobs Americans don’t want. Goods can’t continue to get cheaper when labour costs are rising and materials are becoming scarce. Outsourcing is not going to get cheaper when transportation costs have to rise as energy (oil) costs rise. And so on.

Also, the study found that, even in 2018, only one third of Procurement Leaders use modern technologies such as predictive analytics and collaboration networks.

And over half of Procurement Leaders believe that their current teams do not have sufficient levels of skills and capabilities to deliver on their procurement strategy … proving that they have, as expected, not been investing in training like they should have been.

Eleven years ago, Hackett published a vision of Procurement in 2020 where it predicted that, through a year-over-year evolutionary strategy, it would reach the point where it was harnessing the power of supply markets to maximize the value it is getting from its spend, enabling business strategy, and optimizing its tactical execution. But, in an average organization, Procurement is, at least for now, still overspending, still divorced from business strategy, and unable to react to unexpected disruptions or opportunities in the supply chain.

And it looks like 2020 is, not as everyone predicted in the noughts, going to be 2009 Part XI. Who will take the lead and change it?