7 Sourcing Secrets Everyone Should Know By Now … Part I

… but don’t, because if they did, Source-to-Pay would be ubiquitous across the space.

If you’re a long-time reader of SI, you can skip these posts because you already know it all. But if you are a new reader, and haven’t scoured the archives yet, these posts are for you.

Even though most of the time the doctor gets to interact with people who’ve been there, done that, probably failed because they were using an older, insufficient, product, sometimes someone comes along who’s never really had real tech in one or more areas and the obvious is new. And since new readers still stumble on SI, it’s important to get them up to speed … fast. So, here goes — because you really really really should know the following “secrets” that, after more than a decade, should not be secrets anymore.


1. e-RFX is electronic support for the full information and quote gathering cycle, not just bid collection

If all your e-RFX does is allow you to collect bids, it’s not e-RFX. It’s e-RFQ, and a poor e-RFQ at that. It should allow you to create questionnaires, surveys, and entire RFX packages with closed and open-ended questions, allow you to compare responses side by side, and allow you to collect not only all of the pricing, but all of the discounts, rebates, and promotions the supplier offers. It should help you manage the process, guide you through it, engage with your entire team, and support data import and export in open formats so that you can also use analysis, optimization, and contract management tools.


2. A Reverse Auction is simply an online auction event, it’s not a substitute for proper sourcing project management

We follow the space closely and not a month goes by where we don’t see an article on how Company XYZ is now refusing to participate in online auctions or company ABC no longer wants to use them because they got poor results or inflated costs after the award. When you dig down, this is because the supplier had a horrible experience or the buyer didn’t properly qualify the supplier or the product/service requirements. When you dig deeper still, you find out it is typically either because Company ABC simply threw an auction tool at the supplier and told they had to bid through the tool or lose all their business or Company ABC threw up an auction tool and said they’d award to the lowest bidder and either bought a product that wasn’t qualified to meet their needs or ended up ignoring the auction result and going with a different supplier, usually the incumbent, after the auction closed.

We find this appalling, because e-Auctions, like e-RFX, are not only a great time saver, but a great way to bring parties together from around the globe and allow them to participate in an e-Sourcing event that, when run right, is more transparent, educational, and profitable for all parties concerned than traditional methods of sourcing where you get bids by phone and fax until you find three bids you like and then meet in a room to “negotiate” until a deal is struck with a winner – especially for a commodity, low-dollar, and/or non-strategic category. (And we use the term “negotiate” loosely because old style purchasing methods usually boil down to the party with the most leverage beating up the party with the least leverage.) But this is only true if the event is run right. This takes proper project planning and management. Tools can facilitate the process, but they can’t replace it.


3. (Strategic Sourcing) Decision Optimization is for everyone, not just for math geeks!

We’ll admit this is the doctor‘s personal bandwagon, but having seen savings of over 40% and ROIs of over 400 on a number of projects, and average savings in the 10% to 20% range and average ROIs of 5X to 10X or more, the doctor knows he has a good reason for riding it. Despite the fact that true self-service decision optimization for sourcing has now been around for almost two decades, it’s still the “black sheep” that almost no one uses — and it’s a real shame because now is the time you need it most. Furthermore, the new tools coming out of the leading providers are not only a lot more usable than the first generation tools, but they are also more usable then second generation tools, and can be easily used not only by an college graduate who can build a cost model and specify some business constraints but by any high-school drop-out that can follow a workflow (as they allow the college graduates to build category and event specific templates that anyone can easily follow). In other words, if you have the pre-requisites for strategic sourcing, you can use these tools to save time, to save money, and make better, more informed, decisions.


4. Spend Analysis is flexible Data Analysis, not canned reports on a data warehouse populated via automated classification

Real spend analysis is the ability to dive into your data and find out not just where your true spend is higher than it should be, but why. This requires you to have the ability to slice, dice, and cube your data on any dimension you can think of, because you’re never going to know where the losses are until you find them. (After all, if you knew where your holes were, wouldn’t you have plugged them already?) Canned reports on a static data warehouse can only tell you how fixes you’ve already implemented are working, not where the holes are. Furthermore, “automated classification” (which is not the same as automatic classification rule suggestion) just doesn’t work. Any good consultant worth his salt can load your data into a real data analysis product and find two dozen mistakes in twelve minutes. You need the ability to define and redefine mapping rules on the fly as all automated classification can do is fix previously identified mistakes. It can’t identify new ones. Software isn’t intelligent (despite all the voodoo claims out there). People are (at least until we blindly trust the machine).

Come back tomorrow for Part II!

Algorhythm: Twenty Years Later and the Optimization Rhythm Has Not Missed a Beat

It’s been almost a decade since we covered Algorhythm (Part I and Part II), and that’s because the last time the doctor caught up with them mid-decade, they were deep into creating their new accelerated cloud-native rapid application development platform, called AppliFire, with native mobile-first development support capabilities. And while it was very interesting, it was not Supply Chain focussed at the time, and not the core of what SI covers.

But fast forward about five years later, and Algorhythm has re-built their entire Supply Chain Planning, Optimization and Execution Management platform on top of this new development platform and now has one of the most modern cloud-native suites on the market — which not only has the capabilities of big name peers like Kinaxis, E2 Open and Infor, but also the ability to run on any mobile platform with seamless integration across modules and platforms.

And their optimization capabilities are still among the best on the market, and possibly only rivaled by Coupa Sourcing Optimization (powered by their Trade Extensions acquisition) — demonstrated by the fact that whether you are dealing with a demand plan, manufacturing plan, production plan, supply plan, logistics plan, route plan, or any other plan supported by the system, their system can find the optimal solution no matter how many demand locations, plans, sites, suppliers, products, lanes, etc. — and can do so rapidly if the user doesn’t overload the scenario with unnecessary constraints. (Even without constraints, these models can get huge, as the doctor knows all too well, but yet they solve rather rapidly in the Algorhythm platform.)

The Algorhythm suite of twelve (12) integrated Supply Chain Planning, Optimization, and Execution Management Modules is not only one of the most complete end-to-end suites on the market, but one of the most seamlessly integrated as well. It’s very easy to take the output of the “Demand Planner” (which allows the entire organization to collaborate on forecasts) and pump it into the “Manufacturing Network” (which integrates with the “Distribution Network” and “Inventory Planner”) to create a manufacturing (site) plan and then pump that into the “Production Planner” to create a manufacturing schedule by site and then push that into the “Logistics Planner” to determine the best logistics plan and then push that output into the “Route Planner” to optimize lanes and so on. (The suite also includes a “Supply Planner” to optimize individual shipments for JIT manufacturing; a S&OP planner to help sales and operations balance demand vs. supply; a “Manufacturing Execution System” to break PDI (Production Parameters) down, fetch actual production data, and validate results; a “Distributor Ordering” Management module to automatically create distributor orders across thousands of distributors; and a “Beat Planner” to optimize last mile delivery for outbound supply chain for distributors or CPG companies in geographies — like Asia — where last mile is difficult (due to inability to send large trucks, need to restock daily, etc.) With the exception of strategic sourcing and initial supplier selection, they basically have inbound demand to outbound supply covered in terms of supply chain optimization and management once you know the suppliers you are going to buy from and the products that are acceptable to you.

The UI is homogenous across the suite, and the modern web-based components such as drill-down menus, buttons, pop-ups, and so on make the suite easy to use — especially when it comes to tables and reports. The application supports built-in dynamic Excel like grids and tables which can be altered dynamically on the fly with built-in pagination to make navigation and view-control navigable, especially on tablets (for users on the go). It also supports standard (Excel-like) charts and graphs with drill-down, as well as modern calendar and interactive Google Map components. Navigation is easy, with bread-crumb trails so a user doesn’t get lost, and response time is great. It’s powerful and useable, which is exactly what you need to manage your supply chain on-the-go.

There’s a reason they have some of the biggest names in the F500 as clients, and that reason is their unique combination of

  1. power,
  2. ease of use, and
  3. and understanding of the Asian supply chain needs (especially around last-mile delivery).

The last point is especially relevant as many of the big name American (and even German) supply chain companies don’t really understand the unique complexities of (last-mile) supply chains in India and Asia. However, Algorhythm’s unique capability combined with their understanding has made their platform a force to be reckoned with in a market that is one of the hardest in the world. And as a result, they have built a platform that is more than sufficient for every other market as well. the doctor is looking forward to seeing more of Algorhythm outside of the Asian market as, at least in his view, the supply chain market in general needs a good kick in the pants as innovation there-in has considerably lagged the Source-to-Pay market that we primarily cover here on SI.

So if you need a good Supply Chain Orchestration solution, the doctor strongly encourages you to check out Algorhythm … you won’t be disappointed.

Ten Years Have Passed and Still Some Companies Don’t Want a Check-Up by the doctor!

Ten years ago the doctor penned a post here on SI which noted that one of the regular features here on Sourcing Innovation (and now over on Spend Matters too for those that opt for the full physical) are vendor solution reviews, which occur only after the doctor has seen the product. This vendor coverage provides solution providers with a great opportunity to reach a broad, global, audience and are generally quite well received. But there are still vendors, some who have been around since 2009 or longer, that still don’t get their checkup, even when reminded by the doctor or the administrative team at Spend Matters.

Occasionally the doctor tries to figure out the most likely reasons why, but at the end of the day the five reasons put forth in 2009 still bubble to top:

  1. The product doesn’t exist.
  2. The product doesn’t work.
  3. The product works completely differently than the marketing spin around it.
  4. A discussion of the product’s capabilities “gives too much away” to competitors.
  5. the doctor is distrusted for some reason.

And the doctor‘s responses are the same as they were a decade ago.

As far as 3,4,5 are concerned, no legitimate vendor in our space is selling snake oil or moonshine. All the products work, and accomplish some significant fraction of their mission. So that can’t be it.

With regard to 2, companies should understand that their competitors know them well, perhaps better than they know themselves. Nothing that the doctor might say is going to give away any secrets.

Finally, with regard to 1, the doctor has never slammed a company with a product that accomplished its designated task reasonably well, especially when the company is open about its strengths and weaknesses. The Sourcing Innovation and Spend Matters Pro vendor post archives prove this, far better than any claim we could make here.

Moreover, if a prospective target can’t find any external reviews on you, how are they going to find you? And even if you find them, why should they trust such a closed, secretive, organization? Think about that.

All the doctor can say is that if there’s nothing [relatively recent – last 2 or 3 years at most] out there about you, then you should reach out and get on a review calendar today (especially since the few senior analysts who are left are now booking months in advance due to increased demand now that our space has produced a few unicorns).

You Wouldn’t Let Your Banker Pick Out Your Job …

So why do you let a systems implementor / integrator choose your Sourcing / Procurement system???

And while you might initially believe that this simile is far-fetched, the reality is that it’s very close to home. While a banker is the right partner to help you manage your money, he or she is probably the worst person to figure out the right job for you given that he or she doesn’t really know you. Similarly, while you’re preferred implementation / integration partner is probably the best company out there to implement the platform that will control the majority of your organizational spending, chances are that partner has no knowledge of the true breadth of your Procurement processes work and no clue what the right kind of system for the organization would be. And as a result, just like a banker might steer you towards a job you’d fail miserably at (and lose, leaving you without a pay cheque), an implementor / integrator might steer you towards a system that will not work at all for your organization, and cost your organization millions in the process.

Furthermore, this is also true for any consultancy that has partnerships with a select group of source-to-pay vendors. In fact, taking advice from any of the consultancies that have partnerships with a select group of source-to-pay vendors is MORE risky than an implementation partner without any relationships. Why? Because these consultancies, by way of their partnerships, tend to ONLY recommend their partners because:

  1. that’s all they tend to implement, and know, and
  2. their partnerships provide them with referral fees, guaranteed services, and / or higher margins (and the senior partners at these consultancies mandate that these options are always recommended)

So, if your preferred consulting partner only has relationships with platforms that are primarily for indirect S2P, but your organization is primarily direct S2P, your organization’s chances of getting a good recommendation are zero. That’s right. Zero! (Even worse than a generic systems implementor with no knowledge of the space doing a Google search, coming up with five vendors, and making a random recommendation — at least then you have a 20% chance of getting a good recommendation!)

In other words, if you want a good recommendation, you have to ask a neutral third party, like an analyst firm, a niche consultancy which does not do implementations (and has no partnerships), or a consultancy that uses third party evaluations to provide you with the best recommendations it can, leaving aside any partnerships the consultancy might have. (For example, such a consultancy could license Spend Matters Customer Maps, which are Solution Maps with custom personas defined specific to the client needs, to help your organization identify the best fits and then help your organization with the RFIs to identify the best-of-the-best).

Otherwise, the doctor can pretty much guarantee you’re always going to be recommended vendors A and B (and maybe C) in North America and vendors X and Y (and maybe Z) in Europe … even though there are 8 S2P platforms and dozens of best-of-breed solution providers that might be right for you (as Solution Map ranks over 50 and plans to add many more over time). [Not that A, B, C, X, Y, and Z aren’t good in the right situation — but in S2P, one-size does not fit all — especially when you consider direct vs indirect, product vs service, head vs tail spend, strategic process requirements, optimization and analytics needs, automation, etc. — and the fact that some providers never get recommended even though for certain industries they are usually the best choice.]

So again, unless you want a quick way to triple your losses, don’t let an implementor choose your S2P platform. You choose it, and as per a recent piece of the doctor‘s over on Spend Matters, you take what you want!