Authoritative Sustenation 65: Solution Partners

In our post on authoritative damnation 65: solution partners, we noted that solution partners are their own breed of damnation and can be much more annoying than activist investors and boards of directors, that you might only hear from at quarterly or annual meetings (who will stomp their feet, bang their drum, but eventually settle down and go away for a while), as they could be a pain in the backside on a daily basis.

We said this was because you often depend on these solution partners to serve your customers, run (parts of) your organization, and bring you innovation that you can’t develop in-house (due to lack of time, money, or external ideas). As a result you can’t just tell them to sit-down, shut-up, and wait their turn … especially if their support is essential to keeping a million dollar client happy or a multi-million dollar category stocked and selling.

So what is an organization to do? Especially if it can’t reasonably meet all their demands, err, requests in a short time frame?

Include them in roadmap planning for products and services.

If you include them in roadmap sessions, where they can see all the requests and demands being placed upon you by the organization, customers, and other solution partners, they will understand better that you can’t do everything they want now and that will focus them onto platform, product, or support enhancements that they really need versus those that they think they really want. For example, they might want more do-it-yourself configuration options when they are supporting your software in their country or in their client bases, but if you can typically turn requests around in 2 business days and they see how new features could benefit the customer base more and possibly help them sell more (and earn more commission), they will quiet down about saving 24 hours on a new configuration or install.

Offer them your innovations in Procurement, Planning, and CRM.

Chances are your solution partners are great in manufacturing, production, solution delivery, support, etc. but pretty bad in procurement, project management, or CRM (and why even their best bid doesn’t match your should-cost model with a fair margin). Offer to help them innovate their processes and platforms in exchange for product innovation, production cost savings innovation, and service level improvements.

Help them sell to your customer base.

If it’s a product provider, offer to help them understand what your customer base values most in terms of product purchases (low cost, reliability, innovation, etc.) and what the supplier needs to do to win more of your business. If it’s a service provider, help them understand not only what you need of them to support your customers, but what common services your customers need that you don’t provide, that the provider might be able to up-sell to them (without violating the terms of agreement). This will be a big plus in their eyes and they will start treating you as a customer of choice (who is their favourite customer to work with) and the complaints will go away, with only the odd helpful suggestion here and there.

Solution Partners can be a pain in the backside, but inclusion and support can replae the thorn with the rose. It’s up to you.

7 Secrets to Creating Supply Risk Management Leverage – and 3 More You Might Need

A recent pro-piece on “7 Secrets to Creating Supply Management Leverage” over on Spend Matters Pro [membership required] by the prophet and the maverick highlighted 7 strategies that an organization can be successful in risk management in the light of recent events that include, but are not limited to: the Hanjin Shipping bankruptcy, the Zika Virus, and the East Coast Oil disruptions.

The first three are a must.

1) You must aggregate your data.

No performance improvement, in or out of risk management, can happen without data and the process and performance visibility it brings. For more insight, and tips, into this, see the pro piece.

2) You must standardize your processes through collaborative means.

You can’t take a mish-mash random approach to risk identification and management — it must be coherent, cohesive, and collaborative. Otherwise, for every risk you prevent, two will slip past undetected.

3) Tuning — and minimizing — false positives and false negatives.

False positives are common, and the real risk is the false negatives, right? Wrong. False negatives pose a big risk, but for many companies, false negatives pose a bigger risk because, in order to minimize the possibility of false negatives, the organization will tune the system to let as many weak possibilities slip through in order to make sure no significant risks escape. However, in doing so, what will inevitably happen is that the number of false positives will increase significantly. You might be thinking, so what? Quick review eliminates them. Well, it does, but, over time, the risk reviewers become numb to, and tired of, the false positives and slowly, but surely, turn up the thresholds. Eventually they are raised so high that the false negatives increase and big risks slip in.

The next 4 are important, and most organizations will need to do at least 2 of them, and you can read the prophet and the maverick‘s piece on 7 Secrets to Creating Supply Management Leverage for more details, but here are a few you might also need.

8) Payment and Receipt Monitoring

Supply disruption in critical parts and goods is one of the worst supply chain disasters an organization can experience because an inability to sell the primary product line will result in a significant drop in revenue. Supply disruptions happen for a number of reasons, some of which are preventable (like not ordering from a supplier about to go bankrupt), some of which are not (like a natural disaster).

The best way to detect an issue is in delivery and invoicing monitoring. A supplier that is on hard financial times will submit invoices extremely promptly, follow-up quickly, re-submit on or before the deadline, and often take less than desireable early payment discounts. If they are at the point where they can’t even afford to get the credit to buy the goods and labour they need to make and ship your products, shipments will start to be late. Or maybe quality levels will drop and reject rates will rise. All of this can be detected early on with good internal data monitoring.

9) Impact Event Definition and Real-Time News Monitoring

Once your data is aggregated, and your supply chain mapped, you not only know your sole source suppliers (that need to be duplicated), but you also know your choke-points (where any number of events could impact your supply chain) and primary supply regions. (Just because you’re buying American doesn’t mean 80% of the raw materials aren’t coming from China!) You can easily define these regions, and the most likely supply chain impacts (port strikes, natural disasters, etc.) and then set up news and event monitoring to alert you to any event that could potentially impact your supply (including events that would impact two levels down the supply chain, which would cause a ripple event up). Now, its true that these are only so accurate and you might get a lot of false positives, but its better to quickly eliminate a few dozen false positives and get real time visibility into a critical component supply shortage in three months then find out there is no available supply left when a delivery date is missed.

X) Supplier Development

Let’s face it, the 7 steps in the prophet and the maverick‘s pro piece and the 2 steps above are good, but the best risk management you can do is instill the same commitment to risk monitoring, management, and prevention into your supply base (who will also do their best to push it down). A+ risk management can only do so much if your suppliers are C+ students at best.

Coupa IPO: Good or Bad?

Coupa has filed for a 75 M IPO. Coupa is going to go public, like heavyweights before it, and things are going to change. The question is, for better or worse?

Many bloggers, analysts, and even journalists have written much about the subject, and you can probably buy at least a dozen in-depth analyst reports by now advising you on whether you should invest, how much, when, and how to make money off of it.

And if you are interested in that, go and Google that Sh!t, because, you guessed it, SI doesn’t care about that in the least. What it cares about, and the only thing it cares about, is whether or not its good for Procurement. This blog is about education — process transformation, technology, and talent enablement — not about how to make the most money (or even save the most money, because it’s not savings, its value generated … savings are here today, gone tomorrow without foresight).

So is it good for Procurement? Yes and No. That’s right, Yes and No!

The 75M will help them considerably expand their platform, their support, their global reach, and, most importantly, their sales force. As with any big company that goes IPO, they will need ramp up their sales quickly to support their overhead, which means more big ticket sales. The only way to do this will be to focus on the Global 3000 or the large mid-market companies growing fast that are willing to invest extra dollars in an effort to crack the Global 3000. And if you are one of these companies, they are going to do everything they can to be the perfect solution for you, or at least the best option you have, as they try to win the P2P market away from SAP (Ariba), GEP, and SciQuest and fend off the European heavyweights, like Basware, that are making inroads in their home turf.

But if you are a mid-market Procurement organization, or smaller, and the Procurement organization that Coupa was originally designed for when they launched on Procurement Independence Day ten years ago, not so much.

Big organizations want big, extensive, bloated, solutions with lots of features, and lots of support, that come with big price tags — price tags that are often higher than a smaller organization wants to, or can, pay. And even though Coupa could offer a slimmed down offering at an affordable price tag if they wanted to, it’s not going to be their first priority when they have to prove the value of their IPO. So if you are in this group of Procurement organizations, its not so good for you – at least not in the short term. (Longer term, they could create a platform license model for their core, like Trade Extensions does, and allow a third party to bulk sell at lower rates in exchange for them taking over support and the associated overhead costs, the same way many companies offer SAP support, but that’s not likely in the short term.)

So that’s the short answer for Procurement organizations, which is not the same answer for Investors or for Coupa, but we’ll leave those answers to the analysts and investment advisors.

One Key Question to Ask When Selecting a Multi-Criteria Supplier Sustainability Monitoring Solution

In our last post on Key Questions When Selecting a Multi-Criteria Supplier Sustainability Monitoring Solution, we noted that not only can supply risk management not be siloed, but in order for it to be successful, it must be centralized through a CoE that puts together policies and procedures that not only ensure that

  • every supplier is covered
  • on all relevant dimensions
  • but not on irrelevant dimensions
  • without any duplication of effort

but also ensure that

    • there are no false positives in the risk assessment and
    • there are no false negatives

In order to effectively implement this holistic approach, an organization will require a good multi-criteria supplier and sustainability risk monitoring solution that can proactively monitor, assess, and re-asses supplier sustainability and risk using data from dozens, if not hundreds, of disparate sources that paint a comprehensive picture of supplier sustainability.

But not every platform will make the cut. Definitely not all will meet the integration requirements, which is one key requirement of a good platform. More specifically, ethics, corporate social responsibility, and sustainability information is vital information that can and should be used in many different supply management platforms such as e-Sourcing, e-Procurement, CLM, SRM and other platforms that support a wide variety of supply management processes and workflows. As such, this integration should be trivial and for major supply management platforms, almost “out-of-the-box”. Moreover, in some organizations, this information also needs to be available to other departments that, and no surprise here, are reliant on different platforms and responsible for smaller or indirect spends not (fully) under the control of Procurement. As such, the platform needs a well defined, and easy to use, API that can allow the data to be pulled out for any platform that needs it, and that allows any proprietary or limited access data the organization has access to on the supplier’s sustainability and risk profile to be pushed into the system. Why?

For more complete details on this requirement, as well as key questions to ask when evaluating a multi-criteria supplier sustainability monitoring solution, check out Sourcing Innovation’s latest white paper on 5 Essential Criteria for Selecting a Supplier Sustainability & Risk Monitoring Solution, sponsored by Ecovadis, that will help you understand just what a good sustainability and risk monitoring solution needs to do.

Avetta – Vetting Your Suppliers So You Can Have Confidence

Avetta, formerly known as PICS Auditing, is a solution for companies that need to do formalized vendor pre-qualification on their mid-size, small, and micro-contractor and service providers to ensure that those contractors conform to health, safety, environmental, and other relevant legislation that these organizational (service) providers need to adhere to in order to maintain a safe environment, minimize risk, and minimize organizational liability. (A single fatality, especially one that could have been easily prevented with the proper training and certification, can cost a large organization five million or more in a settlement. Not only does the organization potentially lose a valuable contractor, but they lose a big chunk of change they can’t afford to lose and hope to remain viable.)

Despite being relatively unknown in the Procurement world (but then again, how many of you know of providers like Browz, VendorMate, or even Achilles), it is a well-known big name in industries that rely on heavily on contractors (think energy companies, cable companies, wireless companies, and other utilities) that has seen year-over-year growth in the 30% range since its humble beginnings 15 years ago.

While the solution is essentially an enhanced supplier information management (SIM) platform customized for credentialing, certification, and contractor capability tracking with respect to health and safety, sustainability, and other specific needs, unlike traditional SIM platforms, the solution allows the questions and profiles to be configured for each supplier based upon service(s) provided, risk profile, and/or industry.

One of its main strengths is the supplier-centric data view — the supplier owns their data and chooses whom they show it with. This means that every buyer can benefit from the economy of scale as Avetta grows as suppliers that have been qualified to a sufficient level by a competitor will be suitable for the organization. It’s a platform where you benefit from every competitor using it. After all, in a large, dense, city, there are going to be thousands of choices, and having a pre-qualified pool of dozens, or hundreds, can be very helpful. Similarly, in a small town or isolated region, there’s only going to be one or two contractors, and they are not going to have the time or interest to go through an audit for every company that wants to use their services twice a year.

Avetta‘s definitely a platform to check into if your organization uses a lot of contractors and you don’t have a good, holistic, vetting and certification process, and one that you can find out a lot more about by checking out the Spend Matters Pro (membership required) pieces (Part I with Parts II and III coming soon) co-authored by the doctor and the prophet.

While most organizations don’t think they need a credentialing solution, they don’t realize just how much effort it is to do a proper job manually, or how many suppliers don’t get closely vetted just because they present an insurance form or a certification from 3 years ago (that is still valid but expires in a month). Insurance just means the supplier can afford it and a certification just means that at one point in time someone knew enough to get it. It doesn’t mean they have good processes, or that they can do everything they say they can do with the same level of competence that they got the certification for (which they may lead you to believe). For example, just because their employees passed a safety course in equipment handling, doesn’t mean the employee ever passed one for working on poles or the outside of high-rises. And what is more likely to injure them? A piece of electrical equipment that shorts out and gives them a mild shock, or falling 30 feet onto pavement. Think about that.