Serex – Bringing Auctions Back to Procurement

At this point in time, you’d think reverse auctions would be old news in Procurement, seeing that FreeMarkets was running reverse auctions twenty years ago and the doctor has repeatedly bashed their use in strategic sourcing (because they are not strategic), but they’re not.

There are two reasons for this.

1. They have an important role to play in tactical Procurement.

and

2. Companies new to strategic sourcing are still convinced by first generation solution providers with great marketing teams that they are still the greatest thing since the spreadsheet and that the historical savings opportunities are still there.

And while the doctor would like to think that the majority of buyers of these solutions fall in group 1, the reality is that the majority of buyers fall in group 2, and, once acquired, will treat every strategic sourcing event as a nail and use the auction tool as a hammer. So if that is the case, then the buying organization better get the best damn auction tool out there (since they will still need the auction for the tactical procurement nails when they figure out there is a better way to do strategic sourcing, and will actually need the auction tool more).

And these organizations will need a useable solution. The reality is that while just about every suite and point-based sourcing and procurement vendor offers an auction tool, not all of these are good auction tools against modern standards. Many first generation tools have no way to bulk select suppliers, bulk select products, bulk upload starting bids, import historical data, bulk upload attachments, etc. — ease of use capabilities you would think that would be standard. In fact, for the most part, only the newer reverse auction tools from smaller best of breed vendors targetting the mid-market tend to have the usability one would expect.

Usability and efficiency capabilities in an auction tool is key. I’ve heard countless stories about big organizations taking 1 to 3 weeks to set up a large global auction for large bill or materials or global category in a first generation tool when that same auction could be set up in a modern tool in 1 to 3 hours.

And this is where Serex comes in. Serex is an interesting entrant in the e-Procurement space. Originally founded 23 years ago to help clients select, implement, deploy and effectively use CRM and marketing automation systems, something it still does to this day, a few years ago, after a routine meeting with a client that asked if it had systems to support buying, it decided to enter the e-Procurement space when it found out that its client had tried, and passed on, over a dozen auction and sourcing platforms because not one met its need. (Serex was shocked at this as it knew there were a lot of solutions and assumed some were good, but figured it one Global 3000 couldn’t find a useable solution, then there must be other companies in this group that couldn’t find a useable solution either.)

So, after securing beta customer support (and a commitment for monthly guidance from the CPO with over two-decades of cross industry experience in large mid-size and Global 3000’s as well as weekly buyer availability), they began development of a new auction solution that would be developed by buyers, for buyers, and used by buyers. (And it is. Serex’s first customer saved 6M in year one and since full launch this year, its first few clients have logged over 14M in savings. And this is one reason why all of its prospects are large mid-size and Global 3000 organizations, despite the fact that the solution best fits the mid-market, which they have traditionally served on the CRM side.)

The reverse auction solution was designed to enable buyers to quickly set up and run auctions through quick bidder search and selection, quick product search and selection, quicker selection of which suppliers can bid on which products, and default auction parameters (which can easily be overridden). Complete product specs can be defined or uploaded as attachments if needed. Suppliers can send detailed messages during the auction to request or offer alternate delivery dates or substitutions for quicker delivery, and a buyer can update the auction specs as needed. In addition, all auctions are saved and new auctions can be created as copies of old auctions, and then updated as needed, allowing repeat auctions to be setup in just minutes (which is valuable if a product sells better than expected and an auction needs to be repeated on short notice to meet demand). (The auction platform has a built in attachment viewer that displays standard web formats.)

And that’s the solution. With the exception of a product manager sub-component and a bidder management sub-component, there isn’t even an RFX, which is probably the biggest short-coming of this new e-Negotiation tool — because sometimes you just want a simple tool to collect bids and make a decision. This is the biggest weakness of the tool. But Serex built it in a little over a year, and can easily build it out considerably in the next year. SI expects that in two years it will more or less compete on par with the other best-of-breed e-Negotiation mini-sourcing suites aimed at the mid-market along with adding capabilities that will cause larger organizations to adopt it onside their first generation Source to Pay platforms that they are locked into (but which are not useable enough to use on the majority of procured categories).

Assessing A Procurement Team’s Skills

Special thanks to Charles Dominick, SPSM3 of the Next Level Purchasing Association for this guest post.

You have a procurement team. It isn’t performing quite as well as you’d like.

You instinctively know that there has to be mismatches between the skill levels required for each position and the skill levels possessed by the occupants of those positions. You know action is required. But you can’t exactly put your finger on a way to solve the problems that are preventing you from maximizing procurement performance.

Where do you start?

Well, you can’t solve a problem unless you identify it. And you can’t effectively go to war without knowing what weapons you have. So, at this point, you need to assess the skills of each member of your procurement team.

Now, conducting a world-class procurement skills assessment is a pretty involved process. For the brevity required by a blog post, we will have to cover some parts of the process by simply stating what tasks need to be done and not necessarily how to do them. For example, before you assess procurement skills, you need to determine which competencies are required to achieve organizational goals. That’s an hour-long seminar in and of itself. Let’s assume that you already know what competencies are required for success and, therefore, what skills you need to assess. There are many options for assessing procurement skills, so we will spend more time on that process.

There are three ways of assessing procurement skills. The following is an excerpt from a Next Level Purchasing Association white paper entitled, “The Procurement Leader’s Guide To A More Successful Team: Seven Steps For Improving Skills & Getting Better Results.”

Skill Assessment Method A — Self-Assessment

One commonly used approach is to have each team member complete a self-assessment. For example, you may list your desired competencies and ask each staff member whether their skill levels in that competency are high, moderate or low. While this can get the job done quickly, it is not likely to be accurate.

First, the assessment is inherently subjective. Any skills assessment should be able to challenge a skill level claim with the questions “according to whom?” and “compared to what standard?” The answer to these questions for this method would be “according to the individual” and “compared to that individual’s opinion,” respectively. Not the strongest benchmarks.

Second, there is a risk that a self-assessment might be completed defensively. Individuals may feel that the reason for the assessment is to identify candidates to be downsized or to award promotions or raises. Therefore, individuals may rate their skills higher than they truly are in order to avoid punitive measures or to achieve rewards. Attitudes of individuals in these situations may be characterized by statements such as “If I don’t recognize my skills, how can expect others to recognize them?” and “If they knew my real skill levels, they wouldn’t be asking me to do this self-assessment, so why be modest?”

Skills Assessment Method B — Manager Assessment

Another approach is to either

(i) begin with a self-assessment and validate it with a manager’s review and update of that assessment or

(ii) to simply have the manager assess each staff member’s skill levels independently.

Of course, this approach is still subjective and “inside the box.” An internal assessment does not compare skills with best-in-class procurement professionals — it compares it with internal expectations, which often can drift to one of two extremes:

(i) the current team has inadequate skills or

(ii) the current team has been here a long time and the team members know their jobs inside and out.

When it comes to mastering all aspects of procurement, you should always lean towards the mantra of “We don’t know what we don’t know.”

Skills Assessment Method C — Third-Party Assessment

Yet another approach is to have the skills assessment performed by a third party. A third-party assessment can provide the most objective data. And you may be surprised that, depending on the provider, you can have a procurement skills assessment performed at little to no cost and little effort.

Regardless of the method chosen, you need to have an idea of at least two tiers of skill level in each competency: acceptable and unacceptable. A graduated measurement with data between these two tiers is better, but you must at least know the demarcation point between acceptable and unacceptable.

Using Assessment Results

Once you have assessed the procurement team’s skills, you need to do a gap analysis. Again, that’s one of those things that I could write on and on about. I’ll simplify it by saying you’ll document which team members lack adequate skills in which competencies.

Once you have your skill gap analysis, then can develop a roadmap for training in order to close those gaps. That topic deserves plenty of attention, so I will dedicate my next guest post to that topic.

Stay tuned!

Thanks, Charles.

SpendHQ: Revving Up Visibility Into Your Supply Base

When we last dug into SpendHQ back in 2014 (Part I, Part II, Part III, and Part IV), we noted how this solution has grown from a simple spend reporting tool into a fully featured spend visibility tool that tracks all of your spend over time — by category, department, and user; a category management tool that lets you dive into category spend and filter down to the items of interest, see managed vs unmanaged spend, and track compliance; and, as of the next release later this quarter, track contract meta data and do basic contract lifecycle management.

We also noted that while it was not the most powerful (ad-hoc) spend analysis solution on the market, it was a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needed to get one up and running quickly, accurately, and usefully (as the solution has more power and capabilities than the average company needs to get great results). Within 4-6 weeks, a company with no spend analysis capability can be up and running 100% and be making useful, informed decisions.

Since then, they have been hard at work improving the contract module; adding a new compliance module in the visibility engine that allows the user to instantly see, for the selected categories, the addressable spend, the managed spend, the compliance rate, and the impact rate; and a brand new vendor detail module that sits on top of their brand new supplier database that contains information on about 20 Million entities that was formed from the fusing of their database of over 7.5 M entities that they built up over 12 years of operation and InsideView’s database of over 15 Million entities. The database has basic vendor information (address, ownership, status, industry, revenue, etc.), insights (on products, services, strengths, etc.), family tree (which contains ownership, subsidiary and sibling information), and financial data. A user can also see all associated contracts in the contract module and click into the details of each one as required.

One of the gems of the platform is the new and improved Category Management module with greatly enhanced savings management capability. On a category basis, this module summarizes spend, managed spend, core list compliance, and pricing accuracy — where each unit purchased is compared against the contract price. This allows an organization to identify maverick spend and overspend during the contract (on every refresh) and address issues as they arise. Within a category, they can drill into each item and see total spend and drill into spend by location and/or buyer, allowing them to zero in on maverick spend and spend that is priced off-contract. The pricing accuracy can drill down from a category to an item if need be and track inaccuracies, undercharges, overcharges, and overall error rate (as well as overall loss).

In addition, the particular interface customization and support for MRO, T&E, shipping and small parcel spend categories, often overlooked “tail spend”, is far superior to an average product and lets a buyer not only figure out what is maverick or going to on-contract suppliers (but being billed at off-contract rates), but how the spend breaks down across base charges, fuel charges, surcharges, and so on. This allows you to drill into the cost drivers of categories and products, and attack the real cost drivers in a strategic engagement. The specific capabilities built for shipments in particular are quite good. The shipment analytics breaks costs down into accessorials, zones, and fuel surcharges so that an organization can see precisely how the spend is breaking down, where the bulk of the charges are, and where any overspend are.

SpendHQ was built for the sourcing organization that wants a best of breed spend analysis and visibility tool and support maintaining and interpreting it, with the option to engage the right expert at the right time in the right categories to maximize savings. Its more of a “savings as a service” offering than the majority of other spend analysis players, and the best results come from augmenting it with ISG’s sourcing expertise that can help identify the right category to source to maximize savings at any given time. It’s a vendor that should definitely be kept on your radar.

For a deeper dive into SpendHQ, keep an eye out for the upcoming in-depth Spend Matters Pro review [membership required] by the doctor and the prophet that will appear later this summer.

State of Flux: The Flux Capacitor is being designed for the Future … of SRM!

State of Flux is a provider of Supplier Relationship Management (SRM) software and services that was founded in London (England) in 2004 to focus on an overlooked area of supply management, supplier relationship management. When it was founded back in 2004, most companies were just starting to offer supplier information management (SIM) solutions, which were a pre-cursor to the KPI / scorecard-based supplier performance management (SPM) solutions that followed. Only a few companies had SRM in their mind’s eyes, and State of Flux was one. What started as a very simple system for supplier information, performance, and supplier (corrective) action planning and development has grown into a full fledged supplier relationship management solution that encapsulates supplier information management, performance management, risk management, governance and relationship management, CSR (corporate social responsibility), contract, and innovation management.

In addition to their SRM services, focussed around consulting and executive staffing/managed services, and software (which was branded Statess), they have also been producing the Global SRM research report (which was covered in State of Flux has the Treatment for your SRM Ailments Part I: The Need and Part IV: The Business of Supplier Relationships) for the last seven years which provides very deep insights into the state of supplier relationship management and what the top performers do. (Last year’s report was focussed on the customer of choice, and companies that are their suppliers’ customer of choice get [significantly] more value than their peers and this year’s report will be focussed on technology, and the value it can provide, and the annual survey will be out soon.)

As we have covered the platform fairly extensively in the past (in Statess Part I, Part II, and Part III and State of Flux Part I and Part II), this post will simply focus on major improvements since the last series.

In our last series, we discussed the developments in progress, namely:

  • Prospective Suppliers
  • Contract Management Enhancements
  • KPI Templates and Drillable Scorecards

Since then, State of Flux has completed these enhancements.

  • The prospective supplier module is based on questionnaires with dynamic workflows that ensure a supplier only provides the information that is required, and cannot participate in open challenges until all necessary information has been provided.
  • Contract data and meta-data definition is now highly granular, and the version comparison feature allows a buyer to quickly identify any changes between versions.
  • The KPI templates have been completed and augmented with a wizard that makes it really easy to replicate KPIs across suppliers and organizational units, and make the minor tweaks and modifications (to the weightings, data fields, etc.) that are necessary to have the most accurate and meaningful supply possible.

In addition to this functionality, State of Flux has also added:

  • Single Sign On: that integrates with the organization’s native LDAP (or other single-sign on mechanism) to allow a user to sign-in with an existing account
  • Deep CreditSafe Integration: that integrates all of the credit safe financial and risk data across the application (including the risk and performance modules) with quick access to a supplier rating from the supplier screens
  • Automatic Risk (Severity) Calculation: that automatically computes the severity (and RAG — red, amber, green — status) of a risk as soon as the probability and potential impact of a risk are defined
  • Excel Export which enables every piece of data in the application to be exported to well-formatted Excel spreadsheets and workbooks (for import into other systems and analysis/reporting tools)

The system gets better each year, and when you combine it’s end to end completeness with the fact that there are only a handful of providers focussing on best-practice SRM, State of Flux is definitely a provider to consider. For a deeper dive on State of Flux and their platform, watch out for the upcoming Spend Matters Pro piece (membership required) co-authored by the doctor and the prophet that will take a deep dive into the platform, it’s strengths, and its opportunities for improvement.