The Direct Procurement Challenge Webinar is TOMORROW!

Hopefully you’ve registered by now. If you haven’t, there is still time to register. It’s free. It gives you one CEH. And, for the first time ever, you can ask questions of both the doctor and the prophet in the same webinar! (Downloading The Direct Procurement Challenge is good, but this is an awesome bonus.)

Remember, the doctor is the expert on Complex Sourcing and Procurement and when he says that you shouldn’t use a Chihuahua to herd sheep and asks why are you trying to use a mouse to herd cats (which is mission improbable anyway), you should know that there is something someone is not telling you. That’s why he’s joining a tag-team to bring you this much needed education for free. But as he doesn’t have time to repeat himself (so much to educate on, so little time), like most webinars, this is a one-shot deal. Show up. Or possibly miss out on that one secret that could help you secure the budget you desperately need. Your call.

As a reminder, in this webinar, the doctor and the prophet will discuss:

  • the direct procurement lifecycle
  • how it is different from the classic indirect procurement lifecycle
    (which was cost-centric perfect for indirect)
  • key requirements to support direct procurement that indirect procurement platforms lack
  • key technological capabilities to truly manage the direct procurement lifecycle
  • 15 ways your platform likely isn’t up to snuff
    (especially if it’s a platform built for indirect)
  • the consequences of using the wrong platform for Procurement platform
    (which can leave a lot of blood on your hands)

Sign up. Join in. And learn the questions you should be asking and not the answers you should be accepting without digging a little deeper.

Remember, what you see on the surface:

Is not always the full picture:

Why Does Tail Spend Take Your Head for a Spin?

In our last post on why you shouldn’t let tail spend take you for a tail spin, we noted that tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%) and severely impacting your organization’s profit potential (and operating budget, which Procurement rarely has enough of).

We told you the answer to that was Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, because, unlike most papers, it tells you not only what tail spend is, and why not addressing it is costing your organization more than you know, but how to do something about it.

And it’s not just the typical solutions that the paper throws at you, which include:

  • tacking it on to managed spend,
  • using a GPO,
  • e-Catalogs, and
  • optimization-backed sourcing platforms

because:

  • strategic suppliers want to supply high-volume or high-value products, not low-volume or low-value products, and certainly not as a condition for supplying strategic categories
  • GPO pricing is only as strong as their constituents and if the majority of the constituents don’t want the products or services that constitute your organization’s tail spend, their prices won’t be much better
  • tail spend is too unpredictable to be managed through a single catalog, especially since only a portion of tail spend should generally be made as catalog spot-buys
  • as optimization-backed sourcing platforms have the power to source much of tail spend, but don’t provide the guidance, and the strategy is often the most important thing

That’s why the paper provides not a single strategy, but a process for selecting the right strategy for each type of tail spend, as well as guidance on how to choose a platform to support it.

So download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required), sponsored by Claritum, and get your tail spend management on the right track.

Siloed Supply Risk Management Just Wastes Time, Money, and Resources

In our last post on why Why Supply Risk Management Cannot Be Siloed we noted that, despite the fact that an organization’s supply chain is full of risks that could not only cripple the organization’s supply chain but cost it 100 Million or more in fines, the average organization’s supply chain is overflowing with risk (despite the fact that many of these risks could be mitigated).

Why? Because the average organization is not properly managing risk. Why? As per our last post, there are a number of issues including lack of resources, lack of time, and lack of immediacy, but the biggest issue is lack of cohesion. Even organizations that have risk management and sustainability efforts in place tend to be relatively ineffective overall because most of these efforts grew organically over time as individual functions encountered risks and needed to deal with them. This results in a very fragmented approach to risk management that is very inefficient and ineffective. Why? Each department sends its own surveys and questionnaires and reviews its own data sources and this results in:

  • a duplication of effort where
  • some suppliers will be assessed on the same dimensions twice while
  • other dimensions for the same suppliers go unassessed and
  • some suppliers do not get assessed at all while the process generates
  • false positives as well as
  • false negatives.

How can this happen? And just how much time and money is wasted? And what should be done? For the answer, check out Sourcing Innovation’s latest white-paper on Why Sustainable Supply Risk Management Cannot Be Siloed: Lessons From Leaders Who Beat the Odds, sponsored by Ecovadis. And you’ll learn not only what the correct approach is, and what it involves, but what it can do for you.

Is Your Procurement Platform Cost Centric Perfect for Indirect Only?

We’re all familiar with the standard 5-Step Sourcing Process:

  • Category (Spend) Analysis
  • Category (Sourcing) Strategy
  • Supplier Identification & Invitation
  • Sourcing Strategy Execution
  • Award and Contract

(which is covered in detail in the doctor‘s e-Book on The Strategic Sourcing Lifecycle: A Brief Introduction [registration required])

and we’re all familiar with the core capabilities of e-Sourcing and e-Procurement tools for supporting this lifecycle, namely:

  • Spend Analysis
  • Supplier Network
  • RFX / e-Auction
  • Optimization
  • Award & Contract

… for Sourcing and

  • Requisition & Order Management
  • Invoice & Receipt Management
  • Payment & Tax Management

… for Procurement.

And we’re very familiar with what each of these technologies has to offer for each of the strategic sourcing (execution) lifecycle phases.

But is it enough? For the majority of your indirect (finished product, MRO supply, temp labour, etc.) categories, it is more than enough. Compared to what you had a decade ago, it’s the answer to all your dreams (and, for the religious among you, prayers).

For a commodity alarm clock radio, yes. For a bill of materials for a custom designed tablet, no. First of all, you can’t just do an RFX for all of the “standard components”. Why? For starters:

  • all of the components have to be compatible — it is often the case that components from different manufacturers, even if they are the same form factor, are not 100% compatible
  • the cost is not just the components, it’s the integration — and sometimes you want sub-assemblies, and you want to bid those against components and doing the assembly in house
  • complete composition data is key — if some products use materials that are restricted or banned in one or more target markets, they are not all equal

and when you consider a typical sourcing platform

  • there is typically no advanced strategic sourcing decision optimization or constraint satisfaction capability and no way to indicate that certain products are only compatible with certain others and, thus, it is extremely difficult to create and evaluate the cost of legal award scenarios; and even if the organization has one of the half dozen solutions with this capability, there’s typically no way to capture the data that defines compatibility or incompatibility (or help a sourceror identify potential issues)
  • not only does the average sourcing platform have no support for Bill of Materials, but there is no support for production cost models that capture overhead costs (as most procurement platforms designed for indirect focus mainly on logistics costs in addition to component costs)
  • average procurement platforms track descriptions and bids, not component and material breakdowns (and have no support for compliance and sustainability issues and regulations)

In other words, your typical procurement platform is cost-centric perfect for indirect, but when it comes to direct, the platform is sorely lacking.

So what do you need to support your direct procurement? Download Sourcing Innovation’s newest white paper on The Direct Procurement Challenge (registration required), sponsored by Pool4Tool, and find out today!