Some Good Reading For Your Flight:

registration required for most

On Strategic Sourcing:
The Strategic Sourcing Execution Lifecycle e-book, authored by the doctor, sponsored by Trade Extensions

… and Adoption:
Higher Adoption is Where True Value Lies, authored by the doctor, sponsored by Keelvar

On Procurement Value:
The Procurement Value Engine, authored by the doctor and the procurement dynamo, sponsored by Pool4Tool

… and Invoice Automation:
An End to End Invoice Automation Framework, authored by the doctor, sponsored by Nipendo

On Spend Analysis and Visibility
Spend Visibility: An Implementation Guide, authored by the doctor and Bernard Gunther, sponsored by Opera Solutions

On Strategic Sourcing Decision Optimization
Optimization Backed Sourcing Platform … Or Bust, authored by the doctor

On Supply Chain Risk
Playing With Fire: Hidden Risks in Your Supply Chain, authored by the doctor, sponsored by Ecovadis

On Benchmarks and Trend Analysis:
The Dangers of Benchmarking, authored by the doctor, sponsored by Trade Extensions

On Overpayment Recovery:
Taking Capital Recovery to the Next Level, authored by the doctor, sponsored by Lavante

On Your Supply Management Journey:
Taking the First Step on Your Next Level Supply Management Journey, authored by the doctor, sponsored by BravoSolution

Procurement Is Dead! Long Live Procurement! Part I

Mr. Smith is right. Procurement, which was very recently Doomed! Entombed! and Marooned! on a desert island is dead. (see: “procurious big ideas video peter smith and the death of procurement” on Spend Matters) While it fought valiantly to survive, in the end, it passed away peacefully in the night after everyone stopped caring.

Your career is over. Just be thankful the Romans sealed up the burial chamber of the Egyptian empire and you will not be buried too.

Your ability to remember which catalog among the 200 on the wall contains the part that is needed, where it is, and what section it is in; instantly locate it, and place the order as soon as the request comes in has already been forgotten. With Amazon for Business (in America) and Alibaba (in China), anyone can instantly find the part they need and place an order for next day delivery.

Your ability to quickly create an RFP template, print out 3 copies, customize an opening for the top three suppliers the organization will typically do business with, and get them faxed out (and followed up on with a phone call) faster than most people can figure out how to copy a single page on the over-complicated copy machine is no longer appreciated. With a few clicks of the mouse, anyone can use a modern freemium RFP tool with integrated mail merge and e-Fax to create an RFP, send it to a dozen people, and print out a call list for the intern to follow up on. 3-bids-and-a-buy is reserved for tail-spend spot buys that would normally be done off-the-cuff with the first vendor that comes to mind.

Your ability to step into a negotiation with a contract manufacturer and, after hours and aggravating hours of hard-nosed carrot-less stick negotiation come back with an offer 5% lower than the Engineering team was expecting is remembered, but now that detailed cost models demonstrate that you are still overspending by 10% (and that the supplier always inflates their offer knowing you’ll be happy with a 5% reduction), even a junior negotiator armed with cost models and the facts can get the same result (and they only get half of your salary).

Your ability to manually process the mountain of requisitions, purchase orders, invoices, and goods receipts that come in everyday in a pseudo-timely manner, when everyone else fears to even enter the room, has been antiquated to the history museum as cloud-based m-way match systems can not only process 100 times the paperwork in near real time, but identify the errors in 90% of the invoices that come in with errors (which can be 15% of invoices in an average organization). Properly configured, this leaves a clerk only 2% of invoices (with more than minor errors) to be manually processed, and even the most junior of clerks can do this.

The reality is this: just like the industrial revolution put an end to the armorer, blacksmith, glassblower and other medieval occupations, the internet has officially put an end to the Purchaser.

Procurement is Dead!

To be continued …

Societal Sustentation 52: Project Management

Good project management is the key to success. After all, without good management, the chances of a project over-running its resource allocation (of time, people, and money), if not failing, increase significantly. So, despite the fact that project management is a sustentation, it can also be a damnation. Especially if you can not manage the project.

One has to remember that project management has evolved over the last six decades or so to manage traditional types of projects that produce structures and goods against well-understood designs and project plans, starting with the need to effectively manage complex engineering projects in areas that include construction, defence, aviation, and shipbuilding.

When project management was being defined, the ENIAC was still in operation, Procurement was placing an order against a printed catalogue, and a company imported a small number of commodities in which they had contacts and expertise. There were no complex software projects, no complex Just-in-Time supply chain projects, and no automated factory mega-projects (which resulted in some of the biggest supply chain failures in history).

Where software development is concerned, there is a rough definition of what is desired, but the beginning and end is a best estimate that is no more accurate than a wild guess in some cases, the resources required (while defined as software architect, developer, network specialist, etc.) are not well understood (as a non-skilled software architect cannot define what makes, or identifies, a good software architect), and the amount of money required is relatively unknown (due to uncertain work effort requirements, unknown support requirements, etc.).

And that’s just software. When it comes to supply chain, the difficulty is intensified. There’s the management of the sourcing, the management of the negotiation and contracting cycle, and the management of the procurement. But before that, there’s identifying the right supplier, which requires detailed understanding of the product technical requirements and the supplier production capabilities. There’s identifying the expected costs, based upon understanding material costs, labour costs, energy costs, tariffs, and overhead. There’s managing the supplier relationship. There’s dealing with disruptions and disasters. And taking corrective actions.
In other words, supply chain projects don’t have well-defined beginnings. Don’t have well-defined endings. Don’t have well-defined workflows. Aren’t limited to a fix set of resources. Don’t always have a well-defined team. And don’t always have a well-known cost (even if there is a target one).

But that doesn’t mean there is no hope. There are steps you can take to maximize project success.

1. Document all the steps.

For example, if it’s a sourcing project, outline a detailed process from needs identification, through sourcing plan, supplier identification, sourcing, contracting, and supplier management. Each of these steps have been done before, and, on a step-by-step basis, the complexity, necessary timeframes, and risks can be fairly well estimated. If the expected time-frame is more time than you have, then you have to either simplify the project, or increase the risk.

2. Crystallize and clarify all the risks — and mitigations.

What are the risks in the project from a supply disruption point of view? Liability point of view? Supplier point of view? Contract point of view? Make sure the risks are clear, the potential repercussions clearer, and the mitigations the organization can, is, and will take perfectly comprehensible.

3. Implement Effective Change Management

Document all the hiccups that occur (for future learning), and when something happens that requires a change in process or timeline, be sure to document it, the change, and work out the updates to the plan. Don’t play it by ear or wing it, because it’s easy to mis a beat against background noise or get caught on a wire. Make the effort to manage the project, and your project management skills will improve.

4. Get Training

There is a very big Project Management Body of Knowledge (PMBOK) offered, and certified, through PMI and a lot of organizations that are expert in project management, including a few niche consultancies well versed in best practice in best practice supply chain management in the areas of sourcing, procurement, contract management, etc. Engage one and get the knowledge your organization needs to manage better software projects.

5. Use a Tool

Some modern suites offer integrated supply management project management capability and if your suite, or custom assembled best-of-breed platform doesn’t, there are best of breed providers focussed purely on sourcing and procurement project management, like Per Angusta. Get a solution, and use it.

Transcepta : Global e-Invoicing with Dynamic Discounting Support

Transcepta is an eleven year old company that provides a global supplier network for fast supplier on-boarding and e-Invoicing. Whereas many supplier networks are setup for supplier discovery, and most support e-Invoicing, not many are set-up for straight-through processing and industry-leading auto-match capability.

In addition, most of the solutions that support e-Invoicing are limited in terms of the way invoices get into the system and many can only support invoices through the portal, delivered in a specific XML standard, or pushed into the ERP system the network is integrated with. For mid-size operations, this is typically good enough, but when you work for an organization that has a very large supplier base with thousands (or tens of thousands) of suppliers that use a dozen or more different formats (PDF, virtual printers, EDI, XML, cXML, Oracle Network, etc.), it typically ends up being the case that only 60% to 80% of invoices flow through the e-Procurement application automatically and the rest have to be manually entered or converted through OCR, which just adds more invoices to the exception queue for manual review. That’s where network-based e-Invoice automation solutions come in, and the best ones can easily plug-in to your current infrastructure (through the ERP). Transcepta is no exception to this rule.

Transcepta, recognizing that if you want to achieve a maximal throughput through an e-Invoicing platform, you have to support all of the standard formats used throughout your supply base, has built a platform that not only supports just about every EDI and (c)XML format that you can think of, but also supports Oracle validate integration, virtual printer drivers (that print direct to the platform, which was not a common feature of network platforms when Transcepta first offered this capability), and advanced PDF processing capability. If the invoice PDF is created from QuickBooks (or other supported standard accounting applications), the Transcepta platform will dissect and extract the electronic properties of the PDF to obtain as much information as possible about the supplier, associated purchase order or contract, and items being billed to automatically identify the supplier (from a standard database, such as D&B), and the purchase order in the organization’s ERP.

The strength of the platform lies in it’s advanced auto-match capability. It’s a reasonably well known statistic that invoice error rates are in the 10% to 15% range. SI and SM have quoted multiple studies from Paystream, Aberdeen, etc. over the past few years that consistently report numbers in this range. As a result, most e-Invoice automation solutions will bounce 10% to 15% of invoices back to the supplier or to an AP clerk for review upon first submission. This is a rather high error rate when many of the exceptions are not a result from price or order receipt discrepancies (when the invoice should be bounced back to the supplier with a clear explanation of the necessary adjustments for [automatic] approval and payment) but from missing supplier, purchase order, or line item information that is available somewhere in the organization’s e-Procurement systems.

In their effort to increase straight-through processing, Transcepta has developed advanced PO cloud-match software that implements automated reasoning, statistical matching, and other “AI” technologies that allows the organization to upload every PO and relevant piece of supplier information for processing by an advanced matching algorithm that is able to evolve over time. Using this extra data in conjunction with advanced algorithms, Transcepta is able to match about 80% of invoices that are rejected by traditional matching algorithms. One customer that received 45K to 50K invoices a month saw an 85% improvement in straight through processing from this algorithm, going from an average initial reject rate of 15% to 2%. That’s a lot of man-hours on exception processing saved.

As hinted at in the introduction, Transcepta has a number of other strong capabilities in supplier on-boarding and dynamic discounting, and for more information on these, see the recent and upcoming pieces on Spend Matters Pro (membership required) by the doctor and the prophet.