Cap Gemini IBX – Closing the Loop on Source to Pay

Cap Gemini is a one of the world’s largest multi-national consulting companies headquartered in Paris, France that focusses on management, outsourcing, and technology-based consulting and specializes in strategy, digital transformation, finance, marketing, IT strategy, solutions design, big data / analytics, and supply chain management consulting. Of course, we are primarily interested in the latter and, in particular, any technology underpinnings.

As part of their technology underpinnings, Cap Gemini has three primary offerings. Spend Analysis, powered by Spend Radar; Procurement Intelligence, powered by Microsoft’s Strategy Companion; and the IBX Business Network that implements their Source-to-Pay platform with e-Sourcing, e-Procurement, and supplier (portal) support. This is what we’re going to cover briefly in this post.

The solution is a seamlessly integrated Source to Pay Solution with a global supplier network, where suppliers can self-register, manage their customer interactions through a portal with a single integrated view, and even manage their invoices that originate outside of the IBX platform (which is a unique capability that will be discussed later on). If you consider the classic Sourcing and Procurement lifecycle, first diagramed by the doctor on SI back in the doctor wants to remind you it’s Sourcing and Procurement, a good S2P solution needs a lot of capability, especially if you want to capture low-volume purchases and spot-buys (and, in particular, catalog management needs to underlie the requisition through the approval process). The IBX platform contains, to some degree, almost everything indicated in this diagram (with the exception of true strategic sourcing decision optimization, which we know is currently limited to the six samurai) plus a lot of cool supplier network, catalog management, and spot-buy features, including a few that you will not find in any other (best-of-breed) platform on the planet.

In this post, we’re going to focus on spot-buy and the invoice management dashboard, as they are the most unique offerings in the platform. The new spot-buy functionality allows a requisitioner to create a requisition for anything they need, fill out as much information as possible (including expected pricing), suggest one or more suppliers on the network, and route it to Sourcing for identification of the proper products and/or services. A (senior) buyer in Sourcing will validate the request, choose the appropriate sourcing process (RFX, auction, third-party catalog offering), make a selection, and return it to the buyer for final acceptance and submission, at which time it will be routed to the appropriate approvers. Note that we say Sourcing, not a buyer, as it contains rule-based workflow management that allow it to be routed to the buyer with the proper authority with the smallest workload to minimize processing time.

The new invoice management dashboard, designed for the supplier, allows a supplier to sign in and see on one screen the status of every invoice sent to every customer on, and off, of the IBX network as well as drill in and get as much related information as there is for IBX platform invoices (including, but not limited to, conversations, buyer requested corrections, goods receipts, purchase orders, etc.). The system supports uploads from standard AP and ERP systems for suppliers to get this information in the system. Being able to log into one portal and service all their IBX customers through one login and one interface is great, but being able to manage all of their invoices, which is something that is always top of mind for a supplier, is even better still.

There’s a lot of other cool and powerful features in the IBX system, and they are covered in detail in the recent piece by the doctor and the prophet over on Spend Matters Pro (Part 1 of 2, membership required) which gives one of the most in-depth and balanced reviews of the system that you are going to find anywhere.

One Hundred and Sixty Five Years Ago Today …

The Great Exhibition of the Works of Industry of All Nations, the very first World’s Fair, opened in Hyde Park in London (England).

Organized by Henry Cole and Prince Albert, it was attended by numerous notable world figures of the time and contained exhibits from Britain, its ‘colonies and dependencies’, and 44 ‘foreign states’ in Europe and the Americas. With over 13,000 exhibits, it was a tremendous undertaking for the time and inspired a series of world fairs that followed (which still continue to this day, with the next world fair being Expo 2017, taking place in Astana, Kazakhstan [as sanctioned by the Bureau International des Expositions, which has served as the international sanctioning body for world’s fairs of the universal, international, and specialized variety since 1928]).

A special building, The Crystal Palace, designed by Joseph Paxton and which took the form of a massive glass house 1851 feet long and 454 feet high, was built specifically to house the show. After the exhibition, the building was rebuilt in an enlarged form on Penge Common, and stood until its destruction by fire in 1936. However, its legacy lived on as the site was used as the Crystal Palace motor racing circuit between 1927 and 1974 and inspired the Crystal Palace Garden Parties between 1971 and 1980.

And over six million people attended the fair. One has to remember that in 1851, the population of Great Britain and Ireland combined was only 29M-ish (and Britain itself only 19M-ish) and the world population was only slightly over 1 Billion. This contributed to a profit of £186,000 (£18,370,000 in 2015), and that surplus funded the Victoria and Albert Museum, the Science Museum, and the National History Museum as well as an educational trust for scholarships and industrial research which still provides funds today.

Societal Sustentation 45: (A Lack of) Math Competency

While Procurement needs to be able to deal from a full deck of skills (and SI has compiled a list of 52 unique IQ, EQ, and TQ skills a CPO will need to succeed, which will eventually be explored in future posts over on the Spend Matters CPO site once the outside-in issues, agenda items, and value drivers have been adequately addressed), many of the skills that Procurement requires rely on math. In fact, with so many C-Suites demanding savings, if a Procurement Pro can’t adequately, and accurately, compute a cost savings number that the C-Suite will accept, one will be tossed out the door faster than Jazzy Jeff gets tossed out of the Banks’ manner.

But, especially in the US, strong math skills are not in abundant supply. As per a 2010 SI post on how This is Scary! We Have to Fix This that referenced a MSNBC article on Why American Consumers Can’t Add reported on a recent study that found:

  • Only 2 in 5 Americans can pick out two items on a menu, add them, and calculate a tip,
  • Only 1 in 5 Americans can reliably calculate mortgage interest, and, most importantly
  • Only 13% of Americans were deemed “proficient”. That means
    less than 1 in 7 American adults are “proficient” at math.

So even if the Procurement Leader has strong math skills, it’s likely that not everyone on the team does. And even if the Procurement team has decent math skills, the chances of every organizational buyer having decent math skills is pretty slim. So you need to figure out how to ensure poor math skills don’t affect your performance. What should you do?

1. Make sure you know your team’s math competency.

If you need to, have each team member take a math competency test. You need to know their level of capability, and if you can’t get university transcripts, then you need to figure out their university equivalent math competency.

2. If they are not up to snuff, get them the courses they need – at your expense.

You have smart people. You hired them. They have talent, they just need a bit more math. So allow them to enrol in college or university courses, give them the time to improve their skills, and pay for the courses.

3. Acquire systems that make the math easy.

Give them systems where they can collect all the data, run accurate side by side comparisons and analysis, define formulas, and automate computations. The easier it is for them to create the models, analyze them, and make the right decisions, the better.

4. If possible, acquire systems that guide them.

For example, an optimization-backed sourcing system that asks them about the type of constraint, the split in a split award, and any filters and then creates the equation for them, where they only have to approve, vs. your buyers trying to do complex modelling in a spreadsheet is going to be more accurate and save you more money.

For math competency to improve overall, the importance of a math education has to increase overall. That is going to take some time. In the interim, work with what you got.

Benchmarks are Bad — But Don’t Just Take My Word For It!

A decade ago, Jeffrey Pfeffer, the Thomas D. Dee II Professor of Organizational Behaviour at Stanford University’s Graduate School of Business, wrote a book with Robert Sutton called Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management (Kindle), in which they stated there were three inherent problems with benchmarking. Especially external benchmarking.

1. If your business strategy is simply to copy what others do, then the best you can hope for is to be a perfect imitation.

2. When you benchmark, all you see is the most visible and superficial aspects of the company you are benchmarking.

3. When you try to copy, you forget to ask “should I copy this? is it right for me”?

It’s not who’s spending the least on inventory with JiT (Just-in-Time) supply chains, or who has the lowest labour costs (with warehouses in Georgia and Wyoming), or who has the lowest transportation costs (through mega-volume contracts with a single carrier), etc. It’s not even who has the lowest cost supply chain (although that’s a great start, just look at Apple for inspiration). It’s who has the biggest profit and biggest brand reputation — and that is the organization who manages to extract the most value from every dollar spent.

You don’t get value from a benchmark — the most you can get from a benchmark is an idea of where value may lie. And while this is a great start, especially since, if properly defined, it allows the organization to see where it is doing well against it’s defined metrics and goals, it’s only the start.

Moreover, if the benchmark is ill-defined, it can often hide huge over-spend. The organization could easily be over-spending by 10% or more, operating quite inefficiently compared to it’s potential, or focussing its effort on low return activities — something it will never know unless it continually challenges the benchmark and looks for ways to redefine what the baselines should be. But benchmarks, when they turn green, often lull the organization into a false sense of security. Which is scary. Because …

The reality is that benchmarks are filled with traps and hidden dangers. And if you don’t want to step on a landmine, you should download The Dangers of Benchmarking (registration required) today and identify the six major hidden dangers of benchmarks, four of which are easily eliminated with the right application of a(n optimization-backed) sourcing platform.

Sourcing Adoption Addresses Key Procurement Priorities

Earlier this year, the Hackett Group released it’s Procurement Executive Insight on “The CPO Agenda: Reduce Purchase Costs, Improve Agility, and Become a Trusted Advisor” that summarized the Hackett Group’s annual key issues study that was undertaken to define the top issues that would shape the procurement executive agenda for 2016.

As a result of this study, Hackett identified two major facts:

  1. The Top Four Priorities are, bottom up:
    • improve agility
    • increase spend influence
    • become a trusted advisor
    • reduce and avoid purchase costs

    which is bad, because costs should be well under control by now and Procurement should be seen as a trusted advisor by those that spend the most and

  2. Procurement’s Operating Budget is expected to grow by a mere 1.1%which is worse because most Procurement departments are under-staffed, under-resourced (technology wise), and under-funded (even though they can often make the greatest contribution to the bottom line of any department in the organization).

It’s another year of doing more with essentially less (as 1.1% budget increase doesn’t even cover the cost of inflation), which means that you have to be more efficient, and effective, than ever. You need to push your Procurement Value Engine into overdrive.

How do you do that?
(Hint:  It involves heeding the advice in Higher Adoption is Where True Value Lies, and we’ll get to that.)

There are a number of ways to do this, but probably the most critical thing to do is start at the beginning and get your Strategic Sourcing under control, especially for any non-direct category where you are not locked into a very small group (sometimes a very small singular group) of suppliers. And how do you do this? You get your optimization-backed sourcing platform adopted throughout the organization. (Don’t have an optimization-backed sourcing platform, than maybe you need to talk to one of the sourcing samurai.)

The reason Procurement is still in the “dark ages” in most organizations is because less than half (40%-) of organizations have any sort of platform. Of those, some have Sourcing, some have Procurement, some have Contract Management, some have Supplier Management (SIM/SPM/SRM/SxM), and some have another point-based solution that solves one particular pain, but leaves most of the pain of the Procurement organization unaddressed.

The most common solutions are either e-Procurement platforms, typically with some sourcing capability (namely, RFx), or e-Sourcing platforms, typically with Spend Analysis, Contract Management, and/or some procurement capability (usually order or invoice management). However, just because these solutions are in place, it doesn’t mean that they are used. In many organizations with a sourcing platform, only a small team of senior buyers working on the most strategic or highest dollar categories use the tool. This is costing the organization a lot of money, as the opportunity cost of not applying the platforms across the board (and identifying cost savings or cost avoidance across the board) is huge.

Consider our recent post on Why You Need Mass Adoption of an Optimization-Backed Sourcing Platform, a traditional organization without an optimization-backed sourcing platform will typically only source, at best, 9% of spend strategically with optimization and 18% of spend strategically without using the platform, for a total throughput of a mere 27%. For an organization that sources 50% or more of its spend every year, that’s half of its straight-to-the-bottom-line savings opportunity up in smoke!

But if the organization doesn’t use an optimization-backed sourcing platform, instead of an average of 1/4 of spend being strategically sourced in one way, the fraction decreases to 1/5 (or even 1/6). Think of the opportunity costs! Instead of losing 3% against the bottom line, the organization is now losing 5% or 6%! The reason for this is that the sourcing platform is always in the hands of the few. Why? Sometimes it’s a lack of licenses, but often it’s the complexity of the solution, which is seen as too complex by the majority of the buyers who have to push through volume, complex requirements, or special situations that are, in their view, easier to deal with outside of the platform.

That’s why you not only need adoption, but you need a platform that can, and will, be adopted by all of the buyers so that 90%+ of sourced spend goes through the platform. This will not only increase savings, which addresses the top priority of Procurement executives, but also addresses the priorities of spend influence and agility. How? A good platform allows a sourcing team to move faster, and speed up events by weeks or even months, and it allows the organization to tackle critical projects within different organizations that can increase Procurement’s influence.

So to find out how to get your Sourcing Platform adopted, download Higher Adoption is Where True Value Lies today and find out the tips and tricks that will make your sourcing a success.