Monthly Archives: August 2010

What Happens When You Use Walmart Consultants

Today on Dilbert, Scott Adams uses Dogbert to effectively illustrate what happens when you use a Walmart consultant.

What you have to remember with consultants is that you get what you pay for. If you pay a cut rate, you get a job with corners cut, as illustrated today in Overboard …

… and you get the pleasure of the consultant blaming you for their incompetence!

When hiring a consultant, it’s important to remember that it’s all about the value they can deliver, directly or indirectly. For example, a consultant with the skills and to help you devise a new business strategy that ends up increasing your sales by 30% is worth his weight in platinum. You should gladly fork over a few thousand a day for that kind of expertise as it will end up netting your company millions in the long run. A consultant who can help you select the right optimization or data analysis system for your business that can help it save an average of 10% on corporate buys is worth her weight in tantalum. And a technical resource who can adhere to a schedule and get the job done right the first time is worth his weight in gold — and it still amazes me that in 2010 the vast majority of companies haven’t figured this out! Everyday I hear another example of a company that went with the lowest bid and either got a system that didn’t work (and had to be scrapped) or, after exceeding the schedule and budget by 50% to 150% got a system that only did most of what it was supposed to do and required timely, and costly, manual workarounds. So, instead of paying 30% more for skilled resources who could do the job right the first time within the quoted timeframe and budget, the company spent 50% to 150% more for unskilled resources who delivered a shoddy product with a higher operational cost.

So stop hiring Walmart consultants, especially when, all things considered, Expert Advice is Cheap!

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A Hitchhiker’s Guide to e-Procurement: Tax Reclamation, Part II

Mostly Harmless, Part XVI

Previous Post

In the last post, the process of tax reclamation was defined and some of the complexity around tax reclamation was discussed. This post will address some of the challenges associated with tax reclamation, some best practices, and the benefits that could be expected from an appropriate e-Procurement solution with good tax reclamation support.

Common Challenges

  • Tax Rate Verification

    Is the rate being charged by the supplier the right one? This is tricker than it seems. In HTS, almost identical classifications can have greatly differing rates (which has led to lawsuits by retailers on the basis of gender discrimination, since they believe that gloves for a man should be taxed at the same rate as gloves for a woman). Some countries update tax rates on an irregular basis. (HST [Harmonized Sales Tax, a blending of the GST and PST in some provinces] increased in three provinces in Canada on July 1.) And sometimes a supplier is using an old database or makes a human error.

  • Reclaimable Tax Identification

    Can the organization recover the tax? Is it out-of-state? GST or equivalent? A VAT to which it is exempt?

  • Tax Credit Identification

    Is the expenses an eligible Research & Development expense that can be credited against taxes payable (such as the SRED in Canada)?

Best Practices

  • Automatic Tax Rate Verification

    It’s amazing how many AP clerks will accept the tax calculation as valid, without even a cursory glance, once they have verified the items have been delivered and the rate appears to be in an acceptable range.

  • Automatic Exemption Flagging

    To simplify recovery efforts, any taxes that the organization knows it is eligible to recover should be automatically flagged by the (rules-based) system. In addition, the system should also flag any tax payments that the organization might be able to recover and that should be manually reviewed.

  • Automatic Flagging of Suspect Taxes for Manual Review

    Any taxes that are not in the system should be flagged. Any calculations that are not consistent with internal calculations should be flagged. And the invoice / taxes SHOULD NOT be paid until manually reviewed.

Potential Benefits

  • Prevention of Overpayments

    Automatic verification of taxes (to insure they are valid) and rates (to insure they are current) can prevent significant overpayments.

  • (Over)Payment Recovery

    A good tax tracking system can simplify overpayment recovery when such payments are made (which will sometimes be unavoidable, especially if a 3PL or broker handles imports and screws up a filing), and can simplify recovery of taxes the organization is eligible to recover on a quarterly or annual basis.

  • Future Credits and Savings

    The ability to flag payments that might be (partially) eligible for tax credits can greatly simplify the process of claiming tax credits in an acceptable manner. This can reduce corporate taxes and lead to considerable organizational savings over the long term.

Once the taxes are reclaimed, the actionable part of the procurement cycle is complete and it’s time to analyze performance, which is the subject of the next post.

Next Post: Analysis, Part I

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Everything I Needed to Know About Procurement I Learned at Clown College

When people ask me why I’m so good at Procurement, despite not having a formal degree in business or supply chain or a professional certification such as the CPSM or SPSM, I tell them that I learned everything I needed to know at Clown College. At this point they let out a hearty laugh and walk away, but I swear on the clown’s code of ethics that it’s the honest truth.

People think it’s easy being a clown, but it’s not. It’s very challenging, just like Procurement. And the skills required are quite similar. And while I enjoy the sound of laughter, I would like to dispel the misconception once and for all that all you do at Clown College is clown around. So, in this post, I’m going to tell you the ten most important things I learned in Clown College and how they helped me to excel at Procurement.

  1. Paint Your Face

    As a clown, you need to maintain a consistent mood every second of every minute of every hour of every day. This can be very hard to do. But if you paint on a happy face, you can be happy all the time. And if you paint on a scowl, you can be scowling all the time. You’d be amazed how much this can help in tense negotiations.

  2. Put On Your Big Red Nose

    Just like a clown wears his heritage with pride, a Procurement professional needs to take pride in his, or her, work and let it show.

  3. … and Your Brightly Colored Costume

    One of the biggest keys to success, especially in Procurement which was traditionally relegated to the back room or the basement, is to get noticed. Just like his brightly colored costume helps a clown stand out from the crowd, dressing sharply helps a Procurement professional stand out.

  4. … and Your Big Red Shoes

    You never know when someone is going to try and step on your toes! The extra padding goes a long way to protecting your feet.

  5. … but Stay Light on Your Feet

    as you never know when you’re going to have to dance around an issue or run away from a charging bull. (After all, no matter how good you are, you can’t win every fight!)

  6. Storytelling is an Art Form

    A clown has to engage his audience with a good story, just like a Procurement professional. The ability to tell a good story becomes important when you have to balance the conflicting needs of multiple stakeholders in a major buy but still claim all-around success. It’s especially important when you have to explain to the CFO why you had to pay more to get the reliability required by engineering and the usability desired by the end customer (which is key if Sales is to meet its quota).

  7. Keep Your Hands Sleight

    because sometimes you just have to make magic happen!

  8. Learn How to Take a Hit

    When clowns get together, someone always gets smacked upside the head. Always. The same happens in business whenever something goes wrong, and they almost always try to blame Procurement first. The ultimate key to success is to be able to pick yourself up, dust yourself off, and keep going like nothing ever happened.

  9. Maintain a Good Sense of Humor Through it All

    In life there are ups and downs, but you’ll be able to get through them all if you just maintain a little humor in your heart.

  10. And Learn How to Work as a Team

    as you never know when you’ll have to squeeze into the equivalent of a Volkswagen Beetle with ten of your best buddies in an all-weekend disaster recovery session at an off-site location after a natural disaster took out your primary location.

Has Coupa Settled on a Coupe? Part I

Has Coupa, which opened the Cabana Cafe a little over four years ago with the goal of enabling Procurement Independence for all with it’s Rails-driven cloud-based EC2 platform, given up its quest for a coupasonic flying car and instead settled for a mini-cooper?

Now, while the original goal of Coupa, that wanted to fill your e-Procurement gas tank, was to bring e-Procurement to the masses, it would seem that they are now content with the fact that you can buy anything you want in The Coupa Store as it would appear that they are no longer charging ahead on the innovation front. While it’s true that they’ve been quite busy ever since they enabled QuickDraw Procurement with QuickStart, what they’ve accomplished since then isn’t all that spectacular compared to their historical rate of innovation … and they’ve missed most of the opportunities for innovation that could take their platform to the next level with their latest release. And while it’s true that you don’t need a very powerful solution if you’re selling fertilizer to farmers (and can get by with a simple cart and a good old-fashioned hoe-down), you’re never going to get the design engineers. (i.e. You’ll get the tactical buyers requisitioning office supplies, but never the strategic buyers trying to order a bill of materials for engineering.)

Basically, besides revamping the UI for the upteenth time (which seems to be a waste of resources to me as it was already [among] the easiest enterprise procurement solution out there and as easy to use as Amazon.com), all Coupa appears to have accomplished in the last eighteen months is:

  • improved ERP integration through upgraded APIs and Boomi,
  • drag-and-drop expense management,
  • transaction metadata for OLAP reporting,
  • a new inline spend dashboard,
  • real-time budget-based alerts during requisitioning,
  • the iPhone app,
  • iRequest,
  • opt-in community benchmarking, and
  • supplier ratings.

Considering that:

  • they’ve had APIs since day one, Boomi handles most of the integration, and ERP integration is always just a matter of time and resources,
  • it’s about data capture (not slick UIs),
  • they’ve had the ability to capture this data since day one,
  • dashboards are dangerous and dysfunctional,
  • they’ve always had alerts and the usefulness of this should have been obvious years ago,
  • if you have an iPhone, you have e-mail, and that’s good enough for approvals,
  • the goal is not to buy outside the system,
  • benchmarks are pointless unless you’re benchmarking against peer data, and
  • optional surveys are about as useful as snowshoes in summer

while it is still forward progress (which is more than a few of their peers can claim these days), it really isn’t much considering their historical rate of innovation. (Of course, that’s when Davie ran The Coupa Factory.) While their new strategy may have enabled their rate of growth to skyrocket, going from a few dozen customers to over one hundred and fifty in under two years, it appears to have put a crimp in their rate of innovation — especially considering the unprecedented power Coupa could have brought to their platform if they had taken the last two features to the next level.

To be continued.

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Demos Don’t Teach You Much … Unless … (Part I)

Sheesh is Right! The average analyst doesn’t have a clue how to properly evaluate a technology offering. But what should you expect considering most of these individuals come from a liberal arts background and think “C” is for Cookie? And if you don’t believe me, maybe you should read those tragic quadrants, graves, and benchmarking futiles more carefully … because the reality is that an evaluation scheme based on chicken-with-its-head-cut-off bingo would likely be just as accurate as the rankings in the average analyst report these days.

But back to the point. Recently, over on Spend Matters, Jason Busch decided to tackle the issue of product demonstrations (Part I and Part II). In his first post he said that you should be prescriptive where the demo is concerned and that, except in a few rare cases, you should focus on ease-of-use. I disagree.

In the words of commenter “Sheesh” [italics in the rest of this post], Jason’s points are true if the analyst knows what to ask. If all you do is focus on “usability”, you’ll end up choosing the solution with the most flash. Problem is, there’s always a trade-off between flash and substance. A software company only has so many development hours before it runs out of cash and has to sell something. This means that the more hours it spends on creating a razzle-dazzle UI, the fewer hours it has to spend on actually building useful functionality. Remember, we’re talking about enterprise software, not end user entertainment.

Jason’s followed with a second post where he proposes a series of demonstrations based on specifically prescribed scenarios.

The problem is that, as Sheesh says, you’re not a tech expert and you shouldn’t [even] attend the demo unless you bring one with you. The “business scenario” approach assumes that the ability to address “business scenarios” is a useful measure of anything. Typically “business scenarios” are crafted from melted-down aggregations of vendor marketing messages and feature lists, combined with some business problem that the vendor has already got a pat answer for unless he’s a complete idiot. If he’s on the ball at all, you won’t discover anything interesting; or if you do, it will be something on the order of Debbie Wilson’s mouse clicks. ‘OMG this vendor takes seven mouse clicks and that one takes twelve!!!!!’ Not at all useful!

Sheesh continues, You have to go deeper than chin-stroking about a suite of standard reports and baked in transaction processing flows for “business scenarios.” What’s behind the curtain? What if you want to write your own report, or modify one of theirs? What if you want to change the way the transaction processing works, fundamentally? If you find a solution that’s extensible in those dimensions, then it’s tons better than any canned solution, by definition. Because you can make it do whatever you want it to do.

Furthermore, the software procurement process shouldn’t try to find a “best fit” in a shoe store that doesn’t carry your size. Rather, the software procurement process should focus on finding a solution that can be easily extended and adapted to your needs, on as many dimensions as possible. If the solution can be extended and adapted, it really doesn’t matter what it does out-of-the-box, in terms of canned reports, canned transaction flows, canned sourcing and optimization templates, or canned demos — or what its relative performance might be on business scenarios that encompass what you think you need today, but tomorrow might fail miserably at characterizing your needs. If the solution is extensible, then it can solve a universe of problems rather than a small subset of them.

As the commenter stated, there are lots of such questions that need to be asked, but they need to be asked with the aid of a technical resource.And there’s really no excuse not to have an expert technical resource on hand. Expert advice is cheap, especially compared to what you’d pay to some analyst firm, or waste on some solution that compares well on an analyst checklist, but is actually hopelessly inflexible. In the long run, it’s probably a few tenths of a percentage point of what you’ll spend on the “enterprise” solution (which won’t be a solution at all if it sits there, on the “shelf”, unused).

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