Monthly Archives: May 2023

Source-to-Pay+ is Extensive (P16) … Time to Break Down the CORNED QUIP of Supplier Management, A-Side

So, we’ve implemented e-Procurement, adopted Spend Analysis, and identified Supplier Management as the next Source-to-Pay solution to implement. But it has as many aspects on its own as Source-to-Pay has, so finding the right solution is going to be tough. First we have to decide which aspects of the CORNED QUIP, as identified in Part 15, the organization needs, and then we need to make sure that the solution has the necessary features for each aspect the organization needs. What are those features? Let’s take the aspects one by one, starting with some of the classic capabilities first.

Information Management.

Supplier Information Management (SIM) is where it all began back in the early 2000s. Some would even argue that it began with the formation and launch of Aravo, one of the first pure Supplier Management solutions, and possibly the last surviving great granddaddy in the Supplier Management space. (Aravo was among the first to get big name clients, including Google, using a pure-play SIM platform.)

Almost every Supplier Management solution does basic Supplier Information Management because you can’t really do any supplier management without tracking basic information. (However, these solutions are not all equal in terms of depth and breadth, and the degree of differentiation is quite large.) The core, and the point, of a SIM solution was the centralization of all supplier information for tracking, access, and reporting purposes, which, long ago, was seen as the foundation for management. As a result, the core capabilities required are both limited and fairly obvious:

Extensible Schema
If the schema is fixed or has very limited extensibility, it’s not a modern SIM solution — every S2P system can store the supplier information the S2P system needs to function in a fixed, or limited extensibility, schema. A modern SIM solution has to support unlimited extensibility so that an organization can use it as the supplier master data management (SMDM) solution.
Fuzzy Search
More technically, full reg-ex (regular expression) search across all data fields for partial/like matches as well as weighted rankings (using customized similarity models) for finding the right suppliers (with existing relationships) to meet buyers’ needs.
Customizable Approval Flows
Just like every S2P solution contains a fixed schema that captures the supplier information it needs to function, any that require supplier interaction have a basic onboarding flow. As such, a modern SIM solution needs to have customizable onboarding flows with customizable approval rules.
Customizable Alerting
The platform should support configurable rule-based alerts that can be defined on any field, dimension, or derived dimension to alert a user when a threshold is reached or a value is detected, especially as a modern SIM solution should be the foundation for SMDM. This sounds vague, but the capability has to be very generic and flexible because neither a relationship, performance, compliance, or uncertainty solution will be able to detect everything on their own.
A relationship system that tracks active supplier relationships may not detect that a person just entered into the system as a rep is one that you dealt with in the past (at another supplier that consistently performed poor when you needed to interact with that rep). A performance solution will only detect performance for projects and suppliers actively being tracked, and may not be able to compare that to full historical benchmarks (or realize that the increase in performance correlated to a decrease in ESG activity). A compliance solution will detect compliance with regulations, but not necessarily with corporate goals designed to meet anticipated regulations, or how the compliance affects performance. The uncertainty solution will only be able to identify risks based on the integrated data sources and the integrated models, which won’t cover everything. Nor will it be useful to build risk models for situations that are currently irrelevant for the organization. However, the organization should be detecting whether it may need to build new, or augment, existing models — and that will often be if a value in the database exceeds a threshold. (E.g. The organization is not currently doing a detailed risk of financial failure predictions, but an OTD KPI dropping below a threshold is a signal to start, and that data is currently only tracked in the inventory management solution, and pushed to the SIM, serving as the SMDM, in the weekly cross-enterprise system synch.)

Relationship Management.

What’s the point of tracking information if you don’t do anything with it? The next major solution to hit the scene was Supplier Relationship Management (SRM), where the data was used to help manage the supplier relationship. The majority of modern supplier management solutions claim to be SRM platforms, even though they have wildly different definitions of what SRM is and wildly different functions. Most definitions considerably overlap with SIM and SPM, but we don’t agree with this. While such a system needs extensive data to be effective, and must track performance, it needs to focus on managing the relationship, not the data or the numbers.

A Supplier Relationship Management solution must provide functionality geared around managing and improving the supplier relationship. This must include functionality geared towards helping a buyer identify and implement best practices to manage and improve supplier performance and, in addition to functionality geared towards helping the supplier interact with the buyer, collaborate with the buyer to proactively identify and improve processes to improve future performance.

Synchronous and Asynchronous Messaging
In addition to the standard asynchronous messaging supported by every platform with collaborative elements, it must also support synchronous messaging and real-time discussion and collaboration through voice (with auto-transcript and storage) and screen-sharing and support saving, search, and semi-automatic/assisted work/change order creation from these sessions.
Collaborative Project and/or Product Plans
The system must allow for the collaborative creation of (improvement) project plans — with milestones, tasks, and owners — as well as checks, balances, notes, and sign-offs. If the solution is for direct/manufacturing, it should also support the creation, possibly through integration hooks to CAD/CAM systems, approval, and management of product (production) plans.
Integrated Best Practice Guides
A modern solution should contain a large library of standard improvement plans for common situations, as well as automated best-practice plan selection and guidance when key metrics (either computed internally or imported from an SPM solution) exceed threshholds or predictive metrics indicate likely problems. If the platform does not provide insight, at the end of the day, it’s no better than a SIM.

Performance Management.

At the end of the day, relationships are important, but you, as a buyer, get measured on performance, and you need that from your suppliers too. Relationship management should be the foundation for improved performance management. However, performance management is more than just relationship management. It’s measurable process, and product, management, and that’s the focus of a Supplier Performance Management (SPM) capability.

KPIs and Custom KPIs
Performance is all about improving KPIs, so it should be obvious that the platform should track KPIs. But not just a small set of standard “canned” KPIs! The platform should track standard, customized, and any specific KPIs you can think of to identify potential issues or opportunities for improvement. Just like there is no one set of reports that can uncover everything of relevance in a spend analytics project, there is no one set of KPIs that can guarantee everything is running smooth and that there are no opportunities for improvement. While the standard KPIs are critical, and display major issues that need to be addressed, you want to discover those KPIs that present leading indicators that allow you to sniff out, and deal with, a problem early (before it becomes significant enough to make a noticeable difference in a standard KPI).
Internal and External Benchmarks
KPIs are good, but only measuring against your own benchmarks only tells you how good each supplier is doing against the best supplier for your business, not the average performance other businesses in your industry get from their suppliers, or their best suppliers; you want those external benchmarks built from anonymized data for deeper insight from the KPIs you calculate.
Easy Data Ingestion
Product quality is going to be in the quality / PLM system. OTD (On-Time Delivery) is going to require promised dates from the contract/PO system and receipt dates from the inventory system, etc. It’s going to be critical to get lots of data from related systems to make the maximum use of the supplier performance management module.
Performance Improvement Management
Once you detect an issue from a KPI or a benchmark, you need to do something about it. It might be as simple as contacting a supplier to find out that the root cause was force majeure and outside of their control (a flood prevented transport for three days) or just the result of a miscommunication or it might be that the supplier is repeatedly delivering defective units and there is obviously an issue with their quality control. In the latter case, you will need to start a supplier development project, and the platform should allow you to define it, track it, and, hopefully, manage the interactions (possibly through the relationship management functionality).

In our next post, we’ll move onto the next set of the more classic capabilities: Compliance, Quality, and Uncertainty Management when we flip it to the B-Side in Part 17.

For all I care, they can ban all the Social Media Platforms!

For those who haven’t heard, Montana is the first state to try and ban TikTok, presumably because it’s owned by China that is harvesting the data. Following that logic, shouldn’t they ban every platform that has Chinese investment?

… and then every social media platform that has a presence in China and, as such, must adhere to Chinese law?

Of course, if the real reason they want to ban Social Media platforms is because they realize the damage that social media platforms have been doing to us (and are using the Chinese ownership as an excuse), they can ban them all — including their home-grown American platforms. After all, Twitter made us dumber than a doornail and Facebook is a Toilet so please feel free to take them away too.

Remember, even if you overlook the fact that Facebook is primarily used for sharing conspiracy theories and information that is NOT fact-checked, seeking attention, cyber-stalking your favourite celebrities, and other uses besides the good, wholesome, community aspects they tirelessly promote, if you acted in real life like you acted on Facebook, as the image below suggests, you’d be the subject of multiple psychological assessments and suspicious individual #1 at your local precinct. (Credit to the original source, which I wish I knew!)

Don’t Cheat Yourself with Cheat Sheets, Kid Yourself with KPI Quick Lists, or Rip Yourself Off with Bad RFPs!

In an effort to quickly catch up on the parts of S2P the doctor hasn’t been covering as much in the past few years, when he was focussed primarily on Analytics, Optimization, Modelling, and advanced tech in S2P (inc. RPI, ML, “AI”, etc.), he’s been paying more attention to LinkedIn. Probably too much, even though he can (speed) read very fast and skim a semi-infinite scroll page in a minute. Why? Because a lot of what he’s been seeing is troubling him, and as per last Friday’s post, sometimes angering him when predatory sales-people and consultants are giving other sales-people and consultants bad advice (presumably to increase their follower count or coaching sales or whatever) that will not only hurt what could be a well-intentioned sales-person or consultant (they still exist, though sometimes it seems they are fewer by the year as more sales people bleed into our space from enterprise software, looking for the next hot software solution and the next big payday), but also the individuals, and companies, those influenced sales people sell to in the thoughtless, emotionless, uncaring aggressive style the predatory sales coaches are mandating. (Not to say that a sales person shouldn’t be aggressive about getting a sale, just that they should be focussed on the companies they can actually help and be focussed on getting the customer all the information and insight that customer needs to make the right choice, feel comfortable about it, and feel prepared to defend it. The aggression should be channeled into making sure their company does everything it can to properly educate the potential client before that client commits to a long term relationship.)

A few of the things that have been repeatedly troubling him is

  1. all the cheat sheets he’s been seeing for those looking to get a better grip on Procurement and how it integrates into the rest of the business, that supposedly summarize everything you need to know about accounting, finance, payments / accounts payable, etc. to help you make good choices about Procurement in general;
  2. all the 10/20/50 Procurement, Spend, Manufacturing, etc. KPIs that you need to keep tabs on your Procurement, cashflow plan, product lifecycle, etc.; and
  3. all the RFP outlines or guidances that are being made available, sometimes by leaving your email, to help buyers acquire a certain technology.

And it’s not because they’re bad. They’re not. Some of them are actually quite good. A few are even excellent. Some of the cheat sheets and KPI lists the doctor has seen are incredibly well thought out, incredibly clear, and incredibly useful to you. Some are so good that, as a buyer, likely with little support from your organization and even less of a training budget, you should be profusely thanking whomever was so kind to create this for you and give it away for free.

Nor is it because the doctor suspects any ill intent or malice behind the efforts (in the vast majority of the cases). Many of these people giving away the cheat sheets or the KPI lists are generally trying to help their fellow humans get better at the job and improve the profession overall. And when the RFP outline is coming from a former practitioner, it’s also the case that they are typically trying to help you out (and maybe sell their services as a consultant, but they are providing proof of value up-front).

So why has it been troubling the doctor so? It took a while and some thought to put his finger on it, and the answer is, surprisingly, one of the reasons [but not the obvious one] that the doctor hates software vendor RFPs and despises any vendor that gives you one.

Now, the primary reason the doctor despises those RFPs, which became popular when Procuri started doing it en-masse in the mid-to-late 2000s (before being acquired by Ariba and quietly sunsetted as the integration never finished by the time Ariba sold to SAP, for those of you who remember the APE circus), is that these RFIPs are always written to be entirely one sided and ensure the vendor giving them away ALWAYS comes out on top. The feature list is exactly what the vendor offers, the weightings correspond exactly to the vendor core strengths, etc. etc. etc. And don’t tell me you can start with a vendor RFP and alter it to suit other vendors, because you can’t. You’d have to know all the features as the vendor focussed on point features, not integrated functions, and you, as a buyer who’s never used a modern system, have no knowledge of how to equate features (when vendor specific terminology is used), or how to determine if one feature is more advanced than another. (That was the reason the doctor co-developed Solution Map, to help rate and evaluate technology, which is the one thing most buying organizations can’t do well. Not the things they can do well, and better than most analyst firms, like rate the appropriateness of services to them, assess whether or not the vendor has a culture that will be a good fit, define their business needs and goals, etc.)

But the primary reason doesn’t apply here. So what’s the secondary reason? When an average, overworked, underpaid, and overstressed buyer got their hands on one of these free vendor RFPs, especially when the RFP was thick, heavy, and professionally edited and prepared to look polished and ready for use, and was more detailed than what the buyer could do, they thought they had their answer and could run with it. They thought it was all they needed to know, for now, and that they could send it out, collect the responses, and get back to fire-fighting. They were lulled into a false sense of security.

And that’s why these cheat sheets and KPI guides and former buyer/consultant RFPs are so troubling. When you’ve been struggling without even the basics, and these are so good that they teach you all the basics, and more, it seems like they have all the answers you need and that when you learn those basics, encapsulate them in the tool, and start running your business against them, things will be better. Then you configure your tool to respect the basics, encode the KPIs, and things are better. Significantly better, and for once processes start going smoothly. And then you believe you know everything you need to in that area (that’s not your primary area) to interface with those functions and that those KPIs will be enough to keep you on the Procurement track and let you know if there are any issues to be addressed. And you start operating like that’s the case. But it’s not.

And that’s the problem — these cheat sheet, guides, and templates, which are much better than what you’d get in the past, can make such a drastic difference when you first learn and implement them that they instill a false sense of security. You get complacent with your integrations, reports, and KPI monitors, not recognizing that they only capture and catch what they were encoded to capture and catch. However, real world conditions are constantly changing, the supply base is constantly changing, and external events such as natural disasters, political squabbles, and endemics are coming fast and furious. If the risk metric doesn’t take into account external events, real-time slips in OTD (as it is based on risk profiles upon onboarding, and updates upon contract completion), or past regulatory compliance violations (as an indicator of potential violations in the future), the organization could be blindsided by a disruption the buyer thought the KPI would prevent. Similarly, the wrong cash-flow related KPIS can give a false sense of liquidity and financial security and the wrong inventory metrics can lead to the wrong forecasts in outlier categories (very fast moving, very slow moving, or recently promoted).

In other words, by giving you the answers, without the rationale behind them, or deep insight into how appropriate those answers are to your situation, you will cheat yourself, kid yourself, or, even worse, rip yourself off. And that’s worrisome. So please, please, please remember what these are — learning aids and starting points only — not the end result. (Especially if it’s an RFP template.)

Source-to-Pay+ is Extensive (P15) … And So Is Supplier Management! It’s a CORNED QUIP!

That’s right, Supplier Management is a CORNED QUIP! And we’ll explain what we mean shortly, but first … how did we get here?

When we started this series back in Part 1, we noted that Source-to-Pay is extensive, your organization needed all of it, but your organization couldn’t implement it all at once. So we needed to give you advice on where to start, which, after a careful analysis, needed to be e-Procurement. Next came spend analysis because, in the hands of the right analyst, if your organization wasn’t sure what module was the next most valuable, spend analysis would help the organization identify which modules would likely bring the most (relative) value (based upon the opportunities spend analysis identified). Often, there will be a clear winner, and your organization will know what module to start implementing tomorrow, but sometimes there won’t be. So what’s the answer then? When you are dependent on suppliers, there is no value beyond the supplier. Thus, in this situation, Supplier Management comes next.

But why is Supplier Management a CORNED QUIP? A good solution preserves and maintains the data, like a good cure, but the marketing from most of the vendors with these solutions is more entertaining than enlightening (as they seem to prefer wit to wisdom). This, of course, is not at all helpful when there are literally ten (10) different types, or at least aspects, of supplier management solutions on the marketplace, no one vendor addresses all of the aspects in their solution, and, in many cases, doesn’t even address more than a couple of these aspects. Furthermore, depending on your organizational needs and the platforms your organization currently has in place, some capabilities will be much more important to your organization than other capabilities. Moreover, sometimes certain capabilities in a supplier management solution, already present in solutions already implemented by the organization, will be downright useless as these aspects will, thus, be completely redundant. So, if a vendor is just selling “Supplier Management” or “Supplier Lifecycle Management”, which theoretically includes every core type of capability (even though not a single solution on the market today comes close to materializing all the capabilities), how do you know what they are selling?

Just what might that vendor be selling when they are trying to sell you Supplier Management? One or more management aspects of the CORNED QUIP (but likely not all of those aspects, as every cure is different, and every message witty in its own way, but not exactly enlightening).

What are these ten (10), core, aspects of modern supplier management? (Which dictate the core capabilities that such a solution should offer.)

  • C: Compliance (+ Government + Regulatory)
  • O: Orchestration (or Onboarding + Multi-Tier/Multi-Supplier capability)
  • R: Relationship
  • N: Network
  • E: Enablement (+ Engagement)
  • D: Discovery
  • Q: Quality
  • U: Uncertainty (+ Risk)
  • I: Information
  • P: Performance

Now, before we continue, we know you’re saying “what about ESG” and “what about diversity“? Well, at least as of today, most of these providers are data services that you use to augment your central supplier records (in your Supplier Master Data Management [SMDM] Solution, which could be your SXM or could be the ERP that the SXM extracts data from), and not standalone SXM products, so we will tackle those separately at some point in the future (especially since diversity is literally just data enrichment on a supplier record in any current solution).

Thus, now that we know what we are implementing, our next step is to decide how to evaluate the solution. Thus, in our next post, we’ll begin to break down the ten core aspects of the CORNED QUIP and define not only what they mean, but what capabilities are critical to the cure.

On to the A-Side in Part 16.

Source-to-Pay+ is Extensive (P14) … So Do Not Stop at Spend Analysis!

As we discussed in Part 8, once you have your eProcurement baseline, that’s just the beginning. The very beginning. Even though not all modules are equal, and not all modules will return equal results, you, and your organization, will need all of Source-to-Pay eventually. However, since you can’t implement it all at once, you take it one module at a time.

After eProcurement, if you aren’t 100% sure where the most value will come from, you go on to spend analysis and use it to help you identify the best opportunities, and those opportunities may indicate the next best module to implement (for your organization at the current time). After that, you may have a clear answer, or, you may not. Sometimes the analysis indicates almost equal opportunity between sourcing and contracting, between contracting and supplier management, or between sourcing and supplier management. (Or, you might not have the manpower or expertise to do the analysis you need to get the right answer.)

So if it’s unclear as to which solution to choose next, it’s back to arguments and logic in an effort to determine which of the three aforementioned solutions to choose.

How about Strategic Sourcing? It’s the one technology proclaimed to identify the most savings and deliver the best results. The truth is that while it almost always identifies the most savings, it doesn’t actually deliver those savings, or even guarantee them. The savings are guaranteed by the contract, delivered by the (new) supplier, and captured by the eProcurement system.

So how about a Contract Management System? In order to guarantee the cost reductions, you need the contract. Or it’s just a quote that’s given today, denied tomorrow. But, as we indicated in a prior post, you don’t need a contract management system for a contract. You need (e-)paper, (e-)ink, and a pair of (e-)signatures. The right contract management system makes it easy to author, negotiate, manage, track, and enforce a contract. But the contract itself is up to people, and if they don’t agree, there’s no contract, and, thus, no need for a contract management system.

This just leaves Supplier Management. But is this where we start? If we think about the value sourcing identifies, it’s generated by the supplier. So it’s critical that the supplier perform. If we have a good supplier management solution, it will track the supplier’s progress, alert us to issues, and assist us in managing the relationship if intervention is required. It will enable performance management, which is critical because if the supplier doesn’t perform and/or doesn’t adhere to the contract, then it doesn’t matter how great the sourcing event was or how good the contract inked was.

And so, because suppliers, and relationships with them, are key, when all things are about equal, or when it’s hard to identify where to go next, we go with supplier management.

Start the dive in Part 15.