Monthly Archives: July 2024

The More Things Change …

… the more they stay the same … and the more relevant the past, and the education of, becomes.

Ten years ago today, the doctor asked are you doing it wrong?

Ten years later, the question is just as valid now as it was then. Because if you were doing it right, your supply chains wouldn’t be in such disarray.

Ten years ago we noted that, if you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity and that they have been preaching the following solutions to not only tame the risk but increase the opportunity.

1. Comprehensive Category Management

Nothing has changed here. One consulting firm is literally sending the same email newsletters they were sending a decade ago on the topic because it’s still relevant, and most firms are still doing it wrong.

As the doctor noted a decade ago, spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management, not in the least — nor is running your buys through a “magic” or “delightful” intake-to-procure platform (better called “faketake” as a colleague of mine will point out). As was said before, Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy — which could even be early renegotiation with an incumbent who might give you a great deal to keep you from going back to market. It’s taking a holistic strategic approach, not just mapping to UNSPSC or some out-of-the-box 2-level taxonomy and running with it. And not doing it is what’s resulting in stock-outs and cost-overruns. Because now, it’s not just price, it’s quality and supply assurance. Especially supply assurance. Which brings us to …

2. Supply Chain Risk Monitoring

Not much has changed here, even though the technology now exists for it to change at the majority of multi-national companies. A decade ago, we noted that natural and man-made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least. Still holds true today.

A month ago we also noted that most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. Multi-tier monitoring is key, but most Procurement departments are only now exploring supplier risk management in their supplier management module / application, which is tier 1 — even though we now have a number of great solutions that can monitor to at least tier 3, if not down to the source of each raw material in your supply chain. Considering that any good supplier information management solution will allow you to push in risk, compliance, performance, and visibility data, there’s no reason not to be monitoring your critical supply chains. Especially now that we can easily handle:

3. Big Data

What used to be the biggest buzzword-du-jour (before all this useless Gen-AI, desired only by Dr. Evil himself), Big Data is still desirable, but only to the extent you actually have valid, verified, data. Considering that the algorithms that actually work predict demand, acquisition cost, projected sales, etc. based on trends — unverified non-demand, cost, price data (for the wrong product) is NOT going to be of any help.

Get a real data analysis tool, validate the data at your disposal, and use it to your advantage, no more, no less.

Affordable RFPs — What Are Those?

A couple of weeks ago we penned an article on The Key to Procurement Software Selection Success: Affordable RFPs!. This resonated with those of you wanting to improve your Procurement operations who were willing to admit that you could use the help, but it also left you with one big question: where to find these affordable RFPs?

And the doctor hears you on this. You can’t just go to any old consulting firm and get an affordable RFP. Most of you have encountered high price tags, whether you went to a Big X, mid-size consulting company, or even a niche specialist. And you’re probably wondering why. Well, first you need to understand the following.

1. The Big X.

There are a number of reasons you’ll RARELY get an affordable RFP from a Big X.

  • their modus operandi is to get their people embedded on your projects and keep them there for as long as possible at 3X to 5X+ their hourly rate, they are service firms with a large number of people to keep employed (and they need to invest in employing those people, and, to be honest, trying to streamline RFP processes across every type of software imaginable is just unreasonable for any company to do, so why should we expect it)
  • they have agreements with a number of big suite vendors where they are a preferred implementation partner (and not only do they get a big referral check in addition to YOUR implementation fees which makes finance happy, if they don’t bring enough clients, they could lose that partnership and the deep insight it gives them into the partner, which is key to them being able to bring value to the implementation — see when should you use a Big X?
  • they’ll put a senior resource / junior partner as lead, but you’ll hardly ever see that person, instead, most of the work will be done by a team of inexperienced recent hires, usually recent graduates, who will, unfortunately, even with a good playbook, rack up the hours just trying to get the basics right as they get the experience needed to be more effective (mainly because this senior resource / junior partner will also be attached to many other projects so that they can close the deals, leaving the team without a lot of senior guidance)

2. The mid-size consultancies.

While it is sometimes possible to get an affordable RFP from a mid-size consultancy, the reality is that it’s a rare occurrence (and your odds are about the same as achieving success with an average technology project which, as per Gartner, is less than 1 in 5, largely because they are never scoped and planned right, starting with the RFP), and most of you never will. As with the Big X, there are a number of reasons you’ll RARELY get an affordable RFP from a mid-size consultancy.

  • like the Big X, they want to get projects that keep their people busy (usually at more reasonable 3X to 4X resource hourly rates) as they want to grow, and this leaves little time for trying to streamline RFP creation methodologies which is possible if they are sticking to a niche with only a few, and maybe a few dozen, different solution modules that would be relevant (and, in their quest to grow, they can totally miss the big picture that it is delivered value that wins repeat business)
  • while they are willing and able to be more impartial than the Big X (who need to keep their partners happy to get the insight and training they need to deliver unparalleled value), they have a few partners they prefer to direct any RFPs (and awards) to as they know the systems well (and can get the implementation work), those resources get it done fast, and it keeps them front and center with the vendors who need to direct implementation work to a third party
  • they can’t afford benchers, so their recent grads are not only the top of their class who have shown aptitude for their domain, but they are balanced by intermediate personnel on the projects who can guide them and there’s usually always at least one senior person, but only the senior people can do the RFPs well enough on their own, so the day rates are almost as high as a Big X as the RFPs tend to be mostly senior and intermediate personnel

3. The niche consultancies.

The niche consultancies are your best bet of getting an affordable RFP, but the reality is that it’s still, unfortunately, hit and miss and it’s likely that less than 1 in 3 of you will see a decent rate when all is said and done (where we measure RFP spend against total system spend over five years and try to maintain the right ratio).

This is despite the facts that:

  • unlike the Big X and mid-size consultancies, they have lower overheads and can keep their bill rates in the 2.5X to 3X range (enough to cover their resources’ hourly rate, overhead, and a fair profit margin)
  • even if they have partnerships with a vendor or three, they tend not to favoured by the vendors who will never direct work to them (and only allow them to implement deals they bring) due to their small size and inability to rapidly scale up (like a Big X or mid-size), which means their bias towards any vendor, if it exists, is quite limited
  • they don’t have junior people, because they can’t afford benchers and resources that don’t deliver with their cost model, and only hire (high-achieving) intermediate and senior personnel, and focus primarily on those who can do small projects entirely on their own or with limited support

When you look at this, you should be able to get a lot of value for a reasonable amount of money. And, make no mistake, you do get value for money.

However, when you look at the total system cost that you can afford as a (smaller) midsize company, and then you look at the cost of getting that good RFP, the problem is that the cost of the RFP is more than you can afford (and should be spending relative to the annual cost of the specialized system you are likely to buy). This means that you end up having to cut corners on the software (and get less from a preferred vendor or go with a more cost effective runner up) or forego more than a modicum of help from the consultancy (where you just get a few advisory days and hope your team to can capture enough of the brain-dump to put together something reasonable).

Even though this shouldn’t be the case.

So why are most niche consultancy RFPs not affordable (unless you are acquiring a mini-suite or significant advanced functionality that comes with a significant price tag and are a larger mid-size with the budget for it) when they could easily pick a focus area and make it so?   And for that matter, why aren’t the razor focused mid-sized consultancies more affordable when they could do the same?  After all, it’s only the Big X where the investment would be unjustified compared to the return, and, to be honest, you are going to them for enterprise systems that cost nine (9), if not ten (10), figures, so you should be expecting to pay high six figures for a good RFP in that situation!   (See when you should use a Big X!)

We’ll get to that in our next installment.

e-Procurement Implementation Success Goes Well Beyond The Basics

the doctor was quite disappointed with this article over on the WorldBank Blogs on 10 success factors for implementing [an] e-Procurement System because all of these “factors” were generic success factors for the implementation of any technical system. Let’s look at them at a high level (and direct you to the article for a description of what the requirements are if they aren’t immediately clear to you):

Governance Principles
all projects need to be managed and governed, so this is pretty much a “d’uh!”
Transparency on Legal and Regulatory Frameworks
any platform that processes any personal, payment, or classified data HAS to adhere to Legal and Regulatory frameworks of ALL countries the corporation operates in, so this is obvious for any platform that requires it
Strategy Ownership and Sustainability
it’s classic project management, no owner, everything goes to cr@p
Implementation and Integration Challenges
preparing for this is just a given
Technical Infrastructure and SaaS-based Systems
all technology implementations need to integrate with the current infrastructure and SaaS systems that contain the necessary data, so this is pretty much a “d’uh!”
Training & Capacity Building
well, you need the capacity and the training regardless of the system being implemented
Engage Stakeholders Actively
without stakeholder support, it will be hard to get the resources for a timely, successful implementation of any technology
Align with International Standards
technology should always align with any regulatory standards in place
Clear Communication and Change Management
necessary for the success of ANY project, not just a technology project, so this is pretty much a super “D’UH!”
Data Security and Privacy
if the data is personal, payment, classified, trade secret, etc. etc. etc. then security and privacy is of more concern than the tech, so, another ‘d’uh!”

e-Procurement success goes beyond the basics. There are too many six, seven, and, for some multinationals locked into 5-year contracts, eight figure acquisitions that have failed to deliver on the promises made. This is because the selection, implementation, and utilization of such systems goes beyond most back-office tech to get right.

Selection

In our recent article on The Key to Procurement Software Selection Success: Affordable RFPs!, we noted that selecting the right vendor was paramount to success, and a critical requirement in this selection process was a GOOD RFP.

Furthermore, that RFP needed to specify, among a host of requirements:

  • typical use cases
  • target processes
  • globalization requirements
  • data migration requirements
  • integration requirements

Why are we calling these out? Because these define the key factors for implementation success!

Implementation

Key Factors are thus:

Primary Components / Modules
… that are needed to support the critical use cases and target processes, that need to be implemented and demonstrated first
Test Cases
that must be passed, in priority order, to ensure the use cases and target processes can be accomplished
… including multi-lingual use cases
that support not only the customer organization requirements but the supplier requirements
Data Migration Requirements
spelled out in detail, as well as cut-over requirements
Cross-System Bi-Directional Integration Requirements
spelled it in minute detail, not just push to the ERP … and considerably more than just a high level holistic strategy … when it comes to tech, the devil truly is in the details and chaos emerges when you overlook even one

Utilization

A system not utilized is a failed system, even if the implementation and integration goes as well as can be reasonably expected. Utilization is critical, especially early on, or widespread adoption will never be reached. This is why it’s paramount that the functionality required for the critical use cases be implemented and tested first so that utilization of key capabilities can begin as soon as possible, leading to adoption.

In other words, the basic checklist for technology implementation is nowhere near enough for the successful implementation of procurement technology — that success requires going deep.

Procurement should NOT be reimagined!

It’s not just vendors that have latched onto the Marketing Madness that we addressed in last week’s article where we tried to help you decipher ten meaningless phrases that are polluting the Procurement technology landscape, but consultants and thought leaders as well. And while the marketing madmen fill us with meaningless messaging, these consultants are feeding us with dangerous delusions that we can solve our problems by simply redefining Procurement as something it is not.

Procurement is not something to be reimagined as it is not something that should even be redefined at the core. The purpose of Procurement has not changed since the first known Purchasing manual, The Handling of Railway Supplies: Their Purchase and Disposition was published back in 1887, nor should it change. It’s the process of sourcing, acquiring, and paying for the goods and services the organization needs, and doing it in a manner that ensures that the products will meet the needs, at the best price, and show up at the right time — and that as many orders as possible are “perfect” (or, more precisely, problem free).

Key aspects are thus:

  • Supplier Discovery and Vetting (Risk and Compliance)
  • RFP creation or Auction (Product Service Verification and Competitive Pricing)
  • Award and Contract (Negotiation and Terms and Conditions)
  • Catalogs, Purchase Orders, Pre-Scheduled Deliveries, Auto-Reorders (“Buying”)
  • Logistics Routing, Delivery Scheduling and Monitoring (Risk Management)
  • Invoice Processing and Payment (Payment Confirmation, Fraud Prevention)
  • Quality Assurance and Inventory Management (Loss Minimization)

There is nothing to imagine here. And definitely NOTHING to re-imagine here. Now that supply assurance is still near an all time low (due to geopolitical instability, rampant inflation, unpredictable demand, etc.), it’s time to double down on what is critical and get it right. Not wander off to Imaginationland searching for a magical solution to tough, real-world problems.

New and improved processes might increase the chance of success (by decreasing the odds that something is missed), new technologies might increase the level of automation (and decrease the amount of manual [e-]paper pushing), but neither fundamentally change the work that must be done, the effort that must be made, and the human intelligence (HI) that must be applied to get the job done. No amount of “re-imagining” will change this. As we’ve said before, and will probably have to say again and again and again, there is no big red easy button, and no amount of imagining (or re-imagining) will create one. So, if someone tells you to re-imagine procurement. you tell them the same thing you should tell them if they spew Marketing Madness: CUT THE CR@P!

Is Procurement Complexity at an All-Time High?

A couple of months ago, CIPS and RS released the 2024 Indirect Procurement Report ‘Maintaining Focus’ that focussed on the state of the sector for those responsible for supplies supporting maintenance, repair, & operations (MRO). The survey, which drew a record number of responses, including a large number of younger individuals contributing compared to prior years, like many other, provided a lot of data points and statistics, but unlike other surveys, was pretty surprising.

Why?

Usually, when a report asks about business pressures, challenges, top areas of focus, etc., there are typically 2 or 3 responses that the majority of respondents agree on. But in this survey, the top business pressure received 32% agreement, the top challenge 37% agreement, the top day-to-day challenge 33%, and top activity to drive efficiency 27%, the top strategy 26%, the largest challenge to delivery ESG 39%, the biggest driver of downtime 19%, the top indicator for supplier performance management 44% (which is as close as we get to 50%), the top reason to adopt new tech 32%, the top benefits of a digital procurement service 29%, etc. It would have been really useful if CIPS did a study as to why (especially when we are so used to Deloitte, McKinsey, and Accenture studies with so much agreement), but they didn’t. So we have to hypothesize.

And the hypothesis that the doctor is coming to is that complexity is at an all time high and, because of this, most procurement professionals, especially newer professionals, just don’t know where to focus. There are too many challenges, too many demands, too many conflicting goals and pressures within the organization, and too many possibilities to address them, and with all the meaningless marketing mayhem and Gen-AI garbage, there’s no real guidance out there.

All-in-all, for all but the most die-hard seasoned professionals who remember the last time Procurement was this challenging (which was decades ago, since the 2000s and 2010s saw the constant introduction of newer, greater, technology; steady, stable, globalization; affordable (if not cheap) logistics; lots of sustainability talk, but no real regulations (beyond RoHS, WEEE, and their ilk); etc.), most Procurement professionals have never had so many challenges, demands, regulations, and technology options to deal with.

And if the doctor‘s right, then what is the solution? (He’ll tell you one thing — it’s not intake to orchestrate, but that’s a different rant [but see point 11 of the market madness].) It’s a very good question, and, right now, even the doctor doesn’t have the complete answer. But while technology will obviously be part of the answer, the full answer will require clarity and Human Intelligence (HI). So get ready to wake up and use your brain. There’s no big red easy button for the mess we are in (with excessive outsourcing and an utter lack of clarity on tech)!