Author Archives: thedoctor

Source-to-Pay+ is Extensive (P1) … Where Do You Start???

Even though all core sourcing and procurement technologies have been available for twenty (20) years (although it is debatable just how good the initial versions of many of these applications were), there are still many mid-size or larger organizations that don’t have any modern applications to support Procurement, and the majority of organizations still do not have what any modern analyst would consider reasonable support for the full, core, source-to-pay process.

Given that inflation is back with a vengeance, anticipated savings is leaking faster than a bald spigot (see last Friday’s rant), and most organizations are in a cash crunch as a result of down sales during the pandemic (and now due to a lack of core inventory to sell), they need to update their procurement tech stack fast.

But they can’t do it all at once. Even if your organization selected a SaaS suite platform where the provider can enable a full end-to-end solution with the flip of a software switch, your organization still can’t do it all at once. Why?

1) these applications don’t work without data … and they don’t work well without LOTS of data … most of which is either historical data, which has to be located, cleansed, transformed, and enriched … or supplier / market data, which has to be requested, collected, verified, transformed, and loaded

2) these applications don’t deliver without user training … and I don’t care how much “AI” is included, how “autonomous” the vendor claims they are, or how “intuitive” the UI is supposed to be … everything’s obvious to an expert (who designed the system), but nothing is guaranteed to be obvious to someone without the same education and experience in Procurement and Technology

3) you need value out of the gate to justify the purchase and the continual license fees (SaaS isn’t about utility, it’s about being a utility which locks you in for life)

4) your users need to see results for them to want to continue using it, which is key for not only value out of the gate but value over time

So the reality is, even if you decide to go for a suite solution, you should implement it piecemeal over time (on a realistic schedule), as well as ensure that you don’t start paying for anything you can’t realistically use until you can start using it regularly and with value.

But where do you start?

Upstream? Here you have, at a minimum:

  • Strategic Sourcing, which can include RFP, e-Auctions, and hybrid multi-round events, with and without strategic sourcing decision optimization
  • Spend Analysis, where you can analyze your spend and find opportunities to address
  • Supplier X [Information / Relationship / Performance / Risk / etc.] Management, where you keep track of, interact with, manage, collaborate with, or eliminate suppliers
  • Contract [Lifecycle] Management, which can, depending on what you get, help you negotiate, create, analyze, and manage contracts

Downstream? Here you have, at a minimum:

  • Catalog Management / e-Procurement which allows your employees and buyers to order what they need, when they need it, off of contracts or pre-negotiated price sheets
  • Invoice and Order Management, which allows you to track your orders, manage your invoices, ensure you get the appropriate reviews and approvals, and make sure you get the right OK-to-Pay
  • e-Payment, which ensures the inventory/service is received, the appropriate ok-to-pay(s) has(/have) been received, the payment is appropriately scheduled, and made at the appropriate time and generally manages your AP from a Procurement perspective

Cross-stream? Here you have, at a minimum:

  • Risk Management, which allows you to track supplier, carrier, and other risks that could prevent you getting your stuff or getting it to your customer
  • GHG/Carbon Tracking, which allows you to be compliant with (coming) reporting requirements, and supports Scope 1/2/3 as appropriate
  • Inventory Management, especially in direct where you are doing build-to-order and need to ensure that product doesn’t get released just because it’s in stock (when it is part of an urgent build waiting on another product for a customer that ordered three months before anyone else);

Not an easy decision, eh? So where do you start? Stay tuned for Part II .

How Resilient is Your Supplier Management?

Given that the state of most supply chains is still chaos, and may be for quite some time, if you don’t know, maybe you should find out!

How? Benchmark your current supplier management performance against more than 800 global organizations that participated in the 2022 State of Flux Supplier Management survey at this link (and receive a free maturity benchmark analysis for your organization).

The reality is that supplier resilience, the foundation for supply chain resilience, is becoming more important than just about any other kind of resilience as a business without the products to sell or operate is not a business, and if its suppliers are not resilient, it won’t have any sources of supply … and will not be able to operate.

That’s why, once a an organization has implemented an e-Procurement core and a sourcing core, if it has any supply issues, it should tackle SRM as soon as possible in wave 2 (and this can be done simultaneous with implementing the analytics core — after all, it’s good to have supplier data to crunch on). Plus, SRM supports end-to-end source-to-pay processes when done right, as explained in the State of Flux research publication front-material that brings you best practices from over a decade of research.

The research report, which reviews their six pillars of supplier management:

  • Value
  • Engagement
  • Governance
  • People
  • Technology
  • Collaboration

Also provides you with a four-phase action plan to guide you through your four-phase supplier management journey. At a high level, the journey is to:

  1. Explore the opportunity … with a value opportunity diagnostic
  2. Create the business case … by fleshing out the value proposition
  3. Setup and run … with supplier management in real time
  4. Scale and grow … and achieve ROI

And this is something you want to do as leaders significantly outperform on each of the pillars even compared to “fast followers” …

In a later post we’ll dive into a few of the findings, but for now, if you’re having problems (and you are), and you’re not sure how well you’re doing against peers, take the benchmark, download the report, and start planning for supplier development — even if you aren’t ready to implement a custom solution as all P2P or e-Sourcing platforms can support the basics of supplier management, and the reality is a platform isn’t a solution without a process and trained people to follow it. (And keep your eyes peeled for the State of Flux 2023 research survey which will be launching soon … responding early gets you the results early, and leaders in this space are in the best position to win!)

Rabbit Season? Duck Season?

Is it just me or does the annual return of “conference” season remind you of the old Looney Tunes Rabbit Season, Duck Season shorts with all of the competing, similar, but yet mangled and confusing messages about what you should be focussing on, what conferences you should be going to, and what you should be hunting for?

For the younger generation, the classic “rabbit season, duck season” was a “hunting” trilogy of Warner Bros shorts starring Bugs Bunny, Daffy Duck, and Elmer Fud that began with Rabbit Fire in 1951, that was the first to show Daffy as a flawed, greedy, vain character who always, secretly, wanted the spotlight (and not just a screwball comedian who wanted to make you laugh).

In this particular episode, where it is supposedly rabbit season, Daffy lures Elmer Fudd (the hunter) to Bug’s burrow and convinces Bug that a “friend” is there to see him, seemingly aiming to take out the competition. High jinks ensue until Bugs manages to trick Daffy into saying it’s actually duck season, at which point Elmer tries to shoot Daffy. Then the two find increasingly creative ways to turn the tables until the hunter decides its rabbit and duck season, at which point both realize how stupid they were and work together to make it “Elmer” season …

So why do I think of this cartoon?

Well, first of all, many vendors spend a lot of the year trying to eliminate their competition from your consideration by claiming that the competitor’s product is lacking key features you need for efficiency, value, or ROI (Daffy tricking Elmer into hunting Bugs); then, during Conference Season, the competition (Bugs) strikes back with slicker messaging that encourages the buyer to turn on the vendor that may (or may not) have led them astray; then the original vendor (Daffy) starts copying the message of the competition, with a few twists to get the attention back; and the marketing and messaging dance continues until the buyer (Elmer) gets simultaneously so confused and so angry that he wants to eliminate both vendors (Daffy and Bugs) from consideration, at which point the vendors need to team up (or at least call a temporary back-room truce) in some way to trap the buyer back into buying at least one of their solutions, and if there isn’t complete overlap, preferably both!

As far as the doctor is concerned, this misses the point of conference season, which is supposedly to educate you about the offering and the value you can get from it. Which would be great if that was what the majority of events did, but over the years, I found that less and less of a reality at the bigger shows by the bigger vendors and conference players. Starting with the latter half of the last decade, the events at many of these players have become less about education and more about how spectacular of a show the vendor or conference group could put on as vendors, professional organizations, and conference groups tried to show value by showing how successful they were, instead of just keeping it simple and showing how successful you could be with their technology, education, processes, or platforms (built up from the technology and processes of their sponsors).

I don’t know about you, but I’m a little bit saddened by it — I know it’s been a staple in the enterprise software world for a while, going back to the old trade-show mentality where if you couldn’t afford the poshest venue and the biggest suite, then obviously you weren’t successful … but isn’t Procurement supposed to be about your success and not theirs?

Although it means regular work is less guaranteed, the doctor is actually quite happy to be independent now as it means he can pick and choose what conferences and events he does, and more importantly, does NOT have to even consider going to as, this year, he’s only seen ONE event by a top suite vendor he’d actually like to attend. (Compare this to the early and mid teens where he was quite interested in going to almost all of them … )

Now, I should say, this viewpoint, which is the doctor‘s and the doctor‘s alone, is lobbied primarily at a subset of the big vendor conferences and the big conferences / trade shows and not the smaller vendors or smaller workshops. There are still plenty of smaller and best-of-breed vendors putting on great educational events, many of which even us analysts don’t hear about until it’s too late, that are more than worth your time and money to attend.  (Heck, sometimes even us old dogs and cats who’ve been in this for over two decades will learn a new trick.)

In other words, given that your time, money, and patience is limited, don’t fall for the hype and instead look for the education that you need to make the right decision as to what platform, product, process, or service your organization needs next and whom you should buy it from. And enjoy the fact that you know you don’t have to go to everything or anything if it’s not relevant!

How Can Indirect Spend *NOT* Be Well Managed in 2023?

the doctor gets a lot of press releases. Some of them contain a lot of BS (which is good, he writes best when he’s on an angry rant), others contain a lot of “findings” that, if true (and the findings usually are for the right for the right subset of the market), are simultaneously scary and ridiculous. In this particular case, as the doctor writes this, he received a press release that said the research finds that 82%+ of procurement leaders say their indirect spend is not well managed, leaving substantial cost savings on the table.

The question is, how is that number so high? We’ve had source-to-pay suites for a decade (which were originally designed to source indirect products and services, create catalogs of those sourced selections, support purchase orders only for items in the catalogs, and ensure invoices matched the item prices in the catalog. And for those willing to do custom integration, it was possible to integrate a best of breed sourcing solution and a best of breed catalog management solution and a best of breed e-invoicing solution and achieve this in the late 2000s.

Now, in a mixed solution, there was no guarantee that the sourcing event would choose the best mix (since early solutions generally didn’t support optimization or advanced analytics), that the catalog would force the lowest cost (or even preferred) selection when there were multiple options, or that the invoice management could detect when shipping costs were too high or handling fees shouldn’t be there, but there was still management and any overruns were not substantial (at least compared to pre-solution overages in indirect; an organization could easily cut out 80% of the fat, which could be as high as 30% in some categories; so if the overage went from 30% to 6%, that was well managed — and solutions have only become better over time).

What’s even worse is when the expected reality is put into hard numbers. According to the press release “two-thirds of suppliers (68%) report increased demand for their offerings compared to the past year and nearly half (43%) are planning to increase prices in 2023“. Thanks to global inflation, prices are going up as demand does (which is still pent-up post-pandemic), and we know it, but knowing costs will be uncontrollable to an extent is a tough one.

Of course the press release says that the key to cutting cost is to implement (autonomous) technology that saves on day one, which you should know by now, but the question is why have so many companies not yet implemented basic S2P functionality, either as a suite or as BoB integrations, as such technology would have ensured indirect was well under control, and reduced a likely organizational overspend by (85% of 15% of 35% =) 5% (est. realization * avg. savings * avg. indirect spend) of total spend, which would go straight to the bottom line! No autonomous tech needed!

For those interested, the press release came from a third party PR firm and was based on Globality’s “2023 Research Insights for CFOs”.

Do You Have a Data Foundation?

Last week we asked Where’s the Procurement Management Platform as the future of procurement is a platform that allows Procurement to build up, maintain, and evolve the solution it needs to be successful over time, over time. Such a platform needs to be the foundational data source for Procurement, but not necessarily the data hub that is used to integrate all of the organizational and external data into the core data source (which is either the internal data store or the data store supported as the platforms foundational data source).

While a procurement management platform could be the data foundation, since it’s primary purpose is process based procurement solution integration, it isn’t necessarily … after all, an API / Integration Engine focused on process doesn’t need to support every data source out of the box, nor does it need to make integration with arbitrary data sources easy, and, most importantly, it doesn’t need to support advanced data processing and transformation features, which is key when trying to integrate multiple data sources into a foundation that can be universally processed by the platform and support true end-to-end spend, and risk, analysis.

Like a Procurement Management Platform, which we may see four (4) of by year end, Data Foundation solutions are also quite few and far between. The reason? Most “data” solutions are focused on BI [Business Intelligence], Spend Analysis, or Contract/Document management, etc. and most “data” feeds on risk data, supplier data, catalog data, etc., which means they are built for certain data types and processing operations. This means that they will support a straight-forward integration for any data source with similar data types, or data types with compatible processing operations, but not any others.

When you look across Source-to-Pay and the broader Supply Chain spectrum, there are a lot of different applications that support a lot of different processes that need a lot of different data requirements of different types and formats. You need a modern MDM [Master Data Management] solution that works on web and cloud data, can pull in and process data on the fly, and push it back out enriched as needed. And support any data format and standard, not just flat files or relational tables in text (like old school MDM).

This capability is a lot rarer than you think. Most suites are built on transactions, most supplier networks on relational supplier data record, and contracts on documents and simple, hierarchical, meta-data indexes. But you also need models, meta-models, semi-structured, unstructured, and media support. And that’s just a start. But there are possibilities emerging. Just watch this space.