Author Archives: thedoctor

Supplier Discovery Should NOT Be a Kick in the Pants (Part I)

But, as may of you know, it still is.

Even if you just spent a cool seven figures on a brand new S2P system.

Why is this the case? Well, it’s basically because:

  • many vendors assume you already know the vendors you want to strategically source from and
  • the rest think you will be more than thrilled with their private network

But here’s the problem. The entire point of a strategic sourcing project is to identify the best supplier for your organization whether or not you know already know about the supplier and whether or not you have ever done business with the supplier in the past. This means that much of the time the supplier won’t be in your database and some of the time it won’t even be in your provider’s network, no matter how many (millions of) suppliers are in the network.

The reality of the situation is that a S2P provider’s supplier network is built from the suppliers of its customer base, and most of its customers tend to be in a small number of industries, serving specific markets, and sourcing from other specific markets — so unless you are in the same industry, serving the same markets, and sourcing from the same markets, the chances of the new supplier you need being in the network is not nearly as good as you might think it is, even if there are millions of suppliers in the network. (Some of which might not even be active anymore, and some of which might never have been active.) Fifty suppliers for every product or service you don’t need are fifty suppliers that are no good to you.

So you are left in the situation where you have to:

  • scavenge potential suppliers from wherever you can
  • review their product and service offerings to see if they might fit
  • try to find customer recommendations to validate the validity of their offerings
  • qualify the suppliers for participation

And all of this takes time.

Scavenging means you have to go out and look under nooks and crannies just to get a few names. Not just Google searches (because many suppliers aren’t listing their key capabilities in a manner you can easily search among millions of hits. Local associations. Co-opetition. Multiple on-line directories and marketplaces. Even the yellow pages. Not a very efficient method given that we are supposed to be entering the age of cognitive sourcing where tactical work is done for you and all you are left with is the strategic analysis of critical decisions.

But the time-suck doesn’t stop with the scavenge. Google, associations, colleagues, on-line directories, yellow-pages, and your mechanic (because you are desperate, after all) are going to know of suppliers in your industry that might be able to serve you, but they are not going to know your specific needs and the relevance of the recommendations will be anywhere from spot-on to miles away from what you need.

So you will have to review multiple products and service offerings to see if it’s even worth trying to qualify the suppliers for an invitation. This can take anywhere from a half hour (if the offerings are way off) to a few hours (if the offerings are close, but not necessarily close enough).

And then there’s the task of trying to find references that you can trust. Online reviews don’t count, those are easily faked. You need to find customers in your industry or, better yet, co-opetition that will at least certify the validity of their service offerings, if not recommend them.

And then the big time suck starts. You have to invite the suppliers to participate in a qualification RFI where you validate the basic business requirements for all suppliers, the basic industry and regulatory requirements, and the capabilities you require for the products and services you would consider them for. Depending on the industry, geography, and products in question, this could be dozens of pages of responses that need to be validated to meet all the business, regulatory, and product compliance requirements.

This can be weeks of manpower spread over even more weeks to complete — all before you can even start a strategic sourcing event! Ouch!

(And now you understand why we said in Friday’s post thatit’s not the marketplace or the network … it’s the facilitation, and supplier discovery is one core capability that modern platforms are not providing.)

It’s NOT the Marketplace or the Network … it’s the Facilitation!

Ten years ago SI ran a piece on how it’s not the portal or the network … it’s the facilitation in response to a piece in Global Logistics & Supply Chain Strategies, now on supply chain brain, that asked if supplier portals were so great, then what went wrong?

The article concluded, somewhat correct, that most suppliers who originally embraced the “portals” pushed back because they quickly realized that a “portal” offered little value and was just another way for a buyer to boost a discount. But more accurately, it turned out to be yet another system they had to access to receive orders and send invoices in a buyer’s own custom format, and instead of having to deal with a common XML or EDI format, they now had to deal with dozens. It was an amplified nightmare, even more so when they not only had to deal with a different portal for each customer, but multiple instances of each customer’s portal as early portals didn’t even have the decency to provide suppliers with centralized access to their customer requests — they had to log in separately to check the status of every customer!

The article also claimed that the survivors have evolved into networks with real value, which SI questioned, and still questions, as many networks were just searchable supplier directories with the ability to send electronic communications, and did not really enable any value for the supplier. They would have to enter their profiles in multiple networks, hope to get discovered, check and answer queries in each network and then, when selected for a contract award or PO, they would have to … you guessed it … use the portal associated with whatever Sourcing or Procurement system the buying organization used to submit the signed contract or order acknowledgement, submit the invoice, and generally interact with the buying organization.

So why are we bringing the subject up again? Because marketplaces and networks are on the rise again. With respect to marketplaces, we’re not sure if it’s because a number of the instigators see the recent M&A frenzy as an opportunity to fulfill a need and are thus trying to bring marketplaces back or if there are actually silent screams from pending customers that a select few hear. But in the case of networks, it seems that all the S2P players either believe that they need a network to compete with Ariba or that it will make their platform a lot more valuable.

We don’t agree with either. Marketplaces didn’t really work before, so there’s no reason to think that they’ll work now if nothing changes. And we don’t see anything changing. And another network doesn’t add value just by its existence as it’s just another copy of the half dozen that came before it.

If you’re going to build another marketplace or network, please, please, please remember the following:

  • no one cares about a marketplace or a network anymore, they care about doing business
  • the platform needs to make the supplier’s life easier — it should be less work to communicate, interact, and process e-documents
  • the platform should be differentiated and probably industry focussed — not another generic be-all end-all consumer-like marketplace (that’s what Amazon is for, right)

Because another copy-cat platform is just going to follow it’s brethren to the bit-bucket. That’s just the reality.

Finding Wealth in the Year of the Pig

In yesterday’s post we noted that next year is the year of the pig, and that it could bring greed and obnoxiousness to Procurement, as per the western stigma, or it could bring wealth and good fortune, as per the eastern stigma, but that your fortunes all depend on whether or not you make the effort to acquire a next-generation best-of-breed system. If you acquire a next-generation best of breed system that uses analytics, optimization, advanced modelling, machine learning and/or AI, you can realize value and wealth. If you don’t, well …

So what should you look for? As per our upcoming series on AI in Procurement Tomorrow on Spend Matters Pro [membership required], there are a number of advanced functionalities coming your way that will add value. These include [but are not necessarily limited to]:

  • Overspend Prevention
  • Invisible Buying (of all types of MRO products and services)
  • Automatic Buying (including basic sourcing)
  • Automatic Opportunity Identification
  • Automatic Category Analysis and Emergent Category Identification
  • Procurement Method Identification

To convince you of the need for advanced (AI-based) applications to find the wealth you need to make Procurement profitable again, and the importance of reading the doctor‘s in-depth thought leadership pieces (if you have Spend Matters Pro membership), we’re going to give you a preview of the power of a platform with invisible buying capability.

While current systems can automatically re-order MRO and stock room items when minimum inventory levels and EOQs are defined, the reality is that MRO and stock room items change over time as old products are retired, new products are selected, and organizational needs change. And it can be a lot of work to maintain these items accurately over time.

But why should you have to? After all, the system can infer when a product is retired … as orders stopped being placed. The system can infer what product replaced it, as it’s not only in the same sub-category but ordered when the previously item would have been ordered by the same department and stocked at the same location in a similar quantity (under an appropriate metric). And so on.

But a modern Procurement platform, with augmented intelligence technology, can:

  • Auto-detect regularly needed items through repeated orders
  • Auto-compute usage schedules by tracking inventory levels and computing trends
  • Auto-predict best order quantities based on projected trends, re-order times, shipping costs, and inventory costs
  • Add the items to the MRO repository with minimum stock thresholds and projected EOQs
  • Use the embedded assisted intelligence to re-order the MRO items on schedule
  • And re-calculate the inventory levels and EOQs on a monthly basis using actual usage data to update the trends

And you don’t have to do tactical inventory review and re-ordering when that time can be better spent on value-generating strategic sourcing events.

So keep your eyes open for the doctor‘s upcoming series on AI in Procurement Tomorrow over on Spend Matters Pro [membership required] and, if you haven’t already, read the doctor‘s series on AI in Procurement Today (Part I and Part II) if you haven’t already.