Category Archives: Market Intelligence

Just a Reminder You Get What You Pay For With Second Rate Market Research

While it might not be easy to look at the non-subscriber / non-client prices of a Gartner and Hackett research report or the cost of an annual subscription and say “yeah, it’s worth it“, we’d like to remind you that you get what you pay for and when you pay for cut-rate advice from a generic Indian Research Firm staffed by people who clearly don’t know anything about the Procurement Market and who hire PR people who think it’s a good idea to push their press releases to a website that got its name from a misspelling of Sheldon Cooper’s catch-phrase (from the Big Bang Theory), you’re paying for advice that, if followed, will cost you many times more than what you paid for that “research” when you follow the advice and make disasterous decisions.

So what kicked off this rant? This press release on Benzinga.com by 360 Market Updates on the e-Procurement Tools Market that proclaims to know How the Market will Witness Substantial Growth in the upcoming years. Research over the last decade from Hackett, Gartner, and Spend Matters — where the doctor was a Lead Analyst for six (6) years — have consistently found, and predicted, year over year growth in the 8 to 12% range, at best, across all areas of Source to Pay, a rate that’s no better the consistent predictions of about 11% CAGR for the broader enterprise software market for the current decade, and in some cases worse.  (Note that the doctor is calling out the press release, not the firm.  He’s not going to bother researching yet another firm that offers yet another cookie-cutter report with no clear value if there is no clear press release or website on that value.)

In other words, while steady, consistent growth is expected, it’s not substantial growth under any interpretation and it’s on par with enterprise software as a whole, at best.

But even worse, if you believe the press release, it’s apparently based on a completely random, entirely mismatched, set of “e-Procurement Tool Vendors” which demonstrates almost ZERO understanding of the global Procurement Tools market.

First of all, if you include all of the Procure-to-Pay vendors, there are over 100. SI has listed the majority of them in Parts 7 and 33 of it’s 39 Part Series on where to start with Source-to-Pay where it listed over 70 e-Procurement companies and over 75 Invoice-to-Pay and Accounts Payable companies. Their press release only lists 15 companies but …

… doesn’t seem to recognize that e-Sourcing, e-Procurement, and Supply Chain Management are not the same thing at all, and one of the vendors included is Delta e-Sourcing whose primary offerings are baseline e-Sourcing/tendering and supplier management and offers only baseline e-Procurement, compared to Medius which offers Procure-to-Pay (Procurement, Invoice Management, and AP Automation). Even worse, it contains Archlet that is an analytics-backed Sourcing Platform with Decision Optimiation and which DOES NOT OFFER ANY e-PROCUREMENT TOOLS.

… isn’t up to date. It lists LetsBuyIt.NET GmbH as one of the 15 vendors (and if you’re saying who?, you’re not alone because it doesn’t exist anymore). LetsBuyIt.Net is now eBidToPay Schweiz, and has been for nine (9) months. (So is this a recycled report from 2022 or 2021?)

… includes a big vendor that doesn’t even sell a Procurement Application anymore! It lists IBM corporation as the first provider, and while IBM acquired Emptoris in 2011, it began to sunset it in 2017 when it worked out an agreement with SAP to migrate all the Emptoris customers to the SAP Ariba platform!

In other words, if the press release is accurate, then this report, like many of the two-dozen plus low-cost reports you can buy from the two-dozen plus Indian Market Research firms that have popped up over the last two decades, would be more-or-less complete rubbish and you’d be better off taking that $6K and sending two of your top buyers to a major Procurement event where they can hear from experts, network with peers, and learn something actually valuable.

And if you need REAL market insight into current vendors and their platform capabilities, and the Gartner/Hackett reports don’t meet your needs, you can always go direct to the experts (like the doctor or Xavier and Bertrand* at Spend Matters, who the doctor has publicly recommended in his list of analysts and consultants he recommends when he’s not the best expert to help you). Yes, you may have to pay a few K per day, but you get targeted advice to your organization which is worth ten times (or more) what you pay because it’s based on decades of research and experience that allows the analyst/consultant to give you the best targetted advice for your organization while filtering out the market information that is relevant to you.

* Bertrand could be the last great analyst in our space! Take advantage of this while you still can … after all, it’s not the analyst firm. It’s the analyst!

To What Extent Can True Supply Chain Value be Created under Private Equity?

the doctor recently encountered a headline that implied that there could be supply chain value creation under private equity ownership, which, even before he made it to the tenth word, caused him to stop and ask just how much supply chain value could be created under private equity as the entire point of private equity is NOT to create supply chain value but to increase investment value in the short term for the fund contributors who are essentially the shareholders of the private equity firm.

And when we are talking short-term investment value creation, usually the biggest value creation levers are:

  • revenue / customer base increase
    (Wall Street Values this the most, so most investors value this the most as it gives them a better exit opportunity)
  • operational cost reduction
    (layoffs of the perceived dead-weight or high-earners, job consolidation, etc.; office space downsizing; cloud/SaaS infrastructure reduction/optimization; etc; as it’s an immediate reduction on the balance sheet which results in an immediate profit increase)

Supply chain is not the top two, and in many cases it’s not even in the top twenty, when you’re talking short-term. Mid-term (5 years), it gets up there (but not high enough for anything significant to be done), and long-term, it’s likely the second top value driver there is (as we must always remember that financiers will always put revenue first) as it can lead to cost reductions and value generation that can exceed any short-term operational cost reduction as the benefits from a supply chain improvement will be realized every year (and not just one time).

When the doctor got past these thoughts and returned to the article, the first thing the article noted is that private equity (PE) and the supply chain have been somewhat at odds with each other … due to what we could call a timeframe imbalance since PE typically aims to secure an exit within 3-5 years while supply chains … tended to operate on longer timespans. (Often much longer timespans.)

Now we must admit that, thanks to the pandemic, PE firms now realize more than ever that, without a functioning supply chain, any traditional business that needs to buy and sell physical goods to function is up Schitt’s Creek without a paddle. As a result, the smarter PE firms have started to give the supply chain some attention, but for the most part their focus and investments are usually limited to qualifying suppliers and carriers, not transforming global supply chains.

Moreover, the execution of this focus on qualifying suppliers and carriers is usually part of a broader strategy to make better decisions, which needs better data, so the focus ends up being a data, analytics, and BI (which is supposed to stand for Business Intelligence, but in some companies just ends up being BullSh!t Interpretation when they buy the wrong tool) strategy and an investment in the right SaaS tools to do that, and not on actual supply chain modelling, (re)design, or transformation. The best companies will procure modern S2P and ERP platforms which support real-time visibility into the location of all product — be they inventory, in transport, and ordered — by way of message and e-Document (EDI, XML, etc.) exchange with supplier platforms, but that’s as far as they’ll go on the “supply chain“.

And when the doctor finally brought himself to finish the article, it mostly admitted all of this, but finished by saying that there has been a surge in PE investment into supply chain technology, which he knows to be true.

In other words, PE firms do invest in supply chain technology and do utilize such to maximize the value in the supply chains of the companies they invest in, but they don’t actually invest in the actual supply chain, which is a much greater source of value (and carbon reduction, FYI) in the long term. And, as the doctor thought, the title was quite misleading. PE firms, if they took a longer term view (even 8 to 10 years would be enough), could totally transform supply chains, but, at least for now, all they do is tighten up what’s there in the hopes of making the company profitable enough to flip it to a bigger PE firm or take it public. So, to be brutally honest, there is no true supply chain value created under Private Equity today. (Hopefully tomorrow is a different story, but we’re not holding our breath.)

Disagree … contribute to the conversation on LinkedIn.

Can the UK Help American Manufacturers Shift Their Sourcing of Critical Materials?

Maybe, but not in the way this recent article in SupplyChainBrain suggests. The article, which really had the doctor scratching his head, referenced the “Atlantic Declaration” and how the United States and United Kingdom are resolving to build resilient, diversified, and secure supply chains and, more specifically, bolster the U.K. as a source of five critical minerals: cobalt, graphite, lithium, manganese, and nickel.

While we need a secure supply of these minerals in the Americas to ramp up and sustain EV (Electrical Vehicle) production, as the article also notes, the UK is the world’s 12th largest exporter of cobalt, 16th largest of graphite, 12th largest of manganese, 11th largest of raw nickel, and doesn’t even make the charts on Lithium. It can ramp up all it wants, these numbers aren’t going to change (because every other country is ramping up too), and the bigger countries (likely) have deeper reserves.

Plus, the UK, with very dense cities like London and limited land mass, is in desperate need of EVs itself to keep its smog levels down, so how much can it really afford to export?

The reality is that the UK can help by working with the US to identify non-China sources of these materials, use their collective bargaining might to secure supply at a sustainable cost, and help manage suppliers who are closer to / more used to working with the UK than the US. Similarly, since the UK is a small island and will likely need to import these vehicles (since the local market size doesn’t make an automotive production plant an economical investment for most automotive brands UNLESS a significant part of the UK market would switch to that vehicle), it can also guarantee a market for any suppliers that it secures those materials on behalf of.

Plus, if UK and US companies team up, they can split the effort and share their knowledge and best practices, and the more creativity you have to solve the upcoming challenges, the better — and chances are that the UK, who no longer have the weight and support of the EU backing them up, needs to be very creative these days.

Anyway, while we applaud the joint effort, it’s doubtful that the UK is going to solve even a fraction of the US need raw material wise. But human capital wise, they are even more incentivized than the US to solve these challenges.

Procurement Needs to Change for the Better … But it is Currently Stalled!

A recent article over on Supply & Demand Chain Executive noted that Procurement is Changing for the Better, but if you look at the 5 most strategic objectives from the recent APQC survey they referenced, two of the five focus on costs — specifically, #2 on reducing procurement costs and #5 on maintaining of improving margin. Just like the recent Ivalua/Procurement Leaders survey, cost is the focus, and all the real value they could be delivering is being ignored — and the doctor would argue that while Procurement may have been changing for the better before the pandemic, the supply disruptions and successive inflation that resulted since has not only stalled that progress but reverted Procurement back to its early days.

The reason, as indicated in an article over on CIPS, which also references the Ivalua/Procurement Leaders survey, is inflation. Rapid inflation, which has not only wiped out prior savings for many organizations but resulted in the Procurement department blowning past budgets, has resulted in the C-Suite ordering Procurement to contain costs through any means necessary, and, as the CIPS article has noted, this has resulted in the ESG agenda, along with other agendas, being pushed to the sidelines, if not thrown out entirely.

This is very sad. Not only because ESG initiatives are critical, but because the other three priorities from the AQPC survey are also more critical:

  • avoiding supply disruption
  • improving social responsibility in supply chain
  • improving supplier relationships

First of all, the number one focus of procurement should always be supply, not spend. Doesn’t matter how great the negotiated savings are, if you don’t get the goods, you don’t get the savings and, more importantly, if that was product to sell, you don’t get the revenue. No cash-inflow, no business. (Or, as we say up North, No Sale, No Store.)

Secondly, with carbon emission limits and carbon taxes coming in globally, ESG needs to be a top priority, especially in jurisdictions where you are responsible for all of the carbon in your supply chain.

Thirdly, your quality and capability is limited to that of your suppliers, so you want to improve your suppliers, and that requires good relationships. Furthermore, suppliers can be a source of innovation and creativity, but you won’t get access to any of it without good relationships.

So how do we get Procurement over the hump and back to strategy and not cost reduction regardless of the true price that is paid? It’s a good question, especially when the focus is always short term and not long term. Long term, innovation, responsibility, quality, and sustainability will result in the best value for money, but this never happens in the short term. So, focus on long term sustainability, get back to value, and show the organization what Procurement can really do.

A Slow Cautious Approach to Pulling Out of China May Be Justified …

… but the justification has NOTHING to do with geopolitical events or economic factors, as suggested by this recent SCMR article. First of all, those are always in flux. Secondly, neither of these factors are the ones that could be limiting your ability to peel out.

There are two primary factors that could be limiting your ability to peel out of China:

  1. available production capability
  2. source material availability

And these are the only factors you should be considering when you are considering how [do] you reconfigure the global supply chain. Because, unless you are selling in Asia, you HAVE to get out of China if you want stable supply streams.

Available Production Capability

First of all, are there alternative near-shore plants? If not, you’re stuck until you (co-)invest in one, get it built, get it up and running, and verify the quality is acceptable. If there are, can they produce the products you need in the quantities you need, or at least a reasonable percentage? If so, are the quality and service levels sufficient. If there are three or more near-shore suppliers that can collectively meet your needs, you shift a considerable amount of your award to them immediately (depending on existing contracts, the time-frames for the suppliers to fully ramp up to support your business, and the time-frames your organization needs to get ready to support the shift) and start the process of shifting all of your award to them.

Source Material Capability

You also have to consider where the raw materials are coming from, and how easy it will be for your suppliers to get sufficient stacks of the materials you need in steady supply. For example, if you need lithium-ion batteries produced by current processes, you need cobalt. 73% of today’s cobalt comes from the Democratic Republic of Cobalt (DRC). The DRC has considerable trade agreements with Qatar. So while the country has bilateral trade agreements with over 50 countries, its relationship with Qatar could cause you problems if you want to use a producer in the middle east NOT in Qatar if another diplomatic crisis (like the one in 2017) arises.

Also, China is the largest producer of grains, gold, coal, rare earth minerals, and two hundred (200) plus other materials, components, and products, so if your production depends on any of these materials, components, or products, you need to make sure your suppliers are located in countries who have good relations with China or have already locked up enough secondary sources to guarantee your product production will be uninterrupted.

That’s it. Yes, you have to consider the economics, because you can’t pay 50% more and not seriously upset (and lose) your (current and potential) customers with the price increase that will result, but with proper investments in new processes, equipment, and talent, costs can be reduced anywhere in the world, and all it will take for the potential supplier to make these investments is enough guaranteed business from you. (So make it so!)