Category Archives: Market Intelligence

Realizing Those Savings Is No Easy Feat

Especially when it requires achieving the perfect order.

So how can you maximize the chance of a perfect order, which, by definition, is acquired at just the right cost (which, technically means there are no savings to be had beyond what you negotiated when you signed the contract).

As per this post, for savings to materialize, the following necessary (but not sufficient) conditions have to be met:

  • the order has to be placed with the contracted supplier
  • with sufficient lead time
  • and then shipped by the supplier on-time
  • using the approved carrier and shipping arrangement
  • with the required third party and government fees promptly paid
  • and paperwork promptly filed
  • so there are no delays and the product arrives at the warehouse on time
  • where it is properly received, inventoried, and shelved
  • and then the invoice is verified against the good received and the PO
  • and paid at the right time when everything is okay.

This is a tall task, taller than accepting the tall tale of Jonah and the whale, but not an impossible one, and no miracles are required to make it so. Just the acquisition of the right technology, implemented in the right framework, supporting the right processes, and tailored to support your organizational talent. It will take some terrific transition management to get the right organizational alignment, but such alignment is possible, and the leaders are getting closer — especially now that we are beginning to realize Procurement 3.0.

So where do you start? Acquire the core technologies you need to streamline your supply management practices.

  • a CLM solution to manage your contracts
  • an e-Procurement solution that only allows orders for products on contracts from approved suppliers
  • a demand planning solution (which may be part of a next-generation ERP solution) that integrates with your e-Procurement solution and notifies you when order deadlines are approaching and automatically submits auto-fill orders
  • a 3PL solution that tracks shipments in real-time
  • a Trade Management solution that automatically generates the required paperwork, computes the required fees, and manages, tracks, and confirms their submission
  • an Inventory and Warehouse Management System that integrates with the e-Procurement Solution that manages receipt, shelving, and distribution
  • an e-Procurement solution that also does invoice management and m-way matching
  • an e-Payment solution that integrates with the e-Procurement solution and includes Supply Chain Finance Capabilities (including dynamic discounting, supplier financing, and pre-shipment finance, for example) to help the company determine the best payment time

It’s just the beginnings, but it’s a good start.

Some Additional Screen Questions for Services Suppliers

Is Your Insurance Up To Date And Can We Have a Copy of Your Policy?

Let’s face it, it’s important that you are protected. Especially if you are hiring service people that will be performing tasks that have health and safety consequences such as window washing (they fall off the bucket-pulley), installing power lines (they fry themselves or people around them), or transporting hazardous waste (which doesn’t give people super powers, but can give them acid burns or deadly radiation poisoning). You don’t want lawsuits against you for a responsibility your service provider takes.

How many people do you have with the skill sets we require? How many need to have their certifications renewed in the next 12, 24, or 36 months? How many are within 4 hours of our location?

If you need 5 contracts with a given skill set and certification to do the job, and they only have 5, and those resources are also required by their other (higher-paying) clients, what is going to happen to your timelines? They are going to be shattered.

Moreover, if the certifications need to be renewed pn a regular basis, the last thing you want is a resource that is going to be grounded in 6 months to go take a training course if that’s a critical time in your project timeline.

And if you need a guaranteed response time by a certified professional within a few hours, if the closest resource is a 4 hour plane flight away, that’s not a good situation to be in.

How many claims have been made against you in the past year? And how does it break down in terms of safety vs performance/contractual guarantees?

Face it, if the provider is large enough, something is bound to have gone wrong according to Murphy’s law, or someone is bound to have made a claim, founded or not. And even if the provider is stellar, you need to know this as claims, and lawsuits, can take up their time and resources and put a strain on them that could carry to your projects if not known or managed.

Furthermore, safety issues are paramount so if the provider doesn’t have a good track record, you will need to think twice.

What is your on-time delivery rate for projects of the type we are requesting? When you are late, what is the typical root cause?

If you get this far down the list, then the next thing is to understand when something has went wrong, why. This can allow you to devise communication and monitoring plans to possible prevent disruptions or delays through early warning and better project and service people management.

What is your approach to joint project management? They’re your people, but they need to be meeting our project timelines?

If the service people are being hired to support a long-term critical project, and lack of the right people at the right time could jeopardize that project, then you need to now you have a service provider tha twill work with you to make sure you have the right people at the right time to meet your goals.

Some Screening Questions to ask Prospective Strategic Suppliers

Before you select a strategic supplier, no matter how good their RFI looks, be sure to ask them some point blank questions that are critical to your business and judge the answers they give you (as well as their openness and directness in giving you these answers). Remember, you’re depending on them to serve your strategic customers so you need to be sure they can get it right.

Can we have a copy of your Code of Ethics, CSR Practices, and Privacy Policies?

If the vendor doesn’t have any of these, or won’t give it to you, sound all the sirens and run for the hills. No organization can afford a publicity disaster these days, and a supplier without good ethics (that it is willing to follow), good social responsibility (that it is willing to enforce), and good privacy (that enable it to comply with legislation like GDPR) is YOUR publicity disaster waiting to happen — and we all know what that does to your brand value!

Can you provide 3rd party proof that you live up to it?

It’s one thing to say you have an ethics/CSR/privacy policy, it’s another to follow it — and another yet to have true third party proof that you do. Make sure the vendor has certified CSR and Privacy ratings from trusted, true, third parties (and not from a small consortium of vendors that fund the certification agency) and can point to at least one situation where it terminated a business relationship with a client or supplier that was unwilling to operate in an acceptable, ethical, fashion.

Can we have a copy of your Quality Assurance Process?

If the vendor doesn’t have one, or won’t give it to you, then you need to ask yourself what kind of quality you can expect. (The answer is obvious: low!) Note that you may need a document for each distinct type of product you purchase.

What certifications do you have with regards to your Quality Assurance Process? ISO? ASQ? etc.

If the vendor doesn’t have any certifications, how much faith can you put into the process the vendor is using?

Can you provide references from current AND former clients who did business with you for at least 2 years?

Just like your customers ask you for references, if this supplier is going to be strategic, you need its references. And remember that you don’t want references who have been with the vendor less than a year because the blush is still on the rose and they will be full of peace and love for the vendor. You need a real review from an experienced customer who can tell you what’s good and not so good. No vendor is perfect, and if the not so good is not relevant to your business, then their imperfection is irrelevant. Plus, if customers’ left, why? Was it due to a change in business? Or poor performance? If the customer left for due to a change in business, and they still have a good reference for the former supplier, then that speaks volumes. If the customer left due to continuously poor performance, that also speaks volumes.

What is your dispute resolution process?

Face it, at some point, something is going to go wrong. Sh!t happens. How do they deal with it? And is it a process that you can deal with?

Do you understand our business? Explain!

If the supplier has never supplied a customer in your vertical, and you have special needs, this could be an issue. It could also be an issue if they have never supplied a customer with special needs in your vertical or you have considerably different requirements than the average company in your vertical. Make sure the vendor has a good understanding of who you are as a company by asking this open ended question.

Who are your top competitors? Why are you better for us?

Everyone has competitors. If they don’t, then they are misguided or selling a product or service no one needs. There are no Blue Oceans any more, just open oceans that are only sparsely sailed (by a few companies who are eager explorers). Make sure they give you a few real competitors as well as a good reason as to why they are better, as this will serve to not only enforce their answer to the previous question (and let you know if they really understand your business) but let you know that they have attempted to be honest in their assessment.

Is this everything you need to ask to make sure the supplier can be a strategic partner? No. But it’s a good start!

Dear Procurement: You Aren’t Nearly As Advanced As You Think You Are

One of the best presentations at Ivalua Now Paris last week (which the doctor summarized in a post over on Spend Matters UK on how the conference was “A Huge Success and a Testament to their growth”) was Duncan Jones’ presentation on Successful Procurement Transformation that summarized a recent survey on enabling smarter procurement that clearly proved what the doctor and other leading analysts already know: most Procurement organizations believe they are considerably more advanced than they are.

The survey asked Procurement departments to rate themselves as beginner, intermediate, or advanced. The results, which, unfortunately were not unexpected, indicated that:

  • 65% of respondents said they were advanced,
  • 31% said they were intermediate, and
  • 4% said they were beginner

When the reality is that, according to Forrester

  • 16% of respondents are advanced
  • 24% of respondents are intermediate
  • 60% of respondents are beginne

On the Forrester scale which, by the way, is not as arduous as the scale used by the doctor (but we’ll get to that in another post). In other words, four times as many organizations said they were advanced as were actually at that level. So if you think you are advanced, there is at most a 1/4 chance you are advanced and at most a 2/3 chance you are intermediate or better.

This means that you as a Procurement organization need to take a step back, get a third party evaluation, and understand the reality of where you are. It’s totally okay if you’re not as advanced as you think you are because neither are your competitors. And, in fact, if you are willing to get an honest third party assessment and use it as the foundation for improvement, you are way ahead of your competition which still has their heads in the sand like an ostrich. Because, thanks to modern platforms and well understood best practices that can be efficiently experienced by efficient consultants who have been doing it for a decade, you can master intermediate levels of performance quite quickly, and that puts you in the top 40% in a very short time-frame. And it often doesn’t take a lot of improvement to see significant savings, process improvements, or value generation. (With many more tangible improvements to come as you embark on that first 3 to 5 year transformation journey.)

The key to advancement and tremendous success in Procurement is simple:

  • understand where you are
  • accept where you are
  • put a realistic plan in place for mid-term transformation (3-5 years) with well defined milestones along the way
  • commit to change
  • monitor, measure, and stay on track

Now that the best S2P suite providers can roll out enterprise implementations in a quarter, you can enable processes that lead to significant ROI in 6 to 12 months, and take it step wise from there. But it all starts with accepting the reality and committing to change. The system, the process, and your hard work will take care of the rest.

And a big thank you to Duncan to proving the reality!

Procurement 4.0: We are Borg?

One of the more interesting talks at Ivalua Now Paris was Natacha Trehan’s (of the University of Grenoble Alpes) talk on the “Future of Procurement”. In it she said that in the noetic economy of tomorrow, Procurement’s function will be to drive complex ecosystems on hyper connected platforms that empowers a neuronal organization that values collective intelligence.

I don’t know about you, but it sounds to me like we’re going to be part of the corporate Borg. For those of you who don’t know what the Borg are, they are a fictional alien race of cybernetic organisms in the Star Trek franchise linked in a hive mind called “the Collective”. They expand by way of assimilation where they forcibly transform individual beings into drones by way of nanoprobe injections and cybernetic implants. And their motto is “resistance is futile”. Which often seems to be the case once a large enough organization embarks on a given trajectory.

So why does she think we are on that path? Which, except for the neuronal part sounds great to the doctor because Procurement does need to learn to drive complex ecosystems on hyper connected platforms that empower a knowledge-driven organization that values collective intelligence — he’s just not fond of the “neuronal” aspect that can be easily misconstrued and misapplied.

Because the biggest future challenge for Procurement, once an organization reaches and masters 3.0 (and almost no organization has), is to reinvent the business model. Once procurement has achieved its sustainability of supply, cost reduction, and risk management objectives, it needs to be able to continually create value to elevate its function and maintain its central importance to the business. Be it supplier development, new product introduction, innovation, or business transformation, Procurement will need to serve up what the business needs.

As Natacha says, Procurement will need to become more entrepreneurial and energetic and harbour the propensity to shake up routine and define innovation. After all, once you’ve squeezed the fat out of the margins, optimized the production and distribution process, and minimized the risk, the only way to find value is to truly innovate the product or service.

Plus, as resources continue to become scarce, regulations continue to multiply, and trade winds continue to change, more and more innovation and creativity is going to be needed to meet sustainability goals.

And then there’s the fact that more and more product-oriented markets are transforming to as-a-service markets. People aren’t buying, or even leasing/renting, vehicles anymore, they are switching to uber-like models in both their personal lives and their business lives. Who knows what will be next.

Plus, as companies progress on their Procurement journey, they all want the same, most innovative supplier as they admit only so much innovation can happen within their four walls. This will shift the balance of power back to the supplier unless you are the most advanced, and best, customer to work with (in which case the odds will be about even as they will want you as a customer). “Customer of choice” is going to be measured not on dollars and volume, but what you bring to the table.

In other words, the Procurement function will need to continue to change, continue to advance, continue to collaborate, and continue to connect … but let’s make sure to avoid those neuronal implants, just to be on the safe side. 🙂