Category Archives: Procurement Innovation

Procurement is Global. Platforms should be Global. Truly Global.

And, in particular, as previously noted, those platforms should form the foundation for Virtual Procurement Centres of Excellence. But just acquiring a platform is not enough. It has to be adopted — and not just in the center of excellence, but in every local purchasing department around the globe.

This means a global rollout, but not an instantaneous one. Big bang roll-outs usually end up in big blow-ups. The biggest supply chain disasters in history have often been the result of big-bang ERP or technology projects that tried to update the entire system all at once, often in a bet-the-company endeavour. Such a project even brought down a 5B company. (Remember Foxmeyer? Probably not, but that’s because a big bang ERP project resulted in a big bust.)

Now, a global Procurement platform roll out is not replacing the ERP and a failure likely wouldn’t bankrupt the company, but it certainly would be very costly and knock Procurement back into the dark ages it’s trying to crawl out of. So it has to be done right. So how do you do it right?

1. Take it in steps.

Start with just enabling the center of excellence so that the Procurement leaders can get familiar with the platform before the questions start rolling in. After all, they will be the trainers, leaders, barkers, and bugle-men of the solution, and need to be prepared the lead the charge. After that, enable just a few locations at a time until each is up and running.

2. Get the data model right before a single implementation.

Remember, you have to control the information and financial chain with the platforms, and this will require integrating with data from dozens, if not hundreds, of systems and sources. Without a good data model, integrations will be difficult and time consuming.

3. Identify the systems of record for each data component.

The days where the ERP is the system of record are long gone in leading organizations. These days, organizations have a financial system as the system of record for invoices and payables, a supplier management system for supplier (and sometimes catalog) data, local catalog management for products and services that are primarily sourced locally, a CAD/CAM system for product designs, a MRP system for custom product designs, and so on. Make sure the integrations with each of these core platforms is complete and accurate before using the new system for the first Procurement event.

4. Define small test projects that can be used to evaluate the implementation adequately before continuing with the roll-out.

Pick a few representative, but not mission critical, projects that can be completed in weeks (not months or years) that will adequately test the system, define milestones and checkpoints, and evaluate at each stage. Only continue when any issues or bugs are identified and corrected.

5. Make sure you have experienced, expert help for the roll-out.

Each office will have its own particular process needs, regionalization (in terms of language and currency), audit trail requirements, and so on. Expert help can not only help you identify these requirements but appropriate system configuration options for maximum performance and minimal complexity at each location.

In other words, create a reasonable plan, with expert help, and stick to it. Things will generally go smooth if you realize that, like every evolution before, the advancement of the Procurement function is a journey. You can’t always afford to stop and smell the roses, but you can’t afford to run through the thorns either.

Procurement Produces Platinum when Engaged Early

We all know the statistic that 80% of the cost is defined the first 20% of product design, and that engaging Procurement early can significantly attack and reduce these costs considerably. But leading organizations are learning that engaging Procurement during New Product Design (NPD) is not early enough. Real success comes from engaging procurement during the Market Needs Analysis and New Product Definition phase.

Engaging Procurement after the product specs and initial design has been more or less determined limits Procurement’s capability to add value and extract cost. Once you’ve decided on a 9.7″ tablet with 64 GB of memory and a 5.1 MP camera limits Procurement to going to market for 9.7″ casing, 64 GB of memory. and 5.1 MP cameras and boards that support processors that can stay cool in a 9.7″ tablet. You’ve already limited the universe of potential. Moreover, you haven’t really defined what the real value is from a customer point of view (specs, reliability, brand value, sizzle), why, and how Procurement could add to
it.

Procurement really needs to be involved from the inception of a new product introduction project. It needs to be both a sounding board and the voice of reason to help the organization zero in on the right mix of what will sell and keep the costs in line with market expectations (or at least market acceptance). Value to the organization is maximized when profit is maximized — which is maximized when profit per unit times number of units is maximized. This requires balancing cost with consumer values, not just optimizing cost, which is all that can be done if Procurement is not engaged until the final design / pre-manufacturing stage of the product lifecycle.

So, for real results and greater success, engage Procurement early and engage Procurement often. Sometimes the perceived market requirement isn’t worth the cost, and other times it is.

For more information on the product lifecycle, as well as some of the results Procurement can deliver not only early, but at each phase, you can check out Source One’s latest paper on Strategic Sourcing Throughout the Product Lifecycle. It’s a quick read, and if you want to go deeper, they have hundreds of projects they can draw on if you reach out to them.

Future Trend 34: Digital Transformation

How did SI miss this one in it’s two in-depth series on the future of procurement and it’s follow up future trends expose???

This anti-trend is as old as the internet!

But let’s back up. Recently, the procurement dynamo published a piece on the digital transformation of procurement where he asked if it was a good abuse of language. In this post he started off by noting that the digital transformation expression is an overused buzzword — which is an understatement.

Secondly, as the procurement dynamo notes, no one has a proper understanding of what it actually means. the procurement dynamo attempts to rectify this by giving a clear definition of the term with respect to the also overused digitization and digitalization terminology. According to the procurement dynamo

  • digitization is the conversion from analog to digital … atoms to bits …
  • digitalization is the process of using digital technology and the impact it has and
  • digital transformation is a digital-first approach that encompasses all aspects of business

… and, in particular, digital transformation is a digital-first approach to the extent that digital can be applied.

And this means that this is yet another anti-trend in Procurement as leading organizations have been doing this ever since the adoption of e-Auctions. The best organizations have been adopting, to the extent possible, new technologies since the e-auction hit the scene 20 years ago. RFX. True e-invoicing. Supplier Information Management. Contract Management. Decision Optimization. And so on. The leaders (which are very, very few) have pushed for, and embraced, digital transformation for the last two decades.

And, to be honest, when you get right down to it, the concept of digital transformation is, as a farmer would say, hogwash. You’re either continually adopting and using the best tools and processes available to you, or you are counting down to the days your doors close. The organizations that have survived decades have embraced multiple technological revolutions. They’ve went from carbon paper to copiers to digital transmission. Digital transformation is just the latest technological revolution, and may not be the last. (If quantum tech gets perfected, you’ll have to move to technology based on qubits … a blend of atoms and bits.)

So don’t fall for the latest fad — keep focussed on the goal. Better business building.

What is the Future of the Procurement Function? (Webinar)

In the beginning, there really wasn’t much of a Procurement function. When someone needed something, they either went to the local buyer (who was either the office manager or the designated purchaser) or the local boss and got permission to buy it themselves if it was small. Assuming it was large enough, then it would go through the buyer who than bought either from a catalog, a local vendor, or a contracted supplier for products he or she couldn’t get locally.

Volume leverage was small, time was short, and deals weren’t that great. It was typically the lowest price from some semblance of 3-bids and a buy. And any deal found by one location typically wasn’t shared with another.

As organizations grew and began to realize these inefficiencies, they decided to centralize the purchasing function to achieve volume leverage and better deals, at least for common categories, and in turn decrease the manpower needed for common buys. This also allowed best practices to be created and shared and archived in a knowledge center, but the centralization came with its own problems. Uncommon or unique categories to one or two locations were often sourced with worse results (as the centralized buyers couldn’t exploit volume and didn’t know the local market), local knowledge was lost, and manpower wasn’t reduced that much as inventory managers and designated “buyers” still needed to be at each location to order off of the master contracts and manage inventory.

So, these organizations moved to a center led model. Common, strategic, and/or high dollar categories were centralized, but uncommon, non-strategic, and/or low dollar were managed in a distributed fashion. This, presumably, would achieve the best of the decentalized and centralized procurement worlds with no disadvantages. Right? Wrong.

As center-led organizations matured, a number of cracks in the shiny new armor appeared. This model, like every model before, had its own disadvantages which leaders are now grappling with.

Another evolution is needed. What is that evolution?

A Virtual Procurement Center of Excellence.

What does that look like?

Join THIS THURSDAY’s free webinar (registration required), sponsored by Pool4Tool and featuring the doctor, and find out.

eBid Systems – An Old Procurement Provider with a New SaaS Sourcing Solution

eBid Systems started out as an ASP of (custom) procurement solutions for the public sector back in 1999. While relatively unknown in the private sector, this vendor is well known in the public sector, having grown over the last 17 years to a large provider of ASP and (multi-tenant) SaaS solutions to over 200 public sector organizations of all shapes and sizes and about 100 private sector organizations (that primarily serve the public sector).

Even though the e-Sourcing market is well established, and, despite the recent M&A frenzy, there are still a handful of mature mid-market e-Sourcing offerings for a mid-market company to choose from, eBid Systems decided to re-enter the market with a new SaaS e-Sourcing solution called, ironically, ProcureWare, which has been in re-development for the last three years.

A few years ago eBid Systems realized that if they were going to accelerate their growth, and increase penetration in the private sector, they needed to get out of the custom software and ASP business and into the multi-tenant cloud-based SaaS business and rework their platforms into a nimble, quick to setup, easy to use, competitive turnkey e-Sourcing solution. And for the last three years they have been developing that suite. The result is a solid mid-market entry with solid RFX, e-Auction, Reporting, basic SIM and basic CLM and, just like ScoutRFP, enough to get the attention of new converts to e-Sourcing, especially in the mid-market. Plus, their experience in the public sector is very attractive to those companies looking to get, or increase, public sector customers.

The RFX solution allows for detailed creation of information request forms, pricing request forms, and scoring schemes — which can be split among multiple reviewers. The RFX can be sent to selected suppliers, or opened up to any supplier on the eBid network for bidding.

Bids consist of all responses to the RFX, any associated documents the supplier wants to upload, questions (or clarifications) that are asked, and responses that are provided. Suppliers and Buyers can drag and drop documents into the platform and a complete audit trail of all bids, changes, clarifications, and responses are maintained in the audit log.

The (reverse) auction works like a standard low-bid auction, but the interface is RFX line-based. There is no graphical interface at this time. However, the platform also supports forward auctions for the disposal of excess inventory, which some public sector organizations find useful.

The supplier information management (SIM) is quite extensive and extremely customizeable by eBid Systems and can track not only all basic company information, financial information, and even compliance information, but can be customized to track appropriate diversity, public sector classifications, and insurance certifications. A supplier record can also be associated with all contracts and associated bids.

Contract management is all about managing and tracking awards, vendor obligations, and associated data — it is not about contract document creation or tracking of contract documents and deliverables. It’s primitive at the moment but could prove more valuable as time goes on. Contract data is primarily used for alerts, as the system can alert to expiring contracts, expiring insurance, diversity review dates, and so on.

eBid Systems market entry is solid and shows promise. SI expects that we could see a strong uptake in mid-market organizations in the private sector that primarily serve public sector organizations and continued, steady, growth in the public sector. Time will tell. Regardless, for those interested in a deeper dive, check out the recent deep dive by the doctor and the prophet over on Spend Matters Pro [membership required]. (Part I).