Category Archives: Procurement Innovation

Can Your Platform Handle Direct? Take the Direct Procurement Challenge!

Or at least attend the upcoming ISM webinar, sponsored by Pool4Tool and featuring both the doctor and the prophet who will discuss how

  • the direct procurement lifecycle is different from the classic indirect procurement lifecycle, which was cost-centric perfect for indirect
  • key requirements of each phase of the direct procurement lifecycle …
  • … and key requirements indirect procurement platforms lack
  • key technological capabilities required to truly manage direct procurement
  • 15 ways your platform probably isn’t up to snuff for direct, if it even address the issue at all — and —
  • the consequences of using the wrong platform for procurement management!

The fact of the matter is that you wouldn’t use a Chihuahua to herd sheep, so why are you trying to use a mouse to herd cats (which is mission improbable anyway)? (This is exactly what you are doing if you try to use an indirect sourcing platform for direct sourcing.)

Join our webinar on June 28, 2016 @ 11:30 AM PT, 14:30 PM ET, and 19:30 PM BST (UK Time) and find out why your procurement platform may not be doing your Procurement organization justice.

Don’t think you need a better platform? Remember that while the most blood an indirect procurement manager sourcing office supplies and temp labour has ever seen is the blood on his finger from a paper cut from signing the paper contract, people have been seriously injured and died (in the dozens) from poor judgement in direct sourcing. And if you don’t believe me, check out the many examples cited in the new white-paper on The Direct Material Procurement Challenge: An Indirect Tool for Direct Procurement is Mission Improbable — Direct Procurement Requires Different Capabilities by the doctor! (Just another reason to join our webinar on The Direct Materials Procurement Challenge. Registration is free and can be done now by following the link.)

As this is an ISM webinar, 1 CEH Certificate will be awarded to each attendee.

Free webinar. Free credit hour. Free white paper. How good does it get?

AI Will Not Save Procurement — Thought Leaders Will

In yesterday’s post we pointed out that despite strong claims to the contrary, AI will not save Procurement (and, if hastily applied, will only hasten its demise). Procurement is at a crossroads, but the last thing it should do is sell its soul to the demon that spawned modern AI.

As the public defender pointed out in a recent co-authored piece on The Future of Procurement, courtesy of Trade Extensions, Procurement will survive, as long as it redefines its role to meet the needs of the new enterprise.

As highlighted by the public defender, Procurement will, among other roles, be the organization that

  • brings to the table an understanding of what markets and suppliers can offer to support the strategic direction of the business
  • brings to the table an understanding of what platforms will best support the organization’s business, not just the day-to-day sourcing and procurement solutions
  • brings to the table the deep expert market research and negotiation skills that are required to not only secure supply but transportation, talent for operations, and good customer relationships
  • brings to the table the value engine that increases organizational efficiency and effectiveness and innovation that takes the organization to the next level

But it will do more than that. It will be the department that helps set the strategic priorities for the organization. It will be the department that defines the best strategy for talent acquisition and management. It will be the department that will define not only where the organization fits in the supply chain, but how the supply chain will run to support the organization. It will be the new nerve centre of the enterprise, created by the thought-leaders of tomorrow.

AI Will not Save Procurement … It Will Only Hasten its Demise

A recent post over on Spend Matters UK from Andrew Nichols in “artificial intelligence help businesses save thousands” boldly states that Artificial Intelligence Can Help Procurement Solve Some of the Big Challenges. In fact, he predicts that AI in the not so distant future will play a major role in the international supply chain, supporting businesses to solve a number of very contemporary problems.

In particular, Andrew believes that AI could identify new markets, manage supply chain risks, track exchange rate volatility, and find the best value without compromise on quality.

If this were true, Procurement would not be needed at all, and the C-Suite would be chanting “Procurement is Dead. Long Live the Machine! Our Samaritan has Arrived!” If an AI (which does NOT exist by the way, intelligence is not artificial) could do that, you’d all be fired, because, let’s face it, when it comes to managing supply chain risks, tracking exchange rates, identifying new markets, and always finding the best value, your batting average is less than that of a major league baseball pro.

An AI can give you market statistics, and break it down by region, demographic, competitor, and product. It can NOT tell you how appropriate a market is for you. You have no idea why a market is good for a competitor. You can cross-correlate it’s products to other top selling products on the market and identify common features, common advertising channels, and common comments across brand surveys, but the best you can draw is conclusion based on correlations. Correlation is not causation. You could take the highest ranked strategy suggestion from the analytics engine, implement it, and flop miserably because a key factor was missed, flawing the entire model.

An AI can compute, for every product in the world, the cost to value ranking using market costs, exchange rates, correlation to desired feature lists, and consumer ratings, but this is not the best value. The best value is that where the cost to value formula is based on your value rankings, which could be much more heavily dependent on reliability, safety, and service than look, feel, and flash. And since your organization will not have every product rated, the best the AI can do is suggest the most likely candidates for human review.

An AI can detect the presence of risk indicators that you have defined against known risks, it cannot identify risk indicators for unknown risks. If the algorithm doesn’t understand that a tsunami is a risk because it can damage harbours and destroy coastal plants, the risk will not be identified until it discovers a news story about how the supplier plant had to shut down. And if it does not understand that legal proceedings can bankrupt a small company, it could overlook a filing with the potential to bankrupt the supplier. If the supplier was strategic, that is something the organization would want to know about immediately.

An AI can track exchange rate and give you a real-time view into which is the most preferable rate, the short-term and likely long-term trends, and give you suggestions with an expected level of confidence within plus/minus x%, but can not necessarily predict the right currency to use to lock in a long term value for any better than a human expert. No known algorithm knows all the factors that contribute to exchange rates, how to detect their presence, and how to incorporate them. There are a lot of advanced statistical algorithms that can model the trend curves well, but they assume that markets will more or less keep the status quo, which never happens. Their projections are useful, as they can identify which currencies are likely to be best and where inflection points are likely to occur, making the best use of an experts time, but they cannot replace the expert.

And if any CPO were to try and replace a team with an AI for one or more of these functions, then he would quickly bring an end to Procurement in his organization because, while it would succeed in many cases, sooner or later there would be a spectacular failure that would cancel out all of the previously identified value, putting the entire organization at risk.

Determine – Determined to Conquer b-pack’s Brave New World Part II

Our last post (re-)introduced you to Determine, a name you know even if it’s a name you don’t, as this provider is the successful fusion of the mature solution offerings that have been offered by Selectica since 1996 and Iasta and b-pack since 2000. We ended by noting that the new Determine platform is the platform that many sorcerers always wanted but never knew they were missing. Today we’re going to dive a little deeper into why.

Now, even though there’s not a whole lot new since SI last reviewed b-pack in its series on Taking Root in Their Brave New World (I, II, and III) or since SI last reviewed Iasta pre-acquisition (in Smart-Source Style, I, II, and III), these platforms have been integrated, their core modules have been enhanced and, most importantly, the (core) platform has a new UI that is not only easier to use than the one that b-pack had before, but is better looking to. (It was straight-forward, and there was nothing wrong with it, but parts of it looked like it was built as a Windows application and not a SaaS application.)

That being said, there are some cool new features, including:

  • Virtual Purchasing ContractsGood invoice and payment management requires m-way matching every invoice to at least a purchase order or contract and, if possible, a goods receipt as well. For many types of recurring payments — such as rentals, utilities, etc. — Procurement does not cut a contract and there is no Procurement record for AP to refer to when an invoice comes in. This prevents an m-way match and makes it difficult to detect duplicate, erroneous, or fraudulent invoices (and this, of course, contributes to over-payments). However, in the Determine system, you can set up recurring payment contracts and define expected payment dates along with expected amounts or ranges. Then, when an invoice comes in, it can be matched to an associated virtual contract payment, and if there is already an associated invoice, if the invoice is outside of the expected/agreed to range, or if the invoice is from a supplier without a virtual purchasing contract, it can be defined as duplicate, erroneous, or potentially fraudulent.
  • Supplier NetworkOften you know who the suppliers are you want to invite to a sourcing event, and often they are already in your Source to Pay system, but sometimes they aren’t in the system and sometimes you need to invite new suppliers that you don’t know. That’s why Determine is building a supplier network to not only help suppliers centralize their data management across multiple customers, but help buyers search for new suppliers. However, it takes time to build a supplier network so Determine comes …
  • … with TradeShift Integration… so that a buyer can find a new supplier “out of the box”. Tradeshift has a large global supplier network that can be used by any customer to jump-start their supplier identification and management for new sourcing events.
  • Full E-mail Approval SupportRequisitions, purchase orders, invoices, etc. — anything that requires approval can be approved or rejected through e-mail, making it easier for buyers to get quick responses from approvers and executives who never need to log in to the system.
  • DocuSign integrationWhich allows for contracts to be created and signed electronically, eliminating the need for paper contracts (that get lost in filing cabinets), paper couriers (which can lose the contracts or fail to get them to their destination on time), and paper cuts (which are well deserved when paper is wasted).

And the following will be in the next release (end Q2 / beginning Q3):

  • Contingent Labour ManagementThe b-pack platform had a very powerful catalog management system, which has recently been upgraded and extended in the Determine platform with full punch-out support to third party catalogs, and seamlessly integrates hosted catalogs and third party catalogs like any modern catalog system. It also supports standard requisition templates that allow a buyer to order merchandising (and simply specify the quantity and colors, etc. of the merchandise), bound documents (and specify the binding, paper, etc.), and other standard make-to-order products. And with the next release, it will also support embedded continent labour / service management capability where a buyer can search for resources with select skills, request a time of service, and send it off to one or more organizational contingent labour suppliers under contract (or create a requisition that will be fired off to the appropriate buyer for a sourcing event).
  • Workflow Driven Dynamic QuestionnairesAt present, the platform has standard workflows for new supplier registration, RFX creation, and so on, but these simply present pre-made questionnaire and forms to the user. As of the next release, the questionnaires will by fully dynamic and buyers and suppliers will only see the questions and information they need to see based upon their answer to current questions and their industry, product, service, etc.
  • Universal Action PlansOne of the unique offerings of the b-pack platform was action plans, mainly used for corrective action plans in supplier management. In the next release, buyers will be able to create action plans for any process — including sourcing, procurement, and supplier development — manage them, and even tie them to appropriate metrics (built on the relevant platform master data).

And within a year Determine plans to have the Iasta platform native and all of the relevant CLM functionality native on the core b-pack platform, so not only will everything be off of one Master Data Management store, but one seamless user interface as well. And given the rapid pace at which they’ve integrated and extended the core platform so well, you can be sure that as long as Determine is determined, this will happen. In short, if you’re looking for a new S2P platform, this to know provider should definitely be on your short list.

For a deeper dive into the new Determine platform, watch for the two-part Pro coverage by the doctor and the prophet, coming soon on Spend Matters Pro (membership required).