In Part II we left of noting that not only is Mr. Smith right and Procurement really dead, having passed away peacefully in the night long after everyone had forgotten about it, it’s dead and buried with the radio star (because Video Killed the Radio Star) 6 feet under.  (see: “procurious big ideas video peter smith and the death of procurement” on Spend Matters) The internet has killed the purchaser just like the industrial revolution laid waste to the armorer, blacksmith, glassblower, and dozens of other occupations.

But I’m sure you’re all shocked that in yesterday’s argument we left out the most important fact of all about the purchaser:

He could process a mountain of paperwork that instills fear and loathing in even the most die-hard career AP clerk.

Paper? Who cares! The only paper (not counting the unnecessary printing of e-mails by managers who can’t read on the screen) any organization with a modern platform needs is the signed contract in jurisdictions that still need ink on the page to recognize a contract. Modern platforms take requisitions from anyone in the organization, allow a buyer to flip them into a purchase order to the under-contract or awarded supplier, allow the suppliers to flip them into invoices when the goods have been issued, queue the invoices for processing upon goods receipt from the warehouse, auto-match the invoice to the goods receipt and the PO, and if everything matches (or is within pre-defined parameters), send it to AP for (pre) approved payment (who make an ACH to your bank account). No paper required.

And while we recognize that, historically, up to 15% of invoices will come in with errors and the exceptions need to be processed even in e-form, the reality is that modern rules-based workflow driven cloud-based m-way match system will auto-detect (and sometimes auto-correct) the discrepancies, flip them back to the supplier for correction (or acceptance), and then, when they are correct (or at least within pre-defined tolerances), send them to AP for (pre-approved) (automated) payment. Since most suppliers will correct an (honest) error, and since most omissions (PO Number, address, routing number, etc.) can be filled in with corresponding documents, at the end of the day, less than 2% of invoices will need to be manually processed.

When you look at all of the innovations the internet has given us, not only is there no need for a purchaser, there’s no desire for his resurrection either. After all, it’s so much better to be able to find any product you could ever need with a single search at any time and have it within one business day then it was to have to wait. In the old days, if you discovered at 6 pm on a Friday you needed a part Monday, and the purchaser had already left for the weekend, what could you do? Typically nothing. Today, you do an internet search, place an order, request expedited same-day shipping, it ships out first thing Monday morning, and you have it late Monday afternoon. Maybe you are a day late in delivery, but if you had to wait for the purchaser to return, get his attention, maybe he gets the order in Tuesday and maybe you have the part Wednesday. And today, if you really have to have it now, you can order it Friday night, request special courier shipping on Saturday, finish the product on Sunday, and still make the Monday morning deadline. (It will cost more, but it can be done.)

And who would give up the automated m-way matching? It used to be that a large organization needed a roomful of AP clerks to process the 20K to 40K invoices it got a month, and even then it could only verify 10% of them 100%, leading to an average overspend (on overpayments, duplicate payments, and fraudulent payments) of 1.5% to 3%. Today, all invoices are processed 100% in real time, missing data is automatically appended, and erroneous invoices are flipped back to the supplier (with explanations of errors and acceptable corrections) … leaving less than 2% to be manually processed by a junior clerk who can get through all of them.

The purchaser is no longer needed.

Procurement is Dead!

But with Procurement’s death, we have a new beginning.

Long Live Procurement!

To Be Continued.

Mr. Smith is right. Procurement is dead. It was doomed, entombed, marooned on a desert island, and passed away peacefully in the night long after everyone had forgotten about it. It’s dead and buried. (See: “procurious big ideas video peter smith and the death of procurement” on Spend Matters.) And you should thankful that the Romans closed the door on the Egyptian Empire’s burial chamber or you would have been buried with it.

Just like the industrial revolution laid waste to the armorer, blacksmith, glassblower, and dozens of other occupations (and just like Video Killed the Radio Star), the internet has killed the purchaser. (May he rest in peace with the radio star.)

Let’s face it. Why would a modern organization need a purchaser anymore? What did a purchaser do?

He could find the one product you needed in a wall of catalogs in a minute and have it expedited to you the next day.

But with Amazon for Business, Alibaba, and about a dozen vendors offering integrated and federated catalog search capability that will allow the organization to integrate the third party catalogs of all of their suppliers into a single interface, who needs a paper catalog? Who needs to even remember the supplier or the name of the product? Today’s catalogues are heavily laden with meta-data with full search capability and anyone, anywhere, and at any time can use them to find exactly what they need, order it, and get it. No catalog expert needed.

Create and fax 3 copies of the RFP to the top 3 organizational suppliers in that category and ensure there were timely responses.

Today’s RFX programs, which support not only RFX templates for supplier information, proposals, and bids, but also support mail-merge template capability for creation and electronic distribution, e-Fax, and portal access, allow a buyer to send the same RFP to 30 potential suppliers in the same amount of time as it takes to send to 3. Plus, since everything is online, all of the data is automatically collected into the same online spreadsheet for instant apples-to-apples comparison, and if offline is needed, formatted spreadsheet output is instantly available. No data (re) entry required.

He could shave 5% off a hard-nosed supplier’s bid with hard-nosed negotiating tactics.

With today’s supply market intelligence, cost modelling applications, and in-depth (predictive) analytics applications that can plot trends across different component and raw material factors across regions and timelines, even a junior buyer has a good idea of how much a product from a supplier should cost and knows when the supplier is quoting a 15% margin (when the industry standard is 10%) and when a simple explanation of facts will be enough to convince a supplier to get in line. Plus, with e-Auctions, open book costing, process analysis, and joint inventory and innovation initiatives, costs can be reduced without any negotiation at all. Who needs a hard-nosed negotiator who only knows the carrot-and-stick method (and always eats the carrot before going into the negotiation)?

Procurement is Dead!

To be continued …

Mr. Smith is right. Procurement, which was very recently Doomed! Entombed! and Marooned! on a desert island is dead. (see: “procurious big ideas video peter smith and the death of procurement” on Spend Matters) While it fought valiantly to survive, in the end, it passed away peacefully in the night after everyone stopped caring.

Your career is over. Just be thankful the Romans sealed up the burial chamber of the Egyptian empire and you will not be buried too.

Your ability to remember which catalog among the 200 on the wall contains the part that is needed, where it is, and what section it is in; instantly locate it, and place the order as soon as the request comes in has already been forgotten. With Amazon for Business (in America) and Alibaba (in China), anyone can instantly find the part they need and place an order for next day delivery.

Your ability to quickly create an RFP template, print out 3 copies, customize an opening for the top three suppliers the organization will typically do business with, and get them faxed out (and followed up on with a phone call) faster than most people can figure out how to copy a single page on the over-complicated copy machine is no longer appreciated. With a few clicks of the mouse, anyone can use a modern freemium RFP tool with integrated mail merge and e-Fax to create an RFP, send it to a dozen people, and print out a call list for the intern to follow up on. 3-bids-and-a-buy is reserved for tail-spend spot buys that would normally be done off-the-cuff with the first vendor that comes to mind.

Your ability to step into a negotiation with a contract manufacturer and, after hours and aggravating hours of hard-nosed carrot-less stick negotiation come back with an offer 5% lower than the Engineering team was expecting is remembered, but now that detailed cost models demonstrate that you are still overspending by 10% (and that the supplier always inflates their offer knowing you’ll be happy with a 5% reduction), even a junior negotiator armed with cost models and the facts can get the same result (and they only get half of your salary).

Your ability to manually process the mountain of requisitions, purchase orders, invoices, and goods receipts that come in everyday in a pseudo-timely manner, when everyone else fears to even enter the room, has been antiquated to the history museum as cloud-based m-way match systems can not only process 100 times the paperwork in near real time, but identify the errors in 90% of the invoices that come in with errors (which can be 15% of invoices in an average organization). Properly configured, this leaves a clerk only 2% of invoices (with more than minor errors) to be manually processed, and even the most junior of clerks can do this.

The reality is this: just like the industrial revolution put an end to the armorer, blacksmith, glassblower and other medieval occupations, the internet has officially put an end to the Purchaser.

Procurement is Dead!

To be continued …