Category Archives: Procurement Innovation

The Evolution of Procurement, and Where It Is Headed

Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC and co-author of “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing”.

While strategic sourcing and procurement groups around the globe continue to make headway into new departments and address categories previously off the table, their popularity with business owners and stakeholders has never been lower. Headlines and titles like “Everybody Hates Procurement: Here’s How To Fix It” and “The End of Procurement, Forever!” and “The Problem with Procurement: Misalignment” seem to pop up every day.

I attribute these headlines to the growing pains strategic sourcing and procurement will naturally experience as the role of this group continues to expand and evolve. And evolve it has! In the 11 or so years I have been at Source One, I have seen Strategic Sourcing transition from rarity, to necessity, to commonplace, to part of a larger spend management strategy. In its current form, and as it heads into the future, it looks to me that modern procurement has developed to be just as much about negotiating with an organization’s leadership as it is negotiating with a supplier base. In fact, I tell most college grads entering this industry to be prepared to challenge those within their organization, learn how to market their group, and sharpen their debate skills. Getting savings is the easy part, getting your organization to act in their own self-interest is the challenge. This is not a job for the weak-willed or thin-skinned! To explain what I mean, here is a quick rundown of the change I have witnessed.

The Reactive Buying Era

When I first started at Source One, most of the purchasing groups in the companies we worked with dealt exclusively with raw materials. If the personnel had “sourcing” in their title, it was rare, and many of our customers did not have any sort of sourcing initiative for their indirect spend items. Stakeholders and the department heads responsible for budgeting conducted the purchasing for their needs.

In those days, we did a lot of explaining to potential customers just on what Strategic Sourcing was. It wasn’t a commonplace concept even within Procurement, so those outside of it — Finance and IT, for example — had very little knowledge of it. Especially in the mid-market, any group with spend management tactics that were more advanced than three bid purchasing or preferred supplier relationships were the exception, not the rule.

The Sourcing Era

Slowly, Strategic Sourcing became more and more familiar until it ultimately blossomed. Strategic Sourcing practices were first used by a limited number of organizations as they purchased their raw materials. Seeing the successes in that category, organizations then asked these “sourcing” teams to look into areas like packaging and shipping. Strategic Sourcing’s applicability continued to grow as success after success was reported. Subsequently, most departments were soon asked to start implementing strategic sourcing practices, and procurement departments began to be more directly involved in buying decisions.

The Category Management Error

In its latest form, Strategic Sourcing is now tied into category management, meaning companies are hiring or developing sourcing experts for their individual spend categories — telecom, media buys, office equipment — or departments — Capital Projects, Marketing, IT — and restructuring their departments with the goal of achieving near 100% spend under management. With dedicated sourcing experts managing each category and an intense focus on supplier relationships, those sourcing departments effective in category management are not only able to take advantage of market conditions today, but are better able to predict future market conditions and opportunities within the managed categories.

Even utilizing these strategies, a common problem remains. These sourcing teams lack the institutional clout within their organization to be effective in managing spend. SOPs are reluctantly followed, if they are followed at all, by the end users, and the majority of the end users and stakeholders do their best to avoid involving the sourcing team. Additionally, sourcing initiatives are often dead on arrival, killed in the name of deadlines or supplier relationships

The Change Management Era

So, that’s a short history of Strategic Sourcing’s development. So where is the industry going from here?

From what I have seen in the work we perform for the clients of Source One, category managers must now become “change managers”. “Change managers” are those leaders who can navigate their organization’s structures and barriers to be effective, and transition their department’s role from that of a reactive-tactical resource to one that is proactive and strategic.

“Navigate” here means “maneuvering around” objections or otherwise getting things done, and there are a few ways that I have seen different sourcing groups approach this. At the last conference I attended, I heard some sourcing teams discussing their use of a “bell cow” — a single resource within their group that is skilled in working with department heads and generating acceptance from end users for their group’s sourcing activities. In other cases, I have witnessed sourcing departments working through an executive sponsor, often times a CFO, to help push their group’s agenda items. A third, slower method I’ve seen used to promote sourcing initiatives is the granular approach, meaning the sourcing group is using any quick-and-easy method available to build credibility and support, end user by end user and department by department. Not surprisingly, this third method is high resource-low return, and often causes some areas ripe for sourcing to go untouched. Of these, the proper solution is the one that works best within a particular organization.

When sourcing groups improve their internal relationships, the stakeholders are better encouraged to participate and end users are better encouraged to comply with sourcing activities, increasing their chances of success. These project successes give Procurement something tangible to market internally and use as leverage in drumming up support for future initiatives, and also exposes their unique skills to the organization as a whole. Through continued project success and internal relationship-strengthening, Procurement will slowly be seen as an integral and centric resource to the company; its unique skillset prized not only for its ability to identify cost savings for the organization but for its ability to generate value for the organization as a whole.

Summary

As the need for more strategic spend management practices increases, procurement departments are evolving to meet these newfound challenges. But rest assured; the industry’s progress is not slowing or stopping. Adapting to the industry’s modern changes and challenges is only setting the stage for the next evolutionary step, which will be to become a revenue center for the organization. The better equipped a procurement team is now at handling the challenges of the current market, the better prepared it will be to predict and stay ahead of future trends

Thanks, Joe.

Intengo – Mastering the e-Procurement Tango in Turkey

When we last covered Intengo back in 2010, they were doing the e-Sourcing Tango in Turkey. At that time, they provided an on-demand e-Negotiation platform built around (multi-round) e-RFX and e-Auction with a sprinkling of Supplier Information Management (SIM) and early stage catalog management thrown in. A project-oriented system, it was a breeze to set up a new RFX or e-Auction event in the system and get a new sourcing event going. One of the unique features of the platform was the calendar view, which integrated with Microsoft Outlook and hot-linked to all of the relevant screens in the relevant projects, and which allowed a buyer to get a quick summary of where they were and what they needed to do at any given time. Other cool features were item-level currency support, smart unit support, and bulk-updates on (filtered) lots or items.

Since then they have been dancing up a storm and they are now the leading e-Sourcing and e-Procurement provider in Turkey, with over 100 clients, including a few notable international clients with operations throughout Europe and Asia. That’s right, they have migrated from a basic e-Sourcing application to an end-to-end e-Procurement solution in an effort to serve their clients better. Since 2010, they have added requisition and purchase order support, price lists and full catalog support, delivery notification and tracking, and integration with the big ERPs (Oracle and SAP) for master data management, invoice management, and e-Payment / Accounts Payable integration. In addition, they have also integrated budget management into the e-Procurement process.

A user can begin a requisition from a catalog or from a free-form request. The request can be sent straight to a (preferred) supplier if it is within the user’s spending limit (as defined by the budget), turned into a Purchase Order (after being approved, if necessary), or turned into an RFX or e-Auction. If the request is turned into an RFX or e-Auction sourcing event, the RFX or Auction is pre-populated with pricing from the most recent supplier price list (at the volume level) or catalog if pricing is available. If the request is sent straight to the supplier, the supplier can accept the request and provide delivery information, reject the request, or decline due to incorrect or insufficient information. In the last case, the buyer is notified and corrections can be made. In the case of an RFX, after the event has been configured, the request is sent to the selected suppliers who can bid on the whole or part, decline to bid on the whole or part, or decline to bid because of incorrect or incomplete specifications on one or more line items. In the last case, the buyer is notified, and if the buyer agrees, he can suspend the RFX or e-Auction until corrections are made, and all suppliers are immediately notified of the event suspension. A supplier who accepts a purchase order, who is awarded an RFX, or who wins an auction is able to immediately enter delivery information into the system (which can generate e-invoice data for submission to the organization’s ERP) and when the product is received, a buyer can mark the product as received in the mini delivery module.

The catalog functionality is pretty much what you would expect and is comparable to most other e-Procurement platforms out there and the budget capability can be used to define budgets by user, project, and department and track them against requisitions and awards project-to-date and year-to-date. The built-in reporting is good, and Intengo even has canned reports by brands (which are great for retailers). Furthermore, Intengo can create and customize any report on any platform data that you want, but note that the platform is still missing a custom report builder. However, realizing this weakness, Intengo gives you the ability to export any and all data to Excel or to your ERP (so you can build your own reports using reporting tools you already have). So if you do full ERP integration (and use it for your Master Data), and you already have a best-of-breed reporting product sitting on top of that (and chances are you do), you can use that to build custom reports on your sourcing and procurement projects.

They have also made enhancements to their e-Sourcing platform. One of the most significant enhancements is their formulaic auction capability. This weighted auction capability allows a user to define an arbitrary weighting, composed of one or more factors, to every bid, on a lot and line-item level, that is used in determining the rankings. The user can define one-or-more weighting factors based upon quality, warranty, shipping, associated duties, etc. The categories can be (optionally) displayed to the suppliers who can choose the ones relevant to their bids (such as shipping, warranty included, etc.) and the weighting factors can then be applied behind the scene. In addition, during an auction, suppliers can also suggest substitutions for each line-item and lot, which a buyer can accept. (And, if necessary, the buyer can pause the auction, define appropriate formulae, and provide additional information to other suppliers who might also be capable of offering substitutions on different terms.)

Intengo is definitely an up-and-coming contender on the end-to-end Procurement scene in the European mid-market and another European e-Procurement provider to watch, especially since, like other European players, they have been internationalized and multi-language since day one on their integrated, single-solution, SaaS platform that allows them to create new instances virtually on-demand. While SI doesn’t expect them to cross the Atlantic for another couple of years, it does expect that the North America companies competing across the pond are going to be seeing a lot more of them on mainland Europe in the coming years.

b-pack: Taking Root in Their Brave New World, Part III

In Part I, we discussed how b-pack, who packed it in for a brave new world back in 2010, crossed the Atlantic in their quest to spread some of their French Procurement bohemian revolution to the rest of the world, bringing with them a suite of Procurement solutions that take you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt (which can include asset tracking information), and an invoice, to payment, reporting, and supplier management.

Then, in Part II, we noted that b-pack has spent the last three years implementing (or significantly improving) (collaborative) contract authoring and advanced contract management (coming out in the next release this quarter), advanced requisitioning and services procurement, OCR (Optical Character Recognition) integration, project management and project support across requisitions and budgets, an enhanced collaboration portal, a GPO (Group Purchasing Organization) module, and enhancements across the board to all core and supporting modules while at the same time extending their out-of-the-box integrations with ERP (Enterprise Resource Planning) and AP (Accounts Payable) systems, increasing usability, and taking (RAD) rapid application development to a whole new level with respect to the degree to which the platform can be customized for a new client. In addition, we did a deep dive into their requisition, budget, and project-management functionality.

Today we want to talk about their new RAD (Rapid Application Development) capability and their ability to customize an implementation for every customer off of one common platform. In the new version of their platform, each of their 30+ components have been implemented as stand-alone modules. This allows a customer to choose just the modules that make sense for their organization. In addition, each module can be custom configured to the client’s need. As discussed in yesterday’s post, the customer can choose just those requisitions that make sense for their Procurement processes in the 1Cart & Requisition Module. A customer that already has a BoB (best-of-breed) strategic sourcing module can exclude the sourcing module, a customer that has a multi-channel invoice solution can turn off the OCR module, and a customer that doesn’t have an ERP can leave the integration out.

In addition, the options that are presented for configuration in each module are then restricted to those that are related to the modules that are selected. For example, the user will not be able to configure OCR receiving rules in the invoice module if the OCR module is not part of the solution. Furthermore, the configuration of each module is workflow driven, so the user will only be presented with configuration options that make sense based upon previous selections. So, if a user selects that only user-initiated requisitions and invoice-free requisition workflows are supported, the user will not be presented with, or be able to access, configuration options for check-requisition.

Finally, the workflow-driven dashboard is extensively customizable and can be pre-configured for each user type. The user, which is only presented with the workflow elements and analytics associated with the modules the user has access to, can select what workflow elements (such as outstanding approvals, requisitions, etc.) she wants to see on the dashboard, and in what order, as well as what reports should be generated and loaded upon application log in.

Using the extensive configuration capability in their platform, b-pack is able to rapidly configure a custom-installation for each customer, that exactly mirrors their current processes, in a matter of days and deploy an appropriate instance of their platform from the start, that includes out-of-the-box integrations with ERP and AP systems and third-party punch-outs for catalog purchases. Then, all that is required to get a customer fully operational is to load any master data elements that do not exist in the ERP or AP systems and, optionally, define the requisition, project, budget, invoice, etc. templates used by the organization. In a matter of weeks, the organization is running on a fully configured, fully featured, customized e-Procurement solution that runs on one common code base that can be updated on-demand in a SaaS (Software-as-a-Service) environment, giving the customer the best of both worlds (rapid deployment and extensive customization).

In our next series, we will dive deeper into some of the new capabilities of Version 4.0 of the b-pack platform that is coming out this quarter.

b-pack: Taking Root in Their Brave New World, Part II

In Part I, we discussed how b-pack, who packed it in for a brave new world (Part I, Part II, Part III, and Part IV) back in 2010, crossed the Atlantic in their quest to spread some of their French Procurement bohemian revolution to the rest of the world, bringing with them a suite of Procurement solutions that take you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt (which can include asset tracking information), and an invoice, to payment, reporting, and supplier management. Three years ago their Procurement suite, which also included document management, expense and travel management, asset management, inventory management (which is integrated with asset management), fleet management, dispute resolution, a supplier portal and procurement business intelligence reporting in a solution that was extensively internationalized, was one of the most in-depth solutions available, and it has been developed considerably since then.

In the past three years b-pack has added (or significantly improved) (collaborative) contract authoring and advanced contract management (coming out in the next release this quarter), advanced requisitioning and services procurement, OCR (Optical Character Recognition) integration, project management and project support across requisitions and budgets, an enhanced collaboration portal, a GPO (Group Purchasing Organization) module, and enhancements across the board to all core and supporting modules while at the same time extending their out-of-the-box integrations with ERP (Enterprise Resource Planning) and AP (Accounts Payable) systems, increasing usability, and taking (RAD) rapid application development to a whole new level with respect to the degree to which the platform can be customized for a new client.

Today we are going to discuss the enhancements to requisitions, budgets, and project-management.

As discussed in yesterday’s post, one of the things b-pack has learned while servicing over 100+ global clients in 20+ industries in the public and private sector is that every company has their own unique Procurement process, which starts with the requisition. For example, some companies start with a requisition, which must be approved before a PO can be generated, some companies start with a PO, and some companies, where most of the spend is for small amounts, start with the invoice. In addition, and this is true in the public and health-care sectors, some processes start with check requisitions for employee (travel) expenses and study participant payments. Each of these requisitions requires a different (approval) process. In addition, while some requisitions are for one time product or services buys, some are for repeating, regularly scheduled buys, and some are for products or services that are to be delivered over multiple phases of a project, and multiple POs, invoices, and receipts need to be managed against the same requisition over the course of the project.

In response to this need, b-pack has extended their platform to support a slew of requisition types and processes, and each customer can select just the types, and processes, that they require. In addition, each step can be customized as needed and the approval process, which is rules-driven, can be as simple or complex as required. This is what allows them to meet the needs of Sony Music UK, for example. In the music industry, requisitions are for projects which can include CD recording and CD promotion. A CD recording will require studio costs, producer advances and fees, artist advances, flat fees and payments, post-production costs, etc. A CD Promotion will include promotions for multiple singles, which will have associated production costs, advertising costs, and special event costs (for artists appearances). And while the CD recording requisition might be a single-phase project, the promotion will generally be multi-phase, with each phase centred around the release of a single. The b-pack platform not only supports the requisitions required for these types of projects, but also supports templates for each project (or recurring order) that is required. So, all a talent, or project, manager, needs to do to set up a project is select the type of requisition, select the template, input the expected costs (against the pre-populated expense groups and project codes), and send it off for approval.

It’s budget creation and tracking capability is also quite advanced. It allows you to set up a budget that is as detailed as necessary and track it monthly or against project phases. The budget can be compared against the appropriate project(s), requisitions, invoices, and receipts and the user can see how they are doing at any particular time. This real-time visibility into the budget allows them to track the success of the project.

After requisitions, the next biggest enhancement to the platform is probably in respect to its project definition and management. In the b-pack platform, projects can be as simple or complex as required. They can be single phase or multi-phase; associated with a budget; linked to zero or more documents and contracts; associated with the relevant requisitions, invoices, and receipts; associated with one or more users including the project manager; and updated automatically when any associated requisition, invoice, receipt, etc. is updated.

And, as with previous versions of the b-pack platform, all of the data fields are driven off of master-data and the suppliers, approvers, account codes, project codes, etc. can all be selected from drop-down lists after a few characters have been entered. In addition, all of the master data tables (that are not pulled from associated ERP, AP, etc. systems) can be updated using Excel spreadsheets – making it easy to administer.

b-pack has put a lot of thought into usability and worked hard to make sure the platform meets the needs of its international users. Tomorrow, we’ll dive deeper into its new, relatively unique, RAD architecture.

b-pack: Taking Root in Their Brave New World, Part I

When we first introduced you to b-pack in 2010, they were packing it in for a brave new world (Part I, Part II, Part III, and Part IV), hoping to spread some French Procurement bohemian revolution to the rest of the world.

Unlike other e-Procurement systems of the day, b-pack understood that e-Procurement was more than just requisitions, catalogs, and invoices. Good e-Procurement solutions take you from procurement through purchase through receipt, payment and supplier management to begin the cycle anew. To this end, b-pack brought with them a suite of solutions that take you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt (which can include asset tracking information), and an invoice, to payment, reporting, and supplier management. In addition to these core e-Procurement modules, they also brought document management, expense and travel management, asset management, inventory management (which is integrated with asset management), fleet management, dispute resolution, a supplier portal and procurement business intelligence reporting in a solution that was extensively internationalized.

So what have they been up to since then? Quite a bit. In addition to (collaborative) contract authoring and advanced contract management (coming out in the next release next quarter), advanced requisitioning and services procurement, OCR (Optical Character Recognition) integration, project management and project support across requisitions and budgets, an enhanced collaboration portal, a GPO (Group Purchasing Organization) module, and enhancements across the board to all core and supporting modules, b-pack has been working hard to extend their out-of-the-box integrations with ERP (Enterprise Resource Planning) and AP (Accounts Payable) systems, increase usability, and take (RAD) rapid application development to a whole new level with respect to the degree to which the platform can be customized for a new client.

One of the things b-Pack has learned serving 100+ clients globally across 20+ industries in the public and private sectors over the past 13 years is that every single company is different when it comes to the Procurement processes that they use. Furthermore, not only are the procurement (inventory, and receiving) processes (just to name a few) different, so are the types of requisitions, budgets, and projects that they use. And if you try to meet their needs with a one-size fits all platform that doesn’t mimic organizational processes exactly, what ends up happening is that the employees, used to doing things a certain way, do everything they can to bypass the platform, no matter how easy it is to use or how consumer-oriented it is. And what ends up happening is that, instead of Supply Management getting their spend under management (SUM), maverick spend actually increases after the e-Procurement platform is implemented. In response to this realization, b-pack has been very heavily focussed on not only increasing the customization capability of their platform over the last few years, but in doing it in such a way that the platform can be custom configured through user-driven administration options. This achieves three very important goals in the enterprise software world. One — there is only one instance of the b-pack platform – which makes it very easy to maintain and update as every customer runs the same core code base. Two — every customer (administrator) can configure the platform themselves as their needs change. Three — a custom instance can be configured for even the most complex Fortune 500 in a matter of days by a b-pack product manager who sits down with the customer and walks through all of their Procurement processes with them.

In the posts that follow we will discuss some of the unique customization capabilities in the new b-pack solution in detail.