Category Archives: Procurement Innovation

Happy Procurement Independence Day

It’s the 6th anniversary of Procurement Independence Day, first celebrated at the Coupa Cabana Cafe back in 2006.  I hope it was a good one for you!

Coupa is still going strong, as you might have guessed from the flurry of press releases coming out of their doors lately.  Before the summer is over, we will be checking in on Coupa to not only see where the past year has taken them, but, more importantly, where the next year is taking them.  Their pace of development has not relented, and they have even more cool stuff coming down the pipe later this year. 
We will review some of the forthcoming capabilities in detail and see whether they are ready to make the leap to the big-time with the Series E injection they just raised in May.  They’ve come a long way from the new kid on the block they were six years ago, going from a few sales in the low end of the mid-market to a lot of sales in the high end of the mid-market to making progress in the Fortune 500, where they recently landed a few significant customers.  Will they be able to turn that into a few dozen Fortune 500 customers and become one of the next big pure-plays in the space who fill the void left by the recent acquisitions of Emptoris and Ariba?  And will they be able to successfully penetrate the European market?  Only time will tell, but I can say that the fact that they have almost 300 customers with a 95%+ renewal rate is certainly nothing to scoff at and pretty telling.  
Stay tuned.  SI was one of the first blogs to bring you in-depth coverage of their capabilities when they were just starting, and it will be one of the first to bring you in-depth coverage of their new platform capabilities that might just make them a true Fortune 500 / Global 3000 player in the coming years.
While you wait, you can revisit some of the classic posts or sing a few songs from the “A” side:

“e” does not change the fundamental nature of anything

Purchasing Insight just ran an awesome article by Ian Burdon who talked about the “e-wheels on my wagon”. Attempting to carefully explain why the e-Procurement debate is at least ten years behind the curve (and that if you’re not doing proper e-Procurement by now, you probably just crawled out of a cave somewhere … or at least that’s the doctor‘s interpretation), he makes a great point that has been often missed in the internet age that must be repeated:

If you take a text which is riddled with “e” this and “e” that, the first thing to do is to strip out all of the “e”s. If it then looks like nonsense, it will not be improved by putting the “e”s back. More than a decade after the dot.com boom one hopes people would be less credulous but, alas, marketing budgets are long and memories are short.

To make a long story short, good e-Procurement is good Procurement, whether you’re using paper and pen, telephone, fax, the Internet, or HyperNet (in the year 3000). As the author astutely notes, e-Procurement is more than e-Sourcing, P2P, and e-Invoicing, and the end goal goes well beyond savings. Proper e-Procurement is about more than merely buying things over the World Wide Web. Proper e-Procurement supports a proper Procurement strategy, which encompasses everything from corporate planning and market analysis to understanding and working with the whole supply chain in an effort to deliver the corporate strategy. That goes well beyond putting a pencil in your shopping cart by way of a punch out. And it certainly goes well beyond endless debates about structured documents which entirely miss the scale and nature of the transformational opportunities available.

So don’t get sucked in by the e-Hype. Look for solutions that deliver real Procurement value, and you will not be among those acting like they just crawled out of the e-stuary. And if you need a good guide on how to start, after checking out SI’s recent post on a good lesson in e-Procurement System Selection (courtesy of Discount Tires) and the X-emplification (Day 5) and X-asperation (Day 6) posts, as well as the SI e-Procurement 3.0 Illumination (here), don’t forget about the Enterprise Software Buying Guide as well as SI’s recent 2-parter on How Much That Enterprise Supply Management Solution Really Costs (Part I and Part II) and you’ll be well on your way.

e-Procurement Systems are Great, but Let’s Not Confuse Transparency and Corruption

A recent Supply Management article (yes, Supply Management, how shocking) caught the doctor‘s eye when it said that EU nations should increase their adoption of e-Procurement to provide greater transparency and reduce the potential for purchasing processes to be corrupted. Bzzt. Adoption of e-Procurement will definitely increase transparency as all participants will be able to see what’s going on, but let’s not fool ourselves that it will reduce the potential for purchasing processes to be corrupted. It’s still easy for an individual to corrupt a process if he or she wants too, especially since most awards will be made on a weighted scorecard these days.

And since your first reaction is no, definitely not, because Provider XYZ told me that proper, full disclosure, implementation makes corruption almost impossible, after I tell you bullshit, I’m going to show you how easy it is to corrupt a process if the individual running is corrupt and wants to corrupt the process.

Let’s say you define a weighted scorecard as follows:

Metric Weighting
Cost Competitiveness 40%
Supplier Rating 20%
Product Rating 20%
Service Rating 20%

Let’s say you have suppliers Alpha, Beta, and Echo bidding. Let’s also say, after a preliminary, unconfirmed, analysis, you have the following rankings, which were supposed to be derived from a thorough evaluation based-upon a detailed check-list for each category, on a scale of 1 to 10:

  Alpha Beta Echo
Cost Competitiveness 9 8 7
Supplier Rating 8 9 7
Product Rating 8 7 6
Service Rating 7 7 6
Total 8.2 7.8 6.2

And let’s say that Echo has promised you a free Caribbean vacation (in exchanged for “speaking” at their annual meeting or whatever), some “on-the-side” (read “under-the-table”) consulting revenue, or whatever it takes for you to want them to win — and you want them to win. You can’t do anything, right? Wrong! You defined the scorecard, which, by the way, happens to have three categories where the metrics are very subjective. A few more nines here and there on the subjective metric sheets for Echo and a few less for Alpha and Beta, and, bingo, we have this table:

  Alpha Beta Echo
Cost Competitiveness 9 8 7
Supplier Rating 8 7 9
Product Rating 7 7 9
Service Rating 6 7 8
Total 7.8 7.4 8.0

Hello Echo! And don’t tell me that since the categories and weightings will be predefined, that the chances of there being enough room to manipulate any supplier to the top will be slim. If the buyer wants a certain supplier before the event beings, he can do an off-line assessment, figure out which metrics that supplier happens to be good in, and weight those particular metrics higher (after concocting appropriate rationalizations for long-term reliability being important for printer paper or whatever). The point is, the tool can only affect transparency. The only way to reduce corruption is to instill better processes that are harder to corrupt and the only way to get rid of it is to hire the incorruptibles. Get it now?

For a Good Lesson in e-Procurement System Selection, Ask Discount Tires.

This winter, Chief Executive ran an article on The Synergy Mirage: A Case Study that had a great lesson for every Supply Management team looking to select an e-Procurement system with the intent that anyone in the organization who wants to order something will use it. The lesson was simple:

Customers don’t want to buy new tires. They need to buy new tires. It’s expensive and it takes time out of their day. As a competitor, [Chairman] [Bruce] Halle benefited from making the process somewhat less expensive and taking less of the customer’s time. He also spent extra time cleaning up the shop, including the bathrooms, to make the customer visit a bit more comfortable. Customers appreciated the discount that came with the off-brand products Halle offered, but they also appreciated the opportunity to leave as soon as possible.

Similarly, in your organization:

Administrative assistants don’t want to place re-orders for toner cartridges. Engineers don’t want to have to order new workstations and business analysts don’t want to have to buy reams of papers. And office managers definitely don’t want to order pens. They need toner, computers, paper and pens to do their jobs (and make sure their coworkers can do theirs). Finding the best value for the organization is not their strength and it takes too much time out of their already too busy day. They want a process that is easy and quick. They want to find what they want as fast as possible, place the order, make it someone else’s problem, and get back to their job. And if they have to do it anyway, they would like an experience that is clean, comfortable, and relatively stress free. (And if they have to fill out 17 fracking forms to procure a single pencil they have two choices: pull out their hair and go postal in the classic sense, or just not do it.) They appreciate a tool that simplifies their life and lets them get back to their job as soon as possible.

So if you want to be the organization with 90%+ e-Procurement system penetration (as opposed to the one with 30% to 40% e-Procurement system penetration), you better make sure that whatever e-Procurement system you select is trivially easy to use and designed to make the location and ordering of a particular item quick and easy. Otherwise, you’ll just be buying more shelf-ware. There’s a reason that companies like b-pack, BravoSolution, Coupa, Iasta, and iValua are tearing up the middle market. They get that systems have to be easy to use. And there’s a single reason in particular that BravoSolution is making waves in the Fortune X where only Ariba and Emptoris used to play and that Coupa has reached the upper end of the Mid-Market (and started to sneak into a few Fortune X’s) in five-short years. Their systems are about ease of use. In all of these examples, their systems are about allowing a user to do what they need to do and get back to the more important aspects of their job. And, most importantly, their systems are about customer success.

And that’s also why you are going to see new waves forming in the Fortune X. Companies like hubwoo, IBX, and Wallmedian in particular are each going to make a [big] splash as their focus on helping Fortune X clients stuck on SAP get more value from their ERP system (from a Supply Management Perspective) with a lot less pain is going to start paying off as SAP gets stuck in the Fusion quagmire trying to integrate its latest acquisition. Watch for Wallmedian in particular, a name you’re probably unaware of on this side of Atlantic, to come over and pull a BravoSolution in the Fortune X SAP user base. (Remember when we didn’t know who BravoSolution was on this side of the Atlantic? It wasn’t that long ago and now with Ariba swallowed, they will soon be one of the biggest stand alone names out there in the Supply Management space.)

The Procument Game Plan – The Missing Chapter

Back in March / April, SI did a detailed review of Charles Dominick and Soheila Lunney‘s recent book, The Procurement Game Plan. This review was in-depth and spanned eight posts, which are indexed at the end of this post.

Astute readers will note that the doctor never finished the review. There were a couple of reasons for this, but one of the reasons was that he felt that something was missing from the final chapter of the book, on how to become a perennial Procurement all-star. It was good, but becoming an all-star is harder than you think, and if you’re only going to write a chaper on the subject, you better hit the nail on the head – fast. The chapter didn’t entirely do it for me.

Turns out, they were saving some of their best material on that point for the interviews. A few weeks (or so) ago they did a Q&A with Buyers Meeting Point that I bookmarked but didn’t bother to read closely until today. Answering a seemingly unrelated question on what place that traditional associations have in today’s social media environment, Soheila gave the best piece of advice a seasoned veteran can give a new entrant to the Procurement Game, especially if such entrant wants to be a Procurement All-Star. Soheila said you tend to get as much out of these opportunities as you put in – either a little or a lot. If you want to be a Procurement All-Star, you have to give it your all. Just memorizing the tips and techniques isn’t enough, you have to put your heart and soul into them. You can’t just go through the motions, you have to make them part of you. They have to be natural and instinctual because the Procurement Game is, in reality, as unpredictable as you can get. You could have an IT problem. You could have a market fluctuation that totally changes the supply-demand balance or projected exchange rates halfway through a negotiation. Your shipment of fig paste could be mistaken for hash by an untrained, inept cargo inspector and destroyed. (It has happened.) Every day presents a multitude of opportunities for your game plan to be turned inside out, upside down, and outside in (simultaneously) and you have to be able to react and take a reasonable course of action in real time. You might not even have time to wait for your boss to return from lunch. But if you’ve put all you got into it, you’ll have all you need to get it all back, and then some.

Anyway, check out the Q&A with Buyers Meeting Point. It offers some great insights into the book. (And Charles’ recommendation for Managing Indirect Spend by Joe Payne and William Dorn of Source One, also reviewed in depth on SI earlier this year, is dead on.) (Soheila’s recommendation for Charles Poirier‘s The Supply Chain Manager’s Problem Solver is a good one too. Although the nature of technology and the internet have changed in the last decade, most organizations are still making many of the 12 mistakes covered in the book.)

To be concluded???

Procurement Game Plan: A Review Part 1.1
Procurement Game Plan: A Review Part 1.2
Procurement Game Plan: A Review Part 2.1
Procurement Game Plan: A Review Part 2.2
Procurement Game Plan: A Review Part 2.3
Procurement Game Plan: A Review Part 3.1
Procurement Game Plan: A Review Part 3.2
Procurement Game Plan: A Review Part 3.3