Category Archives: Procurement Innovation

If You Do Not Get Sustainable Results, Blame Yourself!

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It’s deja vu all over again!

Robert Rudzki is not the only blogger and consultant to recently hear that a potential client had, just a few years ago, hired a large consulting firm to do a high-profile “strategic sourcing program” with nothing sustainable to show for it, as he indicated in his recent SCMR blog post on Deja vu all over again. I’ve heard the same sentiments echoed to me by a number of consultants at a number of small and mid-size niche and specialty services and software providers in the e-Sourcing & Supply Management space in recent months.

It would appear that a common trend last time money flowed into laggard Supply Management organizations before the recent downturn was to simply hire a Big-X consulting firm to fast track the organization to strategic sourcing success. While this is a great way to fast-track a project, and a contract, that is expected to result in significant savings, the only thing that is fast-tracked from a finance perspective is payment to the consulting firm that runs all the way to the bank! As leading Supply Management professionals know, a contract does not guarantee savings. The only way to achieve savings is to execute against the contract and make sure savings are realized. Just because you have a new contract that allows you to source widgets at $8 a pop, instead of $10 a pop, this doesn’t mean you are going to save $200,000 on your annual purchase of 100,000 widgets. For the savings to materialize, all of the following has to happen:

  • the buyer has to place the order with the contract supplier
  • within the contracted lead-time and the supplier
  • has to ship on time
  • using the approved carrier and shipping arrangement
  • and pay all required third party and government export fees
  • and file all appropriate paperwork at the same time your organization, or a 3PL acting on your behalf,
  • files all of the appropriate import and compliance paperwork
  • and pays any associated duties to make sure that
  • the product arrives at the warehouse when its supposed to
  • where it is received, inventoried, and appropriately stored which results in
  • an invoice being accepted and verified against the contracted rates and
  • paid at the appropriate time only when all goods are received and verified as acceptable.

Simply put, if

  • the order is placed with the wrong supplier
  • or placed late and the order has to be expedited
  • or shipped late and a different shipping method has to be used
  • or export documents are not filed on time
  • or fees are not paid and fines are issued
  • or import documents are not filed on time
  • or taxes are not paid and fines are issued
  • or the product is not properly inventoried or stored and can’t be found and unnecessary replacements
    need to be ordered
  • or the invoice is not verified and the old rate is still being charged
  • or the invoice is paid late and a penalty is applied

then those (significant) savings negotiated on your behalf go out the window. And you’re not going to get them back! First of all, once they’re gone, they’re gone. Secondly, because you weren’t actively involved in the project and didn’t insure that the knowledge that you required to achieve a sustainable transformation was transferred, you’re not going to be able to keep costs down when you renegotiate the contract in this economy where supply is tightening and costs are rising. So you’ll pay even more, even if the rate should stay almost flat.

In order to get results, you have to work with the consultants to understand the strategic sourcing process, the strategies applicable to your organization, the goals of each individual project, the savings opportunities in each project, the key contract terms, the changes that need to be made to capture the savings and adhere to each
contract term, the key metrics, the measurements that need to be made regularly, and the warning signs that something is happening / has happened that could jeopardize the savings the organization expects. Failure to do any of this is a sure-fire way of making sure that nothing changes and that your organization continues to leave money on the table.

In short, if your organization continues to be one of those organizations that leaves up to 40% of the contract value on the table because you did not do all of the above, don’t blame the service provider unless you did all of the above. As Charles, Bill, and Bob said in their recent books on The Procurement Game Plan, Managing Indirect Spend, and Next Level Supply Management Excellence, success is your responsibility and you have to actively manage your service providers and make sure that the knowledge required for a sustainable transformation is transferred to you.

GoTradeLive: A LinkedIn eBay on Steroids for Small Business Procurement to Groupon To.

GoTradeLive is launching its new, global, trading platform targeted at small and medium businesses in the US today. Its new free social commerce and commercial trading platform is poised to be as disruptive to the small business Procurement market as Coupa (Cabana) was when it was launched back in 2007 on Procurement Independence Day. This is not something the doctor says lightly.

So what is GoTradeLive? It is, simply put, a power-auction platform for small businesses on steroids. And what’s so great about that, you astutely ask because there are dozens, and dozens, of auction platforms out there ranging from free to seven figures in cost? It’s social. It’s networked. It’s mobile. It’s easy to use. It’s global (and multi-currency). It’s Free. It can be branded. And it’s proven — as it’s already been tested in Australia, New Zealand, China, and the UK, where they have offices.

Let’s take the benefits one-by-one.

  • It’s social
    You can create your own trading networks using a Facebook / Linked-In type interface and these can be public or private for public or private sales or trades.
  • It’s networked
    While the build-your-trading network ability of the Ariba or Ketera networks are not yet there, the building blocks are and you can see it’s coming. But the ability to define custom trading networks is unique.
  • It’s (a) mobile (platform)
    Like the consumer social networks and e-Commerce platforms, they have a mobile app that allows you to monitor your trades and bids from your mobile device.
  • It’s easy to use
    It’s as easy to use as Facebook, eBay, and other consumer sites.
  • It’s global.
    It has already been launched in Australasia and the UK and further global launches are already planned. It supports automatic currency translation for global buying and selling.
  • It’s Free.
    It’s using the Freemium model pioneered by sites like LinkedIn, DropBox, and BaseCamp. It literally costs nothing to use. No registration or account fees. No listing fees. No transaction fees. (However, if you don’t pay, you are subjected to ads and there is nothing to prevent an advertisement for a competitor’s product or auction appearing on your listing page.) Given that the cost of some platforms include transaction fees of up to 15%, this is a great deal.
  • It can be branded.
    For as little as $15 a month, which gives you one-user access, you can brand the site into your own trading platform (with your logo, colour scheme, etc.) and eliminate advertisements. Small Business Pricing is coming soon, and will start at less than $100 / month.

It’s a great social commerce platform for quickly moving slow, excess, or end-of life inventory and a great platform for many small businesses, especially those in retail, construction, and similar goods-based verticals, for spot-buying product needed at irregular intervals. And it has a lot of promise. This is one platform the doctor will be watching closely.

The Procurement Game Plan: A Review Part I.1

Charles Dominick of Next Level Purchasing and Soheila R. Lunney of Lunney Advisory Group recently released The Procurement Game Plan: Winning Strategies and Techniques for Supply Management Professionals. We’re going to do a fairly detailed review of this book over four to five posts, but to start, we’re simply going to cover the purchasing professional’s 10 commandments because they do a great job of covering the basic mindset a Procurement or Supply Management professional has to have if she is to expect a successful career.

The Purchasing Professional’s 10 Commandments

  1. Thou shalt always make decisions in the best interest of thy employer.
    Good purchasing agents avoid any real, and even perceived, conflicts of interest.
  2. Thous shalt always involve thy internal customers throughout the purchasing process.
    Good purchasing professionals never act alone.
  3. Thou shalt never make price the only criterion in a purchasing decision.
    Good purchasing agents take quality, delivery, and other relevant criteria into consideration also.
  4. Thou shalt measure thy performance and communicate thy performance to management.
    Good purchasing professionals know and show their value.
  5. Thou shalt treat suppliers fairly.
    Good purchasing professionals don’t attempt to take advantage of suppliers’ mistakes nor trick them into accepting unfavourable terms.
  6. Thou shalt embrace change and new technologies.
    Thou shalt not resist them.
  7. Thou shalt negotiate with the understanding that there may someday need to be a close relationship with the supplier across the table.
    Thou shalt not burn thy bridges, especially before crossing them.
  8. Thou shalt realize it is a global economy.
    Thou shalt never make assumptions that thou knoweth every supplier available.
  9. Thou shalt acknowledge that thy manager’s job is to develop and implement a strategy for development.
    Therefore, thy shalt challenge thyself to solve problems independently rather than involve thy manager in tactical crises that can be reasonably resolved at your level.
  10. Thou shalt commit to continuous improvement of thy skills.
    Thou shalt never let a year go by without learning new practices used by other purchasing professionals.
  11. Thou shalt always exceed expectations, consistently delivering more than anticipated.
    Good purchasing professionals will also fulfill obligations sooner than expected.

In our next post, we’ll review first part of the book on organizational role, supply management strategy, talent, and social responsibility — the stage that a modern supply management professional has to act upon.

Did “The Gambler” Teach Us Everything We Need To Know About supply Management Operational Success?


You Got to know when to hold ’em, know when to fold ’em,
Know when to walk away and know when to run.

Thirty three years ago, Kenny Rogers unleashed upon the world this country classic, written by Don Schlitz, which was the inspiration for a movie that came out two years later. And it seems, thirty three years later, that this is the message that SAP is unleashing upon the supply management world as the foundation of their advice for “achieving operational excellence in any economic climate”.

In the aforementioned article, the author provides four (4) tactics that are employed by best-in-class performers to elevate procurement proficiencies. Simply put, the author is recommending that you hold ’em, fold ’em, walk away, and run.

  • Hold ’em: Hold On To Your Suppliers through a Supplier Connectivity Strategy
    Integrate suppliers into key points in the supply management process. This will reduce mutual overheads and costs through better insights into your process.
  • Fold ’em: Fold Your Employees Into Your Organizational Procurement Process through a Compelling End-User Purchasing Experience
    Utilize the fact that your employees are web-savvy online shoppers with expertise in navigating online purchasing sites in such a way that allows them to slice and dice their options and get the best deal. Provide them with the right enterprise supply management portals and they will get the best value available to them.
  • Walk Away: from Non-Existent Savings and Unprofitable Efforts by Prioritizing Spend Categories with Significant Cost Reduction Opportunities
    Start with categories that will deliver a high return with minimal effort (usually by way of standardization) and then progress to categories that will deliver reasonable savings with reasonable effort, staying far away from those categories that yield only minimum returns for maximum effort. Remember the 80/20 rule – 80% of savings will typically come from 20% of categories. Focus there.
  • Run: Away from Unnecessary Processes by Moving towards a “Zero-Touch” Procurement Process
    Leading organizations use procurement solutions to do the “heavy lifting” on approvals, order delivery, and invoice management that streamline approvals and automate approvals for low-value, low-risk purchases where manual review would often cost more than could be saved through a detailed analysis.

And it’s all great advice. Now if only they had remember that you:

Never Count Your Money While You’re At The Table

    • :

because Failure is Imminent without Constant Innovation

    Simply put, what is leading-edge today, is average tomorrow, and yesterday’s technology the next day. You can never rest on your laurels — you have to keep improving your processes. The minute you stop to count your money, you stop innovating, you stop identifying new cost reduction or value generation opportunities, you stop saving or generating value, and you begin the slow decline from leader to laggard. Today’s corporate world has evolved to a high-stakes winner-take-all poker game and there’s no time to pause and count your savings until the supply management game is won.

It would be a great starting recipe for supply management organizational success.