Category Archives: rants

The Song Remains the Same – So Why Can’t We Sing It?

As the world’s second oldest accepted profession (or is it the third as maybe astronomy came first, as we have examples of astronomy dating back 17,300 years), Purchasing should be well understood by now.

Even the first Purchasing Manual, The Handling of Railroad Supplies — Their Purchase and Disposition, written way back in 1887 by Marshall M. Kirkman and printed by Chas, N. Trivess, has the basic definition of the requirements of a purchaser down flat:

The purchase of goods embodies many varied talents and experiences. The ability to buy advantageously, depends largely upon the knowledge of men possessed by the purchaser and his skill in taking advantage of this knowledge. His value will, moreover, be dependent upon the discretion allowed him, and his judgment in exercising it. The position also requires technical skill. The person filling it must be experienced, otherwise his acts will not command the confidence or respect of his associates. His wisdom and fairness must be such that if he selects material contrary to the requisition made upon him, the person thus over-ruled will tacitly acquiesce therein and abide by the demonstration of its wisdom afterwards. (Pages 38 and 39).

Even though today we might write this paragraph as:

The purchase of goods requires talent and experience. The ability to take advantage of supply market dynamics depends on having the appropriate knowledge and the skill to take advantage of that knowledge. The ability to deliver value depends on having the discretion, and authority, to do so. The position also requires technical skill and the ability to use the tools, old and new, provided to the purchaser. Moreover, the purchaser must be experienced and skillful, otherwise others will not respect her decisions. Her wisdom much be such that if she selects new products or services than the ones the organization, and its employees, are used to, the organization, and employees, will understand that she made the best decision taking all of the information from all of the stakeholders, and suppliers, into account.

A few new words, but the same old wisdom. However, in addition to these few new words, now we have to deal with much more complicated words and a plethora of acronyms like:

  • ABC
  • ATP
  • B2C
  • CLM
  • DPO
  • EOL
  • FIFO
  • GRC
  • HIS
  • HTS
  • ITU
  • etc.

that will drive even the sanest of men mad as a hatter. In an effort to capitalize on a newly recognized opportunity, the consultancies have invented a new language to make the simple complex, and the practical improbable, and the vendors have followed suit. The only thing new since the introduction of the telephone is the platforms that exist to support you, powered by the internet and the latest advances in computing technology. So while most consultancies go on and on and on about EQ, you’ve always needed EQ, just like IQ, and the critical factor is TQ. Today’s purchaser requires much more than the ability to use a phone, keep a ledger, add some numbers, create a shipping schedule, and navigate trade law to succeed. Advanced analytics and optimization. Automated workflows and P2P automation. Complex cost modelling and CAD/CAM skills. Not your traditional everyday purchasing situation that existed before the information age.

So learn the tech, and your job will be a lot easier. And keep reading SI which will, as it has always done, continue to alert you to the technology platforms and skills that you need.

What is Procurement Getting in 2016?

A lot of technology is being hyped yet again for 2016. For example, Juniper Research (courtesy of Entrepreneur) says the big trends to expect this year are:

  • Virtual Reality
  • Social Robots
  • Wearable Technology
  • Supercomputer Cell Phones
  • Multi-System Screen Sharing
  • Bitcoin
  • Cloud-Based Video Gaming
  • Professional Video Gamers Make it Big
  • Better Data Protection
  • Crowdfunding

Not only is there nothing new here (as some of this technology has been emerging for over two decades), but there is nothing that really helps business operate better.

  • Virtual Reality can create more immersive training simulations, but most business don’t need that.
  • Social Robots can take the automated attendant to the store, but it’s still just a fancy kiosk.
  • Giving everyone Google Glass isn’t going to make the world smarter (although it may make the NSA happier).
  • We don’t need a super computer in our cell phone.
  • Platform standardization makes multi-system screen sharing easy, especially if you are running virtual machines in the cloud. (And the now defunct SunRay made this a reality 15 years ago.) And if you don’t have the right information in the first place, who cares what screen it’s on.
  • Bitcoin is no more secure than the person holding the key.
  • If Psy’s Gangnam Style has wasted over 16,000 many years by June, 2014 (Source: The Economist), how many million of man years are being wasted by MMORPGs that are emerging in the cloud?
  • What has the world come to when “sport” is playing a video game?
  • Data protection always gets better, and is always better than 99% of people and organization’s need.
  • Crowds aren’t always wise. They have a history of lynching.

And since Procurement is still often treated as the Island of Misfit Toys, if the business isn’t getting anything good, what is Procurement getting?

Procurement Sustentation


It’s Procurement for the Damned
Our back’s against the wall
We turn into the light
We’re burning in the night

 

After our year-long series chronicling 101 Damnations and our warning that it will only get hotter, you know that, at least for the time being, Procurement is damned.

As we pointed out last year, the CPO is the Rodney Dangerfield of the C-Suite in the 9% of organizations lucky enough to have a CPO that sits at the table, and Procurement still don’t get no respect. But no respect is just the tip of the iceberg. When it comes to a day in your life, if no respect (and the perpetual kick-me sign taped to your back) was all you had to deal with, you’d have it easy. But from the time you get up in the morning until the time you pass out from exhaustion, it’s one emergency after another, one demand after another, and one impossible goal after another. You’re expected to perform eight miracles before breakfast, Monday morning. Demands get tougher after that.

And, in the interim, you have to deal with an amount of future sh!t being dumped on you that is greater than the truckload Biff Tannen had dumped upon his head in the original Back to the Future movie, way back in 1985. But, as SI has said before, echoing the great public defender Mr. Smith who said (on Spend Matters), all predictions will be wrong.

But the smug clouds that will be created by the futurists, and the vendors that will propagate their smug, will be smothering and when combined with the fires set upon you, you’ll hardly be able to breathe. And in the darkness you will find very little light, or help, as training budgets are still slashed, your platforms are still out of date, and your processes are still from the paper-age.

And that’s why SI is following it’s 101 Damnations series with it’s Procurement Sustentations series that, for many of the damnations you are facing, will give you some tips and tricks to deal with these damnations thrust upon you. It won’t be perfect, or complete (as there are some damnations you simply have no way to deal with, but it will at least be something to help guide you through the darkness.

You Might Be Getting the Basics Right, but That’s Not Enough

Last November, the public defender ran a great post over on Spend Matters UK on how “Procurement [is] Still Not Getting the Basics Right – and it’s Happening Too Often” and that’s not only why Procurement is often getting a bad rap, but why Procurement is getting a bad deal.

Case in point, the example given by the public defender where a recent tender used a complex scoring mechanism that scored “price” and “discount” separately and, even worse, weighted early payment discount higher. As a result, a tender of 100 with a 3% early payment discount got weighted higher than a tender of 95 with a 1% early payment discount! In other words, a best case cost of $97 was preferred over a best case cost of $94.05 — an overspend of almost 3%! That’s outrageous.

Another case is point, suppliers of complex services get invited to participate in electronic sourcing events with no prior engagement, and a tick-bock procurement process with no scope to include references, case studies, or suggest site visits for creative discussion. How should such a supplier expect to be judged, if they even expect to be judged at all? This is the well-known classic three-bids and a buy when you already have the bid you plan to accept. A smart supplier will not bid.

Now, as a regular reader of SI, that’s not the common practice in your Procurement department, but it doesn’t mean the common practice is good enough. Just because you know to weight all price factors in unison, that doesn’t mean that the weighting is right. If quality, reliability, delivery time, guaranteed delivery of supply, or another factor is critical, it needs to be weighted as highly. No point getting a 3% unit discount if you lose out on 20% of sales due to late shipments and stock outs. All of the critical factors need to be included and weighted, and, just as importantly, the suppliers must be made aware of the criticality of each factor so they can determine whether or not they even want to bid. If you need 15 days delivery, and a supplier can’t guarantee less than 21, the supplier needs to know that up front. Otherwise, they will get upset that they wasted time bidding on a tender they could not win.

Similarly, it’s not enough to do a proper, verbal, invitation over the phone, give the supplier a chance to include references, case studies, and suggest alternative proposals, if you know that one of the critical requirements of the bid or organizational preference (or prejudice) would preclude the supplier from getting the award. It’s not professional to invite the supplier unless you believe the supplier has an honest chance.

It’s not enough to do the process right if you want to be the BEST Procurement organization. To be the BEST Procurement organization you need the best process and the best ethics. You need to be known as the honest buyer who only invites suppliers who will be evaluated fairly and have a fair shot of winning the business if they are willing to tighten the belt buckle and make an honest effort of putting the best proposal forward. Then, when you make the award, no matter who gets it, chances are, you will be among the customers of choice from day one because you wanted to be both the best Procurement organization and the best customer.

So get the basics right. And then do one better.

SI’s Prediction for 2016 – It Will Only Get Hotter!

Last year, SI, which welcomed you to hell in the year of damnation (with 100 Damnations Down to date in the dirty dozen categories), avoided predictions because, as it clearly explained in its 2014 Series on The “Future” of Procurement and the follow up series which did a “Future” Trends Expose, most predictions are trash, with most futurists recycling the same old garbage year-after-year, and even though we are only four days into this year, it appears this year will be no exception.

the doctor is already seeing a number of 2016 posts about how this is the year we replace “negotiate” with “collaborate” (which the thought leaders have been saying since strategic sourcing decision optimization started becoming common in the leading Sourcing organizations, also known as the Hackett Group top 8%), that analytics will take off (which is the same speech we heard 15 years ago when Business Objects and Cognos were the names in analytics), that the skills gap will finally be addressed (which reminds the doctor of conversations he was having nine years ago), and so on. It looks like the amount of future sh!t that is going to be dumped upon you this year is greater than the truckload Biff Tannen had dumped upon his head in the original Back to the Future movie, way back in 1985. (A reference that is very appropriate because every year at this time it seems we get taken back to the future.)

The only prediction SI has ever really liked is last year’s prediction by Mr. Smith who “predicted all predictions will be wrong” on Spend Matters, because that’s one of only two predictions you can count on for this year. The other SI will give you now so you can get the prediction post itch out of your system and get back to work:

It Will Only Get Hotter!
You’re still in hell. Budgets are still too tight. Your platforms are still too out of date. The training budget is still zilch. Risk are still increasing. Commodity prices are still going through the roof. The emerging market, which is where the population growth is happening (especially now that China’s one child policy has been eased and a couple can have two children if either is an only child and the middle class in India is increasing), is gobbling up commodities and energy faster and faster (as even a small growth rate in the two countries that account for over one third of the world’s population is substantial) which is not only causing rampant price increases but shortages. Product lifespans are continuing to decrease and consumer preferences are changing faster than you can predict. The procurement equivalent of the second law of thermodynamics is in full effect and the result is chaos.

Last year, you might have been in the frying pan. This year, no matter what happens, you will be in the fire trying to dance between the flames. You have been warned!