Category Archives: rants

Cost Savings is NOT Cost Cutting …

… and we need more articles that hammer this point home!

A recent article over on the Supply Chain Management Review (SCMR) focussed on how strategic cost savings differ from cutting costs, highlighted a recent survey from Boston Consulting Group (BCG) that found that while 65% of executives are prioritizing supply chain and manufacturing costs as the biggest levels for organizations to pull for cost savings, 52% [are still focussed on] labour and non-labour overhead costs. OUCH!

Most Supply Chain / Procurement Departments are understaffed and/or under platformed due to lack of talent and lack of available budget. They’re also a very small part of the organizational headcount, which in many organizations is now a small part of total spend. As a result, labour is not the problem. External spend is.

And kudos to the SCMR and Laura Juliano from the Boston Consulting Group for pointing out that strategic cost control is the right approach.

If you’re spending 100M on a category, you should be doing a lot more than just a 3-bids-and-a-buy RFX, cutting a PO, and paying an invoice. A lot more. And looking at more than just the unit cost — at the very least the total cost of ownership from initial acquisition through warranty/repair and eventual disposal, if not full total value management which also looks at brand value, bundled services, etc. Even well managed direct categories usually have 3% or more savings opportunities, and those that were not well managed can have two to three times that (in the 6% to 9% range). In other words, giving one person the time to properly source one category, even if it takes 3 months of man effort, can save 3M. Even if the fully burdened resource costs your organization 240K a year, that’s an ROI of 50X on the proper use of that one resource’s time.

This one example surfaces the key point of strategic cost control. It requires strategy and strategy requires PEOPLE with real HUMAN INTELLIGENCE (HI!). (Not hallucinatory Gen-AI like “chat, j’ai pété”). People who can analyze the situation, the available data, case studies from similar (historical) market situations, suppliers, products, and make the overall best decision(s) for the organization. And, preferably, people who can also consider the sustainability of their decision (and the implications with respect to any regulations in laws in countries they source from and sell to). (Senior Procurement leaders can’t ignore any sustainability requirements they are subject to [40% are], they definitely can’t be unaware of legislation that could affect them [37% are], and they definitely can’t be making awards to suppliers and/or for products that might just disappear in a year or three.)

In other words, you can’t reduce headcount. (You may need to replace people if you initially hired people who thought strategic procurement was catalog comparison or invoice verification, of which 95% to 99% can be fully automated, but never, ever reduce the number of people in Procurement.)

Which Solution Provider Do You Want To Work With? NONE OF THE ABOVE!

In a recent LinkedIn Post, THE REVELATOR asked:

Under which category does your solution provider demo fall?

  1. ? Selectively Stealth With A Reason
  2. ? Smoke And Mirrors
  3. ? Courageous Dreamers

And, more importantly, which one would you, as a practitioner, prefer to work with?

the doctor, who has reviewed over 500 solutions in our space over the last two decades (and interacted with considerably more vendors than that) answered for you:

  • ???? ?? ??? ?????!

a) Selectively Stealth vendors are either

  1. considerably overrating their solution against the market (usually due to lack of homework) or
  2. hiding their solution because they know there is absolutely positively nothing unique about their offering (which is NOT a bad thing if it is easier to use, quicker to implement, better supported, and cheaper than competitors, but if that was the case, why would they be stealth?)

b) Smoke and Mirrors are

  1. greatly overselling a significantly underperforming solution (and usually trying to gouge you with a high price tag while they are at it)

c) Courageous Dreamers are

  1. selling you on a vision they may realize someday, but are usually doing so while trying to sell a woefully inadequate solution (or, a solution with one new great capability but none of the critical baseline functionality)

So what type of vendor do you want?

e. Open, Honest, and Informed

Even if they don’t have anything explicitly unique.

As SI has noted before, a good vendor is one who will be focussed on

  • a particular market size
  • one or more related industries
  • a subset of functionality where the founders / core team have strength

In addition, it will consult with organizations in that niche, analysts and consultants who serve that niche, and third party experts to get feedback during design, development, initial implementation, etc. and take all that into account in order to design a solution that will solve the problems of the aforementioned identified market niche in a manner that will be usable, and used by, the market they are going after.

It’s not about who has the most features, who has the best bells and whistles, who has the coolest sounding tech under the hood, …

IT IS ABOUT WHAT SOLUTION WILL WORK FOR YOU!

It’s the solution that will solve the 80% of your problems, that will contain all the functionality to do the tasks you do every day (not every quarter or every year), that will make those daily tasks more efficient and effective, that will be used in the majority (not the minority), that will be affordable for a business of your size, and generate an ROI.

And, sometimes the best solution is the NO-AI inside solution with nothing new, but the solution that was form fit for companies of your size in your industry, that streamlines your daily processes, that is easier to use than avoid, that solves the problems you wanted solved, and does so at a fraction of the price of the mega-suite that is just complete overkill with respect to what you are looking for.

Some of the vendors that received the best coverage here on SI are those that didn’t contain a single capability the doctor hadn’t seen ten (to one hundred) times before, but came from vendors who designed a solution for an underserved market niche, made it valuable for that market niche, and were completely honest about what they had and who they were selling to. That’s what the market needs.

AND THAT IS WHAT YOU NEED!

the doctor explains the Procurement Alphabet

I would say that you approach them with caution
You should not let them overwhelm you with cheer
Pays to know what you’ll find
To understand their kind
’round here

Drawing their lines,
they look so radical
Tracking their curves
I get so lacrimal
Something deep down reveals they’re tragical

I think I’ve had enough …

It’s a strange alphabet
That’s what I know
But it’s a strange alphabet
We’ve got to follow …

Seventeen years ago I explained the whole numbers. Steve Martin explained the alphabet (but not the Procurement alphabet), and who better to explain the whole numbers than a trained mathematician.

But lately I’m seeing a lot of glossaries and “complete sourcing/procurement guides” that are anything but … so I thought I’d fill in a few basics for you …

A is for Analyst, who pretends to understand
B is for Buyer, with cash in hand
C is for Contractor, lost in Legal land
D is for DEI, now on the witness stand

E is for Equity, where can it be found
F is for Finance, who pay by the pound
G is for Goods, which make the supply chain go round
H is for Hedge, on currencies sound

I is for Insight, desperately needed
J is for Jazz, the hope has been seeded
K is for Kanban, its use exceeded
L is for Legal, its advice unheeded

M is for MRP, technology ancient
N is for Negotiate, done in plainchant

O is for Onboard, suppliers aplenty
P is for Purchase, multiples of twenty
Q is for Quality, often absent-ee
R is for RFX, created by cognoscenti

S is for Supply, critical to success
T is for Tariff, always assessed
U is for UNSPSC, classification coalesced
V is for Vendor, marketing obsessed

W is for Warranty, never enough
X is for Xennial, weary and gruff
Y is for Yardmaster, full of chuff
Z is for Zealotry, Procurement tough

… just to make it clear that the depth and breadth of the space is well beyond what a short glossary or guide can ever hope to address. The Procurement alphabet is not a character alphabet, or even a phonetic or syllabic writing system, it’s a logographic one. One that takes years, if not decades to fully master with all of its global dialects.

But that doesn’t mean you shouldn’t try.

Before You Get All Excited To Learn About Trends for Fall Conference Season

Read SI’s Expose on “Future Trends” from a decade ago, which exposed these “future” trends as artifacts from the past that are polished annually and presented to you on a silver platter.

As per our post last week, with the exception of:

  • Gen-AI being the new fluffy magic cloud
  • Fake-take (sorry, intake) being the new dangerous and dysfunctional dashboards

Very little has changed in the past decade. As a result, do you need to be spending 5K to 7K on a conference to hear the same old, same old that you can read about here on Sourcing Innovation and over on Procure Insights for free?

And if you just want a vacation, take one. You can take a much longer, and better, one if you don’t go to an overpriced conference at an overpriced hotel in the center of an overpriced city.

Before You Get All Excited for Fall Conference Season

Read SI’s “Conference Season” series from a decade ago, and then tell me, with the exception of:

  • Gen-AI being the new fluffy magic cloud
  • Fake-take (sorry, intake) being the new dangerous and dysfunctional dashboards

Has anything really changed since 2014?