Category Archives: rants

Why You Need a Master Data Strategy for Proper Supplier Management (Repost)

This post originally ran on June 24, 2013, but seeing as it’s still a relevant message five years later, it is being re-posted to educate newcomers on the importance of Master Data Management strategies in this data-centric era.

Supplier Information Management is more than just buying a Supplier Information Management (SIM) solution and plopping it into your data centre. Much more. But yet, it seems that some people — anxious to deal with the visibility, risk management, and supplier performance issues facing them — believe that merely obtaining a SIM solution will solve their problems. A proper solution properly acquired, properly implemented, and properly used will go a long way to increasing supply chain visibility, enabling risk management and mitigation, and providing a solid foundation for supplier performance management, but the mere presence of such a solution in your supply management application suite is about as useful as a drill in the hands of a carpenter holding a nail.

You see, Supplier Information will never be restricted to the SIM system. Supplier information will always be present in the ERP system used for resource planning and manufacturing, the accounts payable system, the transactional procurement / procure-to-pay system, the sourcing suite, the contract management system, the risk management solution, the performance tracking and scorecard system, the sustainability / CSR solution, and other systems employed in your organizational back-office to manage the different supply management AND business functions. Supplier data is everywhere, and without a strategy, just shoving it into the SIM system won’t help.

In order to get a proper grip on supplier information, the organization needs a master data strategy that dictates the sub-records that define a supplier record and which system holds the master data for each sub-record. What do we mean by this? For example, the ERP may hold the core supplier identifier sub-record that defines the unique supplier number in your system, the supplier name, the supplier’s tax number, and your customer number in the eyes of the supplier and be the system of record for this information. The accounts payable system, referencing the supplier by it’s supplier number, may be the system of record for the headquarters address and payment address. The contract management system may be the system of record for the list of employees authorized to sign contracts on behalf of the supplier. The CSR system may be the system of record for the suppliers’ carbon rating, third party CSR rating, and your internal sustainability rating. And so on.

If this is the case, the SIM system, to truly be a SIM solution for your organization, needs to integrate with all of these systems and encode the proper rules to resolve data conflicts as required. Specifically, three things need to happen. First of all, whenever a system of record updates data, that data must be pulled into the system and overwrite the existing data. Secondly, anytime data is updated in the SIM system for which it is the system of record, that data must be pushed out to all systems that use it. Thirdly, and this part is sometimes overlooked, whenever data is updated in a system of record, the data not only needs to be pulled into the SIM system, but it then needs to be pushed out to any system that also uses that data. The SIM solution is the centre of a hub-and-spoke data architecture — all updates flow in, and all updates flow out.

This can only be properly accomplished with an appropriate Master Data Strategy. Don’t overlook it. Otherwise your SIM solution will turn out to be a Stuck In Muck solution. An SI is not kidding about this.

Transformation, Transmogrification …. or business as usual?

Today’s guest post is from Tony Bridger, an experienced provider of Procurement Consulting and Spend Analysis services across the Commonwealth (as well as a Lean Six Sigma Black Belt) who has been delivering value across continents for two decades. He is currently President of UK-based TrainingWorx Ltd, a provider of a wide range of Procurement and Analytic business training programs (inc. GDPR, spend analysis, project management, process improvement, etc.) and focussed short-term consulting solutions. Tony can be contacted at tony.bridger@data-trainingworx.co.uk.

The web is a fascinating place, your capacity to search, ponder and read is unlimited in reality. However, whilst rummaging around I happened to read an article in Forbes from 2015 entitled Why Business Transformation Fails and How to Ensure It Doesn’t.

There is little or no doubt that the “T” word has appeared in all functional areas of business life – Finance, Operations, Procurement, Human Resources and just about any type of business. Forbes suggests most transformations that fail are due to inefficient execution (41%), followed by resource and budget constraints (35%). It is likely that failure levels are much higher – but how do you define failure? Forbes also suggest that many failures are due to a “lack of buy-in”. Sadly, that phrase is largely overused — and meaningless if you think about it for a moment or two.

Many employees go to work for income — they may not see buying-in to changes as a high priority. The article also suggests that everyone needs to be “on the same page”. Again, there is a difference in understanding and interpretation by individuals of the reason why a change is occurring and what it means for them. As with many things — there is large scale charity, change and transformation fatigue – people just see inefficient execution as the same internal muddle repeated on a regular basis. Meanwhile, every day of the week the transformation word continues to bounce back. It is clearly a fad with some time to run.

Having been part of, and subject to, a considerable number of transformations over a number of years, the best performing companies (large and small) take changes in their markets and competitive environment as business as usual drivers. Change or die. There is no such thing as transformation. It’s simply good business management. No fanfare, just outcomes, jobs and profits.

In the procurement space in particular, social media articles exhort many large organisations who have managed to deliver “empowered staff within a learning organisation” and yet very little on “the net hard savings from this transformation were … $X”. In an analysis of some (as yet un-published) recent survey data, around 43% of Chief Procurement Officers in large companies had no analytics capability. However, many had advanced contract management, e-procurement and other sourcing capability. But no analytics numbers. One can assume the usual array of uncoordinated spreadsheets.

Whilst it is easy to accept the premise that executives inherit environments, the procurement focus should be on numbers and savings or realized value (if Procurement helped with an initiative that increased sales, that should be captured too). If you don’t have the numbers, get them. The issue may simply be that inefficient transformation execution means that little or no rigour is attached to the expected outcomes. It starts with a pre-change number and ends with a post-change number. What gets measured gets attended to. What people need to read are change strategies that they can emulate to drive down costs.

As will emerge shortly, the collapse of Carillion is likely to have been driven by managers who were transforming visionaries. They just needed to manage the business through market and competitive change. In effect, just get on with it.

Thanks, Tony.

Do You Need Spend Analysis?

DOES YOUR ORGANIZATION SPEND MONEY?

No. You don’t need spend analysis.

YES! YOU NEED SPEND ANALYSIS!

And don’t say you can’t afford it. Given that Spendata offers a single user annual license to a best-in-class do-it-yourself tool for $699, you can afford it. And when you consider companies like Spendency offer enterprise do-it-yourself solutions starting at the 3K/month price point BIQ used to start at (and SpendHQ isn’t that much more per month with their entry level offering) and once you set up the mappings, you’re set to go, you can. Especially when you can use it to identify an average savings of 10% year over year.

And don’t tell me that do-it-(mostly)-yourself is not an option. It always is! You just need a bit of training. And that can be obtained at an affordable price point as well. Contact Data-TrainingWorx limited about their SpendataWorx program, which can include an LMS consisting of 40 online interactive videos and over 800 two page “microbite” documents that is everything you need to know to get started and analyze your data … for years!

Remember, you need it, you can afford it, so just get it, and just do it.

Of Course Catalogs Can’t Be Trusted to Manage Low Value Spend!

They’re a tool in a machine. Saying you trust a catalog to manage your spend is saying you trust a hammer to pound that loose roundhead nail back into the wall stud. It can, but only in the hands of a reasonably skilled laborer who can hit the nail on the head at an appropriate angle to drive it back in (and not bend it, knock it out, put a hole in the wall or knock himself unconscious on the recoil.

Similarly, a catalog is only going to serve its purpose and deliver value in the hands of an appropriately trained buyer or employee who knows how, and when, to use it.

And the fact that a spend management company had to pay Spend Matters to run an article that made clear 3 reasons catalogs can’t be trusted to manage low-value spend shows that, despite all this talk about strategic sourcing, category management, digitization (or any other flavour of this overused, always misunderstood buzzword you care to imagine), and cognitive procurement, Procurement, overall, is still in a sorry state of affairs overall.

Not only are we in the situation where at least a third of mid-size and larger organizations don’t have any modern solutions at all, and of those that do, a majority are still on what we’ll call legacy first-generation solutions which are cumbersome to use and low on power, but this also puts us in a situation where those un-enabled organizations don’t have the platforms to improve processes, reduce workloads, and allow the Procurement team to execute, and get comfortable with, more advanced and strategic sourcing methods.

To these organizations, a catalog looks like an answer to tail-spend prayers. Get a few master contracts for common low-value, low-dollar purchases, load them all into a modern, single search, single view, federated catalog, and allow people to buy whatever they need through the catalog. And while this is a valid strategy for some purchases, and can really take a huge workload off of an overworked Procurement team’s plates, it doesn’t solve all the problems.

As the article noted:

  • Catalogs can Waste Time

    Unless it is always-on, up-to-date (which could require a dedicated catalog manager), federated single view, capable of filtering to in-stock items only, and guided (showing the mosts popular or typically best choice when there are multiple options), an employee will spend way more time looking for the item then she might spend using it! Catalogs are not set and forget. They must be managed! Vendors don’t focus on this, especially if they don’t have a modern solution with strong vendor self-update capabilities (where a buyer only has to review vs. doing all the work), and a buying organization that chooses the wrong catalog solution can end up worse off than they were before they acquired a solution.

  • Catalogs can Miss Savings

    Procurement can always get a better deal on volume or discontinued items (and when its an internal item for consumption, sometimes it just doesn’t matter; such as pens that get lost before they are used, cleaning suppliers where packaging doesn’t matter, etc.) and when an item is getting purchased frequently enough, it’s best just to do a bulk order and put it in the store room. A catalog will never alert you when the time is right to take something out and do a bulk-buy.

    And this is fine, as long as an organization knows that just like you can’t set and forget a catalog, you can’t forget to run the analytics on the purchases on a(t least) a quarterly basis, preferably monthly, to make sure the right purchases are going through the catalog and, at the same time, review the non-catalog P-card and T&E spend and see if other types of purchases should be put in the catalog.

  • Catalogs can Introduce Hidden Risks

    As the article notes, uninformed employees will sometimes bulk buy thinking they are saving money (even if the savings per unit is negligable), when in fact they are tying up capital when the item is low use and the other 10, or 100, will sit in the storeroom for months (or years). Sometimes they will scroll three pages in to find an in-catalog, non-preferred, item that they prefer (and costs twice as much, but because all inventory from office supplies vendor A is in the catalog at a flat 10% discount off of MSRP, just in case something else is needed than formally specified in the contract, they can do it). And so on. And if we’re talking electronics, and the organization doesn’t know how to secure certain non-standard devices, this could be very, very, bad from a data security and privacy standpoint.

Catalogs are a tool to manage tail-spend, but only one tool, and they need to be part of a larger tail-spend strategy to deliver value. Never forget that.

If you can scroll through 10 pages of worthless headlines …

… sometimes you can find a gem. A costume jewelry gem, but still …

Procurement and audit … the missing link?

According to the article, while businesses spend a lot of time on the contracts and agreements, they spend little on price verification and contract compliance when all is said and done.

And that can be fixed with auditing, especially when contract compliance and audit work side-by-side.

Unfortunately it didn’t say how, or why, but presumably you’re supposed to contact the author’s chartered accounting firm (who are experts in ) for that information.

Well, fortunately for you, SI can fill in some of the gaps!

First of all, you need to audit key invoices beyond m-way match.

You all know about m-way match, where an invoice doesn’t get paid unless it has an associated PO or contract with valid pricing for valid products or services, that have been verified as delivered by a goods receipt or an accepted timesheet, but that’s just one way to prevent money from being wasted.

The next step is to ensure that the invoice is not duplicate, going to a verified supplier’s bank account or address, and complete. (Every processed invoiced, and payment, has a cost.)

And this is where most invoice processing platforms end. But there are still overspend prevention opportunities.

Were all the products undamaged and likely useable / re-saleable? And we’re they (immediately) rejected or returned? If so, a credit has to be captured and applied against the invoice immediately. It can’t go on a to-be processed list where it will sit there until the contract expires and the chance of collection is low.

Also, how many returns to the supplier since the last invoice? Were they under warranty/within the window and for the same products? If so, the organization should capture the credit right away.

And with modern electronic payment systems, it’s easy to send remittance notices that indicate what payment the invoice is for, what adjustments were made, why, and what contract the adjustments relate to (to justify them).

But this isn’t the full value of an audit.

A good audit can dive in and compare the units shipped against the estimates. The hours worked against the estimates. The expenses billed against averages. And so on. It can detect anomalies early, and detect new trends that may need to be investigated before they take over. Auditors find things other people miss. Sometimes they can find things even overworked Procurement people miss — and that’s why audit processes can help.