Category Archives: Sourcing Innovation

What is a Platform Anyway? Part I

In the beginning, there was the spreadsheet.

Organizations would send or fax out long, detailed RFQs asking for detailed bids and bid breakdowns for their (complex) sourcing needs, wait for the couriered or faxed responses, spend days (or weeks) entering all of the data into an early spreadsheet application (like Lotus 1 2 3), do their analysis, select one or more vendors for an award, begin negotiations, and eventually cut a contract.

Then, in the very late 1990s / early noughts, RFQ and basic e-Auctions hit the scene. Bid collection was automated, side-by-side comparisons were automatic, and organizations could quickly see who they wanted to work with.

And then, within a few years, there were contract creation and management solutions they could use to author, store, track, and manage the contract.

Then they needed to send out POs against the contract, collect invoices against the PO, match, and manage these e-Documents, so they acquired an e-Procurement or an EDI solution (connected to their ERP) to do so.

At this point they had a slew of solutions that all needed data from the precursor application in the business process and all needed to feed data into the next application in the business process workflow. A few of these solutions supported integration with the previous or next application, but many didn’t and the data re-entry nightmare became as bad as the data entry nightmare when all the organization had was a spreadsheet.

But then suite providers, who offered a set of complementary modules that digitized an entire process end to end (such as sourcing, procurement, etc.), hit the scene and the data re-entry problem was marginalized as all of the modules were integrated, data flowed through the suite end-to-end, could be pulled in automatically from a file that followed a standard format, and could be pushed to an ERP and/or exported to standard format and once IT mapped the export to the next system in the workflow, the process could be automated and manual intervention was only required on exception or on update.

This worked well, and for many smaller companies continues to work well, but as companies continue to advance in Procurement maturity, and need to find new ways to extract and create supply chain value, the cracks in the suite armour begin to show.

The issues with a traditional Sourcing / Procurement suite include:

internal data / data structure is typically not exposed

e.g. a S2C (Source to Contract) will be set up to accept supplier (master) data and export contracts and meta data, but (losing) bids, auction history, negotiation audit trails, etc. will typically not be configured as (standard) reports and exports and may not be extractable in any automated fashion

the artifacts required for related processes and functions are rarely addressed

e.g. a P2P (Procure to Pay) will be used to procure not only goods and services for re-sale and goods and services for consumption, but internal assets such as equipment, licenses, etc. that need to be tracked and managed in an asset control system; the P2P system should collect all of the necessary data, but typically doesn’t nor does it connect or push data to the asset system, meaning purchases just get lost

the workflow is typically fixed to the process the system was built to support

e.g. most companies built solutions to address problems encountered in the companies the founders worked for or the companies that adopted the beta solutions; this not only resulted in some platforms being very good for commodities for re-sale but poor for MRO, very good for direct materials but poor for services, etc. but also resulted in solutions that really only worked for one or two verticals as the sourcing process used by a finance institution (even for similar types of goods or services) was very different than the sourcing process used by a CPG company …

And so on.

So now the leading providers who recognize this are not selling suites, they are selling “platforms”. But what is a platform anyway?

Determine – Determined to Conquer b-pack’s Brave New World Part II

Our last post (re-)introduced you to Determine, a name you know even if it’s a name you don’t, as this provider is the successful fusion of the mature solution offerings that have been offered by Selectica since 1996 and Iasta and b-pack since 2000. We ended by noting that the new Determine platform is the platform that many sorcerers always wanted but never knew they were missing. Today we’re going to dive a little deeper into why.

Now, even though there’s not a whole lot new since SI last reviewed b-pack in its series on Taking Root in Their Brave New World (I, II, and III) or since SI last reviewed Iasta pre-acquisition (in Smart-Source Style, I, II, and III), these platforms have been integrated, their core modules have been enhanced and, most importantly, the (core) platform has a new UI that is not only easier to use than the one that b-pack had before, but is better looking to. (It was straight-forward, and there was nothing wrong with it, but parts of it looked like it was built as a Windows application and not a SaaS application.)

That being said, there are some cool new features, including:

  • Virtual Purchasing ContractsGood invoice and payment management requires m-way matching every invoice to at least a purchase order or contract and, if possible, a goods receipt as well. For many types of recurring payments — such as rentals, utilities, etc. — Procurement does not cut a contract and there is no Procurement record for AP to refer to when an invoice comes in. This prevents an m-way match and makes it difficult to detect duplicate, erroneous, or fraudulent invoices (and this, of course, contributes to over-payments). However, in the Determine system, you can set up recurring payment contracts and define expected payment dates along with expected amounts or ranges. Then, when an invoice comes in, it can be matched to an associated virtual contract payment, and if there is already an associated invoice, if the invoice is outside of the expected/agreed to range, or if the invoice is from a supplier without a virtual purchasing contract, it can be defined as duplicate, erroneous, or potentially fraudulent.
  • Supplier NetworkOften you know who the suppliers are you want to invite to a sourcing event, and often they are already in your Source to Pay system, but sometimes they aren’t in the system and sometimes you need to invite new suppliers that you don’t know. That’s why Determine is building a supplier network to not only help suppliers centralize their data management across multiple customers, but help buyers search for new suppliers. However, it takes time to build a supplier network so Determine comes …
  • … with TradeShift Integration… so that a buyer can find a new supplier “out of the box”. Tradeshift has a large global supplier network that can be used by any customer to jump-start their supplier identification and management for new sourcing events.
  • Full E-mail Approval SupportRequisitions, purchase orders, invoices, etc. — anything that requires approval can be approved or rejected through e-mail, making it easier for buyers to get quick responses from approvers and executives who never need to log in to the system.
  • DocuSign integrationWhich allows for contracts to be created and signed electronically, eliminating the need for paper contracts (that get lost in filing cabinets), paper couriers (which can lose the contracts or fail to get them to their destination on time), and paper cuts (which are well deserved when paper is wasted).

And the following will be in the next release (end Q2 / beginning Q3):

  • Contingent Labour ManagementThe b-pack platform had a very powerful catalog management system, which has recently been upgraded and extended in the Determine platform with full punch-out support to third party catalogs, and seamlessly integrates hosted catalogs and third party catalogs like any modern catalog system. It also supports standard requisition templates that allow a buyer to order merchandising (and simply specify the quantity and colors, etc. of the merchandise), bound documents (and specify the binding, paper, etc.), and other standard make-to-order products. And with the next release, it will also support embedded continent labour / service management capability where a buyer can search for resources with select skills, request a time of service, and send it off to one or more organizational contingent labour suppliers under contract (or create a requisition that will be fired off to the appropriate buyer for a sourcing event).
  • Workflow Driven Dynamic QuestionnairesAt present, the platform has standard workflows for new supplier registration, RFX creation, and so on, but these simply present pre-made questionnaire and forms to the user. As of the next release, the questionnaires will by fully dynamic and buyers and suppliers will only see the questions and information they need to see based upon their answer to current questions and their industry, product, service, etc.
  • Universal Action PlansOne of the unique offerings of the b-pack platform was action plans, mainly used for corrective action plans in supplier management. In the next release, buyers will be able to create action plans for any process — including sourcing, procurement, and supplier development — manage them, and even tie them to appropriate metrics (built on the relevant platform master data).

And within a year Determine plans to have the Iasta platform native and all of the relevant CLM functionality native on the core b-pack platform, so not only will everything be off of one Master Data Management store, but one seamless user interface as well. And given the rapid pace at which they’ve integrated and extended the core platform so well, you can be sure that as long as Determine is determined, this will happen. In short, if you’re looking for a new S2P platform, this to know provider should definitely be on your short list.

For a deeper dive into the new Determine platform, watch for the two-part Pro coverage by the doctor and the prophet, coming soon on Spend Matters Pro (membership required).

Determine – Determined to Conquer b-pack’s Brave New World Part I

Determine is one of those companies that is a name you know even if it’s a name you don’t know (and a name you should know as it’s a 50/50 company with the doctor‘s seal of approval). It’s a name you don’t know because it didn’t exist until 4th Quarter last year. But it’s a name you should know as it is essentially the merger of the Selectica (founded 1996), Iasta (founded 2000), and b-pack (founded 2000) solutions into one cohesive whole (and not just a Frankenstein solution patched together when one company acquires two others).

Understanding that a true CLM-enhanced Source-to-Pay solution is only valuable if it is one solution that empowers one process based on one workflow, the first thing that the new company did was standardize on one platform — namely, the b-pack platform — and the next thing it did was figure out how to integrate the other two solutions on that platform. Since the b-pack platform is, at it’s core, a business process oriented workflow platform with native Master Data Management capabilities, and not a PO or invoice-driven e-Procurement platform with workflow kludged in as an afterthought, Determine was able to quickly accomplish two things:

  • Convert the Iasta Sourcing platform into an “app” on the b-pack platform
  • Rebuild and integrate all of the core CLM IP from Selectica they were missing native on the b-pack platform

which means that

  • even though you have to load the Iasta app to do your full-featured sourcing events that go beyond simple RFX and include powerful auctions, SRM, and strategic sourcing decision optimization (Iasta is one of the six sourcing samurai), all of the data is stored in the central MDM repository in the Determine core, which means it is 100% available when you start the contracting and/or ordering process (and, similarly, all historical data is instantly available in the Iasta app)
  • even though some more advanced (nice-to-have) features from CLM are still missing, there is sufficient functionality (or workarounds) to meet over 80% of CLM needs (for example, native editing and redlining is not yet integrated, but Word versioning is 100% integrated, which is the solution the Legal team wants anyway)

And the core business process workflows have been extended to cover the end to end sourcing lifecycle as well as the end to end purchasing cycle from both a line item and business object perspective (you can trace a line item all the way from initial sourcing and forward to final return and disposal and you can trace the entire history of each contract, purchase order, invoice etc.).

Plus, all of the unique, non-standard, features of the b-pack platform have been maintained and as soon as an organizational asset has been purchased, an asset record to track the lifecycle of that piece of equipment, software license, or IP can be created (and custom managed by asset type); as soon as inventory appears, appropriate inventory records are created (and pushed to the ERP and/or [W]IMS solution as necessary); as soon as a vehicle is acquired or leased, an appropriate entry in the native (or integrated) FMS (Fleet Management System) is created, and so on. The platform not only enables a true source-to-sink source-to-pay process, but also recognizes that acquisitions and artifacts of the source-to-pay process are the starting points of other business processes and supports those as well. It’s the platform that many sourcerors always wanted but never knew they were missing.

And we’ll tell you more about it in Part II.

Sourcing Adoption Addresses Key Procurement Priorities

Earlier this year, the Hackett Group released it’s Procurement Executive Insight on “The CPO Agenda: Reduce Purchase Costs, Improve Agility, and Become a Trusted Advisor” that summarized the Hackett Group’s annual key issues study that was undertaken to define the top issues that would shape the procurement executive agenda for 2016.

As a result of this study, Hackett identified two major facts:

  1. The Top Four Priorities are, bottom up:
    • improve agility
    • increase spend influence
    • become a trusted advisor
    • reduce and avoid purchase costs

    which is bad, because costs should be well under control by now and Procurement should be seen as a trusted advisor by those that spend the most and

  2. Procurement’s Operating Budget is expected to grow by a mere 1.1%which is worse because most Procurement departments are under-staffed, under-resourced (technology wise), and under-funded (even though they can often make the greatest contribution to the bottom line of any department in the organization).

It’s another year of doing more with essentially less (as 1.1% budget increase doesn’t even cover the cost of inflation), which means that you have to be more efficient, and effective, than ever. You need to push your Procurement Value Engine into overdrive.

How do you do that?
(Hint:  It involves heeding the advice in Higher Adoption is Where True Value Lies, and we’ll get to that.)

There are a number of ways to do this, but probably the most critical thing to do is start at the beginning and get your Strategic Sourcing under control, especially for any non-direct category where you are not locked into a very small group (sometimes a very small singular group) of suppliers. And how do you do this? You get your optimization-backed sourcing platform adopted throughout the organization. (Don’t have an optimization-backed sourcing platform, than maybe you need to talk to one of the sourcing samurai.)

The reason Procurement is still in the “dark ages” in most organizations is because less than half (40%-) of organizations have any sort of platform. Of those, some have Sourcing, some have Procurement, some have Contract Management, some have Supplier Management (SIM/SPM/SRM/SxM), and some have another point-based solution that solves one particular pain, but leaves most of the pain of the Procurement organization unaddressed.

The most common solutions are either e-Procurement platforms, typically with some sourcing capability (namely, RFx), or e-Sourcing platforms, typically with Spend Analysis, Contract Management, and/or some procurement capability (usually order or invoice management). However, just because these solutions are in place, it doesn’t mean that they are used. In many organizations with a sourcing platform, only a small team of senior buyers working on the most strategic or highest dollar categories use the tool. This is costing the organization a lot of money, as the opportunity cost of not applying the platforms across the board (and identifying cost savings or cost avoidance across the board) is huge.

Consider our recent post on Why You Need Mass Adoption of an Optimization-Backed Sourcing Platform, a traditional organization without an optimization-backed sourcing platform will typically only source, at best, 9% of spend strategically with optimization and 18% of spend strategically without using the platform, for a total throughput of a mere 27%. For an organization that sources 50% or more of its spend every year, that’s half of its straight-to-the-bottom-line savings opportunity up in smoke!

But if the organization doesn’t use an optimization-backed sourcing platform, instead of an average of 1/4 of spend being strategically sourced in one way, the fraction decreases to 1/5 (or even 1/6). Think of the opportunity costs! Instead of losing 3% against the bottom line, the organization is now losing 5% or 6%! The reason for this is that the sourcing platform is always in the hands of the few. Why? Sometimes it’s a lack of licenses, but often it’s the complexity of the solution, which is seen as too complex by the majority of the buyers who have to push through volume, complex requirements, or special situations that are, in their view, easier to deal with outside of the platform.

That’s why you not only need adoption, but you need a platform that can, and will, be adopted by all of the buyers so that 90%+ of sourced spend goes through the platform. This will not only increase savings, which addresses the top priority of Procurement executives, but also addresses the priorities of spend influence and agility. How? A good platform allows a sourcing team to move faster, and speed up events by weeks or even months, and it allows the organization to tackle critical projects within different organizations that can increase Procurement’s influence.

So to find out how to get your Sourcing Platform adopted, download Higher Adoption is Where True Value Lies today and find out the tips and tricks that will make your sourcing a success.

Trend Analysis: Mantic or Misguided

Trend Analysis, formally defined by Wikipedia as the practice of collecting information and attempting to spot a pattern, or trend, in the information is typically presented by providers of analytics packages as the miracle your organization has been looking for to power your productivity and process improvements. After all, if you can’t use the data you have to get a good sense of how you are doing, how are you going to figure out how you are doing, if you can improve, by how much, and what you should do.

This is true, provided that the trend analysis is statistically reliable, on accurate data, and comparable to a meaningful benchmark. But this is not always the case, and when the trend analysis is poorly implemented or applied to poor data, definitely not the case. In fact, if the trend analysis is not accurate, it will cost the organization precious time, money, and resources and result in considerably worse, instead of better, performance. And even though you don’t hear about it (as the last thing a major provider of analytics solutions wants to do is scare you away from their very complicated, and extremely expensive, solution that is supposed to save you 3X to 7X its annual cost), analytic-based screw-ups happen more often than you think. And if they happen to you, you will be cursing the analytics package until it’s off the asset sheet (and beyond).

the doctor is being dead serious here. Trend Analysis (like dashboards) hide half a dozen serious dangers that can seriously hinder productivity, savings, and even innovation. Half of these are common to internal trend projections and half to external trend projections.

One of the most significant dangers of internal trend analysis is missed opportunities. If an analysis of fulfilment time analysis over the past six months indicates that the organization is likely to continue to hit its 90-day delivery guarantee by at least 3 days, the organization may think that all is fine and well, but not realize that just hitting the 90 day delivery guarantee is costing the organization money. What if the average stock-out rate is 10%, and 6% of that are stock-outs that are less than 40 days. What if the organization could change lanes and carriers and get the delivery guarantee down to 50 days? This could reduce the stock-out rate by as much as 60%, and if this stockout rate is costing the organization 10M a year, that could be a 6M savings overlooked because the trend analysis creates an all-green dashboard.

One of the most significant dangers of external trend analysis is innovation stunting. For example, the trend analysis could show that the organization’s conversion to sustainable energy is outpacing its peers by 5% and think that it is doing great. But what if it has the opportunity, due to its locale, to switch to solar or hydro at a rate that would outpace its peers by 10% and take another 20% off its annual energy bills? Without knowledge of the possible, the analyst could completely miss that innovative opportunity.

But these are only two of the six major hidden dangers that can rear their ugly heads as a result of the misapplication of trend analysis. For a detailed insight into the other four, download the doctor‘s latest white-paper (sponsored by Trade Extensions) on The Dangers of Benchmarks and Trend Analysis (registration required) today. You need to know these inside out before even considering using trend analysis (which, when improperly constructed and improperly interpreted, can be just as deadly and dangerous as a dashboard).