Does Logistics Management Understand Procurement Better than Most Procurement Publications?

A recent Logistics Management Article on The State of Procurement in 2024, starts off with Procurement is fundamental. It spans everything from day-to-day purchases to measuring sustainability to future-proofing operations for long-term growth. It’s a wide spectrum of mission-critical responsibilities, spanning all business functions.

As we noted in our recent article on The Future of Procurement is the Past, Procurement is at the heart of the business. It’s always been a core function and always will be. And once businesses realize that the key to sustained profitability going forward is getting back to basics, it will be again.

And while the article says “Procurement is transforming at lightning speed“, it’s only partially right … leading Procurement departments are transforming their technological baseline at lightning speed to become more efficient and effective, but they are not changing the core, strategic function they perform, they are just implementing processes and tools that allow them to perform those core, strategic functions more efficiently and effectively.

Why? According to the article, which quotes Gartner, its due to the intersection of accelerating changes in risk management, ESG, and technology and the complexity and challenges of keeping up. The internal challenges — such as system complexity, a wide range of vendors and products, and compliance requirements — and the external challenges — rising costs, unexpected economic changes and CSR mandates, and changing digital procurement needs — are increasing by the day.

As a result, many Procurement departments have been going through transformations, sometimes two or three at a times, but not all are turning out as planned. This is because, as the article notes, most of these projects focus on implementation, and not the reason for; relies too heavy on staff(‘s lack of) experience and implementer inexperience; buys into the vendor’s “one size fits all” approach; and leaves workflows incomplete. Digital is not an option, but how you approach it is. The article emphasizes simplicity, quoting Gartner’s statistic that organizations that employ design simplicity have a 42% increase in success, but that’s just part of the picture.

As per our previous articles, it’s not just simplicity, it’s focus on what is needed, why, and vetting the platform and the vendor against both. It’s putting the real need first, not the technology, and selecting the right technology for the job. Sometimes it might be AI, but most of the time it will be classic tech that’s been on the market for 10, or 20, years that has been honed over the years by a vendor laser focused on solving a subset of Procurement problems in the best way possible for companies in the industries, market size, and geography the vendor is focussed on. As the article notes, there’s no AI roadmap and, as such, significant care should be taken with any AI initiative.

It’s more critical as the article notes, to focus on better data analysis, efficiency, and system (and data stream) interconnection. The more insight you get, the better decisions you can make on system selection.

In other words, the current state is a challenging one, but that’s no different than what Procurement has been going through since the first commercial telephone interchange began operations in 1878. Procurement has always had to deal with change, the only difference now is that it’s coming harder and faster than it ever has. But it’s not like Procurement hasn’t always had to deal with or adapt to change, and it’s not like the best Procurement departments haven’t always done so, it’s just that the challenge has reached a new height. But as long as Procurement employs the same best practices they’ve always employed and does the right due diligence on any solutions they are considering, they will do just fine.

The Future of Procurement is the Past … With Just a Dab More Modern Technology

A recent article in the SCMR asked what is the future of procurement after reviewing a benchmarking report (or at least a press release) from McKinsey & Company on “Where Procurement is Going Next”.

The article quoted a statistic that companies excelling in procurement had a digital capabilities maturity score 40% higher in strategy, digital and data analytics compared to average performers. They also noted that this tracks with the first Procurement benchmarking survey McKinsey launched two decades ago which uncovered a clear link between procurement maturity and higher business performance. (Today, top quartile procurement maturity companies have EBITDA margins at least 5% higher than less mature peers.)

According to SCMR, McKinsey found that the priorities for the next 6 to 12 months is end-to-end margin management; next generation technology, data, and analytics; and talent and resiliency. Translation: focus on sustained profitable growth, make sure you have the right technology to support it, and don’t forget that talent is key to resiliency (or at least not until the budget gets tight and the first thing to be cut is the training budget and the next the compensation budget).

First of all, isn’t that what Procurement’s always been about? Supporting the business in a manner that allows it to be sustainable and profitable, using the tools at its disposal (good negotiators and couriers, then phones and catalogs, then faxes, then emails, etc. etc. etc.), and the right people for the job.

Secondly, now that the time of global expansion and growth is over, inflation is back with a vengeance that was unseen for two decades, global trade is disrupted on a daily basis, capacity is low (thanks to ships scrapped during COVID) and lower thanks to Panamanian droughts and the conflict in the Red Sea (and the renewed need to make the long, and sometimes dangerous, voyage around the capes), sustainability is critical in many jurisdictions, and the marketing mad men can only take your company so far, companies are realizing that they need to get back to basics.

And those basics are good operations centered on what is most important. If we go back to Business 101 (which, unfortunately, many of today’s founders and CEOs didn’t take or forget), businesses survive on profit and profit equals revenue minus expenses. Revenue is not infinite, which means the key to growth is NOT just revenue growth, but expense management. And expense management is good old fashioned Procurement.

Which means the future is the past. The future is that Procurement will regain its importance in any organization that not only wants to survive the increasingly turbulent and troubled times ahead, but thrive.

Procurement is at least the world’s third oldest profession, depending on whether astronomy came first or third, and, as we’ve been repeatedly saying, the core, and importance, has never changed. Not since the first known modern manual was published in 1887. Not since The Royal Mint was founded in what is now the UK in 886. Not since someone was first hired in an ancient metropolis by a businessman to buy goods on his behalf thousands and thousands of years ago. Buy usable, quality, goods and services the business needs at a fair price so that the business can sustain its operation profitably. And that’s where Procurement’s focus, and importance, will return. That’s the future. And it’s the past. Brush up on your history. The “tools” may change but the job remains the same.

We just have to survive Everything Louder than Everything Else.

So You Admit You Might Be a Dead-Company Walking. How Do You Avoid the Graveyard? Part 5

In short, as per Part 1, you

  1. keep admitting to every mistake you are making and do something about it, then
  2. continue by looking for cost-effective opportunities for improvement and pursue them and finally
  3. never, ever, ever forget the timeless basics.

Today, we’ll continue by describing what you do when you identify, and admit to, the next mistake (mistake 7) we chronicled in our two part introduction to our “dead company walking” (Part 1 and Part 2) series (where we helped your potential customers identify problems that signify you are a SaaS supplier they should be walking away from). (You can find part 2, part 3, and part 4 here.)

7) Buzz and Sound Bites are More Important than Timeless Educational Content

The last few years have been a barrage of quick-hit sound-bite, buzzword, influencer, and rapid-fire quick-switch focal point campaigns (to see what sticks), and the doctor can tell you that your target customer is as fed up of it as he is. Especially since they don’t have a clue as to what the h3ll you’re talking about, what your solution does, how you differentiate from 20 other vendors spewing the same nonsense, or if you even offer core Procurement functionality (and the doctor is side-eyeing a couple of the fake-take vendors here who need to be clearer in their messaging; while they are all a great fix for those on monolithic suites with archaic interfaces and no organizational process visibility beyond Procurement, they don’t actually work on their own).

It’s critical to remember that:

It’s not the attention quantity, it’s the attention quality!

Ten thousand views of a clickbait LinkedIn sound bite that only results in 100 click throughs to your website and 10 registrations to your webinar is not only unproductive, it’s counter productive. You’re leaving a negative image of your company as one that doesn’t really care about customers as you’re wasting their time with unclear messaging and then presenting them with irrelevant information or SaaS. If those individuals ever have a problem that you would be perfect for, you’re not going to be top of their list, or a company they actively recommend to peers desperate for your solution.

In comparison a clear, Plain English, to the point description of a new functionality and the problem it solves might sound boring, and might only get 1,000 views, but what if 100 click through to your website and 50 register for today’s webinar. That’s 10X the initial click through rate (percentage wise) and 50X the initial registration rate (percentage wise). Think about that. Especially since there’s a good chance that half those fifty will have a problem similar to what you described in your messaging and half of those could be immediate sales targets.

Taglines are okay, but you need real content that resonates to the target’s needs.

Especially if they are clear and centric to your actual solution capabilities. For example, “Mid-Market Procurement for Hospitality and Service” is very good as it specifies the industries, market size, and core offering (and Procurement has basic requirements) and a mid-market customer in hospitality and service knows that it is a potential solution, and even if it’s not perfect for them, researching it won’t waste their time because they’ll learn something (regarding what they need, don’t need, why, and what a good solution should do).

On the other hand, “AI-powered supplier performance for margin multiplication” is utter bullcr@p as “AI-powered” doesn’t mean anything (as it is misused and abused by 6/7 vendors, and sometimes is simply “Applied Indirection” as there’s no real AI at all, not even of the artificially idiotic variety). “Supplier Performance” is vague … it has a few standard meanings … it could be simple measurements, it could be the creation and management of development plans, and it could even be risk or compliance mitigation (even though it shouldn’t be). And it’s been abused by sourcing, procurement, and supplier management vendors alike. And margin multiplication is among the most meaningless manure to be produced in the current cycle of buzzword madness. (Why do you think the doctor is insisting it’s time to start calling out the hogwash for what it is!)

People WILL read and listen when they are seriously evaluating you

the doctor knows we’re in a generation where no one wants to read anymore, where attention seconds are barely long enough for 15 seconds of fame, and everyone is overworked, underpaid, and just short on time when it comes to listening to the tsunami of messaging being targetted at them.

But here’s the reality the marketers desperate for an oversized share of your budget won’t tell you. When it comes to enterprise software, that doesn’t matter. No one commits $1M+ a year on a multi-year software purchase without doing their research and diligence. (They might not do it right, but they will do it.) (And, as per mistake 3, when you factor in maintenance, hardware & software updates, services, data feeds, integration fees, etc. most “six figure” SaaS licenses are usually pushed into the realm of seven figures from a TCO [Total Cost of Ownership] perspective.)

The situation is different when you get to an RFP and are among the final three. Unless it’s a fake RFP (where the buyer has already selected a solution being sold by his buddy Bob) being forced upon the buyer by public sector or corporate rules, the buyer, and key affected shareholders, will do their research. They will read your responses, and they will read any meaningful pieces of literature you put in front of them. As well as watch appropriate pre-recorded demos and webinars. Even if they don’t fully understand it (which is another problem), they will do their diligence because their jobs depend on it! (If they screw up, and their bosses decide it was a result of them not doing their best effort, they will be fired.)

Plus, if they are going to be stuck using whatever they buy day in and day out for the next 3, 5, 7, 10 years, they are going to want to make sure it does the everyday tasks well.

So give them real, solid, educationally focussed content, and when they are truly ready to buy, they’ll eat it up and lick the virtual plate clean (and come to you begging for seconds).

And even if they’re not ready to buy now, if you repeatedly given them real, solid, educationally focussed content (in short, easily consumable, mini / single point white papers / webinars), they’ll build up a positive view of your company and offering and you’ll earn their respect and you will get called when the budget is approved.

This is fact. This is the same advice the doctor has been given companies since he started independently consulting with leading companies in this space in 2006 (and given away for free on SI since 2007), and every single company who took this approach that the doctor worked with before joining Spend Matters in 2016 either

  1. had a successful exit on their terms (including all of SI’s sponsors and most of the doctor‘s original clients) or
  2. had a successful raise on their terms and grew. (i.e. not a single one of these companies went out of business!)

And while it does’t work quickly web statistic wise (i.e. you’re not getting those thousand of eyeballs quickly, but as we just demonstrated, that doesn’t matter), it always works. Enterprise software is NOT consumer sales — people aren’t making high six, seven, and even eight figure purchases on sound bites and buzz.

But, at the end of the day, the reality is

All I got is an online blog, these words and the truth.
All I got is an online blog, the rest is up to you!

Stay tuned for Part 6!

Terror Squirrels are Now Targeting Civilians Directly With Their Sabotage!

They’ve been targeting power (sub) stations for decades, as first reported on SI over a decade ago and most recently reported last weekend.

The Terror Squirrels of Reading upped their game when they forced the evacuation of a Gatwick Train last month.

Now they are sabotaging civilian automobiles in Queens, New York. All they have to do is gnaw the right wire the right amount and your car will randomly stall. Now, they can’t be sure where, but if they can sabotage enough cars in the same way, some will unexpectedly stall in busy intersections and others on the interstate …

We Need Better Events!

This will probably get me blacklisted by half the events in the space, but I don’t care … especially since I have no interest in going to half the events in our space anyway. (Now, are both sets the same? Probably Not. Am I blacklisting myself from events that might be worthwhile? Probably. Do I care? Well, if you’ve been reading the doctor‘s rants for eighteen (18) years, you know the answer … it’s getting to the truth that matters!)

This is something I’ve been thinking about for a while, but a recent article by Gaurav Sharma on how his buyer’s mindset is bugging him on a point, along with recent conversations on LinkedIn, have convinced me it’s time to write it.

Most of today’s big events are a complete waste of time and money for practitioners and vendors alike! And I’m dead serious.

Why?

Vendor: You’re paying 50K to 100K for that event. When you consider the cost of the booth display materials (5K to 10K); the booth, equipment and services rental (30K+); giveaways and fancy dinners (5K to 10K+); getting and housing a small team there (20K to 40K); etc., it’s a lot of money. And for what? A chance to hock your wares to a small (less than 50%) set of attendees who are also being shouted out by 50 to 100 other vendors? At least half of whom have no decision or spending authority at the end of the day? Besides the ability to say for three (3) days: “look at us, we made it“?, what do you get? Maybe a handful of leads if you’re lucky? With each of those leads costing you 10K+. And nothing if you aren’t so lucky!

For each 10K you spend, you could have an expert write a piece of content that could be part of a year-long educational campaign that could be used to generate real leads through sign-up downloads, webinar sign-ups, follow-up conversations and downloads (when someone contacts you to learn more, and thanks you for educating them vs. just shouting marketing soundbites at them), etc. For the 80K you would spend on a glitzy event, you could get 4 custom pieces of content, 4 webinars, and a year-long educationally oriented marketing campaign that you’d be thanked for.

Practitioner Organization: It will cost you 7.5K to 10K for each senior lead, director, and CPO you send to a 3-day event. You’re probably budgeting 25K to 30K to send a small team. And what are you getting for it? A bunch of high-level presentations on various topics by a bunch of people you don’t know, usually not much different than the presentations you saw two years ago on the same topics by different people you don’t know, which aren’t deep enough to teach you anything (except re-emphasize important areas you need to drill down deep on).

A bunch of discussions with random vendors, many of whom won’t be relevant to you, while you completely miss the chance to talk to those vendors who would be because there was no way you could get to them all and without good pre-vetting and education, you were just rolling the bones and engaging randomly (or, if you were hungry, with whatever vendor rep offered you the most tantalizing dinner option).

For that same 25K, you could have an expert from a niche mid-sized consultancy come in and give your team a 1 to 2-day course on a specific problem or area of relevance — i.e. what do modern e-Procurement systems do, how do you select the right one, and who are five vendors that are commonly used by your peers; what regulatory changes are coming in global e-Invoicing requirements over the next two years, and what will we have to do to keep up; how can we address carbon accounting reporting requirements while embedding better carbon management into our supplier development and supply change management; etc. And let me repeat — your whole team, not just 3 people where 2 of them are responsible for multiple areas (or everything) and have no time to train anyone else or oversee the process, program, or technology that needs to be put in place.

The only people who get their money’s worth at these events are:

1. Consultants who don’t sponsor, don’t stay at the overpriced event hotel, but just go and spend their entire time talking to vendors they don’t know (to engage with them firsthand on fact-finding and relationship building) and Directors/CPOs (to find out what the common themes are that they should market too) and come away with verified/renewed focus and new options to sell to their clients.

2. The Organizers who get the fame and the fortune (as they collect a cut of all money coming in).

But does this mean all events are, or have to be, bad?

No. An event would be very worthwhile if:

  • it didn’t try to be everything to everyone (and ended up being nothing to anyone),
  • instead focussed on a market niche (market size – geography – problem or process), and
  • kept the size down, the balance appropriate, and the value up.

Let’s dive into this.

Focus

For an event to be truly valuable, it has to address a relevant problem or technology for a (similar) group of organizations which have a similar problem or need. By this, I typically mean market size (small to mid-market, mid-market and above, large mid-market through global enterprise), region(s) with similar market dynamics (North America and Western Europe, Central and South America, India, China, etc.), and a focus on a technology (Procure to Pay, e-Procurement, I2P/AP, Supplier Management, Direct Sourcing, etc.) or problem (Carbon Regulation and Accounting, Data Management and Predictive Analytics, etc.). This allows organizations to self select as being interested, or needing insight, in this problem or technology, vendors with appropriate technology to come forward (and be vetted by the event organizers as relevant), and the event to ensure value will be received by all attendees — practitioners will get relevant talks and panels (as all the sessions will be appropriately oriented) as well as a chance to learn about solution providers who provide solutions relevant to their peers (and possibly them) and vendors will know that the practitioners are actually interested in the type of technology they are offering, and leads will be real (and more plentiful).

Balance

There should be considerably more practitioners than vendor reps. At least 2 to 1, and preferably 3 to 1. The event organizer can limit vendor registrations based on attendees, as well as the number of reps a vendor can send. This helps the vendors (by ensuring there are more than enough practitioners to go around, which means they will spend more time talking to practitioners than each other) as well as the practitioners (by not only ensuring they aren’t overloaded by irrelevant vendors but by ensuring they have a lot of peers to talk to for insights as well).

Size

A good event is big enough to ensure there is enough variety in vendors and in peers to talk to, but not so big you get lost in a sea of people. In the doctor‘s view, it’s 50 to 500-ish, depending on whether:

  • you’re narrowly focused on one specific (emerging) problem and want to only talk to senior peers: in which case you’re looking for a round table event, 50-ish senior practitioners, 3 to 5 vendors with 2 reps each, and a single large meeting room at a hotel
  • you’re focused on acquiring or upgrading a best-of-breed module to solve a small set of problems such as data analytics, supplier management, or strategic sourcing: then you will want 200 to 300 people, 5 to 10 vendors with 2-3 reps each, a lot of common sessions, and a few breakout sessions on particular problem types or advanced solution features (predictive demand modelling, sourcing optimization, supplier development program implementation, etc.)
  • you’re interested in upgrading your sourcing or procurement capability across the board and/or learning about the current advancements, best practices, and issues in the space in which case you’d want a slightly larger event focused on your market size and geography, with maybe two to three dozen vendors with 3-4 reps each, 500+ (but < 1000) participants, and multiple tracks … still capable of being held at a large, but affordable, hotel

And since all of these events are smaller, it shouldn’t cost an attendee more than 5K in the worst case for 3 days of valuable information and vendor discovery or a vendor more than 20K for a low-cost booth and valuable leads (+ rep costs). And while this is still a sizeable amount of coin for a smaller procurement organization to send 3 people or a vendor to have a both and send 3 reps, it’s still less than half the cost of a bigger event for both parties for considerably more value.

This was the direction I’d hope a certain new event organizer would take when it started a few years ago as a smaller event focused on smaller players and newer tech, and the direction I’m hoping the next new event org will take. Not one big event that tries to be everything to everyone and instead ends up being just a sea of noise, but a series of smaller events across the Americas and Europe that are focused, give more affordable opportunities to more smaller, relevant players, and much more value to the attendees.

Will it happen? History has repeatedly shown it won’t, but if it ever does, the value will be unparalleled to all the attendees.

 

For those curious, the doctor‘s original response to Gaurav on “better events” was the following:

Instead of oversized, overpriced, events pretending to be everything to everyone we need smaller, more focused events that focus on particular problems or technologies for particular markets for (dedicated) Senior Leads, Directors and CPOs only.

T: Sourcing for the Mid-Market in North America and Western Europe
(Primarily EN business, similar processes)
T: e-Procurement for Mid-Market and Large Enterprise in Central and South America
(lots of e-Invoicing Regs, all Spanish or Portuguese)
T: Supply Chain Logistics for India and China
(where we’re still buying everything from)
P: Carbon Management for the modern LMM or Large enterprise in the Americas or Europe
(relevant supply management, carbon accounting, etc. tech for enterprises facing regulations)
P: Procurement Maturity for the growing Mid-Market
(focusing on maturity models, emerging best practices, and new category / knowledge management tech)

Then, when a CPO spends her 5K to go and discuss, she’s focused on a relevant topic, learning something, and seeing demos from vendors with appropriately focused solutions on one or more aspects of the problem (vetted by the organizer). Everything is relevant. For 10K, she can take the lead or director who will be charged with the program and system implementation. Money well spent.

And if she’s in a larger organization, she can take that 10K she saved and invest it in a startup fund, which could also be present at the event, that is collecting funds to seed various startups in S2P+ disciplines and direct that the money be invested in a startup focused on tech to solve her biggest problem. (And this foreshadows an upcoming article.)