Why Your Standard Sourcing Solution Doesn’t Work For Direct

Too many of you have been there. You sign that seven figure deal for that end-to-end Source-to-Pay suite, spend another seven figures and 18 months integrating with the ERP, PLM, AP, BI and existing Legal CR solutions, and then try to source your first NPI project natively only to … fail. Why is that?

They just weren’t built for direct.

And it’s not just something you can add in later. If the platform wasn’t designed from the ground up for direct sourcing, there’s zero chance it will ever do a decent job at it. (And, FYI, the majority of the S2P suites the big analyst firms are drooling over in their annual quadrants and waves started out as simple indirect Sourcing or Procurement tools.) People who don’t understand the nature of software don’t get this, but software has to be constructed like a building. You might hear vendors and techies throw around MVC model, which stands for Model-View-Controller, when they talk about how new and well architected their solution is, but that just means it’s built in a maintainable web-friendly way for what, and only what, it was initially designed to do.

It all comes down to the data model and the software architecture of the controller, and neither can be a black box. The data model has to be designed from the ground up to support bill of materials and direct sourcing and procurement data requirements. The controller has to provide the infrastructure to support the complexity of the application that is required. For those who don’t understand software, I like to put it this way. If you pour the foundation for a two story house, and buy wooden beams for all of your structure and supports, you can’t build a 10 story apartment building. You need a foundation for an apartment building and steel and concrete supports. (Even though you can theoretically build a 10-story structure on a two-story foundation if you have the right steel and supports, it won’t be stable. The slightest tremor on the Richter scale [which might not even be detectable by a human] or a strong wind will send it crashing down.) You need both. And just like you can’t replace the foundation under a building or replace the entire support structure in real life, you can’t do the same in code. You have to rebuild, usually from scratch.

So why weren’t they built for direct? Well, there are a number of reasons (besides they wanted to get a product to market fast and/or just weren’t smart enough to build a direct sourcing solution). They include:

  1. direct material sourcing is hard
  2. substitution is not guaranteed
  3. demand aggregation is not straight forward
  4. delivery time guarantees and on-time arrival is significantly more important

To understand these, and learn about the rest of the reasons the majority of sourcing solutions were not built for direct, dive into Standard Sourcing Technology Solutions Don’t Work for Direct – Part One and Standard Sourcing Technology Solutions Don’t Work for Direct – Part 2 over on Supply Chain Matters.

Are Your IT Vendors Performing Up To Snuff? Probably Not. Maybe you should VendorScoreIT and find out!

Let’s face it, it’s a well known fact that there is serious overspend in IT. Given that global IT spend is surpassing 5 Trillion, and that overspend is generally at least 30% on average, this is a category with over one Trillion in annual, unnecessary, losses, and, let’s be honest, your organization is contributing to this loss as much as your peers unless you are taking multiple initiatives to minimize it. (See: Roughly Half a Trillion Dollars Will Be Wasted on SaaS Spend This Year and up to One Trillion Dollars on IT Services. How Much Will You Waste?)

Moreover, just because you engaged / acquired one of the SaaS spend analyzers and optimizers (that we chronicled in our piece on the Sacred Cows) to optimize your SaaS spend, that doesn’t mean you’ve optimized it. Amalgamating your licences to less platforms, amalgamating the spend to one invoice, and then ensuring all of the licenses are assigned to active employees is a good start, but that still doesn’t mean you are getting your money’s worth. First of all, this only works for commodity software — it doesn’t work for big back-office systems like your ERP or finance platform where you have to negotiate direct with the vendor. Secondly, it doesn’t work for cloud costs. Thirdly, it’s just software costs, not service/support costs. Finally, if the platform isn’t doing what it is supposed to do and the vendor is not supporting you, every dollar you are spending could be wasted. That’s why Vendor performance management in IT Software (Platform) and Service categories is critically important.

That is precisely what VendorScoreIT was founded to do. Allow a SME (or larger) organization to monitor and manage it’s IT vendors on a regular basis through scorecarding-based performance management at a price any organization can afford (with pricing that starts at an amount that can be paid on a P-Card) while also providing that SME (or larger) organization the support to do it right.

Now, you might think that such a solution wouldn’t be needed as there are SXM solutions with scorecarding and good performance management modules, and that’s true, but most of these were designed for large organizations with a six figure price tag to match — which puts these solutions out of reach of SMEs, and especially those that just need to get their IT and strategic suppliers under control. (In other words, while VendorScoreIT was initially designed to help an organization manage its IT vendors, which are typically the most significant unmanaged vendors in many organizations, it is generic enough that it can be used to score any supplier.)

The solution is a scorecard driven solution, where you can define scorecard models by vendor type, primary service, and/or platform offering; break scorecards up into core areas (operations, partnership, innovation, and procurement) and measures by area; associate multiple scorecards with a vendor (based on services and/or platforms you want to score and monitor individually); define scoring intervals (and the solution will automatically initiate scorecard rounds on the interval you define and invite all of the individuals you want to score it); and define who you want to score each individual scorecard (and average the scores across all respondents).

The platform, which allows an organization to define its areas and measures of interest, also allows them to define default service model and platform scorecard templates, and then associate these with the vendors it wants to scores. Vendors can be grouped by type and tier for easier management, and the platform comes with predefined models for SaaS vendors and system integrators to jump start an organization’s vendor management initiatives. (Supporting non-IT vendors is just a matter of defining any additional areas of relevance, and the measures for those areas, in the metadata for the products (which would fall under platforms) and services the vendors offers, defining default scorecards, defining a new vendor type, and associating the relevant product and service scorecard with that vendor.)

The platform makes it super easy to see overall performance by vendor type, vendor, vendor service or platform, for a time-period of your choice (and to output those scorecards to Excel) — offering simple drill down / drill up functionality scorecards to allow a user to quickly identify where a supplier is doing well, where it’s not doing well, and how it’s doing with respect to its peers. It’s also super easy to pull up the comments associated with a measure that you drill in on, which can give you insight into why a score is high or low.

Right now, it doesn’t have any integrations with third party data sources (for risk, environmental, financial stability, up-time metrics, etc.), but an Open API is coming that will allow you to integrate some metrics with ease, or initiative management (when you decide you need to take action on a supplier who is underperforming in a critical area), but that is currently being designed and will materialize at some point (and most organizations already have a project management platform they prefer to use).

But the platform does come with a considerable amount of expert advice and support to jump-start your initiative, from experts with almost two decades of vendor management experience (especially in IT), depending on what service level you buy. With the

  • Professional Plan: in addition to customized scorecards, you get guided performance reviews and quarterly strategic sessions
  • Premium Plan: in addition to everything in the professional plan, you get a customized vendor management framework, monthly strategy sessions and targetted strategic vendor consulting

However, it has the collaborative scorecarding many SMEs are missing in their platforms and, more importantly, has it at a very affordable price-point, with premium service options available where one of their experts will help you with initial scorecard creation, vendor assignment, performance review training, and even regular strategy sessions and supplier performance management training. VendorScoreIT is all about making vendor performance management accessible and affordable for all organizations in a package that anyone can use, and get going with quickly. If this sounds like something you could use, you should check it out.

Need Some New Equipment? Then You Better Get that Financing APPROVEd!

Ten years ago, SI was one of the first sites to cover KWIPPED, which was one of the first, and now likely the oldest (and biggest), marketplace for equipment rental procurement for all your equipment rental needs. Launched to help businesses with idle equipment and equipment rental agencies connect with businesses that needed to rent equipment for the short to long term, it served a niche in complex and project procurement that the major procurement platforms weren’t (and still aren’t) solving.

It works well, and worked well since day one as it grew quite fast, and while it met a lot of the market needs, it didn’t solve all of the market problems that were out there in equipment procurement for precise/complex projects and one-time acquisitions. Namely:

  • Some buyers wanted to rent to own, but suppliers weren’t (or couldn’t afford to be) offering that
  • Some buyers wanted to lease, or lease to own, for long periods of time, but needed up front financing (which suppliers couldn’t afford)
  • Some suppliers wanted to help buyers get financing, but they could only recommend a few lenders, who were often:
    • too strict in their lending criteria
    • too costly with their rates
    • too slow, and buyers walked away
  • Some suppliers didn’t like the loss of visibility into, or control, of the sales process with current lending processes (send the buyer away to a third-party lender and hope she comes back)
  • Many lenders didn’t like random referrals they were unlikely to ever approve (which wasted their time), or the spray and pray tactics savvier buyers who knew how to find options would use (which wasted their time)

In other words, buyers and suppliers wanted financing options so they could lease to own (or even buy outright), but neither of them liked the current application and approval process, and lenders wanted an easier, more efficient way, to get requests relevant to their lending business, so they could waste less time in approvals and more on hitting their lending targets (because they need to lend to make money).

Being techies, the founders of KWIPPED, who started off by making introductions to potential lenders on behalf of suppliers they knew well and buyers who asked, realized there had to be a better way to solve this problem, because forcing buyers to go offline and deal with a lender through old-school fax and email just wasn’t a good experience for anyone. They realized that there should be a platform like Lendgo (that could obtain, and compare, personal mortgages and refinancing options side-by-side), but for business equipment financing and leasing, and, more importantly, one that meets the need of all three parties, not just the buyer or lender.

So that’s what they set out to do, and they do it through the APPROVE marketplace (which can be accessed through the KWIPPED platform, the seller’s website, or even a third-party marketplace through a plug-in).
In KWIPPED, or a supported supplier marketplace, when a buyer brings up a listing, they will see the buy-it-now price, the rental price, and the estimated financing price (per month) based on the equipment type and a predictive model based on a database of over 75,000 financing applications and 3+ responses to each (which allows them to predict, with high accuracy, the estimated financing for that item for a buyer with average or better credit rating).

To start a financing application, it’s a 60-second process for the buyer who just needs to fill in some basic details to kick the process off. At this point, the request will be routed to a supplier’s financing (assistance) department if they have one, or the APPROVE financing team who will contact the buyer for any specific information required to make a lending application, get clarity on their needs, augment the application with the right data in the right language to optimize clarity and success with the lenders, and then, when the application is ready, kick off the automatic application process in the system.

Unlike many of these marketplace financing/mortgage/insurance platforms, the APPROVE platform is not a spray-and-pray platform or one that relies on buyer expertise to build a short list of potential lenders to send the application to. Once all the information has been collected, they use a predictive (machine learning) model that has been trained on this data set of over 75,000 financing requests, over 300,0000 quotes, and third-party risk and financial data on the buyers and sellers to predict which vendors will approve the financing and what the rates will be, and then send it to the top 3 vendors with the lowest predicted rates and a high chance of approval. If one or more of these vendors denies, it will continue down the list of potential lenders (who are predicted to charge higher rates and/or have a lower chance of approval) until it gets 3 quotes for the buyer. And, if the financier on the APPROVE or seller team happens to know that a particular lender is more or less likely to approve a specific request based on experience, they can override the rankings and issue the request direct to the lender (but generally the platform works quite well and it’s best to let it work its predictive model).

This is a very important differentiation. You don’t want to send a financing request to just any lender because:

  • some very risk averse lenders will only approve the top top tier of buyers (the cream of the crop that could probably afford to buy outright), and you’re just wasting your time
  • some less risk averse lenders will lend to anyone, who want to pay exorbitant interest rates that are 2X to 3X prime (and should only be a last resort)
  • some lenders specialize in certain industries and equipment types, and don’t want to lend outside their domain of expertise
  • etc.

This means if you don’t target the financing applications properly, you are going to get a lot of lender rejections or a lot of bad offers that the buyer won’t accept, leading to a lot of wasted time on all parties (and platform mistrust). Through laser focussed targeting, buyers know they have a real shot of getting financing at a rate close to the predicted value, sellers know that buyers are serious if they follow through with the application, and lenders know that, if they want the business, they have (at least) a 33% chance of getting it. That gives these lenders better odds than banks offering a mortgage! Moreover, since APPROVE targets the quote requests, the odds that they will be willing to quote the application is 80% or more, compared to 50% at best for a random application. This means that APPROVE is at least 60% better for lenders than random seller referrals, making it worth the lender’s time to process buyer applications from the APPROVE platform much more quickly.

Moreover, unlike most of the market “lending” platforms out there, all parties have complete visibility into where the application is at all times.

The buyer can see when the financing request has been formally issued to the lenders, when a lender has returned a quote or rejected it, and then the 3 quotes side by side once 3 are received (and then select one to accept through the platform).

The lender has a view into the status of all of its open requests, as well as its request history, and all communications between it and either the APPROVE or supplier financing team (to collect any additional data it decides that it needs to issue a quote).

The lessor/seller can see where the process is at any time for each buyer that submitted a financing request, any communications that went back and forth between the APPROVE financing team and the lender (on the lessor/seller’s behalf), what quotes were returned, and when a buyer has accepted a quote and then begin the process on their end of completing the transaction without delay.

The APPROVE platform, especially when accessed through KWIPPED, a supplier web site, or third-party marketplace, makes the entire process of finding the right equipment, engaging with the supplier, getting the right financing, and closing the deal smooth, efficient, and relatively painless for all parties.

So while, like KWIPPED, this is NOT a typical sourcing or procurement platform that SI would normally cover, it is a very important platform nonetheless as most of your direct, indirect, and complex services sourcing platforms don’t enable the identification of rent-to-own or lease-to-own options when you need to temporarily (or permanently) acquire new equipment for a new construction, commissioning project, factory, or lab, and definitely don’t help you with financing when you can’t afford to, or don’t want to (because you have other, better, uses for your working capital now), pay for the equipment up-front. Like KWIPPED, APPROVE fills a very specific niche that is overlooked until it is desperately needed, and one that any organization that needs to rent or buy equipment, that just can’t be sourced or procured through normal S2P/P2P platforms, should know about.

Find a Supplier You Won’t Part Ways with Using PartFox!

Partfox, billing itself as AI-Powered CNC Matching, Locally or Globally, is an offering from a Zurich-based tech company that was created to solve the dual problems of

  • allowing a buyer to find CNC (Computer Numerical Control) factories that can precisely meet the buyer’s need for a custom manufactured part, allowing the buyer to short-circuit a long discovery and qualification cycle only to find out that a factory doesn’t have the right equipment that meets the stringent manufacturing and metrology needs, can’t work with the desired materials, doesn’t have the right certifications, etc. etc. etc.
  • allowing a CNC factory to advertise its services to buyers who can quickly qualify it for RFPs and purchases

<p[> Partfox is the primary offering form Orderfox, founded in 2016 to meet the needs of the industrial B2B sector, of which they saw one of the greatest needs to be CNC factory location and matching for precise part pairing. While you may not have heard of them, they have been valued in Europe as a Unicorn startup and are just entering the North American marketplace.

For the Buyer

PartFox is an AI-driven commission-free global (and local) network (that can be accessed at no-cost for simple searches) that matches buyers with manufacturers that can meet their exact part manufacturing needs with exact machining capabilities, and can even take into account capacity and availability. When they say perfect match, they mean it because they can take into account the exact machining (including metrology) requirements, material requirements, dimensionality, volume requirements, region and country requirements, and certification requirements.

Using the platform is just a matter of

  1. creating a profile
  2. uploading your part file as a PDF (which will be parsed by an advanced AI solution) or an ISO 10303 Standard for the Exchange of Product Data STEP (STP) file (which allows for even more precise parsing due to its standard formats for 2D and 3D geometric data)
  3. specifying the region and capacity requirements

and then letting the platform find the matches. Then, a buyer can reach out through the platform to the manufacturer to let them know of an opportunity for an in-network manufacturer or connect through the manufacturer’s website for an out of network manufacturer. Using Partfox can significantly speed up an average direct Procurement process, and once an organization has embedded such a solution into their direct Procurement process, they can see cycle time improvements of 30% to 40%.

Partfox is a lot more than just a simple matching marketplace. First of all, it supports over 60 metrology and manufacturing technologies, which means matches are much more precise than traditional supplier discovery solutions. Secondly, it has the largest network of CNC manufacturers with almost 100,000 manufacturers currently in its database. Like Tealbook, it can scour the web for manufacturers and, when it does so, identify the equipment, metrology, and manufacturing capabilities it publicly identifies. It then creates a record and sends an invite to that manufacturer to register on its network to update its profile with any additional capabilities and maintain it over time.

I’d like to call out the 100,000 manufacturers. This is one of the largest, if not the largest, listing of CNC manufacturers out there, and definitely the largest we’ve seen with deep part match capability. It’s that latter part that counts when doing supplier discovery for custom manufacturing.

Before, or after, doing a search, the buyer can create a request for one or more parts, which contains the basic details required for exact matching extracted from the uploaded PDF or STP file, and specify the quantity and basic RFP requirements of quantity, delivery date, incoterms, currency, language required for communication, and deadline to express interest. This can then be pushed to all matching manufacturers in an area, or a subset of your choice, and can be published as public (where any manufacturer can search for, see and respond to your request) or private (and restricted only to verified manufacturers on the platform, as per the tiers defined below). In addition, block lists can be defined to ensure that certain manufacturers will never (ever) see it.

It’s important to call out that the buyer has full control over the specifications the manufacturers see and can limit part file access to verified, select, or NDA-accepting manufacturers only.

This, however, is where buyer capabilities end in the current release as the platform does not yet support RFP responses in the platform (which is slated for the next major release). This means that they will have to (re)create a full RFP in their default sourcing platform when they want to collect price and auxiliary data and invite the newly discovered manufacturers to their formal process (which is easy since Partfox will give you all known contact information in the organization summary).

Also note that the current release does not integrate with any Source-to-Pay, Supplier/Vendor Management, or ERP systems or come with an Open API that allows you to export the basic RFPs you define and matching vendor profiles. They are currently working with select customers on an advisory board to determine what would be the most meaningful and efficient method of integration, which will appear in a release after the RFP response functionality has been completed, and the methodology will either be:

  1. create the RFP in the ERP/S2P and push to PartFox
  2. create the base RFP in PartFox, and then push the selected vendors and responses to the ERP/S2P
  3. create a new standard export format and/or Open API and to each customer its own (which will likely come eventually anyway for customers that don’t use a standard S2P/ERP, but we all know that most customers want an out of the box solution, so you will likely see [a] or [b] well before this option)

(Early adopters will get input into these and similar product roadmap decisions!)

For the CNC Manufacturer

They can register on the platform and maintain a basic profile for free, before or after their website has been discovered (and if before, the platform can parse it and pre-populate some basic data in their profile for them) and be included in searches (but not in priority rankings), which ensures their profile is always up to date and accurate. For priority rankings they can purchase a basic (essential), intermediate (superior), or full (concierge) membership which will give them the ability to define capacities and show up in highly tailored requests (at the basic level), achieve a higher search rank and embed images and pictures in an enhanced company profile with a verification badge (at the intermediate level), and, in addition to a top search slot (as concierge vendors are ranked before superior vendors who are ranked before essential vendors who are ranked before free vendors), concierge-level manufacturers receive expert deal support, preferred buyer recommendations, and exclusive concierge deals.

Moreover, member manufacturers can access the integrated order management system that allows them to get (real time updates on) RFP invitations from buyers, see order requirements, and respond that they are interested directly through the platform. Moreover, premium members can access support services to help them identify potential buyers, access private RFQs, and get help with responding to buyer RFPs.

The supplier profile allows them to specify where they are, how to contact them, and all of the capabilities and certifications that the platform will match on including metrology, machinery, materials, and technologies — with over 60 different technologies supported along with all of the corresponding material, machining, and metrological capabilities of relevance.

So if this sounds like a solution that can solve your direct manufacturer supplier discovery process, which is becoming more critical by the day, you should check Partfox out. It is definitely worth your time to do so.

The Pundits Agree. Winter is Coming!

In a recent LinkedIn Post, THE PROPHET, a year late to the party (see the SI and Procurement Insights archives, and our Marketplace Madness post in particular), finally announced that Winter is Coming: The Great Procurement (and Broader) Legacy SaaS Rationalization and that it is going to be a very cold winter that will be Swift. Brutal. And very, very final.

There’s too many companies that took too much funding at too high a valuation with nothing to show. PE firms will be dropping these companies faster than a hot potato into boiling lava pits to focus on the companies in their portfolio with current year-over-year growth in hopes of making some of their losses back. Too many companies started without doing any research and literally built the 10th AP clone, SXM clone, RFX clone etc. of a dozen already existing solutions. (Just check the mega map if you don’t believe me.) In a race to the bottom (which helps no one), they’ll lose due to their lack of a bank account as they slash prices too deep in hopes of getting customers. Too many applications took a silo focus, didn’t build Open API centric, and the hurdles of plugging them in will be too much or too costly, and no matter how good the tech is, they won’t get bought.

And then Agentric AI will thin what remains (but not lead the cull as THE PROPHET predicts, because these AI solutions still cost money, and sometimes a lot of it, and for what they cost you can hire a real expert and not a fake one, license a few augmented intelligence tools for a quarter of what these over hyped Agentric AI platforms are charging (because they raised, and wasted, too much cash and have to recoup that before they become the next hot potato dropped into the lava pit by their PE investors), and have a super-human employee who does the work of an entire team, error free (with little to no risk of that skilled employee getting you sued as a result of a conversation, installing a back door for hackers on your systems, shutting down your systems for days, costing you 10X on a purchase due to a dot transcription error, or increasing your internal fraud [link]).

And for some of these companies, it’s already too late to pivot. For others, there are actions they can do. THE PROPHET offered some:

  • risk over-cutting
    (if done smartly)
  • consumption-based models
    (which will be more attractive to some potential customers)
  • challenge the team to earn their existence
    (but that doesn’t necessarily mean prompting GPT like a pro: you don’t want junkies)
  • redefine the sales org
    (a better playbook is key, and it needs to be differentiated)
  • Skip the Fairy Dust and Buzzwords
    (Hear! Hear! I’ve been shouting that for years! Unfortunately, not sure most of the companies out there know how to do that though! I know for a fact only the squirrels have been listening to me, and they are getting very tired of that rant. They like variety. Basically, it’s been a long, long time since marketing focussed on education and value and startups priced based on that.)

And that’s just the tip of the iceberg. SI has posted entire series on:

Failures from those who raised too much and offer too little will be coming fast and furious. This needs to be repeated. You need to be very careful which vendor you buy from and what protections you have in place if they don’t make it. (In particular, there must be a “we own our data” clause which gives you the right to all of your data and the right to export all of it into a standard file format at any time, and that specifies your data includes rules and workflow configurations and the right to export those too — for example, in spend analysis, it’s not just the data, it’s the rules that create the cubes; in invoice processing, it’s the workflow and approval rules … you won’t be able to migrate to another system quickly if all you have is the transaction data, the data that defines the processes and rules is just as important. And if you can’t export all of your data, rules, templates, etc., at any time, then don’t buy the system!)

However, while the app consolidation will be brutal, as will the renegotiations if you want to be one of the apps that make it (now that organizations are realizing they don’t need 17 apps for S&M and probably shouldn’t have 17 apps in any function, including Procurement), Agentric AI (especially at 20K a month when you can hire a REAL person for 1/4 of that) will not replace people en masse (but AI-enabled technology will). Teams will be cut and replaced by two individuals who can use next generation augmented intelligence solutions that can truncate months of research and analysis to a few days and allow strategic decisions to be made in hours, not weeks, and shifts to be made seemingly overnight while eventually allowing 99% of all tactical data processing to be automated through evolving rules and workflows under expert guidance.

Moreover, at the end of the day, relationships are not built on 1s and 0s, and they are needed now more than ever. So not only will we have skilled technologists, but skilled relationship managers. (While everyone else who does nothing but push e-paper 90% of the time or code spreadsheets will slowly be eliminated.) Of course, this means if you don’t understand optimization, analytics, statistics, game theory, economics, and logic, or you’re not an expert in relationship management, you’re screwed, but everyone had a chance to study STEM in University (and skip the woke liberal arts) and learn the technical skills for the first set of jobs.

So this also means if the platform is not enabling this next generation of employees to become more and more productive over time, its lifespan is probably short.

So get focussed in your diligence efforts on solution acquisition if you don’t want your platforms disappearing out from under your virtual feet, and if you need help, call an expert!