So Why Shouldn’t We Talk About the Future of Procurement?

In yesterday’s post, we talked about the fact that conference season is around the corner and, with it, plenty of talks on the Future of Procurement, Procurement in 2015, and Procurement 2025 — What it Will Take to Get There. We noted that the doctor is beginning to really despise this because it’s repetitive, unnecessarily stressful (with the false sense of urgency for the wrong solution), and, most importantly, focussed on the wrong question. It’s not what the analysts and vendors think the future is, it’s what the future needs to be for your organization to be successful (and solvent) and what you need to do to get it there. These are not one in the same.

So why is it repetitive? the doctor recently reviewed dozens of “future” studies, papers, articles, PowerPoints, and posts written in the last year and compiled a list of 33 commonly identified “future states” that Procurement is supposedly, according to a plethora of authors that shall not be named to protect the guilty, going to have. The majority of these have been “future states” for years (and are old news). Only a minority are still somewhat innovative (and are ongoing blues) if looked at in the right light and only a portion of these from a select few forward-thinkers are truly new (like a pair of shiny new shoes) and informative and relevant to a future-state discussion as these select few trends have not yet been discussed and drubbed for nearly a decade, and, in a very small number of cases, could not have been foreseen a decade ago.

To illustrate my point, the doctor is going to discuss the full list of 33 “future states”, of which at most 7 “future states” are truly new and forward thinking and relevant to a current discussion. The majority are old news and ongoing blues. Once we get through the old news and ongoing blues, which will take us over a week, we will discuss the 7 “future states” that are still new and shiny and that were not clearly visibile through the long-range telescope as recently as five years ago. Given that we have 33 “future states” to get to, starting with tomorrow’s post, we’re going to dive right in.

But before we continue, let me make one thing very clear. These posts are categorized as rant for a reason. Just like the doctor has no restraint when it comes to rubbish, he has literally no patience for puff-pieces, which he has recently read a lot of. As a result, he’s not pulling any punches with this series. So if you have a habit of reading, sharing, or promoting these pieces, unless you’re ready for a rumble, you might want to go hop over to Spend Matters for the next week where I’m sure you’ll find friendlier pieces. Because, in this series, I’m going to call a duck a duck, a spade a spade, and an idiot an idiot*. the doctor will do his best to keep the language Safe for Work, unless you mention a trigger word, but the bile will likely bleed through where it is well deserved. You have been warned.

* the doctor is well aware you catch more flies with honey than with vinegar, but he doesn’t want to attract any annoying little insects with brains smaller than a mustard seed who, after spending the bulk of their day in someone else’s excrement will, despite being swatted at repeatedly, continue to buzz around senselessly until they get their brains bashed out.

It’s Conference Season Again — Do We Have to Talk About the Future?

Conference season is around the corner and, with it, plenty of talks on the Future of Procurement, Procurement in 2015, and Procurement 2025 — What it Will Take to Get There.

Regular readers will know the doctor is beginning to really despise this. Why? First of all, as will be outlined in an upcoming series of posts, it’s a lot of the same old, same old … which, in some cases, will be recycled for the tenth year in a row. Second, many* of the solution providers will be doing their best to instill in you an unnecessary sense of urgency to adopt second rate sourcing and procurement solutions that you aren’t ready for or that won’t deliver the returns you need now. (While 9 out of 10 companies do need better sourcing and procurement solutions, the solutions these companies need to start with often aren’t the solutions that money hungry solution providers push upon them.) Third, and most annoyingly, come the questions on what does the doctor think the future of Sourcing / Procurement is.

Why is this annoying?

  1. A Future Vision Doesn’t Change Much In Six Months

    Conference season is every six months, but unless a radical, ground-breaking, unexpected innovation hits the scene, between one conference season and the next, one’s future vision is not going to change a heck of a lot. And when one considers there has not been any radical new offerings in Supply Management in over 5 years, one’s future vision doesn’t have much reason to change at all.

  2. Tomorrow Has Come And Gone Many Times, but The Promised Future Has Not Arrived

    If you look at the predictions for 2020/2025, they are not that much different than the predictions for 2010/2015 that were made 10 years ago. Why? First of all, as per our last point, there haven’t been any radical new offerings in Supply Management in over 5 years (just steady improvements, with a few providers progressing much faster than others). Second, adoption of mainstream sourcing and procurement solutions remains slow. Third, the best solutions, and the advanced solutions that an organization really needs to make an impact on their Supply Management return, have not yet been adopted outside of a handful of best-in-class organizations.

  3. It’s Not What You Think the Future Will Be, It’s Where You Need To Go

    When an organization asks What’s the Future of Procurement, it’s asking the wrong question. First, while most of the consultancies, analyst firms, and providers feeding these consultancies and analysts firm their provider preferred messaging tend to agree on what the future is at a high level, each tends to tailor their message to the product or service offerings they can deliver to you today. Second, the future is in a state of flux due to uncertainties in supply management, business, and globalization. Third, and most important, it doesn’t matter what the future is, it matters what the future needs to be for your organization to succeed. The question an organization needs to ask is what is our Procurement Future — where do we need to go to succeed.

So while it’s very important to plan for the future, it’s very annoying to keep talking about it again and again in a way that adds nothing to the message. So, since the medium is the message, unless you want to be annoying, let’s ditch all this feel-good future talk and focus on figuring out how to get the right solutions into the companies that need those solutions now if those companies are to have any hope of having a future. Capis?

*Many, but, fortunately not all. But do you know enough to tell the difference?

Optimize, don’t Compromise!

Continuing on our theme of analysis and optimization, every e-Sourcing suite on the market will support your organization in its sourcing activities, but not every product will allow your organization to optimize it’s sourcing activities.

Optimization requires advanced sourcing capability, and advanced sourcing requires the ability to analyze data, not just collect and report on data.

This means, that at the very least, you will require:

  • true spend analysis,
  • true category analysis,
  • true cost-based bidding, and/or
  • true bid optimization.

Without at least one of these capabilities, you’ll never optimize your spend. So don’t even both to try without them.

Why Bidding Flexibility Is Important to e-Auction Success

Regardless of what you want to call it — expressive bidding, lotting, market baskets, informed sourcing, etc. — the ability to let a supplier bid the way they can give you the best price is very important to e-Auction success. If all you can support is simple auctions on an item by item basis, and quotes on an item by item basis, you are not going to get the best deal.

This is rather easily illustrated. For example, let’s say your business is clone computer assembly for mid-sized businesses who don’t want the Dell or HP premium. Let’s also say that you buy six different components for these computer assemblies: cases, power supplies, motherboards (with on-board everything to keep it simple), memory, hard drives, and cable packs.

If you are forcing a supplier into separate bids by item, and the level of detail they can quote is price per unit, shipping per unit, and extended warranty per unit, you’re probably going to end up with quotes looking like this:

Supplier 1 Supplier 2 Supplier 3
Component Unit Freight EW Unit Freight EW Unit Freight EW
Case 20 5 1 22 4 1 18 6 0
Power Supply 40 3 6 36 4 3 38 4 2
Motherboard 199 5 24 195 5 19 189 5 30
Paired Memory Pack 49 2 4 47 3 6 51 3 4
Hard Drive 78 4 12 74 3 8 81 4 7
Cable Pack 22 4 0 24 3 1 19 5 0
Total 49 2 4 305 12 30 37 11 0
Grand Total 450

Not bad for a clone server, but if you bid out the basket and allow the supplier to bid on just the components they want and do so as a bundle, you might find that you get this result:

Case Power
Supply
Mother-board Memory Hard
Drive
Cables Freight Warranty
S-1 B-1   19   38   20   8   5
S-1 B-2   45   71   5   8
S-2 B-1   20   33   6   2
S-2 B-2   195   14   5   10
S-3 B-1   45   72   5   9
S-3 B-2   185   14   7   30
Grand Total 414

An 8% savings by allowing a supplier to bundle bids according to their operational efficiencies!

Get it now?