Forty Five Years Ago Today

The United States of America, under the leadership of Richard Nixon, launched Landsat-1, the first satellite of what began the US’ Landsat program – the longest running program for the acquisition of satellite imagery of Earth. (We are now up to Landsat 8, launched four years ago on February 11, 2013.)

As succinctly summarized by Wikipedia, the images collected and archived at receiving stations around the world are a unique resource for global change research and applications in agriculture, cartography, geology, forestry, regional planning, surveillance and education, and can be viewed through the U.S. Geological Survey (USGS) ‘EarthExplorer‘ website. For example, the latest, Landsat 7, records data across eight spectral bands with resolutions ranging from 15 to 60 meters and a temporal resolution of 16 days.

And while Landsat 1 only had two sensors, the return beam vidicon (RBV) and a first generation multispectral scanner (MSS) that recorded, respectively, visible and near infrared photographic images and radiometric images, this was still extremely valuable imaging data where none had existed before. And without it, we’d never have Google Earth.

The Advanced Supply Management Phoenix …

… that rises from the ashes and replaces the modern Procurement organization that has one foot in the grave and one in the fire. But this is not just the advanced sourcing that SI has been preaching this year, not just enhanced category management, not even just enhanced supplier relationship management or supply base management. This is really the creation and implementation of design by sourcing. Not design for sourcing, which some extremely advanced organizations are attempting (which is akin to design for recycle, which is part of design for sourcing), but truly a significant evolution of the entire function — as the only other option is, as far as the doctor can tell, to accept that it’s in its final days and will soon die out of existence regardless of what future, described in our previous two posts, comes to pass.

The reality is that the word is changing and no one needs someone who’s only job is to find a source for a product or service. Thanks to the internet, anyone can do that … and have it delivered as early as the next day if needed as these sources generally integrate with multiple global logistics carriers which have extremely quick, air-ship, options for anything from small packages to entire cargo holds. Even if the worst case happens and we get with a mega solar storm produces a solar flare 5X as powerful as the Carrington Event and takes down every power grid on earth, and the internet with it, for weeks to months, it will still be possible to find sources of supply as, guess what, you’ll be going local … back to all the factories you used to know. And you’ll be paying local currency or, more likely bartering, and it will be sales guy vs. sales guy negotiating, because that’s what they do.

So Procurement needs to evolve, fast, or join the elephants in the elephants’ graveyard. Because, let’s face, it, without evolution, that’s the only place Procurement will soon be welcome. (It won’t even be welcome in the local cemetery. With real estate becoming scarce for every use, cemeteries will soon be reserved for the honoured dead. Procurement will not even be among the honoured dead.)

But it has to go beyond the natural evolution to an Advanced Strategic Sourcing function. While this will get it over the hump and extend it’s longevity by (at least) a decade, as it will be finding value that its peers will not (for all of the reasons covered in the many posts on advanced sourcing this year, and more, on why you need to adopt an advanced sourcing solution) and have the support of the CFO as long as the value increases (and superficial savings keep hitting the bottom line), it won’t be enough. At some point, there will be template models for all the categories, including the simple tail spend categories (that will have simple models for optimization-backed options) and anyone will be able to start with those models to source their own products and services, or just turn it over to a cognitive procurement solution that will do the sourcing on its own.

So where does it need to go? Stay tuned for our next post in the series.

The Procurement Wasteland …

… is well on its way, as we discussed in our last post. Buying is not difficult anymore. Thanks to the internet, anyone can find a dozen potential suppliers. Free RFX and Auction technology, alongside good old fashioned e-mail, allows anyone to solicit bids, do simple comparisons, and make a buy that’s not the worst buy one can make. Heck, three bids and a buy is still better than what a lot of buyers do. And with Amazon Business and about 200 different major suppliers online with punch-out, anyone who needs anything that’s not custom manufactured can just go out and get it.

It’s a Procurement wasteland because not only are (tactical) buyers unnecessary, but, as indicated in our last post, it’s easy to replace those (tactical) buyers with cognitive systems that, armed with a few rules and a bit of machine learning, can do just as good of a job as the buyers and, with huge databases of potential suppliers at their disposal, outdo the organizational representative who’d just punch-out to her preferred site and buy the first product she found. No need for buyers, and the work they do is replaced by systems.

The big question is, is this procurement wasteland going to exist in:

  • A Mega-Corporate World,
  • A Project Economy, or
  • A Barter Economy

Mega-Corporate World

While this option wasn’t (explicitly) mentioned in the KPMG report, it is one situation where Procurement could gain primacy if, and only if, it could prove more relevant than the machines. So what is the mega-corporate world? It is a world where the M&A Frenzy continues like crazy across all sectors, where the big get bigger and only a few companies dominate in each category, and you have a select few buying from a select few for the majority, but making sure that those that are bought from properly orchestrate further down the chain because even though mega-cos might own most of the little mom-and-pop shops that supply the raw materials, orchestration is still key to cost control, and these little mom-and-pop shops will be bought and sold like shares in the stock market as balance sheet adjustments appear necessary. And since there are only a few real suppliers, you just carrot-and-stick negotiate between the sales folk, as the corporate landscape is now so small they need what you produce too, until you get the deal you want and you’re done.

Project Economy

As more and more professionals go freelance, and more and more companies try to trim the fixed overhead on the balance sheet by outsourcing more and more to freelancers (who don’t come burdened with health care, retirement contributions, and other benefit costs), we switch to a project economy where mega-corporates still exist on paper, but the organization is primarily a balance sheet that orchestrates projects which are led by freelancers in a project economy. In this economy, the project manager is the purchaser, and she buys how she sees fit.

Barter Economy

A solar megastorm produces a solar flare 5X as powerful as the Carrington Event and takes down every power grid on earth, and the internet with it. All forms of instantly electronic currencies cease to exist, and global communication, and trade, status reverts to what it was in the early 1900s. After the initial panic, riots, and lootings, the power grid is restored in major cities and the global internet restored a few weeks later, but faith in any form of electronic currency crumbles. Especially since the global chaos makes foreign currency worthless for a short period of time and faith doesn’t come back.

In this situation, goods and raw materials are of the utmost value and trade is the name of the game. Failing that, payment in the local currency only is accepted. And unless a buyer can negotiate the trade of goods only, there is no need for a Procurement practitioner.

At the end of the day, there is no need for Procurement. it’s not only dead, it’s cremated. Only ashes remain. The only hope is …

Procurement Tomorrowland …

… could be here sooner than we think, but are we ready for it? For over a decade, everyone has been talking about Procurement 2020 and how advanced and great it would be, and 2020 is fast approaching. It’s less than two and a half years away. But what will it look like. The short answer is not much different than today. That’s why the new date is 2035, because we haven’t gotten to where every big consultancy, and vendor, proclaimed we’d be 10 years ago.

So, the big question is, what does Procurement 2035 look like? Well, last year KPMG said the future is likely going towards one of four scenarios:

  • Procurement Primacy where democratic co-existence between man and machine is common
  • World of Project Economy where companies become decentralized and most of the work is done by free-lancers and there is no central procurement department with procurement the responsibility of project managers
  • The Creative Agency where procurement becomes the primary source of business and finance model development and not only purchases for, but defines the organizational projects

or

  • R.I.P. Procurement because the age of cognitive procurement has ushered in fully automated processes that have replaced buyers

The most likely scenario now is the last scenario because the cloud has eliminated the need for tactical procurement people who buy on someone else’s behalf. Office supplies, janitorial supplies, and simple electronics? Amazon for Business. MRO — Grainger and Home Depot — punch-out online. Electronics, Best Buy, Dell, HP, Apple, etc. Point, click, and order. Custom uniforms, a few dozen suppliers can take your RFX, easily found on half a dozen procurement networks. And so on.

And if you think knowing how to set up an auction will save your job, you’ve got another thing coming. It’s not only very easy to setup and run an auction with a modern platform that makes it eBay easy, but with today’s platforms it’s just as easy to push a category to a platform with demands that can automatically invite all the approved suppliers, send them the specs, get e-Signatures on acceptance and guarantees, run the auction, make the award, send out the draft contract, get a response, analyze it, send it to legal, who can put the finishing touches and it’s off to the races with no human intervention whatsoever. Modern platforms can be set up to automate RFXs and e-Auctions with no human intervention whatsoever.

Similarly, your job is not safe if the extent of your analytics prowess is running the canned reports; identifying the top n categories, suppliers, and geographies; identifying those not under contract, and queueing those categories for sourcing and suppliers for contract negotiation. This can be easily automated too. Who needs a buyer?

In this scenario, not the organization! For Procurement, Tomorrowland is a wasteland …

The UX One Should Expect from Best-in-Class Spend Analysis … Part II

Now that we’ve taken a deep dive into e-Sourcing (Part I and Part II), e-Auctions (Part I and Part II), and Optimization (Part I, Part II, Part III, and Part IV), we are diving into spend analysis. And this time we’re taking the vertical torpedo to the bottom of the deep. If you thought our last series was insightful, wait until you plow through this one. By the end of it, there will be more than a handful of vendor’s shaking in their boots when they realize just how far they have to go if they want to deliver on all those promises of next generation opportunity identification they’ve been selling you on for years! But we digress …

The key point to remember here is that there are only two advanced sourcing technologies that can identify value (savings, additional revenue opportunity, overhead cost reductions, etc.) in excess of 10% year-over-year-over-year. One of these is optimization (provided it’s done right, useable, and capable of supporting — and solving — the right models). The other is spend analytics. True spend analytics that goes well beyond the standard Top N and report templates to allow a user to cube, slice, dice, and re-cube quickly and efficiently in meaningful ways and then visualize that data in a manner that allows the potential opportunities, or lack thereof, to be almost instantly identified.

This requires extreme usability. As noted in our last post, not everyone has an advanced computer science or quantitative analysis degree, and first generation tools were so hard to use that once all of the categories in the top n report were sourced and all the suppliers in the top n suppliers put under contract, there was no more value to be had. And the tools sat on the shelf when they should be used weekly, if not daily. If a hunch can be explored in an hour, and every tenth hunch uncovers a 100K+ value generation opportunity, that’s a 10X return that would never be realized otherwise as the analyst would never have time to explore ten hunches otherwise.

But, as with optimization, it’s hard to create the right UX. It’s not just a set of fancy reports (as static reports have been proven to be useless for over a decade), but a set of capabilities that allow users to cube, slice, dice, and re-cube seven ways from Sunday quickly, easily, and repeatedly until they find the hidden value. It’s innovative new reporting and display techniques that makes outlier identification and opportunity analysis quicker and easier and simpler than its ever bin. It’s real-time data validation and verification tools that insure that a user doesn’t spend a week building a business case around data where one of the import files was shifted by a factor of 100 because of missing decimal points, destroying the entire business case in 4 clicks. And so on.

That’s why the doctor and the prophet are bringing you an in-depth look at what makes a good User eXperience for spend analysis that goes deeper — far deeper — than anyone has ever gone before. In a time where there seems to be a near universal playbook for spend analysis solution providers when it comes to positioning the capability they deliver and when many vendors sound interchangeable, and when many vendors are fungible in a way that is not necessarily negative, this insight is needed more than ever. And if a few vendors quake in their boots when this series is over, so be it. Last week, over on Spend Matters Pro [membership required], the doctor and the prophet published our second piece on What To Expect from Best-in-Class Spend Analysis Technology and User Design that continued our in-depth foray into this critical, but often ill-explained, technology.

So what is required? As per our first post, dozens (upon dozens) of innovative and unique capabilities, including the next generation dynamic dashboards that we discussed in our last post. In our deep dive, we explore four more core requirements, one of which is dynamic cube and view creation “on the fly”. Given that:

  • A cube will never have all available (current and future) data dimensions
  • Not all data dimensions are important;
  • Some of the essential data (referenced in the previous point) will be third-party data updated at different time intervals
  • A user never needs to analyze all data at once when doing a detailed analysis.
  • We have not (yet) encountered a system that will have enough memory to fit enough of a true “mega cube” in memory for real-time analysis.

One cube will NEVER be enough. NEVER, NEVER, NEVER! That’s why procurement users need the ability to create as many cubes as necessary, on the fly, in real time. This is required to test any and every hypothesis until the user gets to the one that yields the value generation gold mine. Because, as this blog has previously published (in why data analysis is avoided), if it is too difficult or costly to do an analysis, a gut-feel assessment as to the value that will be yielded will be done. And if it looks like the cost to value ratio will be too high, the analysis will be avoided. The end result is that the organization will never truly know if the potential value was low or high.

In other words, success requires cubes, cubes, and more cubes with views, views, and more views. With any data the user requires, from any location, in any format. But more on this in upcoming posts. In the interim, for three more requirements of a spend analytics product for a good user experience, check out What To Expect from Best-in-Class Spend Analysis Technology and User Design over on Spend Matters Pro [membership required].