Author Archives: Pierre Mitchell



About Pierre Mitchell

Pierre leads Spend Matters procurement research activities and has broader solution development responsibilities for intellectual property creation and firm strategy as Managing Director of Azul Partners. This includes spearheading efforts to build new types of interactive and social communities of interest within the procurement profession including overseeing the evolution of spendmattersnet.com, Spend Matters PRO, MetalMiner, and other digital assets within Azul Partner’s umbrella. Pierre has 25 years of procurement and supply chain industry and consulting experience, and is a recognized procurement expert specializing in supply processes, practices, metrics, and enabling tools and services. He is a regular contributor to business publications, a frequent presenter at industry events around the world, and counts himself fortunate to have served and interacted with so many CPOs and future CPOs. Prior to his positions in research and advisory, he led numerous operations and systems transformations at Fortune 500 organizations. Industry positions include manufacturing project manager at The Timberland Company, materials manager at Krupp Companies and engineer at EG&G Torque Systems. He holds an engineering degree from Southern Methodist University and an MBA from the University of Chicago. In the early 2000's, Pierre was the first supply chain practitioner to become a procurement "industry analyst" as the VP of supply management research at AMR Research (now part of the Gartner Group) where he provided trusted counsel to procurement executives, business leadership, IT, and the solution providers who serve them. Most recently, he was the head of procurement research and adjunct business advisor at The Hackett Group, where he helped expand Hackett's procurement benchmarks and research studies while growing the Procurement Executive Advisory Program into a gold standard membership-based procurement advisory service in the market today.


Supply Dynamics: Vendor Snapshot (Part 1) — Background & Solution Overview

manufacturing

Direct materials procurement is similar in some respects to indirect procurement: you want to see your spend, aggregate demand and find opportunities to reshape your value chain to unlock value. But that’s where the similarities end. Analyzing direct spend (especially across multiple tiers of supply) is sometimes like seeing a cloud of smoke coming out of your tailpipe — you know there’s something wrong but don’t know the cause. For indirect spend, you basically change the oil, replace the air filter and hope for the best. But for direct spend, you need specific engine diagnostics to figure out what’s driving performance and how much you could potentially improve. And unfortunately, in many cases, the manufacturers of those engines parts don’t want you poking around under the hood.

Whether it’s for plastics, resins, hydrocarbon feedstocks, agricultural commodities, standard catalogue parts, electronic components or metals, you must translate your demand for parts into the raw materials that go into them. And you must understand the demand volumes, supply chain capacities and processing capabilities that drive that pricing — especially if you want to tap into aggregated buying channels beyond the stuff you buy to support your own internal factory requirements.

This intersection of supply chain modeling, demand forecasting, demand-supply reconciliation, demand aggregation and commodity price forecasting is where Supply Dynamics plays. The idea originated with one of North America’s largest privately owned metals distributors where the opportunity to roll up demand information across OEM customers and their outside contract manufacturers gave it a unique opportunity to build out specific analytics that would help it size up opportunities for its customers and itself. But last year that technology was liberated from its previous owners and is now a commercial offering for any manufacturer or distributor that wants to optimize its own extended supply chain.

This Spend Matters PRO Vendor Snapshot provides facts and expert analysis to help buying organizations make informed decisions about whether they need a solution like Supply Dynamics to expand their analytics initiatives into previously unchartered materials and supply chain components. Part 1 of our analysis provides a company background and detailed solution overview, as well as a summary recommended fit suggestion for when organizations should consider Supply Dynamics. The rest of this multipart research brief covers product strengths and weaknesses, competitor and SWOT analyses, user selection guides and insider evaluation and selection considerations.

Coupa’s Open Buy Solution with Amazon Business is a Game-Changer for Unified Catalog Management and Real Guided Buying

Electronic catalogs are a pain in the ass. Twenty years ago, early e-procurement implementations were always dragged down by the work required to build electronic catalogs. And things haven't changed that much. The problem is that you force suppliers to publish (i.e., replicate) catalog content to their buyers’ various system or to electronic marketplaces — unless you use supplier-hosted catalogs that you “punch out” to. This is nearly always implemented as a Level 1 punch out, where the poor buying employee has to click on various supplier icons to get to the right websites where their buying experiences are controlled by the seller (i.e., “guided selling”) rather than the chief procurement officer (CPO) preferred metaphor of guided buying.

The next level of sophistication is a Level 2 punch out, where supplier catalog content sits next to internally curated corporate catalog items before a punch out occurs when the right item is found. The problem, however, is that a supplier still has to syndicate (replicate) all of the content that a CPO wants to expose to corporate employees. And it’s even worse because the type of catalog items in question are broad assortments of infrequently ordered items that make up tail spend. Are you really going to get someone like Amazon Business to syndicate content from hundreds of millions of items to your buy-side catalog? No. Also, the number of suppliers that support Level 2 punch out is extremely low (perhaps fewer than 100 suppliers globally), which is not surprising given that they have to syndicate massive catalogs to multiple channels. Syndication/replication is not a great long-term answer for anyone when an API can be built to serve up the content on demand.

Speaking of Amazon, Coupa has worked with Amazon Business to develop a Coupa solution called Open Buy. The offering changes the paradigm to allow “guided buying” through a more unified experience that actually implements Level 2 punch outs properly in a way that’s palatable to the CPO, employees and the supplier (i.e., Amazon Business doesn’t currently support the existing Level 2 punch out scheme — and we don’t blame them). In this Spend Matters PRO brief, we’ll examine how Coupa Open Buy works, how it’s different and some strategic implications for the market.

A New Spend Metric: “Touched Spend” — Do We Need It?

AnyData Solutions

One of our Spend Matters Plus clients, a procurement manager in the energy sector, sent me a note asking about a new benchmarking metric that he recently saw being collected by CAPS research called “touched spend.” He sent me the following definitions below and asked me to weigh in on them, given my tenure at The Hackett Group running procurement research related to benchmarking, for sourceable spend, managed spend and also "touched" spend.

Navigating The Path From Tactical Procurement Analytics to Strategic Supply Analytics

spend visiblity

Spend visibility is foundational to any procurement transformation because to better manage supply, you have to manage spend. Spend is what you pay and supply is what you get, and to manage spend you have to see it. Yet too many procurement organizations work hard to put basic spend analytics in place but don't have a broader vision, strategy and roadmap for strategic supply analytics (i.e., the analytic capabilities to support strategic supply management). We use the term “supply analytics” instead of “procurement analytics” to reflect procurement’s increasing role in managing broader supply outcomes than just its own performance – especially in direct procurement. This Spend Matters PRO article is designed to provide you such a roadmap. It is not a step-by-step, one-size-fits-all approach because every firm will have a different experience. It is, however, a map that can guide you through plotting out your supply analytics journey.

Taking Inventory of Proactis and Perfect Commerce: Products, Strengths and Integration

Proactis and Perfect Commerce share a number of commonalities, perhaps the three most important being that they have built out similar product footprints, have been able to grow “under the radar” in recent years and have leveraged M&A as a core growth strategy. We covered the news of the announced merger between the two firms last Friday on Spend Matters, and Proactis shareholders initially responded positively to the news.

As background, Proactis’ core source-to-pay (S2P) business has centered primarily on serving U.K. customers, with a concentration in public sector. In the U.K. market, Proactis has made a number of acquisitions in recent years to round out its suite and to acquire market share. These transactions include EGS (2014), Due North (2016) and Millstream (2016). Within the U.S., it acquired Intesource (2014), to strengthen its e-sourcing and related managed services capability, and Intelligent Capture (also 2014), a provider of electronic invoicing and scan/capture services.

Perfect has served customers in the S2P area on a global basis since its founding, in 1994, but with a greater emphasis, until recently, on North America. It has made a number of smaller acquisitions over the years, in addition to its foundational acquisition of Commerce One (2006), including those that leveraged IP enforcement of Commerce One code as a bargaining chip in various transactions. But more recently, Perfect made its largest acquisition to date purchasing supplier network and P2P provider Hubwoo, to help expand its market presence and enhance its capabilities in the catalog management, marketplace and supplier network areas.

This Spend Matters PRO research brief provides an introduction and an overview to both providers, exploring the value proposition and strengths each vendor brings to the combination, including overlap and potential synergies from a customer perspective. It also touches on the subject of integration, as well as the approach we would encourage customers to look for when determining whether the acquisition will primarily benefit them or investors.

Proactis Acquires Perfect Commerce: Something is Fishy (in a Good Way)

U.K.-based spend management and e-procurement solution provider Proactis announced Friday it’s snapping up Perfect Commerce, a U.S.-based source-to-pay (S2P) provider. Assuming shareholder approval, the new company, which will be called Proactis, will be one of the largest global cloud-based spend management companies, according to the announcement. The $132.5 million deal (in aggregate consideration) roughly doubles Proactis’ revenue.

Extending Procurement Information Architecture to Provider Ecosystems (Part 3)

Infrastructure and related platforms delivered as a service (i.e., IaaS and PaaS) are becoming the new battlegrounds for the mega vendors who want to own the platform ecosystems that create the cloud applications and the business networks that connect the applications. SAP has clearly tossed more than just its hat into the ring wanting to capture as much territory as possible in the competitive land grab that is just beginning in this area. Over time, the emergence of integrated capabilities and interoperability will be good news for technology buyers, because they will help standardize and better manage the flexible procurement information architectures that we are advocating. Yet in the short term, this bottoms-up infrastructure overhaul isn’t of much use. So, many vendors are taking a leadership position in certain aspects of such infrastructure or focusing on the top-most business process aspects of such platforms.

Is the Tail Spend Problem Solved with Technology or with Managed Services?

Tail spend is a thorny problem — and an important one.

Tail spend is an amalgam of more granular spending: one time, low dollar, maverick, tactical by design. It doesn't even have a common definition understood by all, and it is generally a mess.

So, how to solve this problem? The design ideal is the concept of guided buying, where you start with the end customers (i.e., employees who need something) at the time of need and then guide them down to get what they need to accomplish their goals (but also within corporate policy). It’s an entryway to all procurement, not just the procure-to-pay (P2P), process, so you need to get it right and make the experience count.

But, who is the guide? Is it a tactical buying group in shared services or outsourced provider? Or is it a technology solution? Let’s discuss.

Procurement Agility is a Pipe Dream Without Intelligent Transformation and Procurement as a Service (PRaaS)

In a previous post, I discussed the three critical focus areas that are foundational to procurement excellence: customer/stakeholder focus, performance and transformation. They seem straightforward, and indeed they are. Unfortunately, it's hard to get them all at the same time, and get them aligned.

It’s like the old adage about buying a bike where you want it strong, light and cheap — but you can only pick two. Here’s an example to make this clearer, using tail spend management.

Take the 80% of purchases that represent 20% of your spend and you will likely find that the requestors want their stuff (or services) delivered quickly and easily. You as a category manager want that too, and don’t want maverick spending, but you’re also focused on big sourcing deals and can’t get bogged down here, nor have the time to transform your thorny tail spend problem. So, you sacrifice transformation and simply work harder within your current processes, systems and metrics.

But if you’re a more advanced firm and have sourced all of your major spend areas a few times, you may have to lower your procurement involvement spend thresholds, wean yourself off of p-cards and figure out a way to improve your stakeholder satisfaction scores when they find you and your complicated systems and policies a barrier to engaging with you more meaningfully.

So, you need to transform your processes, policies and systems to re-engineer this deceptively toxic and disparate amalgam of spending that is in the tail. More problematic, you need to revisit your procurement KPIs and SLAs (if you have them) to reflect this — especially since you also want to free yourself up to do more strategic innovation and SRM/SCM work.

Extending Procurement Information Architecture to Provider Ecosystems (Part 2)

Let’s recap where we ended up with conclusion of the first installment in this series. A range of application vendors are trying to build out native platforms or sit on top of others flexibly. For example, Coupa hedges its bets by building on top of AWS, but also partnering with IBM (on SmartCloud) and showing up on SuiteApp.com. Providers are also trying to develop healthy B2B ecosystems that are creating B2B activity and, as a result, “liquidity.” There’s no way to better monetize that liquidity than from B2B e-commerce networks for source-to-pay (S2P) on the buy side and both attract-to-order and order-to-cash on the sell side. All this talk of liquidity reminds us of a different time and place in the procurement and supply chain world: the “marketplace era” from the late 1990s and early 2000s. This time, however, there are many technology differences that will make the vision of liquidity a reality faster than many will imagine. But not without a key application rub that should be top of mind for all procurement and IT organizations.

Sycamore Partners to Acquire Staples: What is the Broader Strategy Here?

Private equity firm Sycamore Partners announced Wednesday that it would acquire office supply company Staples for $6.9 billion, though rumors of the deal had been swirling for a week. The acquisition comes after the Federal Trade Commission quashed a Staples-Office Depot merger on antitrust grounds a year ago, which Spend Matters covered extensively.

Extending Procurement Information Architecture to Provider Ecosystems (Part 1)

In our previous series on procurement services provision and information architectures (here, here, here, here, here, here and here) we discussed the importance of thoughtfully designing various architecture elements such as MDM, analytics, workflow, portal infrastructure, etc. to re-frame overall information capabilities beyond the traditional provider-led “module-menu” approach. Simply put, the idea is to loosely couple these capabilities so that they can be iteratively improved (and switched out as needed) while they squeeze more value out of the fragmented information topologies that litter the enterprise landscape. The coupling of these capabilities can – and should – create situations where the sum of a set of assets greatly exceeds their individual contribution elements.