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.


Procurement Metrics: Understanding the Economic Language of Value (Part 1) — Spend

buzzwords

One of the challenges that procurement faces is "speaking the same language" as finance, as well as the language of its stakeholders. A marketing department, for example, may use the term “investment” for its spending. Similarly, many procurement organizations categorize some of their added value in a category called “cost avoidance,” even though the term is not taught or recognized formally by the finance function.

Even within procurement, many terms are used inconsistently. Consider the term “addressable spend.” Is all spend addressable, as represented by cash disbursements going to external parties? Or is it supplier spending that is reasonably under the influence of procurement? If you say the latter, what defines “reasonable”?

The friction and misalignment common between various functions often results from stakeholders not having a basic understanding of terms that seem similar but yet can be very different. This problem is exacerbated when the stakes are high and you start getting measured and benchmarked on these metrics. To prevent this, procurement needs to be “business multilingual” and understand the variations of terminology so that it can best speak these languages and help the organization make the best decisions to create value.

This is what we’ll address in this analysis, with a focus on procurement and finance within the enterprise. Clearly defined terminology is the foundation from which higher-level concepts, performance metrics and benchmarks can be consistently understood — and improved.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 2)

funding

Yesterday, we discussed the first five of 10 possible strategies to justify a spend analysis initiative to finance/IT despite the catch-22 that comes from not knowing the potential value that may come from the initial investment. Today we pick up with recommendations six through 10 and close with some final remarks and recommendations.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 1)

finance

Analytics are all the rage. And spend analysis is Procurement 101. So, getting some reasonable investment shouldn't be a problem, right? Wrong. The problem with analytics is that the identified value is all “option value.” You don't know how much value opportunity you will uncover with the analytics until you actually perform them (and implement the identified opportunities)! This article is designed to help you overcome this catch-22. We've prepared 10 strategies to help you get the ball rolling with IT and finance (even if the ROI isn't clear).

EcoVadis: Vendor Snapshot (Part 2) — Product Strengths & Weaknesses

sustainability

The market demand for supplier intelligence and data within procurement continues to increase. Whether it’s supply chain and supplier risk data provided by originators and aggregators or category and supply market based general intelligence offered by analyst-driven models, an increasing number of firms are looking to third parties to augment their internal data gathering and analysis efforts. EcoVadis fits within this supplier intelligence/data (and software) landscape as a cloud-based corporate social responsibility (CSR) and sustainability rating/monitoring solution for global suppliers. To date, it has faced no direct competition for its unique bundling of cloud based software, content and services.

The buyer friendly (and supplier friendly) platform allows suppliers to self-register, complete a profile customized to them based on their UN ISIC code and categories of products or services offered, upload all relevant documentation and get certified for a 12-month period with a CSR certification. EcoVadis builds certifications as a smart superset of CSR mega standards (e.g., Global Reporting Initiative, the United Nations Global Compact, and the ISO 26000), which enables it to be more readily accepted across a buying organization’s customer base.

This Spend Matters PRO Vendor Snapshot explores EcoVadis’ product strengths and weaknesses, providing facts and expert analysis to help procurement organizations decide whether they should consider this provider of supplier intelligence solutions. It also offers a critique (pros/cons) of the user interface. Part 1 of our analysis provided a company and detailed solution overview and a recommend fit list of criteria for firms considering EcoVadis. The third part of this series will offer a SWOT analysis, user selection guide, competitive alternatives, and additional evaluation and selection considerations.

ADKAR: Procurement Change Management in 5 Letters

Change management is a seemingly "soft" topic that can have a highly adverse impact on hard ROI. If you need a practical framework for change management, Pierre Mitchell highly recommends ADKAR as a good default approach. In this post, he evaluates ADKAR in a procurement context and show it can be applied in a few different scenarios. The acronym stands for awareness of the need to change; desire to participate and support the change; knowledge of how to change (and what the change looks like); ability to implement the change on a day-to-day basis; and reinforcement to keep the change in place. Read on to see how ADKAR can be applied in a few example procurement scenarios.

Getting the Most from Sourcing Optimization (Part 1): Lessons From Leaders

Global Risk Management Solutions (GRMS)

The combination of Trade Extensions and Coupa may seem a curious one for those unfamiliar with either organization, and may even raise questions for those who know both. As Trade Extensions’ recent customer event showed (see our live coverage here, here and here), the sourcing optimization specialist and its customers continue to push the limits of what is possible with e-sourcing. In contrast, procurement organizations that gravitate to Coupa — even highly sophisticated ones — tend to do so because they want to avoid complexity for their users and make the transactional buying process as simple as possible, all the while guiding users to make the best decisions for the business.

This two-part PRO research note provides additional perspective from Trade Extensions’ customer event on how this spectrum of complexity and simplicity may not be incongruous in the future; rather, sourcing optimization could serve as a better mousetrap to identify complexity, deconstruct it and ultimately redefine procurement’s role in the business by changing how the function is conceived. But before that can happen, there’s a more important topic address: the fact that most firms using Trade Extensions (and other sourcing optimization technologies) have only begun to scratch the surface of embracing complexity — let alone containing, controlling, distilling and simplifying it.

Part 1 of this series explores how an organization can get the most from sourcing optimization once it has signed up for it, which is easier said than done. We explore three areas: selecting the right users and training them effectively to use optimization, leveraging a center of excellence (CoE) to scale efforts and thinking big (i.e., beyond category-driven events alone). Spend Matters would like to thank all of the conference attendees and Trade Extensions for sharing these ideas.

A 21-Question Health Check to Score Your Procurement Scorecard (Part 3)

As the old business adage goes, “what gets measured gets done.” This is certainly true in procurement. If you want to do the right things for yourself and your stakeholders, you need to measure the right things and do it efficiently. You also need to ensure that you are measuring what your stakeholders want and what you are in fact delivering. It’s a foundational competency. In fact, in the most recent Hackett Group procurement key issues study, “value contribution visibility” ranked third in terms of procurement key capabilities that were viewed to be major or critical. This is the last post in a three-part series providing a 21-question “health check” for your procurement scorecard, this time covering questions 16-21.

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

For many industries and regions, corporate social responsibility (CSR) and sustainability are de rigueur. In several cases, there is also legislation to back them up, and there are no signs the resulting regulations are going away anytime soon.

Despite this, may companies pay CSR little more than lip service. There are numerous reasons for this. For one, CSR often has a hard time competing for budget and investments relative to other “hot” projects focused on short-term cost savings. This is a shame, because when CSR is extended to the supply base, it can actually be used to demonstrate not just regulatory/customer compliance but also to tap supplier innovation, lower costs, reduce supply risk and increase brand leverage.

The bigger tactical issue, however, is that extending CSR out to suppliers is simply hard to do cost effectively — especially if you want to do it properly. Getting hundreds (or thousands) of suppliers to adhere to basic contract terms and a vague supplier code of conduct document is one thing, but getting them to comply with more impactful and enforceable clauses for CSR/sustainability is even more challenging. If you’re a buying organization that’s truly concerned with de-risking your supply chain and looking beyond “check the box” compliance, you need to have a way to engage your suppliers in a more compelling way. Suppliers have many demands on their time and investments, too, so offering them something more than an edict is necessary.

But perhaps the most vexing question begins with measuring success. When you get down to it, how do you even define sustainability and responsibility? How do you measure it? And how do you know whether your performance against those measurements is good or bad for your industry or overall, especially when core requirements for CSR and sustainability differ across dozens of industries and hundreds of categories?

It takes expertise, and not just software. EcoVadis knows this, and that's why it has more than 150 CSR experts on staff to evaluate supplier profiles, documents and third-party audits to objectively gauge the corporate social responsibility of a company against a benchmarked numeric scale. It integrates this expertise into a unique combination of automated supplier surveys, certifications (gathering, analysis, validation, and publishing), benchmarking and training across 21 major CSR factors (with potentially hundreds of atomic level questions) derived from a combination of major global CSR standards — and augmented by best practice. It’s pretty cool when you see it in action.

In this Spend Matters PRO analysis, we’ll dive into EcoVadis’ company background, its solution offering and some recommendations on how the firm is best used to maximize value. Part 2 of this analysis will focus on strengths, weaknesses and production selection guidance. Part 3 will then wrap up with SWOT Analysis, competitive analysis, shortlist guidance and final commentary and recommendations.

What is Your Invoice-to-Pay Persona? Understand Your Requirements and Mass Customize Your Vendor Shortlist

e-invoicing

No two accounts payable, finance or shared services organizations are alike (or procurement departments, for that matter). Each has its own persona that reflects not only its own value proposition and engagement approach but also the stakeholders it serves — and its supply base. The same principle holds true of procure-to-pay (P2P) application providers. Each has a persona that reflects its value proposition, solution strategy and targeted customer segments. Therefore, finance and procurement organizations should seek providers whose personas best align to theirs. In other words, there is no “magic” solution provider, and finding the right fit is critical, because a P2P application represents the main interface for most of procurement’s internal customers.

To that end, we are excited to preview our approach to Spend Matters SolutionMapTM, a comparative analytical framework for practitioners to evaluate relevant solutions to meet their accounts payable, working capital and procurement needs. Our SolutionMap initiative depicts vendor rankings based on specific buyer personas to reflect the unique value proposition, solution strategy and customer segments served by a vendor. Participating vendors are scored both on their solution as well as on customer value, based on in-depth tech reviews (including live demos) by the Spend Matters analyst team and aggregated direct customer input from surveys. Each SolutionMap is updated quarterly rather than in 12-month (or longer) cycles, to accurately reflect the pace of market developments.

As part of our Spend Matters SolutionMap vendor comparison ranking for invoice-to-pay and procure-to-pay solutions (publishing next week, with subsequent quarterly updates), the Spend Matters analyst team has dedicated considerable time to developing the unique organizational “personas” that we’ve most often seen in our decades of experience working with procurement organizations. We have used these personas to weight the requirements that we used in solution scoring, which includes customer satisfaction scoring by solution customers. Having collected feedback from hundreds of invoice-to-pay users, vendors and consultants in recent months as part of our SolutionMap research, we see these personas as useful starting points for procurement organizations to classify themselves before looking at solution rankings of providers in the market.

This Spend Matters PRO analysis shares six of the most common customer personas in invoice-to-pay buying needs. Aimed at practitioners as well as vendors and the consultants advising them, this research brief will be helpful to drive the type of “mass customization” of procure-to-pay solutions needed to meet specific organizational needs.

Below, we present our six personas for invoice-to-pay. For each, we include: full definitions, typical organizational priorities (based on each persona), functional/solution and customer value emphasis and recommended selection processes. Comparative vendor rankings will be published for each persona next week on Spend Matters (and updated quarterly).

A 21-Question Health Check to Score Your Procurement Scorecard (Part 2)

health

As the old business adage goes, “what gets measured gets done.” This is certainly true in procurement. If you want to do the right things for yourself and your stakeholders, you need to measure the right things and do it efficiently. You also need to ensure that you are measuring what your stakeholders want and what you are in fact delivering. It’s a foundational competency. In fact, in the most recent Hackett Group procurement key issues study, “value contribution visibility” ranked third in terms of procurement key capabilities that were viewed to be major or critical. This is the second in a three-part series providing a 21-question “health check” for your procurement scorecard, this time covering questions 6-15.

Procurement as a Service (PRaaS) — Part 4: Assembling Third-Party Services

supplier network

In our previous installment of this series, we discussed how an industrialized procurement as a service (PRaaS) model is critical to not just running procurement more efficiently and effectively but also buying and embedding cloud services better, as well as tie procurement into broader digital business strategy efforts. The notion of procurement as a “prosumer” (producer and consumer) of procurement services is both the DNA of modern procurement itself and of global business services.

Procter & Gamble is a great example. P&G was one of the pioneers of the global business services (GBS) model, and its current capabilities here are impressive. What’s also interesting about P&G was when its CEO drove the “connect and develop” program of open innovation to tap supply markets for product innovation and looking beyond internal R&D.

So, if R&D can do that for itself, shouldn't procurement be able to do the same? And isn't it even more important for procurement to do so when considering that nearly all supply market innovation tied to supplier spending is in play? Wouldn't it be important for procurement to lead by example in aggressively adopting such third-party services and also to share best practices around how other internal stakeholders in various spend categories are doing the same? You bet. This makes procurement an innovation gate opener rather than a policy gatekeeper.

Procurement as a Service (PRaaS) — Part 3: Unpacking the Services Stack

digital

In Part 1 of the series, we delved into why procurement should run itself as a services business, and in Part 2, we shared how procurement can learn from other types of professional services businesses to bring more rigor and value to its internal customers and even external customers. On this last point, organizations such as GE, IBM and others have been masterful at industrializing various services internally, and then using themselves as success stories to externalize those services to new customers. In doing this, they are trying to establish themselves as digital platforms that will be the underlying architecture of emerging digital value chains.

So, what does this have to do with procurement? Many things:

  • As we discussed in Part 2, procurement and other stakeholders must understand how supply markets are fundamentally shifting as this digital transformation occurs. Such disruption is not just the “Amazoning” or “Ubering” of the supply chain, but services, too. For example, consider the mind-blowing transformation that Infosys is embarking on with its Mana platform and its Zero Distance approach to innovating service delivery.
  • Procurement can use this trend to its advantage to bring some leverage to relationships with large incumbent providers that may be threatened. This is also a great time to be a “customer of choice” and use strategic supplier management to capture innovation from your incumbent suppliers while also testing out emerging digital services providers.
  • It’s also critical to understand the implications of signing up on someone else's platform and what that means to switching costs down the road, as well as to what extend today’s suppliers don’t become tomorrow’s competitors.
  • Finally, if your company is going through a digital transformation to execute a new digital business strategy where your firm may also be positioning as a “platform,” then it’s important to understand platform-based business models and also cloud-based architectures (i.e., an XaaS model that lets you deliver these services scalably over the web) to more easily plug and play supplier XaaS services (see IBM cloud reference architecture as an example) into your procurement services.

The IBM architecture diagram can be a little overwhelming, so, let me show you a slightly simpler procurement version of this “aaS” architecture and give some examples of some innovative services. Actually, it’s not simple either, but it’s as simple as it can be while explaining the fundamental design of the PRaaS model in one diagram.