For most things in life, there’s the good, the bad and the ugly. So be it with procurement research. I’ve been doing procurement research for a long time, and have seen some really good stuff from all sorts of firms. However, I’ve noticed lately a marked increase in quantity of research surveys and an unfortunate commensurate drop in quality. “So what?” you say. “What’s the problem here?” The problem is that practitioners are surveyed to DEATH by one other (e.g., advanced firms getting hit up by others) and by third-party firms from numerous provider sectors. And when the research is sketchy, it drags everyone down.more ▸
In procurement, we often look at technology as an enabler. For example, sourcing optimization technology can change how we source by allowing us to gather an increased set of data points from suppliers (and then apply our own constraints to understand how various biases or requirements create additional supply chain cost, such as requiring higher inventory levels, not awarding to the lowest bidder, etc.). Yet technology can enable more than just tactical activities like sourcing – it can also help redesign how we structure procurement teams and leadership to begin with.more ▸
Spend Matters welcomes this guest post from Deloitte. We recently launched Deloitte Consulting’s annual Global CPO Survey. Last year’s edition included feedback from more than 180 procurement leaders across 17 countries, and we’re excited to provide an even broader perspective this year. Our findings from last year (click here to review the 2013 survey summary) focused on the evolving theme of procurement executives learning how to lead in an expansionary – if still cautious – economic environment after years of leading through a tight focus on cost savings.more ▸
Centralized vs. Decentralized Procurement: Centralization Theory Takes a Great Leap Forward (Courtesy of Peter Smith)
A couple of days back, we introduced our readers to the notion of a Center Led Action Network (CLAN) concept for structuring procurement, courtesy of my colleague Peter Smith (who recently authored the paper: . More than 10 years ago, Peter took this thinking a step further by introducing a more advanced CLAN, or Strategically Controlled Action Network (SCAN) as he termed it.more ▸
The analysis and debate over procurement centralization goes back many years. In the paper, , my colleague Peter Smith introduces one of the original contributors to the subject Dr. Richard Russill, who “came up with the CLAN organizational concept – the Centre Led Action Network” over 20 years ago (back when Peter still had dreams of getting out of procurement and becoming a rock star rather than just a serious music enthusiast). In his work, Russill attempted “to answer the particular dilemmas around the centralization paradox,” Peter observes.more ▸
On the surface, centralized procurement seems preferable to the alternative. As my colleague, Peter Smith observes, “It is perhaps easier to see the potential benefits of centralization than the drawbacks. Centralization means control – being able to control the suppliers and contracts that the organization uses. It means procurement can develop capability, and aggregate spend more easily.” This article continues our "Centralized vs. Decentralized Procurement" series on Peter Smith's paper.more ▸
In our previous ‘shades’ (begin with Shade 1 here), we helped describe a foundational capability: to analyze and make visible how much money has been paid to suppliers. We also discussed how to wrangle the supplier master data that feeds the payment data that in turn, feeds the analytics. Now, in this Spend Matters Plus Research brief, Chief Research Officer Pierre Mitchell explores and classifies the types of suppliers with which you've held transactions to analyze your spend – ultimately signaling the shift from spend analysis to supply base analysis.more ▸
Earlier this year, my colleague, Peter Smith, penned a very thoughtful paper exploring the age-old concept of centralization and decentralization with a modern twist and set of observations and recommendations: Centralise or Devolve Procurement? Why not Both? How Technology is Enabling New Operating Models. In the coming weeks on Spend Matters, we’ll take a look at some of the highlights and observations that Peter makes in his work, starting first today with what he aims to achieve with his effort. We’ll also include additional observations and commentary as we explore some of the elements of his analysis in detail.more ▸
This post continues our exploration into shade No. 3 of our 50 Shades of Pay series. In this PLUS post, Pierre Mitchell discusses what happens when you aggregate all your supplier master data alongside the aggregation of your spend transaction data. According to Pierre, you will find "wonderful things" like your supplier master field names will be called different things and suppliers will be classified in all sorts of dimensions by different groups. Read on to learn more.more ▸
In Shade 2 of this spend analysis series, we looked at analyzing total cash disbursements to suppliers through the lens of basic A/P data. In doing so, we touched on the issue of data quality, and in the particular, the data coming from the supplier master file (or vendor master if you use that terminology). Obviously, if the supplier master data is bad (i.e., dirty, sparse, duplicated, non-standardized, etc.), the spend data will show it. But, the highlighting of bad data isn’t about improving data hygiene unto itself, but rather is about fixing the data problem to highlight value creation opportunities that you didn't see before. The most frequent example of this is supplier master duplication where multiple supplier records exist for the same supplier.
When you find duplicate supplier master records, you can obviously begin to see where there is additional volume leverage that you can gain within strategic sourcing. This is a key capability for justifying the ROI of investing to get to this level of capability. However, spend analysis is not just about feeding the strategic sourcing process! When you find duplicate supplier master records for the same supplier, it can lead to a whole slew of root causes that should be addressed. This includes a lack of clarity/controls in the supplier master setup process (e.g., who can add/change/delete what fields in the supplier master file) or poor “supplier discovery” inquiry capabilities of suppliers from your own existing supplier network.
Up until now in this series, much of what we have talked about can be done on your own, albeit inefficiently, but in the area of data de-duplication, cleansing, enriching, auto-classification, and harmonization, the tools can really help. But, this area is also where supplier content providers of many forms can be used (i.e., content firms, MDM providers, supplier/business networks, analytics vendors, supplier management application providers, procurement suite providers, etc.). Such firms can also assist in the de-duplication of effort using a combination of fuzzy logic (pattern matching), proprietary databases, and rules-based analyzers to help with this key task.more ▸
Oracle OpenWorld 2014 is taking place in San Francisco from Sept. 28 to Oct.2. It typically represents one of the best chances of the year for analysts to peer behind the covers of Oracle’s products and informally talk to both customers and Oracle employees at length. It lets us reach outside of our existing research/advisory client base. Earlier this summer, Spend Matters had a collective update from each of the product groups representing the different Oracle brands most focused on the procurement sector – PeopleSoft, Oracle E-Business Suite, and Oracle Procurement Cloud. Over the coming weeks, we’ll be sharing some of the highlights of what we learned.
You will also receive our initial analysis, subject to additional commentary following Oracle OpenWorld. This initial Spend Matters PRO brief, written by Jason Busch, managing director and founder, Pierre Mitchell, managing director and chief research officer, and Thomas Kase, vice president of research, explores the latest happenings with Oracle E-Business Suite Advanced Procurement including Purchasing, Endeca Extensions, Sourcing, iSupplier Portal, Supplier Hub, Supplier Lifecycle Management, Procurement Contracts , Mobile and related product areas. We’ll also touch on the new Oracle Project Procurement application.more ▸
Many organizations recognize that the procurement function can provide the business with much more than simply getting the lowest cost for purchased materials and services. These organizations understand the potential for having procurement align its efforts with the strategies and goals of other business units as well as the enterprise as a whole.
In practice, this can take the form of involving other business groups and even external partners in the selection and appraisal of suppliers. According to APQC’s Open Standards Benchmarking in procurement, organizations involve a variety of groups in this activity, from marketing and sales groups to other suppliers, depending on the needs of the organization. However, the R&D/engineering group and manufacturing group are most often involved in this process. About 60 percent of organizations involve the R&D group in supplier selection and appraisal, and just over 56 percent of organizations involve the manufacturing group.more ▸