Spend Matters Premium Content:
Category Management

Will the Cost of Energy Increase? On Statistics from the US Energy Information Administration [PRO]

Of all the things procurement buys, nothing is more critical to business operations than energy – both price and availability. The US Energy Information Administration (USEIA) has just published their most recent numbers for the nation’s electricity generation, capacities, and prices. The administration defines net summer capacity thus: "the maximum output, commonly expressed in megawatts (MW), that generating equipment can supply to system load, as demonstrated by a multi-hour test, at the time of summer peak demand (period of June 1 through September 30.) This output reflects a reduction in capacity due to electricity use for station service or auxiliaries.”

However, the USEIA provides no summer/winter comparisons in their numbers, nor do they provide a comparison between existing and projected capacities with consideration given to both new and retiring plants. So are we gaining or losing power generation ground? Since the USEIA also does not provide us with a report on the realistic future power generation capacity, Thomas Kase (VP of research, Spend Matters) ran the numbers himself. This Spend Matters PRO research brief is accompanied by two downloadable detailed spreadsheets.

Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 2: Go Deep) [PRO]

Earlier in the month, we had a client ask us if we could offer specific guidelines or methodologies for creating a spend category taxonomy within the automotive and industrial markets. The question resulted in a discussion among a number of us with industry experience. And since we didn’t have any research already published on the topic, we thought we’d invest the time to document our findings. In this second installment of a two-part Spend Matters PRO research series, Chief Research Officer Pierre Mitchell explores how granular procurement should go in creating a spend taxonomy and concludes with practical tips for implementing a program.

Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 1: Do This, Not That) [PRO]

We had a question from a client of ours about whether there were any guidelines or an overall methodology to coming up with a spend category taxonomy. It’s a simple question, but there isn’t a simple answer. So, we thought we’d offer some insights to help guide your efforts. But before we say what to do, there’s a quick recommendation on what not to do. In this first of a two-part Spend Matters PRO research series, Chief Research Officer Pierre Mitchell explores how to think about creating a spend category taxonomy, pitfalls of incorrect approaches, and how to embrace an approach that cuts across categories and spend types.

ProcureCon and Marketing Services Procurement: What We Agree On, What We Don’t [Plus +]

Peter Smith of Spend Matters UK/Europe attended the recent ProcureCon marketing event in London and found it to be a success in terms of number of delegates, sponsors, and quality of the sessions and subsequent debates. In this article for Spend Matters Plus, Peter discusses the state of marketing services procurement and breaks down the areas where speakers were in agreement and the less clear-cut issues. Not a Plus subscriber yet? Contact us to inquire about a free 30-day trial.

ZeroChaos: Threatening the MSP Status Quo (Part 2) [PRO]

Among the MSPs we have spoken to over the years, ZeroChaos most resembles in philosophy a traditional procurement BPO or consultancy with a more granular focus on the inputs and outputs of services cost – and on how to achieve not just compliance, but also savings. Spend Matters believes that its thinking is most likely to resonate with progressive procurement, finance, and supply chain leaders than those with a more HR mindset to the services supply chain. In Part 2 of this Spend Matters PRO research brief on ZeroChaos, Managing Director Jason Busch explores the company’s approach to SOW and project-based spending and offers summary recommendations on the provider’s capabilities and philosophy – while also suggesting what types of organizations are most likely to self-select the ZeroChaos approach over traditional, staffing-centric MSP models.

Direct and Indirect Spend — A Wholly Pointless and Useless Classification [Plus +]

Almost anyone in business will understand the difference between direct costs and indirect costs, and likewise in the procurement world, the terms "direct spend" and "indirect spend" are widely used. We see job titles such as “Head of Indirect Purchasing.” ProcureCon runs very successful “indirect spend” conferences, and articles are aimed at buyers of “indirects.” And yet, it is a classification that arguably not only has no value or purpose to procurement, but can also lead to sloppy and misinformed procurement strategies, activities, and approaches. In this Spend Matters Plus post, Peter Smith, Executive Editor of Spend Matters UK/Europe, explains why the "direct/indirect" split doesn't work for procurement.

Write Better RFPs – How to Get What You Want (and Need) From Suppliers [PRO]

The typical business challenge when you go to market with an RFP centers on getting ideas for what is possible, and identifying suppliers that either already have these ideas or are willing to work with you toward that end. Targeted activities are often services or complex products where quality, service, or the engineered final product will be different from each vendor responding. We've put together some fresh ideas to an old challenge: conveying your needs in ways that a supplier can relate to and that encourages them to put their best foot forward, with a proposal that goes beyond your wants, and addresses your needs as well.

ADKAR: Procurement Change Management in 5 Letters [PRO]

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.

Using DMAIC 2.0 to Blow Up the N-step Procurement Process [PRO]

An n-step chevron process is a siloed procurement-centered sourcing methodology geared towards supplier rationalization. It’s a fine start for procurement hitting cost savings goals, but it’s not a great way to align to the broader organization as procurement evolves. So, we’re proposing DMAIC as an emerging, superior approach, but it’s far beyond the DMAIC that you usually think of. The n-step sourcing process has had a good run, but let’s not try to make it do unholy things. Read on to see how other companies have used DMAIC.

Top 10 Ways to Radically Expand Category Management Value Creation [PRO]

In the never-ending quest to deliver more value, procurement organizations are trying to squeeze more savings and innovation out of spend categories. But, eventually the well starts to run dry, and when that happens, you need to either get more out of that well (fracking for spend savings, perhaps?), dig a deeper well, find another place to dig, or find another way to get the water. My point? To improve category management, you sometimes have to expand it or blow it up completely. Here are some ideas that I’ve seen work elsewhere that can hopefully give you some inspiration and raise your category management game.

Value of an Integrated Suite and Platform Model: Ivalua Sees 50% SaaS Growth from Large Deals [PRO]

We recently caught up with Ivalua for a long-overdue update. Ivalua’s growth is all the more remarkable given their limited investment in marketing and channels, especially in North America. For example, Ivalua is not formally working with any of the large consultancies or SIs. It is working with boutique firms such as Nitor and Shelby for implementation support, but we think that if Ivalua were to build formal relationships with firms such as Deloitte, KPMG, PWC, and E&Y (which should embrace it), Ivalua’s growth would be even greater.

Re-thinking and Re-claiming “Tail Spend” [PRO]

The idea of “tail spend” doesn’t seem very complicated at first. Run a pareto analysis on your spend categories and suppliers to make a cut off at, say, the 80% that represent only 20% of your spend. Your numbers will of course vary, but the idea is to find a way to better manage such “nuisance” low-dollar spend that doesn’t detract from your efficiency, or worse yet, from spending time managing the truly strategic spend categories more deeply. You might think of this as the spend in the lower-left quadrant of the famous Krajlic 2x2 matrix, which describes a strategy of “purchasing management” to manage non-critical, abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And, maybe, if you manage this nuisance spend properly, you can even extract some value from it (e.g., a “quick source” process to gain some speedy spend savings). Sounds straightforward, right? Well, it’s not, and I have purposefully led you astray to prove a point.