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Sourcing

Lost Sourcing Savings: Survey Data Suggest a Crisis (Part 3) [Plus +]

Editor's note: This Spend Matters Plus brief is a refresh of our 2013 series on sourcing strategies, which originally ran on Spend Matters PRO. Check out Part 1  and Part of this series first. 

If we were to point fingers at where technology can help companies drive implemented savings, five areas would rise to the top: demand aggregation, collaboration (internal and supplier), strategic sourcing (with an emphasis beyond driving to negotiated outcomes alone), analytics and architecture/information management. We won’t investigate the latter topic in this series because of the detailed analysis that our analyst team has already conducted. Yet in the other areas discussed, it’s worth exploring the different technology options, beginning with tools that support demand aggregation strategies.

Lost Sourcing Savings: Survey Data Suggest a Crisis (Part 2) [Plus +]

consultant

Editor's note: This Spend Matters Plus brief is a refresh of our 2013 series on sourcing strategies, which originally ran on Spend Matters PRO. Check out Part 1 of this series here

As much we like to jump to some “geek” answer to solve savings and supplier implementation challenges, hopefully you have realized by now that the right technologies alone will not get a procurement organization very far in overcoming the savings implementation hurdles. Indeed, the diversity of challenges surrounding implementing sourcing savings in both manufacturing and non-manufacturing environments run deep across functional and organizational DNA and capabilities. Tackling these first will enable procurement organizations to use the right set of technologies as a glue that binds all of the jigsaw pieces of the rest of the savings implementation equation permanently.

Lost Sourcing Savings: Survey Data Suggest a Crisis (Part 1) [Plus +]

Editor's note: This Spend Matters Plus brief is a refresh of our 2013 series on sourcing strategies, which originally ran on Spend Matters PRO.

During an ISM webinar highlighting how (and why) procurement organizations fail to implement sourcing savings, Spend Matters asked the audience (approximately 500 practitioners) a number of poll questions: Does your organization have a formal program to ensure that identified savings through sourcing and supplier management programs become implemented savings numbers? What percentage identified savings do you estimate that your organization successfully implements from sourcing and supplier management events and programs? This suggests a few key takeaways about sourcing generally.

Direct Material Sourcing and Supplier Management Platforms (Part 1) [Plus +]

In enabling basic strategic sourcing capability for indirect, services and basic direct materials spend, there are now a lot — and we mean it — of solid choices in the market. And it’s a space that’s getting more crowded everyday. Yet in comparison to the broader sourcing marketplace, the direct materials market is, unfortunately, given short shrift. There are potentially many reasons for this. First, it’s complex — there is not one category of solution. Second, the user for these tools is not always the same as one who might use a more generic sourcing toolset (at least not alone). And third, the processes that direct materials sourcing toolsets support are complicated because they are used not only across numerous internal functions (materials management, plant management, operations, supply chain, design/engineering, procurement, sales and operations planning, etc.), but span multiple tiers of suppliers.

In a three-part Spend Matters Plus series that will deliver a cursory attempt to segment this market, we’ll attempt to overcome the current lack of research in this area by providing a concrete segmentation of different technology categories and the capabilities within each. Today we’ll consider additional context and provide a high-level segmentation and explanation of tools (which we’ll flesh out and provide vendor short-lists for later in the analysis).

So You Want to Buy Strategic Sourcing? Key Differentiators to Consider [PRO]

In our previous installments of this series, we focused on some of the key differentiating aspects of contract management and spend analytics solutions. As you may recall, rather than focusing on the features and functions that most providers deliver, this series is focused on highlighting areas that pop up as differentiators in the eyes of the more progressive practitioner organizations that we speak with. The idea is to help separate the wheat from the chaff even though we don’t know what exact flavor of bread that you’re baking.

Within the sourcing area, we will also take some additional liberties by highlighting some key functionality that might perhaps better fall into an “extended sourcing” category that transcends just traditional sourcing strategy and execution. For example, project portfolio management, savings management, performance management, stakeholder management, and other processes clearly transcend just sourcing, but from a pragmatic “on the ground” standpoint, these are often prioritized by sourcing and category management teams. They are trying to drive short-term value while trying to scale their efforts with a form of knowledge management that will support their longer-term transformation outside of episodic sourcing events and into a more end-to-end lifecycle view of progressive category management.

There are also some provider-level differentiators that transcend software feature-function nuances, and we’ll highlight these as well. OK, let’s dive in.

Write Better RFPs: How to Get What You Want (and Need) From Suppliers [Plus +]

RFP

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.

What is Your Sourcing Persona? Understand Your Requirements to Find the Best Technology Provider [PRO]

No two procurement or supply chain organizations are alike. 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 sourcing application providers. Each has a persona — or set of personas — that reflects its value proposition, solution strategy and targeted customer segments. Therefore, 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 sourcing applications are critical to create value through savings, cost avoidance, risk management and value contribution to the business.

To that end, we are excited to preview our approach to Spend Matters SolutionMapSM, a comparative analytical framework for practitioners to evaluate relevant solutions to meet their 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 capability 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 second Spend Matters SolutionMap vendor comparison ranking for sourcing and other strategic procurement technologies, 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 practitioner 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 sourcing users 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 for sourcing buying requirements. 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 strategic procurement technology solutions needed to meet specific organizational needs.

Below, we present our six personas for sourcing. 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 are published for each persona separately on Spend Matters (and updated quarterly).

Vendor Summary Report: Sourcing SolutionMap℠ Q4 2017 [PRO]

This SolutionMapSM analyzes a select group of sourcing providers. It is part of our Q4 2017 SolutionMap report series, also featuring spend analytics, contract management, supplier relationship management and risk (SRM), e-procurement and invoice-to-pay providers. SolutionMap also features procure-to-pay and strategic procurement technology suites.

Spend Matters tracks more than 40 sourcing solution providers today. This analysis features many of the largest sourcing providers, including BravoSolution, Coupa, Determine, EC Sourcing, GEP, Ivalua, Jaggaer, Jaggaer Direct (formerly Pool4Tool), Keelvar, SAP Ariba, Scout RFP and Zycus. Among these providers, the Sourcing SolutionMap features select industry/specialty capability of providers, although it does not highlight them in a specific persona, a change from our last SolutionMap release.

SolutionMap ratings provide comparative rankings and insight into how each provider scored from a Solution perspective and Customer Value perspective.

Dive deeper with our full analysis.

Commodity Management: Drilling into the Supply Chain and the Technology Landscape [Plus +]

My colleague Jason Busch and I have written earlier about how, with the exception of a few top procurement organizations, procurement is failing to deploy the right sets of strategies, tools and tactics to bridge commodity management, sourcing and broader procurement activity.

In this Spend Matters Plus article, I want to dive into some of the details around commodity management and its relation to the broader supply chain, as well as the different solution approaches being used to tackle it. In a value-chain mega chart in the article (which basically follows a design > source > plan [supply] > deliver [inbound] process flow from left to right), I’ve outlined the various processes (brown rectangles) and some supporting solution types (blue ovals) for commodity management.

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

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.

Rethinking and Reclaiming “Tail Spend”: 6 Key Variables to Consider [Plus +]

AnyData Solutions

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 cutoff 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 Kraljic 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.

The problem is that I never really defined tail spend in the first place – and if you can’t define it or see/measure it, you can’t manage it. And herein lies the rub (and the opportunity):

Tail spend could better be described as “nuisance spend” or “tactical spend,” and is comprised of many sub-segments — not just one or two.

Let’s return to our examples above. Segmenting on a spend-per-supplier basis, like in our Pareto diagram, is by no means perfect. What about low-spend, sole-source suppliers tied to large revenue or profit? OK, well, you might then refer to the Krajlic matrix as the solution. It’s better, because it helps profile the categories into complexity vs. impact (or risk vs. reward if you view it as such), but again, these are only two variables, and do not factor in any others.

Which ones? Let’s list six of them and ask whether you’d consider the resulting spend segments as ‘tail spend,’ or at least ‘nuisance spend.'

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

category management

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, which we sometimes affectionately refer to as CatMan, 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.