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Sourcing

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.

Strategic Sourcing and E-Sourcing: Level 1 [Plus +]

Strategic sourcing does not just involve a five- or seven-step flowchart. Nor is it just a “leave behind” by consultants once they’ve helped your organization to identify savings. Rather, strategic sourcing is a process that maximizes the value of each purchase made by a company — at least in theory! And it’s one that, in our opinion, requires the support of a solid technology solution that in turn must support each step of the process.

Strategic sourcing does not come in a one flavor. In fact, in the introduction to this series, we suggested there are six different approaches to strategic sourcing. Starting with the foundation (Level 1) today, this multi-part research brief will delve into the six approaches to strategic sourcing and the requirements, technologies and checklists required to pursue sourcing on the right foot.

Graphically, a Level 1 sourcing platform may look something like this: As one can see from the above diagram, there are four primary requirements for a solution to support e-negotiation. Such a product may contain more capabilities, but it will generally contain at least these four (although very basic platforms, especially those embedded in suite-driven platforms, may not support the full extent of reverse auction capability). In this article, we will discuss each of these four core requirements and some of the key features that define them.

Ready, set, source!

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

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.

Deloitte’s Global Sourcing Insights (GSI) — From Best Shoring to Best Sourcing [PRO]

In Part 1 of this analysis, we discussed the need for a truly strategic supply chain sourcing platform built on a supply network design model rather than just the typical BOM-based sourcing workflows and low-level commodity sourcing efforts that use “empty” e-RFX tools. We detailed the full requirements for such a supply network-based platform in a four-part series (see related articles below), but in Part 4, one of the trends highlighted included a pivot from such empty apps to content-enabled apps increasingly provided by large service providers that use cloud-based analytics and intelligence platforms as a way to deliver continuous insight and value. In that piece, we highlighted Deloitte’s Global Sourcing Insights (GSI) solution as a prime example:

GSI is a strategic sourcing and extended supply network design workbench that allows clients to explore high-level sourcing strategies by uploading their supply network configuration and then performing what-if and predictive scenarios in the tool that is pre-integrated with regional and country-specific cost and risk data. It is truly the harbinger of things to come with consulting organizations that need to survive and thrive by productizing their IP.

Many organizations strive to perform “best shoring” to optimally determine what regions to source from. Deloitte’s GSI solution is the only solution I have ever seen that is so well suited to best shoring, especially in a retail-oriented supply chain. It not only helps optimize the regions that you shore (source) from but also drives down to the cost elements and sub-regions that help you tailor their supplier-level sourcing execution activities that perform cost, risk and capability discovery and then subsequent “risk-adjusted cost” analysis against a “benchmark supply chain” of your peers (and if you load up your own manufacturing plants as suppliers, you can also do make vs. buy analysis).

Phew, that’s a mouthful!

Since the platform is pre-loaded with all sorts of external content and benchmarking data on costs, spend and risk, you can test whether the supply chain that you’ve built over the years still holds untapped opportunities. It basically is like a risk-adjusted should-cost analysis in a box. That’s why it’s more of a “best sourcing” tool than a simple “best shoring” analysis. We spend a lot of time go through it and the bottom line is that it’s pretty badass — and that it has some implications far beyond the consulting ecosystem and how it’ll impact firms that sell app suites, niche apps, analytics, market intelligence (apps/services), “networks”, BPO and the like.

In this Spend Matters PRO analysis, we’ll look under the covers at an offering we feel is on the vanguard of an emerging solution model in sourcing and supply chain. If you are a practitioner who subscribes to Spend Matters Plus and are interested in this content, please drop us a line and we’ll send you a copy.

Buyer Best Practices: Write Better RFPs (Part 4) [Plus +]

RFP

In our first article, we noted that sometimes good RFP responses are hard to come by. We noted that there are a variety of reasons why this is the case and tried to give some insights on what makes a good RFP. Then, in Part 2 of this series, we defined some critical requirements of a good RFP in an effort to help you write better RFPs. Finally, in Part 3, we discussed how to understand and incorporate the supplier’s perspective into your RFP so that you can be a “prospective customer of choice” by presenting an “RFP of choice” that makes your business even more attractive to the prospective supplier. To do that, let’s dive into some details on the best practices needed for creating one.

Requirements: Write Better RFPs (Part 2) [Plus +]

RFP

In our last article we noted that too often good RFP responses are hard to come by. If you want a good response, your odds will greatly improve if you have a good RFP. We also gave you some hints as to what makes a good RFP. In this article we define some more requirements of a good RFP to help you write better RFPs.