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It’s remarkably easy to destroy your own credibility as an “expert” , or at least find you’ve suffered a self-inflicted credibility wound. That’s what consulting firm Alix Partners has done with a recent report on procurement issues. Supply Management, which reported on its publication, also comes into the picture to a lesser extent too.

The report is titled “Rough Seas Ahead for Procurement” and this sentence sums up the message:

“ … the calm seas we have enjoyed for the past decade are ending. Prices are set to rise, and in many cases already have. Unfortunately, we cannot go back in time, and there are no panaceas. However, with communication and a proactive and coordinated strategy, the CPO can prepare for the coming instability”.

However, one comment does raise that question of credibility.

“Meanwhile, Procure2Pay systems such as Ariba, Coupa, and Emptoris have provided transparency on the requisition, receiving, and paying of goods and services and have improved internal controls …”

Hang on a minute, you’re saying. I don’t remember Emptoris being a “Procure2Pay” system?  And indeed it wasn’t. It was what we would probably call a “source to contract” product, providing spend analysis, sourcing and contract management capability. But it did not have that transactional processing functionality around requisitioning, ordering, catalogues, receiving, payments …

The other notable fact is that Emptoris is now dead anyway. As we reported last year, IBM, which bought Emptoris back in 2012, announced its termination and a new partnership with SAP Ariba in its place.

Clearly, Clifton Wessels-Yen doesn’t know much about procurement software.  And, unless Supply Management was being devious in reporting that quote without pointing out its inaccuracy, then neither does the journalist who published that excerpt without comment.

However, being fair, there is some worthwhile content in the Alix Partners report. The analysis of economic trends and commodity prices is worth reading, and the overall conclusion is that industry is likely to see an inflationary environment in coming years, with tightening markets for many spend areas.

The steps that are proposed in terms of procurement response are pretty standard although it is useful at least to make readers consider actions such as “cost to price” initiatives and introducing “price increase approval processes to “delay the actual price increase for as long as possible”.

However, we would question some of the advice given. For example, reducing number of suppliers might give you more “leverage”, but it can also increase risk when whatever you’re buying is in short supply. There is also little recognition of the need to apply carefully considered category strategies to each area individually – this is a pretty blunt approach which seems to assume you approach every category in the same way.

It’s also a somewhat “old-fashioned” view of procurement and the role of suppliers – no mention of partnership, collaboration, supplier driven innovation here – rather it is suggestions such as “Aggressively trim smaller vendors to consolidate the supplier base by each category in order to increase negotiating leverage and press for lower rates”.

“Relationships” gets a mention in the context of giving suppliers cost reduction targets and asking them to present their ideas to the company. This apparently “demonstrates a commitment to the relationship”!

Of course, Alix Partners are often employed in dramatic cost reduction situations – by private equity firms, or when a business is in severe financial trouble. The sort of approach outlined here no doubt can deliver some short-term savings. Whether it is the right long-term strategy for most firms, even if we do move into a more inflationary environment, is less certain.

 

Voices (2)

  1. Secret Squirrel:

    Or that the partners are clueless and the company is selling snake oil?

    I’d suspect the latter (as I would with most consultancies). Especially as Clifton Wessels-Yen is a ‘Managing Director’.

  2. Jason Busch:

    What passes for consultancy “thought leadership” now is ridiculous. Let the reader beware. If this was a lower cost offshore firm it might be one thing, but for a premium firm like Alix to put out such rubbish suggests the lack of hierarchical (i.e., partner led expertise) quality controls on publishing. Sad.

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