SIG Dispatch: The E-Procurement Catalog is Dead…

...Long live the e-procurement catalog (for now).

The debate surrounding the future of catalog management right now is a healthy one to have. Some argue that catalogs, as configured today, are not dynamic enough to support capturing the long-tail of spend nor the frequent information and SKU updates necessary to make sure the business can buy what it needs. There’s absolutely some truth to this. Yet the argument on the other side of the equation is a strong one as well.

At the SIG Global Executive Summit earlier today, Hackett Group’s Senior Procurement Advisor Amy Fong gave an excellent presentation exploring a number of the firm’s purchase-to-pay (P2P) KPIs and benchmarks, including what separates top performers from the rest of the procurement pack (i.e., “peer group”). One of these areas Amy highlighted included how “top performers guide requesters to preferred sources of supply using e-procurement tools.”

Within this grouping/observation are two statistics that might surprise catalog detractors.

  1. Specifically, top performers drive 43% of indirect line items “through an e-catalog” compared with 20% of the peer group in the benchmark.
  2. When looking at overall indirect requisitions “support by catalog content versus free text,” top performers report 54% spend coverage compared with 38% for the peer group.

If we consider Hackett data as the benchmark “gold standard” as the firm claims, then this suggests at least two key takeaways to me:

  • Greater catalog usage appears to be a characteristic of top-performing organizations.
  • Catalogs still form the basis of control and guidance with P2P implementations today.

Of course, top performers could be on top simply because they have adopted and scaled P2P solutions generally (and catalogs have very much been integral to the current generation of solutions). And whether catalogs and P2P success (and overall procurement success) is either causal or correlated (or both) is another discussion entirely.

Yet to dismiss the catalog as dead — even with the next generation of P2P — based on this data might seem a stretch for 2015, although Christian Lanng, the CEO of TradeShift, had no issue with burying catalogs immediately in our recent discussion. However, I’m willing to bury it (as delivered today) with a 5-to-10-year time horizon for the funeral.

Why? A few reasons:

  • Catalog management updates/uploads are inherently inefficient for suppliers — on a one-to-one basis. And let’s not forget catalog data ages fast — even with updates. And in today’s B2B world, it’s aging faster than ever!
  • Punch-out refuses to die. In fact, one could argue, with complex configuration on certain supplier sites, it’s gaining further ground.
  • The Amazon effect and the tail wagging the dog. Market forces want our tail to get bigger. With apologies for the crude remark, catalog that!
  • A large percentage of spend going through cloud e-procurement providers like Coupa is actually services.
  • And most important — we don’t need catalogs anymore to enforce the rigor of terms/conditions. Controls in new P2P systems can do this for us (as well as new buying “front-ends”).

So there. I am declaring the catalog dead. By 2020. Or maybe 2025 (hedging is a good thing).

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