Navigating Uncertainty: Pool4Tool’s Roger Blumberg on Where Manufacturing Procurement Technology is Headed

Toyota supply chain Rainer Plendl/Adobe Stock

Last week we featured a new interview series focused on the technology renaissance coming to direct materials procurement. In collaboration with our sister site MetalMiner, Spend Matters Founder Jason Busch questioned procurement technology leaders and experts on the reasons this renaissance has begun, as well as how procurement and supply chain professionals are using technology to navigate volatile global trade trends.

This interview features Roger Blumberg, chief commercial officer at Pool4Tool, which works with leading manufacturers such as Miele, Swiss Steel and Tower Automotive.

Spend Matters: Why are we hearing about a “direct procurement” renaissance, of sorts, in terms of procurement technology. What has changed?

Roger Blumberg: First, I want to fully agree with the assessment that there is a renaissance happening right now. The surge in interest in the direct materials procurement area is like none that I have seen in my 15-plus years in this space.

From my perspective, there are several factors that are driving the change.

First, there is a much greater focus on supplier management and supplier risk, and that focus is on the manufacturing supply chain — but is an effort led by procurement. Next, we are seeing where the historically siloed quality teams and the procurement organizations are looking for technology to more closely align their organizations. In addition, after over 15 years of focus on the indirect side of the house, I am sensing that much of the waste and inefficiencies in this area have been eliminated and now the focus is shifting to direct materials. Lastly, there are the hot discussions around digitization and digital supply chains that everyone seems to be speaking of these days. Procurement teams within manufacturers are making sure their needs are being met when this topic comes up to ensure they are getting as much of the budget as the indirect side is getting.

SM: What are the top challenges your customers in the manufacturing sector are facing right now?

RB: Uncertainty is the biggest challenge. The direct side is obviously going to be impacted by changes to trade agreements and any other legislative changes being discussed right now. We see organizations trying to “game theory” all of the various policy changes and how they will or will not be impacted by each change.

One day a country is considered “persona non grata” and the next day are being given favorite nation status. That has to be confusing for any commodity manager. Many of our customers are engaging outside consulting firms to plan for all the changes. In my 30-plus years in the procurement space, I have never seen as much uncertainty as we are seeing right now.

SM: What is your view on commodity price volatility? What are you hearing from your customers?  

RB: More than ever, customers are looking for guidance on the management of commodity price volatility. Customers and prospects are asking what technology can do to help them and are seeking advice from us on what consulting firms to engage to help them develop a plan to manage the volatility. This reminds me of the terrible uncertainty there was around fuel pricing in 2008–2010, where some companies greatly benefit and other were not prepared and ended up making poor decisions.

On the direct side, many companies we work with did scenario management around the election outcome and the impact it would have. I don’t recall this happening during any other election during my years in this space.

SM: What technologies are most “in demand” for procurement in manufacturing today? Do you see this evolving/changing in 2H 2017 and 2018?

RB: The most in-demand solution today is the supplier portal or “all in one” where the buying team is able to manage the entire supplier relationship in one place. This includes the area of supplier risk and supplier performance, which has really emerged as the hottest topic for 2017. Companies are looking for a single platform to manage supplier risk, compliance, diversity, sustainability and all other supplier management in a single location. What we are also seeing is the move away from companies using a lot of point solutions and looking to consolidate their library of point solutions into a single unified platform. We see companies retiring their standalone e-sourcing, contract management, e-procurement and other solutions and are seeking a single platform to replace them all.

SM: How do you see procurement and supply chain applications overlapping (or not) from a technology perspective in manufacturing? What is “the line” between them (if there is one anymore)?

RB: Procurement and supply chain applications are not overlapping, they are finally converging. Bringing together these two historically siloed organizations and technology platforms is one of the greatest technology renaissance I have seen in my lifetime. Why should a supplier have to go to a different platform to receive a purchase order or forecast than they go to for an RFP or scorecard or quality incident. All of these business practices are interconnected, yet historically they were not connected via technology. Now, with solutions — gratuitous plug warning! — like the ones we provide, the entire procurement and supply chain process can and should be managed in a single portal. In order to get a true 360-degree view of a supplier relationship, you truly need to combine the procurement and supply chain solutions.

SM: If you had $100 to invest in different procurement technology centric solutions in a manufacturing context, how would you divide it up (assuming only MRP/ERP as a baseline)? In what areas would you place your bets and in what order?

RB: Great question. I would split the spend as follows: 30% on supplier management (portal, risk, scorecards, onboarding, compliance, corporate social responsibility, document management, contract management), 25% on supply chain solutions (order management, VMI, ASNs, forecast management, e-invoice), 20% on e-sourcing (RFI, RFP, RFQ, Auctions, Project Management), 15% on quality management (PPAP, 8D, 5Y, Initial part inspection, incident management, etc) and 10% on e-procurement.

SM: Trump/Mexico/China — where do we end up from a trade perspective in 12 months? Can technology help mitigate any trade risks?

RB: Where we end up from 12 months from now is definitely different than where we are now.

What the change will be I’m not in a position to predict. Where technology can help a commodity manager is to help identify new sources of supply and have their new source approved and lined up if there is a significant policy change that demands reshoring historically off-shored spend. Technology can significantly speed up the supplier on-boarding and approval process and expedite the bidding process.  The right technologies allow you to perform “scenario management,” in which you get to compare suppliers against various potential changes in tariff and duty changes that could happen in the next year or two. You essentially get to game theory all of the various changes that could happen and analyze the impact -- which lets you be prepared to make the change once the impact of policies becomes reality.

Spend Matters would like to thank Roger and Pool4Tool for his thoughtful input and analysis!

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