Author Archives: Pierre Mitchell



About Pierre Mitchell

Pierre leads Spend Matters procurement research activities and has broader solution development responsibilities for intellectual property creation and firm strategy as Managing Director of Azul Partners. This includes spearheading efforts to build new types of interactive and social communities of interest within the procurement profession including overseeing the evolution of spendmattersnet.com, Spend Matters PRO, MetalMiner, and other digital assets within Azul Partner’s umbrella. Pierre has 25 years of procurement and supply chain industry and consulting experience, and is a recognized procurement expert specializing in supply processes, practices, metrics, and enabling tools and services. He is a regular contributor to business publications, a frequent presenter at industry events around the world, and counts himself fortunate to have served and interacted with so many CPOs and future CPOs. Prior to his positions in research and advisory, he led numerous operations and systems transformations at Fortune 500 organizations. Industry positions include manufacturing project manager at The Timberland Company, materials manager at Krupp Companies and engineer at EG&G Torque Systems. He holds an engineering degree from Southern Methodist University and an MBA from the University of Chicago. In the early 2000's, Pierre was the first supply chain practitioner to become a procurement "industry analyst" as the VP of supply management research at AMR Research (now part of the Gartner Group) where he provided trusted counsel to procurement executives, business leadership, IT, and the solution providers who serve them. Most recently, he was the head of procurement research and adjunct business advisor at The Hackett Group, where he helped expand Hackett's procurement benchmarks and research studies while growing the Procurement Executive Advisory Program into a gold standard membership-based procurement advisory service in the market today.


Unconventional Wisdom: On-time delivery and cost versus cash — a two-sided quandary

on-time delivery

During a recent discussion with the CPO of world-class cruise line operator, Carnival Cruise Lines, we found that in some industries and for certain supplies on-time delivery is absolutely non-negotiable. For example, in this industry, when a ship leaves port, it leaves. There’s no contingency for lateness.

As we know, there are always two sides to the supply/demand equation. The buyer at a supplying firm might well encounter delays in parts acquisition, might think enough time has been built into the order process, or might have a CFO ordering them to keep cash in the business until absolutely necessary and to buy just in time. The customer, on the other hand, just wants their goods on time. It throws up all sorts of questions for the supplier: so what's a supplier to do? We asked chief research officer Pierre Mitchell.

Siemens acquires electronics supply chain provider Supplyframe: Rapid analysis

Siemens AG, a global technology provider, announced the acquisition of Supplyframe, a provider of the Design-to-Source Intelligence (DSI) platform for the global electronics value chain.

In a press release announcing the acquisition, the companies said the $700 million deal will allow customers access to both Siemens’ offerings and Supplyframe’s market intelligence. The companies will aim to help clients reduce costs, increase agility and make informed decisions. The deal strengthens Siemens’ portfolio with new capabilities in SaaS.

Supplyframe’s DSI platform is home to over 10 million engineering and supply chain professionals worldwide, providing options for businesses to design, source, market and sell products in the global electronics supply chain. Its expected revenue for 2021 is $70 million.

"We are very pleased to welcome Supplyframe’s highly innovative and talented team to the Siemens family. Supplyframe will be the nucleus to accelerate our overall digital marketplace strategy,” Cedrik Neike, member of the Managing Board of Siemens AG, said in the press release. "Supplyframe’s ecosystem and marketplace intelligence complements our industrial software portfolio perfectly and strengthens our capabilities for the growing market of small- and mid-size customers.”

This Spend Matters Rapid Analysis research brief explores valuation considerations, the rationale for the combination, the increasing intersection between product lifecycle management (PLM) and direct materials procurement, and the rise of supplier/product intelligence as a critical required capability for procurement organizations — and by extension design engineering and supply chain teams. This brief also explores broader market and supply chain implications of bringing the combined assets togethers. To learn more about Supplyframe’s direct materials procurement capabilities, we recommended starting with a recent PRO Vendor Analysis on the provider which you can find here and here.

Unconventional Wisdom: Procurement technology — a fragmented niche market, but a work in progress

wisdom

We wrote recently that we would be starting a new series of posts on ‘unconventional wisdom’ imparted by our chief research analyst Pierre Mitchell. Whatever takes our eye during our conversations with the market, the industry and the procurement people within it, will be a topic for scrutiny — we are looking for the more challenging and unusual questions that are often left unsaid, unexpressed, or unaddressed.

Today, we are responding to a comment made during a CPO interview: "Right now, in my opinion, provider choice is very big and specialization too narrow.” We mine Pierre's brain to understand better what it is that is holding the solution providers back from addressing this challenge.

Deloitte unveils its 2021 Global CPO Survey, finding that agility is needed to manage today’s risks — and rewards

Deloitte

Deloitte has released its latest Global Chief Procurement Officer Survey, titled “Agility: The Antidote to Complexity.” The survey comes out every two years to gauge the priorities, performance, capabilities, perceptions, plans and perspectives of roughly 400 CPOs around the world.

The 2019 edition of the study focused on complexity as the major headwind to procurement performance, and the 2021 edition focuses on agility as the critical emerging competency to addressing this complexity/risk. Agility isn’t a new idea, but the study describes it holistically; read on for some examples, an analysis of the findings and an interesting new twist to the 2021 edition.

Defining and digitizing direct procurement (Part 2) — More on direct materials sourcing

Direct materials procurement

In the previous installment of the introduction into the direct materials sourcing area (which itself is part of a broader direct procurement landscape), the focus was on direct spend analytics and design collaboration & early supplier involvement/innovation.

In this Spend Matters PRO installment, the focus will shift toward the next five areas, which move from collaboration on product lifecycle management (PLM) into cost management, supply chain and direct extensions of upstream source-to-pay (S2P) applications. And we’ll give examples of vendors that excel in these areas.

SAP Fieldglass Assignment Management launches to tackle projects and track worker access, compliance and pay

SAP Fieldglass Assignment Management

SAP Fieldglass Assignment Management is a new solution that enables organizations in asset-intensive industries (like Oil & Gas, Chemicals, Utilities) to manage the execution and accounting of day-to-day plant maintenance work conducted by external workers, the provider said in a demo with Spend Matters. Read more about the benefits of tracking projects, workers, compliance and pay in near real time. And our analysts give their key takeaways from the demo.

E-procurement as a strategic weapon — With BuyerQuest acquisition, ODP preps for war in omnichannel B2B

ODP BuyerQuest acquisition

This Spend Matters PRO analysis looks at the deeper implications of Thursday’s news that the e-procurement specialist BuyerQuest was acquired by The ODP Corporation.

When many people think about e-procurement, especially for indirect procurement that is nonstrategic, it doesn’t seem very exciting. However, procurement can actually be a secret weapon — not just for improving back-office efficiency and driving down purchase-cost savings, but also a way for procurement to increase its value to the business, including supporting revenue uplift.

One perfect example here is the curious case of The ODP Corporation, previously known as Office Depot Inc.

ODP for years has recognized, and felt, the threat of digital disruption in the form of Amazon and other online retail taking business away from its on-premise retail operations. It made the pivot to B2B years ago, and its B2B business has been overtaking its B2C business, and the firm has set itself up as a B2B holding company to offer more than just B2B office supplies, but also IT (via its Compucom unit), and other horizontal business services and vertical solutions.

And it wants to stave off Staples’ recent bid (third time’s the charm?) and try to slough off the physical retail space that’s an albatross around its neck, especially in the times of a pandemic. (See related links below if you want to see our old coverage of the last edition of the Staples/ODP saga).

But, how can e-procurement help?

ODP, of course, has to use e-procurement itself to improve cost savings and efficiency, and it also has to integrate its B2B sell-side systems to various customer e-procurement systems (over 100 of them, to be exact).

But, why would ODP buy a nifty little e-procurement vendor (with some broader procure-to-pay capabilities) like BuyerQuest when it could continue pursuing the status quo?

And how could ODP lure Prentis Wilson, the B2B veteran who put Amazon Business on the map and left it to run Boxed.com, basically a digital-only version of retail discount warehouses?

The reason is threefold: opportunity, strategy and digital.

And it’s more than just something like Koch buying Infor — it’s actually more interesting and disruptive if you dive down into it. We’ve always used scenarios to get clients thinking — like, “What if Amazon bought Coupa (or plug in your favorite S2P vendor here)”?

Well, it’s potentially more than a hypothetical here, given what just happened!

In this PRO analysis, we’ll get into why this is such an important strategic move and we’ll address these issues:

  • Framing ODP’s strategy
  • Where Amazon Business fits in all of this (comparison)
  • What the transaction means for ODP and possible strategic thrusts
  • What the transaction means for BuyerQuest customers & prospects

If you want to come up to speed on BuyerQuest and how it compares in the procurement technology market, we recommend starting here:

Defining and digitizing direct procurement (Part 1) — Direct materials sourcing

direct materials sourcing

The introduction to this Spend Matters PRO series focused on digitizing direct materials procurement and broke the overall landscape down into four main areas. This follow-up installment focuses primarily on eight key digital capabilities for direct materials sourcing.

Although the “upstream” portion of the S2P transcends sourcing and includes supplier relationship management, the focus of this series is highlighting additional digital capabilities beyond those found in more generic S2P solutions.

Finally! Progress being made in the US federal government supply chain efforts for Covid-19

On Friday, the White House announced in its Covid-19 briefing that it will be invoking the Defense Production Act (DPA) to ramp up production of vaccines, at-home tests and more PPE. It also named Tim Manning the National Defense Supply Coordinator to help monitor the supply chain as it tries to turn the tide on the coronavirus pandemic.

Defining and digitizing direct procurement — Introduction and framework

digitize direct procurement

The term “direct procurement,” like the term “procurement” itself, means different things to different organizations. Some view “direct” only as direct materials while others include any supply chain-related spending (e.g., energy, tooling and any allocable spend that will flow to cost of goods sold, or COGS) and services such as contract manufacturing or third-party logistics.

In terms of process, there are many “extended source-to-pay” processes that direct procurement organizations must handle related to raw material inventory management, supply chain risk, supply planning/commitment, and the inbound logistics required to coordinate fulfillment between PO issuance and a receipt.

Many source-to-pay systems (S2P) nibble at the edges, but they’re not supporting the deeper supply management use cases that enable direct spend management because their data models are incomplete related to the supply network, product structures and supply chain plans.

In this Spend Matters PRO series, we’ll help direct procurement technology buyers and solution providers by:

  • Integrating the direct S2P process with broader supply chain process models and frameworks to help connect the dots process-wise between procurement and supply chain
  • Presenting a four-part framework, with nearly 30 underlying requirement areas, including many with substantial gaps not supported well by current technology providers
  • Identifying the three major areas where traditional S2P technology provider systems/platforms fall short in terms of data models, integrations and partnerships
  • Providing selected direct procurement insights from our SolutionMap benchmark database
  • Highlighting proven providers that DO support these extended supply management scenarios

Addressing the ‘first mile’ of the spend management process

budget to pay

In a previous post, I introduced the concept of “plan to pay,” an extension of the traditional source-to-pay process (S2P). But plan-to-pay workflows are generally implemented via supply planning for direct materials in the supply chain, but aren’t well-implemented for indirect spend management. In fact, it starts even more upstream from the typical “upstream” sourcing intake process. To extend the bad metaphor, it’s sort of like the originating spend pools high up on “stakeholder mountain” that feed the S2P value stream. It starts with the business planning process and the financial planning process (e.g., budgeting within finance-led FP&A processes) and then linking that into supplier spend planning via category planning, project planning, etc.

But this isn’t easy to implement! In the previous article, I gave the simple example of trying to take a spend cube (i.e., line items of PO/invoice spend history by cost center, category and supplier) and project it forward. If you have decent PO management and contract modeling, you might have some forward-looking visibility into future spend (like contract renewals and blanket PO’s), but for the rest, the best you will likely do is a budget reflected in your cost centers that are checked in the P2P process.

The trick here is to predict and plan the diverse mix of spend that will unfold within those budgets, and the extent that procurement can help the business drive more value from that spend upfront in the process. This is where real spend influence lies to help stakeholders support their business outcomes with limited budgets.

If procurement doesn’t manage this process formally with finance in the business, all sorts of dysfunctional behaviors and misalignments will result:

  • Budgeting is disconnected from supplier spend planning in category management, commercial/contract management, and supplier management.
  • The budgeting process is disconnected from P2P and creates unhappiness with the business when procurement inserts itself into the process (when the stakeholders thought that having available budget is good enough). These spend thresholds for procurement involvement are also usually very high because procurement doesn’t want to hold up the process when the requirement comes in so late in the game (which is why earlier involvement in spend planning is critical to touch more spend and to better effect).
  • Procurement gets relegated to a discussion of price rather than discussing spend and business outcomes.
  • Savings tracking becomes an after-the-fact exercise rather than being planned for upfront (including procurement’s own target-setting process for savings and other value improvements).
  • A dysfunctional use-it-or-lose-it budgeting process. Solving this with a zero-based budgeting (ZBB) process is one way to solve it, but it’s highly inefficient.

Doing spend management properly means starting it off right and basically treating it like the mirror image of the sales funnel. This “spend funnel” starts proactively during business planning and then flows through category planning, budget setting (with savings pre-baked into the budgets), sourcing/contracting, and then P2P for execution.

Unfortunately, the data in this funnel is fragmented across numerous systems, and we’ve been hoping that an S2P suite provider (or possibly an analytics-centric solution from a services provider or an FP&A-centric tech provider) might be able to help procurement proverbially swim upstream and perform this “spend planning.” In fact, back in 2014, we hoped for this:

A system that could “translate between the G/L views of pro forma financial planning over to both planned supplier spending (e.g., an upcoming contract renewal) and to the operational planning processes that the budget owners will have to execute against (e.g., project planning-vs-execution, supply planning-vs-execution, etc.). It requires strong analytics to not only map between the GL taxonomy, the category taxonomy and the contract portfolio, but now also tying into planning data (e.g., versioned scenario plans and rolling budget revisions). This modeling is nontrivial, and you will need to integrate your previous historic spent data snapshots into a forward-looking, time-phased, planning data model that exists within FP&A applications.”

And then we waited … and waited. And finally, a few months ago, we heard from GEP on a solution that they’ve been working on that addresses this exact area. GEP calls it a “Budget to Pay” solution, and it is, in essence, an extension of its core S2P suite that addresses most of what I’ve discussed in this broader plan-to-pay area.

We participated in multiple demonstrations and discussed some of the findings from GEP’s initial customer implementations. We’re waiting to get more feedback directly from its early customers, but the results so far seem impressive. GEP plans to formally release this solution in the near future, but in this Spend Matters PRO analysis, we’ll share some of our insights on the detailed problem statements and how the solution adds value (which is more than just technology).

Why source-to-pay technology needs to support ‘plan to pay’ for better planning in spend and supply management

plan to pay

Given the current business environment, good planning has never been more important, and this certainly includes finance, operations and procurement. We’ll explore the “plan to pay” topic in this post and, later today, in a Spend Matters PRO post for subscribers about GEP's Budget-to-Pay offering that addresses this area.

Finance should engage the business to translate business planning into financial planning, while operations groups ensure that value chains are operating smoothly — and procurement supports these stakeholders to help them plan with suppliers to help ensure that risk is minimized while value is maximized (and cash preserved).

Unfortunately, planning processes are disconnected. Find out how.