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.


The Collective Intelligence of Supply (Part 1): Introduction

As you may have guessed by the title, this blog series is not going to be a tactical how-to guide for implementing low-level procurement techniques or comparing software providers. Rather, I’m writing this as the supply strategist’s guide to digital business.

There is a lot of content out there on digital “disruption,” including for procurement, but I personally find most of it laden with jargon, and not very instructive on what to do about it. This is a shame, because the fundamental transformation and evolution of value chains offers so many opportunities that supply professionals can seize upon if they understand the changes and how to harness them.

This series will be written as a series of short essays that will (hopefully) help readers understand these detailed drivers behind this digital evolution and what that means from a supply chain and supply management standpoint. Most important, I’ll try to give some practical insights and recommendations on how to best tap these innovations as we all evolve toward higher levels of machine intelligence.

Before we dive in, it’s important to realize that the “collective intelligence” story isn’t about artificial intelligence (AI) per se but really about a convergence of methodologies, strategies, techniques and technologies that are converging.

Read on to see this series’ outline on the successful supply professional’s journey to this collective intelligence that’s being built in the supply chain and how to begin preparing for it.

ISM 2017: Initial Impressions? Great!

Eved

The Spend Matters team has descended on Orlando for the ISM 2017 conference. This year’s event is shaping up to be a great one. I got in Sunday but didn’t get a chance to attend a behind-the-scenes tour of Disney World, which looked fascinating. There’s a metaphor for supply management here, I think: “How is procurement able to generate 10X returns on investment in the function? It must be magic!” Well, like Disney, it’s a lot of hard work, customer focus, innovation, creativity and technology.

Coupa Inspire 2017: Product Impressions and Dissecting R18

VMS

Today’s coverage of Coupa Inspire 2017 will go deeper than our first dispatch, as we we zero in on product. The biggest news to come out of Coupa’s customer conference Thursday was the general availability release of R18. Although “just a scheduled release” may seem boring, procurement transformations are inherently evolutionary, and the 50 major new features and capabilities were well received by the customers — and generally by us, too.

There’s more than just “evolution” to the product set in R18. In this PRO brief, we discuss the good as well as the gaps in Coupa’s latest release as we unpack the latest from the cloud spend management provider. We’ll also point to the future and explore some areas where Coupa may head later in 2017 and 2018 based on what we’ve heard from customer needs (external) and signposts around product innovation (internal), as well.

The Impending Slow Death of “Empty Apps” in Procurement (Part 2)

In Part 1 of this series, I discussed how “empty” applications (i.e., data models and application logic served up via forms and workflow) that need to be spun up from scratch by each customer, and offer no scale across customers, are not going to be competitive in a few years.

For example, most buying organizations pursuing automated supplier qualification workflows in supplier management end up creating mega qualification forms that represent the sum of the regulatory requirements and internal requirements that are in force rather than the supplier questionnaires getting automatically tailored based on the spend requirements that in turn link to the appropriate questions based on appropriate internal/external policies and regulations.

But this is starting to change. New applications and application suites that offer mass personalized functionality in terms of flexible data models, metadata, machine learning and “composite applications” (that embed relevant microservices) will offer huge advantages over traditional software models that basically treat the applications like machine tools (even though the tools are deployed over the web).

I will give a few more examples of embedded services and then turn your attention to some other approaches that applications providers are pursuing to move away from feature function wars and move towards building a collective intelligence on behalf of their procurement customers. This changes the game to build new capabilities beyond automation and to deliver outcomes beyond savings.

In the last installment, I talked about DaaS (data as a service) and embedding microservices into the applications so that “micro best of breed” app services can be embedded into the core processes of large application suites. In fact, it’s already happening. I mentioned digital signatures for contracts and APIs for supplier risk queries, but there are other opportunities! In this installment, I call out providers like SAP Ariba, Amazon Business, Okta, Tradeshift, Slack, Microsoft and Aquiire, but the lessons are what is important. OK, let’s get on with it with our list of services to augment the empty apps.

Coupa Inspire 2017: Spelling Out the Post-IPO Strategy

Eved

CEO Rob Bernshteyn kicked off Coupa Inspire 2017 by, of course, highlighting Coupa’s traction: $360 billion spend under management, 535 customers, 3 million suppliers on the network, 150 countries, $1.36 trillion in spend analyzed (via Spend360) and 80 million API calls, to name a few metrics. More important, he used the letters in COUPA to highlight the firm’s focus going forward. Let’s spell this out.

The Impending Slow Death of “Empty Apps” in Procurement (Part 1)

The cloud computing inflection point has arrived for business applications. Of course, there have been other inflection points, from mainframes to PCs to clients/servers. But, multi-tenant cloud applications now allow for scalable solutions delivered via flexible deployment models across multiple devices.

So, is this the last major inflection point other than some machine learning capabilities embedded into the products? Will success now simply hinge upon functionality, adoption and customer counts using increasingly commoditized application products? For procurement apps, is it now the battle of cloud-based Source to Pay (S2P) suites?

Answer: Not so much.

Let me explain. Think of business application suites as software versions of a machine-tool. Contract manufacturers can use those tools to sell the manufacturing from those tools as a service, but the tool is still basically the same. For procurement applications, this is a problem. First of all, the massively diverse requirements for various spend categories are simply not well supported in the data models of existing procurement applications. There simply is no single procurement application on the market today that meets the needs of all spending such as direct materials, contingent labor, complex assets and complex services.

Now add in the multi-tier supply chain requirements (see here for more on this) and industry-specific requirements, and it gets even worse. Now consider the fact that even basic master data modeling is inadequate. For example, it is folly to think that a single spend taxonomy hierarchy will meet the needs of modern category management (i.e., categories are highly multidimensional, a topic you can read more about here). So, it becomes clear that we’re still pretty early in the “supply tech” market. (I think procurement needs a cool moniker like “Fin Tech” or “Reg Tech” — what do you think?)

Yet, this is not the main subject of this discussion. The main point that I want to make is that when you buy applications, you are buying empty apps. In other words, you are buying a data model and some application logic, but you’re not really buying a solution that more holistically helps procurement organizations deliver outcomes. You know the old adage: “Technology is just an enabler — it's just a tool!” But in the age of digital and “cognitive,” can’t we expect more?

The answer is yes, but it requires some new approaches and mindsets from both buyers and technology providers. Let me give some examples, and I’ll mention firms such as SAP Ariba, Coupa, Salesforce, Tradeshift, Dell Boomi and Rapid Ratings.

Procurement Metrics: Understanding the Economic Language of Value (Part 2) — Expenditures, Expenses and Financial Reporting (CapEx, COGS and G&A)

finance

In the first installment of this series, we discussed the term “spend” (the noun, not verb), in the context of supplier spending, in a fair amount of detail. We discussed addressable spend, and what's included and excluded for the purposes of spend visibility/management, but also for the purposes of using spend within procurement performance measurement and benchmarking. In this installment, we dive a little deeper in terms of comparing and contrasting spend to other terms, as mentioned in the title.

Mega Spend Aggregation: 10 Ways to Supersize your Market Basket (Part 1)

category management

Most procurement organizations complain about diminishing savings on re-sourced categories – and rightly so. But rather than beating the same horse, why not hitch up more than one, and in new ways that you may not have considered? In this Plus piece, we’ll outline five of them, with the first one being "expand the 'lots' in your current market basket."

Selling Kids on a Career in Procurement is Impossible — Here’s a Better Option

supply chain

Let’s face it. No child ever says, "I want to be a purchasing manager when I grow up.” Honestly, the term procurement itself draws blank stares from kids — and even adults. The best I can do is tell people that I try to help companies “buy better.” They usually nod politely, and even murmur an “uh-huh” if I give some B2C consumer analogies of how people try to shop online for supplies, home services, mortgages, travel and so on. So, perhaps the solution isn’t to try to sell kids vocationally on procurement at all but rather introduce the area of the broader supply chain.

Settling the “SCORe” with “Supply” at the Core: It’s time for Supply Management 2.0

Global Risk Management Solutions

As supply networks are becoming more complex, componentized, outsourced, and global (as well as faster, riskier and more regulated), the capability of managing supply (i.e., supply management to manage a network of supply) is promoted from a siloed set of functional process to an integrated strategic one. So, if you want to “orchestrate” it, whether you provide products, services (including information services), or both, you need to collaborate fluidly in a multitier and multilevel fashion that orchestrates both the process silos and the information silos. For lack of a better term, think of this as supply management 2.0. It basically expands the vision from a traditional procurement-led sourcing process, typically managed via ERP or standalone procurement applications, to a cross-functional and cross-enterprise “platform” for orchestration of all critical supply resources in the supply network (materials, capacity, logistics, capital, etc.) across the supply tiers.

In this Spend Matters Plus analysis, we argue that it’s time to flip the traditional paradigm of supply management from not just a new faceplate on the traditional purchasing function but also from the sourcing component of the “sourcing and procurement” moniker that many practitioners use. Having strategic procurement be merely about sourcing as a serial step in an end-to-end lifecycle is a mistake.

Procurement Metrics: Understanding the Economic Language of Value (Part 1) — Spend

buzzwords

One of the challenges that procurement faces is "speaking the same language" as finance, as well as the language of its stakeholders. A marketing department, for example, may use the term “investment” for its spending. Similarly, many procurement organizations categorize some of their added value in a category called “cost avoidance,” even though the term is not taught or recognized formally by the finance function.

Even within procurement, many terms are used inconsistently. Consider the term “addressable spend.” Is all spend addressable, as represented by cash disbursements going to external parties? Or is it supplier spending that is reasonably under the influence of procurement? If you say the latter, what defines “reasonable”?

The friction and misalignment common between various functions often results from stakeholders not having a basic understanding of terms that seem similar but yet can be very different. This problem is exacerbated when the stakes are high and you start getting measured and benchmarked on these metrics. To prevent this, procurement needs to be “business multilingual” and understand the variations of terminology so that it can best speak these languages and help the organization make the best decisions to create value.

This is what we’ll address in this analysis, with a focus on procurement and finance within the enterprise. Clearly defined terminology is the foundation from which higher-level concepts, performance metrics and benchmarks can be consistently understood — and improved.

How to Justify Spend Analysis to Finance/IT When There’s No Clear ROI (Part 2)

funding

Yesterday, we discussed the first five of 10 possible strategies to justify a spend analysis initiative to finance/IT despite the catch-22 that comes from not knowing the potential value that may come from the initial investment. Today we pick up with recommendations six through 10 and close with some final remarks and recommendations.