Enterprise Irregulars Content

In introducing the concept of the “virtual supplier room” in its recent forward looking paper, Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One, Accenture draws a line in the sand that category management will still be an important part of procurement in the future.

The notion of having one place to truly manage a category rather than just execute the various functions associated with sourcing, contracting and procurement goes so far beyond how category management works in practice today, where the vast majority of activity happens in multiple business applications, loosely or non-coupled applications in Excel or in reading PDFs centered on supply market intelligence. The idea of a true category workbench as Accenture envisions will require integrated technology that is useful enough for those who leverage it to want to work in a common space.

What will the future of category management look like? Accenture has a strong opinion on the topic, and shares it in its recently published brief, “Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One,” when introducing the concept of the “virtual category room.”

The notion of extending category management into a digital age is a complex one, especially considering many organizations are still barely crawling in building out category management teams outside of only a few top areas of spend. Yet the technology to support a new type of category management thinking and capability is not that far away. In fact, much of it is already here – it just needs piecing together.

In industrialized nations, there are hundreds of thousands of public sector employees involved in carrying and delivering mail, let alone the back office support required to support such efforts. Curiously, traditional “green” or corporate social responsibility (CSR) calculations examining the benefits of e-invoicing tend to focus only on the individual environmental savings of e-invoice delivery. But what about the back office savings and costs? What about reduced need to purchase equipment, such as sorting equipment and delivery vehicles, in the first place? What about the environmental toll of postal workers commuting into the office?

Earlier this summer, Bruno Koch, founder of Billentis, released his company’s annual e-invoicing market study. The report is currently the best piece of research available on e-invoicing adoption trends. (Though, because the quantitative components are based at least in part on vendor-reported information, we should take the numbers as directional rather than definitive.) Regardless, Koch also features a number of qualitative observations as well – which are arguably just as insightful. In the coming week on Spend Matters, I’ll highlight some of the findings of the report along with our own market commentary and analysis, starting today with the increasing interest in the public sector in e-invoicing adoption.

Anyone who has met Jacob Gorm Larsen, Maersk Group’s global e-sourcing manager, knows he is passionate about sourcing and market design. In many ways, he is the heir to some of the best thinkers that I worked with at FreeMarkets 15 years ago, who pioneered the concept of online auctions for sourcing with different price discovery and feedback mechanisms – nearly all of which are par for the strategic sourcing course today. Jacob deserves to be recognized. But it’s good to see his efforts acknowledged outside of just the procurement world itself. Earlier this summer, The Wall Street Journal covered what Jacob and his team were up to at A.P. Møller-Maersk.

For anyone who has seen a virtual or simulated environment for training or other activity you know it’s really an adult educational version of the Minecraft game kids play. But many of these applications are in fact designed in a world where asynchronous and structured communication is the rule rather than providing a sandbox-like environment for different parties to collaborate. Yet the vision that Accenture outlines in its recent paper, Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One, for “virtual supplier rooms” takes the concept of an online collaboration and learning environment that incorporates both internal and supplier participants many steps further than what is available today.

A recent paper, Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One, explores the future role of the procurement function, including duties, charter and what it will need to leverage and deliver to meet expectations. One of the 5 areas Accenture says will define the future of procurement technology is a concept it terms the “virtual supplier room.” A critical component of the virtually integrated enterprise, this room will, “enable the company to virtually interact with strategic suppliers to share insights and ideas, as well as collaborate on innovation programs via common social media methods. It will also provide uncharted suppliers with an avenue to collaborate with the company on possible future innovations.”

You won’t get any debate from us that supply analytics must form a key basis of future procurement technology investment. But whether supply analytics, as Accenture defines it in its recent report, Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One, becomes as routine as the authors argue is open to debate. A lot will have to happen to make this vision a reality. What Accenture describes is complicated and daring. It’s also going to prove, perhaps, the most challenging tech vision suggested in the paper to realize.

In Accenture’s daring report, Procurement’s Next Frontier – The Future Will Give Rise to an Organization of One, the authors spend a bit of time exploring the future of procurement technology. In fact, they suggest 5 areas that are likely to augment or replace today’s current tech investments. One of these technology areas Accenture describes as “the virtual company mall.” In Accenture’s words, the virtual mall will comprise a cloud-based set of pre-approved private and public “shops” from which internal customers can select goods and services, supported with business logic that guides their purchasing based on policies, preferred suppliers and contracts. But what will it take to for this virtual supplier mall to become a reality?

Late last month, I took the same side as Stephen Allott, crown representative for small- and medium-sized enterprises (SMEs) at the UK Cabinet Office, in a pub debate in London, in which we argued for the motion that procurement is doomed for a variety of reasons, including the failure of many procurement organizations to effectively manage supply risk. Then, coincidentally, on the flight back to the US, I read an article in a UK publication reporting that a majority of SMEs are not prepared to manage supply risk. A curious coincidence? I’m not so sure.

Yesterday, I shared the latest findings from a recent report highlighting chief procurement officer compensation trends. On the executive level, the news is mixed. While CPOs are earning more than ever before, they generally make less than chief financial officers or those in finance, despite a relative increase in responsibilities for CPOs in recent years. This raises a question not just for executives but for those at all levels within procurement: What are the best ways to make more money? Here’s a quick list of 5 insider tips I’ve been sketching down in recent months, based on discussions with friends in the industry and even Spend Matters’ own efforts at matchmaking and informal recruiting.

The good news: chief procurement officers are making more than before – nearly $500,000 per year on average, without factoring into account equity-based compensation. The bad news: CPOs have a much greater, increasing list of responsibilities associated with the role for compensation that is nearing the rate of inflation. That’s according to an updated CPO compensation study by the Center for Advanced Purchasing Studies and Korn Ferry. The findings suggest that average compensation – salary plus bonus – for CPOs has increased to $467,153 in 2014 from $369,556 in 2006, a more than 26% increase. But the total number of resources reporting to the CPO increased by an average of 50%, to 490 from 247, during the same timeframe.