What to do? … What to do? Our analysts tackle some Procurement Predicaments

Over the past couple of weeks, the Spend Matters analysts have been creating a series of ‘procurement predicaments’ articles, each analyst covering his own area of expertise. In each one they identify the ‘pain points’ that users of technology in that space are experiencing, that might be gaps in vendor capabilities and how they might be addressed, supplier quandaries, digital procurement issues (a lot of those) including category-specific functionality, direct procurement support, services procurement support, tail spend, master data management, risk … the list goes on. They also tap into organisational issues and methodologies/practices.

The analysts have (mostly) each produced a main site, free-to-read post and a deeper Pro piece to accompany it, which is our subscription-based ‘deep insight’ analysis.

Services Procurement

We began with a look at Services Procurement (the procurement of temporary staffing services) from analyst Andrew Karpie. In 2020 Predicaments in Services Procurement — No Light at the End of the Tunnel he paints what some readers have dubbed ‘a rather gloomy picture’ of services spend in the future. “In some industry verticals, services is the largest and most poorly managed non-payroll spend category. But the buying and consuming of services in most enterprises is managed and controlled incompletely and ineffectively  — leading to potentially billions of dollars of unnecessary spend and opportunity costs (foregone value). A problem of such enormous scale and complexity is not going to be addressed overnight,” he predicts.

He identifies an ‘organisational’ reason for this – a mismatch between procurement and HR -- and inadequate services procurement technology solutions. “There are not yet any completely functional, comprehensive, integrated … end-to-end solutions for managing a broad scope of contingent workforce and complex services spend,” he says. “While there are established VMS and procurement solution providers as well as some new(er) entrants looking at new ways to address services spend, there is still a gap for enterprises that want a full lifecycle S2P solution for procuring services across a broader set of services spend categories.” He goes on to analyse in depth the two technology solutions he sees having diverged.

Do read the readers’ comments attached to this article here and the Pro piece here for deeper insight.

Contract Lifecycle Management

In 2020 Predicaments in Contract Management: Poor Adoption, CLM Market Fragmentation and Limited Imagination, analyst Nick Heinzmann sees contracts as “a major stumbling block” to digital transformation. “Across industries and company sizes, businesses exhibit low maturity for their approach to contract management. They may have purchased a best-of-breed tool or module within an application suite like a source-to-pay platform to digitize and automate contract lifecycle management (CLM), but their adoption and use of the digital capabilities that could unlock meaningful ROI from these investments is distressingly low,” he says.

“… CLM systems are available today that can power advanced approaches to contract management, yet the majority of businesses find themselves unable to take advantage of the latest capabilities because of how they fundamentally view CLM — as a necessary evil focused on risk transfer via documents managed by the legal department…”

“… contract management at its best,” he says, “can be a critical competency for procurement to influence everything in the businesses.”

He goes on to explore what it is that is holding businesses back from understanding and viewing contract management in a better light. See also his Pro piece here on the likely scenarios, vendors and capabilities that will drive a true commercial value management mindset.

Procure to Pay

While the market for procure-to-pay (P2P) solutions, including its submarkets for e-procurement, invoice-to-pay and AP automation solutions, came a long way in the 2010s, analyst Xavier Olivera can still see problems as we head into 2020. He identifies two persistent predicaments in the P2P space that procurement organisations and their technology providers are facing: the need for procurement organisations to generate new savings year after year, and, supporting the broader organisation's goal of improving cash flow and optimising working capital while balancing the needs of suppliers, through I2P and automated AP.

“We consider these two challenges critical not just for procurement transformation but also for supporting value creation across the whole business,” he says.

He delves into each one and gives his predictions for how P2P solutions might develop, or how he hopes they will develop, over the year ahead. Read that here.

Procurement Analytics

Analysts Michael Lamoureux and Pierre Mitchell take a look at Procurement Analytics and discuss what’s likely and what’s revolutionary. “Analytics was by far the most cited technology area expected to have a business impact within the next two years by CPOs surveyed in the recent 2019 Deloitte Global CPO Survey,” they explain. But while analytics are a hot topic this year, there are implementation barriers to hurdle.

They discuss data quality, master data management, demand forecasting and other predicaments, and go into the current and future state of the procurement analytics area. They then make some predictions about what we expect to see in 2020 from both a market and technical standpoint and consider three categories of predictions: incremental scenarios, evolutionary scenarios and revolutionary scenarios.

Read that under Pro here.

Strategic Sourcing

Magnus Bergfors, our Europe-based analyst, lays out the five ‘traditional’ steps to carrying out strategic sourcing and considers how we can make the process “more strategic.”

“While this process can, if properly applied,” he says “deliver billions in savings, there is a larger problem. This approach is binary — you either run a strategic sourcing project or you don’t — and it’s very episodic in that once you have implemented the strategy, you then move on to the next project. This is the proverbial “drive-by sourcing” and “three bids and a buy and a cloud of dust.” This means that the follow-up and management of the contract is ignored.”

While tackling the shortcomings of today’s eSourcing solutions, he acknowledges there is “no shortage of vendors in the market ... and each year new providers enter the market with, at least in their own minds, a new perspective of the market.” The problem he says is that “when you look at these capabilities you soon realize that these are not strategic, they are at best supporting the tactical execution of a strategy designed and documented somewhere else, if there is any strategy at all. There is limited support for things like TCO modeling and category profiling, not to mention classic management consultant models like SWOT and Porter’s five forces.”

Read the whole of his analysis here and his supporting Pro predictions piece here.

Supplier Management

Magnus also pinpoints the top three problems in supplier management – which he describes as the “lingering issues.” “There is no one-size-fits-all solution,” he says, and attempts to break that down into a few more specific predicaments.

First he tackles supplier data, which he says remains fragmented and poorly managed, and declares that despite all the talk of the importance of data, “most organizations have no real strategy when it comes to managing supplier data.” He moves on to supplier segmentation, which he says stops at identifying the strategic suppliers. “Large organizations have tens of thousands of suppliers and nowhere close to enough people in procurement to manage them all,” he says. And finishes with a lament about how supplier management is disconnected from both sourcing and category management. And how much “more needs to go into the supplier management approach which should ideally be part of a solution-guided process based on the category strategy and supplier segmentation.”

Read the whole article here and his thoughts on what needs to happen to address these issues here.

And look out for a concluding article to come later this week from Pierre Mitchell, our Chief Research Officer,

 

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