All posts by Luis Gile

Eight Critical Actions for Managing Your Supplier Pool

Establishing a pool of preferred or pre-qualified suppliers is  a great idea as long as you are actively managing your supplier pool.  Here’s how it’s done…

Last year Government Technology published an article describing how the state of Colorado has turned to a process they call “mini-RFP’s” to streamline and expedite procurement in their IT category.

The author Jessica Mulholland reports the state performed a prequalification of vendors and awarded multiple contracts to address a “specific set of issues and implementations”.

This select group of vendors operating under pre-negotiated legal terms are solicited when new work comes up.  The lowest bidder is awarded leveraging their prenegotiated terms and conditions.

This is a concept that I have seen quite a few times before.  Many private organisations operate in this manner.  Essentially awarding MSA’s that include no rates or commercial terms, just legal terms.

It should be noted that the reason this is more expeditious is because it streamlines the contracting portion of the procurement process.  This isn’t a shortcut to procurement, you still need a scope of work, you still need a bid period, and you still need analysis.  The time saved is the time with legal.

Prequalification of suppliers isn’t anything new, but it is a unique approach in public procurement.  I’m no expert on the legality of this as a government practice, but I will address this from a private business perspective.

1.Agreements without Commercial Rates

Perhaps this is a nuance of the public sector and possibly the reason why the state of Colorado can have a closed bid, but in private business there is simply no good reason to have an MSA without pre-negotiated rates.  Nonetheless, I have seen this quite a few times.  If you are going to go so far as to negotiate legal terms, locking in rates and commercial terms should be a no-brainer.

2. Obstacles to inclusion

If you plan to add a pre-qualification process to your organisation, consider keeping the process simple and straight-forward.  It should not take more than a couple of weeks to complete the process.  Anything more than that and you may find that your process becomes an obstacle for inclusion.

3. Scale the Pool

Be sure to have a large enough pool to allow for multiple projects to occur at the same time without depleting your bench.  There is nothing worse than having an emergency project when all of your pre-qualified vendors are at capacity and you have no one left to award.

4. Diversify your Pool

Your pool of pre-qualified suppliers should be as diverse as the projects you contract.  When I talk of diversity here, I’m not speaking of minority owned businesses.  That is important too, but more than that you need to make sure your pool of vendors has large firms for the big projects as well as small firms for the small projects.  Don’t just include all the big guys or you may find you have no one at all.

5. Score Performance

If you are going to establish a pool of pre-qualified suppliers it’s important to score each performance.  Develop Key Performance Indicators (KPI) to evaluate how the suppliers performed and make sure to collect a report for each engagement.  This will give you actionable data to evaluate the performance of each supplier.

6. Aggregate and Report KPI’s

Grading the suppliers on each project is essential, but when you collect and aggregate that data across a year, now you have powerful data.  Anyone can have a bad project, but with a consolidated view of a vendors performance over a year, you can address specific problems, identify weaknesses, and generally grade each supplier objectively. With this data, you can elevate suppliers that perform well and downgrade those who perform poorly.

7. Evaluate your Pool at Least Once per Year

With your performance data in hand, you should meet with your suppliers annually and share the results of your scoring.  This may be a difficult conversation, but if you are basing your comments on facts, it will be easier.  In addition to reviewing existing suppliers, this is the time to look outside of your pool to identify new or up-and-coming suppliers to add.  You should also evaluate the state of your organisation to right-size your pool.

8. Update your Agreements

Above all else, don’t let agreement expire.  Track the end of all agreements and create reminders on your calendar to ensure you are proactively renewing, terminating, or renegotiating agreements before they expire.

Establishing a pool of preferred or pre-qualified suppliers is  a great idea as long as you are actively managing your supplier pool.  Keep on top of your contracts and you will soon see the fruits of your labor.

Do you have prenegotiated or prequalified Suppliers in your organisation?  If so, do you follow these recommendations?  Are there any best practices you recommend?  Tell me your stories.


This article was originally published on Luis Gile’s website. Check out more of his content here. 

Sign up for today’s webinar: Clean Up Your Act! Category Management AI-Style. 

How to Prepare Your Organisation for the Cognitive Revolution

Everyone procurement team is talking about AI, cognitive technology and machine learning. But for these technologies to work at their best, your business needs to be prepared… 

There is a lot of talk these days about Artificial Intelligence, Cognitive Sourcing, Machine Learning, and data-driven procurement.

Almost every major procurement organisation in the world talks about how their organisation uses these tools to make decisions.

The direction of procurement is almost certainly towards data-driven decision-making.  This is a reality we all need to embrace.

I certainly subscribe to the notion that the best procurement decisions come from fact-based data-driven strategies and I firmly believe that over time, cognitive tools and technologies will become better and more effective than they are Today.

The truth is that we are not there yet.

As someone who’s industry is in the cross-hairs of cognitive technologies, I have been exposed to more than a few examples of how this technology works.

The category knowledge that these tools will draw from to generate their insights currently resides with guys and gals like me.  As such, we (the subject matter experts and category leaders) of the procurement space hold a special and specific set of keys that unlock these technologies.  It is with that focus that I would like to proceed.

In order for these technologies to work best there are certain fundamental elements that must be right in order for the tool to generate the best insights.

Good Data

Well organised and structured data is an essential foundation for cognitive technologies.

When it comes to any form of data analytics, the old adage “garbage in, garbage out” still holds .  Unfortunately, the vast majority of organisations simply have poor data.

Before you can point any cognitive tools at your data set, the data needs to be scrubbed and normalised.  This is still done manually by a team of people.  I’m sure one day this will be 100 per cent automated and perhaps technology will find a way to avoid these errors in the first place.  The fact is that whenever we receive data Today, it is highly flawed and requires weeks of work to make it usable.

Here is a good primer on data collections.

Be sure you allow sufficient time for your data to be cleansed before you deploy your cognitive tools.

Define your Benchmarks

The greatest value that AI and cognitive will bring is being able to benchmark your organisation in ways never before possible.

In a recent article I wrote on how to use bench-marking to develop cost estimates, but cost estimating is not the extent of how you can use bench-marking with AI.

Consider the value of bench-marking your organization against a competitor’s current performance.  Cognitive tools allow you to bring in publicly available information in real time.

Imagine that you are an electronics manufacturer and your closest rival releases their financial report.  Cognitive tools can seek out these reports and extract data from them to benchmark against your performance.  You can also combine cognitive tools with web crawlers that seek out competitor’s pricing information.  Without cognitive tools, this kind of information would require weeks or months of manually collecting data.  Cognitive tools allow this kind of analysis to be done instantly.

To take advantage of AI, take time to consider all the different ways you can measure your performance and see if you can come up with a few you never thought possible before.

Market Indices

All goods and services are affected by market forces. Staying on top of market indices is important for making strategy decisions.

An effective cognitive data strategy uses data from market indices.  Market Indices will enrich your own data and allow you to forecast into the future.  Adding this level of depth to your cognitive platform will reveal the actionable insights that cognitive data promises.

The Bureau of Labor Statistics is great resource for all kinds of indices.  If you are in construction, there are a number of private organizations that publish various indices to help forecast the future.  Look at the AIA, Dodge, and AGCjust to name a few.

Add market indices to your data set to enrich your analytics and strategise with forecasting.

Category Expertise

Cognitive technologies offer beautiful data outputs rich in data and content, on their own these outputs are just eye-candy.  The interpretation of that data and content must be made by skilled experienced subject matter experts.

Eventually we may get to the point where computers can read the data and a clear strategy will be automatically spit-out for anyone to act on.  Even then, how you act on the data will require some expertise.  Until such time, you must have your cognitive data interpreted by a human with category expertise.

It’s too easy for data to be misinterpreted and for an organisation to run-off in the wrong direction.  Even the most advanced Artificial Intelligence we have Today is unable to interpret the various human factors that go into strategy making and for that reason, Subject Matter Experts (SME’s) are still required.

Be sure you know that the person who will receive and interpret your data has the skills needed to execute a sound strategy.  After all the time and energy you invest in cognitive tools, you need to be sure your direction is sound.

Closing

The future of AI and cognitive is bright.  We are heading in a great new direction where information will rule.  Today there are a few trail-blazers paving the way for us all.  Those using these new technologies Today are sure to be better prepared Tomorrow as they find new and creative ways of using data to guide their business decisions.


This article was originally published on Luis Gile’s website. Check out more of his content here. 

Sign up for next week’s webinar: Clean Up Your Act! Category Management AI-Style.