Category Archives: technical procurement

Three Data And Analytics Considerations Every Organisation Should Make In The Pursuit Of Digital Transformation

The tools exist – and are affordable – to utilise Procurement data throughout the organisation for actionable intelligence. So how do you make that transformation? IBM Procurement’s Laura Beth Hirt-Sharpe writes the definitive guide to clearing the myriad hurdles.


A Procurement organisation’s success relies on transformation from standard spend visualisation tools to a comprehensive strategy to monitor, maintain and utilise Procurement data throughout the organisation. With the advent of inexpensive, efficient and reliable data collection and curation capabilities, many Procurement executives have the opportunity to efficiently create actionable intelligence from their data. Though a myriad of tools, methods and services are available to support this work, a significant hurdle remains for organisations: leaders must determine the best tools and services and curate an appropriate data strategy and data-driven culture to drive the change necessary to remain competitive.  All this, while cutting costs and reducing complexity.

As leaders embark on their Procurement analytics transformation, they face three major considerations: data and data governance strategy, data cleansing and curation, and skill gaps in core analytics and data science skills. In this blog, I will provide suggestions for each consideration based on my experience with global clients at various levels of maturity.

1. Data and data governance strategy 

Many Procurement organisations begin their digital transformation by thinking that data strategy and technology strategy are one and the same, when in reality these are two distinct, codependent pillars. A best-in-class approach to data strategy is to begin with the outcomes you are looking to drive from your Procurement data.  These outcomes can range across various domains beginning with traditional spend analytics, risk and compliance monitoring, to AI-based trending of key metric behavior within your environment, and many more in between. Once you have a clear view of the outcomes you want to drive, begin thinking through important questions like: 

·   What data needs to be captured and what level of structure is required within those elements? 

·   Is this data captured today, and if so, how?

·   What data gaps are present against target outcomes?

·   Does reasonably consistent master data exist across various source systems?

·   How can data completeness, accuracy, and meaningfulness be assured over time?

·   What is the best way to collect and curate data over time?  (This is not a “one and done” event!)

·   How can Procurement processes be optimised to ensure efficient and effective data capture?

These types of questions will help shape your data and data governance strategy. It is important to understand that there will always be a trade-off between speed of execution and granularity of data capture. Finding the right balance is key, and ensuring you have the right technology and innovation partners in place is crucial to optimising this balance. 

2. Data cleansing and curation 

There are two primary factors to consider with regard to data cleansing and curation: determining who from your organisation should be involved and maintaining value drivers in your dataset. 

Who should be involved?

Procurement data teams within an organisation typically lean toward one of two strengths: data science or Procurement. Some organisations focus on pulling data experts from other parts of the organisation to Procurement to help curate an accurate merge of their datasets into a “source of truth” dataset. However, through this method, Procurement subject matter experts (SMEs) have a limited stake in the data cleansing activities.  Knowledge of Procurement is essential to rapidly increase the data return on investment, such as supplier name normalisation and logic flagging.  If those knowledge assets are not brought into the process early, the path to monetisation will be slow and spotty. 

Alternatively, some organisations choose to assemble a team of Procurement professionals who can educate themselves on data techniques and procedures and curate the source of truth data. For these organisations, technical issues and lack of repeatability of process steps ensure the source of truth dataset will require a similar pruning process again in the future. This also has drawbacks in that data architecture is best left to data professionals – especially data that will be used for AI and Cognitive algorithms.  Merging Procurement SME talent with data design in a Procurement environment is tricky. Couple that with the reality that top data and Procurement talent have “day jobs” makes this investment in talent critical, complex and expensive. 

What are the key value drivers?

Organisations that pull their data into a central repository and want to utilise it to its fullest should maintain two value drivers within their dataset: 1) Procurement-specific categorisation and 2) knowledge-infusion based on outside information. 

Cleansing data to support a Procurement taxonomy cannot rely alone on a set of off-the-shelf tools built for classification of natural language – sentences and paragraphs – but will need to be curated for terms and phrases specific to Procurement’s categories. Furthermore, high-accuracy categorisation of spend data hinges on multiple fields such as supplier name, GL classification and rich line-item text fields. 

Utilising these Procurement-specific fields in classification requires more advanced algorithms to decide between potentially disagreeing field content.  To further complicate categorisation and curation, data experts are regularly tasked with combining non-structured information into the source of truth dataset. This work requires technical knowledge and industry acumen to execute as well as regular refreshes of data and terminology.  For example, these data points could include diversity supplier type, occupancy and building information as well as market intelligence purchased from third party providers. This work requires an in-depth knowledge of the source of truth dataset and supporting datasets which may be unstructured. These fields must be updated and verified with Procurement stakeholders. Categorisation work and additional field inclusion require a significant investment by Procurement organisations to create and maintain.

Determining the right team and the value drivers within Procurement-specific data is a task that takes dedicated individuals, time, and effort. However, the size and forethought of this effort will determine the return on data initiatives.

3. Core analytics and data science skills 

A pervasive issue I see with organisations that hire data scientists from top schools at high salaries is that they struggle to extract value from the data that already exists in their systems due to lack of Procurement acumen.

Another common issue is that an organisation’s current team cannot afford incremental budget for the aforementioned data resources, and therefore leans on its existing Procurement and IT staff to monitor, maintain, and report utilising spreadsheets and visualisation tools.

Cross-collaboration

Both approaches leave a significant amount of value unrealised for the business. Instead, I recommend cross-collaboration across the organisation, designating analytics champions and emphasising grassroots training.  Without these, the value of your data will remain untapped and will require a significant amount of future investment to digitally transform your business.

A successful data-focused organisation is one that is fully integrated within your Procurement function. The data team cannot be a siloed organisation, building point solutions for the loudest stakeholder’s pain point. There needs to be an agile approach to daily activities, with a robust backlog and tasks prioritised for highest return to the business.

Analytics champions

Analytics champions are an important, yet often overlooked, position. Data Translators are another name for this role, as organisations need to treat data as another language with certain speakers of the database and statistics “dialects.” 

For example: if an executive has a short turnaround project that is important for continuing operations, they need to meet with their function’s analytics champion before they meet with the data team. The intent of this role and meeting is to vet, assess and format answers to the rudimentary questions that often derail otherwise productive data initiatives. Potential topics to cover include data availability, awareness of the project backlog, agreement on fair timelines and investment, and blockers. 

Organisational growth

Analytics champions need to be cultivated internally first as functional experts and grow as the organization evolves. There are positives to hiring versus training, but as discussed earlier, without the proper functional understanding you will likely see a lack of results without the proper structure in place. 

Your current functional team knows your business, processes, industry, and supply base best, so enable them to make decisions and give structured guidance to the data experts, even if a data translator is required.

Meaningful transformation through modern Procurement

Analytics is at the forefront of high-impact Procurement organisations as a trusted business advisor role, as a supplier relationship reference source, and as the foundation of effective compliance management. Through analytics, modern Procurement can be predictive in their actions and trusted throughout the broader business. To produce the granular level data required for actionable intelligence, source data has to expand beyond basic accounts payable and purchase order elements.  New sources of information, such as demand, consumption and compliance data from a variety of internal and external sources must be linked. This process appears daunting, but we have seen meaningful transformation happen over small, structured, prioritised steps with a focus on data as the foundation for meaningful transformation.

To solve for this complex need, Procurement Business Process Outsourcing services are innovating through AI-based technology infused with an influx of new and re-purposed Procurement talent skilled in data science, mathematics, statistics and computer science. Ensuring the correct mix of skilled data resources with Procurement experts has proven to be an expensive challenge for CPOs, and an opportunity for market-leading specialists such as IBM Procurement Services. These services assist Procurement organisations to meet their analytics demands while empowering their sourcing practitioners to focus on taking action based on the analytically discovered opportunities. Incorporating knowledge built across clients and industries, these services allow Procurement to adjust focus around high yield data and statistically verified opportunities.

Advanced Category Management: It’s Not Just About Savings

Category management is still misunderstood as a specific function in procurement. While understanding the category is important, the focus should be on the word “management”: managing internal stakeholders, understanding their needs, and managing suppliers by understanding their needs to find win-wins, generate value and ensure continuous improvement. Jaggaer’s Georg Roesch explains.


Category management is not a difficult concept to grasp. Really. Just answer the following question: Which do you prefer: a) shoddy or mediocre goods and services at high prices, or b) excellent value? When it comes to execution, however, things get a lot more complicated. Category management is a technique used to understand markets, analyse spending, and make good purchasing decisions that save you money while securing quality goods and services.

If you are new to the subject, there are many tactics, but a common one is to start with bundling items to take a bigger deal to market in order to be in a better position to negotiate a better price. One of the most popular and accessible books on procurement poses the question that goes to the heart of category management, and very simply: Why are hot dogs cheaper in IKEA than in the supermarket?

That’s all well and good, but IKEA sells a standardised range of products through near-identical superstores all over the world. It makes total sense that it bundles everything it buys from hex keys to drapes to hot dogs and gets a fantastic deal. What’s not so easy to understand is how that works for a company whose products are highly sophisticated and/or non-standardised. Take, for example, the Swiss company Bühler.  Each day, two billion people enjoy foods produced from raw materials such as grain, coffee and rice processed on Bühler equipment; and every day one billion people travel in vehicles manufactured with parts produced with Bühler machinery. But the important point here is that every single machine that Bühler produces for its customers is unique. In that sense it is the absolute antithesis of IKEA.

Yet in another sense, it faces a similar challenge. The global orientation of the company’s products, its presence in 140 countries worldwide with 20 business units, 30 manufacturing sites, 100 service stations and 25 application sites mean that sourcing is a global operation – and for Bühler, category management is crucially important to business success. And it is incredibly complex because, whether Bühler is producing air pressure systems, silos, compressors or steel constructions, the company always sources for specific projects, which means there is a huge range of differentiated categories.

Of course, companies like Bühler want to minimise spend, but for companies that believe “you cannot put a price on quality”, category management has many other dimensions.

A misunderstood term

Category Management remains a largely misunderstood term. The confusion arises in the fact that it was originally coined by marketers in the retail industry: Nielsen defines it as “a process that involves managing product categories as business units and customising them [on a store-by-store basis] to satisfy customer needs”. Others define it as managing a line of products as a business unit, as opposed to individual brand management.

Only later did the term get adopted by procurement, where it is defined as “a strategic approach to procurement where organisations segment their spend into areas that contain similar or related products, enabling opportunities for consolidation and efficiency” (CIPS). Many procurement professionals might argue that this is what procurement has always done: understanding markets and looking for ways to strike a good deal. However, what category management as a distinct activity and organisational structure brings to the table is greater depth and sophistication.

A category is basically any group of similar items that you want to buy under a single deal: goods and services that are available from the same or a similar supplier base. Examples are stationery, fuel, travel services, transportation and logistics, advertising and legal services. But we should focus more on the management part, which is about applying robust methodologies (and a good deal of business acumen) so that you not only maximise savings (for example by designing the right sourcing events that are appropriate for each category) but also achieve other goals such as shortening time-to-market, reducing risks, increasing environmental sustainability, broadening supplier diversity or even creating new revenue streams. All of this implies a much stronger connection between the procurement function and the organisation’s strategic objectives and even its mission, vision and values.

The key to effective category management here is understanding the internal customers’ needs, as well as what’s going on in the supplier market. Category management is by its very nature a role that is normally a center of excellence, but it must be responsive to local needs and win stakeholder buy-in. To be successful and to command respect, a category manager must know how to leverage internal knowledge and expertise and must be able to work cross-functionally. In practice, this could involve, for example, involving key stakeholders such as operations and quality control managers – and in the case of strategic suppliers, senior executives – on factory or site visits to build confidence that suppliers have what it takes (human and technological resources, financial strength and resilience, physical size of the business etc.) to satisfy everyone. 

Time-to-market, for example, has become a decisive factor in the success or failure of a product, and in particular, the launch of a new product. Category managers can play a critical role in reducing lead times, as long as they are involved in the production process early on. For example, the lengthy request process for customised parts can be drastically cut down with excellent supplier communication supported by the right IT tools. To ensure that the price of a material or a part is not the only deciding factor in their selection, the category specialists need to look for further streamlining potential in purchasing and striking the right balance between stimulating competitive pressure on suppliers and consolidating spend.

In practice, you might for example negotiate a bonus to suppliers for beating the delivery deadline, or a penalty for missing it. With the emphasis on the former: the best category managers treat suppliers as partners, rather than people you need to beat up on price. In a complex category such as transportation, category managers should seek to balance savings with objectives such as reliability and operational integrity. The outcome should be a win-win for buyer and seller alike. Often the best way to do that is to keep the strongest incumbents on good rates while leveraging smaller operators who offer great performance.

If category management can achieve all of the above, it will succeed in raising the profile of procurement across the organisation, changing the perception from a functional, operationally focused activity to a business process. As well as making breakthrough savings, the organisation will notice improvements in service levels, quality, availability and value for money, and a reduction in disruptions to the supply chain.

The supplier’s perspective

Understanding things from the supplier’s perspective can be approached scientifically and systematically. Just as we are accustomed to plotting suppliers on a matrix to assess their status (as strategic, tail spend etc.) so a category manager should do the same from the supplier’s point of view, which means plotting Attractiveness of Account against Relative Value of Business. Suppliers see their customers as falling into one of four basic categories:

Nuisance: The customer has driven a very hard bargain on price and is highly demanding, which gets in the way of my other business. I have no incentive to compete for their business in future and am not motivated to give them good service.

Growth: The customer is not profitable right now, but the account is worth developing as I expect bigger opportunities. So, I will show willing and “use a sprat to catch a mackerel”, as the saying goes.

Profitable: The account can bring me potentially huge gains in the short term, but I don’t see it going anywhere. I will respond to requests but get the best price, even if that means losing the account. So, let’s make hay while the sun shines.

Core: I value this relationship. It’s profitable in the long term, so I will do what’s necessary to give excellent service in order to beat off any competition. That means I have an incentive to work collaboratively with the customer to reduce costs, innovate and add value.

Whereas strategic sourcing will tend to recruit new suppliers into the “growth” segment, the job of category management should be to move them into “core”. This requires category managers to develop the ability to walk in the supplier’s shoes. And once again, this will require cross-functional stakeholder engagement across the organisation so that both parties understand each the other’s needs in greater depth, appropriate training and joint activities are arranged, etc.

In this way the initial savings secured through sourcing will not be eroded over time; on the contrary, the benefits will be extended as the relationship matures. Both parties have an incentive to look for ways to reduce costs and increase value, e.g. through process improvements, which typically drive year-on-year benefits equivalent to around 5% cost saving with each renewal.

Above all, category management is a continuous process, and one that is multidimensional. Therefore, it is not always easy for mere human beings to grasp in all its aspects. Increasingly, category managers are relying on business analytics and artificial intelligence to undertake continuous analysis of market data and supplier performance against benchmarks to deliver a range of benefits across multiple inter-related projects. The future of category management will be a matter of harnessing what advanced analytics is good at to what humans are good at. If you’re interested in hearing more on category management and how to effectively digitize the process, tune into our webinar with The Hackett Group and AstraZeneca! We’d love to hear your thoughts in the comments!


A Waste Of Time Or A Gold Mine? Why You Need To Classify Your Spend Data ASAP

Classifying your spend data? A big waste of time, surely … or a crucial step that needs to be taken without delay? The Classification Guru Susan Walsh explains why this needs to happen immediately.


So, picture the scene: it’s budget time and as far as you can see everything is under control, the bottom-line balances out, you’re in the black and life is good. But, are you really getting the full picture? You’ll never know unless you accurately classify your spend data.

You may already be thinking about it; or can’t justify the time or resources; or it might be something that you think is just a complete waste of time or money. Let me tell you why it isn’t, and you should have your spend data classified as soon as possible…

First things first, there’s that full picture I mentioned. If you’re only using your General Ledger codes, I can guarantee that they are wrong! Now, I know that’s a bold claim, but it is based on years of experience of working with GL codes. More often than not they’re used by people who don’t necessarily understand or know what they’re logging or the importance of accuracy. The result? Items logged under random GL codes.

Now, have a think about your department budgets: Karen in marketing’s maxed hers out, but she’s just placed an order for 5000 new leaflets to be printed. How? In my experience, it’s been snuck into someone else’s budget. Think about marketing and sales, would an order for 5000 leaflets really look out of place in a sales budget? Probably not, unless you look a bit closer. And this means you’re not really getting a true picture of what’s going on at ground level or what you might need for specific areas of your business. You can’t increase the marketing budget if you don’t know they’re spending it all.

We also, unfortunately, need to mention the possibility of fraud or embezzlement. It’s not pleasant to talk about and no one wants to think the worst of their staff or suppliers, but it can and does happen. Someone may have tried to mislead or take advantage of you in some way and if the spend data is messy or they’ve been clever it can be very difficult to spot. This is why it is also a very good idea to have an external party look over it, because then nobody has a vested interest in hiding what’s in the data – they’re just classifying it!

Now, I’m not saying it is a quick and simple process, good classification can take weeks and weeks … and weeks! But it’s worth the wait when you get back your brand new, shiny data set with all this new and organised information. Then you’ll probably say to me, what do I do with this now?

Well, the first thing you do is actually look at what you really spend your money on and find out if you could or should be negotiating better rates with your suppliers because the data’s shown you’re actually spending a lot more than you thought you were or have been automatically accepting price increase when there’s much better deals out there!

Then once you’ve done that, you’ll probably want to review your processes because, as I said before, I can almost guarantee something will have been flagged up during the classification process which indicates spend isn’t being accurately logged.

Ultimately, it’s all about saving you money and that’s no bad thing for anybody. Now, more than ever, it is so important you know where your businesses’ money is being spent and I am sure every single person who has their spend data classified will find at least one hidden surprise – like a data Kinder Egg! (Sorry my American friends, they’re not banned in the UK!)

So, although you may be put off by the upfront cost of having your spend data classified, it will save you money in the long run and the benefits to your business are pretty massive.

Susan Walsh is the founder of The Classification Guru, a specialist in spend data classification, supplier normalisation and taxonomies.  You can contact her at [email protected] https://www.procurious.com/professionals/susan-walsh

Make Sure Your Data Has Its COAT

Dirty data can be costly – but accurate data is always a great investment. Make sure your data has its COAT and you’ll never be out in the cold, writes Susan Walsh


If your data doesn’t have a COAT, there could be a range of bad or costly decisions made which could affect the business performance, financial situation, risk jobs, or even the fate of the company.  You wouldn’t go out in freezing temperatures without the appropriate coat and you shouldn’t work with data or make business decisions without the same level of protection – accurate data.

And, just like with coats, there are different levels of quality data services out there. If you buy a cheap jacket, it might not be waterproof or protect you from the elements, it won’t last much longer than one season and you’ll need to buy another the next time winter rolls around again. It’s the same with data – if you don’t invest in good quality service you will end up paying twice as much, if not more, in the long run to fix the earlier mistakes. Don’t be left out in the cold.

So, what is COAT?

Consistent

Generally data is used by many people or teams, which can lead to multiple classifications of one product. For example, one person might put DHL as a ‘courier’, while another might log it as ‘logistics’ or ‘warehousing’.  A taxi might be classified generically as ‘travel’ when it should be classed as ‘Travel > Road Transport > Taxis’ and a project cost should be assigned to the same budget or GL code, not several.  Or it could even be a simple as units of measurement. One person may use ‘Litre’, another ‘Ltr’ and another ‘L’ – but these should all be one format.  This means everything can be reported accurately, you get a true picture of what’s going on and better business decisions can be made.

Organised

Data is only useful if it’s organised.  Think of a messy closet: you’re looking for your favourite top but can’t find it as everything has been thrown in there.  And, much like your closest, you can organise your data in different ways, depending on what you want to get out of it and that will produce different reports/analytics.  You may want to assign data to employees, teams, departments, functions or internal categories, as well as time periods such as months and quarters, or year groups like P1, P2 etc… So, for example, when you need the information on the accounts that Sharon in Finance is working on, or the sales teams’ performance for the quarter – you can pull that information quickly.

Accurate

This can mean different things to different people. At its most basic level, accurate data is correct.  In more detail, this could be no duplicate information; correct invoice descriptions; correct classifications; no missing product codes; standard units of measure (e.g. ltr, l, litres); no currency issues; correctly spelled vendors; fully classified data; or the right data in the right columns.

So, what does this mean?  It means greater visibility across your business in several areas, allowing better decisions, as well as time and cost savings and increased profits.

Trustworthy

This is critical.  Business decisions around jobs, staffing, budgets, cost savings and more are all based on data.  Data is used by everyone from the bottom to the top of an organisation. You have to be able to trust that what you’re looking at is the right information, and you need it to be accurate in order for your teams to use the data in their daily jobs. 

If they don’t trust the data, then they might not use the fancy new expensive software you’ve just spent tens of thousands installing.  Or the new AI you’ve installed may not produce the right results because it’s learning from dirty data.

Like a good coat, data is an investment – not a cost.  By making sure it has its COAT on, you’re saving time, money and avoiding future problems.  And also like any coat, it needs to be maintained.  You need to continually ensure your data is consistent, organised, accurate and trustworthy to get the most out of it.

Have you ever experienced a make or break moment at the hands of your data? Let us know in the comments below!

Procurement DigitiSation and the Future Role of Category Managers

With digitisation focused on Operational and Tactical aspects of function, and the next wave predicted to focus on technology that enables Strategic work, what are the implications for our future Category Manager’s skillset? Gregory Romney shares his expertise.


In a recent post, I made the observation that in large part the Procurement digitisation that has happened over the years has been focused on the Operational and Tactical aspects of the function (i.e. Buying, Sourcing). I also made the prediction that the next wave of Procurement digitisation will be more focused on technology that enables the Strategic work that organisations still struggle to prioritise. If I’m right, this will have significant implications on the skills that will be required to be successful in the role of a Category Manager and poses a fundamental question:

What is the future role of a Category Manager and what skills will be most important?

I’m not sure the answer to this question really differs all that much from what we would see on most aspirational job descriptions today, however, there won’t be any room for compromise. Future success in the Category Manager role will be dependent on the ability to closely mirror the skillsets of 3 roles: Strategist, Advisor, and Broker.

1) Strategist

Similar to a game of chess, a strategist has a well defined plan in where he/she knows the the steps necessary to win the game, or in this case to bring the most value to the organisation both from a traditional bottom-line perspective, but top-line as well. As a Strategist, deep understanding of strategic frameworks will be required and their practical application for the category the CM supports. Additionally, sharpened data analytics capabilities will be increasingly important. However, the most important skill the Strategist will have is the ability to interpret the analysis, “connect the dots”, and then effectively communicate this internally to key Business Partners & Stakeholders. This leads me to role #2.

2) Advisor

I recently read the book The Trusted Advisor by Robert M. Galford and it expounds upon 3 core skills that are key to becoming an Advisor: earning trust, giving advice effectively, and building relationships. I believe it sums up perfectly how to transition from playing the Strategist role to the Advisor role. The activity of “advising” may sound more familiar when you use it in the context of engagement with internal Business Partners. According to a study conducted by CAPS Research, only 24% of organisations consider their advisement or engagement Strategic, meaning it is highly collaborative and proactive, there are shared dashboards between Procurement and the Business Group they support, as well as aligned metrics. Despite such a low percentage of Strategic engagement, the study did find that 72% of engagement was Transitional, meaning engagement was increasing, and Business Partners were engaged with the category strategy. This certainly is a positive trend. The reason I believe achievement of Strategic engagement or advisement with our Business Partners is still so low is due to the fact that this work looks very different from the Tactical and/or Operational work that Procurement teams have been tasked with managing historically. However, if we are able to make the transition to “Advisor” successful, it will open the door to significant opportunities that Procurement is already well-suited to help deliver due to role #3.

3) Broker

Most Category Managers play this role decently today and in most cases have sufficient skills to broker deals between the company he/she represents and its suppliers. We have tools and well-defined processes to help us in this role, however, most of the deals that CM’s are brokering today are focused heavily on delivering value in form of cost reduction and less in the form of supplier innovation that can impact the top-line. In order to capture this form of value from the supplier base, a Broker needs to truly be willing to learn from the supply market and foster an environment within his/her own organisation so that they are prepared not only to receive, but act upon the supplier-led innovation. The skillset required in this type of deal brokering is different from what we have traditionally done when playing this role and so will the tools that we leverage to enable this activity (hint: eSourcing will not be the optimal tool from the toolkit for this kind of brokering). A perfect example of this is found in the recent announcement from Coca-Cola European Partners (CCEP) in regards to the introduction of CanCollar, a sustainable paperboard packaging solution, for multipack cans in Spain. Through collaboration with its packaging supplier WestRock, the company projects that the new solution will save more than 18 tonnes of plastic annually and has invested €2.6 million in its Barcelona plant in order to support the initiative. Hats off to the Procurement team that I’m sure was intimately involved in brokering this deal!

As I mentioned earlier, these roles at face value are not a drastic shift from what Category Managers are being asked to play today, but if we are honest with ourselves and the members our organisations, there are very few that excel in one let alone all three. This is the capability gap that Procurement faces and in a parallel there is a Technology gap to help enable it, both of which will require an overhaul across a myriad of current mindsets, practices, and investments.

This is why I predict the future wave of digitisation will be focused on empowering the Procurement function across these 3 roles and I’m confident that the function, as well as the supply market, will rise to the occasion and make the necessary changes to address these gaps. In doing so, I’m hopeful Procurement will become a profession of choice not mishap.

Agree? Disagree? Please share and let me know your thoughts in the comments section!

This article was originally published on LinkedIn and is reproduced here with kind permission.

A Resolution To The Classic End-to-End v. Best-In-Class Saga

End to end or best-in-class? It’s an age-old discussion in IT and became an issue in procurement – an issue which Greg Holt can resolve.


I have been working in the IT industry for a good 20 years and one of the recurring themes continues to be the “end-to-end” versus “best-in-class” saga. Like the central characters in a long-running soap opera, these two adversaries may fade into the background now and again, but they always return, even from the dead. As is the case with soap characters, fans tend to take one side and denigrate the other. You either loved JR Ewing and hated Bobby Ewing, or vice versa. You could not love both.

(Younger readers who never had the opportunity to sit through all 357 episodes of Dallas can catch up here.)

End-to-end versus best-in-class is an argument that lately came to the fore in procurement, where end-to-end solution means a complete source-to-pay or source-to-settle solution. That is to say, you invest in a software suite or platform that supports everything you do in procurement from finding the suppliers to rewarding them. A solution that combines both upstream and downstream sets of processes. The alternative is to select and invest in the best software (sometimes referred to as a “point” solution) to do each particular task or process on the continuum, and string them all together to build a world-class solution.

So, allow me to share what I’ve learned from my own experience and from my colleagues about selecting software so that you can make the best decision between point solutions and end-to-end software suites for your company.

The first and most obvious remark is that procurement software is a major investment, and you will need to work with your IT department and possibly an external consultant to help you to make the right choice, which will take into account what you have now (your legacy systems) and upcoming investments in other areas and functions of the business. You will need to carry out a cost-benefit analysis of the various approaches to business transformation, including the payback period, and where you want to be in five or ten years. Consider the total cost of ownership, not just the upfront investment.

That said, let’s return to our specific question.

When to go for best-in-class

The main benefit of a best-in-class software solution is the depth of its functionality. Think of it as a yard wide and a mile deep. Because best-in-class software is hyper-focused on one area it offers robust capabilities and features to address specialised needs. That means it is absolutely essential that it should be capable of easy integration with other systems. The best best-in-class software solutions easily sync with other systems that focus on other areas.

The promise of vendors of best-in-class software solutions is that you can custom-build a software suite with exactly the solutions each area of your business needs, with focused functionality in every area. This is why they are often loved by end users. What they see is what they want. “I work in sourcing, so I want a sourcing solution. Period.” On the other hand, depending on your organization and your industry, it is likely that your sourcing needs are limited, in which case you may end up paying for mile-deep functionality when you only need to dive down a few fathoms.

A further argument in favor of best-in-class is that you can expand capabilities on your own terms. They are scalable so you can start with the software that addresses your most pressing area of need and then add additional capabilities when the time is right. For example, once you have sorted out sourcing, you look for the best specialist provider of contract management software. On the face of it, this is also the low risk path of least resistance. Rather than buying everything up front, you can incorporate other best-in-class solutions as your business’s needs change and your budget allows. It’s a gradualist approach. Or “evolution not revolution” as the cliché runs.

On the other hand, integration is in practice more of an issue because each best-in-class system has its own data dictionaries, data formats and other sources of incompatibility that can make even a bilateral integration difficult. And when it comes to several systems, the problems multiply. It is likely that you will need to employ a specialist firm of systems integrators to make it work, and even then, the solution may be unstable, processes may not be streamlined, and visibility across all systems rather limited.

When to go for end-to-end

An end-to-end solution can fulfill every operational need for a specific business function, in this case procurement. Companies that choose end-to-end solutions should pay attention to overlap in what the full-service solution offers compared to the solutions they already use. For example, ERP systems may already offer some limited procurement functionality that can be shifted to a source-to-pay implementation.

A further advantage of an end-to-end solution is the avoidance of disputes between various point system vendors when things break down or go wrong, perhaps because there is no clean transfer of data between the contracts management system and the procurement system. With a source-to-pay implementation you only have to deal with one support desk. There is just “one throat to choke”, as the saying goes.

End-to-end software solutions should therefore be used when there is an obvious solution that can streamline processes and provide global visibility through the use of shared data. And that is increasingly the case these days as organizations seek to manage source-to-pay functionality holistically and seek to gain insights through spend analytics software to enable continuous improvements.

End-to-end solutions can also be useful even when there is functionality overlap with existing solutions when the end-to-end software adds more value than existing point solutions or legacy systems like ERP. On the other hand, the following considerations may deter you from choosing an end-to-end solution:

1. Your business need or process can easily be broken into separate parts

2. You have already invested substantially in a legacy system

3. The end-to-end solutions on the market have serious weaknesses in terms of the specific processes that are most important to your business

4. You do not want to be “locked in” to a particular vendor

5. The vendors you have seen who claim to be end-to-end are in fact only strong in certain areas; at some points in the value chain the functionality is limited, to put it mildly

6. The end-to-end solution does not integrate easily with other systems

On this final point: a source-to-pay solution overcomes most of the integration issues that arise when taking the “best-in-class” approach, but you still need to consider integration with other software such as ERP or accounting systems.

Having your cake and eating it

Since the advent and development of SaaS (software as a service) suites, it does not have to be a straight choice between the two extremes. If you are not yet ready for the whole shebang, look for an end-to-end, source-to-pay but modular software solution, and invest in the modules that best suit your immediate needs. You will be able to expand your system horizontally, from the same supplier, so there are no integration issues. Some vendors, including JAGGAER, offer strong functionality and depth of expertise across the entire source-to-pay spectrum.

A SaaS system means you benefit from system enhancements and extensions as they happen, and the cost is shared across multiple participants in the “multi-tenant” implementation.

You can review your contract at any time and if you are dissatisfied, it is relatively easy to move to another supplier – you are not “locked in” as was the case with on-premise end-to-end systems.

Soap operas will run and run with unresolved plots and dozens of loose ends, but this is one storyline that seems to be reaching a final resolution! I’d love to hear your thoughts on this debate in the comments below.

Procurement Process Technology: 3 Keys To Adding Clarity Post Covid-19

Here are three keys to conceiving, deploying and using technology to elevate the performance of your procurement process operations from IBM’s Chander Vashistha


Procurement organisations depend on technology to manage their source-to-pay (procurement) functions most efficiently and effectively. Technology also provides exceptional services experience to their requestors, buyers and suppliers. However, organisations often find the process of selecting, implementing and using technology platforms and applications challenging. While procurement technology provides many benefits, organisations that do not select the right technology, integrate the technology to create a connected ecosystem and create processes to use the technology often do not realise the full benefits.  

Clarity is the cornerstone of successful procurement practices, and procurement technology must support and enable clarity between both parties. When organisations do not receive full value from technology systems, the issue often comes down to clarity. However, it’s essential that clarity exist before adding in the technology. Technology doesn’t create clarity, but improves and enhances clarity already present in the process.

Organisations with good clarity in their procurement practice see significant competitive advantages, business continuity, resilience and digital transformation. While these aspects are essential for a successful business, the COVID-19 pandemic and resulting business disruption significantly increases their importance.

Here are three keys to conceiving, deploying and using technology to elevate the performance of your procurement process operations:

1) Align the purchasing strategy with operations and vision

When organisations lay technology on top of disconnected strategy and vision, the new platforms and systems often magnify the misalignments. Before focusing on technology, organisations should review their current strategies to ensure alignment. A well-connected procurement strategy and vision drives implementation of a frictionless technology ecosystem rather than a patchwork collection of discrete point solutions.

The purchasing process works within both your procurement process and overall company operations. On an even more granular level, the purchasing strategy tightly connects with procurement operations’ vision and procurement operations strategy. Before making changes, especially in processes and technology, practitioners must step back and consider strategic alignment.

After understanding your organisation’s purchasing strategy, procurement vision and procurement operating strategy, the next step is ensuring they all align with one another. After making any necessary changes, your organization will have the foundation to begin looking for technology that supports all three.

2) Understand the four types of procurement technology

Procurement professionals often assume — incorrectly — that all procurement platforms and systems fall into a single category. By understanding the different types, organisations can ensure they are researching and purchasing the best type of technology for their needs. Without clear understanding of the different types of procurement technology, organisations may purchase multiple technologies performing very similar functions, which creates waste and redundancies, not to mention wastes funds.

Procurement organisations use the following four types of technology:

  • ERP software and blockchain equivalents – SAP-MM, SAP-FICO, TYS blockchain, IBM Temp labor blockchain and RSBN blockchain
  • Commodity or process-neutral procurement technology – SAP Ariba Solutions, Coupa, Tradeshift, Sourcematrix and IBM SpendIQ
  • Commodity or process-specific procurement technology – IBM Oniqua, SAP Concur, SAP Fieldglass, Amazon Business, Alibaba 1688, Uber for Business, Service Now and JIRA
  • Cognitive e-procurement applications with intelligent workflow platforms – IBM Procurement Service Desk, IBM Watson Virtual Buying Assistant, IBM B2B Marketplace and IBM Direct Spend IQ

Organisations often invest in one or two types of procurement technology, which does not typically enable achieving their procurement strategy and vision. Often these organisations assume they fell short due to the technology implemented. By deploying relevant technology from each of the four types, organisations achieve the clarity needed to meet their goals.

3) Focus on cognitive e-procurement applications

Organisations find a wide range of choices in technologies, especially in cognitive e-procurement applications, which use artificial intelligence to open procurement transformation processes. This type of technology helps organizations transform the procurement process experience for buyers in direct, indirect, MRO and capital purchasing.

Because cognitive e-procurement applications are relatively new and come with a large amount of hype and innovation, organisations should fully understand what features they need as well as the features offered by each solution. By selecting the right application for your specific needs instead of the most feature-rich product, you’ll significantly increase your ROI and strategy improvements.

For example, Trust Your Supplier blockchain, which came to market in 2019, helps procurement professionals automate and digitize supplier information like a “digital passport.” The application also provides the immutability and trust that comes with processing transactions through blockchain. Because the application shifts the process out of procurement operations, the technology reduces cycle time, lowers transaction costs and improves reliability of supplier information management operations. Additionally, suppliers streamline their process by only submitting information to a customer once and can share the same information to other customers using a digital key for record access.

Making the move to integrate technology

As organisations continue to manage change and disruption due to the pandemic, creating clarity in your procurement cycle remains a high priority. Through using cognitive technology driven by intelligent workflow platforms, in conjunction with the three other types of technologies, organisations can create the most effective and efficient processes that drive business value. By aligning strategies, understanding the types of technology and implementing cognitive e-procurement applications inclusive of the technology ecosystem, organisations can improve performance, maturity and outcomes.

Chander Vashistha is the source-to-pay practice leader at IBM.

How P2P will Become the Technology of the Future

Discover the value that a procure-to-pay (P2P) system can deliver to your business today and over the next five years.


The evolution of procure-to-pay (P2P) has accelerated dramatically over the past few years. And we can expect the pace to pick up further over the years to come. Originally, procure-to-pay / purchase-to-pay technology was seen as a way to connect procurement to finance via accounts payable, and as such it started life in the form of expensive and rather inflexible bolt-ons to on premise enterprise resource planning (ERP) systems. No wonder that for many years, P2P did not have the greatest of reputations, even among procurement professionals.

In the early 2000s, dedicated eProcurement systems emerged. Yet, many large enterprises still do all their purchasing and accounts payables through their ERP systems, even though this leaves much of the process highly dependent on paper in the handling of purchases orders, requisitions, goods receipts and invoicing. Or, in one word, routine. Many ERP implementations even lack a requisitioning facility and a means to communicate electronically with suppliers.

As to accounts payable, in many organisations that do not have a dedicated, built for purpose procure-to-pay solution, vendor invoices still arrive by mail or email and the data must be keyed manually into an ERP or other finance system. If the benefits of touchless invoicing were not already apparent, they have certainly become so in the wake of the Covid-19 pandemic.

The other major issue that continues to plague many organisations is our old friend, maverick spend (or off-contract buying), which is especially likely to occur when anyone looking to purchase items needed for everyday use is confronted with bureaucratic obstacles. Shopping online and submitting an expense report is much easier than submitting a requisition or purchase order that takes ages to process. Without a dedicated P2P system, maverick spend is difficult to monitor effectively. It results in lost money as employees buy at retail prices when you should be securing handsome bulk or wholesale discounts.

(Although worse than that, it forces happy-go-lucky procurement professionals into the role of jobsworths …)

And heaven knows, after years of online shopping with the likes of Amazon, corporate buyers expect the option to order online and enjoy an e-shopping experience comparable to the one they enjoy as private consumers. They expect an experience that is user-friendly, intuitive, and frictionless. Running low on stationery? Simply pick items from a catalog, review the shopping cart and place the order. And maybe pay with a V-card (single user account) number.

This can all be done via a procurement department’s P2P solution – against contracts negotiated with preferred suppliers. The P2P solution allows end-users to shop and track orders as easily as if they were shopping online, with the added benefit that all the information the procurement department needs is captured too, giving greater transparency. Plus, if the P2P solution is integrated with upstream processes such as contracts management and sourcing, the ability to monitor supplier performance against negotiated terms and non-price terms and conditions.

What you should look for in P2P now

A few years ago, people were still asking if procure-to-pay automation is worth it. I think that case has now been definitively answered. Especially if you wish to demonstrate the value of procurement – your value – to the business.

A P2P software suite integrates and automates the entire back-office lifecycle of requisitioning, purchasing, receiving, paying, and accounting for indirect goods and services. By creating standard workflows between buyers, procurement and accounting departments, a P2P solution should provide more transparency into, and control over, indirect spend and should create a more congenial relationship between all stakeholders. SaaS technology accessed in the cloud, such as the JAGGAER ONE suite, has made affordable, flexible and technically versatile solutions P2P available. A major advantage of SaaS is the ability to update functionality and innovate continuously without affecting the normal day-to-day operation of the core solution.

What you should look for in future 

Over the coming years P2P will increasingly leverage artificial intelligence, natural language processing and robotic procurement automation to deliver an even better buying experience on the one hand, while further cutting costs, increasing efficiency, reducing risk and improving governance and insight on the other. Generally speaking, you can expect P2P solutions to be more open, network-oriented, autonomous, collaborative and intelligent.

Here are seven trends that I think you can reasonably expect to reshape P2P not in some distant future but between now and 2025.

·   It will be a more collaborative environment for all stakeholders (internal and external) with full compliance, validations and approvals. P2P and MRP systems will collaborate through direct material order and fulfilment; P2P and corporate treasury will collaborate to support cash flow planning and optimize working capital

·   It will be more autonomous by taking charge of routine tasks such as all forms payment management and processing, improving the productivity of the payment process and the financial health of the supply chain

·   It will empower open business networks bringing together the entire community of buyers and suppliers, integrating and accessing external services and market intelligence feeds

·   It will be interactive with smart assistants assisting you through guided buying, vendor management and other chores

·   Enhanced intelligence will enable P2P systems to act proactively on behalf of users learning from and using all data sources and knowledge to make improvement recommendations to all stakeholder activities and the P2P process

·   It will deliver win-win finance programs to buyers and suppliers, for example dynamic discounting and supply chain finance programs

·   The focus of P2P will shift further from savings to value, reinforcing procurement’s profile as a strategic partner to the business

Conversational systems for guided buying and vendor management

Let’s stop calling them chatbots! Digital or smart help organizations will increase efficiency and achieve high levels of P2P user adoption because of their easy interfaces and clear answers. AI combined with natural language processing (NLP) has opened the door to new, more natural, and more intuitive interfaces that stimulate conversation with humans. There are many uses for digital assistants in procurement – too many to list here. However, the central issue is that procurement specialists are increasingly dealing with vast quantities of data, which means that a lot of their time is spent looking for information rather than using it. They will enable procurement specialists to converse with their AI-powered procurement software, which will do the heavy lifting involved in finding the relevant information and making intelligent suggestions as to what actions need to be taken in specific situations.

Through machine learning the digital assistant will be able learn about your preferences and your organisation’s policies and procedures. A good example is guided buying, whereby a person who needs to buy something will interact with procurement via a conversation conducted by a digital assistant. Based on the procurement strategy (preferred suppliers, preferred items, contracts in place, history of purchases, etc.), the digital assistant will propose solutions, perhaps looking through huge volumes of catalog entries to identify specific products or suggest alternatives.

Digital assistants can also be deployed for handling queries from suppliers, avoiding a lot of back-and-forth correspondences. I think they will become more engaging and human-like in their interactions with you. That, after all, was the original promise of artificial intelligence. But nobody’s perfect, so if the digital assistant cannot find the right answer, it can of course direct the user to a genuine flesh and blood procurement professional (you, for instance).

What innovations would you like to see, or expect to see, in procure-to-pay over the next five years? Let us know in the comments below! Keep up with the latest innovations at the 2020 Global Big Ideas Summit.

Defining Procurement 100%

Organic, original, challenging and aspirational – is this what procurement means to you?  Maybe it should.

In a recent conversation with a business partner where we discussed all-things procurement, a new notion came to mind. The more we talked about it, the more it resonated and the more tangible it became. The concept, as simple as it sounds, embodies a holistic vision of what procurement professionals must strive for.  We called it “Procurement 100%”.

“Procurement 100%”, is not the same as “100% procurement”.  It’s a concept that recognises everything an organisation does is not purely focused on procurement, but that procurement must operate at 100% to enable the organisation to achieve its goals. 

Procurement  is 100% Organic

Procurement 100% implies that procurement is alive and complex, and that significant effort is required to achieve it. All the moving pieces of an organisation will influence procurement and we must be forever diligent to maintain performance.

Procurement 100% is a moving target, is a relative concept that needs to be assessed and gauged within its ecosystem, as it is no stranger to everything else within a company. It is a set of goals that defines and redefines itself constantly as risks become real and resilience is challenged everyday.

Procurement 100% is both the exemplification of sustainability, and its susceptibility to external variables. 

Procurement is 100% Original

The most appealing thing about this concept is that the definition of Procurement 100% will be unique and different for every organisation.  Each company must think about what 100% means to the broader vision of the organisation and devise a path and a plan against it to achieve it. 

Only one rule applies. Procurement 100% is about achieving full operational transparency, enabling process compliance and capturing value at all times, no compromise. 

A procurement function that operates at 100% would be world class  – a function that balances process, people and technology in just the right way to enable the most ambitious goals of an organisation without wasting energy. It’s about making the right way to buy the easiest way of buying.

No procurement function is the same, or requires the same energy and resources to reach its full potential. Not every organisation will need the same set of tools, people and expertise in house in order to perform at a high level.

Procurement is 100% Challenging

Procurement 100% is an exclusive club, because it demands mastery of the competing forces of strategic vision and operational functionality. Many companies have great vision, but lack the on-the-ground resources to execute their plan. Others have strong apparatus, tools and operatives, but fail because there is no strategic direction. Everything gets tactical, too granular, and they are unable to change mindsets.

To me, the greatest ideas come from defining, embracing and deploying out-of-the-box approaches that make us a little nervous, where failing is done quickly and learnings are applied before the fear of losing again, anchors us more to our comfort zone where all is safe, where procurement is still tactical at best.

Procurement is 100% Aspirational

Procurement 100% gives everyone  a goal, a vision and mission to attain.  It speaks about something that must, and can be, measured. Anything under 100% means there’s work to do, everything at a 100% means it needs to be monitored.

I cannot define what Procurement 100% looks like for your organisation, but I can tell you that I don’t know a single entity who has Procurement 100%.   It’s not that they don’t strive for excellence and having a high performance procurement function.  Those who acknowledge the value of 100% Procurement are the same visionaries who keep raising the bar just before its reached.

What I can tell you is that in the holy trinity of procurement – people, process, and technology – each make up for exactly 33% of your winning formula. Achieving the right balance is the secret ingredient for you to figure out to unlock the full potential of your procurement function. 

Join us for the Global Big Ideas Summit next month to share what that 1% looks like for others.

How To Create A Procurement Service Desk

How can you centralise disparate tools and requests to receive, triage and manage work across the source-to-pay process without replacing your applications? It’s not as impossible as it sounds.

Photo credit: @proxyclick | Unsplash

Are your stakeholders frustrated with finding their way through the procurement maze? As a procurement practitioner are you overwhelmed with navigating your way through a variety of disparate tools and requests, such as procurement, accounting and reporting, to get your work done?

Many organisations are increasingly improving the efficiency of the procurement process by implementing a “Procurement Service Desk,” which is a single, centralised user portal for stakeholder requests, routing, communication and PR/PO status reporting.

One-stop shop for “all things procurement”

By using one portal instead of multiple systems, the Procurement Service Desk provides seamless engagement for procurement and its stakeholders, which helps procurement organisations receive, triage and manage work across the source-to-pay (S2P) process. The single portal improves the overall user experience and outcomes with procurement for stakeholders, including requestors, legal, finance and operations.

With a Procurement Service Desk, stakeholders no longer have to spend days trying to figure out where to go, who to call, and what information is required to engage procurement. The platform provides procurement stakeholders with a simple user experience to submit procurement requests. A dashboard provides full visibility to requests and statuses throughout the end-to-end procurement process. Stakeholders and procurement now collaborate directly in the centralised portal instead of through numerous emails, files and phone calls.

Procurement organisations typically realise these value-based outcomes after implementing a Procurement Service Desk:

  • Automated triage of work to appropriate practitioners through intelligent routing
  • Improved user experience for clients, supplier and S2P practitioners
  • Workflow data captured in a structured manner for utilisation to improve processes, deliver efficiencies and provide an improved experience
  • Enablement of metrics that matter
  • Intuitive, easy-to-use platform
  • E2E flow supported by a single platform

Shortening the process through intelligent triage

Through the Procurement Service Desk, stakeholders submit requests covering the full S2P process, including sourcing, contracts, supplier onboarding, purchase orders and invoices. By using standardised processes and forms, the Procurement Service Desk ensures compliance and gathers required data from stakeholders.

Requests are based on standardised processes and forms, ensuring compliance and that required data is received upfront from the stakeholders. Because procurement professionals don’t have to chase down additional information from stakeholders, the Procurement Service Desk enables a more efficient process and quick turnaround times.

When a request is submitted through the Procurement Service Desk, the platform triages the request through intelligent routing rules to the appropriate procurement practitioner for no-touch handling.

Triage rules based on commodity, request value, country and supplier match the request with the most appropriate procurement practitioner. This automated triage ensures work gets to the right team quicker and more accurately, improving stakeholder customer satisfaction.

The Procurement Service Desk provides procurement with full visibility to the types of requests coming into the organisation through an executive dashboard, helping managers measure and address workload balance and required skills. The platform also provides improved data-driven insights based on the volume and types of requests received from stakeholders.

Integrating processes and systems

Because the Procurement Service Desk sits on top of an integration layer, the intake request process connects with the back-end disparate tools and micro services. Procurement manages their full workload in a single platform regardless of the back-end transactional systems. By sharing data from the intake process bi-directionally with the back-end transactional applications, the Procurement Service Desk eliminates data re-entry, improving process efficiencies and analytics.

The Procurement Service Desk also easily connects to other services, such as Marketplace and Analytics, making them easily accessible. Previously disparate tools and services, they now easily scale and function as a fully integrated platform.

After making the decision to move to a services desk, procurement organisations should begin looking for a system platform to manage the Procurement Service Desk and integrate their key systems. By working with a company with specific procurement experience, organisations reduce business disruptions and speed up implementation.

Learn how IBM Procurement Services can help to reduce business costs and meet the challenges of complex global enterprises through effective data-driven source-to-pay operations by visiting www.ibm.com/services/procurement