Curated 3 – The Heyday of Indirect Procurement

Thierry Jaffry - June 26, 2017

Information to readers : we select carefully our curated blogs on specific criteria. Our goal is to share articles we have found inspiring and that will give you disruptive visions of procurement. You will find the original article at the bottom of the blog.

 

Today we have chosen an article written by David Hearn, a key thought leader and advisor in the procurement community. David has led multiple world-wide sourcing, procurement, and supplier management organizations, both in direct materials and indirect categories (Sun Microsystems, Juniper Networks, Kaiser…)

The Heyday of Indirect Procurementdavid-hearn

by David Hearn

I think we will look back at this time as the heyday of indirect procurement.

Why? Because never before has so much innovation gone into our field. I think back 10 years ago and we were still on big ERP procurement systems, which were really built for direct procurement, and handled indirect very poorly. But now I see innovation all around me!

 

Software Innovation Finds Us

In the last month, four start ups contacted me to learn about how they could transform procurement by using very unique technologies they pioneered. They wanted my input on the most difficult things all indirect procurement teams have had to deal with for years. I’m not sure why it took so long for innovators to discover the literally billions…no trillions of dollars spent on companies internal usage goods and services. As soon as they stumbled upon us, and the archaic way we were doing the process, they could see the huge opportunity to sell value-added tools. Many of the companies approaching me lately are not experts at indirect (which I think helps them innovate, no baggage), they just can see the obvious opportunity and then they learn the nuances from procurement folks like myself. They quickly can see the root problems we struggle with and they figure out clever ways to do it differently. Finally, the geniuses in software have made it to us!

 

Tools That Think Like We Do…Only Much Faster

First let’s talk about artificial intelligence and machine learning. If you think about the core problems these technologies solve, it’s helping people deal with mammoth amounts of data, from very different sources, which no one has ever had the time or the inclination to tie together and look for patterns or anomalies. In procurement, we have PO data, purchasing card data, travel and entertainment data, a/p data and no one has the time to analyze it beyond the basics. There are now companies integrating this data and analyzing how best to source it and also to detect fraud. They aren’t sitting and trying to put it all in one spreadsheet and then analyze it like I did back at my last job.

 

Brute Force ≠ Innovation

I admit we tried the brute force methodology, out of desperation, to provide value to our stakeholders at Juniper. I just refused to go to an executive stakeholder with the disjointed data sources and the typical cursory analysis we’d done in the past. So with the help of a very talented financial analyst, we integrated eight databases with all types of spend data, and also HR demographic data. We then mined it for the top ten cost savings insights. Never before were the SVP’s able to see these kind of insights into their spend. But it took the most massive spreadsheet I’ve ever seen, with thousands of macros to combine and then look through the data. Every quarter we ran 10 custom SVP reports. It took no less than 40 man-hours a quarter and took about 200 man hours to create the original macros. We wanted to extend it to and every manager in our company, but knew we couldn’t scale. But now, with the use of machine learning, companies can scale it to run real-time, across all managers. Amazing!

machine-learning

 

Getting Us That Early Involvement

I was really excited to learn of companies that were looking at the human interaction problem we have in indirect where we don’t have enough people to be in every staff meeting across the company.  We can’t be involved early in every one of their business decisions so we’re often caught off guard. One innovative company has looked at the human interaction and how to provide a value added mechanism where early engagement happens naturally as a matter of the way the business groups go about their normal day. Procurement is always in the loop. There’s a lot of technology behind that, which is far beyond me, but they already have many name brand customers.

 

Innovation in Simplicity Yields Mass Adoption

The iPhone taught us all that we’d pay more for simplicity and elegance in design. I’m impressed that innovators are bringing the same thing to indirect procurement. Even where we’ve had tools for sourcing, procurement, and supplier management for decades, I’m impressed with these start-ups who come in and do the same thing much simpler with an elegant interface. I know first hand that a tool with many features but a poor user interface will sit on the shelf whereas a simple tool, with just the features you need, laid out very cleanly, will get used. My team had an over featured sourcing system that never was used, despite my trying to get people to use it. It was very frustrating to me, and costly to buy, but I learned a valuable lesson.

 

Our Time is Now, Don’t Miss This Opportunity

I see these as breakthroughs, because these innovators are going far beyond the obvious target markets and are now applying technology to some of the core issues that we have struggled with in procurement for decades.

These innovators have actually discovered the world of indirect procurement and are coming to the aid of thousands of us who want to do a better job working with our stakeholders and suppliers. Thankfully the geniuses developing software tools are accelerating the evolution of indirect procurement by orders of magnitude, and we’ll look back at this as the heyday. That is, as long as your team is taking advantage of this new technology. Don’t get left behind.

 

I hope you enjoyed this article as I did. Here is the original and full article written by David Hearn :
The Heyday of Indirect Procurement Transformation

 

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About the author

Thierry Jaffry has an extensive expertise in S2P projects working successively with Ivalua and Flucticiel software solutions and integrators. He is the man behind Simetryk.


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