“Shirt Pocket Notes” and Other Reflections

Editor’s Note: Jim Baehr is group leader of Sourcing Strategies Group LLC

We're approaching the time when we reflect on what's happened, or hasn't happened, during the past year. This often is the result of sorting through what some old-time sports reporters referred to as “shirt pocket notes” - notions captured on a small notepad, scrap of paper or a matchbook cover - then stashed away for review at a later time. For some, our impressions are written on a sticky note placed somewhere on or near the desk. For others - the more technologically advanced - they record their thoughts electronically using a notes app or equivalent. For me - I still carry a portfolio so I frequently write my observations on one of the last sheets of the accompanying ruled pad.

The observations that follow come from conversations, conferences, training, reading and a variety of encounters throughout 2018. These are a few basic, but relevant observations regarding systems and their impact on Sourcing and Procurement Management:

The haves and the have nots – is this what Procurement is coming to? There's much hype about digitalization yet most Procurement groups don't have the time, money, inclination or opportunity to pursue the related technologies. These capabilities currently seem to be meant for only the top Procurement groups. Understandable because that's where the opportunity is. It's reasonable to believe that the top 20% of Procurement organizations handle 80% of the overall spend – both direct and indirect. As the Italian economist Vilfredo Pareto opined there's a natural divide - the “vital few,” - the top 20 percent in terms of money and influence, and the “trivial many” - the bottom 80 percent.

An optimist looks at this divide and hopefully offers that at some point there will be a democratization of Procurement technologies – much like the position that's been advanced by Coupa where end users have access to buying tools freeing up time for Procurement to attend to more strategic duties. Another way to look at this democratization is that eventually there will be a realistic price point that will make the technology available for most Procurement groups. “Are we there yet?”

This isn't being pejorative about the 80%, in fact it's a call to improve support for these underappreciated professionals. Way too much is being expected of them. They work long hours and they're subject to intense pressure. They receive too little attention when it comes to training and development. Here's where matters become somewhat convoluted. The trivial many are expected to deliver results and value, in the same way as the vital few. This doesn't happen and can't happen until we find better ways to support these professionals – giving them the attention they deserve. The result is that in many cases Procurement's desired brand identity doesn't synch with its brand image held by stakeholders.
This 80/20 assessment could be the greatest challenge facing Procurement as discipline.

One size doesn't fit all – building on the first point – the tools and technologies designed for the high-end organizations aren't as scalable as needed. Too many small to mid-sized Procurement groups become enamored of a solution that they're not able to pursue. Many don't have the reliable data needed as a starting point. Can we find a way to build technologies from the bottom up – for the greater good – rather than relying on the “trickle down”?

Information as outside-in versus inside-out – while not a new topic, this one seems to be receiving much attention. Enabled with at least some technology, organizations can develop a sense of where they've been - or better – where they are. This is good inside information, but it needs to be complemented with outside information to be meaningful when it comes to Procurement initiatives. High end cognitive sourcing tools are being developed accordingly.

Currently, too many Procurement groups go to market with only their inside information in-hand and without much understanding of the outside picture. If you disagree, this means you've taken the time to do some Porter's Five Forces modeling – right? Unfortunately, there are many Procurement professionals who aren't knowledgeable of this simple model. You don't need the most advanced technology to prepare and “outside-in” view. You need the Porter's model, internet access and a search engine.

CRM (Customer Relationship Management) is the other side of SRM (Supplier Relationship Management) … and as technologies go it's in control - ask any Procurement professional and they can tell you about the importance of SRM. Follow-up by asking what they know about CRM and you might receive some thoughts, but not many. Most Procurement professionals can't identify CRM brand names like Pegasystems or Salesforce.

Per Gartner in 2018 CRM was expected to be the fastest growing software market - tracking for a growth rate of 16 percent. Salesforce.com foresees that within the next five years leading companies will use advanced analytics and machine learning to address fundamental Sales decisions like what sales opportunities to pursue; what resources to allocate to which accounts; and, what behaviors to prioritize to drive sales productivity. In the meantime, SRM continues to be plagued by failure rates and limited adoption.

Agreed - a soundly implemented SRM program can deliver great value. But, consider this scenario – the VP of Sales and the VP of Procurement go before the CFO and the CIO to request funding for CRM and SRM respectively. Who receives the funding?

What does this mean for Procurement? It means that Procurement professionals need to learn more about CRM – what it is, what it does and how it impacts the relationship between Sellers and Buyers.

Lessons learned - from the Procurement related systems advancements during 2018?

• It's a given that the pace of change will continue to accelerate
• Many systems advancements projected for after 2020 are already in place
• Accept the reality of limitations – it may be better to master some digital basics - something like P2P - before taking on more advanced systems
• If you can't acquire a system do what you can for your people with the tools available – it's a great way to develop talent and it's better than longingly staring into the toy store window
• Now is the time to learn more about CRM - waiting could be risky
• Finally, buckle-up - there's a lot more change coming in 2019!

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