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Managing Services: Both Strategic and Tail Spend – Fabian Heinrich from Mercanis

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Historically, there wasn't much technology out there to deal with indirect services spend, both from a sourcing and supplier contract lifecycle management perspective. This has started to change recently. But is it possible to manage both strategic, corporate level service agreements as well as more tactical, tail spend and one-time buys all in the same platform? My guest on this week's podcast is Fabian Heinrich from Berlin-based startup Mercanis. They claim to have a solution for both. We dive into this and find out to what extent their platform can support these requirements. SRM for Services: Managing both Strategic and Tail SpendProcurement volumes have massively shifted from goods to services over the past 10 years, as young tech companies have grown into major corporate entities. Furthermore, IT and marketing have become increasingly important categories and now account for significantly more spend than they used to. How are the sourcing requirements for services different from goods?A services e-sourcing platform needs to be more flexible, due to the very diverse range of products being purchased under the different types of services. Workflows are different in many cases, depending on the type of services and the type of contracts being sourced. Subcategories can often be varied and diverse, and taxonomies are much more difficult to apply to services spend. What's more, the stakeholder collaboration and the level of the relationship between procurement and their internal business partners by necessity requires much more focus during the end-to-end sourcing process. Managing the lifecycle of services spend and its complexityI asked Fabian about how to ensure that the lifecycle of services procurement is reflected, and some of the important characteristics that need to be monitored and taken into consideration. There's the classic trap of having a corporate procurement team negotiate a central or global contract that then ends up on Sharepoint or on a C-Drive that nobody in satellite locations knows about. Stakeholders and local buyers then just continue doing whatever they've always done! Fabian explained that a sourcing tool for services wasn't enough, and that some features from an SRM or contract lifecycle system were necessary to ensure that it was a rounded platform to satisfy the needs further downstream. The "self-service" model for tactical purchasing and one-time buysJust like catalogues have been common for buying tail spend on indirect goods e.g. MRO and office supplies, a guided buying process to enable stakeholders to "self-serve" themselves on smaller, less strategic purchases or one-time buys is a feature Mercanis realised was absolutely essential. If one of the goals is to free strategic procurement teams from the day-to-day operational work of sourcing non-repeatable requirements and low spend, high volume items, then something similar to how this works for goods would need to be part of the user experience. How to avoid maverick spend for local, site level purchasesStrategic spend is (usually) well managed within larger organisations. The problem generally comes once you get down to the decentralised areas of spend. These are often categories or suppliers managed at country or local level. Mercanis has enabled the end users through guided buying to have a better user experience when seeking to buy services locally. This enables the end user to buy from compliant sources, and to find a supplier faster, than having to go through this process in an analogue (Google search and email) RFQ. The other advantage from a procurement perspective is that this frees up resources in strategic procurement teams to focus on the activities which have the most business impact. What preparation is necessary to ensure success with a digital services procurement platform?Like most things in life, you get out from it what you put in. With digital procurement software, this is especially true....

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    Tactical, non-strategic spend is a time suck to pretty much every organisation, regardless of their size. Managing this through traditional channels - i.e. ERP systems - is a cumbersome process for both the procurement professional who has to manage it, and the stakeholder who just wants a simple, user-friendly interface to be able to buy something. Henning Hatje, Co-Founder and CEO of Berlin-based startup Lhotse is my guest on this week's show. He explains how their solution helps to simplify tactical, non-strategic and tail spend (we look into each of these definitions during the show, too!) Simplifying and Automating Tactical SpendLhotse was founded in 2020 and is growing rapidly, having recently announced a €5 million seed round funding just before the show was recorded. The fact that such a young company has managed to secure this kind of funding is tantamount to the need for a solution on how to manage tactical and tail spend. Deloitte's 2021 CPO Survey points towards more effective management of tactical spendWith companies under new pressure to operate leaner, smarter and faster, it's little surprise that tactical and tail spend is coming under the microscope. Operational efficiency topped the list of most urgent priorities among those surveyed for the 2021 Deloitte CPO Survey. Finding a more productive use of buyers' time when it comes to the huge operational workload of dealing with non-strategic spend will no doubt be high on the wish list. Tactical vs. tail spend?There are many different definitions, and much if it is nuanced and dependent upon how different organisations see their spend. Lhotse views "tactical spend" as: Being non-managed spend by procurement Predominantly indirect in nature Whereas they see tail spend as: Also having some crossover with tactical spend But also encompassing "managed" areas of high volume, low value spend such as certain areas of MRO spend and office supplies which are often procured using punch-out catalogues Much depends on the thresholds that companies use to define how tactical spend or tail spend is seen. What typical policies exist for non-strategic spend?These are some common scenarios for how non-strategic spend can fall through the cracks: Spend that falls below the threshold where competitive bidding is required - i.e. three bids, then a buy - clearly has a lot of untapped opportunity. Here, essentially, stakeholders can purchase from whomever they wish. Diligence with which a policy is enforced. Often this is dependent upon the perception or reputation of the procurement function internally, but also is heavily influenced by staffing levels within procurement teams and their (in)ability to manage all areas of spend. There are massive differences between how these thresholds are applied - from very strict, low spend thresholds right the way through to enterprise level organisations in high profit industries which can sometimes have 6-figure sums considered as tactical spend. When it comes to other ways of handling tail or tactical spend, Integrators and Business Process Outsourcing (BPO) are still common, but as Henning explains, they can often have flaws. It can send the wrong message to stakeholders when low value spend is farmed out to an external organisation. But more importantly, there is now technology that can automate or semi-automate large parts of these processes. This moves the organisation away from functionally managing a BPO or an integrator and instead towards a more strategic process of researching and integrating technology into the procurement function. Other advantages of applying technology to this problemHenning talks about the opportunities that a solution such as Lhotse can leverage existing data in your system to automate or semi-automate: Lhotse can integrate system data into existing processes to give relevant supplier recommendations based on internal and external data points. Using technology can also speed up the...
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    There are lots of options out there for software to facilitate and digitise our P2P processes, perform e-sourcing or manage our contracts more effectively. However, the surprising omission up until recently was having something that gets us out of our inboxes. Procurement still relies heavily on email, and the volume we receive means that important stuff can easily be missed. Storing Excel and Word documents, as well as project updates and meeting minutes on Sharepoint was able to do that to a certain extent. But let's be honest, Sharepoint's interface is pretty clunky. It's also difficult to find stuff on there unless you've got an experienced administrator. The solution? One answer is to have a cloud-based SaaS app which shares project updates, stakeholder and supplier communication and delivery objectives all in one space. That's what Richard Sains, my guest today, has developed. He's one of the growing contingent of former procurement professionals turned procuretech entrepreneurs! ! Note - my audio is a bit sketchy on this one due to me recording this outside of my usual podcasting space. Improving our Productivity for Day-to-Day Communuication and Project Management: Richard Sains from Acada1:43 Rich explains what ultimately drove him to make the switch from being a category manager to a SaaS entrepreneur. 4:54 We discuss the biggest changes over the last 5 or so years in terms of developments in the procuretech space, and how the continuing trend seems to be the faster, leaner, more agile tools that are “best-in-breed” modular, niche solutions.  With this comes some unique challenges in terms of integrating all of these together to get them to communicate, but technology is evolving to deal with this.  Swapping things out and replacing them one-by-one makes it easier to upgrade on a modular basis rather than a major IT project each time there is an upgrade. 7:52 I ask Rich what he sees as the most common forms of waste or inefficiency in procurement teams and to what extent he sees automation or technology as the solution to combat some of these challenges? 12:01 Some inefficiencies of existing working practices will have been laid bare as a result of Covid-19 and the immediate shift in many cases to remote work. What therefore are the biggest challenges to larger organisations if we assume remote work in some form is here to stay? 14:24 Should technology be seen as a facilitator or productivity enabler? Or will it completely replace some manual tasks in their entirety and eliminate some operational or tactical procurement roles? 18:32 Rich in his own words describes Acada as an innovative system for procurement people to manage their workload and give visibility to their leaders and stakeholders. He expands on what he means by this here. 22:29 There are overlaps and similarities to some of the other tools out there, a couple of them have even been on the show. I’m thinking specifically Tarmo from ProcurementFlow (Episode 2) and Pierre from Per Angusta (Episode 13). Rich explains any specific inefficiencies or value adds that he feels Acada solves, that other SaaS tools in the procurement tech space can’t do.  25:56 Acada is a pretty new tool compared to some of the other solutions out there, so what are their next steps in terms of growth or development? 28:12 Rich walks through the business case of if I was a CFO, how would he convince me to buy Acada as a tool? How to connect with Richard: https://www.linkedin.com/in/rsains/ (Richard's LinkedIn Profile) Send Richard an email https://www.acadatech.com (Acada website) How to connect with James: https://jamesmeadsconsulting.com/ (James Meads Consulting website) https://linkedin.com/in/james-meads/ (James' LinkedIn profile) https://bookme.name/jamesmeads/lite/initial-consultation (Book a Call with James) https://linkedin.com/showcase/procuretechpodcast (Follow The Procuretech Podcast on LinkedIn)
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    Importance of a Data Strategy – Scott Taylor is The Data Whisperer

    33:26

    The topic of data is like a boomerang. It always seems to come back into every discussion when we get into the nuts and bolts of implementing a digital transformation in procurement or even just implementing a software solution to get more visibility into spend analytics. Problem is, investing in it often doesn't yield a visible payback that can be directly tracked to a future P&L statement. So, how can data management ever become top of the agenda? My guest today argues that a significant part of the solution is being able to tell the right story to the right people, to help them better understand the implications of NOT doing this. The message is clear. At the point of putting together a business case and a budget appropriation request for implementing procurement tech, getting your data ducks in a row needs to be an integral part of the calculation. Scott Taylor joins me on this week's podcast to help explain why. Why Implementing a Digital Procurement Solution Must Include A Data Strategy: Scott Taylor is The Data Whisperer1:47 What problems does Scott see when it comes to the causes and the effects of poor or inconsistent data? 5:53 Master data - what are the different types of data in the procurement space and where do the common pitfalls tend to come from? And how can feeding garbage into a procurement tech solution impact your implementation of a digital transformation? 8:46 Why is data management an important component in the various different procurement initiatives that are buzzwords at the moment? 12:02 Scott explains his "4C" concept and how it helps businesses to understand their potential flaws in master data management. 18:12 If we assume that cleaning your data is something that's a non-negotiable, I ask Scott how to approach the discussion with key decision makers. Specifically, how to pitch to CFOs to get buy-in to make the investment in something that doesn't have an immediate, demonstrable payback. 21:10 Scott explains why if digital transformation is part the journey of where a company wants to go, it requires highly structured data to successfully reach this destination. 22:11 Why selling data cleaning as a stand-alone project is likely to fail, and how to make the case for including data management and structure in the budget of any large-scale procuretech investment. 23:59 When it comes to data management, do smaller businesses have the advantage over larger corporations because they have fewer legacy systems and less data to manage, or do the larger businesses have the upper hand because they have the resources and expertise to stay one step ahead? 27:41 As a final question, I ask Scott about whether he thinks data scientists will be an integral part of procurement organisations going forward. How to connect with Scott: https://www.metametaconsulting.com (Meta Meta Consulting website) https://www.youtube.com/channel/UCVQ1YhjNqc77GVsb3Xs4tvw (Scott's YouTube Channel) https://www.linkedin.com/in/scottmztaylor/ (Scott's LinkedIn profile) How to connect with James: https://jamesmeadsconsulting.com/ (James Meads Consulting website) https://linkedin.com/in/james-meads/ (James' LinkedIn profile) https://bookme.name/jamesmeads/lite/initial-consultation (Book a Call with James) https://linkedin.com/showcase/procuretechpodcast (Follow The Procuretech Podcast on LinkedIn)
  • The Procuretech Podcast: Digital Procurement, Unwrapped podcast

    Spend Analytics with Process Mining – Samir Kharkan from SCALUE

    32:19

    Understanding what you spend is the most important part of strategic procurement. Without this, you can't do much else. You're shooting in the wind, not really knowing whether what you're tackling are the ripest opportunities. While spend analysis tools have been around for a while, they're now becoming old hat. The new generation provides spend analytics and guides you to where the best opportunities may be hiding in your spend data. Taking it to a completely new level, the ability to combine spend analytics with process mining is game changing. If you're not sure https://en.wikipedia.org/wiki/Process_mining (what process mining is), it will save what would previously have taken days, if not weeks of work to find holes and inefficiencies in your processes. The P2P process is a classic case of where this can be implemented effectively, and combined with spend analytics to drive both performance improvement and cost reduction. That's what my guest today, Samir Kharkan, CEO of German startup SCALUE is here to talk about. The Killer Punch for Extracting the Most Value: Combining Process Mining with Spend Analytics 2:40 I start off by asking Samir the same question as I asked Kevin last week, and that is: what makes a vendor “cool”? 3:14 Spend ANALYSIS vs. spend ANALYTICS. What’s the difference, and how does analytics drive businesses forward more than just a standard analysis dashboard? How SCALUE and similar tools (see episode 3 with Eddie from Seaforth Analytics) differentiate themselves from the first wave of spend cube software 6:54 What is Process Mining, and how does this add further benefits beyond the spend analytics function in terms of analysing business processes to view potential inefficiencies and non-compliances? 8:30 Does a powerful tool such as spend analytics combined with process mining enable CPOs or CFOs to employ less experienced procurement managers now that software can do most of the heavy lifting? Spoiler: the answer is NO! 11:45 I ask Samir to walk through what the must-haves or prerequisites are on the customer’s side to ensure that implementation of a tool like SCALUE is successful. Samir’s "Captain of the ship" analogy is absolute gold! 15:47 We drill down into why this type of solution specifically solves a common problem for mid-sized companies, when considering this with the captain, ship and compass analogy that Samir so eloquently explains. 17:53 Is spend analytics and process mining also a relevant tool to use in professional service industries where there is no product being manufactured? 20:43 We drill down into an example of where an automotive supplier discovered 30% maverick spend in indirect services through the data made available by using SCALUE’s solution. Samir walks us through how they discovered it and then put measures in place to reduce this. 26:00 Let’s talk payback calculations…how long does it take for customers to typically see return on investment? 27:18 Samir gives a great example of how looking at invoice discrepancies based on drill down of incoterms can often give return on investment in just one swoop. How to connect with Samir: https://www.linkedin.com/in/samir-kharkan-6b641a40/ (Samir's LinkedIn profile) https://scalue.com/en/ (SCALUE website) How to connect with James: https://jamesmeadsconsulting.com/ (James Meads Consulting website) https://linkedin.com/in/james-meads/ (James' LinkedIn profile) https://bookme.name/jamesmeads/lite/initial-consultation (Book a Call with James) https://linkedin.com/showcase/procuretechpodcast (Follow The Procuretech Podcast on LinkedIn)

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