Thought of the Week: How Not to Procure Services
I had a very interesting call from a supplier earlier this week – they were having a very frustrating experience with a customer and were wondering if this is something they should expect more of from other customers. To make a long story short, and with details changed to protect the innocent, this supplier’s well-meaning customer was requiring that they provide a myriad of detailed, summary invoices, by branch office, on a frequent basis, for a regularly ordered service. The idea was that the buyer would “match up” these invoices to purchase orders generated by a new services procurement application. This seemingly harmless request to the supplier was actually very troublesome, because it required them to hand split up their invoices to send the separate branch bills every month. No self-billing (ERS) allowed here – since it is a service, the volume delivered monthly is highly variable and so the supplier was required to account for what they did. For one customer – this is an inconvenience. If there are many more however, the supplier would be in trouble.
The interesting thing about this situation is a lack of clarity over exactly what value the buyer was getting from this request. The supplier claimed it was a long-term provider – and pricing was very stable – so the new system could not really be delivering improved cash management. And although clearly the invoice matching should go easier with this system, it seems quite possible that the extra time and inconvenience to the supplier would easily offset this benefit. Could it be that the buyer was so focused on “spend under management” that it failed to look at why and how that spend should be managed more efficiently?
For everyone’s sake, I hope this isn’t the direction of the future. And the situation clearly points to ongoing roadblocks to getting services procurement automation right.
In the News
Oracle and Transcepta announced a partnership to provide Oracle customers pre-configured access to e-invoicing and supplier enablement services. While Oracle offers many other means to connect with suppliers (the iSupplier portal and OSN for example), it’s good to see the vendor offer an option that is scalable and allows the buyer to offload community management work.
I would be terribly remiss if I didn’t pay tribute to the now-discontinued publication and website, Purchasing Magazine. This offering has been a fixture of my procurement career ever since I was a wet-behind-the-ears buyer in the ‘80s. I wish the former team there – including editor Paul Teague and journalist Susan Avery – best wishes for their next “adventures.” The closure certainly wasn’t a personal swipe. The magazine’s parent company, Reed Elsevier, closed 23 other US-based trade publications at the same time.
Work in Progress
I just finished up a presentation for the upcoming Corporate United Synergy Conference, titled “Procurement Technology Deployment: The Five-Phase Journey to Best-in-Class.” In this piece I apply the Gartner 5-step maturity model to procurement, and describe why technology plays such an important role in the ability to transform procurement. I will be presenting in Chicago on May 5th, and I plan to publish the presentation in a research note format later this year.
New Research (Subscription Required)
Hot off the presses, published just moments ago is my new research note, “The Benefits and Drawbacks to Group Purchasing Organizations and Collaborative Sourcing.” I wrote this piece with my marvelous UK-based colleague Stewart Buchanan in response to client inquiries on whether collaborative sourcing is a good idea or not. Sometimes it is, and sometimes it isn’t! My special thanks goes to to BravoSolution and SciQuest for input on GPOs.
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