Nobody Cares About Your Commodity Codes...

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Hi readers,

I’ve added a new section to the newsletter → The Road to the ProcureTech Cup.

I’m launching a weekly 30-min show this fall to help put your Procurement Technology market research on autopilot.

You’ll be able to follow along live on LinkedIn and YouTube or watch the replays.

I’ll share info about how to do this weekly. It’s all free.

Just another way I want to help you develop your digital procurement literacy

I hope you’ll tune in.

📰 In this week’s edition:

• 📋 5 procurement jobs that caught my eye

• 🏆 The Road to the ProcureTech Cup : Episode 1

• 🌙 Nobody Cares About Your Commodity Codes

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🌙 Sunday Night Note

Nobody Cares About Your Commodity Codes…

Every time I receive a new government form to fill out (especially a new one during tax time), I die inside a little bit…

I know it’s a necessary evil but I also know it’s going to take longer than I want it to… Why? I’m going to have to read documentation detailing new terms and concepts I’ve never come across to fill it out correctly…

What I’ve come to realize is that your requesters feel the same about having to fill out the commodity code field on your purchasing request forms...

Regardless of if you’re gathering purchasing information manually, via a portal or an ERP system, the requester just wants to buy what they need as fast as possible without all the hassle! They’d rather go to the dentist than to take the time required to understand what a commodity code is, why it’s important and what value is the right one…

(This is the same for all the accounting information too by the way: cost center, general ledger account, etc. — but we’ll leave those to finance…)

Having a great commodity code taxonomy is a pre-requisite to having an effective strategic procurement team. For example, you need one to build out an effective spend cube and mine insights to build a coherent strategy…

So how can you reconcile:

• Getting data you need to do your job?

• Keeping the process as “pain free” as possible for requesters?

No commodity code data on POs and invoices? Good luck figuring out the details of your spending…

This is a question for the ages…

• ERP Systems don’t have a good answer to this question… Commodity codes are but one of 60 fields you need to fill out when logging a purchase requisition… And they all look the same. Depending on which ones you fill, some become mandatory based on the business scenario (stock purchase? non-stock? subcontracting?)
  That’s why users need hours and hours of training before using a new ERP system… By the way, this isn’t just for purchase requests… All ERP transactions are built this way.

  Ever heard someone tell you SAP stands for “Slow And Painful?”… This is why (that being said, a solid ERP is absolutely necessary for any manufacturing business — It’s just not optimal for requisitioning).

• Source-to-Pay (S2P) Suites gave us a partial answer…
  In the last decade, S2P brought the user experience to another level when compared to ERPs. Essentially, the approach translated to: “select the business scenario you’re trying to accomplish and we’ll only show/ask you the information that’s needed to carry out this scenario.”

  While this is better than the ERP paradigm, it’s still focused on what procurement and the system needs to accomplish the task at hand.

  The user is just a data entry mechanism 😅
  Adoption continues to suffer…

• We’re finally seeing a good answer arrive on the market…

  In the past 2-4 years, we’ve started seeing new best-of-breed entrants in the ProcureTech space that are building their applications from the ground up around the requester’s user experience.
  We have realized that without a good user experience, there is no adoption. Without adoption, kiss your benefits goodbye.

  These solutions are providing increasingly good answers to the question: “How do we reduce the fields and clicks to the maximum, providing a great experience to the requester, while ensuring we capture the required data to optimize the back-end administrative processes?”

  S2P Suites and ERPs are taking note and playing catch up but it’s hard to turn an ocean liner…

But why am I telling you this?

Well, for a few reasons…

1. If you are relying on an ERP or older S2P suite to capture purchase request data and are less than happy with the commodity-level data quality you capture, you should:

   • Give the old commodity code taxonomy a haircut (review levels and codes. Simplify to the maximum with requesters in mind).

   • Give your users a fighting chance with contextual “cheat sheets”. “Dear M. Maintenance, here is the list of codes you will need 98% of the time with business specific terms and synonyms they are most likely to use.” Train them on how to use the cheat sheet and why it’s important.

   • Centralize commodity code (and other info) entry if you can. A simple web form with basic fields sent to centralized expert resources who work the systems *can* provide good results if there’s a fit in your context.

2. When you get fed up with the result quality from #1 (because you will… Your requesters are water after all…)

   • Seek out the Next Gen best-of-breed solutions I mention above. I promise they exist… For:

     • Catalog Management (when users pick items, no commodity code required! It’s already assigned in the data)

     • Sourcing (a good AI supported sourcing intake process can pre-fill a whole lot of the information required without much end user effort)

     • Intake Orchestration (AI supported, conversational intake can be a game changer for user experience AND requisition data quality at the same time)

     • Or a combination thereof! All solutions now play nice with the big S2P and ERP solutions out there.

Reply to this email if you want a few company names… I’ll gladly share some based on your context.

The key take away? The next time you give some thought to commodity codes, think long and hard about your requester experience at the same time… Adapt solutions to your constraints (budget, technology, etc.) but aim to maximize adoption for quality data!

Given a great commodity code taxonomy is one of the keys to great purchasing category strategy, doing this will be worth the effort! Guaranteed.

Now if we could simply start doing that with my tax forms, that would be great… (Still waiting for Next Gen Income Tax applications 😅)

What else have you done to get better commodity code data at the source?
Let me know in the comments below 👇

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