Procurement: The Unsung Hero of Business Success with Dr. Elouise Epstein

0:00 Welcome, welcome. Welcome back to How I Met Your Data. Sandy Estrada here, myself and my co-host Anjali Banzal. Could not be more excited to be back. I know we took a little bit of hiatus for the summer, but we're back and ready to go with two more episodes for you to wrap up our first season of How I Met Your Data. We are so proud of what we've created here, and we cannot wait to share the last two episodes with you. And for this episode, myself and Anjali have asked Dr. Eloise Epstein to join us. So Dr. Epstein is a Carney partner, a published author, a prolific keynote speaker at supply chain and procurement events, and a dear advisor to me.

0:42 I have gotten to know her over the last four and a half years as Carney has acquired Cervelo. And I just love chatting with her. She's just so chock full of insights and has a lot of fun pet peeves, some of which we will touch upon today. She's also a digital futurist. So you're going to hear a little bit about what that means during this episode. We wanted to wrap up the season with Dr. Eloise Epstein primarily because our goal has always been for this podcast to showcase all the different aspects and the kaleidoscope view that is the data world. And regardless of where you're coming from, for example, we are data consultancies. We help data leaders and business executives get the most out of data.

1:25 You have your data leaders. You have business executives perspectives. You have software vendor perspectives. You have the, you know, data consumer perspectives. You have others as well that are impacting what people need to do with data. One of those others is a management consultant. And Eloise gives you a really good insight into how they think and how they help their clients. I mean, it's just another aspect of that kaleidoscope. And we wanted to shine a light on that and ensure that we have the full breadth of voices that make data work so challenging and intriguing and interesting for us who are in it because it is a tapestry of personalities, a tapestry of point of views, a tapestry of knowledge that comes together to create insight for an individual.

2:12 So with data. So with that said, here's our conversation with Dr. Eloise Epstein. Music. So thank you for spending some time with us to have this conversation, Eloise. I think when we started thinking about this podcast, Anjali and I made a whole list and your name was probably the first one I had put on the list, but wasn't the first person we reached out to. I don't know why. I'm honored to be on the list. So thanks for doing this with us. The first thought that comes to mind, for me, procurement is part of my world.

2:59 I started my career in basically helping FP&A and all roads from a cost perspective start with procurement. I'm sure a lot of our listeners don't have a background focused on that topic. And I was showing Anjali a video that you had put together answering a video that John Oliver had, which was really comical. But I figured, could you explain to our listeners what procurement is? Yes. So absolutely everybody, or at least in the Western world, is a procurement person. We are procurement people in our personal lives. When we go to buy a car, we negotiate a price or we do various negotiations. We manage to some degree, some less or more than others.

3:44 Our money, how it comes in, where we're spending it. We look for deals on whatever it is we need to buy. Or when we go to make a big purchase, we look at reviews, get recommendations. We buy products and look at the quality over time. And so all of those concepts, everything I just said, is us in our individual lives doing procurement. And it stands to reason, of course, that big companies as well do the same thing. They spend a lot of money and... Other than salaries, money that goes out the building goes to suppliers.

4:24 And so looking for deals, looking for quality, looking for availability. Et cetera, et cetera, managing to budgets. That's pretty much what procurement does in the corporate environment. And you would be surprised or maybe not shocked, but surprised at how the bigger the company, the more they struggle to just understand where they're spending their money, much less control it. What do you think is driving that? Well, it can be a lot of factors. One is oftentimes growth mindsets. When you grow at all costs, grow, innovate, disrupt, that's not always cost saving. So when you look at the growth drivers of the economy, certainly big tech is there, even big oil, all of them are high growth.

5:11 And so when you're in high growth mode, you're not really managing to the bottom line. And especially where you have industries with lots of mergers and acquisitions or the rise of private equity, all of those together, you are constantly adding and subtracting businesses. And this I'm sure you can appreciate. You have different accounting methods, different classifications, you're taking different ERP systems, and you're trying to bring all these companies together. These companies are not just single building entities. They are massive global conglomerates that have many, many, many subsidiaries in different operating companies.

5:54 And so it can be hard. To bring all of that stuff together. Now, that's the positive side. The negative side is, in general, we have not had at least the resourcing or the capabilities to do that management. And procurement as a function is only like 25, 30 years old. So we're still in our infancy. So we haven't had generations of schools putting out homogenized skill sets that have come into the market. Yeah. It was definitely not a topic when I was in college. No, no, nor I. It wasn't. Yeah. Yeah. So Eloise, I'm curious, right?

6:36 So if procurement is kind of in its infancy, where were those activities handled before or how are those activities handled before? Well, either they weren't or they were in finance. So oftentimes you'll see procurement still reporting to finance. At its most basic, procurement is cost control. To your question, historically, it has been this, okay, you've set your budget and now you're going to go buy. Well, you should probably buy with some strategic intention behind it or understanding so you're not overpaying for license or software licenses or buying duplicate items or introducing reducing needless complexity.

7:18 So if you think about a warehouse, supplies that go into that warehouse, not the goods that come in, but the gloves and the safety glasses and Gatorade and whatever else, you might have six different suppliers coming and going into that warehouse on a daily basis when actually one supplier could service all of your needs to run that warehouse. And you would cut down on the number of traffic, the number of suppliers that you have to manage. So part of it's that or, and this is the one that just kills me, is you have a business unit in North America, one in the UK, buying the same software off two different contracts and paying two different prices.

7:58 So a lot of procurement as we mature is looking at that and saying, you know, if we bundled off the same, bought off the same contract, then we can do more. Yeah, I mean, I think one of the things that we run into on the data side is multiple acquisitions of the same third party data sets. Yeah, yeah. Same thing. Same thing. So if you had a strong procurement function where you saw where you were spending your money, you would catch that right away. Like that would be low hanging fruit to to because because that that's exactly then that happens, especially with third party data all the time. For sure. So now Eloise, you described yourself as the procurement futurist. So can you help us understand what that means and what you focus on in your role?

8:44 Yeah. So I actually have sort of rebranded to be more of a digital futurist. What I mean by that is I look at where we are today and where we could be in the future. So I look at it unconstrained and I work backwards to where we are today. Too often when we do roadmaps, too often when we do transformations. We look at where we are today and what we can do incrementally. And I try to pick a point, a North Star, whatever term you want to use and say, no, this is where we should be and how do we work backwards to get there? I don't do the whole, oh, we'll have electric city and autonomous cars and blah, blah, blah. I try to anchor very much into where we are today and where we could get to if we had a huge leap.

9:33 Now, I know that we're never going to get there, but I feel like my job is to push us to think bigger and raise our trajectories higher. Yeah, I love that because the reality of most situations that you get into when an organization is trying to go through any kind of, even if it's a small transformation of a specific area or process or a technology, they work within the constraints or only think through within the constraints. And I often think about, you know, the whole, and everyone uses this metaphor to some extent even in marketing today, but the idea of going to the moon, right? And how wild that was at the time when that vision was put out there, but it required everybody to think outside the box.

10:18 So when you think incrementally, you're always thinking inside the box in which you're living in and working in and with the people that you have to work with and the budgets that you have. But when you think unconstrained, sometimes solutions come out of nowhere that you couldn't think of before. Right. And I'll give you a perfect example. Look at everybody's quote unquote digital transformations these days. It's really just upgrading to the next version of the ERP system. But very commonly it's, hey, our digital transformation is going to be around consolidating our 20 or 50 or 100 ERP systems down to one S4 instance. And that's fine, but that's incremental. That's not transformational. And one, if you took a step back, one, me, might argue that the ERP is a deprecated technology. We are well beyond that.

11:08 The way the modern enterprise works is not relevant to the way the world is today. So in my world, we don't start with the premise that you're going to build your transformation off the ERP. I question, do we even need the ERP anymore? And what would that post-ERP world look like? And then I draw it back to where we are today. day. So truly outside the box is challenging just the basic assumptions, because guess what? There's going to be billions, if not hundreds of billions spent on, oh, I want to pick on SAP today, but on SAP upgrades that are not going to transform anything. And that's okay. Like SAP will make money, systems integrators will make money, partners will get new Mercedes or Teslas, But don't confuse that with actually transforming the organization to become more digital.

12:01 And even I will oftentimes just ask the more fundamental question. Are you sure you want to operate as a digital company? Because what you often get. Is these old companies that are, I don't know, 50, 100, 200 years old. And they look at Silicon Valley here and they're like, oh, I want to be like Google. So we're going to go be a data company. And all of a sudden you have, I don't know, 50,000 employees that are, and many of them probably mid-career or higher or older, and they're not going to make that transition. Position and and and i mean i'm sure you both see it your way oh we want to be data driven we want to be ai this we want to be whatever advanced analytics money ball blah blah blah but but the reality is there is you can't just wish that there that takes a long time to get people in that realm and so so i will encourage people to get there but i will also poke them with a stick yeah there's a realism to the situation, right?

13:05 You can't get people to change overnight despite what their ambition may be. But there's tangible steps we can take along the way to at least get them a little bit closer to what you're hoping for. 100%. So as you mentioned, procurement is 25, 30 years old. And I find, at least in the work that we've done for our clients, procurement and the problems procurement have and the challenges procurement have are often overlooked looked until there's actually a serious issue with cost management. I guess, what is the biggest myth or misconception you've come across regarding the importance of procurement? I don't know about misconception, but first I'll start with a story because the way you set that question up is perfect for the story.

13:49 I live in the Bay Area, Silicon Valley, and every so often the big tech companies will. Ask us and other procurement folks to come pitch or to come give them a briefing or whatever. And you walk in and there's just this arrogance and there's like, yeah, well, we're just printing money. So it's cute what you're doing. That's really fun. I'm happy for you that you're doing that. And then something in the market changes, whatever. And then like all of that revenue doesn't like decline. It like goes off a cliff. And then all of a sudden they They become big believers in procurement because they have to cut costs fast.

14:30 And you've seen that over the last few years up and down the West Coast. And so for a company to be profitable, you can either cut costs one of two ways. You can cut people or you can manage your external spend with suppliers and your contracts and so forth. And I like to do the working with suppliers to renegotiate or to negotiate better terms and manage payments versus firing people because firing people doesn't necessarily, well, first of all, it's not sustainable and it's not helpful. And it's a huge black eye in the public from a public relations point of view. Oh, is earlier this year, I'd worked with a client that was really trying to get their arms around understanding the spend of their sites around the globe.

15:15 Like we're really looking into spend transparency for several hundred sites. And one of the things that was really clear as we're going through that process was the team that was looking for that transparency simply didn't have the data that they were looking for or were unaware of the data that was available to help them get that level of transparency. heresy. So as data leaders, whoever really worked closely with these types of teams, with these procurement teams, are there any sort of strategies or things that they should be thinking about in order to build better collaboration so there is that visibility and ability to use the data that's available to them?

15:59 Okay. So this is my, I'll say fundamental mental pet peeve, but I probably have a thousand of them. In procurement, job one or job zero is understanding where you're spending your money. So any procurement organization that doesn't have good spend transparency is not doing their job and they should be fired. We can't talk about negotiating. We can't talk about contract management, relationship management until we actually know what we're spending where. And there is no excuse for not knowing where you're spending your money. Not only that, but if you have dirty spend data and supplier data, that's a procurement leadership failure.

16:43 And I will call anybody out and I will go right after procurement executives for not having that data readily available. And I've heard every excuse in the book for the last 20, almost 25 years. But I'm not having it anymore. There are plenty of solutions, both you can buy, you can build. So there's no excuse for not having good spend transparency. What you have in the situation you described is intransigence, maybe incompetence. I don't want to be pejorative. But you certainly have people that are not taking the job seriously because it's not acceptable. And getting data out of those places, that's not hard.

17:30 To me, you go all the way up to the CEO if you need that, if you're the procurement leader, because that's your job. If you don't have that, then we're not having a realistic conversation. We are just playing pretend. And well, that's not for me. Interesting, though, because I've met CPOs who, when asked directly, do you have category management spend figured out? Like, do you have it readily accessible? The answer is often no. Right. So I asked that same question and then, then my followup and I don't even give them a chance is like, so why, why not? That's your job. Like, like, what are you doing? Like, like, like, I mean, I say it more diplomatically, but, but there are no, like literally there is no excuse for not having that.

18:20 I mean, even if you've only been in the job 60 days, Jesus. There's no reason you can't. And you have nothing. Like you walk in the door, there's nothing. In 60 days, you can have good spend data. There's spend transparency, I should say. I'm not buying that excuse. That to me, when they say that, like alarm bells go off because they are either scared, incompetent, and I don't mean that as pejoratively as that comes out, Or they're just lazy. You can't do procurement effectively if you don't even know where you're spending your money. Yeah. Is there a conundrum there, though? So as a procurement leader, their job is to lower costs, right?

19:02 In order to solve this problem, there's a cost associated to it. Either you're buying or building something. Is that it? No, that's bullshit. No, that's just like, come on. Don't give me an excuse that it costs too much money. it takes too much time. Well, I have companies that have gone from zero to full spend transparency in three weeks, and that's nine ERP systems, eight GL codes. Don't give me excuses. This is a will, like you have to have the will to do it. So Eloise, I don't think we can let you go or let this conversation go without asking, are there use case for procurement teams to be leveraging Gen AI capabilities.

19:43 Okay. So I'm going to answer this in a different way. So the question we always have in procurement was context. Procurement kind of came about 25, 30 years ago, and there were some various point solution tools that came about. And then we started to get consolidation and development of procure to pay, which is your raising of of requisitions, fulfilling the requisitions, and then paying the suppliers. And then we also have what's also known as source to contract, which is running sourcing events, running RFPs, awarding business, contracting, and managing all the contracts.

20:27 And then taken together, we call it source to pay, which is all of that stuff together. So we have a couple decades of source-to-pay providers that built tools that are massive and expensive and have failed, absolutely failed to deliver on the promise. So we have all this tech debt that is just sitting around that nobody's using, everybody hates. And so, of course, what happens when you have a technology that is ineffective? We take the data that we can get out, we put it into Excel, and we run our operations. I still see RFPs coming in my email with an Excel file attached.

21:09 Or worse, a particular sourcing tool, an RFP tool, which is just simply being used to distribute said Excel file, which to me is a double failure, but whatever. So the question, so if you take a step back, the question, the provocative question there is, is, well, if we have all this tech debt, why don't we just run the whole thing in Excel? So that's the equation when we talk about digital roadmaps for procurement. Now, of course, nobody's going to admit to doing that. You think it's because the process is built incorrectly in these tools because the tools have been around for so long and they're monolithic and they're hard to... I mean, because I've seen your map of all these applications that have come out.

21:56 And I think that happens in any, I mean, it's happening to ERP systems, happening to planning systems, it's happening to every freaking business process out there, where it's becoming more purpose built, right? Where you can plug and play all these different tools to make an ecosystem of products that you're composing a process based on best of breed technologies. Is that kind of where it's headed? Plus Gen AI kind of trickled in the gaps? Yeah. Let's put it into real terms. So my spider map's full of all these logos, but the end user doesn't care. They're going to say, I need a plane ticket from San Francisco to Newark, book it for me. And it's going to then go figure out what the best price is.

22:39 We have a preferred agreement with United and Hertz and whomever else. So it's going to manage all that in the background because I don't care. But right now, to do a codebook that, it puts way too much burden on me as the end user. And so the reason I set that up is I think Gen AI will change how I interact with the system because it will do a good job of interpreting to understand that getting from, if I say I need to go from San Francisco to New York, it's going to know that I'm probably going to fly United. I'm going to want to go nonstop. It might ask me to what time I want to leave because it understands the context of my query.

23:22 That's where I think we'll see it. And to your point, which I liked a lot, that business process change. In fact, there is no process because it's just me and the AI talking and interpreting. Whereas the problem with all procurement systems today is you have to pre-define the process. Well, humans don't fit well into predefined processes because I might be ordering a plane ticket and then in an hour I might need beakers or test tubes. And an hour after that, I might need a Salesforce license. To predefine and then hard code these processes, this is where it all goes wrong. And this is where I'm most excited about Gen AI.

24:03 Yeah. I think everything's heading in that direction, which is exciting and terrifying at the same time. And it should be. Yeah. Yeah. But we're not doing a great job managing it now. And that's the best case. And the worst case is people are just bypassing the systems. So we've actually created multi-layered problems. I would take the chaos of the AI system where we put in various constraints than what we have today, because what we have today is unworkable. So if you could predict like one major shift in the procurement industry over the next, say, five years, what do you think that would be? Well, to answer that question, I have to give you another one of my pet peeves.

24:46 I'm poking all your pet peeves today. Yeah, it's not hard. I have a lot of them. So what's a supply chain? We've all learned what what supply chains are over the last four years. Which is great. To me, supply chains are a national priority for any country and they're a strategic, something that we need to really have a better understanding. However, we don't have really good definitions as practitioners. You can ask a hundred practitioners and you're going to get a hundred different answers. And that's the immaturity of our our broader operations function.

25:27 Set that aside for a second. So just to sort of give you my definition, because it would be irresponsible if I didn't give you mine. So to me, within a supply chain, you have planning, demand management, and intake of, whether it's the consumer or the internal users, you have some sort of intake mechanism that then needs to be fulfilled. Then you have sourcing, which is procurement, essentially, which is where you procure all the raw materials you need to produce a product. Then you manufacture it and then you deliver it. Now, of course, that all is great if you're building a car or a consumer packaged good.

26:11 But if you are a tech company or a bank, you don't have you're not manufacturing anything. thing. And so that's where the sort of supply chain falls apart and we kind of get into different worlds. But you still have planning and intake and you still have procurement because there's things you procure and you still to some degree have distribution and sort of operations. So all of that to me is the supply chain. I have a whole longer definition in my book, but that's a short So as we evolve. Supply chains can be a competitive advantage. In fact, they can be the competitive advantage. And Amazon has built the best supply chain company ever.

26:57 It's just, we don't see it that way because we're all consumers of the platform. But in essence, they've created this amazing supply and demand platform. And that's what's so powerful about it. And so the business is supply chain. And you now see the companies like FedEx and DHL, they want to be supply chain companies as well. And so I think my prediction, which was a long setup to get to the prediction, my prediction is we will see that take a big business like Ford or J&J or P&G, or it doesn't matter who, where the supply chain becomes not a back office afterthought, like improve the supply chain, but it becomes core to how the business is built.

27:46 The business is not just selling the product or developing the product, but it's also delivering the product and sort of bringing that all All holistically, that's where I predict we're going. And we're well on our way. Another company that, Amazon's a really good example. You know, Walmart used to be the example. But I think now, and I hate to bring this up because the CEO is driving me crazy, but I have a Tesla. I love Teslas. Teslas are incredible cars. But one of the advantages they have versus Ford, you know, and everybody else is that they own, pretty much, they've gone backwards in the supply chain. They're creating the batteries. They're thinking about the motors themselves. They're doing all this stuff to ensure that every part of that car ends up in the car when they need it in the car, when they manufacture the car.

28:29 And the quality is of high value. Whereas you look at a company like Boeing that stopped doing that. They stopped carrying up every part of the supply chain, and now they have all these issues. So it's evident in these large manufacturing companies where they're starting to kind of think about that. We have to worry about quality. We have to worry about when we're going to get the supply. And we also want to make sure it's going to be the best thing it can be in our product. And so you have to move backwards in the supply chain in order to do that. Yeah. And that's a great example. And there's a lot to unpack there because it is a very interesting sort of quote unquote procurement. Element there because first tesla the one thing that they did is they didn't try to take a regular gas engine car sort of adapt it to the software development something i forget there's a term for this where all the components of the car are managed by central software yeah and and they complete and credit to them and rivian's done this and i think the other electric car manufacturers done this too that that are sort of brand new where they just said okay everything's running from this core software, it's networked to everything.

29:41 And when we're building new tires or braking systems or acceleration systems that are controlled by the software so that everything can be improved and managed with software updates. You're not, because in traditional cars, you have different computers in the seat recliner and different in the differential and like all that other components. So when you do that, it was a very clever move. Then you can start to control the supply chain. And I believe it was Tesla when we had the microchip shortage a couple of years ago, they detected that earlier and bought a whole bunch of them and they didn't have as much of a supply problem.

30:22 Now, and this gets to back to the question of procurement, the other, you can flip this around and say, and Volkswagen just invested a lot of money in Rivian, the electric car maker, one of the benefits of that, if you're Rivian, is you can use the purchasing power of VW. Because if Rivian's only creating a couple thousand units or a couple hundred thousand units a year, they don't have purchase price leverage. But if you're going to a supplier with. 10 million tires and Rivian just needs, I don't know, 50,000 or 100,000, you can now bundle that order and get a better price than Rivian going alone to the tire supplier.

31:06 So this is a little bit of procurement making its way and back to the question of where we're going in the future. If you're designing this car, you have to look at the supply market, whether what Tesla did is owning more vertical, which is perfectly fine, or understanding how to get the leverage and engage the supply base. As you were talking about how important we're realizing supply chains are, the random thought just popped in my head and I have to share it. I wrote it down because I'm like, I don't want to forget this. Supply chain issues led to the discovery of America. That's how important supply chains are. Literally, they found new worlds. Right. Yeah. To plunder.

31:49 But But actually, it goes back even further than that. Like, you can find supply chains being at the core of many of history's, I mean, look at imperialism. Imperialism is really just supply chain expansion and imperial possessions. And yeah, so, and I mean, if you look at it with a supply chain lens, I mean, it's right there. So yeah, no, I agree. So as someone who solves data issues for executives and leaders and teams, what should we be focusing on from a data perspective with procurement? Like what is the one thing that they're tackling today that they're challenged with?

32:30 Is it really just realizing that transparency or is there something else now? Yeah. I like to joke that within 18 months, we'll have all the technology we can consume and enterprise can consume. I mean, if you look at the AI stuff that's coming out now, I mean, it's bonkers. Companies don't need more technology. They don't need more tools and even data. It's helpful, but we need to get a handle on what we have today. To me, it's all about upskilling. Because the reason I say that we have too much technology is we're not using the technology we have access to today. And forget the procure-to-pay and source-to-pay systems.

33:10 Just write that stuff off. But everybody that has Azure or Google Cloud or Amazon has access to amazing libraries of machine learning and AI and everything else in there, and we don't use it. And we barely use Excel. So what I would like to see is just greater analytical competency and ideally greater algorithmic literacy because algorithms drive our lives. And in fact, your Tesla is driving you literally. And while you understand them, how many Tesla owners understand the algorithms that are literally driving them?

33:51 And so that's what I want to see more of. So yes, we can get spend transparency and then we need to move to contract transparency and the ability to action those. We also have to pull in benchmarks and better sort of stitch our end-to-end data quality. But the other answer I would give you just in a more hopefully succinct way is if you have good spend transparency and contract transparency, the real work is to get better data connectivity with your suppliers. Because A, the supplier experience today is horrible. And B, we need more data than ever from the suppliers. So we need to start plumbing systems, at least to our top 100 suppliers in ways that we haven't thought about in years past. Why?

34:37 Because the ERP was never designed for that. And so that's why we have to get rid of the ERP. There you go. Well, thank you, Eloise, for your time today. This has been a great conversation. We went from procurement to data, to supply chains, to history. Imperialism. Love it. I appreciate the time. It's always a pleasure chatting with you. I think we need to talk more. Indeed we do. No, it was my pleasure. And I was very happy to thank you for having me on.