An Interview on The Role of Technology in the Future of Procurement with David Yarkin
For this episode of the Supplier Experience Live Podcast, we were joined by David Yarkin, Founder and CEO of Procurated, and a former CPO. David is a procurement practitioner who has spent nearly twenty years working in a number of organizations both in the public and private sectors. After gaining experience, David went on to establish his own business, Procurated, which connects public sector buyers with peer-reviewed suppliers.
With David we discussed:
- The importance of understanding suppliers’ historical performance
- Digital transformation in Procurement
- How to prepare for technological transformation within the procurement community
- How to improve supplier relationships
- Why the suppliers’ perspective is important for procurement professionals
The importance of understanding suppliers’ historical performance
David starts off the conversation by explaining the challenges faced by Procurement in the public sector. He explains, “One thing we really struggled with, like every government struggles with, was around the way in which we selected our suppliers on the basis of their past performance.”
They did have a process in place to gather insight from their suppliers, as David explains, “We’d be asking our suppliers to supply us with three references that could speak to their past performance.” However, this approach had its flaws. He continues, “Yet on this critical vital question, we were letting the supplier dictate the terms. We were letting them tell us who we could and who we couldn’t call. And we had predictable results. You call someone, the supplier tells you to call. Of course, they’re going to say that this company or that company is invaluable and walks on water.” As a result, “we learned absolutely nothing from the process. And it was very frustrating for me, and I think very dangerous, in some ways.” He goes on to give an example of how not knowing about a company’s past performance could have had tragic consequences in the case of a contract awarded to a school bus company.
As David recounts, “The driver drove the bus into a ditch. When the police arrived on the scene it turned out the driver was very intoxicated, driving a bunch of kids. The bus company, as a result, sent them a second bus to bring the kids back home. That bus, it turned out, had 18 safety violations and could not be driven either. So, they sent a third bus out to bring the kids home and that bus driver didn’t have a valid driver’s license.”
“This is a company that was a really, really poor performing company and that jeopardized the very lives of kids. And yet, the process allowed this company to be picked because it didn’t provide visibility to the procurement people about that supplier’s poor track record in the past.”
Thankfully this tragic incident did not cost any lives, but as David explains, “This is a preventable tragedy.”
On the other hand, in the consumer world, when we go to a new area and want to find a place to eat, we have a plethora of tools to choose from like Yelp or TripAdvisor. All we have to do is type in “burger” or “best burger near me” and we’d find the best burger near us. It means we can be very happy because we know that we can rely on the wisdom of the crowd to share their experiences.
After his experience working as the Chief Procurement Officer for the Commonwealth of Pennsylvania, David asked himself: “Why can’t we do this for public procurement? Why can’t we create a tool that connects everyone in public procurement in the U.S., and potentially in the world, to let them share experiences with each other candidly, honestly, privately so that when I’m choosing a bus vendor to take kids to a pumpkin patch, I can pick one with confidence?”
Digital transformation in procurement
In the podcast, David explains how we have been and are continuing to experience an accelerated rate of transformation in the procurement industry. As he puts it, “People have been talking about procurement transformation for 20 years. I think that we’re actually experiencing, and we’ll continue experiencing, that accelerated pace of real transformation.”
Real transformation, in his terms, means ‘meeting your users where they are, with the tools they are familiar with.’ He continues, “In our private lives, as consumers, we don’t use software tools that require five-hour training, nor do we read long manuals or hire consultants to do change management so that we can use Yelp. The tools are easy, simple and intuitive. And I think that’s what we, as procurement professionals, are going to start demanding from our software providers.”
In David’s view, we can see this shift in action today with the rise of the Amazon business addressing the so-called tail spend or non-contracted spend. In hindsight, this was a very predictable success story, as he explains, “The reason why it’s popular is because the person who works in a procurement office from 9-5 is the very same person, who, at home, is buying sneakers or a water bottle or a trampoline for their kids – and they’re doing that on Amazon. So of course, they’re going to want to do that in their professional lives on Amazon.”
According to David, these new expectations from procurement professionals have put pressure on the ERP systems to improve when it comes to procurement software. He explains how we have seen a real evolution in the ‘Best-of-Breed’ of tools for procurement: “When I was CPO, ‘Best-of-Breed’ meant that you could use the procurement software that the ERP provider gave you. It was a model, it was one system. We weren’t given the ability to choose from a dozen or more different software solutions that would meet our specific needs.”
Building on this, David adds, “What’s really interesting is something that I’m calling ‘Best-of-Breed within Best-of-Breed.’ Best-of-Breed used to mean that you choose between multiple systems. Now what it means, is, when you make the decision for your procurement system of record, you are able to choose the ‘Best-of-Breed’ within that system, to bring in other tools, other data, and other assets. Making the system work specifically for your organization.
Giving an example, David continues, “We announced, in the last month, two integrations. One with a company called Periscope and one with a company called OpenGov, where users of those systems (and who chose those systems because they’re very good and robust E-procurement software) can now access the Procurated score, the vendor performance score, that we’ve collected natively inside of those tools.” This means, “they don’t have to go to our site, have one window open with Procurated on it, and one window open with their E-procurement software. It’s all together, seamlessly, in one place and it helps them do their jobs efficiently.”
How to prepare for technological transformation within the procurement community
David draws attention to the word “community”. As an active member of the procurement community himself, he really enjoys how, in public procurement, there is so much to be gained by helping each other out and working together. As he explains, “If you were to ask HP to tell Dell about its secret sauce, it’s best suppliers, the things that help their supply chain, they would never do it because they’re fierce competitors.”
In the public sector, on the other hand, “State governments are not competitive with each other. They have no reason not to help each other out and, not only that, they actually like each other.” He continues, “You go to a procurement conference and they have to shut the bar down at two in the morning because my friends in Procurement and I are sitting there, at the bar, telling war stories about this procurement or that procurement, that vendor or that buyer, until two in the morning!”
Concluding, he adds, “We’re a very tight-knit community. But what we don’t realize sometimes is that we actually can be extraordinarily powerful and valuable to one another, if we were but to organize ourselves and help each other as a community.”
David takes a second to go back to the tragic bus story. “Imagine if the procurement directors or the cities around Washington counties and the school districts around Washington had all taken 60 seconds to write a review of this company and described their very bad experiences with them. There’s no way that the procurement director of these public schools, having seen that, would ever choose the company in question. They would never do it and put those kids’ lives on the line.”
That is the power that, as David describes, we can have as a community. “We can solve problems for one another if we band together.”
In order to scale, however, it does require technology. In his words, “Unless we can recreate the two AM bar in every city every day, short of that, technology can do that for us.”
How to improve supplier relationships
The mistake that can be easily made is forgetting to think about the suppliers’ perspective. As David puts it, “I do think that we make a mistake sometimes in Procurement in thinking that procurement is ‘by and for’ the procurement community alone. The expression ‘it takes two to tango’ is certainly true when it comes to Procurement.”
The purpose of Procurement is to find the best supplier out there, and manage that supplier relationship in order to best serve your customers. According to David, this cannot be done in a vacuum: “The supplier has to be an equal partner with you in that process.”
Unfortunately, this can get overlooked at times. He explains, “When you make life harder for the supplier, when you make them fill out forms, jump through hoops, it makes you a less attractive customer. And when a supplier has a choice, if they only have time or bandwidth to respond to one bid today, you as a procurement professional have to do everything you can to make sure that you are the most attractive customer.”
As David describes, this means eliminating any unnecessary forms and steps that you don’t really need because the data is actually never used. “It certainly means making sure that you’re paying on time. It means making sure that your terms and conditions are not onerous.” However, beyond that, it’s critical to focus on good communication. “I think it also means that, in the life of the contract, you’re having a very candid, open and regular conversation with your suppliers about how things are going. You want to hear from them,” he adds.
As well as improving things in your processes as the buyer, David explains that suppliers want to know how they could be improving as well: “What parts of your organization are struggling to work with us? Where are we, as the supplier, performing poorly, and can get better? What are some common themes that you and Procurement are hearing about our performance? Are people complaining that our deliveries are late? Are they complaining that our drivers are not courteous? Are they saying it’s hard to be someone in customer service, or are they saying that the return process is very challenging? That information can be hard to get.”
“If you use software that’s able to get the voice of the customer, capture it, digitize it, aggregate it to you and give it to the contract manager in a digestible format, it’s not that hard, and you can give suppliers the information that they crave on how they can get better.”
Why is the suppliers’ perspective important for procurement professionals?
While traditionally procurement has been much more focused on cost savings, the world is changing. According to David, there has been a real awakening as a direct result of COVID.
He explains, “We saw too many times that a hospital would open up a box of masks thinking they’re going to be an N95 mask that would protect their frontline workers.” Only to find that, “the box would be empty or damaged or the masks inside weren’t the right ones to protect the workers. And so we’ve learned that quality really matters and you need to take that extra step to make sure the supplier you’re working with is a strong performer,” David says.
Finally, he brings the conversation back to the procurement professionals, pointing out that it’s up to them to become the buyer, or customer-of-choice.
David explains, “You need to think about it from the supplier’s perspective as well. You need to think about, if I want to attract this high-quality supplier, I need to become an attractive customer.”