Transcript: What the Duck?! Episode 33

What the Duck?! Episode 33 Transcript

PATRICK OR TREAT?: Why the Direct Material Sourcing Space Merits More Attention from the Analysts with Patrick Reymann

Welcome to What the Duck?! a podcast with real experts talking about direct spend challenges and experiences and now, here’s your host, SourceDay’s very own Manufacturing Maven, Sarah Scudder. Thank you for joining me for What the Duck?! Another Supply Chain Podcast brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of supply chain. I’m @Sarah Scudder on LinkedIn and @SScudder on Twitter. If you are new to the show make sure to follow this podcast so you don’t miss any of our direct materials supply chain content. 

Today I’m going to be joined by Patrick Reymann and we’re going to discuss why the direct material sourcing space merits more attention from the analyst community. If you work for a manufacturer and are interested in what a category manager turned analysts thinks about the future of direct materials procurement, then this episode is for you. And small disclaimer, Patrick nor I are receiving any financial incentive for this interview, and we don’t have any sort of kickbacks or formal relationship with IDC. Just wanted to throw that out there since Patrick is now an analyst. Patrick is an Enterprise and Procurement Applications Analyst for IDC is highly interested in the attributes that are most meaningful to buyers. He spent 20 years as a sourcing and procurement consultant before moving over to the analyst world. Patrick is an avid cyclist, college football fan and amateur woodworker. Welcome to the show Patrick. 

Well thank you very much Sarah. It’s great to be here. So, why the love for cycling? Where did this passion come from? I think it comes from… I lived in Colorado for 12 years and it’s a huge cycling community out there and I’m not a small person so running wasn’t working for me anymore. Kind of hard on my legs and I got into it and some great cycling venues out there, spectacular scenery so I got into it there and still do it today. I moved, believe it or not, I voluntarily moved from Colorado to Ohio, but I’ve kept it up and Santa brought me a very nice, very expensive new bicycle for Christmas this past year. So yeah, it’s just, it’s a lot of fun and I’ve got a good group of guys that I ride with. So, it’s my it’s my hobby. So how many miles a week do you ride? So, I am not a cyclist. So full disclosure, I have no idea kind of what a cyclist routine even looks like. Yeah, it’s weather dependent, dependent upon my schedule. I’m doing a ride this summer called Ragbrai. It’s an acronym basically. It’s the annual ride across Iowa believe it or not and it’s seven days and 500 Miles. This year is the 50th anniversary of that ride and they’re expecting over 20,000 people. So, I’m not in shape right now. Some of the winter months I wasn’t able to train that much but you know leading up to that, I’m sure I’ll do probably 100 miles a week in the weeks leading up to that. So, I think that’ll be I think that’ll get me there.

So, you also mentioned when we were prepping for the call that you love college football. So, I come from a sports fanatic family and my dad and sisters were in multiple baseball and football leagues growing up with team names and following stats and trading players. So, I have to ask, what is your favorite college football team? That would be Notre Dame. I went to school there so for obvious reasons. Last year was the first year in probably 25 years I didn’t attend a home game. I did attend one away game but usually two or three home games a year and yeah that’s my that’s my team. I live and die with them I every year. I say I’m not going to get too worked up or too emotionally invested, but it that never works. So, that that’s my passion and other than cycling, that’s how I spend a lot of my free time.

Are you a fanatic in that you have outfits and you’re decked out when you’re watching the games? Yes, I’m proud of that. But I have, you know, if I’ll wear the same shirt if I feel like it’s bringing me luck for a season and you know, that kind of stuff. So yes, I do have my man cave that’s filled with paraphernalia, and yes, that’s me. That’s my ultimate test of a fanatic or not. If there are outfits and a man cave or memorabilia in the house.

So, you also mentioned that you are a woodworker, which is interesting. The CEO of my company, my boss, also comes from a woodworking family, and their family has a shop, and it’s a big part of their life as well. So, what’s the most difficult thing you’ve built?

Recently, I built a Shaker-style end table made out of cherry, and I’m really happy with how it came out. It kind of tested my abilities. I had to make a few custom jigs to help me make these special cuts, and I have a shop in my basement. If I’m not watching football or on my bicycle, I like to spend my free time in my shop, just cleaning or adjusting or, you know, the great thing about woodworking is you always have an excuse to buy new tools, whether you ever need them or not. So, it’s just a lot of fun. As I like to say, I like to make sawdust. I’m getting better. I am definitely an amateur, but it’s a lot of fun. How did you get into woodworking? Oftentimes, I feel like it is kind of a family thing, so did a brother, sister, mom, or dad do anything? I had a neighbor once who was a carpenter, and he was more of an artist than a carpenter. He did phenomenal work, and just kind of hanging around with him, hanging around his wood shop, he showed me the way, and that really was my conduit into woodworking.

Let’s pivot a little bit and talk about your career because you have a pretty unique and interesting career path.

So, you actually started in your career in the U.S. Air Force. And yeah, I was ROTC in college. I needed a way to pay for school some way, and I was very fortunate to have a scholarship opportunity. So, then I was obligated to serve for four years in the state for ten. I was an aircraft maintenance officer assigned to fighter aircraft units F-16, F-15, and it was a blast. I was stationed both stateside and globally. I met my wife in the Air Force; she was a meteorologist. And really, I would have stayed, but she very much so wanted to leave the Air Force. So, I thought I would interview and see if I had any opportunities. And I had an opportunity. You know, I joined IBM out of the Air Force, but for me, it wasn’t IBM, it was Colorado. The opportunity was in Boulder, Colorado, and I thought I always wanted to live near mountains, being from Kentucky and Ohio is where I grew up. So, did that, loved it out there, and joined initially IBM’s North American distribution headquarters, which was in Boulder but transitioned over to IBM Global Business Services, which launched my consulting career. I started out as a category manager and doing a lot of strategic sourcing engagements, and so that’s what led me on this path of 20 plus years as a sourcing and procurement consultant. 

What did working in the military or, I should say, Air Force, teach you that helped you in your procurement career?”

Good question. I know it’s kind of a throwaway kind of answer, but really, just the team aspect and kind of working for a greater good beyond just my specific duties and being part of a team and having a focus on the mission. That was invaluable, and you really felt that. I mean, that was tangible, especially in a military environment. So, I think that stayed with me. Maybe the things I did didn’t directly translate, but it was a great experience. And just in the military, you work with people from all backgrounds, from every part of the country, and just some great experiences.

So, you pivoted to consulting and were in consulting for quite a long time. It was something that you obviously excelled at and enjoyed enough to have a pretty long career. What did you like about consulting?

Just the variety of engagements, you know, in different industries supported. I really did a lot of things you can do in that space, everything from M&A due diligence support to quick cost takeout type engagements, technology implementation. So, just a variety of things and access to senior executives. That was a great thing about it. I mean, for a long time, I did the classic consulting lifestyle, out on Monday morning, back on Thursday night, and that’s tough. That’s tough. You see some neat places, but it seems like that I didn’t get a lot of engagements that were in the garden spots. I got your rust belt cities and maybe didn’t do so well with respect to the locations visited, but it was very rewarding. You just get exposure to so many things, and, in spite of the travel requirements, really set me up nicely, I think, for what I’m doing now. Other than the grueling travel schedule, which I don’t think I’ve ever met a consultant that said, “I love having to be on the road all the time,” I feel like that just kind of comes with the territory, and it’s tough on your sleep, on your health, just family life. 

What else did you not love about consulting other than the travel? If you had to pick a couple of negatives or challenges.

Well, you have good engagements and not as good engagements. It’s, you know, sometimes you enter an environment where the entity you’re supporting is going to be nervous that you’re there because somebody there hired you to help them be better. And so that can get sensitive because in some cases, somebody has hired you because they think that their organization needs outside help; they’re not doing well. And so there can be tensions, and you really always have to be cognizant, extremely sensitive to those relationships, and to really bend over backwards to convince the supported entity that you’re not there telling them they’re doing things poorly, you’re not there to replace their job, but you’re really trying to be additive and to help them and to leave them with capabilities and technologies when you leave the engagement so that they can be better going forward. So, it’s those sensitivities that can be tense at times. I call it all up who run procurement teams, and you know they’ll have an executive bring in a large consulting firm and everyone just up in arms and, oh, here we go again. So, I think it’s a fine line between this is just wasting money for a company and this consulting firm is actually going to add value and make an impact. Yes, it’s you know these engagements are not inexpensive, and so there’s a lot of pressure to show value very quickly, and that ever-present tension is a real part of the consulting lifestyle. So, you really develop a pretty thick skin after a while, but you have to. 

So, what did you learn about direct materials procurement over the course of your 20 or so years consulting? 

You know, a lot of people in this space are really brought up on the indirect side, as I was, so my exposure to the direct side was just not nearly as extensive. And it’s, you know, to an outsider, you might think that might be confusing because you think, “Well, that’s all sourcing and procurement.” But it really isn’t. The direct side is very different. It’s much more complex. There are just nuances to the direct side and highly specialized with respect to just the deep knowledge base and awareness of specific commodities and just how those specific commodities are procured, their availability, pricing, and so on. A lot of people just don’t get exposure to that. And like I said, I didn’t have extensive exposure to that. And I think that’s kind of bled over into the analyst space of we at IDC don’t give the direct side as much exposure as it deserves. Now, I’m working actively to rectify that and I’m going to be doing a lot this year, both myself and with some colleagues because it just needs to happen. I mean, if you talk about just the spend volume on the direct side, depending upon what data you see, it’s minimally half as much. Some studies show it’s significantly more than half. But I just don’t think, and I’m not going to speak for other analyst firms, but I think across the board that the analyst community should do much more and bring much more attention to the space, much more so, you know, all of the global upheaval that we’ve had over the past couple of years has really shone a light on the direct side. You know, when we talk about all the supply chain challenges that we’re all very familiar with, we’re not talking about challenges on the indirect side. We’re not talking about people couldn’t get laptops and people couldn’t get complimentary workforce labor or office supplies. No, we’re talking about direct. So, you know, in that vein, it’s been as difficult as the past couple of years have been. It’s really elevated the position of the supply chain practitioner and, in particular, direct practitioners. And so, we collectively have a much larger seat at the table. Our voice carries more weight today than it did three years ago, and it’s time to take advantage of that. And so, I just think we’re going to rectify that at IDC, and it needs to happen. 

Why do you think it is that the analyst community has basically ignored direct material sourcing?

I mean, I work 100% in direct materials, direct spend, and I would say it’s almost completely ignored, really. No, I thank you for sharing that because I am interested in your perspective. That’s my hunch. Maybe I wouldn’t state it that strongly, but the fact that you’re saying that is a very good data point for me. Maybe it goes back to so many people in the space, just you’re brought up in the indirect world. Indirect is relatively what’s easier to understand, it’s easier to follow. Unless you’ve spent time in manufacturing, unless you have that background and know those commodities, a very specialized skill, I just don’t think that people are going to be writing about it and covering it. Yeah, so I just think it’s just so much more common that people, particularly in consulting, are going to work primarily on an indirect. The other comment I’ll make is that I feel like analysts firms have historically focused on enterprise primarily and kind of ignored the small and mid-market. So not only would I love to see more coverage on the direct side but also more in the small and mid-market. In particular, I feel like that community is often ignored and/or analysts price themselves so high that they’re not even reasonable or attainable for companies that are smaller in size. 

Yeah, again great feedback and I know we’ll be talking more in the future as I build up my research agenda for the remainder of the year. I absolutely want to know what’s important to the direct community, what coverage you need, where should we go, and you know, I need your input. I need SourceDay’s input for that, so I look forward to those conversations. 

Why did you decide to become an analyst after being a consultant for so many years?

Yeah, how I see it is that IDC reached out to me. They had somebody covering the sourcing and procurement space as kind of an additional duty, and they made the correct decision, in my opinion, that they needed to dedicate somebody to this space. They were not looking for a legacy analyst; they wanted somebody who had significant field time, and that’s how it all came about. They approached me, and I had never considered it, but after talking to IDC, I jumped at the chance, and I’m really glad I did. It’s every everything we do every job has challenges and their nuances, but you know, just the exposure to really smart people and senior executives, it’s fantastic. So, and it’s an area that demands a lot of attention for some of the reasons I said before, but also this space. You know, I tell people all the time that the amount of activity is staggering, and trying to keep up just with news.

Are you meaning in the direct materials place, space in particular?

I’m actually talking about both direct and indirect, but I absolutely would apply it to direct because we would talk about new entrants and new functionality and new capabilities of application providers. I mean, SourceDay is a great example, right? I mean, here’s a space. If you sit back and you think, then I’m going to grossly oversimplify this, but you shine a light and bring visibility to orders and tracking changes and bring transparency to that. It’s so in effect, SourceDay has kind of created a new category that is sorely needed. Judging by the success of SourceDay, you are absolutely filling a need that the market needs. From my perspective, you’re really leading the way, and we’re one of the first, if not the first, in this space. Now there are some additional competitors that we’re seeing, but you know, SourceDay has really kind of set the tone here and highlighted the challenge of these just enormous complexity of doing something that’s fundamentally sounds pretty simple: place an order and fill that order, right? And notify people of changes and keep track of those changes. But it’s not simple, as you know. I don’t have to explain that to you. It’s highly complex, and the functionality that you’re providing, it’s just great to see. It’s great to see your success, and as I said, it just demands, it demands much more research that people like me need to really shine the light on.

So, a lot of our listeners have probably never worked with an analyst firm before, so I’d like to have you explain, what does an analyst actually do? 

So, I exist to bring revenue into my company, right, like we all do. So, I do that in two ways. First way is, the entities will subscribe to my research, so they’ll pay a fee, and they’ll have access to all of my research, and that comes with analyst hours. If they have an inquiry about anything in the space, we have that conversation, and maybe I’ll prepare some material, maybe it’ll be a top-of-mind discussion. So, subscribing to my services is the first way. The second way is what we call consulting. It’s not consulting in the classic sense, but an organization will have a question about, “Hey, I need this functionality. I’m looking to buy a new application. Yeah, sure, I can do an RFI and go through all that, but let’s just have a conversation. I want to know what are the trends, what are people buying, what are you seeing?” And we’ll have those discussions. And that includes even the equity analyst community. I have a number of calls with private equity firms that want to know about the space and what’s happening. I’m not an equity analyst, so I don’t talk about valuations or those kind of things, but I do talk about functionality and capabilities in the marketplace, and trend things that are happening, functionality that’s being added, what buyers are looking for, what buyers aren’t getting today that they want to get tomorrow. So, that’s the consulting. So, those two ways, my research subscriptions and the consulting, are what I do. So, I’m either writing or I’m talking to application providers, and as much, I’m talking to buyers and prospective buyers. The really neat thing about it from my perspective, well, a couple things. You know, it’s my practice, so it’s mine to grow and do as I want with, right? So, the success of my practice is on me. I like that. And the other thing I really like is, you know, when entities want to talk about what are our programs and the sales and all that, I just turn that over to our sales organization. So, I don’t get directly involved in those conversations, which I love because I just don’t want to be involved in those conversations, and I’m so happy I can turn that over to our sales organization. So, that’s at a very high level how I spend my time.

So, just to recap for our listeners, if someone is working at a smaller or mid-sized manufacturing company and has a software renewal coming up or is looking to add technology to their stack, they could leverage someone like you to do research and provide insights and feedback for specific applications or categories. Yes, you said that. Well, those are the exact types of conversations that I have. So, our internal account executives will reach out to me daily and say, “I’ve got this organization that’s looking to buy, or they’re running this application that’s not working for them, and they want to talk,” and absolutely, let’s have that conversation.

Is there anything else from a technology perspective that you can share about trends or focus areas or things that you’re really looking at within the direct space?

 I would say, admittedly, this is going to apply to the indirect space as well, so I’m not trying to dodge the question. But without question, automation and the infusion of what I call intelligent decision support tools, everybody is looking at that and for so many reasons, just the workforce challenges is one reason. We have a number of surveys that talk about how entities are utilizing these intelligent systems because they’re challenged from a staffing perspective. Automation is absolutely a desired attribute for so many buyers. Of course, if you have to talk about ES&G and sustainability, today, a lot of application providers are looking at that. Not so many have really infused that into their offerings, but I think going forward, that’s just going to be another expectation of buyers, that there will be some sort of intelligent decision support that, you know, if I select supplier A over supplier B, what is the impact on my sustainability goals?

I think we’re going to see that more and more going forward, so those are two trends that are absolutely top of mind for providers that I see. Well, thank you for discussing why the direct material sourcing space merits more attention from the analyst community with me, Patrick. I have a personal interest around this subject because I work in the direct materials space, and I also have felt coverage has been lacking, so I’m excited that that’s kind of a focus and priority for you and your group as well. Where would you like to send people to find you if they want to reach out or find more info about the research that you’re working on? It’s available at I think, well, I know my research agenda is out there, and it’s publicly available. It does change throughout the year, but that would be the first place. And of course, LinkedIn, I’m out there as well. If you missed anything, you can check out the show notes. You can find us by typing in “What the Duck?! Another Supply Chain Podcast” in Google. To have optimal search results, make sure to add “Another Supply Chain Podcast” to ensure you don’t miss a single episode. Make sure to follow this podcast and to subscribe to us on YouTube. I’m at Sarah Scudder on LinkedIn and an S gutter on Twitter. This brings us to the end of another episode of What the Duck?! Another Supply Chain Podcast. I’m your host Sarah Scudder, and we’ll be back next week. Thank you.