Archive for April, 2007
April 30th, 2007
David Bush - Iasta
Just as the Discovery Channel pioneered “Shark Week”, Jason blazed a trail on ERP week from SAP Sapphire, last week. His posts have been educated and informative about the direction of the industry. I raised a very skeptical eyebrow on his first post about 3 sourcing events for under $10k, but he clarified and I now accept the explanation of the deliverable. All in all, it is a very interesting round-up of how SAP has really committed to the eSourcing space. I expected more of Spend Matters posts from Sapphire to involve the very wide range of SAP products, but almost every one has been about eSourcing. SAP pointing its cross-hairs on our industry is not a bad thing, though. Frankly, it brings tremendous credibility to the functionality that we all profess will help procurement, and still many companies have yet to embrace. From our perspective, we have beaten SAP head-to-head 3 times in the last 5 months and probably lost just as many or more. A formidable competitor but not invincible.
I have to admit, however, I would have never pegged the German ERP giant to be the more progressive and committed vendor in this space. This is a new SAP and it will be interesting to see where they determine the diminishing returns are. Wherever that point is will start the future innovation cycles of the BoB vendors that survive the next round of consolidations and flame outs - traditionally caused by self-destructive and megalomaniacal behavior.
Finally, I do immensely respect SAP, do not get me wrong. However, they are not the Red Cross and wild fantasies of a kind and charitable leviathan with shiny new customer friendly pricing is more a function of opportunity, not directive. Much of the pricing that SAP clients get will depend on the moxie of the sales rep and progress of the sales quarter. I personally see SAP pricing all over the place, from company to company, for seemingly unpredictable reasons. You can easily see SAP eSourcing cost you 2-3x more than a BoB solution per year, even though you thought you were getting a great deal that claimed eSourcing and SRM to be “thrown in”.
Entry Filed under: General, Reverse Auctions, Technology, e-Sourcing Marketplace
April 27th, 2007
David Bush - Iasta
The Winter edition of the CPO Agenda had a good article on how to Develop a Winning Mindset, important for those who want to succeed. According to the article, our thoughts are not random and we can learn to control them to ensure that we always perform with an aura of self-belief. To that end, they present five things one can do to keep a winning attitude.
- Find Your Voice
Use relaxation or meditation exercises to find your inner voice - it is it that you want to learn to control.
- Practice Under Pressure
Practice your presentations in front of a colleague, or group of, place deadlines on yourself, and regularly work as if you are under pressure. Then it won’t bother you (as much) when it is there in full force.
- Run The Movie
Create a clear and vivid image of success in your mind, visualize how you will get there, and then do it.
- Have a Winning Routine
Develop a routine that puts you in a “winning” mood and exercise it regularly.
- Walk the Walk
Imagine an ultra-successful you and be that person.
I am running a movie right now…it includes making long grass short, a clean garage and very cold beer(s). Arrggghh, its not over, there are 5 more blogs to write for next week!
Entry Filed under: General
April 26th, 2007
David Bush - Iasta
Last November, I blogged a Supply Chain Consultants Who’s Who where I listed the top Supply Chain Consultancies out in the market according to World Trade as well as a number of smaller firms our clients have dealt with that have delivered excellent value. However, I did not provide a methodology that you could use to identify the best consulting organization for your company.
Now, AMR has recently published A Basic Consulting Skills Checklist: Does Your Implementation Team Have It? which noted that there is a common set of soft skills required that becomes more critical as the individual moves from technical back-room work to deal more with business owners and end users: project governance skills and methodologies, a variety of subtle behavioral and communications techniques, and cultural sensitivity as well as an ability to resist Consulting Stockholm Syndrome.
Their list of soft skills was particularly useful. The soft skills they listed were:
- Deep Digging
An innate need to get to the root cause of a problem in order to suggest the best solution.
- Responsiveness
A tendency to provide updates in a timely manner.
- Escalation Capability
Knowing when help is needed and seeking it out at appropriate times.
- Scope Adherence
An understanding of the big issue combined with the ability to stick to the plan or get approval when needed.
- Realism
Promising only the possible.
- Upfrontedness
Knowing that sometimes “bad news is better than no news” and that accurate status updates are as important as timely ones.
- Community Building
The goal of self-enabling the organization as quickly as possible.
Furthermore, they know that their job is first to assist in business and process improvement and, through this, gain the respect of the users rather than be well liked by the masses and that change is hard, and long-term end users will resist new processes and systems and that they will have to act with care and understanding.
Funny thing is…these are the same qualities that make a good and productive employee in sourcing or any industry.
Entry Filed under: Analysts/Research, General
April 25th, 2007
David Bush - Iasta
Many people often wonder (especially eSourcing newbies) what the criteria are for a good reverse auction sourcing event. Since billions and billions of spend are negotiated through reverse auction technology every year, these rules have been developed and refined over time. Honestly, I do not even know the origin of this list or any of the changes it may have gone through over time. I suspect this was some of the original FreeMarkets marketing collateral that could fill an Olympic sized pool. I do know that I have seen it around enough to consider it public domain.
The 7Cs Category Cheat Sheet
- Contractually available
- Clearly definable requirements
- Competitive supply base
- Commercially attractive spend to bidders
- Compressible margin
- Complete data set
- Commitment to process
These are all very good points to address in your decision process. #2 and #3 are probably the most important to understand and account for, as I have stated before. I strongly feel that #5 (Compressible margin) is an admirable but not required goal. Achieving price transparency in rising market conditions is just as successful as getting 14% on your office supplies event. At one point or another, you will be required to focus on these 7 concepts and the amount of savings which is captured and implemented will be directly correlated to the adherence of these rules.
Entry Filed under: General, Reverse Auctions, Supply Management Best Practices
April 24th, 2007
Sean Delaney - Iasta UK
This is a really interesting survey result particularly when some buyers are of the opinion that a sales person stops lying when they stop talking!
On a more serious note it seems that senior management are not necessarily looking for individuals with a procurement background. The skills of procurement can it seems be taught.
It is a great testimony to the role procurement that they can now attract individuals from other professions. I think it reflects the opportunities that now lie in this category and also the high regard this function holds within some organisations. Having this experience is essential for progressing further within any organisation as I discussed here before.
Furthermore it is interesting to note that being able to follow procedures are less of a priority at organisations like Toyota who are “looking for the skills we require as a firm and not just as purchasing specialists. This gives us flexibility.”
All very interesting stuff, but why this change? Is the esourcing effect helping to standardise processes. If so surely optimisation, contract management and SRM will just further accelerate this change?
What skills will be become more valued? I suggested before that retail buyers have the skills that potentially could suit future roles but I also feel a broader skill set from other areas would suit too.
Entry Filed under: Analysts/Research, General
April 23rd, 2007
David Bush - Iasta
Apparel Magazine just released it’s 1st Annual Top Technology Trends Report, authored by Michael Barret, Retail Research Director of AMR Research. The report had some interesting findings.
The four most important business initiatives for 2007 are:
- Reducing product costs to improve margin
- Reducing lead times for new products
- Business intelligence / analytical capabilities
- Increasing supply chain agility
Companies plan to support future growth primarily through-
- Increasing sales volume of current products
- Introducing new products or categories
About half of the companies surveyed will increase their budget in this fiscal year.
About a quarter of companies plan to add enhancements to existing applications in the next twelve months, and about one sixth plan to select and implement a package in the next twelve months. Furthermore, a significant percentage of companies, especially in the mid-market (43%) plan to add enhancements to their current sourcing platforms in the next twelve months. Similarly, 52% of these mid-market companies plan to add supply chain collaboration capabilities.
Does this mean that this will finally be the year that e-Sourcing suites, especially on-demand e-Sourcing suites, start to make a significant impact on the apparel marketplace? Considering that these suites considerably reduce sourcing cycles, assist with supply chain agility planning, can be used to source existing and new product categories, and contain extensive collaboration capabilities, I think it only makes sense to see growth within this vertical. Iasta already works with some of the largest companies in this industry but there are numerous large and medium size companies in apparel that have no eSourcing solutions. I think most in the industry would be surprised to see some of the reverse auction results that are happening in direct material/product events every week.
Entry Filed under: Analysts/Research, General, Reverse Auctions, Technology, e-Sourcing Marketplace
April 20th, 2007
David Bush - Iasta
Typically, this space is reserved for news and commentary on eSourcing and Supply Management. Today, I want to take a quick moment for an advertisement from none other than myself! Iasta is looking for sales reps that can help us with our current 2x YOY growth trajectory. Important factors are:
- Sales experience in the eSourcing industry
- Preferable location - West of the Mississippi
- Desire for a position that can make a difference
If you have these qualities, I would welcome a conversation. More detailed information can be read here. I can be contacted through our main number (317) 594-8600 or my email (first.last@iasta.com). Thank you!
Entry Filed under: General, e-Sourcing Marketplace
April 19th, 2007
David Bush - Iasta
I found this interesting article, written by Eric Issa of Kanbay. Ironically, this first appeared on Line 56, but we all know about that and it is no longer available. In this article, the author mentions four enablers that must be addressed to ensure a successful roll-out and savings over the lifetime of your company’s strategic sourcing project.
- Organization — Center-Led Versus Centralized? A sustainable, long-term procurement organization sponsored at the executive level, where authority, roles, responsibilities and individual performance metrics are clearly defined. Stakeholders must buy into the organization and be aligned along common objectives. Ideally, this organization is in place at the beginning of the strategic sourcing initiative and its structure supports continuous improvement.
- Skills — Continuous Improvement - Sourcing professionals must develop and maintain proficiency in all aspects of the sourcing cycle. Organizations need to identify the knowledge and the skill sets of their procurement staff and develop the specific training plans to close any knowledge gaps.
- Processes & Technology - Procurement organizations and suppliers must invest the necessary time and effort in planning a smooth transition and putting in place the appropriate tools and technology that will automate or facilitate viewing online catalogs, issuing purchase orders via auto-fax or electronic data interchange (EDI), monitoring purchase orders (PO) status with online collaboration solutions, etc.
- Performance Measures — Be Specific. A formal set of measurement processes should be put in place to track usage, pricing, user compliance to established contracts and supplier performance, especially if financial incentives and penalties are contingent upon a supplier’s compliance to service-level agreements (SLAs).
The story ends with sound advice: Strategic sourcing alone can deliver substantial cost savings, often resulting in significant improvements to financial performance. It has been used as, and continues to be, a popular cost reduction tool. But without the supporting organization, processes and technology, skills, and performance measures in place, those benefits will never reach their full potential, impeding companies over the long-run from optimizing their cost efficiencies and profitability.
Entry Filed under: General, Supply Management Best Practices, Technology
April 18th, 2007
Michael Lamoureux
Best-of-Breed is good, often very good, but does have its disadvantages if you carry it to the extreme. Depending on your needs, an end-to-end e-Sourcing Suite with competitive functionality, particularly if its on-demand, from one provider might be significantly more advantageous to you than a best-of-breed spend analysis tool from vendor A, e-RFx and e-Auction tool from vendor B, decision optimization tool from vendor C, and contract management tool from vendor D. And the reasons for this go well beyond the initial cost savings of not having to develop and integrate custom integration solutions between four different vendor applications in addition to their integration with your back-end ERP and accounting systems or the efficiency gains from not having to load up four different applications to review the history of an event.
The real benefits become clear when you start implementing Next Generation sourcing strategies. In particular, end-to-end platforms present significant advantages to those organizations that are adopting center-led procurement organizations, taking advantage of guided sourcing, focusing on the transaction, adhering to the mantra of Do Less, Not More, and implementing hybrid sourcing strategies.
In center led procurement, a procurement center of excellence (COE) focuses on corporate supply chain strategies and strategic commodities, best practices, and knowledge sharing while leaving individual buys and tactical execution to the individual business units. Furthermore, in a center-of-excellence, a sourcing professional is responsible for education and training, benchmarking, and best practices. It should be clear that it is much easier to benchmark a process that can be completed on one platform vs. one that can be completed on many, tailor a best practice implementation to a single platform, and train and support users on one platform.
With guided sourcing, the sourcing professional uses the best tools that technology has to offer, deep analytics and optimization, and dashboards and monitors her sourcing projects through a centralized dashboard that provides a deep command-and-control view into the most critical supply performance information. Generally speaking, most dashboards plug into a specific solution and the only way you’re going to get a dashboard with this capability that can cut across multiple solutions from multiple vendors is to undertake a long, costly, custom development project - which will have to be maintained and updated any time any single vendor updates their offering. Thus, the best guided sourcing has to offer is not only easier, but sometimes only possible, in an end-to-end suite from a single vendor.
An organization with a transactional focus likes to follow the transaction from beginning to end, review the transaction when it is complete, and know, at any given time, where it is. With a slew of tools, it is sometimes difficult to know the status of any given transaction without checking all of the tools. With an end-to-end suite, it’s often just a matter of checking the dashboard.
In order to Do Less, Not More, you have to do as little as possible, as efficiently as possible, and get the maximum results possible. This is obviously simpler in one platform, which can automate as much of the process as possible.
In hybrid sourcing, an organization is blending sourcing technologies with third-party supply market and sourcing intelligence and making use of third party business process outsource solutions for parts of their supply and spend management function, when appropriate. A single platform makes a single integration point and, more importantly, if the platform is on-demand both the internal team and outsourcing service provider can share the same platform, giving the organization 100% visibility into all of its sourcing, and not just the sourcing it chooses to do in house.
Of course, this all hinges on the end-to-end platform being competitive with other offerings. Although it is true that not a single component has to be as good as the best of breed alternatives, each component has to at least meet the majority of the organization’s needs. Exceptions should be rare, and not the norm.
Entry Filed under: General, Supply Management Best Practices, Technology, e-Sourcing Marketplace
April 17th, 2007
David Bush - Iasta
Line 56 is offline? I looked into this long running media web site that has traditionally provided extensive coverage of the procurement practices/technology space this morning in order to reference a blog I was writing. Much to my surprise, the site is empty with nothing on it except links to the virtually worthless Knowledgestorm portal. Call me a web purist, but I think it is unacceptable to just shut down to tinker with your web site, especially when your only product is the information on said web site.
What is going on here? Why is there not a development server that is being used while the upgrades or redesign is happening? I move very quickly through my emails but this web problem has jogged my memory that I recently received notification that the Line 56 newsletter was being discontinued (or did I imagine this?). I also now remember trying to read a past article on SaaS which gave me a nice Page Not Found error. If these factors are all happening, I think this spells big trouble for a media source in procurement that has been around since the “C1 is the next Microsoft” days.
Personally, I think the end has already happened and all that is left is the soft landing known as unplugging the web server. Or, I have had my head in the clouds and everyone already knows this. Either way, the blogs keep chugging along filling the voids that are left or were never filled to begin with.
Entry Filed under: Analysts/Research, General
April 16th, 2007
David Bush - Iasta
The recent issue of Business Finance has a great article on the importance of dashboards to the CFO and how you Disregard Dashboards at Your Peril. It states that The emergence of digital dashboards offers a new platform and opportunity for CFOs to redefine their value proposition for the enterprise and that the notion that CFOs can be champions for business performance — not just financial performance — is an important one.
The article states that CFOs need to take a leadership role in energetically developing and deploying dashboards enterprise-wide. Not only does decoupling and divorcing “financial management” from “business performance management” invariably lead to higher costs and lower efficiency for both, but dashboards represent a great way for CFO’s to get a grip on the company’s financials and help their organizations effectively manage cashflow.
For example, executives can be given an appropriately configured dashboard view into current sourcing projects with proposed payments and into current receivables and invoice due dates. In the latter case, this not only allows the CFO to ensure that all invoices are paid on time, and penalty-free, but to decide if payment should be made early to take advantage of appropriate discounts. In the former case, the CFO can make sure the procurement organization is using standard terms, or, if an exception is being made, that there is a financial benefit before the contract is signed.
As the article says, CFOs can be organizationally subordinate to this challenge, or they can drive it. Savvy CFOs who grasp that they must be business leaders more than financial overseers will treat these technologies as a transformational gift and help procurement select the right tools with the right dashboards that meets not only the requirements of procurement, but of finance and the organization as a whole as well.
And, if the prediction that the dashboard dynamic may well prove more important to business futures than the installation of ERP systems as business and financial platforms holds, the CFO really should be taking a leading role (and, when the CPO asks for such a system, play a part in the selection).
Entry Filed under: Functionality, General, Technology
April 13th, 2007
David Bush - Iasta
7. What about language issues? Americans generally only speak English.
For India, suppliers tend to have good written English skills. Spoken English can be difficult because of different accents and because of poor telecom connections. A US buyer unfamiliar with speaking with people from India will need perhaps 5 or 10 hours of experience speaking on the phone with people in India before finding it easy to communicate by phone.
For China, suppliers tend to have working written English skills. Email serves as a good medium for communication. Phone discussions are more difficult – Chinese suppliers may have poor English skills, and cultural issues may preclude a meaningful conversation (e.g. a Chinese supplier may say “yes” to mean “I hear you” rather than to mean “I agree”).
8. Are there common “red flags” we should know about before selecting a LCCS supplier?
A big one is if the supplier has a lack of experience providing material to the West.
9. When a company works with a 3rd party vendor to help identify, qualify and select a LCCS supplier, what range of deliverables should they expect?
The depth of service varies depending on the needs of the buyer. A buyer new to LCCS sourcing may want the 3rd party vendor to handle.
a) Getting information on suppliers through Requests for Information
b) Eliciting quotes
c) Conducting preliminary site visits
d) Hosting US buyers to visit finalist suppliers
e) Helping conduct final negotiations
f) Helping with design
g) Conducting first part approval
h) Conducting production run quality audits
i) Arranging transportation to the US
j) Arranging customs clearance
k) Arranging transportation from Port or Entry in the US to buyer site
10.What happens if something goes wrong? Can a 3rd party vendor help?
The 3rd party vendor can definitely help, especially if the buyer is new to LCCS sourcing. The 3rd party vendor can work with the supplier or the shipper to resolve production and delivery issues.
11. Are their commodities that should rarely be sourced via a LCCS supplier?
Commodities that are less frequently sourced are those that are expensive to ship because they cube out quickly or because they are very fragile, those that have short lead times, and those that are low volume and require frequent design modifications.
Thanks for your thoughts, Carl!
Entry Filed under: General, Global Supply Issues/Risk, Interviews, Suppliers
April 12th, 2007
David Bush - Iasta
Today, we welcome Carl Greppin from Transpac Access. We took some time to ask Carl questions about Low Cost Country Sourcing to get details on some of the finer points of this process. Part II of this interview will be up tomorrow. There are widely varying opinions about LCCS and best practices, we welcome any additional comments on this topic.
1. There is still lots of buzz about low-cost country sourcing (LCCS).
• What should a company do to help decide whether to pursue LCCS strategies?
A company should thoroughly review everything it buys and determine which materials are best suited for LCCS.
Criteria include:
a) Savings - potential savings that could be attained
b) Experience – the experience that the LCC supply base has with providing similar materials to the West
c) Implementability – how easy it would be for the buyer to move materials to a new supply base
•Is it right for all companies?
Not necessarily. Some materials and services are better suited than others for LCCS. For some companies, such as those that provide services such as temporary labor in the United States, LCCS may not be a viable option.
2. Is LCCS only about using suppliers from other countries?
No - LCCS can also involve helping a company’s domestic suppliers use LCCS for their supply base.
3. I hear one needs to conduct in-depth due diligence on new LCCS suppliers. What does that entail?
Due diligence entails getting thorough information from suppliers on items such as English speaking and writing skills, experience with providing materials to the West, equipment, capacity utilization, other customers. Due diligence also entails conducting site visits to ensure provided information is correct, to inspect production and quality systems, and to determine if there is a workable chemistry between the buyers and the supplier.
4. What additional costs do I need to consider when determining whether to pursue a LCCS strategy?
There are a number of additional costs to consider. International transportation costs can be large, depending on the type of material being imported. Inventory carrying costs can be a factor since the buyer’s Inventory Days will become higher. There will be customs and brokerage costs. And there will be additional administrative costs, especially in the first year, as the buyer spends effort to learn how to operate with LCCS suppliers.
5. What are the “hot” low-cost regions now?
Right now, the “hot” low-cost regions are China for manufactured materials and India for services.
6. Are some regions easier to work with than others?
Chinese suppliers tend to be responsive and reliable. Chinese suppliers are also becoming adept at dealing with buyers from the States, so this is currently a region that is fairly easy to work with.
Entry Filed under: General, Global Supply Issues/Risk, Interviews, Suppliers
April 11th, 2007
David Bush - Iasta
Last month, Purchasing Magazine ran a story named Avoid a mess, clean your data which focused on understanding and managing your expectations when launching a spend visibility application. This is a very helpful article for any organization that has designs on moving into this type of technology. The benefits of spend analysis are wide and virtually guaranteed; however, it is a totally different paradigm than eSourcing. Where sourcing is more of a turn-key application, which can be enabled by the vendor within hours and have the company creating projects within days, spend analysis is a completely different animal. Says Ken Hartman of Boston Scientific:
“”The main issue that we’re seeing that I think companies will face is what the industry calls ETL: extract, transform and load,” he says. “The vendors want to show you the analytics and the dashboarding and all that stuff because everybody really likes shiny things, and that’s what they are. What they don’t show you is the greasy stuff that makes the shiny stuff work, and that’s the ETL.”
Ken is a very smart, good guy and straight shooter who I have always enjoyed speaking to. I particularly like his comment because it gives a real testimonial of the heavy lifting that comes with deployment of most spend analysis tools. There is no getting around the fact that the data must be normalized, loaded, cleansed and then cubed. You get the benefits — AFTER all of this is accomplished.
You separate the men from the boys once you have the data. At this point is when your software can parse data on the fly, create new dimensions for viewing, ease the pain for refreshing and merging, and create suppliers links to find the true total spend per item, group or vendor. Most spend applications have advanced to a point that many of the front-end problems are greatly reduced these days and especially SmartAnalytics which streamlines many aspects of the initial process such as translation, loading and chopping of data sources. This drastically reduces the pain of data manipulation.
Entry Filed under: General, Spend Analysis, Supply Management Best Practices, Technology, e-Sourcing Marketplace
April 10th, 2007
David Bush - Iasta
Yesterday, I posted on Supplier Performance best practices. Today, I wanted to establish a list of things that suppliers should be providing, in some combination, to increase the value of their relationships with the buying organization. These items should be addressed in eRFx stage to determine the value add that each supplier brings to the relationship. This list is general and not necessarily comprehensive, but gives good insight into factors that should be considered and discussed with each valued supplier.
- quality reputation
- partnership differentiation capabilities
- established contacts and cross-company knowledge
- competitiveness
- proven business development support, e.g. promotions
- product design creation and development capabilities
- collaborative product design
- product selection/variety
- consumer support/service
- category management services
- supplier conversion support
- supply chain management
- inventory balancing
- order fulfillment rates
- order-to-shipment lead times
- returns management/defect support
- delivery terms
- payment terms
Many of these I found in a very old document that was meant for consulting suppliers on reverse auction strategy (which I cannot find now and was not developed by us). Some may be industry specific but give very good placeholders for the things that both the buyer and supplier should be considering to make a lasting, mutually beneficial partnership.
Entry Filed under: General, Supplier Performance, Supply Management Best Practices, Technology, e-RFx
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