Archive for July, 2007
July 31st, 2007
David Bush - Iasta
As a follow up to my recent post on Good People First, Good Systems Second, I’m going to highlight a recent article in Supply and Demand Chain Executive: e-Sourcing Tools - Means to an End. This article points out that in addition to good people, you also need effective process definitions and process integration in order to realize the full value provided by an e-Sourcing Tool.
The article points out that one of the primary benefits of an e-sourcing tool is that it allows staff to enter information in an autonomous, distributed manner while also allowing management access to reports that consolidate and aggregate the information into a comprehensive picture of department-wide activity but that if the staff responsible for providing the information are not aligned and using the same data definitions and usage guidelines, then the reports generated will have little or no value.
Therefore it is important that you establish uniform data definitions and provide training, build data collection requirements with the end result in mind, and capture the right data.
The article also lists ten crucial data elements that need to be captured:
- Project Type
- Project Status
- (Over-arching) Program
- Savings
- Vendor Diversity Opportunity
- Project Description
- Project Status Update
- Risk Indicator
- Issue List
- Priority
As well as giving a number of tips for online eRFX and Reverse Auctions, including:
- Auto-scoring capabilities can be better leveraged by structuring as many requirements as possible as binary yes/no or numeric value answers.
- Vendor training saves time and effort.
In conclusion, process integration considerations for a successful e-sourcing tool rollout may seem like a substantial amount of work (and it is), but in reality it is a small investment relative to the payoff received in the form of enhanced efficiency and effectiveness from the sourcing process. With significant dollars and time on the line, it is vital that the enterprise plans ahead and allocates sufficient priority and resources to process integration when making a decision to implement an e-sourcing tool.
Entry Filed under: Functionality, General, Reverse Auctions, Supply Management Best Practices, Technology, e-RFx, e-Sourcing Marketplace
July 30th, 2007
David Bush - Iasta
My friend, Tim Minahan (yes, he’s my friend even though he has made some poor career choices), found a concerning study - which he pointed me too last week. His discussion on topic is very insightful and includes comments from Tim Cummings of IACCM, which offer an insightful, yet, contrarian viewpoint.
Other bloggers quickly jumped the topic, as well. Each have their own takes on the subject, which makes this a very interesting topic. I suppose, you should ask yourself a simple question: Can you perform your job remotely and do you provide more benefit to your company than you are paid? If not, your job will someday exist in a 12 hour time difference. Charles Dominick, of Next Level Purchasing, also chimed in with thoughtful comments. I also agree with many of his comments. (This isnt a convuloted and complex topic, at all).
I do side with Tim and many of his points, and can say definitely, that almost every company we work with and talk to, has a serious shortage of available talent. Basic Econ points to higher wages for people that can perform and deliver value. After all, technology for sourcing was not created because everyone was sitting around playing Euchre, since all the products had been perfectly negotiated and contracted.
Entry Filed under: General, Global Supply Issues/Risk
July 27th, 2007
David Bush - Iasta
To follow from yesterdays post, there is this article from Supply Management in the UK. Although not nearly as comprehensive about the subject, it does have a few interesting tidbits.
“The predominant source is our own knowledge and that of our colleagues,” said Shaun Evans, supplier relationship manager at Britannia building society.
References were also said to be faster and more reliable than internet claims. “Googling a selection on the internet may need lots of additional time to make supplier evaluations,” said Ada Jiang, a buyer at sportswear manufacturer TS Group in Hong Kong. “To shorten the time from sourcing to production, we turn to customers or friendly purchasers for supplier recommendations.”
However, many buyers say they carry out initial research online, citing ease of use, flexibility and speed as the benefits.
Spend Matters also had some detail on this subject which actually stated that web searching was passing word of mouth as a primary method of supplier research and discovery - directly contradicting the SM quote.
Entry Filed under: General, Suppliers, Technology
July 26th, 2007
David Bush - Iasta
Recently, Purchasing Magazine has been running a series on how procurement departments at a variety of companies organize their strategic-sourcing activities. Fellow blogger Michael Lamoureux, one of our semi-regular contributors, picked up on the second installment on Sourcing Strategy Selection over on the Sourcing Innovation blog.
Even though I find that some Purchasing articles can often be hit or miss on the strategy side, I think this installment on How to Identify Available Suppliers, which focussed more on the tactical, offered some great advice on supplier identification. In summary, the article recommended that you:
- Talk with other buyers
- Check the clock
- Ask fellow employees
- Never stop looking
- Collaborate with contacts
Talk with other buyers.
Talk to your colleagues within your industry at every chance you get - at networking events, conferences, and informal get-togethers. Also include market researchers who specialize in benchmarking - they’ll help you identify the up-and-coming suppliers.
Check the clock.
Figure out how much time you have to evaluate and identify a new supplier before you start and follow a pre-set process. This will insure that you use your time productively and take advantage of quick-hit opportunities when they exist. The article includes the process used by Karen Chinich at Sandvik Inc, which is summarized as:
- Start with the approved supplier lists used by other divisions or sister companies.
- Ask internal staff, including product managers, engineers, and sales staff for recommendations.
- Move on to external purchasing professionals.
- Check out a potential supplier’s website.
- Use procurement sites.
- Reference relevant publications.
- Use the databanks for current available U.S. supplier data.
- Take advantage of internet indexes and search engines.
- When all else fails, send out an internal e-mail to all stakeholders for suggestions.
Ask fellow employees.
Sometimes your own resources, especially those in product development and management, might have the perfect candidate.
Never stop looking.
Just because you can’t find the perfect supplier today does not mean that the perfect supplier might not come along tomorrow.
Collaborate with contacts.
Collaboration almost always pays off. Even if the collaboration does not result in a new supplier, just working together will result in a relationship that can be leveraged in the future.
Entry Filed under: General, Suppliers, Supply Management Best Practices, Technology
July 25th, 2007
Sean Delaney - Iasta UK
This article in supply management is a classic misconception that just by adding together more of the same does not always equal lower unit costs. As highlighted by Michael Lamoureux there are a number of issues that inhibit collaboration like culture, time and timing.
I think the SM article gives us a great opportunity to dissect a particular collaboration project and measure it against the inhibitors outlined by Michael and Tim Cummins
1. The process of collaboration is difficult enough with 2 parties. Each party has different objectives and consequently different contractual requirements. Honda has been used as an example of how collaboration can work successfully however each project tends to imply that only 2 parties were involved. The project being announced by SM has 10 parties!
2. Collecting together requirements often adds delays to projects. Any benefits gained can often be lost in the process, only leading to frustrations of those involved. This directly relates to the time issue however there comes a point were time invested out weighs the benefits.
3. Benefits can be eroded when the contract is finally awarded it may no longer suit all parties. In order to meet their requirements stakeholders are required to buy off line from the contract. This further erodes the integrity of the awarded contract. Future collaboration projects have less importance as they only act as a loose frame work agreement thus further undermining the integrity of the process.
In my opinion not only does culture, time and timing prohibit collaboration but also the IT infrastructure and more specifically the category chosen to collaborate with.
In this particular case it is unclear what IT infrastructure is in place. However without it collating the requirements of each member will be a logistical nightmare and will result in high % of non compliance post award.
For me though the real crux of this project is the category that has been chosen to collaborate with. Claiming a potential 10% saving by simply adding together the road surfacing requirements for 10 authorities is a little ambitious especially when you consider the following.
Let me highlight some of the supplier cost drivers:
• The cost of Asphalt is fixed by the crude oil prices and therefore is index linked. Since Oil is in the process of reaching an all time high it is unlikely that savings would be achieved in this portion of the overall cost.
• The Cost of plant and Machinery is fixed by the cost of money i.e interest rates. If suppliers have bought/leased machinery the costs are fixed and standard returns must be achieved.
• The Cost of labour is subject to minimum wages and experience. Since there is a limited supply of labour, underpinned by a minimum wage there is likely to be little room from negotiating here too.
When suppliers are constrained by such cost drivers coupled together with a more bureaucratic process of winning business you start to get a sense 10% might be a little…err pie in the sky?
Furthermore with so many vested interests the requirements are likely to be watered down to such an extent that the service levels become too vague. Measuring any benefit is going to be impossible.
I am not adverse to collaboration but I think small steps should be taken at first to establish procedures, measure benefits and compliance. After all that’s how Honda started!
Entry Filed under: General, Project Management, Supply Management Best Practices
July 24th, 2007
Michael Lamoureux
CRMBuyer recently ran an article entitled Where Should Your E-Commerce Platform Reside which highlighted the success that many small and medium sized retailers have enjoyed with their adoption of hosted Software-as-a-Service offerings. Although this result should not be surprising, considering the rampant success of SalesForce.com and its smaller competitor, SalesBoom.com, it’s nice to see the media recognizing that the model works.
It’s no secret that I’m a big fan of on-demand, as should be obvious from last summer’s weekend series The Good, The Not-So-Bad, And the Coming Pretty … and the follow-up wiki On-Demand / SaaS Application Platforms, but articles like these serve to demonstrate that it is not a fervently held irrational belief.
The article points out that SaaS is another step beyond subscription and that not only does the software innovation flow continuously from the vendor to the buyer, and not only does the buyer pay evenly throughout the life of the relationship, but the software “lives” at the vendor location which is a small difference with big implications. Furthermore, since SaaS is designed to radically minimize the kind of customization that becomes a boat anchor with traditional build or buy mentality, it ends up addressing two of the biggest problem retailers often have with software - the cost conundrum and the innovation gap.
In the cost conundrum, large retailers that have legacy systems in place are continually grappling with the “pay me now or pay me later” problem where they either have to pay considerable incremental costs to maintain a legacy product that is almost crippling them in its inadequacy or pay a very large amount to update the system to the new version.
The innovation gap refers to the fact that the average large retailer has only made two to three investments over the past ten years to try and keep its direct and e-commerce businesses near the innovation curve while Web 2.0 technologies are innovating on what seems to be a daily basis. This has resulted in a technology gap that often can’t be bridged even with a spend of US $20M or more
SaaS overcomes both of these because you pay a manageable fee on a monthly basis and your software is updated regularly and automatically as part of your subscription. As the article says, it all comes down to what kind of business you’re in. If you’re not in software, then you really shouldn’t be trying to maintain a full IT department - you’ll never be able to match the staffs and expertise of the large providers, and considering that doing so provides no value add to your business offering, you should not even be trying.
Furthermore, as the article points out SaaS can provide a clean, contemporary starting point for a cross-channel strategy that front-ends the warehouse, inventory and logistics facilities with the newest technology, designed to evolve with full backward compatibility, instead of forced upgrades and installations.
The article concludes with seven key characteristics that you should use in assessing SaaS offerings in the marketplace that are not a bad start:
- Solution Strategy
How does the vendor bridge the almost inevitable gap between the “out of the box” software and what (you think) you need?
- Integration Strategy
How does the vendor’s solution integrate into your back-end systems?
- End-User Empowerment
Make sure the system is intuitive and usable by all affected parties.
- Cross-Channel Strategy
Evaluate how cross-channel features are implemented.
- Cost-Reduction Strategy
Make sure that the SaaS solution allows you to unplug the costly systems that you are currently running.
- Retailer Differentiation Strategy
Make sure the solution gives you the tools you need to maintain and extend your differentiation and brand identity.
- Design Strategy
Make sure to choose a SaaS vendor that designed its platform to be scaleable from the outset for the business that you play in.
Entry Filed under: General, Technology, e-Sourcing Marketplace
July 23rd, 2007
David Bush - Iasta
There never seems to be a shortage of new buzz terms, but I found this one interesting since I had previously written about the topic. SCDigest recently had a couple articles on the topic, here and here.
In them was some interesting insight from Merrill Lynch, such as: Agriculture products are notoriously cyclical, with huge amounts of supply often coming in when prices rise to get supply-demand equation back in balance. But as with metals and energy, hugely rising demand from India, China and other fast growth nations, the ethanol factor, and other historical anomalies may mean Agflation will plague buyers and consumers for awhile this time.
This was countered a couple weeks later with this: But as typically happens in agriculture, the good times for farmers may lead to over planting, which will increase supply and ultimately reduce prices again. Last week, the US Agriculture Department issued a report estimating the amount of corn planted this year will grow even more than expected. It said farmers will sow almost 93 million acres of corn in 2007 – an increase of 3% over the estimate for the year made in the first quarter, and up almost 19% over 2006 planting levels.
I tend to think the Agflation will continue with strength until the next planting season but then level and ultimately (and quickly) retract. Maybe not to previous conditions, but closer to more acceptable levels. The impact has been felt within many of our food processing/manufacturing clients and the trickle down effect ripples across virtually every industry.
Entry Filed under: General, Global Supply Issues/Risk
July 20th, 2007
David Bush - Iasta
The procurement organization used to be a back-office function, considered of little strategic value to the company. But with the Chief Procurement Officer now taking a seat at a company’s helm and supply management increasingly becoming a bottom line issue, it’s finally getting the respect it deserves.
Technology: The procurement and logistics team at Alltel Wireless, a $7.9B telecommunications company, designed a workflow management tool without the assistance of IT. The tool provides visibility from budgets to sourcing to forecasting. It tracks projects, savings, and has run more than 490 sourcing events.
People: British Petroleum (BP), the $245B energy giant, established the “Rapid Sourcing Team” as part of its efforts to not only find and recruit new people, but also give them skills that greatly enhance BP’s efforts while cultivating a new generation of valued employees.
Process: Johnson and Johnson, the $5.3B consumer products company, concentrated on lean sourcing initiatives. The company rallied 30 leaders from across its organization, representing all the operating companies of J&J in North America, to help focus spending management and create a sourcing process. The result was a “standardized process to understand the spending, a process to source consulting, and the basics for supplier relationship management. J&J created a competitive advantage by improving the sourcing and commercial competence of procurement, and procedures to make and manage business commitments.”
Sorry, its a Friday post and I have been traveling all week. At this point I just dont have the energy to put much more into this. Plus, I wasted over 2 hours of prime blogging time reading about the worst guy in the world, Ron Mexico…errr, Mike Vick.
Entry Filed under: Analysts/Research, General, Supply Management Best Practices, Technology
July 19th, 2007
David Bush - Iasta
Indiana’s own, Kimball International, was recently highlighted in a Purchasing article to “overhaul processes to emphasize ‘creative cost savings’ ideas.”
This is a textbook replication of all the principles that would make Smock and Co. proud enough to write a book. Wait a minute, they did write a book, Straight to the Bottom Line, which is an playbook for best practices in supply management and an excellent breakdown of all the important issues companies should identify and address within procurement best practices.
Of interest were a few resulting outcomes:
- Kimball saved $1.2 million in one day but getting suppliers from their supply chain in the same place to discuss synergies.
- they reduced their overall number of suppliers from 2,000 to about 850 by “value mapping” the suppliers into categories.
- they made the majority of changes without an increase to budget or headcount—which made it much easier for senior leadership to support the ideas
Personally, I am glad to see this transformation be successfully executed and it was much needed. We worked with Kimball many years ago and it was downright painful because the company simply was not ready to do anything in eSourcing. The proper fundamentals and foundations did not exist in a fractured business unit silo system. It sounds to me like Bob Price is a raising star in procurement and made tremendous strides in transforming Kimball into a world class sourcing organization.
Entry Filed under: General, Supply Management Best Practices
July 18th, 2007
David Bush - Iasta
Recently, in their Spring 2007 issue, CPO Agenda ran an executive debate in London with the goal of answering the question What does World-Class Procurement Look Like?. The debate included Andrew Boyd of Britvic, John Collington of the Home Office, Andy Collopy at BP, Philippe Corregelongue of EMEA/Emptoris, David Gilmour at Pilkington, Ben Jackson at Network Rail, John Kirby at Barclays, Heather Rodgers at Centrica, John Taylor at AstraZeneca, Beverly Tew at the BBC, Michael Walsh at Home Retail Group, Ian Wilmot at Lloyds TSB, Rob Woodstock at Accenture, and Geraint John of CPO Agenda and offered some interesting insights from the other end of the pond into what qualifies as World-Class Procurement. I’ll summarize some of the key points from each contributor.
Andrew Boyd
It’s the effectiveness of the teams that work with the business to drive value that matters.
John Collington
To be seen as world class we have to take into consideration views from four constituent parties. The board level, the people within procurement, the customers within the organization, and the suppliers that deliver the goods and services. Also, JC Suggests that it’s the people within the function who sometimes are, and can become, world-class performers.
Andy Collopy
We have people who are technically proficient at what they do, whether they are good negotiators or they understand contracts, but that’s not enough anymore. Some of the softer skills are becoming much more important. Also, it’s about competitive advantage.
Philippe Courregelongue
Both the investment in enabling technology and the upskilling of procurement staff are key characteristics of organisations striving to achieve and maintain world-class performance.
David Gilmour
Learn a lot from your suppliers, depend on them to get it right, to keep the supply chain as short as possible, so that your customers get the product when they need it.
Ben Jackson
A substantial impact on business performance.
John Kirby
Driving change through the supply chain is a business process, it’s not a sourcing process or a procurement process, so it’s absolutely imperative that you have both the suppliers and your internal customers engaged.
Heather Rodgers
One of the biggest challenges is looking after the end-to-end relationship.
John Taylor
World-class procurement is about making a significant and valued and measurable contribution towards your organisation’s performance.
Beverly Tew
The key word for me is simplicity. The process should be so simple that people don’t mind going through it.
Michael Walsh
Our goal as custodian of the supply base is to make sure it delivers advantage to the business, relative to the best competitors we have.
Ian Wilmot
We need a business to be world class in how it procures from beginning to end. Procurement functions are potentially the ambassadors of change management to make that happen. It’s the way that process is executed by people that matters.
Rob Woodstock
Listening to suppliers always provides insights and new ways of doing things. Quite often the suppliers have got more to offer than procurement is taking advantage of.
In summary, world class procurement is supported by management, staff, customers, and suppliers. It’s driven by people who use best-in-class processes that are enabled by technology. It manages change internally and throughout the end-to-end relationship of the supply base and thrives on simplicity. And it’s true on this side of the pond as well.
According to the article, this was the first of multiple debates scheduled to take place this year. As more hit the wire, I’ll do my best to keep up.
Entry Filed under: General, Interviews, Supply Management Best Practices
July 17th, 2007
Sean Delaney - Iasta UK
Whilst it may have come as no surprise Vietnam has emerged as the new LCCS for manufacturing over China. United Arab Emirates is the new location for the service sector over India.
A new emerging-market index launched by PWC last week looks at “reward” factors with LCCS decisions including factors like production costs, size of market, taxes, transport costs and tariffs. In addition the index looks at risk premiums too.
According to the Index BRIC countries are no longer top locations for outsourcing your manufacturing or services. If you start to consider that 50% of manufactured goods could be sold locally and the rest exported, China comes second to Vietnam. What is more interesting for Europe is that Poland is third choice just behind China.
For services the index assumed that 10% of the output is exported in which case it would suggest that there is a heavy bias towards financial services rather than the out-sourced back office functions and call centres we have today. In such circumstances UAE came top with India in 18th place.
I think the important point here is that although outsourcing can deliver cost saving benefits we must always remember there is a potential market locally too. When this is factored into the sourcing decision our long term decisions may differ greatly that our original expected outcome.
Entry Filed under: Analysts/Research, General, Global Supply Issues/Risk
July 16th, 2007
Michael Lamoureux
It should be simple, but yet, according to different sources, including The Road To Collaborative Negotiation by Tim Cummins, collaboration or “win-win” is still not very widespread. The question is, considering the benefits that result when you Collaborate, Collaborate, Collaborate, Collaborate, what are the inhibitors?
According to the article, the issues are often culture, time, timing, and power. Whereas Japanese approaches to business are generally patient and trusting, US approaches tend to be impatient and focused on “fidelity”. Add in the desire for solid frameworks and rules and this results in lengthy contracts covering not only all eventualities but all possibilities which only results in a greater inclination to trust the other side and an assumption of “infidelity”.
In addition, too many negotiations are undertaken under (unreasonably) tight time pressures, which is problematic since US businesses almost always believe that collaboration takes more time than they have. Furthermore, negotiators are usually “involved too late” and the more powerful party often takes the heavy handed approach of “Here are my terms. Trust me, we will collaborate later.”
This is problematic since, as the author points out, collaborative negotiations often take less time than confrontation if you can just get past the all-too-common viewpoint that it is a high-risk approach, simply because it is unfamiliar and might take more time than the traditional heavy-handed sales approach. However, the author is right in that the only way it is going to take hold is that if the more powerful organizations, like the Hondas of the world adopt it as an organizational strategy and methodology, allowing the weaker organizations to step up to the plate. Thus, the time to adopt a more collaborative approach in your strategic sourcing initiatives is now.
Entry Filed under: General, Supply Management Best Practices
July 13th, 2007
David Bush - Iasta
There was an interesting article last month in SDCExec regarding the profile of your Average Joe CPO. This was a study that CAPS developed and had some interesting facts within.
According to the study, the CPO community is predominately male (87 percent) and the average age is 49 years old. Total annual compensation is $366,000 ($418,000 if female), and the CPO has a staff of 247 associates. The average CPO has been in his or her current position for two or more years and reports to one level below the CEO.
Typical CPOs are responsible for an annual spend of $3.5 billion and have 19 years of purchasing experience. They have been with their current firms for less than six years, are the top purchasing executive for the entire firm and have a B.S. in business and an MBA.
I also found it interesting that most respondents indicated they were the first to be appointed to that position. Very encouraging news for the growth of the profession and the corporate acknowledgement of its importance.
Entry Filed under: Analysts/Research, General
July 12th, 2007
Agatha Degasperi - Iasta Europe
Time and time again I hear people say that you can only really auction a commodity; something that is standard, simple – like a widget that doesn’t have too many service components. Well, if that’s the case then what have we been doing the past 10 years??
The European Leaders in Procurement magazine (Spring 2007 issue) had an article written by Bill Simpson (director of financial services managed accounts – Fujitsu Services) in which he addresses the topic of auctioning services (only from a sales perspective). This inspired me to help get the story straight. Can services be e-sourced?
Absolutely! As with any commodity the key considerations for deciding whether or not to auction a service are:
- Is the spend interesting enough to attract vendors?
- Can you define your requirements?
- Is there sufficient competition in this market? We would be looking at a minimum of 3 here…
If you can say yes to these 3 questions, chances are very good that you can run a successful event. Where customers often run into trouble is with question 2 as they can’t really clearly define what their requirements are. When this happens, then naturally you run the risk of having quotes that are not comparable due to the discrepancy between the services that were actually quoted for. Needless to say, this will not make a successful auction.
Returning to Mr. Simpson’s article for just a moment, he makes a point about having the buying organization be upfront about their goals when auctioning a service. Is it going to be a partnership scenario where you expect innovation & continuous improvement plans, or is it going to be similar to what he calls a “commoditized service” where you will tell the vendor how the service is to be delivered? He argues that customers are losing out by trying to commoditize services (thereby making price the only important metric) by not letting suppliers define what would be the best value proposition for their organization. While I agree with his point, I would also add that this is not the case for all services. I think it’s critical for the buying organization to take control of their expenses by clearly defining what is needed, what is “nice to have” and what is a luxury. On the other hand, if you are unclear about the direction you are heading, you need input from potential suppliers, then consider different negotiation routes (RFP, Sealed Bids, etc…). On a final point, it is not just because you run an auction that suddenly the only metric is price. You can define that upfront by attributing the criteria for awarding business and defining which percentage will be based on price, which on the services proposal and consider adding live presentations as well. All of this can then be factored into a total cost assessment per vendor helping you determine who the best supplier is. Always think about what the impact will be to the organization and where the supplier can really add value.
Entry Filed under: General, Reverse Auctions, Supply Management Best Practices, Technology
July 11th, 2007
David Bush - Iasta
Throughout these kinds of sourcing events, sourcing department people can be a big help to Legal by running interference with the service providers. Once Legal has identified the sourcing need and determined what service provider’s should be invited to participate in the event, the speed and efficiency of the sourcing event is a direct result of how disciplined an environment you create for the service providers to compete in.
What does this mean? It means the Legal has a whole slew of other problems to deal with and you can be a big help by running a tight ship on the sourcing side. Legal needs the due diligence done and delivered to them in a way that is meaningful, actionable, and on time.
In our case study, the team collaborated with Legal and IT to evaluate the RFI responses which were submitted. Workplace disruption was eliminated by the evaluators all working remotely via their browsers.
When all the scores were tallied, the final RFI scores ranged from 84 to 94 across all 10 service providers
Just as the evaluations were finishing up, the bidding deadline for the service providers arrived. The bids submitted by these same 10 service providers ranged from a little over $148,000 to just under $1.6 Million.
Now, if you remember back to the beginning of this multi day post – Legal has a completely different way of looking at the world and they must consider various risks and threats which you are not privy to, nor are you paid to worry about.
Legal is not going to look at the bids and just pick the lowest bidder (nor should they). There is way too much at stake to be that flippant. What Legal needs from sourcing here is a sound (and understandable) benchmark for them to base an important business and risk management decision on.
In our case study, the team gave Legal exactly that in the form of a Matter Value Index™ which combats Legal’s fundamental tension: keep costs down but don’t cut corners on quality (because nothing is ultimately more expensive when it comes to E-Discovery).
To understand the value differentiators of each service provider, to say that they shook out with scores between 84 and 94 is not as meaningful to Legal as demonstrating how the service providers break out on a percentile basis.
Similarly, when looking at how the bids stack up, saying that the bids ranged from a tick over $148,000 to a tick under $1.6M would probably only serve to further muddy the waters. With bids that disparate Legal looks at that and, as they are paid to do, starts to sweat about all the potential risk jackpots a bad decision could land the client in. They need more clarity.
Like the RFI percentile snapshot, the team moved the bids into an inverted percentile snapshot formula (wherein the lowest bid is the 100th percentile and the highest bid is the 0 percentile):
Once the team created both the RFI and Bid Percentile snapshots, these percentiles are combined to calculate each service provider’s Matter Value Index™ score. (The maximum score is 200 indicating highest RFI score and lowest bid for any particular engagement.)
The Matter Value Index™ synthesized the entire E-Discovery due diligence effort in a way that was clear, meaningful, and actionable – which was precisely what Legal needed.
The success of the engagement team’s effort was inextricably tied to the following four factors:
- Rule # 1 – The team was non-disruptive as possible to Legal’s deliberative process and managed the entire process – from personnel interviews to service provider hand holding - with complete and utter discretion.
- Rule # 2 – The team understood how the multi-billion dollar E-Discovery market works.
- Rule # 3 – The team understood what questions to ask Legal and how to tease out the threat matrix from personnel interviews
- Rule # 4 – The team understood how to communicate with the various principals in Legal in a way that was meaningful to them.
If anyone is wondering, that’s how you build a bridge to Legal.
Entry Filed under: General, Supply Management Best Practices, Technology, e-RFx
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