Archive for November, 2007
November 30th, 2007
David Bush - Iasta
Light fare on a Friday is always good. Last month, I ran across an article on CNN Money titled 10 dumbest job-interview moves. Personally, I’ve seen the odd thing on a resume that is pretty dumb, and heard a thing or two that was not the brightest thing a candidate could have said, but some of these take the cake!
- Telling a prospective employer to hire you because you’re allergic to unemployment.
- Telling a prospective employer to hire you because you’d make a great addition to the software team.
- Telling a prospective employer that you should get the job because you’ve already applied three times and it’s your turn.
- Telling a prospective employer you want the job because it has nice benefits, which is good because you are going to have to take a lot of leave in the coming year.
- Telling a prospective employer you should be hired because you’ve already drafted a press release announcing your hire.
- Telling a prospective employer you have no relevant experience, but your friend does.
- Delivering your entire cover letter in the form of a rap song.
- Telling a prospective employer you want the position because you want to get away from working with people/
- Bringing your mother to the interview and letting her do all the talking.
- Delivering your resume in a ten gallon hat.
In some respects, it would break up the monotony of interviews to run across some of these characters and just see what else happens. However, with the talent shortage in both the US and, especially Europe, I think a good sourcing analyst could show up dressed like Bozo the Clown and at least get a second interview.
Entry Filed under: General
November 28th, 2007
David Bush - Iasta
I am always fascinated by the concept of “green” supply chains. This not only because I was an Environmental Science major in college, but because, it is interesting to read where companies can actually lessen their impact on the environment and reduce their costs with the same strategy. It seems impossible on the surface, but very true.
In fact, I like to show prospective clients how they can use our optimization technology to account for green suppliers in their award allocation while maintaining the lowest cost.
To that end, it was great to see a new blog by Avaro CEO, Tim Albinson, which is dedicated to the subject. I recommend saving 2Sustain to your favorites or blog reader and become exposed to concepts that Tim speaks of. His first post was to define sustainability, which is a good way to start.
Entry Filed under: General, Global Supply Issues/Risk, Green Sourcing
November 27th, 2007
David Bush - Iasta
Just when I thought information and discussion regarding reverse auctions had exited stage right, along comes Infosys with an incredible breakdown of reverse auction best practices. When I initially started reading it, I thought I would find a couple interesting stats about how companies use and benefit from auctions. The article certainly had that component, however, it went into far more detail about how to leverage strategy in the buyers best interest (eg, dramatically reduce supply disruption risk) and what practices typically result in poor results from reverse auctions. I think this is the type of article (in addition to the reverse auction documentation found on esourcingwiki) that every company using eSourcing should print, frame and read once a month.
For instance, the authors highlight principles which recommend a multi-pronged approach to eSourcing which closes the loop by using spend analysis technology to validate preliminary bids.
Some of the common issues that purchasers have are in determining the quantity to be auctioned and in validating the accuracy of the initial price offered in the RFQ by vendors. Since savings depends heavily on the initial bid price and the decrements, more often than not, there is a persisting doubt about whether the auction is starting off at the correct price. If the vendors offer a greatly enhanced price at the RFQ stage only, then the auction is beginning with lost savings. The buyers therefore need a check against this. Spend visibility offers this check. As the buyer examines the historical consumption pattern of the item, the historical purchase price, trends of volume consumption, and price pattern become apparent to the buyer. This knowledge proves invaluable while setting up the auction quantity and deciding on the opening bid of the auction. Spend visibility also acts as an input to the vendor assessment exercise by validating the credibility level of the vendor. If, in the past, a vendor has had persistent problems with product quality or with meeting timelines, then the purchaser will consider this when awarding the final contracts.
These are not simplistic recommendations and really force one to think about how they are executing auctions that may not have long lasting effects.
They also break down the four common reasons for supplier implementation/delivery failure. These are generally described as:
- Price: Initial bid prices are much less than what vendors quote in their RFQs.
- Volume: Auctioned quantity is more than what is required.
- Vendor: Supply is not delivered according to schedule and is deficient in quality.
- Time: Timing and frequency of the auction are suboptimal.
As I mentioned, this is one of the more comprehensive discussions on auction best practices I have seen in awhile. I highly recommend keeping it on file for periodic refresher courses.
Just last week, Infosys gave e-Sourcing Wiki permission to publish this paper in its entirety. It is available in the Supply Articles sections under the title Maximizing Potential Benefits in Reverse Auctions. Thank you to Infosys and Amitava and Hariharan for their contribution!
Entry Filed under: General, Reverse Auctions, Supply Management Best Practices, Technology
November 26th, 2007
Michael Lamoureux
In Part I, David Bush summarized the fifth installment of the CPO Agenda 2007 debate series - What are procurement’s key challenges in the next 10 years? that took place early this summer in Paris and featured a dozen procurement executives from leading companies in the region.
In Part II, after I added what was missing from a minimally complete list, I briefly defined what each of the concepts were and indicated I would tie them together in this post.
First of all, many of the key challenges of tomorrow will be the same challenges faced today. It will still be about knowing where your products are (visibility), risk management to prevent supply disruptions that are becoming all too common, SRM (supplier relationship management) to make sure relationships go smoothly, SPM (supplier performance management) to make sure the course gets corrected quickly if things go wrong, compliance to make sure regulations are adhered to, and the right talent to make it all happen.
And it will still be about having first-rate analytics to know what you’re spending on, and more importantly, where you’re over spending, kick-ass decision optimization to make the best award decisions when faced with multiple cost variables and constraints, applying best practices, accepting corporate social responsibility on the path to sustainability, and embracing outsourcing and group purchasing organizations to help you spend better.
Secondly, it will also be about continuing mastery of the emerging challenges that leading organizations are starting to face. The need to manage collaborative partnerships with strategic suppliers to reduce costs while increasing quality and decreasing turn-around time, the need to incorporate better strategic planning to make sure the procurement function is more closely aligned with the direction of the business and that procurement gets invited to key planning sessions, better change management to deal with the constantly fluctuating nature of business, markets, and consumer demands today, and the introduction of guided sourcing tools to help junior buyers make the right decisions on commonly sourced categories.
It will also be about accepting and mastering on-demand solutions that give you what you need, when you need it; open source principles, practices, and, when appropriate, software to make sure your organization stays current on best practice methodologies; and crowdsourcing to help you take advantage of the new talent pool of independent consultants and semi-retired graybeards that will be constituting a larger and larger part of the available workforce as time progresses.
Thirdly, it will be about embracing some of the radical new philosophies that are starting to enter the mainstream consciousness, but not quite yet a reality at most leading sourcing and procurement organizations. These philosophies include the securitization of capacity and material in advance as well as hedging in emerging energy markets, working with marketing and R&D to help shape demands to levels that lead to optimal profits, using scenario simulation to determine likely demands based upon different price-points and market directions, embracing the concept of the extended enterprise where you understand that your business is but a cog in a larger supply chain clockwork, and replacing your current ERP with a new ERP (SCRP) system built for the distribution supply chain.
Finally, it will be about innovation. It will be about doing things differently tomorrow than you do them today. As time goes on and businesses start to realize its not sales, marketing, and MBAs that ultimately determine their financial success but spend management that insures the business always spends less than the revenues it makes, they will be expecting a transformation of the purchasing function. Instead of the 1950’s paper pushing department that they always thought purchasing was, they will be expecting the 22nd century supply chain design center that spend management needs to become to truly take business to the next level. And even though it will involve everything I’ve discussed in this post and more, it is still anyone’s guess as to what spend management will ultimately be when the company revolves around the supply chain departments, and not the all-talk but no-walk marketing MBA’s that have been running the show for the last twenty years.
Entry Filed under: General, Global Supply Issues/Risk, Supply Management Best Practices, Technology, e-Sourcing Marketplace
November 21st, 2007
David Bush - Iasta
I found an interesting article that discusses how smaller companies thrive in a world dominated by giants. Of course, I found this somewhat intriguing as I was trying to do a little catch up on a transcontinental flight. The WSJ author points out how a relatively small brokerage is successfully fending off massive competition and growing despite pressures from rivals such as Aon, Goldman Sachs and Blackstone. One can see how I found parallels in the story lines.
Two very similar traits between Lockton and Iasta are quoted in the following:
“Mr. Lockton and his three nephews — who are all executives and board members — hold equal stakes in the closely held firm that add up to about 90% ownership, and the entire company is in family hands. Mr. Lockton became CEO when Jack Lockton, his brother, was diagnosed with cancer in 1998. Jack Lockton died in 2004.”
Iasta: 100% employee owned and operated. No outside interests are involved which is why our methodical growth has maintained for 8 years.
“Key to Lockton’s growth, Mr. Lockton says, is the fact that the family is willing to plow money back into the business. The company’s pretax profit margin, he says, is 10%.”
Iasta: The entire company is run organically and profitably, as it has since 2001. If margins exist during any month, it is virtually 100% reinvested.
This article did not have anything to do with supply management on the surface, but it does give great insight into the concept of FUD (fear, uncertainty, doubt) which is liberally strewn throughout the eSourcing marketplace by companies that have no other recourse to explain their value proposition.
I think it would have been fascinating to take a straw poll over the last few years to predict a last man standing survivor game. PurchasePro, Materialnet, C1, FreeMarkets, (Procuri ???), B2e, Perfect (take your pick of which version), SupplierMarket, Verticalnet, Baybuilder, Frictionless…the list goes on and all now in the rear view mirror. Most of them have completely evaporated and others exist in name only or as part of new ownership. Very few lived up to the promises and none outlasted the smaller company. I guess, more resources does not a company make and for that, I am THANKFUL!
Entry Filed under: General, e-Sourcing Marketplace
November 20th, 2007
Michael Lamoureux
In Part I, David Bush summarized the fifth installment of the CPO Agenda 2007 debate series - What are procurement’s key challenges in the next 10 years? that took place early this summer in Paris and featured a dozen procurement executives from leading companies in the region.
As per his summary, the key topics that emerged from the debate were “Best Practices. Compliance. Supplier Relationship Management. Supplier Performance Management. Strategic Planning. Collaborative Partnerships. Outsourcing. Talent. Sustainability. The Centralized Business Function. and Innovation.“. And, collectively, the debaters did a great job of summarizing many of the key challenges for the purchasing function of tomorrow and what purchasing is going to look like in five to ten years.
But they didn’t get everything. At a minimum, the following should also be added to the list: On Demand. Analytics and Optimization. Scenario Simulation. Risk Management. Demand Shaping. Guided Sourcing. Change Mangement. Crowd-Sourced Open Source. Capacity & Material Securitization. Visibility. The New ERP. Sourcing as the foundation of the Extended Enterprise.
However, before I explain what the future is, how each of these concepts tie into it, and where they fit into the overall picture, I’m going to start with a brief definition of what each concept is.
Analytics
Analytics is all about analyzing spend to understand spend patterns and opportunities for spend avoidance and reduction.
Best Practices
Best Practices is all about improving the sourcing function from a process perspective.
Capacity & Material Securitization
As initially described by Jason Busch, this will involve companies purchasing production capacity at manufacturing plants and raw materials in advance of their production to meet future forecasts. Then, if they over-purchased, or under-purchased, they will trade this capacity on an exchange in current market rates. This model could work out very well for all parties as it would ensure much needed cash-flow on a timely basis to manufacturers who would gain increased stability and better financing terms and ultimately be able to lower costs and keep them down in the long term.
Change Management
Change management is a structured approach to change in individuals, teams, organizations and societies that enables the transition from a current state to a desired future state.
Collaborative Partnerships
This is where buyers and suppliers work together to serve customer needs and reduce costs in a positive manner. It’s not where a buyer beats up a supplier when they are unhappy with quality or cost.
Crowd-Sourced
Crowdsourcing is the process of delegating various tasks for which you do not have the manpower or expertise from internal production to external entities or affiliations of networked persons with the expertise, access to, or raw capabilities that you require.
Compliance
Compliance is a term with at least as many meanings as there are distinct arabic numerals, but generally refers to either ensuring that spend is on contract, that regulations are being adhered to, or that corporate initiatives are being considered.
Demand Shaping
Demand shaping is a demand-driven customer-centric approach to planning and forecasting that tries to shape the demand to a desired level.
ERP
Enterprise Resource Planning systems were early attempts to integrate all organizational data into a system that could be used for enterprise planning. The advantages were that all data was centralized, processes were encouraged, and queries were answered quickly but the major disadvantage was that ERP was primarily concerned with what happened within the four-walls of an enterprise and not the supply chain it was ultimately a part of.
Extended Enterprise
As most recently described by Jean-Phillipe Massin, the extended enterprise is an aggregation/network of independent and top-performing companies, working together to supply products or services as effectively as they can.
Guided Sourcing
In the future, e-Sourcing technology will contain expert systems that “guide” a junior buyer on the right process to follow in sourcing a certain category.
Innovation
Innovation is progress by way of the new. It’s what business should be all about.
On-Demand
On-Demand refers to the delivery of software over the internet using the Software-as-a-Service model.
Open Source
Open source is a set of principles and practices that promote public access to the design and production of goods and knowledge. The most common instantiation is open-source software, which makes software freely available to the general public with relaxed, or non-existant, intellectual property restrictions. This allows users to create software content through incremental contributions.
Optimization
Decision optimization is the application of rigorous analytical techniques to a well-defined scenario to arrive at the absolute best decision out of a multitude of possible alternatives in a rigorous, repeatable, and provable fashion.
Outsourcing
Procurement Outsourcing is the act of turning over part, or all, of the sourcing function to an external company.
Risk Management
Risk management is the art of predicting, analyzing, and mitigating against potential risks before they happen.
Scenario Simulation
A simulation is an imitation of a real-world process and can be used to determine potential outcomes under different scenarios. It can be especially useful in forecasting.
Strategic Planning
Strategic planning is the process of defining organizational strategy or direction.
SRM: Supplier Relationship Management
Supplier Relationship Management refers to the art of managing all aspects of a supplier relationship to make sure it is a beneficial and productive relationship.
SPM: Supplier Performance Management
Supplier Performance Management is particularly concerned with measuring, managing, and improving supplier performance on an ongoing basis.
Sustainability
Sustainability is another one of those broad categories that could refer simply to business viability, to environmentally sound practices, or to the broader subject of Corporate Social Responsibility.
Talent
Talent refers to people - brilliant people capable of doing a brilliant job - and talent management refers to the art of identifying them, recruiting them, retaining them, and when necessary, retiring them in a positive manner.
Visibility
Yet another of those over-used and often misunderstood terms, visibility could refer to spend visibility, it could refer to inventory visibility, or it could refer to potential disruption visibility throughout the supply chain (as in a supplier’s supplier needs titanium for its part and there’s a shortage on the market).
Z’allgood
The phrase we all hope to say someday when someone asks “How’s it going, dude?”, unless, of course, you’re Canadian, then, when someone asks Howse it gowin’?, you answer Z’allgood, eh?
So, now that we’ve got the basics covered, I’ll put the pieces together in part III.
Entry Filed under: General, Global Supply Issues/Risk, Supply Management Best Practices, Technology, e-Sourcing Marketplace
November 19th, 2007
David Bush - Iasta
In this post I summarize the fifth installment of the CPO Agenda 2007 debate series - What are procurement’s key challenges in the next 1 years? that took place early this summer in Paris. [I think I’ll crack a bottle of Cabernet Franc in honor of our European clients.] My summaries of the previous debates on World Class Procurement - The British Perspective, The Next Wave of Savings, Global Sourcing - A Scandanavian View, and What Capabilities Do You Need To Operate In A Global Market? are still available in the archives.
The debate included Claire Brabec-Lagrange of Thales, Claire Dacier of Alstom, Xavier Cassignol of FCI, David Chambeaud of Thomson, Phillippe Courregelongue of Emptoris, Jean-Pascal de Casanove of Messier-Dowty, Sylvain Fresnault of La Poste, Laurent Jehanin of Safran, Luc Jodry of SFR, Marie Christine Jonon of Alstom, Pierre-Francois Kaltenbach of Accenture, and was charied by Geraint John of CPO Agenda.
As with the previous posts, I am going to summarize some of the key points from each contributor.
Claire Brabec-Lagrange
In the past, purchasing was not part of the [strategic planning] exercise, which mainly involved sales and strategy, operations and technology. Now we are part of this strategic exercise and this has made a huge change because it has led purchasing to get closer to sales and strategy in order to understand where the business wants to go and what will be the requirements in sourcing.
Claire Dacier
We have to create a strong partnership inside and outside the company.
Xavier Cassignol
In my view, it will be less about cost - almost nothing about cost - and probably mostly about how many alliances, how many partnerships, how many joint ventures you have built and how deep they are with your suppliers.
David Chambeaud
What we see coming up now and over the next three, four, five years is the need to expand our capability to source not just traditional commodities, but also to manage new areas of spending.
The second thing is for sourcing to challenge our business partners, who can be suppliers but also new providers of technology. It’s about innovating and finding new partners, new sources.
The third point is that, more than ever, sourcing will need to be a “junctioning” function, mastering communication between operations and R&D.
I don’t think any company in the future will be able to invest in every aspect of sourcing; you need to invest in talented people, good communicators, business-driven people, not just good negotiators, who can manage superior customer relationships. If you want to invest there and in IT tools and integrated systems, then you will have to choose.
Phillippe Courregelongue
There are three things you have to focus on: get the basics right, work on compliance to make sure cost reductions are actually hitting the bottom line, and agility to adapt to changing market conditions.
Jean-Pascal de Casanove
We should also have a role to define best practices in the organisation.
Sylvain Fresnault
We shouldn’t also forget the importance of purchasing in sustainable development. It’s changing our relationship with suppliers and customers.
Laurent Jehanin
The challenge for purchasing is to lead supplier relationship management within a properly qualified team.
The aim is really to position purchasing in the whole company process.
The first change will be to involve purchasing in the negotiation phase with our customers because the size of what is purchased has become bigger.
The second area is the involvement of purchasing early in the R&D process to be sure we can attract the best of suppliers’ innovation and that we are involved in optimising the make-or-buy decision by providing an analysis of the marketplace.
The objective is really to make the best of the supply chain, but we can’t base that only on cost because it’s not sustainable. Sustainability is not just about being green or socially responsible, it’s also about the model we can project.
Luc Jodry
The basics are about cost, but I agree that we have to go further and maybe get into profit management - what will our supplier bring us in terms of innovation?
Marie Christine Jonon
Currently, we don’t consider our suppliers as partners and don’t invest in the innovation of our suppliers. Now, because of internal growth, our main target will be to push our suppliers and to help them to innovate and to be a preferred customer.
Pierre-Francois Kaltenbach
I would make five points about future challenges.
In terms of career path, we are still far away from a situation where you can offer your best buyers a clear perspective.
My second point is about profit centres. I think all CPOs are struggling to justify their contribution, to measure savings.
The third thing is outsourcing. I think a lot of the indirect purchasing and the requisition-to-pay process will be outsourced, so that you will see big indirect and process factories in low-cost countries.
The fourth point is about innovation because there are companies now that have innovation objectives.
And the fifth one is about integrated supply chains, because when you are looking at what your customers and suppliers are doing, sourcing on its own doesn’t make sense anymore. You need to be part of a global supply chain, not just look at your suppliers and try to cut costs.
Wow! Best Practices. Compliance. Supplier Relationship Management. Supplier Performance Management. Strategic Planning. Collaborative Partnerships. Outsourcing. Talent. Sustainability. Profit Management. The Centralized Business Function. Innovation. What a great debate - and what a great article! Unfortunately, some of this stuff is at the edge of my area of expertise. I’m an e-Sourcing guy. Have been since day one - and will be until every need of every one of my customers in e-Sourcing is met. So, rather than try to summarize it and take it further on my own, I’ve asked Michael Lamoureux, the doctor of Sourcing Innovation and regular guest contributor here on eSourcing Forum, to write part II of this post.
Entry Filed under: General, Interviews
November 16th, 2007
David Bush - Iasta
Maybe not that extreme, but for those of us that have been around this industry for a long time, it is news to hear that Orville Bailey has returned to the procurement applications market. Orville has joined on at Vinimaya and is working along with Gary Hare again. For those that do not remember the wild days of the late 90’s and early 2000’s, Orville broke out of the GE team (that later formed FreeMarkets) and helped found TPN Register and later launched B2eMarkets, which was eventually acquired by Verticalnet, which is now an Italian cement company (just kidding, relax).
These two guys are great to talk to and have limitless stories about the genesis of eSourcing while at their GE days with Glen Meakem. Orville and Gary are always brimming with ideas for the next generation of functionality and I have been trying to talk Orville into sharing some of ideas regularly here on eSourcing Forum.
Stay tuned to hear more from him soon and hopefully it will be here. You have been publicly outed Orville, come on in!
Entry Filed under: General, e-Sourcing Marketplace
November 15th, 2007
Michael Lamoureux
e-Procurement is the counterpart to e-Sourcing, starting where e-Sourcing ends and ending where e-Sourcing begins. It is the “e” implementation of the procurement cycle which is concerned with the requisitioning, receiving, and reconciliation of the received goods as opposed to the analysis, auction, and award that takes place in the sourcing cycle. It is essentially the automation of the non-strategic and transactional activities that consume the majority of a buyer’s time, but one that comes with increased enterprise level visibility of all purchases.
The basic procurement cycle consists of up to nine steps, depending on the complexity of the buy and organizational policies. At a bare minimum, it consists of an order (requisition or purchase order), an invoice (which might be one with the receipt), and payment. For high-dollar purchases, the process will generally also include authorization and reconciliation of the invoice. In addition, if taxes were paid that the organization is capable of reclaiming, then the forms or entries to reclaim such taxes at the proper time will also be filled out or made. Finally, in a leading procurement organization, every step will be completed, although many will be completed automatically for low-dollar or non-strategic purchases by the eProcurement system using defined rules in the workflow engine.
- Requisition
A buyer recognizes a need and places a request for goods or services.
- Authorization
Each requisition made by a buyer gets routed to an appropriate approval agent. The approver verifies that the goods or services are needed, that they are either off of an appropriate contract or acceptable as a stand-alone non-contract order, and that the purchase amount is acceptable.
- Purchase Order
Once a requisition is approved, a purchase order is created and automatically delivered to the supplier(s).
- Receipt of Goods
Once goods are received, the buyer issues or confirms a receipt of such goods to the supplier.
- Invoice
After a supplier prepares goods for shipment, an invoice is created that denotes the individual goods ordered by SKU and the amounts being charged.
- Reconciliation
After the goods are received, the invoice needs to be reconciled to the purchase order and goods receipt before payment is made. Are the charges for the right goods or services? Are the amounts the contracted amounts? Were the quantities correct? Are any other charges, including taxes, valid and correct?
- Payment
Once the goods have been received and the invoice reconciled with the order and contract, payment is scheduled and made using an appropriate payment method, which could be p-card, electronic funds transfer, or good old fashioned cheque.
- Reclamation of Taxes
In some situations, the supplier of a good or service will be obligated to charge a tax, but the buyer may be eligible to retain some or all of that tax because of its corporate status. Examples include European Value Added Tax, Canadian Goods and Services Tax, and out-of-state sales taxes.
- Analysis
After a number of procurement cycles have been completed, it is important to take measurements of the efficiency and accuracy of the procurement process.
For more insights into e-Procurement, check out the e-Procurement Primer: 9 Steps to Procurement Success over on the e-Sourcing Wiki which not only dives into the 9 steps to success, but also discusses the core capabilities required in every e-Procurement solution, other important features of good e-Procurement solutions, the benefits an e-Procurement solution brings, best practices for implementation, challenges that may need to be overcome, associated costs, and tips on user adoption as well as a glossary of many e-Procurement terms and a rather extensive bibliography.
Entry Filed under: General, Suppliers, Technology, e-Sourcing Marketplace
November 14th, 2007
David Bush - Iasta
the doctor recently pointed out to me an article over on Knowledge @ Wharton titled ‘The Art of Woo’: Selling Your Ideas to the Entire Organization, One Person at a Time that nicely complements our wiki-paper The Quest for Purchasing Fire Develop the Internal Strategies for Selling the Procurement Tools Internally.
The article reviews The Art of Woo, the new book by G. Richard Shell, of Wharton, and Mario Moussa of CFAR, Inc. that provides a systematic approach to idea selling. “Woo” is the ability to win others over to your ideas without coercion, using relationship-based, emotionally intelligent persuasion (or, as other bloggers might say, EQ). It requires focussing on the person you are trying to persuade, and what they need to hear, and not your own goals, needs, and fears.
According to the review, the book presents a simple, four-step, approach to the idea-selling process.
- Polish your ideas and survey the social networks that connect you to the decision makers.
Start with your peers, and when they understand why the plan makes sense, leverage that to get a meeting with your boss and proceed similarly up the chain.
- Confront “The Five Barriers” - the five most common obstacles that can sink ideas before they get started.
Specifically, you must confront unreceptive beliefs, conflicting interests, negative relationships, a lack of credibility, and failing to adjust your communication to suit a particular audience or situation.
- Pitch your idea in a compelling way.
You should be able to distill the business concepts into short, punchy presentations that get right to the essence of the proposal.
- Secure both individual and organizational commitments.
Organizational commitment is good, but someone has to do the work. That’s why you also need individual commitments.
The article also discusses the “six channels” that can be used in persuasion: authority, rationality, vision, relationships, interests, and politics. The channels you focus your arguments in should balance your particular strengths with the temperament of the audience.
It concludes with a mention of the top three mistakes people often make in selling ideas:
- egocentric bias
Focusing on themselves, and what they would want to hear, and not
the audience.
- there is no system to persuasion
You need a strategy. You can’t “wing it” all the time.
- ignoring organizational politics
Whenever a new idea might affect resources, power, control, or turf, you will need an idea selling campaign, and not just a presentation.
I especially liked the discussion of the “The Five Barriers”: unreceptive beliefs, conflicting interests, negative relationships, a lack of credibility, and failing to adjust your communication to suit a particular audience. I see it again and again at organizations where the more progressive purchasers want a sourcing solution but either the boss doesn’t see the value or finance doesn’t want to pay for it. The organizations that are successful in acquiring new sourcing technology to help them meet their savings targets are those that prepare an internal sales strategy to overcome the unreceptive beliefs, conflicting interests, and push-back relationships from day one.
Entry Filed under: General, e-Sourcing Marketplace
November 13th, 2007
David Bush - Iasta
I have no idea, but SCDigest tried to take a stab at it recently and, of course, they do not know either. However, this article does a nice job of presenting two sides of the issue. We deal with freight and fuel surcharges frequently, here at Iasta, because we have many clients in the food service, retail, manufacturing and CPG industries. These global companies are constantly dealing with the impact of freight to landed cost.
The information in this story describes the Goldman Sach’s view that indicate crude oil will be $95 by the end of 2008. (I remember when $100 barrels of oil where considered doomsday scenarios no more than 2 years ago!). This would be a catastrophic development.
However, ISI Group’s - Mike Rothman, predicts more sane levels of $45 a barrel and has a deep portfolio of data to back up his claims. The summarization at the end is equally non-conclusive by stating, “So for which scenario should shippers plan? It’s impossible to say, of course, other than to note Rothman’s view is based almost exclusively on supply-demand data and historical patterns. Others say “It’s different this time.” One thing we do know is that geopolitical events can have a huge impact on perceptions and can also drive prices higher regardless of the fundamentals.”
Of course, if we knew what was going to happen, it wouldn’t be very fun though, would it? Plus, how are all those traders going to make their Ferrari payments if they are not moving the price of oil around on a daily basis??
Entry Filed under: General, Global Supply Issues/Risk
November 12th, 2007
David Bush - Iasta
I would like to start by thanking those authors that were generous enough to contribute content. I was able to harangue some of the best minds and writers in supply management to offer up their thoughts on concepts regarding the cross-over and application of eProcurement and eSourcing with a sprinkle of next gen.
Monday/Tuesday - Michael Lamoureux put down ideas supporting the integration of the two areas of technology with three primary reasons why there is not a clean break between the technologies. Michael even included a nifty chart to further make his case. Dave Stephens followed on with a deep analysis and eloquent explanation of the value proposition of integration. Having spent 10 years at Oracle’s procurement application team (many of them leading it), he is very qualified and experienced. The man knows of what he speaks.
Wednesday - Sensing too much cheer in the air, and not close enough to Christmas, I just could not sit by the campfire and stay in line with the integration love fest. Maybe I spend too much time talking to procurement leaders who are dealing with tight budgets and tighter resources. Obviously, I am a believer in perfect software functionality and solving every problem through technology. It is admirable and important to strive for these goals. However, when you blend time, money and resources needed to get to that point…call me a pragmatist not a dreamer. Michael made a good point on his blog last week, where he bemoaned the fact that no one ever talks about the difficulties with big implementations, which would lead any one to believe that they work as well as the Powerpoints and marketing collateral suggest they will.
Thursday - Vinimaya CEO, Gary Hare, added new age thought around Supplier Networks. If you ever have seen how e-catalogs should work with their software, you will not be surprised by his thinking.
Friday - I got a surprise post emailed to me from Alan Buxton of Trading Partners across the pond. He, like me, took the Grinch-ish view of the idea.
All things considered, I thought we had some great thoughts outlined and argued. I feel strongly that the concept and application of integrating the two sides of procurement is a unique situation at every company, so having the capability and some not.
However, maybe I have been over-thinking it and should just analyze it like a Black and White cookie which represents the zen and harmony of both technology and society.
“Look to the cookie, Elaine, look to the cookie.”
Entry Filed under: Functionality, General, Technology, e-Sourcing Marketplace
November 9th, 2007
David Bush - Iasta
Today, I would like to welcome Alan Buxton, from Trading Partners. Alan contacted me this week with interest in the topic of the week here on ESF.
To do good eSourcing you need to know your data. Good data comes from your eProcurement system because people use this tool to place real orders and buy real things.
To do eProcurement you need to have agreed contracts in place: eProcurement naturally follows on from eSourcing.
So why not plug the two together? Here are two good reasons:
1. The slippery slope to ERP
OK. Let’s assume I’ve integrated eSourcing and eProcurement. I’m probably using eProcurement to purchase stock items so why not plug these into a warehouse management system. All those orders have to be paid - best stick in an accounts payable piece. Well, it doesn’t make sense to have payables and receivables in different places - let’s build in the whole of finance. What about CRM? ….. You can see where this is going: “Look, ma, we built an ERP system.”
Integrating eSourcing and eProcurement is neither ERP nor Best of Breed but is a step on the slippery slope to ERP.
If ERP is for you then fine. But if best of breed is for you then remember that best of breed means focusing on a particular space. Providers who focus in one space and excel at it are unlikely to excel in others.
2. eProcurement data is incomplete
You know what - however good your eProcurement system is, it won’t cover all your spend. With maverick buying on one hand and incomplete category coverage on the other eProcurement systems of today will not have the full story. Relying on data from eProcurement to drive future strategic sourcing exercises will miss out on a potentially large part of the spending picture.
More of Alan’s thoughts can
read on his blog. Thanks again to Alan for weighing in.
Entry Filed under: General, Supply Management Best Practices, Technology, e-Sourcing Marketplace
November 8th, 2007
Gary Hare - Vinimaya
When the subject of supplier enablement for e-procurement comes up, a discussion regarding the merits of supplier networks usually isn’t far behind. Today, as companies work to drive bottom line savings from their e-procurement system investment, using a supplier network is usually the pat answer provided by consultants, analysts or recommenders with regard to supplier enablement for catalogs and transactions.
Is using a supplier network the right answer? Yes, but (there’s always a “but”) supplier networks as they exist today might not be the right answer. As a matter of fact, today’s supplier network model has existed since 1997, and ten years later, hasn’t changed much, and based a some recent analysts reports on user adoption and spend coverage, hasn’t delivered.
So what needs to change? For this discussion, let’s call the current supplier network model Supplier Network 1.0, and the proposed improved model, Supplier Network 2.0.
First, the big, big difference between 1.0 and 2.0 is that 2.0 will fully leverage the connectivity, content and community of the Internet (sound familiar…see Web 2.0).
1.0 currently doesn’t. From a connectivity standpoint, the Internet only serves as an on-ramp to the vendor-proprietary network. 1.0 also re-creates the content (e.g. catalogs stored in a database), even though the content already exists at the supplier’s website. This gap will only widen as suppliers continue to invest in their online capabilities, which for the most part they cannot leverage in 1.0. In 1.0, to be part of the community, you have to pay (e.g. suppliers pay membership fees, client access fees; % of sales fees).
All this redundancy is expensive. In 1.0, providers house their own networks, servers, databases, and pay people to operate everything, build catalogs, and manage the process and so on. These costs are passed on to the participants…buyers and suppliers!
In 2.0, the Internet is the network, thus provides the connectivity! The content is managed by the community member best suited to the task, suppliers for product content and buyers for contract pricing and compliance. And the community is fluid. It can be everyone, or one to one…it’s up to the participants; the elimination of the complexity of 1.0 makes Supplier Network 2.0 extremely efficient and elegant. And best of all, it’s less expensive for all parties.
The 1.0 model exists because when it was conceptualized, the Internet had unreliable connectivity, little content, and a partial community. But all that has changed, so the model must change.
In the end, 2.0 will allow companies to create “virtual” supplier networks using Web 2.0 technologies like search and web services, and static catalogs and proprietary one-to-one connections will be a thing of the past. Cost and compatibility, the two biggest barriers today, will be addressed…and B2B commerce will begin a growth trajectory similar to that of consumer commerce!
Gary Hare is currently the CEO of Vinimaya Inc. He was also co-founder, in 1997, of the company that operated one of the first supplier networks dedicated to Indirect and MRO e-procurement, TPN Register. The TPN Network was based on the Supplier Network 1.0 model. Vinimaya’s technology is designed to deliver the Supplier Network 2.0 vision.
Entry Filed under: Functionality, General, Suppliers, Supply Management Best Practices, Technology
November 7th, 2007
David Bush - Iasta
I have been on the strategic sourcing side of procurement for quite a long time now and my knowledge center for the tactical side has grown steadily over the years. However, I have never been closely tied into it, so I have been trying to diagnose the value across the spheres of functionality and whether there is a value proposition to a question I hear occasionally regarding the business case for integration between eSourcing and eProcurement. I have been trying convince myself of the procurement nirvana which is seamless systems all working in harmony. I’ve even thought of an example:
An organization goes through the requisition process over a short period of time for something like laptop computers. As the numbers grow during the period, a critical mass is achieved where the sourcing team can issue a competitive bid using the data collected over the past week or two. The resulting auction or RFP then is concluded with a true market price at that moment. This is a fantastic idea in concept but the problem is that you need to be the US Government to actually pull out enough volume that you can source that way. To me, this is more of a slick PowerPoint slide than a practical application.
Since we now employ numerous individuals that come from both backgrounds, I immediately turned to one of my colleagues who has had years of experience in this area to get her thoughts on the topic. Various conversations led to the following summarized thoughts:
- Most large purchasing software tools today are complex. Whether that is exclusively because of integration or not, no one will deny that integration raises the level of complexity.
- This complexity makes it difficult for us to learn these tools, adopt them and make them a common practice. After all, we all want tools that make life easier, not more complicated. So from the get go, there is an inherent problem with – what I call – ‘integration illusion’. Isn’t adoption the key to streamlining processes, achieving additional cost savings and ultimately showing a positive ROI? You’d be surprised at the number of companies I talk to that spent millions achieving some state of integration so they can run reports that show that most users are not utilizing the software. Why? Because it was never intuitive in the first place.
- The base of suppliers is always changing so getting suppliers to understand all contingencies associated with a fully integrated tool is nothing short than frustrating. An example: Why is a Tax ID number needed to do an RFI for a supplier that a company may never do business with? When adding suppliers to an integrated software system, one has to collect all kinds of information from them prior to sending them the RFIs so they can be “enabled”. I thought that was the whole reason for the RFI in the first place, to ask them questions like - what is your Tax ID number?
- Data is as good as the person who keys it in. Most of the time integration only brings already “murky” data from one system to the next. It is already difficult to get good, clean reporting data and integration only makes it worse – what system did the data come from? Where do we clean it up? How do we keep both systems updated?
- The decision makers are typically not from a procurement background and the key drivers are financial and/or IT led. All this complexity requires an army of permanent resources to maintain, support, and oversee. So, large integrated systems are cumbersome, hard to learn, and hard to maintain….Integrate – why? This seems like a whole lot of work with minimal return.
- e-Sourcing does not need a lot of data from e-Procurement and vice versa. POs, Shipments, Invoices - although all important and used as data points in the sourcing process, do not have to be gathered via large scale integration projects.
- Large integration illusions are great in theory and make for a good sales story but most of the time they are not applicable in real life. If you were starting a new company from scratch, then maybe you could model your processes around these integrated software packages but in real life, most of these tools are being forced to fit into processes that are already there. People jam them against current ‘cultural’ processes. A great example – A large integrated e-Procurement application requires purchasing professionals to do a Contract Request in order to eventually be able to create a Purchase Order – now in real life, how many purchasing professionals start out that way when at the last minute, they are asked to buy something?
- Should a company change its overall cultural processes to accommodate large integrated software packages? I am a believer that a company’s processes are the key to competitive advantage as well as differentiation. A company is only good as its processes (unless of course they are the only ones selling a product that is in demand). And yet large integrated software packages are created with the thought of standardizing and implementing their large scale solutions throughout the entire organization and across all companies. What competitive advantage is left at that point?
- Which begs the question - Are these fully integrated standardized processes best in class? Well, when was the last time that any software or consulting business purchased textiles from China, or sold drugs in Europe or distributed food to supermarkets in the United States? What makes companies think that anyone would know better than they what makes sense for their organization or for that matter for their entire industry? Software companies offer a recipe but everyone knows that meals can taste very differently depending on the ingredients used, the person cooking, and the taste of the guests.
- Most integrated software is sold with the end game in mind – making software bits that need each other so that a customer will continue to buy and upgrade. Amazing how we, in Purchasing pick functionality based on what we think we may need vs. figuring out what we need and then buying as necessary.
- One of the key commandments in Lean Manufacturing speaks to this topic: Choosing low cost, reliable solutions as an alternative to costly new technologies.
- Finally, and possibly most importantly, think about the cost to achieve Day 1 integration. It will likely take an army of developers weeks, or months, of time (=$$$$) to get to the point that everything is passing data back and forth. There is a very high likelihood that this effort could cost in the millions of dollars. How long will it take for the new, high efficiency system to achieve payback ROI? That’s a lot of money to make up simply with integrated platforms. Uh oh, did I mention there is a new upgrade coming…time to bring in the consultants to fix it again.
My thoughts - Less integration, more down to earth, good basic purchasing functionality with an opportunity to achieve a positive ROI quickly. Not a million dollar pipe dream, but a cost effective timely reality. Hit the ground running and customize your processes to support the platforms that help to achieve concrete goals.
Final Conclusion:
All of my points might be taken to imply that I am a non-believer that procurement and sourcing exist symbiotically and can benefit each other. This is not true, I certainly believe this. However, I also believe that this Utopian concept is more likely to drag resources and money down a rocky road. To me, a business decision is much like the US Marines philosophy of 70% information = decision. Things move too fast in business to try to solve all problems with one mega-uber-solution. Make multiple good decisions and use human intelligence to bridge the gaps. You will take much of the risk out and be able to generate successes quickly.
Entry Filed under: Functionality, General, Supply Management Best Practices, Technology, e-Sourcing Marketplace
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