Robert A. Rudzki, contributor to the Spend Matters blog, brings up a great point in a recent post. “’Strategic’ is perhaps one of the most overused (and misused) terms in business today,” he says. “Simply adding a few bells and whistles to conventional purchasing and then slapping the word strategic onto the process … is not the same thing as adopting the process as it is intended.” This holds especially true when companies are seduced by the “quick fix,” rocked by changes in leadership, or lulled back into conventional purchasing practices.
We couldn’t agree more. In conversations with companies interested in a strategic sourcing solution, we hear the same pain points over and over. “We’ve tried sourcing events in the past, but they never gained traction.” “We don’t really know where to start with a sourcing event.” “Things tend to just fall apart after we’ve collected bids.” “We select the lowest price, but the savings often aren’t realized.” “It could take us months after an auction to actually award our business.” And so on.
What these companies are missing is a true front-to-back sourcing strategy. They have the middle parts strategized – selecting suppliers, running an auction, evaluating the results of the auction – but the most vital aspects of sourcing may actually take place before and after the bids are solicited and collected. The front end of a strategic process is Spend Analysis, and the back end is Decision Optimization.
Having a powerful sourcing team and tool means nothing if you don’t have an effective strategy for what to source, and that means knowing your current spend patterns. You have to know what you’re buying, from where, from who, and so on in order to save money and make the investment in sourcing tools a good one. You can ensure stakeholder buy-in and an increased chance for savings success if you focus on correcting documented issues — sourcing items that have too many suppliers with a high amount of spend, items that don’t have buying consistency across distribution centers, and so on. Spend analysis gives you this type of visibility into your areas of need.
Award decisions can cripple a sourcing effort after the fact, unless you use decision optimization techniques to guide your decisions. Lowest cost may not always be the optimal award scenario for your business. Freight issues, quality issues, and so on can wipe out any projected savings you were expecting unless you factor these issues into your award decisions. An optimization tool can automatically calculate how different scenarios affect your award decisions, based on supplier attributes, award constraints, and so on. Considering this vital stage can mean the difference between dragged out, lackluster events and quick savings realization.
Don’t, as Rudzki advises, become stuck in conventional purchasing practices because you aren’t factoring in spend analysis and optimization into your sourcing decisions. These tools may be the key to putting “strategic” back into your sourcing.
Actual demand for our product is greater (or less) than forecast-ed?
My facilities have different quality standards for the same product?
I need to select a “green,” “low-cost country” or “diversity” supplier?
My preferred suppliers have capacity or lead-time issues?
I have only 10 days to decide the best award for five locations from 10 suppliers, 20 line items and hundreds of bids?
A successful sourcing project does not end with an auction; it ends when the awarded supplier delivers the correct product at the right time, place and cost. Implementation delivers the savings. Yet, at many companies, the “what-ifs” get in the way of realizing significant savings and product quality improvements. While an average sourcing project may take six to eight weeks to prepare and execute, the award decision can often take an additional six to eight weeks, not including new supplier verification. The additional time invested in award analysis can critically affect a company, especially if the company can obtain cost savings in two weeks rather than two months. In one example we know of, a company estimated that it cost them $1.6 million per month for an unimplemented sourcing project.
So why is it so difficult to award contracts when the savings potential is so obvious? Another company ran a $24 million auction for printed circuit boards. The sourcing team ecstatically presented $9.6 million in identified savings (an overall savings of 40 percent, with 70 percent in one lot alone). However, after six months, the actual savings delivered was $0. Why? Too many what-ifs got in the way. The joint sourcing and stakeholder team could not agree on the correct award scenarios, therefore, no decision was made.
Price factors are the easiest to analyze and compare. A sourcing analyst can calculate totals and summarize and rank suppliers for easy comparisons. But it is the other factors that prolong the decision-making process and often override the price factors. The key to a speedy award decision and implementation is managing the “what-if” factors.
The Six “What-if” Factors
There are six basic “what-if” factors, or risks, that affect award decisions and implementations. Some sourcing projects are infused with all factors, others just a few. Regardless, if not effectively managed, they can dramatically lengthen (or stall) the entire award decision and implementation process.
Price issues: These issues are typically the most obvious and easy to manage since they are quantitative. They include any cost associated with the total product value such as product, freight, packaging costs, rebates, discounts and payment terms.
Quality issues: Risks associated with quality are a bit more difficult to manage because some of them are assumed and not clearly articulated. Where it becomes tricky is when different stakeholder groups have different quality assumptions for the same item, such as with the printed circuit board bid.
Capacity and lead-time issues: It is critical that companies have capacity assurance so they can meet the demand of their customers. Juggling supplier capacity issues can be very time consuming, especially when product forecasts can swing dramatically up or down.
Regulatory issues: There are regulations such as accounting (Sarbanes Oxley), distribution and product ingredient quality (lead paint, melamine), and product sources that can affect decision making and must be managed.
Political issues: Though global politics have some impact, it is the internal corporate politics that carry the most weight in all sourcing decisions. Examples of these issues are sensitivities to preferred vendors (due to partnerships), diversity and green vendors, in-sourcing and internal competition between business units.
Supplier strategy issues: In addition to choosing a low-cost supplier, there are other supplier strategies that may need to be evaluated along with cost. These strategies include multi-source versus single-source, low-cost country, supplier consolidation and relative market strength of the supplier (monopoly).
Our second post in this two part series will focus managing the “What if’s.”
This is the first in a series of posts discussing the history of, business case for and strategy behind supplier performance management.
Before we can get to the end goal of creating an SPM strategy, we must understand the factors in our supply chains that have caused SPM to become an enormously important part of our processes. Over the past decade, economic globalization has allowed companies to reach suppliers in previously untapped parts of the world. With the ability to purchase goods and services at lower costs around the world, we now rely more on outsourced suppliers for these goods and services, which has increased our supply chain risk, the complexity of our supply chains and the globalization of our businesses. These shifts in focus have changed a company’s view of its suppliers as a cost to a revenue source to hold down the bottom line.
The combination of these factors across a globalized supply chain means that companies must maintain strong, viable supply chains in order to maintain strong, consistent business performance to protect their bottom lines. Effective, smart supplier performance management allows us to achieve these goals.
So does this mean a company needs a perfect supplier scorecard that makes its metrics look good? NO. Supplier scorecards are one small, though important, piece in the intricate puzzle that makes up supplier performance management. SPM involves aligning the organization, enabling strong business processes, developing meaningful supplier scorecards, and building actionable supplier improvement plans.
But at the end of the day, SPM is mainly about finding ways to improve your suppliers’ performance to reduce costs and risks, while increasing supplier value. Supplier performance improvement could take the form of making more on-time deliveries instead of shipping a few days early, which increases your inventory costs. Or suppliers could decrease lead time for delivery, which lowers your production time. A strong SPM program allows a procurement team to have visibility into performance issues like these so it can correct them with the supplier, while continually building a strong, mutually beneficial business relationship.
For more information on Supplier Performance Management click here to download our white paper.
Incumbent and new suppliers can sometimes be reluctant with a reverse auction. The most important advice to remember when dealing with these types of supplier situations is: communicate, communicate, and communicate.
This point cannot be stressed enough. Many feel that by utilizing an online sourcing tool, all communication only takes place electronically. The e-Sourcing tool should facilitate communication, not replace it. It is important to still maintain professional relationships with your bidders and stakeholders through one-on-one meetings or phone conversations. Before initiating any online sourcing initiative, suppliers should be notified about what they will be receiving and what to do with that information. This also gives you the opportunity to minimize any fears and preconceived notions they may have about online sourcing technologies. The Sourcing Team should also properly monitor suppliers’ progress on different tasks set out for them to do, and follow up with a phone call whenever they are not being responsive. This will ensure maximum understanding and participation from suppliers.
Here are some key times that you should communicate with your suppliers.
• before an invitation to participate in an auction, notify them of the upcoming event
• after the invitation is sent, confirming the supplier received it and asking if they have any questions
• when there are dramatic changes to the RFQ including new deadlines, dates or specifications
• 24 hours prior to the auction to verify participation and answer any open questions
• during the auction if there are noticeable issues with a supplier (like not logging in, logging off too soon)
• after the auction to communicate the award decision
Clarity and communication are keys to not only a successful auction, but to maintaining strong relationships with potential suppliers who don’t win.
Simple steps like these will drastically reduce the risk of event day issues and will keep suppliers interested in your business later, as they will feel the process was fairly managed.
UNSPSC coding is great for numerous industries, but it seems that there is a void in the coding structure when it comes to large financial institutions. I recently held discussions with several directors of sourcing from large insurance and finance companies while speaking about spend analysis. In each conversation it has come to light that the coding is great for a lot of commodities, but doesn’t address the unique services aspect of their spend.
So how do they accurately classify their spend when UNSPSC isn’t adequate? As all animals do in the world, they adapt and evolve out of necessity. They have created a hybrid of UNSPSC that includes the strong elements of what UNSPSC coding classifies well and included additional coding that relates specifically to their unique services spend.
UNSPSC coding is a strong coding system. However, companies should not be afraid to add to coding structures to meet their needs. Visibility into your spend is only as good as a desired taxonomy’s ability to accurately reflect the nature of your data.
A strong Spend Analysis solution will be able to handle not only classifying to UNSPSC, but also any internal structure as well. A spend analysis solution should be as flexible and scalable as the company it’s doing the work for.
Recently, I’ve had numerous conversations with prospects and current clients where the conversation turned to a familiar topic: What are the key selling points to increase use and adoption into business units who are not using eSourcing effectively?
Here are a few short bullets to provide you with a strong business case. These are items that we continue see that sell eSourcing internally as an enterprise solution.
Ability to run reports at a divisional level, as well as the parent company, through the use of project classifications.
By inviting a divisional lead to each sourcing project, or by setting a divisional lead up as a domain administrator, divisions can share upcoming sourcing projects with the ability to aggregate / leverage spend when appropriate.
Each division can have representation to view and score RFPs for a group decision
Divisions have the ability to create customized co-brands all pointing to a single domain. This allow each group to have a their own logo for suppliers but all data is sharing a single instance to manage all project data and reporting.
Ability to centralize a supplier database for all divisions so that they can share supplier information leveraging relationships and low cost vendors.
Standardize supplier communications through email templates, RFP structure, Terms & Conditions documents as well, as what information is collected from suppliers for each sourcing project.
Ensuring corporate compliance is being met through reporting an auditing of projects.
eSourcing can fundamentally improve your process, efficiency and coordination as a team. These in particular would be classified as the third tenant of eSourcing benefits – knowledge transfer and collaboration.
Winning bidders in auctions often experience buyer’s remorse, a gnawing sense that they have paid too much for something that they don’t need and perhaps no longer want. Something similar can happen in reverse when a client selects the cheapest service provider in a competitive tender for outsourced services. For example, in today’s tough conditions, many clients are anxious to strike deals that shift fixed components of their cost base onto the provider. But this can exert colossal pressures on the provider’s operating model if the services are not fairly priced and consumption falls.
Buyers typically – and often with justification – worry that the deal will come to strongly favour the provider. Here are the TPI Top 5 reasons why the opposite might be the case:
1. The service provider doesn’t understand the requirement. Buyer’s remorse is often accompanied by a feeling of embarrassment where the buyer thinks, “the other bidders must know something I don’t.” Likewise, a suspiciously low bid might indicate the provider misunderstood the scope of services or the level to which they were to be performed. Service levels can be a culprit here, as small changes in requirements can result in step-changes in cost.
2. The provider underestimates the transition and transformation effort. This is a subset of the first category, but worth mentioning separately because it is so common. Many service providers understand their own cost bases well, yet believe their products, systems and processes to be broadly standardized when, in fact, significant effort is required to adapt them to client processes and systems.
3. The provider is “buying the business.” A service provider might offer an attractive price in order to acquire a capability and client base in an attractive business area. This is rarely to both parties’ advantage and often ends badly if the provider’s expansion plans don’t result in the expected revenues. Similarly, changes in the provider’s management or business direction (or both) will lead to suboptimal behaviours that are typically focused on the provider’s profit and loss rather than service to the client.
4. The provider relies on leveraging the transferred assets. Perhaps the provider wants to subsidize the cost of, say, a data centre in anticipation of winning additional business that can be serviced from the same location. As above, this can benefit both parties, particularly if both recognise it as a fundamental part of the solution. The risk in this approach, however, can be costly if the new business doesn’t materialise or is delayed, or it if can only be won if the pricing assumes yet more growth.
5. Corporate activity. A client was able to extract a low bid from a service provider who had already announced to the market a strategy dependent on winning the business. As with any price reduction that is unrelated to a corresponding reduction in cost, clients should be wary of such an approach, as the provider’s rationale will soon be forgotten once the margins are being reported.
The lowest bid can easily turn out to be the most expensive. At best, the relationship will be strained and the service provider will try to recover costs through a self-serving reading of the contractual obligations; at worst the client might find itself depending on a bankrupt provider.
OGCs everywhere are finding that their budgets are not immune to the economic downtown. Concurrently, the evaporation of hundreds of millions of dollars in “deal” fees on Wall Street has many of the law firms scrambling for new business in other practice areas. It’s a great time to be sourcing legal. However, you have to be careful in the way you approach this category and the players involved.
The relationships and confidence your General Counsel has with all of the firms they work with has a higher value to them than simply saving a few bucks. In order to be successful in this category, you have to earn the confidence and trust of your OGC.
By that, I mean the Office of General Counsel (OGC) needs to have a high level of confidence that the insertion of Strategic Sourcing will not, in any way, materially impact the relationships that office has with outside counsel – particularly their “A-Team” of law firms.
So what is the best method to approach this category?
The most successful strategy is to spend 75% of your time on building relationships with the OGC and his team to understand their needs and firm relationships. From that, you will have a better understanding of what they value and will not change. A General Counsel’s level of comfort that you “get it” is directly correlated to how deep into the spend you will get. So, after thorough relationship building, you are left with 25% of the project or areas of spend that you can begin to do tactical sourcing projects. Take a look at litigation support service as a good starting category to source and begin building that bridge to strengthen the confidence and relationship with your OGC.
As a sourcing professional, my most difficult negotiations aren’t with suppliers but rather with internal customers. Based on conversations with my colleagues, that experience is not unusual. One measure of this challenge is “savings leakage” (savings negotiated but not realized). Aberdeen Group reports average leakage rates of 21% as Purchasing strives to implement its sourcing decisions. Best In Class companies experience about 14% leakage whereas All Others see 24% leakage (1). Small companies experience up to 40% savings leakage (2). Net, there is a huge payout for improvement.
There can be several reasons for leakage:
Communication. The using organization is unaware of the award and continues buying from the incumbent.
Inconvenience. The new supplier’s process is inefficient providing a negative incentive to change (e.g. a travel reservation website which is difficult to use).
Fear of the unknown. There may be a long-standing, positive relationship between the supplier and the user. Alternately, the internal customer may not be thrilled with their current supplier, but at least the incumbent is “the devil they know”.
Lack of trust. The internal customer organization doesn’t trust the buyer to properly address non-price criteria when making sourcing decisions.
Regardless of the reason, leakage represents innumerable hours of wasted effort and, more importantly, millions of dollars in missed bottom line profit improvements.
Communication breakdown is relatively easy to address, particularly with the use of eSourcing, eProcurement, Spend Analysis and on-line contract management systems. The other three reasons require a deliberate process and up-front planning. It’s all about effective change management! Successful sourcing managers don’t wait until after the award to sell their internal customers. This is particularly critical in companies where business units are relatively autonomous, and not subject to corporate edicts.
Effective sourcing professionals follow Stephen Covey’s advice: “Begin with the end in mind”. What does that mean? It means involving key stakeholders throughout the entire sourcing process so they will support implementation of the ultimate award decision
Specifically, what does this entail?
Ensure upper management support for sourcing initiatives and savings goals.
Initiate a comprehensive and methodical change management process early on.
Work with stakeholders to clearly define decision criteria with appropriate measures.
Conduct the RFP/RFQ with stakeholder input and involvement.
Gain stakeholder support for a comprehensive implementation plan and enforce accountability.
Monitor expenditures over time to identify any leakage.
Sound like a lot of work? It is. However, it often eliminates months of wasted effort on sourcing decisions that don’t stick. Why is it that we never have time to do it right, but we always have time to do it over? Is this formal process necessary for all savings initiatives? No, but the thought process should be applied to all situations. Thinking through this process allows you to determine the extent of the effort required. One size does not fit all.
Addressing stakeholder fear, lack of trust and potential inconvenience through a comprehensive change management effort and improved communication will have a tremendous impact on savings leakage.
Click here to access a more detailed write up or here for a podcast on the topic.
I would like spend some time to talk about what’s new in spend analysis technology and the benefits its providing to the market in terms of efficiency, visibility and speed to ROI.
Data Extraction and Importation
The biggest undertaking with older database driven technology is the time it takes IT to map corporate spend data to required predefined templates which allows the data to be imported by a spend analysis tool.
The new generation of data driven technology utilizes metadata to automate how spend data is organized. This architecture requires a minimal amount IT resources and can simple accept an export of data that includes the column header.
Take the example of 4 source systems with the old technology. It I would take 1 day of extraction and mapping for each source file. That is a total of 4 days. With the new technology it takes a total of 2 hours per source file. So, to start your project you have already saved 3 days in time and can now move on to the next phase in a shorter time frame.
Data Consolidation and Integration
The biggest improvements in this area allow for the data to be assimilated within the tool compared to outside the tool. In addition, the new technology allows for users to create associations across a virtually unlimited number of data field associations. Bottom line IT exports the data files and they get directly imported into the spend analysis tool and the data associations
The old technology required different data files to be consolidated and normalized outside the tool prior to the file being imported. This was usually done by IT and was a costly and timely effort.
Again taking the example above with 4 source systems, it would take a total of 8 days to extract, map and load the data files. The new technology shrinks that time to 3 days. Now in our example we have already accelerated our project by and ROI by 8 days.
Cleansing and Categorization
This area is where the ability to provide higher classification rates in greater detail has provided huge advancements in spend analysis. The new tools have evolved to include thousands and thousands of structured rules and cleansing routines. These routines and rules continue to evolve and grow with every project that is created. These improvements make the entire process repeatable and therefore scalable. As a result, process time is compressed and support costs are dramatically lowered.
Reporting and Analysis
The new reporting tools are built with the end user in mind. Faster access to information they need with drill down capability. Standard ad-hoc reports and the ability to create custom reports at will. The benefits of the new reporting are simple: self sufficiency, ease of use and faster analysis for projects and business decisions.
In end, spend analysis is about visibility to harness savings and speed to ROI. The new technology condenses the project time frame dramatically, increases classification accuracy and provides a fast self sufficient reporting tool. For more information about this topic, please download the wiki white paper located on the side bar of this blog site.
Many companies negotiate small package programs to cover the documents in small packages, but how much consideration is given to those shipments with weights between 200 and 300 pounds.
Normally a shipper will tender those shipments directly to an LTL carrier along with other shipments. These shipments are known as minimums in the LTL industry and are either tendered loose or stacked on a pallet and shrink-wrapped.
These shipments can create problems in handling simply because they command an allotted spot with other LTL shipments. They are normally stripped from the pallet and placed in holes between shipments and essentially scattered about the trailer until they are handled again.
Most small package courier companies in the US offer other services such as multi-weight and hundredweight programs geared to the shipments over 200 pounds that are handled within the small package system.
It makes total sense for an organization to look at these additional services provided by US small package couriers since most LTL carriers are shying away and pricing accordingly these type of shipments since they demand a higher degree of handling.
A complete review of your order picking practices must be done in order to reveal if it is cost effective enough and not too labor intensive to move LTL minimum shipments over to multi-weight and hundredweight programs that are offered by US small package couriers.
Your company has wisely contracted for an eSourcing solution. You are relying on it to deliver process improvements and sorely needed cost savings. You’ve trained your people, but you recognize that the challenge has just begun. Internal adoption is key to your success.
The challenge you face is culture change. It is the biggest obstacle in any software deployment. Less than 15% of your user base will be “early adopters”. The majority will take a “wait & see” approach, and 10% or so will be “foot draggers”. There will be resistance because the implementation requires behavior changes for all involved.
Experience across numerous customers representing a variety of industries has identified some levers which can help to accelerate user adoption. These are:
Goals and Measures – Creating a “pull” enviornment
Organization – the right structure, roles and responsibilities
Processes – documented best practices
Leadership creates a “pull” environment by establishing Goals & Measures and holding people accountable. Since everyone has more to do than they can possibly get done, they must set priorities. So how do they decide what gets done and what gets left undone? It is human nature to seek pleasure and avoid pain. Therefore, what gets measured by leadership gets done! That’s why goals and measures are critical for internal adoption.
While goals and measures are important they must be supported by the proper Organization. This is not merely about structure – the boxes on the organization chart. You must also have clearly defined roles and responsibilities with the positions staffed appropriately. Key roles include:
Champion – He/she establishes and communicates goals and measures, provides necessary resources, breaks down barriers and holds people accountable.
Master User – This individual “puts the feet” on the implementation. Required skills include: Leadership, Change Management, Project Management, Sourcing & Communications. He/she is the liaison with the Champion and becomes the on-going center of eSourcing expertise. A strong Master User is a key indicator of success.
Super User – In larger organizations, the Master User can’t do it all. The Super User is typically an on-site resource who teaches tools and tactics, models best practices, coaches other sourcing professionals, shares learnings within and across the organization, and identifies barriers and improvement opportunities.
Sourcing Professionals – The sourcing professionals do what they’ve always done – apply sourcing expertise to deliver cost savings, cycle time reductions and process improvements. However, they perform these tasks with the assistance of an eSourcing solution supported by new processes and best practices under the tutelage of the Master and Super Users.
The third lever for internal adoption is Processes. A quality tool called the P-D-C-A cycle (Plan-Do-Check-Act/Adjust) is useful for this purpose.
Plan includes: creating an implementation project plan, user training and spend analysis which enables sourcing pipeline development. There is a tendency to shortcut planning and jump to action. This typically results in significant frustration and rework.
Do refers to the actual implementation. This involves the application of processes, best practices, templates and checklists to conduct successful eSourcing events. Most eSourcing solutions provide templates and allow you to embed processes and best practices into the project management feature of the solution.
Check relates to tracking your progress. Are you achieving the goals established on both a program and project basis? Your goals must be supported by specific measures against which you track.
Act/Adjustfocuses on continuous improvement. This includes periodic reviews where individuals share learnings with each other, identify improvement opportunities, and develop an action plan. The cycle then repeats.
Using the three levers: Goals & Measures, Organization and Processes, helps to embed eSourcing into your organization’s culture. Ignoring these important considerations will impede your efforts thereby delaying the efficiencies and savings that are critical for survival in today’s economic climate.
ERP systems have been historically good at processing and recording transactions, but mining data for spend visibility was not one of them. Spend Analysis started in the early 1990’s at progressive companies like GE and at consulting firms like McKinsey. The idea was to mine existing spend data to identify areas where sourcing effort would be most profitable.
The idea in theory in the early days was cutting edge; however the methods to mine the data in an ERP system came with numerous problems including:
• ERP data is usually incomplete
• Contained duplicate vendors
• Poor commodity information
• Data is unchanging
Let’s dig deeper into these problems to better understand them.
ERP Data is Generally Incomplete: ERP systems record transactions which they are designed to do. However, they only record transactions that are made in that system and do not account for other systems that process transactions including P-cards. ERP’s also do not contain important SA information about supplier diversity, risk and scorecard metrics.
ERP Systems Contain Duplicate Vendors: An ERP system records the data that is entered in the transaction. It doesn’t consolidate their transactions into one supplier entity. For example, you could have 16 different transactions, with 16 different versions of Federal Express. Your transactions are just with FedEx, but it looks like you have 16 different suppliers. So you really have no idea how much you are spending with FedEx as a whole unless the transactions are entered identically by different people.
ERP Systems Don’t Contain Good Commodity Information: A good ERP system provides the ability to assign category codes to transactions, but the practitioner who is entering in the transactions usually is not well versed in the coding structure. In many, cases people don’t take the time to find the correct code, because they don’t understand the importance of it.
ERP Data is Unchanging: ERP systems are financial accounting systems by nature and because of that are designed to be rigid and make changing information about vendors or category codes very difficult. It can take weeks or months to modify the information.
All of these issues cause a very cloudy view of Spend Analysis. The problem multiplies itself with large global corporations, or with mergers and acquisitions, where you have numerous disparate ERP systems that don’t talk to each other. With incomplete, bad data, enormous savings opportunities are missed. This is where the data ends and the role of spend analysis begins. Stay tuned for Part 2: What is the value of Spend Analysis?
For more information about this topic and Spend Analysis click here for our White Paper.
One of the big cost and “choke” points in Spend Analysis has been the difficulty in collecting the many different sources of Spend related data. Spend data typically resides in disparate systems, including ERP, AP, PO, Pcard, Suppliers, Supplier enrichment, Expenses, Invoices, Freight Bills, financial systems, sales systems, and more. Spend data can also be spread across many different company locations and systems, as well as available only in foreign languages, thereby making “all” Spend data very difficult to collect. Comprehensive Spend data is needed to achieve more in-depth Spend visibility and to uncover larger cost savings for the company. Typically in the past, vendors required companies to format the data, so it could be put into a fixed database, so it could be rendered to fixed reporting and analytics capabilities. Now that has all changed.
No, data cannot be collected in 10-15 seconds, aka Star Trek “Transporter” capabilities. But today’s data collection capabilities are not far off either. With newer data management applications having underlying dynamic database “data driven” technologies applied, company data can now be collected, audited, and cleansed easily, and in a short amount of time (in hours, vs. days and weeks). All that is needed is a header row defining the file’s data fields, a related template defined, and data validation and integration points applied. This is now done within the vendor data management system, so no IT burden is placed on the organization, except to forward month-end or year-end Spend related files as appropriate, which is an easy thing to do. No more data extraction templates forcing IT people to do field mapping and hard-code their own fields to fields that are predetermined. No data formatting to prescribed translation maps finding places for extraneous or custom data within a fixed database. Simply forward a Spend-related file to a vendor FTP site, and they take it from there.
This new data collection capability may be hard to initially comprehend, but now you can enjoy the ability to easily collect more expansive Spend related data, and drive new analysis and management capabilities. The more complex your organizational disparate data is, the more that “data driven” capabilities apply.
The available selection choices are not truly relevant to new “data driven” Spend Analysis applications. Dynamic database technology saves IT departments’ hours, if not days and weeks of work, and shortens the time to deployment or refresh. Essentially, translation maps are obsolete and a rigid element of the past.
2010 should bring a flurry of new acquisitions with many established companies looking to expand product lines and increase growth within the organization.
Of these companies looking to expand through acquisition, raising capital expense to fund the newly acquired business unit will be a challenging experience in ramping-up operations with manufacturing and warehousing distribution.
Many companies will be looking to outside warehousing and distribution ( 3PL’s ) assistance in order to compensate the need to either add-on to a existing building or to reorganize a current floor plan.
It makes perfect sense when acquiring a new business unit to have the flexibility of outside warehousing and distribution. With all the challenges the current organization has with product line simplification, product integrity, customer retention and merging of operations and customer service the 3PL can add much value to the company but lending it’s expertise in distribution challenges.
Having the flexibility and an open working communication with the outside warehouse and distribution facility allows valuable time to evaluate and streamline the newly acquired business unit or product line.
The organization can now grow and nurture the new product line or reduce the number of SKU and not have it interfere with the current core business.
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