Posts filed under 'Technology'
February 21st, 2008
David Bush - Iasta
Industry Week recently ran an article on 7 strategies for implementing a successful corporate wiki which I found illuminating not for the strategies, as Iasta has already gone down the road of implementing wikis both internally and externally, but because it recognizes the importance of the wiki as a collaboration and knowledge sharing tool within an organization.
The article notes that businesses must enlist technologies that will help workers stay connected while they collaborate on internal projects. This is especially important if your workforce is geographically spread out. Furthermore, in today’s workplace, workers come and go, and it’s important to capture their knowledge before they retire, resign, or move on to another position in the company.
As the author notes, before you start off down the markup-tagged road, you need to assess for yourself what can be done to ensure employees use wikis productively and for the larger good, and design your wiki to meet the criteria you identify. To help you with this, the following strategies were presented:
- integrate the wiki as one of several tools in the collaboration architecture
- define, monitor, and enforce the wiki rules of conduct
- optimize the use of wikis for collaborative knowledge creation
- assign a champion to encourage adoption and use of each wiki
- realize that the largest barrier will be convincing your employees to edit the work of their peers
- incorporate small scripts that structure and automate repetitive behaviors
- constantly encourage collaboration in the work place
Entry Filed under: General, Technology
February 15th, 2008
David Bush - Iasta
I was actually starting to get used to my daily email from Reuters, which I was eventually able to set up with a better topic rule list. So, in the middle of December, I scratched my head a couple times trying to remember the last time I got my sourcing news. Finally, I took the time to email Maud Larpent about it, who graciously replied.
Hi Dave
Yes the daily emails have been stopped… Reuters has moved to the next stage of development of the Reuters Insight service and as a result has closed the pilot on Monday 17th December 2007. The team will use learnings, and your feedback, to drive the next stage of developing the business.
This approach will ensure we are able to concentrate on providing the best service possible. We appreciate your commitment to and support of the Reuters Insight service. We’ll continue to keep you up to date with our plans for the future and please continue to contact us, at go.global@reuters.com.
Kind Regards
Maud
I really liked that service, although I never understood what Reuters was getting out of it. Although, I thought the filters could be improved, it did a pretty good job of sending me about 1-2 articles of interest per day.
So, that’s the update, if any one else was getting those and wondered what happened, since I never got a notice of suspension. Maybe it will be back with more features and push traffic into more Reuters affiliated sites. If I could have drilled into more specific categories, it would have been a really slick way to automate my sourcing news.
Entry Filed under: General, Technology
February 12th, 2008
David Bush - Iasta
Author’s note: This is a joint effort with Michael Lamoureux.
A lot of vendors these days are claiming to offer SaaS, because that’s the buzzword of the day and people are realizing that unless they are an IT company with their own high reliability, fault-tolerant, data center with redundant Internet connectivity and power providers, it’s usually better to have a technology company manage the software and data center. (And even if they are an IT company with a modern data center, sometimes it’s cheaper to have certain applications hosted and managed by a third party.)
However, just because a vendor offers you an application “on-demand”, this does not mean it’s true “Software as a Service”, or SaaS if you will. If you look beneath the covers, it’s often just a traditional hosted ASP model relabeled as “on-demand” or “SaaS” because either the provider doesn’t know the difference between ASP and true SaaS, or the provider is hoping that you
don’t know and will thus perceive their offering to be better than it really is.
True SaaS requires multi-tenant. To understand this, we’ll review three major advantages of SaaS in detail which you will NOT realize if you just go hosted ASP. (Many of these are described in the wiki paper).
- Instant Deployment
A hosted ASP vendor might be able to get you up fast, but not instantly. A hosted ASP vendor will have to build a new machine, install their software, and put it on their network. If they are really efficient, they will used standard configurations and have a ghost image that they can flash onto a new machine in an hour or two, but this is not instant. And if the network guy is sick that day, it might be a few days before they can get around to the flash and get the new machine tested and in their data center.
A true multi-tenant SaaS offering only requires the creation of a new customer account, and it’s good to go on the current platform with no installs, no customizations, and no new hardware. It should literally take the vendor longer to log the request and collect your information than to make you live.
- Instant Upgrades
A hosted ASP vendor needs to update every customer’s machine to upgrade their offering. If they have 200 customers, they have to do 200 upgrades. Could be a few weeks before you see your upgrade, depending on where you fall on their priority list.
With a true multi-tenant SaaS offering, only the main instance is updated and every customer is updated simultaneously. You see the update as soon as its ready.
- Economies of Scale
The real benefit of SaaS is the considerable cost savings it allows. An ASP provider has to maintain separate hardware for every customer, which, most of the time, won’t even come close to maximum utilization, and has to maintain a large team of network professionals to maintain all those
machines.
A true multi-tenant SaaS application can use heavy duty multi-core servers and support 10, 20, or 100 customers (using an IBM or Sun rack configuration) on a single hardware platform with built in virtualization and fail-over. With only one machine and one software instance to update,
only a small team of network people is required - this represents a considerable salary cost savings that can be passed on to their customers. Furthermore, because hardware only has to be added occasionally, and because virtualization allows processors to be powered down when utilization is low, the vendor that has a true multi-tenant SaaS application also saves on hardware and energy costs, and can pass this savings onto its customers as well.
Furthermore, the following advantages will not be realized to their full potential if you just go with a traditional hosted ASP solution:
- Pay as You Go
The provider will need a substantial set-up fee up front, or will have to jack up your price to cover the set-up costs.
- Single Instance
You’re a large organization that has more users than a large server can handle? Too bad. You’ll find your users split across multiple instances. This will be particularly problematic when one instance fails while another stays up.
- Free Upgrades
Since an ASP provider has to install each patch separately for each customer, you’ll be paying a large maintenance fee, whether you know it or not. (Some providers will hide it in the monthly fee, but you’re still paying it.)
- The customer has the leverage.
Due to the large set-up costs, these providers will insist that you sign long-term hosting contracts. A real SaaS provider will go for a contract as short as three to six months, although you won’t get a discount unless you sign up for at least a year or two.
- Regular Automated Data Backup
An ASP provider will claim to do this … and they will buy a separate backup drive for you machine … and all will seem well until your server fails and you realize that they haven’t tested your backup drive in over 2 months (since it takes them a long time to cycle through the testing
rotation) and the last good backup was a month ago.
- Built for Change
To an ASP provider, change is great … as long as you don’t do it more than once a year. Just trust us on this one.
Plus, as my post co-author pointed out over on his blog, Sourcing Innovation, ASP is just not as green as SaaS.
Entry Filed under: General, Technology, e-Sourcing Marketplace
February 11th, 2008
Todd Epple - Iasta
A recent article popped up in Network World about another vendor in the industry extolling the virtues of “utility computing”.
Perfect Commerce, much to the chagrin of its remaining internal IT staff, is outsourcing all of its datacenter operations to Savvis in a $5 million 3-year contract. When I first read this I was shocked at the price tag, which I am sure has been discounted considerably from Savvis’ list pricing considering the public press release and marketing help that Perfect has given them. Still how could this cost be justified in a company the size of Perfect (150 employees)?!?
Digging deeper into the press release, I have found the reason…
“A couple of years ago, we had between 500 and 600 servers at Perfect Commerce in about 29 different application groups.”
Bingo. Now it all makes sense. They had about four times as many servers as employees! And who knows how many other assets (desktops, laptops, printers, routers, switches, firewalls, etc) the overburdened IT staff was responsible for managing. And 29 “application groups” is an awful lot for a small software company to even have a hope of providing decent customer support.
I am sure the strain of supporting SO MANY legacy systems (40 servers per IT employee!!) that were cobbled together or acquired over the years was causing a lot of stress and strain on the understaffed IT department especially considering the skyrocketing demands (and costs) of compliance/security and higher availability levels. So instead of tackling these problems in-house the decision has been made to throw a lot of money at the problem.
Thankfully, Savvis has the right prescription for this problem: server consolidation and virtualization. This clearly should have been accomplished many years ago and, when completed, will increase the efficiency and manageability of these assets. With the sheer volume of virtualization they will need to do this, it may be a good time to load up on some more VMW or EMC stock while they are down. Another winner in all of this is the environment. 600 servers at 300 watts each consume about 180 kilowatts, or almost $500 per day in electricity not including the extra AC such a datacenter would require. Cutting the number of physical servers by more than half would be good for Perfect’s carbon footprint.
So, to recap, here are the winners and losers:
Winners:
Savvis
EMC and VMW
The Environment
The Economy in Atlanta and D.C.
Losers:
Perfect’s IT Staff
Kansas City Power and Light
The Kansas City Economy
IT Consultants (the article says they were paid $300/HOUR!!)
It is clearly very difficult to have to manage this many legacy systems and products for any company, both from an IT perspective and from a customer service perspective. I’m really not sure where this leaves Perfect’s customers–will the quality of their support improve or not? Will the money have been better spent improving the support or the products versus paying the infrastructure tax of legacy acquisitions? Stay tuned…100% acquisition retention is on the line!
Entry Filed under: General, Technology, e-Sourcing Marketplace
February 7th, 2008
David Bush - Iasta
Last month, Global Services Media ran an article titled Sourcing: From Art to Science that noted that not only do today’s approaches to managing global sourcing rely primarily on antiquated methods for project scoping, but that they also fail to put into place real-time metrics to assess productivity. The article also notes that nearly half of sourcing relationships that rely on distributed global teams sour and fall far short of expectations. Those aren’t good odds.
The author states that he believes that we need to build a more sophisticated infrastructure of tools and methods to manage the complexity of working globally. This is because global teams create levels of complexity in management, metrics, and productivity that come with a price. Furthermore, the author states that he believes that the answer lies in real-time dashboards that provide instant metrics on productivity and immediate visibility into a process collaboration, problem situations, and new opportunities.
Now, while I wholeheartedly agree with the need for better visibility, I have to say, especially after discussions with the doctor who has his own views on dashboards (in short, they’re dangerous and dysfunctional), that I do not agree that dashboards alone will solve the problem. Although they might tell you, assuming they’re built properly, where you’re not performing at estimated peak efficiency (and where there’s room for improvement), they won’t tell you why or what you can do about it. Plus, if the metrics say you’re doing well, you can be lulled into a false sense of security. This would be bad if someone came up with a more efficient way to do a process, which you completely ignored because you thought you were doing well enough.
To me, the answer is more science, and more visibility, but it comes in the form of collaborative project management and deep analysis. This requires an e-Sourcing platform that is fully integrated and configurable, to give each team member the access he or she needs, and that tracks project status and outstanding tasks in a simple manner that allows quick access to current projects and tasks. Furthermore, and this is key, the platform needs deep analytics - in the form of spend analysis and optimization - to allow the sourcing team to uncover issues and model the total costs of a potential award so that the best decision can be made going in. In other words, more science is the answer to your sourcing pains, but real-time metrics in a dummy dashboard is not enough.
Entry Filed under: General, Optimization, Project Management, Spend Analysis, Supply Management Best Practices, Technology
February 6th, 2008
Michael Lamoureux
Optimization can not only be used to reduce cost, but it can also be used to reduce risk. In this post I’m going to overview how you can effectively support seven common risk mitigation strategies in a proper strategic sourcing decision optimization solution (including the solution offered by Iasta, if you’re wondering).
Capacity Assurance
You can create exclusion constraints that restrict supply to suppliers with a minimum amount of capacity to insure that the suppliers can handle the award they receive. Furthermore, you can create qualitative constraints that restrict award to suppliers with spare capacity to insure you can cope with unexpected demand surges. Although forecasting significantly more demand than you actually have is bad, especially if you stockpile inventory and don’t dynamically order and pull as needed, forecasting significantly less demand and not being able to meet that demand is much worse - because then your brand takes a big hit in the public market, which is much harder to recover from.
Compliance
These days, there are a dizzying array of regulations that may need to be complied with such as REACH, RoHS, Part 11, ITAR, and SOX (etc., etc., etc.), and failure to comply with any one of these regulations can result in huge fines, delayed or stopped shipments, or confiscation and destruction of inventory. Thus, it’s key that you insure that each product you source meets the regulations that you have to meet. Optimization supports this by allowing you to exclude suppliers that don’t meet any of the requirements, and limit supply to suppliers that only meet the standards of some of the countries you ship product to.
Distribution Alternatives
A strategic sourcing decision optimization solution that supports freight lanes can support multiple carriers, allowing you to select the lowest carrier, and lowest cost shipping lane per carrier, between a supplier warehouse and a buyer distribution center. (If the product doesn’t support multiple shipping lanes per carrier for each warehouse-distribution_center pair, you can always create a second instance of the carrier and associate that with alternate routes. You can then account for total volume discounts offered by the carrier by defining the discounts on all instances of the carrier.)
Dual Sourcing
From a risk mitigation perspective, sole sourcing is a bad idea. A really, really bad idea. With decision optimization, you can use allocation constraints to force an award to at least two carriers, and even specify an approximate award breakdown, such as a 20-30-50% split between the three lowest cost carriers.
Incentives / Performance Based Contracts
Let’s face it, some suppliers will perform much better if they get a bonus for good performance. By using negative discounts, you can determine how much a given award would cost you if the supplier performed exemplary under an incentive structure, and by using penalties, you can determine how much an award would cost if the supplier performed poorly (providing you also factored in an adjustment for the higher cost of processing more returns).
Lead Time Reduction
You can use a qualitative constraint to capture the average amount of delivery time for each carrier on each lane and limit awards to a given distribution center, set of distribution centers, or all distribution centers to product from supplier warehouses that can reach the destination(s) in a maximum (average) timeframe. Thus, if you’re selling a product for which demand can fluctuate significantly, you can make sure you can always restock within a given timeframe as soon as the sales data starts to spike unexpectedly.
Price Hedging
Strategic sourcing decision optimization can help you figure out what contract length might be optimal for a given commodity. For example, if your predictions are that oil is going to keep rising for the next year, with a peak price that’s $20 per barrel above what you’re paying now, and your main supplier thinks that it’s going to top out at a peak price that’s only $10 per barrel more than what you’re paying now, and is willing to give you all the oil you need at only $5 more per barrel than the current market price, you can run scenarios for a 6 month demand window and a 1 year demand window at different price points. Then, you can see that if cost keeps increasing at a rate that is only two thirds of your prediction, it’s probably better to hedge for a full year.
And, of course, proper strategic sourcing decision optimization also gives you:
Total Value Management
Since it allows you to capture all your costs - unit, freight, utilization, and impact costs (by way of adjustments) - as well as any discounts available to you from a supplier for the purchase of certain products in sufficient quantities. This means that you’ll always get the lowest total cost of ownership with respect to your business constraints.
Entry Filed under: Global Supply Issues/Risk, Optimization, Supply Management Best Practices, Technology
February 5th, 2008
David Bush - Iasta
Our last newsletter was a big hit, I got a lot of positive feedback and messages from people that even said they had forwarded to others they thought would relate to it. Apparently, it struck a cord with a few folks, so I am republishing it now. If you are not subscribed to Iasta Insights, its easy and you can do so here. It is a bi-monthly produced newsletter that takes on supply management challenges in all forms. Amazingly, it just started its fifth year.
Software Acquisitions: Is Wall Street’s Gain Your Loss?
In the past year, we’ve seen a flurry of acquisition activity in the sourcing and procurement software world. Most recent, industry giant Ariba acquired venture-leveraged Procuri. In full disclosure, both vendors are companies we respect and often run into in competitive situations. But while deals like this might be good for the fat cats on Wall Street, are they really good for customers? A recent article in The Wall Street Journal offers a strong perspective which suggests customers should watch their wallet when it comes to mergers and acquisitions their providers engage in.
According to the venerable daily, as “software companies flesh out their integration plans internally, customers on the outside are left with unanswered questions about their future. It often takes years for software makers to integrate all the products they have bought — if they manage to at all — making it hard for customers to decide what to buy in the meantime. Some customers worry about losing negotiating power in the long run as the number of product choices dwindles. And all the deal making can crimp a CIO’s ability to plan, since it’s unclear which software makers will survive.” But perhaps an Oracle / Peoplesoft customer interviewed for the article says it best: “In my experience [following the acquisition], it’s been a dog’s breakfast wrapped in a nice pretty ribbon.”
At Iasta, we’re not fond of serving up dog food. In fact, we’re the only vendor of comparable customer reach in the e-Sourcing world that we know who has been able to grow organically without acquisitions which would threaten our focus or customer service ethos. But perhaps even more important, what you see with Iasta is what you get. Unlike everyone else we know in the space, Iasta has no outside investors. Early on, this constrained our ability to grow quickly, but over the long term, it has – and will continue – to afford us tremendous freedom to make decisions that are right for our customers over the long-run versus what is best for external shareholders looking to make a buck.
In fact, this last point would appear very close to home given the recent Procuri deal. Procuri – like Iasta – was experiencing sustainable market growth before Ariba acquired them, but it was not enough for investors who had complete control of the company (and who made 90+% of the money on the “exit”). According to Gartner Research in 2007:
“Ariba has several decisions to make in the wake of this acquisition, as no major functional gaps in Ariba’s product line are enhanced with Procuri’s offerings. Instead, Ariba will have two product lines with primarily duplicate functionality. Since Procuri’s solution set is built on .NET, and Ariba’s is not, Gartner believes that the Procuri platform solution is less likely to survive during the next two to five years as a separate technology platform.”
Now, Procuri customers face a choice – work with a provider with a questionable commitment to a legacy application, or consider other options. If early customer fall-out is any indication, many are clearly opting for the latter.
At Iasta, we remain 100% committed to putting our customers first rather than doing deals to keep our investors happy, but which will ultimately disappoint those who matter most – you. Whether it’s through e-Sourcing, advanced optimization, or contract management, Iasta is committed to driving innovation, value and customer success first. We wish we could say the same about everyone else, but then again, they’re not providers who boot-strapped their way to success, one customer at a time.
Entry Filed under: General, Technology, e-Sourcing Marketplace
February 4th, 2008
David Bush - Iasta
Some of you may have noticed a new facade to E-Sourcing Forum on Friday. Please, join me on a brief tour of your new surroundings with updated amenities abound. Some of the highlights include:
- New Presentation: The last design was fine and worked, but honestly, the pink hue that existed on some monitors always bothered me greatly. As ESF grew and grew, so did the embarrassing pinkness. You will notice that I have really tricked out this theme to match our other sites a little better with sharper lines and the triumphant return of Blood Red / Crimson as the dominant color.
- Aggregators: On the right side of the banner, there are now two new tabs labeled Sourcing News and Sourcing Blogs. These are brand new areas of the site that are pulling RSS feeds from important locations such as Spend Matters, Sourcing Innovation, SS | Europe, ELP, Purchasing Magazine, CPO Agenda and many others.
- Structure: This is pretty obvious, but now the Date, Comments and Author are in the header of each post while the categories have moved to the bottom. Registering and Log in are now at the page footer, as well.
- Upgrade: We upgraded to Wordpress 2.3.2 and also changed the captcha technology. Trackbacks were removed a long time ago, so sorry if you ever needed that. The new captcha should be much easier to read. I hope it works, I have been through 4 different ones and the bots cracked all of them. The last one was very good but also could stump a human, which is not the intended purpose.
- Web 2.0 enhancements: ESF now supports Digg and del.icio.us. Not everyone will use or need this, but it can be pretty cool and might even give you some of social networking experience to speak about and understand the trends!
- Traffic Map: This is my favorite enhancement. I found this utility last month while I was working on the redesign. It is a mesmerizing little application that graphically tracks the visitors who come to the ESF home page. Obviously, a lot of traffic back doors its way in from links and search engines, but this is neat tool that shows where active readers are in real time. Statistically speaking, its probably pretty accurate for the reader distribution.
That’s about everything noticeable. Special thanks to Matt and Moses at Iasta HQ for their help, I am very happy with the final outcome and appreciate any comments and patience while any tweaks are needed.
Entry Filed under: General, Technology
February 1st, 2008
David Bush - Iasta
This post does not need to be very long, I just wanted to point out a nice blog by Sourcing Innovation, which describes the difference between eProcurement and eSourcing. Yes, there is a big difference here, but not every one understands this. To this day, I still get people that go into technology review and market evaluation for eSourcing but reference eProcurement. Michael’s chart is comprehensive, yet simple. As described by the doctor:
“Without procurement, the organization wouldn’t have a large transaction database and extensive visibility into spend, the key to a successful spend analysis effort, which is the first phase of e-Sourcing. And without sourcing, there would be no strategically negotiated contracts to buy against, and procurement managers would be spending willy nilly, making the current level of maverick spending that you have to deal with pale in comparison.”
Thank you, please drive through.
Entry Filed under: General, Technology, e-Sourcing Marketplace
January 31st, 2008
Sean Delaney - Iasta UK
In a previous entry I talked about how the utilisation of Spend Analysis software makes the rational of a vendor reduction programme less relevant. When reading the latest report from The World Economic Forum on the risks for 2008 I am convinced this logic will now start to gain more momentum.
According to the WEF there are 4 major risks to be aware of over the forthcoming decade. What is most disturbing is that all 4 will have an immediate effect on sourcing decisions.
In summary these are:
• Systematic Financial risk – this has already been well documented in recent weeks. The lack of liquidity in markets will have a negative effect on business investment and therefore increase capacity constraints in the global supply chain.
• Food Security – Global food prices are at record highs whilst stocks are at 25 year lows….”population growth, lifestyle changes, use of crops to manufacture bio fuels and climate change – are likely to sharpen over the coming decade”. There is already evidence of this in the UK. During the last 10 years land used for Agricultural purposes has fallen by 8%. In addition land still in use is increasingly being used for the production of Bio fuels. The price of wheat is at all time high. Furthermore during the same period the population has grown by 2m to 60m – this is predicted to grow to 69m by 2027!
As anicdotal evidence of the scale of the shift the other day I was at my son’s children party. When I was talking to one of the Dads he mentioned that an old colleague was, until recently trading currencies and he is now trading livestock in Australia…buying millions and millions of dollars of cattle one day and selling the next. What’s more is he is achieving higher returns than he was when he was trading currencies.
• Supply Chain Vulnerability – “Improvements in technology and global logistics, along with reduced trade barriers, have led to a historic expansion of international and intra-regional trade over the past 20 years”. Although this has widely been seen as a benefit the WEF are saying now our risks are too concentrated in core areas. For example the concentration of raw material ownership in the hands of say State controlled funds or the impact on wage price increases in China.
• Energy – the increasing demand for energy coupled with the requirement to reduce CO2 emissions is going to cause difficulties. I am already seeing the growth in the demand for specialist energy buyers to mitigate organisational risk. However when we see 17% increase in fuel bills universally applied by all suppliers, clear evidence of collusion in the market and what is worse more political influence on the supply it seems that such a move is now punitive.
I would like to add a fifth risk that since none of these risks were mentioned in the same report for 2007 volatility caused by globalisation should be added too!
From this it is quite clear that there is need for global supply chains to be more diverse and as mentioned before this can be achieved with decent (real time as possible) spend analysis. Furthermore this technology should be used to monitor production, commitments and deliveries. Reports should also include commitment further down the supply chain.
The use of sourcing optimisation technology is now essential and especially the use of “what if” scenarios is a must. In fact the speed of change could require optimisation scenarios to be computed more frequently and not just at the point of “award”. This would allow for the inclusion of such things like the effect of climate changes to raw material stocks or the increase in the average wage in China.
It is now obvious that it should be a priority to use both of these technologies. However what has struck me is that combining these technologies together would achieve far more powerful results. I don’t know the exact probabilities by my guess is that the benefits would be exponential and thus reduce the probability of major a catastrophe in a global supply chain.
Entry Filed under: Analysts/Research, General, Global Supply Issues/Risk, Optimization, Spend Analysis, Technology
January 17th, 2008
David Bush - Iasta
Aberdeen recently released an informative research brief entitled The Supplier Enablement Challenge that pointed out the importance of supplier enablement. They found that Best-In-Class companies that had achieved decent supplier enablement had 15% more spend under management (78% to 63%), requisition-to-order costs that were 30% less ($22 vs $32), requisition-to-order cycles that were 60% shorter (1.8 days to 4.5 days), and 21% less maverick (off-contract) spend (17% vs 23%).
More importantly, they pointed out that you should ignore the 80/20 rule when it comes to supplier enablement. Simply focussing your efforts on the top 20% of suppliers that constitute approximately 80% of your spend is not enough - it’s often the remaining 80% of suppliers that constitute the majority of problems when it comes to supplier interactions. You want at least 80% of your suppliers enabled, and preferably every supplier with web access.
The survey also found some very disheartening statistics. Even in best-in-class companies, the amount of spend that can be catalogued that is actually in a catalogue is only 35.3%, the percentage of requisitions off catalog is 30.1%, and the percentage of catalogs managed by suppliers is only 41.7%. Considering a solution like Vinimaya can easily catalogue anything available over the web, and all a supplier has to do to customize a catalogue for a buyer is provide a custom price feed, these statistics should be over 90% for catalog available items, under 10% for requisitions off catalog, and over 80% for catalogs managed by suppliers. Furthermore, the survey also found that it takes Best-in-Class enterprises approximately twenty-three days to on-board a new supplier. On average, it takes Vinimaya one.
The survey concluded that companies that want to be supplier enablement leaders need to leverage supplier networks, catalog hubs, and punchout catalogs. But while this is true, as the doctor pointed out over on Sourcing Innovation, what they really need to do is leverage agent technology - supplier network 2.0 technology, to speed up their enablement. Furthermore, they need to integrate their enablement strategies with their e-Procurement systems to make sure spend is on contract at the contracted rates. This is even more important than integrating your sourcing system with your e-Procurement system. In any given year, you’re only strategically sourcing a few of your big commodity categories. But you’re buying every category every day.
Entry Filed under: General, Suppliers, Supply Management Best Practices, Technology
January 16th, 2008
David Bush - Iasta
SCDigest ran a commentary recently which spelled out five recommendations for improving your results for eSourcing.
- Prioritize The Trinity Of Reliability, Quality And Price
Very true, eSourcing does not change what you would normally do when going through a sourcing exercise, it just enhances it. If you sense the loss of a critical milestones, recalibrate and get it right.
- Use e-Sourcing Strategically
SCD claims here that not all projects are suited for eSourcing. This is a classic trap and not true. It is true that not all things should be reverse auctioned, but teams should get used to using other tools like RFx and optimization for specialized opportunities. Additionally, the sourcing team should be capturing the spend information to maintain quality reporting in the management dashboards.
- Provide Clearly Defined And Relevant Specifications
Again, to point one, have good specs whether you are on or offline line and issuing a bid. Otherwise, you should just “re-order” and not “source”.
- Focus On The Quality, Not The Quantity Of The Supplier Pool
Here is a good point and where your sourcing organization needs to get serious about using RFx technology to the fullest of its capabilities.
- Encourage Suppliers To Participate In Shaping Negotiating Terms
Using collaborative bidding tools like multi-round RFx or optimization allow a much more interactive bidding experience and where suppliers stay engaged and productive for the entirety of the project.
Don’t forget the most important one!
Utilize your eSourcing vendor for high quality support and guidance in eSourcing best practices. In all likelihood, they have already been there and done that, with regards to the problems that you are staring down.
Entry Filed under: General, Optimization, Reverse Auctions, Supply Management Best Practices, Technology, e-RFx
January 10th, 2008
David Bush - Iasta
Supply and Demand Chain Exec has a fantastic article on eSourcing process integration, which is written by Andy Sealock of Pace Harmon. If you can get past the incredibly unfriendly user obstruction for printing and viewing the article on 7 different pages, you will be able to really get a ton of great information. In fact, I would say that this is the best and most comprehensive content I have read about eSourcing project management.
This comes off my recent post, The Per Event Paradigm, where I tried to dissuade companies from under committing to the eSourcing process. This article validates that principle with many examples of best practices for setting up the proper eSourcing frame work and foundation. I will not steal too much of the thunder from the article, but Andy does say, “a common pitfall is to squander that investment by not executing properly on the associated process integration, and therefore never realize the value projected in the business case used to justify the tool.” Well put.
Some of the key principles that are highlighted include:
- Establish Uniform Data Definitions and Provide Training
- Build Data Collection Requirements with the End Result in Mind
- Data Attributes To Capture for Project Management (including project status levels)
The final page also goes into best practices for eRFx and reverse auctions, which are always good to refresh and understand. One of the comments he makes is:
Companies can better leverage e-sourcing tool auto-scoring capabilities for vendor proposals by structuring as many requirements as possible in the form of binary (yes/no) answers, or requiring the vendor to enter a specific value, or choose from a list of multiple-choice responses. This improves evaluation process efficiency as the assignment of weights to these requirements can be built into the tool ahead of time. The tool will then apply the appropriate weights to vendor proposal responses and auto-score them without manual intervention.
I do agree with this principle, but am not sure the practice can be enforced consistently. It is like telling people that an auction should be awarded to the lowest bidder because all other factors have been normalized. This is true, but very difficult to accomplish in tight time frames and other unknowns.
The article ends brilliantly:
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, Project Management, Reverse Auctions, Supply Management Best Practices, Technology, e-RFx
January 8th, 2008
David Bush - Iasta
So, you are a CPO and you have decided that using eSourcing technology is a good thing and read some information about auctions that sounds compelling. Now, you have to make some decisions on how you want to implement your plan and drive the best value. Suddenly, the idea comes to you that buying sourcing projects “by the drink” is a good way to pay for what you use and amounts to the perfect plan. Not so fast my friend…you are probably making an unwise decision and here is why.
- Not committing to the process. By choosing the non-committal route, you are effectively rudderless on eSourcing strategy. The term of having “skin in the game” always comes to mind and without it, you are basically admitting that there is no plan to embrace the eSourcing process.
- Artificially eliminating opportunities by cost of service and support. When you pay as you go, you have to consider the cost-benefit of every single category opportunity. This becomes a non-stop struggle of trying to assess the situation and potential for savings. Consequently, the uncertainty forces many good categories to drift away.
- Losing valuable data for tracking spend under management. If you cherry pick opportunities, you are only tracking data on the categories that actually get tapped for eSourcing, which paints an incomplete picture of the strategic sourcing process.
- Losing the benefit of sourcing automation and efficiency. Again, when you just pluck a few low hanging categories for reverse auctions, you are losing the benefits of knowledge capture and transfer, standardization and process efficiency. This is one of the huge benefits of eSourcing that goes well beyond an auction.
What appears to be good on the surface, actually becomes a self fulfilling prophecy on eSourcing failure. I have seen it happen in the past and the result is almost always the same. There have been exceptions, as evidenced by a new client of ours, who absolutely did not have the ability to go long on eSourcing when they started working with us, but they always had the intention to embrace it when the funds became available. However, most companies that choose this path are doing it for the wrong reasons and the results are predictable.
I also found this article about budgeting that people might find interesting. Budgets are important but should not impede the goal of success.
Entry Filed under: General, Supply Management Best Practices, Technology
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