Monthly Archives: September 2006

Fourth Annual International Symposium on Supply Chain Management

Optimizing the Supply Chain:
Competitive Advantage through Information Technology

Wednesday, October 4, 2006
to Friday October 6, 2006
Wyndham Bristol Place Hotel – Toronto Airport
Toronto, Ontario, Canada

This symposium will outline recent research on the most critical supply chain issues, and discuss solutions adopted by industry leaders. In addition to presentations of competively-selected academic papers and practitioner presentations, the program will include keynote addresses by leaders in the field, open informal roundtable discussions on specific popular topics, and a stimulating panel discussion by experts in the field.

Goals:

  • to improve the understanding of how best to transform supply chains and their associated activities, thus enhancing the competitiveness of business, government and not-for-profit institutions
  • to enhance interactions among supply chain management practitioners and researchers, creating permanent networking opportunities
  • to increase industry knowledge of recent eBusiness contributions to the supply chain management field and
  • to showcase research strengths in supply chain management and transformation, and to encourage the corporate community to take advantage of these strengths

Event Management Contacts:

MeRC (McMaster eBusiness Research Centre):
Glenda MacDonald, MBA,
MeRC Manager,
Tel: 905-525-9140 Ext. 27027, gmacdon@mcmaster.ca

Dr. Elkafi Hassini,
Assistant Professor, Management Science & Information Systems,
DeGroote School of Business
Tel. 905-525-9140 Ext.23954, hassini@mcmaster.ca

PMAC (The Purchasing Management Association of Canada):
Sharon Ferriss, BJ, MBA
Director, Public Affairs and Communications
Tel: 416-542-9129, sferriss@pmac.ca

ORNEC (Ontario Research Network in Electronic Commerce):
Dr. Robert J. H. Crawhall,
Executive Director
Tel: 613-998-5237, crawhall@ornec.ca

Coupa Charges Ahead!

Yesterday I was fortunate enough to have a long chat with Dave Stephens, fellow blogger (Procurement Central) and founder of Coupa. We talked about a number of topics (and I’ll post more when I get the chance), including what Coupa is focusing on for their next enterprise release as they slowly grow (and set up shop in their new offices in Foster City, California).

Besides a lot of minor updates (which appear in both the open source and enterprise version), to appease the open source community at large (like better sorting and slicker interfaces), they are making improvements in three key areas – administration (much easier to use), buying templates and (visual) form construction (enterprise-only), and budget-based procurement (enterprise only) – probably the first “killer-app” for Coupa.

One of the problems with most approval-based eProcurement systems is that they don’t take budgets into account – which is very important not just in a budget-based shop where the approver would first have to log into another system to see how approving a large requisition would affect his budget, but in any business as a manager needs to see how an approval affects not only the total budget, but her unit’s spending to date. After all, you don’t want to overspend your (share of the) budget without a good reason, and you want to make sure that non-priority purchases are only made if it makes fiscal sense.

I was fortunate enough to see the work in progress on the enterprise edition, and it’s looking really good. The admin functionality, and functionality in general, has advanced nicely since 0.1 (and to some degree, since 0.2) and the form-based templates, definable and customizable at will by the system administrators, will give Coupa a great boost as it will now be perfectly suited for not only your office supplies, spot buys, and other odds-and-ends MRO spend, but also for your services spend as well. One-time legal services or consulting project spend, special advertising, promotional, or print spend, and other odd purchases (such as visa or passport application fees) will now all be able to be processed through the same system. This is VERY SIGNIFICANT. After all, Aberdeen has found that MRO is 26% of the total spend of a company (on average), and can be as high as 63%! Even if you’re not able to negotiate significant savings into your contracts, the presence alone of an eProcurement system, like Coupa, will save you bundles of cash since you’ll be able to virtually eliminate maverick spending with the built in compliance – one of the most significant costs to your organization!

I’ll post more later when I have the time, including some of the benefits of their forward thinking architectural choices, but for now, I suggest you download it and check it out. It might still be a pre-release, but there’s enough there to start giving it serious consideration – after all, it’s the early supporters and adopters that will get to guide its development over the next year or two, since open source projects build their roadmap based on customer feedback, not what an arbitrary executive or investor thinks is the right solution for the marketplace. Plus, they have documentation now!

Supply Chain Finance

Earlier this month, Jason Busch wrote a blog entry about Hackett, Working Capital, and a Massive, Untapped Opportunity where he commented on a recent Wall Street Journal article that captured the essence of a recent Hackett Group study that noted the 1,000 largest US Companies were able to free up approximately $72 Billion last year by reducing working capital requirements through improvements in collecting bills, turning over inventory and stretching out the amount of time they take to pay their own suppliers.

Later in the blog entry he alludes that perhaps the largest, low-risk untapped working capital reduction opportunity is a nascent area that Aberdeen and a handful of vendors refer to as supply chain finance, which helps companies treat their payables as an asset. This reminded me of a recent Research Brief from Aberdeen entitled Get Ahead with Supply Chain Finance: How to Leverage New Solutions for End-to-End Financial Improvement where they noted that enterprise benefits from Supply Chain Finance include lower end-to-end supply chain costs, working capital optimization, and shorter cash-to-cash cycles. The research brief notes the financial productivity of enterprises is being undercut by a widespread lack of global supply chain visibility and automation and that SCF solutions can eliminate paper documentation, minimize data errors, provide faster dispute management and easier detection of duplicate payments, and enable increased transparency of purchase-to-pay and order-to-cash processes which drive additional hard-dollar cost savings on top of the SCF benefits of cash flow and cost of capital improvements.

Furthermore, SCF includes not only the technology to automate settlement processes (e.g. EIPP), but also provides a path for accessing financing services throughout an entire transaction lifecycle, including related raw material, asset, and inventory financing. The financing arrangements can be done using a company’s own cash reserves or via third-party financial institution partners.

In other words, a Supply Chain Finance Solution is a combination of trade financing provided by a financial institution, a third-party vendor, or an enterprise itself, and a technology platform that unites the trading partners and the financial institution electronically and provides the financing triggers based on the occurrence of one or several supply chain events.

Makes sense to me … I’m excited to see new innovative ideas on how to maximize use of your capital in this four party arrangement. I’m going to keep a watchful eye on Aberdeen and Hackett Group research as well as SpendMatters in the coming weeks, because I think there is great value to be had in maximizing use of capital and I’m sure Jason is going to dig until he finds it. In the meantime, I’ll probably offer a few more entries on risk management and visibility, which actually bear many similarities to network risk management and visibility at a sufficiently abstract level, but that’s something for the fringe academics to debate.

Managed Services

In Part XI of The Sourcing Innovation Series, John Martin of Building SaaS authored a guest post on “The Future of Sourcing … for Services” which I discussed further in Part XII where I indicated that I not only agreed with John in that services sourcing is going to become a major part of your future sourcing initiatives but provided you with the outlines of an approach that I thought you could use to start getting a grip on your services procurement today.

Little did I know how timely these posts would be at the time I was preparing them. It turns out that as John and I were collecting our thoughts, Aberdeen was releasing their Supply Chain & Logistics Market Alert The Next Wave: Managed Services for Supply Chain. In this market brief, Aberdeen indicates that in a recent benchmark of 180 companies, 58% indicate that they are highly interested in using at least one of the following managed services:

  1. Network design and strategic inventory optimization
  2. Supply chain execution
  3. Trade compliance
  4. Supply chain planning
  5. Periodic Operational Improvement Analysis and System Tuning
  6. Data Quality Monitoring and Cleansing
  7. Data Mining and Analytics
  8. Supplier On-boarding

The study also points out that midsize companies are most likely to be interested in exploiting the expertise and resources of their technology vendors to augment their internal staff, though large companies are highly interested in supply chain execution support.

However, one of the most interesting facts is that companies that view their supply chain capabilities as “above” average for their industry are twice as likely as their peers to be highly interested in wanting to use managed services to help in supplier on-boarding and they are also more likely to desire trade compliance managed services. In other words, top performers appear to want to take advantages of any services that can help them perform better.

Finally, I’d like to emphasize that managed services offer companies the flexibility of gaining additional staff resources and expertise without having to hire people internally or having to abdicate complete process control to a third party-organization. In other words, it appears that, managed properly as part of an overall supply chain strategy, managed services can effectively augment (but not replace!) your internal supply chain teams.

The Talent Series I: Succession Planning

I know you don’t want to read about it. I don’t even want to write about it. But in a marketplace where there is constantly increasing competition for procurement professionals and where consultants are able to command $1000/day, and more, you face a constant risk of losing your most talented people to your talent-hungry competitors, especially if you don’t have good incentive plans in place that will allow your employees to earn bonuses relative to their performance. (Considering that every dollar they save is generally worth at least five sales dollar relative to the bottom line, is performance-based compensation really a stretch?) Given this harsh reality, I think this is a topic worth discussing – and a great way to kick off the talent series and get those gears grinding.

The reason I’m getting to it now is that I was poking around my favorite analyst site (Aberdeen Group*) and stumbled upon the recently released Market Alert The Key To Talent Development: Halogen Adds Succession Planning Functionality to its Employee Performance Management Suite. The brief quotes Aberdeen’s Enterprise Talent Management report that identifies a number of challenges companies are facing in their development of the next generation of leaders. The two biggest challenges (at 61% and 56%, respectively), are lack of funding for leadership development and an inability to locate or create a talent pool of candidates.

The first problem is easily solved – recognize the need for talent and invest accordingly – after all, a solid investment in your people will pay for itself in increased productivity, which translates to hard dollar savings when we are talking about procurement personnel. The second problem is more difficult – attracting people is hard, and turning them into tomorrow’s leaders is harder. That’s where succession planning comes in. By figuring out the skill sets you will need to replace your current staff, you will identify the training and mentoring that your new hires need today to become your leaders tomorrow. That way, even if your best people leave or get poached, you will have leaders ready to take their place.

The Aberdeen brief also notes that to truly be successful, companies need to be committed to long term strategic succession planning that incorporates the following key elements:

  • support from the CEO and top executives
  • creation of a talent mindset
  • creation of a performance culture
  • ensurance of data-driven decision making
  • development of a “learning organization”
  • alignment with the overall strategic plan of the company
  • organizational readiness

In other words, it’s more than just a one time effort and more than just the adoption of a technology solution – although a solution that can be integrated with talent management processes such as employee performance management, training, and assessment could be of significant value. So I’d recommend that if you haven’t started working on a succession plan, that you start today. I know it often leaves a bad taste in the mouth, but I can assure you that’s preferable to walking in to work one day and finding yourself without a leader to carry the business forward. And in the future, I think it will be a fundamental part of talent-focused organizations who solve the talent problem. After all, if everyone has access to the same knowledge, training, and experience, then, if you believe everyone has potential, everyone can eventually become leaders in their own business domains.

* This was written pre-acquisition announcement
** Note to AMR: if you want to know why, contact me. (thedoctor <AT> sourcinginnovation <DOT> com)