Monthly Archives: September 2006

The Sourcing Innovation Series XIII: Part One Wrap Up

First of all, I’d like to thank all the contributors for their efforts and incredibly well thought contributions. It was a great series.

With commentaries ranging from technology through processes to services, from technological, business and even economic backgrounds, I think this first series brought a breadth and depth to the topic that even think-tanks would be hard pressed to match. Ranging from the down-to-earth predictions that the future will be forged from process improvements and enhanced corporate understanding of how to use existing technology (David) through evolutionary process improvements such as new hybrid sourcing models (Tim) to sky-high predictions that in the future capacities will be securitized and traded on the open market (Jason), this series opened our minds not only to the art of the possible, but the art of the probable. Given whom many of these predictions are coming from, I’d say it’s a safe bet that many of today’s predictions will turn into tomorrow’s technologies, processes, and best practices. So if you missed any posts, use the links above to catch up. And if you didn’t, use the links above to read them again. Considering what these guys can charge for their advice, and the very high caliber of the postings, I’d wring every idea I can get out of them. It might just give you the leg-up you need to surpass your competition.

I’m not going to attempt to summarize the series in this post, since I spent nine posts trying to do just that as I offered my views, but instead note that I hope to make this a regular yearly series. Sourcing is always changing, and not just because of the rapid advancements in technology which have skyrocketed it, eProcurement, eCommerce, and supply chain forward in recent years. I think it will be very interesting to see not only where it is in a year, but how that changes our perceptions of where it is going and how fast it will get there. I hope my fellow bloggers and contributors agree, since they’ll all be receiving invitations, root* willing, next summer to contribute to Partie Deux!.

Back to the present. Given the recent focus on talent#, I would like to propose that as the second cross-blog topic. I know Charles, Tim, and David are quite interested in this topic, as well as myself, (as they blog about it regularly). I’m particularly interested in predictions on how companies are going to close the talent gap over the next twelve months – and, in particular, innovative techniques they are going to use to do it. What do you say guys – up for it? (Guest commentators – if you want your top-notch commentary on SourcingInnovation on this topic, feel free to email thedoctor <AT> sourcinginnovation <DOT> com.)

Thanks again guys! Fantastic job!

* Inside Techie Joke
! It just sounds better en francais.
# See the Talent category in the category archives, sixth component down on the right hand side of the page.

Lack of Visibility Kills

I know it’s Saturday, and I know you’re probably expecting me to talk about something along the lines of Flaming Laptops since I usually take the day off from sourcing, but something happened this week that not only cost many large retailers a significant amount of money, but killed someone. If you haven’t figured it out yet, I’m referring to the E. coli outbreak that has hit 20 states (so far) as a result of tainted spinach.

Even though Wal-Mart Stores Inc., Safeway Inc., SuperValue Inc., and other major grocery chains stopped selling spinach and removed it from their shelves and salad bars, the problem is not over – since investigators still are not sure about the source of the problem, which they believe to be somewhere in California’s Monterey County, which grows more than half of the nation’s spinach crop.

The CNN article seems to suggest that the nation’s “fractured network” of food safety agencies is the problem – that they do not “communicate” well enough, implying that one of the agencies, or someone at one of the agencies, did not do their job. I do not think that is the problem. As far as I’m concerned, the problem lies with Wal-Mart, Safeway, SuperValue, and every other chain that sold the spinach. You should know who your suppliers are. You should be aware of their health and safety processes and policies. You should verify that they do regular health and safety inspections or do your own. Your supply chain should be visible to you and you should know that you can trust everyone in it and that everyone in it is doing their job.

It’s not just the benefits of global visibility, or the costs associated with having to trash or scrap and write-off a large buy since the quality was sub-par and the product unusable. In cases where you are producing a product for public consumption, lack of visibility, as this example clearly demonstrates, can produce a product so unsafe that someone dies. And that’s going to cost you a lot more than the high dollar lawsuit sure to come your way – it’s going to cost you brand image, customers, and if you’re the poor sap whose job it was to insure quality, a hell of a lot of sleep.

I’m not saying you need to rush out and buy a six, seven, or eight figure visibility solution (although I’m sure Apexon would love to talk to you if you thought that was the answer for you), although a solid visibility solution is definitely worth a reasonable investment, but that you need to develop a visibility mindset. Institute processes to make sure each supplier meets your health, safety, and quality requirements, perform your own random checks, make sure your suppliers do their checks when they say they do, and to the required level of quality, and, finally, make sure your suppliers have a culture of making sure their suppliers aspire to the same level of health, safety, and quality that they do. Visibility needs to permeate your supply chain to provide maximum benefit.

On Demand V: Preparing for the Transition

Earlier this month, Purchasing.com published yet another article about on-demand entitled On-demand promises to hook savings stating that on-demand software and technology is more than just software on someone else’s servers—it’s a delivery method that supporters say improves ROI. However, what caught my attention about this article was that it gave some suggestions on how to prepare for a switch to an on-demand solution, something we haven’t really discussed yet in this series.

The suggestions offered by the article are:

  • Know what you need! Develop a solid statement of expectation or long-term roadmap for the specific problems you’re trying to fix and/or the specific results you need to attain. (Note: Discuss this list with your prospective solution provider(s)!)
  • Talk to other users of on-demand technology. Get their perspective on what on-demand is doing for them. (Note: Any on-demand solution provider I’ve talked to is usually more than happy to provide you with a list of contacts in their customer base that you can call.)

In addition, I would suggest you also:

  • Identify what systems your data currently resides in and what systems you are going to need to export data from and import data to. Make sure the solution you select either interfaces with these systems or supports standard input and output formats that will allow you to import and export the appropriate data as needed.
  • Start with a pilot. The beauty of on-demand is that solution providers can literally set up pilot accounts at a flick-of-a-switch that you can use to try-before-you-buy. In addition, most providers will engage in a pilot project with you to prove their solution at very little cost to you. (The standard seems to be free access to the system for the length of the pilot if you cover reasonable consulting costs and expenses. Some eSourcing providers with analytic solutions will even do preliminary one or two day proof-of-concepts on existing data for free to demonstrate the power of their tool.)

Another good point made in the article is that moving to an on-demand solution is not an overnight process as it’s a change management process. The most successful projects transition small groups of power users at a time. These power users become the internal proponents, experts, and trainers and help bring the rest of the organization over to the new organization.

The article mentions how Cox Enterprises was up and running on Procuri‘s on-demand solution in under 3 months and saved 2M in a 10M spend category on their very first on-demand sourcing event. It’s important to note that this is a typical result – initial projects using the latest sourcing technologies built into on-demand platforms typically save users 10 to 30% since they not only enable transparency in your market, but remove inefficiencies from the process. If you check out Iasta‘s typical results, they are 17 to 26% in aerospace/defense and automotive, 19 to 27% in consumer packaged goods, 18 to 25% in electronics, and 14 to 27% in food processing and food service, for example. (And some of their results at some of their new Fortune 500 clients have been just as impressive.) Iasta maintains a complete list of categories it has assisted clients in here. Procuri also has a page dedicated to Success Stories.

Another impressive point of note is that ServiceMaster now claims to have a 99% compliance rate as a result of switching to an on-demand solution. I guess the only thing left to ask is if you have not tried on-demand, why? With solutions that encapsulate the end-to-end executable sourcing cycle in a single, consistent, easy-to-use desktop application, and the cost of a pilot project less than what a big five consulting company would likely charge you to analyze your processes and installed applications and tell you that you should probably supplement their weaknesses with an on-demand solution, it seems like an obvious choice to me. So, like fellow bloggers David Bush of eSourcingForum and Tim Minahan of Supply Excellence, I’m going to keep extolling its virtues. The on-demand story will continue.

You can find the previous parts in the series, which started on eSourcing Forum, here:

Global Supplier Visibility and Performance

Continued pressures to reduce costs while maintaining quality and other non-cost factors have caused enterprises to look towards outside providers. In many cases, outside providers refer to manufacturers and suppliers in foreign countries, thus adding other variability to an enterprise’s supply chain. Enterprises have undertaken various efforts to manage the new variability: supplier performance, supplier visibility, supplier costing and supplier collaboration are all activities which can help.

Aberdeen has just released the 2006 Global Supplier Visibility and Performance Benchmark Report (sponsored access) that not only examines GSVP drivers, hurdles, strategies, and tactical action plans for more than 110 companies but offers solid suggestions for improving your GSVP programs.

Considering that Aberdeen has found that the average company has had an average of two major supply chain disruptions per year and that industry average and laggard companies are only able to meet customer-requested ship dates 40% of the time, the need for improved GSVP programs is becoming paramount.

Furthermore, Aberdeen found that despite all of the growing concerns regarding natural disasters, terrorist strikes, political uprisings, etc., the top 3 risks (accounting for over 75% of surveyed disruptions) are actually quality & supplier reliability, lead time increase, and the downstream effects of forecasting errors. Therefore, as I indicated in my posts on supply risk management (I: An Introduction, II: Risks and the Need for Resilience, and III: Managing Risk) and supplier performance management (I: An Introduction, II: The Road to Success, and III: Best Practices) on eSourcing Forum, there is a lot you can proactively do to minimize the chances and effects of disruptions and significantly improve your on-time delivery (by as much as 50% in some cases), and the insightful Aberdeen report is a great start if you want to take your supply chain to the next level. I recommend checking it out. I’ll be posting my own thoughts on it later.

The Sourcing Innovation Series: Part XII

Yesterday we were treated to some insightful commentary from John Martin of Building SaaS on the Future of Services Sourcing. I must admit that this was not an area I had thought much about before I started the series, but after John’s post and doing some research on Rearden Commerce‘s site, I am convinced that services sourcing is going to become a major part of your future sourcing initiatives internally and externally.

After all, with services spending increasing twice as fast as that on indirect goods, with most organizations paying 10-35% more than their negotiated rates for services due to non-compliance and maverick spending (as per a recent Aberdeen study), and with a 10-20% savings potential in the first year alone with the adoption of an on-demand web services platform, your services spending can not be ignored, especially if you are a large organization.

The question is, how do you approach your services spend today in a single, holistic fashion when there does not appear to be a single platform or framework for attacking your broad range of service categories such as T&E, telecommunications, printing, and consulting needs?

I think the answer is a combination of extensible and integrateable on-demand platforms built on services oriented architectures (SOAs) and procurement outsourcing for those categories that you cannot manage effectively in house. For example, you might use a platform like Rearden Commerce for your T&E expenses, a platform like Iasta for managing your local indirect consulting and advertising spend (since there are similarities between services and indirect goods), and an outsourcing services provider like or Provade to manage your corporate services, telecommunications, customer service, and consulting spend.

In the future, I think you’ll see strong integration between web-enabled on-demand SOA platforms and procurement outsource providers which will give you access to both their services and the services of an on-demand platform that can be used by each and every employee in your organization to manage all aspects of your organization’s services spend. Any differing thoughts?