Monthly Archives: March 2007

Understanding UGS

During my whirlwind Dallas tour, I met with UGS the day before Siemens publicly announced the acquisition, which took the media world by storm. (See Jason’s “UGS and Siemens”* post on Spend Matters, for example.) Not wanting my post to get lost in the shuffle, or confused with yet another analysis of what the takeover means for UGS, I decided to wait a while before moving forward with a post.

My goal was to understand how UGS, who I’d primarily associated with Product Lifecycle Management, was going to take the sourcing and spend management world by storm … which I assumed to be their intent once they signed on as a Spend Matters sponsor.

UGS believes that sourcing, or at least sourcing of direct goods, is really an extension of PLM and that an integrated collaborative environment where everyone has access to the same information, and the same world view, is the ultimate key to sourcing success. This is why they acquired eBreviate, a former player in the e-Sourcing space known for their e-RFX and e-Auction capabilities. And this is why they are working hard to integrate all of the sourcing tools that they acquired from eBrieviate into their TeamCenter for SRM (Supplier Relationship Management) solution. (The basic e-RFX and Auction tools have already been integrated.)

In their solution, a part specification sits in their TeamCenter solution. It might be designed in the TeamCenter solution, or in one of the design tools that UGS provides (which integrated with TeamCenter). When it’s time to source materials, the sourcing professionals can log into their TeamCenter application which integrates with the design team’s TeamCenter application and allows the sourcing professional, in one window, to access the specifications and demands. From here, they can run reports, access templates to build an eRFX, access other e-Sourcing tools, and run analysis on current and historical data. They can then publish the e-RFX and receive responses through the tool for analysis. Once they receive responses, cost information can be fed back into the system and the design team can choose to re-design the part, or change the specifications. Furthermore, once an award has been made, the system can be used to collaborate with the suppliers to identify cost-saving design improvements.

Considering that product cost management is a difficult process (just read Eric Hill’s guest posts over on Spend Matters: “What’s the Nature of Your Business?”*, “The Fourth F153″*, “Product Cost Models: An Introduction”*, “What Product Cost Models Are Not — Mythbusting”*, “The Fundamental Dimensions of a Cost Model”*, “eBay and BoB: Cost Model Methodology Cost Modeling Part 1 of 3″*, “The Oracle of Delphi: Empirical Statistical Models Cost Model Methodology Part 2 of 3″*, “Elementary My Dear Watson: Mechanistic Models Cost Modeling Methodology Part 3 of 3″*) that involves systems engineering, requirements, procurement, design, bill of materials, processing costs, service and warranty costs, etc. etc. etc., having one system that everyone in the organization involved with the life-cycle of a part can use to get a common viewpoint could prove to be quite invaluable.

Now I have to admit I do not know how useful or viable their solution is outside of the manufacturing and engineering sectors, but given the size of that marketplace, the dearth of advanced sourcing solutions for the space, the fact that almost every advanced sourcing solution is different (but then again, almost every approach is focussed on a different problem), they definitely have a large potential market in this space alone, and for now, I’m sure that’s more than enough.

So grab your board and keep an eye on the water. I’m sure they’ll be making waves before the year is over. And for those of you in a manufacturing design company, they might just be the waves you want to surf.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Comparing Apples with Oranges (Value Based Sourcing)

In the winter edition of CPO Agenda, you will find an article entitled Comparing Apples with Oranges which notes that moving from a sourcing process based on minimizing cost to one based on maximizing value means embracing supplier differences.

The article discusses value-based sourcing, a sourcing methodology geared towards getting the greatest value out of a more broadly defined supplier relationship. The article encourages procurement professionals, who it claims have traditionally focused on sourcing goods and services, to look at value beyond the immediate scope of purchase to other capabilities and sources of value and indicates that value-based sourcing implies figuring out what other assets, capabilities, or benefits a supplier can bring to the table beyond the product or service currently being sourced.

It then presents a graph that shows value-based sourcing overshadowing advanced sourcing, and although I agree with the importance of value-based sourcing, I disagree with value-based sourcing overshadowing advanced sourcing – it’s simply another component of “Total Value Management” (on e-Sourcing Forum [WayBackMachine]), which is the ultimate goal of advanced sourcing, supported by decision optimization, cost modeling, and life-cycle sourcing.

Nonetheless, the article does make some good points about some of the merits of value based sourcing, and since value based sourcing is a part of Total Value Management, I will do my best to summarize the most salient points herein.

Value-based sourcing seeks differentiation. Complementary capabilities help value chain partners bring more to the table than what is initially requested. Value-based sourcing requires a strategic approach where the procurement professional looks first and foremost at the suppliers’ capabilities. Value based-sourcing treats the supplier more as a partner than a vendor, crafting a complex relationship that allows the supplier’s capabilities to be leveraged to full benefit. Finally, just as advanced sourcing requires a sharp understanding of key business issues and value drivers, so does value-based sourcing.

As a side-note, you can still download the “Advanced Sourcing and Negotiation Benchmark Report: The Art and Science of the Deal”, courtesy of Iasta (acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric) from Aberdeen. It’s a great report, and if you haven’t downloaded it already, I would suggest you do so. And if you’re still trying to identify figure out where to start, the answer is spend analysis, and Procuri (acquired by Ariba, acquired by SAP) has an upcoming webinar on Wednesday that should contain some good pointers to get you started.

The Tower of Spend

To the tune of The Tower of Song by Leonard Cohen.

Well my wits are gone and my hair is grey
I spend in categories where I used to save
And I’m crazy for help, but I’m here getting none
I’m just shuffling papers every day
Oh in the tower of spend

I said to Ignacio Lopez: how bad does it get
Ignacio Lopez hasn’t answered yet
But I hear him pacing all night long
A hundred floors above me
In the tower of spend

I was made for this, I could not sway
I felt that purchasing would show me the way
Out of corporate drudgery to the beyond
But they stuck me in the dungeon
In the tower of spend

So you can stick your little pins in that voodoo doll
Because it looks like I’m going to be nailed to the wall
There’s no light from the window when it should be strong
A total lack of visibility
In the tower of spend

Now you can say that I’ve grown bitter, but of this you can be sure
If I can not track my spend I’m going to end up poor
There’s a mighty judgement coming, and I sure hope I’m wrong
You see, I’m drowning in paperwork
In the tower of spend

I see you standing on the other side
I don’t know how the chasm got so wide
We were the same, way back when
And all the bridges are burning that I might have crossed
Still I feel so close to everything that I lost
Don’t want to lose it again

Now I bid you farewell, I don’t know when I’ll be back
They’re moving me tomorrow even further down the track
You won’t be hearing from me again, after I am gone
I’ll be drowning in the darkness
From a dungeon in the tower of spend

Yeah my wits are gone and my hair is grey
I spend in categories where I used to save
And I’m crazy for help, but I’m here getting none
I’m just shuffling papers every day
Oh in the tower of spend

Innovate Your Marketing with Sourcing Innovation Sponsorships

You can spend foolishly or you can spend wisely. You can take out banner ads and placements on various websites, or you can take out targeted sponsorships on sites where you can reach thousands of highly qualified readers each month – including influential analysts, media, consultants, and end users. Furthermore, you can choose sites where readers come back monthly, or weekly at best, or you can choose sites where readers come back daily. And if you’re really lucky, you can find a site with daily readers focused on your target audience.

But if you’re in the supply management or spend management space … your options are limited. Yes, there is Spend Matters, but it has restricted the number of lead sponsors to four, and all slots are currently full. That’s why I’m pleased to provide you more details on the Sourcing Innovation blog sponsorships that will be available next month!

Not only will a sponsorship of Sourcing Innovation provide you with great value (and valuable advisory services if you commit to a year), but the value will increase over time. Sourcing Innovation is now the second most trafficked (independent) blog in the space (by a considerable margin), and growing in readership every week. Furthermore, I would not be surprised if Jason’s Spend Matters prediction that the leading blogs overtake the more traditional media publication sites (like Purchasing and Supply and Demand Chain Executive) this year comes true. At the very least we should come close!

Moreover, as I hinted last Friday, you will be associated with the only blog with the number one goal of end-user education. Over the last decade, I’ve learned that it doesn’t matter how good your product or service is, or how good you market it, if your target audience does not understand what it is and how it helps them. This is where Sourcing Innovation will help you with its relentless goal of user education.

But for those of you taught to Spend Wisely by Spend Matters, annual sponsors will get even more than a good feeling in their investment. Annual sponsors will also get:

  • a linked company logo on the topmost section of the right-hand side of the sourcing innovation blog
  • a “sponsor welcome” post describing your organization and offerings, and then one “interview”, (blogger) “commentary”, or sponsor “update” post each quarter (subject matter at blogger’s discretion)
  • unlimited permission to reproduce blog content, with citation, for marketing initiatives during the sponsorship period
  • attendance, and blog coverage, of one sponsor event per year in Canada or the US
  • assistance with two webcasts or podcasts
  • access to the sponsor advisory program which includes:
    • virtually unlimited off-site advisory services:(availability for four calls of up to one hour each per month to discuss anything related to your technology, business, strategy, or market is guaranteed)
    • one free day of on-site advisory services per year
    • invitation to any private event sponsored or co-sponsored by Sourcing Innovation
    • one affiliate content link
    • one original vendor-independent technology, process, or solution white paper at half off (up to 10 pages)

If you are interested, please reach out using the contact information in the FAQ. Please note that Sourcing Innovation will only be accepting four sponsorships this year.

Procurement Outsourcing V.V: Provade, Take II

During my most recent Silicon Valley foray, I had a chance to catch up with Provade (acquired by Smart ERP Solutions) again and talk about how they seamlessly enable services procurement for companies with and without a PeopleSoft stack. If you remember, one of the three points I covered in my last post was how they built their solution on a PeopleTools foundation on the Oracle Stack. This is a tremendous advantage for customers with existing Oracle or PeopleSoft implementations since they can tie their solution in directly to your systems with almost no effort and set-up the bi-directional data flows in record time.

However, their solution is also a tremendous advantage for customers without (extensive) Oracle or PeopleSoft implementations – espcially those with large, involved services spend, especially in the legal, financial, contract labour, and marketing categories. They have done a significant amount of work extending their Java/J2EE technology stack to be SOA (Service Oriented Architecture) compatible. This allows them to easily integrate with other systems and enabled them to support rapidly configurable punchouts so that you can tie into your suppliers existing systems. Furthermore, it also allows them to develop Web 2.0 interfaces that are significantly easier to use than traditional PeopleSoft or Oracle (forms-based) interfaces – so current users can expect usability of the platform to only increase as time goes on.

I had a great conversation with these guys because my experience has been that:

  • there is not a lot of recognition for the importance of services spend management, which can consume up to 70% of spend in some verticals (financial, healthcare, etc.)
  • most solution providers are not offering specific solutions (with the notable exception of Servigistics (acquired by PTC) whose service parts, service price, and workforce management solutions I recently discussed, but they have a different spin)
  • most solution providers are not offering an on-demand solution with a low initial implementation cost

Furthermore, they understand that certain types of services are very complex and your offering, especially on the supplier side, needs to be customized if you want suppliers to rapidly adopt the system. One example, and one of their current strengths, is legal services. Law firms don’t bill for “services” or “tasks”, but “matters”. Most services are not fixed quote, but line item services where every line item is at a different rate (para-legal, associate, partner, fixed expense, variable expense, etc.). And they’re not always the most technical of people. (Even the majority of firms that are LEDES capable would rather log into a simple user-friendly web-based system to create a bill.)

In summary, I think they are on the ball with respect to some of the major services procurement challenges in some under-serviced verticals and that their current solution is a good solution for many firms with the challenges they are tackling. I look forward to talking with them again and diving into their process model and technology architecture in a later post.