Monthly Archives: October 2007

The 2nd Sourcing Innovation Series ReCap, Part II

First of all, here are the posts to date.

The Future of eSourcing – Less is More Alan Buxton
The Future of Sourcing: Results-Based Process Specialization Charles Dominick
Sourcing Innovation Series David Bush
The Future of Spend Analysis Eric Strovink
Sourcing Innovation Series: Wither Procurement as Strategist in 2008? Jason Busch
Future Purchasing: The Extended-Enterprise Connector Jean-Philippe Massin
Yes Virginia! There is more to e-procurement than software! (Part 1) Jon Hansen
Yes Virginia! There is more to e-procurement than software! (Part 2) Jon Hansen
The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free Open Source Software Jon Hansen
What’s Next in Purchasing? Ask Your Supply Management System Tim Minahan
Trading on the Spot Market the doctor
Let’s Get Analytical! the doctor

In Part I, we reviewed what Alan, Charles, David, Eric, and Jason had to say. In this part, we review what everyone else had to say.

Jean-Philippe Massin told us the future lied in the Extended-Enterprise Concept. In Purchasing, the trend will be towards industrialization, commoditisation, and automation; specifically, sell-side vertical e-Marketplaces with a commodity focus will become more numerous. These e-Marketplaces will feed globalization, only top performers will survive, and the purchasing department will evolve into a business in the extended-enterprise, managing the aggregation of independent top-performing companies in the network that work together to supply products and services as effectively as they can. The purchasing function will start to look more and more like trading as purchasers of the future will need to digest hundreds of parameters in order to forecast performance, select the best option, and change suppliers at breakneck speeds to maximize their company’s performance.

Jon Hansen offered a trio of posts that told us there is more to e-procurement than software and that strategies that centered on free (open source) software were fraught with risks. In his first post he points out that process, and not technology, is ultimately the main force behind successfully achieving results in terms of efficiency, spend rationalization, and spend reduction and indicates that he believes this will continue to be the case. In his second post he pointed out that achievers have more faith in their own team’s ability to understand and assess what needs to be done and that he does not expect this to change. In his last post he emphasizes that even though it’s not the technology, one still has to be careful of the technology chosen as the wrong technology can be fraught with risk. In the case of free open source software, there is the lack of imputability when software is developed via internet collaboration.

Tim Minahan, extending a train of thought started in a post by Brian Sommer, notes that we have not yet begun to tap the true value potential of supply management software. Future systems will address the major shortcoming of today’s systems, which is that systems today don’t help people make the decisions they struggle with before they enter data on a screen. Tomorrow’s systems will enable new processes and guided analytical scenarios that were previously considered impossible due to fragmented procedures, insufficient communications and data access, and inconsistent skills. They will guide buyers – regardless of skill set – toward the right sourcing and supplier management decisions. True innovation will come with technology that can inform buyers (and other executives) of the right business decisions.

In my prologue post, I noted how one of last year’s predictions by our leading spend management prophet Jason Busch might be on it’s way to reality. Last year, he predicted that securitizing direct materials and capacity was in sourcing’s future and that suppliers would benefit from the model as well as buyers. Then a study comes out by Haim Mendelson and Tunay Tunca of Stanford’s Graduate School of Business that finds that strategically using both fixed-price contracts and open market trading, supply chain participants can create greater efficiencies. Furthermore, both consumers and supply chains as a whole will benefit from these efficiencies.

In my main post, I noted that Spend Analysis Based Cost Modeling Decision Optimization are going to be the seven words of saving grace for tomorrow’s sourcing organization that wants to survive beyond the next decade. The only way companies are going to be able to maintain costs, yet alone achieve savings, is by getting a firm handle on costs and, more importantly, by identifying and achieving savings opportunities not previously explored. This is going to require an improved understanding of the cost drivers of what you are buying (cost modeling), and understanding of where variability exists, either within past buys or against market indices (spend analysis), and what the best award scenarios are (optimization). But it won’t be three applications at three different stages of the sourcing process, it will be one, and it will be at the beginning, center, and end of the sourcing process.

In essence, this years posts revolved around the common themes of talent and technology – and focussed specifically on the continued need for an appropriately assembled team, advanced analytics and optimization, and better process-based decision support software for tomorrow’s professionals. In the future, sourcing technology will be more powerful, easier to use, capable of guiding even the most novice of users through the process, and enable the optimal decision using advanced analytics and optimization. Tomorrow’s technology will merge the functions of general business analyst and sourcing agent into the single role of strategic sourcing professional who will lead the profession to new heights.

O.M.G. R.O.T.F.L “D.T.I.:E.D.I.S.C.S.P.U.C.R.T.A.” … W.T.F? Y.M.H.S? *

* Oh My God! Rolling on the floor laughing! “Distinguishing the Indistinguishable: Exploring Differences in Supply Chain Software Packages Using Centering Resonance Text Analysis” What the f*ck? You mean he’s serious?

One of the presentations I just had to sit in on at the 5th Annual International Symposium on Supply Chain Management was called “Distinguishing the Indistinguishable: Exploring Differences in Supply Chain Software Packages Using Centering Resonance Text Analysis” because I had to figure out whether it was real, or the organizer’s attempt at introducing some comic relief into a symposium that can get a little heady without a break once in a while.

Here’s the abstract: Distinguishing among large supply chain management (SCM) software packages is difficult due to the complexity and breadth of the software. In this paper, we use text mining tools to perform a comparative analysis of documentation covering the seven most popular supply chain software packages (from SAP, i2, Oracle, PeopleSoft, Manhattan Associates, IBS, and Manugistics). Concept maps created for each of the packages indicate a high degree of similarity among the 20 most influential concepts, yet significant differences exist beyond the top 20 concepts. This suggests that any distinguishing features are deeply buried in the documentation, while at a surface level all seven vendors address the same concepts. The resultant concept maps contribute a more precise understanding of the similarities and differences between SCM software packages. Guidelines for using this knowledge to make more rational and informed software selection decisions are discussed.

Before continuing, you should read it again just to make sure you read it right. (Because I know you’re wondering if you did.)

Now you should take thirty to sixty seconds to process the shock of what you just read. The resultant concept maps contribute a more precise understanding of the similarities and differences between SCM software packages. I don’t know if I should laugh or cry. However, having attended the presentation, and, more importantly, found out that ( a ) this paper is getting published and ( b ) some of the audience members thought that this is a fantastic idea, I now know I should be instilled with fear!

The reality is that I can barely wrap my head around everything that is wrong with the abstract, let alone the presentation, and, more importantly, the paper that the presentation is backed on. However, knowing me as you do, you know I’m going to give it my best.

  • There is not necessarily any correlation between documentation about any given platform and the platform itself. The documentation could be help documentation, which might have a moderate correlation, but could just as easily be position papers, analyst reviews, or “what’s missing” analysis that does not necessarily have to have any correlation with the software.
  • Even if the documentation is limited to help documentation, the documentation is still going to focus on how to use the system and not how it solves your supply chain problem. Thus, the most common terms could be “drop-down” and “dialog” and “field” … not at all useful.
  • There is not a one-to-one correlation between a word and a concept or a concept and a word. Let’s take the word order. It could be referring to order placement or order management or order fulfillment or to the ordering of options in a text-box. Also, let’s take the concept of order fulfillment. It could be called order fulfillment or it could be called customer delivery.
  • There’s no guarantee that two products that implement the same features will document them with standard terminology, or even document the features at all! Thus, two products with high correlations in capability are not at all guaranteed to have any correlation at all in documented capability.

I could go on, but you can see that the statement that the resultant concept maps contribute a more precise understanding of the similarities and differences between SCM software packages is absolutely ludicrous, even if centering resonance text analysis did what many researchers claim it can do. (It really can’t, but hopefully the linguist at the conference who also had more problems with this presentation and paper than I can easily count will chime in with a comment on everything I missed.)

Now, apparently, after heated discussions with one of the researchers (and presenter) in question (who will not be named to protect the guilty), I have it all wrong, and what I’m assuming is being stated is not being stated at all, but I believe I have a relatively high degree of comprehension of the English language, and I just do not understand how any rational human being could interpret it in any other way.

“It’s the thought that counts … and so far I’m up to zero.”
  Stephen Colbert, The Colbert Report, Sept 25, 2007

Winning Strategies for Vendor Engagement

By far the best presentation that I attended at the 5thAnnual International Symposium on Supply Chain Management was Jon Hansen‘s presentation on Winning Strategies for Vendor Engagement, part of his Chaning Face of Procurement Series.

Even though there was nothing revolutionary in his talk, Jon did a great job of hitting home on the core message, spelling out the basics, simplifying the core messages which a lot of people focussed on new e-Procurement and e-Sourcing efforts still overlook, and delivering a presentation the way a presentation should be delivered. Simply put, the key to success still ultimately lies with your vendors, and if they don’t participate, or participate 100%, you’re going to lose out in the end. Basically, unless managed properly, your e-Procurement initiative, instead of being a benefit, could be a threat to your supply base. And this is not just theory – it’s fact. Consider a recent statistic from the Wall Street Journal (in February, 2005) which noted that 73% of all implementations result in partial or total failure.

It’s not hard to win suppliers over – often all you have to do is meet their needs and take the time to work with them to explain why the new system is better and why they won or lost the bid. Basically, suppliers are looking at (most at) six factors when being asked to use a new technology:

  • Ease of use
  • Non-invasive technology
  • Convenience and speed
  • Business Intelligence
  • Chance to maintain or increase revenue
  • Non-adversarial environment

Meeting these factors is not hard to do. For example:

  • Ease of use
    • Use technologies not limited to largest / most sophisticated suppliers
    • Communicate the initiative via multiple avenues of communication
    • Proper tool alignment
  • Non-invasive technology
    • Does not increase work
    • Increases opportunities
    • Reduces the cost of sale
  • Convenience and speed
    • Automated and intelligent engagement
    • Minimal Administrative Requirements
  • Business Intelligence
    • Proper spend alignment
    • Real-time reporting capabilities
    • Orientation sessions
    • Project and quarterly Reviews
  • Chance to maintain or increase revenue
    • Create an equal opportunity environment
    • Greater opportunity
  • Non-adversarial environment
    • Fair competition with clearly defined rules
    • Proper spend alignment
    • Proper technological alignment

Basically, vendors are the key to your success and will want to help you succeed if you take the time to help them succeed. It’s not hard. Just do it.

Keynotes: The Good, The Bad, and the Horrific

As those who have been paying attention will know, I was at the 5th International Symposium on Supply Chain Management last week in Toronto. This conference simultaneously had one of the better keynotes I’ve heard in a long time and what is definitely the worst keynote I’ve ever attended. Before I cover the content of the good keynote, I’d like to take a stab at differentiating what makes a good – or great – keynote from what makes a bad – or awful – keynote.

In a good keynote, the speaker is, simply put, energetic, engaging, and engaged. She is passionate about what she’s speaking about, allows her energy to flow from her to the audience, makes eye contact, moves around, and speaks from her head and her heart. Her notes and slides are merely centering points, not the focus. You want her to stay on the stage.

In contrast, in a bad keynote, the speaker is as lifeless as a lump of clay, as unappealing as a puddle of mud, and as uncommitted as today’s pop star is to sobriety. He is passionless about the subject matter, cold as a lump as ice, and as monotone as a metronome. His eyes are glued to his prepared speech, his stance as a rigid as a statue, and his words as disembodied as whispers in the breeze. His paper is also his paperweight, and all you can hope for is that someone has the energy to lift up the vaudeville cane and yank him from the stage.

IBM’s David Swiggum, who had the first keynote, did a great job of demonstrating what a good keynote is all about. It wasn’t the best keynote I’ve ever heard, but it was unarguably pretty damn good and compared to the other keynotes, it was a blinding ray of light in an otherwise dark, dank, and gloomy cave deep in the earth. (The only other speaker that matched David in energy and heart was Jon Hansen. This isn’t to say that there weren’t other great speakers at the conference this year, but that just about every presentation I decided to attend this year was at least a bit of a letdown, at best.  There were three parallel tracks, and I think I picked the wrong one just about every time since I was more impressed with the speakers last year.)

In his keynote, David discussed IBM’s supply chain transformation over the last decade where IBM has transformed itself from a laggard to leader, bringing a company that was barely surviving in 1993 (profit at about 4.5% and dropping) to a company that is thriving, largely in part to the 6.2B in cost savings the integrated supply chain practice saved IBM last year.

David’s presentation was jam packed with great facts, great statistics, and great advice – too much to cover in a single blog post – so instead I’m going to share three key takeaways: IBM’s shared measurements for success, IBM’s rules of change sustainability, and IBM’s list of “Cost Takeouts” that you should be focussing on daily.

IBM’s shared measurements for success fall into three categories: financial, operational results, and client-facing results. They are summarized as follows:

Financial Operational Client-Facing
Cost Reduction Demand/Supply Synchronization Client Satisfaction
Cash Generation Cycle-Time Ease of Doing Business
  Quality of Installation Unleashing Sales Force Productivity

With respect to driving change and sustaining results, David offered up the following tips:

  • transform and strengthen the supply chain function while building end-to-end capability
  • reduce fixed costs and drive flexibility in infrastructure
  • implement truly global processes and technologies
  • apply governance, performance goals, and reporting disciplines
  • tend to the culture, emphasize talent, and improve skill-sets

With regards to the cost “take-outs” you should be focussing on each and every day, David offers up the following:

  • Parts & Services
    • year over year price mark downs
    • cost avoidance
  • Design Efficiencies
    • utilization of standard parts
    • common systems platforms
  • Manufacturing Effectiveness
    • outsource for flexibility
    • low cost / tax jurisdictions
    • process improvements
    • leverage fixed capacity
  • Services & Central Procurement
    • leverage software
    • supply base rationalization
    • focus on core suppliers
    • global leverage
  • Customer Fulfillment
    • common processes and tools
    • “touch-less” processes
    • free up sales reps for customer service
  • Integration of Acquisitions

In comparison, Ariba’s representative delivered the absolute worst keynote I’ve ever heard – with the utmost emphasis on the delivery. I have no idea what his keynote was about beyond the abstract that was given. I know he was speaking English … I know I understood all the words … but … it was just … so … so … stupifyingly comatose and exanimate, that all I wanted to do was drop into a coma and end my suffering. I tried to take a few notes … but … all I managed to jot down was a few meaningless phrases that aren’t even as meaningful as what the Dilbert Mission Statement Generator spits out. His delivery was every bit as lackluster as the textbook definition of a bad keynote and then some.

All I have to say is that next time anyone wants Ariba’s help in putting together a keynote is that they should go to the guy Ariba goes to when they want a good keynote at their conferences – Jason Busch of Spend Matters. You could sleep deprive this guy for a week, OD him on valium, and give him a set of cement shoes and I guarantee he’ll still have more energy and passion than anyone else in the room – and that’s what a great keynote is all about.

And if you’re curious about the other keynotes, they weren’t that great either. (Nowhere near as bad as the Ariba representative’s, but not great.) Mr. Mikell is a really smart guy and a great researcher, but ( a ) you can’t cram more concepts onto a slide than the average genius can understand and get away with it unless you’re Pierre Mitchell and ( b ) I kept wondering if he was really an accountant or tax lawyer when he was up there. As for Mr. Johnson’s, it was also half decent, but it was missing a hook – I just didn’t understand why it deserved keynote status and why it wasn’t relegated to a regular presentation.

Vendor of the Week

Vendor of the Week is a SI exclusive that runs through the end of the year, or until the first two sponsors sign up, whichever comes first.

The following vendors have been selected as vendor of the week:

Week Vendor
October 22, 2007 Coupa
October 29, 2007 Provade
November 05, 2007 Co-exprise
November 12, 2007 Vinimaya
November 19, 2007 Aravo
November 26, 2007 Next Level Purchasing
December 3, 2007 Global Data Mining
December 10, 2007 BIQ

Vendors of the Week are selected randomly at the sole discretion of the doctor. The vendor of the week is a company that is doing something the doctor considers to be truly innovative and relevant to sourcing and procurement.