Monthly Archives: November 2007

Richter’s Key Features and Directions for Supply Chain Software Solutions

In the spirit of our recent cross-blog series on The Future of Sourcing (recap I and recap II), I’m going to wrap up coverage on the 5th International Symposium on Supply Chain Management with a presentation from RSM Richter Consulting on key features and directions for supply chain software solutions.

The presentation overviewed seven major directions for supply chain software solutions, which started, peaked, and ended with some of my favorite topics:

  • Collaboration Among Trading Partners
    • Systems that will integrate with supplier, customer, and other provider systems
    • Transactional integration and visibility / inquiry
  • Demand Planning
    • Inventory requirement forecasting tools
    • Detailed planning by market, by customer, by location, etc.
    • Support for more complex lead time configurations and optional supply sources
    • Incorporation of customer sales history and forecasting
    • Dynamically updates as customer information is updated
  • Inventory Visibility
    • Inventory visibility from cradle-to-grave: on-order, in-transit, received, in-process, on-hand, on-delivery, etc.
    • available-to-promise at point of order entry or earlier
  • Logistics & Freight Management Tools
    • Planning and coordination of transportation with providers
    • Generation of all required documentation
    • Visibility of, and status on, the movement of goods from supplier to customer
  • Complete Integration of Functionality
    • An ideal integration of depth and breadth
    • Elimination of “islands of information”
  • Vertical, Industry-Specific Applications
    • A shift from generic tools to deep industry functionality
    • Without losing the underlying fully integrated suite
  • Optimization of Business Processes
    • tools for workflow and collaboration
    • geared to provide standardization and efficiency
    • automation for business processes
    • consistency in documentation

These are all great topics – and right now companies like Arena, Blinco [rebranded 3rdwave], Co-exprise [rebranded DirectWorks, acquired byIvalua], Enporion [acquired by GEP], Iasta [acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric], MFG.com, Provade [acquired by Smart ERP Solutions], TrueDemand [acquired by Acosta], and VerticalNet [acquired by BravoSolution, acquired by Jaggaer] are cheering – since they’ve understood at least some of these points for quite a while now. (It’s unfortunate for some of them that it’s not coming through loud and clear in their messaging.)

However, regardless of which points you agree with and which points you don’t, the proper implementation and use of more advanced supply chain software comes with some significant benefits, including:

  • increased supply chain efficiency through improved information flow
  • reduced inventory, and related costs, through better management of demand, purchasing, production, and delivery
  • faster and more accurate visibility on inventory and availability
  • improved collaboration with trading partners with whom information can be shared for better decision making

… and all of this leads to improved efficiency and cost savings!

Have No Fear – the doctor Does Not Belong To A Writer’s Union!

I’m sure by now you’ve all heard the news – Hollywood Writers On Strike. And you know what comes next … sympathy strikes from other writer’s unions! Of course, this might not be a bad thing – how many more jokes can you take about Paris’ Pursing of TinkerBell, Britney Baring All, and Lindsay Lohan Beyond Her Bounds? (Speaking of which, what do you have when Paris, Britney, and Lindsay are all in the same room? Vestiphobia Unanonymous!)

Fortunately for you, the doctor does not belong to a writer’s union! The strike will have no effect whatsoever on the doctor‘s publishing schedule – although the doctor might get cranky if the last episode of Heroes ends up being the cliff-hanger of the season. This would likely result in the doctor letting the Sourcing-Maniacs loose in an uninhibited manner on the next un-innovative company to put out a press release advertising last century’s technology as the solution of tomorrow. Either way, as long as this blog publishes, NEW quality content will keep flowing.

Why You Should Consider Procurement Outsourcing

Buried in the mound of data presented by Mr. Jim Mikell in his presentation at the 5th International Symposium on Supply Chain Management was some convincing evidence that, when done right, procurement outsourcing really does work. Depending on the situation, a company without a world class sourcing organization can outsource to a procurement outsourcer with a world class sourcing team and save up to 15-20% in a properly structured and scoped multi-year deal. Considering that over sixty percent of procurement spend is typically addressable by outsourcing, this provides a compelling reason to think about it – at least with respect to the spend that you don’t have a good grip on. Furthermore, the savings from procurement outsourcing can be nearly five times those derived from outsourcing other business processes like finance and accounting and human resources.

Where does the savings come from? Strategic sourcing (40% to 60%), compliance (25% to 50%), and operating efficiency (10% to 15%). A qualified procurement outsourcer will have skilled buyers with deep category expertise, systems to create orders and match invoices and make sure all spend is on contract at the contracted rates, and be able to leverage their scale to operate more efficiently.

When done right, procurement outsourcing can do more than just save your organization dollars. According to Jim, it can also:

  • address the resource shortage issues in your sourcing group
  • improve control, visibility, and compliance for a broader range of spend
  • improve personal and professional experience for procurement professionals
  • enable focus on higher-value, “strategic” procurement
  • address the fact that industry category expertise is low for most buyers as the right procurement outsourcer will have experts on staff

Furthermore, the procurement outsourcing marketplace is maturing and, according to Jim and the Everest Research Institute, entering the “emerging rapid growth” phase of market maturity. This is evidenced by the fact that there were close to 20 major procurement outsourcing contracts signed last year, whereas there were only 39 from 2000 through 2005, with even more projected for this year.

Jim also presented a disciplined roadmap to address the challenges involved in outsourcing, which is defined as follows:

  1. Define “savings”
    Challenges
    • defining savings for complex categories
    • unavoidable economic fluctuations
    • differing stakeholder expectations
  2. Establish (Realistic) Savings Target
    Challenges
    • high number of vendor relationships
    • lack of spend visibility
    • moving saving targets
  3. Measure Savings
    Challenges
    • savings attributable to supplier’s efforts
    • distinction between savings and avoidance
    • investments required to measure savings
  4. Enforce Savings
    Challenges
    • fragmented & decentralized spend
    • areas of high maverick spend
    • budgetary issues
  5. Manage Operational Costs
    Challenges
    • upfront investments in systems
    • higher ongoing staff

And remember it’s not “your mess for less”. If you don’t have a good grip on what you’re doing and what you need to get out of it, you can’t just throw it over the wall and expect a third party to be successful. You need good process and project management, and this might require making some up-front investment to clean your house up and get ready for the transition to someone who can take something that you’re doing well and make it something that, combined, you do great.

The Green Purchasing Summit is Close at Hand

This is a quick reminder that the Green Purchasing Summit is close at hand. Taking place at the end of the month in Miami, Florida on the 29th and 30th of November, the conference promises to tell you about green benefits, green purchasing initiatives, becoming lean and green, greening your suppliers, and procuring proactively. The event, which has lined up speakers from IBM, General Motors, Boeing, and Office Depot, looks to be shaping up nicely, even though it is the first event of its kind for EyeForProcurement. If you want to be the next kid on your block to be Carbon Neutral, it just might be worth your while to check out.

Sourcing Lifecycle Management II: Enter Co-exprise

In yesterday’s post I introduced you to Sourcing Life-cycle Management (SLM), a new dawn for aerospace, automotive, defense, medical device, and high-tech / electronic manufactures with complex direct sourcing problems. SLM is the integration of the supply chain centric business processes of sourcing, procurement, PIM, and supplier management that were always meant to be together.

In today’s post, I’m going to re-introduce you to Co-exprise [rebranded DirectWorks, acquired by Ivalua], I company I first introduced you to in A Kick-Ass Direct Sourcing Solution for Manufacturers: Part II.

In my last post, I indicated that they were building a new-type of direct sourcing solution that integrates RFx, auctions, project management, collaboration, PIM, dashboards, and tree-based navigation as well as enhanced security, contextual-awareness, supplier qualification, and enhanced meta-data capabilities. But as I’ve come to understand it better, I’ve realized that it is the first solution on the market to make a serious, honest, effort to address the complex direct sourcing problems that other systems cannot handle because these types of problems are unique and require a distinct solution.

However, the real power of the Co-exprise platform is that all of this is built on a number of basic building blocks, including workflow management, business process rules, collaboration technologies, a centralized repository, project management, cBOMs (collaborative Bills of Material), cost models, and analytics, that are inherent to, and invasive across, the platform. This means that all of the technologies are integrated into one collaborative workflow where common data is always accessible and analyzable.

This allows the platform to offer benefits to its target verticals that go beyond standard solutions in the areas of productivity, implemented cost reduction, and compliance. Productivity increases start back in NPI (New Product Introduction) as the engineering team can load and track all designs in the system the minute the project starts and continue through to post-award contract management as delivery, quality, and SCOR (Supplier CORrective Actions) can be tracked against each order against the contract. As the system captures and tracks all of the orders and integrates contract management, the system is able to achieve fully implemented cost reductions. Finally, Co-exprise’s unique Secure Digital Forms Technology, which includes a unique ID in every form and allows the form to be completed and uploaded by suppliers off-line, can be used to create mandatory forms that ensure compliance with environmental regulations such as REACH and RoHS.

Now I’m not saying the platform is perfect. For example, it doesn’t have supplier side EIPP capabilities (a very useful part of e-Procurement which facilitates n-way matching and charge error detection before the supplier even sends the invoice), decision optimization (which would allow what-if scenarios to be created and analyzed on make-vs-buy decisions), or a mature spend analytics 2.0 offering (even though the initial spend analytics 2.0 offering they do have now puts standard analytics 1.0 offerings from traditional vendors to shame, and contains some advanced capabilities that are similar to capabilities only found in BIQ). However, it is the most complete platform I’ve encountered for the problem they’re solving, they can integrate with e-Procurement platforms like Ariba that handle EIPP, and they are still working on their new spend analytics offering, which could likely become one of the best analytics tools on the market for the direct sourcing problems they’re solving next year (and what they have now is nothing to scoff at).

For picking up the SLM gauntlet and bringing to market a solution that addresses the complex direct sourcing projects that have been largely ignored until now, Co-exprise is my vendor of the week. (A SI exclusive until year end or sponsor #2 signs up, whichever comes first.)