Daily Archives: January 9, 2008

the doctor Takes His Turn With the (Supply Management) Magic 8-Ball – Part II

As I said yesterday, everywhere you look, someone is summarizing the best of 2007 or making their predictions about the forthcoming year on a technology-by-technology or vendor-by-vendor basis. However, since the nature of futurism is that it’s virtually impossible to get the micro-level details correct, I’m instead asking the Magic 8-Ball what’s in store for a dozen vendors in the year ahead. I’ll continue to indicate whether or not I agree, but remind you that these will just be the doctor‘s best guesses. The only true way to see what the future holds is to wait for it to be revealed.

Question: Is this the year Enporion breaks out of the utility space with their e-Procurement offering?
 8-ball : As I see it, yes
Question: Will they get more than a handful of new customers outside of the utility space?
 8-ball : Ask again later
Question: Is this the year Enporion innovates a new solution that will finally grab them some attention?
 8-ball : Signs point to yes

I think, desperate for a solution that has actually been developed or improved upon in the past year, those companies not ready to adopt an open source solution like Coupa but that still want a new e-Procurement solution will finally take a closer look at Enporion. However, they have a history of being associated with the utility space, so unless they make a concerted, focussed effort to show that they have expanded beyond that space, it could take a while before potential customers see them as a general purpose procurement provider. As for innovation – this could be their year. They’ve been developing all their solutions in house for years, have adopted a process-driven visual model development platform solution that allows for rapid application development (once the platform is sufficiently mastered), and they have been working with some pretty big customers to try and develop fresh new applications. They’re definitely another company to add to the watch list.

Question: Is this the year i2 breaks back into the sourcing scene?
 8-ball : Reply hazy, try again
Question: Is there new AGILE platform strategy a good move?
 8-ball : Most likely

The fate of i2 is another toughie. We’re certainly well beyond the point where any company is going to spend millions of dollars on a multi-year engagement on the promise of a big payoff in the future when they’re hemorrhaging cash today. Thus, an AGILE strategy where a company can start small on a six figure budget to attack their biggest problems first is certainly going to make i2 more attractive to the marketplace. Plus, even though i2 can’t make them public (or at least can’t make them public, yet), I know they’ve gotten a couple of big wins under their belt in the past year and that they’re definitely ready to play in the manufacturing and industrial sectors.

Question: Now that Ariba has taken out Procuri, is this Iasta’s year to shine?
 8-ball : It is decidedly so
Question: Will Iasta continue to develop new offerings, as they did this year with Strategic Sourcing Decision Optimization?
 8-ball : Without a Doubt
Question: Will they become a serious competitor to Ariba and Emptoris?
 8-ball : Better not tell you now

Iasta has been essentially doubling its customer base and revenues for six years, offering new functionality every year since its inception, and has recently advanced beyond just being another suite vendor to a suite vendor with innovative best of breed offerings in two key areas – spend analysis and decision optimization. Plus, rumor has it they are tackling even harder problems in their efforts to become a truly innovative player in the space.

Question: Will MFG.com get the growth they’re seeking in 2008?
 8-ball : Concentrate and ask again
Question: Will the Sourcing Parts Acquisition Pay off this year?
 8-ball : Most likely
Question: Will they breakout among companies looking to improve their China sourcing operations?
 8-ball : As I see it, yes

Let’s face it – new supplier discovery is hard, but a trustworthy service that has detailed information on potential suppliers along with buyer ratings can make it easier. This alone should insure that MFG.com continues to grow. As for whether or not any new innovations from MFG.com will help them, that’s a good question. Even though its free for buyers, there’s a big difference between a basic free sourcing solution and a best-of-breed enterprise solution. Although the free tools may help smaller companies, its likely that they won’t be enough for larger buyers.

Question: Will they ever get Fusion, now delayed until 2009, working?
 8-ball : Outlook not so good
Question: Will they have a competitive sourcing / procurement offering in the next two years?
 8-ball : Don’t count on it

I think the magic 8-ball is pretty close here. I don’t think they’ll have a competitive sourcing or procurement application this decade, but given the resources at their disposal, there’s a good chance they’ll eventually get Fusion working. I just wouldn’t count on it – and I definitely wouldn’t buy on promises alone.

Question: Will SAP pull it together this year?
 8-ball : Very doubtful
Question: Before the decade is over?
 8-ball : Cannot predict now
Question: Will they at least put some effort into updating and maintaining Frictionless until they pull SAP SRM together?
 8-ball : My sources say no.

The magic 8-ball might be on a streak here. SAP is another slow moving behemoth that is not likely to turn on a dime, or even the large hadron collider. It will likely be quite a while before they have a best of breed solution.

Question: Is the Vinimaya Network the future of Supplier Networks?
 8-ball : It is decidedly so
Question: Is this the year they breakout?
 8-ball : Reply hazy, try again

Vinimaya is a very innovative and progressive solution when compared to many of the other supplier networks out there. As such, they face the same issues BIQ is facing – a market that might not be ready to accept that there might be much better solutions than the solutions they are using today and give Vinimaya an honest evaluation. However, when the time comes that the majority of the market is ready to accept a next generation supplier network, it’s very likely that Vinimaya will be a major player.

Supply Management in the Decade Ahead VII: Developing and Managing Suppliers

Today we continue our coverage of Succeeding in a Dynamic World: Supply Management in the Decade Ahead (a detailed report based on research jointly undertaken by the ISM, A.T. Kearney and CAPS Research), and our review of the seven critical supply strategies for succeeding in a dynamic world in particular, with the second critical supply strategy identified by the report – the ability to develop and manage suppliers.

According to the report, in the decade ahead, the development of a competitive worldwide supply base and suppliers that collaboratively help to create value in support of the buying company’s business models will become the norm. Although the doctor is not sure whether or not it will be the norm across all companies, the doctor is sure that it will definitely become the norm across market leaders. Furthermore, as the report notes, the leaders of the pack will enter into an era characterized by companies looking for ways to strategically leverage key supplier/buyer capabilities for innovation and “enlarging the pie” rather than playing the zero-sum game whereby one company’s gain usually comes at the expense of the other. The importance of strategic partners, both buyers and sellers, will increase.

The report outlined thirteen strategies for working with suppliers. The top six were the following:

  • Improve Working Relationships with Strategic Suppliers
  • Allocation of Management Attention and Resources to Suppliers
  • Grow the Volume of Purchases from Strategic Suppliers
  • Require Suppliers to Take a Greater Role in Cost Management
  • Employ Joint Evaluation of the Working Relationship
  • Collaboratively Share Risks, Rewards, and Cost Savings

In the decade ahead, companies will put greater care into strategically structuring their supply base in order to support the business model and category strategies. Effective cross-functional teams will be employed to structure the supply base and help achieve the overall goals of the business. The supply base will be structured using a “bottom-up”approach that will be applied to each category. The collective supply base identified will contain the right number of suppliers for the company.

The report also provides some good questions to ask on a category-by-category basis when attempting to strategically structure the supply base around strategic categories:

  • How many suppliers is right for this category, and what role should each play?
  • What current and future capabilities are required, and where in the world should the supplier(s) be located?
  • Which suppliers do we want and why?
  • Do we want to lead and/or manage supplier networks at the Tier 2 and Tier 3 levels?
  • Which suppliers do we want to cross-collaborate with each other, why, and how can we influence this collaboration?

Suppliers will play a greater role in the innovation process and companies that work in industries where technological change is a driving competitive force will opt to work in an “open innovation” environment that celebrates the power of discovery and dedicates significant resources to working on such efforts. In addition, supplier relationship improvement will be a growing need, as suppliers will be increasingly viewed as a source of innovation, which is a change in the traditional western buyer-seller dynamics.

Furthermore, two different approaches to collaboration – “initiative driven” or “institutionalized” – will be employed as circumstances warrant to enhance future working relationships with strategic suppliers. The initiative-driven approach will establish a leadership team that will drive the company to rationalize the supply base, enhance segmentation, and identify preferred or strategic suppliers, improve performance scorecards, create or further develop capability matrices, modify performance driven sourcing behaviors to identify and reward best performers, and implement a company change program focussed on improving working relationships.

Mature strategic suppliers will be moved from the “initiative driven” state to the “institutionalized” state where the goal of the supplier relationship will be focused on improved value creation along multiple dimensions – including innovation, revenue enhancement, and business continuity – and not just cost reduction.

The report also noted that in contrast to today’s quarterly business reviews, stale supplier training programs, and narrow-focused joint improvement efforts, periodic, cross-functional reviews and meetings with key suppliers will be the way of the future.

In summary, in the decade ahead, the supply management function will have to clearly understand company needs and align with the appropriate suppliers, develop close working relationships with suppliers that are strategically important to unlock value-creating potential, and invest in not only reactive, but proactive supplier development efforts to maximize the value achieved by the supply base.