Daily Archives: January 17, 2008

the doctor Wants to Remind You It’s Sourcing AND Procurement

I’m reminding you of this because it appears that there are still some vendors out there that would have you believe it’s e-Sourcing or e-Procurement, or some fractured combination of both – because that’s what they have and they want all of your business.

e-Procurement and e-Sourcing are not the same thing. They’re too halves of a whole, one tactical and one strategic. Alone they bring value, but combined they bring much greater value. The best way to see this is with a picture. (Click on the image below to enlarge it.)

As you can see from the image, sourcing leads into procurement, usually off of a contract, and procurement leads into sourcing, through the analysis step. Without procurement, the organization wouldn’t have a large transaction database and extensive visibility into spend, the key to a successful spend analysis effort, which is the first phase of e-Sourcing. And without sourcing, there would be no strategically negotiated contracts to buy against, and procurement managers would be spending willy nilly, making the current level of maverick spending that you have to deal with pale in comparison.

Furthermore, as you can see from the picture, e-Sourcing is more than just e-Auction and Contract Management (even though they are the solutions offered by the largest number of providers), and e-Procurement is more than just order management, invoice management, and e-Payment. Each step is important, and the most important steps, particularly from a savings perspective, are the steps that most solution providers don’t have solutions for – true spend analysis (not static reporting on a data warehouse), decision optimization (not monte-carlo simulation – leave that to the casinos), reconciliation (since the only way you realize the negotiated savings is to make sure you’re paying what you’re supposed to, and not paying for anything you didn’t actually receive), and, in global trade, tax reclamation (Global Data Mining hasn’t found billions of dollars in savings for their customers because they got lucky).

After all, even though these are crude, inefficient, poor man’s solutions, you could, if you were brave (or is that masochistic) enough, you could use office documents and e-mail to achieve core RFX functionality, you could do basic contract management with an open source content management system (or an Access data base and a college programmer if you were really daring), hold your auctions using a conference call service, manage your purchase orders and invoices with a basic accounting system, and pay with P-cards.

Now, as I pointed out last week in the doctor would like to remind you the one system solution is still a pipe dream, you’re not going to get all of this from one vendor, and that’s okay. The key is to assemble a complete solution that meets your needs, subject to your process and goals. And, as I have previously pointed out, as long as you adopt platforms that use common architectures and standard protocols for data interchange, it’s not too hard to build a complete end-to-end solution that will generate the value you want – as it’s there for the taking.

Supply Management in the Decade Ahead XIII: Challenges & Recommendations

This series has been examining the joint study by the ISM, A.T. Kearney, and The Center for Advanced Purchasing Studies released late last year that addressed how a company might go about “Succeeding in a Dynamic World”. To date, it has reviewed the eight major forces identified by the report (part I and part II), the impacts to business models and strategies, some of the missions, goals, and performance expectations, and the seven critical strategies (category, supplier development, supply networks, technology, collaboration, talent, organizational enablement). In this final post, we’re going to review some of the challenges and recommendations brought to light in the final chapters of the study.

First, I’d like to encourage you to seriously consider downloading and reading this excellent report, which gets the doctor‘s stamp of approval. (And if you’re a regular reader of this blog, you’ve probably figured out by now that there’s not a lot of literature out there that would get the doctor‘s stamp, or at least not without some serious improvements and edits.) Clocking in at over 100 pages of solid content (as opposed to the fluff that fills many of the longer reports that you’ll stumble across), it’s definitely worth it – especially since it’s Free (with registration, if you haven’t already registered). Although I have done my best to summarize the key points, my posts collectively are less than 20 pages in length – which says that, at most, I’ve covered one fifth of the material – and all of it is worth reading – some of it more than once. And once you’ve read it, you’ll be able to use these posts, which will always be indexed in the Sourcing Future category archive, to remind yourself of the key points.

The pace of change in supply management is more likely to increase rather than the decrease in the future, as evidenced by changing market factors, globalization and the ongoing march of technology. (After all, Shift Happens.)

These forces of change will include:

  • Market Demand
  • Rapid Advances in Information and Materials Technologies
  • Global Growth (in Developing Economies)
  • New Supply Market Dynamics (More Aggressive and Powerful Supplier)
  • Consolidation of Traditional Suppliers
  • Downstream Movement of Suppliers

Each of these forces will present challenges for tomorrow’s supply management organization. But we are moving into a new era of great expectations, which will present additional challenges, as it is also the :

  • Era of Dynamic Value Acquisition Strategies
    Agile, dynamic, category strategies that are easily reconfigurable as conditions changes will be “must haves” for all key purposes.
  • Era of Customer-Centric Supply Base Strategies
    Suppliers will be expected to be innovators and collaborative value-based sourcing that leverages suppliers’ innovative capabilities will be required to meet the increasingly demanding customers.
  • Era of Complex & Dynamic Supply Networks
    Physical assets will need to be reconfigured for mobility, flexibility, and resiliency and positioned or repositioned in response to business dynamics. Different chains will be needed for “innovation push” versus “demand pull” products and services.
  • Era of Collaboration without Boundaries
    Technology that allows suppliers, stakeholders, and customers to “sit together” at a virtual table on an ad-hoc basis will be the price of entry.
  • Era of Networked Analytics
    Knowledge management and decision support tools will be a basic need of supply management.
  • Era of Killer Talent
    The demand for experienced supply talent in developed countries is certain to outstrip supply. Global talent acquisition, management, and succession strategies will be required to survive in the supply chain centric world of tomorrow.
  • Era of Empowerment and Adaptation
    A tipping point where the average enterprise rethinks supply management processes and structures is fast approaching. Will you be ready?

And now you know why the strategies discussed in parts VI through XII are the seven critical strategies for succeeding in a dynamic world.

So what are the key takeaways, as summarized in the report?

  • The CEO Will Ask More of Supply Management : Broader Scope, Higher Performance and Increased Value
  • Supply Chain Complexity Will Increase : Driven by Globalization, Market Dynamics, Customer Demands, & Regulation
  • Collaboration Will be a Major Source of Value Creation : Internal and External Collaboration Alike
  • Technology : Will Transform Supply Management Strategies and Processes
  • The Supply Management Organization Structure Will Continually Change : To Fit Business Models and Strategic Needs
  • Global Talent Management : Will Continue to be a Major Challenge

So what are some of the main recommendations?

  • For Supply Executives :
    You’ll need to interrelate successfully with other members of the senior management team, experience living and working in international locations, master collaborative and competitive spend categories, and succeed in building a global program for talent management – so be ready.
  • For Supply Practitioners :
    You’ll need to improve working relationships with strategic suppliers and functional stake-holders, develop international and leadership capabilities, and master the fine art of collaboration.
  • For Business Unit Leadership :
    You’ll need to be equally familiar with key customers and suppliers, supply channels and sales channels, and understand the opportunities as well as risks.
  • For Suppliers :
    You’ll need to know exactly where you fit in each customer’s supply strategy, become a “supplier of choice”, and improve relationships with the senior executives in your customers.
  • For Service and Outsourcing Providers :
    Outsourcers will have to learn how to serve their customers and add value in addition to just landing the contract.