Monthly Archives: September 2008

Simplifying B2B for Suppliers Enables Buyers

As an enterprise software user, you’re tired of hearing about “Web 2.0″ because, despite all of the buzz it has generated for the last few years, and all of the “value” it has delivered to consumers through Amazon, Google Apps, and Facebook, it hasn’t done a single thing for you. And it’s good that you’re sick of “Web 2.0″. Software is supposed to serve you — you’re not supposed to serve it.

That’s why Sourcing Innovation is proud to announce the release of the second white-paper in its 5-part B2B 3.0 series. B2B 3.0 (Business-to-Business 3.0) is the next generation of technology for the enterprise that not only generates value for you as a buyer, but also generates value for your supplier as it helps you both save time and money — the way enterprise software should. Enterprise software should free you from the mundane and allow you to spend your time conducting commerce instead of fighting with primitive interfaces that force you to do everything but accomplish your goal.

B2B 3.0 is the first generation of enterprise software technology that puts business users on the same footing as consumers (who have had “3.0″ technologies at their fingertips for years). It enables true commerce in the global marketplace. Returning to the fundamentals of e-Commerce, that have been lost for the last decade or so, B2B 3.0 gives us connectivity that is open and free to all, content that is managed once in a non-redundant fashion by the content owner, and an open community where buyers and sellers can come together for short periods of time through virtual networks that allow them to conduct the business they need to conduct — when, and how, they need to conduct it. No “technical” strings attached.

B2B 3.0 is also the first technology to level the playing field between buyers and suppliers and put them both on the same footing. Previous generations of B2B technology focused primarily on the buyer, the target customer, under the fallacy that ‘streamlining’ the process for the buyer would lead to the greatest cost savings. The reality is that this ‘streamlining’ resulted in increased work, and thus increased cost, for the supplier who had to ultimately increase their prices to cover their costs. The technology should have focused on ‘streamlining’ the process for the supplier, because this not only results in cost and process savings for the supplier, but it results in cost and process savings for the buyer as well. True commerce is simple for all.

In Simplifying B2B for Suppliers Enables Buyers, we walk through the B2B 1.0 to B2B 3.0 revolution and illustrate how B2B 3.0 actually saves both parties time and money, whereas suppliers, like buyers, were lucky to break even in B2B 2.0. and, like buyers, usually lost their shirts in B2B 1.0. We end with some examples of B2B 3.0 in action, giving you a glance into the B2B 3.0 future and some companies that might very well be the leaders of tomorrow.

Bringing Up the Rear: Mark Usher, Jason Busch, and Doug Hudgeon

The Seven Grand Challenges for Supply and Spend Management cross-blog series has come to an end. We had some great posts, including those from front-runners Bob Ferrari of Supply Chain Matters and the Strategic Sourceror of The Strategic Sourceror, but participation was low this time around, compared to back in January when I gave everyone a chance to jump on the Sustainability band-wagon and I could barely keep up with the submissions that came fast and furious. And yes, I’m a little disappointed. It’s our job as bloggers to help define the future, and I thought doing so was something all of us bloggers liked to do. But anyway, back to the matter at hand.

Jason Bush of Spend Matters decided to tease us in hist post and only give us his top three challenges last week, and make us wait for the rest. His top three were:

  1. Procurement Integration
    According to JB when it comes to true integration with the business such as enterprise level involvement in budgeting and planning (a favorite Hackett Group KPI), most procurement organizations are still coming up woefully short. Based on my own experience, I’d have to agree. But is this a supply management challenge, a broader operational challenge, or an education challenge?
  2. Risk Management
    Couldn’t agree more. I think we’ve both had lots to say on this topic over the past few years.
  3. Spend Management Led Innovation
    As proof that supply can drive innovation throughout the business, JB gives us the automotive case of how Honda and Toyota helped redefine the basis of innovation through working more collaboratively with their supply base to engineer out cost as an example. But I don’t think this is the challenge, I think the challenge is educating the rest of the organization about the innovation that spend management can bring, as there are a growing number of examples of leading procurement organizations becoming the innovation leaders in their company.

Mark Usher of 1 Procurement Place went all out in his post and laid his seven challenges on the line for our critique. They were:

  • The Strategic Elevation of Procurement
    Mark, like almost every other contributor, also insists that procurement strategy must be an integral component of corporate strategy. I’ve been saying that for years, so I have to agree.
  • Achieve a Truly Seamless Cross-Functional Strategic Sourcing Process
    Considering that many organizations still don’t get that it’s Sourcing AND Procurement, I definitely agree with mark that we DO NOT need another seven-step consulting methodology. ( If you think we do, maybe you need a twelve-step program! ) Mark’s right when he says that procurement in any given organization needs to reach a state where the right organizational players are facilitated smoothly into the strategic sourcing process at the exact time that their respective value-adds are required.
  • Optimize the Outsourcing of Indirect Materials
    Well, I definitely like the word optimize. But I think the goal should be to optimize the outsourcing of those tasks that can be better done by someone else and to optimize the insourcing of those tasks that can be better done in-house. No need to be discriminatory.
  • Pursue Enterprise-Wide Spend Visibility
    Definitely! This fits right in with my challenge of Opportunity Analysis – and you certainly can’t identify opportunities without good visibility into what they are.
  • Pragmatically Manage All Elements of Supply Risk
    Mark says that Personally, I see a little too much talk of virtual reality dashboards and not enough about what is really important! Hear, hear! Glad someone got my message that dashboards are dangerous and dysfunctional!
  • Maximize the ROI of Sourcing and Procurement Technology
    Well, this is definitely a challenge, but I think it’s too broad to be useful. We need to identify what can be done to maximize the Sourcing and Procurement ROI, and then solve those challenges.
  • Make Procurement “Chill” or “Tight”
    According to Mark, who’s lingo is probably a bit behind the times since I understand it, the supply management profession must make itself attractive to young, degreed job seekers who would typically shun a career in Procurement for something more Generation X/Y such as, well, almost anything really. Well, that’s why we have to talk about Corporate Social Responsibility and Sustainability and why only Procurement can truly achieve it, since Procurement is the part of the company that spends the money, and, plain and simple, Money Talks.

Doug “The Blogging Thunder from Down Under” Hudgeon took a cue from an old-classic and gave us his challenges in-line with the 7 deadly sins. In his post, he defined the challenges as follows:

  • Lust: Demand Management
    No matter how good you are at negotiating, you’ll still never beat the buyer who figures out how to achieve their business ends without buying the product at all.
  • Gluttony: Lean
    The challenge for procurement professionals is to master existing methodologies such as lean to influence demand for products and services.
  • Greed: Fair Play
    Greed can manifest itself in a supplier taking advantage of a buyer … or it can manifest itself in a buyer with significant market value tearing the throat out of their supplier’s margins. The challenge for the procurement professional is distinguishing one situation from the other and managing the stakeholders on both sides.
  • Sloth: Contract Management
    The most valuable skill that a supplier can cultivate in its relationship managers is the skill of getting a customer to roll a contract over.
  • Wrath: Supplier Relationship Management
    When a relationship has soured to the point where either the buyer or the supplier is willing to risk supply disruption to extract their pound of flesh, a procurement professional can play a role in keeping the relationship on life support long enough to either revive the corpse or replace the supplier.
  • Envy: Lack of Respect for the Purchasing Profession
    Procurement professionals, as expert purchasers, can assist the business in differentiating true opportunity from fear-driven me-too opportunities.
  • Pride: Talent Management
    The core challenge that must be met to meet the previous 6 challenges is attracting and keeping people who are capable enough to meet these challenges.

So where does this leave us? With a lot of work to do!

Thanks again to:

A Sense of Urgency is a Good Thing

Strategy + Business recently published an article that transcribed part of an interview with John Kotter of the Harvard Business School on why urgency in the face of change matters. Since most executives would agree that change is no longer a luxury, but rather a necessity, leaders need to help their companies cope with the turmoil of transformation.

Kotter, in discussing his new book A Sense of Urgency, indicates why a sense of urgency is important and what it takes to maintain that sense of urgency in a corporation. Kotter claims that a sense of urgency must be pursued relentlessly because a sense of urgency, and a sense of urgency alone, is the only way to eliminate the risk of complacency.

So how do you build that constant sense of urgency? You start by driving an organizational culture built on the belief that change is not only desirable but something that is to be pursued relentlessly. The steps Kotter recommends are to:

  • allow outside influences in,
  • encourage change on a daily basis,
  • look for opportunities that arise in a crisis, and
  • adeptly manage the “no-no’s” — the employees who insist that change efforts won’t work.

Why is change so important? Things have changed drastically since the end of WWI. Consider the quote from a DuPont executive who said that “After World War II we had a product line that was technologically relevant for 20 years. Nowadays, none of mine last five years.” As soon as your product hits the market, it’s already in the obsolescence phase of its life-cycle. Success in today’s market is growth, not holding your own. And, the newer, smaller companies that succeed are the ones who realized that change must be the driving force of their business plan and day-to-day operations.

What needs to happen to get change moving? According to Kotter, you have to take the Gerstner approach. When Louis Gerstner became CEO of IBM in the early 1990s, the company was hugely complacent. And he told everyone, “We’re going to win. We might not win the series, but we are going to win the next game. We aren’t going to take days off — that’s not how you get there. That’s not how you make big things happen. I’m not asking you to work 200 hours a week and die. What you’ve got to do is take all the junk that you’re doing right now — and trust me, you’re doing lots of junk — and get rid of it, purge it, delegate it, whatever.” Once you do that, all of a sudden there’s more time to pay attention to opportunities and hazards and to do that consistently, without fail and without letup.”

Influencing Value Movement Through the Supply Chain

Industry Week recently ran an interesting article by Daniel Flint, Professor of Marketing at The University of Tennessee about moving value through the supply chain. The article, which starts off by noting that it’s not just value that moves through the supply chain, but perception of value, notes that you have to deal with both if you want to influence value movement through the supply chain.

Furthemore, the author is correct when he notes that value management begins with understanding that value is in the eye of the “customer” and not inherent in any product, service, or system. If you don’t understand what the customer wants, there’s no way that you can provide value. Although a significant amount of research states that all customers value functional benefits, relational benefits, service benefits, and brand reputation and that they evaluate each distinctly, they also evaluate both the monetary and non-monetary sacrifices, which includes the difficulty of doing business with a vendor. Thus, in order to move value, a company must constantly improve the value perceptions immediate and downstream customers perceive they are getting. After all, customers are constantly refining their interpretations about the value of specific products, services, and relationships.

So what can you do to influence value movement throughout the supply chain? According to Daniel Flint, you can:

  • Start by operating under the assumption that your competition knows 10% more than you do.
    Dig deep and outwork your competition.
  • Then assume the most critical aspects of the desired value propositions are changing 10% faster than your current nightmare.
    And do your best to stay ahead of the game. Be vigilent for opportunities to influence changes in value perceptions anywhere along the supply chain.
  • Ignore emotional bonding through superior brand management at your own peril.
    Quality is critical, but ultimately, it is emotional bonds that solidify customer relationships and facilitate higher margins.
  • Develop relationships that enable significant and frequent information sharing.
    You’ll need the help of your supplier chain partners to succeed.
  • Learn by thinking out of the box.
    Don’t hire only from within your industry. Top talent from outside can also help you find the way.

Empirical Proof That Saving Is Easy

Earlier this month, Supply Management . com ran a story on how a 21-year old student saved Dow Corning 370,000. Gareth Davies, who is currently studying purchasing and supply chain management at the University of Glamorgan, spent a year at Dow Corning in Barry, Wales as part of his training where he renegotiated a variety of contracts making savings worth around 20 per cent.

That’s right, a 21-year old student kicked-ass in his first outing. Imagine what you can do as a pro if you take Gareth’s simple advice and take the right approach to get the right deal, using the right tool in the right circumstance! Knowing where to start, what tool to use, and how to use it is a great edge … and if you have optimization and spend analysis in your toolkit, the savings, even in today’s economy, are there for the taking. (And if you need to brush up on your skills, I’d recommend checking out Next Level Purchasing‘s SPSM curriculum. It might be for you.)