Monthly Archives: November 2008

Who’s up for Brews in Boston?

the doctor will be in the Boston Area for most of next week, and currently has a fair amount of free time (particularly later in the week when many of you Americans take your 4-day weekend). If anyone would like to meet, and brief, the doctor, please drop a note to the doctor <at> sourcinginnovation <dot> com.

The Sourcing Maniacs 2008 Vendor Tour Part 13: MFG.com

This post is a little lengthy, so it’s been broken down into Comedy and Community, which you can skip to if you’re short on time.

Comedy

Yakko Rapid Response Management. I don’t think we’d ever have thought of that at our old jobs!
  The maniacs just finished visiting with Kinaxis.
Dot It’s sure one cool concept! So Who’s Next?
Wakko Awesome album!

Pick up my guitar and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again
No, no!

Wakko breaks into his best air guitar routine

Yakko & Dot Wakko!
Wakko What?
Yakko I believe Dot was asking a question!
Dot And I want to know what company we’ll be visiting next.
Wakko Oh.
So, onward where?
Yakko Are we done with the K’s?
Wakko I wonder what’s up with that little company down in the valley that we used to pretend didn’t exist?
Yakko Are you referring to Ketera?
Wakko That’s them!
Dot I’m not ready to go back to California.
Yakko I heard they have a new SaaS e-Sourcing offering! Maybe we can get a web-demo and research them online!
Dot That would be cool. I’ll give them a call.
Dot rings up Ketera.
Sales Voice You’ve reached Ketera! How can we help you?
Dot We’d like a demo of your new e-Sourcing offering.
Sales Voice Who are you with?
Dot The Media.
Sales Voice Well, we’re a little backed up right now … the platform is taking off much faster than we expected. Can you wait a few weeks?
Dot Well, uhm, okay.
Obviously not used to being asked to wait.
Sales Voice If you’ll give me your details …
  the maniacs trailed off here
Yakko Well, I guess we’ll have to catch up with them later.
Dot So where are we?
Yakko I guess we move on to the L’s.
Wakko Elle MacPherson … oh yeah … I could definitely …
Dot WAKKO!
Wakko looking confused
Yakko Lexington Analytics?
Dot Too Consulting.
Yakko Lexis Nexis?
Dot Too Data Focussed.
Yakko LlamaSoft?
Dot Too mathematical. And Wakko would spend the whole time tearing the place apart looking for llamas.
Yakko Log-Net?
Dot Too logistical.
Yakko LSC Consulting Group?
Dot Again, consulting.
Yakko Well, I’m out of L’s! On to the M’s!

Editor’s Note: Yakko wouldn’t be out of L’s if he’d check the resource site once in a while, which lists over 500 companies in the space, alphabetically sorted, and accessible by starting letter and major category.

Dot I seem to remember this company called Moai from years (and years) back. Think they’re still around?
Yakko I haven’t heard of them in years! Last time I saw a press release from them was … was … 2004! Not long after the Medebiz merger / acquisition. I thought they were as long gone as the Moai statues on Easter Island that they named themselves after!
Dot Maybe … but I thought I noticed that their web site was still there a few days ago.
Yakko Web site! That’s it! the doctor told us about a web-based operation that starts with M that we’re supposed to check out. Just a minute.

Yakko fetches his handy-dandy notebook.

MFG.

Wakko Are we going for Chinese food! I’m hungry!
Yakko M-F-G, not MSG!
Wakko Oh. Well, can we still go for Chinese food! I’m hungry!
Yakko You’re always hungry!
Dot So who’s this MFG?
Yakko According to the doctor, MFG, who bills themselve as the on-line manufacturing marketplace, is a SaaS-based marketplace where buyers and sellers can come together and do business.
Dot So where are they?
Yakko I believe they’re in Atlanta, Georgia …
Wakko Georgia, Georgia
The whole day through
Just an old sweet song
Keeps Georgia on my mind
Yakko ignoring Wakko
… but the doctor says that everything they offer, and everything we should care about, is on-line.
Dot Time for another trip to the cyber-cafe!
Wakko Look! Look! Here’s a Chinese Cafe!
jumping up and down
Can we go? Can we? Can we?
Yakko Yes, Wakko.

Community

Wakko I love Chinese food!
Dot Is there any food you don’t love?
Wakko thinking … despite the look of consternation on his face
Escargot and Cavier.
Dot That’s sophisticated food.
Wakko I’d rather baloney.
Yakko breaking out the MacBook
Shall we begin?
Dot Sure. Where do we start?
Yakko Let’s go to the blogs for background. the doctor appears to have two MFG-focussed posts: MFG: A Community in the Making and MFGX.com – Exploding onto the scene, which I found through his handy Annual Vendor Day master index post.

Starting as a “parts marketplace” that is free to buyers, it has, especially after its recent acquisition of SourcingParts.com, a large supplier community that you can search, and tap, for custom manufactured parts and products through its free on-line sourcing and collaboration tools. Furthermore, it goes beyond just simple supplier directories, as MFG verifies the listed capabilities of suppliers who use the site and allows buyers to post their feedback, which it compiles into supplier ratings.

On top of this, it has a real-time supplier matching capability that works on detailed part specifications which will automatically locate the suppliers who are capable of filling your order. Once you select one, you can work with them using the built-in tools to collaborate on, and refine, the design until you get a high quality design that is cost-effective to produce.

And then there’s the companion MFGX.com site, released about six months ago, open to all manufacturers, and buyers, in an on-line forum that allows them to come together, share information, ask questions, post classifieds, find work, take advantage of open-source machine tools, and keep up with the latest news and trends. It’s all based on “Web 2.0” technologies – forums, blogs, wikis, and networking tools.

Dot Anything else?
Yakko the doctor has also cross-indexed a number of Spend Matters posts on MFG as well. Let’s check them out.

In Going Global with a Unique Leader, JB tells us about their CEO, Mich Free, and how he’s a b-school type — gritty, school of hard knocks, and personally knowledgeable about how a machine shop actually works — and how he used that knowledge to build a team that actually understood what manufacturing is and what it needs in an on-line platform.

In Smock Gets the Scoop, JB references a recent interview that notes that MFG.com is planning to offer an advanced sourcing solution to buyers, which goes beyond its basic platform that will remain free, that will include “the whole nine yards of sourcing capability plus supplier relationship management and contract management for a subscription price of less than $500 a quarter per buying company”.

Dot Wow! That’s bargain basement pricing! For sourcing!
Yakko In the Fusion posts (I and II), JB told us about some of the visionary insights of Mitch Free, MFG’s founder, and how he’s trying to open up the manufacturing space in ways not previously thought of, and in MFG.com — Building a Textile Marketplace, he tells us how MFG is creating a new marketplace for textiles, an industry that, like traditional manufacturing, has been traditionally underserved on the web.
Dot Wow! Sounds like MFG are one busy bunch of guys and gals!
Yakko And that’s not all! In “Surviving China’s Rapidly Changing Sourcing Tides” (I and II), the doctor mentions MFGChina.com, the MFG companion site … in Chinese … to serve the Chinese marketplace.
Wakko Gan Bei! More Tsingtao please!
Dot Busy, busy, busy!
Yakko Very! I think it’s time to check the MFG.com site out!

Wow! RFQs are sorted into standard, commodity parts, for open, public bid and custom parts — making it easy for suppliers to find the RFQs most appropriate to their orientation. Hundreds of categories, allowing everything to be precisely specified. There has to be over a thousand standardized parts and products here!

And the resource collection is awesome! Industry LInks to CAD & CAM Software, Consulting Srvices, and Machine Tool Builders to name a few. Links to over 20 relevant Manufacturing Publications. Over 15 relevant manufacturing industry associations. Information on the major certifications and standards. Even a collection of useful utilities.

Wakko That’s a collection that even the doctor, with the largest collection of useful resources (on the Sourcing Innovation Resource Site) in the space, would be proud of!
Yakko And the help, and online process guidance, is very extensive. Even you could use it Wakko!

And as far as I can tell, MFGChina.com is just as extensive!

Dot What about MFGx.com – The Global Manufacturing Community?
Yakko I see over 10 active communities – Buy and Sell, Employment, Open Source Machine Tools, General Manufacturing, Sourcing and Procurement, Marketing for Manufacturers, Metalworking and Machining, Textiles and Apparel, Design and Engineering, Software, Logistics, and Materials. And everything’s a wiki document, so you can log in and make it better. And then there’s the blogs. Led by their blog-master, former analyst extraordinaire, AJ Sweatt.
Dot Does Mitch blog?
Yakko Occassionally. (Found here.)
Dot Too bad he doesn’t blog more. the doctor says he’s one smart cookie.
Yakko I don’t think those were quite the words he used.
Dot Same Dif.
Yakko Anyway, this MFG.com looks like a great resource for manufacturing buyers and suppliers alike!

Refining Sustainability, Spend Matters Style

In a recent Spend Matters Perspective, Redefining Sustainability: Saving Money, Reducing Risk and Going Green, my fellow blogger tackles the critical issues of sustainability and green, issues that this blog has been tackling since day one. Although there wasn’t really anything new in this perspective for someone who is well read on the subject (and who also follows blogs like 2Sustain), he did a great job of summarizing the current situation, and how most companies (responding to the headlines) tend to over-focus on (EU and China) regulatory requirements or emerging (Walmart) consumer expectations and how only those organizations that go beyond the hot-button issues and take a holistic view realize the true, quantifiable, benefits that sustainability has to offer a procurement organization – cost savings and cost avoidance.

According to Jason, despite the savings, cost avoidance and risk reduction benefits that companies stand to gain from pursuing green and sustainable procurement strategies, traditional sourcing approaches and mindsets often fall short of what’s necessary to achieve results. The primary reason is that classic strategic sourcing models — which often rely on sealed-bids, multi-round negotiations or reverse auctions — are inflexible and in fact limit the options that are on the table when it comes to achieving green and sustainable savings and returns. Furthermore,

  • Traditional sourcing approaches limit the ability of suppliers to suggest or propose alternatives to a standard specification
  • Rote process allows for limited internal analysis, brainstorming and scenario modeling outside of specific steps in the process
  • Strategic sourcing models typically — and for good reason — isolate the procurement function from the rest of the organization at specific points to enable open and transparent markets and pricing

However, cost savings and avoidance can often only be achieved through market competition in an apples-to-apples bid structure that allows the true TCO of each proposal to be calculated and understood. Furthermore, despite noting that traditional sourcing processes and tools can limit options rather than create new possibilities, Jason also notes that leaders use technology platforms to communicate information, capture data, run scenarios and weigh decisions. So obviously it’s not the tools that are flawed, since many leaders use the same tools as many followers, and it’s not the methodologies either, since leaders use RFXs, Auctions, and Scenario Optimization technology to accomplish bid collection, market competition, and true TCO analysis. So what is it? It’s the mindset, and the traditional application of the methodologies and tools by individuals who are not using the full power and extent of the methodologies and tools to “be all they can be”.

Fundamentally, good strategic sourcing can fully capture the costs and benefits of a sustainable sourcing option, compare it side-by-side with another sustainable sourcing option, and compare those costs and benefits side by side with non-sustainable sourcing options. Your processes do not have to be redefined, just refined to take a more holistic view. The first key to success is to not specify what you want, but instead specify what you want to do when composing an RFX. In other words, don’t specify the materials and fabrication process, but the desired functionality, interface, and minimum performance requirements. It’s the same approach you take when writing a good technology RFP (which DO NOT include the Spend Management RFPs that are just endless, or should I say useless, feature lists) and the same approach Tata Motors used when designing the Nano. They left the actual design and composition of all of their components to the suppliers. Instead of saying “two standard wipers, 12 inches and 11 inches, for driver’s side and passenger’s side, made of steel and teflon” they essentially said “a windshield cleaning and rain repellant system that plugs into an interface …” and instead of saying “a four cylinder 180 HP engine with … “, they essentially said “an engine capable of generating at least X HP …”. By taking advantage of supplier creativity and innovation, they were able to produce a better, more sustainable, vehicle at lower costs than they would have been able to design in-house.

The second key to success is to use a life-cycle-based Total Value Management ranking when evaluating bids that captures all cost and non-cost factors that are relevant (and that assigns each non-cost factor a virtual cost to generate traditional life-cycle TCO rankings that takes into account the non-cost factors to determine the optimal bids). It’s not just unit cost, shipping cost, duties and tariffs, and quality-related costs that come from waste and returns management, but avoided carbon-offset costs from a greener product, avoided maintenance costs because of a better product, avoided marketing costs because of a more-consumer friendly product, etc. And you look at the cost over an average product life-cycle, not just a contract life-cycle. If you plan to make, use, and / or sell the product for five years, you look at the expected costs over five years in figuring out your cost factors — not over the next six months. After all, as Jason notes, sustainability results from collaborative innovation, and this will often require longer term relationships with key supply partners and commitments to new, more sustainable, technologies and processes.

The Perspective outlines three additional strategies that leaders use to achieve sustainable sourcing results, as well as some of the cost savings that market leaders have achieved (and that they have, more or less, kept to themselves because they view it as a competitive advantage). It’s worth checking out.

The Sourcing Maniacs 2008 Vendor Tour Part XII: Kinaxis

This post is a little lengthy, so it’s been broken into Kicking It and Kinaxis, which you can skip to if you’re short on time.

Kicking It

Wakko That hits the spot!
Yakko I hope so! That was your fourth serving of pulled-pork!
The maniancs just finished visiting Integration Point in North Carolina.
Wakko So, where are we off to next?
Dot I think we’re done with the I’s. Time for the J’s.
Yakko I only know of JVKG, who do services, and JDA who do logistics and warehouse management.
Dot I don’t know any J’s. I guess that means we skip straight to the K’s!
Yakko I don’t know many K’s either. What does Kewill Systems do?
Dot More logistics. Kanbay?
Yakko Consulting. Kinaxis?
Dot What do they do?
Yakko Something called Rapid Response Management.
Dot What’s that?
Yakko Honestly, I have no idea!
Wakko even Wakko doesn’t have a snappy combeack!
Dot Should we check them out?
Yakko the doctor says they’re rather unique
Dot That’s interesting … where are they?
Yakko Their US headquarters is back in Chicago.
Wakko Can we go to the Funhouse Maze this time?
Yakko I guess so.
Dot Okay! Let’s head back!
  the maniacs were recently in Chicago visiting FieldGlass
the maniacs head back towards Chicago; we rejoin them a few days later
Wakko Here we are!
out comes the mini-mallet
tap … tap a smiling man opens the door
Smiling Man Greetings!
Wakko quickly putting the mini-mallet away
Hi! We’d like a Rapid Response!
Smiling Man To?
Yakko What Wakko means to ask is, what is “Rapid Response”?
Smiling Man And you are?
Yakko I’m Yakko.
Dot I’m Dot.
Smiling Man And you’re with?
Dot No one at the moment.
Smiling Man So you want?
Yakko To learn!
Smiling Man And you’re here?
Yakko Because the doctor said you had a unique solution.
Smiling Man And?
Dot We’re bored.
Yakko Can you tell us what you do?
Smiling Man I’m not sure it will help you, but ok.

Kinaxis

Yakko So what is Rapid Response?
Smiling Man RapidResponse is our demand management platform, available on-demand, that is used by manufacturing supply chain professionals to manage their change-ready supply chains.
Yakko How does it do that?
Smiling Man It integrates with your supply chain systems, monitors data in real time, and automatically detects changes that could have a negative impact on your supply chain. It then alerts the appropriate individuals who can run different scenarios to evaluate their options and come together in the tool to collaboratively solve identified problems. But to really understand what that means, we need to take a step back and make sure you understand the problem.
Dot Sure!
Smiling Man In the past, manufacturing companies would typically forecast demands on an annual basis, cut contracts with suppliers and 3PL companies, and then tweak their operating plans every quarter or every month. These forecasts, and operation plans, would be created by gathering multiple years worth of demand and production data and a sophisticated set of assumptions created by internal experts, which would then be fed into complex planning software which would churn on a big model, often for days on end, and spit out a master plan that the company would adhere to.

But that was when business, and the world around it, moved at a slower, and more predictable, pace. Today, the world is increasingly volatile and dynamic, demand and available supply levels change rapidly, an ever increasing amount of your business is outsourced across an increasingly complex supply network, and yesterday’s plan may no longer be valid today.

Manufacturing operations need to be able to monitor their supply and demand networks in real time and take course corrections as soon as demands change or supply inavailability puts production, and thus revenue, in jeopardy. You can’t do that with your traditional Advanced Planning and Optimizer (APO) tool.

Our tool gives businesses the capability to monitor supply and demand in real time, immediately determine the impact of a demand or supply change from a production and revenue perspective, and react to the changes.

Yakko How does it do that?
Smiling Man We integrate with all of the standard ERP and planning systems on the market using data files in standard file formats and import data in from all of your manufacturing systems at your various locations — be they Oracle, SAP, JD Edwards, or Excel flat files — which is updated as often as you like — every day, every hour, or every minute. Every time data is updated, the relevant supply chain models are updated and any supply or demand discrepancies are immediately detected and the appropriate individuals are alerted through the tool’s message center, if the change doesn’t require an immediate response on behalf of a person, or through e-mail.

The appropriate individual can log into the system and review the impact of the change. She can then create virtual scenarios that, depending on the situation, reduce or delay production, expedite supply shipments, or alter expected demand levels. These can then be shared with colleagues who can collaborate through the tool to determine the right response to a demand change or supply chain disruption. When the appropriate response is decided upon, the supply chain model is updated, and any changes are pushed back to the appropriate systems the raw data was collected from.

Dot So is the tool hard to use? It sounds like it’s based on advanced mathematics. Am I right?
Smiling Man Like the APO systems it is replacing, it is based on very advanced mathematical models that combine the best of optimization and simulation and update themselves in real time on every data change. But, at least in our view, and the view of many of our customers which include some of the largest manufacturing organizations in the world, it’s quite easy to use — even easier than the Excel-based spreadsheets that so many organizations still rely on as their legacy APO systems don’t allow them to centralize all of the relevant data in one application or create virtual scenarios to analyze as many different possibilities as our tool allows.

Our application uses a tree-based table view which, once you’ve modeled the appropriate part of your supply chain network, allows you to quickly drill-in, find, and update the data associated with a product, part, or raw material. No more searching through pages upon pages of workbook data to find that one cell that needs to be corrected. Drill, drill, select the proper cell, update the quantity or delivery date, hit enter, and not only are you done — but the entire plan updates in real time.

Dot So it must be hard to setup the network?
Smiling Man No, that’s quite easy too. Create a “workbook” that represents the supply chain for the products you’re interested in, define the different nodes (factories, warehouses, distribution centers, and raw material supply centers), define the flows and their properties (Beijing to LA, 21 days, etc.), define the products you produce, consume, or transfer (within your production and distribution network) at each point, map inputs (consumables) to output (produced products), collect the demands from your current forecasting system, and you’re done. If you have a large network, and if you’ve never formally modeled your network like this, it might take a bit of time, but it’s quite easy.
Dot You say “workbook”. Does this mean your product supports multiple networks?
Smiling Man It supports multiple supply networks and multiple views of the same supply network.
Dot Why would you want that?
Smiling Man Let’s say you have a processed food division and a household products division. Although the products produced by both divisions might be sold in the same store, chances are that both divisions require very different inputs with little overlap, that use pretty much separate networks. In this situation, you’d want to model your supply chain as different networks.

You want multiple views because different business units — procurement, manufacturing, finance, and management — each care about different aspects of your supply chain at different levels of detail. Our tool allows you to set these views up once and then everyone gets to see what they want to see, how they want to see it, since you can customize the scorecards, and reports, available in each workbook.

And, as you probably figured out, each workbook supports multiple scenarios. The current scenario that represents your current production plan, and any problems that it might have, and multiple “what-if” virtual scenarios that allow you to model different plans, and different responses to changing supply and demand patterns, any one of which can be promoted to the current plan at any time by the individual with the authority to do so.

Dot So how many different workbooks can you have?
Smiling Man As many as you want. Most of our installations have at least 10 to 20, and we have a large number of templates to enable our customers to set up the views their various business units need. Our tool is quite versatile despite the fact it was designed for demand planning. Some organizations even use it for projected purchase price variance analysis because it has the most complete data view of any system in their organization!
Dot And it has lots of reporting?
Smiling Man You can set up scorecards for each workbook and scenario, define which metrics you want to track, and see how you’re performing today versus yesterday or another point in time. And you can create reports off of these scorecards. It’s not a full blown reporting tool, but it gives you what you need — in real time — and if you want something fancy, you can do a data export and create whatever you want in your internal reporting package.
Yakko Is that it?
Smiling Man Well, if we dig in, and open it up, you’ll find a lot of cool features and applications, but that’s pretty much it. Our customers told us what they really needed was a way to synnchronize supply and demand data, monitor it in real time, define corrective actions, and put them into play — quickly — so that’s we focussed on. An on-demand real-time application that solved the one problem no one else was solving for them. And that’s what we continue to focus on as our primary goal. As we identify additional capabilities that will be of use to our customers, we’ll add them over time. But our focus won’t change.
Yakko Makes sense.
Smiling Man We think so. And with that, I have more educational responsibilities to fulfill. Good day.

Buying Spend Analysis Systems: Taking a Test Drive

Today’s guest post is from Bernard Gunther of Lexington Analytics.
He can be reached at bgunther <at> lexingtonanalytics <dot> com.

During the course of my work, I am always surprised at the large number of procurement organizations who still perform their analyses by dumping AP data into Excel or Access and developing their own reports. An analyst spends days or weeks each month maintaining this information. Even more troubling are those who have purchased an analysis tool, but still dump the transaction data into spreadsheets and spend hours or days creating their reports. The expensive analytics system they purchased is just serving as a repository for data. I suspect they didn’t take their analytic system for a serious test drive before buying. A test drive is a simple way to know exactly how the system is going to do what you need it to do.

To be useful to a procurement organization, a spend analysis system must be able to:

  1. Load the data.
  2. Transform the data. Make changes to hierarchies and create / modify rules to map the data.
  3. Index in other information to further enhance the data; for example, identifying preferred vendors, vendors with contracts.
  4. Create useful output — not just dump data – such as full reports, ready to send to users.
  5. Update the data with the next month / quarter / year of information.

And, it must be able to do all these things without requiring significant support, either from the vendor or from IT, after the initial training. Most Procurement organizations want to be as self supporting as possible.

To get the most out of your test drive, have the vendor show you, step by step, how their tools work with your data. Before the meeting, create a text file with a reasonable sized segment of data, perhaps a year, in a single table with:

  • Vendor name
  • Cost Center
  • GL Code
  • Date
  • Amount
  • Description
  • Other fields that are interesting to you, such as commodity or preferred vendor.

Select a reasonable size block of data so you understand the performance of the system under the load you expect to have. The goal is to have an interesting segment of data to work with. You want to understand how each step of the process works and delivers, not to build the full system.

After you are convinced that the vendor is capable of performing the essential tasks, you can focus on how the process will work on all your data and fully fleshing out your reports. Arrange a meeting with your vendor (in person or remotely) to have them show you how they do each step of their process with your data.

  1. Load the data into their tool. Is it easy to load new data into the system? World class procurement functions build dozens of different cubes on different segments of their spend data, so this needs to be easy.
  2. Look at the raw data. Can you see your top vendors, cost centers, GL codes?
  3. Have them group some vendors and then look at your data. Can you group vendors as you want them?
  4. Have them create a few nodes in a commodity structure and map some spending. Create some vendor rules, some GL rules and then some more complex rules. Modify a rule and see the results
  5. Have them create a report. Print it out. They modify the report and see it again. Start with a simple report and then do something more complicated (for example, with pivot tables).
  6. Perform a refresh. Add some more transactions to the data. See how all the existing vendor grouping and mapping are applied.

You should be able to do all these steps on your sample data in 2 to 4 hours. Once you’ve done this, you will understand how the system will work for you. If it takes hours to make simple changes in the demo, it will take hours in the final system. If six different people are involved in the demo, you’ll likely need this size team in production. If you can’t see your team doing the work shown in the demo, you’re going to need to rely on the vendor or some third party in the future. In the longer term, you may decide you want to leverage external labor to do the work, but to be able to be independent; you need to understand and be able to perform each part of the work yourself. If you can’t be independent, do you want to be dependent on this third party (vendor or IT group) for every single change you to make?

Spending a day or two test driving different spend analysis options is the easiest way to really know if the system the vendor is proposing will work for you.