Monthly Archives: December 2008

On the Eighth Day of X-Mas … (Supply Chain Trends in 2009)

On the eighth day of X-Mas

my blogger gave to me
thoughts for a shilling,
strategies for winning,

tactics for saving,

five golden rings,

four little words,

tri-focal lens,

two boxing gloves

and a lesson in strategy.

Hot Technologies in 2009 Will Be Spend Analysis and Decision Optimization

Given the current economic climate, organizations will start to adopt these technologies despite their concerns that they are too complicated (which has not been true for years) or too expensive (which is also not true). The emerging leaders in low-cost self-service optimization, like Iasta and Trade Extensions, will take off, as will services companies, such as Lexington Analytics and Opera Solutions, that use leading spend analysis software like BIQ.

Emerging Technologies in 2009 Will Be Specialized Marketplaces and Focussed e-Sourcing Offerings

You’ll not only see an emergence of vertical specific marketplaces like MFG and Co-exprise Energy, but commodity specific marketplaces like cBoxBid.

Sustainability Will Be a Component of Every Sourcing Event

Thanks to Walmart, customers are demanding sustainability, and thanks to the EU, many nations around the globe are in the process of defining and implementing environmental regulations like RoHS and WEEE.

Your Favorite Vendor Will Not Be Around in a Year

This year has seen a couple of big vendors, with credit lines cut off due to bank failures, lost lawsuits, and VC belt-tightening, go through a number of layoff rounds. Two of the largest vendors in the space, despite claims of “regrouping”, are in serious trouble and could soon be on the block … along with a dozen small companies that took too much VC money, and sold too little product, in the last few years. Some have great products, and will be sorely missed if they don’t get sold and close their doors, but it’s a harsh reality when you don’t manage for frugal growth, don’t continually focus on innovation not just in products but internal operations as well, and don’t bring in outside expert help when you need it. (It’s too bad that some of these companies don’t understand that consultants are cheap. Unfortunately, many of these same companies are being run by first-time entrepreneurs — who don’t really understand the difference between a start-up, a small company, and the mid-size or large company they came from.)

You Get More Thoughts for a Pound Than You Do for a Shilling

Twenty times more, to be precise.

On the Seventh Day of X-Mas … (Strategic Sourcing Success Strategies)

On the seventh day of X-Mas

my blogger gave to me
strategies for winning,

tactics for saving,

five golden rings,

four little words,

tri-focal lens,

two boxing gloves

and a lesson in strategy.

Seven strategies you can use to increase your sourcing success are:

  • Spend Visibility
  • Supplier Performance Monitoring
  • Smart Country Sourcing
  • Collaboration with Strategic Partners
  • Innovation on Demand
  • Empowerment
  • End-to-End E-Procurement

Spend Visibility

It’s not how much you spend, how you store it, how you cube it, or how you report on it – it’s how much you get, how you profit from it, and how you improve on it. (Remember, Spend Matters Not.) It’s all about value, profit, and continual improvement. And that requires visibility — otherwise, you don’t know what you’re getting, whether you’re profiting from it, and what you need to be improving on.

Supplier Performance Monitoring

Supplier Performance Management (SPM) is a business practice that is used to measure, analyze, and manage the performance of an organization’s performance in an effort to cut costs, alleviate risks, and drive continuous improvement. The ultimate intent is to identify potential issues and their root causes so that they can be resolved to everyone’s benefit as early as possible. It’s critical because companies with formal performance measurement programs greatly improve supplier performance across the board. Consider the recent Canada Post case study which found supplier improvements across the board, even in a public sector organization where past performance can’t be used to disqualify future bids in public competitions.
For more information on supplier performance management, see the wiki-paper.

Smart Country Sourcing

It’s not low cost, best cost, or near cost – it’s smart cost country sourcing, which includes home cost country sourcing whenever there is a justifiable value proposition to doing so. Don’t go half-way around the world for something you can get down the street when a single fluctuation in raw material costs, transportation costs, or exchange rates can wipe out a year’s worth of savings and lead to significant losses in the long term.

Collaboration with Strategic Partners

Remember, Collaborate, Collaborate, Collaborate, Collaborate (I, II, III, IV, and V) because two heads are better than one.

Innovation on Demand

Innovation-on-Demand, as summarized in my post on e-Sourcing Forum, is a great way to increase your sourcing success. Enable it by way of collaborative PLM technologies that integrate design-centric technologies like those offered by Akoya, Apriori, and Co-exprise.

Empowerment

And I mean real empowerment, not just lip service. If you’ve focussed on hiring real talent with real EQ, you’ll do better letting them take the initiative than limiting them to only that which you know.

End-to-End E-Procurement

End-to-End e-Procurement, the implementation of e-Procurement technologies that support each step of the various procurement cycles of your organization in a tightly integrated fashion, enables the benefits that early procurement technologies promised, but never delivered, which include:

  • elimination of invoice overpayments
  • transparent organizational costs
  • regulatory compliance
  • increased visibility into supplier performance
  • significantly reduced maverick spending

and 15 more! So, if you haven’t already, download the jointly-authored Sourcing Innovation Whitepaper today!

On the Sixth Day of X-Mas … (Cost Reduction Strategic Sourcing Strategies)

On the sixth day of X-Mas

my blogger gave to me
tactics for saving,

five golden rings,

four little words,

tri-focal lens,

two boxing gloves

and a lesson in strategy.

Six tactics that you can use to save in today’s marketplace are:

  • Reverse Auctions on Commodity Categories in Competitive Markets
  • Sealed Bids on Strategic Purchases of Custom Goods or Services
  • Decision Optimization on High Value Goods
  • Process Re-engineering with Strategic Partners
  • Lane Optimization
  • Distribution Center Optimization

Reverse Auctions on Commodity Categories in Competitive Markets

A recent post on Supply Excellence asks if you are not sourcing, why not? … and it’s a good question. Many key commodities that go into the parts you buy, and the energy your suppliers are using to convert raw materials into finished goods, recently hit two, three, and, in some cases, four year lows thanks to the recent decline in global demand. For some categories, it’s the best sourcing market we have seen in years as far as reverse auctions are concerned. So review the reverse auction selection criteria over on e-Sourcing Forum, where you can also find details on reverse auction strategy and reverse auction basics, brush up on the key steps to successful e-auctions, and get sourcing!

Sealed Bids on Strategic Purchases of Custom Goods or Services

If the category is strategic, and you can not use a reverse auction or open-bid methodology and have suppliers compete solely on price, because quality will be just as important, use a sealed bid.

Decision Optimization on High Value Goods

As outlined in my recent posts on e-Sourcing Forum and here on Sourcing Innovation where I asked if you can really afford to leave millions on the table, strategic sourcing decision optimization typically saves you 12% above and beyond what you will save with your best reverse auction, and, even today, still saves you up to 40% on some categories … which is an awful lot of bling if we’re talking about a 100 Million category. So review the decision optimization wiki-paper, select an appropriate solution, and start saving.

Process Re-engineering with Strategic Partners

Streamline processes and increase productivity. This allows you to increase spend under management and the savings you can generate. And if you’re worried about resistance, check out this post on overcoming worker resistance in process improvements.

Lane Optimization

Make sure you are using the right lanes at the right service levels from the right carriers. Otherwise, you could be considerably overspending on your transportation. As Dan Kowal pointed out in his recent Supply Excellence post, the Baltic Panamax Freight Index has dropped 90% since May of this year. The market is rife with opportunities.

Distribution Center Optimization

An inefficient distribution network is costly. Save big by optimizing your network. For details on how, see my post on Bob’s Unique Talents.

On the Fifth Day of X-Mas … (Supply Management Takes Center Stage)

On the fifth day of X-Mas
my blogger gave to me
five golden rings,
four little words,
tri-focal lens,
two boxing gloves
and a lesson in strategy.

Five Golden Rings

Legal.
Finance.
Sales and Marketing.
Product Development.
Human Resources.

Supply Management continues to sit at the intersection of these departments. Supply Management must work with Product Development to understand their needs with respect to quality, reliability, and functionality. Supply Management must work with Sales and Marketing to understand what product characteristics can be expounded upon to generate buzz or increase value (and, ultimately, the sale price). Supply Management must work with Human Resources to understand organizational values, look for strategic partners, and source temporary and contract labor. Supply Management must work with Finance to understand working capital requirements and preferred payment terms. Supply Management must work with Legal to create the best contracts for the organization and ensure that they appropriately protect the organization against all foreseen risks.

That’s why the sourcing organization needs to form cross functional teams consisting of representatives of each department that are involved with each and every sourcing project from the get-go. This not only streamlines the process, but increases your chances of success. During RFP formulation, Legal and Finance will help you nail down the terms and conditions in the template contract to streamline signing down the road. Product Development and Human Resources will help in supplier pre-qualification. Sales and Marketing can assist in the RFP evaluations. And with everybody’s help, you’ll ultimately make the right decision every time and maximize the value of each and every sourcing effort.