Monthly Archives: February 2010

Are Open-Source Data Interchange Standards for SaaS the Key to Radically Simple Supply Chains?

A couple of years ago, the Harvard Business Review ran an article on “Radically Simple IT” that noted that the fundamental problem with enterprise IT projects, which continue to be a headache for business leaders, is that these systems are constructed using a cathedral approach. Like the great cathedrals erected in Europe in the middle ages, enterprise IT projects are costly, take a great deal of time, and deliver value only when the project is completed. Furthermore, they yield systems that are inflexible and cement companies into functioning the way their businesses worked several years ago, when the project started.

What’s needed are systems that can be improved — rapidly and continuously — well after they’ve gone live. The systems should be built on a “path-based” approach that provides a path for the system to be developed over time. After all, it’s difficult and costly to map out all requirements before a project starts because people often cannot specify everything they’ll need beforehand.

Given the rapid escalation of supply chain systems, designs, regulation, and security requirements, it’s pretty much impossible to map out all of the requirements of a supply chain systems project before it starts. And even if it could be done, they’d just change tomorrow anyway! A new approach is definitely needed for developing and implementing systems that serve the supply chain, and I think we’re reaching the point where they will be born of necessity.

You see, even though there are now a number of big players out there that offer very broad solution suites, these suites are, still, for the most part restricted to sourcing and procurement, logistics and inventory management, or global trade and data exchange. While the footprints of each type of system is rapidly expanding within their respective domains, most systems are still not expanding beyond the comfort domains of the vendors providing the systems.

And to be honest, most vendors with expertise in sourcing and procurement, have little in logistics, inventory, or shop floor operations and most with expertise in logistics, inventory, or shop floor operations have little in global trade regulations and security requirements. The key is going to be the development of modular SaaS platforms that can interoperate using a common data language that is open and not owned by any single vendor. (Single vendor standards just build a single vendor eco-system, or a bigger Ariba Supply Network.) Just like the web was built on true open standards, next generation supply chains need to be as well. The question is, who will lead the effort and when will the major players buy in?

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The Elusive Right Path to Engineering Offshoring

A recent article in Strategy+Business attempted to address The Elusive Right Path to Engineering Offshoring. They proposed a five step plan to making it work, and while the advice was okay, I think the article missed the point. In my view, the right path to engineering offshoring is not to do it at all if you are developing products for the local marketplace.

While I will freely admit that there is innovative talent in the outsourcing hotspots of India and China, it’s not necessarily the right innovative talent for you. As a for-profit enterprise, an innovative product alone is not enough — you need an innovative product that will sell in your target market, and, frankly, just because something is hot in India or China does not mean it’s going to be hot in North America (and vice versa). In terms even a layman could understand, just like most of the population in India would not buy a Big Mac, most of the population of North America would not be that interested in a McVeggie or a Lamb Maharaja Mac (although the doctor would prefer if his local MacDonald’s served a cheese-free Chicken Maharaja Mac instead of a Big Mac and a McAloo Tikki Burger instead of a Junior Hamburger).

Taking a more technical focus, while sales of a low-cost affordable car like the Tata Nano will probably skyrocket in India, such a small, cheap car would never even leave the showroom for a test-drive in North America as long as fuel prices are half of what they are in Europe. And clone merchandise will never reach the mass market in North America that it has in China (and not just because of much better intellectual property laws, but because of the high status North Americans bestow upon to brand name goods).

However, on the flip-side, if you are trying to create innovative products for international markets, you should certainly, at the very least, augment your R&D organization with a local-team on the ground in the target market. An experienced engineering or development shop in China or India would be much more adept at producing killer products for the local market than you would be thousands of miles away in the midst of a different culture. In this circumstance, the advice of the article applies, and I encourage you to read the article and take its advice.

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Bravo: Analysis and Supplier Performance Management for Contract Compliance

Last month, I told you how BravoSolution Collaboratively Optimized Its Way onto the doctor‘s Short List. Today, I’m going to discuss their (Spend) Analysis, Supplier Performance Management, and Contract Compliance Solutions to give you a broader view of their solution suite.

To get straight to the point, their spend analysis (console) solution, which takes a standard reporting-based approach, and which includes over 60 standard report templates, is nothing special, but their analysis administration tool, the Transformation Designer, is one of the most powerful administration interfaces I’ve seen in a web-based analysis solution. Most providers tout their “leading auto-cleansing, auto-classification, and auto-enrichment” solutions as if they’re the be-all-and-end-all, but those who truly understand spend analysis realize that you can’t auto-cleanse, auto-classify, and auto-enrich everything, no matter how many rules are in your repository or how many billions of transactions your provider has classified. (And those who fall for that line are lucky if mapping accuracy even approaches 80%.)

Every company is different, every department is different, every employee is different, and every transaction is different. That’s why you have 19 different representations of IBM in your supplier master. Furthermore, you don’t buy the same SKUs from the same suppliers with every order. So even if you had a “perfect” set of automatic mapping rules today, they’d be broken tomorrow. You have to continually manage and maintain your data or your reports will be useless. And Bravo’s Transformation Designer allows your data administrator(s) to do all that.

Bravo’s Transformation Designer allows you to select your data sources, define the raw data tables, capture the raw data fields, profile the data, and define custom mapping and transformation rules on the data before it populates your repository. You can also define a bevy of checks (null, range, date, acceptable values, duplicate, etc) and define your rules based on transformations (that can use substrings, calculations, and lookups). The rules can be layered, with higher priority rules taking precedence and lower priority rules kicking in when there are no higher priority rules. (So you can start with the classic “secret sauce” of map the vendors, map the GL codes, map the vendors + GL codes, and map the exceptions and have the rules applied in reverse order.)

In addition to supporting your standard “knowledge base” of auto-classification rules (which includes mappings, and families, for tens of millions of suppliers and even more standard items), which you can use to start your mapping journey, it also supports automated text classification methods based on advanced statistical algorithms. A proper combination of all three rule types — knowledge base for standard vendor and GL code mappings, statistical rules for automated mapping of unrecognized transactions (that can be mapped with high statistical accuracy), and custom hand-coded direct mapping rules for the exceptions — will get you very high classification accuracy with very little work. Especially since you can use their rules engine to quickly identify exceptions and define direct mapping rules that take care of them. And any time you identify a mis-mapping, you can define a new rule to re-map it. (New rules are immediately added to an asynchronous mapping queue and the queue is processed continuously, which allows for near real-time updates. No waiting for the monthly refresh.)

The Analysis Console also works on their supplier performance data. Bravo Solution is a mature provider of SPM, having been offering a solution since 2001. While it might not be broader or deeper than any of the newer pure SPM solution plays (SupplierSoft, Aravo, Hiperos, etc.), they have a history of successful implementations. (And more importantly, how deep is a SPM solution anyway? As long as it captures data, calculates metrics, allows you to create month-over-month, quarter-over-quarter, year-over-year, and trend reports on the metrics, allows you to share that data with your supplier(s), and allows you to collaborate on action plans in a virtual collaboration environment, what else is critical to your average organization just starting on an SPM journey?) With regards to SPM, Bravo has your bases covered. It’s nothing fancy, but it will more than get the job done.

This brings us to Contract Compliance. Their solution can automatically load cleansed GPO contract data, normalize the data based on supplier families and parent-child company organization relationships, and extract line-items and SKUs. If you integrate with your purchasing system, the solution will automatically match purchases to contracts and flag exceptions. It also supports deep embedding with your e-Procurement system and can be used to identify contracts, price levels, and exceptions before a PO is issued. But the best part is the deep integration that is currently being developed between the Analytics Console, SPM Module and Contract Compliance Modules. You’ll be able to analyze contract compliance against supplier performance at any time, over any time period, and see if you’re getting the value you expected from the contract — and then use this information at contract renewal / resourcing time.

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New and Upcoming Events from the #1 Supply Chain Resource Site

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis — and it will continue to do so.

The following is a short selection of upcoming webinars and events that you might want to check out in the coming weeks:

Date & Time Webcast
2010-Feb-16

13:00 GMT-05:00/CDT/EST

 Managing administrative costs & delivering quality outcomes in Healthcare
Sponsor: SSON
2010-Feb-17

17:00 GMT+01:00/CET/WEDT

 Risk Management Community of Interest Call Series
Sponsor: IACCM
2010-Feb-17

11:00 GMT-06:00/CST/MDT

 Preparing for the Recovery: Best Practices in Transportation Planning and Procurement for 2010
Sponsor: CSCMP
2010-Feb-17

14:00 GMT-05:00/CDT/EST

 Hackett Group 2010 Key Issues Study: Results and Analysis
Sponsor: ISM
2010-Feb-17

11:00 GMT-05:00/CDT/EST

 Driving Best in Class Source to Pay Performance and Improving Business Outcomes
Sponsor: SSON
2010-Feb-18

14:00 GMT-05:00/CDT/EST

 Winning Stimulus Funding for Infrastructure Projects
Sponsor: SAP
2010-Feb-18

14:00 GMT/WET

 CiGDM Introduces Web-based HS Classification System
Sponsor: Global Data Mining

Dates Conference Sponsor
2010-Mar-14 to
2010-Mar-16		 AirCargo 2010
Orlando, Florida, USA (North-America)		 AEMCA
2010-Mar-14 to
2010-Mar-17		 2010 Asset Protection Conference
Dallas, Texas, USA (North-America)		 FMI
2010-Mar-15 to
2010-Mar-16		 Strategic Travel Symposium
New York, New York, USA (North-America)		 NBTA
2010-Mar-16 to
2010-Mar-19		 Pharma & Biotech Supply Chain Asia 2010
Singapore, NA, Singapore (Asia)		 Terrapinn Pte Ltd
2010-Mar-17 to
2010-Mar-17		 Indirect Spend China Summit
Shanghai, China (Asia)		 GSCC
2010-Mar-22 to
2010-Mar-23		 AAPA Spring Conference
Washington, D.C., USA (North-America)		 AAPA
2010-Mar-23 to
2010-Mar-25		 IACCM Americas Conference
Orlando, Florida, USA (North-America)		 IACCM

They are all readily searchable from the comprehensive Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know you were looking for!

And continue to keep a sharp eye out for new additions!

2010: The Year of CUTS?

According to a recent piece over on Supply Chain Digest that chronicled the Supply Chain Guru Predictions for 2010, this will be the year of CUTS:

  • Consolidation,
  • Uncertainty,
  • Training, and
  • Specialization.

In other words, the year will be pretty bleak. We’re already at the point where, with the exception of BIQ’s inclusion of a new Computed Measures Language as part of their spend/data analysis package , I haven’t seen anything truly innovative on the technology side in over a year.

I’ve seen lots of great stuff, but almost all of it falls into the better, faster, cheaper category. For example, the recent upgrade to Trade Extensions’ platform, which can now handle Billion-dollar sourcing projects with over 60,000 lanes and 400,000 bids in a single model, is incredibly powerful and really (really) cool (because even five years ago it was hard to imagine being able to solve such a problem on anything less than a supercomputer), but it’s still just a (large) incremental improvement on fundamental technologies and capabilities they’ve had for a few years. Rollstream’s enterprise community management application, built on the better principles of social networking, is really slick, but not a fundamentally new idea. And SupplierSoft‘s integration of their full SRM platform into SalesForce, which gives customer organizations a 360° supply chain view through a single platform, is a unique implementation, but P2P, SIM, SRM, and (Environmental) Compliance solutions are not new.

Now, you might say that the fact that organizations are finally expected to focus on training is a good thing, because it makes your people more productive and, in supply chain in particular, can deliver amazing ROI, but most companies are not going to do it out of respect for their employees. They’re going to do it because they think it will allow them to shovel even more work onto their already overworked employees, delay hiring, and continue to contribute to the jobless recovery in a negative fashion.

And when you dig deeper into the predictions, you see that consolidation is referring primarily to consolidation of supply chain assets, which sounds good at first (more use, revenue, and thus profit per asset), until you realize that having all assets almost 100% utilized allows no room for growth. And you see that uncertainty means that no one is willing to step up and say “this is the year we’re going to recover, economy be damned” which means another year where the majority of companies are going to just hunker down and hope “magic happens” before they go broke. And while specialization, or, in the words of Art Mesher, selective specialization, sounds great, since that presumably means that supply chain systems will get better and better, until we have an open source standard for supply chain data interchange, the visibility nightmare is going to get worse before it gets better.

All I can say is that it’s time to Shape Up or Ship Out, and by that I mean either get on with your business or shut down operations and make way for someone who will. Magic isn’t going to bring the economy back, hard work and forward momentum is, and someone has to start it. Due primarily to the large positive impacts that Supply Management has on the balance sheet, it has the potential, but only if it’s willing to step up, use it, and drive the business.

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