Daily Archives: December 9, 2010

DnB’s Mobile Capability is Good But …

… it’s no substitute for the real thing.

There’s been a lot of hype recently about Dunn & Bradstreet’s new Supplier Risk Manager Mobile functionality, and a lot of coverage on the blogs. I’m not going to say it’s undeserved, as it is one of the first enterprise applications in the supply chain space to make an effort to embrace mobile computing, but I’m not going to hype it either.

The reality is that while D&B are advertising three capabilities, there is really only one real use for the offering (and I’m pleased to say that, when grilled, they readily admitted it), which is:

     determining whether or not an alert needs to be acted on now, or later.

A properly configured Supplier Risk Management System will be configured to send out alerts anytime something might need to be looked at — as the system will be ignored otherwise. When an alert is sent out, the first thing that a recipient needs to do is determine how serious the alert is and whether or not more research needs to be done and/or an action needs to be taken. With the mobile platform, that works on ‘Berries, ‘Droids, and iPhones, a risk manager can drill into the alert and see why it was issued (reduced credit score, late shipments, plant shutdown, etc.) and then drill into the supplier profile to determine what effect the reason for the alert could have on the supplier and/or the relationship. The manager can then determine if the alert needs to be followed-up on or not, and if the follow-up (whether additional research, a call, or another action) has to happen now or later. This is useful if the manager is on the road and doesn’t have easy access to the regular application or if the manager is just enjoying personal time and doesn’t want to drop everything to run to the [home] office to figure out whether or not something needs to be done — which could be the situation if the alert is for a major supplier of critical inventory.

The mobile app also allows you to search for suppliers and look up (random) company profiles, but let’s face it, that’s not something you’re going to be doing when you’re on the road or on personal time — especially when it’s so much easier on the full application. It’s neat, but you’re only going to be doing it when conduction sourcing events back at the [home/hotel] office. In short, it’s good, but don’t place unreasonable expectations on it, or they’ll be dashed.

Using Consultants and Advisors Wisely

Today’s guest post is from Robert A. Rudzki, President of Greybeard Advisors LLC, who has (co-) authored a number of acclaimed business books, including Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise, On-Demand Supply Management, and the supply management best seller Straight to the Bottom Line.

Maybe it is the urgency of the current business environment, but in the past few months we’ve heard about several large procurement consulting projects that did not turn out well. For a recap of some of the classic reasons for potential trouble, see my earlier posting on Consultants: Use Them Intelligently.

Two of the most recent stories that came to our attention involved different firms but a common thread: “success fee” or “risk free” procurement consulting engagements. For those of you who are not familiar with the practice, “success fee” or “risk free” consulting obligates the client to pay to the consulting firm a fairly hefty percentage of the “savings” generated during the project. Often, 30 to 40% of the first year’s benefits are due as payment. These arrangements are also sometimes known as “shared savings” engagements.

Beyond the large total cost of this option (often 3 to 4 times more expensive than the classic professional time and expenses approach), major challenges/drawbacks of a success fee approach include:

  1. Potential misalignment of interests between client and consulting firm (the client often wants not just negotiated cost reduction, but implemented results — along with fundamental transformation and capability building; consulting firms in a pure success fee or “risk-free” arrangement are incented to drive quickly for negotiated savings, and then depart for their next client.)
  2. Administrative and practical complexities of agreeing on savings calculations, and the potential of disputes regarding payments due.
  3. Unpredictable, and potentially unproductive, behaviours from client employees if the existence of the shared savings arrangement becomes known.

When a client asks us whether we would entertain doing sourcing advisory work on a success basis, we take the opportunity to have a full disclosure conversation on the subject. For example, at a minimum, Greybeard presents the detailed pros and cons, including estimated total costs for the project scope, for three options: professional time and expenses, success fee, and a hybrid of the other two. That information is the catalyst for a meaningful conversation. And, it enables the client firm to make an informed decision that is in its best interests, not the consulting firm’s best interests.

Thanks, Bob!

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