Monthly Archives: April 2011

TradeCard: Transaction Management for the Global Supply Chain Part I

In yesterday’s post on how it’s sourcing, procurement, and global trade management, we mentioned how a critical part of global trade is finance and document management. One company that facilitates this process is TradeCard, an end-to-end SaaS transaction management solution that connects over 4,000 buyer and supplier companies across the world with local support in over 50 countries. And while they aren’t the only company that facilitates this process, with notable competitors being Integration Point and their extensive suite of import, export, and supply chain compliance solutions and TradeBeam with their import, export, and visibility solutions, they are the first solution that I’ve seen that implements end-to-end transaction management from the PO to final settlement (including chargebacks) with support for financing, document management, 3rd party freight forwarders, and factory floor shipment packaging. Furthermore, their solution, which supports the physical, financial, and information flows from all parties, focusses on the alignment of the flows.

The financial flow is supported by way of a procure-to-pay solution that enables pre- and post- export financing solutions, payment protection, invoice discounting, settlement, and chargebacks. Through agreements and alliances with over 25 banks, insurers, and other third parties, the TradeCard platform allows a suppier to request financing as soon as the purchase order is received. Then, depending on the supplier’s credit rating and the amount of the request, the request will be forwarded to one or more financing partners who will offer financing at standard terms or the TradeCard credit line, where the TradeCard platform can automatically grant certain financing requests under standard terms on behalf of the partners in the financial network.

The time of the financing request is flexible. The supplier can request financing at any point from the receipt of the purchase order to the receipt of goods by the buyer, and might even be able to request financing beyond receipt of the goods by the buyer, depending on the buyer’s standard payment terms. In addition, the platform allows the supplier to offer invoice discounting on early payment by the buyer as soon as the invoice has been accepted. Finally, the platform allows for electronic payments, which completes the end-to-end financial lifecycle of the transaction.

The physical flow is supported by their collaboration solution, which allows buyers and suppliers to collaboratively share current demand data and collaborate on forecasts and production plans, the Factory Xpress solution that allows for the creation and execution of detailed packing plans, and the document management solution that allows for the creation and transmission of documents that are required by freight forwarders, customs agents (for import and export), and distribution centers.

The information flow is supported by their Procure-to-Pay, Collaboration, and Factory Xpress solutions as well as their TradeCard Advantage solution that allows for queries and reports across the platform and the transaction data that it contains. It’s also supported by their new Custom Objects Toolkit that allows TradeCard to quickly create custom extensions — that can take the form of integrations, reports, or global trade documents — for customers on an as-needed basis.

By integrating the three flows, TradeCard provides a single view into the global supply chain for buyers, suppliers, factories, and partners around the world, which can be integrated into the platform as needed. TradeCard can, and has, integrated multiple ERP, best-of-breed, and home-grown sourcing, procurement, and global trade solutions into its platform in support of its hundreds of global Fortune 3000 customers. Furthermore, over 150 service providers already inject services into the platform in the form of financing, payment protection, inspection, and logistics, which a customer can take advantage of day one.

Tomorrow’s post will dive into the physical supply chain flow and the solutions that TradeCard provides.

What’s the Biggest Problem with Sourcing from China

Quality? Supply Reliability? Or Management Expectations?

In last year’s CPO Agenda inaugural debate on Assimilate to Accumulate, Martin Lockstrom, of the BMW-SMI Center for Purchasing and Supply Management at China Europe International Business School, said that the most difficult thing is not necessarily to manage the Chinese suppliers but managing HQ expectations on these kinds of things.

With all of the issues making the news in recent years with respect to outsourcing from China around supplier quality, reliability, and intellectual property, it’s important to remember that the biggest issue is not always the supplier, who may respond well to sincere attempts at supplier improvement initiatives, but management expectations. It is amazing how many executives still believe that outsourcing will fix all their problems and that, because outsourcing to China has been going on for over a decade, the supplier will deliver high quality and cost savings off the bat. While the irrational exuberence is not at the high it once was, there are still executives who hold on to unfounded beliefs because “it worked for the competition”, failing to realize that the competition may have worked years on supplier development to get the performance they are achieving.

Done right, sourcing from China will pay off, but great results can still take time.

It’s Sourcing, Procurement, and Global Trade

A few years ago, I took the time to remind you that it’s Sourcing and Procurement because it appeared that some vendors wanted you to believe that it’s e-Sourcing or e-Procurement, or some fractured combination of both, because that’s what they have and they want all of your business.

As I said before, e-Procurement and e-Sourcing are not the same thing. From a supply management perspective, they’re two halves of a whole, one tactical and one strategic. And while they bring value alone, combined they bring much greater value. Sourcing leads into Prourement, usually off of a contract, but sometimes after e-Negotiation or decision optimization alone, and Procurement leads back into Sourcing, through the analysis step. Without Procurement, the organization wouldn’t have a large transaction database and extensive visibility into spend, and without Sourcing, there would be no strategically negotiated contracts to buy against, leaving procurement managers the freedeom to spend willy nilly.

But when it comes to supply management, Sourcing and Procurement are still not the full picture. While they are the full picture from the viewpoint of the buyer / analyst in a mid-sized or larger supply management organization, they do not address the supply side, or the fact tht goods need to come from a supplier, sometimes by way of a distributor, and end up in the buyer’s warehouses for shipment to stores and/or end consumers.

The goods have to be packed, shipped, exported, imported, and, sometimes, finananced. And the settlement function has to take into account invoice discounting and chargebacks, at a minimum. This doesn’t sound too bad until you realize that the average international shipment requires twenty or more documents for export and import, especially when the US or the EU is involved. Ever since the introduction of 10+2 and new advance cargo declarations in the EU, it seems that documentation requirements have been compounding ever since.

And while this functionality does not necessarily have to be in the e-Sourcing or e-Procurement system, it is needed by any company doing international business and it should be easy for a company to push data out from the e-Sourcing/e-Procurement system into the appropriate Global Trade Management system and pull the necessary data back in for analysis.

Because, when you consider the average transaction in today’s global supply chain end to end, this is what you usually end up with.

Sourcing – Spend Analysis (what needs to be sourced)
Sourcing – e-Negotiation (RFX, Auction – who will it be sourced from)
Sourcing – Decision Optimization (optional, to analyze the bids)
Sourcing – Contract Management (to store the awards)
  Procurement – Requisition (for a Bill of Materials)
  Procurement – Approval (for the requisition)
  Procurement – Purchase Order (for the supplier)
    Global Trade – Financing (can be pre or post invoice)
    Global Trade – Packing (goods have to be properly packed and labelled)
    Global Trade – Shipping (goods have to be shipped)
      Freight Forwarder (if a third party handles the shipping)
      Export Documentation (for the supplier’s home country)
      Import Documentation (for the buyer’s home country)
  Procurement – Good Receipt
  Procurement – Invoice
    Global Trade – Invoice Discounting (if the buyer pays early)
  Procurement – Reconcilation
  Procurement – Payment
    Global Trade – Settlement (the purchase has to be settled in the source accounting system)
    Global Trade – Chargebacks (chargebacks for penalties or returned goods have to be accounted for)
  Procurement – Tax Reclamation
Sourcing – Spend Analysis (what needs to be sourced)

So You Don’t Think Open Communication Is Important?

Okay then. Your peers who do will show a return on assets six times higher than your company achieves. If you don’t want to make the case for an open communication culture, then your chances of creating customer loyalty top out at 64% compared to your peers. And since a 5% increase in loyalty creates a 25% to 95% profit increase, can you really afford to be losing 36% of potential loyalty? Think about it.

So what is an open communication culture? It’s one in which information flows freely and is easily accessible to both insiders and to the public at large. And, consistent with the culture and values of the organization, its leadership enables, advocates and provides open access to information in which employees, customers, shareholders and the general public have a legitimate interest. Pretty straight-forward, eh? So why don’t you have one?

Pierre Mitchell on The Hackett Group Best Practices Conference

Today’s guest post is from Pierre Mitchell, Director, Procurement Research and Advisory for The Hackett Group.

the doctor is coming to our annual best practices conference in Atlanta in a couple of weeks (May 11-12) and wanted me to say a few words about it. He is doing this on his own nickel, which is appropriate since the Canadian nickel has a beaver on the back, and the beaver is nature’s engineer (which many an MIT alumn has pointed out to me), and Michael is an engineer. More importantly though, I really applaud the bloggers who get out there and press the flesh as much as the keyboard keys!

Anyway, I really love the event which is held every year in Atlanta at the Intercontinental Buckhead hotel. Our website has all the official marketing about the event, but what I really like about it is not only the chance to reconnect with our Procurement Executive Advisory Program clients at our CPO summit the day before and at the event proper, but also the cross functional nature of it. Don’t get me wrong, dressing up for Procurement-only black-tie events can be fun, and vendor-sponsored golf events can provide welcome respite from the typical CPO workweek insanity, but this is the only executive forum (majority of the hundreds of our conference attendees are VP level and above) I’ve seen that is cross-functional in nature. Many of our Procurement clients remark how it’s nice to see other functions like IT, Finance, HR, Shared Services, etc., also going through the same set of issues. Hasbro‘s CIO Denise Clark will talk about agility and service excellence, communications, governance, metrics and more. Procurement leads a very similar life to IT (although the internal buyer-supplier relationship is not always ‘optimal’).

We do have some great Procurement speakers. Christie Breves, CPO at Alcoa, will discuss the evolving role of procurement at Alcoa and how it contributes to the broader enterprise, especially with its integrated team of procurement and business unit members that helped it quickly respond to the economic downturn. Rick Wertsching, VP Sourcing & Procurement, The Walt Disney Company, will discuss Disney’s results and lessons learned in category management, global sourcing and global operations. Thomson Reuters‘ will be talking about how they optimized sourcing, real estate and facilities, accounting and transaction operations within their Global Business Services (GBS) organization. Air Products, will talk about their experiences on both the sell-side and P2P side. Finally, Chris Sawchuk and myself will be featuring some of our latest Procurement insights from recent research and our latest benchmark data cut.

The big themes for the conference will be agility (as antidote to volatility) and global service delivery:

  • Solo Cup will talk about its ‘next generation’ Integrated Business Planning (IBP) process and moving finance from “reporting” numbers to “making” numbers. In response to rising commodity costs, the company’s management team developed IBP to provide a more robust planning capability than we typically see — especially between Procurement and Finance.
  • Kohler will discuss how to go from multinational to global and balancing need for global vs. forces driving local customization, including the evolving role of the finance organization — from transaction provider to strategic business enabler. Procurement must similarly “mass customize” its processes in both sourcing and in P2P.
  • Michael Bordoni, VP Finance Strategy & Transformation at HP, is a top-rated returning speaker to discuss HP’s journey to world-class finance performance. He will address process design and sourcing, technology and automation, skills and talent, governance and organization — including the use of global business service centers and centers of excellence.
  • Not to be outdone, Dell will also discuss their EPM (enterprise performance management) journey and their fundamental shift from country-based segmentation to one aligned with global customers and products.
  • Unilever will focus on its interesting “global operating model” and how the company delivers based on a model that is being “designed in the East” and “transported to the West”.

While there’s nothing like actually being there, I’m sure Michael will write up some good insights to share back with the blogosphere. If you do make it down though, I look forward to seeing you!

Thanks, Pierre!