Monthly Archives: October 2011

Are You Ready For SI To Take You To The Next Level?

Next week, sixty four (64) months and one point seven five million (1.75 M) words into its operation, SI will publish it’s 3000th post. It’s time to ask the 64,000 Question:

Are You Ready For SI To Take You To The Next Level?

And it’s time for you, dear reader, to give me the answer.

     

On this date, 185 years ago today, the Granite Railway began operations as the first chartered railway in the United States.

In order to demonstrate that SI has achieved its primary goal of educating you and preparing you to be a Supply Management Leader, I want you to leave a comment stating why you are ready for SI to take you to the Next Level, and include somewhere in this comment an explanation of the significance of the Granite Railway to the development of the modern Supply Chain.

I’m looking for the answer that demonstrates, in my mind, that you’re ready for SI to take you on that Next Level Journey.  

Lavante Recovery – A Risk-Free Way to Segue Into SIM

Yesterday, I was the first to get a sneak peak into the live-beta of Lavante’s new Recovery Audit solution that is being built on top of the brand-spanking-new Supplier Information Management solution that they released earlier this year (as showcased in this February post). Given it’s unique foundation, and the decade of recovery audit experience that has been baked into it, it is no surprise that Lavante is finding ten (10) times the savings of an average recovery audit, and up to fifty (50) times for select clients — even though the product is still in Private Beta and full (seamless) integration (with SIM) won’t be available until next year.

The great thing about the solution is that the first thing it does is identify omissions, errors, and inconsistencies in your supplier data. Using phone number, fax, address, web site, e-mail, and TIN checks, the software is able to find duplicate, erroneous, or incomplete records that need attention. Once these are fixed — either through automated import of up-to-date data from it’s network of over 2 Million companies, or from a multi-channel reach-out that seamlessly integrates telephone, fax, and snail-mail reach-out as well as e-mail reach-out — the software automatically applies a suite of rules and checks to find duplicate payments, overpayments, and potentially fraudulent payments that you have not yet identified. And once these are verified as accurate, provided you have a decent agreement/contract in place, you can go after the vendor for credits.

The benefits of good supplier data and multi-channel reach-out cannot be underestimated where recovery audits are concerned. For the latter, they have average reach-out response rates of over 50% (and as high as 80% for some customers), which are eight (8) to ten (10) times the response rates of providers who just do e-mail / web-based reach-outs. With respect to the former, cleaner supplier data makes for more complete transaction data, which not only increases the chance of finding a duplicate, incorrect, or fraudulent transaction — but improves your follow-on spend analysis efforts (and results). As a result of its supplier data cleansing effort, Lavante is typically able to process at least 95% of spend through its recovery audit solution, which maximizes the chances that it will find the majority of your recovery opportunities.

The SaaS solution is quite simple to use — consisting of four main components: the dashboard, claims management, invoice management, and reporting. The claims management section allows you to review each claim found by the system, which includes complete information about the claim — type, reason, organization, supplier, status, supporting documentation, etc, and take appropriate actions, which can include additional review, processing, or reassignment. The invoice section lets you manage your invoices from Lavante for recovery services. If you choose the fixed fee option, you will get one invoice on the agreed upon invoicing cycle for access to the software. If you choose the risk-free contingency model, then you will get an invoice for each valid claim made to a supplier that results in a credit or repayment. The reporting section consists of a suite of audit, cash-flow, claims, invoice, non-compliance, OFAC-SDN, and Vendor reports that give you pretty much any piece of information correlated with any other piece of information any way you want to look at it. The dashboard allows you to see your claim and invoice summary data at a glance, and to select the four most important reports to you — which can be viewed in (multiple) chart form(s) or in tabular form, and exported to csv or pdf. And while it’s a basic solution at this point, the only obvious weakness, given that the one goal of the platform at this point is to find all payments eligible for recovery, is that they do not yet have a custom report builder.

I’m sure they’ll get there. They shared with me their 2012+ roadmap for the solution, and it’s quite impressive. They have a vision to build on the solution to extend it first to a contract compliance solution, then to a fraud prevention solution, and finally to a risk management platform that will also integrate with their supplier management platform which will include compliance management. They understand that, done right, recovery is a one-trick pony (because, if you do it right, you also identify the source problem and fix it) and that the real value is not in recovery, but duplicate, overpayment, and fraud prevention — and monitoring transactions in such a way that they can be used to judge supplier, and supply chain, risk. I expect it will take them a few years to get there, but it will also take an average company one to two years to identify the majority of reasons for duplicate and over-payments and fix their processes, so Lavante should be able to grow in lock-step with their customer base. Regardless, Lavante is a company to watch and a solution to investigate for any Fortune 500/Global 3000 (want-to-be) that has never done a recovery audit. At the very least the included supplier data analysis service will add value. And when your data is in order, you can take your transaction analysis to the next level. And given that good data enables good spend analysis, and that a spend analysis will typically uncover 10% savings opportunities, what have you got to lose?

Recovery Audits – Are They Worth It?

According to one vendor:

AP departments face daily challenges, including fraud, data decay, product returns, and errors — resulting in transactional errors and [lost] credits with suppliers. An ongoing, comprehensive review of your suppliers’ AR records, known as a statement audit, recovers these dollars for your company. If you’re not performing a statement audit, you’re leaving money with your suppliers.

And this is true, but is there enough money being lost to make a recovery audit worth it? Some statistics state that, for an average Fortune 500/Global 3000, a traditional average recovery audit will only uncover 50,000 to 100,000 in vendor credits for every 1,000,000,000. That’s a best case savings of only 0.01%. I can march into an office supply vendor and demand 10% off the top (before I take my business across the street), get it, and probably save you that much from 10 minutes of negotiation. Considering that the average company will spend well over 1,000,000 on office supplies, taking 10% off of that is well over 100,000 dollars, and quicker than a traditional recovery audit (where a team of “analysts” pour through transactions hoping to find duplicates you don’t know about).

However, using technology and analysis, some companies are able to recover an average of 600,000 to 1,000,000 in vendor credits for every 1,000,000,000 in a recovery audit, and even though this is still only 0.1%, that’s enough money to make it worth while if it doesn’t cost you very much. And in some cases, the leaders are able to recover 5,000,000 for every 1,000,000,000, and that’s always worth it no matter how big you are. Especially if you can get a good contingency-based arrangement.

And it’s even better if, in the process, the vendor, using SIM-powered technology, can identify problems with your supplier records that you need to fix to prevent such errors from happening again in the future. So where do you look for such a vendor? Stay tuned!

SIRI: Not Just for Radio Anymore

Over on the Purchasing Certification Blog, Charles’ just penned a great post on why “your procurement resume needs to have more of these four words”: Saved, Increased, Reduced, and Improved.

Charles’ is right when he notes that these are the result-oriented words that hiring managers and CPOs want to see, read, and hear. CPOs don’t want to hear what they already know you did. Every Procurement Pro manages, negotiates, analyzes, and contracts. They want to hear that when you managed, you improved efficiency. That when you negotiated, you saved big money. That when you analyzed, you reduced demand for indirect goods and services. And that when you contracted, you actually improved supplier relations.

If you’re looking for more tips on what you should be saving, increasing, reducing, and improving, check out this post from 2009 on how to get noticed and keep your sourcing or procurement job.

High Definition Adoption Measurement Part VIII

Today’s guest post is from John Shaw (Senior Director, Adoption Services) of BravoSolution, a leading provider of spend analysis, (e-)sourcing, supplier performance management (SPM) and healthcare sourcing solutions and a sponsor of Sourcing Innovation (SI). It is the eighth and final part of an eight (8) part series, which forms a white-paper that BravoSolution is releasing to the general populace today.

Yesterday’s post (Part VII) provided a case study that describes typical challenges faced by a national provider of construction materials. In the case study, a 30,000-foot view might also show positive progression even though only 23% of forecasted spend is being sourced through the system and four (4) users have an average event size that is significantly lower than expected value.

Today’s post completes the series on High Definition Adoption Management by reviewing some best practices for implementation.

From 30,000 feet to Detail:

Best-of-Breed Sourcing isn’t conceptually all that much different then Best-of-Breed software adoption programs. A competent Sourcing Professional knows that an organization doesn’t operate based upon negotiated savings, but upon realized savings. It isn’t until an agreement is implemented and adopted by an organization that the contract yields value to the organization.

The same is true with the tools and process that you select for your sourcing team. The path to success lies in how your team adopts those tools and processes.

Whether you are managing a contract or managing an e-Sourcing implementation you can be infinitely more effective if you understand how it is being utilized by the organization.

If you are starting your journey towards understanding adoption in your organization, start at 30,000 feet. Stop, ask questions, find your initial opportunities and keep digging deeper. Adoption measurement is a journey and the end measurements tend to be different for every organization.

Don’t get lost in the woods!

Remember your business case. Yes, it will naturally evolve over time and those changes will need to be managed and communicated. Overall, it should serve as a compass for helping your Adoption Team navigate your organization, keeping them on track in guiding your organization towards superior performance.

Discuss, Commit and Revisit

Share your data, open a discussion with Category managers on what make sense for measurement in their Category and get a commitment from then on their targets. Make tool usage metrics a regular part of your team communications so the team knows it will remain a priority within the organization.

Now that the series is complete, please show your appreciation for this first-look by downloading the white-paper through this link or the big orange download button below. This will help to ensure that SI is able to bring you more educational pieces on a first-look basis in the future. Thank you.