Monthly Archives: November 2013

The Most Important Word In Supplier Relationship Management Is Not What You Think It Is


Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC. Joe co-wrote the book on Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing.

It may be an old story, but it is still an important story in any discussion of Supplier Relationship Management (SRM). According to Business Insider, with about six weeks to go before the launch of the iPhone in 2007, an angry Steve Jobs pulled his senior team into an impromptu meeting on a Monday morning. His plastic-screen’d iPhone prototype was scratched, and he demanded a glass screen be fitted to the iPhone. Specifically, he is quoted as saying “I want a glass screen. And I want it perfect in six weeks“.

If you read the Walter Isaacson biography on Jobs, you can imagine a few other words were in those two sentences. But that is not critical to this story.

Here is the important part. Once Apple and Corning perfected the art of cutting glass so intricately on a massive scale, they had two weeks to get the new glass faces on the phones. Their assembler, Foxconn, woke its employees when the first glass shipments arrived in the middle of the night, and arranged for production to run non-stop.
Not every supplier is going to wake its staff in the middle of the night to cater to your needs, but when you maintain a close relationship with them, and firmly establish the ways in which each party is critical to the other’s success, then the proverbial (and in Apple’s case, actual) doors open. This is the critical takeaway from any talk on Supplier Relationship Management: those in-depth relationships with your suppliers can lead to competitive advantages ranging from moving up in that supplier’s priority list to getting first dibs on their innovative practices and products.

The importance of Supplier Relationship Management is not lost on sourcing professionals and the industry at large, but the most important aspect of SRM seems to have been lost; or if not lost, then effectively drowned out by savvy marketers. A Googling of “Supplier Relationship Management” produces more than eight million results, but the first page is dominated by companies selling SRM software. When I googled, seven of the first page’s organic results, and all of the ad space, are dedicated to software solutions. While “Management” is an important aspect of “Supplier Relationship Management”, and having a clear view of your organization’s entire supplier pool is critical to effectively working with them, the value of SRM comes from the “Relationship” portion. Worded another way, no supplier has ever given a customer exclusive access to a new product because that customer put them in a database!

I should probably stop here to note that SRM software is a great way to manage all of your suppliers, and relatively easy to implement across all of them. Relationship-building, by comparison, is an impractical across-the-board practice returning minimal results for maximized efforts for all suppliers outside those producing critical, hard-to-obtain, or otherwise-important materials for your organization.

That said, “Relationship” is the critical term of SRM when dealing with critical suppliers. Period. Supplier relationship software allows you to track purchases, organize data, and better understanding of your organization’s demand for a supplier’s goods — all of which are tactical, short-term measures. Building relationships, on the other hand, is crucial for your organization’s critical suppliers, as it allows you to talk frankly with them and develop the long-term strategies necessary for mutual success. And it provides critical benefits.

So what are those critical benefits? For starters,

Preferential Access to the Supplier — Much like Apple was able to rouse Foxconn’s employees in the dead of night for glass screens, a thoroughly developed relationship with a supplier can gain your organization preferential access to them. The benefits of a healthy relationship can be leveraged to obtain priority access to product capacity, better pricing, and, depending on the supplier and product or service needed, access to the supplier’s best people.

Supply Chain Stability — With a relationship developed between your organization and a supplier, it is possible to talk frankly about their risks. Weather and disaster vulnerability, political events, logistics concerns — anything that could potentially impact the supply of their products to your organization. Additionally, these discussions allow you to get a better understanding of the supplier’s supply chain and the potential hiccups within it. Most importantly, these discussions provide the foundation for your organization and a critical supplier to jointly develop solutions to potential problems, ensuring that a mutually beneficial solution is reached in the creation of a better understanding between the two organizations.

Input Into Innovation — Another area where Apple capitalizes on its strong supplier relationships is in the joint innovation of new technologies, strategies, or processes. The company routinely puts out the cash to fuel a supplier’s development of an improved or revolutionary product or process in exchange for exclusivity. Recent examples include the company’s lockdown of capacitive touch screens following the iPhone’s launch and their joint development of the highly precise lasers used to perforate the aluminum MacBook frames to allow for hidden status lights. Even if your organization lacks the capital to fund supplier improvements, enhanced relationships can still get your organization input into a supplier’s next product, leading to design changes that can lead to more efficient production, or a lower cost, on your side.

Knowing that a partnership can lead to a reduced total cost of goods through shared responsibility, assistance in the product development process through shared expertise, and long-term stability through the forming of a bond with a customer are key incentives that can persuade reluctant suppliers to come onboard and sweeten the relationship on an ongoing basis.

If your supplier is critical, a deep and mutually beneficial relationship with them is critical too.

Thanks, Joe!

It’s an e-Frenzy Out There! Can You Make Sense Of It All?

It’s an e-Frenzy out there! e-Sourcing. e-RFX. e-Procurement. e-Payment. e-Negotiation. e-Procure-to-Pay. e-Invoicing. e-Auction. e-Contract. etc.

The Supply Management solution space is filled with e-Solutions. And, as you might have guessed, they are not all the same. They solve different problems. Some solutions are sub-solutions of other solutions. Some focus purely on the sourcing side of the equation where the products and services are identified and contracted. Some focus purely on the procurement side, where requisitions are placed, purchase orders are placed, products are received, and invoices are processed. Some play on both sides of the sourcing and procurement pond, but only address a few functions from each side.

To help you understand what solution you really need, Sourcing Innovation is hosting a webinar on Making Sense of e- in Sourcing and Procurement: What Solution Do You Really Need?. This webinar, sponsored by the Next Level Purchasing Association (NLPA), taking place next Wednesday, November 20th at 8:30 am PST / 11:30 am EST / 4:30 pm GMT, is for NLPA members only, but basic membership is free. Space is limited, so (if necessary, join the NLPA and) sign up now.

In this webinar on Making Sense of e- in Sourcing and Procurement: What Solution Do You Really Need?, we will clearly define the sourcing and procurement cycle, indicate where each technology falls, outline what each technology does, and indicate the conditions that need to exist for each solution to potentially be appropriate. We will describe the e-Sourcing journey and provide the user with a starting set of questions that they can ask to determine what technologies they need to focus on as they look to acquire new sourcing and procurement technologies to support them in their Supply Management Journey.

Vinimaya: Taking Their Procurement Marketplace Global, Part III

In Part I we noted that since we last covered Vinimaya, the B2B Search Engine that was the the next wave in product catalogue management with their ability to do real-time federated search across all of your supplier databases, catalogues, and punch-outs through a single consumer-like search and shop interface, they have continued building out their base platform, adding (more extensive) auditing capability, workflow-based catalog management, quick-quote (RFX) capability, e-Forms, deep analytics capability, mobile capabilities, and social integration on top of a base platform that supported content management, federated search, powerful connectivity options, personalization and customization, globalization, and an easy to use shopping cart. Then, in Part II, we focused in on their vTransport and their new quick-order and e-Forms functionality, known as vQuote. Today we’re going to dive a little deeper into five of the new capabilities added since our last major review, starting with vQuote.

vQuote
vQuote was specifically designed for the time when multiple bids is the right, or only, option but the situation does not warrant a full-scale sourcing event. For example, unless the organization is bundling the printer cartridge spend with the printers (which is generally NOT a good idea, by the way, since most printer manufacturers make their money off of ink that costs more than blood), running a full sourcing event to award next year’s printer cartridge buy is not worth the effort. Also, many small projects in the public sector, such as network support services at a small local government office, have to go to bid, but aren’t worth full scale sourcing events either. In this case, a quick quote — often to known suppliers already in the system, is typically the way to go. The Vinimaya vQuote solution was designed to make this process as quick, easy, and painless as possible — whether the request for quote was going to existing suppliers in the system or to new suppliers.

Since it was designed specifically for those categories of buys that fit between spot-buy from a catalog and full-fledged sourcing event, Vinimaya was able to streamline the solution significantly. Creating a quote request is as easy as giving a quote a name, specifying line items, selecting suppliers, and providing a due date – which can all be done on a single screen. If the line items are services, a SOW can be attached and quickly sent off. The buyer can see the status of the quote requests on a summary screen, review each quote as it is returned, compare them side-by-side in a summary report, and select a winner just by marking a quote, or line item from a quote, as awarded. It’s as quick and simple as a quoting solution can get and meet the needs of the quoting category they designed for.

vRank
vRank is the ability for a senior buyer or contract manager to ensure that contract items always appear first in the search results, that items from preferred suppliers always appear before items from non-preferred suppliers, and that prohibited items never appear. Basically, the administrator has the ability to assign each item that appears in a search result a rank between 1 (do not include) and 4 (show first), where 3 is (show ahead of other items) and 2 is (normal rank). It’s pretty simple, and it works based on the simple fact that almost half of all people who use search functionality click on the first link that is returned. (Recent Google statistics indicate that a whopping 47% of searchers click on the first search result.) The ranks can be applied to individual items or suppliers, with item ranks overriding supplier ranks). In addition, these ranks can be defined in real-time on every search and will take effect immediately on all future searches. This allows an administrator to define priorities as needed based upon what users are actually searching for and buying, saving a lot of up-front configuration to define ranks for products that might not even be searched for!

vCatalog
vCatalog updates the capability Vinimaya has always had to manage local catalogs in a manner that pushes all of the work back on the supplier. With vCatalog, a supplier that is not technical enough to, or that does not want to, maintain a punch-out or other on-line catalog can upload their entire catalog to the buyer through a web portal. The catalog file is completely validated, and any errors are pushed back to the supplier, with specific details on the error, for correction before it is allowed to be pushed to production.

vAudit
vAudit is what allows a buying organization to take advantage of vendor managed catalogs with confidence. It continuously monitors products and pricing from punch-out, vCatalog, and web-db suppliers to make sure that prices are compliant with contracted prices or original quotes. As soon as a price is detected that is above the contracted price, the appropriate buyer representative is alerted to the issue. The system can be configured in three different ways:

  1. block a purchase for a product over the contract amount
  2. allow the checkout to proceed, but don’t send the PO to the supplier until the price is corrected
    (and alert an administrator to contact the supplier to get the price fixed)
  3. allow the checkout to proceed at the current price, but tag the item for proactive cost recovery

With the vAudit solution, it’s quick and painless to retrieve a report of all items bought above contract or quoted price in a given timeframe, and just as simple to break it down by supplier to allow the AP department to go after suppliers for money owed.

vAnalytics
vAnalytics is Vinimaya’s new reporting engine that was designed to provide Procurement Directors with an understanding of what people were buying and how they were selecting the items they were buying. With the understanding that the purchase process cannot be optimized without a good understanding of shopper behaviour, Vinimaya built a platform that allowed a Procurement Director to understand not only the the top purchases, the top suppliers, and the top buyers, but also the top search terms, the items they led to, the failed search terms, and the actions the buyer took on a failed search.

vAnalytics, which includes a report builder, has all of the standard reporting package features you would expect in a Procurement reporting system and allows reports to be created by supplier, buyer, item, and even checkout process. Common report types include unique users, spend by supplier, line items by supplier, utilization by search time, and out of compliance check-outs (if they are permitted). Since these reports are against real-time data (and not cached in an OLAP system), some can take a few minutes to run, but those restricted to a single-user or supplier will typically be quite responsive. And, of course, all data in the entire Vinimaya platform is exportable.

Vinimaya has also made advancements in mobile and social, but these enhancements will be the subject of a future post on the Vinimaya Global Procurement Marketplace.

Are Your Invoices Out of Control? Want To Do Something About It?


Paper, paper everywhere
all the desks did warp.
Paper, paper everywhere
enough to fill a thorp!


Despite the recent appearance on the market of some modern solutions that can revolutionize invoice management and automation at even the largest Fortune 500 and Global 3000 companies, the state of e-invoice and AP Automation today is dismal. The 2012 AP Automation Survey Report found that 9 in 10 organizations still deal with paper invoices and that 90% of invoices are paper-based in half of the organizations that responded!

Moreover, Aberdeen’s 2012 study of of 180 organizations, reported in AP Invoice Management in a Networked Economy, found that laggard organizations, which represent the bottom 30% of organizations, require an average of 16.3 days to process an invoice from receipt to approval. The good news: this is a significant improvement over their 2009 study on E-Payables: Invoice Receipt and Workflow that found laggard organizations required an average of 32.9 days to process an invoice. The bad news: it’s still a very large amount of time, especially if an organization wants the opportunity to take advantage of early payment or dynamic discounting.

As a result, the average organization spends somewhere between $30 and $40 just to process a single invoice! In other words, with the exception of best-in-class organizations that heavily employ modern invoice automation solutions and only spend an average of $3 to $4 to process a single invoice, invoices are out of control in 4 out of 5 organizations. But they don’t need to be!

To find out how you can get your invoices under control, join Sourcing Innovation and Nipendo next Tuesday, November 19, at 8 am PST / 11 am EST / 4 pm GMT for a live webinar on How to Make Invoice Automation Pay Off! In this webinar we will cover the challenges in the invoice process, how traditional e-Procurement technologies have let us down, what is required for true end-to-end invoice automation (and the 80% cost savings that can be obtained therefrom), how the Nipendo Supplier Cloud (which facilitates over 5 Billion in Procurement a year) fits the bill, and how it enables Israel Aerospace Industries (IAI) to reduce its paper-process by over 90% through the electronic receipt and processing of over 100,000 e-Documents from over 3,000 suppliers each year — which has already allowed IAI to reduce its operational overhead by over 50% in two years.

In addition, attendees will be the first to receive Sourcing Innovation’s new Illumination on An End-to-End Invoice Automation Framework — Benefits & Best Practices! So Sign Up today. Space is limited.

Arena – Taking PLM Deep Into the Supply Chain Part II

In Part I we noted that Arena, since we last covered The Arena Solution in 2007, extended their PLM solution that was built around BOM (Bill-of-Material) Management, Item Management, and Change Management to support (better) Document Management, Quality Management, and Compliance Management. We also noted that they added more enterprise integration capabilities to ensure that their PLM solution integrated with all of the major ERP and MRP solutions on the market. We briefly covered these solutions before noting that, on top of these additions, they just released four new capabilities on top of their existing platform that we are going to cover in depth today.

Arena Projects
Arena Projects is a fully-functional project management solution that is fully integrated with the rest of the Arena suite which adds the dimension of product data to Project Management and allows for product-level production schedules to be defined and integrated with the master project schedule. Like every other project management solution, every project can be attached to a program, given a manager, assigned a start date, given milestones (composed of tasks) and target dates, and updated when a task is completed or milestone is reached. In addition, as it was developed on top of a PLM solution to support NPD/NPI (New Product Development / New Product Introduction), projects can be broken down into the conception, planning, development, manufacturing release, and launch phases. Statements of work and other supporting documents, can be attached and participants can leave notes on projects and issues as the project progresses. And, most importantly, all of the schedules associated with all of the projects in a program can be rolled up to provide a program manager a master view of status. In addition, there is a user view that allows a user to see all of her assignments across projects, recent notifications, documents she has access to, and actions she has to complete.

The solution was also designed to support CAPA (Corrective and Preventive Action) projects and has a built-in understanding of the process that consists of team establishment, problem definition, interim containment actions, root cause identification, corrective action identification, corrective action implementation, best practices to prevent recurrence, and project closure (with the recognition of team efforts). This built-in template makes setting up a new CAPA project, which can be linked to products already in the system, a breeze. The Project module is also integrated with their new Reporting module that can access any and all data in the system, so it is easy for a manager to get a handle on all projects under her purview or for an engineer to see the status of all projects on which he is assigned tasks and prioritize his work appropriately.

Arena Demand
Arena Demand is their demand management solution. Like other demand solutions, it allows a user to enter a forecast against multiple BOMs, aggregates the total demand for required parts or materials against multiple products, and presents the user with the total demand for each part or raw material along with any cost and sourcing information in the system. It’s an obvious feature that, for the longest time, was missing from many PLM systems. And while basic demand management capability will often exist in the MRP that the PLM provider will assume the organization has, the PRM provider is actually making two assumptions here that aren’t always true. The first assumption is that the organization has a higher-end MRP (which isn’t always the case for mid-sized manufacturers with limited IT budgets) and the second assumption is that the customer can easily get the relevant PLM data in the relevant format out of the PLM solution and into the MRP (which can require IT expertise the manufacturing organization does not have). Plus, sourcing doesn’t want to deal with an MRP — they just want a report that, for each product or raw material, presents them with total aggregated demand for the relevant time period, historical cost data, and known sources of supply.

The Arena Demand solution is quite easy to use — for each product, the manufacturing (or marketing) organization can input the expected demand by month or quarter and the solution spits out a report of demand by component part or raw material for the same time period, augmented with known supplier part matches and historical costs, if desired. In addition, since the solution is also tightly integrated with the Reporting platform, the sourcing team can filter in to specific programs, categories, or parts, or even suppliers of interest (if the sourcing team is looking to potentially aggregate volume to preferred suppliers for additional savings).

Arena EI
Arena EI, short for Arena Enterprise Integration, as we noted yesterday, is a new Open RESTful API that can be used to push data into Arena from any system and pull any and all data out of the Arena solution that needs to be pushed into other organizational systems. Supporting JSON data transport over secure https with session ID authentication, the API is flexible, powerful, and secure. And since it has access to all of the data in the Arena platform, it is a powerful, complete solution for data interchange into and out of the Arena platform.

Arena Exchange
Arena Exchange, which is the most revolutionary of the new Arena offerings, introduces the ability for real-time supply chain collaboration to include all impacted parties across multiple tiers of the supply chain during new product introduction, and the solution does so with unprecedented ease. It paves the way for a paradigm shift in the way manufacturers can manage the design and development of new products in an inclusive, but still secured and controlled, fashion.

In the Arena Exchange solution, any one can invite supple representatives to view, comment on, and approve bid packages, sub-packages, or even individual components — as each user can limit the data that the invitee sees to only the data she needs to see. In addition, if the invitee doesn’t have all of the input required for her part of the bid-package, she can carve out a chunk and send that off to someone on her team or to her supplier representative if needed. The relevant parts of the PLM can go all the way down to the tier-3 supplier shop floor for rework if need be, and the business impact of this up-front visibility and collaboration will be better DFM (Design for Manufacturing), faster TTM (Time-to-Market) due to fewer errors, less scrap and rework, lower cost, and higher quality.

The platform, which can be put on top of any PLM solution (not just Arena’s) that stores its files in standard PDX (Product Data eXchange) format (an international electronics manufacturing initiative standard), has a very simple interface that allows the user to access the specifications, bill of materials, sourcing information attached files, and (change) history by item, manufacturer item, and vendor item. The user can then add comments, send (selected portions) of the BOM to an existing (or new) user, add reviewers, define due dates, submit approvals, and ask questions. Drill-down is easy, so the user can quickly get to the appropriate sub-assembly, component, part, or raw material. At any time, the user can see the (rolled-up) status of the raw materials, parts, components, sub-assemblies, and assemblies within her purview as well as which users didn’t respond. Arena Exchange is the solution the PLM industry has been missing and should be evaluated by any manufacturing organization wanting to take their NPD and NPI processes to the next level.