Monthly Archives: February 2016

Authoritative Sustentation 63: Board of Directors

As per our authoritative damnation post on the board of directors, they can be your best friend or your worst enemy, but they’ll probably be your ongoing nightmare because their dictates can drive your daily duties even more than the wacky whims of the CEO.

If all the board does is chant “savings, savings, savings”, then guess what the CFO has to chant. That’s right! “Savings, savings, savings.” But this isn’t the only craziness the board can throw your way. They can get razor-focussed on outsourcing. They can decide that the organization should have no FTE obligations and try to make as many jobs as possible contingent labour. Or they could decide the organization has to acquire or merge with someone soon and task you with supply chain analysis of the most likely candidate organizations.

So what do you do? Dance to their tune every time it changes? Well, you have to — but we’re no longer in the age of the folk, ballroom, or line dance, so you should do your best to make sure those aren’t the dances that come your way. How do you do that?

Stop waiting to follow the leader and start planning to lead the leader. What do we mean? Regardless of any lip service the executive or the board may throw towards the press about a desire to do support minority businesses, increase overall sustainability, or focus on innovation, they profit when the company profits, and profit, which they generally associate with higher revenues (which they demand of sales) and lower costs (which they demand of Procurement), is all they really care about.

So if you want to stop looking for illusive, and possibly non-existent, savings, then start focussing on how you can increase profit and come up with value-generation plans that you can sell to the board.

For example, Procurement can add value by:

  • helping Sales sell into new markets
    maybe the problem is high distribution costs, which Procurement can rectify as it’s already sourcing from the market and knows the lowest cost shippers;
  • helping Finance improve working capital
    as it’s understanding of in-depth cost modelling and (strategic sourcing) decision optimization can help it work with finance to create an optimal payment plan model that optimizes early payment discounts, invoice factoring, and supplier interest charges or late fees
  • helping Engineering improve quality and lower costs during NPD
    as a leading Procurement organization has expertise in Supplier Management

And Procurement can bring a plan to do so to the board before the board gives it a plan that would take it back to the Procurement dark ages.

Nine Hundred and Fifty Years Ago Today

Westminster Abbey opens.  While this Church of England is not the oldest building, or even the oldest church, in the United Kingdom (as St. Martin’s Church in Canterbury dates back to 597), it’s one of the most known religious buildings in the United Kingdom that is the traditional place of coronation and burial for the British monarchy.

While this structure has very little to do with Supply Chains, it goes to show how long something can last when it’s built right and maintained.

Mass Adoption of Optimization via Modern Sourcing Platforms

In our last post we addressed three common misconceptions about sourcing. In this post we expand upon those corrections we provided to give you six pillars of a properly designed optimization-based sourcing platform.

The three pillars of a properly designed optimization-based sourcing platform that we addressed in our last post were:

  • Useable by everyone, including the most junior of buyers
  • Affordable as any other sourcing platform
  • Efficient, decreasing event set-up time by at least a factor of 2 to 3

In addition, an optimization-based sourcing platform is also:


Optimization is powerful. A modern optimization engine can solve sourcing problems to 99.9%+ optimality in a matter of minutes, even if they require tens of thousands of variables and hundreds of thousands of equations to describe. The platform is effectively evaluating hundreds of thousands, or millions, of different award splits in a matter of minutes.

Valuable, more so than any other sourcing platform

Simply put, optimization gets amazing results. Even if the category has been negotiated repeatedly over the last ten years, and it looks like the savings opportunities are razor thin, with the ability to analyze more suppliers, more bids, more transportation options, more value-add options, more constraints, and more supplier-specified opportunities, optimization can often identify an additional savings of 10% or more. In fact, the year-over-year average savings from optimization alone on the categories it has been applied to has been clocked at 12%, more than any other sourcing platform.


With optimization, you can create different scenarios, with different suppliers, constraints, and goals and see how the optimal awards differ as the problem definition changes. This inspires a sourcing analyst to look at the problem in different ways.

However, the first three statements in particular are only true if the platform used by default is an optimization-backed sourcing platform . Classically, optimization solutions have been implemented as stand-alone platforms. These were powerful, and when used by the right senior resources who set up the right sourcing events, these platforms generated amazing results, but they were very difficult and time-intensive to use compared to an e-RFX or e-Auction platform. The model had to be set up. RFX data had to be imported. The data had to be validated and cleaned. The model was then run, altered, and re-run until an acceptable baseline was found. Then multiple what-if scenarios were run until a final award scenario was identified. Then the award scenario had to be exported to the sourcing platform so the suppliers could be notified and the contract(s) drafted. All of this was very time consuming. As a result, the platform was not useable across the sourcing organization, was not very affordable as it had to be supplemented by other sourcing platforms, and this process was definitely not efficient.

For mass adoption of optimization, it needs to be supported by an RFX and/or an e-Auction platform for data collection, by analysis and reporting for result presentation and exploration, and needs to be integrated with contract management and the supplier portal for negotiations and communication. In other words, optimization is the engine that powers the modern sourcing platform, it is not a stand-alone solution.

That’s why a modern optimization-based Sourcing platform, and not a standalone optimization module, is the silver lining that Procurement has been waiting for. What does this platform look like? Stay tuned!

The 8 Laws of Successful Supplier Transitions: Part II

Today’s guest post is from Brian Seipel, an information technology and marketing project analyst at Source One Management Services, a leading procurement services provider with over two decades of experience delivering procurement success.

In our last post we noted that there are plenty of reasons your organization may choose to switch suppliers. Perhaps your incumbent’s quality is slipping, or their prices aren’t as competitive as they once were. As you’ve grown, perhaps your incumbent supplier isn’t able to scale with your organization or keep up in emerging areas of your business.

However, switching isn’t always easy because transitioning to a new supplier is a scary thing, especially as there are plenty of risks. In our last post we noted that the first step managing risk is identifying risk, which we covered, and the next step is developing a strategy to manage the transition, which is the subject of this post.

Managing the Transition

Here are 8 basic commandments to follow if you want to avoid running into the risks above:

  • Before Committing, make sure your prenup is up to par.
    Nobody thinks about ending a relationship before it begins, but foresight here is crucial. Exiting incumbents can make life very hard if agreements don’t have favorable termination, survivability, and exclusivity clauses or if they fail to specify transition support owed to you in case of a breakup. Bake these items into your new agreement and all future contracts.
  • At all times, stay in the driver’s seat.
    Too often, organizations are happy to let suppliers control the implementation process. Don’t let this happen: Losing this control removes much of the supplier’s accountability, and is a leading cause for transition timelines dragging or derailing.
  • Start strong by bringing the team back to the table.
    Every new project we start with a client begins with a kickoff meeting, where all key stakeholders on both sides of the table meet. This meeting helps ensure roles are clearly defined and sets expectations for the level and frequency of communication moving forward.
  • … There is a “team,” right?
    The key corollary to the point above is — there needs to be a dedicated team. Part time committee members will always place more importance on their own day-to-day tasks, leaving implementation in the hands of the supplier (refer back to commandment #2). Put a dedicated team together, and make sure it includes members of upper management.
  • Consider the timing and scale of the transition.
    Identify the best time to make the switch based on your team’s workloads, inventory cut-in or service termination dates, and major events on your company’s horizon. Also consider whether a phased implementation may be appropriate — this will stretch your time line, but would allow more flexibility among resources.
  • Don’t jump immediately to transformation.
    Focusing first on transitioning to a familiar model and incrementally adding additional services of a new supplier can help keep a transition on track.
  • Establish an implementation calendar.
    This calendar should be accessible by all stakeholders and act as checklist of important events and timelines. Develop the calendar with suppliers to ensure they understand and can meet deadlines. For less business-critical elements of the implementation, allowing for greater stretches of time can avoid mistakes and start off a better relationship
  • Continue Communicating throughout the process.
    Remind internal stakeholders that the relationship will be most tested during implementation, and that focus needs to remain on the transition. Communicate externally to ensure the supplier keeps the full scope of work and related SLAs in mind throughout implementation and adheres to each milestone as it approaches.

Adhere to these commandments and your transition will be much smoother. Ignore them and you may find yourself dealing with some major headaches.

And If A Transition is Still Set to Fail

If you find your transition going off the rails, several speedy and decisive actions can bring it back on track:

  • Reevaluate the project plan and timelines for the transition
    At what point did the process go south, what can be done to correct, and how will the timeline need to be revamped to accommodate for a fix?
  • Changing out key players on both sides of the table managing the transition
    this may add to short term delays, but long term success. Hurt feelings always get trumped by botched implementations.
  • Reengage senior managers who quietly slipped away
    after the contract was signed and get them involved again.

Supplier transitions can be painful — but they don’t have to be.

The key takeaway is to never lose focus on a new deal just because a new contract was signed — all hands need to be on deck to ensure your transition to a new supplier lives up to the potential promised during the sourcing and contracting phases. This can seem painful, but strategizing the transition can take care of headaches before they crop up. Taking the right steps early on lessens the risks and moves the process into an opportunity to improve supplier performance and quality, streamline processes, and ultimately save money.

Thanks, Brian.