Monthly Archives: October 2016

Trade Extensions is Redefining Sourcing, Part I

At their recent User Conference in Stockholm, recently covered by the public defender over on Spend Matters UK, Trade Extensions unveiled the upcoming version of their optimization-backed sourcing platform. With it, Trade Extensions are redefining the sourcing platform.

In first generation sourcing platforms, you have stand-alone Spend Analysis, RFX, e-Auction, Decision Optimization, Contract Management and, maybe, Supplier Information Management (SIM) modules where each module feeds into the next in a well-defined linear order: Spend Analysis into RFX. RFX into e-Auction, Decision Optimization, Contract Management, and/or SIM. e-Auction into Decision Optimization and/or Contract Management. Decision Optimization into Contract Management. Contract Management into SIM.

In second generation sourcing platforms, which permeate the market today, these modules are better integrated and data is more fluid. Data can flow back and forth between all of the modules. However, flows are still well defined. Data can flow from any module into any other, but only using well defined, scripted, workflows. You can’t break a process, or enhance a process, with capability from another module. For example, you analyze the spend data, and issue an RFX. You can analyze the costs that come back, and when you do, you can pump additional data into the optimization module. But as it’s not common to output multiple scenario awards into spend analysis, slice and dice for cost variances, and understand how the cost models and bids affect the global supply chain, there’s no easy way to push them into the spend analysis module. As a result, a user typically has to save the scenarios in .csv or Excel format and then import them into spend analysis.

In an optimization-backed sourcing platform, like TESS, that is properly defined all data is centralized in a data store and can easily be accessed by the RFX, Auction, Analytics, Optimization, and Contract Management modules. Because the system works off of common centralized data (known as fact sheets in TESS), cost models, and scenarios and not predefined, rigid, workflows, the user can approach the sourcing event the way they want to approach the sourcing event. They can create RFIs, send them out, get data back, create cost models, send them out for completion, analyze them, optimize them, go back to suppliers for cost concession or innovation requests, jump straight to negotiation and award if they get an innovative proposal, realize that a supplier can only satisfy 75%, cut the contract, and then push the unsatisfied demand back to the RFX for a subsequent round for a secondary supplier and so on. It’s extremely flexible. But it takes a skilled user to understand how to manipulate a tool that requires an advanced understanding of models, scenarios, workflow composition, and analysis. In fact, considering the user may not only have to design the workflows, but also the fact sheets, formulas, constraint definitions, and sourcing process, the skill level required to maximize the value potential of a sourcing is often more programmatic than an average user can handle. It essentially takes a skilled software developer to maximize what the platform can deliver.

And even though Trade Extensions, with their leading, state-of-the-art, optimization-backed sourcing platform has dozens upon dozens of clients making very extensive use of their platform and getting industry leading returns, they have also realized that the best results are from the most capable users and that there is always an opportunity to do better still. And not ones to settle for anything but the best there can be (even though they have the most powerful optimization-backed sourcing platform there is), they decided to figure out how to do better still. However, realizing that they were optimization experts and not design experts, they took a step back to figure out what was needed. After much consultation, soul searching, experimentation, user canvassing, and testing, they came up with an approach that will allow not just the pros, but the beginners, to use the platform with the same ease and achieve the same results, no programming skills, or training, required. And, even though they are already industry leading, that’s how they are redefining sourcing.

So what in particular is Trade Extensions doing?

We’ll get to that. But first, a little background on what’s missing (in Part II).

Give Your Procurement Practice Some Backbone! Part II

Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their Procurement expenditures.

In Part I, we discussed how as an organization moves from decentralized/departmental procurement decisions to a centralized procurement and strategic sourcing department, there are bound to be some growing pains when it comes to working with departmental stakeholders and that transitioning to an effective central procurement and sourcing model will require changes. We discussed two preventable gaps that undermine the transformation process and in today’s post we discuss two more.

  • Lack of management tools or processes.

    Procurement needs to be equipped so that once spend and suppliers come under purview, they can effectively manage each component. This doesn’t have to be a full software solution, but Procurement should be setting up some standards so that stakeholders can feel comfortable with handing off pieces of contract and supplier management to Procurement. This may start as a simple Excel sheet tracking contract notice and term dates, and can evolve to full contract management and compliance departments. With Procurement handling these components, stakeholders can reallocate their time to accomplishing departmental goals as opposed to tracking performance and dealing with contracts, SLA, and pricing issues. Having Procurement involved in supplier management can actually help the working relationship between suppliers and end users as stakeholders can rely on Procurement to play “bad cop” and push where necessary without putting the day-to-day relationships in jeopardy.

  • No clear way to provide feedback.

    When a business moves to a centralized model, there are sure to be some bumps in the road. It is key to have two-way communication between Procurement and other business units to continually improve and refine the process. Positive communication (e.g. sharing success stories) is a great to share how Procurement is benefiting the company and other departments (e.g. reducing costs, improving service, etc.), but be sure to also open a forum for constructive feedback. I have seen positive feedback shared through company announcements, newsletters or quick “blurbs” in departmental bulletins. Procurement departments can solicit feedback from something as simple as a quick email survey when projects close or by establishing more formal project debriefs to talk about what went right and what could have been improved with the stakeholders involved.

As Procurement professionals, it is key understand from a stakeholder perspective the challenges with letting go of control and autonomy for project and purchasing decisions. Procurement and executive-level management need to ensure that the Procurement department is being set up for success by establishing company policies and processes that will give Procurement the authority and standing it needs to be truly effective.

Thanks Torey!

Give Your Procurement Practice Some Backbone! Part I

Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, who focuses on helping global companies drive greater value from their Procurement expenditures.

As an organization moves from decentralized/departmental procurement decisions to a centralized procurement and strategic sourcing department, there are bound to be some growing pains when it comes to working with departmental stakeholders.

Two of the main drivers for this are that:

  • Stakeholders are used to making decisions.

    End users and department personnel feel they know what is best to support their needs and may have had free reign in the past to make purchasing decisions for department-specific needs as well as more general categories (e.g. office suppliers, laptops and desktops, IT accessories, etc.).

  • Stakeholders are used to managing relationships with the suppliers with whom they work.

    Because stakeholders are making their own purchasing decisions, they are also typically managing the negotiation, contracting, and ongoing relationship with the supplier.

To transition to an effective central procurement and sourcing model, changes will be necessary within the organization to support the new structure. As someone who has helped clients transform (or build) their procurement operations, I have some seen some preventable gaps that undermine the transformation process and cause frustration for Procurement and the business units they support.

  • No standard procurement process.

    One of the first steps for establishing a central procurement department in an organization is to ensure that those in Procurement are singing from the same sheet when it comes to process. If you have a mix of past (or no) experience, each person is likely to come to their role in Procurement based on their past processes (or lack of processes) in mind. Begin by defining what the standard sourcing process looks like for your company and communicate that process to the organization as a whole. Reiterate Procurement’s role and the stakeholders’ role within that process; the goal is ensure end users are familiar with and are able to embrace the process, not to cut them out of it. Certainly not every project and/or purchase may follow the same process, but having a standard and communicating this to end users provides a familiarity with how procurement works and what the stakeholders can expect. Having a standard process allows stakeholders to feel comfortable working alongside Procurement and not feel as if decision-making is being stripped.

  • No defined (or enforced) Procurement and Contracting policies.

    Many times I have seen organizations start pushing centralized purchasing decisions and procurement support without any organizational policies that establish this new standard within the company. Without clear organization policies (and management support of those policies) for where, when, and how Procurement should be involved in departmental purchasing decisions, stakeholders are bound to continue to work in a vacuum.Any policies put in place should cover at a minimum the procurement process, how and when procurement needs to be notified of a purchasing need, and authorization levels (e.g. who can sign for what, spend levels that require certain level of sign off). Many times, part of that process includes a legal component in terms of who is actually authorized to sign agreements, purchase orders, etc. Many companies employ a checklist or agreement cover sheet that requires multiple sign-offs that may include review by the stakeholder, legal, procurement, and others before the final signature on the agreement is completed by the authorized party. Without a clear and communicated (and backed by management) policy, contracts typically continue to be signed by business units without any Procurement knowledge or oversight. While this may threaten the autonomy of some stakeholders, Procurement and management should be explaining the benefits of this oversight, especially for high value agreements or purchases, and the pitfalls these policies help prevent.

If only these were all of the gaps. These are just the beginning, In part II, we will discuss two more gaps that need to be prevented.

Thanks Torey!

Societal Damnation 47: XaaS

This is a damnation so damning that it was one of only two damnations that required two entire posts just to overview (and one of the few damnations the doctor could literally write an entire book on)! So just what is XaaS?

XaaS, short for Everything as a Service, is the latest craze that is going to cause your Supply Management organization nothing but suffering and pain. While it sounds really cool, because, historically, the transformation of a non-core but essential function (legal, accounting, etc.) or utility (water, electricity, waste disposal, etc.) into a service made your life easier. But, as with any good thing, it’s always possible to have too much … and with XaaS, to have too much forced down your throat even if you’re already choking on your own regurgitations.

And while the right services can provide an organization with advantages that include, but are not limited to,

  • expertise,
  • cost reduction, and
  • efficiency

for an organization that does not have the dedicated personnel, or expertise, to perform the function as good as a third party, if the wrong services (or service providers) are provided (or selected), the organization will instead be burdened with a number of considerable disadvantages that included, but are not limited to:

  • cost increase,
  • efficiency decrease,
  • loss of control, and a
  • 3rd Party Management (3PM) nightmare.

And if different business units decide to start outsourcing what they perceive as non-core functions (which are in fact core to the business or which should be managed by Supply Management or a different business unit), functions for which the service provider cannot achieve economy of scale, or functions that have not been optimized for outsourcing (which will result in an efficiency decrease as a best-practice provider will not be able to optimize inefficient workflows) willy-nilly, Supply Management will have quite a third party management mess to deal with.

In a nutshell, services are good, but, as clearly illustrated in our second damnation post on the subject, Everything-as-a-Service is a ridiculous concept and any organization that buys into it is just asking for trouble.

So what can you do when you are pushed to buy into this latest outsourcing craze?

1. Get an organizational policy in place that all services spending goes through Procurement.

This will be very hard, but unless Procurement knows about an outsourcing initiative or a XaaS buy, it can’t make sure that the organization makes the right buy, if a buy is even required at all!

2. Do your homework on each request.

Why is the service being requested. What does it do and what processes or services does it replace. Why could a third party do it better and are the third parties being considered capable of doing it better. If the process is outsourced, will the organization lose important skills or knowledge. Should a traditional product to enhance in-house be considered instead?

3. Figure out what processes are truly strategic and what process are just tactical.

Strategic processes should be kept, or at least managed, in house while tactical processes are the prime candidates for XaaS providers. From the list of tactical processes, identify those that would be best suited for outsourcing through efficiency gains or cost savings.

In other words, the key to sustentation is not jumping on the bandwagon and doing everything you can to prevent the rest of the organization from jumping on when you’re not looking.

Happy One Hundred and Thirty Second Birthday, Prime Meridian

Without you, we’d never know where zero longitude was, and that could make geolocation very difficult without a reference point.

… and the eastern border of the Texas panhandle with Oklahama would not be so easy to find … (look it up).

Historical fact, it took a whole International Meridian Conference, at the request of U.S. President Chester A. Arthur, to select this!