Monthly Archives: October 2023

Logility “Starboard”: The Real-Time What-If Supply Chain Network Modeller that Every Sourcing Professional Should Have

Now, it’s true that this blog is focussed on Source-to-Pay and it’s true that, as a result, we usually focus on Strategic Sourcing Decision Optimization and occasionally on Logistics-focussed Models and Optimization Solutions, as that what’s typically needed for a Sourcing Professional to make the optimum buy, but this time we’re going to make an exception.

Why is network modelling an exception (besides the fact that, as we told you yesterday when we said Don’t Overlook the Network, it has the absolute best return on investment across all supply chain applications)? Well, if you think about classic network modelling, it’s not something a sourcing professional would do because it’s typically up to logistics and supply chain to maintain the network infrastructure that gets the product from the suppliers to the ports and warehouses and then to the distribution centres, retail facilities, and end consumers in drop-ship models. It’s up to logistics to re-evaluate the supporting network infrastructure on a bi/tri-annual basis and determine if warehouses should be added, relocated, or deleted (on lease end); if ports should be changed (to reduce overall costs due to port fees or local carrier costs or rail vs truck options); if new carriers should be considered; and so on.

The reason that this is typically only done on a bi/tri-annual basis is because it has traditionally been an arduous endeavour where you have to

  • build a very detailed model of all
    • the supplier production facilities, ports, warehouses, distribution centers, manufacturing/assembly centers, and retail facilities
    • the lanes used
    • the modes used for each lane
    • the carriers used for each mode / lane combination
    • the LTL and FTL rates for each carrier
    • the drop-ship rates for direct-to-consumer
  • identify all of the products being purchased and
    • associate them with the appropriate suppliers
    • associate them with the appropriate lanes, modes, and carriers
    • associate them with the appropriate warehouses
    • associate them with the appropriate retail locations or drop-ship locations
  • collect all of the current rates, for every supplier-carrier-lane-mode option in use
  • then solve a current-state optimization problem to determine baseline costs, times to serve, carbon emissions, etc.
  • identify all of the potential port and warehouse locations you could (also) use
  • identify all of the new lanes that would create
  • identify all of the additional carriers that could be used
  • collect quotes for every lane-carrier-mode combination from the potential new options that might actually be used
  • then build an extended model that includes all options and feed in all of the data
  • then solve a full-state model to determine baseline costs, times to serve, carbon emissions, etc.
  • then determine the ranges for the number of ports, warehouses, distribution centers, carriers, time to serve, carbon emissions, etc. that are acceptable
  • solve a copy of the restricted full-state model to determine a new baseline cost
  • then make and create copies of the model and run analysis against different objectives until the model is acceptable, and the costs (time to serve, emissions, etc.) reduced significantly enough to do a network transformation exercise

and this endeavour would typically take three to six months due to the fact it would take weeks to build the baseline models, months to collect the data, and weeks to build, solve, and analyze the models and come up with a new state that improved all the measures of interest as well as the implementation plan to make it happen.

But the problem with doing this bi/tri-annually is that you never know the impact of adding a new supplier or, more importantly, replacing a supplier of a significant product line or category where that supplier is in a completely different location, and possibly one that the last network design never took into account. Plus, the removal of a big supplier might cause a certain node (warehouse, distribution center, etc.) to be significantly under-utilized, resulting in unexpected overspend in certain parts of the distribution network.

But this knowledge is critically important to know before making a major sourcing decision that might change the supply base for a highly utilized product line or category — because the costs of the award will not be the expected costs. They will not be the unit or expected transportation costs used in the analysis that the award decision is based on, but will instead be those costs plus the fixed and variable losses incurred from underutilizing a sub-set of the network and/or overutilizing another sub-set of the network.

While this has always been the case, as the belief was that nothing could traditionally be done about it, if there was a tool that could

  • actively maintain the current network model
  • allow for copies to be created on the fly
  • allow for those copies to be easily modified, including
    • the addition or deletion of nodes (suppliers, ports, warehouses, distribution centers, retail locations, etc.)
    • the definition of new lanes
    • the the addition of carriers and/or carrier modes
    • updated costs for every lane
  • solve those copies quickly and accurately

then a sourcing professional could have deep insight into whether their cost models and assumptions are correct and logistics could update the network model, or at least the future state (if leases/contracts need to expire and new leases/contracts need to be signed), upon every award, and the overall sourcing, logistics, and supply chain costs.

And this is what you can do with Logility Network Optimization, formerly Starboard Solutions (acquired in 2022) and exactly why we are making an exception and covering them.

With the Logility Network Optimization Solution (which really should be called Logility Starboard, for reasons that will soon become clear), a Sourcing Professional can:

  • instantly see a graphical view of the current global network
  • bring up reports that summarize all of the key data
  • drill in to node / carrier / supplier / port / warehouse / distribution / product / combination costs
  • create a copy of the current network with all relevant data
  • and then create a what-if baseline scenario where they can
    • add whatever they wish (through simple pop-up interfaces they can add nodes and relationships),
    • remove whatever they wish (by simply clicking on a node or searching for the entity or relationship and deleting it), and, most importantly,
    • change whatever they want through in the network design through a simple drag-and-drop mechanism
  • they can then specify any constraints and goals, run an optimization, and see the new costs, and, most importantly, extract lanes / costs / variables of interest to populate into the TCO (total cost of ownership) calculations in their sourcing events

Logility Network Optimization can do this because it integrates with third party platforms and constantly extracts current market quotes and market rates for all major global lanes and can, when you change a design, automatically bring in those market rates and costs as a baseline for any lane / (generic) carrier / mode / volume combination you don’t already have a quote for. This not only provides a baseline rate (which might get better with a volume promise, negotiation, or current quote), but a statistically accurate one (especially if you just go with a generic carrier rate). (And, if there is no quote for a lane, the platform is smart enough to build one up from lane segments or tear one down using existing quotes and statistically significant costs per distance using statistically significant base rates for just securing the transportation mode.)

Furthermore, because it is a true multi-tenant cloud solution that uses a distributed “serverless” model that can decompose tasks into subtasks that can be run in (a massively) parallel (manner), such as data fetching, sub-model building, and even model solving (as all optimization models can be solved by solving sub-models on convex subspaces of the high-dimensional solution space), it can do it fast. And it’s just as accurate as the traditional, prior generation tools, at a speed that is breakneck in comparison, and that’s even if it uses statistically significant calculated data.

Moreover, it’s very easy to define multiple constraints and weighted objectives. You can guarantee maximum times to serve / times to deliver (subject to minimums that cannot be improved upon) while balancing overall cost and carbon footprint (through a weighted objective). (It’s quite easy to define objectives in the platform which have built in pop-ups to solve for different goals — service time, emissions limit, cost, and best X, where X is a single dimension or derived dimension that weights 2 or more other dimensions.) Or you can guarantee maximum times to serve, a fixed / x% carbon reduction, while minimizing overall cost. Or you can keep ports you know are stable and the warehouses with contracts you can’t break while allowing the delivery network architecture to shift to minimize overall costs.

The browser based interface to Logility’s platform offers a graphically represented virtual twin to an organization’s network with high-level summary data (products, facilities, lanes, suppliers, customers, activities, and costs) with easy scenario selection and easy definition and modification of scenarios. It’s very easy to dive into definition screens and see the suppliers, facilities, lanes, etc. and see/edit all of the data for any individual supplier, facility, lane, etc.; add a new instance, delete one, and see the associated costs, times, emissions, etc. and the underlying calculations associated with a node or relationship in the network graph (which is stored in a graph database that allows for massive scalability).

It’s also very easy to dynamically generate comparison reports between scenarios that compare (activity) costs (across cost types, such as leases, handling, transport costs, rail costs, ocean freight, tariffs, etc.), (average) service times (by supplier, product, lane, etc.), carbon (by carrier, lane, product, supplier, etc.), and other metrics of interest. Furthermore, when a user is happy with a scenario, they can one-click generate and output a complete comparison / summary report deck to PowerPoint for executive reporting (across as many scenarios as they like).

To enhance usability — which is quite obvious out-of-the-box to anyone who understands the basics of modelling, optimization, and decision analysis — Logility has an integrated quick-tour to get started, a full multi-media course on the platform and the modelling that can be done, playbooks for particular problems and challenges, and weekly office hours where users can ask Logility pros questions and get answers in real time. Logility Network Optimization was designed from the bottom up for usability and success.

Logility Network Optimization is the perfect complement to optimization-backed sourcing platforms with bill of material support. Buyers can model potential changes that would result from awarding to a new supplier, not awarding to an existing supplier, changing carriers or lanes, get expected transportation and tariff costs, augment the supplier quotes with this updated data in real-time through a Logility API feed (from an identified scenario), run a total cost of optimization scenario on the full set of bids augmented with accurate total cost of ownership data, make an award, push that award back to Logility Network Optimization which will update the network model in real time, create a new what-if, and see if the network model should be altered when the new supplier is brought fully on board. For the first time, an organization could have closed loop sourcing, logistics, and network optimization in real-time — a reality that was once as far away as the stars themselves (and why the platform takes you Starboard). It’s a powerful concept, and worth branching out beyond traditional Source-to-Pay providers and Strategic Sourcing Decision Optimization to achieve.

Don’t Overlook the Network (that Corresponds to the Award)

According to a recent Forbes article on Supply Chain Software’s Best Return on Investment, per $1 Billion in company revenues, no supply chain application has a better return on investment (ROI) than network design! And the doctor couldn’t agree more.

Just like strategic sourcing decision optimization is the best bang for the buck in Source to Pay, with documented, average returns of up to 12% year-over-year (by multiple analyst firms) as it can minimize total landed cost, and even total cost of ownership in some cases (including internal inventory costs, waste costs, etc.) and not just bids, while ensuring all business constraints are adhered to, an optimization-backed network design application can help minimize overall organizational supply chain costs. This is because a supply chain network optimization platform can minimize transportation costs, intermediate warehousing costs, tariffs, waste, emergency replenishment in the case of an unexpected stock-out, carbon/GHG, etc.

Plus, as the article notes:

  • network design solutions are absolutely necessary to uncover business value when the production-distribution infrastructure is large (and not just because you just can’t model that infrastructure in a spreadsheet)
  • network design solutions can look at Total Cost to Serve (TCTS) across a wide-range of fixed and marginal costs (and identify unintended circumstances of network design changes that could cause marginal costs to skyrocket)
  • network solutions can allow for multiple scenarios to be defined and multiple models to be run and cross-model and cross-scenario Pareto analysis to be run, trade-offs to be analyzed, and the best decisions to be made

One point that should not be overlooked is that projects will take some time, and it’s not because of the complexity of the network modelling or the time it takes to run the scenarios (as modern computing architectures are super powerful and modern algorithms highly optimized to be efficient and take advantage of massively parallel processing), it’s because you need a lot of good, clean, data. It can take months (and months) just to identify, collect, clean, and enrich the data required for global supply network optimization. But once you do that, the ROI will be beyond the expectations you have for every other supply chain solution.

The article, which describes a project to redesign the spare parts supply chain for a global automotive manufacturer, resulted in a redesign that immediately reduced network costs by 4% and identified transportation cost reduction opportunities through consolidation and re-allocating of routes to a smaller set of 3PLs that will save another 2.5% at contract renewal time. In today’s climate, especially in direct supply chains, a savings of 6%+ across the entire supply chain, and not just one category, is phenomenal!

Plus, as the article notes, in the age of sustainability, reduced transportation mileage and fuller trucks also equate to significant reductions in carbon emissions. WHAT A BONUS!

Automation is Good Across the Board! But Automation still does NOT mean Automated.

Not that long ago, we penned Procurement Automation: Good. Automated Procurement: Bad because organizations that embrace the right digital technology do much better than their peers, but organizations that go all in and put too much trust in unproven technology without human oversight (while trying to run before they’ve learned how to walk) or good data (and then make worse decisions than having no technology at all, as recently determined by Gartner) are making a huge gamble while forgetting that it is the house who always wins. (And in this case the house is the technology provider that is charging you a lot of money for the technology that eventually fails and costs you time, money, and in the worst case, your job and/or business. But we digress.)

And while this blog is a Sourcing, Procurement, and related Supply Chain Technology blog, it was very happy to see a recent release from the Hackett Group, as advertised in a recent press release on yahoo! Finance / BusinessWire, that noted that while HR (and Humans are VERY important to successful Procurement Operations) operating costs increased significantly in 2023, Digital World Class organizations continued to spend significantly less than their peers while delivering more resiliency, employee productivity, and greater business value with less staff than their peers. The Hackett Group concluded that increased spend on technology plays a key part in driving the superior performance.

Other key metrics that Hackett pointed out is that companies with at least one business services function operating at Digital World Class levels see a five-year average performance premium over their industry medians -– an 80% improvement in net margin; 24% higher earnings before interest, taxes, depreciation and amortization; 89% greater return on equity; and 44% higher total shareholder return. (So imagine how good your organization would be doing if you were world class in Procurement and HR, and ensured that your organization always acquired, trained, retained, and promoted the best of the best.)

Hackett found that a key aspect of Digital World Class Organizations in HR, just like Procurement, was a greater use of technology (to the tune of 60% more likely to have and use the full capability of Human Capital Management applications).

There are a lot of great applications that a leading HR organization can employ that go beyond the specific applications mentioned of:

  • Human Capital Management
  • Time Sheet Management (for hourly employees / contractors)
  • Health (& Welfare) management

and, as Hackett points out, include the use of emerging technologies such as:

  • smart automation (not automated Gen AI applications)
  • advanced analytics
  • collaborative tools

For example, a good HR department will employ platforms that:

  • will use smart automation to onboard employees, ensure they get paid on a regular basis, ensure that their expense claims are properly routed and evaluated on a timely basis (and OCR use to reduce receipt processing), ensure that all information they enter on health/disability/etc. claims is auto-routed to the right third party systems (and not lost/transcribed wrong), etc.
  • will use advanced analytics to analyze its highest contractor/third party costs, determine what functions should maybe be brought (more) in-house, analyze it’s biggest employee benefit plan costs, optimize those costs (without reducing benefits), etc.
  • use collaborative tools for onboarding, training, and continued professional development, especially for remote learning and self-study

Just like a good Procurement department will employ platforms that

  • use smart automation to onboard suppliers, automatically distribute and collect RFPs, verify data that can be verified by a third party, do automated sanity checks, do initial analysis for presentation to a HUMAN, automatically generate POs from carts/contract schedules, automatically match, to the extent possible, invoices to POs, etc.
  • use advanced analytics to identify not only the greatest costs but the greatest opportunities available to the organization based on PPV (purchase price variance), market opportunities, consolidation, demand management, substitution, etc.
  • use collaborative tools to involve all stakeholders and make sure processes are automated to the extent possible

Because modern technology is far superior for tactical processing (thunking) than we are as humans. However, the leaders understand machines, while they can augment our intelligence with finely tuned applications, cannot think and leave the final decisions to the humans. Technology is applied appropriately for maximum success.

As Hackett says, the bottom line is that Digital World Class HR organizations are better at enabling their companies to succeed. They have streamlined the day-to-day transactional elements of their operations, and through systematic use of global business services and process automation have freed up an additional 12% of their teams’ efforts to focus on value-added activities. Now, they can more effectively focus on attracting, retaining, developing and engaging employees. The right digitalization helps people, and that’s why the right digitalization helps Procurement.

MarketDojo has stepped up it’s Mid-Market Game!

The last time we covered MarketDojo (which recently had a majority stake in the company acquired by Esker) was in 2016 where we noted that marketdojo opens the dojo to suppliers as well after introducing you to MarketDojo in 2014 back when it was a simple RFX/e-Auction platform with some category intelligence and SIM (in our posts on how you could walk your own way and plan your own path). Since then, they have improved the platform greatly. For details on some of these improvements, we recommend their 2016 Vendor Analysis on Spend Matters by Jason Busch (Part I, Part II, and Part III) and their 2020 Vendor Analysis on Spend Matters by Magnus Bergfors (Part I, Part II, and Part III) [Pro or ContentHub subscription required].

Today, we’re going to quickly overview the primary capabilities of the platform, and then focus in on the new and advanced capabilities added since our last review.

MarketDojo is primarily an e-Sourcing platform with foundational supplier management (information and relationship capabilities) and contract tracking (baseline governance). (They still have their categorydojo solution, where they identify current market opportunities that you may want to pursue, but that isn’t the focus of this piece, so we will refer you back to previous articles for details on that functionality.)

e-Sourcing primarily consists of (multi-round) RFX capability, lot-based e-Auctions, and quick quotes (for quick one-time buys/quotes where full sourcing events are not needed). e-RFX creation is quick and easy — define some basic meta-data under settings, add any necessary documents, create the specific questionnaires and additional supplier data collection forms, define the items (which can be lotted in RFX as well as Auctions), add the collaborators (that can be given full access or limited view access), and even invite new suppliers (which can be onboarded later if the responses to the survey forms look good).

The major improvements and/or differentiation since we covered them last is in the

event instantiation
they now support templates, with a library of out-of-the-box templates (for the categories they track in categorydojo and then some) for RFX and e-Auction as well as custom templates built by the organization
survey creation
(in beta) you can now use Bard to identify common questions / characteristics of a category or product/service and then edit the form accordingly [which is a decent use of NLP, gives you some good ideas you might miss but keeps you, the intelligent human, in full control]
lots now support transformational bids (where bids can be marked up by a percentage or a fixed amount to implement switching costs or penalties for reduced quality/utilization rations) as well as bids in DPD (Dynamic Parcel Distribution), FOB (Free on Board), and EXW (ExWorks).
bids can defined as a complex formula over an arbitrary number of bid components and they support a brand new formula builder
collaborators weren’t part of the initial solution, and they didn’t have tiered access
bid ranking
easily see the top bid for every item in every lot in a default lowest cost award scenario and easily dive in to see all the bids for every item of every lot in rank order
bid component ranking
see how every bid component ranks against all supplier bids for an item; this helps you identify the cost components that a #2 or #3 supplier (that you want to do business with) is not competitive on (such as freight, overhead, etc.), which might allow you to work with the supplier to get those cost components down to make their bid more competitive
dynamic RFX round creation
you can easily create a new round and control which suppliers and collaborators from the current round get invited to a new round

And, of course, the quick-quote functionality is brand new. These are super simple. All that a requester has to specify is what do they want, when do they want it by, what requirements must be satisfied, what are the payment terms, and which (approved) suppliers should it go out to and off the quote request can go. They can also attach spec documents, add special instructions, and request physical copies, but that’s not necessary. And if they want a certain currency or quotes in a certain unit of measure, that can also be specified. When the quotes come back, they’ll see an easy-to-understand quote summary and can choose one for award. Easy-peasy and, most importantly, the spend is captured and can be managed.

The supplier information management primarily covers the onboarding of new suppliers, to ensure that the appropriate information is captured, and then supports ongoing maintenance of the data. Onboarding is quite simple. A buyer defines the basic supplier information (name and corporate e-mail address), adds any mandatory and optional tags (such as DPST Tier, ESG, Minority, specialized category, etc.), selects the questionnaires they want the supplier to answer (of which a default set will be automatically selected upon tag definition), identifies the business users, either by role or by name, that will approve the forms as the supplier returns them, and then the corporate/contact email the onboarding request will be sent to (and the language the request should be sent in — it’s relevant to note that MarketDojo now supports 23 languages in its platform, but if you want the forms in 23 languages, someone will need to translate them, unless you are using MarketDojo out-of-the-box forms where those forms have already been translated).

The relationship management solution is straight-forward as well and is primarily designed to track supplier contacts and organizational users, associated sourcing events (that they participated in, not just awards), onboarding status (by requested survey/form) and associated surveys, contracts, identified innovation opportunities, and activities. Activities have a type (such as call, task, objective, audit, review), an assigned organizational user who is responsible for ensuring the supplier completes the activity, associated documents, organizational (and user) notes, and possibly even an (optional) associated hierarchy of sub-tasks.

Reporting has been updated and is currently supported in PowerBI through MarketDojo’s OpenAPI (and it is also supported by MarketDojos partner SpendKey) and the default built in reporting suite is pretty decent for a Sourcing platform with click-through dashboards on contracts, sourcing events, suppliers, overall spend, spend by category, spend by supplier, spend by country, spend distribution, PO (vs non-PO) Analysis, Compliance, and even Supply Chain Geographic Coverage. While not a full-fledged analytics platform by any stretch of the imagination, it’s enough to give buyers some insights as to where they may want to begin their analytics efforts if they are looking to increase savings, increase diversity, increase compliance, or decrease risk.

Contract management is baseline. It’s basically a searchable meta-data index of contracts, which can be associated with suppliers. However, for smaller mid-size organizations, that might be all they need.

MarketDojo is a great mid-market SIM-powered sourcing platform at an affordable mid-market price point.

Need Some Procurement Principles? Balfour Beatty Published a Great Starting Point.

Google sometimes digs up the strangest things when you ask for Procurement News. One thing it recently dug up was the Balfour Beatty “Procurement Strategy” page, which wasn’t so much a strategy, but a set of principles that every organization should subscribe to. (Regardless of what industry they are in.)

So, if you’re wondering what principles you should adopt before you set your Procurement organization strategy, you can start with these seven principles:

  1. Become the customer of choice
  2. Ensure that we have the right, skilled people for the job, a strong talent pipeline and that we provide an environment where they excel
  3. Put in place processes that work, are compliant and transparent, making the best use of technology to deliver for our business and for our supply chain partners
  4. Mitigate and manage risk through early and closer integration with our supply chain partners
  5. Work together to identify market risks and forecasts
  6. Keep safety and wellbeing at the forefront of all that we do
  7. Prompt Payment for Suppliers

The great thing is they will lead to a great strategy as:

  • it covers talent, technology, and process transformation
  • it places importance on the supplier, the relationship, and the supplier sustainability
  • it covers CSR (corporate social responsibility)
  • it covers risk

In fact, the only principle that is missing is Sustainability, so if you add this eight principle

  1. Embrace sustainability in all that we do

We’re pretty sure that if you were to start here, you won’t go too far astray in the creation of your Procurement Strategy.