Author Archives: thedoctor

HICX: HI-C to the X for SXM

HICX Solutions, a provider of a leading Supplier Management platform, was founded in London in 2004 to create a platform to effectively tackle supplier master data management and supplier risk management. Recognizing that the Supplier Information Management (SIM) platforms of the day were not enough to effectively manage suppliers — especially since the data was needed in ERP/MRP, sourcing, procurement, logistics, and related systems — they embarked upon a mission to create a solution that fixes that.

The problem with SIM solutions, besides the fact that they aren’t true SPM (Supplier Performance Management) or SRM (Supplier Relationship Management) solutions; don’t address risk; and don’t address supplier development, is that SIM is not master data management. It’s supplier data management, but it’s data management within the platform. An organization needs supplier data management throughout the enterprise, not just a single platform. And that is effectively master data management (MDM).

And that is HICX’s core strength. It’s cradle-to-grave supplier management and contract management is built upon this core industry leading MDM capability that can not only accept data from and push data to dozens of ERP and best-of-breed systems throughout the enterprise, but can automatically match and merge the majority of such data, even upon an initial engagement. (HICX has already mapped common fields in dozens of ERP and best-of-breed systems and if your systems have already been mapped, you can skip the mapping step that typically precedes a data merge process.) The MDM system will automatically identify duplicates and conflicts and human data stewards will only need to correct records on an exception basis (when there is a conflict as the system can be programmed to ignore exact duplicates on import).

On top of this MDM capability, HICX has implemented a suite of solutions for:

  • Supplier On-boarding for discovery, enrolment, and enablement on the system
  • Supplier Data Management for supplier data centralization and management
  • Supplier Performance Management for KPI, issue, and initiative tracking
  • Supplier Risk & Compliance Management for risk factor, regulatory, and insurance tracking
  • Supplier Corrective Action Management for issue identification, resolution plans, and implementation tracking

The supplier on-boarding, which is built on the industry leading MDM, is a particular platform strength. In the HICX, the on-boarding process can start as early as the identification of a new supplier which is onboarded using a process that adapts to the type of supplier (be it under consideration as a long-term [strategic] supplier, a sub-contractor, a one-off vendor, logistics company, government organization, etc.) and that is simplified with the provision of a D&B (or equivalent) number that allows for all public information to be automatically imported. One advantage of the solution is that, even before a supplier is onboarded, potential matches or duplicates in the system are automatically identified to prevent a user from inviting a supplier that is already doing business with another organizational unit. And if additional data is needed, data can be imported quickly from any platform using their script-based import capability.

For more information on HICX Solutions, check out the 2-part series on Spend Matters Pro (Part I and Part II [coming soon]) [membership required] by the doctor and the prophet. This in-depth analysis is definitely worth your time if you are on the market for a SxM solution and trying to not only identify the leaders (of which HICX is one), but determine which of the leading solutions is right for you.

Environmental Sustentation 18: Natural Disasters

Natural Disasters are on the rise. The rapid rise to be exact. As per a 2011 publication from THINK Executive, the number of disasters between the 1970s and 1990s occurring worldwide tripled. But as if this was not bad enough, it is predicted that both natural and man-made disasters will increase five times in the next fifty years. Ouch!

Something bad is going to happen. And it’s going to seriously disrupt your supply chain. Are you ready?

Probably not. But regardless of the natural disaster, these tried-and-true techniques can help you survive the next earthquake, hurricane, tsunami, volcanic eruption, or ice storm.

1. Dual Source from remote regions.

That way if a crop or factory in a region is destroyed, you can switch to the alternate source.

2. Maintain visibility down to raw materials for key products.

This way if something happens that affects a supplier’s supplier, you will have early warning and can make plans to switch sources, or help a supplier find an alternate source of supply.

3. Continually investigate alternate designs that require less of raw materials in limited supply.

The less you are dependent upon that one rare earth supplier in China or petroleum based products, the better you will be.

4. Invest in your own renewable energy source.

Should the main grid be overloaded and go down or be destroyed, having your own renewable energy source that your own engineers can maintain can help.

We know you’ve heard this a hundred times, but there’s a reason for that. These techniques are among the few that can be used to prepare for, and deal with, any natural disaster that considerably disrupts part of your supply chain.

It’s Time To Rev Up Your Procurement Value Engine. But Do You Know How?

Procurement doesn’t exist to just buy stuff. Procurement exists, at least if it’s a modern Procurement organization, to identify and deliver organizational value. Long gone should be the days when Procurement, staffed by the island of misfit toys, existed only to process the paper work that allowed manufacturing to buy the parts it needed or the back office the paper and calculators required to do the day-to-day accounting.

But the identification of organizational value, as long-time readers of SI know all too well by now, is not always straight-forward. Every organization is different, and every Procurement function has a different level of organizational maturity. As per the classic Hackett Hierarchy of Supply, a supply organization could still be at the level of supply assurance, could have moved on to analyzing landed cost, may have begun its entry into the modern era with an analysis of TCO, might be poised to become a leader with a foray into demand management, or, and this is the highest level of maturity, may be focused on the art of value management.

However, delivering value takes more than just realizing that your function is to deliver value. It is understanding what value is to the organization and how Procurement can contribute to it. Simply put, one way of defining value to the organization is whatever allows the organization to increase its revenue potential. (More sales, more market share, more brand recognition and brand love, and so on.) One way of assisting the organization in the capture of this value is to deliver products, services, and knowledge that will assist the organization in strengthening its Unique Selling Points (USPs) or Unique Value Propositions (UVPs) that give the organization the competitive advantage it needs to increase its revenue (or profit) potential.

It is not easy to do, especially since a Procurement organization has to understand not only what it must do, why it must do it, and how it will achieve it, but how to be good at it. Few organizations get demand management under control and step up to the highest level of the pyramid. Fewer still can stay there as they will struggle with the how. And even if they occasionally understand the how, they may never master the art of being good.

If one wants to be good and drive to success, one has to have a vehicle powered by a finely tuned engine that can deliver value lap after lap around the sourcing track. Such an engine must be efficient, effective, and sustainable. Only then will Procurement be able to get good and stay good. So what does such an engine look like, what sort of value will it deliver, and how will it deliver that value?

For the answer, check out the new white paper co-authored by the doctor and the procurement dynamo, sponsored by Pool4Tool, on how to Boost Your Procurement Value Engine. Part I of a II-part series (with Part II coming out in Q3), this paper will give you the insights you need to understand the various levers you have to deliver true value and how you can do so in an efficient, effective, and sustainable manner.

Benchmarks: Blessing or Bane?

Benchmarking, formally defined by Wikipedia as the process of comparing one’s business processes and performance metrics to industry bests and best practices from other companies, are typically presented by consultants as a boon for business managers and a reason to buy their services and/or solutions. After all, if you can’t benchmark, not only do you know how good you are doing (compared to the industry), but you do not know if you are improving or deteriorating, at what rate, and what the potential is.

And all this is true, provided the benchmarks are accurate, apples-to-apples, and actionable. This is not always the case, and when the benchmarks are poorly designed and implemented, definitely not the case. In fact, if the benchmarks are not accurate, they can cost the organization precious time, money, and resources and result in worse, instead of better, performance. And even though you don’t hear about it (as the last thing a Big 6 consultancy wants to do is scare you away from one of their most profitable service offerings — as it takes a long time to design the scorecard, collect the data, and interpret the findings [which translates into a huge number of top dollar billable hours for the House of Lies] — it happens more often than you think, and if you end up being one of the unlucky, you will be cursing benchmarks until the end of your Procurement career (and beyond if the word ever again arises).

the doctor is being dead serious here. Benchmarks (like dashboards) hide at least six serious dangers that can seriously hinder productivity, savings, and innovation. Three of these are very common to internal benchmarks, and three of these are very common to external benchmarks.

One of the most significant dangers of internal benchmarks is hidden opportunities due to false negatives. This often arises when monitoring best-price contracts. A classic example is that of enterprise desktop systems. Considering that technology depreciates the time it hits the market, just like a car depreciates from the time it leaves the lot, the price of these systems should decrease over time. If the benchmark says that the contracted configuration decreased over the 12-month contract by an average of 0.5% a month, for a total decrease of 6%, the buying organization might believe that the vendor is honouring the best-price clause. But if the buying organization isn’t aware that the average depreciation of these systems is 12% to 18% and doesn’t monitor market pricing, the buyer might not know that the pricing should have decreased an average of 1.25% a month, and would have lost 0.75% a month on purchases. If the organization was buying 500 systems a month as part of a phased replacement for 1.5K each, or spending 750,000 a month, that’s a loss of $5,625 a month for a total loss of over $60K, or another help desk resource! (And if all hidden opportunities were this small, it might not be too bad. But this is more of a best-case loss example.)

One of the most significant dangers of external benchmarks is wasted years due to lack of validation. One common example is that of contingent or manual labour spend analysis. For example, consider the analysis of warehouse (contingent) labour across the enterprise. An enterprise could quickly find that its paying, on average, a fully burdened rate of $17 an hour for workers to stuff boxes while its competitors are paying, on average, a fully burdened rate of $14 an hour for workers to stuff boxes. This might lead an analyst to believe that the organization is paying 30% more than it should be and that it should seek out a new contingent labour provider to get costs down, and waste months on RFX and analysis only to find out that the most it can lower its costs from the quotes is 10%. At this point, the analyst might go back and do an analysis of what it would cost to take the labour management back in house (which would require building a Contingent Labour CoE, staffing it, etc.) and still not see a savings when it replaces the outsourced management cost with the internal management costs applied to the total wages paid out. At this point the analyst would give up, or spend even more time investigating the reason only to find out that the organization’s main warehouses are in California, New York, and Massachusetts, the states with the highest minimum wages in the nation, while most of its competitors keep their warehouses in the mid-west / south-west states that only mandate the federal minimum wage of $7.25 (vs. minimum wages north of $10). Benchmarks only capture price and performance tiers, not the realities that led to them.

But these are only two of the six major hidden dangers that can ruin any benchmarking project (and the efforts that they will kick off, for better or worse). For a detailed insight into the other four, download the doctor‘s latest white-paper (sponsored by Trade Extensions) on The Dangers of Benchmarks and Trend Analysis (registration required) today. You need to know these inside out before even looking at a benchmark (which, when improperly constructed and improperly interpreted, can be just as deadly and dangerous as a dashboard).