Category Archives: B2B 3.0

It’s Sourcing, Procurement, and Global Trade

A few years ago, I took the time to remind you that it’s Sourcing and Procurement because it appeared that some vendors wanted you to believe that it’s e-Sourcing or e-Procurement, or some fractured combination of both, because that’s what they have and they want all of your business.

As I said before, e-Procurement and e-Sourcing are not the same thing. From a supply management perspective, they’re two halves of a whole, one tactical and one strategic. And while they bring value alone, combined they bring much greater value. Sourcing leads into Procurement, usually off of a contract, but sometimes after e-Negotiation or decision optimization alone, and Procurement leads back into Sourcing, through the analysis step. Without Procurement, the organization wouldn’t have a large transaction database and extensive visibility into spend, and without Sourcing, there would be no strategically negotiated contracts to buy against, leaving procurement managers the freedom to spend willy nilly.

But when it comes to supply management, Sourcing and Procurement are still not the full picture. While they are the full picture from the viewpoint of the buyer / analyst in a mid-sized or larger supply management organization, they do not address the supply side, or the fact that goods need to come from a supplier, sometimes by way of a distributor, and end up in the buyer’s warehouses for shipment to stores and/or end consumers.

The goods have to be packed, shipped, exported, imported, and, sometimes, financed. And the settlement function has to take into account invoice discounting and chargebacks, at a minimum. This doesn’t sound too bad until you realize that the average international shipment requires twenty or more documents for export and import, especially when the US or the EU is involved. Ever since the introduction of 10+2 and new advance cargo declarations in the EU, it seems that documentation requirements have been compounding ever since.

And while this functionality does not necessarily have to be in the e-Sourcing or e-Procurement system, it is needed by any company doing international business and it should be easy for a company to push data out from the e-Sourcing/e-Procurement system into the appropriate Global Trade Management system and pull the necessary data back in for analysis.

Because, when you consider the average transaction in today’s global supply chain end to end, this is what you usually end up with.

Sourcing – Spend Analysis (what needs to be sourced)
Sourcing – e-Negotiation (RFX, Auction – who will it be sourced from)
Sourcing – Decision Optimization (optional, to analyze the bids)
Sourcing – Contract Management (to store the awards)
Procurement – Requisition (for a Bill of Materials)
Procurement – Approval (for the requisition)
Procurement – Purchase Order (for the supplier)
Global Trade – Financing (can be pre or post invoice)
Global Trade – Packing (goods have to be properly packed and labelled)
Global Trade – Shipping (goods have to be shipped)
Freight Forwarder (if a third party handles the shipping)
Export Documentation (for the supplier’s home country)
Import Documentation (for the buyer’s home country)
Procurement – Good Receipt
Procurement – Invoice
Global Trade – Invoice Discounting (if the buyer pays early)
Procurement – Reconcilation
Procurement – Payment
Global Trade – Settlement (the purchase has to be settled in the source accounting system)
Global Trade – Chargebacks (chargebacks for penalties or returned goods have to be accounted for)
Procurement – Tax Reclamation
Sourcing – Spend Analysis (what needs to be sourced)

How Low Can Strategic Sourcing Go?

In the beginning, strategic sourcing and supporting applications were for the Fortune 500 only, not only because they were the only organizations that could afford the multi-million dollar price tags, but they were the only organizations that theoretically had enough spend to see a significant ROI after the (very) significant product, process, and people costs were taken into account. (And whether or not you agreed with the viewpoint that strategic sourcing was only for the rich and famous, you couldn’t argue that unless you were among the rich and famous, you couldn’t afford the price tag.)

Then the Sourcing 2.0 providers, who said we can use the web to deliver solutions on-demand for a fraction of the cost of the on-premise behind-the-firewall model (which, in the beginning, was six figures instead of seven), hit the scene and strategic sourcing broke into the (high end of the) mid-market. It wasn’t applicable to every category, or to every project in the categories it was applicable to, but made a significant impact in those categories it was applicable when best practices and the right expertise was applied.

Then costs went down, as features increased, and (strategic) sourcing solutions slowly permeated the mid-market, starting with the companies with revenues in the high nine-figures and ending at the companies with low nine figures in revenue. At this point, most of the “leaders” had these solutions, as well as a few of the learners, and the laggards still did not give a damn one way or the other. The market started to saturate. So what was a vendor to do?

Push strategic sourcing down into the small business market. Simplify the solutions, make them true self-serve cloud-enabled multi-tenant applications, and price them so that everyone can afford them. But is this really strategic sourcing?

While you can argue that the market was starting to stagnate because it was saturated, you can also argue that the market was starting to stagnate because most of the market wasn’t benefitting from the solutions (to the extent that they adopters of the technology thought they would). And if the latter is the case, you have to ask if strategic sourcing truly exists in the mass market. After all, if the solutions aren’t working, there can only be three reasons:

  1. the solutions being sold don’t support strategic sourcing
  2. the solutions being sold do support strategic sourcing but aren’t being properly utilized
  3. strategic sourcing isn’t possible at a company below critical mass

If we assume that a critical mass isn’t required to effect strategic sourcing, then if a company isn’t getting results, it’s either because the solutions don’t support strategic sourcing or they do but aren’t being properly utilized. I think we can quickly rule out the theory that the solutions being sold don’t support strategic sourcing (when properly utilized) because the basic process has been well understood for a couple of decades now, every big consultancy has their own n-step process, and the foundational solutions have been built and rebuilt so many times that they’re almost commodity. I also think we can’t say that the solutions aren’t being properly utilized because while I’m sure some companies don’t have a clue, at this point it’s well understood what the solutions do and how to use them, especially at any company that’s investing in the right people, process, and technology to improve it’s sourcing.

This leaves one reason why the results aren’t being realized (to the extent they were expected) by the majority of the market — they companies are not at critical mass. In order for strategic sourcing to truly be effective, I would posit that the following two conditions must hold:

  • there is enough spend to warrant a strategic sourcing effort
  • there is enough knowledge to effectively execute one

At most mid-market companies, the knowledge of modern procurement is limited. Procurement is still primarily a back office function, telephone and fax is more prevalent than modern technology, and the level of education isn’t much beyond high-school. You don’t have a room full of MBAs or Engineers trained in supply chain, and most of the buyers, who have no form of certification whatsoever, don’t even belong to any purchasing organizations. And this lack of knowledge to the face that most of the solutions don’t go beyond the help necessary to guide the user through the process, and you can see that most organizations don’t have the knowledge to effectively execute a proper strategic sourcing effort.

Furthermore, even at those few mid-market organizations that have made the effort to recruit and attract the right people, and give them the right training, I would argue that strategic sourcing is a rare event because most categories don’t have enough spend to enable a true strategic sourcing effort. As Dalip Raheja (of The MPower Group) said when he declared that Strategic Sourcing is Dead, it’s not strategic if everyone else is doing it. You can’t just go through the seven steps and have a strategic event. You have to analyze the rationale behind each and every assumption and decision you make for the event to be strategic. (Why are you dual sourcing? Why are you outsourcing design? Etc.) This takes time, money, and, often, specialized consulting and/or tools in addition to your sourcing suite — and, one way or the other, this comes with a hefty price tag. A price tag that’s only worth it if the spend is significant enough to insure (the likelihood of) a high ROI!

As a result, I have to (mostly) agree with a colleague of mine who has said that there’s no such thing as strategic sourcing in the SMB market. While there will be a few categories in the higher end of the MB market where strategic sourcing can be effectively applied, and while you can push the sourcing tools down through the mid-market to the small business market, you can’t push the strategic element. The best you can do is bring true B2B commerce to the average small business. And while this is certainly a good thing, as it drives transactional efficiency and lowers cost, let’s not fool ourselves. True “strategic” sourcing is a rarity.

Share This on Linked In

e-Leaders Speak: Gary Hare of Vinimaya on “B2B e-Commerce: Are We Starting To Get It Right?”

Share This on Linked In

Today’s guest post is from Gary Hare of Vinimaya.

Being successful at B2B e-Commerce is hard for both buyers and suppliers! Unfortunately, despite the hype, there are more stories of failure than success out there. Why haven’t we made more progress? Who’s to blame? These are valid questions, but there is one question that, if we can answer it, might hold the key to success.

Why has Consumer e-Commerce adoption blown past B2B e-Commerce?

Speaking as someone who has been in B2B e-Commerce since the days EDI was considered a “killer app“, and acknowledging that are some “complexities” in B2B that don’t exist in the consumer world, I am going to try to answer this question by noting three things that consumer e-Commerce does better than B2B e-Commerce:

  1. Usability – How many clicks and screens does it take to search for an item and place an order in SAP SRM? I don’t know exactly, but I do know it’s a lot more than ordering from Amazon! For years, B2B was all about how much functionality can we jam into a screen … the problem being you use 10% of the functionality 90% of the time. Consumer sites rightly focus on that 10%.
  2. Content – In the consumer world, all the content is available right on the web. You don’t have to join a supplier network or get a catalog file loaded to place an order. Although many B2B suppliers have invested heavily in their web sites, the majority have not, at least when you take into account the total number of suppliers. There are many reasons for this, some valid (e-Procurement system integration issues), some not so valid (don’t see the ROI).
  3. Technology – Ever hear the terms mash-up, widgets, AJAX, intelligent agents, REST, meta-search, RSS and JSON in the context of B2B technology? You probably hear terms like database, SQL, JDBC and HTML more often. The previously mentioned terms (e.g. mash-up, widgets, etc.) are all commonly used Web 2.0 technologies and protocols that make up the consumer e-Commerce “stack”. Note that they don’t replace the B2B technologies (e.g. database, SQL, etc.), but enhance their capabilities by providing an abstraction layer on top of them to make them more “web sensitive”, which makes it easier to do things like federated search and secure content syndication, without dedicated connections, using only the Web “as is”.

So, at the end of the day, consumer e-Commerce has simplified the online buying process by combining great usability with robust, easily available content; easily accessed via “web sensitive” technologies.

Now here’s the good news. B2B now gets it! You’ve been hearing for years about B2B providers who are “consumerizing” the B2B user experience (e.g. #1). Every day, more and more suppliers make their content available on the Web, and there are now providers out there who can build and even host B2B websites for as little as $5,000 a year (e.g. #2).

And what is enabling these changes is the technology (#3). As more and more B2B providers innovate and adapt consumer e-Commerce technologies to their B2B problems, B2B e-Commerce adoption will ultimately take off just like consumer e-Commerce did in the early 2000’s! To ensure this happens, it is important for users to engage these innovative providers, versus signing up for the same old solution from the same old provider (a wise man once said, “the definition of insanity is doing the same thing over and over and expecting different results“).

I guess the question now becomes, which of these innovative providers is going to be the eBay / Amazon / Google / etc. of the B2B world?

Thanks, Gary!

Seven Tips for Online Marketing Success in a Down Economy

Share This on Linked In

Smart companies know that the last thing you should do in a down economy, which is what builds great companies, is to stop marketing because out of sight, out of mind is never more true than it is in troubled times. Plus, with so many of your competitors blindly freezing the marketing budget, with less forward-thinking companies marketing these days, those of you who do consistently market and build a brand presence become front of mind, and the first invited to the table.

To help you get started, here are the doctor‘s top 7 tips for marketing online in a down economy.

  1. Understand Your Audience
    Who are you trying to reach? What do they look for online? Where do they go to find it?
  2. Understand the Avenues at Your Disposal
    Once you’ve identified where your audience goes, you then need to understand the audience of the sites they visit before you choose any as potential investments. For example, 50% of your audience reads CNN. Does that mean you should you advertise on CNN? Considering that CNN gets over 1,000,000 visits a day, if you have a niche product that you are targeting at 5,000 companies, this says that your audience comprises less than 0.5% of CNN’s readership on a good day. Not good odds of your ad being seen by the right individual. You want to find a site where the majority of it’s readers are from your target audience.
  3. Target Niche Sites and Bloggers
    The best way to reach your target audience is to advertise on niche sites and blogs where the majority of their traffic is your potential customer base. A blog with 10,000 unique visitors a month that likely has 70% of it’s readers in your target market is ten times as attractive as a major site with 100,000 unique visitors a month that would likely have only 0.70% of it’s readership in your target market.
  4. Focus on Building Your Brand
    It used to be all about impressions. Then it was all about clicks. Now it’s shifting to leads. But the leaders know it’s all about impressions through a trusted channel (and recent research is proving this out). There’s a difference between selling trinkets to tourists and selling enterprise software and services. The first is an impulse buy. The second is a calculated decision, after a budget becomes available, made by individuals who will not always be ready to buy when you’re ready to sell and who are very busy and likely will not have the time to research your offering when they first see your ad. That means you need them to remember your brand so that they’ll look you up when the next budget cycle comes near and they are researching the solutions they want to acquire. They’re most likely to remember you if they see your logo time and time again on a trusted site that they visit every few days.
  5. Avoid Sites with “Set-Up” or “Hidden” Fees and Prices
    Let’s face it … there’s not much work to adding your logo to a page, re-directing a URL, or cutting an invoice off of a standard agreement. The price should be all-inclusive and straight-forward, because if you can’t trust the price, can you trust the site?
  6. Look for Prominence
    Just like people will not notice your logo on a printed page with a dozen other logos crowding the page, people will not notice your logo on a crowded web-page that has more advertising than content. You want to make sure that the site limits the number of advertisers/sponsors it will accept at any one time to a small number (my recommendation is at most 7, since psychologists tell us this is the maximum number of pieces of information an average person can process at any one time in their short term memory) and that your logo is at the top of every page, because, let’s face it, most readers don’t scroll all the way down on a page that’s 3, 4, 5, or even 10 screens deep.
  7. Target the Campaign
    Use your understanding of the site’s audience to tailor welcome pages specific to what they will be looking for. And keep the content current and relevant.

Far from the Twittering Crowd

Share This on Linked In

Editor’s Note: This is Kevin Brooks’ first post as a regular contributor to Sourcing Innovation. His previous guest posts are still archived.) Kevin is an experienced marketer in the sourcing and procurement space who was an early visionary where blogging, green supply chain, and web 2.0 is concerned.

Twitter is everywhere these days, and some might be wondering whether this new communication frenzy holds any significance for spend managers. The hype is extreme and no doubt baffling to buttoned-down, serious procurement types. However, beware of dismissing it too quickly.

Twitter is significant for spend management in companies of all sizes because …

Communication Styles are A-Changin’

I was recently at a panel discussion about the future of print media. Robert Scoble, the well-known blogger and technologist noted that his young son will likely never pick up a newspaper in his life. Similarly, there is growing evidence that the younger generation views email — a 40-year old technology, mind you — as dated and irrelevant, preferring more free-form communication styles such as texting, instant messaging and Facebook status updates.

Print — and email — will be around in some form for a long time to come, but their significance and dominance is changing as new and faster ways to communicate move closer to the mainstream. This has major implications for spend management activities such as supplier discovery and assessment, contract negotiation, performance management, and even invoicing and settlement.

Unfortunately, new ways to communicate are often ridiculed or considered irrelevant by the status quo business software establishment. Not so on the consumer applications side, where bleeding edge software such as Google Wave (an intriguing, all-encompassing communications idea), mobile devices like the iPhone and the Kindle and open source blogging platforms such as WordPress are redefining communications for the younger generation. Keep in mind, these are your future employees, suppliers and consumers.

Speed is More Important Than You Realize

Fast is good. Fast is usually less expensive (which is good). Fast is increasingly what your customers, your colleagues, your CEO and your shareholders expect. Industry leaders like FedEx built their success on speed and efficiency. So did the semiconductor industry. So did the auto industry (once upon a time).

Twitter moves quickly — all those “tweets” flying by in real time can be dizzying. Rather than trying to read every “tweet” like you would email, why not consider Twitter like you would a busy stock trading floor. The trends matter more than the individual transactions. When viewed through a spend management lens, tracking “tweet” trends on key topics or suppliers can give you a unique, real-time view of the market. Free Twitter aggregators such as TweetDeck and Seesmic Desktop are two of the more popular tools that support keyword or tag-specific tracking. Admittedly, the view is rather murky and confusing today, but it isn’t a big stretch to imagine more clarity on the near horizon.

The real-time speed of Twitter and its seemingly unstoppable growth will indirectly put pressure on business processes and communications to move faster. That is a terrifying thought to some, and a golden opportunity to others.

Transparency is the New Normal

Transparency in procurement is a controversial subject. In fact, my friend Tim Minahan recently touched on this over on Supply Excellence:

“… online negotiations — what some still refer to as e-sourcing — actually brings much needed discipline and transparency to buyer-seller negotiations.”

Twitter, like blogs and all manner of social networking, is open to the world. Yes, you can send private “tweets” and have an email-like Twitter conversation if you wish, but the model is based on visibility and on Web 2.0 concepts such as the wisdom of crowds. In our new regulatory era, and at a time when nearly a quarter of the U.S. population has no problem posting information about themselves on Facebook or LinkedIn, business communications will inevitably absorb some of the more useful attributes of open models like Twitter.

What all of this bodes for the future is anyone’s guess. I think it is doubtful that Twitter will change the way we live, as Time Magazine so hyperbolically put it in their recent cover story, but I do think it is symptomatic of some larger trends that sourcing and procurement teams — and the vendors that provide solutions for them — shouldn’t ignore.

Kevin Brooks

Editor’s Note: Views of contributors are entirely their own.