Category Archives: Best Practices

Back to Business Basics with B2B 3.0

All the experts finally agree — it’s a recession and we need to get back to basics if our businesses are going to survive. The question is, after years of irrational exuberance, do you remember what the basics are? I’ll give you a hint … good spend and supply management professionals practice them every day. That’s right, smart spending — backed by smart research, smart processes, smart people, and smart technologies — that delivers value to you and your customers is the basics of good business. And if you forget what that means, and can’t find any procurement professionals nearby, you can also just ask anyone born without a silver spoon in his or her mouth who had to work their way through University, work to get that first job, and work to get ahead. Having survived good times and bad, they’ll tell you that, no matter what, integrity, hard work, and an eye on communication, relationship management, and productivity is the way to go.

So what does this have to do with B2B 3.0? Well, in these times you have to spend less, do more, and provide more value if you want to keep existing business and have any chance at all in winning new business. This means that you need to step up your productivity, and this will require better processes enabled by better systems. However, if you are still in the B2B 2.0 world, better systems cost more money, and chances are you’ve paid too much for the systems you have as it is.

But if you embrace the B2B 3.0 world, you’ll find that better systems cost less, not more, and deliver more value than their old-school counterparts ever could. This is because B2B 3.0 solutions take advantage of the true power of the Internet and the new SaaS delivery model while 2.0 solutions are confined to expensive and proprietary networks and delivery models. B2B 3.0 solutions are built to be multi-tenant and leverage an economy of scale from the ground up, while B2B 2.0 solutions are still force-fitting classical architectures onto expensive hosted ASP delivery models. This also means that B2B 3.0 can leverage the power, knowledge, and innovation of the community it creates while 2.0 creates isolated user groups, who have to struggle just to exchange limited amounts of information.

Furthermore, B2B 3.0 is agile. It gives you visibility into your business, helps you organize your institutional knowledge in a central repository where everyone can take advantage of it, and enables the implementation — and maintenance — of best practices. This increases your productivity, and does so at a lower cost since true SaaS providers leverage economies of savings and pass those savings onto you, and allows you to spend more time on communication, relationship management, and finding new ways to bring even more value to your customers. In other words, unlike the technology evolutions that preceded it, B2B 3.0 is the first true technology revolution that lets you get back to basics.

To find out more about B2B 3.0, check out the inaugural Sourcing Innovation Illuminations, now available for quick and easy download with No Registration Required!

1. Introducing B2B 3.0 and Simplicity for All
2. Simplifying B2B for Suppliers Enables Buyers
3. Content Enablement Technologies Enable e-Procurement 3.0

RFP Drafting Tips from DLA Piper

The SSON (Shared Services and Outsourcing Network) recently published an article by Kit Burden of DLA Piper, a legal services and business insights firm that represents emerging growth and high tech companies, on his Top Ten Tips for Drafting an RFP that are worth sharing, especially since some of them echo the tips this blog has given you in the past. The tips are:

  • Don’t Issue The RFP To Too Many Suppliers
    Otherwise, it will become unmanageable and drain your internal resources. Do your homework before issuing the RFP and only issue it to suppliers who are likely to be able to meet your requirements at an acceptable price level. If too many providers fall into this category, shortlist the providers with the most experience in your vertical and the most stability. Generally, the RFP should only be issued to three to six providers, unless you are in the public sector and are required to open it up to anyone who wants to submit a proposal.
  • Ask Questions That Allow for Genuine Differentiation
    As I’ve said again and again, don’t use a vendor “check-the-box” RFP template. Not only are they designed to make the vendor look good, but they don’t ask open-ended questions that will allow the respondents to genuinely differentiate themselves from their competition. Don’t ask “do you have invoice management”, instead ask “how does your application support our invoice processing function, which works as follows”.
  • Ensure the References and Case Studies are From Directly Comparable Projects or Customers
    If you’re in high-tech and the vendor only provides you with CPG client references, you’re not going to know the breadth of the provider’s capabilities and expertise in your vertical. You should do your homework and also contact the clients in your vertical that they don’t give as references. (A Google search on a few news sites and a quick review of their press releases should provide you with some good candidates quickly.)
  • Be Crystal Clear on Your Objectives
    Is your primary goal cost reduction, service improvement, support flexibility, etc? And are you looking for a product or a service? Everyone wants to save money, but the vendors need to know how you expect to achieve that goal, and what the provider’s role is to be.
  • Ensure the RFP Specifies the Ground Rules for the Entire Procurement Process
    Submission requirements, use of information, timeframes, points of contact, rules of engagement, etc. Although important in the private sector where a provider can call “foul” and file complaints, this is crucial in the public sector where government bodies are legally required to play “fair”.
  • Include a Draft Agreement or Contract
      (or the standard terms and conditions and key provisions at the very least)
    Understandings as to what has been agreed to at a commercial and business level can quickly unravel when you get to the contract drafting stage, especially if the provider thinks your “standard” terms and conditions are onerous.
  • Identify the Core Team and the Core Legal Team
    This is important for a number of reasons. If you leave out someone important in the initial stages, the whole project can grind to a halt if an executive later decides “it’s not right for our business”. And if it’s a large IT project or outsourcing project, the amount of work will be significant and not something that the project leads can do as part of their current “day job”. Big projects require serious up-front commitments to get right.
  • Be Clear on the Scoring
    Not only will secrecy on scoring lead to trouble if you’re in the public sector, but it will prevent the service providers from putting their best proposal forward as the scoring system serves to identify which functions are the most important, and what information you want first and foremost from the vendor.
  • Involve all Key Internal Stakeholders
    They need to be kept abreast of how the negotiations are going and given the opportunity to provide their input, otherwise you’ll run into resistance during project implementation every time they don’t like something because “they weren’t consulted on that and it’s wrong”.
  • Anticipate Questions and Gather the Information in Advance
    Due diligence is an essential process, and any supplier worth their salt will want to have a clear understanding of what they are being asked to take on. Furthermore, if the information provided is deficient, one can expect suppliers to argue for the inclusion of contractual assumptions/dependencies regarding the areas of uncertainty. The last thing you want to do before a negotiation is reduce your credibility and your leverage with a potential supplier.

As Kit says, the RFP process is a crucial part of the sourcing process and it is necessary to invest the utmost care and attention to it. Every hour and dollar spent during development will be reclaimed many times over during the project implementation as the project will flow smoothly and generate returns quickly. For more information on constructing a great spend management RFP, see the X-emplification and X-asperation series. Although the vendors won’t, you will thank me for it.

And just remember, you can always find RFP Help Here.

Working with Your Users is Key (to Spend Management Success)

Today’s guest post is from Bernard Gunther of Lexington Analytics.
He can be reached at bgunther <at> lexingtonanalytics <dot> com.

Getting key people involved with the design of any system is good advice. This is especially true for the design and usability of your spend analysis system. The key users for any single commodity include the sourcing manager and the business line owners who drive demand for the commodity. These business line owners may include multiple people from different divisions with different responsibilities. For example, for PCs, the users could include someone from technology who ensures the machines conform to corporate IT standards, as well as someone from a major business line that drive the demand for a specific unit.

Rather than thinking of working with users as a burden, think of it as an opportunity to engage and educate your users and refine the work process. Collaborating with users will help you:

  • create a better commodity structure,
  • demonstrate that you value their input,
  • get user buy-in by incorporating their feedback,
  • find out what’s important to them, and,
  • establish a process for working with each type of user going forward.

A working meeting should cover the existing spending – showing users their spending by commodity, vendor, cost center, and GL codes – both summary and over time. You should ask for input on the commodity structure, the vendors used, the preferred vendors, and any vendors they think are missing. You should ask how they use the data; what value they get from the data and what they would like to have in the system or reports that they don’t have now. If you are doing category cubes, you should review spending patterns, contract compliance and ways to improve the information that exists. The meetings can be formal sit-down sessions with new users, or can be done by email / telephone with users who regularly work with the data and are already providing feedback.

These meetings will probably involve a lot of give and take, but they are essential to improving communication and producing a structure that makes sense to the people who have to live with it. Don’t assume everyone fully understands why these working sessions are important to the company. Let them know why their input is critical. And don’t be concerned if users initially resist these meetings. Their resistance will drop once they have an “a-ha!” moment and start getting value from the data.

In addition to an initial meeting, other milestones that may warrant follow-up meetings are:

  • When someone new takes over responsibility for a commodity. The more they know about their new position, the better they will perform. If you start out providing value, they are more likely to come back for more.
  • At the end of a sourcing event. Ensure that all the learning and changes in the category is properly reflected in your spend cube.
  • On a regular basis, say every 6 to 12 months, ensure that the key users are actually using the data. If they aren’t, why not?

This may sound like a large number of meetings, but, when all is said and done, these users are your “clients”. Is there a more productive way to spend your time than meeting with your client and making sure the service you provide is valuable to them?

Turn to Technology, But Make Good Decisions

There’s been a plethora of articles in recent months on how you can “leverage technology to thrive in a down economy”. And while I generally agree that technology can improve your operations and save you some serious cash, I want to remind you that technology alone is not the answer. Remember the results of the recent McKinsey Quarterly article on “managing IT in a downturn”: The impact on run-rate EBIT from optimizing supply-chain processes with streamlined systems is 3 to 4 % … which is 6 to 8 times the impact on run-rate EBIT from transactional IT cost reduction which tops out at 0.5%.

So why the focus on IT? As the article points out:

  • IT can streamline processes
    The right technology can improve productivity, empower knowledge workers, and help you satisfy customers efficiently.
  • IT can enable best practices
    The right tools can make best practices available company wide and provide a foundation for their implementation.
  • IT can ensure compliance
    Compliance is not just a threat, it’s an opportunity … with the right systems, you can use your compliance to your advantage.
  • IT makes document management easily
    Never search for a contract again!
  • IT enables visibility and collaboration
    You can track the progress of each project and work with your suppliers.
  • … and so on …

And while all this is true, it’s only true if you select the right technology. In order to get maximum benefit, you have to:

  • Select the tools that enable the right processes
    This is not necessarily the process you use now, and most likely not a fixed pre-packaged process the tool comes with, but the process that will allow you to meet your needs with a minimum amount of work. This means that the tool needs to support flexible workflows to allow you to set up the process that best-fits your needs today, and revise it as you discover better ways to get the job done.
  • Make the right-decision with respect to on-premise vs. SaaS
    If a provider can manage the solution for you more effectively and more cost-efficiently, because IT just isn’t your strength, you have to seriously consider SaaS. This is doubly true if data security is an issue, because a certified SaaS provider often has better security in place in their data center than you do in yours.
  • Remember that technology is only the enabler
    You still have to do the work, and, most importantly, use your brain.

So how do you make good IT decisions when trying to improve your supply chain processes? As per this recent SCMR article on “making better IT decisions”, which attempts to introduce a supply chain IT governance framework, you need to:

  • Take a Holistic Point of View
    The best decision will require the input of all of the stakeholders.
  • Be Involved
    Don’t just select a system and hand the project off to IT to get it installed and integrated. It’s your processes that need to be enabled, not theirs.
  • Communicate
    Before, during, and after the implementation.
  • Think Collaboratively
    Let everyone give their input and consider all of the strengths and weaknesses associated with every decision.
  • Learn from Previous Projects
    And, most importantly, don’t repeat the same mistakes you did last time.

Don’t Be Seduced by Change Management Tools

Industry Week recently ran a great article on “change management tool seduction” and the damage these tools, and the programs they support, can cause, which include:

  • Wasted Time
    The wrong change programs will do nothing but consume time that could be better spent on other tasks. For example, documenting all of your processes only to find out they’re poor isn’t worthwhile
  • Increased Politics
    Employees might look upon it as punishment, and rebel, or simply use any new data that results from the effort to try and blame other departments for organizational failings.
  • Functional Distractions
    Employees might get caught up trying to figure out how to meet the new requirements rather than working towards process improvement.
  • Strategic Misdirection
    If the change management program selected doesn’t actually improve product or service quality, it’s pointless.

Change management, and change management tools, only work if you’re implementing the right changes, and not the latest fad, cliche, or feel-good organizational change theory. You don’t change just because your competitor did. You change because a detailed analysis caused you to conclude that you will likely see a significant return from going through the effort. You change because your analysis revealed that the process improvements you identified will have a positive impact on your operations and will increase efficiency, reduce costs, and improve quality.

So how do you know if you’re on the right path? The Industry Week article had some great advice for determining whether you’ve embarked on a successful change management project or been seduced by the latest change management tool (or fad). Specifically, if one or more of the following five scenarios exists at your company, you might have to adjust your plans in order to reap benefit from your change management initiative:

  • Tool Tossing
    Are managers trying to solve problems just by throwing technology at the situation? Technology is an enabler, not a solution upon itself.
  • Consultant Lure
    Are consultants repeatedly brought in to tell you what most of the organization already knows?
  • Buzzwords
    Do managers use buzzwords excessively, particularly with the goal of making themselves look knowledgeable?
  • Change Program of the Week
    Has your company introduced so many change programs in the last few years that your staff feels whiplashed?
  • Plan Blindness
    If management believes that a plan in and of itself is progress, look out!

If you want to get help finding and staying on the right path, the article also offers some advice on how to assess the likely impact of a potential change management program to determine if it’s right for you. It’s definitely worth a read.