Category Archives: Cost Reduction

Product Price Pandemonium? Covalyze and Clarify!

In a nutshell, Covalyze (by Valunoo) is an advanced analytics platform designed to help an engineer and/or a direct buyer understand the price quotes they are receiving from a supplier by helping them understand what the average price is, what the (target) price of a similar product should be, and what factors are contributing most to the product, regardless of what type of product you are considering.

While primarily used for manufactured products (with no restrictions on categories), it is not restricted to (select categories of) (electro) mechanical or electronic products like some platforms. Nor is it restricted to products where you have unit prices, as it also encodes the necessary algorithms to analyze bundles (which are common in software, for example) and if you have enough quotes, understand the underlying pricing of each module.

The platform, founded and run by two economists and built by German trained mathematicians and data scientists, encodes advanced curve fitting, regression analysis, cluster analysis, support vector machines and k-nearest neighbors and other advanced statistical and machine learning algorithms to analyze all of the available commercial data against the relevant technical details of the product and its production process.

The platform can be used standalone if you have, or can export, all of the data into decently formatted csv flat files, or it can be used in conjunction with their partner platforms that will digitize technical drawings and/or specifications, collect available market data on raw material production and pricing, cleanse and classify all organizational data in the organization’s systems to ensure the data used for analysis is accurate and complete enough to be used, and to integrate external commercial data feeds for market intelligence. (They and/or their consulting partners can resell these platforms so you only need to deal with Valunoo or your preferred consulting and implementation partner.) Covalyze has partnerships with ChAI, KNIME, Konfuzio, and Werk24 that it can use to power it’s new Data Connector (for Super Analysts) which it can deploy to help you build your perfect data pipeline. It also has partnerships with catuuga, EFESO, and P3 (management) consulting firms that can provide you with the services you need to help you integrate your systems, cleanse your data, and get all of the product data into the platform you need to do your cost analysis (and support your negotiations).

Feature Based Price Breakdown

The Covalyze platform revolves around the calculation of the zero margin price line using a feature-based price breakdown that will allow the engineer and the buyer to understand

  1. whether each price/quote from a supplier has a positive or negative contribution line (and you want to minimize a supplier’s positive contribution margin as that means you are paying more than average and not optimizing your pricing) and
  2. what features of the product are contributing the most to the price/quote

Once all of the data for all instances of a product (from multiple suppliers and or quotes) with their relevant features and costs are loaded into the platform, the platform runs its suite of analytics, selects the appropriate algorithm, and computes the feature-based price breakdown for each instance of the product and then the zero-margin line. (Note that, since all of the techniques are essentially statistically based, you want at least 30 for decent accuracy, and if you have 100, or 1000 instances, load those too … some clients have up to 2000 instances of a product, although you will find negligible increases in accuracy beyond 100 in most cases).

At this point, the buyer can

  • plot all of the products/quotes against the price line and see how many are above/below the line
  • dive into the feature-based pricing overview for the product and see the average contribution of each “feature” to the product (which would be gross area, coating, edge type, stamping, material, thickness, and supplier variance for a sheet metal part, with most of the cost dependent on the gross area and the rest split among the other features)
  • dive into a specific supplier product/quote and see the cost breakdown by feature

Once they understand the price line and feature-based price breakdown, they can dive into the

  • savings potential
  • target price calculation
  • feature price calculation

Savings Potential

Once the price-line has been computed, if the platform is also fed, or has access to, the data on which products are currently being bought, in what volume, and/or the forecast data, it can be used to compute the cost savings if:

  • all suppliers making a positive margin contribution reduce their pricing to the the zero-margin line or
  • all products that can be replaced with a lower cost product from another supplier are replaced with the lowest cost alternative

Target Price Calculation

Not only can you see the average price for a product across multiple instances, and see the average contribution of each feature, but you can see the price impact if you change (or remove) a feature. For example, if different products used different material options (steel, aluminum, titanium), you can see the impact on the target based on changing the material type.

Moreover, as long as you have the data, you can create your own customized part configuration (by selecting your own options for all of the features) and the platform will tell you what the target price should be based on all of the data at its disposal.

Feature Price Calculation

Not only can you see how much a feature type contributes to a target price in the target price calculation, but you can see how the price varies across the different options, and if those options can be mapped to a scale (like area, length, weight, etc.), then it can extrapolate the expected (target) price of that feature based on available data.

Similar Parts

If you need to find a replacement part (because a supplier suddenly becomes unavailable or the particular part you were using becomes too expensive), or you don’t have enough data on a feature in a part to fully understand the cost or the options, you can use the similar part explorer that will show all similar parts in a category with one or more features in common.

Model Builder

The platform allows the user to construct feature-based cost models for any product of interest within the platform, which will then simplify the loading of data, or allow the user to target cost a new product currently being designed (as long as there are enough products in the database with cost information on each feature of interest, where the features do not have to be in the same, or even similar, products).

Discussion

Covalyze doesn’t do “should cost” because that depends on market and private data you can never have access to (as labour rates are not just country and region dependent, it’s company dependent — if the company is using state of the art technology on its production line, it may need better trained engineers which will cost more; if a company is close to a hydroelectric plant, it might be able to cut a private deal lower than average energy rates in the country that still has a lot of oil burning plants; if it has it’s own water supply or water processing facilities, it’s costs will be significantly lower; etc.), but it can do very informed target cost as you can determine what data to include in the baseline calculations. You can limit to products/parts that only use a specific material type, are produced in a certain region, only use a certain production technology, etc. and create a highly defensible target cost model that you can use as a baseline in your negotiations with suppliers, which can help you get suppliers to disclose their real cost — because you can say “this cost is based on the products we buy (or have quotes for) that use only these materials, are produced on this type of (production line) technology, and come from factories in your region, so if your costs are wildly off, you need to tell us, and tell us why“. Not to mention, you probably already have tools that allow you to build should cost models, but don’t have any access to the data needed to populate those models. So you can start with Covalyze target costs and force suppliers to justify increases.

One key point is that Covalyze is NOT just for Procurement Intelligence — it is great for Sales Intelligence as well. Nothing stops a sales organization from going to competitor and distributor websites with price listings and detailed product specifications, loading that data with their product data, computing the price lines, and seeing how their product will place against their buyer’s zero-margin line. They can also see which costs dominate in the cost models, which features are demanding a premium price, how they can defend their pricing if it is above the line, or how they can claim that a competitor’s product is overpriced. Insight is the key to success!

In the hands of an astute and acclaimed analyst, you’ll quickly be able to get at the true cost factors of any product, including one you haven’t sourced yet (which could be a manufactured product, a SaaS suite, or even produce [as it can compute cost differentials between farms, greenhouses, and hydroponics against lifespan and waste costs if you so desire]) the true performance of a supplier against a market, and the true target cost baseline you should be seeking, with exceptions only made with concrete evidence from the supplier that the desired quality, detail, etc. can not be obtained at the market price (and that, thus, all other products at market price will be inferior for your needs).

The implementation timeline is dependent only on three things:

  • how long it takes you to arrange system access to all of the systems that data needs to be pulled in from (API keys, access to data lakes where there is no API and just data dumps, etc.)
  • how many parts you want to model
  • how many part instances in total you want to pull in

This is because:

  • until you can access all of the data (which will be spread across the PLM, the ERP, the Supply Chain S&OP, the Sourcing, the Procurement, and the Finance systems, you can’t do anything but define the part models; if you have a slow/uncooperative IT, or archaic systems, it could be weeks before Valunoo or their consulting partner can start the implementation
  • models depend on the complexity of the product (they are just a list of features with associated types and, in the case of an attribute set, defining the attribute sets); they can be created pretty quick from scratch for many parts by an experienced engineer, and both Valunoo and their partners have starting libraries that they can use to customize a model for your business (but these are not included out-of-the-box as the factors you include are dependent on what data you have, how significant a cost factor has to be to be meaningful to your organization [because if it only contributes about 1% to the cost of a $100 product and you only buy 10,000 units a year, and the savings potential is max 10%, you’re not going to do a deep dive analysis for a max cost saving of $1000 — you’d spend more in computing power building the model than you’d end up saving])
  • it takes a lot of time to initially populate each part instance because you have to collect data from multiple systems; do multiple levels of conversion, cleansing, and validation; and then run multiple types of analysis to identify the best cost model (and run it); on average, it’s 8 hours to load 50 part instances and do all of the initial analysis and computations; so if you have 50 types of parts with 100 parts each, that’s about a month with standard provisioning (and while you could provision a larger virtual server and parallelize multiple streams, this would cost more but your analysts probably couldn’t keep up with the manual analysis anyway; but if you were a large enterprise with 500 parts and 50 to 2000 instances a part, you would likely provision multiple instances (for completely different product types) and then large instances for big categories

This being said, most clients will be up and running in a month, with all parts and data integrated within a quarter.

Covalyze is a great analytics solution for design engineers and direct buyers who really want to understand the pricing dynamics of the current and potential supply base, which quotes are truly good or bad (against a baseline), the features (and requirements) that are really driving the price (which is not always material), and what changes, if made, should substantially lower the price. It’s the type of solution every Direct Sourcing team needs to have in their repertoire.

What Are the Biggest Organizational Cost Saving Levers?

Every year there is a new survey or research report that will name one to three levers as the biggest cost savings levers in an organization, but it’s really not that simple. For example, the SCMR last year reported on a BCG study and the Hackett Group 2024 Procurement Key Issues Report and said, in Managing Procurement in a Price-Sensitive Environment, that:

  • supply chain costs and
  • manufacturing costs

are the biggest levers for cost savings. And while generally true if more than 50% of revenue is being spent outside the global organization’s many four-wall structures, it’s not true if most of the spend is internal (on headcount, property, etc.).

And it’s not true at all in the current environment in America where now tariffs are increasing costs by up to 145% (and there’s no solution, beyond BTCHaaS) and everything is unpredictable.

Moreover, supply chain is generic — is the cost inefficiency in the manufacturer (and if so, is it in their material and component supply chain or in their operation), the distributor, the logistics partners, or the organizational warehousing and inventory management. And if its manufacturing costs, is the bulk of the costs raw materials governed by commodity markets or in the production process? If the former, you can’t do much. If the latter, the assembly line is your oyster.

And then, even if you find the lever, where is it located? Who has access? Do they have the strength and permission to pull it? It’s tough!

Let’s look across the spend (ignoring tariffs because they are beyond your control):

  • products: low quantity, no lever; high quantity, sourcing if the market conditions are in your favour (or about to not be in your favour, so you lock a contract in early for a small hit); if the product was never sourced before, it’s tail spend which typically sees 15% to 30% overpsend
  • services: low quantity, tiny lever; high quantity, across a nation or the globe, if you take a multi-level view, are willing to work with multiple providers, and apply SSDO (Strategic Sourcing Decision Optimization), 30% to 40% can be shaved off with no detriment in service level
  • logistics: mode matters; intermediate storage matters; FTZs matter; source and sinks matter (if you’re selling in multiple countries, you might want to consider producing from multiple countries); easy to take 10% off just with a better network design, sometimes 20% off with a better network design, smarter load distribution across carriers, more cross-docking (and less intermediate storage), and the most appropriate (mixed-modal) transport plan
  • taxes and tariffs: source and sink matters! and, in some countries, so does minority/diversity/etc.; you can cut these in half (or even eliminate them) with better planning; when tariffs can be 20% or more, this matters
  • warehousing: major cities and hubs are expensive, secondary locations can be a fraction of the cost; and if smartly located, can cut your “local” distribution costs to your “local” stores, plants, offices, and/or customers; for years all the studies said inventory cost can be as high as 25% of product cost; better management (not just JIT, that can lead to more stock-outs and losses than a few extra percentage points) can halve this while reducing stock-out rates
  • facilities: if you’re willing to consider a balance between on-site and remote, shared spaces (and designated lockers), locale of choice, costs (and savings) can vary wildly; millions can be saved here in larger companies;
  • personnel: you pay the best people the best rates and you keep them as the best deliver an ROI multiple that is many times an average Joe; but that doesn’t mean you have to overpay for benefits (and with good negotiation, you can get great benefit plans at below market average rates); this can be hundreds of thousands to tens of millions

There are many levers, and the savings potential differs by industry, company size, organizational Procurement maturity, and individual company.

In other words, don’t just look at the top two or three levers, look at all of them and focus on the ones with the most potential, even if they are on the bottom of the “expert lists”.

Time to Get SaaSy with SaaSRooms!

If you’ve been following along, we don’t have to tell you again how much money is wasted on the IT category every year (about 1.5 Trillion), how much is wasted on SaaS and Cloud spend alone (about 500 Billion), and how much you are probably wasting (about 30%).

We’ve told you there are options out there to get SaaS spend under control (along with the other sacred cows), but they aren’t all equal. And understanding the differences is key to selecting the right solution … which is critical to extracting the value you expect.

In order to extract value from a SaaS optimization platform, you need to understand:

  • how many solutions you really need
  • how many users are actually using the solutions you do need
  • whether they have the right licenses
  • how much you should be paying for those licenses based on market averages
  • … and so on!

If you’ve been following the stats, most organizations have three to five times as many app subscriptions as they should have. (Features ARE NOT Applications) The first key to savings is to get rid of the subscriptions you aren’t using at all as soon as you can. (And the second is to see how many of the applications that are being used can be harmonized so that some that are more or less duplicates of others can be eliminated over time.)

Then you need to figure out, of the applications that are being used, how many users are actually using them regularly — not just signing up for them when asked to do so or signing in once a quarter to get a report that they could be emailed. The next biggest way to save money is to minimize the licenses.

Then you need to figure out if you have the right licenses, especially if you are subscribing to module / application packages. If you’re subscribing to a suite, chances are not every user needs every module, even if it’s just a Microsoft office suite. Most users only use Outlook, Word, Excel, PowerPoint, and Teams … at most. Some won’t even use PowerPoint (if they don’t do presentations) and others, if they’re always in the office, will have no use for Teams. If you have hundreds of users with the full basic pack of 5 – 7 applications (because Microsoft loves to sell you on Visio and Project as well) and the majority only use 3, that’s a huge amount of money flowing down the drain.

But just getting rid of unused apps and optimizing licenses by employee isn’t enough, you still need to make sure you’re paying market rates, or you’ll still be paying a good 10% to 20% more than you should be.

None of this is easy.

  • how do you know what apps aren’t being used when you never created an infrastructure to track utilization? and do so in a manner that’s not burdensome on your employees?
  • how do you figure out if you can get rid of a license if it hasn’t been used in the past 30 days?
  • how do you figure out what the right subscription is for each user when it depends on what they use, what they need to use, and a very convoluted set of package offerings from the vendor?
  • how do you figure out what you should be paying when vendors do their best to convolute average market pricing to the greatest extent possible?

But SaaSRooms makes it easy by:

  • offering a ShadowSense browser extension that tracks what apps your employees actually use without interfering with their work
  • including automated integrated surveys which will automatically ask an employee if they are (still) using an application that hasn’t been used in the amount of time it should be used in if it is used on a regular basis (and, furthermore, the application can help you qualify license needs through role requirements, workflow demands, and usage patterns)
  • providing a deep understanding of standard packages from some of the major vendors, including Microsoft (and can break it down no matter how convoluted the reps make the pricing tables out to be)
  • drawing insight from deep data on market averages and know exactly what you should be spending

And then doing the analysis that needs to be done to identify the potential savings and, more importantly, when they can actually be realized.

But let’s back up to what SaaSRooms is and what truly makes it different and valuable. And to do that we’re going to go beyond the website marketing (because if they don’t say “AI” no executive will take them seriously, because the analyst firms are driving that hype train full steam ahead) and talk about what makes SaaSRooms different.

Fundamentally, SaaSRooms is a SaaS Spend Analysis platform, built by an ex-Simfoni founder specifically to do SaaS spend analysis to help organizations attack one of the most significant areas of overspend that traditional spend analysis systems couldn’t address. They do this by marrying AP, contract, employee and utilization data in a way that allows them to extract the deep insights they need to create a realistic savings plan you can actually realize.

That last point is worth diving into. They are more than just a platform, they are a managed service that works with you to develop a realistic plan that will deliver the savings you expect. (Their clients see anywhere from a 10% to 30% savings, and generally see a 10X ROI within two years, if not within a year. Moreover, the vast majority see a return within the first quarter after the first wave of opportunity has been addressed [including two clients who have permitted the publication of public case studies where they saved almost 300K in the first 90 days], and they are identifying an average of almost 6M in wasted SaaS and Cloud spend per client.)

Their ability to generate a realistic saving plan that you can accurately capture is one of the main differentiators. It’s easy to collect a stack of cost data across a hundred clients, compute market averages, compare that to AP data, and generate savings projections … but much harder to determine how much of those are actually realizable, and when. The reality is that if the contract has a year left, you just can’t cancel it. While many vendors will let you reassign licenses during a contract, most will not let you cancel it or reduce spending below a threshold (so you need to optimize it to the best of your ability until you can reduce spending or cancel the contract if you need to) — which means you need a staged plan that you can address in waves.

Since SaaSRooms collects, and connects, all of the relevant data, it can group the contracts into waves based upon when they can be (re)negotiated, along with giving you the insights to optimize them at the right time. (And, of course, based on these insights they can automatically mine and bubble up the insight at the right time and slot it into the right part of a multi-stage plan, and then they will create a step-by-step plan for you with verified opportunities based on the data).

The tool not only collects and connects all of this data, it centralizes it in a manner that is both easy to understand and to query in a manner you are comfortable. If you are a real analyst with real analytical (math) skills, you can drill through the data like you could in any other spend analysis tool. If you’re a business user who likes to chat with your applications, then you can use the GPT layer to ask questions and get the answers (and widgets) you are looking for. If you are an executive who just wants a summary of the plan, the built in AI layer will create an executive summary for you.

When you log in to the platform, you get the dashboard which summarizes the key SaaS metrics, the savings potential by stage and month, the current license utilization, pending renewals by month, compliance coverage, cyberthreat (if you have the cyber data integration), user anomolies, and summaries of your stack, from largest to smallest spend.

From here you can drill into one of they two main platform interfaces: Optimize and Manage.

Optimize is where you can drill into each app to evaluate and optimize the opportunity on an app by app basis. When you enter the Optimize interface, on the main Overview screen you see key metrics (app count, provisioned licenses, total spend, contracted %, users, and average utilization percentage). In addition, you see for each app the category (level 2), the amount being spent, number of licenses, number of active users, and inactive licenses. Drilling into an app on the App Summary screen you see all of the metrics on an app basis along with additional details on contract date, contract expiry date, payment method, key/managing user, spend breakdown by month, user count by month, logins by user, etc. You can also dive into renewals to date, pricing details, forecasted spend, etc.

Finally, you can dive into the savings plan summary, strategy overview, and opportunities. The application will summarize your total spend, addressable spend, and the overall opportunity. From here, you can drill into the savings forecast by quarter based upon the addressable spend in each quarter. From here you can drill into the quarterly summaries, broken down by application, and then drill into the individual opportunity which will give you all of the license and cost data and how much can be saved by reducing and optimizing licenses across actual users.

And, of course, you can quick-jump to the savings strategy report that summarizes the:

  • current technology landscape
  • optimization opportunities
  • overlapping technologies
  • cybersecurity contract optimization
  • market-driven optimization optimization
  • implementation roadmap

Moreover, because these reports can be generated by the embedded AI technology, they can be updated at any time by the client. This is critical because SaaS usage patterns will change, terms and conditions will change on renewal, cloud costs and compute requirements will evolve, and so on and the platform will automatically identify and revise your opportunities on an ongoing basis and this allows you to see overall trend adjustments at a high level at any time.

The end user organization has full control over opportunity management and can accept, modify, or reject all of the opportunities identified by SaaS Rooms as well as create their own from scratch if they so choose.

Plus, SaaSRooms also tracks cloud spend and utilization versus contracts and buckets and allows an organization to track, manage, and optimize their cloud spend as well as the platform will identify and detect:

  • under-utilized instances
  • abandoned instances
  • instances ready for shutdown
  • unattached (storage) volumes
  • obsolete IPs
  • obsolete images
  • reserved instance opportunities
  • obsolete snapshots
  • abandoned buckets
  • un-deallocated instances
  • abandoned streams
  • migration opportunities
  • etc.

Once the optimizations have been selected, users can enter the Manage module where they can not only see the key metrics summarized at a glance, but dive into the

  • backlog opportunities that are overdue to be addressed
  • scoping projects in progress to evaluate the full extent of the opportunity that can be addressed
  • negotiations in progress and the data that will help you achieve your goal
  • contracting efforts in progress and where they are
  • completed opportunities and savings realized

And, if the organization realizes that they have multiple applications that should be replaced by a single application, or is missing from their stack, in the Reach module they have their software marketplace where an organization can buy SaaS packages at pre-negotiated rates from the marketplace, where the rates are typically better than what a mid-sized organization can secure on its own (as with any software GPO marketplace).

And if the contract should be renewed, the built-in negotiation intelligence will help an organization secure better terms and pricing. Plus, the proactive contract management controls will ensure the buyers get early notification of upcoming renewals, up-to-date market rates, real-time insight into actual usage, and insight into negotiation strategies that are typically successful with the vendor.

When you put it all together, SaaSRooms is a great tool for

  • Finance as they have complete visibility, can monitor projects, control approvals, and adjust budgets accordingly
  • Procurement as they have a complete overview of current vendors, contracts, adjustment capabilities, renewal dates, identified, and captured savings (from rate and waste reductions)
  • IT as it can track the entire SaaS stack used across the organization, manage users, and plan for utilization

as it can be fully utilized self serve but, as we indicated, also includes managed services to get the organization up and running quickly and identify the initial multi-stage savings plan (and ongoing guidance over time as desired).


Ooh, the way that you spend it
Makes me go crazy, show me you can end it
You could be saving more
Ooh, the way that you buy
Makes me go crazy, show you I can end it
You could be saving more

Much more
Much more
Much more

Get SaaSy, now, get SaaSy
Get SaaSy, now, get SaaSy
Get SaaSy, now, get SaaSy

Savings
Now (much more)

After all, it’s better these days if that New Thang is SaaSy!

Is your Procurement Practice Too Tactical? Maybe you need to Quote STRATegic with QSTRAT!

QSTRAT was founded twenty years ago to help companies get a better understanding of real product and part costs in order to assist those companies with the relentless margin pressure, constantly tightening timelines, and always-on global competition. They do this through a very customizable, and customized, Sourcing and Supplier Management Platform along with a rather unique Distributor Quoting Solution (which we are not covering in detail) to support value-added distributors (VADs) [who go beyond just logistics and fulfillment and might also provide training, technical support, sales demonstrations, and/or bundling with other complementary products for more complete customer solutions in addition to other value-add solutions]. Let it just be said that the Distributor Solution is an extension of the manufacturer solution where the value added distributor can get detailed quotes from the supply base, add its own markups and outbound costs, and provide very detail quotes to a buyer.

The core of their platform is a highly configurable single tenant cloud sourcing and supplier management solution for manufacturers and distributors who need to extend their ERP backbone with solid strategic sourcing capability in a manner that is compatible with their favourite tools — Microsoft Excel, e-Mail, and PDF forms.

Before we go any further we are going to call out one key difference between QSTRAT and most other cloud-based platforms — there is no supplier portal. In certain traditional manufacturing industries populated by old-school manufacturers, they are not very modern technology / SaaS savvy. They don’t want yet another supplier portal to try and figure out, to try and remember the passwords and security configurations for, and to have to log into every day to try and find their orders and communications when for years they ran off of email and spreadsheets and could get all their communications through one source. Also, in defense, it can be very hard to get yet another platform/portal approved, and even if it’s okay for your company, if one of your suppliers is also a defense subcontractor, they may not be able to use your new platform, putting you in a pickle — do you insist on the platform and find a new supplier, or keep the supplier and not get the benefit of the platform you jut bought.

QSTRAT was developed with those customers in mind and ensures all bids, quotes, surveys, and information exchange goes through secure PDF forms (or, should the customer choose, Excel spreadsheets can also be used, especially for simple information requests where there is no need for provably secure audit trails because no award is being made). This is because, with their target market, e-mail, Excel, and PDF forms are already universally accepted by the majority of suppliers. Whenever a quote, survey, request, etc. is issued, a custom secure PDF form is generated by the platform which is sent to the supplier through an email (link) for completion (and button based submission when they are happy with the form, where the state can be saved while it is in process).

The QSTRAT Sourcing and Supplier Management platform has the following key parts:

  • part database
  • supplier management
  • events (RFPs/Qs and Surveys)
  • reports
  • administration

Part Database

The platform can maintain the organization’s complete part database natively to facilitate rapid (re)sourcing of parts and programs, which can even consist of multiple quote packages that collectively satisfy a bill of materials. Part profiles are extremely extensive and can be configured to track all of the fields you want to track as well as have their own cost breakdown models if desired. They can be associated with risk factors, compliance requirements, insurance requirements, and detailed CAD/CAM drawings / STP files and all of this information will be sucked in by an event that includes the part.

Supplier Management

Supplier management is kicked-off during initial implementation where the cusstomer’s (active) supplier list is loaded from the ERP. Once the suppliers are loaded, additional information can be collected through surveys that can be sent to the suppliers as part of onboarding, data collection, performance reviews, etc. Suppliers can be categorized into organizational hierarchies of choice which can be product based, region based, raw-material based, etc. to allow for easy administration and selection of relevant suppliers for events.

Supplier profiles can be as in-depth as you like and upon system installation QSTRAT will define as many data fields in as many categories (basic profile, financials, contract management, risk factors, Scope 3, scorecard, etc. etc. etc.) as the organization desires. All available data will be imported from the existing supplier master in the ERP, the rest can be collected from surveys or manual entry, and updated data can be pushed back to the ERP on a schedule.

Suppliers can be created and onboarded natively in the QSTRAT application (and then pushed to the ERP when approved), and onboarding can begin with only a supplier name, contact name, and contact e-mail. Onboarding can be multistage and start with a registration questionnaire, continue with specific questionnaires based on the categories you will assign the supplier to (and focussed on its capabilities), and end with a formal evaluation exercise that follows a pre-defined workflow that will end in a supplier approval (or denial). The specific requests can include tooling capabilities, associated capacities, and, if the supplier is an MRO supplier or provides services, it can also include maintenance services and default rate cards.

Events

RFQs, which are the primary events in the system, consist of header information, line information, attachments, suppliers, communications, and returned quotes. The header information is the information that defines the event and goes beyond the simple meta data (id, name, dates, contact) but also defines the RFQ type (and associated workflow), program relationship (is it supporting a program defined by a parent RFQ that has been split into sub-programs to simplify analysis based on similar part types or supply base), prior event history (with the last quotes received, if they exist), and any financial guidance you want to provide (like expected margin % in detailed cost breakdowns, etc).

The attachments consist of global event attachments as well as individual attachments by part. Default attachments will be pulled in according to the RFQ type and the parts included in the RFQ, but additional can be attached at the global or part level before the RFQ is issued. This attachments will typically include NDAs, CAD/CAM drawings, compliance and insurance requirements, etc.

The lines represent the individual parts being quoted, each of which can have their own custom-defined detailed cost breakdown model, notes, and attachments. The quotes, which are filled out through custom PDF forms generated for the suppliers, can be exported in bulk to CSV for users that like to do spreadsheet-based analyses, but can also be compared in the QSTRAT platform in the QuoteMatrix which will show the quotes summarized (and sortable) on two key fields (landed cost, fully burdened cost, country of origin, or any other pre-defined calculation or identifier). The buyer can use this quote matrix to select bids for award, or use the pre-defined auto-select functionality (which, depending on the workflow, will select the lowest cost, the lowest cost that meets a certain requirement, etc.). The quote matrix is not limited to current bids by line, but can include key description fields (unit count, target price) as well as historical quotes for comparison. The matrix has extensive filtering capability so it is really easy to see parts with all or without one or more supplier responses, that are or are not selected for award, and with and without returned attachments. The buyer can also drill in to the cost breakdown matrix by supplier as well to see the relative costs for each component (material, tooling, certification, etc.).

Suppliers can be auto-selected based upon a pre-configured auto-assignment rule (that will select all suppliers that can supply all of the parts or at least one of the parts), assigned en-masse based on associated categories, assigned on a part basis based on manual selection, or selected en-massed based on category and then deselected on a part-by-part basis. Once the supplier is selected, the buyer can select the contacts at the supplier who should receive the RFQ, which, depending on the event flow, will be pre-selected to the first/default contact or all.

Events are single round by default, but can be turned into multi-round events with the re-quote functionality, which can also be used to kick back a quote (with a comment) to the supplier for re-quoting during the event if the buyer believes the supplier made a mistake.

Reporting

Accessible from its own tab or as drill downs off the dashboard, the platform contains a number of built in reports around event activity, customers, suppliers, and parts that breakdown by status, spend, activity, etc. The specific dashboard widgets and reports will depend on the platform configuration on implementation, and if the buyer wants DIY reporting, they can export all of the data to CSV or pull it into an external business intelligence (BI) or spend analysis tool using the Open API.

Administration

The user can do standard organization, user, workflow, and form field administration through the platform, but most of the configuration is done on implementation where the different event workflows are defined for the different event types that the buyer wants the system to support.

The platform supports a large number of event types which include, but are not limited to, supplier registration, supplier information update, supplier evaluation, tooling request, RFI, estimate (only), RFQ, order request, maintenance request, market test, etc. and additional types can be configured on demand. Associated with each event type can be an associated response/quote-flow definition that defines not only the desired header information, attachments, and communication requirements, but also the associated workflow both for event creation and issuance but also review and approval. Note that every field/document submission requirement defined at the header level will cascade down to each individual line, which will also pull in the cost model, fields, and attachment requirements associated with the part/SKU. These templates can also be configured to pull in the cost of an item currently in inventory or the last quote from a supplier (if still valid), to minimize the effort on the part of the supplier to update a quote and respond to an estimate request or RFQ.

Implementation and Integration

Now, with everything customized for each customer, it sounds like it would take a long time to get this system up and running, but the reality is that customers are usually up-and-running on supplier onboarding and core categories within four to six weeks and fully up and running in three to four months. QSTRAT has been delivering their solution in this manner for over 15 years (as the company turns 20 this year) and have a huge library of templates for each event type, each industry, etc. that they can start with for rapid customization to customer needs.

QSTRAT integrates with the major ERPs and has an open API for loading parts/lines/suppliers from your existing systems (ERP, CRM, EDI feeds, etc.), automatically creating events, and pulling information back.

Summary

QSTRAT is very interesting in both its approach to manufacturing and distributor sourcing and the way it implements that approach. Unlike many sourcing platforms,

  • it believes in 100% customization to the client and the way they work, maximizing the value-add on top of the ERP/MRP/WIMS the manufacturer/distributor uses to run their business.
  • it is single tenant cloud both to ensure maximized customization capability and to meet the security requirements of defense contractors that are subject to rigid security requirements
  • it uses secure PDFs for supplier interaction and data capture, forgoing the “yet another portal” approach the majority of vendors take to supplier interaction
  • it was built around Open APIs as most buyers want to work with their existing systems and tools they are comfortable with to the extent possible, and just use a sourcing tool for sourcing

So if you happen to be looking for a direct sourcing solution that meets one or more of these requirements, QSTRAT is definitely a solution you shouldn’t overlook when making your shortlist, and one that is currently serving customers across automotive, aerospace, medical devices, industrial, and high tech manufacturing.

Do You Have Continuous Cost Control?

If not, you should, because with tariffs rising, markets falling, inflation out of control, sales dropping (as entire markets are cut off with sanctions and trade wars), we’ve gone beyond the point where every dollar counts to the point where every penny counts on every purchase because those pennies add up as every 100 purchases is a dollar and every 100,000 purchases is $1,000 and when money is as tight as it is now, that is actually value (especially for an organization making millions of purchases a year).

And right now, organizations are wasting a lot of dollars through the entire purchasing process. From poor sourcing strategy and process, to poor sourcing and negotiation, through poor purchasing execution, and poorer logistics management, to poor invoice and payment management. Every step without good cost control adds cost to the process, at a time when you need to be taking cost out just to survive.

And we know organizations are losing across the board because the following is required to keep costs in control:

  • good processes at each step
  • (near) real time market intelligence at each step
  • good systems supporting each step
  • continuous monitoring at each stage

And we’ve never seen an organization, even a best-in-class organization, that has all of this for their Procurement department. In fact, it’s rare to find an organization that has more than half of this. It’s now at the point where your organization may not survive if it does not have:

  • well defined processes for
    • supplier discovery and management
    • sourcing
    • contract award and management
    • procurement, on-and-off contract
    • invoice management and accounts payable
    • logistics and warehousing
    • ongoing analysis
  • (near) real-time market intelligence at each step
    • current, financially stable, accessible suppliers
    • current commodity costs, average overhead costs by region, tariffs, etc.
    • current best practices, standard clauses, and insurable risks
    • market availability, quality, delivery times, remaining contractual commitments
    • current entity information, payment terms, standard processing times, community intelligence on supplier OTD
    • carrier availability, costs, surcharges, etc.
    • changes in spend trends and curves, etc.
  • good systems/modules supporting each step
    • supplier 360 module (not just SIM/SRM/SPM .. all supplier data and interactions)
    • sourcing (RFX) management
    • contract negotiation tracking, signing, and ongoing management
    • e-Procurement that supports ALL purchases through the system
    • I2P with automated invoice processing and workflows
      (85% should be touchless on implementation, 95%+ over time)
    • logistics booking and carrier monitoring
    • best in class spend and performance analysis that updates at least daily
      (and regularly re-runs best-in-class trend and outlier analysis and alerts you to unexpected changes)
  • … with built-in alerting when something unexpected happens or doesn’t happen on schedule / as expected

And you don’t. But you need this now more than ever. So, if you don’t have:

  • processes, define them; they can be basic to start; for example, classic 7-step sourcing is enough to start (even though there are some more refined 11 step processes)
  • market intelligence, get yourself some; in particular, supplier discovery as some of your suppliers will go out of business, be unreachable, or get too expensive in the days to come; cost modelling for major spend categories to understand true costs for better negotiations because even if it only shaves half a percentage point on average, that’s still 500K on a 1M category (and you can get some of these solutions for under 100K a year), and those hundreds of thousands quickly add up to millions; and major news/event monitoring to pinpoint emerging risks as fast as possible
  • modules supporting the entire S2P process, acquire them; note that most of these don’t need to be BiC; for example, all of the major suites will tout the tens or hundreds of millions their big customers have “saved” with their solution, but what they won’t tell you is that at least 90% of that savings simply resulted from the client implementing a good process supported by a tool with a decent workflow solution; in other words, you don’t need the multi-million dollar solution (to start), you’ll see the same benefit from a six figure suite that is better than average in the key modules that matter to you (especially since it will take you years to master the new processes it will support, meaning that for a big suite, it’s usually five years or more before you can see more value than just going with a basic solution given that the journey to Best in Class, as determined by Hackett in the mid moughts, is at least eight years)
  • continuous data modelling and analysis, start now; with your spend analysis and performance tool updated at least daily

you need to make a plan to incrementally acquire what you are missing, most critical need first, until you do. (Remember, don’t try a big bang implementation. No matter what the vendor or Big X will tell you, those always end in big booms.)