Category Archives: Guest Author

High Definition Adoption Measurement Part I

Today’s guest post is from John Shaw (Senior Director, Adoption Services) of BravoSolution, a leading provider of spend analysis, (e-)sourcing, supplier performance management (SPM) and healthcare sourcing solutions and a sponsor of Sourcing Innovation (SI). It is the first of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace next Wednesday. However, since SI is focussed on delivering educational, innovational, and inquisitive content on a regular basis, BravoSolution has been kind enough to give SI readers a first-look.

So you are a seasoned leader in the rapidly maturing field of strategic sourcing and your leadership team continually challenges you to maximize the value of your team to the organization. You are, of course, resource constrained. Before you lay an open field of opportunities, yet you hold in your hands a limited amount of time, money and people.

And so the work begins! You prioritize the opportunities, build a budget and set about bringing the right mix of people, process and tools forward. As a part of this planning, you invest in giving your people the right set of tools and processes for the job. In the field of Strategic Sourcing this usually means the implementation of solutions to support activities like spend analysis, sourcing execution and contract implementation.

Unfortunately, rolling a spend analysis or e-sourcing tool out across a global organization isn’t anything like building the “Field of Dreams“. Just because you’ve built and shared the solution doesn’t mean the team will use it AND use it correctly. Just as a Sourcing Professional needs the right tools in their toolkit, the leadership team needs a set of tools designed to help their people succeed with the solution and tools they have provided. They need an “adoption toolkit” to make sure the solutions and tools are adopted as standard operating procedure.

The Adoption Toolkit

The most successful adoption programs start at the very beginning of the solution implementation project and are institutionalized into the ongoing operations of a business. In practice, most solution implementations are heavily front-loaded. For a period leading up to the “Go-Live”, organizations invest heavily in solution configuration, communications, training, documentation and process consulting. When the solution goes live, the broader team celebrates, claps each other on the back and leaves the solution’s ultimate success to the solution owner and their super users. We’ll call these individuals left in charge of the solution the Adoption Team.

There are a number of critical tools that should be available to the Adoption Team, but the most important by far are the tools by which they will measure the ongoing adoption of the solution by the organization. Measuring adoption progress against a solution’s business case is the single most important element in understanding where to direct the time and energies of the Adoption Team. Without high quality adoption measurement, an Adoption Team is analogous to a ship at sea without a navigation system; the best and most experienced captains may find their way, but the majority will be left drifting without direction or focus.

Part II will define High Definition Adoption Management (HDAM) and describe it in the context of e-sourcing, a commonly complex adoption challenge.

Innovation in Sourcing

Today’s guest post is from Chetan Raniga, who is General Manager, Americas at Trade Extensions.

As someone who’s been in the strategic sourcing field for over ten years as a consultant and product manager, it’s been interesting to see the rapid evolution of sourcing solutions over the past few years. Leading solution companies now realize that users need solutions that feel familiar; that’s why Excel integration is common among leaders in the supply management arena. It’s the same reason Coupa has screens that almost mirror Amazon.com — providing an interface and workflow that’s both familiar and intuitive. Another example is the use of dashboards — the charts and alerts in Trade Extensions remind users of Mint.com, a popular personal finance site, though they show vastly different types of data!

Here are some other changes for the better:

Collaboration and Workflow:
The sourcing solutions of the past were extremely tactical (e.g., automating the process of running an RFQ or auction for a specific category), and therefore, didn’t give buyers the ability to share ideas, exchange documents, and view the real-time status of their sourcing initiatives. Now, platforms provide robust project management capabilities with Gantt charting, custom workflows (e.g., only have new suppliers go through the qualification step), document sharing, and Skype-like chat features. A buyer can see exactly which suppliers, team members, and stakeholders are online, and instantly communicate with them. Audit trail and logging capabilities have also gotten stronger, which is important for the confidence of both buyers and suppliers in using these platforms. Multiple teams are now using these platforms to share data. For example, a Direct Materials sourcing group can incorporate freight pricing from a tender conducted by the Logistics team. The group can use the platform to determine which items will use the suppliers’ freight (delivered pricing) and which will use the 3rd party carriers’ freight (FOB plus freight).

Flexibility:
Systems of the past didn’t provide the flexibility that we have today in collecting inputs. Labels such as ‘Price per Unit’ would be hard-coded or the cost formula would only support a limited number of operators and functions. Data entry was also cumbersome and error-prone since it involved either manually entering or copying-and-pasting vast amounts of data. Today’s solutions integrate with Excel, so that existing data and formulas can be easily leveraged. For example, item, demand, and cost component data stored on separate Excel spreadsheets can be uploaded with one click. Even better, some solutions allow users the ability to customize the supplier’s bid form. This is critical to change management since companies can continue to use their existing bid forms in the bid gathering phase but obtain the decision support and reporting benefits in the analysis phase. These improvements have led to even shorter RFQ/P creation times.

It’s also now possible to run auctions with optimization (a step forward in utility from the original concept of reverse auctions), and to run RFQ/Ps with feedback — blurring the line between RFQs and auctions but also going further by providing custom feedback (e.g., a custom message of “Not Competitive” is shown when the bid is x% greater than the median price).

Usability in the Analysis Stage:
The one sourcing area that has lagged in adoption has been the use of optimization (which the doctor has defined as the application of one or more rigorous analytical techniques to a well-defined model to generate the absolute best decision from a multitude of possible alternatives in a rigorous, repeatable, and provable fashion). It sounds complicated, and in the past it really was. For example, if a customer wanted to see what the result would be if all the business went to incumbents at their current proportions, then she’d have to create a rule limiting allocation for each item and affected supplier. That’s painstaking when you have a couple of hundred items — but most projects had thousands of items! Nowadays, in a modern optimization solution (which include the solutions by Trade Extensions and BravoSolution), the buyer just selects one rule, written in plain English (as shown below).


Even better, new platforms allow buyers the ability to create rules in Excel and then upload them. In the example below, the buyer is setting limits by plant and supplier simply by completing a table.


Reporting:
The solutions of the past didn’t offer much in terms of reporting. Most had a couple of pre-defined reports that exported to Excel. Buyers had to spend additional time modifying the reports — even changing labels and creating pivot tables — before they could present the results to their peers and managers.

Solutions today have made major strides in this area. Leading spend analysis tools (which include BIQ as well as Trade Extensions) allow users to create custom reports that can be saved as templates and re-used. The ability to choose specific dimensions (rows), columns (facts), and other information means that users no longer have to go outside the system for further manipulation. Some tools even allow the ability to drill-down/up on data (e.g., view allocation data by country first, then by region, then by state, and finally by city/plant).

We have heard buyers comment that their analysis time is shortened by three-and-a-half (3.5) weeks on average by using the new decision support and reporting capabilities mentioned above.

Thanks, Chetan!

Feces!! Dookie!! Scheisse!! How do you define Value?

Today’s guest post is from Dalip Raheja, President and CEO of The Mpower Group (TMG) and a contributor to the News U Can use TMG blog.

Let me answer the question first. It doesn’t matter how you define value. That definition is actually worth a bucket of crap (I missed that one). But I digress and will come back to that question later. Let me address the other part of my title first by asking you a hypothetical question. Regardless of whether you believe in climate change or not, if I were to tell you that there was a way to provide you with water that you could bathe in and drink with a 100% certainty that it was cleaner than any other water source, would you use it? Now, if I were to tell you that it was actually recycled water but was still able to prove to you scientifically that it was absolutely clean, would you still use it? Would your answer still be the same if I were to tell you that it was waste (sewage) water from where you live?

It turns out that people strongly resist the 3rd option of using local waste water, even if they are facing a drought. Water prices are going up and scientists have categorically proven that it is cleaner than almost ALL other water sources (including natural springs). In addition, it has a significant positive impact on the environment, preserves water sources, eliminates the need to dispose of waste water, etc. etc. etc!

According to Alix Spiegel, from NPR on “why cleaned wastewater stays dirty”, “No matter what the scientists or environmental organizations said, the public saw it differently: They thought that directly reusing former sewage water was just plain gross.” It turns out that you can take the physical excrement out of the water but you cannot take the cognitive crap out of it! The technical term for this is psychological contagion. The fact that ALL water has someone’s feces in it (upstream sewage) and the fact that birds and fish are contributing their feces is irrelevant. It just cannot be my scheisse. And it turns out that the only way you can get rid of my psychological dookie is to process the water through a natural aquifer, even though that will take 10 years AND it actually makes the treated water less pure!

The NPR article goes onto say that those working on the project didn’t feel that the public was looking at the scientific facts and simply rejected the water, infuriating water engineers who felt that the public was being irrational. If you replace public with stakeholders (customers) in that statement, it might represent what a large number of Sourcing/Supply Chain professionals might say. The reason is that we continue to define value as we see it, whereas our customers define value totally differently. Continuing to throw more spend analysis, decision optimizers, and Total Cost of Ownership (TCO) models at them is not going to alter the fact that our definition of Value Drivers is fundamentally at odds with each other. Unless we change our definition of value to match the definition of value by our customers, we will continue to knock at the proverbial C level door as a profession. By the way, redefining the Value Drivers is only half the battle. Actually adopting and implementing them is the real challenge.

Thanks, Dalip.

Pierre Mitchell on The Hackett Group Best Practices Conference


Today’s guest post is from Pierre Mitchell, Director, Procurement Research and Advisory for The Hackett Group.

the doctor is coming to our annual best practices conference in Atlanta in a couple of weeks (May 11-12) and wanted me to say a few words about it. He is doing this on his own nickel, which is appropriate since the Canadian nickel has a beaver on the back, and the beaver is nature’s engineer (which many an MIT alumn has pointed out to me), and Michael is an engineer. More importantly though, I really applaud the bloggers who get out there and press the flesh as much as the keyboard keys!

Anyway, I really love the event which is held every year in Atlanta at the Intercontinental Buckhead hotel. Our website has all the official marketing about the event, but what I really like about it is not only the chance to reconnect with our Procurement Executive Advisory Program clients at our CPO summit the day before and at the event proper, but also the cross functional nature of it. Don’t get me wrong, dressing up for Procurement-only black-tie events can be fun, and vendor-sponsored golf events can provide welcome respite from the typical CPO workweek insanity, but this is the only executive forum (majority of the hundreds of our conference attendees are VP level and above) I’ve seen that is cross-functional in nature. Many of our Procurement clients remark how it’s nice to see other functions like IT, Finance, HR, Shared Services, etc., also going through the same set of issues. Hasbro‘s CIO Denise Clark will talk about agility and service excellence, communications, governance, metrics and more. Procurement leads a very similar life to IT (although the internal buyer-supplier relationship is not always ‘optimal’).

We do have some great Procurement speakers. Christie Breves, CPO at Alcoa, will discuss the evolving role of procurement at Alcoa and how it contributes to the broader enterprise, especially with its integrated team of procurement and business unit members that helped it quickly respond to the economic downturn. Rick Wertsching, VP Sourcing & Procurement, The Walt Disney Company, will discuss Disney’s results and lessons learned in category management, global sourcing and global operations. Thomson Reuters‘ will be talking about how they optimized sourcing, real estate and facilities, accounting and transaction operations within their Global Business Services (GBS) organization. Air Products, will talk about their experiences on both the sell-side and P2P side. Finally, Chris Sawchuk and myself will be featuring some of our latest Procurement insights from recent research and our latest benchmark data cut.

The big themes for the conference will be agility (as antidote to volatility) and global service delivery:

  • Solo Cup will talk about its ‘next generation’ Integrated Business Planning (IBP) process and moving finance from “reporting” numbers to “making” numbers. In response to rising commodity costs, the company’s management team developed IBP to provide a more robust planning capability than we typically see — especially between Procurement and Finance.
  • Kohler will discuss how to go from multinational to global and balancing need for global vs. forces driving local customization, including the evolving role of the finance organization — from transaction provider to strategic business enabler. Procurement must similarly “mass customize” its processes in both sourcing and in P2P.
  • Michael Bordoni, VP Finance Strategy & Transformation at HP, is a top-rated returning speaker to discuss HP’s journey to world-class finance performance. He will address process design and sourcing, technology and automation, skills and talent, governance and organization — including the use of global business service centers and centers of excellence.
  • Not to be outdone, Dell will also discuss their EPM (enterprise performance management) journey and their fundamental shift from country-based segmentation to one aligned with global customers and products.
  • Unilever will focus on its interesting “global operating model” and how the company delivers based on a model that is being “designed in the East” and “transported to the West”.

While there’s nothing like actually being there, I’m sure Michael will write up some good insights to share back with the blogosphere. If you do make it down though, I look forward to seeing you!

Thanks, Pierre!

Interpreting Japanese Communication

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Note to readers of the Purchasing Certification Blog: most of this post appeared in this morning’s post on Japan’s Supply Chain Recovery: Interpreting The Estimates.

I’ve been watching and reading the various sources of information coming out of Japan and trying to interpret it after filtering it through the cultural differences that can impede communication and sometimes action. I see one apparent difference and am concerned about another potential difference.

One consistent complaint is that the various spokespeople in Japan seem to be understating the seriousness of the radiation hazards. It’s very likely that this is due to a cultural difference that strongly affects communication. The difference goes by various names, and I call it a “need for harmony”. It could also be called a “low score on a frankness scale”. A strong cultural need for harmony can make it difficult for people in that culture to deliver bad news directly. They will often resort to various expressions such as the Japanese “honto ni muzukashii“. That literally means “truly difficult” in English. However, people in Japan will correctly take it to be a very frank statement that something will not happen.

A classic example is in the Japanese Emperor’s speech to the nation announcing the surrender at the end of World War II. It included “the war situation has developed not necessarily to Japan’s advantage”. This was after two nuclear bombs and a total collapse of manufacturing and logistics.

While Japan is especially strong in this need for harmony, it’s a fairly widespread characteristic among Asian and some Latin American cultures. Keep in mind that Japanese may be perceiving the messages differently than Westerners.

The second difference is just a concern at this point. There’s a well known cultural difference called “Uncertainty Avoidance”. It influences the willingness of people to make decisions without being sure of the outcome. It makes people much more comfortable with routine situations and incremental improvements than they are with dealing with the unexpected. While Japan is extremely high on the “Uncertainty Avoidance” scale, I really haven’t seen any indication of lack of creativity in solving the problems.

Now, for those of you who are trying to gauge potential supply disruptions:

If you can manage face to face meetings that’s clearly the best way to handle it. You’ll have to judge the danger of traveling to a particular Japanese supplier of course. Second best is video conferencing, so you can watch facial expressions and body language. Third best is telephone. In all cases, send some questions ahead of time by email. In questioning, be sure to probe assurances of continuing supply more deeply than you would with people from a frank culture such as Germany or the US. It’s best to ask open ended questions such as “how are the roads to the airport” or “how are your suppliers in the affected area” than questions that can be answered with a simple yes or no such as “is everything OK”.

You should also keep in mind that Japanese communicators are usually not being dishonest when they seem overly reassuring. It’s just that their culture makes it difficult to say some things too directly and they are seeing themselves as courteous.

Dick Locke, Global Procurement Group and Global Supply Training.