Category Archives: Market Intelligence

Could You Be Doing It Right? Part I: Category Management

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing these three thing wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transition management plan to support the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right category management track.

Talent for Category Management

Good category managers need at least the following hard and soft skills:

  • Analysis
    to determine the volume and spend in the category
  • Modelling
    to determine the major cost components, and cost drivers, of the major products or services in the category
  • Commodity Market Expertise
    in the major raw materials and commodities used in the production of the major products in the category
  • Stakeholder Management
    as savings and performance improvement will usually come from consolidating related items with a smaller set of suppliers, which is going to ruffle some feathers when some departments lose their coveted suppliers and supply relationships.
  • Negotiation
    since not only will the individual need to consolidate a set of commodity purchases with a single supplier, but the individual will also need to cut a good deal and maybe even convince the supplier to take some business it normally wouldn’t want
  • Change Management
    since good category management typically requires changing the way the organization conducts business today

Technology for Category Management

Appropriate technology platforms for category management will have at least the following features:

  • Spend Analytics
    with extensive aggregation, cubing, and filtering capability
    as the category manager needs to not only extract volume and spend, but identify related products and services based on components, raw-materials, and sub/related services
  • Should Cost Modelling
    which allows the category manager to understand not only what the product should cost but the primary cost components and the appropriate inputs to an optimization model
  • (Real-Time) Market Data
    which allows the category manager to track historical market trends and predict future prices to time the market if prices are volatile
  • Supplier Performance Management
    which allows the category manager to track and manage supplier performance
  • RFX
    to manage the data collection and track supplier bids and responses before and during negotiations

Transition to Category Management

In order to transition to proper category management, the organization needs to hire someone with good change management skills and give that person the tools he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for proper category management, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to category management success.

Are You Ready to Leave the Procurement Dark Ages? ScoutRFP Has a Simple Tool For You. Part II

In our last post, we noted that many organizations are still in the Procurement Dark Ages, conducting procurement using the age-old three-bids-and-a-buy technique and the fax machine running over a 64 kbit digital ISDN circuit. And that, in the low end of the mid-market in particular, this was the norm and not the exception. Scary!

We also noted that there were a number of reasons for this dismal state of affairs including, but not limited to, a lack of foresight and faith in Procurement by the organizations, the high price tag that used to be associated with these products, and the complexity of the suite solutions that were often thrust upon the technologically illiterate organizations that, sadly, were just not ready for sophisticated solutions.

Some companies need to take it one-step at a time, and like a kid on the beach for the first time, dip their toe in the open ocean before getting comfortable enough to walk, and eventually, dive in. To this end, Scout RFP has decided to launch a new RFP solution to help those companies, and other companies who are using RFP solutions that are overpriced or too advanced for their needs.

Does this make sense given that they are not the first company to offer a stand-alone RFX product, or at least a stand-alone RFX module, and that there are a number of companies on the market that have, or started with, this strategy? For example, EC Sourcing, ThomasNet, and PurchasingNet all offer low-end stand-alone RFX solutions that can be obtained at low cost.

Unless they do something different, definitely not. But the founders recognize this, and might find a way to brighten up the space just a little. (Time will tell.)

So what’s different about ScoutRFP? Especially considering the maturity of RFX technology? Not much, but when you consider the market they are going after, it probably doesn’t take much to make a difference to have an impact. (With the majority of players chasing the same Global 2000, there is still a big unexplored blue ocean when you move further down the corporate food chain.)

Scout RFP is currently focussed on differentiating themselves in the following ways:

1. Ease of Use

The solution is 100% web-based and designed to work with minimal inputs. Like all other modern RFX products, it guides the user through a minimal workflow to create the RFX, select the suppliers to receive the RFX, and evaluate the responses, side-by-side, when they are returned.

2. Flexibility

Whereas many solutions force the user to create an RFX section by section, question by question, the ScoutRFP solution allows the user to create the RFX at their desired level of detail. They can cut and paste entire sections from a Word document into an entire section, break it up into individual questions, or go somewhere in between.

3. Control & Visibility

It allows for the definition of hierarchical visibility and control that allows a CPO to view the work being done by his or her directors who can see the work betting done by his or her buyers.

Like other modern tools, ScoutRFX also has a dashboard view, supplier response and status tracking, and side-by-side comparisons.

And it’s brand new. The company has not officially been around for a year, and has accomplished quite a bit of development in that timeframe as well as landing over a dozen customers in that time as well. So it’s very likely that the next year will see quite a bit of new development, the creation of a knowledge and template library, and other useful advancements to jump start your dark-age Procurement enterprise.

If you’re a mid-size company without an RFX solution, it’s worth checking out. It doesn’t have all of the bells and whistles of some more established solutions, but it doesn’t have the price tag either. And the founders, who know what it’s like to be stuck without basic tools to do your job, won’t beat around the bush or try to shovel you a side of bullcrap with a modules, services, or license seats you don’t yet need. (After all, when you’re selling enterprise systems in the low five-figures, you can’t afford to!)

Are You Ready to Leave the Procurement Dark Ages? ScoutRFP Has a Simple Tool For You. Part I

In yesterday’s post we noted that even though the Procurement profession has went from zero to hero in those leading organizations that were forward looking enough to let Purchasers gain influence in both the inbound and outbound supply chain and raise the profile of the organization in the eyes of both customers and suppliers, it is still only a select group of leaders that have truly embraced Supply Management and leaped the pond.

The remaining organizations are still in the Procurement Dark Ages, conducting procurement using the age-old three-bids-and-a-buy technique and the fax machine running over a 64 kbit digital ISDN circuit. And, especially in the lower end of the mid-market, this is the norm and not the exception.

To this end, a new company has hit the Procurement Technology marketplace focussing only on RFX. That’s right, RFX. You’d think that the market would be saturated by now, given that RFX solutions have been on the market for a decade and a half, but it isn’t. There are a number of reasons for this:

1.As described above, a lack of foresight and faith in Procurement has held Procurement, and Procurement technology, back in a number of organizations.

2. The high price tag that was associated with such technology in the past. This technology used to be six figure technology. It’s far from that today, but when many companies first investigated this technology, they got such a sticker shock that they decided it would be out of their reach for years, if not decades, as used to be the case with MRP and ERP technology.

3. The complexity of the suite of products that were often forced upon them. A number of early Sourcing and Procurement Technology providers tried to sell entire suites, insisting that individual products were not valuable on their own, and most companies, still using phone and fax, were not ready for the breadth of technology being thrust upon them and so retreated to their dungeons.

The companies at the low-end of the technology and innovation spectrum need to take things one step at a time, and get comfortable with basic technology solutions, like RFX, before moving on to auction and spend analysis and even, if we’re lucky, optimization. And they want to be able to acquire these solutions one at a time.

That’s why Scout RFP has launched a new RFX solution that attempts to provide these companies with a simple, starting, technology solution that these companies can use to dip their toe in the modern age of Procurement at a low cost with little to no risk.

Is it needed? Is it worth it? Stay Tuned for Part II.

Supply Managers are the Rock Stars of the Coming Resource Revolution … But

… the reality is that, in the majority of organizations, Supply Managers are still zeroes, not heroes, even though Professor Sheffi is taking the glass half full view in his article on “how a profession went from zero to hero” on SupplyChainMIT.com.

Supply Managers are only heroes in those leading organizations that were forwarding looking enough to let Purchasers gain influence in both the inbound and outbound supply chain and raise the profile of the organization in the eyes of both customers and suppliers. Their new practices, global view, and risk mitigation not only raised their profile, but also the profile of the organization as a whole. They were given more respect and authority, and soon after were the heroes of their organization.

But not every organization had the foresight of these leading organizations and, as a result, it is still only a select group of leaders that have truly embraced Supply Management and leaped the pond. Most organizations are still effectively in the dark ages and haven’t even embraced RFx or basic e-Invoice technology. While a considerable (but not necessarily a majority) of Fortune 500 / Global 2000 organizations have embraced Supply Management to some degree and some Procurement or Sourcing Technology, as you work your way down to mid-size and smaller organizations, the percentage of organizations that have embraced Supply Management and associated technology decreases dramatically.

Furtheremore, not only is there a huge number of organizations that have not adopted Supply Management, there is a huge gap between the enlightened and the ignorant. And the gap could mean the difference between uninhibited success and eventual bankruptcy.

So how do we spread the message to the masses and usher in the resource revolution?

Thanks to U2, Everyone Remembers Bloody Sunday. But 80 Years Ago Today Was Bloody Thursday!

The Industrial Revolution was not easy. It was a difficult time in American History. It was a time when workers’ rights had not yet been formalized, when unions were being formed, and when America was working hard to become the world leader it is today. It was a period of progress broken up by turmoil when America was going through its growing pains.

Part of this turmoil took the form of regular labour strikes by newly formed unions trying to bring workers rights to hard labourers and some order to the chaos that accompanies rapid industrialization. This included the Wheatland Hop that occurred 101 years ago in Wheatland, California that resulted in 4 deaths and Bloody Thursday that occurred 80 years ago today as part of the 1934 West Coast Longshoremen’s Strike.

This strike lasted eighty-three days and began on May 9, 1934 when longshoremen in every West Coast port walked off the job. They were joined by sailors a few days later. It was a heated and aggressive strike on both sides. As per the Wikiepedia entry, the employers recruited strikebreakers, and in response to this, strikers attacked the stockade housing the strikebreakers on May 15. This resulted in employer’s private guards shooting and killing two strikers.

Due to the impact of the strike (as a significant amount of trade has passed through west coast ports for the last century, which is also why “Billions [are now] at Risk as West Coast Port Contract Ends” [ABC News]), the Roosevelt administration tried to broker a deal to end the strike, but the membership of the newly formed unions rejected the agreements brought to them twice.

This resulted in the employers deciding to force a reopening of the port in San Francisco on July 3, sending trucks through the picket lines which resulted in fights between police and strikers. Then, on July 5, eighty years ago today, the employer’s Industrial Association tried to force a further re-opening of the port. In this attempted reopening, which started in the morning, police shot tear gas canisters into the crowd of strikers, picketers, and supporters, and charged with mounted police. Picketers threw the canisters and rocks back. Both sides then suspended aggressive actives, refortified, and took stock.

But then hostilities resumed in the afternoon outside of the ILA strike kitchen. Eyewitness accounts differ in the exact accounts that transpired next, but the end result was that police ended up firing shotguns, striking three men, and killing two — and giving us Bloody Thursday.

At this point, the California Governor called in the California National Guard to patrol the waterfront and federal soldiers stationed at the Presidio were placed on alert. The picketers pulled back and trucks and trains were, after 58 days, allowed to move without interference. But the strike didn’t end. On July 8, teamsters in both San Francisco and Oakland voted to strike. Then, on July 14, the San Francisco Labor Council voted to call a general strike, and the Mayor declared a state of emergency. This was probably unnecessary, as the Labor Council strike only lasted four days.

When the Labor Council voted to end the General Strike, it also recommended that unions accept arbitration of all disputed issues. This resulted in the National Longshore Board making the same proposal that passed in every port except Everett, Washington. At this point, only one point and striking seamen were left in the lurch. This was the beginning of the end of the strike, and the arbitration award on October 12, 1934 cemented the ILA’s power, which still exists today in the ILWU, which was formerly known as the ILU which broke off from the ILA in 1937 and which covers the west coast district.

The ILWU continues to recognize this day by shutting down all West Coast ports every July 5. Let’s hope they, and the employers, never forget what happens if both sides don’t sit down for as long as it takes to resolve disputes and work out a deal.