Category Archives: Marketplaces

Hiperos – It’s So Hip To Be Square with 3rd Party Management! Part I

When we last checked in with Hiperos, they had evolved from a Risk Management platform to an “Extended Enterprise Management” platform that integrated Contract Management, Compliance Management, Performance Management, and Sustainability Management into a 360° solution platform for an organization that wanted to get these various facets of risk under control.

However, as they have continued to roll-out their platform and work with clients in different verticals (beyond finance, which was their initial core strength and where they appear to be dominating the market), they have found that as enterprises get their internal(ly controlled) risks under control, their clients realize that typically the biggest risks they face are from their suppliers and vendors who provide then with all sorts of direct and indirect product and services. As a result, 3rd Party Management (3PM) has become critical to their operational success. How critical?

Consider these statistics. Forty-four percent of data breaches involve third parties, and the most expensive data breach has cost 35.3 Million dollars to resolve. And while this is atypically high, a data breach will cost an organization millions to resolve (as even the cheapest data breach cost $780,000). And if there turn out to be traces of blood money or drug money in your supply chain, it could cost you as much as $160 Million to settle the resulting probe. In short, 3rd Party Risk, if not properly managed, is likely to end up costing your organization millions. The only question is when.

And if you believe that preventative spending to manage risks that might not happen is unwise in this economy, consider this. Organizations that implemented Hiperos 3rd Party Management saw a 75% reduction in customer impact incidents due to sole sourcing. One organization was able to eliminate a seven-figure spend of 4 Million in annual subscription fees that it was paying just to insure that it wasn’t using blacklisted or banned suppliers (and that it wasn’t working with suppliers who were known to bribe and/or be involved in anti-corruption investigations) as the Hiperos 3rd Party Management solution contained all the functionality they needed. And, overall, Hiperos’ clients saw a 300% increase in the assessment of 3rd parties with a high-breach potential — allowing them to be vetted or eliminated before a costly incident occurred.

And this is jus a short-list of costly compliance and reputational risk facing an average organization that operates globally and has to deal with ISO, SAS 70, Anti-Bribery, Anti-Money Laundering, FCPA, SOX, OCC, CFPB, REACH, WEEE, OSHA, HIPPA, and W9 security and reporting obligations, just to name a few. A third party management solution tracks all of this, and more.

So what does Hiperos do to help you with your 3rd Party Management? Stay Tuned for Part II.

Robbie and the Coupa Factory, Part II

Oompa Loompa Doom-pa-dee-do
We can’t stop building products for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise you’ll try it tout-de-suite

What do you get when you’re UI obsessed?
Teams of coders who are distressed
Until they reduce the clicks to one or two
That’s what the ‘loompas will do for you.

Coupa is still trying to make the easiest end-to-end e-Procurement platform on the market, and still innovating new releases on a quarterly cycle.

So what’s changed since our last update in July?

  1. A greater focus on the front office.
  2. A stronger focus on supplier support.
  3. Better Inventory Management.
  4. Universal Search.
  5. Transactional Spend Analysis.

A greater focus on the front office.
This shows up in the form of better budget visibility and better contract management. In Coupa, a user can see what the budget impact of a requisition will be before they submit it, not after the fact. This feature is more powerful than it appears to be on the surface. For example, in one large retail client, every department that used Coupa was under budget, while every department that did not use Coupa was over budget. When people see the impact of a purchase before they make it, they are much more frugal.

With respect to contracts, Coupa has set up a “contract dropbox” where all contracts can be uploaded to the system and real-time spend dashboards by contract. Again, this may not sound that important until you realize that without such dashboard, the average user in an organization does not see the importance, and impact, of a contract. When spend quickly adds up, it becomes clear not only which products and suppliers are critical to the organization, but which contracts — and it also becomes a trivial exercise to determine the cost of buying off contract, which is where a lot of the savings leakage occurs in an average organization. The reality is that most savings available to an organization in the majority of non-strategic and non-high dollar categories lie in off-contract spend. In many organizations, just getting the majority of spend on contract can increase savings 50%. (Given that, on average, savings leakage is 40%, and the majority is due to maverick spending, shifting another 30% of spend on-contract where only 60% of spend was on-contract before increases savings opportunities by 50%.) For example, one company saved 120K in one year just be getting bottled water on contract with Staples!

A stronger focus on supplier support.
Suppliers, who are never charged by Coupa (as this greatly increases the odds that they will use the system) will soon be able to invoice their Coupa clients any way that they want to. In addition, a lot of effort has been put into insuring that their UI is as easy to use as the buyer’s UI.

Better inventory management.
Coupa has created a new API for inventory management and the system can automatically determine if the order is for internal inventory or external inventory. In addition, it now supports configurable lists for items bought on a regular schedule, which support par levels and auto-buy calculations based on current inventory to make it simple for a user to do regular re-orders. In addition, the system can auto-generate GL codes based on user, department, and commodity so that the re-order is charged against the right budget and filled by the right contract.

Universal Search.
One thing that Coupa learned is that its average user did not want to leave Coupa and punch-out to a third party site to find a product or service they needed to accomplish their day-to-day job. In response, Coupa now includes punch-out and other external products and services from partner-sites through scraping and auto-loads. In addition, they have integrated back-end reporting that lets Procurement know when prices change.

Transactional Spend Analysis.
They have implemented a basic data analysis tool (GoodData) that lets a user slice and dice spend by contract, commodity, department, and other basic measures so that they can better understand the Spend Under Management through the Coupa System. While not a replacement for a full-fledged Data Analysis Engine, it now has the same power as any package that contains a canned set of spend visibility reports and a basic report building engine, which is impressive for a Procurement platform. No more heavy lifting in Excel for the simple stuff for sure!

Oompa Loompa Doom-pa-dee-do
They can’t stop building products for you!
Oompa Loompa Doom-pa-dee-dar
They have the goal to take your spend far.

e-Procurement on an ERP – Harder than Fetching Groceries in a Battle Tank

Procurement Insight has been tearing up a storm recently. First, they make it clear that “e” does not change the fundamental nature of anything, then they rip the covers off of Supply Chain Leakage, and now, for the triple play, they tell us that you “don’t take your tank to the mall, Mrs. Worthington”.

In the article, the author, Ian Burdon, described a particularly dispiriting conference where he went to a session on “Re-engineering Government Procurement” where “experts” claimed that the thing to do was to sort out procurement processes then hand it all over to SAP and Oracle. Really? In this situation, I would not have thought about throwing myself out of a high window but, instead, of throwing the experts out of the high window, because anyone who would say such a thing can’t be much of a Procurement expert.

As Ian said, the reason things were often going so badly in government (procurement) despite their having invested in ERPs was precisely because they were using ERPs. ERP stands for Enterprise Resource Planning, not Enterprise Resource Procurement. Failing to even ask what the “P” stood for was the government agency’s first mistake. The next mistake was failing to understand that a “planning” system that told you there would be a need for 5,000 toner cartridges, 10,000 reams of paper, and 500 litres of industrial solvent does not have to tell you how you would go about procuring these items in order to accomplish resource planning. Nor does it have to give you RFX, Auction, or analytics capabilities of any kind as it is not sourcing, nor purchase order management, invoice management, and payment management functionality, as it is not procurement. Trying to use ERP for e-Procurement is like trying to fit a dodecagonal peg in a hexagonal hole. (Good luck with that.)

Just because someone claims to be the Procurement oracle, doesn’t mean that they are. They just might be trying to make a sap out of you. Get an unaffiliated third party to figure out what you need, and get it. Not what a big corporation, or a misguided expert, tells you.

The (Board) Gamer’s Guide to Supply Management Part II: The Settlers of Catan

I’m very excited to continue this brand new summer series that will help you whether you are just interested in finding out about this new and exciting career opportunity or ready to take your Supply Management career to the next level. Learning Supply Management doesn’t have to be as fun as watching paint dry — it can be much more fun! And when you can grasp some of the basic concepts playing a strategic board game with your friends, it’s a blast.

While Settlers of America Trails to Rails (also put out by Catan) might be a better choice to follow Ticket To Ride, that we introduced in last week’s post, The Settlers of Catan is also a great game to include in our series, and, more importantly, there is another great TableTop episode, again hosted by the one, and only, Wil Wheaton In Exile on Twitter. And since the best way to learn a new game is to see it in action until you are familiar with other board games in the same vein, we’re going to take advantage of the priceless gift that Mr. Wheaton has given us.

In TableTop Episode 2, Wil Wheaton uses Settlers of Catan, a modern day classic that has sold hundreds of millions of copies, to introduce us to the joys of trading wood for sheep. What could be better?

As with Ticket to Ride, the rules are fairly simple. As explained by Wil:

We are settlers on the legendary island of Catan. The first person to reach 10 victory points wins the game. You get victory points by collecting and managing resources. You get resources when one of the settlements you have built is adjacent to a tile that has spawned a resource. We find out which tiles spawn resources every turn by rolling dice. No one will have enough resources on their own to build the roads, settlements, and cities they need to win the game. So we will all have to barter and trade with each other. Just like in real life, there are nasty surprises waiting for you. Whenever we roll a seven, the robber gets activated. He steals from you. We hate the robber. The robber is a dick. But if you get robbed, it’s not the end of the world. There are other ways to get victory points — having the longest road, having the largest army, or you can also trade in resources to buy [these] development cards (which may also give us victory points).

Sounds easy, right? So where is the difficulty? Some resources are more likely to be spawned than others, as each of the 18 non-desert hexes have different numbers associated with them from 2 to 12 (excluding 7), and, according to probability, hexes with sixes or eights are more likely to be rolled and spawn their resources. Plus, there are five different resource types (brick, wood, wheat, sheep, and stone), and each type of building requires multiple resource types. A road requires wood and brick; a settlement (worth one victory point) requires wood, brick, wheat, and sheep; and a city (which is built on top of a settlement and worth two victory points) requires two wheat and three stone. As such, you need to strategically position your settlements to maximize the chances of getting the resources you need, but you can’t place settlements just anywhere. They can only be at hex boundaries and there must be a road of length at least two between any pair of settlements on the board. Or, if you don’t have good placement opportunities for your settlements that would allow you to maximize your chance of getting resources (by placing the settlement on a corner between three hexes with decent roll probabilities), you can try to build on a port that gives you better than average trading opportunities. (In the game, you can always trade four resources of the same type for a resource of any other type with “the bank”*, but some ports reduce this to three for one, and some ports allow you to trade specific resources two for one. This is very useful near the end of the game when your opponents are unwilling to trade with you if they see you nearing victory.)

The only other relevant rules are that if you build the longest road (of length five or more), or amass the largest army (of three or more knights, which are mixed in with the development cards), you gain two victory points and if you are lucky enough to draw a monopoly card when you purchase a development card, you can play it down and every other player has to give you all cards of the resource type you name.** And if you roll the robber, everyone (including you) with 7 or more resource cards has to lose half, but you get to move the robber to any hex and steal a (random) resource from a player with a neighbouring settlement (or city).

So what are the parallels with Supply Management? In Supply Management:

We are Supply Chain Professionals doing business in the global marketplace. The first of us to secure and deliver all of the products and services we need to meet all of the customer demands wins the game. We secure the products and services we need by managing suppliers and reserving limited production and distribution capacity. We find out which resources are limited by watching the market and taking note of tumultuous events. In today’s marketplace, no supplier will be able to meet all of our component or service needs on their own, so we will not only have to barter and trade with multiple suppliers, but also with our competitors and their suppliers in tight markets. And there will be nasty surprises waiting for us. A natural disaster may wipe out part of the raw material supply or Somali pirates may seize a precious shipment. We hate the pirates. They are dicks. But if our shipments get robbed, it’s not the end of the world. There are other ways to serve our customers. We can use the insurance money to buy from someone else, we can redesign our products to use alternate materials, or we can focus on a new or different substitute product or service to get us, and our customers, through the worst of times.

And just like in Catan, some resources will be more readily available than others. We will need different resources (from different suppliers) to assemble our complex product and service offerings, strategic reservation of production capacity and distribution capacity will give us a major competitive edge over our competition, and the more international trading capability we have at our disposal, the better trades we are going to be able to make (as some countries value wheat, lumber, or brick more than others, depending on whether they are short on building materials or food). The more trade lanes we have access to, the more markets the organization can serve; acquiring a monopoly on a certain product or service in a region, even for a limited time, gives us a significant edge in negotiations (as long as it’s not in violation of local laws), and keeping individual shipment value down can limit losses in the event of a robbery.

So what does The Settlers of Catan teach us?

  • if we are gamers new to the subject matter, it teaches us that successful Supply Management requires a lot of skill as we have to balance investments in (new) product development (settlements and cities) and logistics capacity (roads); we have to optimize local distribution (inner placement) hand-in-hand with global distribution (port placement); and we have to try and keep our competitors from locking up too much of available capacity in critical trade lanes (longest road) or production (largest army) and, most importantly, that we will have to do a lot of negotiating to succeed.
  • if we are new Supply Management professionals looking to improve our Supply Management game, it allows us to practice our negotiation skills and see how the negotiations change depending on the supply/demand imbalance for the raw materials and our relative strength in the marketplace (as your opponents will typically be very open to trading with you to mutual advantage if they are in the lead but very reserved if you are in the lead and the trade is perceived as advancing you [closer] to victory).
  • if we are seasoned Supply Management veterans, it helps us understand the strength and weaknesses of different Supply Management strategies. For example, if we focus on inland building to maximize the chances of resource spawning every turn, we are giving up any chance to guarantee low-cost trades later in the game (as we will not be building on ports). And if we focus on the ports, while we may be able to trade many resources cheap, we may never acquire enough resources to trade. If we focus on pure settlement and city building, an opponent may be able to sneak in and win the game with only two settlements (2 points) and one city (2 points) if they took a development strategy and secured the longest road (2 points), largest army (2 points), and two victory point development cards (2 points). It allows us to work on our strategic planning skills and notice that for every strength we achieve with a strategy, there is always a weakness that can be exploited by our competition with the right counter-strategy. And the better we understand the strengths and weaknesses of our strategies, the better we can adapt them and monitor them over time.

It’s a great game, and if you can’t wait to get started, I have great news if you own an iOS device. Catan for iOS is available in the App Store — although I must admit its a bit hard to play on the iPhone/iPod touch as you constantly have to zoom in and out. Now go forth and settle!

* which is a term you Monopoly (which we will not be including in this series) players are familiar with
** which has the opposite effect of the Mod card in Uno Mod for you Uno players

Has the Best been Bought from Best Buy?

StorefrontBacktalk recently ran a couple of pieces on Best Buy that followed up their recent pieces on “Best Buy’s Black Friday Fiasco” and “Best Buy’s Wifi Porn”, which was expanded upon by SI in its recent posts on how if you wanted a best buy experience, you weren’t going to get it at Best Buy (Part I and Part II). In its first piece on “Best Buy’s Last Hope”, the author says that Best Buy has one shot — an expensive, painful, highly disruptive shot — to truly turn itself around. It must embrace customer service in-sore to an extent that would make Nordstrom, Trader Joe’s and Whole Foods blush. That means store associates who are true experts in the electronics they are selling.

Frankly, I don’t think this is going to happen. The mentality would have to change from “who will work for us for minimum wage and pretend they know enough about this product to actually sell it” to “where can we find someone who knows what they are talking about, is passionate about the products they sell, and will actually work for us as a sales rep” and “what is it going to take to get that kind of people”. Right now, the type of service I’m used to is “this isn’t my department, you’ll have to find someone that is working in this department” to queries as simple as “can you tell me if you still have any of this product in stock” (which any associate can do simply by logging into one of their terminals and doing a query) or, my favourite, in response to “I’d like that” (pointing to something in a cage). Get the key, open the damn cage, give it to me and/or walk it to the cashier. An untrained monkey could do it! (And monkeys are smarter than you think. Pete the Monkey taught himself to do dishes.)

Plus, as the author notes, they would probably have to fire most of their staff and replace them with Apple-store caliber employees. And any employee of that caliber is probably going to go work for Apple or, if they prefer Windows, Sony where knowledgeable associates are preferred.

After all, as the author notes, they currently think they can win a price war with Amazon. A company with massively deep pockets, minimal physical overhead (compared to a retail store chain), and a willingness to go eight years without turning a profit just to conquer a market. Winning a price war against Amazon in the electronics space is not going to happen. Amazon can, and will, win on margin every time if that’s what it takes to be the next major electronics retailer and put Best Buy and its competitors out of business. (And it won’t be hard when it’s customer service reps often give better service over the phone than Best Buy associates in store!)

The other piece that got my attention was that “Best Buy Planned Outages Due to Its Move to the Cloud”. If you believe the hype (and the doctor does not), the whole point of moving to the cloud is so that you don’t have outages. But the most ironic aspect to this story is that Best Buy is cutting Amazon a check for its cloud efforts. They might as well just sell to Amazon.com now and become Amazon’s mobile presence. One little glitch and a propagated purge command and — voila! — no more Best Buy online. (Not that it would make a huge difference anyway. What good is a web store that a growing portion of your market can only order one item from at a time anyway? [See Best Buy Experience? Not at Best Buy! Part II.] the doctor is now ordering more electronics from the local office supply depot because their web site actually works! And if you send them an e-mail, customer support actually responds! On the other hand, it seems that Best Buy’s method of dealing with problems is just to ignore them. It’s not a problem if you don’t recognize it, right?)

The nostalgic part of me would like to say that Best Buy still has a Bright Future, but, in the doctor‘s view, the only chance of Best Buy lighting up the sky is if the same thing happens to it as happened to the Buy More in the season three finale of Chuck. The way things are going, it’s going to be closing 50 stores on a regular basis. And I don’t think China’s going to save it. If Best Buy truly takes off in China, there’ll likely be so many indistinguishable clones in three months that it will just be hastening its demise.