Category Archives: Marketplaces

Will the Force(.com) be the Glue that Binds BoB to PoE?

As per a recent post, Best-of-Breed ( BoB ) solutions alone are not enough, you need an end-to-end enterprise platform operations engine ( PoE ) that consolidates all of your spend and provides you with one version of the truth. Otherwise, you’re working with blinders on and a seemingly good decision, like going with a lower cost provider, can cost you more in the long run, because their shipping costs and their defect rates are higher.

And as per another recent post, the time of niche is (almost) here, and best-of-breed solutions will be needed for certain verticals, departments, and / or categories. Generic platforms with generic processes will not be complete enough, or useable enough, for the sophisticated buyer of specialized products or services — who expects an ease of use and power that goes beyond Amazon.com and today’s social networks. As a result, the base systems will be bypassed and critical spend will escape management.

Both BoB and PoE solutions are required, but unless they are integrated, a user will not be able to realize the full benefits of either platform. But as there is still no common supply chain language, and no magic middleware that can connect any ERP or transaction engine to any BoB front-end, how can you insure that your systems play nice?

In a recent post I noted that, these days, it seems that everyone wants a piece of the Force. I’m still not entirely sure why, since it was built to serve CRM (and not SRM), the ecosystem is new, and it’s still not a proven enterprise platform for the supply chain, but vendor after vendor is taking the leap, so we have to acknowledge that, until something more exciting comes along, it’s where the supply chain market is going.

Given that the Force is cloud-based, that, for better or worse, it’s becoming the new ERP of (small and) mid-sized business in particular, and that it won’t be long before every vendor and its mascot has a Force.com app, it would appear that it won’t be long before you can use the platform as your data store and different vendor apps as your BoB applications. Now, it’s probably going to take a while for most vendors (who haven’t been training with the Force since day one) to port the bulk of their functionality, but with development timeframes compressing by the year, probably not as long as one may think. Which begs the question, is the Force going to be the glue that binds BoB to PoE and bring us the next level of supply chain efficiency?

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What is the Net/Net of the Network?

If you thought the noughts was the decade of the network, think again. At this point, every sourcing vendor and its mascot either has a supply network or is in the process of creating one. We’re long past the point where the only network you could get aribaed on is the ASN. We have the Ketera Network. We have the Coupa Supplier Network. We have the SciQuest Supplier Network. We have the OB10 Global e-Invoicing Network. And two more Bay Area companies are in the process of releasing (or, depending on the timing of this post, have just released) their own supplier networks. It’s the age of the supplier network. But what’s the net? Is it worth it?

Should we, and by we I mean the little guy who’s going to ultimately end up paying the price (as networks, like most other systems of taxes, are the ultimate means of quickly and efficiently pushing the cost down upon us little guys), embrace the new networks with open arms? Should we do whatever we can to resist their adoption? Or should we take a neutral wait-and-see stance.

To answer this question, let’s examine each of the “selling points” of today’s supplier networks from both the buyer and supplier perspectives. (Although we ultimately care how the networks impact us, we also have to understand how they affect the buyers in order to make an informed decision. We have to consider the net/net, because even if the networks are detrimental to us, if the benefits to the buyer far outweigh the detriments to us, we can’t outright reject them if the buyer could pass some of those benefits to us. I know it’s a big if, but we have to be fair!)

  • Find a supplier. / Find a customer. Like any buyer worth her salt doesn’t already know who her suppliers, and their competitors, are? (Heck, all you have to do to find out your supplier’s top three competitors are is to ask them why they’re better than one and the salesman will start to ramble about how they’re better than competitors A, B, C, etc. until you cut him off!) And as a supplier, you definitely know who your top customers are, and it’s pretty easy to find out who their big competitors are with Google. No real value here.
  • Electronically receive purchase orders and send invoices. How long have we had secure FTP? And what modern e-Procurement platform doesn’t do this? And how many freeware programs / (HTTPS/SSL) websites exist that let you do this? (More than I can count!) No new vaue here either.
  • Automate and Streamline Processes. And how is this different from every other supply chain tool? Marketing gibberish. For value, we have to keep looking.
  • Grow your business. Sorry, but I just don’t believe this. Exposure != Award for a supplier and using a back-end tool does not guarantee a front-end sale for a buyer. Besides, what B2B / B2C technology provider doesn’t make this claim?
  • Get paid (or make payment) faster. Maybe, maybe not. That depends on whether or not the buyer has the appropriate systems in AP and on their internal policies. If the buyer believes in waiting until the last possible day to pay an invoice (or has an internal policy that they won’t pay an invoice any sooner than the “net” date), the supplier won’t get paid any faster. Besides, how much faster is this than the e-cheque, ACH, e-mail, or wire transfers we all have access to through our online banking? It all goes over the wire, and all packets transmit at the same speed. So, technologically speaking, there’s no gain here either.
  • Participate in / run events. Every sourcing tool allows you to do this through your browser. In fact, there are a number of free tools (including WhyAbe) that buyers and suppliers alike can use to solicit, and conduct, business on-line. Another claim filled with empty calories.
  • Automated “lead” alerts of new RFX opportunities. Okay, so you can’t get this if you’re not on a network, but I’d argue that at least 99% of these alerts aren’t real “leads” anyway. If a supplier hasn’t contacted you directly, how likely is it that they are going to award you the business? More importantly, how likely is it that you can even meet the demand? Just because a dumb keyword matching algorithm (and let’s face it, since software is not intelligent, most searching algorithms are pretty dumb) detected that the buyer wanted processors and you manufacture processors doesn’t mean you have the right equipment to make the custom processors the buyer wants. Sorry, but the web isn’t semantic yet, and even if it was, you’d still get more false positives than real “leads”! So we have negligable value here.
  • Market Intelligence. Okay, so you can see who’s out there, who’s bidding, what they’re bidding on, and, to some extent, what they are being awarded, but you can get most of this intel from most reverse auction platforms if you regularly participate in on-line events. Of course, as a network member on an appropriate network, you can have access to all data from all events, which can be quite useful as you can make an informed decision as to whether or not its worth your time to participate in an event before you do so. This, in turn, allows you to focus on events where you have a reasonable chance of winning the bid. So, there is some new value in terms of market intelligence. As to how much that value is worth, that’s highly dependent upon how many users the network has, how much business is flowing through the network, and how much of that business is relevant to you. If the network is small, if it’s mostly used for “listings”, or if most business ultimately happens offline, the value could be quite minimal.
  • Benchmarking. This is about the only argument I’ve seen that actually has real, undeniable, merit. While many on-demand / SaaS / Cloud providers collect data and aggregate benchmarks, most are restricted to their customers and, furthermore, most don’t have enough customers to reach the transaction and spend level required to truly allow the derivation of meaningful metrics that can be defined relative to a specific category in a specific vertical. After all, most benchmarks defined at the global level are not that meaningful when each industry and category has its own individual nuances. But when all of the data across a large network is available for aggregation and analysis, the market intelligence becomes meaningful and usable by each and every member.

So what’s the net/net? There is undeniably some value in a supplier network, especially if it has a large number of members and an annual transaction volume in the Billion plus range, but the value provided is, at least for the time being, no where near as great as most of the providers claim it is. As a result, if you’re paying a lot for the pleasure of being a member, at least for now, you’re more likely to get aribaed then you are to see a profit. That may change in the near future, but make sure you go in with both eyes open and do the cost, and value, calculations before you make any long-term, big-dollar, commitment. And if the fee structure of the network model is designed to push all of the inflated costs and fees down upon you, the little guy, you should put up all the fight you can muster, because you’ll only end up getting aribaed if you don’t!

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A Hitchhiker’s Guide to e-Procurement: Catalogs & Contracts, Part II

Mostly Harmless, Part XX

Previous Post

The last post defined catalogs and contracts and discussed reasons why they will need to be revisited and revised on a regular basis. As promised, this post will address the associated challenges of catalog and contract maintenance, some associated best practices, and the benefits that could be expected from an appropriate e-Procurement solution.

Common Challenges

  • Unused Item/Contract Identification

    Catalogs are continuously updated and procurement constantly negotiates and renegotiates contracts. However, how many of the items are ever bought and what percentage of the contracts are used for more than a short time?

  • New Item Identification

    What items were bought this month/quarter that were never bought before? Which are not associated with a contract or an approved catalog?

  • Similar Item Identification

    For those items which are not on contract, were there similar items on contract that would have sufficed? If not, were there at least similar items in approved catalogs that would have worked?

Best Practices

  • Automatically Flag Items Not on Contract and Force Supervisory Review

    The best way to reduce maverick spend is to prevent it from happening in the first place. Forcing a supervisor to review all purchases not on contract (above a certain dollar limit or for products / categories there are contracts for) can put a significant dent in contract spend.

  • Automatically Flag Items Not in the Catalog and Force Procurement Review

    Not everything will be on contract, but there’s no reason that the majority of goods and services that the organization needs to buy on a regular basis can not be in the catalog. Unless the item is brand new, it should be in the catalog if it is needed. Forcing Procurement review will minimize the purchase of off-catalog items where price, and associated spending levels, are unmonitored and where pricing could spiral out of control.

  • Automatically Identify Items in Contracts and Catalogs that Have Not Been Purchased in the Last Month, Quarter, Year

    New items need to be tracked and monitored as any new items bought in quantity on a regular basis are prime candidates for future contracts.

Potential Benefits

  • Improved Contract Compliance / Reduced Maverick Spend

    The automatic flagging of off-contract and off-catalog purchases for manual review and approval can greatly increase contract compliance while simultaneously reducing maverick spend.

  • Easy Identification of Additional Savings Opportunities

    The automatic identification and tracking off off-contract items and associated volumes can identify some of the best opportunities for future savings opportunities.

Once the catalogs and contracts are up to date, it is time to begin the cycle anew. The next post will move on to how to cost a solution.

Next Post: Costing a Solution

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A Hitchhiker’s Guide to e-Procurement: Catalogs & Contracts, Part I

Mostly Harmless, Part XIX

Previous Post

A(n e-)catalog is an online catalog that lists products and services that a supplier is offering for sale. It can take many forms. It can be a simple flat file listing all products and services that the supplier sends to the buyer (who can then maintain it in their catalog system). It can be a database that can be queried. It can be the supplier’s website. It can be a punch-out marketplace. It can be an e-marketplace. It can be a virtual supplier network. As long as it lists item for sale and prices, it can be considered a catalog for the purposes of e-Procurement.

A contract is an agreement between two parties which, if it contains the elements of a valid legal agreement, is enforceable by law. In the procurement realm, a contract is usually between a buyer and a supplier for one or more services, under one or more conditions, at contracted rates. Contracts are generally managed by a contract management system, which may or may not be part of the e-Procurement system as contract management is a key part of the (e-)Sourcing cycle.

At the end of a procurement cycle, and before the next cycle begins, the catalogs and contracts need to be revisited to make sure they are still relevant and up to date. This is because, over the course of time, the following will happen:

  • the number of products purchased not in the catalog will increase

    over time, new needs will arise and replacements will have to be found for items no longer being manufactured

  • the number of items in the catalog no longer purchased will increase

    over time, needs will change and certain items will no longer be required

  • the number of items purchased against a contract will decrease

    as needs change and old items are no longer needed and new items not contracted for are required, the usefulness of contracts will decrease

  • contracts will expire

    and the pricing they contain will have to be renewed, revised, or removed from the system

The next post will outline some of the challenges associated with catalog and content management, some best practices, and some of the benefits that can be expected.

Next Post: Catalogs & Contracts, Part I

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Ecovadis: Ecovating the Globe

When we introduced you to Ecovadis back in 2008, we pointed out how this European start-up was building a sustainability solution for evaluating and monitoring suppliers in a manner that would help companies meet and exceed the emerging green and sustainability regulatory requirements. Fully compliant with GRI G3 (Global Reporting Initiative) standards and the ISO 26000 CSR Guidance with their solution that tracks metrics across 23 green/sustainable criteria for the 150 procurement categories they support, it provides a very extensive CSR scoring mechanism across environmental, social, ethical, and supply chain issues.

Back in 2008, all they had on the technology side was the core supplier assessment module for the buyer — which was built around a “dashboard” that provided a snapshot rating of a supplier on each of the key categories with drill down ability into the scorecards for each rating, cross-industry benchmarking, and integrated news feeds (with human reviewed articles, relevant legislation, etc.), and a supplier portal — which allowed the supplier to log in, answer questions, provide relevant data, and see their scorecard. On the services side, they had the ability to arrange and verify audits on your behalf, scan and classify relevant documents automatically, and support suppliers in five languages even though the platform only supported English and French. And when SI last covered them, they had only three public customers.

Flash-forward to 2010, and they have made considerable progress on the technology, services, and customer front. On the technology front, they have made significant updates to the core supplier assessment platform (the newest of which are in beta testing now and will be in general release at the end of the quarter / start of next quarter), released an audit module, released a new risk analysis module, and improved the multi-lingual capabilities of the platform. On the services side, their partnership with SGS, the largest certification company with over 1500 auditors certified in CSR auditing, allows them to do 2nd party audits on your behalf on your suppliers anywhere in the world and they have added a few more languages to their back office. On the customer front, they have increased their customer base tenfold, with 30 public customers that include 10 companies in the Global 500 who are in the top 10 in their vertical (including the largest construction company, the second and third largest insurance companies, the third largest building materials company and the third largest industrial manufacturer), with a few more big names to be announced soon. These customers represent over 2,500 users that collectively track CSR data on over 4,000 companies across 40,000 sites in 80 different countries with a 94% adoption rate among suppliers.

The upgrades to the core supplier assessment module include an improved UI, feedback capability within scorecards, guidance for buyers and suppliers on how to improve ratings and the most critical weaknesses that need to be tackled, and a new corrective action plan capability for suppliers to allow them to propose corrective action plans and collaborate with buyers on their design and implementation. The guidance highlights key issues across each of the 23 categories, primary weaknesses, (upcoming) regulations and initiatives of import, policy recommendations, and proposed actions.

The Risk Analysis module, designed to allow all users to perform a quick check of the potential CSR risks associated with a specific supplier profile, and identify those suppliers which should be subject to a formal assessment or audit, is pretty simple, but it’s a great start considering that most organizations don’t have any tools at all. (Plus, you can’t automate risk analysis — this will always require human interaction. Software is not intelligent and can’t identify unknown threats — only humans can.) Basically, the user fills out a (proposed) usage profile (direct or indirect, country, turnover, categories, branding, influence, etc.) which can be uploaded from an Excel file, the system extracts the CSR profile of the supplier and all of the related data, and an automated analysis engine determines the primary potential risks, the probable degree of supplier CSR risk relative to buyer CSR exposure on a nine-by-nine grid (which goes from low to high as you progress from the lower left [green] zone to the upper right [red] zone), and the action you should take (which is either no action, assessment, or full audit). While not perfect, it will quickly identify the majority of the company’s riskiest suppliers, which is where the company should start its risk management efforts.

The real value in their solution to procurement is in the massive cost savings it enables. CSR is important, but we all know that North America tends to follow the mantra of Gordon Gekko and that, unfortunately, when times get tough, the mighty dollar trumps everything else. Companies like to feel good, but they like to profit more. These days, profits come not from sales (which are sluggish), but from savings that come from cost reductions and risk avoidance. Ecovadis’ platform assists you on both accounts. Without the platform, buyers are wasting a lot of time and money chasing suppliers, who are fatigued from answering the same damn survey over and over again, for data, analyzing that data, and shelling out for expensive benchmarks from high priced consultants to put that data into relative light — data that might be suspect to begin with. Similarly, suppliers are wasting time cutting and pasting data instead of providing the buyer with the products and services the buyer needs, which drives up costs for both parties, and not even getting any decent feedback in return that they could use to improve their operations. But with the centralized sustainability marketplace Ecovadis provides, suppliers only have to answer a question once, they only have to suffer a time-consuming and costly audit once, and they get a scorecard which not only rates their performance, but benchmarks them against their peers and identifies areas for improvement. Buyers get up-to-date reliable data and actionable scorecards which they can use to leverage suppliers and make better decisions. Everyone wins. Plus, if the buyer has a SPM tool (like that offered by Ariba, Aravo, Hiperos, SAP, etc.), Ecovadis’ can plug their platform into the tool and greatly simplify the CSR SIM that the buyer would likely have to do manually.

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