Category Archives: Marketplaces

Emerging Markets Will Disrupt Your Home Markets

An article in the special report on innovation and emerging markets in the April 17th edition of The Economist on the power to disrupt made some very good points on why things will move faster and further this time with emerging markets that deserve to be repeated and discussed because they will, ultimately, disrupt your home markets and the supply chains that serve them.

  1. Senior Management Talent Markets are LiquidGreat management talent can not come from anywhere, but can go to anywhere. And chances are that where ever they go, they’ll have access to highly developed capital markets for merger, acquisition, and expansion.
  2. Emerging Markets are Already Larger Than You ThinkThe emerging-market export machine has engines in almost every industry. ArcelorMittal in Luxembourg is the world’s biggest steel company, Infosys and TCS in India are among the world’s biggest IT companies, Haier in China is the fourth largest manufacturer of home appliances, and ZTE in China is a top-ten mobile handset manufacturer expected to soon be a top-five.
  3. Emerging Markets Offer VolumeDue to the slim profit margins in emerging markets, emerging market companies are obsessed with volume and ways to expand their footprint.
  4. Emerging Markets are Sources of Growth and InnovationNo longer the sweatshops of the world, emerging markets often offer more potential customers and innovation opportunities than home markets.

If you don’t keep a watchful eye out, the end result could be that your top talent defects to a competitor in an emerging market, which aggressively goes after your market share and wins because the innovative new offerings, which can produced more economically using frugal processes and economies of scale, cost less, which will become of increasingly greater importance to the cash-strapped developed economies suffering from stagnating growth.

To maintain your lead, you’ll have to recruit senior talent from emerging talents to revolutionize your supply chain, merge with emerging market companies in local markets, find ways to support even larger volumes at lower costs, and look for innovation the last place you’d expect it.

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Trade Extensions Trades Up Its UI and e-Negotiation Management Capabilities

About a year ago, I introduced you to Trade Extensions (TE) on the eleventh day of X-Mas. A provider of an extensive on-demand e-Negotiation platform, Trade Extensions is an emerging player in the global e-Sourcing marketplace — one that offers negotiation management, extensive RFX, and (reverse) auctions with embedded real-time decision optimization.

Since my initial coverage, Trade Extensions has made the following significant updates to their platform:

  • a brand new UI across their end-to-end system
    The new UI is crisp, clean, and click-minimal. It’s quick and easy to use and very self evident. Plus, their online help pages are very extensive and updated regularly by the entire TE development and consulting teams.
  • integrated data cleansing & classification capabilities
    Have to fix a lot of data? Just create a rule and map it, just like you’d do in a spend cleansing and classification system.
  • OLAP Reporting for Scenarios
    Users now have access to full OLAP capabilities when viewing scenario results and reports.

In addition, the following features, which I have not covered before, have been improved:

  • extensive modifications to their bid supplement functionality
    Data — pricing, discount(s), rebate(s), etc. — can be captured at any level (supplier, business unit, plant location, etc.) and used for mark-ups, discounts, qualitative scores, or as the basis for any formula(s) the user wishes to define.
  • flexible bid forms
    Not only does TE support full Excel integration, but bid forms can be designed by the user to fit their business needs. There’s no need to force your information into a single system format. A user can create additional worksheets, add columns and rows to existing worksheets as required and add macros and formulas without interfering with the platform’s ability to read completed bid forms.
  • outlier analysis and statistical reporting
    The platform can automatically detect bids that might be too high or too low and flag them for your review (after you define your outlier rules, such as specific bid field values x% away from average / historic / custom calculation). The platform also includes a number of statistics reports, including a parameter statistics report that contains a detailed analysis at the lot and bid level.
  • composed filters
    Filters, which allow you to define constraints on any set of suppliers, ship from locations, ship to locations, products, etc., can now be defined on other filters to allow for very easy, and very powerful, constraint creation.
  • selection sheets
    Excel spreadsheets can be used to define allocation constraints, discounts, penalties, and multipliers … greatly simplifying discount and constraint creation in many cases.
  • project management functionality
    100% integrated into the cohesive e-Negotiation platform, the project management functionality allows for the creation of phases and tasks, the allocation of resources to phases and tasks, and the creation of scopes (by supplier, geography, etc.) as appropriate.

They’ve also continued to increase its power. Consider a recent project run by a financial services firm that tendered all of the components of a direct mail project that would result in the mailing of 1.8 Billion documents. The project, which consisted of 65,000 items, 60,000 transport destinations, and 400,000 bids from over 100 suppliers was valued at $1 Billion with a “B”.

The project was to ultimately deliver documents to the firm’s customers, but to get to that stage each part of the supply chain needed to be tendered. This included design, paper supply, printing, assembly, and transport. The project was completed as a single tender with offers collected on-line and all components tendered concurrently. In addition, suppliers could make conditional offers that reflected their own efficiencies that could present the firm with further savings. This was a project that could not even be attempted by hand as it would take someone close to two weeks just to scan each bid. There’s no way someone could even fathom attempting to optimize this scenario if all they had was a spreadsheet solution that couldn’t handle more than 65,536 rows.

Finally, TE is one of the few players in the market to make their pricing scheme public.

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What Relationships Do You Have With Your Suppliers?

One of the invited presentations at the MPower-hosted BPX exchange last week was Dr. Lloyd Rinehart’s talk on “Relationship Management Systems for Internal Procurement Strategies“. In his talk, which was very good, Lloyd noted that there are multiple dimensions of corporate relationships today and that each relationship can be classified into one of seven different categories based on the amount of trust, interaction frequency, and commitment in the relationship.

The seven relationship categories that Dr. Rinehart has identified in his research are the following:

 

Relationship Type Trust Interaction Frequency Commitment Frequency
Non-Strategic Transactions Low Low Low > 15%
Administered Relationships Low High Low < 15%
Contractual Relationships Medium Medium Medium < 20%
Specialty Contract Relationships High Low Low < 10%
Partnerships High Low High > 10%
Joint Ventures Low High High > 10%
Alliances High High High < 20%

 

If you look closely, you can make a number of important striking observations from Dr. Rinehart’s research on this table alone.

  1. All of the common “relationships” that you encounter can be determined on three simple dimensions.
  2. Even though there are theoretically 27 different classifications one could make using a Low-Medium-High classification across each of the three dimensions, some combinations just don’t happen. For example, if trust is low, the interaction frequency is at one extreme (and high if the relationship is considered important) or the other.
  3. No one relationship type is clearly dominant. In an average organization, all types of relationships will be present and could be present in nearly equally quantities.
  4. The three most common type of relationships are contractual, alliances, and non-strategic transactions — which indicates that, at most companies, products will either be strategic (and strategically sourced through alliances and contractual relationships) or not (and then bought as commodities in transactional spot buys). (The question is, is this a result of sourcing and procurement systems, which tend to focus on one of the extremes, or the reason for their continued development?)

But what’s even more striking is that the best results, from a sourcing perspective, only come from two of the three most common relationship types. Can you guess which two?

And now I’m going to leave you hanging because Dr. Rinehart has agreed to do a couple of guest posts next months on the most effective relationship types and better negotiation practices. Stay tuned!

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Will We See The Two-Per-Category Theory Where Supply Chain Technology is Concerned?

A recent TPMA (Trade Promotion Marketers Association) Outlook contained an article by Bob Houk (of the TPMtoday blog) that expounded on the two-per-channel theory that refers to the idea that retail channels are consolidating to the point that there will eventually be only two significant players in each channel. The article also discussed the two-per-category corollary that states that as retail channels consolidate, and as shelf-space decreases and increases in cost, the suppliers to the few remaining retailers will also consolidate.

This reminded me of my recent post on why Marketing is Not Optional and how, as a result of too much inaction on the part of too many vendors and a lack of faith by too many buyers, this prolonged recession is likely to accomplish what years of M&A activity couldn’t, namely, condense the market to a small handful of key players for each technology and services offering. And I got to thinking, what happens if the space over consolidates and we see the two-per-category theory take effect in core e-Sourcing and e-Procurement offerings? What would happen then? We already have the situation where the suite solutions offered by the big providers are essentially the same solutions offered five years ago, with a few more “bells and whistles” in the UI that really don’t offer much in the way of value improvements. Would we have any innovation at all? And more importantly, even if we don’t see the two-per-category, but only see a small handful of providers … would they all centralize on a “value system” like SAP or Microsoft? What value would there be if all the savings they offered up had to be pumped into (ridiculously?) high license fees and maintenance fees with “empty-calories“? Good questions. Scary questions!

And questions we’ll have to ask unless the more innovative vendors wake up and small the espresso, double down, show you the value, and find a way to sell it to you with essentially no up-front cost — which is very realistic with a SaaS model where they can give you a free 30 day trial and not bill you until the end of month two, giving you enough time to get your first quick wins, demonstrate value, and justify the low monthly service fee that you’ll pay for the 3, 5, 7, and 10+X ROI that these solutions will deliver.