Category Archives: Miscellaneous

Sourcing Lifecycle Management II: Enter Co-exprise

In yesterday’s post I introduced you to Sourcing Life-cycle Management (SLM), a new dawn for aerospace, automotive, defense, medical device, and high-tech / electronic manufactures with complex direct sourcing problems. SLM is the integration of the supply chain centric business processes of sourcing, procurement, PIM, and supplier management that were always meant to be together.

In today’s post, I’m going to re-introduce you to Co-exprise [rebranded DirectWorks, acquired by Ivalua], I company I first introduced you to in A Kick-Ass Direct Sourcing Solution for Manufacturers: Part II.

In my last post, I indicated that they were building a new-type of direct sourcing solution that integrates RFx, auctions, project management, collaboration, PIM, dashboards, and tree-based navigation as well as enhanced security, contextual-awareness, supplier qualification, and enhanced meta-data capabilities. But as I’ve come to understand it better, I’ve realized that it is the first solution on the market to make a serious, honest, effort to address the complex direct sourcing problems that other systems cannot handle because these types of problems are unique and require a distinct solution.

However, the real power of the Co-exprise platform is that all of this is built on a number of basic building blocks, including workflow management, business process rules, collaboration technologies, a centralized repository, project management, cBOMs (collaborative Bills of Material), cost models, and analytics, that are inherent to, and invasive across, the platform. This means that all of the technologies are integrated into one collaborative workflow where common data is always accessible and analyzable.

This allows the platform to offer benefits to its target verticals that go beyond standard solutions in the areas of productivity, implemented cost reduction, and compliance. Productivity increases start back in NPI (New Product Introduction) as the engineering team can load and track all designs in the system the minute the project starts and continue through to post-award contract management as delivery, quality, and SCOR (Supplier CORrective Actions) can be tracked against each order against the contract. As the system captures and tracks all of the orders and integrates contract management, the system is able to achieve fully implemented cost reductions. Finally, Co-exprise’s unique Secure Digital Forms Technology, which includes a unique ID in every form and allows the form to be completed and uploaded by suppliers off-line, can be used to create mandatory forms that ensure compliance with environmental regulations such as REACH and RoHS.

Now I’m not saying the platform is perfect. For example, it doesn’t have supplier side EIPP capabilities (a very useful part of e-Procurement which facilitates n-way matching and charge error detection before the supplier even sends the invoice), decision optimization (which would allow what-if scenarios to be created and analyzed on make-vs-buy decisions), or a mature spend analytics 2.0 offering (even though the initial spend analytics 2.0 offering they do have now puts standard analytics 1.0 offerings from traditional vendors to shame, and contains some advanced capabilities that are similar to capabilities only found in BIQ). However, it is the most complete platform I’ve encountered for the problem they’re solving, they can integrate with e-Procurement platforms like Ariba that handle EIPP, and they are still working on their new spend analytics offering, which could likely become one of the best analytics tools on the market for the direct sourcing problems they’re solving next year (and what they have now is nothing to scoff at).

For picking up the SLM gauntlet and bringing to market a solution that addresses the complex direct sourcing projects that have been largely ignored until now, Co-exprise is my vendor of the week. (A SI exclusive until year end or sponsor #2 signs up, whichever comes first.)

Sourcing Lifecycle Management I: The Direct Sourcing Cure

Strategic Sourcing is great. Technologies that enable it greater still – since even an across-the-board 5% reduction in spend can have more of an impact on the bottom line than a 25% increase in sales. And with the right tools and techniques, the former is a lot easier to achieve. However, today’s strategic sourcing applications, while working wonders on indirect, MRO, service, and commodity spend for vendors across the board, sometimes fall short when applied to custom parts and raw materials in the manufacturing verticals such as aerospace, automotive, defense, medical device manufacturing, and parts of the high-tech and electronics sector. If you look at the mega-success stories, many are with CPG companies, Food Service providers, Retailers, and standard-component device manufacturers in high-tech and electronics. There aren’t a lot with custom defense providers, medical device manufacturers, or sophisticated consumer device manufacturers. That’s why something else is needed. But to see why, we’ll have to discuss current technologies and where they fall short.

First, there was the ERP. By integrating MRP, HRM, accounting, simple e-commerce, accounting, and some basic CRM, it enabled better processes, quicker reporting, and more efficient operations. But it had a fatal flaw – it was designed to run a business within the four walls of an enterprise. There was no concept of external supply partners collaborating with internal cross functional teams to source goods and services. A purchaser entered an order into the system when it was made, accounts payable entered an invoice when it was received, and then entered the payment when it was authorized. That’s it. Modern ERP systems have improved, and some have add-on procurement modules, but the fundamental system is still flawed from a supply chain perspective.

Then came e-Sourcing technology to address the more strategic aspects of sourcing. e-Sourcing vendors delivered RFX, on-line reverse auctions, decision optimization, spend analysis, and contract management solutions that have worked well with unsophisticated spend. However, being optimized for simple commodities and services that can be costed using a single price-per-unit bid, they fell short for products that could only be accurately costed using a combination of fixed set-up costs and variable production runs and couldn’t handle complex assemblies that required multi-level collaborative bill of material descriptions at all. Finally, most e-Sourcing technology does not adequately begin to address the most difficult problems associated with direct-sourcing – project management, design and specification management, and collaboration.

This led some vendors to develop web-based Product Information Management (PIM) systems to manage all of the designs, schematics, and documentation related to a project. A specialized extension of traditional Product Life-cycle Management (PLM) solutions, they were designed to complement existing sourcing solutions and provide the badly needed design and specification management capabilities. Problem is, most don’t support complex assemblies or multi-level collaborative bills of material (cBOMs) and trying to find the right component specification in a given project is like trying to find a needle in a haystack, as complex specifications can contain hundreds of parts, each with multiple description and specification documents, and have thousands of associated documents. Plus, project management is only complicated by having to switch between two systems and PIM does not enable e-Procurement.

e-Procurement, designed to handle the requisition, order invoicing, and payment aspects of the traditional procurement cycle, delivers significant improvements in productivity, and drastically reduces invoice processing costs (up to 90%), but the real cost savings potential is in strategic sourcing and capturing all of the data needed for meaningful spend analysis. However, when dealing with custom manufactured parts and service, savings are only realized if the contracted rates are adhered to, the parts are delivered on time, and the quality levels are acceptable. e-Procurement only deals with with the transactions, not the post award performance management.

Now we also have the trifecta of supplier management technologies: Supplier Relationship Management (SRM), Supplier Performance Management (SPM), and Supplier Information Management (SIM). While SRM tries to manage communications and agreements; SPM tries to manage performance by way of quality tracking, improvement initiatives, and balanced scorecards; and SIM just focusses on managing all data related to the supplier, its products, and existing agreements. These are all great technologies, but performance management really needs to be tracked against orders and contracts and actions defined within the context of post-award management of a sourcing contract.

In other words, whether deployed on their own, or as a group, neither stand-alone ERP/MRP, basic sourcing, PIM, e-Procurement, nor supplier management technologies hold the key to successful, productive, streamlined direct sourcing projects. That’s why Sourcing Life-cycle Mangement (SLM), which integrates the supply chain centric business processes of sourcing, procurement, PIM, and supplier management into one coherent platform customized for the direct sourcing of custom parts and materials for manufacturers, is needed.

I’m Sorry USA.

To the tune of Mark & Bob Mothersbaugh’s “American Dad” TV theme.

I’m Sorry USA,
I have to tell you that it’s now a sad and miser’ble day
The sun in the sky has a frown on his face
and Stephen Colbert’s out of the presidential race!
Oh boy, it’s sad to say: “I’m sorry USA.”

Networks are ok. Catalogs are Good. Punch-outs are Better. But Agents are King!

Let’s start with some clarifications.

A Supplier Network is simply a single point of integration that provides a many-to-many connection between buyers and suppliers, allowing them to transact in real-time. The major selling points are large numbers of pre-enabled suppliers and the ability to find new suppliers quickly for a given product or service. However, the reality is that unless most of your competitors are already using the network, most of your suppliers will not be enabled when you join up. Furthermore, despite hype to the contrary, if you ask purchasing, they know who they’re doing business with for the majority of products and services, even if its not captured in the system.

An online catalogue is simply the electronic equivalent of the old Sears catalogue that used to come in the mail. It contains a complete listing of all of the products a supplier has for sale as well as list prices and, in a good electronic catalogue, any discounts offered by the supplier or negotiated by the buyer. If it’s maintained by the supplier, it’s good for the buyer, but only if the catalogue is compatible with the system that the supplier uses to maintain the catalogue in house. Otherwise, they would have to maintain dozens or hundreds of copies, one for every buyer, and this is prohibitive.

A punch-out is a technology (based in XML) that allows a buyer to shop on the supplier’s e-commerce site but add the products to the shopping cart in their e-Procurement system. It’s better than a catalogue because it allows a supplier to maintain one version of a master catalogue for all of their buyers (as the buyer’s system can store discounts), but falls short in that a buyer cannot compare products across suppliers side by side.

A software agent is a mini-program used by a larger program to accomplish a specific task subject to a particular request. The agent is capable of acting autonomously and the controlling program can deploy multiple copies of the agent simultaneously in a distributed fashion if required. An example is a search agent. Search engines like Google will employ multiple agents simultaneously when a multi-part query is entered to find all pages that each satisfy a part of the search, and then use an intersection agent to find all pages that satisfy all parts of the query. Index agents are another example, one instance is deployed on each page being indexed for future search.

Agents are critical as the right set of agents can be used to overcome the shortcomings of traditional supplier networks, electronic catalogues, and punch-outs to build a Product Catalogue Management (PCM) system that enables an organization to achieve total control over its general purpose indirect, MRO, services, and commodity spend.

With the right set of agents, you can build a Product Catalogue Management (PCM) system that allows a buyer to access up-to-date catalogue and pricing information from any supplier in real-time over the internet from the supplier’s site – regardless of what technology or in-house system the supplier uses. This can be augmented with buyer pricing rules and audit engines to make sure you always see, and pay, the agreed upon price. Furthermore, the right set of agents can even support various “pass through” levels to the supplier’s e-commerce site even if punch-out is not enabled.

This why Vinimaya [rebranded Aquiire, acquired by Coupa] – and not Ariba – is the next generation of Product Catalogue Management (PCM). It’s based on a distributed agent platform that allows it to integrate content from traditional ERP APIs (Enterprise Resource Planning / Application Programming Interfaces), EDI (Electronic Data Interchange), XML (eXtensible Markup Language), and various web-site APIs into a single, consistent, coherent view in real-time using the basic internet technology that has been working fine for the last ten years or so.

Let’s face it – with agent technology, any company can enable hundreds of suppliers in a matter of days, especially if the provider has already customized agents for all of the common suppliers. Furthermore, if a supplier has agreed to custom pricing, it can integrate directly into that feed and, worst case scenario, a buyer only buys so many products and services from a supplier and it will not take very long to hand enter the agreed upon price for each relevant SKU in an audit engine. (Just like a knowledgeable purchaser can hand classify 95% of the transactions in even the largest of transaction stores for spend analysis in at most two days by hand with a good rules engine, and not the two months some providers would have you believe). (The average time for Vinimaya (rebranded Aquiire, acquired by Coupa) to enable a new supplier for a buyer is a few hours. It generally only takes them fifteen (15) minutes to one (1) hour to customize an agent and an hour or two to test and deploy the agent.)

I’ll be blogging more on Vinimaya in the weeks for come, but for now you can always check out their website.

(Supply Chain) Risk is Everywhere! Part II

Another presentation I hoped to make, but wasn’t able to (due to a prior commitment – and to be honest, if I didn’t have the prior commitment, I probably would have attended the parallel track on green supply chain) at the 5th Annual International Symposium on Supply Chain Management was the presentation on Risk Management in the Electronic Supply Chain by Anne Banks Pidduck from the University of Waterloo.

Just like the presentation and paper on A Supply Chain Risk Management Process covered in Part I, this paper also did a great job of classifying risks – but these risks are particularly suited to the electronic supply chain while the last paper was worried more about the physical supply chain for manufacturers and logistics services providers. It also provided some great recommendations. But first, the risks:

  1. Complexity of the Electronic Supply Chain System
    • Users do not know how to use the system.
    • Single point of failure.
    • Information is lost or incorrect.
    • Incorrect data is transmitted.
    • Complexity & Uncertainty leads to the bullwhip effect, mistrust, and chaos.
    • Project failure due to overwhelming complexity.
  2. Integration / Independence
    • Poor Quality Upstream.
    • Failure to integrate internal & external expertise.
    • Organizational conflicts.
    • External connectivity & network problems.
    • Lack of system integration.
  3. Technical Risks
    • Software errors.
    • System down.
    • System slow.
    • Virii
    • Denial of Service
    • Security Issues
    • Privacy and Confidentiality
  4. Data Management and Quality
    • Inventory Problems due to incorrect data.
    • Missed Orders (and customer loss).
    • Integrity loss.
    • Sensitive data compromise.
    • Critical data corruption.
  5. Schedule / Time
    • Single late supplier leads to downstream delivery failure.
    • Straight-through processing and the bullwhip effect ends up affecting all partner schedules.
    • Shipping errors lead to slow delivery.
    • Escalated system and process implementation leads to costly errors.
  6. Costs
    • Supplier change costs lead to higher upstream costs.
    • Insufficient people or financial resources.
    • Inventory costs from obsolescence, mark-downs, or stock shortages.
    • Slow or inaccurate systems reduce cash flow.
    • Incorrect data causes reminder notices to be sent to customers who have paid and while customers who haven’t do not get any.
  7. Business Processes / Operations / Production
    • Lack of appropriate methodology or production processes
    • Existing processes are not supported by the new system
    • Bullwhip effect creates phantom demand, overproduction, and overstock.
    • Inventory level becomes critical success factor.
    • Product and technology life-cycles get shortened.
    • Lean practice adoption leaves little margin for error.
    • The tendency toward supply base consolidation is not always correct.
  8. Business Environment Uncertainty
    • Unpredictable life-cycle demand due to competitive product introductions.
    • Increasing demand volatility across industrial sectors.
    • Constant changes in business strategy, internally & externally.
    • Outsourcing trends impact the entire chain.
    • Globalization increases market uncertainty.
  9. Personnel
    • Lack of management commitment and support.
    • Employees refuse to use the system.
    • Employees don’t follow procedures.
    • Insufficient user training.
    • Shortage of experienced staff.

But fear not! It’s not all bleakness and desolation. There are some generic risk resolution strategies that work across your risk categories. These include:

  • Avoidance
    Avoiding products, markets, suppliers, and / or customers that are riskier than the norm.
  • Behavior Change
    Encourage motivation and responsibility through corporate policy, contracts, and rewards for desirable actions.
  • Flexibility
    Introduce flexibility wherever possible – in the supply base, in the schedule, and in the production system, for example.
  • Mathematical Models
    A greater understanding leads to better prevention strategies.
  • Portfolios
    Spread the risk if you can.
  • Visibility
    Improving visibility across the chain decreases risk.

Moreover, there are some specific resolutions that you can use to address each of the system, technical, data, process, flexibility, and personnel risks outlined above.

  1. SCM System
    • Start with a small-scale implementation.
    • Use a flexible implementation schedule.
    • Continue with existing solutions until a full implementation is in place.
    • Implement internally first.
    • Document strong legal and enforceable contracts.
    • Encourage co-operative joint efforts.
  2. Technical
    • Firewalls.
    • Multiple Levels of Password Protection.
    • Structured Data Entry to reduce errors.
  3. Data
    • Formalize and maintain reliable backups.
    • Use paper-based backup procedures as needed.
    • Formalize data management.
    • Offer data and process visibility to supply chain partners.
    • Automate exception reports.
  4. Business Process
    • Redesign work processes as needed.
    • Integrate business processes.
    • Divide larger processes into smaller ones.
    • Separate business functions where appropriate.
    • Coordinate work between production planning and inventory management.
    • Control production with appropriate levels of buffer inventory.
    • Use just-in-time production.
  5. Business Flexibility
    • Adaptable, flexible business practices.
    • Materials flexibility in production.
    • Multiple backup suppliers.
    • Flexibility in production schedules.
    • Discontinue high-risk products, markets, suppliers, and/or customers.
  6. Personnel
    • Adequate training on systems.
    • Training on privacy, security, and system independence.
    • Appropriate behavior changes.
    • Top management support.