Category Archives: Miscellaneous

The e-MarketPlace Future

Chief Procurement Officers are being asked to deliver even more. Organizations are seeking procurement-based savings to offset some of the impact caused by an economic slowdown. At the same time, globalization, decentralization, and merger and acquisition activity have made it more difficult to implement best practice standards and create a common information infrastructure for sourcing and procurement.

To further complicate matters, it is unclear how quickly or completely B2B eCommerce platforms will be able to deliver the benefits many companies thought were imminent.

This quote is from “A Case for eSourcing: The Strategic Side of Procurement”, a 2003 Supply Chain Perspective from Accenture. Reading the recent article “What future for e-Marketplaces” over on European Leaders, a topic discussed recently by JP Massin in his recent posts “Why industry-led eMarketplaces failed” and “What future for e-Marketplaces” on Strategic Sourcing Europe [WayBackMachine], I am inclined to agree with Alain Andreoli on the surface, and with JP Massin in one of the details, but still think something is missing in both analyses.

In Alain Andreoli’s view, summarized in the article, in order for B2B to take off, consolidation, which takes the market down to two or three global supplier networks, is required. Apparently, businesses are waiting for that three letter household name that they’ll never get fired for selecting. Furthermore, those providers must increase the network supply base (mass on-boarding) and roll-out value-added services.

According to JP Massin, e-B2B applications are not yet mature enough. A key yet-to-be invented capability is missing. Furthermore, the cost and lead time of deployment, the lack of interoperability of current marketplaces, and the lack of proven reliability is holding current marketplaces back. Not to mention the fact that the applications need to be user-centric, and not process centric like current instantiations.

Basically, it all comes down to value … and right now, the marketplaces don’t really have the value. From a supplier’s viewpoint integration isn’t easy, there’s no cross platform standard, not a lot of buyers, and no guarantee that a buyer will even use the platform. From a buyer’s viewpoint, the platforms are not always easy to use, there’s no integration to their e-Sourcing or e-Procurement application, and a limited supply base. From both viewpoints, there’s no obvious financial incentive or other reason to use the system.

Value is going to require, as Alain points out, a large user base, which will likely mean consolidation within verticals to a handful of primary marketplaces and user-centricity, as JP-Massin points out, but it’s also going to require community and standards. It has to be easy to integrate into from a suppliers viewpoint, but, more importantly, it has to be easy to integrate into from an e-Sourcing and e-Procurement provider’s viewpoint, since buyers are going to want to tap into it using the tools and interfaces they already use. And it has to offer community – so people feel like they are part of a network. Then e-MarketPlaces might take off.

You’re Losing Money on Your Invoices

Those who follow Aberdeen Research will realize that there are three levels of publication frenzy: ( a) end-of-the-month, ( b) end-of-the-quarter, and ( c) end-of-the-year. Well, end-of-the-quarter just passed, and a slew of new reports just hit the Aberdeen website. In addition to the “Supplier Performance and Risk Management Benchmark” that was the subject of yesterday’s post, the “E-Payables Benchmark Report” also hit the e-waves this week.

The report found that Best-in-Class enterprises that utilize automation to drive performance report the following advantages:

  • 91% lower invoice-processing costs
    ($1.50 to $2.00 compared to $10.54 for industry average and $58.09 for laggard)
  • 46% shorter process cycle time
  • 12% fewer late payments
  • 30% less time responding to inquiries

The report also gives some advice to organizations that want to become Best-in-Class. These recommendations include:

  • Moving toward a fully automated environment that integrates A/P with existing procurement and financial systems
  • Establish a linkage between your A/P goals and objectives and the broader goals of the finance and procurement groups
  • Develop disbursement strategies in concert with your treasury and finance teams that seek to optimize working capital
  • Leverage data visibility to drive performance improvement across the enterprise
  • Increase collaboration with IT to assist in the development of a portfolio strategy to best manage an array of electronic receipt and payment methods

These recommendations are important because over 60% of enterprise lack visibility into the primary A/P spend and invoice data and paper invoices cost 74% to 89% more to process than electronic invoices. This lack of visibility cascades into lost opportunities across the enterprise, including treasury, procurement, and supplier management. Treasury is unable to make optimal working capital decisions, procurement is unable to identify opportunities for leverage, and supplier management is unable to even answer the simple question “have you received my invoice?”.

The sad thing is that getting to best-in-class is not very hard, especially compared to risk management or strategic sourcing. The enabling technologies are straight-forward, have existed for a while now, and include:

  • E-Invoicing
  • Document Scanning, Workflow, and Management
  • Spend Analytics for Invoices and Compliance
  • Reporting Capabilities
  • Invoice Dashboards
  • Payment Networks

Moreover, Aberdeen lays out a straight-forward e-payable framework to follow. The framework is a four-part solution that progresses from receipt through approval and inquiry to validation and reconciliation, and finally to settlement. After all, in addition to significantly lower invoicing costs, A/P automation also allows for improved resource productivity, stronger controls, fewer errors, better payment performance, reduced cycle times, and improved visibility into spend. This is another report I’d make time for if you’re not best-in-class already.

Ain’t No Saving in a Perfect World

To the tune of Perfect World by Huey Lewis and the News.

Ev’rybody’s looking for a perfect world
where you could save everything your heart desires.
A perfect buy will happen every time
and the perfect order will set your world on fire.

What you gonna do
when one and one makes three?
And a vision of the future is impossible to see.
Nobody’s perfect
not even a perfect fool
but if you’ll use sourcing tools reductions will find you.

Ain’t no saving in a perfect world
there ain’t no perfect world anyway.
Ain’t no saving in a perfect world
but we’ll keep on dreaming of getting to a perfect world.
Keep on dreaming of getting to a perfect world.

Everybody’s got targets
you know that it’s true.
They’ll RFX me and they’ll e-Aucton you.
Something happens to the pledges of trust
down through the years they begin to rust.

Now here we are amid the chaos and rising tides
still waiting for our agreements to save our hides.
We’ll keep on fighting as long as we can
try to remember and understand.

Ain’t no saving in a perfect world.
Ainlt no saving in a perfect world.

Keep on dreaming of getting to a perfect world.
Keep on dreaming of getting to a perfect world.
Keep on dreaming of getting to a perfect world.

The Risks of Globalization Are Not What You Thought They Were

Given the recent supply chain failure of Imperial Oil, as laid out by David Rotor over on the Procurement Investor [WayBackMachine] blog (which is still being felt by many Canadians who saw gas prices spike 35% in some places), I think it is worth pointing out an AMR Research article from January that noted that we are in times of unique economic and environmental changes and that the current political and economic environment is a dynamic that we have not seen since 1880, echoing Newsweek International editor Fareed Zakaria, which has created a paradox that, according to the article, most economists are not getting right.

Global growth is fueling capitalism which is fueling demand. But these demand shocks are dampening political changes and their effects. Thus changes in government structures, civil unrest, and natural disasters are not having the normal impact and are creating unusual market behavior.

Countries and companies have greater interdependencies economically and environmentally than we have ever seen before. And some 1.5 billion people have been added recently as consumers in global markets, which is creating rampant capitalism along with the formation of anti-capitalist islands with strong nationalism. The result: an economic climate that includes a new type of risk and impending uncertainty.

According to Mr. Zakaria, the paradox will only widen. Largely due to China, with its 1.3 billion people and its current growth rate of 9.5% over the last 30 years. Furthermore, supply chain professionals can no longer depend solely on political infrastructure as the primary framework for global trade. Business must shoulder more burden for economic and environmental issues as they enter global markets.

But there is a fix. Invest in two-way processes in supply chain relationships, build collaborative relationships with a foundation of strong win-win value propositions, and recognize cultural differences. This is backed up with examples that include McDonalds, Dow, IBM, PepsiCo, and Toyota.

And finally, don’t overlook risk. Look for it, analyze it, come up with ways to prevent against it, and have backup plans in case it happens anyway.

A (Supply and Demand Chain) Pro You Should Know

As you know, Supply & Demand Chain Executive recently announced their Pros To Know for 2007. Like Jason Busch, I think some names were missing from that list. Jason pointed out that Mickey North Rizza and Mark Hillman were conspicuously absent.

Today I make my first nomination to the Pros You Should Know – But Don’t – List. The blogger’s supplement to the incomplete Supply & Demand Executive List. That individual is Jean-Philippe Massin, former CEO of Eutilia, and editor of Strategic Sourcing | Europe [WayBackMachine]. Jean-Philippe is one of the few bloggers on the other side of the Atlantic working hard to spread the Spend Management message over in Europe and needs to be recognized for that commitment.