Category Archives: Procurement Innovation

Straight to the Bottom Line: Part I.i – A Roadmap to Successful Supply Management

In preparation for next month’s June 28 release of Robert A. Rudzki and Robert J. Trent’s Next Level Supply Management Excellence: Your Straight to the Bottom Line Roadmap, we’re going to do a formal review of Bob & Doug’s (& Michael & Shelley’s) classic Straight to the Bottom Line: An Executive’s Roadmap to World Class Supply Management. Even if you have read it, now would be a good time to read it again to make sure you’re well versed in all of the foundations before starting your Next Level Supply Management journey.

The classic text starts with an overview of the opportunity available to those organizations willing to embark on a Supply Management journey. Packed with success stories, including that of a 40B Manufacturer who saved 1B over three years with a modest investment of 20M, of Xerox and how it slashed produt development time by a year and manufacturing costs by 50% by including suppliers strategically in design, and of Lucent and how it achieved 20% year-to-year price savings when it needed them most, the underlying theme is that supply chain management can play a significant role in profitability.

In addition to describing the great opportunity that Supply Management offers an organization, the first chapter also does a great job in defining the new role for Purchasing in a modern supply management focussed organization and the benefits that can be achieved. Some of the key changes and benefits are:

Changes Benefits
  • Ongoing Priority
  • Transformation Mandate
  • Central Point of Contact for Suppliers
  • Strategic Corporate Objectives
  • Cross-Functional
  • Reduced Cost Structures
  • Higher Return on Assets
  • Better Risk Management
  • Reduced Cycle Times
  • One Voice

Before diving into the basic roadmap, the authors state that an organization must first understand where it is before it can define the roadmap to where it is going. And the organization should start by asking some important questions, which the authors define as follows:

  1. Are supply chain goals integrated into the strategic plan of the business?
  2. Does the chief executive know who the chief purchasing professional is?
  3. What is the relationship of the chief purchasing professional to the chief executive?
  4. Does the procurement team have top- and bottom-line objectives?
  5. What percentage of external spend is supervised by purchasing and covered by a written strategic sourcing plan?
  6. What percentage of spend is leveraged through internal spend pools?
  7. Does the organization have the right leadership in the Procurement function.
  8. What is the working relationship between Procurement professionals and those in other disciplines?
  9. What are the opportunities available to Purchasing professionals for training and improvement?
  10. What is the chief executive’s personal commitment to achieving improved corporate performance through a best-in-class Procurement organization?

There are right answers and wrong answers to each of these questions. Before an organization can truly begin it’s journey, it must have the right answers to most, if not all, of these questions. Otherwise it won’t have what it takes to move up the Procurement maturity curve. And an organization does want to be best-in-class because best-in-class organizations see the following transformations:

Before After
Little/No Strategic Sourcing 100% of Sourcing Covered by Written Sourcing Plans
Spreadsheet Analysis Optimization Analysis
Defect Rates > 40K PPM Six Sigma Quality
On Time Delivery (OTD) of 65% to 90%    Optimized OTD
Prices Rise 3% to 5% Annually Costs Drop 5% to 7% Annually

And these benefits just scratch the surface. For more benefits, more success stories, more insights, and the right answers to the above questions, check out Bob & Doug’s (& Michael & Shelley’s) classic Straight to the Bottom Line while you wait for Robert A. Rudzki and Robert J. Trent’s follow-up on Next Level Supply Management Excellence.

Cornerstones of Strategic Procurement

Yesterday I pointed you to Bob’s post on Smart Working Capital Management where he pointed out the pitfalls of being preoccupied with DPO (Days Payable Outstanding) and how a DPO focus can be counter-productive. Specifically, the requests for DPO extensions that tend to result from the DPO focus tend to leave untested the willingness of suppliers to entertain aggressive discount payment terms in exchange for early payment by the customer.

Today I want to remind you of a post Bob wrote back in early January that you might have missed if you returned late from the Christmas vacation. In the evolving landscape of low cost country sourcing, Bob outlines the three fundamental requirements of strategic procurement:

  1. fact-based approach based on a thorough understanding of current reality and anticipated trends
    that should be based on whatever data you have available
  2. an investment in the appropriate skills and enough of the right resources to develop and execute the strategies
    including the right technology to perform the necessary analysis
  3. constant monitoring and adjustment to optimize results in an ever-changing world
    that should include simulation and modeling software where appropriate

For more information on strategic procurement, be sure to check out Bob’s new book on Next Level Suppply Management Excellence, hitting the (e-) shelves on June 28, 2011.

The AchieveGlobal Model for an Innovation Culture

A recent article over on Chief Executive outlined “The “Six C’s” Model for Building A Culture of Innovation” from AchieveGlobal. The model was created by examining the practices and behaviors of the Boston Consulting Group’s top 100 innovative firms around the world and is worth a review.

  1. Collaboration
    Innovation now requires the collaboration of large, diverse groups of people. Not only has the size of research teams grown by 20% per decade over the last 50 years, but a paper is six times more likely to get at least 1,000 citations if it comes from a team, which should be made up of a socioeconomic mix of people at all levels up and down your supply chain, from different departments, functions, divisions, brands and plants.
  2. Customer Centric
    A culture of innovation requires a deep commitment to understanding customers’ expectations and providing them with value. In addition, it looks for user innovation and situations where users use products for unintended purposes or refine the products for particular needs.
  3. Context Rich
    Leaders in innovation put lots of effort into the development of formal and informal systems to collect and share information throughout the workforce.
  4. Curious
    Innovative leaders encourage their employees to question authority, to question their assumptions, to ask why, why not and what if? Innovation leaders give their employees time to research, explore, and even wander down blind alleys.
  5. Confidence Focussed
    Businesses that excel at innovation actively increase their employees’ capabilities and self-esteem. Innovation requires the confidence to explore, experiment, push-through the darkness, and succeed.
  6. Challenge Culture
    Innovative companies focus on meeting challenges and aiming for new heights. They are never content with good enough or solving today’s problems. They strive for excellence and solutions to tomorrow’s problems.

TradeCard: Transaction Management for the Global Supply Chain Part II

In yesterday’s post we introduced you to TradeCard, a supply chain management services and trade finance company that provides an end-to-end SaaS transaction management solution that connects over 4,000 buyer and supplier companies across the world with local support in over 50 countries. This solution, which implements end-to-end transaction management from the cutting of the Purchase Order to final settlement (including chargebacks) with support for financing, document management, 3rd party freight forwarders, and factory floor shipment packaging, is one of the most extensive SI has seen with respect to visibility into the three critical supply chain flows — financial, physical, and information.

We discussed the financial flow, which supports pre- and post- export financing, payment protection, invoice discounting, and settlement with their Procure-to-Pay solution; the physical flow, that is supported by their collaboration, Factory Xpress, and document management solutions; and the information flow, which is supported by the aforementioned solutions along with the TradeCard Advantage and Custom Objects Toolkit solution. Today we are going to dive into the physical flow and the solutions that support it.

We’ll start with the collaboration solution. Designed with forecasting and supply planning in mind, the solution allows for forecast and purchase order data to be pulled from your ERP / forecasting system / system of record of choice and pushed back when the production plan and/or purchase order is complete. Forecasting revolves around (rolling) supply plans, that can be completed from a material, supplier, forecast, inventory, (material) commitment, or demand view. Buyers and suppliers, who are given permission, can edit the forecast, and the revised forecast can be maintained along side the original forecast. The forecast can be at the product level, or the component material level, as the platform has equal support for component and 2nd tier raw material suppliers, who can also be given (read or edit) access if relevant or key. The system also allows the scheduled production runs to be collaboratively decided upon (and updates the projected inventory automatically). There are no built-in forecasting models at this time, but that may change in a future release. (In the interim, Tradecard can integrate any forecasting system that can provide data in a standard format such as EDI, XML, or CSV.)

The UI is similar to many web-based supply management platforms, and includes a “taskboard” that keeps track of all of the current tasks for the current user, which can be ordered by action type, transaction, or assignment date. With respect to transactions, which the suite is designed around, a user can query and track transactions by purchase order, invoices, payments, packing & shipping, financing, (goods) receipts, contracts, adjustments, events, and customs filings in addition to supply plans. Purchase orders are extremely detailed and can contain all of the information required by the supplier, freight forwarders, and any customs authorites (including order terms, parties, freight terms, destinations, items, components, additional terms, and required documents). This allows for the easy generation and submission of appropriate trade and customs documents (with over 10 import and export document formats supported out-of-the-box). The system maintains complete document history and allows an authorized buyer to query exactly who did what when. Events allow the buyer to track the transaction after the PO is issued and record actual production, shipments, receipt, distribution to warehouses, returns, chargebacks, and other relevant events.

Factory Xpress is the “shop floor” solution that is designed for the personnel who are actually packing and shipping the orders. The users can access, and (if they have permission) edit the packing plans, create and print packing slips and/or shipping labels, and even scan appropriately barcoded labels to indicate when an order has been packaged and shipped. In addition, orders for packing labels and materials can be sent directly to Avery Dennison, whom the solution was developed in conjunction with. The system supports bulk packing, multi-packing, and free-packing plans and can automatically regenerate packing plans based upon changes in order quantity, delivery location, carton sizes, or item mix. Once the shipment has been packed, packing manifests can automatically generated from the packing plan and purchase order.

One very neat feature of the platform is the “discrepancy preview” that a supplier can run before finalizing the invoice. When the discrepancy preview is run on a draft invoice, it compares invoice data to shipment/packing manifest data and PO data and reports all discrepancies in pricing, order quantities, factories, origins, destinations, and other comparable data and checks that all terms and/or documents have been completed. This allows the supplier to correct any data that can be corrected before the invoice is sent, minimizing the chance of the buyer rejecting it or sending it back for correction. It also allows the buyer to verify that the invoice they received is consistent with what they expected, or if its not, immediately determine what the discrepancy is and whether or not it was approved (due to a change in forecast or demand).

With respect to reporting, there are dozens of built in report types and the user can select the attributes and value ranges for each report, but TradeCard does not yet possess a generic report builder tool, although custom reports can be created by way of their Common Objects toolkit if required. However, complete export of all in XML and CSV format is supported and the buyer can use a third party data analysis and reporting tool to construct whatever report they want for more detailed analysis.

Finally, the TradeCard platform currently supports English, Traditional, and Simplified Chinese with Spanish coming later this year, and most implmentations, which includes integration to your ERP and forecasting systems, and onboarding of 80% of your relevant supply base, and user training, are accomplished in 90 days. It’s a solid solution and one worth looking into if you need to manage end-to-end transactions across the global supply chain.

TradeCard: Transaction Management for the Global Supply Chain Part I

In yesterday’s post on how it’s sourcing, procurement, and global trade management, we mentioned how a critical part of global trade is finance and document management. One company that facilitates this process is TradeCard, an end-to-end SaaS transaction management solution that connects over 4,000 buyer and supplier companies across the world with local support in over 50 countries. And while they aren’t the only company that facilitates this process, with notable competitors being Integration Point and their extensive suite of import, export, and supply chain compliance solutions and TradeBeam with their import, export, and visibility solutions, they are the first solution that I’ve seen that implements end-to-end transaction management from the PO to final settlement (including chargebacks) with support for financing, document management, 3rd party freight forwarders, and factory floor shipment packaging. Furthermore, their solution, which supports the physical, financial, and information flows from all parties, focusses on the alignment of the flows.

The financial flow is supported by way of a procure-to-pay solution that enables pre- and post- export financing solutions, payment protection, invoice discounting, settlement, and chargebacks. Through agreements and alliances with over 25 banks, insurers, and other third parties, the TradeCard platform allows a suppier to request financing as soon as the purchase order is received. Then, depending on the supplier’s credit rating and the amount of the request, the request will be forwarded to one or more financing partners who will offer financing at standard terms or the TradeCard credit line, where the TradeCard platform can automatically grant certain financing requests under standard terms on behalf of the partners in the financial network.

The time of the financing request is flexible. The supplier can request financing at any point from the receipt of the purchase order to the receipt of goods by the buyer, and might even be able to request financing beyond receipt of the goods by the buyer, depending on the buyer’s standard payment terms. In addition, the platform allows the supplier to offer invoice discounting on early payment by the buyer as soon as the invoice has been accepted. Finally, the platform allows for electronic payments, which completes the end-to-end financial lifecycle of the transaction.

The physical flow is supported by their collaboration solution, which allows buyers and suppliers to collaboratively share current demand data and collaborate on forecasts and production plans, the Factory Xpress solution that allows for the creation and execution of detailed packing plans, and the document management solution that allows for the creation and transmission of documents that are required by freight forwarders, customs agents (for import and export), and distribution centers.

The information flow is supported by their Procure-to-Pay, Collaboration, and Factory Xpress solutions as well as their TradeCard Advantage solution that allows for queries and reports across the platform and the transaction data that it contains. It’s also supported by their new Custom Objects Toolkit that allows TradeCard to quickly create custom extensions — that can take the form of integrations, reports, or global trade documents — for customers on an as-needed basis.

By integrating the three flows, TradeCard provides a single view into the global supply chain for buyers, suppliers, factories, and partners around the world, which can be integrated into the platform as needed. TradeCard can, and has, integrated multiple ERP, best-of-breed, and home-grown sourcing, procurement, and global trade solutions into its platform in support of its hundreds of global Fortune 3000 customers. Furthermore, over 150 service providers already inject services into the platform in the form of financing, payment protection, inspection, and logistics, which a customer can take advantage of day one.

Tomorrow’s post will dive into the physical supply chain flow and the solutions that TradeCard provides.