Category Archives: Risk Management

CVM: Not Just About Supplier Diversity Anymore!

CVM Solutions (acquired by supplier.io), one of Spend Matters’ Nine Vendors to Watch in 2008, appears to be on a quest these days to conquer the sourcing space, with their intent to offer supplier data enrichment, supplier relationship management (SRM), spend analysis, and a soon-to-be-launched procure-to-pay process management solution. According to Jason, CVM is a “best-kept secret” because of their extensive data enrichment services, supplier portal, and their new uber-workflow and process management engine that creates a level of control and visibility that he’s not seen elsewhere.

Now, I don’t know if they’re the “best-kept” secret, but when it comes to their data management capabilities and their new process management engine, they’re certainly a well-kept secret. Their extensive data management solution allows you to track extensible & customizable information on each supplier of a generic, location-based, contact-based, business registration, financial, capability, diversity, contract, sourcing, SRM, administration, and documentary nature – including scanned attachments which can be easily uploaded by specifying meta-data, printing off a cover-page with a system-generated bar-code, and faxing the document (with a cover-page) to a CVM provided fax number. (Reducing the number of steps in the traditional scan, convert, upload, tag, index.) In other words, their data management capabilities are in the same class as Aravo, a vendor I’ve written about before. However, due to their extensive supplier information databases (as the largest provider of diversity information in the US with enrichment data being culled from over 330 external databases and over half of the Fortune 500 as customers), they can also quickly and easily enrich your data, eliminating the need to integrate a third party’s data stream into your supplier data management / supplier information management solution (SIM), which might reduce the Total Cost of Ownership for a company that needs extensive amounts of third party data (as long as their pricing for enrichment services remains competitive with Austin Tetra and D&B.

For an initial release, I was also quite impressed by their new procure-to-pay process management engine. Although it’s not competitive with either your best-of-breed e-Procurement suites or your best-of-breed e-Sourcing suites when it comes to procurement and sourcing capabilities, with proper use, its flexible design allows you to accurately track all of your ongoing projects, and their current status, with respect to each supplier and each category and manage the process which, for most companies, probably involves at least three or four different systems (spend analysis, e-Negotiation, contract management, e-Procurement, e-Payment, order management, etc.). For example, their default assessment / supplier selection / contract draft / contract approval / transition workflow allows a category manager to document where each sourcing project is, and, when a supplier is selected, track where the project is with respect to contract drafting, approvals, and issuance. This information is then integrated with the data repository, where you can define alerts to notify you when certain quotas are reached / not reached in a time period and when a contract is about to expire. Steps can be added to, or removed from, the workflow, as required by your organization, and it allows you to continue using a collection of best-of-breed products from multiple vendors but still track your project status in one-location (which I believe is critical because there isn’t a single suite vendor with more than 3 solutions that is Best of Breed in everything – and when a best-of-breed solution can squeak out even 2% to 3% more on 100M+ spends, in today’s economy, I don’t think you can justify not going with a BoB solution).

I was also impressed by the usability of the application from a buyer’s perspective and a supplier’s perspective – which is important when you want to capture tier 2 diversity information from your suppliers in addition to asking them to use the tool to enter and maintain their basic information. The only thing I didn’t like was the response time – many screens took an average of 3 to 4 seconds to load in the demo (and I’m not willing to blame the internet as I have high speed cable on a 15MB rated network and can sustain 1MB/sec download times on my machine with ease). If you’re going to be maintaining large databases, you’ll need to ask about their SLAs and insure that you have enough processing power and bandwidth dedicated to the application. (Fortunately, with today’s hardware prices, you can do that at very affordable prices!)

I was, as regular readers might guess, not impressed with their “spend analysis”, or, more appropriately, with their classification of their spend reporting program as “spend analysis”. It’s a good reporting package with over 30 pre-configured reports that has all of the day to day reports that managers and accounting and tactical purchasers are going to need … but when it comes to the true analysis capability required by your power buyers, it’s just not there. In other words, like many of the spend analysis applications on the market, it will satisfy all of the requirements of management and your tactical purchasing team, but none of the requirements of your power buyers. However, it is seamlessly integrated with their platform, so if you were willing to augment it with a stand-alone power tool for your power buyers (like BIQ [acquired by Opera Solutions, rebranded ElectrifAI]), it would allow them to focus on true analysis and not have to worry about meeting the reporting requirements of management or the tactical buyers AND allow those individuals to quickly and easily access spending reports augmented with supplier information, diversity data, and standard classification systems such as NAICS and SIC. Plus, if you maintain complete contract pricing information (which is quite easy to do in their solution for commodities), it can automatically generate “offender” reports for accounts payable when you’re over-billed or accounts receivable when you reach the discount volume. So, if you can get a good deal on it, the “spend reporting” solution could be worth the price when you calculate the opportunity cost of a power user of a companion BoB application generating standard reports for management and accounting vs. digging for new opportunities. Plus, and this could be a key selling point for them, they have an add-on Federal Reporting Module that can be configured to automate Federal and State Agency reporting down to the contract level – and anyone who has had to prepare these reports knows how time-consuming they can be.

Finally, they’re also getting into Risk Assessment Reporting, which, after some of the recent supply chain disasters we’ve seen in recent years, is likely soon to be a must for larger corporations. When it comes to talking-the-talk, they’re certainly ahead of much of their competition in understanding “risk” and the importance of measuring it, planning for it, and proactively dealing with it. When it comes to walking-the-walk, their reports appear to be more-or-less comparable to their competition, especially since they can pull in D&B risk scores and supporting data. However, these days, I don’t think a financially based risk-assessment tells the whole story. I think they need to integrate more sources of information, especially for small businesses (like Austin Tetra is doing), to arrive at a more complete risk picture. It’s good for a first offering, but I’d like to see how it improves over the next year before locking in any long-term agreements. This is an emerging market in the sourcing services sector, and I’m not sure if anyone really has a good lock on what the right solution is.

In summary, I think they are a well-kept secret when it comes to supplier data management and, now, sourcing and procurement workflow management, I definitely think they have a lot of potential on the SRM/SPM side and the risk side as well, and even though they don’t have true “spend analysis” (just like the vast majority of vendors who make the claim), I think that their “spend reporting”, and their federal reporting module in particular, is quite good from a usability perspective, especially for non-technical management, accounting, and tactical buyers. They’re definitely a company to look at and keep an eye on, but like other extensive suite providers, they’re not best-of-breed in everything (no matter how good the “eye-candy” UI looks).

Supply Risk – Seize the Initiative!

Today’s guest post is by Brian Daniels (brian <dot> daniels <at> cvmsolutions <dot> com), VP of Strategic Marketing at CVM Solutions (acquired by supplier.io), a sourcing and procurement content and application solution provider to mid-market and large enterprise companies, including half of the Fortune 500.

In 2007, North American companies began to wake up to the dangers of supply risk. From the bankruptcies of a number of “big name” tier one automotive companies to the scandals of lead painted toys and tainted eels – just to name a few items – hitting the North American shores from China, supply risk changed from theory to reality for many companies. But twelve months later, are they any better prepared to manage supply risk? In many cases, the answer is no. Many companies are just beginning to think about what putting a supply risk management program into action means. In my view, this requires stepping back from some of the news headlines to better understand the specific types of risk which could have the greatest impact on your particular organization.

For example, while quality and labor issues dominate the news when it comes to China-sourced products, in many cases, it is total cost risk and supplier performance risk which should be of greater concern for companies doing business in the region. Consider how the chance of a change in currency value or tax/tariff/import regulations could create significant risk in the savings models that led to a global sourcing decision in the first place. Perhaps the most common risk we see in global – and even local – sourcing initiatives comes down to on-time performance. To this end, on-time performance is not just when an item leaves a factory, but when it arrives at your loading dock. On a global basis, there’s a lot that could go wrong in the weeks this process takes. But in my view, building visibility into past supplier performance – including on-time delivery – is critical to predict and model future supply chain performance – both locally and globally.

Another risk many companies fail to fully consider is their suppliers’ overall financial and corporate stability. Checking a Paydex score or third party credit rating alone is insufficient to develop a complete perspective into whether or not a supplier will be able to stay in business to meet your organization’s continuing needs. Taken alone, these analyses represent a point-in-time snapshot based on information which may or may not be accurate (and timely). These approaches should never replace expert-driven analysis and the direct verification of financial and other information with your suppliers. In my view, it’s essential to conduct customized and expert financial risk assessments based on metrics which matter most to your organization prior to contracting with a supplier. Furthermore, risk assessments should be part of ongoing monitoring and risk forecasting.

In addition, if supply risk information is managed and analyzed within silos inside a procurement organization, it’s critical to insure that this information is available to the rest of the company – or at least to those individuals who need it the most – whether it is via a portal-based system that provides proactive alerts and insights to front-line managers, who can develop mitigation strategies and approaches, or some other mechanism. Some companies and providers might call this supply risk “dashboarding”, but the name is not important. The key is to make sure that these information sources provide the right level of information to the specific individuals who can make a difference if they’re brought into the supply risk loop in time to intervene before a preventable risk rears its ugly head.

Is This The Year Austin Tetra Breaks Out?

Austin Tetra has been relatively silent since their acquisition by Equifax a little over a year ago. And it’s not because Equifax is in a hurry to dissolve the name (unlike D&B who appear to be trying to dissolve the Open Ratings brand as soon as possible), but because they want their new division to be well prepared with a solid offering for the B2B and B2C communities before they re-launch the service offering.

the doctor had a chance to catch up with the business leaders of Austin Tetra, Equifax’s commercial business unit, last month and it sounds like they have been making a lot of progress over the last year. They’ve been busy helping Equifax build a unique global identification system that will compete against the as-to-now relatively unchallenged DUNS # of D&B and Austin Tetra has been making good progress integrating the US, Latin America, European, and other global databases in Equifax’s arsenal into one universal database with one universal classification scheme – a task they expect to complete in the first part of this year.

They’ve also been making great strides in their service offering that pulls business and consumer data together for businesses that need to deal with small businesses on a regular basis and need to determine the risk, especially where the financial stability of the business often comes down to the financial stability of the owner. They can now, for a given small business, pull together the credit history of not only the business, but the owners as well and give you a combined risk or credit score where they have the data integrated.

They’ve also been making strides in compiling their supplier master and customer master databases where, for any given business, they can give you its performance history both as a supplier and as a buyer, as well as their employee master, where they can tell you how much the individual earned at his or her last job if his or her previous employer submitted information to the TALX database (another recent Equifax acquisition) – which has income, salary, and compensation information on approximately 150 M employees in the US.

They’ve also made great strides in their balanced scores, which aren’t just about diversity anymore. Their blended financial / risk scores now take all of the following information into account:

  • public filings (which they monitor and append regularly)
  • denied / debarred party tracking
  • blended score on individual & business credit history for small, private, businesses
  • customer credit risk based on past payment trends
  • diversity information
  • predictive supplier business failure score
    the chance of failure over the next 12 months using all available information

In addition, they’ve been extending their web services platform to make the data instantly available through customers’ current platforms and their current customers are now able to access all this data through multiple platforms that include Oracle, Siebel, and SAP.

In other words, now that they have the support of a 20B business behind them, they’ve been making great strides. However, given that they still believe in the “crawl-walk-run” philosophy when it comes to development and release cycles, they believe that it will likely be the middle of the year before everything is complete and tested (by current customers) to their liking, and hence likely the summer or fall before they attempt to make a big media splash. But that doesn’t mean that, if these are the types of solutions that you need, that you can’t start talking to, and evaluating, them now – or that, if these are the types of solutions that you might need down the road, you can’t keep a watchful eye out to see what they announce this year. Regardless of what happens, now that D&B is about to have a major competitor, I bet you’ll see a lot more innovation in this space over the next few years as the new contender in the space begins its fight for dominance – and that’s a good thing.

Supply Management in the Decade Ahead V: Missions, Goals, & Performance Expectations

In Part I of our review of “Succeeding in a Dynamic World: Supply Management in the Decade Ahead”, we overviewed the various external forces that will impact a company’s supply chain. In Parts II and III we took deep dives into the eight major forces that were identified specifically by supply managers who took part in the survey. In Part IV we focussed on some of the major impacts to business models and strategies in the decade ahead. In this post, we will address the new and expanded missions, goals, and performance expectations for supply management as identified by the report.

The report notes that chief executives will ask far more of supply management – requiring it to take on a broader, more strategic mission, evaluating it on a more comprehensive set of goals and expecting a higher level of performance. To accomplish this, supply management will need to expand its influence across functions, business units and geographies, go beyond the comfort zone of traditional success measures, and find creative ways to deliver even more value to the corporation.

The report than indicates that tomorrow’s missions, goals, and performance expectations for supply management will fall into four main areas:

  • Delivering More Innovation From Suppliers
    The need for innovation will accelerate as companies continue to pursue new geographic and demographic markets. With the demand and supply for innovation destined to be in a constant state of flux through the coming decade, and with the limited resources that will be available within any single company (thanks to the talent crunch), business will need to overcome the usual “not invented here” barriers and tap into all available sources of innovation on a global scale.
    Companies will have to develop advanced approaches to how they identify external sources of supply, how they structure the commercial and working relationships with those sources, and how they make those resources an integral part of the product and services development process. Reinvention of the innovation model will be required to fully leverage external sources – and companies will need to formalize an ongoing process for sourcing innovation.
  • Contributing More Broadly To Revenue Generation
    Close attention to costs for goods and services leads to more competitively priced end products while a focus on quality and service reduces failure rates, improves availability, and leads to higher customer satisfaction and loyalty. However, some companies will expect even more. Some will seek to boost revenue by rapidly introducing products with a limited life-cycle to smaller, niche, markets. Other companies will seek to leverage the existing asset base and distribution channels to bring to market higher value or radically different products. Others still will ask supply management to take a lead role in finding new revenue streams using their unique knowledge of the business. And some will ask supply management to assist sales in co-selling products and services in one channel to suppliers of another channel.
    In the first case, supply management will need to find suppliers and create processes that support entering and exiting these unique offerings quickly with speed, agility, and minimal waste. In the second case, supply management will need to develop or restructure the supply case to meet the needs and costs of the markets into which the company wants to sell. In the third case, supply management will need to assess, screen, and take a lead role in negotiating with the relevant external parties. In the last case, supply management will need to provide deep insights into the dynamics of upstream supply markets.
  • Anticipating And Managing Supply Risk
    Extended global supply chains that include geographically distant, unproven, and even unknown suppliers pose supply continuity, liability, reputational, and intellectual property risks. Changes in buyer-supplier market dynamics reduces predictability. Actions related to environmental protection, sustainability, and labor practices pose uncertainty. The volatility of commodity prices, currencies, interest rates, and even tax structures adds additional complexity. Risk is everywhere!
    Supply management executives will be epxected to play a more strategic role in identifying and interpreting risks, and making tough decisions about risk exposure and mitigation. The level of sophistication required to manage the complex, wide-ranging portfolio of supply risks and integrate risk management into overall supply activities will need to increase.
  • Expanding the Breadth And Impact of Cost Management Efforts
    Performance expectations will be raised considerably as global competition forces companies to squeeze unnecessary cost out of every part of their business. For supply management, this will mean widening the breadth of spend areas covered, managing costs more holistically, and delivering cost savings faster. A range of tools and techniques will be used, including complexity reduction, greater standardization, tighter management of specifications and demand, compliance management, target costing, value analysis, value engineering, price benchmarking, statistical price modeling, should-cost analysis, expressive bidding, lean design, and Six Sigma.

Cost Management, Revenue Management, Risk Management, and Innovation management covers a lot of the bases, but I’d add at least the following:

  • Supplier Management
    Suppliers are going to become more critical to your operations as a whole – and this is going to require better management of not only their performance, but your overall relationships – as well as all of the data you collect about them, their products, and their operations. This will involve implementing and utilizing the next generation of SRM (Supplier Relationship Management), SPM (Supplier Performance Management), and SIM (Supplier Information Management) technology, which will eventually be unified in a common platform.
  • Sustainability Management
    Sustainability is the word on everyone’s lips these days and sustainability from social, environmental, and business perspectives will be critical. It will cease to be a secondary concern to cost, revenue, and risk management and many of tomorrow’s strategies will be designed with sustainability as the key priority.
  • Talent Management
    In a knowledge economy, talent is key. As talent becomes scarce, HR will be looking to supply management to help them identify available sources of talent within the supply chain to meet the organization’s needs via outsourcing, insourcing, and new types of talent sharing agreements between organizations, third parties, independent consultants, and semi-retired individuals.

After a break, this series will return with Parts VI through XII that will cover each of the seven critical supply strategies for succeeding in a dynamic world that were identified by the report.

Strengthen Your Supply Chain

In yesterday’s blogologue I told you that your brand was a terrible thing to waste – and that the strength of your company’s brand ultimately lay in its supply chain, and not the latest fad dreamt up by your company’s marketing mogul. This means that, unfortunately, it’s up to you to protect the brand, and not the apathetic advertisers who lounge around all day being “creative“.

So how do you do that? The Industry article “Strengthen Your Supply Chain” that I referenced yesterday has some good starting points. It tells you to focus on five key elements that cover most of the basis. It’s key elements were:

  • traceability
    you should be able to track all products, components, and raw materials backwards and forwards through the manufacturing process
  • measurement
    basically, testing; identify the components and risk points (start with the hand-off points) and then have internal quality assurance personnel or an independent auditor test each component and at each risk point
  • certification
    certification programs set guidelines and involve an additional process of checks and balances: these usually fall into regulatory, industry self-regulation, and third-party certification
  • efficiency
    be sure to adopt a traceability and testing program that works with day-to-day supply chain operations
  • organizational buy-in
    successful supply chain management depends on the cooperation of employees at each and every level

To this I’d also add, at a minimum:

  • Visibility
    It’s important to not only know what goes into your products, but where each raw material, component, and product is at all times. Could they have been tampered with? And, if you are dealing with consumables, how long did they sit on the truck? Could they have gone bad?
  • Modeling
    In order to be sure you have the right process, including the right checks and balances, you need to be able to model the supply chain as it is, as it should be, identify the differences, identify what could go wrong, and insure an appropriate test is included for each hand-off point, risk, and exception.
  • Supplier Management
    You ned to insure that your suppliers understand the importance of the process, are following the process, and are reporting any and all problems that arise, including those that they are able to detect internally. (If too many problems arise internally, even if they are corrected before defective or contaminated goods are shipped, then they need help with their process as the risk of something slipping through the cracks is too great.)

Finally, I’d like to point out that as important as certification is, checking out the certifications is even more important. In some parts of the world, it’s quite easy to buy a faked certification document. Just because a new supplier sends you a certification document, that doesn’t mean they are actually certified. Be sure to check with the organization that issues the certification that the supplier in question was actually certified AND that the certification is still in effect. But don’t stop there – if the certification is one that is actually done by third parties, check out the reputation of the third party conducting the audits. Are there any complaints against them? If so, how many and how recent. In some places, it’s even easier to buy a successful audit then it is to buy a fake certification.