Category Archives: Sourcing Innovation

How Medium Sized Enterprises Can Better Manage Spend

McKinsey & Company recently ran a long article on how medium-size enterprises can better manage sourcing that noted that the big reasons that mid-sized companies have difficulty reining in external spending are:

  • a lack of spending transparency
  • a myopic focus on the short term
  • talent gaps
  • underused digital tools and automation
  • exclusion of procurement and supply chain in business decisions

And noted that any action plan that a medium-size enterprise comes up with for procurement cost savings should include:

  • establishing CoE (Center of Excellence) teams
  • improving forecasting
  • expanding use of digital procurement tools
  • gaining greater market intelligence
  • establishing a culture of — and process for — continuous cost improvement
  • incorporation supplier-driven product and service improvements

And they recommend a ladder model that consists of the following steps:

1) Set Aspirations
2a) Rapid renegotiations with top suppliers
2b) Make-vs-Buy Analysis
3) Build spec catalog to enable market engagement
4a) Conduct request-for-quote (RFQ) rounds
4b) Build parts catalog
5a) Validation of suppliers and production parts
5b) Consolidation of SKUs and modularization

And this is all very good, and when you read the article for the details you will understand why it’s all very good, but it doesn’t really provide a clear, step-by-step, roadmap on where you should start.

Fortunately, Sourcing Innovation did provide a partial roadmap in it’s 39 Steps … err … The 39 Clues … err … The 39 Part Series to Help You Figure Out Where to Start with Source-to-Pay which outlined the order in which an organization should get the tools (and thus the associated market intelligence) it needs to effectively tackle spend (and forecasting), work with suppliers, and establish a culture of continuous improvement. About the only item we didn’t address on the McKinsey list is the establishment of CoE teams — the right structure is highly organization dependent, and will be better enabled by the implementation and adoption of the right tools.

So, if you missed the series, go back to the beginning and understand where you start, why, and how a proper, ordered, logical implementation of Source-to-Pay in a modular fashion will help you maximize savings, efficiency, and even sustainability within your allowed budget.

Efficiency Is In The Process, NOT THE MARKETPLACE!

the doctor really should stop reading the “news” and “best practice” articles the internet pushes his way because most of them are rubbish and just make him angry, but then again, if he didn’t get angry, what would he have to write about?

One of the articles recently was about how procurement can push efficiency and sustainability into the organization. The sustainability advice of “look for eco labels or EPA ID or products with recycled content” was pretty abysmal (because, duh!), but the efficiency recommendation of “create an e-marketplace to give your buyers an online catalog of goods and services” was just appalling.

That’s only efficient for organization end-users charged with restocking the supply cabinet in the office or keeping the MRO stock levels high enough to guarantee the production lines keep going when the store room gets low. That’s not injecting ANY efficiency into the Procurement process.

When you consider even the most basic strategic procurement process, you have to:

Identify the Need
and efficiency here is an intake management solution that allows you to collaborate with the end-users / end-sellers to make sure you’re procuring the right products for them to ply
Identify the Potential Suppliers
and efficiency here is a solution for supplier discovery, evaluation, and onboarding
Identify the Evaluation Requirements
and efficiency here is an orchestration solution that allows procurement to integrate all of the requirements from the users, the business, and the organizational goals
Evaluate the Bids
and efficiency here is an RFX solution with integrated analytics
Negotiate and Sign the Contract
and efficiency here is a contract lifecycle management that at least supports the contract negotiation process with complete document (and version) tracking and preferably also includes support for initial contract creation from award, key issue tracking, and e-signature integration
Determine the Appropriate Ordering Strategy
and efficiency here is determining whether the best fulfillment is regular shipments (if the factory uses X thousand units a month), auto-reorders on inventory level triggers (if the usage is/sales are irregular, but the product can be pulled quickly), or (managed) catalog-based orders as needed
3+-Way Match (against an invoice)
and efficiency here is a solution that makes it easy to ensure the invoice matches the goods receipt that matches the PO (at a minimum, and you also want to make sure the PO matches the contract etc.)

Efficiency is injecting efficiency into this process, not just setting up a marketplace!

TenderEasy: Easy Breezy Beautiful Freight Quotes

First things first: if you are shipping globally, you need a(n) RFQ / Spot Bid solution built for freight. You may believe that just because you have a generic RFQ / e-Auction solution that can be used to collect freight quotes that you don’t need a custom freight tendering solution, but nothing could be further from the truth. When it comes to freight, at a minimum you have to consider:

  • five modes: road, rail, ocean, air, and small parcel,
  • multiple cargo types: dry, cold, frozen, and liquid,
  • palletized vs. non-palletized,
  • LTL vs FTL,
  • regular vs flammable vs hazardous, and
  • multiple cost tiers

and that’s quite a few data elements that most RFX tools are not setup to collect out of the box. Furthermore, even if the solution is highly configurable and can allow the creation of bid collection matrices that will collect all of the associated bid and lane data, chances are the platform isn’t setup with the rules to enforce the right bidding, the analytics for the right comparison, or enough sophistication in auto award scenario creation even for a baseline low-cost cherrypick scenario.

Furthermore, when you are shipping globally, you need to

  • understand approximate current lane costs / benchmarks,
  • know who is shipping in a region AND their typical capacity, and
  • be able to quickly access current rate agreements or spot-market bid rates

and your typical out-of-the-box RFX tool for indirect or direct sourcing is not going to do that.

However, a tool built by freight sourcing / logistics professionals for freight sourcing is going to do that and more. That’s what TenderEasy is. Founded almost two decades ago in 2004 to help organizations optimize their freight sourcing, they launched the first version of their fully SaaS-enabled freight tendering solution eleven years ago. Their freight tendering solution was among the first solutions that were custom built to help global companies manage their global fright RFQs across air, land, and sea. Since then, they have added spot quote capability, rate (contract) management, an integration API for custom data push to any TMS, ERP, or S2P system you want to transfer the awards to, out-of-the-box integrations with multiple TMS systems (e.g., Alpega, SAP4Hana), out-of-the-box APIs with public freight rate benchmark and analytics platforms (including Xeneta, Freightos, Upply, and Alpega FX), out-of-the-box integrations with container management platforms (including BuyCo), and out-of-the-box integrations with freight/lane-based emission calculators (including EcoTransIT World).

There are three main parts to the TenderEasy platform:

  • Administration
  • Buyer Interface
  • Supplier Interface

Administration

There are six main parts to the administration interface:

  • User Management: where you can manage your internal users with easy profile settings controlling visibility, accessibility and inter-activity with bidders
  • Supplier Management: where you can import, add and manage suppliers, including the ability to #tag supplier groups, and this management includes the management of (supplier) modes, cargo types, pallet capability, whether or not they do LTL or FTL, any certifications for flammable and hazardous materials, countries they can operate in, etc.
  • Currency Rates: where you can define, on project level, the currencies you support and the rates you wish to use for base conversion
  • Keyword Lists: where you can define as many arbitrary value lists as you want for bid and data collection during a tender (to make sure responses are with the right naming convention for rule creation and future data integration with your TMS, ERP, and/or S2P system)
  • Integrations: where you manage your export connectivity to whatever systems you want to push data to
  • Partners: where you select the data partners you wish to connect with for data enrichment of your analysis data (freight benchmarks, emissions, service KPIs, etc.). With some Partners you can “pay-as-you-go” via TenderEasy. Other partners will require a subscription and your partner license key credentials to access the data.

Supplier Interface

The supplier interface has four main parts and is designed to be as simple as possible for the suppliers:

  • Tender List which lists the tenders they are currently invited to and the status of those tenders
  • Tender Details where they enter their bids by lane
  • Import/Export where they can export the tender to Excel, fill it out in their favourite tool, and then import it
  • On-line bidding where Suppliers can fine-tune bids on-the-fly

Buyer Interface

There are four main parts to the buyer interface:

  • RFQ/Tendering which is where the multi-round magic happens (which we will dive into shortly)
  • Spot Quote Request where a buyer can empower their organization to execute quick spot requests for a single load in a transparent and compliant way
  • Rate Management where the buyer can store and manage their contracted rates in an auditable and sustainable way
  • Rate Search where the buyer’s stakeholders can search for contracted services and rates (that are stored in the system) in real-time, including historical rate records

The core is the tendering component where the buyers spend most of their time.

A tender can be created from an existing tender (as a copy) or from scratch. Creating a tender from scratch is quite easy:

  1. name it
  2. select a currency group and a default currency
  3. define the transport mode
  4. define the end time of the current round (with start [auto-]populated when you publish it)
  5. define the range for which supplier bids must be valid
  6. optionally upload any attachments with requirements
  7. optionally provide a detailed event description
  8. optionally define any terms and conditions (separate from the file uploads)
  9. create the bid / rate matrix by either
    • copying a matrix from a previous event
    • instantiating one from a best-practice template defined on system implementation
  10. add the suppliers (and you can easily upload their details via Excel)
  11. select/customize notifications
  12. publish

That’s it. Complex freight events can be instantiated in a matter of minutes. Why?

  • pre-defined best practise rate cards can be utilized, or you can copy a previous RFQ
  • pre-defined currency groups make currency definition one-click
  • the platform can store attachments in the platform, creating libraries for your standard specialized requirements, Ts&Cs, etc.
  • the buying organization can define matrices for every mode – region – good type / transport requirement they have on system implementation, including all of the validations and rules that are 100% compatible with Excel, with all of the appropriate lanes
  • the system will automatically select the suppliers associated with the mode and region with the necessary characteristics (hazardous certification, etc.) and all the buyer has to do is check the suppliers it wants to invite
  • there are ready-made automatic notifications in the system for every event you want to action

A key point to note is that TenderEasy supports full Excel capability within the platform, and easy wizard base definition of column and cell settings and properties. For example, each column can have a type, an associated validation rule, display/coloring properties, a visibility definition (buyer or supplier, read or write), etc. and each cell can have a more specific validation based

Another key point is that it’s stupid simple to import benchmark data into (private) columns in the matrix that you can use to evaluate bids (and, automatically, flag any that are too high or too low, possibly with colour coding in the column, or a separate column if you are using colour coding to show the percentage change in a bid from round to round. You simply select “import benchmark” and select the benchmark provider you want to use (which is typically the one you have a subscription with) and the quotes get sucked in automagically.

Bid analysis is also very easy. It’s simple to define a scenario that auto-selects the appropriate carrier and bid for each lane. There’s an integrated scenario builder where you simply define the grouping columns, the supplier group to consider, the tariffs to use, the (optional) adjustments to apply (where you can favour incumbents or innovative carriers and disfavour new carriers or eco-unfriendly carriers or low reliability carriers using a financial cost percentage adjustment or fixed cost modifier), and whether or not you want to use breakpoint optimization (where it will select the FTL amount when that is cheaper than the LTL amount at the current weight / space utilization).

Supplier feedback can also be customized and color coded in a multi-round tender to tell a supplier approximately how far off they are from being selected (e.g. < 10%, 10% to 20%, > 20%). You can generate feedback on any numerical value in the rate card, including service data, emissions, quality etc.

You can create as many (partial) bid analysis as you want, including baselines, using whatever rules you want, and then visualize them graphically in the dashboard, where you can also define thresholds to alert you if any carrier would get too little or too much business. You can also compare them side by side to help you identify the awards you want for each lane. When you figure out what you want, you can incrementally build (by combining partial awards from existing scenarios) the award scenario you want, push it into your external system for contracting, and lock it down as a set of rates to be included in the rate management part of the platform.

If you do need help (which won’t happen often as the platform is very usable, it is usually quite obvious what to do next, and all of the up-front setup on implementation jump-starts pretty much everything you will ever do), there is extensive help built into the platform, training material and self-testing, and a webinar archive.

There is pretty much everything you need out of the box to get going, with the only obvious exceptions being

  • combinatorial carrier optimization (once you have selected the preferred carriers) to balance cost, emissions, and/or delivery time (which they are currently investigating)
  • market-based alerts if a supplier you select is not likely to have current capacity (based on the spot market), if prices are going up quickly (and you should make lock in an award sooner rather than later), or if KPIs are dropping for current carriers (which are currently under investigation, with KPIs and improved benchmarks, which are needed at the foundation level, being investigated with Partners on how to best share this information pro-actively)

In other words, if you do global freight, and you don’t have a custom solution for freight RFQs and spot buys, you should not only have one but include TenderEasy on your shortlist. Once you see the capability a platform like TenderEasy can provide and how much more efficient and effective it can make your freight buyers, you’ll wonder how you ever lived without it. (Like any good e-Sourcing tool, it will quickly pay for itself many times over.)

Dear (Software) Vendor: If you Missed the Ten (+ 2 Bonus) Best Practices for Success, Time to Catch Up Now!

  • Part 1 Best Practices #1 to #3
  • Part 2 Best Practices #4 to #7
  • Part 3 Best Practices 8 to 10
  • Part 4 Bonus Best Practice #1
  • Part 5 Bonus Best Practice #2

In twenty years as an independent analyst and consultant, the doctor has never encountered a small/mid-size vendor who wasn’t doing at least one of these, usually there were a couple they weren’t doing, and the lack of these practices (and knowledge) was (and sometimes still is) holding these vendors back. In other words, you definitely should read these. We are only posting these articles once.

Serex Procurement: Easy e-Auctions for the Small Enterprise and Lower Mid-Market

Serex Procurement is a point-based solution with one purpose: to replace the spreadsheet that most e-Procurement departments in smaller companies still use to manage their procurement (as well as eliminate the thousands of emails needed to collect prices and update that spreadsheet).

You might ask why, with so many auction-centric mini-suites available on the market, and over 70 e-Sourcing solutions available, we would focus on a niche solution centred around e-Auctions, request-for-price, and centralized buyer-supplier communications. The answer is simple — not every Procurement department is supporting a large enterprise and not every Procurement department needs advanced functionality, a mini-suite, or a pricey solution with bells and whistles they aren’t going to (be ready to) use at the current state of their Procurement evolution.

It may be 2023, but there are a still a large number of Procurement departments still running Procurement events from a spreadsheet, still stuck with an archaic ERP, and, especially in the small enterprise / mid-market, still burdened with a very limited budget for Sourcing and Procurement software. Furthermore, for these departments, this single step up is sometimes everything they need from an e-Sourcing perspective at the current step of their e-Procurement journey which gives them incredible value today. (And, as per our stance that what Procurement needs is a platform that allows them to add one module at a time on their digitization journey, it’s the puzzle piece they need right now.) Also, there are organizations that bought into super suites that have an end-to-end Source-to-Pay process but no auctions, an archaic process that doesn’t support quick and easy auctions, or a user-based licensing model that prevents roll-out to the entire organization. For these organizations, a point-based auction solution with an API that supports data pull and award push through the API (or fixed-format spreadsheets where the current solutions don’t support a modern API) is exactly what they need.

Plus, the blended pricing model Serex Procurement offers makes it very affordable for companies with no budget to start on a gain share and, once the value is proven, move to a fixed price model with no gain share. More specifically, an organization can sign up for as little as $300/month by giving up 50% of their savings, or get unlimited events with 0% gain-share for $5,000/month. (Or pick a tier somewhere in between — Sourcing Innovation recommends doing the math based on the conservative end of the estimated savings on the events you will be running and picking the tier appropriately.) Furthermore, while there is a minimum contract term, an organization can upgrade their tier at any time during the contract term (once they are confident they’ll save more by upping the tier.)

The fully SaaS e-Auction solution has all of the core capability you’d expect from a modern SaaS e-Auction platform, and then some. One of the key differentiators is that the platform is SKU-based and supports the definition of SKU groups in a manner that makes it just as easy to source a direct Bill of Materials as it is to source an indirect lot of office supplies. Not many sourcing/auction platforms make it easy to do both, but Serex Procurement does.

In addition to product groups, the platform also allows the definition of bidder groups which allows an organization to group suppliers that it typically invites for a certain category (indirect) or Bill of Materials (direct). Combine this with the fact that an auction can be defined on a set of product groups and bidder groups, and this makes it extremely quick to define a new auction from scratch, and even quicker to define a new auction as a copy of a historical auction, as this only requires changing the start and end dates and times to make the copy. (Once the copy is made, a buyer can edit whatever they wish.)

As we indicated above, the auction platform supports the standard parameters you would expect, including:

  • start and end time
  • auto-extension of y minutes with a bid in the last x minutes
  • show/hide bidder position
    by setting to “hide”, the platform can be used as a simple request for price
  • tie bids accepted/rejected
  • bid increment
  • max bidder position
  • bid validation window
  • landing factors (% of savings required to leave an incumbent to acknowledge switching costs;
    basically it is a penalty factor on new suppliers)
  • shipping factor (to acknowledge additional transportation costs / currency exchange costs)
  • product yields (to account for variable wastage due to packaging/sizing)

It also supports new bidder definition, new product definition, import from spreadsheet or API for bidder or product definition, and Excel-based bidding for suppliers. Product sheets can be uploaded and attached with as little or as much information as needed, and in-platform messaging allows for easy direct or group-based communication between the buyer and suppliers.

The platform allows the buyer to setup as many email / message templates as they like, to make supplier communications quick and easy as events are created / modified. It’s also very easy to search products, bidders, and past events (to find the perfect instance of the event to copy for quick setup).

When you think about its intended market, about the only thing missing is better quick-hit RFP functionality, as the way you do it now is to set up a private price-based auction. Since they already have document management, bid sheet support, supplier and messaging support, and history management, it would be quite simple to add easy three-bids-and-a-buy RFPs where suppliers can get requests, upload their own options to fulfill a request as well as corresponding prices (at different volume breaks), and provide more detailed information and the buyer can then select one or more to either direct award to or invite to an auction with pre-certified options. Serex has acknowledged that this would be useful, and is in their queue for future development, but they are very customer driven and the queue gets prioritized based upon what current customers are asking for. However, should multiple customers converge on this, it would not take them very long to build it as they have three decades of software development and implementation experience (with the first 20 years in CRM system selection, implementation, and custom integration add/on development — an area their other division are still leading experts in).

If you are in the market niche, we strongly encourage you to check Serex Procurement out as you can get a great, unlimited use, e-Auction solution for a few thousand a month (plus modest gain share, or unlimited use platform for only 5K/month) without the need to bite off more than you can chew solution capability (and cost) wise.