Category Archives: Technology

Exploring EcoVadis

Last month, Jason Busch gave the sourcing world an introduction to EcoVadis in his two part series (Part I and Part II) over on Spend Matters.

In his posts, he noted that EcoVadis was a European (and, in particular, a French) provider of a sustainability solution for evaluating and monitoring suppliers whose primary focus is helping European companies meet emerging green and sustainability regulatory requirements. According to Jason, not only does EcoVadis monitor environmental and operational practices, but they also consider labor practices & human rights, fair business practices, customer and product responsibility, and sustainable procurement. This is important because, in the EU, there are country-specific laws that require green and sustainability efforts.

Jason also notes that not only does EcoVadis provide capability with respect to supplier assessments, supplier audits, and corrective action procedures, but that they are also compliant with GRI G3 standards and the pending ISO 26000 certification with respect to the 150 procurement categories they are currently supporting across 23 green/sustainable criteria (and the 1200 plus pre-defined questions at a user’s disposal).

In this post, I’m supposed to be tackling the technology underpinnings of the solution, but the fact of the matter is that the technology underlying the platform is quite basic – which it should be when you consider the goal. The goal is to give a procurement buyer a quick overview of the sustainability status of a supplier on a single screen while also giving the buyer the ability to drill down deep into the rating and understand where the supplier is strong and where they are weak from a sustainability perspective.

All you need is a “dashboard” that shows a snapshot rating of a supplier on each of the key categories with the ability to drill down (which is key, because, otherwise, a “dashboard” is useless) into scorecards for each rating to find out why the score was high, low, or zero and linkages to relevant audits, alerts, and reports that led to the scores. In addition to this, EcoVadis offers a 360-degree watch that aggregates human-reviewed news articles relevant to the suppliers and their sustainability ratings, benchmarks against other suppliers in the industry on the relevant sustainability categories, and highlight summaries of each supplier. With regards to the solution they are trying to offer, the only critical component missing is an administrative interface where the head of CSR can add additional questions specific to the company and category in question (as some companies will want to go above and beyond the regulations and others will have special needs). The solution, which is multi-linqual, has the ability to add specific questions by category and customer – they just haven’t coded a web-accessible user interface yet (as most of their early customers have been more than content with the extensive question sets built into the product).

The big advantage of a standard web-based solution such as Ecovadis is the fact that suppliers only have to answer a question once and the result of an audit can be shared across multiple clients. One of the biggest downsides to wide-spread sustainability initiatives is the severe burden they place on a supplier. Think about it – not only is it resource constraining for a supplier to answer essentially the same questionnaire from each of its customers, and undergo multiple audits on the same indicators (when one surprise audit every couple of quarters should be more than enough), but it is resource crippling to have to answer the same set of questions for every potential customer, knowing that you’re only going to win a percentage of the RFPs you answer. A supplier should be able to answer the questions once, go through the (surprise) audit once, and then not worry about it for at least a couple of quarters.

Healthcare – Three Way Matching

Today I’d like to thank Vinnie Mirchandani of Deal Architect and New Florence. New Renaissance. for allowing me to re-post his thoughts on Healthcare – Three Way Matching as part of Healthcare Week.

At the HiMSS conference a couple of weeks ago, I had the privilege of having an industry veteran – Dave Watson – as a tour guide through the exhibit hall. He has years of experience at Baxter and Kaiser and is now CTO at MedeFinance, and it was a joy to hear his commentary on the technologies on display.

But at one point, he mentioned “three way matching” and I had to do a double take. Why was he talking about an age-old accounts payable concept of matching invoice with purchase order and receiving report?

The concept has been adapted in healthcare to reduce medication error with some slick new technology. The three-way match is across patient, prescription and care giver (whether certified to administer the medication) information. It involves all kinds of RFID and other sensors, bar codes, software to check on conflicts, and drug dispensers with their own controls built in.

How bad is the medication error problem? A recent study reported “One in every 10 patients admitted to six Massachusetts community hospitals suffered serious and avoidable medication mistakes”

So we saw the Motion C5 tablet.

Look at all the capture and communication technology it integrates:

wireless connectivity: to access patient information and physician’s order.

RFID: to identify patients, medications and assets

integrated bar code reader: to manage medicines or costly supplies

integrated digital camera: to take pictures and capture video for patient education and sealed design: wipeable for quick cleaning and disinfecting

bluetooth: to help capture patient vital signs

security: integrated fingerprint reader, hardware based encryption

Then on to smart pumps like Hospira’s Symbiq which delivers precise amounts of fluids, medications, blood, and blood products.

More safety checks – this time between the patient code, the IV bag bar code and the pump bar code. A wireless link connects both the pump and the bar-code scanner to the main database, which matches patient, order, and pump. If correct, the order is checked against the hospital drug library that contains formulation and dosing guidelines. Once verified, the pump is automatically programmed and the infusion can begin.

For pills, there are other smart dispensers such as this Medicine Cabinet developed by Accenture.

At the show we also saw various voice recognition products from Nuance. Doctors are notoriously poor scribblers so dictating prescriptions can also reduce other medication errors.

Of course, as with accounts payable, you can also have a 4 way match by introducing cross-check with an inspection report. My wife who works part-time at a hospital tells me about the four-way match in health care: The patient who asks “how come my pill today is pink. It was blue yesterday”. Inspection report indeed.

Fallacies of Logistics Productivity Management

Manufacturing & Logistics IT recently ran an article on “The 10 Fallacies of Logistics Productivity Management” that noted that productivity management often represents the lowest hanging fruit for companies interested in reducing supply chain costs. It also noted that the failure to implement advanced productivity management systems may be related to a number of misconceptions surrounding productivity management system processes, technology, and impact. I’m betting the authors are right … because I know similar fallacies prevent many companies from adopting modern strategic sourcing support software.

The top 10 fallacies outlined by the article are the following:

  • My current WMS / ERP does productivity management.
    Warehouse Management Systems (WMS) manage your warehouse with respect to inventory, what’s coming in, what’s being stored, and what’s moving out. They don’t optimize your logistics. Enterprise Resource Planning (ERP) systems are even worse – they just tell you what you need to acquire to produce your products
  • Productivity management represents an unenlightened way of thinking about employee relations.
    Advanced productivity management systems emphasize such elements as management/supervisor engagement, detailed training on the best method to perform each job, and consistent employee feedback.
  • Productivity Management Systems reduce morale and increase employee turnover.
    The reverse is almost always true because employees want to know how well they are performing when measured against fair and objective feedback.
  • Productivity management benefits are primarily for the DC manager.
    Productivity Management provides a broad set of benefits that supports multiple organizational objectives by way of cost reductions and quality improvement.
  • Productivity management increases complexity and risk.
    The reverse is almost always true as it generally dramatically reduces operator variability by way of the increased training requirements.
  • Productivity management doesn’t add a lot of value.
    It’s true that engineered standards deliver results, but without productivity management, the extent of the results delivered will often be limited.
  • A new “system” won’t provide much incremental benefit when high quality DC supervision is in place.
    Good management is good – but precise, discrete goal time calculation and detailed feedback is better.
  • Productivity management requires too much time for data collection and administration.
    Companies with WMS and/or RFID systems already have the data collection infrastructure in place to support productivity management systems.
  • Productivity management is unnecessary in an incentive environment.
    Advanced productivity management systems offer benefits beyond incentive systems by way of discrete standards that precisely determine the specific goal times of each task.
  • Productivity management won’t fly in a union environment.
    It all depends on how you sell it … are you trying to ram it down their throats, or are you introducing it with increased training and a new incentive program based on the new, objective, metrics the system will capture?

(A Great CPO is) The Practical Visionary

A recent article in Strategy+Business which started off by noting that today’s Chief Information Officer must enable the organization to meet its strategic goals and to envision goals that were never before possible caught my eye. The article, which quickly quoted Michael Giledman who said that you (need to) spend a lot of time listening and fixing things in the background because you need to prove yourself if you want to be taken seriously, really emphasized why today’s CIO needs to be The Practical Visionary.

Moreover, not only is the article packed with great advice for CIO’s – but it’s also packed with great advice for CPO’s! The article noted that today’s CIO also trains her focus on the demand side of the business, becomes a serious contributor to business results, and harnesses powerful new technologies that make (real-time) information attractive and accessible. This is because a strategic CIO has much to offer the organization with her specialized knowledge of the capabilities, requirements, and costs of new technology – capabilities that uniquely position the CIO to help the organization set priorities that affect each and every one of its operations.

Replace “CIO” with “CPO” and add “product” to the above and you get Today’s CPO also trains her focus on the demand side of the business, becomes a serious contributor to business results, and harnesses powerful new (on-demand) technologies that make (real-time) information attractive and accessible. This is because the strategic CPO has much to offer the organization with her specialized knowledge of the capabilities, requirements, and costs of (new) products and technology – capabilities that uniquely position the CPO to help the organization set priorities that affect each and every one of its operations. That’s one of the best descriptions you’re going to find anywhere on what today’s CPO needs to be!

It’s a long article, but like many of the articles on Strategy+Business, it’s a good read. The article also stresses the importance of openness, intelligence, and interoperability – which are also key to supply and spend management success. And of course, just like the CIO has to manage the information life cycle, the CPO has to manage the product and service life cycles. The guidelines it gives for strategic leaders are also very well thought out and worth the read. So check it out.

Putting McKinsey’s Business Technology Trends into Practice Part II

The McKinsey Quarterly recently published an article on “eight business technology trends to watch” that was not only quite good, but a good summary of the trends that you should be implementing, appropriately, in your supply chain. In this second part of this two part series, we are going to review the remaining trends and give you some examples of how you can apply them to improve your sourcing and supply chain practice.

Expanding the Frontiers of Automation

More and more systems are becoming interconnected through common standards for data interchange and more and more business processes are becoming automated at larger and larger scales. This information exchange can be used to automate even more activities, with a little thought and proper planning.

For example, you’re probably using multiple systems for sourcing and procurement, and in e-procurement in particular, there are probably considerable improvements you could make to not only increase efficiency with automation, but reduce overspending and maverick spending. Let’s consider the process – requisition creation, requisition approval, supplier acceptance, goods receipt, invoice generation, review, and payment. You’ve probably heard a few of the more progressive vendors say that you should have 2, or even 3, way match at the invoice review stage – but the reality is that you should have m (where m is equal to the number of data points you have) at each step of the process. When the user creates a requisition, items should be checked to see if they are under contract, and if not, if there are contract equivalents and prices should be compared against contract pricing. If an item is being bought under contract, but the price is wrong, it should be corrected (and the user notified), and if the item is not under contract, but there is an item that is, the user should be notified and if the user insists on requisitioning the off-contract item, the user should be forced to enter a reason as to why he or she is seeking permission for maverick spend. When a supervisor goes to approve a requisition, the prices should be re-verified and the supervisor should be immediately alerted as to whether or not the requisition contains any maverick spend requests. Before the invoice is approved, it should be matched to the purchase order that was generated from the requisition to make sure each item was ordered, the goods receipt to make sure everything was delivered, and the contract to make sure the prices are right. In this way, a supervisor can quickly spot requests for off-contract spend and focus attention where it is really needed, and invoices from approved suppliers where everything is verified can be automatically scheduled for payment, allowing users to focus their time only on those invoices that need to be manually investigated.

Unbundling Production from Delivery

Technology helps companies to utilize fixed assets more efficiently by disaggregating monolithic systems into smaller, loosely coupled, systems. It’s not one big production line, but a set of smaller lines that work on individual components, some specialized to a single task. Improvements in information and communication technology not only enable the new models, but enable the use of each resource to be monitored and metered separately. This allows companies with free capacity to lease their resources to other companies which need to gain access to assets quickly to scale up businesses but keep their balance sheets in check.

There are a number of ways you can implement this concept in your sourcing and procurement organization, and the best way to start is to simply unbundle product (production) quotes from delivery (shipping) quotes and then use a strategic sourcing decision optimization platform that can optimize your allocation to minimize total cost of ownership and total value delivered in ways that you will not achieve with e-Auctions alone. The next step is to contract for additional capacity as you start scaling up operations or need a new technology that you don’t have, and don’t take on any fixed assets until you have proven the market and demand. Then, you if you’re truly innovative, you’ll identify other organizations with similar supply chains whom you are not in (direct) competition with and take on management of their third party logistics requirements to increase the volume of your logistics requirements to negotiate even better deals with your 3PLs.

Putting more Science into Management

The article notes that technology is available to help managers exploit ever greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. The article notes that from “ideagoras” (e-Bay like marketplaces for ideas) to predictive markets to performance-management approaches, ubiquitous standards-based technologies promote aggregation, processing, and decision making based on the use of growing pools of rich data. It also notes that leaders should get out ahead of this trend to ensure that information makes organizations more, rather than less, effective, and the doctor agrees with this wholeheartedly!

The best way to start is to acquire a real spend analytics platform (which is more than boxed reporting on a data warehouse, but you know that) and a real strategic sourcing decision optimization platform, if you don’t have them already. This will help you target the spend that has room for improvement and make optimal award allocations, keeping spend down. Then, acquire some collaborative PLM software to enable you to monitor NPD from the inception stages and insure that the best decision is made by the organization at each stage of the process.

Making a Business out of Information

The article points out that accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities, and while that may be true, the doctor thinks that the trend you should be focusing on is running a better business on timely information.

Not only do today’s organizations have access to more data than they have had access to in the past, but those with visibility enabled supply chains (that use RFID and XML or EDI interchange with partners) have access to this information faster than their peers. Those companies that are able to make use of this information quickly and appropriately will be able to outperform and outmaneuver their competitors, and respond much quicker to events that could cause supply chain disruptions and re-engineer around them. For example, a pizza chain that monitors expected tomato crop yields and any natural events that could significantly diminish those yields, after finding out that a hurricane wiped out a large crop, could move to quickly lock up future supply at today’s prices, putting it in a much better position than its competitor that will be forced to fight for a much smaller supply at higher prices. A 3PL that keeps on top of all news that relates to major ports as well as where its trucks are at all times through GPS could immediately divert all trucks, en-route, to a different port as soon as it discovers that a tsunami just wiped out a dock and shut the port down for a week. Let’s face it, supply chains are not in the information business, and shouldn’t be looking to create new businesses around information when they can instead use that information to execute their business much more efficiently then their competitors, giving their firm a strategic advantage that could enable it to grab more market share with less dollars, which is a contribution to the bottom line above and beyond the significant savings they are able to achieve.

As the article states, creative leaders can use a broad spectrum of new, technology-enabled options to craft their strategies. These trends are best seen as emerging patterns that can be applied in a wide variety of businesses. Leaders will reflect on which patterns may start to reshape their markets and industries next – and on whether they have opportunities to catalyze change and shape the outcome rather than merely react to it. As the doctor has demonstrated, each of these trends can be co-opted by your sourcing and supply chain organization to literally get more for less. the doctor hopes that you have enjoyed this two-part mini-series.