Category Archives: Technology

Remember: Big Bang = Big Bang!

While the doctor was at Coupa Inspire, he heard a very scary message over and over again from Coupa customers during the CPO panel. It seems that even though it’s been over 20 years since the demise of Foxmeyer Drug, organizations are still pushing for big-bang supply chain re-vamp projects and advising Procurement to “wait for the ERP upgrade to [almost] complete and then select a new BoB solution to fill any gaps as it will be quicker and easier to do it all at once“! Gadzooks! Six of the 11 biggest supply chain disasters of all time (as chronicled by Supply Chain Digest) were directly, or indirectly, caused by a big-bang ERP project and the fiasco it created, including the ruination of Foxmeyer Drug that was a 5 Billion global company. Big bang projects almost always end in big bangs that wipe out entire divisions, markets, or global organizations. There is no excuse for them in this day and age and no organization, consulting or otherwise, should be pushing for them.

Fortunately for these customers (who were chosen because they were prime examples of successful Procurement organizations in the Coupa community who led the way), they didn’t listen to their organization and just did it. The beauty of a modern self-contained cloud-based solution like Coupa is that you don’t even need an ERP. You can just license an instance and go. This is what they did, and one organization, instead of waiting 18 months to get started, completed a global roll-out in 4 months and banked over 10M in savings before they would have even started product selection had they sided with their organization!

In other words, don’t go big bang unless you want to sabotage your organization (because you are a mole for, or taking kickbacks from, the competition) as the likely outcome is big bust. Just get going, one solution at a time, which you can integrate at the right time in a focussed project that is much more likely to succeed mostly on time and on budget as the project parameters will be better understood.

Supply Management Technical Difficulty … Part II

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master‘s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. We’ll take it area by area in this series. In our first post we tackled standard e-Sourcing, and in this post we’re tackling standard e-procurement.


Requisition, Approval, and Purchase Order Management

Technical Challenge: NOTHING

There’s nothing challenging about creating a requisition, placing it in a, possibly bifurcating and reconnecting, approval stream, getting approvals, and flipping it into a purchase order. It’s literally just adding lines and data to a form, like building a survey or RFX, recording approvals, and generating a purchase order in an appropriate distribution format when the necessary (final) approval(s) have been generated.


Invoice Management

Technical Challenge 1: Automated Error Correction

It’s easy to create and distribute an invoice. It’s easy to run a set of verification rules to verify completeness and correctness and then reject an invoice if data is missing, incomplete, or invalid. It’s harder to determine when data is missing (such as codes, skus, etc.) what that data should be, harder still to figure out which data is likely correct when there is a mismatch between fields that should align, and even harder when data is incomplete and suggests multiple possibilities. The goal should be to not only determine when there are issues with an invoice and flip it back to a supplier for correction (to reduce the number of invoices that need to be manually reviewed and approved) from an average of 15%+ to 1.5%+, but to indicate what the acceptable corrections are / should be so that the supplier can accept and the invoice can be automatically accepted and processed on re-submit. This requires strong AR (Automated Reasoning) technology and it is not easy to not only identify 90% + of the bad data, but 90% + of the correct data to replace the bad / non-existent data with.


Payment Management

Technical Challenge: Working Capital Optimization with Multiple Options

While ACH integration can be a challenge because of the security requirements, it’s not that difficult (as the banks / payment providers did the challenging task of implementing the encryption, secure networks, etc.) and the vendor just needs to plug in, it’s just coding hoops and a well understood process. The challenge is how to optimize the payment schedule against net terms (to prevent penalties), early payment discount options (when it is cheaper to take the discount offered even if the organization has to pay interest at their preferred credit rate), co-factoring (where the organization helps the supplier factor the invoice and agrees to take an early payment cut to cover some of the supplier’s cost of factoring), and investment opportunities to make sure the organization has the cash on hand it needs while minimizing its supply management costs.


Taxation Management

Technical Challenge: NOTHING

While it’s the ultimate pain-in-the-backside to keep up with all of the requirements associated with tax-tracking across multi-level jurisdictions when taxes can be applied at the union, country, state, and city level, especially when the amounts, collection rules, and submission rules are always changing, it’s just data tracking. Nothing more.


IN SUMMARY

With the exception of automated error identification and automated corrective suggestions and of working capital optimization, as with basic e-Sourcing, basic e-Procurement is pretty much common fare today that can be bought off the shelf from dozens (and dozens) of providers, but, as you can see, it’s not all equal. Any provider with AR capabilities for advanced invoice processing and working capital optimization capabilities is leagues ahead of anyone else.

And, as per part I, in this series we’re not discussing the User Experience. While a good User Experience, while not always challenging to code, can be challenging to define, it doesn’t define Technical Difficulty on its own.

Next Up: Supplier Management!

Supply Management Technical Difficulty … Part I

A lot of vendors will tell you a lot of what they do is so hard and took thousands of hours of development and that no one else could do it as good or as fast or as flexible when the reality is that much of what they do is easy, mostly available in open source, and can be replicated in modern Business Process Management (BPM) configuration toolkits in a matter of weeks.

So, to help you understand what’s truly hard and, in the spend master‘s words, so easy a high school student with an Access database could do it, the doctor is going to bust out his technical chops that include a PhD in computer science (with deep expertise in algorithms, data structures, databases, big data, computational geometry, and optimization), experience in research / architect / technology officer industry roles, and cross-platform experience across pretty much all of the major OSs and implementation languages of choice. We’ll take it area by area in this series.


E-SOURCING – RFX

Technical Challenge: NOTHING!

I’m going to burst a lot of bubbles here, but there’s nothing technically sophisticated about the development and implementation of an RFX solution by any stretch of the imagination. In this day of age, one could pretty much implement a basic RFX application in HTML5, javascript, and MySQL with a bunch of open source libraries in a couple of days. Form elements, templates, basic branching workflow, weighting, etc. … you even see most of this in free survey tools. Even bulk file upload is just naming conventions. ( But it’s amazing how many vendors haven’t even figured this out. :-( )


E-SOURCING – e-Auction

Technical Challenge: NOTHING!

Again, more bubbles bursting by the dozens. Twenty years ago, implementing an e-Auction was a real challenge with relatively simple web technology, slow internet speeds, and lack of graphical frameworks that could be updated in real time. But today, there’s a host of cheap / freemium solutions that implement basic e-Auction functionality. Unless the vendor is tying in with an optimization solution in real time to create a optimization-backed auction solution, no reason you should pay much for these dime-a-dozen solutions.


E-SOURCING: Optimization

Technical Challenge 1: MODELLING

This comes in two forms.

1. Structured for “Easy” Definition

Creating one or more templates that allow a user to quickly define the entities of interest — suppliers, products, services, locations, lanes, etc., collect the bids, define the constraints, and solve unconstrained, and maybe default constrained scenarios (3 suppliers, geographic split, etc.). Making what’s hard easy is no easy task.

2. Free-Form for Custom Models

Not every model the organization will need to create will fit in a template — especially if the organization wants to optimize working capital, minimize risk, cross-optimize related categories, etc. This requires the ability to allow end users to define the models they want using a modelling interface, which will not be easy to build because how do you hand over all the power but still make it understandable by a non-programmer / non-mathematician.

Technical Challenge 2: SOLVING

It’s hard to build these models, but it’s much harder to solve them. First of all, you have to map them to a system of equations that can be solved by your, hopefully, mixed integer linear programming solver (as you want to use a solver that is mathematically sound and complete), optimize them, optimize the solver settings, and hope that everything was translated consistently and there are no conflicting or unsatisfiable constraints and the model can be solved in a reasonable amount of time. Given that solution time grows exponentially with model size, this can be quite a challenge even for moderate sized models.


E-SOURCING – Contract Management

Technical Challenge 1: Contract Analytics

A simple contract management application, which is nothing more than meta-data based contract indexing and tracking, can literally be built by a high-school student with an Access database and go head-to-head with most of the basic contract management modules out there today! In fact, most of the capabilities of most contract management modules are pretty simplistic and can be built in a matter of days with a good BPM configurator (and companies like Agiloft have done it). The exception is contract analytics (like that provided by the likes of Seal Software).

Using semantic analysis to figure out what contracts contain clauses of a certain type, what contracts are missing clauses that pertain to a certain regulation, and whether a certain clause is close enough to a required / suggested clause is not easy. Not easy at all! Semantic technology is still emerging, and trying to capture a user’s wants, even given a set of sample clauses, is quite computationally difficult!


IN SUMMARY

With the exception of decision optimization and contract analytics, baseline e-Sourcing is pretty much common fare today that can be bought off the shelf from dozens (and dozens) of providers, but, as you can see, it’s not all equal — any provider with true decision optimization or true contract analytics is leagues ahead of anyone else.

And, of course, in this series, we’re not discussing the User Experience, and in some cases, a good User Experience, while not always challenging to code, can be
very challenging to define.

Next up, baseline e-Procurement!

What Makes a Sourcing Suite?

Good question, and one both customers and vendors must answer in the days ahead. Last decade, it was pretty simple. You could claim a sourcing suite if you had decent e-Negotiation support with some document management and reporting. And if, instead of document management, you had contract management and if, instead of reporting you had real spend analysis, then you were best of breed. And if, on top of all of this, you had some basic project management or category guidance, you were awesome.

But that was then, this is now. These days, if you don’t have basic S2C (Analysis, e-Negotiation, Contract Management) with decent Supplier Information Management, you’re not even a contender. Plus, given that many providers are offering some project / workflow management, expert driven category guidance, bill of materials support for direct sourcing, contract analytics (not the same as contract management), deep SRM (Supplier Relationship Management, Performance Management, Compliance Management, Risk Management, Optimization and other unique offerings that they expect to gain them market-share.

So what do you need? Hard to say because the real answer is whatever you need to successfully conduct and monitor a sourcing event that doesn’t belong in the complementary P2P suite. That varies based on the category and the industry you’re in, but there is some commonality. Specifically, while still not a mainstay of sourcing suites, every suite needs project/workflow management, every suite needs some performance tracking and management (as that should influence not only current, but future, events), a minimum of SPM (supplier performance management) and not SIM, some compliance requirement and documentation management, and better than average analytics. And any organization that does a lot of direct sourcing needs Bill of Materials Management, and while most organizations don’t know it, you’ll always find a lower-cost allocation with an optimization-backed sourcing solution. (And going back to Wednesday’s post, this isn’t savings, this is avoidance of unnecessary costs.)

In other words, you need a lot. But, fortunately, you don’t need best of breed for most of this. The only solutions that continually provide year-over-year value of 10% or more (through avoidance of unnecessary costs) are advanced analytics solutions and true optimization solutions. So you need best of breed here.

But not for most of the other components, although certain components should be better than average. The RFX in particular. It should not only be ridiculously easy to create and modify RFXs (which are typically the beginning of every sourcing event) but also to bulk upload attachments (as this can kill days in large projects when you have ten bill of materials with a dozen to a hundred items each and each component needs its own spec document), define a team for collaborative and distributed creation and scoring, and one-click integration into the analytics and optimization modules for detailed analysis.

Another component that needs to be better than average is the Supplier Portal — you need to make it as easy as possible for suppliers to provide information, response to events, create collaborative corrective action plans, offer innovation ideas, and so on. You want your suppliers to work with you and find it at least a reasonable, if not an enjoyable, experience. If the portal, and integration options, are sub-par and painful to use, and leave a bad taste in their mouth, this will eventually sour the relationship.

In other words, while the exact definition of a Sourcing Suite can be a bit nebulous, the requirements it has to fulfill, especially for your organization, are not. And a key requirement is usability and a good user experience for buyers and suppliers alike. Keep this in mind when selecting your new sourcing solution.

OEM Software Maintenance: Should I Stay or Should I Go? Part III

After working your way through Torey’s 2-part series, you have probably figured out that it’s a tough decision. It all comes down to ROI, which is a two part calculation. The first part is what does it cost to stay, and what does it cost to go:

This calculation requires filling out the following table at the very least and getting a good feel for total cost outlay either way:

Provider 3rd Party
Annual Maintenance Cost Usually % of License Often Fixed Amount
Estimated LifeSpan Annual Maintenance Cost * (Years-1) Usually fixed amount, sometimes lower for longer lifespans
Required 3rd Party Software Upgrades Extra Provider Costs Extra Third Party Costs
Forced Provider Upgrades Provider Costs 3rd Party Costs
Extra Training Costs if not included if not included
Extra Customization Costs if not included if not in base support
Grand Total $$$ $$$

If the third party cost is significantly less (at least 20%, preferably more, because there are always unknowns and gotchas and switching costs), then you consider switching. But only if there is also value.

Cost alone should not be a consideration. What sort of value will the new vendor bring with them? Will they bring best-in-class processes? Do they have any needed industry and category expertise? Do they consistently out-perform the vendor in areas of inefficiency in the organization? If they don’t also bring value, the savings will be limited compared to what is expected. But if they bring added value, then it’s a totally different story, and one that needs to be read.