Category Archives: Technology

Vendormate: Great Fit, Less Fraud

Those of you following Spend Matters in recent months will remember a post on Vendormate (acquired by GHX, acquired by Thoma Bravo) on “Tackling the Compliance Side of Supplier Risk Management”*, a vendor registration, credentialing, and compliance monitoring solution provider with a large footprint in the healthcare sector.

Not long ago, I too spent some time talking with Andy Monin in an effort to understand the extent of their offering and how they differ from services provided by providers such as Austin Tetra (acquired by Equifax), Open Ratings (acquired by Dun & Bradstreet), Browz (merged with Avetta), and Connect4Growth. It was an illuminating discussion and I believe that they are truly fulfilling a need in the healthcare sector in particular and that the financial sector needs to take a long hard look at their offering.

Jason Busch highlighted some of the benefits of the Vendormate solution, including the capture of supplier information through an online registration portal, the capability to capture supplier credentials and certificates, the built in rating and scoring system that uses 126 data points, user defined thresholds and risk tolerance, and 3rd party data to assign each vendor a risk score, and the ability to manage compliance risk through exception and be alerted when a supplier may have fallen out of compliance.

What Jason did not highlight were the following facts:

  1. most mid-size and larger organizations have no clue how many vendors they are doing business with, even within a single commodity category (a point that the spend visibility vendors spend a lot of time trying to drive home)
  2. many companies go through peaks and troughs with respect to vendor cold-calls; after a major advertisement or in a public standing offer renewal period, a company will be bombarded with more calls than it can handle, while the rest of the year calls will be few and far between; furthermore, it can be difficult to differentiate between vendors that can provide positive productivity and savings opportunities and those that will do nothing more than waste your time and money – a systematic approach, such as that provided by Vendormate, for receiving, screening, and processing these vendors helps you differentiate the gold from the coal and insures that your business operations are never disrupted as a result of vendor cold calls
  3. regulatory compliance, terrorist screening, and fraud are huge problems that need to be addressed not only in your company, but in your supply base
  4. many companies have no means, or no time, to insure that vendors are aware of, sign off on, and agree to policies and procedures
  5. since Vendormate implements a paid subscription service, vendors have an incentive to keep the information current

Vendormate’s solution addresses these problems as follows:

  1. by providing a common registration system, and refusing to deal with any supplier not in the system and approved, you can know precisely how many vendors you are dealing with and precisely how many provide you with a certain category of goods; this can greatly improve the accuracy of your spend visibility and analysis efforts
  2. by providing a self-serve supplier portal, especially one that comes bundled with a registration fee (to offset processing costs and credential review), a buyer can streamline vendor registration, review, approval, and selection
  3. by integrating with third parties that provide terrorist watch lists and companies that have been identified as committing fraudulent activities in the past, companies can insure they remain in compliance with their vendors and mitigate some key risks
  4. by providing you with a centralized process, it can insure that a supplier accesses a policy, and signs off on acceptance before completing registration; this is key to mitigating risk and future litigation

All-in-all, it’s a great way to kick-start your vendor management and compliance initiatives, especially in the verticals they have considerable strength and experience in. In addition, I highly recommend you check out Vendormate’s blog, it is shaping up to be a good resource on vendor management.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

The New and Improved I2

During my whirlwind tour of North Dallas, I was lucky enough to be able to meet with both Sarinder Chhabra (Senior Vice President) and Manish Govil (Program Manager) of i2 Technologies to talk about what i2 has been up to lately and where they are going.

I’m sure many of you still consider i2 to be the gold-ring exclusive services provider to the top ten or top twenty aerospace, automotive, high tech, and chemical providers, with deep service offerings beyond your needs and capabilities, and price tags to match, but that’s the i2 of old. Having conquered best in class, they realized that they only had two options for growth: conquer new verticals or address a larger market-space. New verticals would be a great start, and their generic process solutions could be customized to the needs of just about any vertical, but the real market lies in the mid-market, where most companies reside. Therefore, they decided to entirely re-architect their software and solution offerings to address the needs of small and large alike! And it sounds like they got it right.

The following are seven key points that I took away from my discussions.

  • They’ve re-architected all of their modules and major sub-modules as Service-Oriented Architecture enabled components and developed a new AGILE business platform that allows them to integrate just the components you need.
  • They’ve enhanced their technology architecture to include best of breed third-party products, such as Endeca’s (acquired by Oracle) search technology and Denso’s OEM catalogue.
  • They have embraced Software as a Service principles and will offer hosted solutions or managed services as well as event-based offerings.
  • They have been working hard on a next generation supply management solution that integrates the software and services you need to be successful.
  • They have been actively creating and embracing partnerships, and will happily work with complimentary providers to provide you a full suite of connected and integrated products to give you an end-to-end solution for whatever part of the supply chain you are attacking.
  • They have been working hard to translate their broad in depth knowledge base of industry best practices into generic processes that can be built into your configured software solution.
  • They have been working hard to transform from a software provider to a solution provider – to offer you the services, be it generic software, custom software, consulting services, or managed services, in-house or through partnerships – you need to succeed.

I look forward to diving into some of their new offerings in the near future.

Spend Analysis IV: Defining “Analysis”

Today I’d like to welcome back Eric Strovink of BIQ (acquired by Opera Solutions, rebranded ElectrifAI) who, as I indicated in part I of this series, is authoring the first part of this series on next generation spend analysis and why it is more than just basic spend visibility. Much, much more!

“No canned report survives first contact with the analyst.”

Analysis = Agility

Reporting on a large transaction dataset is
technically challenging. For example, pointing ordinary reporting
tools at a large dataset doesn’t work well, because what might
seem like a perfectly ordinary and reasonable database query can require minutes to
complete, sometimes even hours. That’s why OLAP (“On Line
Analytical Processing”) technology is required in order to
return results quickly on large datasets, and that’s why every data
warehouse uses some variant of it.

OLAP is not a panacea. OLAP database queries only
work within a rigid framework — that is, queries are
fast only within the data dimensions and hierarchies that have
been pre-defined. To ask a question outside of that rigid
framework, and to get an answer to that question in a reasonable
amount of time, the underlying dataset structure must be changed —
either dimensional hierarchies must be altered, data re-mapped, or
entirely new data dimensions created.

Data analysis is an inherently ad hoc process —
to paraphrase Sun Tzu, “no canned report survives
first contact with the analyst.” But, in order to be able to perform the
OLAP queries that support ad hoc reporting, it is necessary to change the dataset structure
to support those queries. And, it had better be possible
to do that quickly and easily; otherwise OLAP power cannot
be brought to bear on the ad hoc report, which means that
the report can’t be generated without great pain.

Analysis therefore equates, in a very real sense, to “agility”;
in other words, how quickly and easily one can:

  • generate new dimensions;
  • change existing dimensional hierarchies;
  • map and family new and existing dimensions.

Agility also applies at a higher level. I argued in

Spend Analysis I: The Value Curve that the notion of
one dataset for spending data is limiting, because many
different analysis views — especially commodity-specific
views — can be key to driving additional value. If the spend analysis process involves the creation
of multiple datasets over time, and it’s hard or expensive to build
or modify datasets, then that process can’t move forward.

Agility also requires that the above operations be performed by
business users with limited IT skills, on their own, without
assistance from vendor or internal experts. If the system is
not agile, then the default decision is not to analyze,
as pointed out in

Spend Analysis II: The Psychology of Analysis. That is
the worst possible outcome for the enterprise, because it perpetuates
information starvation in a land of data plenty.

Analysis = Speed

Here’s a heretical statement, coming from a spend analysis vendor:
anything that a spend analysis system does for you can be done
with ordinary tools. You
can use a database system to load a large dataset; you can cleanse your own data by
writing database queries;
you can write programs
to build reports; you can dump data to pivot tables. You can get great answers to your
questions. Some old-school sourcing consultants still use manual methods like
these, and some home-grown spend analysis systems built around
tools like Microsoft Access are still operating today.

However, if you do use a modern spend analysis system, you can produce
those same pivot tables and reports with a few mouse-clicks; and, you can alter their
properties and constraints with slice-and-dice operations easily and quickly. For every
report that the old-school consultant generates, you’ll have had the opportunity to generate hundreds.
Does this mean that your insights will be better than those of the consultant? Not necessarily;
but it’s hard to argue that they shouldn’t be.

If your spend analysis system isn’t agile, though, you’ll be back in the same boat
as the crusty old consultant, and he’ll be laughing at you. You’ll have to extract
transactions from the system and hack at them with the same tools that the consultant
uses, with the same productivity loss.

Analysis = Power

It’s important to distinguish between ad hoc reporting and reporting in general.
Does the spend analysis system have the ability to produce complex and custom
reports, guided by you?
Or are its reports written in some programming language like Java or C++,
the source code for which is inaccessible to you
and unmodifiable by anyone but the vendor?

Analysis power is precisely the power that you wield as a business user,
independent of canned reports supplied by a vendor. Complex, multi-page
reports such as the original MMG Commodity Spending Report (below),
variants of which are now commonplace across the e-sourcing space, should
be within your reach to create quickly and easily — without any
programming, database queries, or other IT magic, and yet with full flexibility
to build whatever it is that you need.


Click the image to enlarge

Next: Spend Analysis V: New Horizons (part 1)

Show You The Money, Part II (Supply Chain Cost Avoidance Basics)

Yesterday we talked about the fact that the best way to save money is to avoid spending it in the first place and introduced you to the 4 F’s of Cost Reduction: Failure, Facility, Focus, and Finance. Today we are going to discuss focus and finance and point out the specific solutions and methodologies you can use to meet your goals of increased cost avoidance.

Focus
This refers to your market focus and how you address the market. More specifically, it refers to your marketing and sales costs. Don’t just let marketing outsource a campaign – there’s no guarantee the agency they select are going to get anywhere near the best prices for print and media production. If you need to bring an agency to help with your message – do so – it’s often a great idea, especially if they understand your target audience. But make sure they’re service costs are decoupled from the print and media production costs you can control and often save big on. Also, if your sales people don’t have the right message, or don’t attack the right audience, they will be wasting a lot of the companies money. It may sound like it’s their problem, and not yours, but the reality is that if they do not make their sales numbers, then your company’s demand will not hit its forecasts. This means that you will not be ordering as much as you thought, and if you cut a great deal that came with a big rebate once you ordered one million units, and you only order 900,000, you don’t get your rebate, you don’t hit your savings number, and all of a sudden it looks like its your fault. So make sure you have systems in place that allow sales to collaborate with engineering, marketing, and procurement and truly understand what they have to sell, what it can do for the customer, and who they should be targeting in their efforts. Also, if they sell more than they expected, they need to be able to inform you quickly so you can adjust your orders to meet a demand surge.

Finance
They say money talks and money walks. But they often fail to tell you that it’s easily the most expensive asset you have. You have to collect it, disburse it, protected it, pay taxes on it, and, more often than not, finance it. And that last one can really cost you a lot of money – even when you are not actually financing it yourself. The fact of the matter is this: if anyone, anywhere in your supply chain has to borrow a lot of money to meet the demands placed on them, they are probably paying a large financing charge, which is being rolled up into their price, which is inflating your price. Therefore, it is vitally important that you understand your supply chain, especially your tier one suppliers, and do what you can to mitigate financing whenever you can. If paying up front will mitigate the need for your selected supplier to take out a loan that costs them 5%, then they will be able to reduce your price by 5%. Unless you have an investment that will absolutely guarantee over 5% return, and that’s unlikely given the unstable nature of investments, then simply paying early can avoid 5% of otherwise non-avoidable costs.

Disbursing your money can also cost you a lot of money, especially if you have people who aren’t buying on contract and using the absolute best price that you spent a lot of time and effort negotiating and securing. Make sure you have a good contract and compliance management system in place to allow you to track your contracted costs, track purchases against those contracts, prevent, or at least alert you to maverick spend (sometimes it might be necessary, in order to prevent a disruption), and insure that suppliers are billing you what they agreed to.

To summarize, you can also save money by avoiding spend in the first place, and you do that with the right strategies supported by the right technologies and methodologies. Therefore, in addition to the nine technologies and methodologies I outlined in Show Me the Money!, make sure you also have the following technologies and methodologies in place to help you avoid spending that cash in the first place!

And now you also understand why I (will) also (keep) talk(ing) about companies like:

  • Austin Tetra (acquired by Equifax),
    Aravo,
    Connect4Growth,
    Open Ratings (acquired by Dun & Bradstreet),
    VendorMate (acquired by GHX, acquired by Thoma Bravo)
    Vinimaya (rebranded Aquiire, acquired by Coupa),
    etc.
  • Browz (merged with Avetta),
    CT Space (acquired by idox),
    Logility,
    New Momentum (acquired by Market Track, acquired by Vista Equity Partners),
    Quadrem (acquied by Ariba),
    Sockeye Solutions (rebranded Vecco International),
    etc.
  • Salesboom.com,
    SalesForce.com,
    etc.
  • Fogbreak Software (defunct),
    i-Many (acquired by LLR Partners),
    International Trade Bureau,
    Nextance (acquired by Versata Enterprises),
    Upside Software (acquired by SciQuest, rebranded Jaggaer),
    etc.

Show You The Money, Part I (Supply Chain Cost Avoidance Basics)

Last week, in Show Me The Money! I asked you to apply various technologies, methodologies, and strategies to stop your supply chain from hemorrhaging cash and Show Me The Money! And if you did everything I asked you to do, it would be a great start, as it would provide you a big, fat, increase on your balance sheet, but it’s not the whole solution. Even though I only addressed every aspect of your physical supply chain from raw material mining through final delivery to the end customer, I only addressed the physical supply chain. Furthermore, I only talked about cost reduction technologies, strategies, and methodologies – and the fact of the matter is the best way to save money is to avoid spending it in the first place!

So today, we’re going to talk about the other half of the supply chain, and for those of you who want a very simple classification, the cost avoidance half of the supply chain. Just like there are four areas where the right technologies, methodologies, and strategies will save you a lot of money, there are four areas where the right technologies, methodologies, and strategies will help you avoid spending money in the first place. They are the 4 Business F’s of Cost Avoidance (as opposed to the 4 F’s of Product Design, as brilliantly laid out by Eric Hiller in his “The Fourth F”* post on Spend Matters [WayBackMachine]).

The Four F’s

  • Failure
  • Facility
  • Focus
  • Finance

Failure
According to Aberdeen’s “Global Supply, Visibility, and Performance Benchmark Report”, the average company has had an average of two major supply chain disruptions per year and industry average and laggard companies are only able to meet customer-requested ship dates 40% of the time. Every time something goes wrong, it not only costs you revenue (lost sales, etc.), but it costs you had cash as you usually have to take expensive action to fix it. Thus, if you could prevent failure, you could prevent costly expenditures and revenue loss that, when combined, can easily break six, seven, and even eight digits.

So how do you prevent failure? You manage your suppliers and you manage your risk. How do you do this? Through visibility, enablement, and risk-mitigation strategies. Invest in a supply chain visibility system to always know where your parts are, where your parts’ components are, and where the raw material is coming from. If your supplier has a temporary shutdown, you need to know. If their supplier runs into a problem, you need to know. And if the mining company had a shortfall, you need to know. With enough lead time, you can relay an order to another preferred supplier, inform your supplier that they may need to follow up with their supplier to make sure they have the components when they need it, or lock up additional raw materials in a different part of the world – preventing a supply chain disruption long before it happens. With a supplier enablement system, you can not only help them inform you of potential problems before they happen, making sure that such problems are resolved before they occur, but you can help them improve their efficiency, which will ultimately lower your costs even more. Risk mitigation doesn’t require a system, just good planning. Make sure you have at least two suppliers for key purchases – or if they are custom made, and dual-sourcing is difficult, make sure your chosen sole-source supplier has multiple plants where the components could be produced – preventing against disruption by natural disaster or political unrest in a specific region.

Facility
Facility can be defined as readiness or ease due to skill, aptitude, or practice, in other words, facility relates to your level of productivity. Just because you can’t do much about your labor costs, as wages are more-or-less set by the market, that doesn’t mean that you can’t maximize your return. Maximizing your productivity will allow each of your resources to do more, effectively lowering your overall cost for each unit or service you offer. In addition to the strategic sourcing, spend analysis, and award optimization systems I highly recommended you provide to each of your buyers (as such systems have been proven to reduce cycle times by an average of 66% or more), I also recommend providing them with good collaboration, e-Procurement, and Procure-To-Pay systems. Collaboration systems allow remote groups to work together more effectively and e-Procurement and PtP systems greatly simplify the actual ordering and payment processes, allowing your users to spend less time on tactics and execution and more time on strategies to reduce and avoid costs.

Come back tomorrow for a discussion of focus, finance, what-to-do, and where-to-go!

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.