Category Archives: Technology

Sometimes Good Advice for IT is Good Advice for Sourcing

A while ago, ZDNet published a short article that described a “10-Step program to SOA Success”. What’s neat about this article is that it could have been titled 10-Step Program to Sourcing Success as it is a great primer if you are just entering the world of e-Sourcing.

Let’s examine the ten steps carefully.

  • Who’s Your Daddy?
    Without support, any project is doomed to failure. If your organization does not yet have a Chief Procurement Officer on the senior management team, you need to find someone in senior management who is responsible for a top business imperative and convince them the project will save money and let them champion your cause.
  • Have a Vision!
    You need to articulate your vision regularly and consistently to gain support from other teams, departments, and upper management. You’re implementing the foundations for sweeping business change that is going to affect the business for decades to come.
  • Identify Attainable Projects.
    Start with an initial project that has immediate value and that can be finished in a few months since nothing speaks louder than a successful project delivered on time with better-than-planned savings.
  • Support the Business.
    If you choose the projects with the greatest potential impact to the business, you will ensure that your sourcing projects get the attention they deserve.
  • Flexibility Matters.
    Create flexibility through loosely coupled on-demand services that can be formed to create composite applications that automate business functions across the sourcing and procurement cycles. This flexible infrastructure will form the basis of business processes that are capable of adapting quickly as markets change.
  • Networking is Not Just for Salespeople.
    A key to success is the establishment of corporate-wide support at all levels of the organization. Be visible, promote your success, and find a way to make your success their success.
  • Don’t Lose Control.
    Establish strict governance procedures from the outset. With stringent government regulations, organizations need to be acutely aware and be held accountable. In sourcing terms, this means documenting each step of the process and ensuring compliance with negotiated contracts.
  • Don’t Fear Change.
    Organizational changes are imminent and you should be prepared to not only adapt to them, but guide them. After all, procurement is a central business unit in a successful organization.
  • Learn as You Go.
    Even if the first projects go very well, which they can if you use good tools, best practices, and follow the advice of experienced category professionals (that you should consider hiring as consultants if you do not have the expertise internally), there is always room for improvement. The most successful aspects should be recognized, captured, and carried to the next project while the less successful aspects should be identified and improved.
  • The Best and the Brightest.
    Create a center of excellence and staff it with the best and brightest. This team will be responsible for identifying best practices and guiding your procurement teams in their implementation.

New Technology Strategies for Supply Chain Management

The first keynote at the Symposium on Supply Chain Management yesterday was Beth Enslow’s (of Aberdeen Group) presentation on New Technology Strategies for Supply Chain Management. Over the last 6 months, Aberdeen has produced a slew of reports on Supply Chain that have identified a number of common findings that point the way to a best in class supply chain.

The five key findings were as follows:

  • Compete on Agility
    Traditionally, technology has not had the required agility, but in today’s environment where product cycles are shortening, new product introductions are increasing, and transportation networks are taxed, agility is key if you want to be best in class.
  • Beyond 4-walls Control
    Today, there is more reliance on external partners and processes are often driven externally.
  • Collaboration is Popular Again
    Collaboration can drive more value than reverse auctions. Significantly more value.
  • Reinvigorated Focus on Inventory Management
    Inventory is costly – you have to store it, and many products are perishable with new products always just around the corner.
  • New Technology: SOA & SaaS
    These technologies are more agile and integratable and should be at the foundation of any new initiative you undertake. After all, when 86% of companies require more than 6 months, and 40% more than 18 months, to adapt IT systems to changing business requirements and many on-demand SOA / SaaS solutions can be implemented in 3 to 6 months, this just makes sense.

Amazingly enough, these key findings line up reasonably well with the top four investment priorities for SCM, considering there seems to be a systemic blindness out there to the importance of proper SCM processes and technologies, a topic I’ll discuss further in a later post.

The top four SCM investment priorities identified by Aberdeen were:

  • Inventory Management (63%)
  • Demand Management (S&OP) (63%)
  • Supplier Collaboration / Global Transportation Management (40%)
  • Supply Chain Execution (40%)

In other words, if a company implements these technologies using Business Process Management and Workflow driven on-demand SOA applications with the ability to be configured on a company-by-company basis, they will be multiple steps closer to being able to execute as a best in class company.

Other interesting statistics included the attributes of the best-in-class inventory management companies (which have customer service satisfaction levels over 95% and reduced inventory carrying costs):

  • 45% use multi-echelon optimization systems
    vs 14% for all others
  • 57% have existing supply chain visibility systems
    vs 22% for all others
  • 52% have a forecasting system supporting customer-level forecasting
    vs 23% for all others

… and the on-demand vs. traditional statistics …

Metric better same worse
ROI 64 32 3
Upgrade Ease 66 19 16
Implementation Time 57 34 9
Customer Service Level 46 47 7

… and fact that for certain managed services, up to 50% of companies are somewhat interested and up to 30% of companies are highly interested … which is promising considering that best-in-class PSPs (Procurement Service Providers) can often outperform your in-house staff on categories outside of your core strengths.

Beth concluded with five recommendations that I strongly suggest you keep in mind when selecting new supply chain technologies:

  • Choose SOA-based solution offerings to ease implementation and improve usability and agility.
  • Consider on-demand and managed services.
  • Demand quick implementation and payback. You should be fully implemented within 6 months and see a return within 1 year.
  • Exploit the value of improved supply chain management information internally.
  • Agility! Agility! Agility!

(Supply Chain Management Technology) Still Going …

A month or so ago, “AMR Research” (acquired by Gartner) released their “Supply Chain Management Applications Report 2005-2010”. Considered one of the cornerstone reports of the space (with a price tag to match), it’s always worth a read – if you can afford it.

If you can not afford it, you can settle for the highlights, which SupplyChainBrain was kind enough to post in an extended three page review in the September 6, 2006 edition of the e-Insider. I hope you were fortunate enough to catch the summary before it disappeared from their site. If you were not, here are seven highlights from the summary.

(1) The SCM market grew 3% in 2005, and is expected to grow 7% in 2006 and 5% in 2007.

(2) The most rapid innovation is being delivered by independent software providers that are focusing on industry-specific functionality and targeting under-serviced business problems.

(3) While 75% of firms have supply chain organizations, only 52% have experience with a supply chain organization for more than two years. As a result, domain expertise is a limiting factor for user adoption of supply chain management technologies.

(4) Analytics is merging with optimization to drive decision support for critical processes.

(5) The following environmental factors affecting the SCM market have triggered a shift in business priorities since the last report:

  1. Globalization and global sourcing
  2. Leaner supply networks
  3. Increased customer expectations
  4. More mass customization
  5. Increased demand variability
  6. Cost volatility, inflation, and competitive pressures

As a result, the development focus for vendors has shifted as follows:

  • movement from static demand planning to demand sensing and shaping
  • progression from enterprise planning to multi-tier decision support
  • recognition of materials and logistics as major manufacturing constraints
  • shortening of order execution cycles
  • focus on network flow analysis

(6) The top growth area for 2005 was in AMR’s inventory configuration and policy technology category as a result of the need for multi-echelon inventory optimization and inventory policy to buffer against supply risk, maximize in-stock positions, and ensure continuity of supply.

(7) Revenue from application hosting/subscription grew strongly at 16%. SCM software is increasingly purchased by buyers on a subscription basis to avoid capital budgeting, rapidly achieve ROI, and avoid large upfront license commitments. Furthermore, AMR expects subscription licensing to continue to grow as a share of SCM software revenue.

In other words, (1) the market is growing, (7) on-demand is capturing the market place, (5) execution cycles are shortening in a time when improved demand sensing and shaping is key, (6) technology that addresses this problem will continue to grow and improve, (4) the best technology will be built on analytically-based optimization, (2) it will be built by innovative fast-moving independent software providers, and (3) chances are good that you need to adopt this enabling technology since there is a 52% chance your supply chain organization is limited in expertise and experience and the right technology from the right partner will greatly enable your organization.

And all of the above is good news for you.

(1) In a growing market, your solution providers will be pumping more sales dollars back into R&D to make better products for you. This will be especially beneficial to those of you who use on-demand solutions with frequent upgrade cycles.

(2) As time goes on, there will be more and more solutions that address an ever-increasing number of business problems, making your job easier and easier.

(3) Knowing that your domain expertise is limited allows you to go out and seek precisely that. Many consulting firms have been springing up to help you with specific problems. Use them. After all, Aberdeen has found that companies that outsource well do better than their peers.

(4) Considering that Aberdeen has found the application of optimization tools to analyze total costs, and of flexible bidding functionality to uncover creative supplier solutions has enabled early adopters to identify an average incremental savings of 12% above those that basic, price-focused auctions alone have generated, the quality of your allocation award decisions can only improve.

(5) One of my summer series discussed how Demand Driven Supply was the future of supply chain demand planning, so the fact that vendors are already actively pursuing this direction is great news for you.

(6) Simply put, improved inventory management software decreases your costs and increases your profits.

(7) On-Demand is here to stay – which is good news considering all of the benefits it provides (as chronicled on the e-Sourcing Forum [WayBackMachine]).

Eight Figures for an ERP? Think again. Think Compiere.

ERP – Enterprise Resource Planning – the be-all and end-all of business software – all of your transactional data in one place – everything you need to run your business – only seven figures! That was the promise.

The reality is much different. Seven figures for the software license. Multiples of that for the installation. That much again for the annual maintenance contract. In the end, it was an eight figure system – that if you were lucky recorded the majority of your transactions, in such a way that you couldn’t derive any intelligence out of the system without buying expensive modules for each business domain that sat on top of the ERP to allow you to create your financials, run human resources, create your manufacturing plans, negotiate your contracts, etc.

And that’s if you were lucky – if you weren’t, you couldn’t afford a real ERP and had to settle for a smaller, imitation system that probably only contained some set of transactions for the business unit that maintained it, was only accessible by a few people, and didn’t even meet their needs – leading to home-grown ad-hoc systems created by mavericks in an effort to do their jobs.

Either way – you probably have a solution that does not meet your needs. A system that requires more modules or third party add-ons than you can afford to be truly effective or a system that does not have the core capabilities or third party support. But what can you do? If you haven’t fully depreciated your mainstream ERP, you can’t afford to rip-and-replace, and if you don’t have one, you just can’t afford one.

You can look to open-source! And no, I’m not stark raving mad. Once the exclusive domain of big international multi-billion dollar software vendors, even ERP is now available open source. Compiere is a fully functional open-source ERP with built-in CRM functionality that is being used today by hundreds of companies all over the world. In addition, Compiere has amassed almost 100 partners in countries all over the world – so local support is available. And because it’s open, anyone can build extension modules on top of it, and custom modules for various domains are already being offered by it’s partners. Furthermore, Compiere and some of its partners are already hosting instances on-demand. And no, I do not believe I’m insane.

If you’re not an IT company, why not host your ERP on-demand? If it’s not your core business, why maintain an expensive 24-hour IT operation with redundant power supply, internet connectivity, real-time failover, automated off-site backups, IT security experts, always available on-call tech support, etc? After all, with today’s encryption and security protocols, communication security is probably the least of your security concerns.

For those of you who are already open source converts, you might be a little disappointed that Compiere was built on Oracle, but fear not! Compiere just received a significant amount of funding, relocated to Santa Clara, is in the process of completing a Sybase port, and it’s a safe bet that a MySQL(X) port may occur in the future!  (MySQL(X) may not have the required functionality to support Compiere yet, but MySQL(X) improves every year!)

It’s a procurement professional’s dream come true. No huge up front spending for an ERP system that may or may not deliver. With Compiere on demand, you’re paying for the system and support that you use, when you use it, and you’re not locked in!

Furthermore, you just know that a complete open-source-based on-demand procurement system with Compiere at its base is around the corner. After all, Rearden Commerce is less than 30 miles away in its San Mateo offices and there are a number of e-Procurement companies, like Ketera (which was acquired by Deem in 2010) nearby.  If these three companies adapted their APIs to allow you to merge their solutions, it would not be long before you could manage 100% of your contracted materials and services procurement spend. Rearden excels at services, Ketera is good for indirect procurement, and ERP-based planning and forecasting systems are the foundation of your direct materials spending.

I know it’s just pure speculation, but if these three companies made it easy to integrate their solutions, you’d be able to run your entire procurement effort on-demand! Then you could run your entire sourcing and procurement operation on-demand! After all, with respect to a complete solution, we have only left out sourcing (remember, procurement is the acquisition phase, sourcing the predecessor negotiation phase) and visibility (since, at a high level the cycle is Source-Acquire-Monitor). But wait — companies like Iasta (acquired by Selectica, merged with b-Pack, renamed Determine, acquired by Corcentric) have been offering (complete end-to-end) sourcing suites on-demand for years and now we have companies like Apexon offering on-demand visibility solutions!

As a side note, Compiere is holding it’s annual Partner Conference next month in Santa Clara – October 20-21 at the Embassy Suites at 2885 Lakeside Drive in Santa Clara. Check out Compiere’s Events Calendar for more details.

The Unique Solution for Travel Procurement

Earlier today we discussed the unique challenges of travel procurement – a nightmare shared by your employees as well as your finance team. After all, when booking a single trip can take an hour by the time you book your flight, rental car, hotel, airport transportation, off-airport parking, and dinner reservations and when finance has to sort through (tens of) thousands of expense reports literally by hand to determine whether their preferred carrier owes them a discount, how could you call it anything but?

Last week I was fortunate enough to see the answer. It’s called the Rearden Commerce Network (rebranded Deem in 2012) For those of you who read Spend Matters regularly, you’ll probably remember Jason more-or-less gushing about them as well in posts such as “Rearden unShrugged”* where he called Rearden the future of “personal” services Spend Management for employees.

Services are tough. They’re calendar-based, time critical, and dynamically priced. There’s a reason there is no Amazon, Google, or Yahoo for services. Even the brightest software engineers cringe at the thought of trying to build a single platform to handle such a diverse array of services. But as far as I can tell, Rearden has done it. Sure the interface still looks Web 1.0, but the capabilities are Web 2.0 all the way. And when they say you can book a complete trip in 10 minutes – they mean it. I saw it – and it works! I’ll tell you one thing – from an applications perspective, few software packages on the market today impress me. Even today, I equate most software applications with undifferentiated organic fertilizer (which is probably why you hear me mention so few companies in this blog – that, or I really am another one of those arrogant PhDs). But Rearden’s solution impressed me.

If you are a mid-size or larger company with a lot of travel related spend, I can not think of a single reason why you should not be using Rearden now! When your employees who travel regularly are probably wasting up to 20% of their time on travel arrangements (instead of a more palatable 5%, or less), when you have no way of easily tracking who you are spending your travel budget on (and if you qualify for discounts) and, more importantly, no way of enforcing that employees are buying against your preferred contracts when possible and sensible when there is this easy to use system that lets your employees do almost everything they need in a one stop shopping experience, allows your finance team to figure out whom you are spending on and in what amount, and allows your procurement team to enforce flexible spending rules. It’s a great addition to your supply chain suite!

Now, I’m not entirely sure whether it will scale up in the future to support all services in a consistent, coherent manner, even though they claim the platform was built to support any service you can imagine, but it is certainly capable of supporting any T&E service you can throw at it, and this is a very significant feat from both a business and a technological perspective. I can’t wait to get some time with their senior technology guys to do a deep dive into the architecture and technology. (After all, I need to use the PhD sometime!) If it’s as impressive as the business capability, I might just be inquiring as to whether or not that Director of Applications Engineering position that they are advertising can be done remotely.

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