Category Archives: Vendor Review

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part II

Yesterday we introduced you to SpendHQ, one of the strongest players in the spend visibility and analysis space from a software and services solution viewpoint. Unlike most spend analysis solutions that were designed and built by sourcing solution providers, SpendHQ was designed by sourcing and spend experts and implemented by a development team experienced in the implementation, and integration, of sourcing solutions.

In today’s post we are going to dive into the visibility module. The goal of the visibility module is to help the sourcing team, and the C-suite, get a handle on what the organization is spending over time (by quarter, month, or year — depending on the amount, and granularity, of the data available). The SpendHQ solution does this by pre-constructing a spend cube tailored to organizational needs and providing an interface that can drill into any level of detail, on the dimensions of relevance, and filter out any data items of interest, or non-interest, along any dimension. The solution then presents the data in a very easy to understand graphical display that is designed to be focussed on the most relevant items of interest, and only the most relevant items of interest. In the SpendHQ solution, no screen has more than three graphs. The designers, which have experience with a number of sourcing and spend products and associated dashboards, have found that any more than three graphs on a screen not only clutters the UI, but often distracts the decision makers from the most relevant data (which leads to more time spent analyzing the wrong data and less time focussed on what really matters from a savings perspective). This does not limit the usefulness of the product in any way as another key feature is that every screen tells you exactly where you are in a drill down as well as what filters have been applied. Furthermore, a user can always jump back up to any level or down to the bottom (using a pre-defined saved filter) and every piece of data is selectable and filterable dynamically. (So, even though the user only gets one cube, the user can extract any subset of that cube and view it along the dimensions of the user’s choice.) Plus, the current view, and all of the data behind it, can always be extracted to an Excel spreadsheet at any time (which makes it easy for the user to build reports, verify analysis, and load it into the supply management software of their choice for subsequent event execution and tracking).

The visibility product has six main components: home (the spend-trend dashboard), details, compare, compliance, reports, and tools.

The spend-trend home dashboard displays a spend trend graph for the default (but changeable) date range by month, broken down by category, the total spend, and the total number of vendors who contributed to that spend. From here, a user can drill into the relevant categories. Selecting a category brings up a screen with the spend for the category, broken into sub-categories.

The details section breaks the spending down by category and vendor, allowing the user to see trends by selected categories and subcategories, and, if desired, restrict that view to a select group of vendors.

The compliance section allows the user to quickly determine how much spend is being managed relative to the total organizational spend and how much of that managed spend is compliant. This allows the organization to not only determine the compliance rate, but the impact rate — which is the amount of compliant total addressable spend. This section is broken down into an overview section, a managed spend section, an unmanaged spend section, and a Rogue’s Gallery (TM) that summarizes the top unmanaged categories and the top non-compliant subcategories so that a spend manager can quickly zero-in on the biggest offenders with respect to compliance, and generate a list of the top locations, departments, and buyers.

The reports section allows the buyer to quickly access standard and pre-defined reports and the tools section allows the buyer to define their configuration options.

One of the unique features of the application is the Power Filter that allows a user to quickly select the spend range, dimensions of interest, and the relevant items as well as filter out the sub-dimensions and even line items of non-interest. With this tool, even the most novice of users can quickly slice and dice out just the data of interest to them. The user can save any and all filters of interest and (re) apply them at any time.

It’s not only a powerful spend visibility solution, but a very useable one. If your company is a mid-market company without a (useable) spend analysis or visibility solution that needs to get one up and running quickly, accurately, and usefully, take a very close look at SpendHQ. It’s a great starting point on your spend visibility and analysis journey.

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part I

As SI outlines in its upcoming white paper on the Top Ten Transitions To Tackle in 2014 to Tame the Tolls, hyper-inflation is just around the corner, logistics capacity is on the rise (just like the cost of transportation), and working capital management is still lagging. If you put it all together, costs could rise out of control while millions of dollars sit tied up unnecessarily. The only way to avert this impending disaster is to take proactive action and get your spend, and spend management, under control.

In order to do this, you need good spend visibility — and, if you are not an expert in spend visibility or spend analysis, you need visibility that you can use and that is graphical, categorized, and relevant to your spend management needs. Furthermore, if you do not have technical skills (in house), you need services that can help you normalize, integrate, categorize, and cleanse your data. And if you don’t know where to start once you have the data categorized, normalized, and cubed for analysis, you need category expertise and consulting services.

If you are in one of these groups, up until recently there were essentially no solution options for you to choose from and even now, there aren’t that many. Furthermore, most of the solutions on the market that are available to you today, with only a handful of notable exceptions that you can count on your fingers (without your thumbs), fall into either the category of solution or service, but not both. However, for those of you that need an option that provides a full-service solution that includes data integration and category expert consulting, an often overlooked solution (that has been under continuous development for almost a decade) is about to make a big splash in the Spend Analysis and Visibility space.

That solution is SpendHQ. What started out as an internally developed tool to help Insight Sourcing Group (ISG) achieve the visibility they needed to help them drive savings for their clients, was transformed into a basic commercial software solution in 2007 for a select group of marquis clients to help those clients track spend and associated savings. Since then, ISG has spun off the product into an independent business unit which recently added new team members with commercial product development expertise from leading sourcing and spend analysis solution companies. This new business unit has been dedicated to improving and extending the tool for the last three years in quarterly product releases.

The solution has grown from a simple spend reporting tool into a fully featured spend visibility tool that tracks all of your spend over time — by category, department, and user; a category management tool that lets you dive into category spend and filter down to the items of interest, see managed vs unmanaged spend, and track compliance; and, as of the next release later this quarter, track contract meta data and do basic contract lifecycle management. In addition, the services component has matured and the organization can quickly import, merge, classify, and cleanse all of the relevant data from whatever ERP, AP, or Procurement systems you happen to be using and refresh this data for you as often as every week, although SpendHQ recommends monthly refreshes (even though, for larger clients, quarterly refreshes often suffice). (Their largest client, with 50 Billion in revenue, chooses to only refresh their data quarterly as real-time isn’t all that relevant where spend analysis is concerned.) Plus, SpendHQ can also integrate supplier data feeds for verification and enrichment and currently integrates with a number of office supplies vendors out-of-the-box.

While not the most powerful (ad-hoc) spend analysis solution on the market, it’s a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needs to get one up and running quickly, accurately, and usefully (as the solution has more power and capabilities than the average company needs to get great results). Within 4-6 weeks, a company with no spend analysis capability can be up and running 100% and be making useful, informed decisions. In the next two parts, we will dive into the visibility and analysis capabilities of SpendHQ as well as the category management capabilities.

aPriori, rationi viam ad sumptus! Caput II

In yesterday’s post, we re-introduced you to aPriori, the masters of Enterprise Product Costing that have been working their cost reduction magic for a full decade, taking out mountains of cost before the first part is produced! We noted that, even though it’s been over half a decade, the masters of costing have stayed the course and are still focussed 100% on taking cost out during the design and production phases, where up to 80% of the cost of a product is locked in. They do this through complex process models, built on CAD geometry, that they embed in sophisticated VPEs (Virtual Production Environments) which are populated with accurate cost data for each material, machine, and overhead factor that contributes to the total production cost.

Today we want to highlight the major improvements made in the last five years.

Significantly More Production Process Models!

When SI first reviewed aPriori, their out-of-the-box capabilities were limited to metal-based parts only, and there were only a few dozen process models. Now they can handle virtually any metal and plastics component you can think of and support over two hundred production process models out of the box. In addition, they recently signed some very big name electronics manufacturers and are adding electronics process models to their repertoire, and a few of these will likely be available out-of-the-box this year.

Significantly More Virtual Production Environments!

Now that they have close to 100 customers across the Americas and Europe, that produce their components across the Americas, Europe, Asia, and even Africa, they have up-to-date cost models and accurate VPEs for every major geography out-of-the-box. An engineer, or buyer, can get a rough idea of production cost for any supported production process in any geography before even engaging with a supplier, who can, of course, provide even more accurate cost data specific to their factory.

Support for Every Standard CAD File Format and Just About Every CAD System

The more customers you get, the more CAD systems and file formats you have to work with. At this point in their evolution, aPriori now supports every standard CAD file format and every major CAD system currently in use in the manufacturing sector.

Improved UI

It looks better, responds faster, and integrates the best of CAD and OLAP. The main screen has three sections: the component view, the cost model, and the process model. Each displays the high-level information, but in each the user can drill down as deep as she desires.

Full Excel Export Capability

Not only can the user copy and customize process models and VPEs, update / override any cost, and save any scenario – but they can also export the full scenario and underlying cost model to excel for analysis, review, and distribution.

Powerful Comparison Reports

The user can compare multiple process models, and associated costs, for a part side-by-side, and, if desired, export the full comparison report to Excel.

Roll-Ups and Automatic Process Model Generation and Solution

A user can create a component-based production should-cost model that rolls-up the production should-cost model for each part and the system will automatically cost the full component using the individual part geometries and identified (or default) production processes and, if desired, the lowest cost production process for the entire component.

The improvements save their customers millions every year. For example, the construction equipment manufacturer that saved over 500K annually just on frame and door production also saves over 200K annually on cage rear pivot production. The manufacturer thought that machined casting w/x-Ray was the best way to produce the part, but the aPriori solution was able to determine that a two-step process that first burned the part farm from plate and then machined holed the cavities could reduce the cost from 16.56 to 10.05 on 22K cage pivots per year.

And it’s not just construction equipment manufacturers that save. Thermo King, which produces temperature and climate control products for the transportation industry, analyzed 5.679M in annual spend across 294 sheet metal parts and quickly identified a potential savings of 900K (16%) and realized 400K of this in just 12 days! And a a 6.5B manufacturer of commercial trucks that analyzed 7.7M Euro in spend across 86 sheet metal parts was quickly able to identify that 17 of the 86 parts were “outliers” (and nowhere near expected costs) and through additional analysis was able to identify better production methods that led to a confirmed savings of 1.6M Euro (21%).

It definitely helps to know your expected production costs aPriori!

aPriori, rationi viam ad sumptus! Caput I

When we last covered aPriori in 2007 and 2008 in aPriori and The Sourcing Maniacs 2008 Vendor Tour Part III, they were very focussed on Enterprise Cost Management (ECM) and taking cost out of the design phase. Fast-forward six years later, and nothing has changed, except, of course, the depth, breadth, and usability of their platform — which has grown in leaps and bounds.

Unlike traditional sourcing applications, including advanced spend analysis and decision optimization, that are limited to component cost-based should-cost models, aPriori can also factor in design and production factors to model the full production cycle of the part you are buying (if it’s metal, plastic, or, in some cases, electronics-based) and give you a true understanding of what the part should cost to make. The reality is that the cost of a part is dependent not only on its design, but on the production process employed. As noted in our first post, a supplier that’s always made a certain part a certain way might not realize that new technology or materials would allow them to make that part significantly cheaper if they used a different process. Since the aPriori application instantly and directly interfaces with your CAD program and interrogates the solid model to extract the geometric cost drivers, the aPriori application can automatically determine all the process routings that can be used to make the part, compute the costs associated with each step based upon standard machine, material, and labor costs, and compute the total cost of each part on a per unit basis by factoring non-geometric cost-drivers such as production volumes, the selected supplier or factory set-up selected, and the exact routing and machines used. This is because the aPriori application currently supports over 200 out-of-the-box process models in over 12 major process groups (including, but not limited to, Bar & Tube Fabrication, Casting, Forging, Machining, Plastic Moulding, Powder Metal, Roto & Blow Moulding, Sheet Metal Sheet Plastic, Stock Machining and Rapid Prototyping.

In addition, because the application supports the creation of complete VPEs (Virtual Production Environments) that encapsulate the production processes, a customer can fully model the production and overhead costs associated with each production process supported by a factory in question, including local labour, power, maintenance, and other overhead costs to create a fully accurate should-cost production model, which can be compared to alternate production processes in the factory and other factories modeled with an appropriate VPE. This allows for the true identification of the lowest cost because, as the Sourcing Maniacs documented in their vendor tour post, the COGS is a combination of raw material costs, labor costs, production overhead costs, and margin and these costs not only vary by locale and production process, but in their interaction. For example, just because you identify three ways to make a part and each requires three steps, this doesn’t mean that each process is going to be roughly equal in cost. Not only do different processes require different amounts of manpower or energy (for energy-intensive equipment like lasers, etc.), but reordering the steps can change the manpower or energy required in subsequent steps.

Let’s take, for example, the production of the main Frame sides and door for a piece of heavy machinery construction equipment. An aPriori customer was cutting the entire frame using a laser process. While this seemed efficient, as only one piece of machinery was required, cutting the entire frame and door using a laser cost them 75.54 per frame and door combination, and they required over 14,000 of these combinations a year. That’s over a million dollars on just one part! If, however, as discovered by aPriori who analyzed the geometry and ran it through every possible production process that was available to the manufacturer, they switched to a two-stage production process that involved an initial laser cutting of the frame and door followed by an NC Punch process to punch out the internal cavities, the time required to produce a single frame and door combination decreased by 14 minutes and the cost decreased by 56% to 33.29 (as laser cutting is expensive compared to NC punch).

So what’s new with aPriori? Come back for Part II.

FREIGHTOS: Helping to Bring Freight Into the Modern Era

Freight is often the bane of the Procurement professional, especially when such professional needs a quote in a hurry. It’s not uncommon even in this day and age for a Procurement professional to call up a freight carrier for a spot quote and have to wait two or three days. It’s absurd. Quotes, or at least quotes on standard table rates, should take two or three seconds. The only time you should wait a couple of days for a quote is during a master contract negotiation for hundreds of lanes, as you will want to give the carrier some time to determine their absolute best rate in this situation.

This is the primary reason BuyTruckload.com was founded. The founders, veterans of the logistics management software industry, got fed up with both having to wait for bids on the spot market and being unable to shop the business to enough carriers to get the best rate.  But this isn’t an article about BuyTruckload.com, even though BuyTruckload.com does a wonderful job in North America. Why?  Because BuyTruckload.com it doesn’t solve the global shipping problem, doesn’t address other modes of transit, and it doesn’t account for the fact that you might have contracts in place (that the buyer might not even be aware of).

In order to address this problem and speed up the freight quote time, on or off contract, in the global market place, Zvi Schreiber and his team built FreightOS (pronounced Freight O.S., or even freigh-toss, as it is a freight operating system and not a brand of breakfast cereals), which is an technology platform that enables an on-line network of global freight carriers to provide instant spot-rate and on-contract quotes when a (potential) customer needs them.

When a carrier, or freight-forwarder / 3PL,  signs up for the FreightOS network and uploads their standard rate tables for ocean, air, and land-based shipping for all of the routes they service, customers can access the carrier’s portal on the FrieghtOS network and get almost instantaneous quotes (which, depending on the number of routing options and shipment goal — be it lowest cost, fastest delivery, etc. — could take a few seconds) for the route(s) of their choice. All the buyer has to specify is the origin, the destination, some basic load characteristics (what is being shipped [boxes, pallets, etc.], dimensions, unit weight, and quantity), the desired pick-up date, the allowable modes (land, ocean, air, or any combination), whether or not the load is hazardous, if insurance is required (and the load value if it is), the applicable HS code(s), and if a customs brokerage is being used and click a get quote button. Within 10 seconds, the buyer will get the quickest delivery quote, the cheapest quote, and, if applicable, some suggestions for nearby delivery locations that are quicker or cheaper (especially in the case of inter-continental shipments where there are multiple options that require a multi-modal delivery network that consists of air or ocean and truck or rail). Each quote returned will include the total cost, the time-in-transit, the modes of transportation required, and whether or not the carrier will work with a customs brokerage or transport hazardous material. Clicking on a quote will break it down into its constituent cost components, which may include, but are not limited to, basic freight cost, (airline) screening fees, (airline) security fees, fuel surcharges, documentation fees, (airline) handling fees, export declarations, advance manifest fees, etc. If the buying organization has a contract with the carrier, even if it only covers some lanes, they can upload the contract and all of their buyers can get on-contract quotes instantaneously and compare them to off-contract quotes. This can help the buyer discover whether a different routing can save them some money.

Also, after the buyer has requested quotes from their (preferred) carriers of choice on the FreightOS network, they can download their entire quote history to an excel spreadsheet to not only do a lowest-cost cross-carrier comparison by lane, but determine where the real (hidden) costs are. For example, it’s possible that (one of) the biggest cost(s) (in air freight in particular) is the fuel surcharge, and if the buyer can identify this and negotiate a better fuel surcharge rate with a carrier of choice, they could potentially lower their shipment costs going forward. Also, in the case of exports and imports, a buyer can see if any of the security or documentation fees imposed by one carrier are (unreasonably) higher than the market average.

Right now, the FreightOS platform has approximately 20 carriers on-board, but considering the huge cost savings this represents to a carrier that spends a considerable number of man-hours every day quoting on business for which it knows it will only see a 20% to 30% success rate at best, it shouldn’t be long before more carriers sign up. With this type of platform, no man-hours are needed to provide market-rate quotes and the carrier will know that when they do get a call based on a quote provided by the platform, the buyer has product she needs to ship, has decided that the carrier may be able to provide the service she needs in an acceptable price range, and has narrowed her pool of carrier choices down to select few. The founders of FreightOS believe that they can increase the success rate of their carriers by 10% with this tool, but SI believes that this tool could increase a carrier’s success rate by as much as 50% as most buyer’s will only call, at most, the 3 lowest quoting carriers and select the first carrier that can meet their delivery requirements at an acceptable price.

If you have global freight and need a better quoting solution than calling up a carrier who will take, on average, a day or three to get back to you, SI recommends checking out FreightOS. It’s definitely a platform to watch.