Category Archives: Vendor Review

Claro’s Crown Jewels

Last year, I blogged about how you could achieve Clarity with Claro in your sourcing projects. Since then, Claro has been named one of Seven Small Jewels for 2008 by Consulting Magazine. I was in Chicago recently, so I decided to catch up with Bart Richards, who is now a Managing Director of the Sourcing Group.

Over the past year, their sourcing practice has been growing by leaps and bounds as more and more companies are trying to find savings opportunities in an inflationary market where cost pressures on all sides are causing financial hardships across the board. The good news is that they have been successful as there are still savings to be found when the right categories are addressed, but the better news is that they understand that, in today’s market, cost avoidance is king as simply holding prices static can provide you a significant advantage over a competitor who sees their costs rise 10% to 30%.

The truth of the matter is that if your organization is still focussed on cost savings, and you are focussed only on strategically sourcing those categories you know you can save on, you’re actually losing money. How can this be? Let’s pretend that you source steel and services (or petroleum and travel, or energy and telecom, etc.). Let’s also say that you spend 10 Million on each category and that it is your expectation that you can only save on services. If put all of your effort into strategically sourcing services, you could probably save 20%. But steel prices have more than doubled over the past year. If you simply delegated steel to an e-Auction, you’re likely to find your steel prices increase 90%. Although that would be good compared to the market, that would be very bad if focussing all of your efforts on this category could have resulted in a price increase of only 60%. By focussing on savings, you saved 2M on savings only to lose 3M on steel — for a net result of a 1M loss. Not very smart. Today, it’s more important to focus on those categories that have substantially increased in price since your last sourcing event, or that are rapidly rising in price, than it is to focus on the few remaining categories that might yield savings. Because if you don’t, you find that you save a dime only to lose a dollar.

This is also why it’s critical that an organization’s sourcing performance metrics, as well as incentives and bonus plans, revolve around cost avoidance and not cost savings. After all, as I have said before, there’s no such thing as savings, because if you really can save money, it simply means that you shouldn’t have been paying that much in the first place, and that you are paying a price that should have been avoided! Now, I know it is more work to define avoidance metrics than it is to define savings metrics, but the payoff is worth more than the price. Furthermore, there are a number of on-line resources, such as the article archives and blog entries provided by Next Level Purchasing (now the Certitrek NLPA) and the wiki paper on the e-Sourcing Wiki, that you can use to guide your efforts, standard pricing indexes that you can use to precisely define average raw material price increases since your last sourcing event, and a number of consultants (including the doctor) who can help you define the right metrics as well as the right sourcing sourcing program.

With this knowledge, Claro has been successful both at finding savings for their clients in categories such as services, travel, and benefit plans as well as controlling cost increases and keeping them to a level that is usually significantly less than market average by focussing on those categories that the client can buy in bulk, hedge against, or lock in longer-term preferential agreements. They’re still saving an average of 10%+ in a number of categories for their average client, but more importantly, they’re reducing expected cost increases in key categories by 10% to 20% or more, which provides for better overall cost containment across an organization than simply focusses on the low hanging fruit.

A number of examples of their success stories can be found in the numerous case studies on their web-site, and if you want to know whether or not they have sourced a particular category recently, and what sort of results you could expect, you can contact them for more information and additional case studies relevant to your situation at any time. They’re more than happy to take your call, or your e-mail, and Bart Richards can be reached at brichards <at> theclarogroup <dot> com.

Our next post on Claro will talk about the other services Claro offers as well as some of their particular areas of expertise.

Design Cost Out with Akoya

Last year, I gave you a formal introduction to Akoya (acquired by I-Cubed) in my post Ahoya, Akoya and their unique solution for reducing direct material spend, which was described by their co-founder and president Brett Holland in his posts on “Getting Ahead of the Product Cost Management Curve” and “Taking Control of Cost Management for Engineered Direct Materials” over on Spend Matters. (With additional information to be found in their short paper on why “analytically derived should-cost information is critical for improving product margins”.)

When I was back in the mostly windy city recently, I had a chance to catch up with Akoya and discuss their new product offering, currently in beta with a few select customers, which is designed to complement their existing product offering and help organizations save even more on their manufactured part purchases.

Their current product offering, Category Workbench, allows a company to identify which parts it is likely paying too much for using a technique Akoya calls “competitive banding”. By extracting identifying features and product composition information from part designs, Akoya’s Category Workbench can automatically group parts into categories by common design elements and raw material composition and extrapolate average prices. Using this information and market costs, it can also statistically extrapolate expected prices for each part in a category and identify those parts that are currently being sourced at below market price, at market price, and above market price. This allows the company to identify those parts that present savings opportunities through re-sourcing, re-negotiation, or re-design. With this information in hand, a company not only knows where its sourcing teams should direct their sourcing efforts, but where it’s engineering teams should direct their redesign efforts. Considering that re-design and re-costing of even a simple part through a system like MTI Systems’ Costimator or Apriori’s Virtual Product Environment* can take a design engineer the better part of a day at the low-end, and a few days at the high end, and that their time is very expensive, this is very important as a company that sources thousands of direct parts can only attack a few hundred parts in a given year, and the wrong choice (based simply on a spend analysis by volume, supplier, or cost) can cost a company more money than the redesign effort will save.

Akoya’s next product, Designer Workbench, is going to allow a company to dive into those parts where the Category Workbench indicates a potential savings opportunity in a way that’s going to allow the company to determine the potential extent of the savings opportunity in minutes instead of hours, or even days. In addition to a number of new search, costing, and CAD data support features, which I plan to dive into at a later date after the product is generally available, one of the significant new features that this product is going to include is a new “What If” Analysis Tool. Using market pricing and price data from other products in the competitive band, this tool is going to allow an engineer to quickly create virtual variants with different features, treatments, processes, and raw materials and calculate estimated costs in real-time. In a matter of (less than 15) minutes (on average), a design engineer is able to iterate through a number of options and identify not only a lower cost alternative, but the high level design features that the lower cost alternative needs to have. In beta tests with an existing client, the estimated costs produced by the solution have been found to be accurate within 95% or more (when compared with detailed Costimator analyses which take an average of 6 hours for the customer in question). Needless to say, these are some amazing results, and I suspect that a forward thinking company that properly utilized this solution in conjunction with complementary solutions would see incredible returns. But that’s also a subject for a later post.

* Although re-design and re-costing through Apriori’s Virtual Product Environment can be done in a matter of minutes once the environment is configured and appropriate cost information entered, setting up one of these environments usually takes days, and often requires the assistance of Apriori personnel. 

Strategic Service Knowledge Management a la Servigistics

Knowledge Management is the process of identifying, creating, representing, and distributing knowledge to those who need it. It’s a broad subject with definitions that focus on the technology, organizational, and sometimes even ecological aspects. As noted by Wikipedia, schools of thought include those that focus on intellectual capital, social planning, information theory, value networks, and even complexity while concepts tend to revolve around the dimensions of knowledge, the different stages of a knowledge-related activity where knowledge is required, and both structured and unstructured, planned and ad-hoc knowledge access.

The reality is that any definition of knowledge management will be contingent on the knowledge you need to manage and the definition that is right for you will be the one that not only addresses your issues but allows you to define and measure value. With respect to strategic service management, a knowledge management solution is one that allows your service personnel to access the knowledge they need, when they need it, and to contribute new knowledge quickly and easily to the knowledge base. It should also allow your customers to access the knowledge that is appropriate to them when they need it, in a format that makes sense to them. And it should be very easy to manage and maintain.

Specifically, it should make problems easy to diagnose and identify by a technician so that they can quickly get to a solution. To this end, it should support free search for advanced users, guided search for novice users, and direct solution access for expert users who know the system well. It should also support multimedia so that users can identify problems visually, and, if appropriate, audibly as well. The indexed solutions should be structured to not only allow information display at various levels of detail, but to allow a user to quickly jump to the portion of the solution they need.

Servigistics’ knowledge management solution allows for free-text search, guided search, and direct access by index values. It supports images, audio, and video that can be included in both problem descriptions and solutions and enables information to be be coded for display at different levels of detail depending on the user.

If the user has the right permissions, the user can update the knowledge store on the spot – which allows expert technicians to capture their knowledge as soon as they identify a new problem and a new solution. It also includes your standard “rate the usefulness of this solution” feature that not only allows users to give their feedback, but affects the order in which solutions are displayed, or queries asked, in the future as the system learns with each access. And it incorporates natural language processing which allows a solution to be found even if the search terms don’t appear in the solution as it is capable of identifying similar terms and concepts.

Now, if you’re an expert in KM, or someone who studied it ten (10) years ago, you’ll realize that there are no revolutionary features incorporated in Servigistics’ knowledge management product, as all of these features were being worked on ten (10) years ago, but you’ll also know that generic KM solutions not customized for a particular problem domain tend not to be very useful. The reality is that case-based reasoning, dynamic questioning, natural language search, and similar techniques aren’t perfect, and their accuracy degrades (rapidly) as the breadth of the solution decreases. Furthermore, people in different professions tend to work in different ways (as they are trained in different ways) and no generic solution is going to please everyone. This means that the right solution isn’t the most advanced solution, but a solution tailored to your problem domain that incorporates the most appropriate technologies.

To this end, I believe Servigistics’ offering, which is one of the first Knowledge Management solutions for the Strategic Service Management domain, is a good solution. It meets the basic requirements. It’s easy to configure and use. It’s accessible by support representatives, technicians, and customers and it can be configured to show each user the information at the right level of detail in a view tailored to them. And it integrates with their command center and the rest of their Strategic Service Management Suite, allowing each user to access it quickly and easily when they need to. It’s definitely the right approach.

NineSigma’s Open Innovation Mission

A few weeks ago, I wrote about The Value of Non-Confidential Exchange in the Open Innovation process and briefly introduced you to NineSigma, a consultancy built on an Open Innovation process. I recently had a chance to talk with Frank Evan at NineSigma about their company and their processes, and I’m going to summarize some of the key points in this post.

The primary offering of NineSigma, who are focussed on accelerating the innovation cycle, is their Rapid OIsm program that they designed to help clients design and launch their own open innovation initiatives.

The Open Innovation (OI) process begins with the NineSigma team sitting down with the client in a two-way conversation designed to help the client understand what OI is and how they might have to change the way they do business to take full advantage of what OI has to offer. Then NineSigma reviews the client’s goals, processes, and projects; builds a RACI (responsible, accountable, consulted, and informed) diagram to make sure that all key parties are included in the process; identifies areas where processes need to be altered or improved to take advantage of OI; and outlines the changes that need to be made for the company to take full advantage of OI. The next step is to sit down with cross-functional teams to help the client implement the appropriate OI-friendly process changes.

Once the client is ready to take the first step down the open innovation path, NineSigma will work with the client to generate the right proposals and disseminate those proposals through their network (which is 1.7 Million strong and growing). They’ll also review all proposals that come back, to make sure they are appropriate and well-formed, and assist the customer in identifying those proposals that appear to be the most suitable. Once one or two proposals are accepted, they will help the client engage with the solution provider(s) and make sure the entire process goes smoothly.

As partly discussed in The Value of Non-Confidential Exchange, there are numerous advantages to both the buyer and the supplier in the open innovation process when a third party is used as an intermediary. The buyer gets to explore the market without exposing their identity, which is important if they are a big multi-national in an ultra-competitive industry, as this could tip of their competition about their future plans. Furthermore, NineSigma, who requires suppliers to sign off that they are not releasing confidential information in the absence of a formal agreement, insures that all proposals submitted are appropriately formed.

In addition, at NineSigma, all of the primary facilitators are PhD scientists and engineers with significant industry experience. Compare this to your average big consultancy who is just as likely to assign you a fresh MBA with no real world experience as it is to give you a senior partner. Furthermore, commitments are on a project-by-project basis and the client retains the right to all information generated during the process – which has worked for big name clients including Kellogg’s, P&G, and Hershey in sectors that include CPG, Food, Automotive, High Tech, Chemical, and Petroleum. That might be why NineSigma has been growing rapidly for the past three years, opening their first international office in Japan in 2006 and their second international office in Belgium this year.

Workforce Management: A Servigistics Approach

Workforce Management, as defined by Wikipedia, is a business process that encompasses all the responsibilities for maintaining a productive and happy workforce. A workforce management solution is a software-based solution that optimally plans and dispatches field service technicians and their properly stocked vehicles to a customer’s location in a timely manner in order to deliver on their service commitments. Such a system will typically addresses demand management, workforce scheduling, workforce dispatching, and mobility solutions.

The workforce management solution offered by Servigistics, a Strategic Service Management Solution Provider (that was discussed last year in Tomorrow’s Strategic Service Management Today) addresses all of these points. Its workforce planning component forecasts workload to determine the appropriate workforce size, its scheduling engine can automatically set and adjust optimal assignments based upon available data and available rules and update those assignments in real-time if higher-priority service calls enter the system, its web-based appointment request feature allows customers to self-schedule, and its service mobility solution not only enables workforce communication, but allows the technicians to indicate where they are in the delivery cycle.

The scheduling engine is an advanced engine that can take into account dozens of variables that include contract / SLA type, service level, customer priority, ticket type, visit number, severity, customer inquiries, and age scores as well as transit times – which can be automatically computed based upon optimal routes computed by its GIS-aware engine that integrates with Google Maps. It allows the user to define priorities and scheduling rules and will take those into account in its computations. It also allows users to define alerts, such as a technician being stuck in traffic or a missed SLA because a technician wasn’t able to make the repair during the first visit. This not only allows the user to escalate the issue, but notify a customer when a technician might be late or unable to make the repair in the estimated time. (This, of course, goes a long way to keeping the customer satisfied as they know the service provider is working on the problem and keeping them up to date.) Furthermore, the scheduling engine is very effective in both its production and automatic update of schedules in real-time. In some deployments, the default schedules are usable as is by Servigistics’ customers, who include multi-billion dollar global enterprises (like Dell), as much as 98% of the time.

The view engine contains your classic GANTT chart view with drill down for details into specific tasks, but also supports map views with multiple filter options based on time period, priority, job type, and technician, among other factors. In addition, the job indicators can be color coded based on priority, whether or not they have been completed on time, or technician. This allows a support representative to quickly find jobs that might need to be escalated or reassigned. Finally, it allows jobs to be displayed in a grid, with user-defined detail columns.

The solution also supports multiple built-in report types and trend computations on multiple built-in dimensions such as resolution time, tickets closed, technician utilization, and overall performance. In addition, the solution integrates with their Command Center, their Knowledge Management Solution, and their Mobility Solutions which allows technicians to be more productive and keep their home office up to date on the status of the current service call.

Considering their success at a number of global multibillion dollar companies across IT, telecommunications, manufacturing, and automotive verticals, among others, and their recent updates in the real-time scheduling and mobility domains, it’s certainly worth a look if service is a large part of your offering.