Virtual Procurement Centers of Excellence: The Next Level of Complex Direct Procurement

We have already discussed Value-Based Sourcing in Complex Direct Supply Chains and how it can generate an ROI well beyond what cost-savings focussed Procurement can generate on its own. We also indicated that a key requirement of success for value-based sourcing was a platform designed for complex direct procurement, and outlined the basic requirements for such in previous posts.

However, the right platform not only allows Supply Management to extract more value from every event than it would otherwise, but, when properly implemented, also provides the foundation for a Virtual Procurement Center of Excellence — a VP-COE if you will. A VP-COE is the next phase of Procurement Evolution for leading Procurement organizations that have evolved from decrentralized models through centralized and center-led models but which now need another evolutionary transformation to excel in today’s increasingly sophisticated global supply chains.

Today’s leading Procurement organizations are center-led. These Centers-of-Excellence are focussed on the identification of appropriate supply chain strategies, strategic categories, best practices, and knowledge sharing and often leave individual buys and tactical execution to the individual units in an effort to get the best of both worlds.

These centers of excellence typically build cross-functional teams to tackle strategic categories that represent all of the key divisions and business units, allow for the creation of flexible supply chain processes and commodity strategies through collaboration, and find ways to fully leverage strategic category spend across the enterprise. They, theoretically, give the organization the best of both worlds and many organizations that employ this model have evolved to be leading Procurement organizations, often recognized in the Hackett Group Top 8%. But is this as good as it gets?

Not even close. The view painted by consulting organizations offering to transform your Procurement organization into a COE is one shared through rose coloured glasses. First of all only high dollar “visible” strategic categories will make the cut due to the limited manpower and additional time required to manage global communications and project teams. A lot of spend will go unmanaged, and a lot of opportunities left untapped. This does not sound like the definition of a true center of excellence to us. Does it sound like a true center of excellence to you?

The long and short of it is, in order to get all spend under appropriate management in a large, distributed, global organization, a virtual procurement center of excellence is required.

So what, precisely, is it and what, precisely, do you need to enable it? Good Questions! And you will find the answers in Sourcing Innovation’s latest white paper The Benefits of a Virtual Procurement Center of Excellence for Complex Direct Procurement, sponsored by Pool4Tool. Download Now! [registration required]

Freightos: Still Flippin’ Freight Quotes Faster than a Fleet-Footed Feline on Guarana

When we last checked in on Freightos a year ago, they were serving up real-time freight quotes for global shipping and were just launching the marketplace where buyers could search by “lane”, see public freight quotes from shippers serving those “lanes”, compare them, and book quotes. (And a buyer can define a lane by zip code or city, and the software will automatically identify all relevant [air]ports.) Since then, the Freightos marketplace has been growing, and a few noticeable improvements have been made:

More, and bigger, carriers.

Now that big global companies have publicly announced their adoption of the platform — including Sysco, Marks & Spencer, and Panasonic US — bigger forwarders and carriers are signing up and there are a plethora of good, competitive, economical options for all major lanes between Asia and North America — which includes complete multi-modal options from just about any zip code to any zip code in the regions of interest (and almost all major ports and major distribution centers are covered).

More refined cost tracking and rate comparison. 

Upon launch, Freightos provided buying organizations the ability to upload all of their contracts and associated rates. The UI has been improved and it’s easy to compare the contract rate against the current market rate of a carrier as well as the market rates of other carriers side-by-side and to see the relative delivery times that correspond to the rates. (The models break down the cost and delivery time component of each leg of the journey. Truck to port, ocean or air cargo from port to port, truck to distribution center, etc.)

The detail provided on quote breakdown is incredible compared to most platforms that simply collect an all-in-one delivery free for each segment and the government tariff rate(s). If relevant, the platform will break out delivery fee (per unit), fuel surcharges, messenger charges, e-document charges (at origin and destination), lift gate charges, manifest system charges, customs charges, each export and import tariff, SOLAS administration fees, docking fees, temporary storage fees, freight station fees, pier pass fees, cleaning fes, chasis fees, handling fees, and local charges.

Immediate Online Payment with Booking

Since Freightos can now collect payment immediately upon booking through the marketplace, this provides two major advantages over the initial version of the platform where a buyer requested a quote, a supplier replied, and then a booking was made at a later time. The buyer gets the booking they need when they need it, no fear of the lowest cost or preferred carrier maxing their quota (and the option disappearing because someone else selects and pays first). Secondly, since all marketplace payments flow through the platform, Freightos is able to offer the service free for buyers and at a low cost to service providers, who pay a small transaction fee (which should cost them much less than it does to hire multiple sales people to respond to offline RFQs all day with the same quotes cut-and-pasted into multiple Excel sheets of various formats).

More Powerful and More Responsive Drill Down Filters

Not only can you select/deselect ports, modes, forwarders/carriers, intermediate routings, and intermediate ports/distribution centers, you can also include or exclude additional requirements such as lift gate, cross-docking, etc. in your search and comparison. The platform is effectively doing hundreds of searches across (potentially) thousands of carriers with dozens of options in real-time.

Streamlined Document Management

The platform can store, index, and cross reference all contracts and documents (such as insurance certificates, compliance certificates, etc.) related to all carriers used by an organization and they can be easily retrieved when a quote is accessed or easily managed through a carrier management interface.

A Full Featured API

You can include the power of their marketplace in your sourcing application. You don’t have to use their web-interface, you can embed the search functionality in any platform you are currently using to get worldwide shipping estimates and available carriers in real-time.

Freightos is getting very close to becoming the powerful freight management solution that will not only be Supply Management’s best friend but the default platform for all logistics tenders and spot buys performed by the organization. Stay tuned. We’re sure we will be hearing more from Freightos in 2017.

One Hundred and Seventy Seven Years Ago Today …

The American Statistical Association (ASA) was founded in Boston, Massachusetts (which makes it the second oldest continuously operating professional society in the US).

If you were ever wondering why there are so many experts so adept at manipulating statistics to support whatever viewpoint they are selling, it’s because you’ve had the best professionals working together to improve the art for even longer than you have had professionals working together to improve science and engineering. (The IEEE is only 53 years old, and the associations that formed — namely the American Institute of Electrical Engineers and the Institute of Radio Engineers — would only be 132 years and 104 years, respectively.)

And for those of you relatively new to Sourcing Innovation, particularly those who would like more insight into lies, damn lies, and statistics, we’d like to remind you that, in the archives, Pinky and the Brain (back in the days when they were locked in the basement of a building in Massachusetts that was the headquarters of a major sourcing company before it was acquired) gave us a lesson in statistics that exposed some of the, well, lies. Enjoy!

Whenever you find yourself on the side of majority …

… it is time to pause and reflect.
Mark Twain

As far as the doctor is concerned, nothing could be closer to the truth. SI never strived to be #1 in breadth, readership, coverage, etc. for this very reason. It’s not happy with the majority that is willing to accept the status quo, the inefficiencies, the lack of progress, and, most importantly, the lack of innovation.

He’s also not interested to join the ranks of the analysts that think you can do an in-depth vendor review from a powerpoint presentation and a few customer references. SI has never covered a vendor without a live demo and never will. (At least this explains why so many tragic quadrants and product grave reports are so out of whack.)

Nor is he willing to allow “sponsored posts”. Such a slippery slope. Maybe you insist that the posts be written by the experts, and the sponsor agrees, but then you get a bait and switch where the expert was too busy, so the social media coordinator writes the post instead, it’s regurgitated drivel, but a spot was paid for and if you don’t post it, they threaten breach of contract.

Or attend half-a-dozen me-too conferences every spring and every fall and deliver the same old speech o’er and o’er again. Some analysts and bloggers like the junket circuit, but most of the people who are there time and time again fall into two categories: those that like to hear themselves talk and those that are trying to talk themselves into a new job.

Nor does he feel like towing the same-old same-old line put forth by all of the heavyweights that have been selling the same sauce for over a decade. (He has nothing against big companies that keep innovating, but, unfortunately, a few that sold out to big enterprise software companies really haven’t innovated anything since they did. Likely because integrations at these giants take so long that by the time you can get back to innovation, the boat has been commandeered by quicker competition who snuck aboard during the night and sailed it out of the harbour.)

And he definitely won’t sign an NDA to get a demo. (After all, how could you cover anything once you signed an NDA?) The rules are simple on SI — an open demo is a requirement for coverage. The vendor doesn’t have to show anything they don’t want to or answer any questions they don’t want too (but if too much is kept secretive and not enough is shown to convey the value, then the chances of coverage aren’t great as SI always wants to cast a vendor in a positive light if there is value in the solution for a subset of the market), but remain secretive at their own risk.

Is this alone enough to keep the doctor and SI out of the majority and on the innovation path? Hard to say, but that is where the doctor wishes to stay. And he hopes that you’ll stay here too and that you will …