Monthly Archives: December 2008

Dead Company

Two weeks ago, I brought you Dumb Company, a starting list of things that companies who fail the CIRCUIT rating (Corporate Intelligence Rating Calibration Under Inflationary Times) tend to do. Today, I bring you Part III of the series, which will attempt to explain why your favorite vendor likely won’t be here next year at this time.

The harsh reality is that this year has seen a couple of big vendors, with credit lines severely diminished or cut off due to bank failures, lost lawsuits, and VC belt-tightening, go through a number of layoff rounds. Two of the larger vendors in the space, despite claims of “regrouping”, are in serious trouble and (could soon be) on the block … and they could soon be joined by up to a dozen small companies that, relatively speaking, took too much VC money, and sold too little product, in the last few years. Some have great products, and will be sorely missed if they don’t get a quick cash infusion and close their doors, but it’s a harsh reality when you don’t manage for frugal growth, don’t continually focus on innovation not just in your products but in your internal operations as well, and don’t bring in outside expert help when you need it.

Why is this happening? The reasons vary from company to company, but the following reasons are common.

Too much VC money, too soon, against an overly ambitious business plan

The days of your average company spending seven figures on yet another enterprise system are over. Especially if such system is unproven. The way to succeed is to plan for slow and steady growth; delay sales, marketing, and CXO hires until the product is (almost) ready for massive deployment; and take as little money as possible early on so that there’s equity left to get more money later if the market declines and throws a crimp into your five-year plan.

Poor Approach to Sales

Many companies believe that if you bring in a few big guns (knowing that 20% of the sales force is responsible for 80% of the revenue at enterprise software companies) or get enough feet out there, you’ll get sales. This isn’t automatically true for a number of reasons. (1) The big guns are used to selling proven systems with large organizations backing them up. (2) It’s not the size of your sales force that matters, it’s the quality. (3) If they’re not getting the right message through to the right people, they’re not going to sell a thing.  (And if you haven’t had one lately, a sales and marketing review by an expert in the space might be a good idea.)

Too Many Assumptions, Too Few Verifications

A lot of entrepreneurs come from big company backgrounds where they’ve worked in a job for a number of years and grew frustrated at the lack of a solution for a problem to which they’re sure they know the solution. What many don’t understand is that not every company has the same problems, or the same processes, or the same viewpoint as to what constitutes a solution and, believing they are the expert, they over-engineer the solution to the point where it only solves one problem for one company.

Belief that Innovation Bursts are Enough

Some companies believe that once they have a product that represents a new solution to an unsolved, or poorly solved problem, they don’t have to do anything else for at least a couple of years. They effectively stop New Product Development and divert all their efforts to Sales & Marketing. The problem is that anything that can be built can be copied and improved upon many times faster, and the way to gain, and keep, customers is through continual innovation.

Our Way is the Right Way

The entrepreneurial team comes up with a way to structure, and run, the business, usually on-the-fly and by the seat of their pants, and runs with it, no matter what. If the structure is ripe with inefficiencies, it can prevent scalability and lead to discontent, which can, in return, result in the loss of key personnel.

So what can you do if you don’t want to end up like your favorite vendor?
Remember that consultants are cheap and

  • Get a Sales Review
    Are your sales people getting the right message through to the right people? Are they aligned with marketing? Are they selling at the right price points?
  • Get a Technology RoadMap Review
    Are you solving the right problems? Is your solution advancing at the right rate? Do you have enough innovation to get, and keep, a customer’s attention?
  • Get an Operations Review
    Are you efficient? Are your people enabled? Are you ready for growth?

And if you don’t know who to call, call the doctor (or e-mail him). If he can’t help you, he’ll help you hook up with someone who can.

 

The Sourcing Maniacs 2008 Vendor Tour Part 17: Power Advocate

This post is a bit lengthy, so I’ve broken it into Prelude and Power.

Prelude

Wakko Faster! Faster!
The maniacs are describing their ride on the Mindbender at the West Edmonton Mall, which they visited after meeting with Upside Software (acquired by SciQuest, rebranded Jaggaer).
the doctor I’m glad you enjoyed your trip to The Mall, but would you like to get back to where we left off before I had you jump ahead in your story?
Yakko Where were we?
the doctor You were describing your on-line review of MFG
Wakko MFG … it’s dynamite
MFG … it’ll win the fight
MFG … it’s the power load
MFG … watch it explode!
  air guitar
the doctor Yes, Wakko, we covered that already. So who did you visit next?
A brief moment of silence while they collect their thoughts … a daunting task for Wakko.
Wakko I’ve got the Power!
the doctor Uhmm …
Yakko That’s right! Power Advocate.

We were sitting in the Chinese Cafe …
Wakko finishing up our sixth order of Chow Mein …
Dot while wrapping op our review of MFG.
The maniacs return to their story and, as usual, proceed to ignore me.
Dot Where to next?
Wakko Hopefully someplace a little less breezy. I’ve lost three kites today!
The maniacs are still in Chicago, having recently visited Kinaxis before hopping into the cyber-enabled Chinese Cafe for their MFG research.
Yakko We’re on the N’s. I don’t know many N’s. New Momentum?
Dot Predictive market intelligence using optimization models. I think that’s a wee bit over Wakko’s head.
Yakko Fair Enough. NewView?
Dot Visibility solutions for automotive and aerospace?
Yakko I think so.
Dot Given the turmoil in those markets, I’m sure they’re too busy trying to get their solution installed at manufacturers that desperately need it to talk to us.
Yakko Possibly. the doctor did mention that he’s never been successful in his reach out attempts to them …
Next Generation Logistics?
Dot Again, Logistics.
Yakko Right. Not our focus. Well, I’m tapped.
Again, because he doesn’t check the Resource Site often enough, which currently has over ten companies that start with N.
Dot On to the O’s?
Yakko Sure! I’ve always been intrigued by Open Bravo.
Dot Aren’t they headquartered in Spain?
Yakko I believe so. But maybe we could get a web-demo and research them from right here!
Wakko That would be great! I could have more chow mein … six is an unlucky number in Cantonese … while eight is very prosperous … Waiter!
Yakko Let’s see if I can Google a number …
tappity, tappity
Here we go! A US number too!
beep bip-beep-bop boop-bop-bip boop-bop-bip-beip
Operator Hello …
Yakko Hello … could we get a demo of Open Bravo?
Operator You can download Openbravo ERP through SourceForge or access our demo centre for a quick overview. As we’re open source, you have free access to the product.
Yakko Oh. Uhm … thank you?
Operator You’re welcome.
click
Dot So?
Yakko Looks like “O” stands for “Oh, Bother”.
Dot What happened?
Yakko They told me to download it and try it out for myself. I don’t know about you, but I don’t feel like installing an ERP system just to review it.
Dot Neither do I. Who else starts with O?
Yakko I’m too bummed to think about it. Let’s just move on to the P’s
Dot Perfect Commerce?
Yakko Perfect? As far as I can tell, they got their ass-whooped so bad in the market, they had to be saved by a European-based services firm by the name of Cormine, that, for reasons beyond me, decided to keep the name. Plus, especially considering what we’ve learned so far on our tour, I think it’s really conceited to claim that your applications enable “perfect” commerce.
Dot Prime Revenue?
Yakko Interesting. Online billing and payment is commodity these days, but supply chain finance is cutting edge. However, as most companies still haven’t figured out that making your suppliers wait 30 extra days for payment isn’t supply chain finance, the concept might be too innovative for the market and an area we should tread carefully in.
Dot Power Advocate?
Yakko Didn’t the doctor mention them as a company he wanted checked out?
Dot I think so …
Yakko Where are they?
Dot Back in Boston …
Wakko Awesome! I was just thinking how great a cream pie would be to top off my eighth order of Chow Mein!
Wakko is, apparently, addicted to Boston Cream Pies.
Yakko I guess that settles it. Back to Boston we go!
Wakko So who will we be visiting?
Dot Power Advocate …
Wakko I’ve got the Power!
Yakko Wha …
Wakko Like the crack of the whip I snap attack
Front to back in this thing called rap
Dig it like a shovel rhyme devil
On a heavenly level
Bang the bass turn up the treble
Radical mind day and night all the time
Seven to fourteen wise divine
Maniac brainiac winning the game
I’m the lyrical Jesse James

apparently, Wakko likes Snap

Power

We rejoin the maniacs a few days or so later back in Boston.
Dot Are we here?
Yakko I don’t know … I always get so turned around in this city … even Wakko could have done a better job at urban planning!
Dot I think this is the right address.
Wakko raps on the door with his mini-mallet
British Professional Good day, sirs and madam. How can I help you?
Wakko Do you have the power?
British Professional Well, as you Americans say, we always pay the hydro on time …
Yakko I believe what my colleage is asking if this is Power Advocate.
British Professional Absolutely. How can I be of assistance?
Wakko Well, we came here from Chicago to find out what you do?
British Professional Blimey O’Reilly! You trekked all the way here from Chicago and you don’t even know what we do? Are you off your rockers?
Wakko Nope!
Somehow, Wakko has found a rocking chair.
British Professional On the cadge?
Wakko Not yet …
British Professional Well, that doesn’t sound very made up. So why are you here?
Wakko the doctor said we should give you a check-up.
British Professional Well, now I’m in bits.
Wakko You look whole to me!
British Professional looking very cautiously at Wakko
Yakko I believe what my colleague is trying to say is that the doctor of Sourcing Innovation said we should check you out if we wanted to expand our horizons.
British Professional Well that certainly clears things up a bit. I thought I was going bonkers.
Yakko Conversations with Wakko often have that effect. So, can you enlighten us.
British Professional I can definitely give you the griff. What would you like to know?
Yakko Let’s start with the basics. What do you do?
British Professional In his best American
We provide cost-effective supply-chain solutions to the energy industry with the goal of helping our customers achieve operational performance goals. We have deep expertise in the energy, utility, power, gas, chemical, and manufacturing industry; a custom 3-tier schema for the utility industry that captures detail in critical areas that UNSPSC and other generic schemas lack; tailored sourcing and spend analysis solutions; and customized category intelligence and cost-indices that you won’t find anywhere else.
Yakko That’s a mouthful!
British Professional It’s definitely not half! Where would you like to start?
Yakko Let’s start with your sourcing platform.
British Professional It’s essentially your standard e-RFX and e-Auction platform.
Yakko So why would someone choose your platform over Ariba or Emptoris?
British Professional Well, besides the fact that it’s a lot more affordably priced, it’s customized for the energy and utility industry. We have a lot of built-in commercial and technical templates as well as extensive capabilities for buyers to build their own data-sheets for apples-to-apples comparisons.
Yakko Don’t scores of platforms come with templates and templating capabilities?
British Professional They do, but buying hardware in the energy and utility industry is very different than buying a stapler from the cheapest office supply site. A lot of this stuff isn’t commodity, and even standard components are often only made by a handful of companies. Plus, it often takes a lot of detail to distinguish one component, like a transformer, from another … detail that’s lost without the right questions … which require the right templates … which requires the right category knowledge, which your average e-Sourcing firm lacks.
Yakko And you have that expertise?
British Professional Yes. That’s what differentiates us not only from other supply chain software providers, but other sourcing consultancies — our expertise in the energy industry where we’re an end-to-end solution provider. Even the new marketplace entrants, like Co-Exprise and CombineNet Energy don’t have the platform – services – market intelligence package that we can offer our customers. You have to remember, we’ve been around almost a decade, and many of our staff members have been doing this for over two decades … giving us hundreds of years of collective experience in the energy and utility industry and expertise that we feel is unmatched.
Yakko Can you tell us about your expertise?
British Professional Our expertise comes in the way of three major offerings: category intelligence based on years of experience that helps you get the most from your sourcing events; our new capital and O&M cost indices that provide our clients with leading market intelligence on the categories that matter to the energy and utility industries; and our customized taxonomy, used by a number of Fortune 500 companies, that provides the foundation for our leading spend analysis and visibility solutions.

Let’s start with our new cost indices. They’re web-based and provide our clients with real-time access to supply market data. They’re dynamic and allow users to define their own scenarios, with their own assumptions, to create their own probabilistic cost and demand forecasts in addition to the forecasts we provide them. And since they’re based on over 880 publicly available indexes that are augmented with data from over 65,000 suppliers and 1,000 international companies, they provide the most accurate market trend information you can get.

We currently offer six O&M indices and seven construction indices, with more coming in 2009, including “green” indices in first quarter and European indices in second quarter. The 5-level indices break costs down to the commodity level and allow the impact of each commodity to be measured and understood. The data goes back to 2000, and for any index, or any component category, sub-category, item, or commodity you can view trends based on at least five years of data.

These indices complement the decades of category expertise in the energy and utility industry that we bring to our clients, as well as our unique category intelligence power-search tool that acts like a Google for the energy industry. We also maintain extensive supplier lists, like Thomas Net, but with more detail, and our own category hierarchy, which underlies not only our spend analysis and visibility offering, but a number of Fortune 500 ERP taxonomies as well.

With regards to spend analysis, we offer all of the standard data-aggregation, cleansing, and enrichment capabilites that all of your standard spend analysis vendors offer, augmented by 20,000 unique industry specific auto-classification rules that allow us to parse transactions and automatically classify a much greater percentage of your spend faster.
Yakko 20,000 rules?
British Professional Yes, 20,000 rules.
Yakko I thought automatically classifying spend was easy and only required a small rule set?
British Professional That’s what the big players want you to believe. The reality is that there’s so many suppliers, so many abbreviations, so many SKUs, so many part numbers, and so many ways to identify a part in a limited-size description field that it’s almost impossible to automatically classify spend across an organization. Most solutions don’t even come anywhere close to 80% accuracy, which a good data analyst can do by hand in a few hours with the right spend analysis tool that allows real-time rule-generation and data classification!
Yakko Then how do Emptoris and Zycus do it?
British Professional Lots and lots of manual labor in India. The reality is that unless they’ve already classified spend at another company in your vertical with a similar supply base and similar purchases, they’re “automated classification engine” won’t even classify half of your spend, and they’ll have to ship it off to their offshore operation to clean it up and classify the rest. That’s why it often takes them 3 weeks to 3 months for them to build you an initial cube … they’re classifying your spend by hand and building the rules your organization needs to automatically classify similar transactions in the future.
Yakko So that’s why you have so many rules?
British Professional Yes, that’s why we have over 20,000 rules … which, by the way, only map spend in energy and utility companies. (A cross-industry solution would need hundreds of thousands of rules!) And it’s also why we use the most powerful spend analysis tool we could get our hands on that allows for real-time rule-generation and classification of spend. It’s called BIQ. You might have heard of it. Between our huge rule-set and our ability to apply our domain expertise on the fly, we can build a starting cube in a matter of hours, and do an initial spend analysis for our customers in a matter of days.
Yakko Days?!?!
British Professional Absobloodylutely!
Yakko But I keep hearing about how it usually takes a few quarters to select a solution, build a data warehouse, map the data, clean the data, enrich the data, configure the reports, and get actionable information.
British Professional Well, if you’re using last-generation technology, it certainly does, but we use BIQ, a rule-set we’ve been building for years based upon decades of experience, and deep expertise. Did you know that Lexington Analytics, another services distributor of BIQ with deep expertise in the financial industry, routinely goes to client sites and builds an initial cube, on the fly, in a few hours in their first meeting?
Yakko You must be pulling my plonker!
British Professional I assure you I’m not. With the right tool, and the right expertise, it really is possible to build starting cubes that fast. You really should read Eric Strovink’s guest posts on Sourcing Innovation carefully. A real spend analysis solution allows you to map data on the fly … and do so after you’ve applied a layered rule-set that allows you to progressively refine rules until you’ve achieved the required level of accuracy … usually 90% is sufficient for a good spend analysis. And it allows us to get results quite quickly.
Yakko But you say you also offer a web-based solution. BIQ is desktop. How do you do it?
British Professional Right now, we build the initial cube in BIQ, map it to our taxonomy, and when we have the right view, export it to our custom on-line viewing engine that provides you with dozens of built-in reports and allows you to slice and dice the data in the cube anyway you want.
Yakko Doesn’t the data get stale?
British Professional It would if we didn’t update it, and we have an automated process to do that. Which, to be quite frank, is just as good as any other product out there, as they all work the same way.
Yakko And what if the user wants more flexibility?
British Professional Such as …
Yakko Multiple-cubes. Measures. Meta-measures.
British Professional We rarely run into that. The reality is that only the power-users even think about that level of analysis. It’s not a problem though. Since we use BIQ ourselves, we can provide our clients with a full data dump of their cube at any time, the associated ruleset, and relevant report templates that will allow them to use BIQ on their own machine.

Plus, if the demand is there in the future, we will take advantage of BIQ’s new XML interface, forthcoming in its next release, that allows it to be driven over the web through a standard web-browser.
Yakko It sounds like you guys have an extensive solution for the energy industry.
British Professional We do … and we’re building out a basic contract management solution that takes into account energy-industry specific needs as we speak. An initial version will be available next year.
Yakko How will it compete with the stand-alone players like
Apttus,
CMA Contiki,
iMany,
Open Text,
Selectica,
Symfact, and
Upside Software, and a slew of others I know I’m forgetting?
British Professional It won’t. Just like our sourcing platform isn’t built to be the be-all-and-end-all of generic sourcing platforms, our contract management solution isn’t being built to be the be-all-and-end-all of enterprise contract management platforms. It’s being built to meet the needs of the energy and utility industry, and will offer capabilities, and templates, that specifically meet those needs. It will help us serve our clients better. We don’t serve companies buying staplers from office supply vendors. We serve utility companies buying transformers from electrical equipment manufacturers. There’s a big difference, and that’s why you need a customized solution.
Yakko So you really are an end-to-end solution for the energy industry.
British Professional Yes we are.
Yakko Cool.
British Professional Very, and with that I bid you ta-ta old bean!

 

See Box, c Box Bid

I was recently alerted to a new niche play in the sourcing market by the name of cBoxBid for buyers and sellers of, you guessed it, cardboard boxes. And just like you’re asking now, the first thing I asked is why would we need a marketplace just for boxes … after all, we have a large number of generic marketplaces already, not to mention a plethora of e-Sourcing applications that can be used to source boxes to your heart’s content.

The answer is we don’t, as there are dozens of ways to source boxes, unless you are a buyer who wants to get the best price possible on your box order. Cardboard boxes, and RSC boxes in particular, are the commodities of commodities … there are over 5,000 plants in the US alone that can make that RSC box for you. Some cities, like Atlanta, have 60 – 70 manufacturers in the local area that can make your box. And unless you’re an expert in the cardboard box marketplace, which you’re probably not if your job is to strategically source critical parts and materials, you’re probably not going to know which manufacturers are going to be able to give you the best quote, which is largely based on their current capacity utilization, at any one time.

Plus, it benefits the supplier, who is able to find more opportunities to increase production without having to spend thousands of dollars on potential client site visits. The average manufacturer is currently operating at 48 to 55% capacity, and spends an average of $700 to $1,000 for every three site visits by its sales force in its local area. A marketplace will bring it dozens, and maybe hundreds, of opportunities for the same price.

Moreover, because the marketplace is built around one commodity, the template is built in. This makes it trivial for a buyer to create a new request, and even more trivial for a supplier to find the requests that best matches their particular capabilities and production lines, and the requests that they can manufacturer cheapest. All a buyer has to do is define the production date, printing, style, wall, board weight/flute, board color, glue tab, dimensions, panel printing, warehousing requirements, quantity, delivery requirements, and bid-by date and the quote is ready to go. All the supplier has to do is enter a price. And the true market price is revealed.

The platform also offers buyers anonymity, suppliers accurate contact information of interested buyers, and both parties the opportunity to explore a potential transaction without a binding contract. A buyer places a bid, suppliers respond, and then a buyer releases her information to the supplier(s) that submit acceptable bids. At this point, an award can be made through the system, through the buyer’s in-house e-Sourcing system, or either party can walk away if a conversation uncovers a misunderstanding.

The tool also supports buyer feedback, and captures ratings from other buyers who have used a supplier.

The tool is free to buyers, and suppliers pay a monthly fee for unlimited use of the system.

The Sourcing Maniacs 2008 Vendor Tour Part 16: Next Level Purchasing

This post is a bit lengthy, so I’ve broken it into Prelude and Purchasing.

Prelude

In Part 19, a conversation between the doctor and the Sourcing
Maniacs eventually results in Wakko uttering the following line. The following conversation, which is left out of Part 19, ensues.
Wakko We don’t want to look stupid.
the doctor We’ve been over this already, Wakko. I’m not *that* kind of doctor. You want a plastic surgeon …
Yakko No, no. What Wakko means to say is that we’ve decided to go see Servigistics and we don’t want to show up not knowing anything about strategic service management. We’re getting tired of looking stupid because of our ignorance.
the doctor You could do something about that.
Wakko Hey! I like the way I look!
the doctor I was speaking figuratively Wakko.
Wakko Oh.
the doctor You could get some training.
Yakko Who does training in this space besides the vendors, who, often, teach their own version of the truth and the ISM, who tried to force feed an outdated C.P.M. down our throats last time we talked to them?
the doctor Have you ever heard of Next Level Purchasing (now the Certitrek NLPA)?
Wakko Who?
the doctor The creators of the SPSM – the Senior Professional in Supply Management, which was introduced as the first truly global supply management professional certification back in 2004.
Wakko What?
the doctor I thought you read my blog!
Dot We do … but …
the doctor But what?
Dot We tend to skim it … and …
the doctor And?!?
Dot Not pay much attention unless it’s entertaining.
the doctor No wonder you’re so desperately in need of some education! An education that, to some extent, you can get for free, I might add, on Sourcing Innovation.
Yakko Well, I think we’ve learned how remiss we’ve been by not reading your blog … carefully … on a daily basis. By sticking to a single vendor viewpoint, we’ve certainly missed a lot over the last decade.
the doctor Yakko, I still don’t think you have a clue as to how much you missed. It’s not just sourcing, procurement, and supply management technology that’s advanced by light years, but entirely new applications in global trade and supply chain management have appeared on the scene — as well as a couple of good training options in industry and academia and, as per this conversation, the first international certification in supply management — which I’ve discussed numerous times on this blog.
Wakko Numerous?
the doctor Yes Wakko, numerous. I’ve reviewed four of the six core courses:
Mastering Purchasing Fundamentals (Parts I and II),
Savings Strategy Development (Parts I and II),
14 Purchasing Best Practices (Parts I and II), and
Supply Management Contract Writing (Parts I and II);I’ve reviewed their course in
Expert Purchasing Management (Parts I and II);

I’ve reviewed their Purchasing Assessment of Skills for Success (PASS) program (link);

and I’ve reviewed the following white-paper from Next Level Purchasing:
The Importance of the Job Description to your Talent Management Strategy
Wakko Really?
the doctor Yes, Wakko … Really! I do more than write catchy lyrics. Much more.
Yakko Maybe we should have checked them out when we were on the N’s!
the doctor Maybe you should go check them out as soon as you finish with Servigistics. They’re not a software vendor, so they wouldn’t mess with your insistence on visiting software vendors alphabetically, and you certainly could use the education.
Yakko Maybe you’re right.
the doctor Of course I’m right. And while you’re there, why don’t you see if you can eek out some of their plans for 2009. It will be the fifth anniversary of the SPSM. I’m sure they have some big things planned!
Yakko Will do, doc. So let’s get back to Servigistics.
the doctor Okay. So what do you want to know?

Purchasing

Immediately after the Sourcing Maniacs finish their visit with Servigistics in Part 19.
Wakko Georgia, Georgia
The whole day through
Just an old sweet song
Keeps Georgia on my mind
Yakko There sure is a lot to strategic service management! I think we need to listen to the doctor and investigate Next Level Purchasing.
Glaring at Wakko.
What do you think, Wakko?
Wakko is currently banging his head against a tree rapidly in his best Pileated Woodpecker impersonation.
Yakko Let’s go, Woody!
Dot So, besides what the doctor wrote about the courses, do we know anything else about Next Level Purchasing?
Yakko Checking his new iPhone … obviously the maniacs haven’t been reading Vinnie’s blog either and don’t understand the TCO …
Looks like the doctor sent me some links. Give me a few minutes and I’ll see what they say.(The SPSM Certification on e-Sourcing Forum,
The SPSM Certification Story Continued on e-Sourcing Forum,
Chamber Honors Moon Company on Your Moon Township,
Supply Market Assessment on Supply Excellence,
Online Education Provider Gets High Marks From Buyers on Purchasing,
Tools for Professional Excellence on Supply & Demand Chain Executive, and
The Purchasing Certification Blog by Charles Dominick, Founder and President of Next Level Purchasing.)
Next Level Purchasing also has the Purchasing Certification Channel on YouTube, but knowing the maniacs don’t read enough, I decided to leave this out.
Wakko Wakko starts humming the Jeopardy theme song. I’m not even going to fathom a guess as to why.
Yakko It looks like Mr. Charles Dominick founded Next Level Purchasing back in 2001 when he noticed a lack of decent private training offerings in the supply management space as well as a derth of on-line training options, and, in particular, a lack of how-to programs for delivering measurable results in the workplace. For the first three years, it just offered training classes, but after a number of students commented that they learned a lot, that their performance improved dramatically, and that they should be certified for their effort, he decided to research ISO 17024 — the international standard for personnel certifications. After examing the marketplace and realizing there were no globally recognized purchasing certifications, he decided to create the first valid certification program in supply management.

It’s a low-cost option, with the basic program currently only $1,149*, and although the average completion time is 4.5 months, it has been completed in less than two months **. It looks like it pays for itself in spades, as the 2008 Purchasing & Supply Management Career & Skills Report found that SPSM Certification holders have an average annual salary that is $19,220 US more than their peers! They have 10 courses now and they currently appear to be adding at least three courses every two years.

As for Charles, he spent much of the 90’s working in, and managing, procurement departments at various large organizations including Kurt J. Lesker Co., US Airways, and the University of Pittsburgh where he noticed that one of the key challenges facing supply management organizations was that staff members were either not being encouraged, or were not acquiring the necessary skills, to be independent actors … which is necessary for leaders to lead. Otherwise, a lot [of work] gets upwardly delegated, and that really attracts from the leaders’ ability to focus on what upper management’s vision is.
*Yakko’s going to waste more money on his shiny new iPhone in his first year of ownership! And less than what one of the four prepartory courses for the now defunct CPM certification used to cost.
**If you know what you’re doing, relatively up-to-date on your job, and willing to devote yourself all-in to the task, you could do it in a month. (It only took me a [long] day to complete, analyze, and write-up each class I reviewed, and the final exam, which I also reviewed for Charles, is only 3 hours. Of course, I am the doctor and already knew the majority of the material, but an ambitious and intelligent student willing to go “back to school” and put the long hours in could do two classes in a 6-day week. One week for review, final, and documentary requirements and you’re done.)
Dot Sounds like we really should check them out and see if we can learn something. Where are they?
Yakko Back in Pittsburgh, Pennsylvania.
Wakko Do you think the Penguins will be having exhibition games yet?
Yakko I don’t know, but we can look into it.
Wakko Great! I can’t wait to see skating penguins.
Yakko shakes his head in disbelief
Dot also ignoring Wakko
Are we off?
We catch up with the maniacs a few days later.
Dot Well, we’re in Moon Township. I think this is it.
Wakko Are you sure? Looks kind of small … is this another micro-organization?
Yakko No, it’s a small company … you have to remember, not everyone gets massive 500 square foot plus executive offices. Some companies are frugal and only give employees the space they actually need to keep costs down and value up.
Wakko If you say so …
out comes the mini-mallet
Dot taking advantage of the opportunity, knocks on the door
Charles Dominick Hello and welcome to Next Level Purchasing. How can I help you take your purchasing career to the next level?
Wakko I don’t want to look stupid anymore.
Charles Dominick … without missing a beat
Here at Next Level Purchasing we help you find intelligent answers to the many questions that plague your daily job as a supply management professional. Would that help you with your problem?
Yakko I don’t think anyone can help him with his problems, but we’ve recently discovered there’s a lot more to supply management than we ever thought there was …
Charles Dominick That’s certainly true. There have been a lot of changes going on in purchasing, and people in purchasing today are doing different things than they did 20 years ago, 10 years ago, and even 5 years ago. Now it might be easy to say that I’m qualified because I’ve been in my job for 20 years, but that’s not really an indicator of how skilled I am or how capable I am of delivering great performance. I could be doing the same things that I was doing 20 years ago and doing them just as badly. That’s why we developed the Senior Professional in Supply Management, or SPSM, certification here at Next Level Purchasing. Certification provides a best-practice third-party standard that I can follow and have confidence that I’m doing my job well. Could you use the SPSM certification?
Yakko Well Wakko
who’s trying to use an otoscope and a periscope to look inside his own head
is definitely certifiable, but I was wondering how you help professionals advance in their careers?
Charles Dominick At the core of the certification is six core courses that provide you with 44 continuing education hours. These courses cover the basics of purchasing, contract writing, purchasing tools, project management, and savings strategy development. On top of this, we’ve introduced courses in negotiation, expert purchasing mastery, international procurement, and global sourcing strategy with new course offerings on the way in 2009 — which will mark the 5th anniversary of the SPSM on July 1.

However, we understand that continual skills development and knowledge acquisition is vital to a supply management professional’s success these days, and offer a number of free resources to help our students throughout their careers. We’ve been offering semi-monthly purchasing articles for a number of years, I maintain the Purchasing Certification Blog, and we recently created the Purchasing Channel.
Yakko It certainly sounds like your program has a lot to offer.
Charles Dominick We think it does, and we strive to make it better everyday.
Dot So, would you be up to telling us about it.
Charles Dominick Certainly, where would you like to begin?
Dot Donning her grey fedora and black trenchcoat
How about an interview?
For Sourcing Innovation?
Charles Dominick Well, if you think the doctor will run it, I’d be happy to. We’re certainly a believer in education here at Next Level Purchasing.
Dot How many certification holders are there?
Charles Dominick We don’t give that number out as it changes daily. I will tell you that over 3,000 students have enrolled in our paid classes to date, from over 100 countries. At last count, we have SPSM’s in over 40 countries.
Dot I notice that you also have an enhanced results program that comes with an extensive multi-media study-guide on an iPod. What prompted NLP to go multi-media and be one of the first programs anywhere to offer materials on an i-Pod? What type of enhanced results are you seeing?
Charles Dominick Three principles drive how we make our education available: convenience, innovation, and fun. As innovative as it was – and still is – to put multi-media procurement study material on an iPod, it was a natural decision for us given our commitment to those three principles. We’ve done some tests with people who have failed the SPSM Exam then used the SPSM Multimedia Study & Implementation Guide and dramatically increased their scores on the SPSM Exams. If they grasp the material that much better, then it is only logical that they are better prepared to deliver the types of measurable results like other successful SPSM’s. We are in the process now of gathering data on actual performance. Because we’ve only introduced the SPSM Multimedia Study & Implementation Guide about a year ago and the Senior Professional in Supply Management Program allows up to two years to complete the study, we are still gathering the amount of data necessary to be statistically significant.
Dot This year saw the course-offerings kick it up a notch from a global perspective with “Basics of Smart International Procurement” and “Executing a Global Sourcing Strategy”. What is NLP going to offer next year to take it to 11?
Charles Dominick As I answer this question, we are in the midst of finishing and launching four new innovations and improvements that will kick off in late 2008 and gain traction in 2009.

First, there’s PurchSearch – our search engine designed to help purchasers do research more quickly while also getting more authoritative results when compared to doing a traditional search.

Second, we are launching mid-term games. These are multi-media games based on popular game shows like Jeopardy and Who Wants To Be A Millionaire that will not only make our students’ learning experience more fun, but will also help them retain and apply what they’ve learned for real-world results. Sourcing Innovation readers can play a free game based on our PurchTips newsletter.

We will be formally launching the Purchasing Certification Channel on YouTube. This channel will feature what I believe is the largest collection of online procurement education videos consisting of vlogs, interviews, SPSM Certification Success Stories, and more.

Finally, we will be announcing the results of our massive annual update. While we update our material in small chunks throughout the year and do one comprehensive review and update every year, this year we were really determined to increase the value our students get from our programs. A couple of our courses had content increases in the 12 – 15% range. And we didn’t raise our prices a penny!

In early 2009, we have a surprise launch planned that will help deliver our procurement training on an even more global basis. Stay tuned for more information on that. And, as you know, innovation is a continuous process for us. It is not a one-time event. So you can expect more exciting developments throughout 2009.
Dot Any spoilers?
Charles Dominick Not today.
Dot This year also saw NLP start promoting department-wide certification programs, and also showcased a case study demonstrating remarkable results with essentially exponential returns in ROI. What are NLP’s future plans for offering it’s certifications on a department-wide scale? Are you going to offer classroom sessions to accelerate training on a department wide-scale?
Charles Dominick We currently offer an assessment program called “Purchasing Assessment of Skills for Success” or PASS as a first step for procurement leaders to determine whether the SPSM Certification is right for their teams. This assessment is based on our research that indicates that there is a correlation between seven key skill dimensions and the savings that procurement professionals achieve. That program has been wildly successful and has helped many procurement teams. In 2009, we will be expanding the skill dimensions to also assess management readiness and global procurement skills.

In addition, we are developing technologies and services that will be available at no additional charge to our clients who enroll their entire teams with us.

We are actually seeing less interest in classroom sessions than ever. This is due to a number of factors including the quality of our online training as well as the costs and environmental implications of travel.
Dot Next year is the silver anniversary of the SPSM in the “modern” system. What surprises does NLP have in store to celebrate?
Charles Dominick If I told you, it wouldn’t be a surprise now, would it? But you are right, we have something massive planned for the five year anniversary of the SPSM Certification on July 1, 2009. Let’s just say that we will be introducing an innovative process for giving SPSM’s the assurance that the SPSM is scalable, will always represent the highest level of credentials available in purchasing and supply management, and will adapt to the inevitable changes that our profession will face over the next few years and decades.

And with that, I have to get back to making our purchasing programs better. To your career!

Charles Dominick ducks back inside Next Level Purchasing’s offices and gets back to work.
Dot Wow! There’s certainly a lot to purchasing these days!
Yakko And to think we used to believe that an RFX could solve all your problems!

 

Getting the Most Out of Cost Reduction

Today’s guest post is from Patrick J. Hogan, a Partner at Paladin Associates, Inc..

A recent article in Paladin Associates’ CheckMate Newsletter entitled “Cost Reduction is NOT a No-Brainer”, generated interest and requests for more information. It made the case that cost reduction programs should be carefully thought out so mistakes and inexperience don’t cause harm. What follows are some common ways that cost reduction programs can be mismanaged, go wrong, and cause real headaches. It is NOT a complete list!

Companies with inadequate spend information really don’t know what they are spending, who is doing the spending, and what suppliers they are spending with. Without such fundamental intelligence, chances are high that resources will be misdirected or wasted, and results will be sub optimized.

Many companies simply need to focus on fundamentals. It is surprising how many companies do not consolidate purchases or buying points, do not require system or product specifications, or do not require suppliers to compete on a regular basis. Many firms simply need to get back to basics.

A common oversight is indirect spending. Companies often focus exclusively on strategic direct materials and ignore indirect spending on telecom, facilities, transportation, office supplies, and so forth. Yet big savings are often available in these areas.

A frequent obstacle to efficient cost savings is lack of buy-in by the organization. It is an unfortunate fact that not everyone in a company is cost-sensitive, or sees cost reductions as being in their interest. In fact, many employees, and even managers, are “empire builders” who are actually more interested in maintaining or growing budgets, organizations, and perceived power. They may talk a good game, but really are not committed to cost-reduction. They may even fear cost reduction. Internal politics and power struggles are very often the chief obstacle to more efficient processes and procurement.

Frequently, the cost-reduction “team” lacks the specific functional expertise to effectively cost-reduce certain functions. Finance or Procurement personnel are generally not the best people to effectively cost reduce Marketing & Sales, Human Relations, Customer Service, Telecom, IT, and many other functions requiring specific product, market, contract, technical or professional functional expertise and judgment. This requires balancing both functional skills and cost awareness. Establishing cross-functional teams with both functional and procurement expertise is one solution.

“Right-sizing” or down-sizing is an area of great risk. Downsizing can improve a company’s health dramatically, or destroy morale and precipitate a “death spiral”. Many of the issues are not intuitive. This topic needs a book in itself, and requires experienced hands to get positive results.

Frankly, overly cozy vendor relationships can get in the way of effective cost-reduction. Suppliers’ sales people work to establish personal relationships and “differentiate” their products for reasons other than price. They are often successful in minimizing competition as a result. But this usually costs the buyer money!! Some favorite sacred cows are sales commissions, legal fees, HR benefits, ad agencies, and printing companies.

On the other hand, not understanding a supplier’s full capabilities can result in overlooked opportunities for savings. A supplier might well have the resources to help reduce costs through process or product changes or simple suggestions, or other approaches not defined in a formal specification or RFP.

An ironic mistake that companies can make in tough times like these is locking into a new “low” contract price, only to find that prices actually drop below that level over time…resulting in overpayment during the contract period. Don’t mortgage the future simply to insure short-term savings.

Many companies have a do-it-ourselves mentality. They do not believe they need help, or they don’t want to pay for consulting help. But nonetheless they are just not getting the total job done. “Not-invented-here” and the “we-already-thought-of-that” syndromes are common themes in many companies. The “fear factor” also plays a role… many employees are concerned about getting credit for cost-savings ideas, or of being blamed for ideas someone else may find. In our increasingly “blaming” society, they are not always being unreasonable either. Many companies have inadvertently set up win-lose scenarios on cost reduction that block the free flow of ideas and participation, and inhibit the use of consulting experts whose savings ideas might expose waste. But all companies have waste, and wise companies want to find it and remove it ASAP. Setting up a win-win environment is key, and getting outside help is smart.

A very common problem for procurement organizations is a lack of appropriate resources. Most companies, even those with large procurement staffs, lack all the skills, the manpower, the funding, and the time to turn over all the rocks required to get the total job done. An ROI analysis would frequently justify more resources. Or, temporary use of consulting resources may be appropriate.

Another common phenomenon is excessive focus on identification of cost reduction opportunities and process development, but inadequate attention on execution and results. Many companies have long lists of opportunities, but short lists of what have actually been accomplished or resulted in tangible savings. In a related vein, savings can erode over time if companies don’t monitor results, update specifications, record engineering changes, housekeep their records, etc. Implementation, follow-through, and measurement are essential in driving for results.

Effective cost reduction is not just about common sense. Like so many other things in life, it requires experience to do it right and avoid costly pitfalls. In tough times like these, with so many “new” managers being pushed into cost-reduction exercises, finding experienced hands to guide the process is critical. Professional consulting help must be considered, particularly with a company with a results-driven focus.