Monthly Archives: October 2013

Why Should You Go Paperless? Paper is Very Expensive!

Hackett just released the first report in their new Category Insight Report series from their “Procurement Advisory Service” on “Commercial Print”. What did Hackett find? First of all, it found that the Commercial Print (CP) industry is shrinking in the US due to a shift toward digital-based solutions, which is in line with what we would expect as on-line advertising has been increasing. However, surprisingly, the global market is expected to grow at a 2.8% CAGR (Compound Annual Growth Rate) between 2011 and 2016, primarily as a result of expected growth in Asia-Pacific.

Thirdly, it found that the most significant costs are raw materials, which we would also expect. However, we might not expect that raw materials, and paper and ink in particular, account for nearly 60% of Commercial Printing Cost! In comparison, labour, averaging at 27%, is less than half of the cost. Thus, if you go digital, as the layout costs are probably similar, you can save 60% of the costs and spend that money on value-generating creative activities instead!

In addition, the report also highlighted that while paper accounts for approximately 50% of the costs in Asia-Pacific (AP) and Europe, ink accounts for about 44% of the costs in the United States. This is because printer ink, in the US, can cost over $5,000 a gallon, making it at least 25 times as expensive as a pint of blood (based on the average amount a hospital has to pay a provider to guarantee a tested, safe supply), and because the manufacturers design printers to reject cartridges when they are nearly, but not yet, empty. It’s ridiculous. Based on the average costs in Europe and Asia-Pacific, the cost of ink is 10 (ten) times what it should be — and it’s doing environmental damage to boot! (Because manufacturers make their money on the ink, they are making low-quality disposable printers that just end up in landfills when the drum nears the end of its useful life or it’s cheaper to buy a new printer on sale with a half-cartridge than buy a new cartridge.)

It also had a few surprising insights. For example, it found that the CP industry is experiencing a shift towards low-cost country sourcing. Traditionally, most companies printed at home, using either the printer preferred by their advertising firm or the local printer that gave them the best price, because quality control was vital (and transportation costs for paper can be high). But the internet makes project management and quality control possible from anywhere, and costs in countries (without the ink monopoly) can be significantly cheaper, especially if they are close by (like Poland, Slovenia, and Turkey are for European countries).

It also had some great insights into the dynamics of the industry, with a medium threat of potential entrants to existing suppliers (fighting for a low-growth or dwindling market), a medium to high threat of substitutes (as buyers go electronic), a high rivalry, and strong bargaining power on the buyer-side. For complete details, check out the Commercial Print report, which, like future reports in the series, in addition to the category overview and key market trends, addresses:

  • the cost structure in detail,
  • the competitive landscape and key industry players,
  • category tools,
  • the sourcing and procurement Capability Maturity Model (CMM) for the category,
  • category best practices, and
  • optimal channel design(s).

Hackett isn’t the first group to offer Category-Specific Market Intelligence, and players like the Denali Group and Mintec, have been offering it for a while, but it is one of the few research firms that have the expertise to deliver industry-leading category-specific market intelligence. If you’re already a Hackett client, and you need category-specific market intelligence, it’s probably the product you need. If you’re not a Hackett client, but need category-specific market intelligence, be sure to put Hackett on you’re shortlist!

FTZ, As Easy as 1-2-3

A recent article over on Inbound Logistics did a good job of dispelling Three Top Myths About Foreign Trade Zones. In short, despite some opinions, free / foreign trade zones (FTZs) are not risky, hard to use, or costly. (Although they are well-regulated with their own intricacies and do involve a setup cost like everything else. But the future benefits surpass the set-up costs quite quickly!) This is because:

FTZs are no more risky than regular imports.

Customs always has the right to inspect your imports, and import process, at any time whether or not you are using a FTZ. And whether or not you are using an FTZ, you still have to deal with a slew of reporting and transparency regulations, such as 10+2 and advance notifications, so there really isn’t more reporting or record keeping involved (as much of the information required already needs to be maintained for customs and inventory control). Plus, FTZs can allow duties to be deferred — which can improve company cash flow. In fact, properly utilized, FTZs can be less risky than regular imports.

FTZs are easy to use — with the right process.

Basically, instead of landing your goods to your warehouse, you land them to a Free Trade Zone where they stay until they are manufactured/reconfigured, extracted for consumption, or re-exported. In the first two cases, the goods become subject to duties at this time. In the third case, the goods, destined for manufacturing or consumption in another country, are sent on their way to their final destination duty free.

And if there is a Government run multi-purpose FTZ set up at or near the port of import, utilization of an FTZ is as simple as an application. (If, however, the importer wants to set up a special FTZ at its warehouse or manufacturing location, the process is considerably more complex and the company will have to bring in an expert and will definitely need to acquire best-of-breed global trade management software.)

FTZs improve Working Capital Management.

As mentioned above, FTZs allow a company to defer duties until such time as the goods are consumed and avoid paying duties on goods that are destined for re-export as-is. This can be an incredible cost saving for a company that does a lot of importing and exporting.

In addition, as noted by the author of the article on Three Top Myths About Foreign Trade Zones Dispelled, FTZs can also eliminate duties on waste, scrap, and rejected or defective parts as such parts are never consumed! In other words, a properly configured and utilized FTZ insures that you only pay duties on goods that you use or sell, when you use or sell them! This is a much better way to improve your working capital situation than extending DPO to your cash-strapped suppliers!

Spot the doctor!

Like Waldo, the doctor can often be hard to spot in the wild. Since he’s a blogger, and not an analyst, he isn’t plageed by the media whore persona and can blend in, observe, and see what is actually happening out there. That’s why, occasionally, he gives you some hints as to his whereabouts.

Two weeks from today, if you look really hard, you might just see through his urban camouflage and spot him at the Coupa OneVision Roadshow in downtown Toronto.

If you care to try and find him, after being fed, you will get to hear John Mavriyannakis, a Director at Deloitte, talk about Empowering Modern Procurement and Ian Murray of TD Bank talk about their Coupa e-Procurement Success Story. Deloitte always has quite a few insightful success stories to share and given that TD Bank is a Fortune 500 company and a bank, this makes their success story all the more impactful.

the doctor will see you there. (But will you see him?)

b-pack: Taking Root in Their Brave New World, Part III

In Part I, we discussed how b-pack, who packed it in for a brave new world back in 2010, crossed the Atlantic in their quest to spread some of their French Procurement bohemian revolution to the rest of the world, bringing with them a suite of Procurement solutions that take you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt (which can include asset tracking information), and an invoice, to payment, reporting, and supplier management.

Then, in Part II, we noted that b-pack has spent the last three years implementing (or significantly improving) (collaborative) contract authoring and advanced contract management (coming out in the next release this quarter), advanced requisitioning and services procurement, OCR (Optical Character Recognition) integration, project management and project support across requisitions and budgets, an enhanced collaboration portal, a GPO (Group Purchasing Organization) module, and enhancements across the board to all core and supporting modules while at the same time extending their out-of-the-box integrations with ERP (Enterprise Resource Planning) and AP (Accounts Payable) systems, increasing usability, and taking (RAD) rapid application development to a whole new level with respect to the degree to which the platform can be customized for a new client. In addition, we did a deep dive into their requisition, budget, and project-management functionality.

Today we want to talk about their new RAD (Rapid Application Development) capability and their ability to customize an implementation for every customer off of one common platform. In the new version of their platform, each of their 30+ components have been implemented as stand-alone modules. This allows a customer to choose just the modules that make sense for their organization. In addition, each module can be custom configured to the client’s need. As discussed in yesterday’s post, the customer can choose just those requisitions that make sense for their Procurement processes in the 1Cart & Requisition Module. A customer that already has a BoB (best-of-breed) strategic sourcing module can exclude the sourcing module, a customer that has a multi-channel invoice solution can turn off the OCR module, and a customer that doesn’t have an ERP can leave the integration out.

In addition, the options that are presented for configuration in each module are then restricted to those that are related to the modules that are selected. For example, the user will not be able to configure OCR receiving rules in the invoice module if the OCR module is not part of the solution. Furthermore, the configuration of each module is workflow driven, so the user will only be presented with configuration options that make sense based upon previous selections. So, if a user selects that only user-initiated requisitions and invoice-free requisition workflows are supported, the user will not be presented with, or be able to access, configuration options for check-requisition.

Finally, the workflow-driven dashboard is extensively customizable and can be pre-configured for each user type. The user, which is only presented with the workflow elements and analytics associated with the modules the user has access to, can select what workflow elements (such as outstanding approvals, requisitions, etc.) she wants to see on the dashboard, and in what order, as well as what reports should be generated and loaded upon application log in.

Using the extensive configuration capability in their platform, b-pack is able to rapidly configure a custom-installation for each customer, that exactly mirrors their current processes, in a matter of days and deploy an appropriate instance of their platform from the start, that includes out-of-the-box integrations with ERP and AP systems and third-party punch-outs for catalog purchases. Then, all that is required to get a customer fully operational is to load any master data elements that do not exist in the ERP or AP systems and, optionally, define the requisition, project, budget, invoice, etc. templates used by the organization. In a matter of weeks, the organization is running on a fully configured, fully featured, customized e-Procurement solution that runs on one common code base that can be updated on-demand in a SaaS (Software-as-a-Service) environment, giving the customer the best of both worlds (rapid deployment and extensive customization).

In our next series, we will dive deeper into some of the new capabilities of Version 4.0 of the b-pack platform that is coming out this quarter.

b-pack: Taking Root in Their Brave New World, Part II

In Part I, we discussed how b-pack, who packed it in for a brave new world (Part I, Part II, Part III, and Part IV) back in 2010, crossed the Atlantic in their quest to spread some of their French Procurement bohemian revolution to the rest of the world, bringing with them a suite of Procurement solutions that take you from the start of a traditional sourcing cycle (RFx), through a contract, to a requisition (which may be from a catalog), against a budget, to receipt (which can include asset tracking information), and an invoice, to payment, reporting, and supplier management. Three years ago their Procurement suite, which also included document management, expense and travel management, asset management, inventory management (which is integrated with asset management), fleet management, dispute resolution, a supplier portal and procurement business intelligence reporting in a solution that was extensively internationalized, was one of the most in-depth solutions available, and it has been developed considerably since then.

In the past three years b-pack has added (or significantly improved) (collaborative) contract authoring and advanced contract management (coming out in the next release this quarter), advanced requisitioning and services procurement, OCR (Optical Character Recognition) integration, project management and project support across requisitions and budgets, an enhanced collaboration portal, a GPO (Group Purchasing Organization) module, and enhancements across the board to all core and supporting modules while at the same time extending their out-of-the-box integrations with ERP (Enterprise Resource Planning) and AP (Accounts Payable) systems, increasing usability, and taking (RAD) rapid application development to a whole new level with respect to the degree to which the platform can be customized for a new client.

Today we are going to discuss the enhancements to requisitions, budgets, and project-management.

As discussed in yesterday’s post, one of the things b-pack has learned while servicing over 100+ global clients in 20+ industries in the public and private sector is that every company has their own unique Procurement process, which starts with the requisition. For example, some companies start with a requisition, which must be approved before a PO can be generated, some companies start with a PO, and some companies, where most of the spend is for small amounts, start with the invoice. In addition, and this is true in the public and health-care sectors, some processes start with check requisitions for employee (travel) expenses and study participant payments. Each of these requisitions requires a different (approval) process. In addition, while some requisitions are for one time product or services buys, some are for repeating, regularly scheduled buys, and some are for products or services that are to be delivered over multiple phases of a project, and multiple POs, invoices, and receipts need to be managed against the same requisition over the course of the project.

In response to this need, b-pack has extended their platform to support a slew of requisition types and processes, and each customer can select just the types, and processes, that they require. In addition, each step can be customized as needed and the approval process, which is rules-driven, can be as simple or complex as required. This is what allows them to meet the needs of Sony Music UK, for example. In the music industry, requisitions are for projects which can include CD recording and CD promotion. A CD recording will require studio costs, producer advances and fees, artist advances, flat fees and payments, post-production costs, etc. A CD Promotion will include promotions for multiple singles, which will have associated production costs, advertising costs, and special event costs (for artists appearances). And while the CD recording requisition might be a single-phase project, the promotion will generally be multi-phase, with each phase centred around the release of a single. The b-pack platform not only supports the requisitions required for these types of projects, but also supports templates for each project (or recurring order) that is required. So, all a talent, or project, manager, needs to do to set up a project is select the type of requisition, select the template, input the expected costs (against the pre-populated expense groups and project codes), and send it off for approval.

It’s budget creation and tracking capability is also quite advanced. It allows you to set up a budget that is as detailed as necessary and track it monthly or against project phases. The budget can be compared against the appropriate project(s), requisitions, invoices, and receipts and the user can see how they are doing at any particular time. This real-time visibility into the budget allows them to track the success of the project.

After requisitions, the next biggest enhancement to the platform is probably in respect to its project definition and management. In the b-pack platform, projects can be as simple or complex as required. They can be single phase or multi-phase; associated with a budget; linked to zero or more documents and contracts; associated with the relevant requisitions, invoices, and receipts; associated with one or more users including the project manager; and updated automatically when any associated requisition, invoice, receipt, etc. is updated.

And, as with previous versions of the b-pack platform, all of the data fields are driven off of master-data and the suppliers, approvers, account codes, project codes, etc. can all be selected from drop-down lists after a few characters have been entered. In addition, all of the master data tables (that are not pulled from associated ERP, AP, etc. systems) can be updated using Excel spreadsheets – making it easy to administer.

b-pack has put a lot of thought into usability and worked hard to make sure the platform meets the needs of its international users. Tomorrow, we’ll dive deeper into its new, relatively unique, RAD architecture.