Category Archives: Decision Optimization

The Sourcing Maniacs 2008 Vendor Tour Part X: Iasta

In our last installment of the 2008 Sourcing Maniacs Vendor Road Tour, the maniacs had just finished talking with a somewhat contemplative looking gentleman from GDM somewhere near Denver, Colorado. We rejoin them shortly after their conversation with the somewhat contemplative looking gentleman from GDM.

Today’s post is a little lengthy, so it’s broken up into Interlude and Inquiry, which contains the vendor content.

Interlude

Yakko, Wakko, & Dot We dig dig dig dig dig dig dig
through our data the whole day through
To dig dig dig dig dig dig dig
is what we really like to do
It ain’t no trick to get rich quick
If you dig dig dig with a shovel or a pick
In a large data mine! In a large data mine!
Where a million diamonds shine!
Dot Where Next?
Wakko I think it’s called e-Sourcing Place now.
Dot sneering
Wakko!
Wakko Sorry!
Dot Any more G’s?
Yakko Lots of services companies! Global Procurement Group (Global Supply Training). Global Sourcing Specialists. Greybeard Advisors.
Dot Can you think of any technology companies?
Yakko Besides Google, not today.
Dot So on to the H’s then.
Yakko Hiperos?
Dot SRM. Hmmm … let’s file them under services for now.
Wakko Hyperion?
Dot Oracle, remember?
Yakko I guess we’re skipping the H’s too this time around. Where do we start in the I’s?
Dot I seem to remember this punky little upstart by the name of Iasta from our Ariba days.
Yakko I heard they were just 4-guys in a garage with a simple e-RFX tool.
Dot Well, that’s what we used to say they were. But when was the last time we actually paid any attention to them …
Yakko Uhm … err … I can’t remember.
Dot Neither do I! Should we check them out?
Wakko Well, I seem to recall the doctor mentioning them quite a few times on SI … there must be something to them.
Dot Might as well go for it. And with our e-Sourcing background, maybe we’ll even understand what they do!
Wakko So where are they?
Yakko Indianapolis, I believe!
Wakko Race car city! Cool!
Yakko Super Overdrive!
Wakko Wakko breaks out his best rendition of Super Overdrive by Billy Idol.

 

Inquiry

  The maniacs head off towards Indianapolis, on the scenic route. We catch up with them again a few days later.
Dot This is it. I hope they talk to us!
Yakko Their CEO is a blogger, and they sponsor the e-Sourcing Wiki, which hosts some of the best wiki-papers in supply management that you’ll find anywhere. I’m sure they’ll talk to us.
Wakko Wakko breaks out his mini-mallet.
Let’s find out!
Wakko taps on the door.
A minute later, a smiling man with a moustache steps out.
Wakko Who are you?
Smiling Man I’m the CEO of Iasta.
Yakko, Wakko, & Dot And we’re …
CEO The Sourcing Maniacs.
Yakko, Wakko, & Dot You know of us?
CEO Yes. I’ve read about your exploits, and Eric Strovink from BIQ warned me that you were making the rounds.
Dot Well, hopefully you’ve only heard good things about l’il old us!
CEO Checking that the door behind him, and more importantly, to the server room, is locked (see Where Pinky and the Brain Devise a Plan to Market Their Strategy for a reason why).

What I’ve heard varies. How can I help you?
Wakko What do you do?
CEO e-RFX …
Yakko yawn
CEO e-Auction …
Dot looking very bored
CEO Smart Optimization
Wakko Com-bin-a-tore-e-ul Op-ti-my-za-shun?
CEO Yes Wakko, we do strategic sourcing decision optimization … and we think it’s one of the best solutions out there. And we do Contract Management …
Dot perking up
CEO and we’re in the process of preparing our first Supplier Relationship Management release, better known as SRM.
Yakko Really?
CEO Really. And when you add in our built in project management and our Smart Analytics solution, based on BIQ’s leading spend analysis product, you see that we have one of the most complete end-to-end e-Sourcing suites on the market.
Dot So you go head to head with Ariba and Emptoris?
CEO All the time!
Yakko And win?
CEO More often than you’d be led to believe!
Dot How often?
CEO Let’s just say that we have well over 100 global customers, many in the Fortune 500, and that both our annual North American User Conference and our annual European User Conference are very well attended by happy customers who enjoy learning how they can do even more with the platform they have already bought, and at a very attractive price point I might add.
Wakko How attractive?
CEO We’re a True SaaS provider, so we are very competitive with our basic solution prices.
Dot Under a Million?
CEO We start at under one hundred thousand a year for our entry-level solution.
Dot shocked
Under One Hundred Thousand?
CEO Yes Dot, under one hundred thousand for our basic Smart Source solution. You don’t have to buy everything to start, and even if you do, unless you also buy a considerable amount of services support for your organization, it’s still under the seven figure mark that you liked to charge.
Dot still shocked
How do you make money?
CEO Economies of scale enabled by SaaS, and smart spending. We eat our own dog-food and follow our own advice. We keep our costs reasonable, which allows us to give our customers good service at a great price, and in return we keep them. We believe we have one of the highest customer retention rates in the sourcing space. But I’m sure you’re not here to discuss our success stories. What would you like to know?
Yakko How you’re different.
CEO Well, we think our product is better than our competition, but if you limit yourself to a “check-the-box” comparison, as so many analysts are prone to do, you’d see that our major solution differences when we are compared against your average sourcing vendor are our strategic sourcing decision optimization and supplier relationship management capabilities. These go well beyond your standard bid-negotiate-award-track capabilities found in your average e-RFX, e-Auction, and Contract Management applications and allow you to focus on identifying the best value for your money and then ensuring that the savings you negotiated, and contracted for, are realized.
Wakko But don’t a number of companies claim to have Op-ti-my-za-shun?
CEO Very few have true optimization, Wakko. Most just use heuristic decision support algorithms that they try to pass off as optimization. We use true Mixed Integer Linear Programming and best-of-breed industry solvers, like ILog CPlex, underneath a true strategic sourcing decision optimization model that meets ALL of the requirements outlined by the doctor in the wiki-paper.
Wakko And that’s important because?
CEO Because you need all four types of constraints — capacity, allocation, risk mitigation, and qualitiave — and costs — unit, usage, and freight — to accurately model your average real world sourcing scenario. Otherwise, the scenario you end up with is only approximate, which means the solution is only approximate, and, if you missed key constraints, not realistic. Without all of the constraints, and some “competitors” only provide a subset, you either get a result that’s too good to be true, and is, because you can’t implement it, or the result isn’t as good as you can get, because you couldn’t specify all of the constraints and discounts.
Wakko And it works?
CEO Remarkably. As covered in recent posts by the doctor on Sourcing Innovation and our own e-Sourcing Forum, we’ve had two events where we’ve saved over 20M on two projects of roughly 80 Million and 110 Million, respectively. We also find that we do hit the industry average of 12%+ above and beyond e-Auction savings alone when we apply the technology.
Yakko It must be hard to use. You need a team of PhDs to drive it, right?
CEO Not at all! It’s quite easy … your average intermediate buyer can drive it very successfully after just a few hours of training. You create the constraints using wizards and english sentence fragments. You can import the cost data from Excel or from your e-RFX. You can create a new what-if scenario by copying an existing scenario and changing only what you want. Your power-users will teach themselves to be experts in the tool in a matter of hours. I bet even you could use it Wakko.
Wakko But I don’t know how to do Com-bin-a-tore-e-ul Op-ti-my-za-shun!
CEO You don’t have to. Our tool does all the heavy lifting. If you can fill in a spreadsheet, use drop downs, and enter numbers in web-based text-boxes, you can use it. It’s really that easy.
Wakko Wow!
Yakko And what about SRM. Is that easy too?
CEO As you would say, yassuredly.
Dot So what’s it do?
CEO It’s still in development, and we’re aiming for a late 2008 / early 2009 release, but what it’s going to do is streamline data capture and sourcing processes for the buyer and supplier alike. The first addition to our suite is a new supplier self-registration portal, backed up by a workflow-driven custom survey development tool. This pair of tools, the first for the supplier and the second for the buyer, is going to allow a buyer to define what information they need from every supplier, and then what information they need from suppliers in certain verticals and / or what information they need from suppliers who wish to supply certain types of products or services to the buyers. Then, when a supplier logs in and enters their basic information, as well as specifying the products or services they offer, they only have to fill out the surveys specific to them.

The survey construction tool, which will look similar to those who have tried our relatively new contract management tool, is based on the same underlying concept that the user should be able to define what fields, and meta-data fields, are of interest and allow the buyer to define what information they want, and how they want it. In addition, our survey construction tool, which builds on our RFX creation abilities, allows a user to define survey pages, and then makes uses of wizards to guide the buyer through survey construction. And, of course, all of this data is indexed, searchable, and easily managed. Furthermore, as with contract management, the buyer can define triggers on certain events (survey completion, changes to key data fields, etc.) and certain values (expiry dates, renewal dates, etc.) which will send off alerts or e-mails when certain events happen or certain actions need to be taken.
Dot Well, that sounds pretty common sense. A few companies have that already. How’s it different?
CEO What’s different is where we’re going with it and, most importantly, the approach we’re taking. We realize that the “R” in SRM stands for “relationship” and that is something that can not be accomplished with software-based tools alone. You can only have a relationship if there is interaction between the buyer and supplier on a regular basis. This means that there are only two ways a tool can help: enable communication or disable the roadblocks that prevent it. The most common roadblocks are the various tactical tasks that keep getting in the way, specifically, the tasks around collecting, organizing, tracking, and reporting on data.

Thus, in our view, a good SRM tool enables communication — and that’s why we’re building a new supplier portal, starting with our registration site — and centralizes all of the tactical data collection, organizing, tracking, and reporting in one location for the buyer — and that’s why we’re building a new supplier administration module, starting with surveys and scorecards, that is integrated with the rest of our suite, including contract management and meta-bid enabled optimization, which will allow the buyer to track agreements, expirations, certifications, insurance, and performance data in one place. Sometime next year, the tool will also allow senior buyers to define workflows around supplier contracts and interactions, which will guide the buying team through the organization’s best-practice supplier interaction processes. And we’re also building in new commodity-based classification hierarchies that will allow buyers to better segment their supply base and define hierarchical scorecards by commodity category and location to help them get a better view of total operational performance and how a supplier is impacting that.
Dot And it’s all going to be integrated in one platform?
CEO Seamlessly. Unlike our competitors, who have been on acquisition binges for the last decade, we built everything from the ground up on one platform, in one core language. That allows us to seamlessly integrate all of our products into one application in a way that most companies would envy. That’s why we think our SRM will succeed where many have failed before. It may not have all of the bells-and-whistles of some of the best-of-breed stand-alone products, but we believe it will have the core functionality that everyone needs, plus provide the advantage that you only have to deploy one platform. It’s the classic 80/20 rule — 80% of the functionality, for 20% of the cost, and effort, for our customers. When the full platform is released next year, we believe that the majority of customers will find that it does more than what they need. And that’s what we feel the market needs.
Yakko That’s a very interesting take.
CEO And a practical one. Most of the mid-market just needs basic functionality in sourcing and procurement to get through the day. There’s only a few Fortune 500 / Global 2000 companies that are advanced enough to productively use every bell and whistle you can imagine. We’d rather serve the 90% of the Fortune 500 / Global 2000, and, more importantly, the mid-market at large, who have been underserved for years due to the big-platform price tags that have traditionally put the traditional e-Sourcing platform solutions out of their reach.
Wakko I think I get it. 20% of the Fortune 500 would give you 100 companies, and it’s hard to get 20% of the Fortune 500. But if you got 10% of the Global 10,000, that’s 1,000 companies, and there are still 9,000 other companies who need a solution, and a lot fewer companies serving them.
CEO That’s right, Wakko. It’s about building a great company with a great tool that brings great value to, and enables, the mass market. That’s what we’re shooting for. And we think we’ll get there. And with that, I must get back to work. Have a good day.

 

The Road Tour will continue on Thursday.

 

The Sourcing Maniacs 2008 Vendor Tour Part VII: Emptoris

At this point in the story, I ask the Sourcing Maniacs to jump ahead and discuss their expedition to Massachusetts for Empower and what they learned.

This is a long post, since the maniacs love to go on and on and on at times, so I’ve broken it up into Preamble and Discussion. If you’re short on time, you can skip the pre-amble, which doesn’t have a lot of content.

Preamble

 
Guys, if I may interrupt, can we jump ahead a little bit?
Yakko, Wakko, & Dot startled, probably forgetting I was even in the room as I’ve been rather silent to this point during the recounting of their massive summer road tour
Wha …
Dot You’re still here?
the doctor Of course! I’ve been listening intently to your story.
Wakko That’s right! We were telling you the story of our summertime blues …
Yakko I’m gonna raise a fuss, I’m gonna raise a holler
About a workin’ all summer just to try to …
the doctor Yakko!
Yakko Yes?
the doctor Can we jump ahead in the story to where you return to Massachusetts in your quest to sneak into Empower?
Dot I thought you wanted to here about our journey as it happened.
the doctor I do … but I just want you to jump ahead and tell me about your recent trip back to Massachusetts, because I know Emptoris is on everyone’s mind these days … and don’t you want to fit the “E” in at an appropriate place? Besides, as soon as you’re done telling me about your recent side-trip, we can return exactly to where you are now in your story.
Dot Promise?
the doctor Yes Dot, I promise.
Wakko? Wakko!
Wakko just lit four roman candles that he pulled out of his backpack and he is starting to juggle them.
You need to put those out now!
Wakko But juggling candles helps me focus!
the doctor But those are Roman Candles!
Wakko So?
Yakko & Dot They explode!
Yakko and Dot quickly grab the candles from Wakko and snuff them out.
the doctor So, can we jump ahead a little bit? Does it make sense?
Wakko Cents … don’t you need copper to make those?
Yakko Wakko!
Yes, doctor, I think it makes sense.
the doctor Then take it away!
Dot Wow, Vinimaya was awesome!
Yakko I never knew you could integrate more than one catalog in one view before!
Wakko … and simultaneously bring up every vendor of baloney in the world with their current pricing and get the best possible deal for your money today! I’m hungry …
Yakko & Dot You’re always hungry! Didn’t you just eat an entire Boston Cream Pie?
Wakko … and it was yummy! …
Yakko Look … way up ahead … I think that’s Pinky and the Brain!
Wakko I think so too!
Dot Let’s hurry!
the maniacs pick up the pace …
soon after, Pinky and the Brain round a corner
when the maniacs round the corner, they see Pinky and the Brain enter a resort ….
they approach … a guard is guarding the door
Dot Quick! They’re in there!
Guard in a French accent
Halt! No en-tray for yoo!
the maniacs come to an abrupt stop
Dot Do I know you!
Guard Yoo furry little hamzterz again? Yoo are not welcome here either!
Wakko We’re not hamsters!
Guard But yoo still zmell like elderberriez, yoo pointy-eared Ratatouilles!
Yakko What are you doing here?
Guard I go where dey send me!
Yakko What do you mean?
Guard I work for RAG … Rent-A-Guard!
Now go, or I shall taunt yoo again!
Yakko Let’s go … this guy is still crazier than us!
Wakko But …
Yakko We’ll have to find another way to find out what’s going on with Emptoris.
Dot But … Pinky …
Yakko Maybe we can catch them on the way out.
Guard I make fun-nee facez at yoo!
Dot OK … I’m getting weirded out …
Wakko Wakko starts making funny faces back
Pzzzt!
Yakko Wakko! Let’s go.
  The maniacs take their leave.

 

Discussion

the doctor So, you didn’t get into Empower? Did you lean anything? Is there a point to this story?
Yakko We did overhear a few conversations at the local restaurants …
the doctor So, nothing more than rumors then …
Dot Some we heard a few times …
the doctor Well, with respect to those that you heard more than once, did you overhear anything that is more informative than what I already read on Spend Matters and heard from attendees?
Yakko Spend-What now?
Wakko Cost Matters, dude! It’s all about getting as much as you can for whatever you’re selling! It’s all about the mighty dollar!
Dot After all, it wouldn’t be Prada if it were cheap now, would it?
the doctor OOO-Kay … back to topic … let’s discuss what my readers probably already know and see if you have anything to add to it. Sound good?
Wakko Of course they sound good! They’re Bose speakers!
the doctor learning quickly that interrupting the maniacs does not lead to predictable results
Let’s start with the numbers. Any idea how accurate the headcount numbers reported on Spend Matters are? In other words, does Emptoris have almost 450 people, with 150 staff members in engineering and QA?
Yakko I never heard anyone at the local restaurants talk about headcount numbers.
Wakko They were more concerned with losing their shirts, though I don’t know how you lose something that you wear snugly around your body.
the doctor I think they were using a metaphor to refer to the current economic crisis, Wakko.
Wakko Wakko looks … thoughtful.
the doctor It’s unfortunate that you can’t add anything. I’d like to know more about the current R&D breakdown, and, in particular, QA vs. maintenance and support of existing products vs. development of new products vs. mid-term to long-term research?
Yakko Why?
the doctor 150 is a large R&D organization, esprecially in this space. If I had that many people, and they were the right people, I could do some great things. And the more they have on new development and mid-to-long-term R&D, the more you can expect from them in the future.
Yakko After our road tour this summer, I don’t know what to expect anymore! I used to think the solution our former employer developed was very comprehensive and kicked-ass … but now I know it only solved a small part of the problem and that there’s a lot more to sourcing than I thought, and a lot of new solutions out there to help companies address their problems.
the doctor That’s right, Yakko. It’s a wide world of sourcing, with great tools to help you if you know where to look. Let’s move onto the new developments coming down the pipe that Emptoris released details on at Empower.

I have gathered the following from Spend Matters alone:

  • better attachment handling
  • an enhanced notification & alerting framework
  • an updated preliminary bidding interface as well as optimized auctions
  • incremental awards capability
  • ad-hoc reporting capabilities that plug into Microsoft Excel
  • embedded domain knowledge

and I must say that, with the exception of the third and sixth improvements, they don’t grab my attention. We’ve known how to handle attachments for over a decade now, and open source content management / document management solutions with extensive attachment support have been available since early in the decade; if the architecture properly accounts for events, it’s trivial to send off a notification or trigger an alert on any event that occurs in the system; just about everything plugs into Microsoft Excel these days, and has for years; and incremental awards capability is a pretty logical product extension.

That being said, if the domain knowledge that was embedded was extensive, good, and guided the workflow … that would be incredibly useful to your average buyer and if the optimization was tightly integrated into the auctions, that would seriously rock. However, the later is much easier said than done. So, needless to say, I’m curious as to how far they have progressed down that road.

Can you add anything to this?
Wakko When I was hiding in the foliage …
the doctor You were … never mind … continue …
Wakko I heard a couple of men in suits talk about the new “drillable dashboards” and how cool they were. How they thought they’d be able to drill around their reports in real time and find hidden opportunities and then export the data to Excel and play around some more. They said it’s much better than the reporting they got when they first bought the solution.
the doctor A couple of my sources mentioned that too. I hope they did more than that. First of all, as I’ve said again and again, dashboards are dangerous and dysfunctional as they can give you a false sense of security. Secondly, with a spend analysis solution, which is one of the many solutions Emptoris provides, you can not only build your own “dashboard” reports, but actually drill around the entire data set in real time.

I was hoping that the dashboards were quick access points into their SRM application, since that’s the one place I see them being incredibly useful, and was hoping that you’d be able to provide some clarification.

But c’est la vie. Anything else?
Dot When I was pretending to be a waitress, I heard them talking about something called spend desktop intelligence.
the doctor The Prophet (of Spend Matters) mentioned that too, but I’m fuzzy on the details. Are they packaging up their best practices and market insights that they would have gained from working with their customers across America and Europe, and maybe trying to leverage it the same way Ariba is apparently realizing that it needs to leverage it’s category expertise?
Dot I don’t know. They mentioned how great it was that it worked with Excel and supported more ad-hoc reporting.
the doctor That makes it sound like its just an improved reporting tool, which it may be based on a few things I heard. But I hope I’m not getting the full story and that it’s more than that, especially since it’s been reported that they have a Center of Excellence with over 65 staff that speaks ten languages and works with customers across North America and Europe. With that many staff, they would be developing significant market and category expertise, just like the Ariba Supply Watch team, from working on the large number of customer projects that such a team could support over the course of a year. I want to see them package that knowledge up and build a tool that instantly puts it at their customers fingertips. That would be desktop intelligence!

Anything else?
Yakko I heard a couple of suits talking about something called agile contracting and whether or not the simultaneous amendments and mass amendments would be useful.
the doctor Well, if by simultaneous amendment you mean the ability for multiple parties to simultaneously collaborate in the drafting and rapid approval of a contract amendment, which is what I believe it is, that is very useful. But what do you mean by mass amendments?
Yakko I think it’s the ability to amend multiple contracts at once.
the doctor Well, that scares me a little.
Yakko Why?
the doctor Most amendments to a contract need to be mutual … between both parties. That means you can’t just go modifying a contract, once signed, willy-nilly, and that you definitely can’t go modifying a group of contracts willy-nilly … unless you want to give your legal advisor a heart attack. Now, it’s true that some modifications can be made unilaterally, but they are usually restricted to change of address, etc. Although the feature could prove to be quite useful in larger organizations during contract template maintenance and update, which is a huge task in itself if you have the same terms and conditions across multiple types of contracts, I can see it scaring legal council, who would thus be adverse to using it, especially if they think there’s a chance they could overwrite a live contract. Let’s hope they put out some really good messaging on this capability.

Anything else?
Dot Spend enrichment …
the doctor Yeah … I’ve heard this from multiple sources … but I’m going to cut you off at the starting line with this one. Spend enrichment is child’s play with a good spend analysis system (and if you don’t immediately see why, read the wiki-paper and the spend analysis posts on my blog), and doesn’t need much discussion.

What else?
Yakko Performance visibility within Contract Management …
the doctor Now that would be cool … especially if they tightly integrated their SRM application within their CM tool and, for any supplier, you could see how well they were doing at a glance, where they were weak, and what needed improvement … and could take immediate action. And if you can see their invoice accuracy, and verify that you are not overpaying, and thus realizing your negotiated savings … that’s useful. What were you able to find out about it?
Yakko Nothing.
the doctor Nothing?
Yakko They left the restaurant just as they started that conversation.
the doctor That’s unfortunate … as I don’t have any details on this either, though I’m told by multiple sources it’s coming. Anything else? Anything?
Wakko Something about A T K.
the doctor Do you mean AT Kearney?
Wakko I think so.
the doctor What did you hear?
Wakko Something about AT Kearney using Emptoris Spend Enrichment exclusively for all of it’s opportunity assessments.
the doctor Are you sure?
Wakko I think so. Why? Is it important?
the doctor Are you kidding? If you heard right, that’s huge!
Dot, tell me what you heard about what they are calling “spend enrichment” … their definition must be more extensive than mine if they’ve won over AT Kearney.
Dot Something about building in an item knowledge base and vendor knowledge base …
the doctor And???
Dot I got called to another table. I had to keep the waitress act up, you know.
the doctor That sucks. I’d love to know how they won AT Kearney … and to what extent AT Kearney is deploying them … I’d bet that to be one of the most important revelations to come out of Empower … after all, with the exception of optimization-based auctions, just about everything else sounds like logical, incremental, expected upgrades to their existing suite. But whatever they did to get the undivided attention of AT Kearney is certainly worth investigating! It’s too bad they won’t talk to us …

Anything …
Yakko They’re hoping to have their next release out soon.
the doctor I’ve heard that too. Did you overhear what’s going to be in it?
Yakko Dutch reverse auctions, dashboard intelligence, and better spend analysis.
the doctor Sounds about right. My sources didn’t provide much insight here, which is probably good since future development plans are always subject to change anyway. Did you hear if they are going to take whatever they have for auction-optimization up a notch? That could be so cool!
Yakko I don’t know. I didn’t overhear anyone talk about optimization at all.
the doctor That’s depressing. I know that I’ve said before that I don’t think it’s the best solution on the market, but let’s face it, you don’t need the absolute best optimization solution on the market to save big money the first time you apply it to a category … a good optimization solution, which they appear to have based on the details they released in a Spend Matters Post (Emptoris Optimization: Setting the Record Straight) and other publications I’ve been able to dig up, will save you a small fortune (especially if it is significantly more affordable than the best solution out there, as there is generally not that much of a difference between a good, solid, optimization solution and a great one, which generally only saves you additional dollars on significantly complex or specialized categories), and from what I understand, they’ve made some definite improvements, at least on the usability front, over the last couple of years and I bet there’s still a lot of categories their average customer could save 10% (or more) on. (And, these days, that’s a lot of money!)

But what should I expect from the market? The true leaders get it, and the laggards, which, apparently, constitute the majority of the space, don’t. I guess I’ll just have to keep educating them that optimization is easy, that they can do it, and that they can save money … significant money … and this is doubly true if they are already using a solution (like Emptoris) that has optimization. (Even though I’m starting to feel like Rob Schneider in an Adam Sandler movie.) I hope that, for the sake of so many companies which are in unnecessary financial jeopardy, it doesn’t take me much longer.

Anything else?
Yakko Not really.
the doctor Dot?
Dot No … I was really much too busy having fun playing waitress …
Wakko I got so comfortable in the foliage, I feel asleep.
the doctor So you didn’t hear anything more than I did. Pity. Because what I’ve been told, by attendees, and heard over the last few months doesn’t go much beyond the coverage on Spend Matters, the news sites (Supply and Demand Chain Executive, ITWeb, and their own Emptoris Connect news site), and the Analyst sites (like Forrester, AMR, and IQPC). And my readers want more than that. They want deep insights into problems, solutions, and vendors who can help them. Not marketing fluff or the superficial coverage, which is often no more than parroting press release, that most of the news sites seem to be content with these days.

On a different subject, did you meet up with Pinky and the Brain while you were in the area?
Dot Pinky came to see me …
the doctor And?
Dot He told me some funny stories.
the doctor Any contain any insights as to what’s going on with the vendor world?
Dot Not really. They were just about the Brain’s latest attempts to take over the sourcing world.
the doctor Tell him to share them with me! It’s been a while since I’ve heard from him.

Well, if there’s nothing else, I should let you get back to your story.
Yakko Where were we?
the doctor Reviewing notes.
Oompa Loompa Doom-pa-dee-do

 

The next part of the story continues after where we left off in Part VI.

the doctor’s Seven Grand Challenges for Supply & Spend Management

Seven deadly sins
Seven ways to win
Seven holy paths to hell
And your trip begins

Seven downward slopes
Seven bloodied hopes
Seven are your burning fires
Seven your desires….
  Adrian Smith / Bruce Dickinson

In my last post, which announced the cross-blog series that this post is officially kicking off, I reviewed the seven grand challenges for IT over the next twenty-five years, as laid out by Gartner back in the spring. Although they ranged from the ridiculous to the sublime, and contained a fair amount of overlap when closely analyzed, it’s a worthwhile exercise to undertake every now and again, because in order to develop a useful solution, you need to identify what is needed and the path you should be on.

This inspired me to propose a set of “seven grand challenges” for supply and spend management, in the hopes that it would get you, dear reader, to think about what is important, what problems should be solved, and where we should go. Considering how important supply management is in these troubled times, I hope that all of my fellow bloggers chime in with their ideas on what’s good, what’s bad, and, what’s downright ugly in supply chain today — because the first step in solving a problem is properly identifying it.

So, without further ado, to kick off this cross-blog series, here are the doctor‘s proposals for the seven grand supply and spend management challenges:

  • Optimization
    There are a number of challenges here. The first challenge is getting people to use solutions that are already out there. There are currently a number of offerings that address strategic sourcing decision optimization, distribution network optimization, and freight optimization quite well, and that, when properly applied, can save the average company up to 12% above and beyond the best solution obtained with auctions. The second challenge is integrating the different problems (sourcing optimization, freight optimization, network optimization, etc.) into a common framework that allows the tradeoff effects of each decision to be adequately modeled and understood in the big picture. The third problem is addressing the emerging non-quantitative regulatory and compliance requirements such as RoHS, WEEE, and GHG emission limits in a consistent and value-oriented manner within the optimization model.
  • Supplier Enablement
    This is something we still don’t have a good handle on. Beyond “supplier enablement is the provision of technology based solutions that enable the supplier to be more productive and better serve the buyer”, there isn’t yet a general consensus of what this technology needs to be, as most companies have not yet embraced B2B 3.0. I’ve argued before that, today, it’s a combination of catalogs, networks, e-Document exchange and management, and supplier portal technology, and I still think that is a good start, but enablement should go beyond enabling the exchange of information, it should improve the supplier’s operations overall.
  • Integration of the Physical, Information, & Financial Chains
    For most companies, these are three different chains. Some companies that have embraced RFID, GPS, and e-document management have taken the first steps to integrating the physical and information flows, but the technology is still emerging, the integration isn’t smooth without extensive integration and customization between a number of different solutions (and only Fortune 500 companies can even afford to consider this), and we have only started to look at the financial supply chain and how to best integrate it with the information supply chain. I think it will be a while before solutions that truly support a holistic view will emerge, especially considering that even the gorillas in the space don’t have end-to-end sourcing and procurement.
  • Solution Globalization
    Let’s face it … supply chains today are truly global, but the solutions are not. Most “internationalized” solutions are only available in a smattering of languages, most “internationalized” solutions are not plugged into real-time currency exchange feeds — and few developers have thought about the need to maintain/display multiple conversions (including the rate at the time of purchase, the projected rate, the current rate, etc.), and most “internationalized” solutions don’t help you understand how to do business with the country of interest.
  • GHG Tracking and Reduction
    Most enlightened countries have woken up to the fact that, even though we don’t know precisely how damaging each ton of GHG and / or carbon we emit is, we do know that it’s damaging and that we have to reduce our emissions. The first step is to get a baseline of the emissions produced by your operations, but for many companies, this is a multi-year effort. Better product and service solutions are needed. Also, although there are multiple proposals on the table to reduce emissions, there are few total value management models out there to help us select the right ones.
  • Risk Prevention
    Not only is risk not going away, but it’s getting worse by the year. Supply chains are getting more complex by the year, and the likelihood of something going wrong is steadily increasing. Solutions that can help a company identify risks, in real time, and identify possible mitigations and actions required to implement them, are desperately needed.
  • Opportunity Analysis
    Costs are skyrocketing, but consumer discretionary spending is stagnant at best. They key to a successful supply chain is cost reduction and avoidance, and this requires continual opportunity analysis. I envision this starting with modern spend analysis, but it needs to go beyond true spend analysis to continual innovation, since the greatest cost reductions will come from true revolutions, and not just the shrewd identification of category-based overspending. I envision that this will start with the integration of PLM with Life Cycle Analysis and Next Generation Analytics and then morph into something that none of us can envision today.

Now, I realize that these are pretty much the same problems we have been facing for the last five to ten years, but I suspect that it will be quite a while before they are solved due to the overwhelming complexity of today’s supply chains.

When the series is done, I’ll compile the “master list” of challenges and, if any of my fellow bloggers can convince me there are bigger challenges out there, revise my list.

the doctor’s Guest Posts: The Year in Review II

Since last year’s summary of my guest post contributions (in June), I’ve blogged a number of guest posts over on eSourcing Forum [WayBackMachine] as well as authored or co-authored a significant number of wiki-papers over on the eSourcing Wiki. I’ve also contributed articles to the EyeForProcurement monthly newsletter as well as Efficient Purchasing.

e-Sourcing Forum

December 2007 to June 2008

Regulations Unlimited
Strategies for Supply Chain Finance
Customs & Security
The Seven Scruples of a Sourcing Sensei
Discovering Your Leverage Points
Seven Risk Mitigation Strategies You Can Do With Smart Optimization
If it ain’t Multi-Tenant, then it ain’t got SaaS (co-authored with David Bush)
Not All Free Trade is Equal
Best Practice Freight Bidding
CSI: Corporate Social Irresponsibility
Critical Skills of Supply Chain Leaders
Devising an RFP That Works
Core Capabilities of Supplier Enablement
Is it Center of Excellence or MindSet of Excellence
Successful GPOs Are About Value, Not Cost Savings
Don’t Swing the Wrecking Ball Unless You’re Prepared for the Falling Debris
Can you really afford to leave Millions on the table?
Are You Managing Your Talent Chain?

June 2007 to December 2007

Supplier Enablement
Confucious eSourcing Project Management Tips
Brunswick Corporation’s e-Auction Best Practices
Collaborative Negotiation
Seven Tips for SaaS Selection
Incentives Motivate
Optimal E-Tool Selection
Five Ways to Take Your Sourcing to the Next Level
A Global Trade Primer
Applications of Spend Analysis
The Benefits of Purchasing Consortiums
Optimization is the Future And The Future is Now
Some Low Cost Country Sourcing Insights
Twelve Steps to Purchasing Program Predominance
Ten Tips for Talent Retention
A Case for E-Sourcing and E-Procurement Integration
Nine Steps to e-Procurement Success
Key Challenges of Tomorrow, Part II
Key Challenges of Tomorrow, Part III
Ten Common Negotiating Mistakes

Articles

Why aren’t you optimizing?, Efficient Purchasing Issue 5, Fall 2007

Why Aren’t You Optimizing Your Sourcing Decisions? EyeForProcurement August 2007 Newsletter

(Strategic Sourcing Decision) Optimization: Can you afford NOT to do it?

Last week at reSouce 2008, Iasta (acquired by Selectica, merged with b-Pack, acquired by Determine, acquired by Corcentric) provided 5 optimization case studies of recent projects that they did for, or in conjunction with, their e-Sourcing clients (who have free access to basic Decision Optimization in a basic suite license as well as access to enhanced Smart Optimization, with extensive freight support that includes support for LTL and TL at buyer-defined freight brackets, for an additional fee). In one of the projects, they only saved a measly 5.5%! That’s only 55,000 of savings for every 1,000,000. Pocket-change to your CFO, right?

Well, in case you haven’t figured it out yet, I’m being sarcastic. Iasta not only proved the twice-discovered Aberdeen result that optimization saves 12%, on average, above and beyond e-Auctions, but that, for categories with untapped opportunities, this doesn’t capture the true savings that can be extracted from categories that can’t be efficiently analyzed without optimization. Although two of the projects were below 12%, at 7.0% and 5.5% in the worst case, three of the projects were not only above average, but two were considerably above average, clocking in at 35% and 40% savings, respectively. The first project was a new national roll-out for Dairy Queen, who would have spent 29% more had they gone with their pre-optimization strategy for award distribution, transportation, and inventory management. Instead, they walked away with approximately 1.8M in savings while reducing analysis time by over 2/3rds. The second project was a national award of temporary labor contracts for a large insurance company who would have spent 25% more had they used their traditional spreadsheet analysis methodology. Instead, they walked away with 20M in savings AND reduced the analysis phase by over 75% – completing a project that normally took over a month in less than a week. Furthermore, the project that only achieved 18.2% savings was also quite significant – as it was on a 110M hardware category for Conoco Phillips – who also walked away with over 20M in savings. I say “over” because the 75.6% cycle time reduction they achieved also allowed them to capture an additional 1.6M in savings because they were able to complete the project in 2 weeks, instead of the usual 6+ weeks.

Thus, I must ask you again – why aren’t 75% of you even considering optimization? Can you really afford to leave millions … if not tens of millions … on the table when prices are skyrocketing across the board, revenue is falling, and your job is on the line? Especially when a savings of even 5% on a 2M-3M category can be the difference between the company being able to afford your salary over the next year? (And, to be honest, the chances of you not racking up a cost avoidance of at least 5% with optimization on any category of even moderate complexity are quite low.)

Is it because you think it’s hard? Although I would have conceded this point to you even three years ago, and would still concede this point to you if you are using the wrong vendor who still believes that everyone can use a mathematical programming language interface, the fact of the matter is that some vendors, like Iasta who has put a lot of R&D into making optimization usable by the average buyer over the last few years, now offer solutions that you can be up and running on with only a day or two of training. Now, it’s true that you won’t master some of the more advanced features that quickly, but when even the basics will shave 5% to 10% off the total cost of the award, that’s one heck of a good start and your mastery will improve with each project you do. Furthermore, now that most vendors with UI-based optimization products, like Iasta, now offer you a multitude of options to get started, which include full service and guided support in addition to self-serve, you are free to start at your level of comfort. And when buyers with only a few months under their belts are creating scenarios beyond what people like myself could envision as model designers, and suggesting enhancements that experts like myself (who have been designing these types of solutions for eight years now) never even thought of, you begin to understand that it’s really pretty easy compared to the state of affairs of a few years back.

Of course, you do have to know what you are doing – and as I pointed out above, you do need a little bit of training. But it’s often a lot less training than you think, especially if you’re a self-starter (which you should be if you’re in sourcing these days) and willing to take steps to self-educate. In addition to readily available buyer-training (most vendors will give free demos, free support, and schedule training on short notice for their customers – and do it on your site if that’s what you want), there are also a number of resources out there that you can use to begin to understand what optimization is, what it can do, and how you can begin to use it. There’s the optimization archives on this blog, the optimization archives on e-Sourcing Forum [WayBackMachine], the optimization wiki-paper on the e-Sourcing wiki [WayBackMachine] (which also forms the basis for the chapter on strategic sourcing decision optimization in the e-Sourcing Handbook [e-Book available on request]), the Next Level Purchasing (now the Certitrek NLPA) podcasts (Parts I and II), and the extended transcript with commentary (as well as the introductory “purchasing tips” article). And your vendor, with extensive experience, will be able to help you identify relevant issues for any project you wish to undertake.

It might take a little bit of effort initially, but when your analysis time is reduced by 50%, 66%, and even 75%, it will be more than worth it … especially since successive projects will be faster still as you’ll already have the data templates ready for future projects as well as the basic scenarios you need to build and compare defined. Plus, you’ll have to do less projects to meet your savings / cost avoidance targets … which means that you’ll hit your bonus faster. And, if nothing else, isn’t that reason enough for you to take the leap?

As I have already fully disclosed, Iasta is a client and I am responsible for much of the model that their product (and Smart Optimization in particular) is based on, but the UI innovations are entirely Iasta’s, as are the results reported.