Category Archives: eSourcing Forum

The Benefits of an End-to-End e-Sourcing Suite

Originally posted on on the e-Sourcing Forum [WayBackMachine] on Wednesday, 18 April 2007

Best-of-Breed is good, often very good, but does have its disadvantages if you carry it to the extreme. Depending on your needs, an end-to-end e-Sourcing Suite with competitive functionality, particularly if its on-demand, from one provider might be significantly more advantageous to you than a best-of-breed spend analysis tool from vendor A, e-RFx and e-Auction tool from vendor B, decision optimization tool from vendor C, and contract management tool from vendor D. And the reasons for this go well beyond the initial cost savings of not having to develop and integrate custom integration solutions between four different vendor applications in addition to their integration with your back-end ERP and accounting systems or the efficiency gains from not having to load up four different applications to review the history of an event.

The real benefits become clear when you start implementing Next Generation sourcing strategies. In particular, end-to-end platforms present significant advantages to those organizations that are adopting center-led procurement organizations, taking advantage of guided sourcing, focusing on the transaction, adhering to the mantra of “Do Less, Not More”, and implementing hybrid sourcing strategies.

In center led procurement, a procurement center of excellence (COE) focuses on corporate supply chain strategies and strategic commodities, best practices, and knowledge sharing while leaving individual buys and tactical execution to the individual business units. Furthermore, in a center-of-excellence, a sourcing professional is responsible for education and training, benchmarking, and best practices. It should be clear that it is much easier to benchmark a process that can be completed on one platform vs. one that can be completed on many, tailor a best practice implementation to a single platform, and train and support users on one platform.

With guided sourcing, the sourcing professional uses the best tools that technology has to offer, deep analytics and optimization, and dashboards and monitors her sourcing projects through a centralized dashboard that provides a deep command-and-control view into the most critical supply performance information. Generally speaking, most dashboards plug into a specific solution and the only way you’re going to get a dashboard with this capability that can cut across multiple solutions from multiple vendors is to undertake a long, costly, custom development project – which will have to be maintained and updated any time any single vendor updates their offering. Thus, the best guided sourcing has to offer is not only easier, but sometimes only possible, in an end-to-end suite from a single vendor.

An organization with a transactional focus likes to follow the transaction from beginning to end, review the transaction when it is complete, and know, at any given time, where it is. With a slew of tools, it is sometimes difficult to know the status of any given transaction without checking all of the tools. With an end-to-end suite, it’s often just a matter of checking the dashboard.

In order to Do Less, Not More, you have to do as little as possible, as efficiently as possible, and get the maximum results possible. This is obviously simpler in one platform, which can automate as much of the process as possible.

In hybrid sourcing, an organization is blending sourcing technologies with third-party supply market and sourcing intelligence and making use of third party business process outsource solutions for parts of their supply and spend management function, when appropriate. A single platform makes a single integration point and, more importantly, if the platform is on-demand both the internal team and outsourcing service provider can share the same platform, giving the organization 100% visibility into all of its sourcing, and not just the sourcing it chooses to do in house.

Of course, this all hinges on the end-to-end platform being competitive with other offerings. Although it is true that not a single component has to be as good as the best of breed alternatives, each component has to at least meet the majority of the organization’s needs. Exceptions should be rare, and not the norm.

Are there any limits to procurement’s role?

Originally posted on on the e-Sourcing Forum [WayBackMachine] on Wednesday, 10 January 2007

The current issue of CPO Agenda published a very provocative article entitled “Are there any limits to procurement’s role?” where they summarized the responses of a panel of leading professionals that recently debated the issue in Brussels.

The participants included Gordon Criction, Nando Galazzo, Malcolm Harrison, Craig Lardner, Silla Maizey, Tom Rae, Luc Volatier, and Peter Kelk.

The participants had a significant number of great insights to share, which I’ve summarized below.

Silla Maizey
Procurement is shifting from being relatively transactional to something that’s quite commercial. Procurement is now about how to drive the business forward commercially. The only limits you put on the role are the limits that you place on yourself.
Luc Volatier
Whereas in the past, procurement heard the news along with the rest of the world with respect to acquisitions, today procurement is often involved in the due diligence process from the beginning. Procurement also tends to be included in any innovation project. In the end, the limit to procurement’s role is the one set by the executive board.
Craig Lardner
Procurement is now included in the sales process at some companies. For example, to meet with the client’s purchasing director to overview cost structures and demonstrate cost containment. The limitations of procurement are ultimately driven by the quality of your team and what they can achieve.
Peter Kelk
Procurement is now becoming involved in professional services.
Nando Galazzo
Globalisation and consolidation have opened up tremendous opportunities for procurement development. You are ultimately constrained in what you can do by the overcommitment of your people.
Gordon Crichton
Procurement is now a real contributor to the business, especially in helping to build the brand to create sustainable shareholder value. Today there is a high-level demand for procurement that wasn’t there before. The sky’s the limit.
Tom Rae
Procurement is becoming more of a profession for generalists, rather than specialists. Also, procurement is now devoting more time and resources to strategic issues.
Malcolm Harrison
If you take sequential steps, build credibility, build the capabilities of your team, and go as fast as you are capable of, there are no limits to procurement’s role in the long term.

The article also asked what was driving this change in procurement’s role, what needs to happen for procurement to be involved in non-traditional activities, and what the constraints and challenges are when it comes to the expansion of procurement’s role. It’s a great article and I encourage you to read the article in its entirety.

Accelerating Value with On-Demand: An Aberdeen Perspective

Originally posted on on the e-Sourcing Forum [WayBackMachine] on Wednesday, 16 May 2007

As you well-know, On-Demand is a favorite topic of mine and of e-Sourcing Forum, so it should be understandable that Aberdeen’s recent report on “B2B Collaboration: How On-Demand Platforms Accelerate Value and Impact TCO” caught my eye.

According to the report, “On-demand technology platforms (also called ‘software as a service’) are playing an increasingly important role in enabling electronic communication and process collaboration. Companies seeking to improve their collaboration capabilities should take a strong look at on-demand solutions. On-demand solution providers tend to have greater resources and experience in on-boarding trading partners onto the collaboration platform than a company has in-house. Many on-demand providers also come to the table with networks of pre-connected suppliers and carriers, further reducing rollout times and increasing trading partner acceptance. Considering that most on-demand supply chain solutions are operational in less than three months and have an ROI period of less than a year and that best-in-class companies are more than twice as likely to be using on-demand supply chain applications”, on-demand should be in your sights if it is not already.

The report also notes the following benefits achieved by market leaders:

  • administrative cost savings
  • shorter planning and execution cycles
  • reduced out-of-stocks at retail locations
  • increased percentage of perfect orders
  • reduced inventory holding costs
  • shorter cash-to-cash cycles
  • increased customer satisfaction
  • revenue growth

According to the report, which notes “on-demand solution providers often have much greater resources and experience in on-boarding trading partners onto the collaboration platform” and that “many on-demand providers also come to the table with networks of pre-connected suppliers and carriers” the two main process areas for collaboration are the order-to-cash process (customer collaboration) and the purchase-to-pay-process (supplier collaboration). On the P2P side, the touch-points identified for collaboration are product design, forecasting, VMI, capacity and material planning, transportation management, and order fulfillment. On the order-to-cash side, forecasting, order management, trade promotions and marketing, invoice reconciliation, inventory management, and transportation management are the main touch-points.

Fortunately, on-demand SCM solutions are well-suited to address two critical requirements of effective collaboration and synchronization:

  • the need for rapid electronic partner enablement
  • the requirement of process flexibility

The report also provides a value framework for assessing B2B collaboration options to help a company decide whether an on-demand solution is right for its B2B collaboration needs. The framework consists of four dimensions: TCO, business value gained, speed and project risk and is meant to look at the costs and benefits from all relevant angles.

Dimension 1: Estimating the Total Cost of Ownership

The total cost of ownership is dictated by start-up costs, recurring costs, and business partner on-boarding costs. These costs are defined as follows:

Start-up Costs

  • Cost of software
  • Cost of pre-requisite software
  • Upfront hardware costs
  • Software implementation costs
  • Initial software training costs

Recurring Costs

  • Software maintenance fee
  • Customization costs
  • Monitoring and on-going maintenance of hardware and pre-requisitie software
  • Data storage and continuity
  • Business continuity
  • Internal training costs for users and system administrators
  • Help Desk costs
  • Internal IT staff maintenance and support
  • Upgrading software

Business Partner On-Boarding Costs

  • On-boarding business partners
  • Maintaining and trouble-shooting trading partner connections
  • Total costs borne by business partners

Dimension 2: Estimating Business Value

The business value is primarily determined by the corresponding reduction in operating costs, increase in revenue, supply chain metric improvements, and community benefits.

Reduction in Operating Costs

  • Reduced labor costs
  • FTEs avoided during business expansion
  • Reduced transaction costs
  • Reduced inventory costs
  • Reduced logistics costs
  • Reduced managed services costs

Increase in Revenue

  • increase in sales due to new customer acquisition
  • increase in new product sales
  • decrease in sales due to old customer defections

Supply Chain Metrics Improvements

  • supply chain costs as a % of revenue
  • increased # of partners participating in collaboration initiatives
  • demand management-specific metrics
  • supply management-specific metrics
  • logistics management-specific metrics
  • cash-to-cash cycles

Community Benefits

  • hard and soft benefits of community development

Dimension 3: Estimating Speed

Speed is estimated along the following dimensions

  • Initial implementation time
  • Time to on-board trading partner
  • Rollout to new locations/business units
  • New process deployment
  • Time to reconfigure existing processes
  • Upgrade speed

Dimension 4: Estimating Project Risk

Project Risk is estimated along the following dimensions

  • Year 1 exit costs
  • Risk of project failure
  • Risk of software disuse
  • Risk of implementation cost overruns
  • Risk of data security
  • Risk of system downtime

Once a company has completed this analysis, according to Aberdeen, they can determine if they are in the sweet-spot for on-demand / Software-as-a-Service solutions and use the framework to consider the advantages and disadvantages to using on-demand versus more traditional approaches. It’s a good framework, and I believe it nicely complements the weekend series I authored last summer on On-Demand (The Good, The Not-So-Bad, And The Coming Pretty, And the Story Continues).

Weekend Series Wrap Up IV: Process and Technology

Author’s Note: Unlike Parts I to III, this part, started in 2009, went unfinished and never posted. It was intended to bring attention to a number of articles that covered key topics covered in depth on the e-Souring Wiki. (It identifies the articles, but does not summarize their importance and is, hence, unfinished.

Back in 2006, we posted a number of weekend series on key aspects of the sourcing methodologies, technologies, and best practices to provide a quick introduction to key topics, many of which are covered in depth on the e-Sourcing wiki. Since 2006, we have continued to add to the e-Sourcing wiki and it now contains over two dozen wikis on core topics important to the success of any Procurement and/or Sourcing professional.

In order to introduce you to these very valuable wikis, I have authored a number of posts here on the e-Sourcing Forum that will help you understand the purpose and importance of these wikis. To date, these include:

Each of these posts, and wikis, should provide you with valuable information and insight to begin your evaluation and implementation of the methodology, technology, service, or best practice that will bring your Sourcing and/or Procurement organization greater success. Check them out today!

10 Tips for Talent Retention

Originally posted on on the e-Sourcing Forum [WayBackMachine] on Tuesday, 30 October 2007

A recent study by McKinsey & Company and the Supply Management Institute found that high performing firms have high performing purchasing departments, that what matters most is the people in the purchasing department, and that purchasing departments staffed with talented, motivated, and interactional personnel achieve, on average, savings that is two-and-a-half times higher than their peers who haven’t yet figured out that when it comes to supply chain, People Matter Most.

Therefore, should you be so lucky as to acquire exceptional talent, it is key in today’s economy that you hold on to it. The following are ten tips that might help you do just that.

  • Organizational Culture
    An organization needs the right environment to attract and retain the highest calibre procurement talent. Although this is hard to define, a good start is the right mix of openness, diversity, ethics, sustainability, fun, and support for work-life balance.
  • Give Them Space
    Empower employees to make their own decisions and give them the room to do so. Encourage them to try new ideas and don’t break out the whip if they fail, as one can often learn more from failure than from success. Also provide employees with the freedom that allows them to get the job done in the ways that work best for them.
  • Mine for Opportunities
    Involve the organization’s best people in strategic planning when the search is on for the next great opportunity and allow them to head new projects or spend categories on their own.
  • Challenge Them
    Ensure that BIG and NEW purchasing challenges are presented to them on a regular basis. Great talent is drawn to the opportunity to work on big things and to apply new thinking.
  • Training
    Good training starts on day one, from the minute a new recruit walks in the door. Before the recruit was hired, the manager should have laid out the skills relevant to the role, identified potential gaps, and developed an appropriate (on-the-job) training program to get the new employee up to speed as soon as possible.
  • Mentoring
    Mentoring facilitates knowledge transfer, helps the organization take advantage of lessons learned, and makes both the mentor and the mentored feel valuable.
  • Career Path
    Good procurement personnel are ambitious. They want to know that they can advance over time. Make sure there is a career path for every employee that starts at junior buyer and goes all the way to CPO.
  • The Right Equipment
    Every professional needs tools. This goes doubly so for procurement professionals who often have the hardest job of all managing the organization’s global supply chain. Make sure they have the right sourcing, procurement, logistics, inventory management, and contract management tools (to name a few) that they need to do their job effectively and productively and don’t be cheap when it comes to technology.
  • Rewards
    A good salary is often the top indicator of employee retention, and often the top reason an organization loses its top talent. Know what your top people are worth on the open market and do your best to compensate them justly.
  • Proactive Stay Interviews
    Even if the organization has the right culture, makes efforts to empower its employees, mines for opportunities, challenges the team regularly, offers continuous training opportunities, institutes mentorship programs, establishes a career path for each employee, gives them the right equipment, and rewards its employees handsomely, don’t assume this is enough. Everyone is different and every team is different. Instead of guessing, find out what your staff really want by asking them.

For more information on Talent Management, check out the “Talent Management: Build and Retain World Class Sourcing Talent” wiki-paper over on the e-Sourcing Wiki [WayBackMachine] which covers the five R’s of talent management – resolving, recognizing, recruiting, retaining and retiring, skills development, and succession planning.