June’s Technology for Procurement Forum in San Francisco, put on by EyeForProcurement, had some really good case studies. In this post, I’m going to convey some of the highlights, and associated insights, in order to encourage you to consider attending this conference next year. (A couple were only so-so, but it was the first year of this particular conference, so one has to cut a bit of slack. However, since conferences that adequately focus on technology, which is a vital tool for today’s sourcing professionals, are few and far between, it’s important to recognize when someone tries to pick up the slack.)

The BMW case study (presented by Jason Trevison) showed that taking the time and patience to get it right from a technology perspective can have incredible payoffs on performance. The first automaker to use SAP, one of the first to build their own custom enhancements to cover the processes SAP didn’t, and one of the few to focus on automating anywhere they could get value, saw BMW reduce manual processing and intervention on purchase orders, invoices, and payments from 60% down to under 30% in a six-year period. They also benefitted from streamlined processes and continual supplier development, in part due to an automated supplier rating system that provides feedback to suppliers on a regular basis.

The Chevron Phillips case study (presented by Richard Roberts) told us that with the right approach, there are often significant savings to be gained in freight payables. According to the presenter, errant invoicing is common in freight, and this could be your biggest opportunity for savings. This is often due to complex contract pricing and dynamic efforts, but is also often due to manual errors and, sometimes, underhanded efforts by your supplier to get more than you bargained for. (The “what they don’t catch is our profit” tactic. Just like some office supply suppliers who give you a “best price” quote will, if prices are not carefully monitored, fail to reduce prices and sometimes even creep prices up as time goes on.)

The presenter indicated that the best way to reduce errant invoicing, and thus get instant savings, is to adopt, and standardize, a workflow process, move from paper to electronic invoicing (he promoted EDI, but it really should be XML – add an XML to EDI adapter for your out of date supply base if you need to), perform regular audits, adopt best practices and use multi-way matching and, if possible, third party providers to automate the task, and understand the costs associated with complex pricing terms.

The Timken case study (presented by Dean Devine) on commodity strategy development told us that there are great rewards to be reaped, but that it’s a lot of work to get there. The lessons learned were quite insightful:

• Just Get StartedIt will never be “the right time”, you’ll always be too busy, but you won’t reap the rewards if you don’t start working towards them
• Reach ConclusionsRegardless of how much or how little data you find, draw a conclusion and act on it. Use what you learn from going forward on the next buy.
• Don’t just develop tacticsYou need a concise strategy and action plan
• Review with stakeholders frequentlyThis is required for buy-in, alignment, and, if required, mid-course corrections
• Give your staff the time they needStrategies take work, and can’t be done in off-time, spare-time, or (when overworked) in over-time
• Strategy development is a competencyIt needs to be developed – it doesn’t magically appear
• Use the process to assess the resultsBe willing to change. You won’t always get it right the first time

The McKesson case study (presented by John Visaya) on procurement system selection and implementation focussed on the importance of a good business case in obtaining buy-in both for the project and system adoption. It also provided a good check list for building the business process:

• Don’t forget the Financial Factors (NPV, IRR, EPS, etc.)This is what the CFO wants to see, and he controls the budget
• Understand that Benchmarking is NOT BaseliningYou need to baseline your current performance before you can

  determine how well you are performing to market average

• KPIsThis is how you’ll measure your success
• Emphasize the BenefitsCost Avoidance and Cost Reduction in particular
• Quantify the Hard vs. Soft BenefitsCost Savings and Efficiency vs. buy-in and ease-of-use
• Determine the Impacts and Objections and the Mitigation Strategies
  Solve your dilemmas before they strike

Again, nothing you haven’t heard before over the past year both here and on Spend Matters, but us bloggers always appreciate knowing we got it right!

June’s Technology for Procurement Forum in San Francisco, put on by EyeForProcurement, had some really good presentations. In this post, I’m going to convey some of the highlights, and associated insights, in order to encourage you to consider attending this conference next year. (It also had some weak presentation, but it was the first year of this particular conference, and I’ve never been to a conference that didn’t. However, since conferences that adequately focus on technology, which is a vital tool for today’s sourcing professionals, are few and far between, it’s important to recognize when someone tries to pick up the slack.)

In John Ferguson’s (Vice President and CIO of Optical Cable Corporation) keynote on Technology and Procurement, The most profitable way to leverage your technology – and rise above the competition, he reminded us that technology is, at most, a tool, that one size does not fit all, and that tools that support different strategies are required for best results. After all, no matter how hard you try, software can’t fix a broken process and the only thing worse than a broken process is an automated broken process.

Furthermore, it’s also critical to understand that a technology focussed project will often take a lot longer than you expect to both complete and to see a return on, especially if it involves business process improvement. Process improvement requires time, effort, and considerable change management that should never be underestimated due to the human factor. That’s also why you should not automate for the sake of automating – make sure there is a significant return waiting to be realized.

With respect to sourcing, according to John, you should buy high volume components as commodities from the same sources as your competitors whenever possible, buy components with volatile demand cycles as needed, and make an effort to be the easiest business partner to deal with. Furthermore, your strategy should focus on penetrating less-commoditized markets through differentiated product and service offerings.

In John Cleminshaw’s (Director of Global Quality Systems Procurement at Whirlpool) keynote on the strengthening of your procurement core, Technology that improves your financial and customer focus, he focussed on the importance of process-based management and that your procurement cycle must include participation in the design, manufacturing, and logistics process flow, as these can be sources of considerable cost that will be “locked-in” if not done right.

John also offered some suggestions on how to develop a process-based system.

• Document the Present Systemhow does it work? what’s missing? what are the gaps costing us?
• Revise the Processcomplete it, add efficiency, and make changes if necessary
• Turn the Process into a Systempreferably, find an existing best-of-breed COTS

  (Commercial-Off-The-Shelf) system as it is time consuming and

  expensive to develop a custom system

• Make the System Visibleand take steps to integrate into project and product management
• Communicate Objectivesand accountability!
• Align Expectationsmake sure everyone is on the same page!

In Betsy Miller’s (Corporate Director, Sourcing and Procurement Corporate Contracts of Northrop Grumman Corporation) keynote on global technology management, How to organize and manage the technology aspect of numerous buying platforms across a variety of geographical locations, we found out that an aggressive focus on supplier master data cleansing, commodity spend aggregation, and e-Sourcing can generate a 6% to 12% savings opportunity and that if you are a multi-billion dollar corporation (30 B ) and can apply this rigour to 40% of your spend, then you can, rather easily, save nine digits. (Or, more precisely, a number so large you might not be allowed to tell the public just how much you saved!)

According to Betsy, the drivers that you need to focus on are:

• Value Optimizationa focus on better contracts
• Sourcing Optimizationa focus on strategic partnerships and risk management
• Process Efficiencyfocus on common processes
• Complexity Reductionfocus on process streamlining and the elimination of unnecessary steps
• Supplier Collaborationand capability development
• Organizational Empowermentfocus on visibility

Nothing you haven’t heard before over the past year both here and on Spend Matters, but us bloggers always appreciate not being the only ones trying to drive home certain points!