Category Archives: Guest Author

An Analysis of eSourcing’s Fast Growth and Predictions for 2015 & Beyond


Today’s guest post is by Jill Ivancich, COO of MM4, Xchanging’s procurement technology solution. Xchanging is a business process, procurement and technology services provider. To learn more, visit www.mm4.com or www.xchanging.com.

In a recent Market Overview report by Forrester Research, Vice President and Principal Analyst Andrew Bartels reported that the ePurchasing software market will see 10% growth in 2014. Additionally, Forrester and Bartels predict double-digit growth for Software-as-a-Service (SaaS)-based eProcurement solutions, under which eSourcing falls. This is a promising outlook for a market that saw global revenue growth of just 5.9% in 2012, according to research reports.

Big Demand, Right Now

The report compelled me to consider what’s fueling the demand now for eSourcing. Factors like its ability to provide risk reduction, transparency and expedited savings have been big drivers for growth based on my recent experience and customer feedback, along with the intelligence it provides. The continued need to drive savings is causing companies to review their entire sourcing process and bring the best in class tools to help execute. We’ve seen eSourcing become a trusted tool for the everyday buyer — one that combines components like company intelligence, market insights, and user and supplier support. These assets ensure that clients have the intelligence needed to drive real results quickly.

The bigger picture is this: the world of procurement has reached a peak in complexity. Exchange rates have never been more volatile, sourcing destinations are experiencing huge shifts as production and services move away from China and India to new and frontier markets, environmental disasters are massively impacting supply, and trading conditions and regulations are constantly changing. In response, some of the biggest companies in the world are turning to cloud-native, next-gen eSourcing solutions to empower procurement teams to know not just how to source, but also what to source, when to source and from whom to source.

What’s Needed for Increased Adoption

The Hackett Group reports that organizations that leverage the most out of technology see 27% overall better performance within their procurement operations. And that’s exactly where more procurement teams will be investing in the coming years. But right now, we’re seeing interest levels in eSourcing peaking, not necessarily adoption. There’s still progress to be made before we reach critical mass, and that will require addressing the specific pain-points of CPOs and procurement teams, and the ability to transform business as usual with an impactful suite of diverse tools that are intuitive and easy to implement.

For eSourcing adoption to continue on its current growth trajectory, addressing the issue of support and knowledge is imperative. Supplier risk will be critical, especially as new, low-cost markets to source from are being considered more heavily. Integration of third-party information sources, so customer’s workflow and intelligence levels are optimized, will also be key.

To address the challenge of market volatility, cost modeling modules will become more important as part of eSourcing solutions. Identifying key metrics that influence the company, such as exchange rates from current or potential trade regions and commodity prices for key inputs, will be increasingly critical. Focusing on trends and forecasts rather than spot data, which often has little or no direct value in eSourcing, can help to address this challenge.

In terms of competition within the market, looking ahead, acquisitions will lead. However, the acquired won’t necessarily be gobbled up. The technology companies with the right infrastructure in place can still thrive, and my business, MM4, is one example.

Closing Remarks

New technology and service innovation has drastically expanded the applicability of eSourcing, and it will continue to do so for several years to come. As leveraging technology effectively remains a goal for procurement teams, eSourcing will arm CPOs with the intelligence needed to drive real cost reduction, make smarter buying decisions and have deeper visibility into realized savings. Solutions that support the entire sourcing lifecycle will continue to grow in demand, become more refined and play an increasingly large role in driving sourcing success for businesses of all sizes.

Thanks, Jill.

Risk Management and Suppliers: How Banks can Comply with the OCC’s Guidelines on Third-Party Relationships

Today’s guest post is from Rebecca Lorden, Business Development and Marketing Manager of Source One Management Services, LLC.

In October of 2013, the Office of the Comptroller of the Currency released specific guidelines to banks and federal savings associations that outline how their companies should assess and manage risks associated with third-party relationships. The OCC’s reason behind these guidelines was mainly due to the fact that “the quality of risk management over third-party relationships may not be keeping pace with the level of risk and complexity of these relationships“. (OCC Bulletin 2013-29, October 2013).

It is true that third-parties pose a threat if their own security protocols are not up to par with that of a major financial institution. In fact, in March of 2013, Bank of America became quite aware of this when they announced that a hack into TEKsystems, a third-party security firm they contracted, was the reason their internal emails were released to the public. These emails were no ordinary messages, but documented proof that Bank of America was monitoring hacktivist groups. Furthermore, the hacking group, known as Anonymous, later revealed that data was not retrieved from a traditional, time intensive and difficult hack, but “stored on a misconfigured server and basically open for grabs“. (“Bank Of America Says Data Breach Occurred At Third Party”, Computer World, February 2013). The scandal was not only damaging to Bank of America’s reputation, but also an obvious indication that banks needed to manage supplier risk more effectively.

The OCC’s guidelines outline eight key phases that should be considered when developing risk management processes. These phases include planning, third-party selection, contract negotiations, monitoring, termination, accountability, reporting and reviews. As clear as that might be, banks are still struggling on how to properly implement controls around these factors. That is where supplier relationship management can play a significant role.

Supplier relationship management, otherwise known as SRM, is the actual practice of strategic planning and managing all interactions with third-parties to maximize their value. Many think of SRM as a way to reduce spend. SRM processes can reduce quality issues and delays with suppliers that, in turn, can translate into cost savings. More importantly, however, SRM can function as a main component in reducing a bank’s risk with suppliers. Supply chain experts feel as though SRM offers a “solid framework” that can provide companies with a “formal risk and control process to follow“. (Building The Case For Supplier Relationship Management, May 2014).

For those that already have an SRM program in place, or believe SRM is just a sales tactic for supply chain consultants, now may be the time to reevaluate. First, suppliers can be neglected over the course of their contract. Even if the relationship started off on a good foot, the value from a supplier can diminish pretty quickly, especially if the supplier or the bank is faced with turnover or a redirection in initiatives. SRM dictates a process that continually communicates and supports the relationship, helping build supplier engagement no matter what changes are on the horizon. Secondly, for those non-believers, consider this: if managing suppliers is now a major priority set by the OCC, what better way to adhere to these guidelines than to build a solid foundation on which to base all third-party relationships on?

It certainly seems that these OCC guidelines are a daunting task for banks to tackle. Managing supplier risks and enforcing compliance is not something that can be done overnight. Banks, however, have a secure solution in supplier relationship management. SRM can be the catalyst to successful third-party relationship management, ensuring that the risks are minimized to the best of a bank’s ability.

Thanks, Rebecca.

Procurement – Why we really matter! (Repost)


This post originally ran on November 10, 2010. However, it is still as relevant today as it was then and, for those of you who did read it before, not too much of a distraction to you as we approach the World Cup Final :-;


Today’s guest post is from David Furth, VP of Marketing at Hiperos. David has been in Procurement for over 20 years and has held senior positions at Perfect Commerce, BasWare, RightWorks/i2, and Deloitte Consulting.

Procurement is on the verge of experiencing its next major transformation. During the past ten years, the emphasis has been on optimization – leveraging spend, improving the sourcing process, and becoming more efficient across all aspects of the P2P and Order-to-Cash value stream.

As a result of these improvements, companies now rely on suppliers, outsourcers, and other third parties more than ever. A fact now recognized by C-level executives, boards of directors, and regulators, alike. Why? The increased reliance on these third parties has occurred without implementing the same level of control or having the same level of visibility that was in place when the work was being performed internally. The result is increased risk to company performance and brand reputation.

As a result, forward-looking procurement leaders are transforming their organizations. They still maintain the same obligation to keep costs down. But they have added the responsibility to continuously assess risk, pre- and post-award, and introduce integrated processes and controls across their companies to mitigate that risk by working closely with other functional areas, business lines, and geographies. During the next few years, procurement will be looked upon to provide important guidance around how key external contributors to their companies’ value chains are managed.

This is why more and more procurement executives are stepping forward to introduce a consistent method for managing providers across a wider breadth of their extended enterprise. These executives recognize that just because the contract assigns responsibility/liability for just about “everything”, this does not absolve their companies from the responsibility of ensuring each provider is living up to all contractual obligations. This requires implementing management control programs that actively monitor both performance and compliance to help ensure suppliers are meeting all their obligations.

This is an enormous responsibility that requires consolidating requirements across a large number of stakeholders, communicating expectations to all providers, collecting information and documentation about current status, and collaborating with providers to remedy issues when shortfalls are identified.

To be successful requires a new attitude, a thoughtful approach, buy-in from key stakeholders, and the appropriate technology. Despite the best of efforts, responsibility or risk cannot entirely be outsourced.

So, when you consider the consequences of suppliers failing to meet their obligations, regulators handing out fines for poor oversight of third parties, and investors losing confidence in your brand, it is not surprising to see real action taking place. The past few years have made it abundantly clear, it is not a good strategy to expect that a great contract will get you great results, ensure providers follow the law, or prevent them from acting unethically. Therefore, it is imperative to have the appropriate level of controls to mitigate to the appropriate level of risk. This has not been the traditional way of thinking, but that is rapidly changing.

Thanks, David.

Do We Really Need Supply Risk Programs Anyway? (Repost)


This post originally ran on April 21, 2010. However, it is still as relevant today as it was then and, for those of you who did read it before, not too much of a distraction to you as we approach the World Cup Final :-;


Today’s guest post is from Pierre Mitchell, Director, Procurement Research and Advisory for The Hackett Group.

OK, now that I have your attention. Am I being provocative? Yes … and no. If the purpose of supply risk management is to ensure supply that is: available, reliable, high quality, well priced, supporting lowest TCO, ethically sourced, etc. (per the enterprise mission and brand), then we really “just” need to clarify what constitutes the performance of supply and the causal factors which impact it. But, this is a big “just”. It means first translating the performance of supply from the business (i.e., the true ‘risk owners’ who ultimately own the performance of supply) to the inbound supply chain to a commodity to the supplier and even down to the part/spec/site level — and then ensuring that your processes for extended network design, sourcing, and supplier management are addressing the risk factors that can impact that supply performance. That’s a tall order to expect as a bottoms-up outcome.

For example, if you look at a company’s sourcing and supplier management processes, you might find risk-oriented knockout criteria in an RFI. Or you might find a regulatory compliance driven process in supplier measurement. But for the latter example, do you have an explicit risk score in your supplier scorecard? Most organizations don’t. There is a direct analog to the quality area here in terms of placing emphasis on process capability and managing upstream causal factors. A TCO model that includes quality costs (i.e., a ‘cost of quality’ model) is not only similar, but actually overlapping with the ‘cost of risk’. In other words, you can pay for risk prevention now or pay for external failure later.

This is why, although you should theoretically be able to bake your supply risk management processes systematically into your existing supply management processes (sourcing, SPM/SRM, etc.), the fragmented and reward-biased performance measures don’t encourage this end-state approach. This is why a bottoms-up process usually does not work and it requires that Procurement/SCM not only work with the natural risk owners to build the cost/risk models, but also use that to have the top-down discussion with senior management on how the firm wants to deal with it and what is the cost of doing nothing. To quote the rock band Rush: “If you choose not to decide, you still have made a choice“. (Freewill) And for some organizations, they might be able to tie into an existing enterprise risk management and corporate sustainability governance structure.

Another important strategy is to have a good diagnostic, and some external benchmarking intelligence, as part of this process — especially when trying to justify the effort beyond ‘it is the right thing to do’. Showing where you are vs. other firms and how well you/they are performing in supply risk (and comparing that performance to capabilities) is a good way to support the discussion. And so is having a good ‘cost of risk’ model. But quantification is tricky.  Firms need to arm themselves with some good insight on elevating the conversation. Why? To get more attention, resources, and proper measures/alignment that cascade back down to get baked into the processes. Once they’re baked in, you won’t need a ‘program’ anymore — you’ll have a proper risk-adjusted process.

Thanks, Pierre!

A Futuristic Look at High Definition Sourcing (Repost)

This post originally ran on March 10, 2011. However, it is still as relevant today as it was then and, for those of you who did read it before, not too much of a distraction to you as we approach the World Cup Final 😉

Today’s guest post is from Paul Martyn (VP of Marketing), who recently penned a guest post on Achieving Category Excellence with High Definition Sourcing, to look ahead three years when High Definition Sourcing and Next Generation Sourcing Techniques (which include Value Focussed Supply Management Techniques) are commonplace in the leading Supply Management organizations and put together a picture of what e-Sourcing might look like.

It’s 2014. I’m a senior sourcing professional at a large multi-national company and I’ve got major sourcing programs planned for categories that share the following characteristics:

  • Large amounts of spend
  • International, operational, marketing and/or finance stakeholders
  • Complicated cost models
  • The category leader is frustrated with traditional sourcing techniques
  • The category is avoided by the faint of heart
  • Dynamic corporate, supplier, and market conditions

Sound daunting? Maybe even impossible to succeed? Three years ago, I would have shared your skepticism and been completely frustrated by the sheer complexity of tackling these challenges. When I look back, there was a lot holding me and my team back, including:

  • A one-size-fits-all approach to sourcing:
    For successful sourcing of complex categories, what my team really needed was the ability to define the world of their particular category. A flexible framework would allow us to state the opportunity/problem, gather the necessary inputs to evaluate possible reactions, make a decision, and track the implementation and monitor the changing conditions around the decisions we’ve made to constantly take advantage of changing realities — all while staying consistent across the organization.
  • Silos, silos everywhere and not a bridge in sight:
    The conventional approaches I used created nonsensical boundaries across functions. I couldn’t get engineering, distribution, supply chain, and customer service aligned or more importantly — involved in the decisions. Worse, we weren’t really in problem-solving mode, these were merely sequenced ‘events’ executed with no ability to create and manage a ‘process’ that ended up as a ‘system’ to manage key categories. All we created were more damn task lists. My category leaders didn’t need more “to-do’s”, they needed laboratories for research and testing, board rooms for decision-making, and a ship’s bridge from which to monitor and control.
  • Drowning in useless data:
    We made great use of data at first, but wrestling with it was so manual and there was no way to easily refresh it. It very quickly became like a can of soda: when first opened, it’s great, but the longer it sits, the flatter — and less useful in providing relief — it gets.

So what’s changed? I’ve used ‘High Definition’ Sourcing with category specific ‘Business Centers’ for complex categories. With this sophisticated approach:

  • Category managers have a panoramic view that allows them to manage their categories, end-to-end with regards to
    1. defining new opportunities/problems
    2. gathering a full spectrum of metrics to use in evaluating potential solutions,
    3. establishing, monitoring, and tracking of key decisions to highlight deviations from expectations

    These three (3) parameters form our ‘system’ for managing complex categories, where the stakes are high and the opportunities for value, even higher.

  • With a category management Center of Excellence we have two critical resources for successful management of high-definition sourcing:
    1. A Data Management Guru (DMG) responsible for the data capture and informatics. The DMG establishes connections to gather baselines; refreshes usage and capacity details; links to spend sources for up-to-date consumption figures and arranges performance data aggregation and design.
    2. A Business Intelligence Management Professional (BIMP) responsible for configuring the new analytics necessary to analyze key categories within an initiative. Every problem is a little different, and the right analytics are crucial to making the right decision.

As a result, my sourcing tools can

  • Flexibly define the problem opportunity for a specific category
  • Utilize robust data sources to feed the evaluation and performance processes
  • Allow creative scenarios to complete the evaluation process
  • Support the determination of specific decisions and actions
  • Establish KPIs for tracking ongoing performance
  • Effectively report the impact of our initiatives in terms (EPS/Profit Contribution) the entire organization understands

All in the context of a given category.

And the return on investment for the staff augmentation and additional tools? An additional 5-8% savings in my most strategic categories, an overall improvement in my supplier performance post-contract, and an overall reduction in organizational risk by involving all of my stakeholders, their key data inputs, and constraints.

My only regret: I didn’t do it sooner.

Thanks, Paul!