Category Archives: Guest Author

High-Definition Sourcing: Category Excellence Moves to the Next Level (Repost)

This post originally ran on February 14, 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, Vice President of Marketing for Bravo Solution.

the doctor — along with many others — has been advocating for “next-generation sourcing” for some time. I couldn’t agree more that modern supply management organizations must take sourcing practices to the next level if they are going to continue to distill value from the discipline and practice.

But like most New Year’s Resolutions, while the aspiration to improve may be great, the effort may be too much for even the most committed. I see this a lot, especially when it comes the challenges of sourcing strategic, complex categories. Not without reason of course, but more and more I also see that the benefits of mastering the art of sourcing these challenging categories far outweigh the difficulties of the actual process.

Strategic categories mean different things to different businesses. For one company, the category may be transportation; for another, packaging material. The common denominator: the business can’t succeed without it, and can’t afford to over-pay for it.

To make decisions based on the most strategic objectives of the business, sourcing teams need to integrate many dimensions of information from areas well outside their domains. For example, if non-price factors like diversity or sustainability are part of the company’s corporate social responsibility initiative, those factors can — and should — be part of sourcing strategies.

As a result, the volume and the sheer variability of the information render common e-sourcing tools or Excel spreadsheets useless for collecting and evaluating proposals. That’s where high-definition sourcing — which combines technology, expertise and process — delivers the goods at the lowest total landed cost, and aligned with the greater organizational strategy.

So how do you know if high-definition sourcing can turn even the most complex categories into real value for your organization? There are generally three scenarios where the opportunity to apply this discipline will help you capture meaningful and sustainable savings

  1. The category leader is frustrated with traditional sourcing techniques
  2. The category is avoided by the faint of heart
  3. Sourcing alone will not deliver the value

Sound familiar? Odds are good that at least one of these reflects what’s happening in your organization. Regardless of which situation you face, there are immediate opportunities to be gained with high-definition sourcing

  • Use technology to design and execute more sophisticated proposal collection and analysis, including the ability to use “what-if” scenarios.
  • Build supplier performance monitoring and triggers for re-evaluating supplier selection into your category management solution
  • Partner with suppliers to drive costs out of the system and strike the perfect balance between suppliers’ pricing and capabilities with buyer business constraints and preferences
  • Tap domain and process experts to bring market and industry best practices to bear on your own sourcing process

The results will be well worth it. Best-in-class companies make the connection between complex categories and the business’ charter. Lowering initial costs is a given. More importantly, these leaders make better decisions based on capabilities and price and secure meaningful — and sustainable — savings.

Thanks, Paul!

Looking Behind the Knowledge Network Curtains (Repost)

This post originally ran on November 19, 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 John Shaw, the Director of Education Services for Supply Management at BravoSolution.

In a recent post, the doctor asked, “Where is the Knowledge Network?” and “What is an aspiring supply management professional to do?”

Our industry is offering a growing list of online resources and supply management organizations. We can use these resources to augment the knowledge we gain through our professional activities and personal networks. As the doctor stated, each of these resources takes time and effort to build, so naturally, the goals and objectives of these networks are aligned with those individuals who invest in building each network in the first place.

Our challenge as supply management professionals is to navigate this forest of information in a way that maximizes our personal development. To do so, we need to understand where our personal objectives align with those of a knowledge network. The better we understand how each network’s objectives align with our own, the more value we will receive out of the limited time we have to invest in them.

So as both a consumer of these networks and a developer of some (see discloser below) I’d like to offer some questions for you to ask when trying to determine if participating in a particular knowledge network would be valuable to you:

  • Does the intent of the network align with the needs of the membership?
    The Network Guidelines should clearly state the audience, and the types of information exchange the network facilitates. If they are not stated, or they do not align with what your current development needs, your time may be better invested elsewhere.
  • Who are the thunder lizards?
    Look to see who the most active participants are. The most active people in a community will steer its direction. If these people are your peers, or better, if they are in roles that you aspire to, look further into participating.
  • Who is in charge?
    Successful communities are driven by the membership. If enough thunder lizards march in the same direction a community will move and take a life of its own. The builder can find him/herself in the passenger seat. In the best scenario, you’ll find that the thunder lizards are your peers, and they are in charge!

So what are we to do? Unfortunately there isn’t a simple answer. Whether we are learning about supply management, following politics or trying to get the best advice online for fixing a leaking pipe, we need to look behind the curtains to understand our information sources

Thanks, John!

Stagnant Sourcing, Part II


Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC and co-author of “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing”.


In yesterday’s post, Joe began to address the fact that despite the clear path laid out before them — the path of “take a strategic approach, see positive results” — many procurement groups are still falling behind and failing to do just this. He noted that while the reality of the situation is different for every organization, there are some trends that weigh more heavily than others and discussed two of these trends. In today’s post, he discusses two more.

Lack of Skill Sets and Vision

While everyone might jump on board and say they do not have the proper resources, this reason is a little harder for some to admit. A large portion of procurement groups are operating without the analytical skills and foresight necessary to implement more strategic initiatives. While some might see this as the result, or the validation, of Jack Welch’s infamous quote, it is also due to the traditional role procurement currently plays or has played for most of the department’s existence.

In many companies, procurement is nothing but a rubber-stamp — just another step in the issuance of a purchase order. In others, they may have implemented a three-bid process or another similar purchase control method to try and secure savings, at which point they become viewed as not a rubber stamp but as a hindrance — not a step in the issuance of a purchase order, but a hurdle. And I will stop for a second and explain that procurement is not always pigeonholed into this tactical role because it is all they can do. This tactical limitation is often just as much an indictment of a failure by management to capitalize on the full abilities of all of its resources as it is a statement on the limited capabilities of procurement professionals.

Skills carried over from education and prior experience are not like riding a bicycle. These skills fade and fall away. This limited role, when performed for a long enough period, can limit the effectiveness of any prior analytical skills that fall outside the needs of the assigned role. Luckily, one of the benefits attributed to the rise of Supply Chain Management programs at major universities is the resultant increase in incoming supply chain personnel with college-honed analytical skills tailored to the procurement industry.

Procurement may soon be equipped with the skilled resources needed for strategic changes.

Management Is Not Interested

A final hurdle for procurement groups looking to make a strategic leap is disinterested leadership. Executive management, whose approval is and would be needed for a procurement group to “resource-up” and/or take on new challenges, might not think procurement is capable of such initiatives. Alternatively, leadership may be disinterested due to their inability to see the benefits to procurement taking on strategic endeavors. This can be frustrating, but it can be solved.

Disinterested management has to be persuaded, and the easiest way to persuade is through a prolonged effective internal marketing campaign. Reports should not be seen as an administrative chore, but rather as an advertisement for a procurement department. Operating transparently should not be seen as micromanaging, but as a way to actively show interested parties how effective the procurement department can be. Other successful procurement groups — when they make the news — can also be used as leverage to convince an otherwise-disinterested leadership group that strategic procurement endeavors can be worth the investment.

Additional marketing methods could include a training program designed to mitigate the frustration that comes from procurement’s involvement with some stakeholders. One of the most effective methods is securing a “bell cow”. A procurement department wishing to be given a more strategic role should identify an influential stakeholder and work to get that person onboard with their efforts. They should then use that person as a cheerleader for the group.

Wrapping Up

There is no single reason why procurement groups do not undertake strategic endeavors, just as there is no single party at fault. However, the evidence is mounting that those procurement groups that do not set themselves up strategically will face a widening gap between themselves and the best-in-class operations.

Thanks again, Joe!

Stagnant Sourcing, Part I


Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC and co-author of “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing”.

Late last year, I wrote about the “evolution” of procurement — how the department’s practices have moved from simple purchasing, to strategic sourcing, to category management, and to a level of control and strategic involvement that I called “change management”. In the conversations that stemmed from the article, both on- and off-line, I heard from many people out there that organizations don’t need to worry about “change management”, or even “category management”, yet. Many purchasing groups still struggle with implementing any strategic change at all.

This is troubling. If you have read anything related to procurement/supply chain in the last decade, you know that procurement’s ongoing success is tied to strategic improvements. Not only has this been preached, but it has been realized at best in class companies like Apple and Toshiba, where procurement took on a strategic role, optimized supply chain operations to the extreme benefit of the company, and saw executive leadership incorporate procurement leaders more openly. As you are probably aware, both Apple and Toshiba’s current CEOs were formerly CPOs at their respective organizations.

So with a clear path laid out before them — the path of “take a strategic approach, see positive results” — why are so many procurement groups falling behind and failing to do this? The reality is the situation is different for every organization, but over time I have seen a few trends that weigh more heavily than others.

They Think They Are

One of the most common objections lobbied from stakeholders when Source One is brought in to pitch our services is “We are already doing that” or, worse, “We tried that already and it didn’t work”. If brought out early into the pitch, it is clear that the objections are being lobbied by someone protecting their turf, or who sees our being there as an indication of their poor performance. As you drill in on these concerns, you will normally find they are an indication that there is a fundamental confusion regarding what strategic endeavors actually entail.

So, to clarify: A three-bid process is not strategic sourcing. Subscribing to an index on its own is not sufficient market intelligence to make informed decisions. As I have stated previously here on SI, supplier management software is not strategic supplier relationship management.

It is inefficient to continue to dedicate resources to an issue if you believe it is resolved. Procurement groups that mistakenly believe they are engaging strategically are not going to commit resources to actual strategic endeavors, and their failure to act is to their detriment.

Lack of Resources

If a procurement group is cognizant of the tactical nature of their current practices, they still face an obvious hurdle. Despite the numerous ads and pitches from software and service providers, strategic initiatives require significant resources to design, implement, and carry out. These are resources that most procurement groups simply do not have.

We did a survey of procurement professionals a little over a year ago and released the results throughout the spring and summer of last year. The first paper was on resource shortages, and the big number was that 30% of all procurement groups feel they are understaffed. Digging deeper for statistics more relevant to strategic endeavors, 34% of all polled procurement groups have zero resources dedicated to strategic activities, and 52% of all polled groups have less than half of their resources working on strategic endeavors.

While the need for strategic action may be evident, many procurement groups simply do not have the resources available to commit to the development of these long-term strategic initiatives.

“Engineers who can’t add, operators who can’t run their equipment, and accountants who can’t foot numbers become purchasing professionals”
— Jack Welch

Thanks, Joe! I bet our readers can’t wait for Part II tomorrow!

Optimize Your Supply Chain (and Your Company’s Worldwide Operation)


Today’s guest post is from Srini Vasan, CEO of eShipGlobal, a Transportation Management Software Company.

Our new global economy has opened the door to more opportunities than ever. Businesses have never had so many choices for products and services, or the chance to work so efficiently across borders. Technology has expanded options, as instant communication has made it possible to carry on business in three (or more) continents simultaneously. And the global nature of these innovations makes supply chain management more important than ever.

Companies are beginning to recognize the importance of maximizing supply chain efficiency and minimizing costs. In a 2012 U.S. Supply Chain Survey conducted by IDC Manufacturing Insights, 80% of supply chain managers reported that reducing their total supply chain costs was a top priority. And supply chain improvements can have positive implications across the board: A freight transportation infrastructure study by Boston Strategies International showed that a 10 percent reduction in direct transportation costs would result in supply chain improvements that could reduce companies’ overall operating costs by 1 percent.

Successful management of a global supply chain can be daunting — there are so many moving parts than ever before — but there are steps that can help your company tackle the inevitable issues and take advantage of the opportunities.

Review Your Talent Pool — Three-fifths of the supply chain management executives who responded to a 2013 PricewaterhouseCoopers’ survey said that the “acquisition or development of supply chain talent and skills” was essential to their current success. Note the word “development”. Of course your company can hire new talent, but you can also better utilize existing staff by ensuring their skills are up to date. Provide ongoing and intensive training, whether through internal education or by outsourcing training to supply chain management academies.

Focus Your Energies While Broadening Your Horizons — It’s not just training that can be outsourced. Consider your company’s core competencies. Where does your company shine? What are the tasks your managers and staff must do? Are there any that could be done more effectively out-of-house? Outsourcing can focus your staff’s energies and help them perform at the top of their game. And keeping a global perspective can be very cost-effective. According to a 2013 white paper by Fifth Third Bank (on optimizing the global supply chain), analysts report that companies can substantially lower supply chain expenses by identifying countries or regions with low-cost suppliers (and by keeping managerial staff limited).

Communicate and Collaborate — An optimized supply chain is just that, not a bunch of independent activities and functions, but a chain. All of its links — from small internal departments to large global trading partners — must communicate with each other in order to optimize efficiency. Better communication and collaboration between manufacturers, suppliers and retailers can improve everything from data-driven forecasting to inventory management.

Today’s technology can make communication easier than ever. Andrea Robinson, the UK business development manager for CargoWise, suggests that “using a single automated database ensures trading partners can communicate in a language compatible with other companies to identify common key performance indicators that provide a level of integration for shared systems and processes.”

Embrace Technology — An investment in information technology is critical for supply chain infrastructure development. IT supply chain solutions can:

  • Organize and unify supply chain processes
  • Integrate department activities
  • Enable sharing of software and information resources
  • Provide metrics that help to evaluate performance
  • Provide transparency
  • Offer customer service
  • Identify trends and changes more quickly and enable the supply chain to respond faster to both

Mobile technology can also be a supply chain game-changer. According to Ms. Robinson, “This technology can help improve field sales, merchandizing and marketing, and enable direct services to the consumer (through customized location-based coupons or services that improve employee productivity in the field). Providing information such as provenance, origin, item contents and specialized information on demand about sustainability, local content or manufacturing methodology enhances the brand and allows companies to connect directly with the consumer.”
Of course, an investment in IT is like any other. It’s vitally important to assess your needs, conduct a thorough search, and carefully choose the right solution for your company.

Plan (but keep an open mind) – IT solutions can also aid in planning, by providing information that helps to predict needs, forecast trends, and identify strengths and weaknesses within a supply chain. Companies can (and should) utilize this information to set goals, remembering to be realistic, flexible, and open to input from collaborators. “Adaptability is key!” was one of the takeaways from a recent “successful supply chain optimization by HP” on supply-chain.org, the operator of the largest IT supply chain in the world.

By following many of the steps above, HP was able to “streamline, simplify, standardize” and profit. By optimizing its global supply chain, the company leveraged scale spend and common parts; consolidated suppliers manufacturing partners and logistics providers; eliminated unnecessary or duplicate nodes; reduced the number of drivers; and decreased the number of IT processes and applications used.

HP also learned a few lessons along the way. As mentioned, the company found that adaptability is crucial, as is business continuity, especially during transformational efforts. But the most important idea behind the company’s success is also one of the simplest: Strong organizational leadership is essential. In the end, a thoughtful plan created by collaborative, creative leaders is the strongest link in an optimized global supply chain.

Thanks, Srini.