Category Archives: Guest Author

7 Reasons Why Organizations Need a Global Classification Platform

Today’s guest post is from Clay Perry, SVP of Global Markets, of Integration Point, Inc.

It’s more than just an item master. It’s definitely more than just a spreadsheet. A Global Classification platform includes various and multiple forms of classification data, stores required documents, provides up-to-date trade content, and provides a centralized, web-based solution that all trading partners can access. Having trouble selling the need for a Global Classification platform internally? Below are 7 great reasons why any organization needs, and can benefit from, a Global Classification platform.

  1. Centralize product databases
    By consolidating all product classification databases into a central, shared repository, you eliminate the all too common practice of using spreadsheets to manage a company’s multi-national parts list. As a result, the centrally controlled classification database reduces errors, increases internal and external communication, strengthens compliance, and improves the timeliness of the information shared with external trading partners.
    (Remember, up to 90% of spreadsheets contain non-trivial errors.)
  2. Increase visibility
    Managing all classification data in one location provides visibility into when additions, changes, or deletions to the classification data repository are made.
  3. Improve compliance across the supply chain
    Providing on-demand availability to the classification database via the web ensures that every trading partner has access to, and uses, the same classification data at every stage in the supply chain.
  4. Minimize risks and/or delays in the supply chain
    Having the correct classification data in an easily accessible platform reduces the chance of shipments being delayed in Customs resulting in demurrage and other late fees.
  5. Share classification data to maximum compliance in other trade areas
    Involving members from various areas within the organization — from the shop floor to shipping department to accounting — provides better classification data. By collecting input, facilitated by an online tool, you ensure that all product data used for classification determinations is thorough and timely.
  6. Demonstrate reasonable care
    Complying with government regulations, such as the Modernization Act for US importers, is required by all importers and exporters. This means organizations must show they demonstrated reasonable care when deploying a solution focused on managing and maintaining accurate classification data.
  7. Manage trade preference programs applicability
    Utilizing a Global Classification platform, organizations eliminate the possibility of missing duty savings opportunities caused by not flagging the products in the classification database and sharing that information with Customs Brokers that these products are eligible for Free Trade Agreements.

Thanks, Clay.

For more information on closing the loop with entry visibility, see the white-paper. For more information on why you need trade visibility,
download the Sourcing Innovation Illumination on Why You Need Trade Visibility.

Procurement Pros and Sales Pros: The Yin-Yang of the Business Universe

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Today’s guest post is from Stephen R. Guth of The Vendor Management Office Blog and it originally ran on that blog on Saturday. It was so extraordinarily well written that I just had to ask him to re-run it on this forum, even though he did call Jerry Seinfeld very talented.

Let me start off with a bold, controversial statement…  Procurement pros should be in sales…  Procurement pros / Sales pros are natural dualities, the yin and yang, the Jedis and the Dark Side, oil and water, day and night (you get my drift)–but that doesn’t mean that one can’t learn from the other.  To that end, sales pros spend a significant amount of time understanding the nature of procurement and how to work around procurement pros.  For example, sales pros are specifically trained on how to do end runs around procurement to schmooze who the sales pros think are the decision-makers.  With that being the case, why not do the same with procurement pros?  Meaning, why don’t procurement pros dabble in the black art of sales?

We all know that relationships matter, and that’s the bread and butter of sales pros.  A seasoned sales pro will establish a relationship with a customer and manipulate that relationship to the nth degree to maximize their sales revenue and commissions.  In the words of the very talented Jerry Seinfeld, “Not that there’s anything wrong with that.”  Leveraging relationships is a crucial part of business…  Our job as procurement pros is to help level the playing field between customer and sales pro.

So, ask yourself, what are you doing as a procurement pro to leverage relationships with your internal customers?

Your likely response to that question is exactly my point, and why procurement pros should be in “sales.”

Just like sales pros, my staff have quotas in their performance plans, but instead of revenue quotas, my staff have savings quotas.  They are measured and compensated on those quotas.  If my staff don’t hit those quotas, they get zinged on their merit increase.  They exceed those quotas, and they get more $$$.

In addition to commissions, many companies use special incentives to motivate and compensate their sales pros (called “SPIFs” or “Sales Performance Incentive Funds”).  SPIFs can be cash or other incentives like travel or gifts.  Well, I do the same thing.  I have “Special Procurement Incentive Funds.”  If one of my staff do extraordinarily well on a big deal, they get an on-the-spot cash award, free time off, or a work from home day.  Over the years, I’ve given thousands of SPIF dollars away and lots of time off.

Sales pros have the job of determining your customer’s “needs,” so sales pros will meet with your customers to get them to divulge this information.  Yep, my staff do the same thing.  Every year, at the beginning of the year, my staff are required to meet with budget center managers who have made large capital and expense requests.  The purpose of the meeting is to understand what the customers have in their pipelines for the year.  In these discussions, my staff reiterate how we can help the customer through the procurement process, make it easy for them, and, most importantly, how we can save them budget dollars so that they have some extra cushion in their budgets to help pay for other pet projects that may not have otherwise been funded.

Sales plans are a critical work product for sales pros.  Sales plans keep track of all deals in progress and potential deals.  The sales plans help sales pros keep their eyes on the ball and keep them on top of the deals.  You guessed it, my staff have the same thing.  They maintain “RFx Spend Plans,” which document all of the projects where they might need to be engaged to conduct a procurement.  We discuss these spend plans at least once a month to ensure that we’re engaged and work is proceeding.  As we discover new deals, they’re added to the spend plan.

Relationships, relationships, relationships are the mantra of sales pros.  Procurement pros should have the same mantra.  Sales pros routinely have lunch, etc. with customers to develop and sustain the relationship.  Procurement pros should have the same resources to develop those relationships.  At this point in this article, you won’t be surprised to find out that my staff do the same thing.  In my staff’s performance plans, they have a requirement to meet with at least one major customer per quarter over lunch (my budget pays for it) to help manage the relationship and build trust / credibility.  My staff are strongly encouraged to personally know their customers, and if they become true friends, then that’s healthy.

Sales pros of larger companies usually have an annual customer appreciation event (cloaked as a user conference so as to not appear as too much of a boondoggle) where the biggest customers get an all-expenses-paid trip.  Well, I certainly can’t afford to do that, but my staff do something similar.  Every year, we have a customer appreciation event where our customers receive personalized, hand-written notes thanking them for their business over the past year and inviting them to our event.  At the door to the event, the guests are personally greated by my staff and given a raffle ticket with a small party favor (which includes a pen with our department’s logo.)  At the event, we have finger food and non-alcoholic beverages (we go to Costco)–and my staff mingle with their customers.  I do a short presentation of our accomplishments over the year and then we present those customers who worked with us on larger deals (where we saved big $$$) plexiglass awards.  Finally, at the end, we raffle off prizes to our customers (some really good stuff that we get from our vendors, like laptops and digital cameras).  Our customers LOVE this event and the event drives them to want to do business with our department (because it’s an invitation-only event–if you’re not a customer with an invite, you’re not getting in).

Sales pros wouldn’t be very well equipped if they didn’t go through extensive training.  Some companies put their staff through months of training before the staff are permitted to hit the streets.  That’s one area where I think I’ve fallen down when it comes to my staff.  Just like sales pros understand what procurement pros do, the opposite should be true.  For next year’s budget, I’m planning to find a good basic sales training course for my staff and have them go through the training.  The more my staff can get into the heads of sales pros, the better.

Thanks, Stephen.

While Others Slow Down … Sourcing Innovation Revs Up!

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While many organizations, including those you belong to, will slow down, go on vacation, and generally take it easy over the summer months (in the Northern Hemisphere), Sourcing Innovation is going to take it up a notch and bring you even more insight and innovation.

I’m excited to announce that, starting the first week of June, you’ll see three new regular contributors appear on SI and more regular postings from two of your favorite guest authors and that, by mid-month, more contributors and guest authors should be ready to go. Starting the week of June 1st, we’ll see:

  • Eric Hiller, the Enterprise Cost Master of Hiller Associates
    As a co-founder of Apriori and a former blog master of Cost Cents, Eric brings a wealth of Enterprise Cost Management knowledge and experience with him from both the consulting and implementation sides of the business. Not only will he discuss ways to save money through better cost management, but he’ll also highlight many of the common mistakes made by production and supply management that cost the business money.
  • Norman Katz, the Founder and President of Katzscan and its Supply Chain Fraud practice
    Norman is an expert in supply chain risk, supply chain fraud, and risk and fraud prevention who has been helping companies secure their supply chains for over 15 years.
  • Dick Locke, the International Sourcing Specialist of Global Procurement Group and Global Supply Training
    Dicke Locke, who brings over 30 years of international sourcing experience and expertise to every engagement, has been helping Fortune 3000 global companies do global business since 1993 though his books, seminars, workshops, and consulting. Author of “Global Supply Management: A Guide to International Purchasing” and co-creator of the new “Basics of Smart International Procurement” from Next Level Purchasing, Dick Locke is a reknowned expert in the ins and outs of international sourcing and procurement.

and we’ll also see more guests posts from

  • Kevin Brooks, a B2B 3.0 Visionary who has worked his magic at Ariba, Apexon, and TrueDemand
    Kevin brings with him a wealth of knowledge about the impact and usefulness of Web 2.0 and B2B 3.0 platforms (and collaborative and social networking platforms in particular) in supply management, a wealth of experience in performance monitoring and improvement, and the experience of an early advocate for green supply chain analytics and capabilities.
  • Eric Strovink, the Chief Cuber of BIQ
    An experienced professional who has been building transactional, analytic, and business intelligence systems for end-to-end business operations, including supply management, for over 20 years, Eric brings a deep knowledge of the many ways technology can be used to impact a business in a powerful manner and find productivity improvements and cost savings no one ever even knew existed.

and more voices will be joining us in the future because Sourcing Innovation is where thought leaders converge.

Open Call for Category Consulting Clarity

As some of you may have picked up from a recent comment of mine on Spend Matters, I got a bit of blasting behind the scenes for my recent post on how to deal with Yo Yo Contracts, with the notable exception of the constructive feedback from Barb Ardell of Paladin who was willing to publicly share her advice with you. The private feedback ranged from statements that I didn’t know what I was talking about because I’m not a “real” sourcing consultant (I never claimed to be a sourcing consultant, I’m a sourcing technology and process expert who freely admits his only category expertise is in IT … and that’s why you never seen me advertising traditional sourcing services through my consulting practice), through statements that questioned practicality (a matter of opinion), to stuff that I wouldn’t (or couldn’t) post, repeat, or respond to.

Usually my readers are pretty quiet, so I found this a bit surprising and, upon further contemplation, promising. If people are willing to get riled up over this topic, then they must be passionate enough to want to write about it. So, in lieu of the cross-blog series that I would normally try to pull together to kick off spring conference season, I’ve instead opted to run a special guest series on category sourcing, starting the week of April 27. I’ve already invited some of the thought leaders who’ve previously posted on SI to submit a piece on how you can save money on raw materials, goods, and/or services in these troubled times, but I don’t want to exclude anyone who wants to take a crack at educating the space. So, if you want to be front and center on SI, just drop me a line or send me a draft post and we’ll get to work on putting you in the limelight.

Managing The Purchasing Factory


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

Dave Nelson, the CPO from John Deere, co-authored a book titled “The Purchasing Machine“. The book was good, but never explained the meaning of the title. It did however get us thinking about the analogy of a factory to a Procurement function, and how Procurement can apply Lean Manufacturing principles to its operations.

Many companies are currently implementing Six Sigma methodologies, and both Lean and Six Sigma emphasize a focus on the customer and the elimination of waste. Six Sigma’s “DMAIC” methodology can very easily be applied (and is being applied at some progressive organizations):

  • Defining the needs of procurement’s internal customers,
  • Measuring the criteria of success (e.g., supply assurance, savings, supplier innovation, etc.),
  • Analyzing the current situation (e.g., too many suppliers, too many ways to buy, etc.),
  • Improving the processes (i.e., the “opportunity identification” step in a sourcing methodology), and
  • Controlling processes to “hold the gains” (e.g., contract compliance) through fail-safe processes.

This is foundational and fundamental stuff. However, applying lean manufacturing techniques to the “white collar factory” of sourcing and P2P (Purchase-to-Pay) is a mostly untapped area of opportunity.
Interestingly, some procurement organizations have named themselves “Supply Chain Management” even in non-manufacturing environments (e.g., Bank of America), but yet they always haven’t taken to heart key practices that manufacturing organizations have put in place on the shop floor. This is unfortunate, because it can be done.

Managing the “sourcing factory”

One way to view strategic sourcing is that of a Configure-to-Order business that “manufactures” highly profitable services. How profitable? For every $1 invested in procurement, world-class procurement delivers $7 to the firm, and that number goes even higher when looking at strategic supply processes. Unfortunately, there is a backlog of work because there is not enough investment in the bottleneck work centers (e.g., commodity managers), and not enough profitable services are getting out the door. So, attacking the bottleneck is critical, but funds are not unlimited to purchase more capacity, and must be freed from other areas (e.g., transactional processes) while improving “yield” through better work methods and measured doses of appropriate automation (e.g., freeing up commodity manager’s time via better spend/supplier analytics).

Another issue within the sourcing factory is aligning capacity to customer expectations via a “Capable-to-Promise” model. Various types of standard sourcing services, and their associated lead times and quality levels, should be offered up to customers based on finite capacity, and then configured to order. Without segmented “flow lines” (e.g., simple negotiations versus complex ones), standard lead times, capacity planning, and demand management (e.g., setting rules by which procurement must be involved in sourcing), the factory is going to be backlogged, quality will suffer, and customers will be very unhappy.

Designing what you can manufacture

The end of the sourcing factory is not the contract. A sourcing service is only profitable when preferred agreements are actually utilized within the “P2P factory” (where orders are placed and bills are paid). Unfortunately, they often aren’t. For the average company, our benchmark data puts overall bypass/maverick spend at 10%; but the real problem lies within indirect spend. A custom study that we did with 200 firms on contract management revealed a 23% maverick spending figure for influenced indirect spend. This translates to $11 million in lost savings per billion in indirect spend for the typical company. The problem with this $11 million of “scrap” is that the design of the Source-to-Settle process didn’t adequately consider the downstream processes of P2P (or supplier management and development). Strangely, every strategic sourcing methodology includes a “stakeholder management” process, yet the methodologies rarely explicitly define how P2P processes and systems will guide users to preferred supply sources and optimal buy/pay methods. It’s important to make strategic sourcing staff accountable for maverick spending (and not just savings). Treat P2P process users as customers – key stakeholders – and utilize thoughtfully designed downstream processes such as P2P and supplier management and development.

Converting the P2P job shop to flow lines

Most companies claim they have a defined P2P process, but if you scratch the veneer, you’ll find issues — e.g., only one-quarter of typical firms have single accountable P2P process owners. Frankly, some companies’ P2P processes are positively medieval, with each transaction handcrafted in a manner befitting the purchaser trying to get it through the system. If a firm has moved into the industrial age of P2P manufacturing and does have any P2P methods defined, it is likely the venerable three-way match. In manufacturing vernacular, this is known as a “job shop” — a “one facility fits all” general purpose processing capability, where everything goes in on one side and hopefully makes it out the other. If it’s an ERP environment, it’s “one system fits all”. In Lean manufacturing environments, flow lines (or “cells”) are set up based on families of similarly-made parts; for P2P processing, firms should define tailored transactional flow lines beyond the 3-way match, to include p-cards, assumed receipts, Evaluated Receipts Settlement (ERS), invoice-to-contract matching when POs not required, etc.

Papers from Hackett’s Purchase-to-Pay advisory program describe these concepts: “”Using an Optimized Transaction Strategy to Achieve P2P Efficiency”” and “A Management Primer for Balancing Risk and Control in P2P”. By designing a “P2P manufacturing” factory with transactional flow-lines that are fit-for-purpose, efficiency and effectiveness will invariably improve.

Thanks, Pierre!