Category Archives: Manufacturing

The Sourcing Innovation Source-to-Pay+ Mega Map!

Now slightly less useless than every other logo map that clogs your feeds!

1. Every vendor verified to still be operating as of 4 days ago!
Compare that to the maps that often have vendors / solutions that haven’t been in business / operating as a standalone entity in months on the day of release! (Or “best-of” lists that sometimes have vendors that haven’t existed in 4 years! the doctor has seen both — this year!)

2. Every vendor logo is clickable!
the doctor doesn’t know about you, but he finds it incredibly useless when all you get is a strange symbol with no explanation or a font so small that you would need an electron microscope to read it. So, to fix that, every logo is clickable so you can go to the site and at least figure out who the vendor is.

3. Every vendor is mapped to the closest standard category/categories!
Furthermore, every category has the standard definitions used by Sourcing Innovation and Spend Matters!
the doctor can’t make sense of random categories like “specialists” or “collaborative” or “innovative“, despises when maps follow this new age analyst/consultancy award trend and give you labels you just can’t use, and gets red in the face when two very distinct categories (like e-Sourcing and Marketplaces or Expenses and AP are merged into one). Now, the doctor will also readily admit that this means that not all vendors in a category are necessarily comparable on an apples-to-apples basis, but that was never the case anyway as most solutions in a category break down into subcategories and, for example, in Supplier Management (SXM) alone, you have a CORNED QUIP mash of solutions that could be focused on just a small subset of the (at least) ten different (primary) capabilities. (See the link on the sidebar that takes you to a post that indexes 90+ Supplier Management vendors across 10 key capabilities.)

Secure Download the PDF!  (or, use HTTP) [HTML]
(5.3M; Note that the Free Adobe Reader might choke on it; Preview on Mac or a Pro PDF application on Windows will work just fine)

SmartCube: Putting a Nice Box Around Industrial MRO for Commissioning and SPIR Procurement for Projects

There are dozens (and dozens) of Procurement Solutions out there, especially for indirect procurement, as that’s where it all started. There are also a dozen or so good solutions for BoM (Bill of Material) direct procurement for manufacturers who need to source to build the products they are selling. However, when it comes to acquiring MRO assets, and spare parts to maintain them, there are very few solutions — and even less for managing procurement and inventory from a (commissioning) project perspective.

Most Procurement Professionals assume that this is handled by the ERP/MRP or the asset management platform but the reality is that the ERP/MRP will only track product specifications for approved products and materials, the asset management will only track assets that are actually delivered, and most of the sourcing is done old school — email and Excel spreadsheets, which is not a great solution. First of all, it is very time consuming for both parties to fill out all the information manually and send documents back and forth. Secondly, it is very error prone as the technical specifications will require detailed part numbers, identifiers, standards, etc. where one miskey can totally invalidate an entire record that might have taken days to put together. Thirdly, as the sheet is not in a version control system, it’s hard to control who can access it when and ensure updates are properly maintained and not missed or overwritten. Fourth, given that an average asset will require 10 or 15 associated spare parts, and multiple assets will need to be acquired at a time, an average sourcing process will take a minimum of two weeks (if not much [much] longer).

SmartCube has developed two tools to handle 1) the pre-commissioning Procurement of components and systems for major projects (such as new plant creation or plant renovation, utility construction, ship construction, etc.), as well as the commissioning process and 2) the material/part master, and the procurement projects needed for the ongoing support (as plants will require production line maintenance and upgrades, utilities will constantly require new regulation and control systems, ships always need upgrades, etc.) along with the procurement and management of the spares required to keep the components and systems running when something breaks.

This is done through their two primary offerings of I-SPIR, which they bill as an interaction and collaboration platform to allow multiple project partners and collaborators to input, collect and share spare parts information (SPIR) between all stakeholders in real time for asset-intensive industries, and I-MAT, that they bill as autonomous warehouse management & material master cleansing & coding platform for any asset heavy industry.

SmartCube I-SPIR

First, some background. SPIR stands for Spare Parts Interchangeability Record, which is basically a list of equipment and spare parts that a manufacturer or supplier recommends that a project owner or asset manager should purchase in order to develop and maintain their industrial plant or process. Once the purchase suggestions, or modifications thereto, are accepted, the project owner then matches the purchases to the material master data in the ERP, if there are appropriate product records, or pushes the appropriate records to the material master.

SPIR is a lot more than just a slight modification to the direct procurement process, because it’s not purchasing materials and parts to build products for sale, but components and systems to keep a process running or a plant (utility, or vehicle) operating. It’s also a well-established systematic supply chain process used for tracking and recording information on various replacement parts used in industrial operations. The process involves:

  • Inventory Management: inventory must be established and properly maintained, and it must include what (parts), where (storage facility, room, and shelf), who (is responsible for), how many (quantity) and why (associated components or systems)
  • Identification: every component needs a unique identifier (and any manufacturing identifiers it’s associated with)
  • Documentation: specifications, function(al requirements), compatibility, and any standards met
  • Interchangeability Assessment: a thorough assessment that takes into account design, materials, operating requirements, and other relevant factors
  • Recording: that identifies parts that a given part can be substituted for, which includes a link to the assessment as well as information on the manufacturer, supplier(s), and lead times (for restock)
  • Maintenance: the record must continually be reviewed, updated as needed, and deactivated when the part is no longer needed or approved

When it comes to identifying components and associated spare parts, and executing SPIR projects, the process is similar to a traditional sourcing process:

  • Identify the need
  • Determine the specifications
  • Research potential substitutes
  • Evaluate compatibility
  • Select the replacement and make the award
  • Update records

It’s Procurement, but Procurement with needs not typically addressed. That’s why a specialized system is needed that takes into account all of the specialized aspects not addressed in traditional direct Procurement systems. That’s the system that SmartCube has created for Industrial MRO with its I-SPIR solution. The module has the following primary components.

Projects & Packages

In the I-SPIR platform, projects correspond to systems and packages to related sets of one or more modules (and each module will require one or more spares to maintain it).

SPIR Processes

Once a project has been defined, the system makes it super quick and easy to request spare parts for one or more components or systems. Setting up a SPIR project is simply a matter of:

  • selecting the master project
  • selecting the responsible individuals (for QA, Evaluation, Assessment, DCC, PRE, Coordination)
  • selecting the supplier
  • providing the basic SPIR info (Doc ReF, PO, Due Date, System & Area of intended use)
  • uploading any necessary documentation
  • sending it to the supplier

Once the supplier receives the SPIR, they can select the part they are willing to provide simply by specifying their ID, the original manufacturer name and OEM part number (if they are acting as a distributor) if they already have the SPIR in their system or it’s in EQHub, a third party SPIR database that contains pre-vetted products with validated information which, when imported, is tagged as already validated information (which can allow an organization to accept the part without having to go through a full evaluation). If the part does not already exist in the system or EQHub, a popup will allow the supplier to enter all of the required information, which will then have to go through a full evaluation process on the buyer’s end.

When the SPIR is returned, the system walks the individuals on the buying team through the process, which consists of:

  • Quality Assurance: is the data valid and are the specifications appropriate
  • Evaluation: classify the Spare against key asset tracking attributes of redundancy, repair/discard, consequence, and criticality and define/override the auto-suggested quantities
  • Assessment: asses the overall purchase against the inventory and finance requirements
  • DCC: verify the DCC data
  • Final Approval and Order: final approval and place the order

Tag Management

The platform makes it easy to manage asset tags and provides downloadable templates for quick upload. This simplifies integration with ERP/MRP/Asset Management systems and material masters.

Dashboard

The main entry point summarizes the projects the user has ongoing and their current states for easy project location, access, and management:

  • To Do: tracks the SPIR requests that need to be opened, re-submitted, evaluated for quality, concluded, etc.
  • New: new Projects & SPIRs recently opened and awaiting supplier submission
  • Open: Projects that are open where team members need to assess submitted SPIRs
  • Overdue: Projects that are overdue
  • Rejected: SPIRS that have been rejected (and need to be returned or recast to new suppliers)
  • Submitted: tracks the supplier submissions (that need to go through the SPIR process)
  • Concluded: SPIRS that have been concluded

SmartCube I-MAT

SmartCube‘s other major offering is their materials “master” management and inventory platform that was specifically designed for supporting material and inventory requirements during (new) plant/site/rig construction and commissioning, plant/site/rig retrofit/upgrade and commissioning, cross-platform / site based material and inventory management (where the organization doesn’t have an ERP/MRP integrations that support that), and other temporary or permanent material and inventory management scenarios not adequately handled by the ERP.

The platform is designed to serve as a part and material master as well as an inventory master for the locations and projects not managed by the ERP/MRP (which, for organizations running on the BIG ERPs like SAP or Oracle, or older ERPs, are any temporary/construction/retrofit/commissioning project where inventory needs to be managed separately and off-site in a yard, on a rig, etc. until the project is done). It’s very easy to load products and materials into the SmartCube I-MAT platform as it allows for easy CSV upload (in addition to direct ERP integration if you so desire, both for initial load and final push when you are done with the project).

In addition, as part of their latest release, they have automatic (potential) duplicate detection and simplify the process of merging duplicates and cleansing the material / product master. They also make it one click to deactivate products (and make it clear when a certain product should not be ordered).

Upon implementation, it’s really easy to define (and upload):

  • Vendors: that are providing the products and materials
  • Tag Numbers: standard (asset) tag numbers (for system integration)
  • Projects: the projects currently being managed through the system
  • Product States: Evaluating / Accepted / Offsite / InTransit / Not Found / Destroy / etc.
  • Locations: Onshore / Offshore / Yard / Europe Warehouse / USA Warehouse / etc.
  • Imports: upload a file and track the imports
  • Deactivated Products: for easy identification and management
  • Users: and their associated permissions

Once the data is loaded, it’s really easy to search for any product using a free-text search on all key fields, or an in-depth filter-driven search on each supported product field. In other words, filters aren’t just limited to material/part name, number, tag, project, vendor, etc. It’s also easy, once a search and drill down is performed, to select all or a subset for batch editing where all products are missing the same data or need the same field updated.

Once a product is selected, it’s easy to bring up, and if necessary, edit all of the associated data, which includes all of the standard part/material fields, as well as perform standard inventory operations. The system understands the standard actions of:

  • Add Stock: increase the stock at the selected location
  • Move/Transfer Stock: move the stock from its current location to the selected location
  • Withdraw Stock: mark the stock as withdrawn and used

In addition, you can (re-)set the status of any product at any time for any reason (which you can capture) if you have the appropriate authority. Plus, when you move or transfer stock, you can indicate the type of transfer and withdrawal (if you define multiple types of transfer and withdrawals, such as consumption, returned, trashed, queued for destruction, etc.).

Plus, coming soon, if you are doing a transfer from one location to another that requires shipping (such as from a rig to onshore or one country for another), the platform will automatically export data for manifest creation in third party shipping systems (either through an API integration or through a flat file CSV export for loading in the third party system).

The entire system has been designed to be incredibly easy to use and support the primary requirements of a temporary project not supported by a traditional ERP/MRP material master or inventory management system:

  • easy off-site management
  • collaboration
  • high quality data

… and eliminate the need for error-prone spreadsheets and shadow processes that were created to get around the limitations of systems that were setup for managing acquisitions and inventory for traditional production line utilization, which is not the case in facility/plant construction and/or upgrade.

Both solutions are delivered as SaaS and no integration with ERP’s are required. Last but not least, the amount training needed is very limited as the design focuses on ease of use. Once a decision is made to use one or the other solution (or both) you can be up and running in matter of days if integrations are not required. Integration with ERPs and other systems is typically only a matter of a few weeks.

As explained in detail, if you need to do a lot of sourcing for pre-commissioning, commissioning, and asset-maintenance, SmartCube is a system you should add to your (very) short list as traditional indirect (and even direct) Sourcing/Procurement systems just weren’t setup for the type of sourcing and (temporary) inventory management you need to do (while SmartCube checks all the necessary boxes and then some).

Interrupt that Risk Event with Interos and Sustain Stable Supply Chains

Supply Chain risks are on the rise, as are disruptive events, and an event anywhere in your supply chain, even four levels down, can bring your operations to a halt if you can’t detect it, respond quickly, and take active mitigations. To this end, as chronicled in Part X of our Source-to-Pay+ Series that discussed Supply Chain Risk, a number of vendors have cropped up in the last few years around Supply Chain risks, but not all players are equal.

One of the first of the new breed of integrated supplier and supply chain risk players, and one of the most differentiated, is Interos. Interos was founded in 2005 by Jennifer Bisceglie as a consultancy focussed on helping organizations map out, understand, and get a handle on supply chain risk. Jennifer realized near the end of last decade that, with supply chains becoming so long, so complex, and so interconnected across the digital, financial, and physical realms, that technology would be needed to support organizations in this effort.

The core team knew that in order to do this, they’d need a completely new type of technology, so they sought out a new team to build one of the first outside-in business relationship graphs using trade data, third-party data sources and artifacts (such as ownership data, executive data, etc.), and even press releases. Then, on top of this relationship data, they’d need to layer risk data to help an organization identify risks in the supply chain. This would involve capturing risk events as well in order to help them understand which clients may need to be notified and/or use the Interos platform to gauge the extent that a risk event may impact them. So that’s what they built — at a global scale.

Interos has built a business relationship (knowledge) graph that connects 11 Billion relationships across 410 Million companies. These companies are then risk scored against 230+ attributes across six (6) different categories of risk: Finance, Geo-political, Restrictions/Sanctions, ESG, Cyber, and Catastrophic, depending on the extent of information available. At a minimum, they track country/industry level risks and will use that when there is insufficient data to assess the specific company risk against a specific attribute. Based on the assessment of each risk, Interos will compute an overall i-ScoreTM from 1 to 999, with lower scores being higher risk. It will then scan your entire network, from sink to source, and identify all high risk suppliers for you.

The Interos Resilience platform, which processes tens of thousands of sources and over 3 Terrabytes of raw data daily, constantly monitors for new relationships, information, and (related) events that could pose a change in an entity’s risk status, as well as indicate the presence of a (potentially) catastrophic event, including a natural disaster or a cyber-attack. For each of the six risk domains, the platform scans for a number of factors, sub-factors, and individual attributes. We’ll cover the primary factors in this post, and if you have a particular area of interest, you can always drill in during a demo or discussion with Interos.

With respect to Finance, the platform looks for the following:

  • Liquidity: Cash, Working Capital
  • Solvency: Assets, Capital Efficiency, Credit Rating, Debt Coverage, & Leverage
  • Profitability, Debt Coverage, & Valuation

With respect to Geo-Politcal risk, the platform looks at the following:

  • Political Instability
  • State Capacity
  • Political Process
  • Economic Rights
  • Socio-Economic Development

With respect to Restrictions/Sanctions, the platform looks at the following:

  • Sanctions (USA, UK, EU, etc.)
  • Associated Sanctioned Individuals
  • Import/Export Embargos
  • Associated Regulations

With respect to ESG, the platform looks at the following:

  • Environmental Performance
  • Social Commitment
  • Governance Strategy

With respect to Cyber, the platform looks at the following:

  • System Attacks (compromised accounts, cyber-attacks, data spills, etc.)
  • System Vulnerabilities
  • Supply Chain Cyber Events
  • Cyber Compliance
  • Cyber Threat Activity

With respect to Catastrophic risk, the platform looks at the following:

  • Localized Natural Hazard and Disaster Risk
  • Communication Capacity
  • Healthcare Capacity
  • Infrastructure Capacity
  • Burden of Disease Risk

Based on all of this, the platform is very useful for companies that need to perform

  1. Supplier due diligence
  2. Continuous related party monitoring
  3. Real-time catastrophic event detection

Interos is one of the most complete supply chain risk intelligence platforms for supplier due diligence. The ability to quickly screen a supplier on six highly relevant domains can give an organization confidence that the organization understands the risk profile of a supplier before onboarding it, which is not something you can get from a traditional credit score or an empty search on sanction lists.

Interos is one of the few platforms that can be counted on for continuous related party monitoring as it processes over 3 TB (Terrabytes) of data a day, constantly updates risk scores and related events for affected entities in the system, and can propagate updates through the business relationship graph in real time.

Interos is also one of the few platforms that can be used to do real-time catastrophic event detection where the event is not limited to a single event type, as the platform monitors for natural disasters, man-made disasters, bankruptcies, and cyber incidents — some of which Interos can detect before anything is reported due to a change in organizational behaviour — and it can immediately propagate news of events or risks to one of the 410M+ business entities it tracks to all impacted clients who can use their relationship explorer to identify all the links it has to the company.

For example, if there’s a fire in a raw material or component factory (which seems to happen in one of the few major RAM suppliers every decade — just do a few historical Google Searches if you don’t believe me) two (or three) tiers down the chain under your tier 1 supplier, you can immediately map out all of your tier 1 suppliers that trace down to that factory and make sure they have enough stock on hand to continue producing your products until you expect that factory to come back online (by either instructing them to immediately secure additional stock on your behalf or doing so for them) well before your competition realizes there’s going to be a disruption a week down the road when the plant is announced shut down and it finally trickles down to local news half a world away.

The platform monitors and tracks natural disasters globally down to a gird of 10 km squares, as well as potential paths of storms, waves, and fires, and can thus immediately identify each business entity that is likely to have been impacted as well as each business entity that is likely to be impacted if a natural disaster (such as a storm) continues its course. Thus, if a tsunami hits the coast of Japan, it can allow an organization’s incident response teams to immediately identify just those organizations in Japan in the area the wave hit and allow it to focus its efforts on just those suppliers, vs. having to reach out to and assess every supplier in Japan, of which it may have hundreds if it is in electronics when only ten were in the immediate area. The time savings alone is incalculable. (And, of course, if an earthquake hit a province in China, it would take an army of consultants months to figure out precisely what suppliers were close enough to the fault line to likely have suffered [significant] damage vs those far enough away to only feel minor shaking whereas the Interos platform will calculate all of this in just a few minutes.)

However, one of the most unique risk monitoring capabilities lies in its proprietary digital behavioural modelling that can often detect when an organization has experienced a potential cyber-attack, breach, or data theft and alert customers to that potential cyber-incursion days, or weeks, before the organization announces a breach and/or it makes the news. Using the business relationship graph, this immediately allows an organization to determine every first-tier supplier that relies on that organization. The organization then has to determine if any of those suppliers has access to the organization’s financial account information, personnel data, or confidential intellectual property. Those tier 1 suppliers that do need to be immediately approached and asked if any of that data was shared with, or accessible by, the sub-tier supplier that was breached, or affected by. If so, the organization can immediately start taking mitigation actions before they themselves are the target of a cyber attack.

The platform is very easy to use. When a user logs in, they see a summary of their full supply base and multiple sub-tier relationships (which for a multi-national with tens of thousands [10k+] of tier 1 suppliers can be hundreds of thousands of tier-3 suppliers). The user can see the number of suppliers by tier who are high risk, medium risk, low risk, and, possibly, unknown (as it’s a brand new supplier where there is little to no information on that supplier). Note that the number of “unknown” suppliers will typically be really small, and for most truly global companies with 500K global suppliers in their extended supply chain, the unknown will be significantly less than 5K (usually 0.5% or less).

(Note: If more than 1% of your extended supply chain falls into high risk, you have some serious problems. In a good supply chain, the vast majority of suppliers should be low risk (> 95%) with a small percentage medium risk, preferably no high risk, and preferably no unknown.)

You also see a breakdown of risk by

  • each of the six (6) risk domains, which lets you see if there is a particular risk concentration,
  • average risk by groups of interest (which could be country, product line based, strategic suppliers, etc.),
  • a summary of natural hazards and disasters currently being tracked, both visually and textually (which shows the number of potential tier 1, 2, 3+ suppliers that are potentially impacted)
  • a visual summary of the most relevant current events being reported on (with links to full articles in third party sources), and
  • a quick link to the relationship explorer tool that will let you find all of your connections to an entity of interest

When you select a category of high-risk suppliers (overall or by category), it will bring up a list of companies with their individual i-Scores that you can select to to bring up their complete risk scorecard (if you have unlocked their scorecard; depending on your subscription level, you have so many credits that allows you to unlock that many scorecards; you can buy more if you need, but most since most companies don’t need to evaluate more than a small percentage of tier 2+ suppliers, their packages are usually sufficient). The scorecard summary will summarize the score in each of the six areas, and will allow you to drill down into the factors, sub-factors, and individual attributes that are known and scored (and contribute to the overall score), which include those discussed above.

The scorecard will also summarize company corporate data (industry registrations and codes, locations, etc.), its tier 2 and tier 3 relationships and risks, which can be filtered to all known relationships (in your extended supply chain), as well as all events (and related sources) that have been detected that are relevant to that supplier entity. If a risk score is low (or suddenly drops), you will have access to all of the data that contributed to that score to make your own judgement (and jump-start your investigation).

The platform also has a geographic view of natural disasters that is interactive and allows a user to drill into a region, filter on natural disaster type (earthquake, tropical storm, volcanic eruption, etc.), and even project a few days in the future (if the disaster is a tropical storm, cyclone, tsunami, etc. and there is forecast data available from Interos‘ 3rd party, or public, sources). In addition, it can be used to look at historical natural disaster and weather event data, which goes back between 50 and 200 years, depending on how much historical data is available for the region, as well as the risk of each natural disaster type (wildfire, drought, earthquake, flood, etc.) in the region base on all of this historical data.

And the relationship explorer is likely the most useful part of the platform because, if a risk event is detected, such as a natural disaster or a cyber breach, you can instantly trace all of your active relationships to that company, and immediately start the process to determine if these tier 1 (and tier 2) suppliers will be impacted, and, if so, the degree to which you’ll be impacted. Not only will you know about an event days, or weeks, sooner than you would know without this platform (and by then it may have been too late to find an alternate source of supply or protect your data), but you can limit your discovery and mitigation efforts only to suppliers that might be affected, versus doing massive surveys and reach-outs (that can take days or weeks) to find out who might be impacted in the first place.

Interos is a one of the most powerful, and complete, risk intelligence platforms out there and one that should definitely be on your shortlist if you’re looking to get 360-degree visibility into your supplier, and supply chain, risk.

It Was the Most Wonderful Time of the Year. Could it Be Again?

A couple of months ago we published an article on how ‘Tis the season … to bring an end to seasonality! (And JIT!) because, while consumer shopping may be seasonal, supply chains no longer support seasonality. The pandemic finally broke globally over-stretched supply chains and with the continued issues (lack of ships, due to scrapping; containers; due to trade imbalances; lack of capacity, due to extended shipping times now that the two major canals are not available and ships have to sail around both capes), the situation is not going to be fixed anytime soon.

In the article we noted that if you didn’t want to seasonally stock out, you needed to stop trying to stock seasonally and start planning for sustained stock up over time. Stock at the rate products are normally produced and able to be shipped. And stock to what you forecast.

But don’t stop there. If, even spacing out the orders and shipments, you can’t reasonably stock to demand, or, if the demand may not be high enough to minimize your logistics costs (via full container shipments), then you need to work on demand shaping as well as demand forecasting. Don’t over market / promote / sell a product you’ll have trouble delivering, and don’t maintain a product that isn’t going to optimize your economic order quantity.

Not everyone needs the newest product, or the top of the line product, some just need a product that works, which can be last year’s product, or the mid-line product. If you shape demand properly, through targeted marketing, targeted selling, or proper account management, you can make sure that you can meet all of your demand and keep each product line you should be maintaining profitable. And while we admit demand shaping can be harder than forecasting, sometimes it needs to be done. But it needs a lot of advance planning, so it’s critical that Procurement work hand in hand with Marketing and Sales to help identify the demands it can safely meet, when, and what demand levels are optimal for each product line. But if you integrate your planning, marketing, forecasting, sales, and supply chain planning, then maybe the holiday season will, in 2024, be the most wonderful time of the year.

Are Vendors Demanding Ridiculous Cost Increases due to “Inflation”? Maybe you should tie them to an index when you ask What’s The Price!

Buynamics WTP was founded by two former CPOs and a Purchasing IT Guru back in 2015 after they had spent years being stymied at every reasonable request for open costing and reasonable justifications for significant price increases from opaque vendors where the salespeople did everything to prevent cost insight so they could maximize their margin, and their bonus. Tired of being forced into 20% cost increases when only 2% were justified, the founders of Buynamics WTP decided to do something about it and started Buynamics to build a solution that would provide them with insights into the cost drivers, and actual material costs, that they could use to start fact-based negotiations. [ In other words, the solution we are about to describe in this article was designed and built by buyers, who know exactly what output is needed to negotiate. ]

Since their founding, Buynamics has hired only two types of people: Procurement People (who know how to buy and have expertise in the categories they bought to help Buynamics design a better solution and explain it to interested buyers) and IT People (to build it). They don’t sell (consultant) services, they sell subscriptions to a platform that can provide deep insight into just about any product you buy and, as of this year, many standard services as well. Plus, if you pay for the Upply data subscription, you can get deep insight into current freight costs in different regions and, in 2024, there will be extended cost modelling support for logistics, which we’ll discuss later.

Their primary product offering is Buynamics What’s the Price which is their index-based negotiation support product that, in their words, “gives [you] access to the one-pager that your supplier never wanted to share“. You are able to see it all: the commodity costs, the change over time, the cost breakdown (materials, labour, energy, transportation, and overhead) and the appropriate (estimated) margin calculation. You can verify whether their steel cost actually did go up 20% over the past year, and, even if it did, if it justifies a 20% increase. (If steel is only 30% of the total cost of the product, than the most the cost should increase is 6% unless there is also a transportation or energy cost increase, which could be the case in the EU right now [since the sanctions on cheaper Russian Oil and Gas].) It could be that only an 8% increase is justified, and that’s a lot easier to argue with the data.

The What’s the Price module is extremely straightforward with only 6 areas of functionality: cockpit (the entry dashboard), the prices & indices, the industry cost profiles, the cost models, the reports, and the settings. The platform is designed to help a buyer get to the point, and it does that, which is why it’s so great. (Buyers need insights, not complicated tools — those are for cost engineers in the plants.)

In the Prices & Indices Section, the buyer can pull up the prices and changes over time for any commodity, salary, or freight rate tracked by the system. For a commodity, they just have to select the commodity/salary/freight rate (using easy search) and define a date range and up comes the start and end price, average price over time, % change, and a detailed line chart (which can be swapped or overlaid with a mutation chart, moving average, or index). For a job description, they just select the job title(s) and it brings up the average price and typical range (per month). For freight, you simply select the index by country and type (contract, spot, domestic, cross-border, long-distance, etc.).

In the Industry Cost profiles, you can pull up any NAICS code or keyword and see the typical cost breakdown for all products in that category using industry census data — specifically, the direct materials, direct labour, manufacturing overhead (contract work, CAPEX depreciation, energy, MRO, rentals, waste removal, etc.), GSA & Other Expenses and Profit at a high level, with drill in capability to the labour, manufacturing overhead, and GSA. By selecting the country of origin, the data is then complemented based on labor costs and energy rates prevailing in that region.

In addition, you can dive in and the software will calculate the economies of scale based on your growth potential that you are entitled to claim from repeat orders (since you should only pay for so much CAPEX depreciation, etc.) by simply estimating the fixed overhead and G&A of your vendors. (In 2024, you’ll be able to select the transportation index of choice, and get a complete cost model with freight.)

Prices & Indices are useful when you are looking at contract renewals (for quick insight into negotiation with an incumbent), cost profiles are incredibly useful when you’re looking at shifting more business to an incumbent (to negotiate a bigger discount), but the core of the product is in the cost models. You pull in (or enter) your bill of materials, select the NACIS code and the country, and using the current prices and the most recent industry cost profile breakdown, the platform will calculate the estimated total cost of a product using all the data it has. (So if materials account for 33.3% of the cost and add up to $10, then the platform knows the that the total product cost is expected to be $30 and estimates the cost breakdown across labour, overhead, GSA, and typical profit using the region-specific cost data and industry cost profile.

The buyer can build as many cost models as she likes, set up alerts to get updates on a regular basis or when a change occurs in the price that surpasses a threshold (be it due to material cost, energy cost, labour cost, or other significant factor), and see how the cost models have changed over time (since the time they last sourced, for example). (Also, the alert can be set to a percentage change or a financial impact within your organization.) And if you provide the price you are currently paying, it will also calculate how much you are likely overpaying per unit by cost component.

With respect to settings, besides defining system alerts, a user can also maintain their own settings to not only see their interface the way they want to (currency, formats, auto-tracked prices, cost profiles, [active] models, etc.), but reset them on the fly (so they can see prices in Euros when they are negotiating with European suppliers, Yuan when they are negotiating with Chinese suppliers. etc.).

With respect to depth, it tracks index data for over 3000 raw materials and commodities across over 160 countries and uses this to power over 360 built-in industry cost structures. When it comes to services, it tracks salaries for over 750 positions across 37 industries, and over 115 cost profiles, for over 170 countries and regions. Buynamics integrates with the full extent of Upply data (which built their cost indexes from neutral freight pricing from over 750 million invoiced freight transactions) and has detailed up to date market pricing for air (freight; worldwide), land (road, esp. EMEA and North America), and sea (worldwide).

It’s literally everything a buyer needs to start a fact-based index-based negotiation as the buyer understands what the cost should be unless the supplier has a unique situation where certain costs are higher than average (and the supplier is willing to prove it). It also helps the buyer understand when they are getting a reasonable deal and when they are truly paying actual cost increases only, and not just claimed cost increases.

So if you want to understand what you should be paying before you start a negotiation; the extent to which commodity, energy price, labour, or transportation price changes really affect you; and what the real cost drivers are (or where the supplier truly isn’t competitive), then the buyer should acquire Buynamics WTP today. It’s really the only platform that does index-based negotiation support (vs. stochastic analytics, CAD driven analytics, process model analysis, or hand-built cost models that typically require cost engineers and sometimes even PhDs).