Category Archives: Procurement Innovation

TradeCard: Transaction Management for the Global Supply Chain Part I

In yesterday’s post on how it’s sourcing, procurement, and global trade management, we mentioned how a critical part of global trade is finance and document management. One company that facilitates this process is TradeCard, an end-to-end SaaS transaction management solution that connects over 4,000 buyer and supplier companies across the world with local support in over 50 countries. And while they aren’t the only company that facilitates this process, with notable competitors being Integration Point and their extensive suite of import, export, and supply chain compliance solutions and TradeBeam with their import, export, and visibility solutions, they are the first solution that I’ve seen that implements end-to-end transaction management from the PO to final settlement (including chargebacks) with support for financing, document management, 3rd party freight forwarders, and factory floor shipment packaging. Furthermore, their solution, which supports the physical, financial, and information flows from all parties, focusses on the alignment of the flows.

The financial flow is supported by way of a procure-to-pay solution that enables pre- and post- export financing solutions, payment protection, invoice discounting, settlement, and chargebacks. Through agreements and alliances with over 25 banks, insurers, and other third parties, the TradeCard platform allows a suppier to request financing as soon as the purchase order is received. Then, depending on the supplier’s credit rating and the amount of the request, the request will be forwarded to one or more financing partners who will offer financing at standard terms or the TradeCard credit line, where the TradeCard platform can automatically grant certain financing requests under standard terms on behalf of the partners in the financial network.

The time of the financing request is flexible. The supplier can request financing at any point from the receipt of the purchase order to the receipt of goods by the buyer, and might even be able to request financing beyond receipt of the goods by the buyer, depending on the buyer’s standard payment terms. In addition, the platform allows the supplier to offer invoice discounting on early payment by the buyer as soon as the invoice has been accepted. Finally, the platform allows for electronic payments, which completes the end-to-end financial lifecycle of the transaction.

The physical flow is supported by their collaboration solution, which allows buyers and suppliers to collaboratively share current demand data and collaborate on forecasts and production plans, the Factory Xpress solution that allows for the creation and execution of detailed packing plans, and the document management solution that allows for the creation and transmission of documents that are required by freight forwarders, customs agents (for import and export), and distribution centers.

The information flow is supported by their Procure-to-Pay, Collaboration, and Factory Xpress solutions as well as their TradeCard Advantage solution that allows for queries and reports across the platform and the transaction data that it contains. It’s also supported by their new Custom Objects Toolkit that allows TradeCard to quickly create custom extensions — that can take the form of integrations, reports, or global trade documents — for customers on an as-needed basis.

By integrating the three flows, TradeCard provides a single view into the global supply chain for buyers, suppliers, factories, and partners around the world, which can be integrated into the platform as needed. TradeCard can, and has, integrated multiple ERP, best-of-breed, and home-grown sourcing, procurement, and global trade solutions into its platform in support of its hundreds of global Fortune 3000 customers. Furthermore, over 150 service providers already inject services into the platform in the form of financing, payment protection, inspection, and logistics, which a customer can take advantage of day one.

Tomorrow’s post will dive into the physical supply chain flow and the solutions that TradeCard provides.

It’s Sourcing, Procurement, and Global Trade

A few years ago, I took the time to remind you that it’s Sourcing and Procurement because it appeared that some vendors wanted you to believe that it’s e-Sourcing or e-Procurement, or some fractured combination of both, because that’s what they have and they want all of your business.

As I said before, e-Procurement and e-Sourcing are not the same thing. From a supply management perspective, they’re two halves of a whole, one tactical and one strategic. And while they bring value alone, combined they bring much greater value. Sourcing leads into Procurement, usually off of a contract, but sometimes after e-Negotiation or decision optimization alone, and Procurement leads back into Sourcing, through the analysis step. Without Procurement, the organization wouldn’t have a large transaction database and extensive visibility into spend, and without Sourcing, there would be no strategically negotiated contracts to buy against, leaving procurement managers the freedom to spend willy nilly.

But when it comes to supply management, Sourcing and Procurement are still not the full picture. While they are the full picture from the viewpoint of the buyer / analyst in a mid-sized or larger supply management organization, they do not address the supply side, or the fact that goods need to come from a supplier, sometimes by way of a distributor, and end up in the buyer’s warehouses for shipment to stores and/or end consumers.

The goods have to be packed, shipped, exported, imported, and, sometimes, financed. And the settlement function has to take into account invoice discounting and chargebacks, at a minimum. This doesn’t sound too bad until you realize that the average international shipment requires twenty or more documents for export and import, especially when the US or the EU is involved. Ever since the introduction of 10+2 and new advance cargo declarations in the EU, it seems that documentation requirements have been compounding ever since.

And while this functionality does not necessarily have to be in the e-Sourcing or e-Procurement system, it is needed by any company doing international business and it should be easy for a company to push data out from the e-Sourcing/e-Procurement system into the appropriate Global Trade Management system and pull the necessary data back in for analysis.

Because, when you consider the average transaction in today’s global supply chain end to end, this is what you usually end up with.

Sourcing – Spend Analysis (what needs to be sourced)
Sourcing – e-Negotiation (RFX, Auction – who will it be sourced from)
Sourcing – Decision Optimization (optional, to analyze the bids)
Sourcing – Contract Management (to store the awards)
Procurement – Requisition (for a Bill of Materials)
Procurement – Approval (for the requisition)
Procurement – Purchase Order (for the supplier)
Global Trade – Financing (can be pre or post invoice)
Global Trade – Packing (goods have to be properly packed and labelled)
Global Trade – Shipping (goods have to be shipped)
Freight Forwarder (if a third party handles the shipping)
Export Documentation (for the supplier’s home country)
Import Documentation (for the buyer’s home country)
Procurement – Good Receipt
Procurement – Invoice
Global Trade – Invoice Discounting (if the buyer pays early)
Procurement – Reconcilation
Procurement – Payment
Global Trade – Settlement (the purchase has to be settled in the source accounting system)
Global Trade – Chargebacks (chargebacks for penalties or returned goods have to be accounted for)
Procurement – Tax Reclamation
Sourcing – Spend Analysis (what needs to be sourced)

What Do You Want?

One thing is for certain, the CPO Agenda knows how to get your attention these days. As soon as I saw the headline for their recent executive debate on “what comes first, quick bucks or big changes”, all I could say is “well, that depends on what you want“. Are you just in it to make a buck, or are you in it to make a career. A career requires long term viability, and that requires the willingness to make big changes when big changes are necessary. Continue to do it right, and the market, with its money, will come.

But I guess the answer is not that easy when management is divided, or you want to keep your job (though I personally don’t see why you would want to keep a job at a company with no vision of the future, as it won’t likely survive this economy without one, but I have to respect a healthy fear of the current job market, or lack thereof). To this end, you could take the advice of Laurence Laroche of Saint-Gobain Packaging — quick wins are a means to gain this credibility [with purchasing] and then transform the function, and do a few quick wins to get respect and then start the long-term transformation.

The real question is whether you can pursue quick wins and long term transformation at the same time. As Xavier Cassignol of FCI points out, it is difficult to do both at the same time, especially when purchasing needs to be constantly in tune with the broader challenges facing the organisation. Especially when product lifecycles are shrinking along with average management tenure. For better or worse, a manager is not likely to survive four years if she doesn’t show increasing returns in each of the first three years, which is difficult when real transformation efforts often take two years in a multi-national.

But you still need to constantly improve. We’re in a perform or perish culture, and it’s not always easy to keep up, so getting ahead of the game can be a real challenge. And you can’t ignore your long term supplier relationships, even if another supplier tries to woo you with lower costs, because quality, reliability, and fit is important too — so you have to continually improve in supplier relationship management too.

And, as Mohamed Marfouk of LVMH notes, if you do continuous improvement right, each step is going to happen faster and faster, because you are building on success, you are building credibility. As you build success in marketing then R&D will want to be your customers and so on. You must carry out your own marketing internally so that other people know what you did and that it worked. This will drive more customers, which, in turn, means you get greater resources and you deliver more. It is continuous. Especially if you start with getting the right team, as I pointed out in step 1 to building a world class supply management organization.

Want to Cut Cost? Focus on Quality!

I’m glad I read all the way to the bottom of a recent article in CPO Agenda on “cutting it fine”, even though I became a little discouraged about half-way through, because the response from Willem F van Oppen, owner of Provoque Consulting in The Netherlands, succinctly summarized the problem with continuously focussing on the non-strategic activity of cost cutting.

As long as companies only play to shareholder value and its myopic dynamics, procurement will not be able to successfully drive a strategic agenda of value sourcing.

There’s a limit as to how much cost can be cut. That’s why, by the third reverse auction on a category, costs actually go up. At some point, all of the margin is squeezed out of a supplier and the costs are not going to go down without a sacrifice in quality or service unless value is improved. This might take the form of increased quality (since a product that lasted longer or sold at a higher price would, relatively speaking, cost less) or better service (since service has a cost too) or it could take the form of raw material substitution or production process upgrades (since reduced production time would lower production costs). Either way, value is being added.

As Rod Wood pointed out, a key role of the Procurement function is cost management. Cost cutting is a knee-jerk reaction to a problem that often introduces more problems than it solves (when quality, service, and/or on-time delivery decreases) whereas cost management is done according to a strategic plan that balances quality, risk, security of supply, product development, and logistics. The odds of the success of the former aren’t much better than a roulette table while the odds of success of the latter are about equal to the house winning.

Is There Any Room In The Space for an E-CHAOS Vendor?

When it comes to openness, there are three primary types of vendors. There are the self-promoters that openly talk about their capabilities with pride, with confidence that they are, at least in one way, the best at what they do and that some customers will see that value and buy from them. There are the modest types that don’t talk much, but don’t hide when you ask questions. Then there are those that try to hide behind proprietary technologies and processes, aging patents, and trade secrets, often knowing that what they have is not even as good as the company down the street, that the patents are outdated and reaching end of life, or that the trade secrets have been public knowledge for years.

However, because this third group hasn’t been innovating (as fast as their peers), have a large (and expensive) Sales & Marketing organization, have high manufacturing costs (because they haven’t upgraded facilities or capabilities), are top heavy (with too many chiefs and not enough tribal members), and/or have high-shareholder expectations, they have to do something to maintain their revenue stream and/or profit margin, and since openly flaunting what they have won’t do the trick (on its own), they have to hide behind patents, proprietary technologies, and trade secrets, even if the latter turn out to be nothing more than a lot of hot air in the end. (For example, there are still spend analysis vendors today trying to sell their mapping algorithm with its “secret sauce“, when the “secret sauce” has been publicly known for two decades.)

I call this third group of vendors E-CHAOS vendors because, in my mind, they bring chaos and confusion to what would be an otherwise orderly and well understood space, and usually attempt to do so with heavy use of the electronic medium (because it’s cheap and reaches a wide audience quickly) that includes copius amounts of press releases, extensive media coveage of those press releases, and regular self-serving webinars.

And I personally don’t think there’s any room for these vendors anymore. Thanks to the recession and jobless recovery we’re overworked and stressed to the max, especially since we have to increase productivity by 2.3% year after year or fall (further) behind on the global stage. As a result, as far as I’m concerned, we don’t have time for vendors who hide behind smoke and mirrors and won’t put their money where their mouth is when its time to step up to the plate — especially if they expect you to spend seven figures on a solution. And, as far as I’m concerned, just giving you a demo doesn’t count. First of all, you’re not the expert. You don’t know what to look for, what to ask, or when you should insist the vendor go off script. Heck, for all you know, it could be a video of fine-tuned “in-development” functionality that never makes the final cut (because that was the only example where it worked). Secondly, you don’t know what you need to see to make apples to apples comparisons. (And while you can compare apples to oranges, the comparison isn’t that meaningful, and only possible if you have a lot of time and the right analytics expertise on your team, which you probably don’t.)

And, most important, why should you put up with this when for every vendor that tries to hide behind closed doors, when an analyst or blogger tries to put them under public scrutiny, there are dozens who’ll gladly welcome anyone into their glass atrium with open arms? You shouldn’t! If you can’t go to your favorite analyst or blogger and get an objective third-party review of a solution that is going to cost you an investment of six or seven figures, and you have other options, the first thing you should do is strike that solution from your list because you can’t afford to not know what the vendor is trying to hide. Maybe all the vendor is trying to hide is a bloated organizational structure with too many chiefs and sales people which requires a high revenue stream, and, thus, a high sale price, to maintain and that’s okay if the vendor can deliver value appropriate to the purchase cost (because it’s fine to spend 1M to save 10M as no one’s going to argue with that ROI), but what if the solution is missing a fundamental capability and you don’t discover that fact until integration time?

Thus, from now on, not only will SI not cover any solution from an E-CHAOS vendor, include such a vendor on any potential solution lists, public or private, or make any further attempts to reach out to these vendors (since SI has had an open policy since day one and has NEVER refused a demo request that follows the rules), but it will also not cover any vendor in the modest category (or the open category if such vendor snubs SI, because then the vendor isn’t truly open in SI’s view), include such a vendor on potential solution lists, or make any further attempts to reach out to that vendor if the vendor won’t give SI a demo. Because, frankly, without a demo, there’s really no way to tell the difference between a modest vendor and an E-CHAOS vendor.

And, as per yesterday’s post (where I mentioned I would not be reviewing the vendors in the Forrester Wave in detail because too many fall into the small group of vendors that have refused SI a demo), this means that SI will no longer be including the following vendors in its recommendations or covering their solutions until such time as they change their minds and give SI a demo (because even though SI honestly believes these vendors have good solutions, belief is not enough — you need proof):

Emptoris
CombineNet*1
Hubwoo
Ariba
Oracle*2 (Sourcing/Procurement) and
SAP

If you really want coverage of the first four, you can go to SpendMatters, as long as you don’t expect much more than a services / business analysis for some of them (because that’s all I’ve seen in the past). For the last two, you can try the Enterprise Irregulars. While Oracle and SAP are finicky with whom they’ll open up to, they will open up to a few bloggers. But, until these guys open up more, just don’t look here.

*1 Yes, CombineNet recieved some fairly extensive coverage a few years ago, but that was when a different regime was in charge.
*2 Oracle is a top commercial database in my mind, and the doctor‘s generally preferred ERP solution, but Oracle is off the sourcing/procurement list until I get more than a white-paper to base a recommendation on.