Category Archives: Procurement Innovation

iValua: Tackling End-to-End Sourcing And Procurement, Part I

By now, you’ve probably heard the foreshocks of the latest vendor to enter the supply management space in North America, iValua. iValua is a ten-year old French software solutions company that has slowly built up a broad e-Sourcing and e-Procurement solution that covers most of the bases that I outlined in my post where I reminded you that it’s sourcing and procurement, in which I also reminded you that you don’t have your supply management bases covered unless you have a solution, or set of integrated solutions, that cover the basics.

In that classic post, I indicated that the basic cycle was the following:

  • Spend Analysis
    Analyze spend related data and find the best sourcing opportunities,
  • RFX
    solicit an RFI, RFP, and/or RFQ and/or
  • e-Auction
    initiate an e-Auction then
  • Decision Optimization
    make the best award using available data and
  • Contract Management
    start the contract management lifecycle.
  • Requisition
    A requisition is created when a good or service is required and
  • Approval
    if it is against the existing contract, it is approved
  • Purchase Order
    and a purchase order is created off of the contract.
  • Goods Receipt
    When the supplier delivers, a goods receipt is created and
  • Invoice
    the invoice is recorded and
  • Reconciliation
    the invoice is reconciled against the goods receipt and purchase order.
  • Payment
    Payment is made after reconcilation
  • Tax Reclamation
    and if VAT is reclaimable, filings are made
  • Spend Analysis
    and after time has passed, the payments are analyzed to insure spend is on target.

With respect to this cycle, iValua has modules that cover the basics for just about every phase except for decision optimization and tax reclamation. In addition, the suite also has modules that address:

  • Sourcing Process Management
    which allows sourcing processes to be customized and managed as sourcing projects
  • Procurement Process Management
    which allow you to define your own requisition, approval, and purchase order creation and delivery processes
  • Supplier Performance Management
    which allows you to create surveys and track performance metrics
  • Budget and Expense Management
    which allows you to create budgets by organizational unit and sub-unit and capture expense reports
  • Customization
    which is an extensive administration module that allows branding, coloring, wording, dashboards, roles, permissions, security, and default processes to be configured

All-in-all, it is one of the broadest supply management suites in the market. In my next post, I’ll provide more details on some of the various modules.

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When it comes to Public e-Procurement, is North America a Third World Country?

I have to wonder after reading this recent article on “the power of online real-time bidding” in The Global Graft Report. The article described Chile’s procurement system which goes beyond the simple e-tender submissions common in Canada and the US and actually uses real e-Procurement functionality, including real-time, public e-auctions.

Chile’s system is simple and cost-effective. Government agencies submit a projection of their needs to a website. It compiles a list of the requirements and then invites suppliers to bid. Their proposals are concurrently submitted to the website, where all bidders and the general public can see what’s offered. The real-time aspect of the program allows suppliers to adjust their bids depending on what other bidders are offering, spurring more competition. At every step, the process is completely transparent.

That’s the way it should be. Not a one-time sealed bid submission against a probably incomplete specification, with the award going to whomever is the lowest cost among the suppliers deemed competent to “deliver the goods”. (Which allows corruption to run rampant in the hands of the less than worthy, who can judge who is and is not competent to deliver without consequence.)

Especially now that modern systems can handle bid packages as complex as you want them to be! And hey, as the Swedish Public sector found out, if you throw optimization into the mix, you can truly get optimized auction results.

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B2B Connex: e-Document Management for Small & Mid-Size Manufacturers

B2B Connex provides a web-based sourcing and procurement document management solution that is a great fit for all types of small and mid-size manufacturing organizations that need simple e-Sourcing and e-Procurement functionality at a low price tag. It’s basic portal solution, that plugs in to your existing ERP & MRP solution, can be acquired for as little as $30,000 (plus 20% annual maintenance) for a small operation. Mid-size operations are generally priced by the number of locations and users, but even their larger customers don’t pay much more than 100K. (Pure SaaS configurations and pricing are also available, but most of customers with traditional on-site ERPs/MRPs generally prefer on-site installations.)

Designed to fill the niche in the small and smaller mid-sized business market left by the big end-to-end e-Sourcing and e-Procurement suite vendors whose solutions often come with a big price tag, the B2B Connex solution allows you to easily manage the following e-Document types (among others) and efficiently conduct your day-to-day procurement operations.

  • RFQs
  • Purchase Orders
  • Kanban Orders
  • Shipment Notices
  • Payment Inquiries
  • Invoices

In addition, it can also handle the CRM side of your business and allow you to manage the following e-Document types (among others):

  • Inbound RFQs
  • Sales Orders
  • Inbound Shipment Inquiries

It’s implemented as a simple web-based portal solution, that can be accessed as needed by your procurement personnel, and it integrates with your back-end ERP and/or MRP systems. (Right now, they support about a dozen ERP/MRP systems with no or minimal configuration work, including SAP, Oracle, JDE, Intuit, Avantis, and Mapics.) And since it handles all the key document types, it allows you to do m-way matching and insure that the invoices are accurate (and represent actual shipments and agreed upon pricing) before you pay them. Since the lack of this capability is one of the two biggest reasons that up to 60% of negotiated savings never materialize (with the other being maverick spending), it’s a good one to have!

In addition to document status (such as new, acknowledged, reviewed, accepted, etc.), the system also supports state management, and a supplier can, for example, accept, reject, or mark each line item for negotiation on a purchase order. This is a useful feature for spot buying, which is common for MRO, SG&A, and low dollar spending in smaller organizations. Also, each e-Document can have an unlimited number of e-Document attachments, so your RFQs can contain detailed item descriptions and sample contracts and your purchase orders can contain detailed specifications and shipment terms and conditions, etc.

If you’re a small or smaller mid-size manufacturer still on EDI and holding off on an e-Procurement system because you think it’s too extensive for your needs, or you think it won’t integrate with your ERP/MRP, or you think you’re too small for such a solution, it’s certainly a system you should check out. Plus, they have an ROI guarantee. If the system does not pay for itself in a year, they’ll refund the purchase price. However, considering the implementation of even a basic e-Procurement e-Document management system such as this generally comes with at least a 25% productivity improvement across your Procurement department, it’s pretty hard not to see savings (especially since the automatic matching will reduce payment errors and the built-in e-Negotiation capabilities on spot buys will help you get price reductions).

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Masco Knows the SCORE

I enjoyed this recent article over on Supply Management . com on how when you “know the score”, like Masco, and use collaborative two-way scorecards (like Canada Post does), you can save a lot of money. Masco saved over $5M with its pilot project with just one supplier, exceeding their initial savings goal by over 40%. And that’s just the tip of the iceberg. When they roll the program out to their other strategic and high-volume suppliers, I’m sure they’ll save 10 to 100 times that.

Although it’s hard to measure, and even harder to define, true collaboration — where both parties commit to continuous improvement — works. And it generates significant returns when both parties work together and merge their strengths, knowledge, and experience pools. This is because, as the article points out, good collaborative two-way scorecards will:

  • Put the strengths of your purchasing professionals to use
  • Leverage suppliers with whom you do significant business
  • Transfer technical expertise from suppliers to you and vice versa
  • Focus on win-win opportunities that engage both parties
  • Allow both parties to honestly evaluate operations and identify areas for improvements and realistic targets

For more on Masco’s Score methodology (formally labeled their Supplier Collaborative Cost Reduction Evaluation initiative), see the article. It also has their five steps to success, which, though high level, are pretty good.

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Glad To See I’m Not Alone On My “Don’t Be Dumb” Bandwagon

As my regular readers know, after the recession started, I tried my best to convince anyone who would listen not to be a dumb company until I was blue in the face. As I predicted, I wasn’t very successful (as I lost track of the number of companies who put new solution acquisition on indefinite hold and of the number of smaller solution providers that put new development on indefinite hold), but I was still glad to see this recent article in Industry Week on “how leading companies will thrive after the recession” which said that some companies will emerge in a downturn in a better position than their competitors and start to outperform them because they have a commitment to innovation and a drive to become immersed in emerging growth markets.

The truth is that without investments in innovation and new markets, growth will stall even as the economy rebounds. I understand that less business means less revenue which means less money in the corporate coffers, but this doesn’t mean you cut the innovation budget. If money is really tight, you reduce the innovation budget in line with other budget reductions, but you don’t cut it. You cut the non-essentials like the box at the ballpark, the Nascar sponsorship, the deadweight middle management, and — even though you’ll despise me for saying this — your bonus. I strongly believe that management should not get big bonuses during times of poor performance. (However, congruently, I also strongly believe that management should be entitled to big bonuses during times of record growth because I believe management bonuses should be based on the overall corporate performance they drive.)

The simple truth of the matter is that innovation must be a priority, no matter the economic outlook because the right innovation will drive growth even in a down market. The article gives two examples of companies, namely Snap-on Tools and Makita, whose sales are increasing because their products match what consumers want. If you can find a way to give consumers want they want with higher quality and lower cost, they will switch to you, even if your product is considered a luxury. Although they are more thrifty, consumers will still treat themselves in down markets — just not as often.

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