Category Archives: Procurement Innovation

What Level of Procurement Performance Are You At?

Last week, Pierre Mitchell of The Hackett Group asked you if you knew the difference between procurement value and procurement performance (part I and part II) over on Spend Matters and invited you to participate in a study that would help you identify where you were on your procurement journey by way of 18 value streams that range from “naive apprentice”, where you’re measuring performance at an elementary level, to “expert sorcerer”, where you’re extracting procurement value at a very advanced level. (Pierre also posted a link to a corresponding finance study that will help Hackett compile a full view on the problem, which Pierre has promised to provide free insights into on Spend Matters in the weeks to come.)

If you haven’t taken the survey, as a serious supply management professional, I highly recommend that you do. I know that 30 to 45 minutes is a lot of time given how busy most of you are, but the 14 page survey is overflowing with more good information on what you might do to become “best in class” and much more informative than the last dozen tragic quadrants, graves, and research griefs that I’ve read from the “major” analyst firms. Organized around the 18 value streams that are designed to take a Procurement organization from “naive apprentice” to “strategic sourcerer”, it forces you to think about the core issues and will help you understand where you are in your Procurement journey and just how far there is to go. This, in turn, will prepare you for the forthcoming posts where I give you the value streams and explain why they are important. These posts will then be followed by more posts from Pierre that will summarize the major results, on Spend Matters, and, at a later date, provide his views on the results and a few of the best practices that might help get you started on your journey, here on Sourcing Innovation.

(For those of you thinking you can skip the survey and wait, I have two things to tell you. First, Hackett, which is the premiere benchmarking and strategic advisory firm in the space, doesn’t give away everything for free — at the very least you have to complete the survey if you want deep insights. Second, if you don’t take the survey and think about the questions with respect to the given alternatives, you’re not likely to fully understand the value propositions Pierre and I will be giving you. Just like you have to prepare your body for a marathon, you have to prepare your mind for knowledge.)

Stay tuned! Much more to come in the weeks ahead.

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

In my last post, I described how iValua, a ten year old French software and solutions company, has one of the broadest supply management suites on the market today. From RFX to payment, the majority of the key steps in the sourcing and procurement cycle are covered in one of iValua’s many solution modules. And while it is true that most of the modules aren’t very deep, it’s also true that many small and mid-sized companies, and even some of the larger Global 3000’s that don’t have that many complicated buys, don’t need deep functionality where sourcing and procurement is concerned. Over thirty of France’s largest companies use the solution, including Air France Industries, La Poste, and Arcelor Mittal, the largest steel company in the world.

In this post, I’m going to describe some of the capabilities of the product in more detail. But first, some global capabilities. The platform, which is built on .Net, is delivered via SaaS through your browser. As a result, it is accessible anywhere. Many of the screens are built using a widget-based architecture and, like dashboards, the layouts are customizable by each user. The user can sort by, show, and hide any column of any table. Quick search and advanced search is available for every screen (and table), a navigation history is maintained for quick back-tracking, and the user can customize a favorites link for quick access to specific screens and reports. Finally, all data can be exported to Excel and all supported objects (bids, contracts, purchase orders, invoices, payments, reports, etc.) can be imported from Excel as well.

But the best platform-wide capability is the ability for the platform to be integrated to any ERP, Database, or external data source (due to the existence of appropriate abstraction layers in the platform). Before iValua decided to become a provider of a SaaS supply management platform, they were a custom software development shop. As a result, they had deep development skills and broad experience with a number of platforms. Thus, when they decided to focus on supply management, they were able to do custom integrations for each client. Now that they have over 100 customers, they have integrated with almost every major ERP and Relational Database in France, most of the major ERPs and Relational Databases in Europe, and some of the major ERPs and Relational Databases in North America. If they haven’t integrated with your environment yet, it probably won’t take them long to do so. Plus, using their partnerships with Bureau Van Dijk, D&B/Altares, Vigeo, and EcoVadis, they can enrich your supplier related data when they pull your data in.

Sourcing

Sourcing starts with the definition of a project. Once basic information is defined (type, process, owner, dates, and scope), the owner can define a team, create a message center, define currencies, outline a schedule, and keep track of relevant documents. Then the user can invite suppliers, create RFXs with selection and evaluation criteria, track responses, save analysis, create awards, and create an implementation plan. RFXs and Auctions support multiple lots and multiple rounds and the buyer can determine whether or not suppliers can see bids, whether or not the bids are displayed anonymously, and when they can see the bids.

Procurement

In addition to requisitions, budgets, purchase orders, expense reports, invoices, goods receipts and recurring receivables, the procurement application supports catalog-based buying. The system can be integrated with any EDI, XML, or punch-out catalog, which can be augmented with user-defined items (which could include custom items or services defined in contracts). The expense reporting module supports p-cards, advance requests, standard expense, and travel expense reports. In addition, a supplier evaluation form can be attached to every purchase order (in addition to every award and contract) and reports can be run at the purchase order level, award and contract level, and global supplier level.

Reporting

They have a very extensive reporting tool that allows you to look at data over the time periods of your choice (daily, weekly, monthly, quarterly, or yearly), in the organizations of your choice, in the spend category families of your choice, for the suppliers of your choice, along the dimensions, or axes, of your choice in a wide variety of tabular and graphical formats. Basically, the application builds a master spend cube and allows you to view any sub-cube, or sub-cube summary of your choice. While it might not allow you to do arbitrary spend/data analysis, it will more than satisfy your average procurement professional and manager. (And you could always augment the suite with off-line analysis for your senior analysts if you needed.)

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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

B2BConnex 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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