Category Archives: Procurement Innovation

Vinimaya: The Next Wave in Product Catalogue Management (PCM)

A little over a week ago, in Networks are ok. Catalogs are Good. Punch-outs are Better. But Agents are King!, I introduced you to Vinimaya [rebranded Aquiire, acquired by Coupa] – a little known company from Shelton, Connecticut (apparently, it’s not a total wasteland) that may be the only company in the space with a real answer to the Supply Network 2.0 Challenge.

Billing themselves as a Supplier Enablement Solution for e-Procurement with their Catalog Integration System based on distributed search technology, their product truly does allow an e-Procurement system to access supplier web-sites, online catalogs, and internally managed catalogs concurrently from a single user interface.

Unlike today’s supplier networks which only support hosted catalogs and punch-out enabled sites, constitute a large expense for the buyer and the supplier, have a long enablement cycle, and provide the buyer with almost no control over access, Vinimaya’s new Product Catalogue Management (PCM) solution, which they sometimes call a Virtual Punch-out or Virtual Supplier Network (the VSN), supports ANY site (be it a punch-out, catalog, market-place, or plain old web-site), does not cost the supplier anything (as any solution that charges the supplier only adds to the buyer’s cost as the supplier has to raise their prices to compensate for the cost), can be enabled in a day, and gives the buyer total control over access, view, and pricing with their local pricing and audit engine capabilities.

Furthermore, they can easily enable standard and custom terms and pricing to each buyer. Since most suppliers plugged into a supplier network accomplish this through a separate, protected, landing page that contains pricing customized for a particular buyer, all Vinimaya has to do is program that link (and the login) into the agent instances used by that buyer, and, presto, the buyer gets standard terms and conditions and – more importantly – gets those terms and conditions in the standard view which allows them to compare the terms and conditions across all products from all suppliers that meet the identified need. Alternatively, if the supplier cannot do this, the buyer can create discount rules or override SKU prices on a supplier (by supplier) basis in the local pricing and audit engine. No need to have a third party involved, as all the third party does is take a cut of the transaction and significantly raise the transaction cost by performing a service that the buyer can easily do on her own.

And the system works. They already have over 12M skus from over 150 leading suppliers in a single instance (with over 200 suppliers enabled for general use), and the interactive distributed search works in a couple of seconds for a new query, and under a second for a query that is similar to, or a repeat of, a previous query (as the system caches relevant results). It’s also very scalable – in their five largest implementations, they support over 30K users and hundreds of suppliers. (And, as indicated in my last post, they can quickly enable new suppliers by extending and customizing existing agents in their database. On average, they can enable a new supplier in a couple of hours, and have found that over 75% of US suppliers fall into this “quick enable” category. Furthermore, when they encounter a supplier that uses a non-standard web-site design or custom protocol, do to the distributed nature of the technology, they find that, on average they can still enable the supplier in about a day.)

The things to remember are that we don’t need a separate “network”, we have one already, it’s called the internet; we already have all the content we need on supplier websites (the supplier doesn’t have a web-site you say?* that’s okay, the supplier network 1.0 options are still available); and web-services allow a lot more functionality than some of the big dogs (who haven’t innovated in ages) would have you believe.

I applaud Vinimaya for cutting through the noise and offering the direct-connect solution that probably should have been designed in the first place. The reality is that today’s supplier networks are nothing more than bad implementations of what is fundamentally a really good idea. The technology has to use what’s there, bring it all together, and do it quickly in a seamless fashion. Otherwise, your procurement department will be spending too much time on the tactical when they need to be focussing on the strategic.

* If the supplier isn’t on the web, then all of the supplier network 1.0 options are still available: the supplier can upload the catalogue using excel or use an e-form. If the supplier doesn’t have web access, then either Vinimaya or the buyer can load the catalog on behalf of the supplier. (But if the supplier doesn’t even have web access, then I think you have to ask if you’re sure that you’re using the right supplier.)

Does Procurement Need to Be Saved From Itself?

Last month, Strategy+Business ran an article on Saving Procurement from Itself that started off by saying that it’s time for chief procurement officers (CPOs) to stop relying solely on functional depth and start increasing functional breadth.

According to the article, the emergence of strategic sourcing was a defining moment for procurement, with the potential to transform it from a primary administrative function to a powerful new force for competitive advantage, but that, as of today, the reinvention has stalled in many businesses. The article claims that CPOs today are increasingly focussed inward, implementing sophisticated ways of improving procurement itself but neglecting coordination with the wider organization. This focus on cost reduction fails to address the significant potential for creating value generated when procurement engages the rest of the business and its suppliers.

The article continues by stating that more complex business models requiring more sophisticated skills from procurement leaders are required to generate revenue and eliminate costs and that procurement, uniquely positioned to reach out across the organization, needs to step up. CPOs need to start the process by developing a close working relationship with finance, managing cross-functional trade-offs, collaborating on the joint supplier-customer value chain, gaining preferential access to innovation, and designing-in network resilience. This will make sure that they get invited to the table before major decisions have been made.

I have to agree that procurement needs to take a broader role as time goes on – it’s something I’ve been preaching for a while – but I’m not sure that procurement needs to be saved from itself or that depth can be ignored. In the more progressive organizations, the leaders of tomorrow already recognize that they need to do more and they are taking steps to do that. They may need a little help, but the point is that they make the first step along the journey of transformation. Furthermore, just how do you expect to develop and maintain a closer working relationship across the supply chain without solid collaborative technology? How do you gain preferential access to innovation without demonstrating a commitment to innovation yourself? And how do you design-in proper network resilience without best-in-class network modeling, simulation, and optimization tools?

It’s true that procurement needs to go broad, but this breadth cannot be achieved in any way that also sacrifices depth in key areas. Success lies in the proper balance between breadth and depth. It’s true that your average organization probably needs help achieving this balance, but I don’t think procurement needs to be saved from itself. I’d like to see faster progress, but the fact that you’re reading this means that you’re trying to improve yourself and your operation, and that tells me there’s some forward thinking going on. And that’s what it’s all about.

Now that the question’s out of the way, let’s focus on the tips the article had to offer that were pretty good.

  • Procurement needs the ability to report on performance in a manner that reflects the CFO’s definition of profitability. This will require the ability to provide timely and accurate spend data.
  • Procurement needs to facilitate sharing data up and down the chain to allow for the generation of better forecasts at each link.
  • Procurement needs to be the party that brings the economic insights required to build a picture of the joint value chain that all parties can agree, and work together, on.

Winning over the CFO is key to becoming a critical player on the senior management team, an in-sync chain is less costly and more profitable than an out-of-sync supply chain, and only procurement is capable of seeing the full picture. Good advice.

Networks are ok. Catalogs are Good. Punch-outs are Better. But Agents are King!

Let’s start with some clarifications.

A Supplier Network is simply a single point of integration that provides a many-to-many connection between buyers and suppliers, allowing them to transact in real-time. The major selling points are large numbers of pre-enabled suppliers and the ability to find new suppliers quickly for a given product or service. However, the reality is that unless most of your competitors are already using the network, most of your suppliers will not be enabled when you join up. Furthermore, despite hype to the contrary, if you ask purchasing, they know who they’re doing business with for the majority of products and services, even if its not captured in the system.

An online catalogue is simply the electronic equivalent of the old Sears catalogue that used to come in the mail. It contains a complete listing of all of the products a supplier has for sale as well as list prices and, in a good electronic catalogue, any discounts offered by the supplier or negotiated by the buyer. If it’s maintained by the supplier, it’s good for the buyer, but only if the catalogue is compatible with the system that the supplier uses to maintain the catalogue in house. Otherwise, they would have to maintain dozens or hundreds of copies, one for every buyer, and this is prohibitive.

A punch-out is a technology (based in XML) that allows a buyer to shop on the supplier’s e-commerce site but add the products to the shopping cart in their e-Procurement system. It’s better than a catalogue because it allows a supplier to maintain one version of a master catalogue for all of their buyers (as the buyer’s system can store discounts), but falls short in that a buyer cannot compare products across suppliers side by side.

A software agent is a mini-program used by a larger program to accomplish a specific task subject to a particular request. The agent is capable of acting autonomously and the controlling program can deploy multiple copies of the agent simultaneously in a distributed fashion if required. An example is a search agent. Search engines like Google will employ multiple agents simultaneously when a multi-part query is entered to find all pages that each satisfy a part of the search, and then use an intersection agent to find all pages that satisfy all parts of the query. Index agents are another example, one instance is deployed on each page being indexed for future search.

Agents are critical as the right set of agents can be used to overcome the shortcomings of traditional supplier networks, electronic catalogues, and punch-outs to build a Product Catalogue Management (PCM) system that enables an organization to achieve total control over its general purpose indirect, MRO, services, and commodity spend.

With the right set of agents, you can build a Product Catalogue Management (PCM) system that allows a buyer to access up-to-date catalogue and pricing information from any supplier in real-time over the internet from the supplier’s site – regardless of what technology or in-house system the supplier uses. This can be augmented with buyer pricing rules and audit engines to make sure you always see, and pay, the agreed upon price. Furthermore, the right set of agents can even support various “pass through” levels to the supplier’s e-commerce site even if punch-out is not enabled.

This why Vinimaya [rebranded Aquiire, acquired by Coupa] – and not Ariba – is the next generation of Product Catalogue Management (PCM). It’s based on a distributed agent platform that allows it to integrate content from traditional ERP APIs (Enterprise Resource Planning / Application Programming Interfaces), EDI (Electronic Data Interchange), XML (eXtensible Markup Language), and various web-site APIs into a single, consistent, coherent view in real-time using the basic internet technology that has been working fine for the last ten years or so.

Let’s face it – with agent technology, any company can enable hundreds of suppliers in a matter of days, especially if the provider has already customized agents for all of the common suppliers. Furthermore, if a supplier has agreed to custom pricing, it can integrate directly into that feed and, worst case scenario, a buyer only buys so many products and services from a supplier and it will not take very long to hand enter the agreed upon price for each relevant SKU in an audit engine. (Just like a knowledgeable purchaser can hand classify 95% of the transactions in even the largest of transaction stores for spend analysis in at most two days by hand with a good rules engine, and not the two months some providers would have you believe). (The average time for Vinimaya (rebranded Aquiire, acquired by Coupa) to enable a new supplier for a buyer is a few hours. It generally only takes them fifteen (15) minutes to one (1) hour to customize an agent and an hour or two to test and deploy the agent.)

I’ll be blogging more on Vinimaya in the weeks for come, but for now you can always check out their website.

What Does the doctor Do?

Note: This is written as a narrative and contains a lot of background on the doctor. Although the doctor believes that this information will help you put what he does into perspective, he understands that you might be time constrained and / or be more interested in a straight-forward listing of the services he offers. If that is the case, please refer to What Does the doctor Do? … For Executives instead. Thank you.

Pre-script: This post deals with the sustainability issue most important to me – me!

As time goes on, not only do I continue to spend a significant amount of time having what seems to be the same one-sided conversation explaining what I do, what I don’t do, and why I do, and do not, do what I do, or do not, I also find myself answering “uh, me” on a regular basis in calls with solution providers and other professionals in response to “Do you know anyone who does X?“. I know the one-sided broken-record is the curse of the consultant, but, even though I generally try to keep this blog not about me, or my company, I have come to the conclusion that a post might be a good idea as it could not only save a prospective client, or non-client, some time, as they can scan this post and determine whether or not I may be a good (first) contact, but it could also save the “Oh …” that often follows. And, if you don’t care about what I do, or do not do, then you can simply skip this post (which is a wee bit lengthy) and come back tomorrow where we will return to your regularly scheduled programming at the same-bat-time on the same-bat-channel.

In order for me to explain what I do, I need to give you a bit of background on what I’ve done, what has led me to where I am today, and why. Some of it you’ll find in the “about” posts, some of it you’ll piece together from comments on this and other blogs, and some of it you may infer from my writings herein. But nowhere have I made a concerted effort to try and explain what I do. My resume is long, and my formal academic CV longer, but I’ll try to keep it to the important points.

I started out by pursuing my graduate degrees in Theoretical Computer Science – Multi-Dimensional and Spatial Data Structures and Computational Geometry in particular – and teaching in Academia, but soon ventured off into industrial training, then consulting, and then IT R&D – first in e-Commerce, then in sourcing and optimization, and then into the broader supply chain from a process and modeling (especially for optimization and analysis) perspective. My academic background gave me a solid background in the fundamentals of computing, algorithms, and sophisticated mathematics – the keys to efficient software and complex modeling and problem solving. Five years of course development and delivery in academia (including internet and web technologies before they hit mainstream and object oriented technologies before they were the buzz word of the day) gave me a lot of teaching and training experience. My industry background forced me to become an expert in e-Commerce and Supply Chain processes and data requirements as well as the technologies that enabled them. I’m also an experienced software architect in both the (traditional) client-server and internet/web realms (who, given sufficient time and resources, can also code the back-end of just about anything).

This sounds diverse, but there are some common threads between everything I’ve done and what I now do – and these are a triumvirate focus on knowledge transfer, enablement, and innovation. And now you’re probably asking “What?“. However, before I can answer that, I need to get into a bit of the “Why“.

It wasn’t long into academia that I quickly lost interest in writing paper after paper (in the detrimental publish-or-perish mentality that has only compounded in recent years) that merely presented incremental improvements to a theory or a heuristic relevant to only one problem of a handful of practitioners in one or two obscure verticals. The anti-epiphany came after I had spent a few hours working through a dense 30-page paper in a well-respected journal only to realize that it was merely a simple and obvious extension of Theory T developed by Mr. X 20 years ago in the Y domain of computer science applied to the Z domain of computer science, which is almost the same, but just uses different terminology.

I also had no interest in writing papers whose sole purpose was to sit on a shelf and collect dust merely to build a publication record, which, these days, is not indicative of the relevance of the underlying work – especially since most administrators, whom I would swear do not know the difference between the front end and back end of a dog, only care about quantity, not quality. This is partially because it doesn’t take long to realize that a huge amount of great work is already sitting on the shelf ignored because most of the great academic researchers in any specialty have little or no interest in applying their work outside of the ivory tower. Great work, especially in computer science, should not be only great theory, but theory that has an application. Furthermore, although it’s rarely recognized as a worthwhile scholarly effort by the ivory tower inhabitants, I believe that working to take the best of what’s already known, to extend and modify it, and then to help someone design and build a great software application that will actually be used, and have an impact, is just as important as working on the next great theory – which the vast majority of pursuers will never even come close to. And this is why I developed a great interest in “knowledge transfer”.

Furthermore, I spent a lot of my early industry career working as a lead architect, R&D director, or chief scientist for what are now mostly unknown, and out of business, companies that produced solutions that were considerably ahead of what competitors had on the open market. Since it made no logical sense that the solutions should fail from a technology perspective, I spent more and more time asking myself why the solutions failed, since I refused to accept all potential clients were incapable of seeing the benefits, and discovered most of the time that the reason was the solution was solving the wrong problem (i.e. the business analysts, or, in most cases, the managers who assumed they knew what the problem was and skipped the analysis, did not do their homework), it wasn’t being marketed or sold properly (the salespeople were not properly educated and in a few cases just incompetent at that particular job), or the company was being poorly managed (and smart people could see it was not a wise investment from a long-term perspective).

Thus, I came to realize that not only is knowledge transfer from academia to industry (as there is a lot of knowledge there to draw from if you know where to look) and knowledge transfer within the company (everyone needs to speak the same language, understand the same problem, and work towards the same solution) important, but so is knowledge transfer and understanding throughout the supply and demand chain. This requires each participant to speak each other’s business and technical languages, but each group (marketing, engineering, finance, etc.) to be able to understand each other. Considering that each discipline has it’s own dialect these days, and that many individuals who specialize in one discipline have no idea what individuals in other disciplines do, this is a challenge for most companies. And this is where enablement comes into play – it’s not just a matter of writing code, but building a solution that enables the people who need to use it in solving their problem (and not just what someone perceives their problem to be) and, moreover, makes them want to use it.

This challenge – speaking a common language to identify, understand, and solve a common problem – can really only be solved by having one or more individuals who can work across the business – from market research through to engineering – and do so with competency and guide a core cross-functional team towards identifying a solution. This is more than just saying “we need to do X” and selecting a suite of applications that “do” X, but understanding what X is, what processes it involves, why, what fundamentally needs to be done, how those processes can be streamlined, and what new processes and technologies can be brought to bear to make it better. And thus the need to be innovative.

So where does someone like yours truly fit into the picture when he has done research, teaching, training, educational and marketing material preparation, coding, architecture, R&D & Operations management, process consulting, operations research, optimization, analytics, and business consulting in various B2B, B2C, and C2C e-commerce and supply chain spaces (and done so in the last decade alone) but yet does none of these things while focusing on knowledge transfer (as exemplified by this blog and the eSourcing Wiki), enablement, and innovation? The answer, confounding to your average recruiter, is everywhere and nowhere. Simply put, the doctor does what most others do not.

Going back to one of my previous statements that the supply chain professional of tomorrow must be a jack-of-all-trades and master-of-one (as opposed to a jack-of-all-trades but master-of-none) – I broke the mold I endeavored to fit. But the trade I focus my mastery on is not one that can be defined in any traditional business terms. My focus is purely on innovation – where innovation is relative to where you are today – and helping an interested company take their capabilities and solutions to the next level. Although the Big5 would plug what I do into a business process consulting, change consulting, management consulting, and maybe even a scenario consulting practice where the end goal is to help you make your business more efficient, more profitable, or both by identifying efficiencies, new processes, or technologies that you can bring to bear based upon the best (or most in vogue) business practices of the day, and then bring in their six sigma black belts, lean experts, or kaizen kamikazes to help you accomplish your goal, what I try to do for my clients, although very similar, is a bit different.

Unlike your average consultant who comes with his or her firm’s “best practice proven methodology” with a specific goal of “streamlining your processes” to improve your operations and bottom line, I don’t subscribe to any particular best practice methodology, don’t assume that any (overly) specific endeavor will guarantee results, and, most importantly, I don’t just work out the business part of “X” and ignore the ramifications of the suggested change or the technology that will be required to achieve “X”.

Specifically, like some of your newer boutiques in the space, my goal is to understand what your problem is or what you want to do, what underlying restrictions you have in developing a solution (based upon budgetary restrictions, manpower knowledge, and technical restrictions of existing solutions and infrastructure), and then choose, modify, or develop an appropriate methodology for the project. I try to balance the process with technology in helping a client design or build a solution, versus selling one or the other as the magic bullet. I work across the chasm that often exists between the marketing, sales, and business development and the engineering team – to make sure that both parties converge on and understand what’s required, why, and how it needs to be done. But most importantly, I try to identify a path of innovation appropriate to you and help you walk down it. This could be as significant and complex as a R&D project to develop brand new technology with features and functions no one else in the world has, as mediocre as slightly altering one step in a seven-step business process that allows you to improve efficiency 50% with almost no effort, or as important as helping you nail down your positioning, strategy, and marketplace communications. It’s all relative, it’s all specific to you, and it requires someone who doesn’t fit in any of the roles on your organizational chart. It has to be someone external, someone capable of looking at the business from a different viewpoint, and someone capable of looking across the business, which today means understanding technology, processes, and business requirements on an equal footing and how they interconnect, someone with the ability to put that puzzle together in a (slightly) new way that is beneficial to you and your customers, and, most importantly, someone who can actually help you, or your team, as appropriate, do it. That’s my view, but maybe I’m paying too much.

In short, the doctor does Innovation for the Real World, whatever that happens to be. And if you still don’t understand what the doctor does, then maybe someone like the doctor is just what you need.

The 2nd Sourcing Innovation Series ReCap, Part II

First of all, here are the posts to date.

The Future of eSourcing – Less is More Alan Buxton
The Future of Sourcing: Results-Based Process Specialization Charles Dominick
Sourcing Innovation Series David Bush
The Future of Spend Analysis Eric Strovink
Sourcing Innovation Series: Wither Procurement as Strategist in 2008? Jason Busch
Future Purchasing: The Extended-Enterprise Connector Jean-Philippe Massin
Yes Virginia! There is more to e-procurement than software! (Part 1) Jon Hansen
Yes Virginia! There is more to e-procurement than software! (Part 2) Jon Hansen
The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free Open Source Software Jon Hansen
What’s Next in Purchasing? Ask Your Supply Management System Tim Minahan
Trading on the Spot Market the doctor
Let’s Get Analytical! the doctor

In Part I, we reviewed what Alan, Charles, David, Eric, and Jason had to say. In this part, we review what everyone else had to say.

Jean-Philippe Massin told us the future lied in the Extended-Enterprise Concept. In Purchasing, the trend will be towards industrialization, commoditisation, and automation; specifically, sell-side vertical e-Marketplaces with a commodity focus will become more numerous. These e-Marketplaces will feed globalization, only top performers will survive, and the purchasing department will evolve into a business in the extended-enterprise, managing the aggregation of independent top-performing companies in the network that work together to supply products and services as effectively as they can. The purchasing function will start to look more and more like trading as purchasers of the future will need to digest hundreds of parameters in order to forecast performance, select the best option, and change suppliers at breakneck speeds to maximize their company’s performance.

Jon Hansen offered a trio of posts that told us there is more to e-procurement than software and that strategies that centered on free (open source) software were fraught with risks. In his first post he points out that process, and not technology, is ultimately the main force behind successfully achieving results in terms of efficiency, spend rationalization, and spend reduction and indicates that he believes this will continue to be the case. In his second post he pointed out that achievers have more faith in their own team’s ability to understand and assess what needs to be done and that he does not expect this to change. In his last post he emphasizes that even though it’s not the technology, one still has to be careful of the technology chosen as the wrong technology can be fraught with risk. In the case of free open source software, there is the lack of imputability when software is developed via internet collaboration.

Tim Minahan, extending a train of thought started in a post by Brian Sommer, notes that we have not yet begun to tap the true value potential of supply management software. Future systems will address the major shortcoming of today’s systems, which is that systems today don’t help people make the decisions they struggle with before they enter data on a screen. Tomorrow’s systems will enable new processes and guided analytical scenarios that were previously considered impossible due to fragmented procedures, insufficient communications and data access, and inconsistent skills. They will guide buyers – regardless of skill set – toward the right sourcing and supplier management decisions. True innovation will come with technology that can inform buyers (and other executives) of the right business decisions.

In my prologue post, I noted how one of last year’s predictions by our leading spend management prophet Jason Busch might be on it’s way to reality. Last year, he predicted that securitizing direct materials and capacity was in sourcing’s future and that suppliers would benefit from the model as well as buyers. Then a study comes out by Haim Mendelson and Tunay Tunca of Stanford’s Graduate School of Business that finds that strategically using both fixed-price contracts and open market trading, supply chain participants can create greater efficiencies. Furthermore, both consumers and supply chains as a whole will benefit from these efficiencies.

In my main post, I noted that Spend Analysis Based Cost Modeling Decision Optimization are going to be the seven words of saving grace for tomorrow’s sourcing organization that wants to survive beyond the next decade. The only way companies are going to be able to maintain costs, yet alone achieve savings, is by getting a firm handle on costs and, more importantly, by identifying and achieving savings opportunities not previously explored. This is going to require an improved understanding of the cost drivers of what you are buying (cost modeling), and understanding of where variability exists, either within past buys or against market indices (spend analysis), and what the best award scenarios are (optimization). But it won’t be three applications at three different stages of the sourcing process, it will be one, and it will be at the beginning, center, and end of the sourcing process.

In essence, this years posts revolved around the common themes of talent and technology – and focussed specifically on the continued need for an appropriately assembled team, advanced analytics and optimization, and better process-based decision support software for tomorrow’s professionals. In the future, sourcing technology will be more powerful, easier to use, capable of guiding even the most novice of users through the process, and enable the optimal decision using advanced analytics and optimization. Tomorrow’s technology will merge the functions of general business analyst and sourcing agent into the single role of strategic sourcing professional who will lead the profession to new heights.