Category Archives: Procurement Innovation

Vinimaya: Taking Their Procurement Marketplace Global, Part IV

In Part I we noted that since we last covered Vinimaya, the B2B Search Engine that was the next wave in product catalogue management, they have continued building out their base platform, adding (more extensive) auditing capability, workflow-based catalog management, quick-quote (RFX), e-Forms, deep analytics, mobile, and social integration on top of a base platform that supported content management, federated search, powerful connectivity options, personalization and customization, globalization, and an easy to use shopping cart. Then, in Part II and Part III we focussed in on their vTransport technology and their new vQuote, vRank, vCatalog, vAudit, and vAnalytics solution modules. Today, in the final part of this four-part series, we are going to talk about vSocial, vMobile, and their up-coming market indices.

vSocial
vSocial is the social interaction component of the Vinimaya platform. Taking a cue from Amazon, which teaches us that not only do people tend to gravitate to products with reviews but they also want the ability to comment on the products and services they receive and be part of the community, Vinimaya added social interaction capability to their platform. Buyers can post feedback on the goods they procure, suppliers can respond and provide additional details, and procurement can include explanations as to why certain products or services are preferred. In addition, the platform is artificially intelligent, so if there is no feedback for a 14.4 V cordless drill from a given manufacturer, but there is for an 18 V cordless drill from that same manufacturer, the platform will pull the feedback in for the 18 V drill in when a user is viewing the 14.4 V drill to give the user as much information as there is available about the potential purchase. It’s a simple platform, but it works quite well.

vMobile
vMobile is the mobile instantiation of their platform, and one of the most unique offerings on the marketplace. Not only was the Vinimaya platform the first to do real-time federated search across punch-outs, catalogs, and databases and present the results to a user through a single buying platform, but it’s now the first platform to do the same on a mobile device. Designed for a smart-phone, a corporate buyer now has access to all of the goods and services available through the Vinimaya platform on their corporate smartphone, and despite the small amount of real-estate, it is very useable. Vinimaya put a lot of thought into their solution and made search and product retrieval very easy. In addition to the standard keyword search, the mobile solution also supports artificially intelligent barcode based retrieval. If the buyer happens to have the packaging for an item of interest in close proximity (such as the box for the last printer cartridge that requires an immediate reorder when used), she just has to scan the barcode and the solution will find all instances of the product. And if an exact match is unavailable, because the solution is intelligent and retrieves the manufacturer and product description, the search application will find all related products. Maybe the Brother cartridge is currently unavailable from your current suppliers, but a third party Staples replacement cartridge is. The platform will find that option and present it to you. The results are returned in a list and choosing an option brings up a summary of the product details which has an option to add the product to the cart. The cart can be accessed at any time from the app menu bar, which also allows quick access to search, favorites, and history functionality, and checkout can be as easy as one-click as your data is pre-populated. It’s a very slick catalog-based Procurement solution.

Market Indices

Sometimes, not a week goes by where a Procurement doesn’t hear “your contracts suck — I can get the same printer cartridge 5-pack on Amazon today for 5% less” from an office manager or “prove to me that our prices are as good as you say they are and that we are beating the market average because I don’t believe you” from the CFO who only seems to notice Procurement when, a year after a contract has been cut, market prices for a given commodity drop or when the CIO complains that the organization is spending too much on hardware as it’s forced to buy from an overpriced supplier at last year’s prices that are no longer the best price.

In order to get the monkeys off its back, Procurement really needs to be able to demonstrate how good it’s doing — how the majority of it’s contracts are at, or better than, market price, how paying slightly more for that printer cartridge gives it a discount on a range of electronic products from the same provider at 5% below market average pricing, and how IT isn’t factoring in the huge end-of-year rebate the organization is expecting once it meets the million-dollar spend threshold. But to do this, Procurement needs three things:

  1. index data, to know what market prices are,
  2. pricing data, to know what it’s really paying, and
  3. deep analytics, to put two and two together and map reality to potential.

Vinimaya has the pricing data. Not only does Vinimaya manage all of an organization’s punch-outs, catalogs, and pricing databases — but they save every search result to maintain historical pricing data for all products in the database. And, with the recent release of vAudit and vAnalytics, they have the audit trails and the analytics to analyze purchases in detail. That just leave one element to go — the pricing indexes.

The Vinimaya platform crawls a large number of consumer sites (including Amazon, Alibaba, and other online storefronts) and has a huge database of commercial pricing in its archives. This provides the foundation for a consumer price index that will allow an organization to compare its pricing for a product in many consumer categories with the average price charged to a consumer. Vinimaya serves a large number of public sector clients and since public sector pricing is public, this provides the foundation for a market index that will allow an organization to compare its pricing for a product with the average price charged in the public sector for products for which Vinimaya has a lot of data. If you’re beating the public index, you’re doing good but not great. If you’re beating the consumer index, you’re doing okay but not that good. Better shape up. And if you’re not even beating the consumer index, better get your house in order before trying to enforce your contracts on the rest of the organization!

In conclusion, since we last covered Vinimaya, they have made many advancements to their base platform in the last 5 years, but the best may be yet to come. The market indexes are just the tip of the iceberg! More to come in 2014!

The Right MindSet is the Foundation for a Successful Procurement Career but

the mind has to be prepared for the job at hand to succeed.

A recent post on “the right mindset: what does it take to have a successful acquisition career today” over on the Public Spend Forum (powered by Spend Matters and the Censeo Consulting Group) by David Wyld did a great job of outlining twelve traits that procurement professionals need to succeed in supply management today. However, while these traits may do a great job of laying the foundation for a procurement career, they are not sufficient on their own to prepare one for a successful procurement or supply management career.

SI would add at least six additional traits to the list, three major traits and three minor traits. The major traits that SI would insist are necessary for success in today’s Supply Management space are:

Technological Competence

Modern Supply Management runs on modern supply management technology – without it, best-in-class status is unobtainable as sophisticated spend analysis, decision optimization, and decision support systems are need to analyze, manage, and squeak cost savings and efficiency out of modern supply chain networks.

Risk Awareness and Risk Averseness

The rate of supply chain disruptions is increasing year-over-year and the chances of a major multi-national not experiencing a disruption over a twenty-four month period is 2% or less and dropping fast. In order to succeed, a supply manager needs to be aware of risk and have a mindset to mitigate it before it happens. Contingency and mitigation are the new modus operandi.

Project Management

Sourcing is no longer three-bids-and-a-buy. It is a sophisticated process that typically involves sophisticated supply market research, should cost models, deep category expertise, fact-based negotiations, and in-depth analysis. In addition, most sourcing exercises are category-focussed and need to be managed as category-based projects.

The minor traits that SI would insist are necessary are necessary for success in today’s Supply Management space are:

Habitual Change (Management)

Supply Management is in a state of constant flux these days as technologies, best practices, and global trade regulations are constantly changing and shifting. In order to stay on top of the supply chain game, a practitioner needs to be ready to adapt as needed.

A Sustainable Mindset

Oil reserves are limited. Demand for rare earth metals is increasing. Food reserves are hovering near all-time lows. Water is becoming scarce. Energy production is limited in many locales. A Supply Management professional needs to not only be thinking about the environment, but needs to be focussed on sustainable alternatives in order to keep production going.

Cost Conscious

Inflation is back, and hyper-inflation might be just around the corner. Manual processes are costly, and a lack of data is costlier. A Procurement Professional has to always have cost at the back of her mind and identify unique and creative ways to contain costs going forward.

So How Do You Align Your Supply Management Organization and Advance its Maturity?

In our last post we indicated that the expected value of Supply Management maturity was a 50% improvement in ROIC and a 75% improvement in Operating Margin, but that effort was needed for an organization to reach that maturity level. However, any effort involved would pay off handsomely as this is only an average – for example, in “Enterprise Procurement – Back on Track”, a presentation on Aurizon’s Procurement Transformation presented last month, Roger McNeill documented a ROIC increased from 2.0% in 2010 to 8.0% in 2013, a 300% improvement!

We also indicated that if the effort was put into the right process, specifically the EPAM (Evaluate. Plan. Act. Measure.) process, the organization could move up the maturity curve and see this success, as well as make the necessary alignments with the business in the process. So how does it do this?

1. Evaluate

Start by measuring the organizational maturity on the axes of proactivity and organizational alignment. Specifically, is the organization:

  • Reactive and/or Internally Focused
    a Supply Management organization that is reactive and/or internally focussed is typically near the bottom of the maturity curve, still approaching sourcing from an auction or best-bid perspective, running on an ERP, and quoting savings numbers without validation
  • Proactive and Metric Focussed
    a Supply Management organization that is proactive and metric focussed is typically in the middle of the maturity curve, approach sourcing as a total cost optimization project, implementing P2P, adopting best practices, and measuring realized savings; they’re doing good, but could be doing better
  • Strategic and Organizational Strategy Focussed
    a Supply Management organization that is strategic and focussed on organizational strategy is at the leading edge of the maturity curve, approaching sourcing as a value generation exercise, running on a suite of best of breed source-to-pay solutions, approaching sourcing exercises as strategic joint ventures with other organizations, creating best practices, and measuring outcomes against shareholder value and time to that value

Plan.

Where the organization is on the curve dictates what the organization has to do next.
An organization that is:

  • Reactive and/or Internally Focused
    needs to plan sourcing events with ample time to do the detailed spend and market analysis required to approach the category strategically, move to bid evaluation on total cost (of ownership) and not just landed cost models, implement a P2P or e-Procurement system to capture organizational spend and increase Spend Under Management (SUM), implement an appropriate e-Sourcing solution, institue best e-Sourcing practices, and start measuring realized savings using the P2P system
  • Proactive and Metric Focussed
    needs to plan sourcing events in conjunction with stakeholders and identify the outcomes that are most important to the stakeholders and give those outcomes the greatest weight in a total value model, run on an integrated end-to-end Source-to-Pay suite (which could include sub-suites from different leading BoB [Best-of-Breed] vendors), institutionalize and embed best practices in the sourcing technologies and processes, and measure outcomes using the metrics of interest to finance and the C-Suite (like ROIC, Operating Margin, increased market share, etc.)
  • Strategic and Organizational Strategy Focussed
    needs to embed itself in NPD and NPI (new product design and new product introduction) to take cost out before cost is baked in by Engineering (or Marketing when it insists on features that most of the target market doesn’t want, which Supply Management can identify by sourcing an appropriate market research study), work with Marketing to help it understand the risks and difficulties in new market entry based on its global market knowledge gained from sourcing from different regions, work with Operations to redesign the corporate footprint to reduce cost and increase sustainability, work with Finance to help it better manage Working Capital based on better demand management and improved cash-flow forecasting, and help the C-Suite define the corporate strategy

Act.

Once the plan is in place, the organization needs to execute the plan. The execution will vary based on the plan.

Measure.

The plan, if properly defined, will include metrics and outcomes that can be measured quantitatively and evaluated qualitatively. When the plan has been executed, the results should be measured, compared against any baselines or expected outcomes, and reported.

The devil is in the details, but the process is sound. And there are a number of leading Supply Management software and solution companies that can help your organization through this process, including BravoSolution, if the organization is looking for software and services, and Deloitte, if the organization already has a sourcing software suite (from a provider that doesn’t provide transformation services). And even it it takes 4-5 years, which is the average for Global 3000 organizations, the end result will be worth it as most save hundreds of millions of dollars and see an increase in key financial metrics of 50% or more.

The Measurable Value of Supply Management Maturity

Simply put:

  1. a ROIC (Return On Invested Capital) of 12.8% vs 8.5% for laggards
  2. an Operating Margin of 14.6% vs 8.4% for laggards

according to BravoSolution (Source), who, as a Best-of-Breed global e-Sourcing software and services provider that has been delivering software and services to global clients for over a decade, has been measuring the maturity of client organizations from the time they start their e-Sourcing journey (with BravoSolution) to the time that they master the e-Sourcing process that BravoSolution supports and the platforms they provide.

This 50% performance improvement in ROIC and 75% performance improvement in Operating Margin should not be too surprising given that all of the analysts firms have been telling us for years that leading Supply Management organizations far outpace laggard Supply Management organizations when it comes to financial success. What should be surprising is that the vast majority of companies still have trouble advancing Supply Management out of the laggard category even though many of the secrets of success have been known for many years.

Especially since the the first step is to align the Supply Management organization with the business (goals). This shouldn’t be hard, but for many companies it is. Why?

Let’s start by considering the reasons for misalignment

  • 5% is due to different drivers
  • 30% is due to (different) data
  • 65% is due to differing definitions

The big problem is still communication. In most organizations, Procurement doesn’t speak the same language as the rest of the business, and Finance in particular. Remember, HR still thinks sourcing refers to the recruiting function, Engineering thinks procurement is calling up the preferred supplier and asking them to ship the required parts for the prototype, and Finance defines savings as the difference between last year’s spend and this year’s spend, not how much savings have been identified or how much cost has been avoided. In order for Supply Management to mature as an organization, it not only has to align with the business goals, but it has to speak the business language.

So how can Supply Management achieve alignment and, at the same time, advance as a function and achieve the financial success that will make it the favourite child of the organization?

The EPAM Loop.
Evaluate. Plan. Act. Measure.

In the 1950’s W. Edwards Denning proposed that business processes should be analyzed and measured to identify sources of variations that cause products to deviate from customer requirements. Specifically, he recommended that business processes be placed in the context of a continuous PDCA (Plan. Do. Check. Act.) feedback loop so that managers can identify and change parts of the process that need improvement. And it was a leap forward in business philosophy at the time (and could even be considered the foundation for the DMAIC (Define. Measure. Analyze. Improve. Control) cycle that is the foundation for Six Sigma. Given that sourcing processes are only improved if they are continuously monitored, it’s obvious that a similar process is needed.

So why can’t we just use the classic PDCA cycle? Simply put, we have no way of knowing whether or not a plan is likely to be beneficial, or even executable by the organization, without an understanding of what the current level of organizational maturity is. That’s why the first thing that needs to be done is an evaluation of where the organization is against a maturity framework, built on the study of Supply Management transformations over the last two decades. When an evaluation is done against a well-defined framework, that is associated with best practices that have been successfully used by leading organizations to advance up the maturity curve, the organization can come up with a plan appropriate to its current level of capability. This not only maximizes the organization’s chance of project success but helps it accelerate up the curve faster than organizations that take their best guess, which amounts to nothing more than trial and error.

Once an organization has a proper transition plan in place, it’s talent should be able to quickly execute on that plan and see some success in the short term. Then, when the project has finished, or in the case of a multi-year project, reached key milestones, the team can measure the results versus the expected results (based on case studies and surveys of organizations who undertook similar projects at a similar maturity level), and determine if they are on-track, ahead, or behind. If the team is behind where they can expect to be, they return to the Evaluation stage, determine the reason for the shortfall, modify the process, and try again. When the team has reached the desired level of success, and advanced up the maturity framework, it begins the EPAM cycle again and comes up with process and technology transitions designed to get it to the next level of maturity.

BravoSolution, which has been working on improving their assessment and change management process for years, has found that the process works so well that they have cemented their global sourcing service offerings on the process, which they are calling BravoAlign. Regardless of what it’s called, the method works, and can work for your organization too.

It’s an e-Frenzy Out There! Can You Make Sense Of It All?

It’s an e-Frenzy out there! e-Sourcing. e-RFX. e-Procurement. e-Payment. e-Negotiation. e-Procure-to-Pay. e-Invoicing. e-Auction. e-Contract. etc.

The Supply Management solution space is filled with e-Solutions. And, as you might have guessed, they are not all the same. They solve different problems. Some solutions are sub-solutions of other solutions. Some focus purely on the sourcing side of the equation where the products and services are identified and contracted. Some focus purely on the procurement side, where requisitions are placed, purchase orders are placed, products are received, and invoices are processed. Some play on both sides of the sourcing and procurement pond, but only address a few functions from each side.

To help you understand what solution you really need, Sourcing Innovation is hosting a webinar on Making Sense of e- in Sourcing and Procurement: What Solution Do You Really Need?. This webinar, sponsored by the Next Level Purchasing Association (NLPA), taking place next Wednesday, November 20th at 8:30 am PST / 11:30 am EST / 4:30 pm GMT, is for NLPA members only, but basic membership is free. Space is limited, so (if necessary, join the NLPA and) sign up now.

In this webinar on Making Sense of e- in Sourcing and Procurement: What Solution Do You Really Need?, we will clearly define the sourcing and procurement cycle, indicate where each technology falls, outline what each technology does, and indicate the conditions that need to exist for each solution to potentially be appropriate. We will describe the e-Sourcing journey and provide the user with a starting set of questions that they can ask to determine what technologies they need to focus on as they look to acquire new sourcing and procurement technologies to support them in their Supply Management Journey.