Category Archives: SaaS

Why Your “Peers” Buy Stupid Products


Since we’re on the topic of technology acquisition, which for many of you translates into SaaS renewals, it’s a great time to dig this post up from the archives, that was originally posted on 6-Jan-2010, on why your “peers” buy stupid products because it’s a great education on the pitfalls you could fall into if you lose sight of the goal.

For a while, I was thorougly confused as why your not-so-enlightened peers (who aren’t the smart and sexy leaders and innovators that you are, as they don’t constantly educate themselves and read industry leading blogs like this one) buy stupid products. While there are a number of great products out there, which I attempt to profile here on Sourcing Innovation as often as circumstances permit, there are also a number of bad products out there (which fall into the “products I don’t cover” bucket, which, to be fair, also contains “products of vendors who still think new media is a fad not worth spending time on” [even though they should probably be covered on SI]). This mix includes some really bad (installed) products that, year after year for reasons that escape me, keep selling, often for obscene amounts of money — especially when you consider what these products actually do compared to what newer, leaner, meaner, SaaS products do for a fraction of the price.

After a few enlightening conversations with some old pros and highly intelligent consultants (who shall forever remain nameless to protect the innocent), I have realized it is either because

  1. the buyers are timid field mice afraid to make a mistake;
  2. the buyers are lazy and inept, they know it, and they don’t want anyone to find out; or
  3. the buyers are yes-men and work for managers who are morons and
    • way too easily impressed by flash without substance; or
    • way too easily impressed by name dropping; or
    • (real) good buddies with (a member of) the vendor management team (who they just happen to be sharing a hotel room with on a regular basis)

In the first case, the buyers often look for the biggest vendor in the space who currently has the “best” reputation and simply use the “Well, no one ever got fired for buying IBM” excuse, replacing IBM with the “big” vendor of the day. This isn’t always bad, as some of the current “big” vendors do have some pretty darn good solutions, but it often is a bad choice because not all products in their “big” vendor solution suite are equal, and, most importantly, even the best product the “big” vendor has might not be appropriate to a particular company’s situation. An MRP won’t solve your problem if what you really need is an on-line RFX and e-Auction tool.

In the second case, the 9-to-5 buyers — who give intelligent, hard-working, and successful procurement professionals like you a bad name — are pretty sure that a good product would quickly uncover the millions of dollars of waste from unmanaged or non-compliant spend, or quickly uncover the lack of process that allows maverick spend to run unchalllenged, or quickly uncover the sheer amount of work they are not doing but should be (like managing spend, sending out RFPs, doing post-bid briefings, etc.) and want to do everything in their power to make sure that they get a solution that is as inept and inefficient as they are.

In the third case, even if the yes-men identify, and want, a good solution, Maury the Management Moron steps in and strongly recommends the worst solution identified (and indicates the buyer’s job could very well depend on making the “right” choice) because:

     

a) it has a nice flash interface with (useless) dashboards and colorful graphics-rich reports that make his under-developed brain go “ooh” and “aah” (while failing to tell you anything that you didn’t know already, like you spent 800M and your top 10 suppliers included 8 of the suppliers you regularly send million-dollar purchase orders to)

b) the company has a lot of “big-name” competitors as customers and / or a number of “big-name” companies your CXO really admires and, therefore, must know what they’re doing and be the right choice (even if they haven’t upgraded their solution in 5 years).

c) the company “obviously has a superior product” even though the real reason is that the company has one or more senior managers that are your boss’ golf buddies and/or hotel room buddies.

And sometimes, it is a combination of these reasons. The buyer knows he is lazy and/or inept, isn’t overly concerned with improving himself, but desperately wants to keep his job (which pays very well considering the amount of effort he actually puts in). He also knows he works for Maury the Management Moron who is easily impressed by flashy dashboards and pretty reports and so chooses a solution that will simultaneously make Maury’s mouth moisten while failing to uncover anything that could be embarassing and jeopardize his job in anyway.

For example, for our timid buyer with Maury the Management Moron for a boss, it would be really bad if he acquired a modern contract compliance system when he recently spent Millions on the current EIPP system two years ago and just found out it contains a big gaping hole, that a few of his suppliers have been exploiting since it was installed, that allows the supplier to charge whatever they want on substitutions and holds, regardless of what contract pricing is in place. For example, he just found out that if:

  1. he punches out for a SKU and
  2. the vendor is out of stock and
  3. the vendor places the order in the “on hold” queue because they don’t want to reject the order then
  4. when the SKU arrives and
  5. the vendor brings up the “on hold” order to “fill” it
  6. the price field isn’t carried forward to the “active” queue so
  7. the vendor can enter any price it likes, which is usually “list” and
  8. the system doesn’t do an invoice-price-vs-contract-price comparison, allows the “list” price, and doesn’t even flag it as pricing that violates the contract.

So, because he thought a few million would buy him perfect software (and didn’t do his homework), he just assumed everything was wonderful, paid what the vendors asked, and lost millions over the last couple of years. He’s not entirely sure how many millions, but is fairly certain that 15% to 20% of purchases were made off of contract pricing. He can’t let the boss find out! (Even though there are specialist consultancies out there who are great at finding these overcharges and helping their clients recover their money.)

Finally, he knows that his boss, easily impressed by flash, is too dumb to realize that dashboards, static reports and “real time alerts” are — when you really think about it — incredibly stupid ideas at the core. For example, so what if the boss can instantly see that 90% of shipments are on time. All that tells you is that 10% of the shipments are not on time. It doesn’t tell you what shipments, to whom, why, and more importantly, what to do to fix the situation. A report that you spend 10M with Wesley’s Widgets isn’t very useful. If that’s all I have, here’s how the negotiation is going to go. “We demand a 10% discount because we spent 10M last year.” ‘So? The price of steel went up 20% … you should be thankful we only raised prices by 15%!‘ “Uhm … erm …” If I don’t know what % was on steel parts, and what % of cost was steel in those parts, I can’t negotiate anything meaningful. And how useful is a “real time alert” at 3 am in the morning that tells you that your container is stranded 500 miles from port because the 3PL forgot to transmit the manifest 48 hours in advance and the carrrier isn’t allowed to enter American waters. Not! You need a system that tells you what you have to do before the order is shipped.

Federalist No. 13

In Federalist No. 13, after addressing the utility of the union in respect to commercial relations and a navy in Federalist No. 11 and the utility of the union in respect to revenue, Hamilton then approaches the broader subject of the advantage of the union in respect to economy in government. Since we all want a more economical government, this is definitely one of the series’ must reads.

Hamilton starts off by noting that, if we have an efficient government, the money saved from one object may be usefully applied to another, and there will be so much the less to be drawn from the pockets of the people. Is it just me, or have governments around the world forgotten this? Let’s look at North America. Every state and province has their own Department of Motor Vehicles, and every state and province issues their own licenses. And while this is probably as it should be, they all use their own, custom, systems instead of using one, common, system (or at least one system that uses the same APIs and same protocols) so they need to do extra work to get driver history data from drivers who move into the state or province. In addition, many are not able to automatically suck the basic information of the individual in from a Federal database, and we have a duplication of data that leads to propagation of errors. One system, individually administered by each state, would be much more efficient. As prove, look at multi-tenant SaaS, which is gaining traction in enterprise software. Every improvement is able to be immediately leveraged by all for one development cost. But I digress, back to one of Hamilton’s key points:

If the States are united under one government, there will be but one national civil list to support; if they are divided into several
confederacies, there will be as many different national civil lists to be provided for. The whole point of a union is strength and efficiency. Since it is true that when the dimensions of a State attain to a certain magnitude, it requires the same energy of government and the same forms of administration which are requisite in one of much greater extent, efficiency can only increase with size and scale (provided such size and scale is properly administered). The advantage of civil power is that properly organized and exerted, [it] is capable of diffusing its force to a very great extent; and can, in a manner, reproduce itself
in every part of a great empire by a judicious arrangement of subordinate institutions.

Hamilton’s final words deserve to be etched in stone:

If, in addition to the consideration of a plurality of civil lists, we take into view the number of persons who must necessarily be employed to guard the inland communication between the different confederacies against illicit trade, and who in time will infallibly spring up out of the necessities of revenue; and if we also take into view the military establishments which it has been shown would unavoidably result from the jealousies and conflicts of the several nations into which the States would be divided, we shall clearly discover that a separation would be not less injurious to the economy, than to the tranquillity, commerce, revenue, and liberty of every part.

BizSlate, an ERP for the Small to Mid-Size Distributor

If you’re a small to mid-size distributor, with revenues under 100 M who is still running on QuickBooks (or even Microsoft dynamics), BizSlate is an ERP solution that you should be looking at — right now! BizSlate is doing for small-and-midsize distributors what Compiere and Made2Manage, are doing for small-and-midsize manufacturers — bringing usable, affordable ERP with exceptional supply chain support to the masses. And even though the official release of V1 doesn’t come out until Q4, BizSlate is already approaching two dozen distributors who are already using the solution, almost a dozen of which pre-paid for it over a year ago to be part of the usability design team.

With the sheer amount of data an organization needs to keep track of these days from an e-procurement, e-sourcing, spend analysis, risk management, and compliance perspective, it’s almost impossible for an organization with more than 10 Million in revenue to do without an ERP, but given that the annual total cost of the big ERPs still end up being in the seven figure range once implementation, training, maintenance, and infrastructure are factored in, these solutions are not affordable for the average small or mid-sized business. And while there are a number of SaaS best-of-breed solutions in each of the aforementioned supply management areas (like Coupa, iValua, Iasta, BravoSolution, BIQ, SupplierSoft, Vendormate, Lavante, etc.) that will allow an organization to collect and retain all relevant data, this data still needs to get into a centralized data store for inventory, warehouse, and logistics management; accounting; and spend analysis — a central data store that should probably take the form of an ERP solution. (And we recently pointed out how best of breed on an ERP backbone provides the best of both worlds.)

But not any ERP will do if you’re a small to mid-sized distributor. It has to be lightweight (as small to mid-size organizations don’t have the needs of large multi-nationals), SaaS (as they don’t have the IT departments either), low-cost (as they also don’t have large software budgets), and come in default configurations appropriate for distributors in different verticals (apparel, food & beverage, pre-manufactured components, etc.). And while Compiere and Made2Manage do well in the manufacturing world, and for the distributors who handle manufactured components and electronics, it can require some consulting and effort to customize them for apparel and food and beverage distributors, especially for certain organizations with certain processes.

Enter BizSlate. Before they spun it off from Ezcom software, the founders of BizSlate — who were focussed on low-cost EDI solutions for retailers — noticed the lack of appropriate ERP support for the small and mid-sized retail and distribution space, and decided to do something about it. Over the past year, they have designed a new SaaS-based ERP from the ground-up that addresses the everyday accounting, inventory, catalog management, and order management / e-procurement requirements of small and mid-sized distributors through a simple web-interface that is as easy to use as most of the new SaaS enterprise e-Procurement systems on the market. And they did it with the unique needs of the retail distribution space in mind.

The importance of their focus on the retail space, and the apparel space in particular, cannot be overlooked. In this space (as in food and beverage, but to a much greater extreme), it is generally the case that each distinct instance of a product (which is often a combination of colour, size, and style) needs to be its own line item and have its own SKU. As a result, setting up a clothing line in a traditional ERP system can often require days of manual entry as a user often has to create up to 100 products just to handle one shirt (10 sizes * 5 colours * 2 styles). If an average clothing line contains six shirts, two sweaters, four pants, three jackets, etc., and four new clothing lines are being carried, it is easy to see how thousands of new product records might need to be created in a traditional ERP, making the data entry so egregious that the ERP is almost unusable. In BizSlate, an administrator can batch-create new products simply by entering all the base product information and then defining the characteristics that define different instances and the set of values for each characteristic. A user can create hundreds of combinations in a matter of minutes.

In addition, they also looked at how orders were created and came up with bulk order template functionality that allows a user to quickly generate an order form for a product group, with a line for each instance of each product in the group, and a default order quantity for each group, or product. As a result, a user can generate an initial start-of-season order in a matter of minutes as all the user will have to do is change a few order quantities.

And this focus on process support is not limited to product and order creation. They also looked at the inventory management and accounting processes and made each step as easy as they could for the average user, focussing on collecting only the information that is required and only when it is required. The entire goal of the design is to keep the user out of the system as much as possible as success in this space depends on selling and generating orders, and then optimizing the inventory levels and logistics, not on mucking around with an ERP or trying to optimize pennies when the volume doesn’t exist to achieve FTL discounts from a big carrier.

As they are only in the process of releasing V1, there are still a few week areas, such as reporting which is limited to canned reports and accounting which only supports GL integration with QuickBooks, but even the functionality in these areas supports 80% to 90% of the needs of a typical distributor in retail or a related channel. V2, slated for Q2 next year, will have a fully integrated report writer, a (punch-out enabled) shopping cart, and support for carrier integration. But from an efficiency perspective, which was their goal, they’ve hit the nail on the head. The manpower savings alone will more than pay for the solution, and the value that a company will be able to generate through even the most basic spend analysis effort after deploying the solution for a year will be substantial.

In summary, if you are a small to mid-sized distributor, with revenues under 100M, in a retail vertical, and you don’t have an ERP, BizSlate is one company that you have to check out. They’re on the right track, and once you have your data in a centralized data store, bolting on a best-of-breed e-Sourcing or Spend Analysis engine will be a breeze, and your savings will multiply. (And yes, the doctor hasn’t been this impressed with an ERP effort since the early days of Compiere.)

What Elements Are Truly Necessary To Prevent Missing Links in Your Supply Chain?

A recent article in Canadian Transportation & Logistics that asked “where the missing links in your supply chain are” did a great job of of pointing out that when it comes to supply chains, what you see is what you get. And it often is the situation that the more you can see into the chain, the more benefits you can receive.

It also hit the nail on the head when it noted that the ability to view timely, accurate information from the beginning of the chain to the end is essential for:

  • reliable forecasting
  • accurate decision making
  • minimizing risks
  • optimizing inventory turnover
  • reducing days and costs in supply chain cycles
  • healthy cash flow and profits
  • customer satisfaction
  • competitive advantage

But when most companies rely on a patchwork of systems and software to address supplier management, purchase order processing, receipt of goods and inventory management, did it have the right checklist of critical system and software capabilities required to avoid the critical missing links that are currently present in most enterprises that are not Supply Management Leaders?

The article identified these necessary elements, which we’ll take one by one:

  • Real-time detailed visibility into every key juncture
    i.e. demand, procurement, production, transportation, and inventory and accounts payable (to make sure the invoices match the order), market data (to make sure quotes are reasonable), risk data (to detect potential volatility or issues as soon as the signals appear), and trade data (to inform you on issues of regulatory and customs compliance)
  • portals connecting the entire supply chain from order through deliver
    what year is this? 2002? there has to be e-integration all the way down through you supplier, and their suppliers, to raw material providers for key or scarce raw materials, but it doesn’t have to be a portal; heck, it could be as simple as the pull of a daily update EDI file from a secure FTP server or as complex as real-time asynchronous communication between multiple databases in a replication configuration
  • collaboration capabilities that allow stakeholders of the chain to readily share information on supply and delivery
    and communicate with each other, in real time, when they are both online
  • ability to integrate varying information formats from various supply chain partners
    which is a given and should be automatic; again, it’s 2012, not 2002
  • open-endedness with flexibility
    enabling easy modifications and integration with other systems and this is a definite must — avoid any system with proprietary integration methods
  • capability of generating alerts of events that require attention
    throughout the supply chain as most day-to-day management should be exception based, with the exceptions defined on your rules (and not the vendor’s)
  • ability to create “dashboards” that enable consolidate viewing of information from multiple sources
    in a manner that focuses on problem areas identified by missed metrics, bad data, missed data, or declining trends — generally speaking, you don’t care about the green, only the red

These were quite good, but it’s also very important not to overlook:

  • sourcing, procurement, logistics, and global trade solutions
    this could be one solution with dedicated sourcing, procurement, logistics, and global trade modules (or views) or multiple solutions that are interconnected — you need end-to-end sourcing to identify the right deal, procurement to secure it, logistics to get it delivered on target, and global trade to make sure there are no costly, disruptive snags
  • an analytic solution
    that lets you analyze trends and predict demand levels, market cost changes, and potential disruptions
  • out of the box ERP support
    because chances are that a number of supply chain partners are going to have one of the big ERP solutions and be relying on it at least partially
  • security
    as there will be a lot of sensitive data flowing back and forth — make sure it is encrpted and only accessible by authorized parties
  • adoption
    how many companies are currently using the solution, how big are they, how much third party support is there and what is the long term outlook for the solution

But if you can meet all of these requrements, and the collaboration flows, the the solution is probably going to prevent many of the critical missing links in many of today’s supply chains.

The Top 10 Supply Management Technologies Webinar 2012-04-24

Top 10
Top 10 Supply Management Technologies
A Foundation For Your Next Level Supply Management Journey
Webinar

 

Tuesday April 24, 2012 from 12:30 PM to 1:30 PM EDT

 

VFS. Hi-Def Sourcing. Next Level Supply Management. Next Practices. Value Chain Creation. The acronyms and acclamations are flying fast and furious. Even world class Supply Management organizations have to do something more to maintain their year-over-year contributions to the bottom line with the perfect Procurement storm of high demand, low supply, and high market volatility brewing off of the coast. But where does an average Supply Management organization begin?  Good question!

In our upcoming webinar on our Top 10 Supply Management Technologies – A Foundation For Your Next Level Supply Management Journey, Michael Lamoureux will attempt to provide an answer.  The short of the situation is that your organization probably needs to begin a next-level supply management journey, and this will require that your organization achieve excellence along the three dimensions of talent, transition, and technology.
In this webinar, we will attempt to get your organization started on the right track by reviewing the top 10 technologies for Next Level Supply Management which will help an average organization find the goldmine of untapped savings opportunities that it fails to realize because it doesn’t even know about the gold-bearing vein running through its enterprise data.  The reality is that, with the right systems in place, the average company can tap cost reduction and savings opportunities that could collectively add up to 30%, or more, of spend across major direct and indirect categories.  And it is these systems, along with a few real world case studies, that will be reviewed in our webinar on Top 10 Supply Management Technologies –  A Foundation For Your Next Level Supply Management Journey!
Registration is limited to 30 attendees.  Please register early to secure your space. 

   
 
Interested in learning more about the technologies that will be discussed? Click here to read Michael Lamoureux’s whitepaper “Top 10 Technologies for Supply Management Savings Today”

Sincerely,
Bridgette Barry
BravoSolution