Category Archives: Services

What is a “Servitized” Supply Chain?

Last summer, the Supply Chain Quarterly published an article that defined “8 steps to a servitized supply chain”. Each of the 8 steps consisted of a supply chain best practice that you should be doing whether or not you desire a servitized supply-chain, or even care about services from a revenue perspective, as each of the 8 steps is something you should be doing even if you have a product-focussed supply chain. So why would you need, or want, a “servitized” supply chain and, more importantly, what is it?

According to the article, “servitization” is defined as bundled product-service packages that provide differentiated sources of value to customers, and, as a result, a “servitized” supply chain is one that supports such offerings and, ostentatiously, is different than a product-focussed supply chain. According to the authors, such a chain is more responsive and agile, can vary degrees of service outcomes to a differentiated customer base, and increases the probability of more profitable relationships between the Supply Management organization and the manufacturers with whom it does business.

At this point, I’m a little confused because, at least in the fast-moving Apparel and Consumer Electronics industry, a successful product-oriented supply chain is extremely responsive and agile (as orders for products in demand have to met quickly and orders for products not in demand have to be cut), offers various levels of product and warranty customization (where applicable) to user-defined tastes, and increases the probability of profitable relationships between the Supply Management organization and the manufacturers with whom it does business. This is because, in these industries, the product is the service, as McLuhan’s classic statement that the medium is the message, while not always true in today’s information age where you are hit with the same message across multiple mediums, is true in the consumer product industry. For many consumers, the products they buy define who they are and create the statements and messages they want to convey. As a result, when you create a product you are also creating a messaging service that your consumers can use to, indirectly, advertise who they are. So, in effect, your offering is a service as much as it is a product and the concept of a service supply chain being different is, well, a bit foreign.

Of course, if you are in the hardware industry and selling the same old nuts, bolts, and traditional C-section joists that you have been making for twenty years, then it’s probably the case that your supply chain is not very service oriented. In this case, if you “servitized” your supply chain and listened to your customers who want frames that are lighter (as steel prices are skyrocketing), stronger (as they want to build bigger), and faster to assemble (as labour is costly), you might come up with a solution akin to the iSpan Total Joist solution. To do this, you would have to become more responsive, offer various levels of product and services (including pre-fabricated kits for warehouses of pre-defined architectures and sizes), and, as an effect, increase your profitability as your customers pay more for the solutions they want (that save them time or raw material cost). But note that, even in this situation, your supply chain would still be oriented around a product — the only difference is that you would optimize the services offerings around that product.

So, in effect, a “servitized” supply chain is just one that is optimized for products and associated services, and, that, in effect, is just an “optimized” supply chain. And an “optimized” supply chain is one that creates collaborative teams across the supply, sales, and marketing functions to drive value. And we should call a spade a spade, instead of creating more unnecessary terminology.

Iasta: Smart Source-Style! Part II.

To the tune of Gangnam Style.

Sourcing Smart-Source Style.
Smart-Source Style.

Sourcing platform for users and bosses too. Sweet.
SaaS on the cloud, always on, real-time reporting complete. L33t.
Analyze this. Auctions, Performance. Real time data.
Optimize It. Contracts, and vendor schema.
One. Two. Smart-Source Success!

In Part I, we covered the first three significant changes to the Iasta platform since we last covered Iasta in depth on SI three years ago. Today, we cover the remaining significant changes.

Extensive Support for Third Party Data Feeds
Realizing that no analytics platform is complete without the ability to enhance the data with supplementary data that makes it meaningful (like index data for raw materials / components, inventory cost data from an ERP, services spend from a third party management [3PM] system, etc.), Iasta has developed native in-house capabilities to pull in data from a plethora of ERP/MRPs, e-Procurement/P2P systems, and third-party data feeds (like D&B, etc.) as well as custom feeds from sources you already use.

P2P Integration Capabilities
Iasta knows that the best sourcing event is all for naught if the sourcing plan, ultimately embedded in a contract, is not properly implemented and followed through and 40% of the negotiated savings leaks and goes down the drain. Thus, they have developed powerful P2P integration capabilities in-house and can suck in all of the transactional data from your e-Procurement and/or P2P systems, map it against your contracts, and let you monitor spend in near-real time as the contract progresses. This way, if the contract is being neglected, the buyer can detect that after the first or second purchase, and not three years down the road during the re-sourcing event when all of the negotiated savings have been lost due to maverick spending or dishonoured discounts and/or rebates on the part of the supplier.

Customizable Reporting and Dashboards for Users and Executives
While Iasta, like other (e-)Sourcing and (e-)Procurement providers has always had sourcing dashboards, by module and by suite, it has developed the ability for users to create their own dashboards using pre-configured reports and widgets, custom reports (which can be created by its custom reporting engine), or existing dashboard templates. Most clients don’t, choosing to have Iasta do it for them, but the extensive reporting and dashboard configuration capabilities allow Iasta to create extensive summary dashboards to meet any need or desire in a matter of hours. Buyers can see what they need to see to be most effective on a daily basis, supervisors can see what they need to see to make sure all of their buyers’ programs are progressing appropriately, and high-level executives can get their traditional 6-gage 30,000 foot view dashboard and see that everything is, or is not, under control.

A Broader Services Offering
Iasta is finding what many other software and services providers are finding, that most organizations that (still) don’t have a (modern) (e-)Sourcing platform don’t have the resources to manage one, the skills to fully apply one, or the support to acquire either. The fact that an average organization still is not hiring or putting money back in the training budget means that a new supply management software acquisition is not beneficial to an organization without vendor or third party support. Due to the lack of talent, and training, most of the advanced functionality ends up being shelf-ware unless it’s used by an appropriately knowledgeable third party. So, like BravoSolution, Iasta has extended their suite of services and are now doing as much, or more, services work than software support. In addition to being able to fully manage events, they can fully manage sourcing programs, spend analysis efforts, integrations with P2P or ERP systems, and training efforts.

Other changes include enhanced category management and sourcing pipeline management capabilities, built-in trend reporting and variance analysis, geographic reporting, enhanced project management with milestone-level tracking, and built-in supplier scorecards.

It’s an extensive suite, and exemplative of why Iasta is now a clear-leader in the e-Sourcing mid-market.


We are the Priests of the Temples of Syrinx
Our great computers fill the hallowed halls!

How advanced are your Shared Services?

Especially if you’re not a global 3000 working with a BoB (Best of Breed) Shared Services Advisory firm?

A recent article over on the Shared Services Link describes “Six Trends that define the Shared Services age today”. In particular, it notes that:

  • Shared Services Continue to Move Up the Value Chain
    The argument is that much of the finance function has been outsourced, the dynamic of staff in an SSO is changing (as teams no longer crunch and enter data) but instead judge and advise, and the model works.
  • Business services rather than finance services
    The argument is that we’ve moved on to business functions like HR, IT, and Procurement and this provides the organization with greater value.
  • Outsources gain share, but slowly
    Since 2007, there have been 850 major finance multi-process outsourcing deals.
  • Shared services find better ways to work in a multi-ERP environment
    They have adopted middleware technology to integrate the systems.
  • Data is evolving into insight
    Now that we’ve moved beyond process consolidation and off-shoring, we can focus on BI (Business Intelligence).
  • A new breed of being — the global process owner
    We have created end-to-end process guardians who oversee the global implementation of a process.

And while I believe this is true for the 850 multi-nationals that entered into big shared-services deals with “tier 1” shared service providers, for mid-size companies just jumping on the bandwagon, are they as lucky? Yes, the technology and processes will be there in the providers, but in order to take advantage of it, it often requires considerable restructuring and change management on the part of the company. Sometimes so much so that the leading organizations, uninterested in what will be a losing engagement during the learning curve, may inadvertently scare these organizations away to “tier 2” providers that mainly focus on process standardization and data consolidation and haven’t advanced to the third wave of BI and expert consulting. So if you’re not in the big leagues, have you yet to catch sight of the third wave?

Safety Stock or Service Levels?

The answer is easy. Both!

A recent article in Industry Week on “The MRO Dilemma” asked if you should focus on safety stock or service levels. The answer is both.

The article, which notes that waste is generated every time a piece of equipment breaks down or runs at less than optimal speed because of needed repairs, and that these repairs are delayed if there is not enough spares on hand, notes that more MRO inventory translates to higher inventory carrying costs but also likely higher service levels while less inventory will reduce the carrying costs [while putting] service levels in jeopardy. This is obvious.

It is also obvious that trying to maintain 100% service levels is likely not an option for most companies because that would mean you just about built a duplicate plant in your store room.

But what might not be so obvious is that the 95% service level recommended as a good target is not good advice at all. The target service level does not, as the article indicates, depend on what your company can afford, but depends on what is optimal for your company. And it is often production line / product specific. A production line producing your most profitable product line should never be down, and if that dictates a costly 98% service level, so be it. However, the turn around time on replacing a printer in the admin offices is not nearly as critical and you can accept a service level of 90%, or less, from your internal IT support, especially if they have outsourced the function to a vendor and a higher service level would increase costs 20%.

Just like you optimize your buy, you optimize your service levels. If downtime on a production line costs you $1,000,000 per hour, you spend $100,000 to make sure you have spares for every moving part that can break. If downtime on a secondary machine that is only required for custom orders, which account for less than 10% of profits, only costs you $10,000 an hour, and stocking the same level of spares would cost you $50,000, you opt for a lower service level. It’s all about optimization.

And, there are companies like Servigistics and MCA Solutions, just to name a couple, that can help you optimize this trade-off so that you’re not improving inventory carrying costs at the expense of service levels and vice versa. With optimization, you can have both … at the right levels that are the most profitable for your organization. Be smart.

Ariba Vision 2020: Tomorrow’s Shoes (Part I)

This is the first of two posts that address the fourteen predictions that were dead on in Ariba’s “Vision 2020 – The Future of Procurement” report. Any Supply Management organization that recognizes the truth of these predictions is well on its way to formulating a plan to be a leading Supply Management organization in the decade ahead.

01. Everything is automated

This prediction is dead-on. Next Generation Supply Management shops are investing heavily in technology to automate all non-strategic and low-value supply management activities, leaving the sourcing professionals to focus on strategic and high-value categories where they can extract the most value for the organization.

07. Spend management shrinks

I’ve said it before, and I will say it again: Spend Matters Not. It’s not how much you spend, how you store it, how you cube it, or how you report on it — what ultimately matters is how much you get from it, profit from it, and derive value from it. Next Generation Supply Management organizations are focussed on improving business outcomes, not cutting costs until quality and stability of supply suffer. Spend Management will shrink as true Supply Management focussed on value takes its place.

09. Service providers excel

Given the increasing cost of outsourcing complex and strategic functions to emerging economies where labour rates are rising exponentially, in order to maintain cost competitiveness and deliver value, the service providers will provide service that constantly improves in efficiency and execution.

13. Let’s get financial

Since overall financial success will still be the ultimate measure of value generation in public enterprises, Supply Management will revolve around the financial supply chain and will be heavily involved in optimizing cash flows, working capital, and financing programs from NPD through return and disposal.

14. SM pros get sophisticated

Supply Management professionals will definitely be much more sophisticated in 2020 than they are today. As the secret agents that essentially drive all aspects of the business, their business savvy, analytical capabilities, relationship skills, and overall execution abilities will be, for the most part, a level above where they are today.

15. Supply pros expand expertise

This is the obvious result of a supply managmeent professional getting more sophisticated. It should not have been included as a separate prediction because it’s impossible to get more sophisticated in Supply Management without expanding depth of expertise in key areas.

16. Strategy scope widens

One does not get to the next level by maintaining a narrow focus, so it should also be obvious that the scope of strategy addressed by an average Supply Management organization is going to expand as well. The strategy will be more closely aligned with the needs of the organization’s end customers and be more cognizant of the needs of the current, and future, customer base. Supply Management will be increasingly called upon not only to analyze merger and acquisition possibilities, but to lead the initiative as success will depend upon succesfull integration of the end-to-end supply chains. And it will be involved in all NPD from day one to help identify customer needs and supplier capabilities before any decisions are made.

The next post will address the other seven predictions that were dead-on.