Category Archives: Sourcing Innovation

Trade Extensions Trades Up Its UI and e-Negotiation Management Capabilities

About a year ago, I introduced you to Trade Extensions (TE) on the eleventh day of X-Mas. A provider of an extensive on-demand e-Negotiation platform, Trade Extensions is an emerging player in the global e-Sourcing marketplace — one that offers negotiation management, extensive RFX, and (reverse) auctions with embedded real-time decision optimization.

Since my initial coverage, Trade Extensions has made the following significant updates to their platform:

  • a brand new UI across their end-to-end system
    The new UI is crisp, clean, and click-minimal. It’s quick and easy to use and very self evident. Plus, their online help pages are very extensive and updated regularly by the entire TE development and consulting teams.
  • integrated data cleansing & classification capabilities
    Have to fix a lot of data? Just create a rule and map it, just like you’d do in a spend cleansing and classification system.
  • OLAP Reporting for Scenarios
    Users now have access to full OLAP capabilities when viewing scenario results and reports.

In addition, the following features, which I have not covered before, have been improved:

  • extensive modifications to their bid supplement functionality
    Data — pricing, discount(s), rebate(s), etc. — can be captured at any level (supplier, business unit, plant location, etc.) and used for mark-ups, discounts, qualitative scores, or as the basis for any formula(s) the user wishes to define.
  • flexible bid forms
    Not only does TE support full Excel integration, but bid forms can be designed by the user to fit their business needs. There’s no need to force your information into a single system format. A user can create additional worksheets, add columns and rows to existing worksheets as required and add macros and formulas without interfering with the platform’s ability to read completed bid forms.
  • outlier analysis and statistical reporting
    The platform can automatically detect bids that might be too high or too low and flag them for your review (after you define your outlier rules, such as specific bid field values x% away from average / historic / custom calculation). The platform also includes a number of statistics reports, including a parameter statistics report that contains a detailed analysis at the lot and bid level.
  • composed filters
    Filters, which allow you to define constraints on any set of suppliers, ship from locations, ship to locations, products, etc., can now be defined on other filters to allow for very easy, and very powerful, constraint creation.
  • selection sheets
    Excel spreadsheets can be used to define allocation constraints, discounts, penalties, and multipliers … greatly simplifying discount and constraint creation in many cases.
  • project management functionality
    100% integrated into the cohesive e-Negotiation platform, the project management functionality allows for the creation of phases and tasks, the allocation of resources to phases and tasks, and the creation of scopes (by supplier, geography, etc.) as appropriate.

They’ve also continued to increase its power. Consider a recent project run by a financial services firm that tendered all of the components of a direct mail project that would result in the mailing of 1.8 Billion documents. The project, which consisted of 65,000 items, 60,000 transport destinations, and 400,000 bids from over 100 suppliers was valued at $1 Billion with a “B”.

The project was to ultimately deliver documents to the firm’s customers, but to get to that stage each part of the supply chain needed to be tendered. This included design, paper supply, printing, assembly, and transport. The project was completed as a single tender with offers collected on-line and all components tendered concurrently. In addition, suppliers could make conditional offers that reflected their own efficiencies that could present the firm with further savings. This was a project that could not even be attempted by hand as it would take someone close to two weeks just to scan each bid. There’s no way someone could even fathom attempting to optimize this scenario if all they had was a spreadsheet solution that couldn’t handle more than 65,536 rows.

Finally, TE is one of the few players in the market to make their pricing scheme public.

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What Are The Requirements for Collaborative Innovation?

We all know that collaboration is important, because we know it gets results. What we don’t always know is what is required or how to get there. This recent article in Industry Week on Collaborative Innovation (CPG Leaders Discuss Best Practices for Manufacturers) provided some insight.

The article, which resulted from a survey of 30 global CPG manufacturers and retailers and a panel discussion with Coca-Cola, Aerosoles, and Unilever, highlighted four requirements for successful collaborative innovation in the manufacturing and retail sectors. While they may not form a complete recipe for success, they certainly provide a good starting point:

  • Non-Adversarial Mindset
    I would go one step further and say that you need to be able to trust the the party.
  • The Ability to Learn to Speak “Another Language”
    Every profession, and every group, has their own “language”. You are going to need to learn it or you might as well only speak English while your collaborator only speaks Mandarin as the communication gap will be just as broad until you do.
  • New Metrics
    The metrics that got you to today won’t necessarily be the metrics that get you to tomorrow.
  • Willingness to Share IP
    Everyone has to bring something to the table.

In addition, the article highlighted four key lessons that you should heed:

  • Look for Opportunities that provide Mutual Success.
    All parties have to be engaged. This is more likely to happen if it’s a win for everyone.
  • Conduct Collaborate Business Planning that Meets the Needs of Each Partner
    You need to focus on everyone’s needs, not just yours.
  • Build Trusted Relationships
    As I noted, you have to go beyond the non-adversarial mindset and actually work toward trust between all parties.
  • Get Your House in Order Before Attempting External Collaboration
    If you’re not ready to collaborate, your efforts will be for nought.

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Glad To See I’m Not Alone On My “Don’t Be Dumb” Bandwagon

As my regular readers know, after the recession started, I tried my best to convince anyone who would listen not to be a dumb company until I was blue in the face. As I predicted, I wasn’t very successful (as I lost track of the number of companies who put new solution acquisition on indefinite hold and of the number of smaller solution providers that put new development on indefinite hold), but I was still glad to see this recent article in Industry Week on “how leading companies will thrive after the recession” which said that some companies will emerge in a downturn in a better position than their competitors and start to outperform them because they have a commitment to innovation and a drive to become immersed in emerging growth markets.

The truth is that without investments in innovation and new markets, growth will stall even as the economy rebounds. I understand that less business means less revenue which means less money in the corporate coffers, but this doesn’t mean you cut the innovation budget. If money is really tight, you reduce the innovation budget in line with other budget reductions, but you don’t cut it. You cut the non-essentials like the box at the ballpark, the Nascar sponsorship, the deadweight middle management, and — even though you’ll despise me for saying this — your bonus. I strongly believe that management should not get big bonuses during times of poor performance. (However, congruently, I also strongly believe that management should be entitled to big bonuses during times of record growth because I believe management bonuses should be based on the overall corporate performance they drive.)

The simple truth of the matter is that innovation must be a priority, no matter the economic outlook because the right innovation will drive growth even in a down market. The article gives two examples of companies, namely Snap-on Tools and Makita, whose sales are increasing because their products match what consumers want. If you can find a way to give consumers want they want with higher quality and lower cost, they will switch to you, even if your product is considered a luxury. Although they are more thrifty, consumers will still treat themselves in down markets — just not as often.

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Brian Sommer on The New Sourcing Concerns

Today’s guest post is from Brian Sommer of Vital Analysis — a research analyst firm that advises technology buyers on what to buy or run from — and TechVentive — a market research firm that advises major technology and services firms on the messages that resonate with today’s buyers. He is also the blogmaster of Software and Services Safari.

So it’s time to reset the plans, dreams, strategies, etc. of souring and procurement organizations. The economy has bottomed out. Businesses have exhausted their inventories and must replenish their stores. Sourcing should kick in again.

But will it be any different than before? I have my doubts.

In a study I completed this summer, I conducted detailed interviews with sourcing professionals, supply chain experts, research analysts and more to find out what’s changed with strategic sourcing and procurement the last ten years. The unsurprising and disappointing answer was ‘not much’.

So these disciplines haven’t changed in robust times or poor times. When, then, will they change? I don’t know but I do know of several problem areas sourcing experts must address soon if their groups are to remain viable and relevant.

1) Knowledge Transfer
The folks at the MPower Group are hearing some of their clients worry that large amounts of sourcing and technical knowledge is about to leave their firms. Businesses with complex, aging tools, equipment, etc. will need to replace these items in the near future; however, the individuals who did the initial sourcing are retiring and their knowledge of suppliers, engineering specifications, lead times, supply sources, etc. may be leaving with them. Your key to-do is to determine how many of your key sourcing experts may leave your employ once their 401K is rejuvenated via a rising stock market. Then, decide how you can capture this person’s knowledge before they’re out the door.

2) New supply chain opportunities are available but you might not know about them.
For example, the Kansas City Southern (KCS) railway has been building out a powerful rail network the last few years. From the Midwest U.S. to Gulf ports and southwest into Mexico, it’s an interesting route. They’ve also developed a deep port on the Mexican west coast that can take container traffic scheduled for U.S. ports without the delays that used to plague those ports. Now, the KCS has put in a new rail line southwest of Houston that significantly reduces transit times for trains moving across Texas and Mexico. Rail traffic is down, fuel costs are down (for now), ports are less congested, etc. Now is the time to re-evaluate and re-negotiate.

3) Bankruptcies are still happening
This recession artifact is not over yet. Just because the economy has bottomed out doesn’t mean that the remaining companies will be survivors or prosperous. Watch out for key suppliers as some may fail right before your eyes.

4) When the economy does improve, there is a real risk that hyperinflation could strike.
That’s not a guarantee but the level of debt the U.S. has (to fund two wars, TARP, etc.) will eventually drive up interest rates. Your sourcing team must develop two alternate sourcing scenario strategies: one for hyperinflation and one for stagflation. Make sure you know how to tell which space the economy is in and how to adjust buying accordingly.

5) The risk of a pandemic outbreak (e.g., SARS, swine flu) could be a real problem for modern businesses.
It could change what we buy, where we buy it, how it gets shipped, etc. Make sure you have multiple suppliers in diverse parts of the world ready to provide materials to you. Don’t bet it all on one country, one supplier, etc.

Thanks, Brian!

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Celebrate Your Failures!

A recent article in Strategy + Business asks: Are You killing enough ideas? It asks this because, chances are, you’re not. You’re probably wondering how that can be when your number one chance to emerge victorious from a downturn is to innovate. Well, the answer is that you need to kill losing ideas, or at least those ideas that don’t have any support, and do so quickly to free up the supporting resources for those ideas that look like winners that you can get most of the organization behind. You also need to put them in their final resting place so that you can do a post mortem, identify lessons learned, and share that knowledge throughout your organization so that you don’t make the same mistakes when trying to implement those ideas that you expect to be winners.

However, you won’t be able to do this if you don’t celebrate your failures. If your organization treats failure as something that is to be swept under the rug and never discussed again, you’re not going to learn anything — ever — because no one else in your organization will ever know what won’t work, why, and how to avoid making the same mistake again … and someone else will eventually repeat the mistake. The perception that winners don’t fail is false. The difference between a market leader and a market follower is that a market leader doesn’t fail publicly. Internally, they fail multiple times because they are always taking risks and trying new things before their competition. Some of their efforts don’t pan out, but they don’t hide the fact from their employees … they analyze what went wrong, why, learn from it, and correct it in the next attempt. Then they succeed and grab market share from their competitors who aren’t willing to learn from their mistakes, and who are thus doomed to repeat them.

So celebrate your failures … because if you do so, you’ll probably find that, over time, you have fewer and fewer and that, in the market, you do better and better. After all, it’s not a failure if you learn something and use that knowledge to do something else that helps you conquer the market!

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