Category Archives: Sourcing Innovation

The Future of e-Sourcing – Less is More

Today I’d like to welcome Alan Buxton of Trading Partners.

Anyone remember SAP circa 1998? The way SAP integrated everything was great. Except it was completely unusable. Then along came Ariba’s e-procurement system and it’s whizzy interface. Here was a system that would address SAP’s legendary user-unfriendliness, and drive adoption of improved purchasing processes through organisations. Guess what? While Ariba did solve some of SAP’s problems it raised plenty of new ones: how to ensure catalogs could be easily searchable and contained relevant items; how to ensure users understood what they had to buy through the Ariba platform and what they had to buy through different processes, etc.

A common theme throughout is that software systems, however intuitive they are to their designers and builders, are rarely intuitive enough to their end users. Aside from a small number of glowing successes, many corporations find themselves achieving less than what they expected when implementing new e-sourcing systems. As European Leaders In Procurement put it in July 2007: “E-systems gather dust”.

The relentless consumerisation of business technology is a great opportunity to change all this. I’m not talking about a Web 2.0 phenomenon – the blurring of boundaries between consumer tools and business tools has been going on since Instant Messaging, if not before. However, it is consumer Web 2.0 sites that are now pointing the way to the future of enterprise sourcing software. For example, two web sites that excite and inspire me the most are ones like www.ecourier.co.uk and www.zopa.com. They are easy, friendly and the user can see where the value is. Consumers are not interested in “downstream process improvements” – they are interested in whether a particular tool is good for them now. This is not to say that consumer tools are unsophisticated. Zopa, certainly, needs to do a lot of fancy footwork behind the scenes when it matches borrowers with lenders.

For sure, the e-sourcing industry has come a tremendous way in the past decade, but in all honesty e-sourcing is still in a comparatively early adopter phase, globally. In order to really reach mass adoption of our tools, and to transform the effectiveness of enterprises, e-sourcing tools need to take far more cues from consumer-friendly sites and, dare I say it, less cues from IT departments’ integration requirements. Imagine that: users demanding e-sourcing tools because they are fun and helpful rather than using them because the boss says so. A brave new world indeed.

For those of you expecting Sustainability Sunday, this week will instead feature Thought-Provoking Tuesday.

The 2nd Sourcing Innovation Series – The Ents Awaken!

If you haven’t guessed already, calling bloggers to action is a bit like herding cats … except the cats move faster … much faster … and use real claws if you tick them off. And even though they recognize that Web 2.0 time goes by faster than dog years, when it comes to the big issues, they like to think about them … they really like to think about them! And sometimes they think so deep, you wonder if they’ve succumbed to the slumber of the Ents.

Fortunately, they haven’t … and some of them have finally picked up the virtual pen and committed their thoughts to the virtual paper. Even though Charles from Next Level Purchasing (now the Certitrek NLPA) was quick to enter the fray, logging his thoughts the day my pre-announcement post went up, it was only late last week that the other bloggers began to make themselves known. Tim from Supply Excellence gave us a preamble post (in “whats next in purchasing ask your supply management system”), inspired by a post of Brian of Software Safari, Jon Hansen gave us his preamble post and his main contribution, and Jason Busch’s “Wither Procurement as Strategist in 2008 gave us his first post.

And more will be coming. Both David of e-Sourcing Forum and Dave of Procurement Central were contemplating theirs last week, JP of Strategic Sourcing Europe is keen as well (though he might be a bit late with the new job), and a couple of the usual suspects (including Kevin Brooks and maybe even Eric Strovink, who’s also lined up for a guest post on spend analysis and contract management) should be chiming in sometime in the near future as well. There’s even a good chance I might even get one of our favorite analysts from AMR to chime in!

It’s taking longer than usual, but I assure you that I’m committed to do this and that I take the words of Cmdr. Peter Quincy Taggart to heart when it comes to innovation.

Never give up, never surrender! The future depends on it!

Crouching IBM, Hidden Accenture

Every now and again I search for Sourcing Innovation on Google, expecting to find this blog and companion website [resource site removed in the late 2010s], a few Spend Matters posts, Nine Sigma, a service for innovation seekers looking to hook up with innovative solution providers using open innovation, and maybe the Wikipedia definition for innovation. But I recently ran the search, and what did I find in the top 5? IBM with their “Innovation Sourcing” white paper and Accenture with their “Innovation Sourcing Strategy Matters” research report. And, especially in the former case, what nerve!

According to IBM, innovation sourcing is the term used to collectively describe the assets, processes, and techniques used in outsourcing contracts to drive innovation. I have to disagree. As far as I’m concerned, innovation sourcing is innovated sourcing and innovated sourcing is any sourcing endeavor you do that applies innovation – be it outsourcing, insourcing, category sourcing, or personnel sourcing. And the innovation doesn’t have to to be restricted to processes and techniques – it could be the technology you employ, the location of alternate materials, or even finding a way to bypass sourcing altogether. Now I know I should be flattered that they used my blog as their inspiration for suggesting a way to take outsourcing to the next level, but they could at least get it right!

In Accenture’s paper, penned by the Institute for Strategic Change back in 2003, they noted that although many companies are increasing their reliance on external sourcing for innovation, most of them lack an innovation sourcing strategy that would not only help them decide what combination of internal and external sources they should consider but how to leverage those resources throughout the innovation chain. This is important because a good innovation sourcing strategy can open up new doors, delivery quality results faster, cut the cost of innovation, facilitate priority calls, and even stimulate internal innovation while the lack of such a strategy carries risks and costs.

According to Accenture, a good innovation sourcing strategy, which should be holistically driven, addresses five questions:

  • What is the organization’s innovation strategy, including desirable domains and end products for innovation?
  • What are the key sourcing principles?
  • What are the firm’s innovation sourcing channels and what needs do they address?
  • How are the interfaces across channels identified and managed?
  • What international organization mechanisms need to be established to leverage external sourcing effectively?

Not bad … but what about Why?? And, more importantly, Why?? First of all, you can’t develop an effective innovation sourcing strategy unless you know why you should have such a strategy, and how it could help you source better. And secondly, you need to know why you want a strategy. Because a strategy takes commitment, and that takes drive.

Roses are Red, Violets are Blue, Mz. Dawson is Sassy … and so am I!

The 2nd Sourcing Innovation Series – Let’s Get Analytical!

Spend Analysis. Decision Optimization. Cost Modeling. Almost since the beginning, these have been the six dirty words of strategic sourcing. Study after study has found that these techniques easily save 8% to 15% for just about any organization that spends more than 500M a year, but yet, on average less than one fifth of companies out there have tried these technologies, and less than one tenth are using them. It’s like they’re taboo. Well, in the not too far off future, the tables are going to turn, and instead of being the six dirty words, 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. But the technology of tomorrow is not going to be the technology of today. But first …

Why? There are numerous reasons that this will happen, including negative returns from reverse auctions from early adopters, the forthcoming fall-out of the majority of first-generation supplier networks and marketplaces that still remain, and the eventual realization that contract management is not the holy grail if you don’t have a good contract in the first place, but the primary reason this will happen is the G-Word. Globalization. The effects we’re starting to see now are nothing like what’s going to come, especially since the majority of companies are unprepared!

Tactical job loss to outsourcing, rampant inflation in raw materials due to skyrocketing demand from developing countries, quality issues, and CSR (Corporate Social Responsibility), or should I say CSI (Corporate Social Irresponsibility), issues are only going to compound in the coming years. And, without recourse, this is only going to push costs, as they say, through the roof of the nearest skyscraper!

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. Think about what CoExprise is doing for the management of contract manufacturing – integrating the important PLM, Sourcing, and Procurement aspects of complex assembly sourcing – it will be something like that. But instead of an Aravo-Iasta*1-Ketera*2 union for a specific domain, it will be an Apriori–CombineNet–BIQ–Akoya union for the generic product domain. And it will look like nothing you’ve seen before. Sourcing tomorrow will be quite different than sourcing today. The only question is, who are the brave souls that are going to lead the way?

*1 Iasta was acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric
*2 Ketere was acquired by Deem

The future’s coming hard and fast … and I’m gonna be on the freight train that meets it head on!

The 2nd Sourcing Innovation Series

Last week I kicked off the second Sourcing Innovation series with a prologue on spot market trading and how one of last year’s predictions on the future of sourcing might soon be coming to pass. A little over a year ago, Sourcing Innovation launched the first Sourcing Innovation series on The Future of Sourcing, which was also the first cross-blog series in the sourcing and procurement world. The goal was to bring the bloggers and visionaries, who are out in the trenches, together to collectively define what’s ahead and provide you – tomorrow’s leaders – the insight you’ll need to succeed in the sourcing and procurement world of tomorrow.

Although only eleven bloggers participated in that inaugural event, I consider it to be a smashing success – especially in a space where only a handful of regular-posting blogs exist. After that, sourcing innovation launched two more cross-blog series – Sourcing 2007 and The Top Three – and the last cross blog series had twenty different bloggers and visionaries participating. To date, roughly thirty different bloggers and guest authors have participated in the cross-blog series and I’m hoping that this one trumps them all. (I’ve sent out more than seventy invitations to bloggers and guest bloggers alike from across the supply chain space – including vendors, analysts, and consultants – in the hopes that the collective viewpoint put forth this year outdoes any report that you could buy from any research firm in terms of the scope of vision provided.)

This cross-blog series will run for the next two-and-a-half weeks and, as with the previous series, Sourcing Innovation will cross-reference every post and guest post that hits the blog-sphere to provide you with a single reference point to begin your exploration into what is likely to come.

Last year we found out that decision and analytics guided sourcing and hybrid sourcing strategies were on the horizon, relationships will take center stage, the focus will shift to demand management and cost avoidance, on-demand is coming big-time, and securitizing materials and capacity will be a common occurrence. I wonder what we’re going to learn this year?

P.S. If you have not received an invitation, and would like to participate, please drop us a line using the contact information in the FAQ.