Category Archives: Sourcing Innovation

The Evolution of Procurement, and Where It Is Headed

Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC and co-author of “Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing”.

While strategic sourcing and procurement groups around the globe continue to make headway into new departments and address categories previously off the table, their popularity with business owners and stakeholders has never been lower. Headlines and titles like “Everybody Hates Procurement: Here’s How To Fix It” and “The End of Procurement, Forever!” and “The Problem with Procurement: Misalignment” seem to pop up every day.

I attribute these headlines to the growing pains strategic sourcing and procurement will naturally experience as the role of this group continues to expand and evolve. And evolve it has! In the 11 or so years I have been at Source One, I have seen Strategic Sourcing transition from rarity, to necessity, to commonplace, to part of a larger spend management strategy. In its current form, and as it heads into the future, it looks to me that modern procurement has developed to be just as much about negotiating with an organization’s leadership as it is negotiating with a supplier base. In fact, I tell most college grads entering this industry to be prepared to challenge those within their organization, learn how to market their group, and sharpen their debate skills. Getting savings is the easy part, getting your organization to act in their own self-interest is the challenge. This is not a job for the weak-willed or thin-skinned! To explain what I mean, here is a quick rundown of the change I have witnessed.

The Reactive Buying Era

When I first started at Source One, most of the purchasing groups in the companies we worked with dealt exclusively with raw materials. If the personnel had “sourcing” in their title, it was rare, and many of our customers did not have any sort of sourcing initiative for their indirect spend items. Stakeholders and the department heads responsible for budgeting conducted the purchasing for their needs.

In those days, we did a lot of explaining to potential customers just on what Strategic Sourcing was. It wasn’t a commonplace concept even within Procurement, so those outside of it — Finance and IT, for example — had very little knowledge of it. Especially in the mid-market, any group with spend management tactics that were more advanced than three bid purchasing or preferred supplier relationships were the exception, not the rule.

The Sourcing Era

Slowly, Strategic Sourcing became more and more familiar until it ultimately blossomed. Strategic Sourcing practices were first used by a limited number of organizations as they purchased their raw materials. Seeing the successes in that category, organizations then asked these “sourcing” teams to look into areas like packaging and shipping. Strategic Sourcing’s applicability continued to grow as success after success was reported. Subsequently, most departments were soon asked to start implementing strategic sourcing practices, and procurement departments began to be more directly involved in buying decisions.

The Category Management Error

In its latest form, Strategic Sourcing is now tied into category management, meaning companies are hiring or developing sourcing experts for their individual spend categories — telecom, media buys, office equipment — or departments — Capital Projects, Marketing, IT — and restructuring their departments with the goal of achieving near 100% spend under management. With dedicated sourcing experts managing each category and an intense focus on supplier relationships, those sourcing departments effective in category management are not only able to take advantage of market conditions today, but are better able to predict future market conditions and opportunities within the managed categories.

Even utilizing these strategies, a common problem remains. These sourcing teams lack the institutional clout within their organization to be effective in managing spend. SOPs are reluctantly followed, if they are followed at all, by the end users, and the majority of the end users and stakeholders do their best to avoid involving the sourcing team. Additionally, sourcing initiatives are often dead on arrival, killed in the name of deadlines or supplier relationships

The Change Management Era

So, that’s a short history of Strategic Sourcing’s development. So where is the industry going from here?

From what I have seen in the work we perform for the clients of Source One, category managers must now become “change managers”. “Change managers” are those leaders who can navigate their organization’s structures and barriers to be effective, and transition their department’s role from that of a reactive-tactical resource to one that is proactive and strategic.

“Navigate” here means “maneuvering around” objections or otherwise getting things done, and there are a few ways that I have seen different sourcing groups approach this. At the last conference I attended, I heard some sourcing teams discussing their use of a “bell cow” — a single resource within their group that is skilled in working with department heads and generating acceptance from end users for their group’s sourcing activities. In other cases, I have witnessed sourcing departments working through an executive sponsor, often times a CFO, to help push their group’s agenda items. A third, slower method I’ve seen used to promote sourcing initiatives is the granular approach, meaning the sourcing group is using any quick-and-easy method available to build credibility and support, end user by end user and department by department. Not surprisingly, this third method is high resource-low return, and often causes some areas ripe for sourcing to go untouched. Of these, the proper solution is the one that works best within a particular organization.

When sourcing groups improve their internal relationships, the stakeholders are better encouraged to participate and end users are better encouraged to comply with sourcing activities, increasing their chances of success. These project successes give Procurement something tangible to market internally and use as leverage in drumming up support for future initiatives, and also exposes their unique skills to the organization as a whole. Through continued project success and internal relationship-strengthening, Procurement will slowly be seen as an integral and centric resource to the company; its unique skillset prized not only for its ability to identify cost savings for the organization but for its ability to generate value for the organization as a whole.

Summary

As the need for more strategic spend management practices increases, procurement departments are evolving to meet these newfound challenges. But rest assured; the industry’s progress is not slowing or stopping. Adapting to the industry’s modern changes and challenges is only setting the stage for the next evolutionary step, which will be to become a revenue center for the organization. The better equipped a procurement team is now at handling the challenges of the current market, the better prepared it will be to predict and stay ahead of future trends

Thanks, Joe.

Intengo – Mastering the e-Procurement Tango in Turkey

When we last covered Intengo back in 2010, they were doing the e-Sourcing Tango in Turkey. At that time, they provided an on-demand e-Negotiation platform built around (multi-round) e-RFX and e-Auction with a sprinkling of Supplier Information Management (SIM) and early stage catalog management thrown in. A project-oriented system, it was a breeze to set up a new RFX or e-Auction event in the system and get a new sourcing event going. One of the unique features of the platform was the calendar view, which integrated with Microsoft Outlook and hot-linked to all of the relevant screens in the relevant projects, and which allowed a buyer to get a quick summary of where they were and what they needed to do at any given time. Other cool features were item-level currency support, smart unit support, and bulk-updates on (filtered) lots or items.

Since then they have been dancing up a storm and they are now the leading e-Sourcing and e-Procurement provider in Turkey, with over 100 clients, including a few notable international clients with operations throughout Europe and Asia. That’s right, they have migrated from a basic e-Sourcing application to an end-to-end e-Procurement solution in an effort to serve their clients better. Since 2010, they have added requisition and purchase order support, price lists and full catalog support, delivery notification and tracking, and integration with the big ERPs (Oracle and SAP) for master data management, invoice management, and e-Payment / Accounts Payable integration. In addition, they have also integrated budget management into the e-Procurement process.

A user can begin a requisition from a catalog or from a free-form request. The request can be sent straight to a (preferred) supplier if it is within the user’s spending limit (as defined by the budget), turned into a Purchase Order (after being approved, if necessary), or turned into an RFX or e-Auction. If the request is turned into an RFX or e-Auction sourcing event, the RFX or Auction is pre-populated with pricing from the most recent supplier price list (at the volume level) or catalog if pricing is available. If the request is sent straight to the supplier, the supplier can accept the request and provide delivery information, reject the request, or decline due to incorrect or insufficient information. In the last case, the buyer is notified and corrections can be made. In the case of an RFX, after the event has been configured, the request is sent to the selected suppliers who can bid on the whole or part, decline to bid on the whole or part, or decline to bid because of incorrect or incomplete specifications on one or more line items. In the last case, the buyer is notified, and if the buyer agrees, he can suspend the RFX or e-Auction until corrections are made, and all suppliers are immediately notified of the event suspension. A supplier who accepts a purchase order, who is awarded an RFX, or who wins an auction is able to immediately enter delivery information into the system (which can generate e-invoice data for submission to the organization’s ERP) and when the product is received, a buyer can mark the product as received in the mini delivery module.

The catalog functionality is pretty much what you would expect and is comparable to most other e-Procurement platforms out there and the budget capability can be used to define budgets by user, project, and department and track them against requisitions and awards project-to-date and year-to-date. The built-in reporting is good, and Intengo even has canned reports by brands (which are great for retailers). Furthermore, Intengo can create and customize any report on any platform data that you want, but note that the platform is still missing a custom report builder. However, realizing this weakness, Intengo gives you the ability to export any and all data to Excel or to your ERP (so you can build your own reports using reporting tools you already have). So if you do full ERP integration (and use it for your Master Data), and you already have a best-of-breed reporting product sitting on top of that (and chances are you do), you can use that to build custom reports on your sourcing and procurement projects.

They have also made enhancements to their e-Sourcing platform. One of the most significant enhancements is their formulaic auction capability. This weighted auction capability allows a user to define an arbitrary weighting, composed of one or more factors, to every bid, on a lot and line-item level, that is used in determining the rankings. The user can define one-or-more weighting factors based upon quality, warranty, shipping, associated duties, etc. The categories can be (optionally) displayed to the suppliers who can choose the ones relevant to their bids (such as shipping, warranty included, etc.) and the weighting factors can then be applied behind the scene. In addition, during an auction, suppliers can also suggest substitutions for each line-item and lot, which a buyer can accept. (And, if necessary, the buyer can pause the auction, define appropriate formulae, and provide additional information to other suppliers who might also be capable of offering substitutions on different terms.)

Intengo is definitely an up-and-coming contender on the end-to-end Procurement scene in the European mid-market and another European e-Procurement provider to watch, especially since, like other European players, they have been internationalized and multi-language since day one on their integrated, single-solution, SaaS platform that allows them to create new instances virtually on-demand. While SI doesn’t expect them to cross the Atlantic for another couple of years, it does expect that the North America companies competing across the pond are going to be seeing a lot more of them on mainland Europe in the coming years.

While You Were on Summer Vacation, Vendor Posts, Part III

While you were on summer vacation, SI was powering away with daily posts and continuing to cover some of the leading vendors in the space, presenting a number of deep dives on their technology platform. Here is a short recap of some of the coverage you might have missed!

Airclic

Designed to make 3PL deliveries click, Airclic’s Transport Perform solution, which is tightly integrated with their new Route Planning and Route Optimization solutions, incorporates support for simultaneous high-volume cross-docking and multi-driver cross-border routes in a new web portal that makes their platform as easy to use as a multi-tab spreadsheet. One of the highlights of their solution is a clear, easy to use, non-distracting, straight-to-the-point interface for dock workers and truck drivers, especially when all these people have is a small, primarily text based, mobile device. The application, which can be pre-configured with relevant supplier data, including whether the supplier is ASN-based or non-ASN-based (Advance Shipping Notice), allows the application to be customized to each supplier so that a dock worker or driver only has to enter the absolute minimal amount of information (which, for an ASN-based supplier, can be as little as scanning a barcode) and when additional data has to be collected, is presented with a minimal list of options to choose from.

PrimeRevenue

In our posts on how they are priming your financial supply chain for success (Part I and Part II), we introduced you to PrimeRevenue, a provider of Supply Chain Finance solutions that provides supply chain finance solutions to over 12,000 customers in 40 countries and that processes Billions of dollars of transactions each year. Like other providers of supply chain finance solutions, they provide a platform that helps suppliers access financing for their receivables when they need it from over 40 leading financial institutions. But that’s not the best part of their platform. The best part of the PrimeRevenue platform is a solution by the name of SciMap that provides a consolidated and classified analysis of your spend, enriched by insights from PrimeRevenue’s global database, based on detailed and updated market intelligence. This allows you to make better buying decisions as well as negotiate optimized payment terms, putting the power to improve your working capital in your hands.

iValua

In our four-part series on how they are proving their mettle with source to settle (Part I, Part II, Part III, and Part IV), we noted how iValua is one of the few providers tackling end-to-end sourcing and procurement in a single suite of integrated modules built on one common platform. With capabilities that, to some degree, address each of the core phases of the basic sourcing-and-procurement cycle except decision optimization and tax reclamation, the platform is one of the most extensive native source-to-settle platforms out there. Integration and implementation will take time, especially if your organization wants the full end-to-end capability, but could be worth it for a large organization that needs an extensive, integrated solution.

iValua: Proving Their Mettle with Source to Settle, Part IV

In Parts I through III, we noted that when we last covered iValua in 2010, they were one of the few providers tackling end-to-end sourcing and procurement in a single suite of integrated modules built on one common platform. We noted in Tackling End-to-End Sourcing and Procurement, Part I that this French company had capabilities that, at least to some degree, addressed each of the core phases of the basic sourcing-and-procurement cycle except decision optimization and tax reclamation. Since then, they have added advanced tax tracking capability, and a boatload of other features that include SIM/SPM, Risk Management, Project Management, Enhanced Analytics, and Extensive UI customization. Today, we will continue our coverage of the platform, which includes modules for Supplier Management, Sourcing, Contract Management, Catalog Management Procurement, Invoice Management, Expense Management, and Reporting that were covered in Parts I through III; and Administration that will be covered today as we wrap up the series.

Administration

Administration is very extensive in the iValua platform. Administrative users can manage users, tables, workflows, reporting indicators, units of measure, currency, alerts, menu options, content, templates (for RFX and Auctions), import, scheduled processes, notifications, (re)assignments, and information sources (as the platform can pull in RSS and XML feeds from various web sources for display on the dashboard).

The ability to define arbitrary data tables and import the data for analysis into the system is quite powerful. It makes the built-in analytics capability much more useful as the data can be augmented and enriched to also include data from the payment platform, third party supplier assessments, and optimization events conducted external to the iValua system. A classic limitation of many Sourcing and Procurement systems was the inability to import arbitrary data not accounted for in the existing schema. The iValua platform took a best practice from leading spend analysis platforms and made sure a user could import whatever data she needed anywhere in the supported source-to-settle process. The ETL screen is comparable to an advanced version of Microsoft Excel import (familiar to every Microsoft Office User) that allows the user to define the first line index and last import row, column and line separators, text qualifiers, encodings, and field template (that defines the fields and their names). The user can also define how long the data should be kept (and throw-away one-time analysis data or archive payment data indefinitely), who can see it, and what modules, plans, or anomalies the data should be associated with.

Design Mode

Design Mode is a new capability in the iValua platform that allows a user to dynamically redesign the layout of their menus, screens, and dashboard widgets. Each user can customize the look and feel of the application in a way that makes them most productive using simple drag-and-drop and checklist-based / mouse-click component and option selection. It is quite slick. It also allows iValua to customize a configuration for a new client extremely rapidly based upon the particular needs of the different users of the application.

In summary, the iValua is a very extensive Source-To-Settle platform and an extremely viable option for a mid-size or large organization that is looking to update their sourcing and procurement capabilities in an integrated end-to-end source to settle platform. It is especially suited to a multi-national that has to operate in a significant number of countries and languages as iValua, which already supports 15 different languages, is used daily by more than 150K users and 500K suppliers in over 70 countries.

iValua: Proving Their Mettle with Source to Settle, Part I

When we last covered iValua in 2010, they were one of the few providers tackling end-to-end sourcing and procurement in a single suite of integrated modules built on one common platform. We noted in Tackling End-to-End Sourcing and Procurement, Part I that this French company had capabilities that, at least to some degree, addressed each of the core phases of the basic sourcing-and-procurement cycle except decision optimization and tax reclamation. The platform still doesn’t address decision optimization, but in the past three years, in addition to adding considerable intelligence for tracking and managing taxes, ASN (Advanced Shipping Notice) support, and customizable pivot-tables for bid and auction analysis, they’ve made extensive additions to many of their modules, added powerful workflow capabilities, extremely powerful UI customization capabilities in Design Mode (considering the platform is accessed through a standard web browser), drag-and-drop document authoring capability (also through the web browser) and round-trip integration with Microsoft Word, a comprehensive supplier view (that integrates all of the data related to the supplier across all of the modules), and the ability to easily define and load custom data tables for surveys, questionnaires, tracking, and reporting through built-in native ETL tools, among other enhancements.

Version 8.0 of the iValua platform, being released at the start of Q4, is one of the most extensive integrated native Source-to-Settle platforms that SI has ever seen, especially considering their recent additions for the management of services. It comes as no surprise that they now have over 100 customers globally with a 99% renewal rate, that the majority of their customers have migrated to their SaaS platform, and that their current growth rate year-over-year is over 20%. Along with bPack and Wallmedien, they are making a serious play to take over the high-end of the Best-of-Breed market that was almost eliminated (with the exception of BravoSolution, that does have industry leading decision optimization) with the acquisitions of Ariba and Emptoris. (It truly looks like the European providers are starting to pull ahead of the pack where Spherical Supply Solutions — Part I, Part II, and Part III — are concerned.)

iValua divides their platform into Supplier Management, Sourcing, Contract Management, Catalog Management, Procurement, Invoice Management, Expense Management, Reporting, and Administration. So we will cover the highlights of the platform with respect to each of these categories. Note that, in addition to the application dashboard, each of these modules has their own dashboard that is extensively configurable so that a user can quickly see the status of supplier efforts, sourcing projects, contracts under construction, procurement processes, catalog integration, invoice processing, expense and budget management, and performance reports.

Supplier Management

Supplier Management in the iValua platform consists of Supplier Registration, Supplier Performance Management, Supplier (Related) Document Management, approved Supplier Lists, and Supplier Risk Profiles (called Supplier Risk Indicators). The on-boarding process is similar to the process employed by other SRM vendors, document management is the process of tracking certifications, proof of insurance, and compliance documentation, and approved supplier list management is quite straight-forward so we won’t go into any additional details on this functionality. What is interesting, and powerful, is the ability to identify and track anomalies from expected performance, create improvement plans, and access a supplier risk profile based on environmental, CSR, and other user-defined indicators, as this is functionality typically only found in SRM platforms, and not sourcing, procurement, or source-to-settle platforms.

The supplier management tab integrates all of the data associated with a supplier across the entire platform. The user can quickly access the basic info (name, address, credentials, risk score, etc.), the lifecycle workflows associated with that supplier (with respect to sourcing projects), the supplier’s credentials, associated users, pre-defined reports and analytics with respect to the supplier’s performance, current activity, commodities and services being provided, financial and risk KPIs, and overall performance and risk rating. It’s a one-stop SIM/SPM shop.

In iValua, an improvement plan, which can be created off of an anomaly (which is a user-defined record that describes an issue that needs to be addressed, such as an exceptional late delivery, quality problem, etc.) and associated with a commodity and/or organization, is an action plan designed to address an (underlying) issue (that caused the anomaly). It consists of a sequence of defined tasks that are expected to resolve the issue. Each task has a type, an associated user who is responsible for the task, a manager who will ensure the task is completed, start and end dates, and other attributes consistent with the definition of a project in a standard project management application. It’s interactive, and as steps are completed, the plan, and status thereof, are updated.

The supplier risk profile capability is quite advanced. A user can define any type of risk that they wish to track (supplier, product, sustainability, financial, product, etc.), how the risk indicator rolls up (finance, CSR, etc.), and where it comes from. iValua integrates with leading risk profile providers out-of-the-box, like D&B, and this integration goes beyond simple financial profile providers and also includes an integration with a leading provider of sustainability data, namely EcoVadis. (You can even access the native EcoVadis profile direct.)

We’ll cover the remaining parts of the platform in the remainder of this series. Come back tomorrow!