Category Archives: Sourcing Innovation

What to Look For in a Spend Analysis System

These days, every vendor and his dog is offering “spend analysis” solutions to the market, but, as one can easily guess, not all “solutions” are appropriate in all situations, or even capable of producing a true picture of spend for an average organization. Therefore, in order to select an appropriate solution, one has to know what to look for. The right answer is often elusive, because there is a fundamental lack of understanding in the market of what a “spend analysis” solution actually is, and what it should be expected to do. Depending on who is asked, the definition of analysis will vary from the process of building predictive models using historical data, to deciding whether past events or transactions are statistically significant, to sorting through haystacks of data to find meaningful needles that will suggest patterns. Each is a valid definition, but it is not necessarily useful to an organization that just needs a better understanding of what it is spending, where, with whom, by whom, and, more importantly, why. From a practical perspective, spend analysis boils down to “finding stuff in your data” that the organization was not aware of, or was not sufficiently aware of. Spend analysis, therefore, is the process of deriving insight from spend data.

So how do you derive insight? You apply a well understood process to multiple data sets. Emphasis on “you” and emphasis on “multiple”. If the process can only be accomplished by a team of programmers in a back room, it is not useful from a business perspective. You have to be able to use the system to do the analysis you need to do. And if the system can only build one cube on one data set, then it is not a useful analysis system. Depending on your organization, there could be savings in the AP data, the invoice data, the HR data, or the ERP data. You don’t know until you look at all the data sources and build and analyze all the cubes.

So what does this mean from a system perspective? Find out in our article on “What to Look For in a Spend Analysis System” over on the new Next Level Supply site. True spend analysis is a fundamental requirement of a next generation supply management organization.

Next Level Supply Management Excellence: Your Straight to the Bottom Line Roadmap

Leading analysts and practitioners have recognized for a while now that supply management practices and methodologies must be taken to the “next level” if supply management is going to continue to deliver the returns the organization expects.

But most professionals have had no idea how to accomplish this as there have been no manuals or guidebooks … until now.

Next Level Supply Management Excellence (by Robert Rudzki and Robert Trent) is the first book to not only define the foundations of a “next level” supply management organization, but to also provide a transformation roadmap that an organization can use to make the transition.

From advanced collaboration and negotiations management through idealized design and energy management to a detailed discussion of risk management and complexity, this is the first book that will help you understand where the untapped opportunities are, how to tackle them, and how to realize sustainable savings while identifying and managing risk from a bottom-line perspective.

The discussions of idealized design and complexity alone will have you looking at your supply chain in a whole new light.

So, don’t just read Next Level Supply Management Excellence, devour it! (And follow the link to order it today.)

PPT isn’t enough, you need EAI as well (NPX Deep Dive #1)

As many of you are well aware by now, a few weeks ago I attended The Mpower Group‘s Next Practices Xchange. A gathering of some of the top supply management personnel from a select group of Fortune 500 companies who met to discuss how to get to the next level of supply management, the NPX participants are leaders in their fields. On average, NPX members beat the field at the macro level at supply chain visibility, risk management, strategy execution, and value creation (at least according to a recent joint survey undertaken with the IACCM that will be explored in a future post).

But today’s best is not enough to sustain value in an increasingly competitive and economically challenging global marketplace, and the best of the best know it. The supply management leaders are already working hard to figure out how they are going to maintain their edge in tomorrow’s supply chain landscape. While there are still a number of questions to be answered, they know that the first step is to understand value, that the second step is to get to value, the third step is to capture value, and the fourth, and most critical step, is to step is to execute.

But execution is tricky. It’s more than just People, Process, and Technology (PPT) that consultants have been talking about for decades. It’s more than just the following framework, which isn’t enough.

 

People
Organization
Talent
use
Process
Strategy
Procedure
Tools and Templates
supported by
Technology
Infrastructure

 

It’s Exploration, Alignment, and Information. It’s the Adoption, Execution, Implementation, Optimization, and Utilization of the People, Process, and Technology to their fullest potential, as illustrated by the following framework:

 

Information
Visibility
Metrics and Reporting
Knowledge Management
undergoes
Alignment
Decision Process
Business Strategy
Change Management
by way of
Exploration
Learning
Coaching &Mentoring

 

Technology enables the processing of information which is used by good processes that support organizational alignment with the business by people who explore next generation supply management practices and techniques and take the business to the next level. PPT goes hand in hand with EAI and neither on their own will deliver EBR (Exceptional Business Results).

The importance of the vowels in next generation supply management, and the EAI framework they define, will be explored further in future posts. The reality is that best (PPT) framework in the world is useless if you don’t execute. So master the vowels and see your organization advance to the next level of supply management.

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

This is the second 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.

18. Offensive line takes the field

Supply Management professionals will increasingly use online communities and networks to discover, connect to, and collaborate with suppliers in a relentless pursuit of growth and expansion in line with the strategic goals of the company. Furthermore, the collaboration will be much more intensive and innovation focussed than it is today.

23. Buyer-seller lines blur

The focus will shift from the effective utilization of supplier functions to the effective integration of supplier functions to the point that integrated supplier functions will be almost indistinguishable from buyer functions. In leading organizations, the line will blur to the point where it is essentially nonexistent.

24. Innovation comes from without

As the paper says, the supply management role will be less about “person-who-brings-innovation-in” and more about “person-who-assembles-innovation-communities-and-gets-out-of-the-way”. Even at most companies that use innovation networks today, the innovation is still driven by the supply management professional that posts a problem in need of a solution. In the future, the networks will identify the problems and the solutions and then bring them to the supply management professional. Next generation web-based technology will bring the democratization of technology to new heights.

26. (Key) Suppliers gain power

Increasing reliance upon (key) suppliers is going to give them substantially more leverage in buyer-seller relationships, which is going to result in the supply management organization having to sell itself to the supplier as a customer of choice instead of the supplier having to sell itself to the supply management organization as the supplier of choice. And the more innovative the supplier, the harder the sell the Supply Management organization will have before it.

27. Firms share risks and rewards

The leading supply management organizations, that are incorporating incentives into their contracts today, will move to a shared risk and reward model where both parties share the rewards of a successful venture as well as the risks of the undertaking. No longer will contracts be lopsided in favor of the buyer that will be as reliant on the supplier as the supplier is on the buyer.

30. Risk info catches up

Risk management will take prominence in an average Supply Management organization which will have more access to readily available third party information (from networked communities where participants pool data for operational risk assessment) and be better poised to mesaure risk and formulate appropriate mitigations. Risk management will be embedded in every sourcing and contracting process and a key component in the calculation of expected value.

31. Profits replace cost savings

The shift in focus from cost to value will see most Supply Management organizations retire cost savings and instead institute profit generation as a primary measure of organizational success. Top line growth will be just as important as bottom line impact in an organization that wants to improve business outcomes overall.

The next post will address the predictions that came close to the mark, but did not hit it.

Can Your Supply Chain Be More Agile? Yes It Can!

A recent article on speeding up business agility over on ChiefExecutive.net had some great tips for making your supply chain more agile.

  1. The CIO is Your Business Partner
    Let’s face it, the best supply management organizations run on modern technology platforms that have to be implemented quickly and efficiently and operate 24/7/365. Supply Management needs to make a partner out of IT to insure that this happens.
  2. Foster a Culture of Innovation
    Yesterday’s best practice is today’s common practice is tomorrow’s laggard practice. The best organizations are constantly innovating, and this takes an innovative culture.
  3. Use Software to Fail Fast and Minimize Risk
    Model potential supply strategies and simulate both expected flow and disrupted flows to insure that the supply strategy chosen has the maximum chance of succeeding in today’s volatile and unpredictable global market place.
  4. Integrate IT at the Grass-Roots Level
    Not only is the CIO your business partner, but IT is part of every sourcing team. You need their support, and they need your help to minimize their costs. And they are your best ally when you need a new system.
  5. Establish Centers of Excellence
    Not only are the best supply management organizations generally center-led or hybrid (center-led / centralized models), but they have teams dedicated to nothing but strategy and innovation.

These are all great pieces of advice. They are so good that not only has SI recommended each individually before, but will do so again. Agile supply chains survive volatile times. Make yours agile before its too late.