Category Archives: Supplier Management

Procurement Trend #22. Process Convergence into Supply Management

Nineteen anti-trends from the hinterlands still remain. As much as we’d like this series to be nearing its end so that LOLCat can come out of hiding, this delirium has to stop. We have to shine the light on all these half-truths and lies and put an end to them once and for all. We will continue until each one is laid bare in the hopes that the outback futurists crawl back into the sand caves from once they sprang and leave us alone to push forward.

So why do so many historians keep pegging process convergence into supply management as a future trend? Besides their inability to remove the blinders, there are a few reasons, but among the top three are:

  • Supply Management used to be office supplies and pushing manufacturing POs
    and the most sophisticated process was getting quotes from three office supplies vendor and selecting the lowest but
  • Now its product, services, marketing and legal
    each with their own needs, own processes, own languages, and own regulations and
  • Processes and talent haven’t kept up
    as change management and training wasn’t a priority as not much was needed when all you were doing was buying office supplies or cutting POs for a contact signed by another department

But, as we all know, it’s not that way anymore! So what does this mean for you?

Supply Management is the New Heart of the Organization
and needs to be structured and positioned as such.

All of the functions of the company are, to different degrees, becoming dependent on Supply Management. Supply Management must now be a leader in collaboration, supplier relationship management, and transition management, among other modern processes and technologies, that will be discussed in an upcoming series.

Back-Office and Front-Office are Converging

Its not just AP (Accounts Payable) merging with AR (Accounts Receivables) or Sales merging with Marketing, its the CRM (Customer Relationship Management) and SRM (Supplier Relationship Management) processes merging and Sales, Finance, and Supply Management getting an end-to-end view.

Transition Management to a new operational paradigm is required

And processes like ADKAR, as we discussed in our recent post #25 on More Stakeholder Collaboration, are going to be required. More on this in an upcoming series as well.

Procurement Trend #30: Continued Margin Pressure

We still have twenty-seven (27) trends to go, so we need to get back to our discussing in detail each and every trend we debunked in our Future of Procurement series so that you understand not only why the historians are still talking about these trends, but why they are still relevant to many Procurement organizations that are stuck in the past with the historians.

The goal is that, at the end of this thirty part series, you will not only know what you need to do to prevent staying in the past with your organizational “peers”, but what you need to do to not only stay in the present but start marching towards the future, which is coming faster than you think.

As per our original series, ever since the beginning of the modern industrial age and the introduction of the first mass production factories, customers have wanted lower prices. And when efficiencies gave customers these lower prices, they wanted the prices to be lowered even more. With end customers putting continued pressure on retailers to lower prices, these retailers are putting continued pressure on manufacturers to lower prices, and these manufacturers are, in turn, putting pressure on raw material providers to lower their prices. Margin pressure has always been with us and it’s not going away any time soon.

So why do so many historians keep pegging it as a future trend? There are a number of reasons, but among the top three today are:

  • Multiple global recessions in a short-time frame
    In the early noughts, mid-noughts, and late noughts in the US; Turkey, Greece, Ireland, Portugal, Spain, and Cyprus in Europe; Palestine and Egypt in the Middle East / North Africa, and so on over the last decade and a half …
  • High rates of joblessness in many first world countries
    including Greece at 26%+, Spain at 25%+, Portugal and Cyprus at 15%+, Italy at 13%+, Ireland and France at 10%+, India at 9%-, Sweden and Egypt at 8%+, Canada at 7%+, and a US U6 Unemployment rate of 12%-!
  • Hyper-competition in hot markets
    because less consumers working means less consumers with money to spend which translates into more companies chasing a smaller market, which, with the return of inflation and increasing interest rates, has less money to spend — net result, hyper-competition just to stay in business!

So what does this mean for you?

Multiple global Depressions in a short-time frame

Markets are still recovering, and even where people have cash to spend there is still apprehension. Plus, until we recognize the inherent warning that as long as we continue to let bankers rule the world, this is just the beginning. So, for the time being, don’t be too ambitious where projects are concerned, be realistic and look for flexibility and the ability to do more JIT if demand escalates (as the last thing you want is to be stuck with millions of dollars of excess inventory).

High Rates of Joblessness in Many First World Countries

This is not only prolonging the depression, but is reducing the number of people who have cash to spend and your organization’s potential market. This means sales prices need to be maintained, if not cut, which means that costs need to be maintained, if not cut as well. And if they can’t be cut, value needs to be added — for free. A significant amount of supply base development may be required.

Hyper-Competition in Competitive Markets

About the only way a new product is going to sell these days is if it is different and provides more value to the consumer than the competitor’s product. This means that Procurement needs to identify suppliers who can add value at little or no incremental cost in product design, manufacturing, or experience. Value added services are just the beginning of what Procurement needs to look for.

Four down and twenty-six to go!

Risk Management and Suppliers: How Banks can Comply with the OCC’s Guidelines on Third-Party Relationships

Today’s guest post is from Rebecca Lorden, Business Development and Marketing Manager of Source One Management Services, LLC.

In October of 2013, the Office of the Comptroller of the Currency released specific guidelines to banks and federal savings associations that outline how their companies should assess and manage risks associated with third-party relationships. The OCC’s reason behind these guidelines was mainly due to the fact that “the quality of risk management over third-party relationships may not be keeping pace with the level of risk and complexity of these relationships“. (OCC Bulletin 2013-29, October 2013).

It is true that third-parties pose a threat if their own security protocols are not up to par with that of a major financial institution. In fact, in March of 2013, Bank of America became quite aware of this when they announced that a hack into TEKsystems, a third-party security firm they contracted, was the reason their internal emails were released to the public. These emails were no ordinary messages, but documented proof that Bank of America was monitoring hacktivist groups. Furthermore, the hacking group, known as Anonymous, later revealed that data was not retrieved from a traditional, time intensive and difficult hack, but “stored on a misconfigured server and basically open for grabs“. (“Bank Of America Says Data Breach Occurred At Third Party”, Computer World, February 2013). The scandal was not only damaging to Bank of America’s reputation, but also an obvious indication that banks needed to manage supplier risk more effectively.

The OCC’s guidelines outline eight key phases that should be considered when developing risk management processes. These phases include planning, third-party selection, contract negotiations, monitoring, termination, accountability, reporting and reviews. As clear as that might be, banks are still struggling on how to properly implement controls around these factors. That is where supplier relationship management can play a significant role.

Supplier relationship management, otherwise known as SRM, is the actual practice of strategic planning and managing all interactions with third-parties to maximize their value. Many think of SRM as a way to reduce spend. SRM processes can reduce quality issues and delays with suppliers that, in turn, can translate into cost savings. More importantly, however, SRM can function as a main component in reducing a bank’s risk with suppliers. Supply chain experts feel as though SRM offers a “solid framework” that can provide companies with a “formal risk and control process to follow“. (Building The Case For Supplier Relationship Management, May 2014).

For those that already have an SRM program in place, or believe SRM is just a sales tactic for supply chain consultants, now may be the time to reevaluate. First, suppliers can be neglected over the course of their contract. Even if the relationship started off on a good foot, the value from a supplier can diminish pretty quickly, especially if the supplier or the bank is faced with turnover or a redirection in initiatives. SRM dictates a process that continually communicates and supports the relationship, helping build supplier engagement no matter what changes are on the horizon. Secondly, for those non-believers, consider this: if managing suppliers is now a major priority set by the OCC, what better way to adhere to these guidelines than to build a solid foundation on which to base all third-party relationships on?

It certainly seems that these OCC guidelines are a daunting task for banks to tackle. Managing supplier risks and enforcing compliance is not something that can be done overnight. Banks, however, have a secure solution in supplier relationship management. SRM can be the catalyst to successful third-party relationship management, ensuring that the risks are minimized to the best of a bank’s ability.

Thanks, Rebecca.

HICX Solutions Wants To Buy You A Shiny New Pair of Shoes! Part I

Last week we asked if SIM was old news or a shiny new pair of shoes. We noted that SIM (Supplier Information Management) was a mature and stable technology with a large number of solution providers not only providing the tools and best practices to manage supplier life-cycles, but to manage risk, compliance, receivables and even spend repositories for spend management. It’s almost a commodity in the Supply Management space, and, thus, an acquisition thereof is not likely to get baby that new pair of shoes anytime soon. Unless, of course, the solution has some new tricks not found in most current solutions.

What tricks? Tricks that provide added value to your organization. What might these tricks look like? As per our last post on the issue, if the SIM product not only allowed a user to define, and redefine, data models as necessary but define, and redefine, workflows as necessary to allow an organization to not only accommodate new product demands but adapt to new technologies and new business requirements as they arise, then this would qualify as new tricks as many classic SIM products have rather fixed data models and inflexible workflows. It’s not the only new trick that would have value, but it is a new trick. And it’s a new trick that HICX Solutions brings to the table with their SIM solution. More on this later.

HICX, which stands for Harmonize, Integrate, Control, and eXchange, is a relatively new SIM offering (even though it has been in development since 2004) that not only addresses the classic SIM sweet-spots, but also hits a few new ones that can bring significant value to your organization if properly implemented and utilized. But let’s back up a bit.

In addition to classic SIM, the HICX SIM platform addresses each of the following areas, which, with the exception of MDM, are all addressed by most current SIM platforms:

  • OnboardingHICX is not the first SIM provider to have a comprehensive on-boarding solution, and won’t be the last, but they are one of the few that recognizes the absolute criticality of a good on-boarding process as effective SIM is 100% dependent on good, complete supplier data — which is dependent on the supplier providing that data to you on a timely basis. This is, of course, dependent on getting the supplier on-board not only with your efforts but the systems you use to collect the data. As a result, effective on-boarding is key.
  • Master Data ManagementWhile many SIM solutions manage data, most can’t serve as your MDM (Master Data Management) repository. However, the HICX solution can. This is important since most Supply Management solutions outside of the ERP space do not have MDM capabilities. But MDM is the key to good supplier and supply management initiatives as every initiative — analysis, modelling, payments, reporting — requires good data. And since the ERP is usually so tightly locked down, and such a mess, you rarely get the good data you need out of it.
  • Performance ManagementThe whole point of collecting good information is to help the organization effectively manage the supply base and improve both organization and supplier performance. As such, this was the first major piece of functionality offered by SIM providers and one of the staples that should be offered by every SIM provider.
  • Compliance ManagementA critical part of performance management is compliance management. It doesn’t matter if your supplier can produce the product 10% cheaper if they do so using a chemical that is banned under RoHS and your product would be confiscated if you tried to import it. Compliance is critical. Compliance with regulations and directives. Compliance with agreed to processes. Compliance with ethics. So you definitely need good compliance management capabilities.
  • Integrated Supplier PortalThe best way to get the data is directly from the supplier, and the supplier is only going to buy-in if the portal is easy to use and integrated. If the supplier has to go to a separate page for each request, with a different login, workflow and UI, the supplier is going to start boycotting your tools and your initiatives faster than the hammer drops.

Moreover, in a few of these areas, and MDM in particular, the HICX solution adds a few tricks of its own. What tricks? Come back for Part II.

SIM? Is It Old News or a Shiny New Pair of Shoes? Part II

As per our last post, SIM (Supplier Information Management) is a mature and stable technology with a large number of suppliers not only providing the tools and best practices to manage supplier life-cycles, but to manage risk, compliance, receivables, and even spend repositories for spend management. It’s almost a commodity in the Supply Management Space, and an acquisition thereof is not likely to get baby that new pair of shoes anytime soon. Or is it?

As great as they are, most SIM products — stand alone best-of-breed or integrated suite offerings, have at least one weakness — and often two. In particular, the data model and the workflow. Just like early spend analysis solutions were often tied to one, rigid, UNSPSC data model, most current SIM solutions are also tied to one, rather rigid, data model. In addition, most of those solutions with some SLM (Supplier Lifecycle Management) also have rigid workflows.

This worked well when business processes were predictable and stable and corresponded to products with long life-spans. But the times they-have-a-changed. These days, product life-spans are measured in quarters, and not years, if we are lucky. Associated processes change to not only accommodate the new product demands but to adapt to new technologies and new business requirements. If the workflow can’t adapt, the capability, and overall usefulness, of the tool is limited.

A SIM product that could not only allow a user to define, and redefine, data models as necessary but define, and redefine, workflows as necessary would offer more value than current SIM platforms. And if that product could also maintain full audit trails, which not only track data changes but model and workflow changes, and insure that old records and workflows can still be seamlessly accessed when the data model or workflow changes, then that would be even better.

And if that SIM product went even further and allowed for dynamic organizational, supply base, and user-defined hierarchies, that would be icing on the cake. Supply Chains are not boring because they are not static. They are constantly changing. The supply chain can not only change from product to product, but batch to batch as a primary raw material or part supplier runs out of material, becomes unreachable due to a political or natural disaster, or simply gets greedy and forces the higher tier supplier to find a new source. A good SIM solution will allow the supply chain map to evolve in real-time as the supply chain evolves. Moreover, with acquisitions, mergers, and spin-offs being the normal modus operandi for many businesses, a SIM solution that can easily adapt the organizational data model is also required. Finally, for maximum productivity, a user needs to be able to maintain their own view of the supply chain, back and front, relevant to them. They need to maintain their view of the relevant multi-tier supply base and the relevant hierarchies in their organization that they have to report to and serve.

In other words, a SIM tool that allowed for a truly dynamic data model, workflow, and supply chain organization map could bring a new wave of value to a modern Supply Management organization and the individual with the foresight to acquire such a tool might just get baby a new set of shoes. But is there such a solution?

Stay tuned!