Category Archives: Supplier Management

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!

Don’t Confuse Centralized Sourcing with a Centralized Sourcing Model

A recent article over in S&DC Executive on “The Four Vs of Fixing a Decentralized Procurement Model” noted that implementing a centralized model from nothing is no mean feat and then presented the Four Vs” as a good starting point to begin their path forward to centralization of selected spend categories. Centralization of spend is a necessary step on the path to a centralized sourcing model, but that’s all it is – a step.

In order to have a centralized sourcing model, you have to centralized:

  • Talent,
    all of the Sourcing and Supply Management Personnel have to be in the same business unit
  • Technology, and
    all of the operations, even if they are decentralized all over the world, need to run on a common base technology platform
  • Transition,
    all of the processes need to be migrated to common sourcing and supply management processes, with local sourcing only taking place on categories that are truly local (otherwise, sourcing should be center led)

Now, when you are transitioning processes, you should start with sourcing and procurement, as this one-two punch will give you the biggest bang for your buck. The application of good advanced sourcing techniques to categories never sourced this way, or to significantly larger spend volumes, will typically identify savings opportunities in the 10% to 12% range. Then, good procurement systems will make sure that the savings are captured by preventing maverick spend (if the spend has to go through the system and appropriate rules are in place) and making sure the invoices match the POs which will need to match the contracted rates.

And the first step in a good sourcing process is spend analysis, which, if you want to get it right, does require:

  • Visibility,
    into all of the spend in the category being sourced
  • Variance,
    on the spend between sites (which will give you a quick estimate of savings potential)
  • Velocity, and
    to savings which results by choosing categories where contracts are expiring or have expired and where there will be little resistance
  • Value.
    generated from the process in a way that can be measured, tracked, and reported to the CFO.

The four V’s covered in the article are indeed a good starting point on your journey to centralized the sourcing process, but that’s just one aspect of transition, and it doesn’t even address technology or talent, two key factors in the centralization of a Supply Management function.

What The A-Team Can Teach Us About Supplier Negotiations, Part II

Today’s guest post is from Mason Lee, Manager of the Strategy and Operations Practice at Archstone Consulting, and Matt Kucharski, a Senior Consultant in the Strategy and Operations Practice at Archstone Consulting, a division of The Hackett Group.

In Part I, we discussed how the Hackett Group’s point-of-view on Strategic Sourcing Negotiations is that it is a team effort, and that you should be sending in your A-Team. We also overviewed the role of “Face”, the Frontman. Today we will discuss the rest of the roles.

“B.A”. Baracus – The Muscle
When all else fails, sometimes you need to bring the pain and, to do that, you are going to need some Muscle. “B.A”. pities the fool who takes NO for an answer. At the negotiations table, people often have a tendency to stop when they first hear that word. If you want to maximize the result of your negotiation, be sure to bring your “B.A”.; his role on the mission is to handle challenging topics like price. Just make sure that you have enough ammo (fact-based analysis) to give him the confidence to negotiate aggressively.

While supporting our client through their negotiations with a major Hotel chain, both parties were far apart on price. The hotel representative continually stated that the room rates offered were the best they could do and insisted that they did not have visibility into our client’s historic spend and stay volume. Armed with analysis, our “B.A”. presented the client’s historic data and proved more aggressive pricing was warranted if the chain desired to keep the business. As a result of providing proper ammo and “B.A’s” inability to take no for an answer, an incremental 15% savings was achieved.

“Howling Mad” Murdock – The Unconventionalist
In many circumstances, it is impossible for a sourcing professional to know as much about the category in question as the subject matter expert they are supporting. In these circumstances, do not be afraid to bring in “Howling Mad” Murdock, your subject matter expert, to help you develop a creative approach and gain credibility as a result of their knowledge. Since some subject matter experts may not be experienced in negotiations, it is valuable to conduct a preparation session with the individual in order to gain alignment on the objective; if you just turn them loose, you never know what may happen.

During the course of lengthy negotiations between our client and HVAC providers, progress was at a standstill. Our client was facing an increase in equipment pricing from all engaged providers. Out of conventional options, our “Howling Mad” Murdock saw an opportunity to expand the scope of the negotiations and bring HVAC services into the mix. By combining equipment and services, our client was able to contract with a single supplier for all their needs and realize 20% in savings.

Hannibal – The Tactician
During the course of negotiations it is important to observe and proactively modify your plan based upon the actions of the supplier. “Hannibal” knows how to do this best. After establishing your preliminary strategy, it is crucial to be able to modify your ground-game based upon what you observe. Is a supplier representative highly analytical? Time to bring out the reports and quantitatively demonstrate where you stand. Is the supplier agreeing to everything? Maybe you have not asked for enough and need to recalibrate.

During negotiations with a German-based metals supplier we hosted, company representatives clearly believed they had won the business, were stonewalling, and were engaging in side conversations at the table. Our “Hannibal” knew it was time to act, calling for a break. During the pause in action, the team revised tactics and sent in the Sr. VP (who had been previously quiet) with a stern message and strong proposal. Our “Hannibal” also decided that only the Sr. VP should speak while the rest of the team remained silent and stoic to reinforce the seriousness of the proposal and shutdown cross-talk. The result of “Hannibal’s” plan was an additional savings of $500K.

Conclusion
The next time you reach the point of Supplier Negotiations it is of the highest importance that all planning, strategizing and due diligence have been completed before attempting to channel the characteristics of the A-Team. A great negotiations team should have the ability to leverage the expertise of “Hannibal”, “Face”, “Howling Mad”, or “B.A”. in order to capitalize on the unique elements that arise. At the end of the day, you’ll “love it when a plan comes together”.

Thanks Mason and Matt for this great two-part post!

What The A-Team Can Teach Us About Supplier Negotiations, Part I

Today’s guest post is from Mason Lee, Manager of the Strategy and Operations Practice at Archstone Consulting, and Matt Kucharski, a Senior Consultant in the Strategy and Operations Practice at Archstone Consulting, a division of The Hackett Group.

From 1983 to 1987, The A-Team delivered five seasons of action-packed episodes to its cult following. The ex-U.S. Army Special Forces unit, turned mercenaries, were constantly on the run for a “crime they didn’t commit”. The four “soldiers of fortune” who made up the team were Colonel John “Hannibal” Smith, Lieutenant Templeton “Face” Peck, Captain H.M. “Howling Mad” Murdock, and Sergeant First Class Bosco “B.A”. Baracus. The sitcom has left its mark on popular culture through its iconic van and catchphrases. But the creators of the A-Team were unlikely to be aware that they were also providing us with valuable lessons in Supplier Negotiations.

Supplier Negotiations are a critical step within the Strategic Sourcing process. After profiling a category, developing sourcing strategies, and engaging the market, it is time to more personally engage your potential future state supplier(s). The Hackett Group’s point-of-view on Strategic Sourcing Negotiations is that it is a team effort. Your A-Team should be comprised of individuals with different skill sets in order to increase its strength and ability to adapt.

“Face” – The Frontman
“Face” had a knack for making friends everywhere. “Face” was the master of the win-win, excelled at breaking the ice, and had an ability to get both parties feeling good. On your negotiations team, “Face” is the persuader and consummate influencer of the group. Use your team’s “Face” to open up the meeting and set the tone or when negotiations get rocky, consider channeling your inner “Face” to diffuse the situation.

In the show, “Face” also had a knack for scrounging up whatever resource the team needed no matter where in the world the team was. You can apply this invaluable ability in business. When negotiating with incumbent suppliers, chances are that there are opportunities for you to become a better customer. Give your incumbent the opportunity to constructively communicate what is not working optimally for them then send your “Face” back into your organization to locate a solution.

We had a negotiation in which our supplier and buyer were equally frustrated with each other (to the point of shouting and nearly ending the relationship) because the supplier was missing orders and the buyer’s orders kept changing. Our “Face” intervened, calming everyone down and eventually helped the supplier revise its planning systems all-the-while also going back into her buying organization and securing commitments to provide better forecasts.

Come back tomorrow for Part II!

Thanks Mason and Matt!

Why You Need a Master Data Strategy to Properly Do Supplier Information Management

Supplier Information Management is more than just buying a Supplier Information Management (SIM) solution and plopping it into your data centre. Much more. But yet, it seems that some people — anxious to deal with the visibility, risk management, and supplier performance issues facing them — believe that merely obtaining a SIM solution will solve their problems. A proper solution properly acquired, properly implemented, and properly used will go a long way to increasing supply chain visibility, enabling risk management and mitigation, and providing a solid foundation for supplier performance management, but the mere presence of such a solution in your supply management application suite is about as useful as a drill in the hands of a carpenter holding a nail.

You see, Supplier Information will never be restricted to the SIM system. Supplier information will always be present in the ERP system used for resource planning and manufacturing, the accounts payable system, the transactional procurement / procure-to-pay system, the sourcing suite, the contract management system, the risk management solution, the performance tracking and scorecard system, the sustainability / CSR solution, and other systems employed in your organizational back-office to manage the different supply management AND business functions. Supplier data is everywhere, and without a strategy, just shoving it into the SIM system won’t help.

In order to get a proper grip on supplier information, the organization needs a master data strategy that dictates the sub-records that define a supplier record and which system holds the master data for each sub-record. What do we mean by this? For example, the ERP may hold the core supplier identifier sub-record that defines the unique supplier number in your system, the supplier name, the supplier’s tax number, and your customer number in the eyes of the supplier and be the system of record for this information. The accounts payable system, referencing the supplier by it’s supplier number, may be the system of record for the headquarters address and payment address. The contract management system may be the system of record for the list of employees authorized to sign contracts on behalf of the supplier. The CSR system may be the system of record for the suppliers’ carbon rating, third party CSR rating, and your internal sustainability rating. And so on.

If this is the case, the SIM system, to truly be a SIM solution for your organization, needs to integrate with all of these systems and encode the proper rules to resolve data conflicts as required. Specifically, three things need to happen. First of all, whenever a system of record updates data, that data must be pulled into the system and overwrite the existing data. Secondly, anytime data is updated in the SIM system for which it is the system of record, that data must be pushed out to all systems that use it. Thirdly, and this part is sometimes overlooked, whenever data is updated in a system of record, the data not only needs to be pulled into the SIM system, but it then needs to be pushed out to any system that also uses that data. The SIM solution is the centre of a hub-and-spoke data architecture — all updates flow in, and all updates flow out.

This can only be properly accomplished with an appropriate Master Data Strategy. Don’t overlook it. Otherwise your SIM solution will turn out to be a Stuck In Muck solution. An SI is not kidding about this.