Category Archives: Supplier Management

Stay Hip with the Program with Hiperos

Last year, I told you how you could Get Hip with Hiperos, an “Extended Enterprise Management” platform that allows you to manage your risk, performance, compliance, sustainability, and supplier information through a single portal that they dubbed R3. Knowing that you can’t stay still in the quickly evolving supply chain space (and knowing that there were lots of point players with deeper solutions in each), they’ve been hard at work on R4 since that time. Last week, I had the chance to do a detailed review of R4, and am pleased to say that they did a great job and that a number of significant improvements in R4 greatly increases the value the solution offers.

In particular, five improvements in the Hiperos R4 platform commanded my attention:

  • In-Line Collaboration
    It’s a pretty simple idea, but the fact that you can associate a discussion thread with any element of the system is quite powerful. No longer do you have to search separate discussion forums or, even worse, try to track down out-of-system e-mails to find out what happened, or why part of a questionnaire is still blank, or why a template was modified.
  • New Workgroup Capability
    Hiperos recognized that true performance, compliance, and sustainability is collaborative, that single-directional Q&A is not collaboration, and built in a new discussion-based workgroup capability that lets buyers, suppliers, and other involved parties collaborate through a centralized, integrated environment.
  • The Program
    Since compliance, risk management, sustainability, and performance all revolve around programs designed to satisfy a regulatory initiative, emerging threat, or a green goal in the real world, in the Hiperos platform, it’s now abundantly clear that everything revolves around the program, which is very easy to define and manage. There are three ways to create a new program. Instantiate it from a template, load it from a properly structured Excel file, or define it from scratch in the tool — which will walk you through its creation step by step in a simple 7-step process. (Outline Detail, Organizational Units, Questions & Documenation Requirements, Dates, Individual Organizational Unit Reqirements, Measurements, and Reviewers.)
  • Out-of-the-Box Compliance Programs
    They have over 60 compliance templates built in, with heavy support for the finance (BITS, etc.) and health-care sectors (HIPAA, etc.).
  • Supplier Focus
    The supplier portal is almost as extensive as the buyer portal. Suppliers get their own set of dashboards, which they can do deep reporting dives into to find out where the measurements came from and how they were calculated, relationships, which they can manage, programs, which they can track, and communities. Truly enabling the supplier on your platform goes a long way towards supplier adoption. The only functionality suppliers don’t get is Supplier Information Management (SIM) and Application Administration (unless, of course, they buy the platform themselves).

The system also includes a number of other improvements, particular in the area of SIM (where you can capture a lot more information in out-of-the-box templates and define your own data elements to be tracked), reporting (where, in addition to dozens of reports in each area that you can use out of the box, you can also create your own reports using an improved wizard that walks you though a simple 6-step report definition process), and built-in KPI and SLA templates available for your use (there are over 6,000 that can be accessed system wide). Furthermore, the dashboards are more than just pretty gages, they also contain a quick summary of your action items (open evaluations, pending approvals, etc.); the relationships you are responsible for; and current risk assessments, in-process supplier profiles and compliance controls. And while other providers might still go deeper in specific areas (though none go deeper in all areas), the breath of integrated capabilities put them in a fairly exclusive club as I have only seen applications displaying a similar breadth and focus in enterprise management from Aravo, CVM Solutions, Rollstream, and, in the healthcare and agency management verticals, Vendormate and Decideware.

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Sourcing Innovation Welcomes EC Sourcing Group as New Lead Sponsor

Sourcing Innovation is pleased to welcome EC Sourcing Group, a leading provider of Sourcing, Vendor Management, and Document Management solutions for the Mid-Market. Established back in 2001, EC Sourcing Group has spent the last nine years quietly building out a very respectable sourcing and spend management suite as they amassed a large, global, customer base (of almost 100 customers, a number they are on track to pass before 2010 is up). Formed by strategic sourcing professionals with decades of experience running projects in the CPG and Retail space, EC Sourcing Group is also able to offer strategic sourcing services where they bring their wealth of sourcing experience to bear.

As per my post earlier this month on how EC Sourcing Makes Sourcing Easy and Affordable, EC Sourcing Group offers a full e-Negotiation suite with RFX, Auctions, Project Management, Document and Contract Management, and a brand new Corrective Action Reporting Module, which is pretty snazzy. Plus, they are in the process of internationalizing and simplifying the platform that is already used by a number of multi-national clients. The platform currently supports (four) 4 European languages, will support at least six (6) by the end of 2nd quarter, and will also support at least two (2) Asian languages by the end of the year, including Mandarin. To make their SaaS offering even easier to use, they’re currently adding a new quick-access layer to the existing UI that will allow more advanced users to do basic tasks even quicker and easier than before. Finally, as the founders come from a strategic sourcing background (as sourcing managers in retail and CPG), EC Sourcing Group also offers sourcing and spend analysis services, and maintains a network of consulting partners who they can refer to you if you encounter a scenario that requires specialist sourcing expertise.

In my last post, I walked you though the basic e-Negotiation platform. Today, I’m going to describe their new Corrective Action Module that can be used by all affected parties to track, report on, and resolve issues that can arise in the delivery of goods and services. The importance of being able to identify, track, report on, and correct issues quickly, which is often overlooked by sourcing groups who have not yet graduated to best-in-class status, cannot be underestimated. Savings identified during the sourcing process are only potential until they are realized — they are not realized until they are captured. These savings are not captured until the supplier delivers at the service level committed to and the buying organization pays at the price committed to. And while an EIPP/P2P system that makes sure invoices are paid at contracted rates and that maverick spending (that erode rebates) is stopped dead in it’s track is a good start, as it can be configured to make sure you don’t overpay, if the supplier continually delivers bad shipments, these “savings” will soon be eaten up by the cost of dealing with repeat problems.

With EC’s solution, anyone can report an incident as soon as it’s discovered and start the tracking and resolution process right away — the buyer, the receiver at the warehouse, the engineer who discovers the components are all faulty, etc. And once the incident is created, it’s added to the repository where it gets compared against alerts, repeat occurrence triggers, and running reports. The right person will be immediately notified when a priority shipment is botched, if the supplier has been late 3 times in the last 3 months, or if the number of incidents this year has entered the double digits — or if anything else of interest happens. The alerts, triggers, and reports are all 100% user customizable and can be defined by supplier, location, reason (customizeable 3-level reason codes), product or service, item number, time-frame, key-words, status, and other custom fields defined on your custom corrective action report templates.

The template-based solution allows each organization to create it’s own corrective action report templates appropriate to the goods and services it is buying and streamlined for creation by the individuals who will be receiving and working with the products and services. To report an incident, all an end-user has to do is log-in, select the template, fill out the appropriate fields, and submit it. Then, depending on organizational rules, it goes to an administrator/buyer (who is alerted that it is ready) for review, who then releases it to the supplier; or it goes straight to the supplier, who is given a fixed amount of time to respond. If the supplier doesn’t respond on time, the supplier is reminded and people higher up the organizational hierarchy are alerted.

It also has all the standard features you’d expect in terms of template creation, incident status tracking, user-defined report generation, and export to Excel and PDF, as well as an audit feature that lets you find out who did what and when. That way, if a template, or data is changed, and something doesn’t seem right, you can examine the history, and take corrective action if you need to. It’s a great way to kick-off your Supplier Performance Management program.

So please join me in welcoming EC Sourcing Group. It’s forward-thinking companies like them that keep this blog, and the education it gives you, going!

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Decideware: Agency Performance Management Experts

DecideWare, an Australian Company (with offices in the US and the UK) that dubs itself as a Supplier Performance Expert with a Scorecard Deployment Service, offers a niche Vendor Management Solution that excels in managing certain types of vendors. Specifically, their niche solution, which started out as a niche play in HR Management, is used globally by a number of Fortune 500 Multi-Nationals — which include P&G, Dell, Pfizer, Target, and Wal-Mart — to manage their vendor relationships, and their Agency relationships in particular.

Their uniquely designed solution — which allows for simultaneous 360° degree assessments and self-assessments between buyers, agencies, and vendors (which allow a buyer to rate an agency who can self-assess while it rates the buyer and a third party vendor, such as a print shop, which can rate the agency in turn) — is built on the ultimate application of the KIS(S) (Keep It Simple, Stupid) philosophy. Knowing that their target market are not very technically sophisticated, they opted for the 80% solution, free of bells and whistles, with easy SaaS deployment and an easier-to-follow step-by-step methodology for building vendor capability repositories, scopes of work, vendor assessments, and reports that allow vendor performance to be quickly determined, performance gaps immediately identified, and a vendor’s relative performance graphed against their competitors.

While the base capabilities may not exceed the capabilities of a standard RFX tool with extensive survey creation (which they have), process management (which the tool is built around), and reporting capabilities (which are fairly extensive), the extensive amount of industry knowledge they’ve built in for their niche markets is impressive. They understand that organizations have units, geography, account structures, account types, locations, functions, and accounts; that profiles need criteria, contacts, priorities, questions, and documents; that accounts have definitions, assessors, and reviews; and that business people in non-technical areas of the business like lots of ready-to-use pre-packaged reports and easy-to-use drop down interfaces for drilling into performance data and performing gap analysis. The tool literally walks an administrator through the definition of a vendor capability database, a scope of work, and an assessment step-by-step. (And the tool is even more streamlined for the assessors.)

All of these tools have all of the basic capabilities, and a few advanced ones, that you would expect in a scorecard-based on-demand performance management tool. The vendor capability database, which is a streamlined Supplier Information Management (SIM) tool, allows you to approve supplier (agency) representatives to manage their supplier profiles. The scopes of work (or, for us in North America, statements of work) module allows you to define the services, initiatives, and deliverables that are required, broken down by organizational unit, type, and geography, as well as the details of the quotes required (line items, fees, expenses, etc.), with fees that can be broken down by type and include overhead rate, profit margin, and total hours and benefits for FTE quotes. And the assessment creator, which is part of their Relationship Optimizer, includes all of your standard RFX Survey creation features including configurable variable weight scales, the ability to include quantitative measures, and the ability to define weightings to each section and each component question. The tool contains significant support for comments and detailed explanations for questions as the goal is to take the qualitative and fuzzy and generate numeric scores that are quantitative and precise which can be used to generate actionable intelligence for semi-annual, or quarterly, performance reviews.

In summary, while a number of providers might offer more powerful Supplier Information Management (SIM), RFX, Reporting, or Supplier Performance Management (SPM), the tool is exceptionally well defined for the niche Vendor Management Spaces DecideWare is going after. And their client list, most of whom have rolled out the solution globally, speaks for itself — as will the case studies from Pfizer and Dell that they will be releasing in the near future.

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Avoid the Five Traps of Performance Measurement

Performance measurement, the foundation of supplier performance management, scorecards, and outsourcing deals, is a key to supply chain success but, like everything else, it has to be done right. That’s why I enjoyed the article on “the five traps of performance measurement” (subscription required) that the Harvard Business Review published late last year. If you avoid your traps, you greatly improve your chances of success.

  • Measuring Against Yourself
    While you should measure against past performance and goals to insure that you’re improving, what ultimately matters is how well you’re doing against the competition. And besides, the historical numbers or estimates could be inaccurate (due to poor data collection or manipulation).
  • Looking Backward
    While you should look at year-over-year performance comparisons, beating last year’s numbers is not the point. The goal of performance management is to insure that you’re making the right decisions and following the right processes now, and not following the decisions and processes that were right for last year (and not now). Thus, you should focus on measures that lead, rather than lag, revenue and profit. For example, a smart healthcare insurer, who realized that the sickest 10% of its members accounted for 80% of its costs, offered customers incentives for early screening because preemptive treatments could save it a bundle and increase overall profits.
  • Putting Your Faith in Numbers
    The numbers are meaningless if they’re not accurate (and include good surveys as well as bad), not anonymous and independent, and, most importantly, not relevant to the goal you want to achieve. For example, the NPS (Net Promoter Score), is only relevant if recommendations play a dominant role in a purchase decision. So while it may be quite relevant to a baby-food manufacturer, it may not mean anything to an electricity supplier. An even better example is the application of financial metrics to nonfinancial activities. For example, to avoid outsourcing, IT, HR, and Legal cost centres often create meaningless ROI numbers.
  • Gaming Your Metrics
    Misguided pressures (billable hours for law firms, reserves for oil companies, security valuations for investment companies) and poorly thought out compensation packages can cause many executives and employees to try and “pad” their numbers to get results which are optimal for them but not for the business, which results in skewed metrics. Also, someone who has learned how to optimize a metric without actually having to perform will often do just that. You have to do your best to insure pressures and incentives align with the goals your metrics are trying to capture and then work with the fact that there will always be a select view who will still try to game the metric anyway. One way to do this is to diversify your metrics (so that they capture different aspects of your goal) as it is a lot harder to gain multiple metrics at once.
  • Sticking to Your Numbers too Long
    As your business evolves, your metrics have to evolve with the business. Before defining your metrics, be very precise about what you want to access and what the success criteria is so that you can not only re-evaluate your metrics in light of the goal on a regular basis, but also instantly recognize if the metrics need to change because the definition of the goal you are trying to measure has changed.

Finally, a really good assessment system must bring finance and line managers into some kind of meaningful dialogue that allows the company to benefit from both the relative independence of the former and the expertise of the latter. And if you avoid these traps, the chances of your performance measurement system meeting this requirement are greatly increased.

But of course, measurement is only the first step. The next step is to use those measurements and transform your way to value. And as I pointed out in my last post, you can start with The Hackett Group‘s current study.

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Purchasing 0.3

Is Purchasing Magazine trying to give me a heart attack? Isn’t it enough that they refuse to acknowledge the presence of Sourcing Innovation (which, as you know, is one of the few blogs that brings you real supply management content you can use day-in, day-out six days a week, every week) which they dropped from their “News from the Web” feed years ago (when I first ripped apart one of their sloppy articles)? After reading a few of their recent articles, my blood is boiling!

That’s right! That bullcr@p that Spend Analysis is expensive (see last Thursday’s post) is just the tip of the iceberg. And even though many of the quoted individuals had good advice to share, in the end, Purchasing’s recent article on “Purchasing 3.0” is just as bad and filled with absurdities … which start on the first line! (If Purchasing had their way, we’d regress to Purchasing 0.3!)

Have you used Social Networking to build supplier relationships?
I Hope Not! Since all Facebook is good for is Facebook parties that result in “Million dollar homes being trashed” (Metro.co.uk) …
If you want to build drinking buddies relationships, yes, Facebook will work great … but what you want is productive and professional relationships where you can work together to make each of your businesses better.

Are you sure you’re using Excel effectively?
You can’t use Excel to manage your supply chain! How many fracking times do I have to say it? Spreadsheets are bad strategy, prevent innovation, and cost you billions! You’re better off using an etch-a-sketch like the dork in It’s All About the Pentiums (2:54 mark). (And just because it’s still all about the pentiums, baby, that doesn’t mean it should be!)

Do you, uh, Tweet?
Are you kidding me? Hasn’t Twitter Turned Too Many Into Twits already? It appears that Twitter has already made twits out of at least 3 in 10 students! The only things that should go “tweet” are Tweety Bird bird and Rockin’ Robin (Muppet Version).

With the prevalence of ERP systems in large companies, more purchasing professionals … should be focusing on developing advanced database skills.
Uhhm, no. Purchasing professionals should be focussed on learning advanced data analysis skills. This is not quite the same as learning advanced database skills. Purchasing managers don’t need to know how to configure, manage, scale, back-up, restore, and replicate databases … that’s what DBAs are for. Purchasing managers know how to use today’s spend analysis tools, which require them to learn how to build and manipulate cubes through dimension-driven UIs, not how to optimize 4 level nested SQL statements … that’s what the tools do! (And frankly, even your average CS graduate would have a hard time optimizing 4-level nested SQL statements across multiple tables, if they could even write them in the first place!)

The article also promotes the new Microsoft Online Services
which will only work if everyone on the team is using a supported version of Windows. And even then, it might not work. (Furthermore, even though they claim that LiveMeeting works on Safari and Firefox on Mac, even if your system meets all the requirements listed, it often doesn’t.) Mac is around 15% of the market and growing, Linux is on the rise (especially in Netbooks), and a number of organizations still use AIX and UNIX based platforms (which could become popular again if thin-client desktops [e.g. SunRays] take off). Not everyone is in the Microsoft eco-system anymore. (And the majority of supply management systems are NOT built on .NET.)

And then the last paragraph indicates that mobile devices are the answer to requisition approval (to keep projects moving), commodity price updates, and procurement communication!
This is probably the most dangerous message of all, because now we’re in Yes, … but territory. Not all requisitions can be approved on a 3×5 screen. What if there are 20 (or more) line items? What if your system flagged 5 as off-contract? What if it’s an unusual request for a significant amount? You’re going to need more data to make the right decision than you’re ever going to fit on that itsy bitsy teeny weeny tiny Blackberry Storm or Curve. It’s one thing to approve a new laptop or mobile phone for an employee that needs it right away to continue working, but another to approve an order of 10,000 units of SKU XYZ123, when the contract is for ZYX321! Why is the order off contract? Oversight? Have requirements changed? Or is your supplier out of ZYX321 and you need an acceptable substitution right away? And what good is a commodity price update if you can’t see the history and the trend graphs. Unless you’ve already done the analysis and figured out that you should buy when it hits 75 or sell if it hits 100, because you’re hedging risk on the commodities markets, that update is useless. And communicating in 140 byte tweets? That would just make you a Twit!

Let me finish by saying that I’m so glad that you, dear reader, are an educated, informed, and intelligent individual who would drop this blog from your feeds faster than a hot potato if I ever published anything as ridiculous as what Purchasing and other publications are getting away with these days!

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