Category Archives: Supplier Management

On the Seventh Day of X-Mas … (Strategic Sourcing Success Strategies)

On the seventh day of X-Mas

my blogger gave to me
strategies for winning,
tactics for saving,
five golden rings,
four little words,
tri-focal lens,
two boxing gloves
and a lesson in strategy.

Seven strategies you can use to increase your sourcing success are:

  • Spend Visibility
  • Supplier Performance Monitoring
  • Smart Country Sourcing
  • Collaboration with Strategic Partners
  • Innovation on Demand
  • Empowerment
  • End-to-End E-Procurement

Spend Visibility

It’s not how much you spend, how you store it, how you cube it, or how you report on it – it’s how much you get, how you profit from it, and how you improve on it. (Remember, Spend Matters Not.) It’s all about value, profit, and continual improvement. And that requires visibility — otherwise, you don’t know what you’re getting, whether you’re profiting from it, and what you need to be improving on.

Supplier Performance Monitoring

Supplier Performance Management (SPM) is a business practice that is used to measure, analyze, and manage the performance of an organization’s performance in an effort to cut costs, alleviate risks, and drive continuous improvement. The ultimate intent is to identify potential issues and their root causes so that they can be resolved to everyone’s benefit as early as possible. It’s critical because companies with formal performance measurement programs greatly improve supplier performance across the board. Consider the recent Canada Post case study which found supplier improvements across the board, even in a public sector organization where past performance can’t be used to disqualify future bids in public competitions.

Smart Country Sourcing

It’s not low cost, best cost, or near cost – it’s smart cost country sourcing, which includes home cost country sourcing whenever there is a justifiable value proposition to doing so. Don’t go half-way around the world for something you can get down the street when a single fluctuation in raw material costs, transportation costs, or exchange rates can wipe out a year’s worth of savings and lead to significant losses in the long term.

Collaboration with Strategic Partners

Remember, Collaborate, Collaborate, Collaborate, Collaborate (I, II, III, IV, and V) because two heads are better than one.

Innovation on Demand

Innovation-on-Demand, as summarized in my post on e-Sourcing Forum, is a great way to increase your sourcing success. Enable it by way of collaborative PLM technologies that integrate design-centric technologies like those offered by Akoya, Apriori, and Co-exprise.

Empowerment

And I mean real empowerment, not just lip service. If you’ve focussed on hiring real talent with real EQ, you’ll do better letting them take the initiative than limiting them to only that which you know.

End-to-End E-Procurement

End-to-End e-Procurement, the implementation of e-Procurement technologies that support each step of the various procurement cycles of your organization in a tightly integrated fashion, enables the benefits that early procurement technologies promised, but never delivered, which include:

  • elimination of invoice overpayments
  • transparent organizational costs
  • regulatory compliance
  • increased visibility into supplier performance
  • significantly reduced maverick spending

and 15 more! So, if you haven’t already, download the jointly-authored Sourcing Innovation Whitepaper today!

On the Second Day of X-Mas … (Cost Avoidance Basics)

On the second day of X-Mas
my blogger gave to me
two boxing gloves
and a lesson in strategy.

The first boxing glove that I hand to you, to help you beat down proposed price increases, is market and category intelligence. For those of you who have been following the blogs for a few years now, you’ll recall Charles Dominick’s insights over on Supply Excellence a couple of years back in “Caveat Emptor: Economic Indices Could Be Misleading You” and “Supply Market Assessment 101” where he noted that a single commodity index alone does not justify a price increase (or decrease) for that matter.

To truly understand when the price of a part should be rising (or falling), you have to truly understand the marketplace and the component (and raw material) breakdown of the part you wish to buy. The best way to understand this is with the new category intelligence offerings that are being put forth not just by the traditional vendors (like Ariba Supply Watch) but niche vendors with particular specialities like Denali Intelligence and Power Advocate.

Even when buying refined raw materials, to accurately determine a price you need to know where the supplier is buying from, the relevant cost indices of the raw materials in those regions, the relevant exchange rate between your supplier’s supplier and your supplier, it’s expected stability, the relevant exchange rate between your supplier and you, and it’s expected stability. An increase in the steel index in the U.S. is irrelevant if your supplier buys its steel in China. Also, the cost increase in a commodity can often be offset by a recent currency devaluation. Therefore, your first defense against a commodity price increase is a deep understanding of your should-cost structure, gleaned from good category and market intelligence, which will include a supplier’s cost structure.

The second boxing glove that I hand to you, to help you beat down proposed price increases, is a good strategic sourcing process that you can use to find alternative sources of supply. This process should take advantage of the readily available supplier networks that are out there on sites like MFG.com and ThomasNet Purchasing Tools and should be enabled by cross-functional teams that will allow you to quickly and efficiently work through a best-practice sourcing process. After all, even if there are genuine reasons for a cost increase, but your supplier refuses to collaborate to keep costs down for both parties, sometimes you will need to find an alternate source of supply.

Subscribe … and Take Your Knowledge to the Next Level

As a regular reader of Sourcing Innovation, you’re on a quest to continually expand your knowledge of sourcing, procurement, and supply chain vendors, technologies, and best practices as this helps you to be the best professional you can be. The best way to do that is to make sure you stay on top of the wealth of free information available to you. One way to do so is to check the blog daily and watch for new additions to the sidebar (under “Free Resources“) and the resource site. Another way is to Subscribe. You can receive Sourcing Innovation blog posts in your inbox as well as newsletters, special announcements, and direct links to the latest resources available to you.

In addition, you can also sign up for the Next Level Purchasing Free Purchasing Resources Program which gives you free access to the Managing Supplier Performance course, a new purchasing tips article in your in-box every two weeks, and first access to Next Level Purchasing white-papers, including the 2008 Purchasing & Supply Management Carer & Skills Report.

The last two articles have been quite insightful. In “Cost Reduction Ideas (Beyond Sourcing)”, Charles Dominick, the President of Next Level Purchasing, with the help of Rob Patton of Paladin Associates, outlined four ideas for achieving cost reductions without switching suppliers, including:

  • Ask & You May Receive
    Sometimes your suppliers have cost saving ideas … all you have to do is ask them.
  • Aggregation
    Aggregate your need, especially for a commodity item, with other buyers.
  • Specification Rationalization
    Use industry standard components and standardize on as few as possible.
  • Leveraging the Supply Chain
    If you have multiple suppliers buying the same raw material, consider buying it for them if the combined volume nets a lower price.

In “Supplier Partnerships: Your End of the Deal”, Charles identified four common supplier goals that you can help your suppliers achieve. Helping your suppliers achieve their goals increases their commitment to your needs for cost reduction as a buyer — and I don’t think anyone can say they don’t need cost reductions in today’s market. The contributions you can make include:

  • Reduced Payment Cycle
    Right now, your suppliers are suffering from a credit crunch and most likely hurting way more than you are. Pay them in a reasonable time-frame, and go to the top of their favorite customer list.
  • Reduced Complexity
    Customized reports, unique packaging requirements, and other “special requirements” come at a cost to your supplier (and, ultimately, to you). Eliminating unnecessary services, especially those without value-add, will reduce your supplier’s costs … and yours.
  • Better Sales Forecasts
    This is actually a two-for-one. First of all, providing your supplier with better sales-forecasts will help it insure that it buys only what it needs to make your products. Buying more locks up cash in inventory that it can’t afford to lock up right now, and buying less means it will have to pay more on spot buys. Secondly, you can commit to multi-year deals, which increases your supplier’s confidence in future sales, and revenue–targets. This keeps your supplier on stable footing and keeps you on the preferred customer list.
  • Testimonials
    Suppliers need sales now more than ever. If you will step up and certify the quality and reliability of the supplier to the marketplace, that will increase the supplier’s business and stability. Not only will this make you a favorite customer, but it will decrease your risk that your supplier goes out of business when you need it most.

If you haven’t, I would consider signing up for Next Level Purchasing’s Free Purchasing Resources Program. In my view, there are not enough good quality free resources out there, and you should take advantage of the few there are. And besides, when you consider that the last mailing reached over 97,500 subscribers, you know that it must consistently deliver information that you can use.

The Sourcing Maniacs 2008 Vendor Tour Part 18: SupplierSoft

This post is a bit lengthy, so I’ve broken it into Set-Up and Supply.

Set-Up

Waiter Your pie, sir!
Wakko Thanks!
Wakko dives into yet another pie. A stack of empty pie trays sits beside him.
Waiter Shall I fetch another?
Wakko Most certainly!
Yakko So, not all industries are created equal when it comes to sourcing.
Dot I guess not! I never knew that some categories were so involved!
the maniacs just finished their visit with Power Advocate, an end-to-end solutions provider to the energy and utility industry
Wakko between mouthfuls of Boston Cream Pie
So, where next?
Dot On to the Q’s I guess!
Yakko Quintiq?
Dot Supply chain optimization? That’s too much for Wakko …
Yakko QP Group?
Dot I think they’re consulting.
Yakko You’re right. How about Quadrem?
Dot The marketplace? Maybe.
Yakko I think they also provide solutions and services.
Dot Sounds good. So where are they?
Yakko Good question. I believe they have offices all over the world.
Dot I bet most our sales. Where’s their head office?
Yakko Let me check.
tappity-tap-tap
Amsterdam.
Dot Too bad. They might have been interesting. On to the R’s?
Yakko Rapt?
Wakko between mouthfuls of Boston Cream Pie
Didn’t Microsoft buy them?
Dot I think you’re right. I don’t want anything to do with Microsoft …
Yakko Rearden Commerce?
Dot Back in California … and they’re a little corporate for my taste.
Yakko I’m not ready to go back to the valley either. Resources Global Professionals?
Dot They’re a consulting and staffing services agency, not a consulting and staffing solutions provider.
Yakko Oh. Hmmm.
ring
Yakko Yakko’s Yummy Yams … picture perfect produce …
the doctor Hello, Yakko. You guys looking for someone else to check out?
Yakko We are, actually.
the doctor Great … I just got contacted by SupplierSoft … a new supplier management solutions company … they want to give a demo.
Yakko Will they give it to us?
the doctor I don’t see why not.
Yakko Great! Where are they based?
the doctor The valley.
Yakko We’re not ready to head back to the valley yet.
the doctor That’s okay. They’re 100% SaaS and they will do the demo on-line.
Yakko That sounds good.
Wakko between mouthfuls of Boston Cream Pie
What does doc want this time?
Yakko He wants us to review SupplierSoft, a SaaS company. He says we can do the demo from here.
Wakko Great!
Waiter …
Yakko So, when’s the demo?
the doctor Ten minutes. I’ll send you the details. Have fun!
Yakko Later, doc!
the maniacs prepare for the demo
beep bip-beep-bop boop-bop-bip boop-bop-bip-beip
Yakko Hello?
Mr. CEO Hello. Is this the doctor?
Yakko No, this is Yakko.
Wakko I’m Wakko.
Dot And I’m Dot.
Mr. CEO The maniacs? Don’t you work for …
Yakko Not since last year.
Wakko We were wakko’d. Get it?
Mr. CEO Sorry to hear that. Anyway, I’m expecting a call from the doctor …
Yakko Something came up. Doc can’t make it. He asked us to take the demo on his behalf.
Mr. CEO Well …
Dot Don’t worry. We’ll convery everything we learn!
Mr. CEO Do you work for the doctor?
Yakko We don’t work for anyone at the moment.
Dot So we’re doing a vendor tour …
Wakko learning as much as we can about the sourcing world …
Yakko and passing on anything useful that we learn to the doctor …
Mr. CEO That’s interesting.
Dot Very. We’ve learned a lot!

Supply

Yakko So, can we have the demo?
Mr. CEO Uhmm, sure. Where should we start?
Yakko Well, Doc literally just asked us to do this ten minutes ago, so we haven’t the first clue about you. We didn’t even know you existed until then!
Mr. CEO That’s probably because we’ve been in stealth mode developing our solutions and working out the kinks with our beta customers until very recently. I don’t believe in vaporware, and since we’re a pure SaaS solution, I wasn’t going to launch a product for mass-market adoption until it was ready.
Yakko So how long have you guys been around?
Mr. CEO I started the company last year …
Yakko and you already have a product ready for the mass-market?
Mr. CEO We have four actually …
Dot Are you serious?
Mr. CEO Yes. Since we built our solution on the Salesforce platform …
Dot Isn’t Salesforce CRM? I thought you were in the supplier management space.
Mr. CEO We are. There’s actually a lot of similarity between CRM and SRM …
Yakko But one solution is focussed on customers and the other solution is focussed on suppliers …
Mr. CEO That’s true, but what you have to realize is that both platforms require the same foundation …
Dot … which is?
Mr. CEO Extensive information management capabilities. CRM requires you to maintain an interaction history with the client. Those interactions are captured and categorized as data. SRM requires you to maintain an interaction history with the supplier. Those interactions are also captured and categorized as data. Fundamentally, from a technical standpoint, they’re almost identical solutions … the only real difference is one solution faces the downstream customer while the other faces the upstream supplier.
Dot But what about SPM? (Supplier Performance Management) There’s no CPM equivalent …
Mr. CEO You’re right. But the foundation is, again, data.
Yakko So you’re telling us it really is possible to build an extensive supplier management platform on Salesforce?
Mr. CEO And then some!
Yakko Ok, I’ll bite … why would you do so?
Mr. CEO Salesforce is a scalable, secure, reliable, and proven platform with 47,000 customers and 1.2 Million users. They’ve spent over 150 Million on their infrastructure. It allows us to offer our customers big enterprise scalability and reliability from day one … and do so at small company prices. How many companies in the supply management space can say they’re hosted on a 150 Million infrastructure?
Yakko Uhmm … uhmm … uhmm …
Mr. CEO That’s my point!
Yakko So what solutions do you offer?
Mr. CEO We currently offer Supplier Management, Environmental Compliance Management, Supplier Corrective Action Management, and Supplier Audit Management solutions with embedded process and project management. And we have a Supplier Help Desk Application in beta.
Yakko I guess we should start with the Supplier Management solution.
Mr. CEO As you can see, it’s an extensive supplier information management solution that captures a complete supplier profile; contacts based on roles; diversity, quality, and environmental certificates; insurance certificates; non-disclosure agreements; documents; meetings and meeting notes; projects; and custom data-capture requirements. In addition, you can tag items, include custom links, and search your entire supplier database based on multiple filters. It also has fairly extensive reporting capabilities, and a customizable dashboard for the home-page which keeps track of your tasks, calendar, waiting approvals, and the reports of your choice.

In addition to being able to define your own suplier data model, it supports multiple sections for each information type, it supports attachments whereever you need them, customizable step and task-based workflows by user or role, and an instantly accessible supplier view from anywhere in the supplier management application.
Yakko What does that do?
Mr. CEO It allows you to see what the supplier will see at any time.
Yakko Well, so far it sounds similar to what Aravo and CVM Solutions offer.
Mr. CEO There are similarities, as they also offer supplier information management solutions, but we feel we have some significant differences that will make our platform more attractive to our target market.
Dot Like what?
Mr. CEO The stability of our underlying platform, our low-cost, and, most-importantly, the tight integration with our other modules, which include not only the environmental compliance (which we believe allows us to match Aravo’s capabilities) and the supplier audit management (which we believe is better than CVM’s capabilities), but our rather unique corrective action management and help desk solutions.
Yakko Let’s move on. I’m still waiting to be suitably impressed.
Mr. CEO No problem. As you can see, our Environmental Compliance Solution comes with extensive environmental data collection capabilities at the Bill of Material (BOM), part, and raw material level; the ability to track all of the relevant regulations and regulatory exemptions; complete specifications, parts, component materials, and material declarations; substances and substance declarations; and AVLs.

It supports standard PDF forms that can be filled out by suppliers and uploaded into the system by way of XML extraction and automated data load; it validates and verifies all data on definition and import; it can generate user-defined alerts whenever a substance, material, part, or BOM is not in compliance; and in addition to a standard set of compliance reports, it allows users to define their own.
Yakko So you’ve more or less matched the lesser-known offerings from EcoVadis and Co-exprise.
Mr. CEO Well, I’m not really familiar with those solutions, but I think our solution does what an environmental compliance solution needs to do. And it integrates with our Information and Audit Management solutions, which we feel is a big plus.
Yakko Interesting. Show us your Audit solution.
Mr. CEO No problem. As you can see, it builds on our information and environmental compliance solutions and allows for collaboration between our customer, their suppliers, and third party auditors. It also allows for the definition of corrective action plans and projects to implement and monitor those corrective action plans, which is based on our integrated workflow and project management capabilities.
Yakko Not bad at all. So how did you build it all so fast?
Mr. CEO We took advantage of everything Salesforce had to offer and built it in their Apex language, which essentially wraps Java in a rapid development language designed to take full advantage of the multi-tenancy Salesforce.com environment. We also used good coding practices and created our applications in an object-oriented manner that allowed us to re-use common components, which could be tested once and re-used wherever needed.
Yakko So what are your plans?
Mr. CEO Eventually, we plan to be the Salesforce++ of the SRM world.
Wakko But I thought you said you used a Java-Based language?
Mr. CEO Ha, ha. Good one, Wakko.
It’s an ambitous plan, but one we believe is ultimately realizable. Of course, we’re starting small. Right now, we’re focussed on manufacturing and distribution.
Yakko Why?
Mr. CEO That’s where we see the biggest pain, and the biggest benefit of our solution.
Yakko How so?
Mr. CEO Consider a large manufacturer sourcing 10,000 parts from 500 suppliers who has to get the lead out to comply with RoHS. How are they going to do this without our solution? They’re going to use spreadsheets. This is going to result in hundreds of thousands of spreadsheets. How do you analyze that many spreadsheets to find out which parts from which suppliers are not in compliance. And, more importantly, how do you insure that they get to the right person at the supplier who you are certain will fill them out properly without a central supplier database with up-to-date contact information? You don’t … and you scramble a very large team on a very large project, that takes way too long, trying … and risk huge losses from product recalls if just one part slips through.
Yakko And with your product …
Mr. CEO You select the parts that need to be in compliance, all of the suppliers get the PDF forms e-mailed to them, once the form is filled out it is automatically uploaded into the system, and you can run a report at any time that tells you how many parts are compliant, non-compliant, or in an unknown state because the supplier hasn’t provided you with the information. You can then run another report to get a list of the suppliers, listed contacts, and follow-up with them through the system, which integrates with Outlook. As you maniacs would say, once the supplier and part masters, and their relationships, have been defined … it’s easy-peasy.
Wakko Whoa!
Mr. CEO You said it, Wakko. And if anyone wants to see for themselves how powerful our solution is, we offer a free 30-day trial. We’re sure that it won’t disappoint.

 

Do Common Scorecards Help (with Supplier Management)?

One of the presentations at the 6th Annual International Symposium on Supply Chain Management was on Performance Management in Buyer-Supplier Collaboration Programs. It focussed on the implementation of a common scorecard between a buyer and supplier and described the impact of the implementation.

A common scorecard, which extends the traditional balanced scorecard, was selected because the parties believed that it would lead to mutual success since it would clarify performance measurements, which in turn would align partnership goals, link strategic objectives to day-to-day tactical execution, and communicate the overall effectiveness of the partnership. Once the performance indicators are mutually agreed upon, a common scorecard can be implemented by way of regular data exchange between the parties.

The presentation described a case study on custom packaging materials where consignment stock (VMI) was used. In this particular example, where goods were being transported from Asia to Western Europe, the lead time was eight weeks, the demand viability on the buy-side was high, and the goods had to be expedited by air on a regular basis due to regular stock-outs. The motivation behind the implementation for the buyer was to decrease shortages and increase forecast accuracy and the motivation for the supplier was to improve operations efficiency and overall customer service.

The parties chose to monitor production cycle time, transit time, consumption vs. forecast, stock-outs at the buyer site, number of expedited shipments, the value of stock on hand for the next eight weeks of forecast, and the value of stock materials without demand. To enable these measurements, the buyer shared stock, consumption, minimal target stock, and consumption vs. forecast data on a weekly basis and the supplier shared its dispatch (supply) plan and stock levels with the buyer on a weekly basis.

After implementing a common scorecard, supplier production cycle time decreased 60%, consumption vs. forecast accuracy improved 40%, the number of expedited shipments in a month dropped from an average of 7 to 1, and the value of stock on hand decreased 25%, while the other measures remained constant or improved slightly. Thus, when properly implemented, common scorecards appear to do quite well. This is what one would expect if both parties enter into a collaborative partnership, share data, and work toward a common goal. More information will be released in an upcoming special issue of the Journal of Operations Management next March in a paper by Barros et. al.