Category Archives: Supplier Management

Vinimaya: The Next Wave in Product Catalogue Management (PCM)

A little over a week ago, in Networks are ok. Catalogs are Good. Punch-outs are Better. But Agents are King!, I introduced you to Vinimaya [rebranded Aquiire, acquired by Coupa] – a little known company from Shelton, Connecticut (apparently, it’s not a total wasteland) that may be the only company in the space with a real answer to the Supply Network 2.0 Challenge.

Billing themselves as a Supplier Enablement Solution for e-Procurement with their Catalog Integration System based on distributed search technology, their product truly does allow an e-Procurement system to access supplier web-sites, online catalogs, and internally managed catalogs concurrently from a single user interface.

Unlike today’s supplier networks which only support hosted catalogs and punch-out enabled sites, constitute a large expense for the buyer and the supplier, have a long enablement cycle, and provide the buyer with almost no control over access, Vinimaya’s new Product Catalogue Management (PCM) solution, which they sometimes call a Virtual Punch-out or Virtual Supplier Network (the VSN), supports ANY site (be it a punch-out, catalog, market-place, or plain old web-site), does not cost the supplier anything (as any solution that charges the supplier only adds to the buyer’s cost as the supplier has to raise their prices to compensate for the cost), can be enabled in a day, and gives the buyer total control over access, view, and pricing with their local pricing and audit engine capabilities.

Furthermore, they can easily enable standard and custom terms and pricing to each buyer. Since most suppliers plugged into a supplier network accomplish this through a separate, protected, landing page that contains pricing customized for a particular buyer, all Vinimaya has to do is program that link (and the login) into the agent instances used by that buyer, and, presto, the buyer gets standard terms and conditions and – more importantly – gets those terms and conditions in the standard view which allows them to compare the terms and conditions across all products from all suppliers that meet the identified need. Alternatively, if the supplier cannot do this, the buyer can create discount rules or override SKU prices on a supplier (by supplier) basis in the local pricing and audit engine. No need to have a third party involved, as all the third party does is take a cut of the transaction and significantly raise the transaction cost by performing a service that the buyer can easily do on her own.

And the system works. They already have over 12M skus from over 150 leading suppliers in a single instance (with over 200 suppliers enabled for general use), and the interactive distributed search works in a couple of seconds for a new query, and under a second for a query that is similar to, or a repeat of, a previous query (as the system caches relevant results). It’s also very scalable – in their five largest implementations, they support over 30K users and hundreds of suppliers. (And, as indicated in my last post, they can quickly enable new suppliers by extending and customizing existing agents in their database. On average, they can enable a new supplier in a couple of hours, and have found that over 75% of US suppliers fall into this “quick enable” category. Furthermore, when they encounter a supplier that uses a non-standard web-site design or custom protocol, do to the distributed nature of the technology, they find that, on average they can still enable the supplier in about a day.)

The things to remember are that we don’t need a separate “network”, we have one already, it’s called the internet; we already have all the content we need on supplier websites (the supplier doesn’t have a web-site you say?* that’s okay, the supplier network 1.0 options are still available); and web-services allow a lot more functionality than some of the big dogs (who haven’t innovated in ages) would have you believe.

I applaud Vinimaya for cutting through the noise and offering the direct-connect solution that probably should have been designed in the first place. The reality is that today’s supplier networks are nothing more than bad implementations of what is fundamentally a really good idea. The technology has to use what’s there, bring it all together, and do it quickly in a seamless fashion. Otherwise, your procurement department will be spending too much time on the tactical when they need to be focussing on the strategic.

* If the supplier isn’t on the web, then all of the supplier network 1.0 options are still available: the supplier can upload the catalogue using excel or use an e-form. If the supplier doesn’t have web access, then either Vinimaya or the buyer can load the catalog on behalf of the supplier. (But if the supplier doesn’t even have web access, then I think you have to ask if you’re sure that you’re using the right supplier.)

Winning Strategies for Vendor Engagement

By far the best presentation that I attended at the 5thAnnual International Symposium on Supply Chain Management was Jon Hansen‘s presentation on Winning Strategies for Vendor Engagement, part of his Chaning Face of Procurement Series.

Even though there was nothing revolutionary in his talk, Jon did a great job of hitting home on the core message, spelling out the basics, simplifying the core messages which a lot of people focussed on new e-Procurement and e-Sourcing efforts still overlook, and delivering a presentation the way a presentation should be delivered. Simply put, the key to success still ultimately lies with your vendors, and if they don’t participate, or participate 100%, you’re going to lose out in the end. Basically, unless managed properly, your e-Procurement initiative, instead of being a benefit, could be a threat to your supply base. And this is not just theory – it’s fact. Consider a recent statistic from the Wall Street Journal (in February, 2005) which noted that 73% of all implementations result in partial or total failure.

It’s not hard to win suppliers over – often all you have to do is meet their needs and take the time to work with them to explain why the new system is better and why they won or lost the bid. Basically, suppliers are looking at (most at) six factors when being asked to use a new technology:

  • Ease of use
  • Non-invasive technology
  • Convenience and speed
  • Business Intelligence
  • Chance to maintain or increase revenue
  • Non-adversarial environment

Meeting these factors is not hard to do. For example:

  • Ease of use
    • Use technologies not limited to largest / most sophisticated suppliers
    • Communicate the initiative via multiple avenues of communication
    • Proper tool alignment
  • Non-invasive technology
    • Does not increase work
    • Increases opportunities
    • Reduces the cost of sale
  • Convenience and speed
    • Automated and intelligent engagement
    • Minimal Administrative Requirements
  • Business Intelligence
    • Proper spend alignment
    • Real-time reporting capabilities
    • Orientation sessions
    • Project and quarterly Reviews
  • Chance to maintain or increase revenue
    • Create an equal opportunity environment
    • Greater opportunity
  • Non-adversarial environment
    • Fair competition with clearly defined rules
    • Proper spend alignment
    • Proper technological alignment

Basically, vendors are the key to your success and will want to help you succeed if you take the time to help them succeed. It’s not hard. Just do it.

Secrets of Suppliers and Office Suppliers

Back in July I alerted you to two great new podcasts on optimization over on Next Level Purchasing [now the Certitrek NLPA] (“What is Supply Chain Optimization?” Part I and Part II) and earlier this month I alerted you to another great podcast on corporate social responsibility and animal rights. What I didn’t tell you was that over the past year, Next Level Purchasing has amassed almost a dozen podcasts in its Purchasing & Supply Management Podcast Series, including one on “Suppliers’ Secrets for Negotiating with Purchasing” and “Office Supplies Sourcing Secrets”. Today, I’m going to review a few of the highlights of each of these podcasts to indicate why they are worth a listen.

In “Supplier’s Secrets for Negotiating with Purchasing”, Charles Dominick, founder and president of Next Level Purchasing, interviews Ken Knudsen, CEO of Eagle Rock Enterprises, a firm that specializes in sales and leadership coaching. In this podcast, Ken offers up some tips that purchasing managers can use in negotiations with suppliers to get the best deal.

The first thing Ken notes is that the key for a purchasing manager who wants to get the best deal is to make sure there is potential for a long term relationship between them and the potential supplier they are negotiating with. There’s almost always room for improvement in terms of price, terms, guarantees, and so forth – but you’ll never get the best deal if you’re not willing to go in for the long term. Furthermore, negotiations will go better if the salesperson feels you can be trusted, so be open about where you’re coming from and what you hope to gain.

The, the second key to success is open communication. This will foster a spirit of collaboration and increase the success that the negotiations will go favorably. This will require honesty, since a good salesperson will be watching your body language, and will likely know, or at least have a good hunch, if you’re not telling the truth.

As Charles says, negotiation isn’t just figuring out which side of the table a fixed amount of money is going to end up on … it’s evaluating your compatibility for a long-term relationship, looking at how decisions are made and how quickly you’re responding to things, and how stuck the other party is in their own business model, as opposed to being flexible.

In “Office Supplies Sourcing Secrets”, Charles Dominick interviews David Clevenger, Vice President of Corporate United [acquired by Omnia Partners], who offers up some tips for maximizing your office supply buys.

David starts by noting that purchasing professionals are frequently victimized by a lack of quality data. If the data is not current and if your evaluation of that data is not ongoing, you run the risk of creating a list of core items that are not valid for the organization, and this will definitely hamper communications. Especially considering you’ll be seeking the best deal on core items, and a supplier is likely to only give you the best possible deals on one set of items if you also buy another set of items at prices closer to list. So it’s critical you pick the right items.

It’s also important to understand manufacture suggested prices or list prices when dealing with an office supplies distributor, because otherwise the supplier can play with the base price and still claim to meet your demand of 30% off while only reducing their profit margin by 10%.

It’s also critical to focus on cutting contracts for the items that personnel use. If they insist on a specific type of pen, cutting the best contract in the world for what you consider to be a reasonable substitute will not save the organization any money if personnel will not use them and instead expense the other brand, just like a great corporate rate with the Hilton is useless because everyone stays at the Mariott instead because they get points.

Finally, make sure to keep on top of your contract. Often, when a buyer signs a multi-year contract for dozens, or hundreds of items, the supplier will discontinue or replace items on that list every year. It will usually do so with items that give it a higher margin, which may or may not be of the same quality and same level of desirability. Make sure that your contracts allow you to resource discontinued items and that you cut new contracts for those items on a regular basis to maintain savings.

There’s More to Ketera than Connect

The big news this month with Ketera was their recent Connect conference in California, but back in July they put out a good whitepaper on “Supplier Catalog Management: Avoiding an Expensive SAP SRM Migration” in the context of supplier enablement.

The white-paper starts by noting that SAP SRM customers are in a big dilemma with regards to their current Requisite implementation (which is no longer supported) – either they migrate to CCM, which will in turn require another migration when the customer upgrades to SRM 6.X down the line, or they migrate to MDM Catalog, which is young, buggy, unproven in large deployments, and has a non-trivial cost of migration. However – there is a third option – and that is to migrate to a third party solution. Of course, the solution proposed is Ketera’s Supplier Content Management (KSCM) solution, but the central idea is valuable – why rely on an inefficient and costly solution with a poor migration path when you can instead use an efficient, cost-effective, and extendible third party solution that can meet your needs.

The white-paper also outlines what such a solution should look like. It should be on-demand, streamline the content/catalog development and update process, allow suppliers to easily upload, validate, and manage catalogs and related content using tools they are familiar with (such as MS Excel templates), enable multi-party workflows that bring together suppliers, buyers, and external service providers, and make all catalogs immediately available for use by SAP SRM once they are created.

Furthermore, the solution should support at least two deployment modes: Supplier Managed, Vendor Hosted and Supplier Managed, Client Hosted. In both cases, the supplier provides all the product data and is responsible for keeping it up to date, but in the first case the vendor manages the implementation and IT support and integrates into SAP SRM via punch out while in the second case, the buyer manages the implementation and the buyer’s IT team handles the bulk of support. And, if the supplier or buyer wishes it so, the Vendor should be capable of managing the catalog on behalf of the Supplier.

Now, I know this isn’t as glamorous as the financial supply chain solutions discussed by Jason Busch over on Spend Matters (Ketera Connect Dispatch 2), as innovative as the cost-baslining and modeling solutions I suggested back in a July post, or as appealing to a CFO – but it’s important nonetheless, since the more efficient a procurement professional is, the more time they have to seek out, find, and capture true savings.

When it comes to data migration, there’s no need to be a sap.

Buy Now, Pay More Later (Without Good Supply Chain Finance)

Last month, SupplyManagement.com ran an article titled “Buy Now, Pay Later” that examined the repercussions for suppliers, and ultimately your business, if you fail to settle your invoices on time. According to Experian, the average business takes more than two months (61 days) to pay its bills and evidence gathered by the Federation of Small Businesses (FS shows it is increasingly common for large companies to bully suppliers into accepting extended payment terms of 60, 90, or 120 days from invoice receipt.

As will be further discussed in the forthcoming wiki-paper on Supply Chain Finance on the e-Sourcing Wiki [WayBackMachine], this is counter-productive to the cost savings initiatives such actions are often driven by. For starters, as estimated by the Forum of Private Business (FPD), 40% of business insolvencies in the UK are prompted by late or disputed payments. Furthermore, a European Commission (EC) review recently approximated that over 450,000 jobs are lost each year as a result of such delays.

Late payment can put extraordinary pressure on suppliers, especially small and medium sized suppliers, which often desperately need cash to purchase equipment, raw materials, and, most importantly, meet their payroll. Furthermore, in addition to cash flow problems caused by late payments, many firms incur significantly extra costs for the time and money spent chasing payments and securing interim financing, usually at exorbitantly high rates.

All these costs do nothing but drive up the supplier’s cost of operation, and effectively, the price they will need to charge in the future to maintain enough profitability to survive. So even though it looks like you’re getting a deal in the short term by extending payment terms, in the long term, you’re simply driving up your price – and risking a major supply disruption if your supplier goes out of business while waiting for you to pay.

So instead of extending Days Payable Outstanding, consider looking at other strategies that can lower your cost of operations – such as improving forecast accuracy, just in time production, and low cost financing options that are available to you, as a large company, and not your supplier. Better forecasts lead to less missed opportunities and a reduced need to clear inventory at significant markdowns, just in time production reduces inventory costs, which is much better than just shifting them to a third party, and financing your purchase at prime or less will cost everyone less in the long run that forcing a supplier to take out short term financing at 20% to 40% per annum.