Category Archives: Technology

Project Assurance: Pre-empting ERP/SCM System Failure

ERP/SCM projects fail all the time. The reasons include, but are not limited too, lack of top management commitment, unrealistic expectations, poor requirements definition, improper package selection, gaps between software and business requirements, inadequate resources, underestimating time and cost, poor project management, lack of methodology, underestimating impact of change, lack of training and education, and, last but not least, poor communication. In other words, human factors cause these projects to fail much more often than they should.

However, as per a recent article in Supply & Demand Executive on “preempting ERP/SCM failure through project assurance”, there is a way to minimize the risk. It begins with a blueprint of strategic project assurance at critical points in the implementation project’s evolution. It establishes clear understanding of expectations among all people involved — from the executives, to the business and IT management, to the software vendors and end users.

A Project Assurance plan, that

  • identifies the real issues,
  • sets realistic timeframes,
  • aligns the work streams
  • looks beyond the indicators for early warning signs,
  • manages the expectations,
  • seeks objectivity,
  • communicates the expectations, and
  • measures progress regularly

reduces the risk of failure by

  • trakcing milesontes,
  • controlling costs, and
  • minimizing surprises.

It requires a lot of up-front planning, and a willingness to be realistic at all times, but is worth the effort. For details on how to create one, see Rob Prinzo’s No Wishing Required that will hep you identify six critical points in every project and get you on your way.

IT Outsourcing: The Two-Headed Beast

A recent article on “IT Outsourcing Category Management” over on Efficient Purchasing did a great job of capturing the nuances of the category in that the drivers will be dependent on whether it’s a first or subsequent sourcing event and so will Procurement’s role. In the outsourcing scenario, the number one driver is access to competence. Cost reduction and flexibility take a back-seat with Procurement, whose role is to facilitate the process, that is led by IT, and ensure a competitive environment. In a subsequent event, cost reduction becomes the number one driver and innovation, completely absent in the first phase, jumps into the back-seat. Procurement jumps into the driver’s seat, leading the effort to find qualified suppliers that can reduce costs and increase value.

However, the two events are not completely different. In both scenarios, Procurement must master stakeholder management, do its homework properly, understand risks and the nature of likely disruptions, accurately model cost, and get a grip on the value a supplier could bring to the table. The last part is key, since while 67% of IT leaders rely on outsourcers to turn ideas into new and improved processes, as per a Warwick Business School study, only 33% measure the impact of innovation delivered by service providers, which is key component of delivered value. Plus, as per an IDG Outsourcing Survey, IT Outsourcing has only led to cost reduction and flexible staffing in one third of engagements!

And contracts are a major headache for the unprepared. In addition to detailed descriptions of the services, service levels, and service management process, that need to be provided, a significant number of commercial terms and legal terms generally need to be provided as well. Plus, contract templates should be included in the bidding event as this will let potential providers know what is expected of them. As a result, many projects have to be planned six to twelve months in advance as it often takes four to eight months just to stipulate the scope of services and SLAs, which needs to not only define the services, but the transition plan and an exit plan should the contract not be renewed.

1999


Oops out of time
So tonight I’m gonna party like it’s 1999
Yeah

1999, Prince

Somehow SI gets the feeling this song was playing on the oldie’s station when Aberdeen was penning their recent piece on “The State of Strategic Sourcing: Building a Context for the Next Decade”. In a nutshell, their required actions would have been okay if penned in 1999 as necessary actions for leading supply management organizations for the next decade (although, in reality, they would have only taken an average organization through 2007). But in 2011 for 2020? Let’s just say SI liked Ariba’s predictions that data will predict the future, outsourcing will explode, and sourcing geeks will go the way of the dodo better. (Even though I hope it’s just a ruse.)

Normally SI ignores Aberdeen, as they haven’t, in SI’s opinion, put out anything good in years (as they lost their last senior analysts in the space a few years ago), but after having this particular piece brought to our attention, SI just can’t ignore it and how behind the times it is. Let’s put it this way, if a supply management organization thinks that the required actions are new and next level, it belongs in the bottom of the barrel in the laggard category. Let’s look at these required actions from the executive summary:

Leverage e-Sourcing solutions to drive higher savings and automate manual strategic sourcing processes
Just like every leading supply management organization has been doing for the last 10 years? This is advice for 2020? An average supply management organization has already squeezed every penny they can out of simple automation and standard reverse auctions, which most e-Sourcing suites revolve around. e-Sourcing is still the foundation, but now it is just the beginning of your Supply Management journey, not the destination.

Utilize spend analytics to drive visibility into corporate spending and forecast savings for future planning and budgeting
Wow! Two big problems with this. First of all, after the last two years, every executive and his dog has a “spend analysis”, “spend visibility”, or “spend reporting” tool that tells him just how much the organization is spending. What he needs to know is where the savings opportunities are. Just because the organization is spending 50M on fuel doesn’t mean there are any savings in the category. Maybe supply management saw the sharp prices increases coming and locked in low rates just in time. Maybe the real savings is in temporary labour where only 10M is being spent but where rates are still, despite recent increases in average labor rates, 20% above the norm. Secondly, spend analytics can’t forecast future savings. That depends on demand and input costs. Basic spend analysis just tells you what you spent, not where prices are going or where demand is going. The organization needs a real data analysis tool as well as good demand and price forecasting tools to get that picture.

Align overall sourcing activities/processes with the goals and objectives of the greater organization
Really? And should we also put our underwear under our pants? Supply management leaders have only been saying this for how long? Maybe SI should lighten up a little as it’s the only piece of advice that’s right, as supply management must be aligned with the rest of the business to be successful, but if this is not common sense to any supply management leader (who is also a business leader), there’s a fundamental problem in the organization that no action will fix. Plus, it’s a requisite, not an action!

The only action for success that SI can give you where this report is concerned is to burn it. The same-old, same-old is not going to get your supply management organization through the next decade. That’s why SI is spending so much time discussing next generation supply management and highlighting the efforts being taken by thought leaders such as Greybeard Advisors, The Mpower Group, and The Hackett Group to get the word out there. Supply Management must get to the next level, and it’s not going to do that rehashing technology from a decade ago.

TMS Requires 100 Million, Does ERP Require 1 Billion?

A recent article over on Logistics Management that put[s] the spotlight on ERP had a great quote from Ben Pivar, Vice President and North American Supply Chain Lead for Capgemini regarding Transportation Management Systems (TMS) Pivar says that the economics of installing a TMS package on a client server, for example, doesn’t really work until you have nearly $100 million in freight spend and that’s why on-demand is so popular in that space.

SI has to agree. Unless a firm has tens of millions in freight spend, the costs of installation, maintenance, and usage tend to dwarf the benefits of using a TMS system. However, what’s even more important to note is that enterprise ERP (from a top vendor) is, on average, at least five, if not (usually) ten times, more expensive to install, integrate, maintain, and use than TMS. This would seem to indicate that the economics of traditional ERP don’t make sense unless your company has 1 Billion in spend, or at least 1 Billion in revenue. In other words, unless you’re a member of the Fortune 2000 or Global 3000, traditional end-to-end on-premise enterprise ERP is probably not for you. And it would appear that Oracle, one of the largest players, tends to agree. Why do you think it has advertisements stating it has 98% of the Fortune 500? It’s not just because the Fortune X, it’s target market, provide it with its biggest deals. It’s because Oracle also understands that unless a company has reached a critical mass, given the cost of the system, the company won’t get the advertised return (which is a key to keeping the company as a high-paying customer year after year).

However, every organization needs a good transaction store and data repository as analysis is key to supply management success. So what does this mean if you’re not one of the lucky ones? Don’t look at a a tradtional on-premise end-to-end ERP from a big boy. Look at either a newer, smaller, slimmed down offering from a smaller player, possibly based on an open-source solution (like Compiere), a suite from a provider that maintains its own transaction store, or a newer, slimmed down, SaaS offering from a traditional provider that can integrate with some BoB solutions in the cloud and offer an effective hybrid solution. Just don’t go for the billion-dollar solution, because your organization likely won’t get a return from the millions it will cost.

Trade Extensions: No Rest for the Wicked-ly Powerful – Part II

As per yesterday’s post, it’s been less than five months since we last checked in with Trade Extensions, who had traded up to a Fact Sheet User Interface and added a slew of new features, including improved RFI support, multi-dimensional rankings in e-Negotiation, Google Earth integration, new incumbent rules, and an OLAP foundation to reporting, including the implementation of a new n-way comparison report. Since then, Trade Extensions has been on a tear to add new functionality as fast as it can to make the platform not only one of the most powerful expressive bidding optimization platforms on the planet, but also one of the easiest to use — listening to its users (which include the Fortune 1000) and adding features and functions that make an average buyer’s life easier, taking usability to a whole new level yet again. And while earth-shattering technology improvements are cool, it is usability that is the ultimate key to to adoption, use, and, ultimately, cost avoidance and reduction in your sourcing organization.

Scenario Creation & Analysis

Not only are there new rules that allow partial awards to be fixed based upon existing scenarios, but the number of constraint categories has doubled. While there were only general and incumbent constraints in the past, there are now an entire category of scenario reference rules and post processing rules. With respect to scenario reference rules, not only can allocations be kept, but bids can be favoured or penalized as well. The post-processing rules are also quite useful. Allocations can automatically be rounded and allocations that don’t meet a minimum number of units can be removed (or re-assigned to the supplier who meets a minimum allocation with the lowest total cost).

Feedback Mechanisms

The buyer now has fine-grained control over what the supplier sees, and can even mix feedback types. For example, if the buyer only wants the top three suppliers to know they are top three, but suppliers four to six to know their exact rank, they can specify that specific rank starts at bidder four, and the top bidders default to “top 3”. In addition, if the supplier does not meet a minimum bid increment, which can be defined in a number of ways (including, minimum dollar or % decrease over last bid), the supplier gets a nice red error that the bid is not acceptable AND a message indicating the minimum increment required. Finally, and this is really cool, the user can define custom color-coded bid feedback fields based on dynamic formulas that now only let the user know where they rank, but how competitive their bid is (against the current bids from the competition) in English using a buyer defined scale such as “Competitive”, “Slightly Competitive”, “Not Competitive”, and “Not Acceptable”.

Plus, the buyer can now chat with users online in an integrated IM client, and immediately see who is online when they log in as it is a widget on their project management dashboard.

Odds and Ends

The “dashboards” for RFX and auction phases have also improved. The summary, bidder summary, and lot summary are now completely customizeable by the user, support custom fields, and user-defined colour codings in the rankings. In addition, there is integrated show/hide, drill-down functionality, and customizeable pop-up (bid, trend, and bidder activity) charts where a user can select one, some, or all of the rows in each report.

They have also added a basic workflow engine that allows buyers to initiate rate requests, lot requests, and allocation publishing requests of project managers / administrators when new needs arise during a project. This allows managers and supervisors to maintain control and a complete project history to be maintained. The workflow is fairly basic at the present time, but I suspect it will mature and fill out quickly given Trade Extensions’ track record of rapid application development over the past two years. (Especially since the feature is being used by a couple of very large companies.)

All and all, it’s a lot of new functionality in a short time frame that makes the tool extremely useable by an average buyer.