Category Archives: Technology

the doctor’s Guest Posts: The Year in Review II

Since last year’s summary of my guest post contributions (in June), I’ve blogged a number of guest posts over on eSourcing Forum [WayBackMachine] as well as authored or co-authored a significant number of wiki-papers over on the eSourcing Wiki. I’ve also contributed articles to the EyeForProcurement monthly newsletter as well as Efficient Purchasing.

e-Sourcing Forum

December 2007 to June 2008

Regulations Unlimited
Strategies for Supply Chain Finance
Customs & Security
The Seven Scruples of a Sourcing Sensei
Discovering Your Leverage Points
Seven Risk Mitigation Strategies You Can Do With Smart Optimization
If it ain’t Multi-Tenant, then it ain’t got SaaS (co-authored with David Bush)
Not All Free Trade is Equal
Best Practice Freight Bidding
CSI: Corporate Social Irresponsibility
Critical Skills of Supply Chain Leaders
Devising an RFP That Works
Core Capabilities of Supplier Enablement
Is it Center of Excellence or MindSet of Excellence
Successful GPOs Are About Value, Not Cost Savings
Don’t Swing the Wrecking Ball Unless You’re Prepared for the Falling Debris
Can you really afford to leave Millions on the table?
Are You Managing Your Talent Chain?

June 2007 to December 2007

Supplier Enablement
Confucious eSourcing Project Management Tips
Brunswick Corporation’s e-Auction Best Practices
Collaborative Negotiation
Seven Tips for SaaS Selection
Incentives Motivate
Optimal E-Tool Selection
Five Ways to Take Your Sourcing to the Next Level
A Global Trade Primer
Applications of Spend Analysis
The Benefits of Purchasing Consortiums
Optimization is the Future And The Future is Now
Some Low Cost Country Sourcing Insights
Twelve Steps to Purchasing Program Predominance
Ten Tips for Talent Retention
A Case for E-Sourcing and E-Procurement Integration
Nine Steps to e-Procurement Success
Key Challenges of Tomorrow, Part II
Key Challenges of Tomorrow, Part III
Ten Common Negotiating Mistakes

Articles

Why aren’t you optimizing?, Efficient Purchasing Issue 5, Fall 2007

Why Aren’t You Optimizing Your Sourcing Decisions? EyeForProcurement August 2007 Newsletter

Move over crowd-sourcing, here comes ITO 2.0!

The outsourcing journal recently had a good article on “OpenWater Networks” and how it partnered with Augmentum to build its Enterprise 2.0 Service Network – a “Social Network” for work – using “IT Outsourcing 2.0” or ITO 2.0. What is ITO 2.0? It’s the outsourcing of IT work to where the best brains are. Which is the way it should be.

I really liked some of the common sense quotes in the article from Timothy Chou. When he says that if you outsource to someone who is cheaper but not as smart as you, you have to spend a great deal of time managing them and that you (have to) look over everything down to the tiniest detail, he couldn’t be more accurate. It’s also true that this causes you to lose your economic advantage. However, it’s not true if you hire someone smarter than you (who has a PhD, for example) because you (can) let them flourish on their own. Just like when you hire an executive chef, you don’t have to tell him how to cook – you just have to tell him that you want a chicken dish that’s sweet and spicy and then let him work.

The advantages of this method, when compared to ITO 1.0 – which takes you to where the warm bodies are cheapest, are that partners are free to demonstrate their expertise, there is (essentially) no duplication of work, and innovation can flourish. As long as you make sure everyone speaks a common language from day one, the method can utilize the talents of all involved – especially if you augment the method with regular face-to-face communication. OpenWater personnel, in San Francisco (California, USA), make regular visits to Augmentum’s sites in Shanghai and Beijing (China) and Augmentum developers routinely visit the Openwater offices in California. This encourages the move away from e-mail, where context is loss, to the “service networks” that OpenWater is developing. This not only helps OpenWater and Augmentum build innovative software that would have cost them 10 times more money and 10 times more time if they had done it under ITO 1.0, but insures that the products are actually consumable – as, to borrow a phrase, they’re eating the dog food they make.

So how does this differ from crowd-sourcing? In crowd-sourcing, everyday people using their spare cycles to create content, solve problems, [and] even do corporate R & D and the company takes advantage of the collective to augment their internal capabilities. In ITO 2.0, the company is going out to the collective and specifically seeking out the best and the brightest. It then uses the network to share information and form relationships with these individuals to advance the common goals. In essence, the major difference is crowd-sourcing is ad-hoc and more in tune with open source while ITO 2.0 is more organized and more in tune with standard corporate methodologies. And the major similarity is that both revolve around the same underlying principles of using the network and the best and brightest to get the work done (wherever they are) – and that’s a good thing.

ThomasNet Takes Sourcing to the Masses

ThomasNet recently launched it’s free Purchasing Tools, based on SourceOne’s (acquired by Corcentric) free WhyAbe (sunset) platform. This platform allows buyers who still haven’t adopted an e-Sourcing platform to test the waters with a basic RFx and Auction service.

The platform, which comes with a complete Buyer User Manual as well as a Supplier User Manual, allows buyers to create a private or private RFX, see their listings on a dashboard (where they can also identify reviewers and block blacklisted suppliers from bidding), and also take advantage of ThomasNet’s engineering, web, and community tools. The RFxs are essentially RFQs where you solicit bids for well a basket of well-defined products and services, and the reverse auction formats are limited to supplier rank and lowest bid, but that’s where most companies start on their e-Sourcing journey.

The auction tool allows you to specify whether or not you want duplicate bids, minimum decrements during bidding (as a number or percentage), and automatic extensions to prevent bid sniping. The product also supports multiple currencies, attachments, and product images as well as e-mails to invited suppliers. It’s not on par with any of the paid Software-as-a-Service offerings, but as I’ve said before, it’s cracking the sourcing mold and offering a free solution that companies new to sourcing and sourcing technology can use and experiment to find out what works for them, what doesn’t, and what they need help on. It’s a great way for a company to test the water as it provides a quick start to e-Sourcing with a price that can’t be beat. Then, when an organization has identified it’s needs, and, more importantly, identified what it can do well in house – and what it can not, it can always upgrade to a more extensive e-Sourcing platform and retain a PSP, like Source One, to help it with those categories that it doesn’t have the experience, or the leverage, to get savings on.

So, let’s give ThomasNet some applause for trying to spread the sourcing word and hope that this convinces more organizations still using e-mail and fax for RFQs to join the twenty-first century.

Vinimaya : The B2B Search Engine

Last November, I introduced you to Vinimaya (rebranded Aquiire, acquired by Coupa) in my post on The Next Wave in Product Catalogue Management. With their agent technology, Vinimaya is a leader in supplier enablement for those companies that need an integrated catalog solution for their e-Procurement platform as their Product Catalog Management Solution (PCM) supports whatever mechanism the supplier already has – be it a punch-out, catalog, market-place, or plain-old web-site.

However, Vinimaya, which is a very stable and profitable company (despite some competitor’s claims to the contrary), is not content to just have the best PCM solution. They’ve spent the past six months improving their core technology and working on additional offerings to benefit the supply management space. In addition to their streamlined agent technology-enabled SmartSearch Buyer, which they are able to implement for an average large customer, who needs hundreds of suppliers enabled, in four to five weeks, they now offer a SmartSearch Supplier service for suppliers, B2B transaction services, and they are working on a new Discovery service that is likely to be launched before the end of the year.

Their SmartSearch Supplier service allows suppliers that require specialized punchouts or catalog formats to support their buyers to offer these formats without having to build these punchouts or specialized (XML, CIF, etc.) formats on their own. The SmartSearch Supplier offering, which uses the same underlying agent technology as SmartSearch Buyer, translates the supplier’s current catalog format (web-site, database, XML, etc.) into whatever format the buyer requires (because they use Ariba Supplier Network, SciQuest, Ketera, etc.) on the fly. In addition, it supports the same price override capability as SmartSearch Buyer, so the supplier can customize its prices to each buyer using a set of pricing rules.

Their B2B transaction services supports internet EDI with seven standard document formats, p-card payments, XML-EDI punchouts, and interchange and is delivered by their partners, including VITG USA and ESIS. In other words, Vinimaya is all about the internet as the network and providing you with the ability to connect with anyone, anywhere, anytime.

However, it is the SmartSearch Discovery offering that they are currently working on now that really got my attention when I caught up with them last week. Right now, they allow you to search multiple sites seamlessly through their SmartSearch Buyer, which is more than any other catalog solution allows you to do. However, in the near future, it sounds like they will also allow you to search third-party marketplaces at the same time, in the same view, and seamlessly integrate the best of B2C with the best of B2B. Right now, you can search by product, category, part, and supplier location – everything you can do with your standard catalog. But with this new service, you’ll also be able to search by component, manufacturer, third party rating, and any other piece of information that is out there on third party marketplaces. And there’ll be better integration into your current e-Procurement and e-Sourcing platforms. What will it look like? That’s a topic for a later post. So stay tuned!

Hackett Hacks Away at Recession Declines

Hackett recently published a research piece on how “G&A Spending Cuts Can Offset 21% to 45% of the Anticipated Decline in Pre-Tax Profit During Recession” as part of their Enterprise Strategy Series which noted that their 2008 benchmark data reveals a savings of 184 – 400 Million for a typical global 1000 company that’s worth a re-read. Unlike most of their pieces, this was available to the public (registration required), and, if it’s still available, you should definitely download it – as it is jam-packed with more information than a single blog post can cover.

The piece starts off that by noting that while mandated G&A cuts are the norm in times of recession, arbitrarily cutting costs across the board can lead to serious deterioration in service-delivery capacity. It’s critical that cuts are made in ways that minimize impact on business value delivery, but this requires an understanding of the strategic alternatives, current cost structures (as compared to those of world-class organizations), and clear-eyed risk assessments. Furthermore, Hackett found that average companies can reduce G&A cost between 15% and 41% simply by optimizing process cost. Furthermore, reduced technology spend can take out another 6% to 7%.

The research brief also points out that you should not determine a savings target before understanding what a “normal” spend level is in a world class organization. For example, a typical Global 1000 company (with 23.4B in revenue and 56,100 employees) spends 3.6% of its revenues on four core principle G&A functions (Finance, HR, IT, & Procurement), but world-class companies execute significantly better by combining process excellence with technology leverage. They perform at lower cost levels (22%+) and enable the business to succeed by producing improved financial results and cash-flow; by recruiting, training, and retaining talent; by driving costs out of the supply chain; and by making superior use of technology.

The research brief also identified 10 targets for G&A reduction across the four core functions that, when combined, should allow for a cost reduction of at least $158M in a typical Fortune 1000 company in process costs alone (labor and outsourcing) that can be achieved by way of best practices, simplification, and standardization. Specifically, the 10 functions, and potential cost savings were:

  • Infrastructure Management : 25.1
  • Revenue Cycle : 22.7
  • Application Maintenance : 21.6
  • General Accounting : 17.9
  • Application Development & Implementation : 15.8
  • Compliance Management : 13.4
  • End-User Support : 12.7
  • Transactional HR : 11.7
  • General Disbursement : 10.6
  • Purchase Order Processing : 6.4

The research brief identified a cost difference of 55.6 Million in technology spend between average and world-class organizations.

Hackett also identified another 74.9 Million in cost savings that may be available through globalization (and outsourcing).

So how do you start identifying these cost savings? You start by reading the research brief and focussing on the specifics in the identified areas. You also apply the expertise the doctor and his fellow bloggers have imparted to you over the years while noting that most of the savings opportunities are in technology (75.2), finance (51.2), and procurement (19.8). If you have been paying attention, this should screen one acronym to you: SaaS. If you’re currently using bloated behind-the-firewall software, switching to SaaS will simultaneously reduce your infrastructure (the largest), application maintenance (the third largest), application implementation (the fifth largest), and end-user support (the seventh largest) costs. Plus, if it’s e-Sourcing or e-Procurement, you’ll also reduce your revenue cycle (the second largest), compliance management (sixth largest), general disbursement (ninth largest), and purchase order processing (tenth largest) costs. That’s eight cost reductions with one decision! How can you go wrong?