Category Archives: Technology

Managed Services

In Part XI of The Sourcing Innovation Series, John Martin of Building SaaS authored a guest post on “The Future of Sourcing … for Services” which I discussed further in Part XII where I indicated that I not only agreed with John in that services sourcing is going to become a major part of your future sourcing initiatives but provided you with the outlines of an approach that I thought you could use to start getting a grip on your services procurement today.

Little did I know how timely these posts would be at the time I was preparing them. It turns out that as John and I were collecting our thoughts, Aberdeen was releasing their Supply Chain & Logistics Market Alert “The Next Wave: Managed Services for Supply Chain”. In this market brief, Aberdeen indicates that in a recent benchmark of 180 companies, 58% indicate that they are highly interested in using at least one of the following managed services:

  1. Network design and strategic inventory optimization
  2. Supply chain execution
  3. Trade compliance
  4. Supply chain planning
  5. Periodic Operational Improvement Analysis and System Tuning
  6. Data Quality Monitoring and Cleansing
  7. Data Mining and Analytics
  8. Supplier On-boarding

The study also points out that midsize companies are most likely to be interested in exploiting the expertise and resources of their technology vendors to augment their internal staff, though large companies are highly interested in supply chain execution support.

However, one of the most interesting facts is that companies that view their supply chain capabilities as “above” average for their industry are twice as likely as their peers to be highly interested in wanting to use managed services to help in supplier on-boarding and they are also more likely to desire trade compliance managed services. In other words, top performers appear to want to take advantages of any services that can help them perform better.

Finally, I’d like to emphasize that managed services offer companies the flexibility of gaining additional staff resources and expertise without having to hire people internally or having to abdicate complete process control to a third party-organization. In other words, it appears that, managed properly as part of an overall supply chain strategy, managed services can effectively augment (but not replace!) your internal supply chain teams.

The Sourcing Innovation Series XIII: Part One Wrap Up

First of all, I’d like to thank all the contributors for their efforts and incredibly well thought contributions. It was a great series.

  • Kevin Brooks
    The Future of Sourcing Commentary
  • Jason Busch  [WayBackMachine]
    Sourcing Innovation: Securitizing Direct Materials **
    Sourcing Innovation: Next Generation On-Demand **
    Evaluating Spend Visibility and Analytics Providers **
  • David Bush [WayBackMachine]
    The Future of Sourcing?
  • Charles Dominick [Purchasing Certification Blog, now the NLPA blog]
    Sourcing Innovation for Single-Customer Contracts
    Sourcing Innovation for Enterprise-Wide Contracts
  • Doug Hudgeon [WayBackMachine]
    “Rogers and Hammerstein: The Future of Sourcing”
  • John Martin
    The Future of Sourcing … for Services
  • Tim Minahan [WayBackMachine]
    Sourcing Innovation: Predictions for the Future of Strategic Sourcing
    Predictions for the Future of Strategic Sourcing: Part II
    What’s Next According to Busch: Supply Skills Networks
  • Rob Parrish
    Sourcing Innovation Blog Swarm (SCRISK.com)
  • Dave Stephens [WayBackMachine]
    The Future of Sourcing
  • Eric Strovink
    The Future of Sourcing

With commentaries ranging from technology through processes to services, from technological, business and even economic backgrounds, I think this first series brought a breadth and depth to the topic that even think-tanks would be hard pressed to match. Ranging from the down-to-earth predictions that the future will be forged from process improvements and enhanced corporate understanding of how to use existing technology (David) through evolutionary process improvements such as new hybrid sourcing models (Tim) to sky-high predictions that in the future capacities will be securitized and traded on the open market (Jason), this series opened our minds not only to the art of the possible, but the art of the probable. Given whom many of these predictions are coming from, I’d say it’s a safe bet that many of today’s predictions will turn into tomorrow’s technologies, processes, and best practices. So if you missed any posts, use the links above to catch up. And if you didn’t, use the links above to read them again. Considering what these guys can charge for their advice, and the very high caliber of the postings, I’d wring every idea I can get out of them. It might just give you the leg-up you need to surpass your competition.

I’m not going to attempt to summarize the series in this post, since I spent nine posts trying to do just that as I offered my views, but instead note that I hope to make this a regular yearly series. Sourcing is always changing, and not just because of the rapid advancements in technology which have skyrocketed it, e-Procurement, e-Commerce, and supply chain forward in recent years. I think it will be very interesting to see not only where it is in a year, but how that changes our perceptions of where it is going and how fast it will get there. I hope my fellow bloggers and contributors agree, since they’ll all be receiving invitations, root* willing, next summer to contribute to Partie Deux!.

Back to the present. Given the recent focus on talent#, I would like to propose that as the second cross-blog topic. I know Charles, Tim, and David are quite interested in this topic, as well as myself, (as they blog about it regularly). I’m particularly interested in predictions on how companies are going to close the talent gap over the next twelve months – and, in particular, innovative techniques they are going to use to do it. What do you say guys — up for it? (Guest commentators — if you want your top-notch commentary on SourcingInnovation on this topic, feel free to contact us using the contact information in the FAQ.)

Thanks again guys! Fantastic job!

* Inside Techie Joke
! It just sounds better en francais.
# See the Talent category in the category archives, sixth component down on the right hand side of the page.

** All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

On Demand V: Preparing for the Transition

Earlier this month, Purchasing.com published yet another article about on-demand entitled “On-demand promises to hook savings” stating that on-demand software and technology is more than just software on someone else’s servers—it’s a delivery method that supporters say improves ROI. However, what caught my attention about this article was that it gave some suggestions on how to prepare for a switch to an on-demand solution, something we haven’t really discussed yet in this series.

The suggestions offered by the article are:

  • Know what you need! Develop a solid statement of expectation or long-term roadmap for the specific problems you’re trying to fix and/or the specific results you need to attain. (Note: Discuss this list with your prospective solution provider(s)!)
  • Talk to other users of on-demand technology. Get their perspective on what on-demand is doing for them. (Note: Any on-demand solution provider I’ve talked to is usually more than happy to provide you with a list of contacts in their customer base that you can call.)

In addition, I would suggest you also:

  • Identify what systems your data currently resides in and what systems you are going to need to export data from and import data to. Make sure the solution you select either interfaces with these systems or supports standard input and output formats that will allow you to import and export the appropriate data as needed.
  • Start with a pilot. The beauty of on-demand is that solution providers can literally set up pilot accounts at a flick-of-a-switch that you can use to try-before-you-buy. In addition, most providers will engage in a pilot project with you to prove their solution at very little cost to you. (The standard seems to be free access to the system for the length of the pilot if you cover reasonable consulting costs and expenses. Some eSourcing providers with analytic solutions will even do preliminary one or two day proof-of-concepts on existing data for free to demonstrate the power of their tool.)

Another good point made in the article is that moving to an on-demand solution is not an overnight process as it’s a change management process. The most successful projects transition small groups of power users at a time. These power users become the internal proponents, experts, and trainers and help bring the rest of the organization over to the new organization.

The article mentions how Cox Enterprises was up and running on Procuri’s (acquired by Ariba, acquired by SAP) on-demand solution in under 3 months and saved 2M in a 10M spend category on their very first on-demand sourcing event. It’s important to note that this is a typical result – initial projects using the latest sourcing technologies built into on-demand platforms typically save users 10 to 30% since they not only enable transparency in your market, but remove inefficiencies from the process. If you check out Iasta’s typical results, they are 17 to 26% in aerospace/defense and automotive, 19 to 27% in consumer packaged goods, 18 to 25% in electronics, and 14 to 27% in food processing and food service, for example. (And some of their results at some of their new Fortune 500 clients have been just as impressive.) Iasta (acquired by Selectica, merged with b-Pack, renamed Determine, and acquired by Corcentric) maintained a complete list of categories it has assisted clients. Procuri also had a page dedicated to Success Stories.

Another impressive point of note is that ServiceMaster now claims to have a 99% compliance rate as a result of switching to an on-demand solution. I guess the only thing left to ask is if you have not tried on-demand, why? With solutions that encapsulate the end-to-end executable sourcing cycle in a single, consistent, easy-to-use desktop application, and the cost of a pilot project less than what a big five consulting company would likely charge you to analyze your processes and installed applications and tell you that you should probably supplement their weaknesses with an on-demand solution, it seems like an obvious choice to me. So, like fellow bloggers David Bush of eSourcingForum [WayBackMachine] and Tim Minahan of Supply Excellence [WayBackMachine], I’m going to keep extolling its virtues. The on-demand story will continue.

You can find the previous parts in the series, which started on eSourcing Forum:

  • I: The Good
  • II: The Not-So-Bad
  • III: And the Coming Pretty …
  • IV: And the Story Continues

Global Supplier Visibility and Performance

Continued pressures to reduce costs while maintaining quality and other non-cost factors have caused enterprises to look towards outside providers. In many cases, outside providers refer to manufacturers and suppliers in foreign countries, thus adding other variability to an enterprise’s supply chain. Enterprises have undertaken various efforts to manage the new variability: supplier performance, supplier visibility, supplier costing and supplier collaboration are all activities which can help.

Aberdeen has just released the “2006 Global Supplier Visibility and Performance Benchmark Report” (sponsored access) that not only examines GSVP drivers, hurdles, strategies, and tactical action plans for more than 110 companies but offers solid suggestions for improving your GSVP programs.

Considering that Aberdeen has found that the average company has had an average of two major supply chain disruptions per year and that industry average and laggard companies are only able to meet customer-requested ship dates 40% of the time, the need for improved GSVP programs is becoming paramount.

Furthermore, Aberdeen found that despite all of the growing concerns regarding natural disasters, terrorist strikes, political uprisings, etc., the top 3 risks (accounting for over 75% of surveyed disruptions) are actually quality & supplier reliability, lead time increase, and the downstream effects of forecasting errors. Therefore, as I indicated in my posts on supply risk management (I: “An Introduction”, II: “Risks and the Need for Resilience”, and III: “Managing Risk”) and supplier performance management (I: “An Introduction”, II: “The Road to Success”, and III: “Best Practices”) on eSourcing Forum [WayBackMachine] , there is a lot you can proactively do to minimize the chances and effects of disruptions and significantly improve your on-time delivery (by as much as 50% in some cases), and the insightful Aberdeen report is a great start if you want to take your supply chain to the next level. I recommend checking it out. I’ll be posting my own thoughts on it later.

The Sourcing Innovation Series: Part X

I know it’s been a few days, but as I said in my last post, it wasn’t over … just delayed a little while my fellow bloggers enjoyed the long weekend and collected their thoughts. Over the last couple of days, Charles Dominick posted “Sourcing Innovation for Enterprise-Wide Contracts” over on the Purchasing Certification Blog (now the NLPA blog), his second post on the future of sourcing, and Jason Busch posted “Evaluating Spend Visibility and Analytics Providers”* over on Spend Matters [WayBackMachine]. Now, I know Jason’s post wasn’t explicitly a post on the future of sourcing, but it is on spend management innovation, and the future of sourcing is all about innovation.

Charles pointed out that the sourcing world is ready to go to another level. In the not too-distant future, we’re going to look back at today’s supplier selection methodology and consider it archaic. Today we use TCO analyses or weighted average supplier scorecards, but these are problematic in that each internal customer or commodity team will not only value different criteria variably but assign different subjective values to the same qualitative criteria.

In the future, Charles expects speculative bickering to be replaced by the widespread watching of simulations of various scenarios associated with the various supplier selection opportunities. The sourcing team will see the risks and the impact on the buying organization if those risks come to fruition. I think Charles in on to something here. While I do not foresee simulation replacing decision optimization for award allocations, for reasons that I will discuss in an upcoming red paper from Iasta that I am co-authoring, it is a great technology for risk evaluation, identification, and mitigation as you can not only simulate the effect of a disruption but the effect of a risk mitigation strategy. This gives you a more comprehensive, tangible understanding of the factors that should influence your decision.

The net effect is that in the future a procurement professional will need to be even more skilled and educated then today as you will have to be smarter than the simulator, and understand what factors the simulation considers and know how to evaluate those factors to arrive at an optimal decision. According to Charles, some of the skills a purchaser will require in addition to their current skill set are:

  • Skills in quantitative analysis, with an understanding of statistical probabilities, decision trees, etc.
  • Knowledge of macro- and micro-economics
  • The analytical ability to quantify the total cost of the supplier relationship, not just the total cost of ownership

In addition, a procurement professional will need a better understanding of decision optimization, the underlying technologies, and where simulation ends and optimization begins. Not an easy task, but this is why procurement is going to become the center of tomorrow’s organization.

Jason focused on spend visibility, noted that your spend management approaches need to become more sophisticated, indicated that your solution providers need to focus on content integration, vision, and integration, and that in a few years time leading procurement organizations will think about spend visibility, supplier performance, and supplier risk management as a single implementation.

With respect to content integration, Jason states that auto-classification and cleansing tools will never be sufficient on their own, since examining the supplier master is just a start. You also need to be concerned with supplier credentialing, supplier financial viability, supplier quality, and operationally related information.

With respect to vision, your solution provider needs to have value beyond just one-time cost reduction category sourcing efforts, otherwise you should be looking at another solution provider because the true value of any spend or supply management solution is long term viability. At the very least, your provider should understand and offer solutions for long term supplier performance management and supply risk management.

The solution should be integrated into, or support strong integration with, a spend management suite and have strong ties into other systems of record and data stores since the notion of periodic batch-based approaches to spend visibility and analytics is no longer sufficient and the future will require near real-time updates to insure your supply chain continually functions like a well-oiled machine.

All-in-all, a great couple of days on sourcing innovation and the future of sourcing.