Using Technology to Improve the Sourcing Process
If you ask a typical procurement organization why they are attracted to eRFX and auction technology, they’ll tell you that they expect to realize significant savings from introducing competitive online negotiations. But we believe that companies can also significantly improve their sourcing processes by using the right toolset, creating additional savings and efficiencies, from streamlining supplier management to improving internal knowledge capture and purchasing performance.
Our experience suggests that there are five key areas where the right technology can improve sourcing processes within an organization. These are:
1. Defining organizational processes and standards – Few procurement organizations will admit to having undefined processes and standards. But quite often, procurement managers have significant leeway in how they source and manage different categories. For example, this "artistic license" might range from what supplier information they capture to the optimal number of suppliers to invite to a specific negotiation. The right sourcing and eRFX application can help procurement organizations to both define and implement the right set of processes and standards.
2. Setting category specific workflow and processes – When companies first begin to implement strategic sourcing techniques, many take a generalist approach to procurement across categories, employing standard five, six, or seven (pick your flavor) step processes across a range of spend. But in many cases, this can result in sub-optimal savings results that are challenging to implement in certain categories. Procurement organizations can optimize their sourcing performance by defining category-specific steps and workflow within their technology by taking into account the nuances of specific categories and individual supply market dynamics.
3. Ensuring communication with suppliers throughout the sourcing process – Before the advent of eRFX and auction tools, the biggest mistake that many procurement organizations made in negotiating with suppliers was not communicating frequently enough – and without enough level of detail – to create transparent market environments. The more information a supplier has throughout the sourcing process, the more likely he will be able to submit a bid that represents his best possible offer (which he will be able to honor after a bidding event is complete). The right eRFX toolset can streamline supplier communication, greatly reducing the buyer’s time commitment, while providing accurate and detailed information that puts in place a foundation for the best possible outcome.
4. Capturing internal knowledge – Some organizations think it's bad to keep supplier and purchasing information scattered across dozens of IT systems. We would agree that this can make internal knowledge management difficult. What's even more challenging to knowledge management, however, is attempting to manage procurement information scattered about in print (card catalogs), ERP systems, and user’s desktops, a situation that is surprisingly common inside many purchasing organizations. In both situations, procurement groups can begin to drive their extended organizations to capture knowledge by using online eRFX and strategic sourcing tools. Implement the right solution, and you can be on your way to capturing best practice steps and templates to drive sourcing success. 5. Improving supplier relationship management – Supplier management should be an iterative, ongoing process, but unfortunately, many procurement organizations primarily look at it through an event-based lens. For organizations just getting started with eRFX and reverse auctions, the right toolset, however, can serve as a foundation to manage supplier information in a common environment accessible across the company. And as an organization becomes more advanced, this supplier information repository can help drive ongoing supplier relationship management activities, from monitoring responsiveness, to keeping track of quality and performance.
6. Without a doubt, many organizations get lost in the initial sizzle of price compression through reverse auctions and eRFX tools. This can certainly be a wonderfully, long-lived cookout. But procurement organizations focused on long-term value would do well to ask themselves how they can employ the same tools to sow fields that will return additional, sustainable savings from looking inwards to better manage and improve their own processes.
First posted: November 22, 2004
How Will Suppliers React to Reverse Auctions?
The term "reverse auction" tends to spark a strong reaction from both buyers and suppliers. Buyers familiar with the process will often point to the savings that they've been able to achieve through using them. Suppliers tend to react in one of two ways. They will either strongly support their use (especially in the case of highly competitive providers and / or new suppliers) or will display varying degrees of displeasure.
Often the way a buying organization - or third party - presents the concept of a reverse auction will determine how suppliers react. If a buying organization takes the time to explain their purchasing philosophy and how they incorporate reverse auctions into their overall procurement strategy, they stand a much better chance at bringing suppliers onboard with the process. Region and geography will also play a role in how suppliers react to reverse auctions. Suppliers in the rust belt who have been participating in reverse auctions for years with the Big Three automotive companies and other buying organizations who focus almost exclusively on cost will tend to have a more negative reaction than suppliers in other regions. This, however, is not always the case. Recently, we have heard about one reverse auction where a small, high-quality metals provider was extremely excited to get the chance to participate in a bidding event, because other potential customers had considered them "too small" despite their quality and capabilities to meet the specifications required. In the end, the supplier was one of the low-cost providers in the reverse auction event, and was in the running for the contract award.
But in most cases, suppliers are not always as ecstatic to get involved at the start. In recruiting new suppliers to the process, buyers should stress the opportunity to win new business without increasing SG&A expenses. When approached properly, cost competitive suppliers often react to the chance to participate in reverse auctions with a smile, as they realize they are a highly efficient sales channel, which enables them to compete on price and quality, rather than the size of their salesman's expense account (and his rolodex).
In having the same conversation with incumbent suppliers, buyers can expect a bit more push-back, especially in the case of long standing relationships. But by stressing that the reverse auction is actually a chance for the supplier to win additional business - through the consolidating of spend - as well as a chance to solidify and build on the existing relationship, they can often overcome initial push-back. In some cases, cost competitive incumbent suppliers will react to reverse auctions without voicing concerns, though this tends to be the exception rather than the norm.
In recent years, it has become significantly more difficult to convince incumbent - and even new - suppliers in specific categories to participate in reverse auctions. This is due in part to the reputation of some of the larger strategic sourcing service providers and technology vendors, who have operated by shaking up the supply bases in specific categories like metal stampings by looking primarily just at unit cost as the primary decision factor. But by stressing the importance of price and non-price factors and over-communicating with incumbents and new suppliers alike about the process and expectations from the start, the buying organization is much more likely to avoid this type of confrontation, even with the most curmudgeonly of the lot.
First posted: January 28, 2005
Sourcing Support - It's Not as Simple as it Sounds
In recent years, it seems that just about every vendor and professional services vendor offering eSourcing capabilities
have touted their ability to help buyers and suppliers alike with sourcing support in addition to software.
But our experience and feedback suggest that not all support capabilities are created equally.
A common complaint we hear from users is the challenge of being stuck with a standard "help-desk" level support capability. We've heard the story of one sourcing manager who called a sourcing application help-desk at 10:00 am one morning with a question and then later called back the same support number at 10:15 am. Unfortunately - as is often the case with many help-desk set-ups - the representative on the second call had no knowledge of the first call, and the user had to re-communicate everything.
Delays like this cost valuable time and resources. From an activity based costing perspective, a few delays like this can cost an organization thousands of dollars in lost productivity. To avoid this situation, procurement professionals should ensure that their sourcing provider offers a dedicated, consistent customer support team that can not only respond rapidly to requests but has the context and knowledge with which to answer questions quickly and effectively. But don't take a vendor's word for granted. Do yourself a favor when negotiating with your provider and make sure this level of team-based support is included in your contract.
From a support standpoint, global language capability is essential and should be targeted to the supply base that is participating in the events. English is frequently adequate for all users; however, it is best to align the support functions with the local country cultures. Europe, in particular, is very insular and prefers working with individuals within their respective borders and languages.
But basic support does not start and end with a phone call. Your sourcing professionals should work with a provider with expertise and capability to augment your internal capabilities and resources. From helping build accurate RFQs / RFPs to identifying and qualifying suppliers, support prior to a sourcing event is also essential. And it goes without saying that once an event begins, your partner should be able o provide bidder assistance, training, and monitoring at a reasonable cost.
Beyond basic support and event-based support, working with a partner who can offer the right level of training to take your procurement organization to the next level is also important. Whether it's basic or advanced training that includes lessons on sourcing (and reverse auction) ethics, supplier communication, and category / item selection and strategy, the right partner should be able to tailor support levels to your needs.
If identifying the right sourcing opportunities is a challenge, your partner should be able to identify categories and projects through cost effective sourcing opportunity analysis initiatives, which can be ompleted in days, not weeks or months. These types of services can help users double or triple the number of successful projects which they can use an online strategic sourcing tool for and at price points which can make your CFO smile.
Above all, it's critical to look for services flexibility from your partner. Your partner's capabilities and services should map to your needs. But all too often, it's the other way around. Given this, how can you ensure your support needs are met? Begin by thinking through support scenarios and accurately specifying your support needs when you set your initial contract with your sourcing provider. Ensure you get what you need, but don't pay for unnecessary bells and whistles. Otherwise, you might be spending time repeating yourself to a help desk who knows your name, but not much else.
First posted: April 4, 2005
Beyond the Auction: The Sourcing Cockpit
When the reverse auction became a mainstream negotiation method, it created significant buzz for the sourcing
movement. And for many organizations, the reverse auction provided both steak and sizzle. But after the
initial cook-out, organizations began to realize that the initial feast was just beginning. Often, the most
sustainable savings and efficiencies would come from using sourcing tools to standardize and embed
purchasing processes within the organization.
When a purchasing organization goes through a specific cost reduction initiative for a category (whether they use a reverse auction or not is irrelevant), they can achieve significant process savings and can reduce sourcing cycle time by as much as three times by using a sourcing application. For example, they can use a sourcing application to communicate disparate file types (CAD, Excel, PDF) enabling suppliers - and internal stakeholders - around the world to access and share information in a secure streamlined fashion.
In short, the application becomes the sourcing cockpit. The reverse auction or sealed bid component might be the accelerator pedal, but the instrumentation keeps the vehicle on the road. Like the Model T Fords which replaced horse-drawn carriages, the sourcing cockpit improves upon a previous way of doing business. For instance, a sourcing cockpit replaces email as the primary tool to communicate information. And it allows the standardization of offline processes. For example, organizations can create qualification templates and RFQ documents, creating standards that can be shared across and between organizations.
The essence of a sourcing cockpit is that it enables an organization to communicate similar information to a wide audience, providing a new level of transparency and visibility. It cuts down on rework such as phone calls, faxes, emails and useless searching. It also ensures that everyone is seeing the exact information at the same time.
As important, in today's increasingly stringent regulatory environment, sourcing applications can be used to create audit trails and standardized purchasing processes. While not a replacement for Sarbox financial systems and controls, sourcing tools can help organizations achieve new levels of compliance and transparency, which, according to a research study conducted by Hyperion, can lead to increased valuations as investors tend to reward companies with control systems and documented processes.
Sourcing cockpits also pay dividends over time, creating sustainable savings and efficiency. That's because if an organization goes back to source another category in the future:
1.The information is already in a common repository (prints, supplier lists, contact details, RFQs, etc.)
2.A lower-level resource can handle the sourcing process (because the intelligence is baked into the application)
3.The RFQ documents can be reused and repurposed, saving time and cutting purchasing process costs
4.A list of suppliers is already in a common database
5.Standardized processes and practices can be shared by individuals across an organization within the purchasing, engineering, and operations functions
The power of a sourcing cockpit only gets stronger over time, as organizations begin to populate their repositories with information and templates. But for many, the first step along the sourcing path is to begin to use applications to manage information and the purchasing process, regardless of whether they use a reverse auction negotiation tool.
First posted: June 7, 2005
Optimization Moves into the Sourcing Mainstream
Sourcing Optimization is technology that can and will be used by the masses
Every so often an academic invention makes its way into mainstream business practice. Sometimes this can take years. Other times, decades. But quite often, it's worth the wait. Sourcing decision optimization is a great example why. Sourcing decision optimization capabilities help procurement organizations reduce their total supply costs by empowering users to make better decisions while shortening sourcing cycle time. In addition, decision optimization provides a range of additional benefits which include:
- Making procurement teams focus on the upfront component of setting up the best decision award criteria by putting the actual "decision" factor into the hands of software that provides the mathematically correct answer every time
- On a total cost basis, saving an average of an additional 5-20% on complex bid categories (e.g., transportation, MRO)
- Helping procurement organizations to evaluate make vs. buy decisions more strategically
- Enabling strategic sourcing for categories which were previously too challenging to analyze or impossible to source via traditional negotiations or reverse auctions
- Eliminating the need for building separate spreadsheets and custom formulas to analyze supplier bids and responses
- Empowering all stakeholders to share project and award decision data across functions (and even divisions), creating a strong team environment
- Shortening collaborative decision cycle-time through use of real-time analysis
Iasta's new SmartSource® decision optimization makes all of these benefits a reality by automating the decision process to help
companies not only identify, but implement savings faster. How does it work? Iasta's approach provides suppliers with greater
flexibility in the sourcing process by allowing them to tailor specific offers to buying organizations. With this information,
procurement teams can then select the best combination of suppliers, products and services for their specific needs. Based
on a unique set of criteria, organizations might factor in the following types of criteria in analyzing award optimization scenarios:
- Overall business objectives
- Sourcing strategy (e.g., supplier rationalization)
- Risk aversion / supply risk factors
- Quality standards and supplier performance
- Minority / women-owned business status
Jason Busch, in his blog, Spend Matters, recently wrote that "optimization is a way to elevate the role of Spend Management by removing organizational barriers, helping procurement move beyond its traditional role. By helping Spend Management leaders to focus on the drivers that impact a decision -- rather than the decision itself -- it elevates the traditional procurement role. For instance, optimization technology can allow procurement organizations to significantly impact supply chain design." Using optimization today, procurement teams are impacting supply chain design and award decisions outside of categories for which they traditionally applied offline or services-based optimization approaches (e.g., transportation). For example, Busch cites that "in addition to ocean freight, air freight, LTL, and truckload transportation -- all of which remain great categories for optimization -- companies have deployed optimization with great results in such categories as MRO, packaging, temporary labor, plastics, labels, and printing."
The good news is that procurement organizations no longer need to pay hundreds of thousands of dollars to services-based firms to engineer optimization results for them. Nor does optimization require expensive, installed software that drains your IT resources, not to mention your budget. Sourcing optimization technology has finally gone mainstream, and at Iasta, we're thrilled to make it a core part of our sourcing platform.
First posted: February28, 2006
Appreciating the Landscape, but Staying True to eSourcing
eSourcing is a valuable component to an enterprise cost reduction strategy
In the past year, we've seen an explosion in the number of procurement and supply chain technologies that are now reaching past early adopters and capturing the attention of a mainstream business audience. These include such areas as supply risk management, which can help companies reduce their supply chain exposure through the proactive monitoring of supplier operational and financial performance, and multi-echelon inventory optimization, which can help companies understand how to reduce inventory levels and carrying costs across their extended operations. We've also seen the rise of supplier networks, which help companies reduce the costs of integrating supplier catalogs and managing procurement transactions in the indirect and MRO arena.
But while it seems like a week does not go by without a new buzzword or technology hitting the procurement world, eSourcing, which has been around in some forms for a decade, continues to define and shape the market. When FreeMarkets introduced the concept of reverse auctions back in 1995, they essentially automated the negotiation component of a strategic sourcing process that AT Kearney and others had used for an extensive period of time. But the online competitive negotiation environment that FreeMarkets originally introduced paved the way for Iasta and others to offer broader eSourcing capability that brought the end-to-end strategic sourcing process online.
Today, still stands as the number one cost reduction and quality improvement opportunity for procurement organizations worldwide. When most first hear the word today, they immediately think about reverse auctions. But at Iasta, we have seen hundreds of companies improve their bottom line not only by reducing costs through reverse auction and other competitive negotiation formats (e.g., optimization), but also by implementing a rigorous, standardized sourcing process and approach using an eSourcing suite as the centerpiece.
At the same time, eSourcing suites also can help companies better understand supplier capabilities. Through the use of templates to understand supplier certifications and quality levels, procurement organizations can streamline and automate much of the qualification process. On the back-end, sourcing teams can use their findings to assign variables to supplier bids to arrive at a total cost understanding of how each supplier stacks up in the process. ESourcing applications can also help procurement organizations meet emerging compliance needs by creating an audit trail of activities throughout the qualification, negotiation, and contract award phases of working with suppliers.
But all of these capabilities do not matter if an organization does not deploy eSourcing capabilities throughout its organization. We often hear that the ease of use and project workflow of an individual application matters as much - or more - than the latest bells and whistles that come to market. If an application is not easier to use than a traditional off-line way of managing the sourcing, quoting, and supplier selection process, then it's unlikely it will be adopted widely within a procurement organization. This is especially true for companies that do not have centralized procurement leadership which can dictate process and policy.
First posted: May 1, 2006
eSourcing: Global Style
When talking to procurement organizations these days, both eSourcing and global sourcing almost always come up as top issues. But unfortunately, they're rarely discussed at the same time. This is a shame, because how suppliers - local or global - participate in an eSourcing process can tell you a lot about whether they're a good fit for your organization.
In China and other regions, we still see occasional resistance to eSourcing, not because of the competitive process, but because of a lack of business process understanding and language barriers. The former issue is relatively simple to address through training and explanation, but the latter is one that should raise a red flag of sorts, especially in the case of highly engineered direct materials (e.g., build to print parts). For instance, even in China, it's highly likely that any company with export experience will have at least one employee or contractor with some degree of English language proficiency. If they do not appear to have some English language proficiency, you need to ask yourself if you want to be an export guinea pig - particularly one who can't communicate directly with your supply base.
A global suppliers' initial willingness to open and respond to an RFI or RFQ in an online format can certainly tell you a lot. But it's important to separate out cultural and business issues from language ones. If after an initial development or training call, the global supplier in question is resistant to using an application for basic quoting and document exchange at a minimum - let alone reverse auctions or competitive negotiation - then it's important to think through all of the implications, especially if language hurdles are the driver of this push-back.
Consider the added risk involved in working with a supplier that has little or no English capability at all. Even if your organization has an on-the-ground international procurement office (IPO) in the country, it's critical to think through the implications of doing business with a regional supplier like this. Consider whether:
- You want your US or European engineers to work through two sets of translators to work with the supplier's engineers during production ramp
- The company has really undergone the same level of proficiency (e.g., TS, ISO, etc.) to qualify for a certification; if they cannot afford to hire English language capability, it's highly unlikely that they would pass a Western-standard certification
- You will be able to easily handle quality, performance, and supplier development issues should they arise
Distance can magnify this risk in fact. Think about what happens if a part defect issue arises, and your next dozen containers are already on the water. Short of parachuting in a local supplier development team with regional language, cultural, and business experience and air-freighting replacement items, it's likely that a serious supply disruption will occur.
The cases we have addressed so far in this article relate to language issues and barriers and what they represent. The good news is that cultural and business challenges which global suppliers may voice are easier to overcome than language ones. For example, it is not unusual to encounter a supplier that will state that they are unwilling to enter bids electronically during an event. But if you tell them that they can submit bids via a surrogate bidder and that it is their choice if they want to respond to the market by reducing their pricing, it can often open up the door to explain the eSourcing process in more detail and find acceptable common ground. In some cases, there is no replacement for on-the-ground training to answer questions and step through the process in more detail. In large, multi-million dollar events where the product will almost certainly be sourced from a particular country or region, holding a bidder's conference to answer questions in a group setting can also be invaluable.
When it comes to Global Sourcing, it's important to remember that a supplier's capability and willingness to participate in an eSourcing process are two different things. By separating the two and proactively recruiting and convincing the right set of suppliers to participate, it's possible to marry eSourcing with Global Sourcing, and get more from each initiative together than is possible separately.
First posted: July 3, 2006
How an eSourcing Suite Can Help Reduce Supply Risk
Even in the industrial heartland - not to mention farmland - of America, we can open our local paper and read front
page stories on a weekly basis that feature topics highlighting the impact of global supply risk on the regional and
world economies. From articles featuring hurricanes and typhoons to full length pieces examining plant strikes and
global conflicts, it can be hard to avoid the very issues driving global supply risk, even in our local newspaper!
For procurement and sourcing professionals, the rise of supply risk is nothing new. Since the end of the 19th century - as companies moved away from vertical integration as common practice - manufacturers and service providers alike have exposed themselves to significant business risk due to external supply related issues.
These risks can be significant. From supply disruptions that shut down production lines to supplier quality and under performance issues that can damage customer satisfaction or cause product recalls, even issues with the smallest of suppliers can wreck havoc with a company's top and bottom line. The good news is that many forward thinking sourcing organizations have begun to think about ways to actively mitigate and manage supply risk. Some have embraced financial and operational monitoring capabilities that predict the percentage likelihood of supplier bankruptcies. But these approaches only encompass one piece of the supply management equation.
Procurement teams can also reduce supply risk by re-evaluating the ways in which they deploy eSourcing suites. For example, by actively managing supplier certifications and qualifications in a common repository and using collection templates to gather and analyze supplier responses, sourcing professionals can better understand supplier capabilities and quality levels before they think about award decisions. In the manufacturing sector, for example, a procurement group might use an eSourcing tool to track and manage supplier quality and process certifications such as TS and ISO. They might even include their own questionnaires and supplier development surveys to better understand current or future at-risk suppliers. One Iasta user who deploys a lean approach in all of their sourcing decisions uses an eSourcing survey tool to better understand supplier capabilities and processes before developing the formal "event".
During the negotiation and bid analysis process, eSourcing suites can also help reduce supply risk. For example, by using a classic 60/20/20 split of business approach - as Toyota has so famously done over the years - an organization can reduce its dependence on any single source of supply, while still developing a preferred option and conducting joint cost take-out efforts. The great news is that eSourcing suites can enable a 60/20/20 split while ensuring the absolutely lowest total landed cost through advanced, solver-based post-bid optimization capabilities hich determine ideal awards scenarios.
Yet in other cases, we have known buying organizations to handicap suppliers from specific regions (e.g., China) in bidding events by a specific factor (e.g., 10%) because of existing spend concentrations in certain regions. The notion, in this case, is that any more regional spend concentration would increase overall supply risk due to the chance of specific country-related issues (e.g., currency inflation or a port disaster).
Without question, an eSourcing suite is not a substitute for managing the ongoing operational and financial performance of a supply base. But when deployed in conjunction with other capabilities and processes, eSourcing suites can serve a critical role in reducing a company's overall supply risk and exposure.
First posted: October 3, 2006
Suggestions for Closing the eSourcing Loop
Without question, eSourcing solutions deliver a significant, stand-alone ROI - far more than virtually any other
technology investment a company can make. But closing the loop on these savings - not to mention identifying the
best opportunities to go after in the first place - can prove challenging for even the most sophisticated procurement
organizations. In our experience, we've observed that organizations that create sustainable savings by closing
the procurement loop make two critical technology investments outside of online strategic sourcing.
These are investing in spend visibility and analytics and contract management. We'll now examine these two areas -- and their contribution to closed loop savings.
First, let's consider spend visibility and analytics. There's no question that spend visibility solutions can help organizations tee-up the right set of sourcing opportunities on an ongoing basis by helping pinpoint sourcing-driven savings opportunities (e.g., supplier rationalization or supply base reduction). But did you know that spend visibility and analytics tools can also play a critical role in driving sourcing savings and compliance as well?
By using an analytics tool to examine off-contract spend, for example, procurement organizations can gain a handle on where "savings leakage" is coming in the organization. Is it coming from a group of materials managers with a penchant for expediting orders (leading to what was previously a PPV that was hard to pinpoint?). Or is it due to maverick buying on the front lines of the business for computer and office equipment? By answering these types of questions, spend visibility and analytics capabilities play an essential role in closing the eSourcing loop.
Second, let's turn our attention to contract management. For many procurement organizations, contract management is akin to tossing an issue over the wall - to legal, finance, the line of business, etc. After all, once a contract has been negotiated, it's up to the business to act on it, right? Well, it's not that simple. In many cases, front-line requisitioners do not have streamlined access to contract terms and conditions, making it challenging to enforce supplier pricing terms and conditions when the contract is buried somewhere on a company's shared hard drive.
Moreover, unless an organization is actively managing a contract, it can be very difficult to know when to re-source a given category or item. In other words, without an active method to manage contracts, the identified savings unearthed by procurement through eSourcing can often be eroded unnecessarily.
Certainly other technology investments such as catalog driven procure-to-pay capabilities that automate the requisitioning and financial flow of indirect and services categories can drive enhanced closed loop sourcing savings as well. But in our experience, spend visibility and contract management together are absolutely essential to closing the eSourcing loop. As you start implementing your sourcing resolutions for the New Year, and, if you've not already acted on these two areas, we'd suggest you put them on the top of your list.
First posted: February 1, 2007
Getting Down to Contract Management: When the 80% Solution is Enough!
A couple of years back at Iasta, we took a hard look at our strategy for building a contract
management solution. In fact, more than a handful of our customers asked us about our development
roadmap as it related to contract management functionality. Coming up with the right product
development strategy was critical. At the time, when we considered what else was out there in
the market - and how most customers actually adopted contract management technology - we concluded
that selling a full contract lifecycle management application that started with contract authoring
and carried through to legal and sell-side contract management would be akin to selling that
shiny red sports car that sits in the garage because no one knows how to drive it or where to take it.
In Indianapolis, we’re no strangers to fast cars. But we weren't about to build and sell something which would rust out. So we decided to build a highly focused application specifically designed for procurement contract management. And given the importance of tracking contracts, we even decided to include it as part of the core Iasta eSourcing application. What we came up with would ultimately include an advanced custom contract repository with specific triggers and alerts to tell sourcing professionals what they needed to know, when they needed to know it. But we made the conscious choice to limit development around specialized authoring features - since we observed that so many high six and seven figure contract management implementations out there fail to fully use even a fraction of all the features which are built into the application. In fact, a CLM insider once told Iasta executives that the single biggest threat to the industry came from eSourcing vendors that bundled in the core functionality that was needed. Frequently, the added cost does not justify the expense when companies are not ready for the full blown investment and change management needed.
Now, there are many additional places to take contract management if a company truly wants to make a significant standalone investment in it from a non-sourcing and procurement perspective. Indeed, sell-side and legal contract management introduce many nuances of their own along with the potential value they can bring as well, as do buy-side contract management which integrate tightly with third party ERP packages (which is a path which we found that delivered little value to the customers we surveyed).
But the major reason we opted to focus on contract management rather than full contract lifecycle management were based on complaints we heard from users who had deployed the latter type of solutions. Among other areas, we heard that the deployment costs were often significantly more than the cost of the software, and the third-party configuration and systems integration required brought significant added risk and cost to the table. We also found that a number of the more advanced systems still elicited significant customer complaints for cost-benefit relationships and critical missing data integration.
At Iasta, we're committed to delivering the best bang for the buck in the sourcing world. But this philosophy does not just carry through to what we build. It also carries through to how we think customers will actually use what we sell. If a six or seven figure piece of software starts collecting dust - or when the majority of the features in it go underused after a deployment - what's the point in the first place? We knew we couldn't sleep at night, knowing that either indirectly or directly, we were leading our customers down a path representing high-cost for the commensurate value delivered.
First posted: August 14, 2007
What Type of Savings Are You Leaving on the Table?
We know you’ve most likely achieved some level of success in sourcing. Perhaps you’ve gone through a few
pilot categories in an offline strategic sourcing process, identifying savings numbers that make even the most
curmudgeon CFO’s jump for joy. Or maybe you’ve implemented an eSourcing program designed to systematically cut
across categories to achieve millions of dollars in savings that drop to the bottom line. Regardless of what camp
you’re in – or even if you haven’t gotten started yet down a sourcing path -- we have a secret for you. And that’s
unless you’ve deployed a sourcing-driven approach to spend analysis, you’re leaving money on the table.
If you ask an experienced sourcing executive the number one mistake they’ve made in the past with eSourcing, there’s a ood chance they’ll tell you that they waited far too long to invest in spend analysis technology that told them exactly what they were buying. Instead, to drive their strategy forward, they relied on one-time data extracts and incomplete gathering techniques to drum up as much spend as possible to cram into a category that could be packaged for an eSourcing environment. But if they had to do it over again, they’ll tell you that they would have invested in a sustainable process from the get go to not only identify all the potential spend at their disposal, but to determine the optimal strategy for bidding it – which can make the difference between identifying 15% line item savings versus implementing 20% savings on a total cost basis (factoring in switching costs, supplier management, etc.)
Not only can spend analysis applications help to build the right pipeline and sourcing strategy from the start, but they can also help identify opportunities that might be extremely easy to pull the trigger on. Quite often, when companies compare contracted pricing to actual invoice and payment data, they discover suppliers who are intentionally or unintentionally over charging. Suppliers in certain categories of spend are notorious for this. But the good news is that if you have the data to prove that you’re being overcharged, you can send those suppliers a bill or ask for credits towards future purchases. This can often yield similar savings numbers to longer eSourcing initiatives in a matter of hours or day. And plus, there’s no risk of changing suppliers or pulling resources off of other programs which are already underway.
At Iasta, we’ve observed that the majority of our customers and organizations still consider spend analysis applications to be a “nice-to-have” type of capability. But we believe they’re absolutely essential to deploying programs that achieve the types of savings that are possible from world class sourcing efforts. Still, companies should use caution when thinking about their approach to spend analysis. Sourcing organizations that place big long-term bets that rely on significant investments in IT resources or large bills for implementation and data cleansing take far longer to realize returns than those who focus on implementing spend analysis packages with an eye to achieving returns immediately. After all, it’s not just about the spend. It’s equally – or even more – about the analysis.
So ask yourself: with your current approaches to looking at spending data to drive sourcing strategies, how much are you leaving on the table? We’re willing to bet that it’s a number which you can’t tell us because you don’t know. But don’t despair. At Iasta, our entirely software-driven approach to spend analysis can help you see all the chips at your disposal in less time that it takes to carry out a single eSourcing event – sometimes in much less time. Curious to learn how the game has changed in spend visibility? Do you think an ERP data warehouse or BI tool does the trick? Reach out to us for more information.
First posted: November 9, 2007
Software Acquisitions: Is Wall Street's Gain Your Loss?
In the past year, we’ve seen a flurry of acquisition activity in the sourcing and procurement software world.
Most recent, industry giant Ariba acquired venture-leveraged Procuri. In full disclosure, both vendors are
companies we respect and often run into in competitive situations. But while deals like this might be good
for the fat cats on Wall Street, are they really good for customers? A recent article in The Wall Street
Journal offers a strong perspective which suggests customers should watch their wallet when it comes to
mergers and acquisitions their providers engage in.
According to the venerable daily, as “software companies flesh out their integration plans internally, customers on the outside are left with unanswered questions about their future. It often takes years for software makers to integrate all the products they have bought -- if they manage to at all -- making it hard for customers to decide what to buy in the meantime. Some customers worry about losing negotiating power in the long run as the number of product choices dwindles. And all the deal making can crimp a CIO's ability to plan, since it's unclear which software makers will survive.” But perhaps an Oracle / Peoplesoft customer interviewed for the article says it best: "In my experience [following the acquisition], it's been a dog's breakfast wrapped in a nice pretty ribbon.”
At Iasta, we’re not fond of serving up dog food. In fact, we’re the only vendor of comparable customer reach in the eSourcing world that we know who has been able to grow organically without acquisitions which would threaten our focus or customer service ethos. But perhaps even more important, what you see with Iasta is what you get. Unlike everyone else we know in the space, Iasta has no outside investors. Early on, this constrained our ability to grow quickly, but over the long term, it has – and will continue – to afford us tremendous freedom to make decisions that are right for our customers over the long-run versus what is best for external shareholders looking to make a buck.
In fact, this last point would appear very close to home given the recent Procuri deal. Procuri – like Iasta – was experiencing sustainable market growth before Ariba acquired them, but it was not enough for investors who had complete control of the company (and who made 90+% of the money on the “exit”).
According to Gartner Research in 2007:
“Ariba has several decisions to make in the wake of this acquisition, as no major functional gaps in Ariba's product line are enhanced with Procuri's offerings. Instead, Ariba will have two product lines with primarily duplicate functionality. Since Procuri’s solution set is built on .NET, and Ariba’s is not, Gartner believes that the Procuri platform solution is less likely to survive during the next two to five years as a separate technology platform.”
Now, Procuri customers face a choice – work with a provider with a questionable commitment to a legacy application, or consider other options. If early customer fall-out is any indication, many are clearly opting for the latter.
At Iasta, we remain 100% committed to putting our customers first rather than doing deals to keep our investors happy, but which will ultimately disappoint those who matter most – you. Whether it’s through eSourcing, advanced optimization, or contract management, Iasta is committed to driving innovation, value and customer success first. We wish we could say the same about everyone else, but then again, they’re not providers who boot-strapped their way to success, one customer at a time.
First posted: January 22, 2008
"R" Does Not Have to be a Dreaded Letter
I’m not sure about you, but we find it almost hilarious how politicians tip-toe around the "recession" word.
Seriously, why can’t our President and others call the economic situation for what it is? At least when it
comes to the sourcing and procurement world, we don’t need to be as careful. After all, we’re not running for
office or trying to obfuscate the truth – or the numbers as the case may be. And even one "R" word can be a
boon for us and our companies. The word that we’re referring to here is re-sourcing.
Before you get confused, let us explain. Re-sourcing is quite a simple concept. It involves going back and re-bidding a category which you might have previously sourced. And it just so happens that with the economy the way it is today, there could not be a better time than now to revisit a range of categories that you previously achieved savings in. So get ready to dust off the old eSourcing tool as re-sourcing becomes an "R" word which you can get the rest of the company excited about.
What categories of spend are ripe for re-sourcing today? A good many, in fact. But the sourcing environment is not always cut and dry. On the one hand, there remains relatively high commodity price inflation in areas such as oil, energy, plastics, metals and food related products despite rising inventories and capacity. So in categories where raw material inputs comprise a material portion of the overall total cost, it might make sense to adopt a sensible sourcing approach where suppliers separate out the raw material components from their bid (and agree to tie the underlying elements to some type of market index). This will create significant competition in a market with slackening demand where suppliers are hungry for business.
But in areas where raw material inputs matter little – or are less transparent in the actual pricing – such as hotel spend, office products, or temporary labor, re-sourcing strategies can be quite simple indeed. In these cases, simply identify a list of new suppliers who you want to invite into the fray and join them with a previous approved bidder list. In some cases, you might find that the supplier landscape has changed quite a bit since the last time you revisited the category. Other times, it will look the same. But it’s always worth spending some time on supplier outreach to ensure that you’re creating a bidding environment – regardless of whether or not you plan to use a reverse auction, sealed-bid, multi-round, or optimization environment (or even a combination thereof) – with the maximum amount of competition.
If our experience about the hungriness of suppliers to participate in re-sourcing projects is any indication, you’ll find that each category will be hit or miss (but you’re more likely to find hits as the economic picture gets bleaker). The only challenge is you often won’t know before starting the re-sourcing process whether or not you’re going to achieve the type of results you’re hoping for.
A good way to test the waters is to reach out to suppliers you’re not working with today and engage them in conversation before bringing the process online. Find out what’s going on. How are inventory levels, orders, etc? Practice small talk by commiserating about the state of the economy and see if they take the bait. Then, once you’ve satisfied your curiosity that there really is a good opportunity, it’s time to pull the re-sourcing trigger – one category at a time.
First posted: March 21, 2008
Resource Libraries for eSourcing
What it is, why it's valuable, and why you'll like it
Supply management professionals should begin to embrace the community aspect that only the Internet can bring, namely in the form of Web 2.0. You may ask, "What is this Web 2.0 that you speak of?" Well, Dario De Judicibus, an IBM Social Networking Analyst says it best;
"Web 2.0 is a knowledge-oriented environment where human interactions generate content that is published, managed and used through network applications in a service-oriented architecture."
Social networking will undoubtedly lead to sourcing communities of common interest where participants will be able to seek guidance, share information and develop analysis from peers. From category sourcing best practices, to anonymous - but public, price benchmarking, to publicly available supplier score-carding; social networking will have a profound effect on sourcing professionals around the world.
Any eSourcing best practice center, or resource library, should provide its user community with varied and dynamic content. These can include some typical types of public data, but also can be loaded with internally developed material.
VALUABLE INFORMATIONAL CONTENT (as found in Iasta's Resource Library)
- eSourcing Best Practices: eSourcing news, eSourcing coaching, online bidding and reverse auction workflow, online bidding pitfalls and more.
- eSourcing Coaching: Determining items to source, negotiation tactics, presenting reverse auctions to suppliers and more.
- eSourcing Workflow: Pre-project planning/checklists, project building, supplier outreach, evaluate preliminary bids, managing a Live Event and more
- Industry Information: Industry specific project preparation information, pricing index tracking, RFx templates and more.
- Recent News: Relevant sourcing topics with user driven information control.
- Software Feature Suggestions: A public feature suggestion offering allows all users to view, rate, and enhance suggestions.
- Blogs: Information has become real time with the emergence of blogs. Almost anything that a professional could require has a chance to show up on an industry blog which can be quickly retrieved.
- Wikis: Another new method of providing online best practices, supply management has its own wiki devoted only to its industry (www.esourcingwiki.com). Much like Wikipedia, if readers feel they have more or better information, they can publish and share it themselves. Although esourcingwiki is a public website, most wikis are internal resources for teams to collaborate and exchange information.
First posted: June 26, 2008
Sourcing and Supply Management Advice for Tight Economic Times
Even though we've been talking about the potential for an economic slowdown for some time, it looks like the world
economy is finally slowing thanks to a faltering US economy, and rising commodity and energy prices
(even though oil and some others have dropped precipitously in recent weeks, the effects of lower prices
have not cascaded through the economy yet). One of the outcomes from the economic situation is the
opening up of capacity in the supply base. This provides an opportunity for companies to reduce
their cost of goods (COGs) by targeting both the value-added portion of their spend and the
underlying commodity components.
How will you know when to re-source (versus when to keep on with your current contracts)? It varies across different categories of spend and the types of underlying raw materials. Consider how a few months ago, backwardation occurred in the copper markets. What is backwardation, you ask? According to Wikipedia, "it means a downward sloping forward curve (as in an inverted yield curve): one says that the forward curve is 'in backwardation' (or sometimes: 'backwardated'). Formally, it is the situation where, and the amount by which, the price of a commodity for a future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery." The reason this matters for our purposes is that current demand is more robust than forecast demand -- which is a signal that contract prices will fall.
In declining price markets, it's not only a great time to re-source -- or invoke de-escalation clauses -- because commodity prices are falling. It's also a good time to source because there's a chance that a new set of suppliers will be more interested in filling capacity just to stay busy and will accept a margin hit on new business. This also holds true in services and indirect categories as well, considering that rising inventories and newly available capacity will create greater competition in competitive sourcing environments where previously, constrained capacity might have led to reduced savings opportunities.
So as we gear up for a downturn, get your sourcing pipeline ready for the rest of 2008 and 2009. And don't be afraid to revisit categories that you recently sourced. But be sure to arm yourself with pricing and category market information to better prepare for negotiating with suppliers (on both a local and global basis). But look on the bright side -- this is a great time to be in the sourcing world. There is savings in them thar' recessionary (or at least rolling) hills!
First posted: October 2, 2008
Building a Procurement Center of Excellence
By now, we all know all about the benefits Strategic Sourcing brings to an organization: reduced direct costs, fewer suppliers, lower total cost of ownership, improved sourcing process, etc. To achieve these benefits organizations must come together as a team and approach the process from a corporate perspective, not as a collection of fragmented areas. An effective method to unify the procurement organization with other teams is to build a Procurement Center of Excellence (COE). A Procurement COE serves as the core element to a sourcing transformation initiative and provides the processes, knowledge, training, tools and best practices for implementing the strategies needed to make the change. Depending on the size of the organization and the scope of the projects, the COE could be a 1 - 3 person team or a larger global, group. As a centralized or center-led purchasing function, the key functions of the COE are:
- Developing corporate and regional supply chain strategies
- Conducting corporate wide spend assessments and compliance monitoring
- Prioritizing direct and indirect commodities and services
- Developing and implementing best-practice sourcing processes
- Implementing the use of leading sourcing technology tools
- Developing a shared knowledge database of the sourcing program
- Implementing a supplier management program
- Leveraging sourcing resources & costs (including sourcing specialization and the outsourcing of projects when needed)
- Communicate, Communicate, Communicate - evangelize throughout the company
To begin with, it is vital that organizations take the time to build a foundation for success by aligning itself with the organization and educating business units about new processes and team wins. The value of communicating narratives about wins is often under-rated. It helps conquer the "yeah, but..." mentality many people outside sourcing have. They think to themselves, "it works well for that commodity, but it will never work for mine because of..." To overcome this type of resistance, sourcing must focus its message on how they helped other teams solve problems. Explain the process in a simple manner so they can visualize success with their own commodity. Show them how much easier it was to obtain results.
Change is very difficult for people and for corporations. The difficulty lies not in the change itself but in the unknowns. Will my job change or be eliminated? Will our suppliers be changed? How will this affect production? People want to know how it affects them. Clear, consistent communication about the COE goes a long way to resolving many issues before they become stoppers. This includes both internal resources and the supply community as well. Changes in the organization should map to the center-led purchasing model. This may take the form of a Strategic Sourcing group, a Category Management group or Tactical Purchasing group.
While implementing changes, remember that sourcing and procurement are one part of the corporation and that other parts must be considered. The organizational changes do not take place overnight and require strategies and milestones to be successful. Outline and explain the transitional steps, listen to feedback and make adjustments. These strategies include:
- Understand and consider the business context
- Develop a long term, total cost sourcing vision
- Implement and measure results
- Use momentum to produce success</il>
The success of a COE depends largely on the implementation and the force behind that implementation. There are many ways to design
an effective COE strategy. For example, within the master Procurement COE, it may also make sense to have specialized sub-COE's that
focus on a particular category (direct, indirect, services, etc.), region (Latin America, Asia, etc.) or process (award analysis,
optimization, implementation and compliance).
And finally, the most critical success factor is executive level sponsorship. Executive sponsors should be unified, consistent and visible. Their support of the initiative blazes a path for success. To achieve the results the organization requires, executives should welcome feedback but not dissention.
For organizations committed to a COE strategy, the transformation takes time; many expect a 12-month - 3-year time frame to complete such a transformation. Throughout the transformation period, the sourcing team must continue delivering high quality sourcing projects and savings. These successes earn credibility to support the build-out of the COE. Success is measured when other parts of the organization involve the COE as a standard part of any decision making process.
First posted: December 1, 2008
Exciting times ahead for Sourcing!
Commodity prices to the left, capacity risks to the right --- and you're the only game in town.
Though today's headlines dramatically tell of Wall Street's meltdown and its impact on the global and local economy, companies can still be successful. As the downturn settles in, a new supply chain opportunity has once again emerged. And the sourcing team has a unique opportunity to lead the organization during turbulent times. Higher pressures, yes; but those challenges bring even greater rewards. Because sourcing touches so many elements of an organization, supply chain performance is at the heart of a company's ability to grow in today's global economy. As it introduces new suppliers, products, processes and innovation, the sourcing team is the ambassador of positive change throughout an organization. Though technology remains a critical factor with this new supply chain revolution, it's the business decisions and best practices that take the lead.
Top 5 best practices recommendations:
- Continue following cost containment strategies - While commodity prices rise, it is important to get the best value for every dollar the company spends. Technology plays a key role in any cost containment strategy. It provides price transparency, lowers the overall project costs, and expedites communication and decision making. It's time to explore some of the advanced functionality - such as optimization or post-bid award analysis - so that teams can squeeze as much savings out of every single project as possible. For many, this functionality may already be part of your technology platform.
- Commit to continuous process improvements - Over time, even small, incremental process improvements lower costs and improve quality. Continuous, incremental process improvements are often more important than dramatic process transformations. It's like earning interest on your investments. Process improvements reduce project cycle times and project costs, and allow small teams to do more.
- Remain quality focused - Though it is tempting to reduce costs by lowering quality, this strategy often backfires. Customers expect quality products. Instead, focus on the high quality elements and get creative with the less essential areas. Collaborate with your vendors about adjusting shipping, recycling packaging or other elements, without compromising on quality.
- Spend visibility - Insight into a company's spend helps the sourcing team focus scarce resources on areas that will yield the highest return. In today's environment, it is critical to have your projects prioritized based on facts, not assumptions or estimations. You have two great choices; acquire software to manage your own spend analysis initiative, or partner with someone who provides spend visibility as a service. Either way, get the facts on your spend.
- What is the total spend?
- What is the total spend by commodity, supplier, and business unit?
- How much spend is currently under contract, in total and within each commodity?
- How many suppliers account for the top 80% of spend; in each commodity?
- With how many different departments are your highest spend suppliers doing business?
- How much spend in each commodity is with non-approved suppliers? By what department?
- Measure and track Key Performance Metrics (KPMs) - KPMs keep a company focused on the critical activities that drive overall success. Identify these activities and track them rigorously. For your organization, what are the top 5 to 8 critical factors that result in overall success? One KPM may be contract compliance rates. High non-compliance means that the company is not getting better pricing obtained in an auction. In addition to paying higher rates, the company may also miss volume targets associated with rebates.
- 1.Establish a Steering Team
- 2.Conduct the Rollout strategy planning meeting
- 3.Establish a metrics-based scorecard (key performance metrics - KPMs)
- 4.Establish a milestone-based roadmap
- 5.Develop a prioritized sourcing project pipeline
- 6.Kickoff the eSourcing initiative
- 7.Monitor progress
- 8.Communicate and evangelize across the entire organization
- a.General situation and contributing factors
- b.Role of the vendor-partner or consulting-partner
- c.Specific roles, responsibilities and G's & O's for the
- Steering team
- User community
- Sourcing teamM
- d.General Rollout strategy
- A "big bang"
- Gradual Rollout - by region, by business unit, by category, etc.
- e.Current and future user community
- General users
- Super users & specialists
- Stakeholder groups & key stakeholder champions
- kill requirements
- f.Task and due date assignments
- Green = on-track, completed
- Yellow = needs additional support/attention
- Red = delayed, behind schedule
- White = future deliverable
- a. Platform (software/application) readiness plan
- b. User support plan
- c. Communication plan and schedule
- d. User training plan
- e. Award implementation plan
- Platform customization
- Look & feel
- Standardized documents, T's & C's
- Email templates, RFx templates, project templates
- Sourcing processes
- Process standardization
- Activating new users, de-activating users
- Standard buyer rules and standard supplier rules
- Rules regarding new project creation, pausing and deletion
- Rules regarding live event monitoring and supplier proxy bidding
- Award notification
- Internal (super users) vs. vendor-provided support levels for:
- Technical support (error resolution, password resets): for buyers, stakeholders and suppliers
- Navigation support (how to's): for buyers, stakeholders and suppliers
- Sourcing support (lotting strategies, supplier strategies, etc.): for buyers
- Escalation process and contact information
- Access to external consultants or subject matter experts (SMEs) support
- Supplier resolution process (non-technical issues)
- buyers, suppliers, stakeholders
- new user, ongoing refresher sessions, certification/black belt programs
- Content: software-focused, sourcing process-focused
- Delivery: classroom sessions, mentoring programs, eLearning (webinars, etc.)
- Provider: internally delivered, vendor delivered programs, associations (ISM, etc.)
- provide a calendar of training sessions based on content and location
- focus on getting a target sub-set of eSourcing software users through user training
- Audience: Steering Team, sourcing team, executives, stakeholders (finance, legal, etc.), partners, suppliers
- Potential channels: regularly scheduled or ad hoc team meetings, new hire training, corporate intranet, corporate newsletters, email blasts, events, lunch-n-learns, Executive briefings, or Executive-delivered messages/mandates
- Potential content: eSourcing wins, how to participate, training schedules, support contact information, status reports
- New supplier qualification requirements and process Stakeholder consensus building strategies
- Contract compliance management
- Appropriate levels of documentation
- Commercially attractive to suppliers (high value)
- Definable requirements (current, available specifications)
- Competitive supply base
- Savings opportunity (it has not been sourced for some time)
- Low inherent risk
- a.Wave I - Select 3-5 sourcing projects with the highest probability of success. Success can be defined as high savings opportunities, low complexity levels and a strong category advocate or sourcing team.
- b.Wave II - Select 3-5 sourcing projects with greater complexity. Complexity may be related to lack of current specifications, delicate supply base issues or involvement of multiple stakeholder groups.
- c.Wave III - Select 5-10 sourcing projects based on a more detailed spend analysis initiative. The spend assessment can be conducted internally or by your vendor-partner.
- d.Future projects - Select 10- 20 sourcing projects that may have potential, but still need additional analysis before they are officially scheduled.
- e.Ongoing pipeline maintenance - The future projects list should be constantly replenished so there is an ongoing list of potential projects.
- # number of users with userIDs / number of users using eSourcing software to
- manage projects / % of users using eSourcing software to manage projects
- # number of completed projects
- # number of projects per buyer / number of buyers trained
- # number of projects in pipeline / number of projects completed
- # identified savings overall (or cost avoidance) either by:
- % saved
- # identified savings per project
- # cycle time per project
- # Total spend under management vs. total corporate spend
- # $-amount of spend managed per buyer
- # Stakeholder feedback scores
- a.Schedule regular meetings to anticipate, discuss and resolve issues. The Steering Team should aggregate user issues to see if there are trends. Perhaps a particular region has training needs, or another group bristles over some of the buyer rules.
- b.Make adjustments to processes and templates, review new functionality to further aid the sourcing team, evaluate the possibility of including outside SMEs or consultants to expedite goal obtainment. By incorporating overall learnings into new sourcing templates, training sessions or business processes, the Steering Team facilitates knowledge transfer. People thrive on information. They want to know how to do their jobs better.
- c.Review the scorecard, create appropriate action plans to address problem areas.
- d.Conduct an ongoing spend analysis and project prioritization initiative that reviews compliance and new projects.
- Master Roadmap
- Rollout Pipeline
- Training Schedule
- Iasta Support Services
- Step 1: Methodology to balance managing insignificant "many" with strategic few.
First, companies need to develop a program that focuses on what might appear to be the insignificant many, rather than the strategic few. Why? Because you're only as good as the weakest link in your supply chain. Suppliers that would fall into the "leverage" 2/2 sourcing quadrant – in comparison to the partner one – are still important to include in a supplier performance management program because a disruption, quality drop or bankruptcy in this group can still have a material impact on the business.
- Step 2: Automate data capture and analysis
It is essential to find ways of automating data capture and analysis to facilitate the monitoring of a broad supply base. Excel-based tools will rapidly prove insufficient. What's necessary is a systematic way to roll-up self-reported supplier information along with qualitative and quantitative performance-related data from inside the organization. In companies with multiple operating divisions, sites and systems, it is even more essential to have a centralized repository that rolls-up this information for a centralized sourcing team to analyze, starting with a basic but automated scorecarding approach.
- Step 3: Track performance metrics
Third, it is essential to track performance metrics at the right level of granular detail. As an example, it is helpful to know when a supplier's PPM or defects are going up (or that service levels are dropping). But it is more important to know the specifics about what is happening. For instance, it is often the case that a specific supplier is not necessarily shipping poorer quality parts or delivering lesser service levels across the board. Rather, it might be a single plant or branch office whose performance is suffering. By the same token, gathering information at the right level of detail will allow a procurement organization to see if third-party providers are responsible for the issue (e.g., a logistics provider, a lower-tier supplier etc.)
Step 4: Establish a proactive performance monitoring system
Fourth, it is important to analyze supplier performance information in the context of a broader supplier relationship on a continuous basis - not just quarterly or yearly. In today's recessionary environment, a supplier's financial condition can decline in a matter of weeks and performance related issues are almost always the first clue. Looking at data weekly or monthly - even at a cursory level - is essential. Companies can save deeper dives for periodic reviews, but staying proactive in monitoring core performance is essential to stave off potential disasters that can materialize in a highly compressed timeline in the current economy.
Step 5: Share supplier performance data
Fifth and perhaps most important, supplier performance data must live as much with the business as much as with procurement. By providing and sharing data with business stakeholders, procurement organizations will not only create greater trust, the effort will also cause the group to be seen as more than just a cost cutting organization. In addition, by partnering with the business it's possible to develop a better total cost understanding of the implications of supplier performance. For example, a sourcing group might learn in the context of sharing information that a certain level of availability or on-time performance is not really necessary and that a greater tolerance is acceptable. This new level might shave material savings off the next negotiation when procurement can specify new business-driven performance and service level expectations.
- 1. Training is not a one-time event (big bang) – A user’s skill set evolves over time as they get more experience with a software tool and the stakeholder community. A user training program should include both big bang training sessions (to introduce new functionality and best practices) as well as refresher seminars.
- 2. Context – User’s should be trained on how to use software in context of their own organization and best practices. Yes, they need to know what buttons to click. But they also need to know when to use them or how to work through stakeholder and supplier issues as they are using them.
- 3. Blended delivery models – Hands-on, instructor-led classrooms are very effective, especially when rolling out new information and enhancing networking opportunities, but they can be very costly and time consuming due to travel requirements. Webinars are more budget-friendly, but may not be as effective when the user is sitting in front of their own computer also doing email.
- Increasing two-way flow of communication
- Improving supplier performance and uncovering better joint processes
- Uncovering hidden costs and cost drivers
- Provides scalable project execution capabilities
- Offloads simple, repetitive task-based activities- allowing Category Managers to focus on making strategic decisions
- Reduces project cycle-time, enabling companies to address more spend and run more projects
- Drives additional cost savings through efficient use of resources
- Removes bottlenecks by automating processes through template creation and implementation
- Increased profile of sourcing and procurement in organizations. Whereas in the past, many people were sent to the Siberia called "purchasing," in many of today's companies sourcing now sits at the C-level table, Chief Procurement Officer. Companies must now compete for global customers and enlist suppliers all over the world and this is not suited for someone biding their time before they can retire. Risks are enormous and the impact to a company's bottom-line very visible. The availability of better software tools and business processes have helped CPOs earned their seat at the table.
- Increased skill levels and strategic business knowledge for sourcing practitioners. The rising expectation of procurement to deliver continuous value requires its team to improve its set of skills. Before purchasing was considered to be a paper-pushing role - just put the order in and make sure it gets there on time. Today's practitioners need to have negotiation skills to handle incumbent and new vendors, communication skills to make sure stakeholders are on board, analytical skills to evaluate risks and forecast scenarios, technical skills to use complicated sourcing and analysis software, and stamina to handle the travel schedule that often comes with a global sourcing team. It has become a more interesting job and therefore attracts more interesting and smart people
- Software designed to enable better decision making. Prior to the first reverse auction a sourcing practitioner relied on the following technology: paper, pen, phone, voicemail messages, faxes, email and sometimes a spreadsheet. After a project, all the details were filed away nicely and neatly in a manila folder in someone's file cabinet (and in some cases the spoils also included season tickets to a favorite sports team). Today's modern technology makes everything visible, efficient and effective. Sourcing, stakeholders and suppliers can communicate quickly and easily about specs, updates and schedules. Pricing is negotiated through various formats (auctions, sealed bids, surveys) on a fair, level playing field. Awards are analyzed through complicated optimization functionality, shortening decision making time in half. Yes, it saves money. But more importantly, sourcing software facilitates better decisions.
- A philosophy of standardized, best practices. Prior to the reverse auction, except for high profile commodities, purchasing had a reputation of being essentially ad hoc. With reverse auctions, practitioners had to think differently about how to set up an auction properly so as to maximize savings. Over time, people discovered that a sourcing project follows the same basic plan regardless of what was being sourced. Sourcing metal parts was similar to sourcing plastic parts, electronic components, janitorial services or pallets. Specific commodities and supplier markets had unique nuances that could be accommodated by making adjustments to the basic the strategic sourcing process. The wide-spread adoption of sourcing best practices allowed companies to do more with fewer people, improve quality and consistency, expand into different supplier markets. Companies could actually think globally and act locally through the concept that is now known as "Center-led."
- A network of global alumni that keeps delivering value. A large number of FreeMarkets alumni have stayed in the sourcing and procurement industry. Some alumni remain with the companies that acquired FreeMarkets, some moved to consulting or competitor organizations, many moved onto become practitioners themselves and others started their own companies. Regardless of where they work today, the skill-set of these hard working, enthusiastic alumni is widely recognized as top notch. (We often hear that a company is looking to hire "someone with the FreeMarkets skill set.") Alumni actively network with each other to share war stories of "the good ole days," encourage achievement and recognize talent. The alumni network continues to drive value into organizations around the world, even though FreeMarkets ceases to exist as a standalone company.
- Help documents (for bidders and users)
- Online training videos
- eSourcing Best Practices
- Interactive discussion forums
- RFx templates
- Common pitfalls
- Industry information
- Providing scalable project execution capabilities
- Offloading simple, repetitive, task-based activities so Category Managers can focus on strategic decisions
- Reducing project cycle-time by enabling companies to address more spend and run more projects
- Removing bottlenecks by automating processes through template creation and implementation
- Join forces with Iasta team members to submit the data and build the project, allowing your team to be involved as much or as little as you prefer
- Maximize the use of your time by focusing on key business objectives without performing repetitive, tactical work
- Benefit from Iasta's SmartSource® knowledge, sourcing expertise and strategic sourcing best practices
- Increase user adoption (and ultimately cost savings) by allowing first-time users to gain exposure to Iasta's SmartSource solution and processes
- Conduct a live auction
- Analyze award scenarios using advanced optimization functionality
- Invite suppliers to participate in an auction
- Find additional suppliers, if applicable
- Online Tutorials
- Webinar Training
- Classroom Training
- Best Practices Training
- Gain support from your company's CEO and other key stakeholders. Without executive support, it will be difficult to gain momentum and make an impact on your organization / community.
- Incorporate the supplier diversity program into your company's overall strategic plan for diversity.
- Create specific goals and objectives behind your supplier diversity program. For example, include specific annual goals for purchasing from minority-owned businesses.
- Develop strategic partnerships and alliances with companies, non-profits and media outlets that can further spread and strengthen your company's supplier diversity mission.
- Promote the supplier diversity program to your internal employees and to the public / media on your company's Web site.
- Communicate your progress toward supplier diversity goals and objectives with the entire company. You can also promote any key (public) accomplishments on your public Web site.
- Implement a solution that allows you to monitor and act on your supplier diversity program.
- Simple, but meaningful: The data should be easy enough to understand at a quick glance but also have enough context to deliver real information.
- Personalized: Create options for targeting data to individual users with varied job functions.
- Actionable: The data should have the power to induce action.
- Contract search result- puts critical information, such as expiring contracts, front and center where users can act on it by charting contract counts from custom searches.
- Personalized: Create options for targeting data to individual users with varied job functions.
- Recent activity- provides a detailed log of actions performed on auctions, sealed bids, surveys and documents.
- Task list- increases user productivity by providing a "to do" list that is automatically generated by Iasta SmartSource and ordered by due date.
- Activity calendar- allows the user to prepare for upcoming tasks, activities and dates.
- Profile statistics- decreases response times by raising visibility into supplier profiles, especially for Supplier Self-Registration profiles.
- Current projects- displays a high-level summary of information about active sourcing projects.
- 41% of respondents said a lack of culture that accepts procurement as strategic
- 38% of respondents listed a lack of technology to automate the strategic sourcing process
- Supplier Information Management
- Supplier Performance Management
- Contract Management
First posted: March 2, 2008
Conquering the 'yeah but' syndrome...Ensuring high adoption levels through a structured Rollout program (Part I)
For the next few Iasta Insight newsletters, Iasta will present a three-part series discussing how organizations can
implement a structured Rollout program to obtain higher savings and adoption levels. The final part of the series will
include a downloadable Rollout Roadmap that organizations can use as a template for building their own custom Rollout program.
Congratulations! Your company just completed a rigorous selection process for an eSourcing provider. Now it's simply a matter of "flipping the switch." The promised cost savings are sure to follow, right? Well, maybe. For many organizations, the eSourcing initiative starts out with a flurry of excitement as the first few projects deliver the promised cost savings. But after 6, 9 or 12 months the initiative starts losing steam. The big win projects have been completed and fewer and fewer new projects are being initiated due to stakeholder reluctance. Many stakeholders are infected by the "Yeah, but" syndrome. Afraid to lose control of a category or a favored supplier, stakeholders respond with, "Yeah, it work well for X category, but it won't work from mine because ..." Pretty soon it's back to business as usual as the Sourcing Team gets pulled back into old habits and the eSourcing momentum slowly stops.
The easy route is to blame the eSourcing provider for the lack of success. And switching vendors won't solve the problem either. The real issue was lack of planning. The program stalled because the organization did not plan for success. Every successful Sourcing Team knows that a long-term eSourcing program is built before a single userID is issued. It focuses on driving adoption throughout the organization and building momentum over time. And the critical element to high adoption rates is a structured Rollout program - let's call it Rollout.
A successful Rollout need not be long or complex, but it does need structure and transparency. Depending on the size of the Sourcing Team and organization, it can be crafted in a few hours or a few days. A simple, focused Rollout creates a strong foundation and makes it easier to address the many, potential roadblocks that stakeholders like to build along the way. A good Rollout gives the Sourcing Team ammunition to address the "Yeah, but" syndrome by developing a pattern of success. With success in hand, it is easier to communicate in simple, clear messages about how eSourcing helps and how stakeholders will be involved. It also helps remove the stigma often associated with auctions. ESourcing uses many tactics; auctions are just one of them.
The optimal time for a Rollout is in the beginning. However, it's never too late; Rollouts can be just as successful when staged later in the initiative. Many organizations use Rollouts to re-energize the eSourcing initiative. Additionally, a Rollout is application neutral - it can be applied to any type of new strategy, whether it is eSourcing or spend analysis or contract management.
What about change management? Essentially, a structured Rollout facilitates change management. Any time you introduce something new to an organization - technology, process, team members - there should be a plan in place to help make sure it runs smoothly. To successfully manage change, you must address the issues that impact individuals. A structured Rollout helps by identifying, preparing, planning, implementing and sustaining the change.
So where does someone start? The best place to start is with a Rollout roadmap. A roadmap provides key guidelines but still allows for creative customization based on your company's personality and needs. Based on Iasta's successful Rollout roadmap, there are 8 key elements - each having additional components that need to be thought through. Iasta will discuss each step and its elements in detail, as well as provide a downloadable spreadsheet that can be customized for your own purposes.
The Rollout Roadmap:
Element 1: Establish a Steering Team
The Steering Team will drive the overall eSourcing initiative, resolve conflicts and be the go-between with vendor-partners. It is important to have balance in the team so that various perspectives are included. Team members should feel comfortable with technology, process and delivering presentations. Obvious members include the Executive sponsor (CPO, CFO, etc.) and representatives from the Sourcing Team. Other considerations include representatives from key stakeholder groups such as Finance, Legal, Operations, Manufacturing or Marketing. Also consider including someone from corporate communications so that information can be disseminated effectively. This is particularly true for large organizations with people in various locations. The optimal size is 3-8 people. A larger group can become cumbersome and difficult to coordinate due to so many schedules. Other people can be included via sub-committees led by individuals in the Steering Team. Many companies want to include IT. It seems to makes sense since there is usually a software component. However, IT typically has goals different than the sourcing team. IT requirements should be considered during the software decision-making phase. After the software decision has been made, we recommend that they be included as part of a sub-committee. The frequency for Steering meetings varies. Most Steering Teams meet frequently during the early phases of the Rollout (weekly) then less frequently after the foundation has been established (monthly). The critical element is regularity. The Steering Team should commit to regular status meetings to keep communication channels open and implement any needed adjustments.
Element 2: Conduct a Rollout strategy planning meeting
The Rollout strategy meeting often takes place over a series of meetings. There are multiple areas to cover, most involve active, open debate among the Steering Team. The vendor-partner can play a critical role in these sessions as they are typically politically neutral and have insight into what works well. Scheduling a series of "off-site" meetings typically works best, so that the members can focus on plan development. Sometimes the meetings are back-to-back; sometimes the meetings occur over several weeks. If there is a widely dispersed team, then a multi-day, focused session works best.
Critical areas to discuss:
Part II of the three part-series will appear in the next Iasta Insights newsletter. The final part of the series will also provide a downloadable Rollout Roadmap that can be customized and used to support your own Rollout program.
To download the complete series and Rollout Roadmap tool, please go to: http://www.iasta.com/resourcecenter_collateraldownloads_structuredrollout.phtm
First posted: July 15, 2009
Conquering the 'yeah but' syndrome...Ensuring high adoption levels through a structured Rollout program (Part II)
For the next few Iasta Insight newsletters, Iasta will present a three-part series discussing how organizations can implement a structured Rollout program to obtain higher savings and adoption levels. The final part of the series will include a downloadable Rollout Roadmap that organizations can use as a template for building their own custom Rollout program.
Element 3: Establish a milestone-based roadmap
A milestone-based roadmap is the schedule for the Rollout. Throughout the Rollout strategy, design and delivery, there will be multiple activities occurring simultaneously. Prioritize each activity so that the team knows which ones are critical to the success of the overall Rollout schedule. For example, an activity labeled as a "roadblock" is critical and must be completed before other activities can be completed. Additionally, activities (and their sub-activities) should be assigned to a single individual for direct accountability. The easiest way to track key activities/deliverables is to have simple color codes associated with progress.
The Steering Team uses this roadmap to guide each meeting. Activities with yellow or red
codes get the most attention, especially if labeled as a roadblock. If a member of the
Steering Team does not provide agreed upon deliverables, then consider replacing that
member (as diplomatically as possible). The Steering Team can manage the roadmap with
different tools, such as spreadsheets, word documents or project management applications.
Use what is available and familiar to most of the Steering Team members.
Include these key areas in the Rollout roadmap:
A. Platform (software/application) readiness plan –
This area focuses on making sure the eSourcing software is ready to use. Most eSourcing applications give companies the flexibility to configure and customize the software so that it maximizes sourcing effectiveness and it looks like it belongs to the sourcing company. Best practice sourcing processes can be accessible via templates and standardized documents. The team should also discuss the rules about how the users gain access to or transition from the application. Start with a few basic rules and make adjustments over time. Don't be so rigid that inflexibility becomes a stumbling block. The goal is to encourage and promote the use of the eSourcing tool. The Steering Team should discuss the following areas as part of the platform readiness plan:
The actual platform launch will be managed by the software vendor, based on the Steering Team's recommendations. For additional custom configurations, the software provider can load custom templates, user roles and documents as part of an add-on service. The customer can also load the custom templates, user roles and documents as part of an internally supported software configuration process.
B. User support plan –
There will always be questions about how to navigate the software, interact with suppliers, handle stakeholder resistance or establish an effective lotting strategy, etc. Buyers and suppliers need to know where to go with their questions. The Steering Team should establish a clear plan for user issues. Some organizations handle all user support issues internally and escalate only technical problems to the vendor-partner. These organizations have a strong comfort level with technology based on past experiences. Other organizations outsource all user support issues to the vendor-partner. This model works well for companies who have never eSourced because they can leverage industry best practices and market neutrality. Over time, as they gain more experience, these companies often shift more of the user support responsibility back to themselves. The Steering Team should discuss the following areas as part of the user support plan:
C. User training plan –
Companies that invest in user training show higher user adoption rates and greater cost savings. When users are comfortable using a software application, they use it. They integrate it into their day-to-day job. Even with budget constraints, user training should be a required element to a Rollout plan. Additionally, Steering Teams should equate user training as a learning process rather than a training event. Learning happens over time, not just in a classroom or webinar. Teams need to consider how to train new users about eSourcing software and processes, but also how to refresh their knowledge over time. The Steering Team should discuss the following areas as part of the user training plan:
Some organizations may want to consider doing a deeper dive into training requirements. They should spend
more time assessing the sourcing team's current skill set, compare it with the desired future state and then
develop a training strategy that bridges knowledge gaps. A strategic sourcing team assessment will show
whether the team should focus more on building technology skills or process and best practice skills.
D. Communication plan and schedule –
People are hungry for information. They want to know how a new application affects them, where they go to for help, how they can do their jobs better... and the list goes on. There already exist numerous communication channels within your organization; it is simply a matter of identifying them and determining which work best for the sourcing team and its stakeholders. Adapt the communication strategy to the informational requirement and audience. For example, it may make sense to host a big lunch-n-learn event to educate stakeholders on the benefits of eSourcing. As part of the lunch-n-learn, show a current auction in progress so that can see it. Or, promote sourcing wins through an email blast or newsletter. Or, schedule quarterly Executive Team briefings to review the scorecard, wins and learnings. A successful communication campaign builds momentum for ongoing eSourcing success. The Steering Team should discuss the following areas as part of the communication plan and schedule:
E. Award implementation plan –
Many people think that awarding the business is the easiest part of the eSourcing process. It is not. It can be emotionally charged if incumbent or favored suppliers are uncompetitive and it becomes necessary to change vendors. Another difficult decision may occur if the team must decide between two very qualified, favored suppliers. Establish a process well before any award decision must be made. It will enable fact-based decisions and help build stakeholder consensus. With today's Sarbanes-Oxley requirements, it is even more important to have a structured, documented award implementation plan in place. The Steering Team should discuss the following areas as part of the award implementation plan:
Element 4: Develop a prioritized sourcing project pipeline
You need to know what to source so you can source it. The Steering Team will need to line up projects in the early phases of a Rollout. The pipeline should prioritize sourcing projects and assign a high-level strategy such as auction, sealed bid, RFP, etc. At this point in the process, most Steering Teams know the most relevant projects - it is just a matter of prioritizing them. The first set of sourcing projects should have minimal complexity and high potential savings opportunities. As the Steering Team works through the list of potential projects, it helps to apply the following factors that point to high success levels:
Afterwards, there should be a process to maintain the pipeline with a constant stream of potential projects. Many organizations maintain the pipeline through a spend assessment initiative. Based on successful Rollout programs, Iasta recommends structuring the sourcing projects into three distinct (yet overlapping) phases before shifting to ongoing pipeline maintenance. The sourcing projects for the first two phases can be determined during the Rollout planning session, while projects for the third phase can be determined during phase two. Seriously consider hiring subject matter experts (SMEs) or consultants to get projects done quickly and with higher success rates. Additionally, to maintain momentum, the Steering Team may need to switch-out one category for another.
Part III of the three part-series will appear in the next Iasta Insights newsletter. The final part of the series will also provide a downloadable Rollout Roadmap that can be customized and used to support your own Rollout program.
To download the complete series and Rollout Roadmap tool, please go to: http://www.iasta.com/resourcecenter_collateraldownloads_structuredrollout.phtm
First posted: August 5, 2009
Conquering the 'yeah but' syndrome...Ensuring high adoption levels through a structured Rollout program (Part III)
For the past few Iasta Insight newsletters, Iasta presented a three-part series discussing how organizations can implement a structured
Rollout program to obtain higher savings and adoption levels. This is the final chapter in the series.
Element 5: Establish a metrics-based scorecard
Scorecards are often referred to as key performance metrics (KPMs). The terms are interchangeable. Scorecards help teams establish and track priorities. They must be numeric-based, objective and easily collected. They can evolve over time as the team matures and objectives adjust. For example, during the earlier stages of eSourcing, a team may track number of eSourcing projects vs. traditional projects. As they evolve, a more important metric might be contract compliance ratios.
It is important to establish scorecard metrics from the very beginning. Both the team and individuals need visibility into where they are and where they need to go. Establish regular meetings to review the scorecards as a Steering Team so that focus can be adjusted to appropriate areas. In the beginning, it makes sense to have more frequent meetings to make sure everyone is collecting and reporting information in a uniform way. A consistent scorecard vocabulary is critical. Once that is established, the Steering Team can meet less frequently.
Sample Scorecard metrics:
Element 6: Kickoff the eSourcing initiative
Celebrate the start of your eSourcing initiative. Formally schedule a kickoff meeting that includes the Steering Team, sourcing project leads, key stakeholders, vendor-partners (if appropriate) and the executive sponsor. During the kickoff meeting review goals and objectives, introduce team members, discuss sourcing projects and review the Rollout schedule. Be open and be fact-based because people thrive on information. Tell the team how they will get support, information or help managing their suppliers and stakeholders. Get the team excited about participating in the maiden eSourcing initiative - make it a big deal. After a group session, break-off into project-specific teams and start developing timelines and a list of deliverables.
Element 7: Communicate and evangelize across the entire organization
Launch the communication plan and follow through. Promote and educate beyond the sourcing team. Stakeholders at every level in the organization are important for the long-term success of the eSourcing program. Successful communication strategies help people understand the benefits of eSourcing. Success is contagious and people want to work on successful projects. With increased exposure, people will bring projects to the sourcing team. This step is not a one-time event; it is something that occurs as a normal part of sourcing. Active communication facilitates knowledge transfer. With an effective way to disseminate knowledge, people know where to get answers, how to apply new strategies and work more effectively.
Element 8: Monitor progress
Now that there is an infrastructure in place, it will be easier to manage eSourcing across the organization. To keep itself healthy, the Steering Team must monitor progress and make adjustments. Organizations constantly change through external factors (like acquisitions or legislation) or internal factors (change in personnel or leadership). It is easier to adjust to these changes when there is a system in place to monitor and adapt. A healthy eSourcing system drives results and contributes to the bottom-line. The Steering Team should do the following as part of their ongoing monitoring process:
As Mabel Newcomber states, "It is more important to know where you are going than to get there quickly. Do not mistake activity for achievement." Building a successful eSourcing program takes commitment of thought and time. You can quickly launch an eSourcing program by purchasing a software tool, issuing userIDs and running a few projects. But it will not overcome the resistance of the stakeholder community as they fight to retain their incumbent suppliers. "Yeah, but my supplier came through for me when..." You can run lots of projects, identify high cost savings, but unless you have implemented those savings, you have gained nothing. By taking a little more time upfront to think through your approach, you can successfully rollout an eSourcing program (or any other program) in very little time relative to the scope of the overall program. Iasta's structured Rollout Roadmap should give you a head-start as you start thinking through critical issues and develop a plan to address them. To further aid your quest for a structured Rollout program, Iasta has developed a downloadable Rollout Roadmap (link to spreadsheet). This simple Roadmap highlights key elements that should be part of any discussion. There are multiple tabs that can be customized to meet the unique needs of your organization. The Rollout Roadmap is organized into the following tabs:
We wish you luck with your initiative. Also, we would be interested in hearing about your own experiences so we can expand on the Rollout Roadmap. You can contact Iasta directly at firstname.lastname@example.org
To download the complete series and Rollout Roadmap tool, please go to: http://www.iasta.com/resourcecenter_collateraldownloads_structuredrollout.phtm
First posted: September 24, 2009
The Case for Supplier Performance Management - Five Starting Steps
It's never been a better time to institute a supplier performance management program. In today's climate, supplier performance is often a better leading indicator of potential supply disruptions, supplier bankruptcies or other potential supply chain threats than even supplier credit or financial-based analyses (which are always retrospective). But few companies that start down the supplier development path end-up developing the right level of insight to make a difference when it comes to avoiding disruptions or improving supplier performance. At Iasta, we believe that companies can take five initial steps to get started correctly on the supplier performance path.
Now is the time to make supplier performance management a core part of procurement -- not as an afterthought. It's
precisely the organizations that say they don't have the time for the effort or that under invest in supplier
performance management programs during the current crisis that stand to lose the most.
First posted: February, 3, 2010
Three Must Haves to Get Spend Analysis Right
If all companies knew how to get spend analysis right, then there would be many more happy shareholders in the market, looking forward to their monthly holdings statements showing rising stock prices as a result of improved company earnings. But few companies that start a spend analysis journey get off on the right foot. All too often, procurement teams are misled by an incorrect map, showing a false path to what they believe should be their ultimate destination.
At its core, overcoming these spend analysis navigational challenges requires doing three things right. Get one of them wrong and the outcome may lead you to head down a savings mountain pass that will prove difficult to traverse, ultimately leading to a situation that minimizes procurement’s potential value to the company. So what three things should procurement stick in the core navigational pack? We suggest the following three capabilities as a start:
1. Implement a common language that makes sense to sourcing:
The ability to classify to a useful coding structure that can enable a common language to identify categories/spending data and implement a savings/sourcing process. This may include taking a generic code structure such as UNSPSC and leveraging it to create a more appropriate accurate taxonomy for a specific industry or need.
However, more and more companies are choosing to entirely bypass generic code structures (like UNSPSC) because they don’t make sense to the sourcing team. They may make sense to accounting and finance, but they don’t accurately reflect the needs of sourcing – especially with indirect materials that don’t map cleanly to generic code structures.
The current trend is for organizations to use custom sourcing codes. In some cases they may use generic codes as an underlying structure and then roll them up into common sense category code structure. In other cases they classify directly to the custom category code structure. By using multiple taxonomies to look at corporate spend, companies have greater insight into the way a particular area of the organization does business.
2. Apply changes quickly:
Companies should have the capability to quickly rollout changes to classification structure as the organization begins to adapt and meld the toolset to their specific environment. This is especially important as a roll-out begins to encompass increased spend quantities, details, geographies and stakeholders. When classification errors are found and not quickly corrected, the entire classified dataset is mistrusted. It is important that stakeholders trust the underlying data that supports business decisions.
3. Access to flexible reporting:
It is critical that teams have access to flexible reporting/analysis within the toolset – not just canned reports. Canned reports get you started, but may not be able to include the full range of data in the data set. Flexible, ad hoc reporting and analysis capabilities enables companies to leverage both intended strategies as well as discover opportunities they may not have anticipated. Analytics capabilities should be able to support the needs of the analyst-type (e.g., power-users) as well as the executive-type and other stakeholders looking for a quick view into activities.
First posted: March 25, 2010
Spend Analysis – Compliance Monitoring
With the right spend analysis technology and process in place, companies can reasonably expect to begin identifying savings opportunities in a matter of weeks. But making sure that identified savings opportunities become a reality is another matter. It is not a one-time-check-the-box event. The job of making sure that savings are implemented is a never ending activity, one that should be done on a regular schedule. Fortunately, it’s possible for your procurement organization to use spend analysis tools both as an upfront precursor to sourcing and related efforts as well as a compliance vehicle to insure that identified opportunities fully drop to the bottom line.
Still, the gap between savings identification and compliance monitoring efforts is not one that every organization successfully bridges even when they have access to the right set of technology. Compliance monitoring requires that companies routinely refresh and update their spending data while tracking variations and changes overtime. Now, it’s never possible to capture 100% of identified savings. It’s a well known fact that, even in the most advanced organizations, only 60-80% of savings identified in the strategic sourcing process ever gets implemented,. As one example, it might be because a stakeholder insists on maintaining an incumbent supplier that has reduced its price during a negotiation, but does not reach the savings level of a non-incumbent.
Spend analysis tools can help insure that organizations capture as much savings as possible by making sure that front-line users are spending with the right suppliers and paying the contracted price (and allowing a quick path to intervention if they’re not). Perhaps even more so than eProcurement and contract management tools, spend analysis represents the one critical technology to insure that organizations capture the maximum savings from their hard-earned savings efforts.
First posted April 22, 2010
User Training—Planning for Success
Year after year, engagement after engagement, we see that the organizations that commit time and money to user training are the most successful. These companies have learned that to help people hit their goals they need to know how to use their tools. It’s an easy, common sense lesson to learn. People use tools more frequently when they know how to use them. People just don’t have the time to self-teach, especially when other priorities get in the way.
Iasta has seen how the most successful organizations approach user training. They follow three basic principles:
Many successful companies use both. They commit to classroom sessions for new user functionality and webinars for refresher content.
Iasta can work with your organization to design a budget-friendly training program. We’ll blend best practice training with how-to-use product training, and combine the use of instructor-led, classroom sessions with buyer webinars. It’s never too late or too early to rollout a user training program that enhances the effectiveness of your sourcing team.
First posted April 22, 2010
One Busy Decade - A Ten-Year History of Reverse Auctions
Starting around the tail-end of the original procurement / eProcurement automation excitement, reverse auctions began to catch hold like a wildfire, spreading from buying organization to buying organization. By the end of 2000, reverse auctions had gone from becoming an expensive and rare novelty to a standard process for many forward thinking procurement organizations. But the next decade would see a steady evolution of usage and roll of reverse auction tools inside many companies. To simplify this ten-year transformation, let's separate it into three phases.
Phase 1 - 2000-2003
In the initial phase of reverse auction evolution, companies began to apply auctions across a range of categories. They also started to use more advanced negotiation features such as multi-attribute bidding to incorporate non-price factors as well as basic RFI and RFX tools to collect information in preparation for an event.
Phase 2 - 2004-2007
The second phase of the reverse auction evolution marked a turning point in the definition and scope of sourcing solution sets. Companies, for the most part, stopped buying reverse auction tools and instead began shopping for eSourcing platforms. The difference between the two was more than a case of just adding broader features onto a sourcing toolset to help manage the lifecycle of the sourcing process. Rather, companies began to also embrace the concept of eSourcing because it recognized that reverse auctions were but a single type of negotiation form they could deploy and also that such activities as online negotiations would be most successful as an outgrowth of a defined strategic sourcing process rather than a short-term savings enabler.
Phase 3 - 2008-2010
The latest (and continuing) phase of the reverse auction evolution is coming with a range of twists. Not only are companies becoming more familiar with advanced negotiation formats (e.g., optimization, Reverse Dutch auctions, etc.) but also the benefits of incorporating eSourcing capabilities into a broader procurement technology set including spend analysis and supplier performance management. By more closely tying sourcing decisions to past supplier performance, for example, procurement organizations are making better decisions on a total cost basis, incorporating quality and other metrics into a strategic sourcing process.
First posted June 3rd, 2010
Sourcing and Procurement Transformation
Every organization strives to achieve the most effective balance of cost reduction, product fulfillment and customer service while maintaining high quality. These often competing objectives can be solved through an effective supply chain and procurement program. A primary goal of these programs is to create operational efficiency - a continuous process of improving a corporation's operations across all operational functions. Procurement transformation takes this approach and applies it to all operational functions that enable cradle to grave product fulfillment.
For a successful Procurement Transformation engagement, Iasta focuses on three distinct areas of improvement - process, technology and people. And like many initiatives, Procurement Transformation incorporates several steps; assessment, improvement and monitoring. An assessment is necessary to identify the strengths as well as gaps in the three areas. With this understanding Iasta can implement an improvement roadmap with subject matter experts to help the organization through the transformation period. The final state is a completely self-sufficient procurement organization that monitors their own performance.
Many companies that go through a supply chain assessment and a subsequent procurement transformation program see significant cost reductions associated with getting their products and services to market. At the same time they create a sustainable improvement model and develop stronger more equitable supplier relationships. With Iasta's experience in supply chain strategy and strategic sourcing methodology, customers see significant operational improvements, improved coordination between departments, reduced costs for commodities and others. Such results typically yield clients an ROI of more than 10:1.
For more information about our Organizational Assessment and Procurement Transformation programs, please contact us at email@example.com.
First posted June 3rd, 2010
Starting a Procurement Transformation: Diagnosing and Treating the Patient
The current economic situation that continues to impact global markets has dramatically altered the competitive landscape for corporations. Every day, the news is the same. Demand, revenue, profits, and shareholder value are all down while the costs and risks of doing business are all up.
These economic conditions have created a once-in-a-career opportunity for procurement leaders to change the storyboard around procurement. By transforming the role of procurement from a cost center functionary to a must-have strategic partner, you can seize the opportunity to redefine procurement as a key driver of increased profits, market share growth, and competitive differentiation.
A good analogy for the early stages of any procurement transformation is to think of the way doctors diagnosis and treat patients when they enter a hospital. Granted, the situation is rarely as metaphorically grave in the case of a procurement organization as it is when a patient enters the emergency room, but the analogy holds for a number of reasons. Consider that the first step to getting anyone back to proper health is to run through a diagnosis process. For example, a nurse or doctor must diagnosis if a patient’s chest pains are the result of a muscle pull, stress or something more serious. In a similar way, an executive running a procurement transformation must put his finger on the pulse of the underlying conditions holding back his organization.
She starts by leveraging tools (e.g., spend analysis, supplier management, etc.) and processes (e.g., talent evaluation and gap analyses) that lead to a prescription for initial treatment. In these early phases of a transformation, procurement leadership shouldn’t guess, make assumptions, or leave any area to chance. To yield an initial course of action, one must perform a rigorous, fair and complete evaluation of overall and specific performance- like a doctor does a thorough evaluation with the patient. Next, combine the results with transparent visibility and trend analysis just as a doctor reviews the patient’s current symptoms and medical history to move forward to a diagnosis.
Following the evaluation and diagnosis phase, the organization must then create an action plan consisting of a defined set of waves that drive specific outcomes and results. Early waves often involve achieving relatively quick and high probability wins. From a tools perspective, this often includes the continued implementation and rollout of spend visibility and eSourcing tools. From a category standpoint, procurement leadership often selects categories that balance savings potential, ease of implementation and overall visibility and impact – or lack of impact, from a negative sense – to the business.
Like a top-notch medical team, the Procurement team must have the skills to bring out the best in their team members to achieve optimal results – a healthy patient. Physicians and nurses improve their skills through training, new devices and new processes. As they do, they raise the skill level of those around them. A procurement transformation has the same impact on the organization. As the technology, skills and processes of the Procurement team improve, so do the other parts of the organization.
First posted: July 22, 2010
Two Reasons to Make Supplier Performance Management a Priority
We can imagine a world of reasons why procurement organizations should make supplier performance management (SPM) a priority. But there are two reasons that stand out more than any others in today’s environment. The first might be a surprise to some, and that's the insight that SPM elements (e.g., quality, on-time performance, responsiveness to correction action requests, etc.) can yield when it comes to predicting overall supplier financial risk. Many manufacturing companies consider supplier performance the single most indicative leading indicator of whether a supplier will stay in business. In fact, some organizations even prioritize supplier performance data as a supply risk indicator over credit scores or financial ratings provided by third party authorities.
The second reason to invest in SPM in today’s climate is that SPM tools can help procurement organizations stay focused on core activities that drive cost reduction and savings. SPM tools draw their data from a combination of systems data, business stakeholder feedback and supplier input. Using SPM tools provide a tremendous degree of automation over manually or anecdotally tracking supplier performance in an ad-hoc manner. With this new level of insight gained primarily from the input of others and systems information, procurement organizations can make better total cost decisions that lead to additional savings (e.g., quantifying the cost of quality) while delighting stakeholders.
As a final adjunct point worth considering in the context of both reasons we’ve discussed, it’s also worth taking into account how SPM can help procurement create multiple advocates in all areas of the business. For example, enabling internal audit/finance teams to identify risky suppliers or weed-out under performing suppliers sooner can reduce overall business risk. Procurement organizations can use SPM capabilities as an internal public relations building tool as well as a solution that delivers quantifiable savings and results.
First posted: August 27, 2010
Why Supplier Information Management Matters
In recent quarters, supplier information management or SIM has rapidly become more than a buzzword in procurement circles. As companies are becoming increasingly dependent on procurement organizations to track supplier data to enable initiatives outside of just unit cost reduction, SIM is proving itself as the most effective multipurpose tool for the job. With SIM, procurement teams are helping their organizations get eProcurement and electronic invoice present and payment (EIPP) initiatives established more quickly, implementing and managing supplier diversity programs, adhering to new CSR requirements in certain geographic markets and reducing supply risk. And that's just a start.
But what is supplier information management? SIM tools provide an automated way to collect, update and manage supplier records and details (either supplier provided or delivered via third-party enrichment tools). When it comes to tracking and managing supplier information, there is no 80/20 rule like in other areas of sourcing and procurement. Rather, companies must focus on enabling the majority or all of their suppliers around particular information management initiatives. For example, with SIM companies can collect current insurance certifications without requiring phone calls and emails to each and every supplier (or manning a fax machine or email account).
Depending on the complexity of an initiative, the workflow, automation, alerting and related capabilities in SIM can transform an almost entirely manual process into an automated one almost overnight. In a time where procurement teams are stretched thin focusing on hard-dollar savings initiatives, SIM can help organizations accelerate savings, drive compliance and reduce risk while actually reducing or reallocating resources to other initiatives.
First posted: September 23rd, 2010
Supplier Scorecards: Driving Business Performance Excellence
Supplier scorecards have become an essential component of the supplier performance management (SPM) process. Measuring and tracking supplier performance is a key ingredient in enabling firms to achieve business performance excellence. To obtain optimal results from a supplier scorecard, the metrics you develop must directly align with your company's goals, business needs and overall SPM strategy.
Remember the golden rule of developing metrics for supplier scorecards: quality is more important than quantity. Metrics, which are typically expressed as Key Performance Indicators (KPI's), should be simple and concise. KPI's need to support to the overall goal of improving your relationships with suppliers while increasing your corporate value. Other benefits of supplier scorecards include:
Make sure your scorecards provide you value so that you can establish plans to improve your supplier relationships or maintain consistent satisfactory supplier trend levels. It's also important to set goals and deadlines for developing, measuring, and tracking supplier performance using supplier scorecards. For example, have your buyers evaluate suppliers every quarter. Then, compare results from the previous quarter to guide the development of the metrics for the next supplier scorecard. Iasta's latest wiki paper, Understanding and Growing Supplier Performance: Improving Supplier Management, lays the foundation for implementing a successful SPM process and developing quality metrics for your supplier scorecards. Iasta's most recent product upgrade, SmartSupplier®-Enterprise, has the functionality to develop and track company specific supplier scorecards that can serve as the cornerstone to your SPM process.
First posted: September 23rd, 2010
Five Days to Savings? Get There With Sourcing Optimization and Award Analysis
Originally, many procurement managers prided themselves on their ability to negotiate with suppliers. While negotiation skills are certainly an important requisite to success, that ability no longer stands alone as a key requirement to maximizing a sourcing process. New capabilities, such as optimization, are now becoming standard elements of an effective sourcing strategy. Procurement organizations must now rely on their analytical skill-sets as well as their negotiation capabilities to identify and implement the best possible outcomes. And they must continue leveraging these capabilities after negotiations are complete.
Sourcing optimization and award analysis have the power to help procurement organizations make better decisions on a total cost basis. As a basic example, consider a scenario across a dozen lots involving hundreds or thousands of lines. In the past, the procurement organization may have only awarded lots or items to suppliers with the lowest price bids. But such a decision might create a large category where the procurement organization awards to ten or more suppliers. Then, they must contract with and manage these relationships.
In contrast, the procurement team can leverage optimization and award analysis capabilities to easily define and explore different scenarios and their impact on lost cost (e.g., lowest total cost based on awarding to no more than three suppliers). In doing so, the team can drive a decision that not only optimizes costs in the long run, but also improves the chances of receiving greater levels of service from the selected suppliers. In other situations, companies are using optimization and award analysis approaches to help meet diversity spending requirements. They're also leveraging optimization to evaluate additional variables, such as past performance and quality, to weight alternative supply options (e.g., purchasing individual parts or buying components).
Optimization results in better award decisions and substantially reduces the amount of time required to do so. When award scenarios are created, reviewed and adjusted on a reiterative basis through spreadsheet calculations, it takes a great deal of time. Then, add in the amount of time it takes to schedule key decision makers to meet at the same time so they can discuss those scenarios. Decisions can take several months of deliberation, leaving savings opportunities on the table. With sourcing optimization technology, award scenarios can be created, calculated and compared in seconds. For example, a large, global restaurant company recently evaluated bids from 70 suppliers for over 250 lots. By their estimates, the award decision took 5 days using optimization technology rather than the 36 days it would have taken using a traditional spreadsheet-based technique. As a result, they were able to capture those savings almost immediately.
First posted: October 28th, 2010
Address More Spend, Run More Sourcing Projects
Often, companies need tactical, project-specific help simply to "get more things done." Others require tactical support to keep projects moving forward or to reach target savings in a short amount of time. Iasta can provide project support for any type of sourcing requirement based on your specific company needs. Iasta's Sourcing Acceleration Center (SAC) is able to fully-manage one sourcing project or an entire set of sourcing projects.
The Sourcing Acceleration Center acts as an extension of your own sourcing team. It helps companies meet milestones and hit aggressive cost-savings targets while using your own Iasta product platform as the backbone for all project support.
The benefits of the Sourcing Acceleration Center include:
An example of a potential tactical support activity includes supplier management, where Iasta adds suppliers to the SmartSource database, invites these suppliers to the project, reminds them to respond to surveys and information requests and responds to suppliers' basic project questions.
First posted: October 28th, 2010
The Rise of the Reverse Auction: Honoring the FreeMarkets Legacy
By Melissa Beuc, FreeMarkets 1999-2004
Something happened to the sourcing and procurement industry in the 1990s. What happened was the online, reverse auction. FreeMarkets commercialized the reverse auction (then named a competitive bidding event or CBE) and introduced it to reluctant companies. The benefits were clear - dramatic cost savings, reduced time to negotiate with suppliers and streamlined sourcing processes. Despite the noticeable benefits, companies did not immediately embrace the reverse auction. It took constant doses of education, evangelism and results before companies accepted the reverse auction as a standard tool in their strategic sourcing toolbox.
For those who remember the hubris of the 1990s, there was a constant tug-of-war between bricks-and-mortar companies and high-tech, software companies. Software companies hired young-soda-drinking-who-doesn't-sleep software coders, had a few early adopter customers, showed no profits, yet boasted of sky-high valuations. There were plenty of "paper millionaires" created every time a software company went public. Traditional bricks-and-mortar companies were considered fuddy-duddy and slow to embrace the new economics of high tech. Many bricks-and-mortar companies, hoping to cash in on the software money train, tried to join in by developing their own software.
FreeMarkets was actively part of the excitement of the 90's as it went public on December 13, 1999 at $48 and closed at $280. This high-flying IPO garnered global attention to the sourcing and procurement industry that historically received very little attention. Suddenly, sourcing was interesting.
As the bubble burst and the dust settled, business leaders recognized that great companies still needed a solid business model that leveraged modern technology and also included profitable customers. The FreeMarkets value proposition was still valid - help sourcing and procurement teams spend the company's money more wisely. FreeMarkets continued to provide software and services to deliver on this promised value, though under a different name. Today, the heart of FreeMarkets, its sourcing services, has been acquired by Accenture.
Though FreeMarkets doesn't exist as a standalone company, it has left indelible marks on the industry including:
The implications left behind from the FreeMarkets legacy all blend together to create a positive and promising future for sourcing and procurement professionals across all industries. These impacts will continue to benefit businesses for many years to come.
First posted December 02, 2010.
Good Customer Support Transitions into Successful Software Users
When considering a vendor that offers eSourcing capabilities, companies often want to know if the desired vendor provides good customer support. But what defines "good" software support? Iasta believes good customer support is a strategic combination of proactive and reactive support opportunities. Iasta's proactive support initiatives include:
Reactive support allows customers to contact application support for users through phone or e-mail. Customers can use e-mail based assistance by e-mailing their questions and concerns to firstname.lastname@example.org. Clients who have used Iasta's application support have discovered the effectiveness of such opportunities. "I love that when I contact Iasta Support, the phone is always answered within a few rings and they are quick to help," said a representative from a $5 billion manufacturing company. "Recently, a user sent me an email requesting a hardcopy training manual to supplement the training videos. I emailed Iasta Support and less than five minutes later I received a 49-page booklet of information with screenshots."
A key element to good reactive customer support is accommodating a global language capability. For example, telephone support for Iasta clients is available in North America, Europe, Australia, China, India, and Japan. English is frequently adequate for all users; however, Iasta believes it is best to align the support functions with the local country cultures.
If clients need additional in-depth services, they can contact Iasta's Sourcing Acceleration Center (SAC) to help the company meet milestones and hit aggressive cost-savings targets. The SAC acts as an extension of the company's sourcing team. Benefits of the SAC include:
Iasta understands that users capitalize on their software platforms when they are fully engaged and educated about the software's functionalities, Best Practices, and industry trends. Iasta strives to be the right partner for our clients and tailor support levels based on specific company needs, which is why we encourage customers to accurately specify their support needs when signing a contract.
First posted December 02, 2010
Beginning a New Year with Valuable Feedback from Iasta's Client
Each year, Iasta performs a customer satisfaction survey. The purpose of the survey is to gain valuable feedback from users of the Iasta's software platforms and services. The results give us increased visibility into areas of satisfaction. Furthermore, the responses give us important customer recommendations for product and service improvements.
Iasta values our client's input, so we encourage our users to opt-in to receive notifications about the survey. We sent a permission e-mail to all business sponsors prior to inviting all active-admin users to participate in the survey. One business leader said, "We really appreciate the approach of asking before sending out the survey. We think that is smart."
Using our own product, Iasta SmartSource®, we developed and sent out a six question survey to our user community. The survey was open from September 16, 2010 to October 16, 2010.
Overall, Iasta clients are satisfied with our products and services. In fact, 82% of users said Iasta's support and services meets or exceeds their expectations, which is up 5% from last year. One user commented, "They [Iasta Support team] are great; very professional and engaging. I try to stump them all the time with what I think are tough questions, but it very rarely happens. When they cannot answer a question immediately, they are very good at following up shortly thereafter."
Approximately 74% surveyed said they are likely or very likely to recommend Iasta, which is up from 71% last year. Another user said, "I love working with the tool and the Iasta team. I continue to recommend this product to everyone in my industry."
Iasta e-mails information to SmartSource users through the Resource Library, which contains valuable information including recent news and announcements, eSourcing Best Practices, interactive forums, RFx templates and industry in formation. Of those surveyed, nearly 100% said the Resource Library meets their needs.
Currently, Iasta is digging through survey results for feedback on development initiatives and plans to follow up with users who have expressed specific concerns.
Thank you to all of the users who participated in the survey this year. We hope to have an even higher response rate next year.
The Iasta Leadership Team
First posted January 25, 2011
Iasta Client Success Story: Centrica plc
Centrica plc is an integrated energy company supplying gas and electricity to millions of homes and businesses in several countries around the world. Centrica is the largest supplier of gas to domestic customers in the UK, and one of the largest suppliers of electricity, operating under the trading names "Scottish Gas" and "British Gas."
British Gas announced its plan to roll out Smart Meters to homes across Britain in 2009. The company created the plan after a government announcement informed energy suppliers that they were responsible for the installation and maintenance of the new technology. In response to this new initiative, Centrica created a new business unit to take responsibility for the high profile project that would require the company to install more than two million Smart Meters by 2012.
"2010 was a defining year in British Gas with the creation of a new business unit that was tasked with changing our entire meter portfolio within a challenging timescale and significantly enhancing customer experience," said David Wylie, Head of Strategic Procurement at Centrica.
After a thorough market analysis, Centrica selected Iasta®'s eSourcing solution, SmartSource SRM®, to help the company select a supplier to install more than two million Smart Meters. The implementation of SmartSource had an enormous impact on the success of the metering project. SmartSource enabled Centrica to source new providers for its Smart Meters initiative through an automated RFI survey tool that allowed Centrica to analyze the responses interactively.
"With a tight deadline to deliver an entire new business in, the tools came into their own against this challenge," said Wylie.
To date, Centrica has run three Smart Meters projects in SmartSource. The first survey was sent to 90 suppliers. During the first survey, Centrica used Iasta's Project Management functionality to manage 18 total activities. Project Management was used to send the initial information out, to inform suppliers of deadline reminders and to tell suppliers when additional questions were added to the survey. Centrica eliminated 79 suppliers based on the survey responses. The second RFI was then sent to 11 suppliers. After analyzing those responses, the final Smart Meter RFP was sent to 5 suppliers. The RFP includes 12 sections regarding Smart Meter specific questions, ordering, client experience, information security and corporate responsibility, to name a few. According to Centrica, SmartSource greatly sped up the decision making process.
"Iasta has delivered a lot of custom configuration in order to deliver high adoption and this in turn is delivering innovation within our business; the working partnership with Iasta has been remarkable," said Hywel James, Head of Procurement Systems and Policy at Centrica.
Centrica already has the largest Smart Meter trial in the country with more than 200,000 meters installed. The company has received positive feedback from its customers since the company started implementing the Smart Meters. Of those residential customers taking part in the trial, 85% find the new Smart Meters and their energy monitors easy to use. Nearly 75% said that Smart Meters and monitors have made them more aware of the energy they use.
First posted March 25, 2011
Learning From The Supply Chain Disruptions After Japanese Earthquake and Tsunami
The ground shook violently and roads began to separate. Buildings tumbled to the ground and vehicles turned upside. People were screaming and the sirens were sounding. On March 11, 2011, evacuations were planned in anticipation of a tsunami along the coast of Japan and in 20+ countries after a 9.0 earthquake. Powerful tsunami waves, which reached more than 30 feet in the air, struck Japan and travelled 6 miles inland. The world seemed to pause and watch as Japan suffered through one of the most deadly earthquakes and tsunamis they've encountered in the last 100 years.
Any natural or man-made disaster can have an unforeseen impact and disruption on supply chains. In fact, Spend Matters reported on a piece that estimated the supply chain recovery to take 9 to 12 months. Many leading organizations are likely to use this crisis to fuel their efforts to implement a strong supplier risk management program. Not only do companies have to measure supplier performance and risk with direct suppliers, but they potentially need to consider their suppliers' suppliers and beyond. Everything from mobile phones to car parts has been harder for companies to receive from its suppliers.
An article in Supply Chain Digest said, "The compact battery in Apple's iPods relies on a polymer made by Japanese company Kureha, which holds 70% of the market, and whose factory was damaged." While the battery producer is fine, its ability to manufacture is threatened by the troubles of its supplier. Also, it turns out that just two Japanese companies, Mitsubishi Gas Chemical and Hitachi Chemical, control about 90% of the market for a specialty resin used to bond parts of microchips that go in to smartphones and other devices. The factories of both companies were damaged in the quake. Both Harley-Davidson Inc and Toyota Motor Co are expecting lowered shipments and sales because of part shortages.
In the Iasta Alliance Group in LinkedIn, Jon Gilbert, owner of Gilbert Group Management Consultants, commented that, "Risk management is a big concern for many of my high-tech clients, but I have not seen nearly as much interest at midsize firms outside of high-tech. This is an area within supply chain management that will definitely grow in importance. I don't think there's any reason other than lack of focus. It comes down to workload, goals, and priorities. In smaller firms, it's difficult to get to the level of specialization and focus required to manage all these aspects of the supply chain. That means savings trumps risk reduction, especially in firms that lack depth in procurement resources. Consulting support can help immensely in these situations."
Another member in the Iasta Alliance Group, Per Wendelboe Nielsen, agreed with Gilbert, saying he comes across this lack of focus and priority everyday. "It is not enough to just collect the information (which many do, or have a 3rd party provider do it) - you need to analyze and act upon it (before it is too late), which requires specific skills (and of course resources) as Jon also pointed out. As the great Warren Buffett once said: 'Only when the tide goes out do you discover who's been swimming naked.'"
Measuring key indicators of supplier performance is essential to helping firms achieve business performance excellence and continuity. A strong Supplier Performance Management (SPM) process that actively monitors business needs and supplier performance will limit supplier risk, reduce costs and increase supplier value. Iasta's SmartSupplier® -Enterprise uses configurable supplier scorecards to track company-specific performance indicators. Analyzing SPM data from supplier scorecards will help you achieve a winning supply chain by ensuring you only work with top-performing suppliers.
For more information about how to reduce risk by improving your supplier performance, download Iasta's wiki paper: Performance Management to Performance Improvement. To see how you can gain visibility into your supplier performance, please email email@example.com to schedule a live Web demo of Iasta's SmartSupplier-Enterprise.
First posted May 05, 2011
Increasing Sourcing Credibility while Maximizing Available Resources
Today, sourcing and procurement teams face immense pressure to manage a vast range of projects and be many things to many people. This hectic schedule makes it difficult for these teams to shift away from tactical activities that undoubtedly create bottlenecks within their organizations, resulting in lost credibility.
But, what exactly is credibility? How do sourcing teams achieve sourcing credibility, even with a smaller pool of resources? And equally important, what tactics can these teams apply to encourage business units to tap into sourcing's expertise in the beginning rather than at the end of a project? Iasta answered these questions, providing four specific tactics with supporting mini-case studies in a recent a Webcast titled "Building Blocks to Achieve Sourcing Credibility: Gain Fortune 500 Value with Mid-Market Resources."
The Webcast featured Mickey North Rizza, from analyst firm Gartner®, and David Bush, Sean Delaney and Michael Coletti from Iasta. The panel of speakers discussed how sourcing teams can create momentum to leverage their sourcing capabilities and resources to raise the profile of procurement and minimize risk throughout their entire organization. Furthermore, the discussion focused on how to reach sourcing excellence by developing a collaborative environment that provides enablement, visibility and control to make data-driven decisions that are aligned with corporate goals.
"Procurement's job is to sell situational influence, not positional leverage," said David Bush, CEO of Iasta. "I've seen positional leverage work, but it's really a short-term elixir. Situational influence takes a more collaborative approach that stems from data. The purpose of procurement is to lead internal customers to logical conclusions that are in the best interest of the organization."
According to survey results from the Webcast's registration process, 54% of the registrants said the biggest spend management challenge they face is spend analysis related (reporting, visibility and granularity). The Webcast concluded with ideas for next steps to help sourcing teams overcome these challenges and move toward creating a "Center of Excellence."
To learn about the four tactics that can serve as the cornerstones to increasing your team's sourcing credibility, download the presentation slides today. The complete presentation also includes an overview of the Q&A session.
For more information, please visit www.iasta.com or e-mail firstname.lastname@example.org.
First posted June 21, 2011
Strategy, Collaboration and Innovation: How the CPO Can Get It Right in 2011
How can CPOs help their organization deal with supply chain disruptions, talent shortages, communication gaps, globalization, increasing commodity prices and many other challenges invading their supply chains? It all starts with getting the strategy right, focusing on cross-collaboration and being an innovation-driven leader.
Iasta recently sponsored an Aberdeen Group report written by Constantine Limberakis titled, "Dynamic Procurement: The CPO as a Collaborator, Innovator and Strategist." You can download the full report. More than 120 finance, operations, procurement and supply chain professionals were surveyed for the 30 page report that explores what best-in-class organizations are doing to increase the influence of procurement across their entire organization.
"Beyond reducing costs, CPOs will be expected to take on a more strategic role to help their organization overcome complex business challenges this year," said David Bush, Chief Executive Officer of Iasta. "In order to tackle these increased pressures and new initiatives, CPOs should focus on concepts highlighted in this report, such as identifying new strategic sourcing opportunities, managing supplier relationships, improving category expertise and encouraging cross-functional collaboration to increase procurement's visibility and credibility."
"It is evident from our research and interviews with procurement leaders that best-in-class organizations today are influencing corporate strategy through the expanded use of strategic sourcing and spend analysis to help offset inflationary pressures and reduce exposure to supplier risk," Limberakis said. Based on the report, leading strategies from best-in-class organizations include: developing and implementing supply risk mitigation strategies with top suppliers, increasing activities focused on strategic sourcing and expanding into sourcing strategies that offset inflationary pressures.
"Moreover, cutting costs continues to be the leading pressure for the CPO, which is consistent with our findings over the years," Limberakis said. "But what has changed is the global landscape, given the geopolitical tensions in the Middle-East, sovereign debt crisis in Europe and debt concerns here in the US. This current climate is providing the landscape for procurement to become that strategic partner."
To learn more about how procurement can have a direct impact on an organization's performance and success, download "Dynamic Procurement: The CPO as a Collaborator, Innovator and Strategist," sponsored by Iasta. As a reminder, the benchmark report is provided free for a limited time for Iasta's subscribers.
For more information about Iasta, please visit www.iasta.com or e-mail email@example.com.
First posted August 31, 2011
Smash Your Q4 Savings Targets with Collaborative Sourcing Projects
Collaborative Sourcing Projects, often referred to by Iasta as CS-Projects, are an excellent way for your sourcing team to identify cost savings, despite not having the time and resources to run your own projects. These projects are fully managed by Iasta, allowing you to benefit from Iasta's resources to hit your Q4 cost savings goals. Talented Iasta professionals will work collaboratively with your sourcing team on your project to ensure you get the desired results without having to conduct the project on your own.
Choosing to conduct a CS-Project with Iasta allows your sourcing team to:
You select which elements of services are needed for your CS-Project. For example, Iasta could::
In the end, your sourcing team makes the final award decision based on the information collected from the qualified bidders and then you move forward with awarding the business on your own.
To learn how a leading global beverage and food chain contacted Iasta for an eSourcing and optimization CS-Project, download the case study here.
If you are interested in discussing your potential CS-Project and available discounts based on the scheduling and scope of your project, please email firstname.lastname@example.org.
First posted September 29, 2011
Boost User Adoption through User Training Programs
Often, Iasta's clients make achieving high user adoption a critical element when implementing our solutions. For example, one Iasta client placed strong user adoption at the heart of its eSourcing rollout initiative with Iasta's SmartSource. There was a lot at stake with the eSourcing implementation because its previous tool never took hold in the company. Additional key challenges for the team included ease of use and cost savings. This time around, it was critical to establish a clear process to guarantee success and overcome these challenges.
The client put together a steering committee to ensure successful implementation of SmartSource. In addition, a design authority team, which was guided by Iasta, assembled to evaluate how to best tailor SmartSource for the company's needs while ensuring compliance with industry best practices. The company also worked with Iasta to develop Key Performance Metrics to better measure and evaluate the results of the initiative. Finally, a sourcing pipeline was developed to help identify potential early successes, which would help drive uptake of Iasta's SmartSource by the users.
To read about the client's accomplishments and results gained from the structured eSourcing rollout plan, download the complete case study here. You can also learn 8 elements to drive user adoption in Iasta's Structured Rollout Plan for eSourcing Initiatives.
If your company wants to boost user adoption too, you should consider user training programs. Iasta offers support-based user training programs that are developed to ensure your team receives maximum results from Iasta's solutions. When users are comfortable with the software, they use it more frequently and deliver more value for your company.
During the training program, users learn how to navigate through Iasta's software and apply it to their actual projects. Iasta's training program also provides beneficial context for users, advising them how and when to use specific features to make their eSourcing projects successful. The program can be tailored to different levels of expertise required to use and internally support the tool. Often, the goal of the user training programs is to ensure that your team becomes as self-sufficient as possible within the quickest time frame possible.
Companies can choose from a standard menu of training topics, or request for Iasta to develop a custom training program unique to their organization's user adoption goals. Iasta user training programs include:
All training qualifies for the Institute of Supply Management's (ISM) A.P.P, C.P.M and/or CPSM continuing education requirements (CEHs).
For more information about Iasta's user training programs, please email email@example.com.
First posted October 24, 2011
Implementing a Supplier Diversity Program Following 7 Best Practices
Supplier diversity programs, like many broader sustainability initiatives, are gaining traction in corporations worldwide. Yet, research from The Hackett Group indicates that "Most rely on overly simplistic measures to evaluate the progress of supplier diversity programs, and never truly assess whether programs are meeting corporate objectives. Many companies are taking the easy way out with respect to their performance measurement processes, and as a result aren't driving "real" supplier diversity benefits. They are focused on making the numbers they need to meet government requirements, or getting recognition from their customers or industry. But they aren't showing the attention to detail required to create programs that have real impact on their stated objectives."
So, how can you create a program that will have a strong impact on your organization? Here are seven best practices to consider when implementing a supplier diversity program:
By utilizing the supplier information management capabilities Iasta's SmartSupplier platform, companies can better manage their supplier diversity programs. The best way to achieve a strong supplier information management program is to directly align your existing suppliers with your company's corporate goals. Iasta's clients can create custom supplier scorecards in SmartSupplier to track Key Performance Metrics aligned with their business goals and strategy. However, creating the perfect scorecard to track metrics such as supplier diversity and performance is not enough. It's important for companies to act on the data gained from those scorecards to improve relationships, reduce risk and achieve corporate goals. More information about supplier performance management and supplier scorecards is available in Iasta's Supplier Performance Management Wiki Paper. In addition, Iasta Supplier Discovery allows companies to search for suppliers from Iasta's own database based on key criteria. Companies can key in criteria to pinpoint companies based on factors from diversity status to revenue tier to vertical focus and beyond.
For more information about supplier performance management, please email firstname.lastname@example.org.
First posted November 30, 2011
Making Your Data More Relevant with Sourcing Dashboards
In the modern, data-centric world we live in, dashboards are all the rage. In fact, a dashboard is one of the most powerful tools that business-intelligence (BI) software can bring to users. As BI software continues to evolve, three key characteristics have emerged as best practices for developing successful dashboards:
Dashboards enable users to visually compare data in meaningful ways. The accessibility and user-friendly data offered by well-designed dashboards can increase transparency of key projects and improve resource tracking, to name only a couple advantages. Put a graph alongside the same data in a chart so you can see the big picture without sacrificing important details. Information gadgets used in dashboards are most effective when they communicate information visually. The visual display lets you get to the sourcing intelligence more quickly -- by essentially uncovering information that's deeply buried under mounds of data.
"In order to enhance the user experience, we have turned the Iasta SmartSource landing page into a personalized Sourcing Dashboard," said Sheri Lindsay, director of product management at Iasta in a recent press release. "The new Sourcing Dashboard provides users with even more cross-platform information at their fingertips. Users can choose from a library of gadgets and layouts so they can visually customize information that helps them prioritize their work more strategically and efficiently."
New gadgets in Iasta's SmartSource 8.4 library include:
Each user chooses a personalized combination of gadgets and lays them out in columns and rows to visually emphasize the information that is most important to them. We're also providing a couple of gadgets that tell users about updates to the Resource Library and communicate other Smartsource-related announcements from Iasta.
Ideally, your dashboard should synthesize data and place it in a context that can drive action. Our research tells us that dashboards are most likely to increase your productivity if you think strategically about the type of data that you need to support real-time decision making. Pick gadgets that are likely to prompt you to take some sort of action. It could be a corrective action to prevent, resolve, or mitigate an issue or it could that simply increasing visibility to certain pieces of information improves your ability to prioritize.
For more information Iasta SmartSource and how your team can make your data more relevant with sourcing dashboards, email email@example.com.
First posted January 6, 2012
Create a Culture that Embraces Procurement as a Strategic Business Partner
In Iasta's pre-conference survey for resource '12, we asked our clients what were the main roadblocks to becoming a best-in-class procurement organization. The top two roadblocks for respondents were:
In order to help our clients overcome these clients, Iasta recently launched Iasta Executive Analytics Suite™, a highly interactive, customizable and sophisticated reporting suite. You can gain visibility into your entire sourcing and spend management process across four main areas:
Within a few clicks of the mouse, you can generate interrelated sourcing, spend, supplier and contract intelligence to make data-driven decisions that can easily earn executive support. Using Iasta Executive Analytics Suite can help you create a culture that embraces procurement as strategic partner in the organization. Iasta Executive Analytics Suite provides you with a single source of truth into the type of business intelligence your executive team needs. Our clients say adopting Iasta Executive Analytics Suite has allowed them to exhibit procurement's value across the entire organization and quickly grow their sourcing pipeline with powerful analytics at their fingertips.
The journey to becoming a best-in-class, Integrated Category Management company requires you to grow your sourcing pipeline with projects that are aligned with your organization's goals and growth initiatives. Iasta Executive Analytics Suite helps you complete that journey.
Email [firstname.lastname@example.org] to schedule a demo and learn more about how you can connect your sourcing and spend Intelligence with Iasta Executive Analytics Suite.First Posted March 26, 2012