Siloed Supply Risk Management Just Wastes Time, Money, and Resources

In our last post on why Why Supply Risk Management Cannot Be Siloed we noted that, despite the fact that an organization’s supply chain is full of risks that could not only cripple the organization’s supply chain but cost it 100 Million or more in fines, the average organization’s supply chain is overflowing with risk (despite the fact that many of these risks could be mitigated).

Why? Because the average organization is not properly managing risk. Why? As per our last post, there are a number of issues including lack of resources, lack of time, and lack of immediacy, but the biggest issue is lack of cohesion. Even organizations that have risk management and sustainability efforts in place tend to be relatively ineffective overall because most of these efforts grew organically over time as individual functions encountered risks and needed to deal with them. This results in a very fragmented approach to risk management that is very inefficient and ineffective. Why? Each department sends its own surveys and questionnaires and reviews its own data sources and this results in:

  • a duplication of effort where
  • some suppliers will be assessed on the same dimensions twice while
  • other dimensions for the same suppliers go unassessed and
  • some suppliers do not get assessed at all while the process generates
  • false positives as well as
  • false negatives.

How can this happen? And just how much time and money is wasted? And what should be done? For the answer, check out Sourcing Innovation’s latest white-paper on Why Sustainable Supply Risk Management Cannot Be Siloed: Lessons From Leaders Who Beat the Odds, sponsored by Ecovadis. And you’ll learn not only what the correct approach is, and what it involves, but what it can do for you.

Is Your Procurement Platform Cost Centric Perfect for Indirect Only?

We’re all familiar with the standard 5-Step Sourcing Process:

  • Category (Spend) Analysis
  • Category (Sourcing) Strategy
  • Supplier Identification & Invitation
  • Sourcing Strategy Execution
  • Award and Contract

(which is covered in detail in the doctor‘s e-Book on The Strategic Sourcing Lifecycle: A Brief Introduction [registration required])

and we’re all familiar with the core capabilities of e-Sourcing and e-Procurement tools for supporting this lifecycle, namely:

  • Spend Analysis
  • Supplier Network
  • RFX / e-Auction
  • Optimization
  • Award & Contract

… for Sourcing and

  • Requisition & Order Management
  • Invoice & Receipt Management
  • Payment & Tax Management

… for Procurement.

And we’re very familiar with what each of these technologies has to offer for each of the strategic sourcing (execution) lifecycle phases.

But is it enough? For the majority of your indirect (finished product, MRO supply, temp labour, etc.) categories, it is more than enough. Compared to what you had a decade ago, it’s the answer to all your dreams (and, for the religious among you, prayers).

For a commodity alarm clock radio, yes. For a bill of materials for a custom designed tablet, no. First of all, you can’t just do an RFX for all of the “standard components”. Why? For starters:

  • all of the components have to be compatible — it is often the case that components from different manufacturers, even if they are the same form factor, are not 100% compatible
  • the cost is not just the components, it’s the integration — and sometimes you want sub-assemblies, and you want to bid those against components and doing the assembly in house
  • complete composition data is key — if some products use materials that are restricted or banned in one or more target markets, they are not all equal

and when you consider a typical sourcing platform

  • there is typically no advanced strategic sourcing decision optimization or constraint satisfaction capability and no way to indicate that certain products are only compatible with certain others and, thus, it is extremely difficult to create and evaluate the cost of legal award scenarios; and even if the organization has one of the half dozen solutions with this capability, there’s typically no way to capture the data that defines compatibility or incompatibility (or help a sourceror identify potential issues)
  • not only does the average sourcing platform have no support for Bill of Materials, but there is no support for production cost models that capture overhead costs (as most procurement platforms designed for indirect focus mainly on logistics costs in addition to component costs)
  • average procurement platforms track descriptions and bids, not component and material breakdowns (and have no support for compliance and sustainability issues and regulations)

In other words, your typical procurement platform is cost-centric perfect for indirect, but when it comes to direct, the platform is sorely lacking.

So what do you need to support your direct procurement? Download Sourcing Innovation’s newest white paper on The Direct Procurement Challenge (registration required), sponsored by Pool4Tool, and find out today!

EC Sourcing: Getting Ready to Take the Mid-Market by Storm

When we last checked in on EC Sourcing, they had recently released an updated version of their basic e-Negotiation suite, Flex RFP, and their Supplier Corrective Action Reporting (SCAR) solution. Their e-Negotiation suite had straight-forward RFX, auctions, and a basic contract repository that was the 80% solution at the time. It couldn’t compete in the big leagues, but that wasn’t the focus — the focus was the majority of the market that the big players were ignoring (by selling overkill solutions the market didn’t need at a price point the market couldn’t afford).

The platform also had basic project management built in to allow customers to define projects — which include suppliers, users, RFXs and/or Auctions; message with users and suppliers — through integrated message boxes and e-mails; and define notifications in addition to standard project management features — such as timelines, state tracking, and document management. It also supported 4 languages, multi-currency, and formulas in auction and RFX weighting, it was a solid solution, which is further evidenced that about 1/3 of their client base are actually Global 3000s that realized that they didn’t need an overkill solution at an absurd price point to meet their daily sourcing needs.

Since we last checked in a few years ago, they have been developing steadily — improving both the base solution and adding new modules and capabilities, including some not found in the majority of e-Sourcing platforms (even when the big guys are included). They have added supplier management and workflow management and improved everything across the board (including, but not limited to, their internationalization with support for a dozen languages so far). The three biggest changes are:

Supplier Management

Their new supplier management module contains everything you would expect, including, but not limited to, self-registration, deep supplier meta-data management and search, and out-of-the-box Big ERP Integration. The supplier management module supports self-registration. When a supplier self-identifies, it will be presented with the default questionnaire(s), and upon initial review, the buyer can select the supplier for on-boarding, generate a full profile, and request that the supplier complete it. The buyer can define as many fields (across questionnaires) as they want, and each field can be tagged, filtered, and searched. Plus, the module, like the rest of the platform, integrates with JDE, Oracle, and SAP out of the box.

Workflow and Configuration

EC Sourcing has moved well beyond basic project management and now includes procurement request functionality (which can kick off a workflow outside of Procurement), deep approval and routing capability, customizeable status information associated with each task, and custom workflow definitions that allow a user to define a complete workflow for any sourcing project, with direct links into the relevant parts of the platform. All of these workflows are 100% configurable by the user, who can create them as templates, copy them, and customize them as needed for each sourcing project. Very few sourcing platforms have this capability, and no other mid-market solution has Procurement project management at this level of configurability and completeness.

e-Sourcing Automation Capabilities

It might sound trivial, but EC Sourcing’s new capabilities that allow the platform to:

  • automatically identify and invite all approved suppliers for a product/category
  • automatically attach specifications to an RFX on a line-item basis
  • automatically calculate advanced weightings and scorings (when the event is created from a template using advanced lots)

is extremely powerful, especially for large events and junior buyers.

Some categories (like office suppliers, MRO, etc.) have hundreds of line items and, for national (and international operations) that are collectively provided by thousands of suppliers. Even if each product or service specification (document set) can be located, uploaded, and attached in 2 minutes, for 210 items, that’s 6 hours of manual labour. And if there are 5 potential suppliers for each item, and no supplier can supply more than 50, it’s easy to conceive that there may be 1,000 different, pre-approved, suppliers. The manual time it would take to identify those 1,000 suppliers and then identify the lots they are allowed to bid on and configure that could be days.

However, with EC Sourcing’s auto-identification and auto-association capability, all approved suppliers in the SIM database can be automatically identified and invited to just the portion of the RFX/e-Auction they have been qualified to bid on and, if the documents follow a naming convention, all of the specification documents can be uploaded in a single zip file and the system will automatically extract the documents and associated them with the line, lot, or event as appropriate. This, as we noted above, can save days of a buyer’s time.

With the recent acquisition of classic mid-market leaders like Iasta (by Selectica, now Determine) and MarketMaker4 (by Xchanging), there are few providers that have been around since the noughts, fewer still with as mature a platform, and even fewer still with almost 2 decades of strategic sourcing advisory and consulting (which is how EC Sourcing started out before it realized that an organization could be much more effective powered by a proper platform as opposed to just a crack sourcing team with limited bandwidth). As a result, EC Sourcing is poised to make a big splash in the mid-market, and with the recent release of its newly upgraded solution, is sure to make one in the years to come.

What’s Your SRM Index Score?

Supplier Relationship Management is a key component of good strategic Procurement management. Good SRM can contribute to lower costs and higher organizational value through higher quality, great reliability, value-add, and innovation that an organization might not achieve otherwise. But how does an organization know how well it’s doing?

One way is to benchmark against its peers. While this will not necessarily tell an organization how good it is doing compared to how well it could be doing, it will tell an organization how well it is doing against its peers, which provide a baseline of how good it could be doing.

So, considering most organizations keep this data private, how do you figure it out? One way is the State of Flux SRM Index. Over the last seven years, State of Flux has collected and analyzed detailed SRM data on over 1200 global companies across the six different dimensions of business drivers, stakeholder engagement, governance & process, people & skills, information & technology, and relationship development & culture.

If your organization takes the SRM Survey (closes July 1, 2016), State of Flux can automatically assess your responses against its database and compute an index score for your organization and instantly let you know if your SRM is undeveloped, developed, established, or advanced. In addition, should your organization desire (and should multiple individuals in different departments complete the survey), State of Flux will also give you a free SWOT analysis on request.