The Fuel for the Bus Goes Up and Up

on Thursday, June 26, 2008

Everywhere you turn, you hear someone complaining about the price of gas these days. Most of the time, it’s your very own voice you hear. If I were a superintendant preparing a budget for the upcoming school year then I would need a muzzle. Problems come in all different shapes, sizes, and colors. This time around, the problem is big and yellow.

I came across an interesting article published in The Wall Street Journal titled “Yellow Buses Put Schools in the Red.” In summary, many school districts are currently focusing their efforts on how to allocate costs for the upcoming school year. Many schools went over their budgets this past year to pay for their gas-guzzling yellow school buses. I never really took the bus as a child on my way to school; and I am sure every school district in the U.S. is wishing the same went for all children nowadays.

In a previous blog, a question was posed: “Are there a lot of gamblers in corporate America? It turns out that some of the gamblers in America are not running a business; instead, they are governing our schools. The main challenge facing these individuals is predicting how many children will board the buses next year and what the price of fuel will be. I do not envy their position. There is great risk involved. While making negotiations with bus companies, school districts need to decide carefully whether to choose a fixed rate for fuel or remain with the market’s current price and hope it doesn’t rise out of control. One Pennsylvania school district has chosen a fixed rate of $4.33 a gallon out of fear that fuel prices will continue to rise.

When looking to source strategically, some costs just cannot be avoided. Therefore, school districts are doubling the size of their fuel budget and cutting costs elsewhere. Reiterating the statements I made in my last blog, these administrators are targeting the areas that complement the core, such as field trips and maintenance. Some measures that have been taken vary from ordering fewer new textbooks to not filling teaching positions. Some schools have also cancelled or postponed the purchase of new equipment, such as boilers.

One of the underlying reasons why school districts’ budgets are shrinking is due to the downfall in the real estate sector. In the past, when the budget got tight, schools relied on the cushion they received from high property taxes. That cushion no longer exists.

Although school districts and their situation are not fully relevant with strategic sourcing, it is important to note that everything eventually comes full circle. One thing will impact another. If schools continue to overspend their fuel budgets, we may eventually be paying more in taxes. The companies that manufacture the big yellow buses are already feeling the effects of school districts’ budget size. Many school districts have refused to purchase newer vehicles, leading to a 10% fall in sales compared to last year at this time.

We need to be proactive instead of reactive as both consumers and businesspeople. I know that others have discussed what measures to take when dealing with the rising price of oil, more specifically in the blog “Is Everyone Going to Stay Home? If you haven’t done so already, begin to provide a cushion for yourself with regards to your transportation costs and fuel budgets. The higher the price of oil soars, the messier everything will get – even messier than a cafeteria food fight.
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The Smartphone Lineup, Alternatives to BlackBerry

on Wednesday, June 25, 2008

In today’s fast paced business environment, it is essential for many people to keep in constant contact with their office and their supply chain. It is now common to see most business professionals “tethered” to their office via electronic devices such as BlackBerry, Windows Mobile, Symbian, or the iPhone (though the iPhone is not yet where it needs to be for an enterprise solution).

Blackberry continues to dominate the US enterprise marketplace. According to IDC, the first Quarter of 2008 shows that RIM took 44.5% of the total U.S. marketplace for smartphones. The second in sales was the Apple iPhone holding 26.7% of sales, however it can easily be argued that the vast majority of Apple’s sales were consumer not enterprise users. On a global level, Symbian OS dominates the marketplace, while Windows Mobile owns slightly more market share than RIM’s BlackBerry (13% vs. 10%). Symbian’s domination is due to the fact that Nokia (the world’s largest manufacturer) prefers to deploy it on the majority of its devices.

With Blackberry only owning 10% of the world’s marketplace, it seems a bit odd that it still holds such a dominate share of the US marketplace. In my opinion, this is mainly due to name recognition, and first to market with a truly integrated device. I am a user of a Windows Mobile device, yet everyone that sees it still asks what kind of Blackberry it is.

My point is that the name recognition of the Blackberry itself probably accounts for the fact that it is the main device that is deployed in most enterprises. What really surprises me though is how many IT managers I have met that were not even aware that you can accomplish much of the same things a Blackberry can do without owning a Blackberry or paying for their software/services. Windows Mobile and Symbian both have the ability to integrate with Exchange Servers, and WinMo even supports push synchronization (where the emails are pushed to your phone, you do not have to retrieve them). Additionally, most enterprises already have the licensing and equipment in place to support deployments of WinMo without purchasing anything other than the device itself.

For those of you looking to upgrade existing smartphones, or perhaps to deploy them for the first time, there really is a lot to consider. I suggest engaging the help of a third party to help you make the decision. If you go at it alone, don’t take the marketing literature of each solution verbatim. A quick evaluation of RIM’s published cost comparison has many misleading costs built in to their competitor’s solutions that the vast majority of enterprises would never have to absorb. Basically, their cost comparison assumes that your enterprise is running on 9 year old technology, and you would have to do a complete upgrade. The fact is, most enterprises are already standardized on later technologies (i.e. Exchange 2003) and would not need to acquire the majority of the software/hardware that RIM says you need to run competitive solutions. Each of the vendors is guilty of comparing apples to oranges, so make sure you do a lot of research, and evaluate each alternative carefully.

Below are some of my quick thoughts for each of the competitors that I have used:

BlackBerry
  • Best management and security for IT staff
  • Bulk discounts available
  • Flexibility in choosing carriers
  • Wide variety of devices to choose from
  • Requires separate servers (additional costs)
  • Requires separate licenses (additional costs)
  • Experiences nationwide system outages due to the Blackberry network failing

Windows Mobile

  • Bulk discounts available
  • Flexibility in choosing carriers
  • The widest variety of devices to choose from
  • Does not require separate servers, if running Exchange 2003 or later
  • Awesome integration into outlook without extra software
  • Is only prone to fail due to local enterprise infrastructure failures
  • Wide variety of 3rd party applications readily available
  • Not as secure as BlackBerry

iPhone

  • Hands down the best user interface
  • Hands down the best web browsing experience
  • Hands down the best multimedia experience
  • No discounts available
  • Must be with AT&T, no exceptions
  • Only one device to choose from (love it or hate it)
  • Currently does not fully integrate with corporate mail servers, but promises to in the near future.
  • Is only prone to fail due to local enterprise infrastructure failures (once it finally can integrate with Exchange)
  • Very few 3rd party applications available – most require hacking the equipment (voiding warranty in the process)

My personal overall preference is the Windows Mobile (Microsoft) Devices. Although the interface leaves a lot to be desired, it serves its main purpose very well, which is to keep me synchronized to my office computer for a low cost.

Click here to learn how Source One can help manage your wireless spend and infrastructure.

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Scalpel, please.

on Tuesday, June 24, 2008

Finding a solution to decrease costs is like performing triple bypass surgery. Sure, the process lasts longer than a mere three to five hours, but the outcomes are very similar – a longer life for the company and the individual.

Some companies tend to turn directly to their business’s core in their efforts to reduce costs. However, just as the heart is not the underlying reason to perform bypass surgery, the same may go for the heart of a company. Blocked arteries are like red ink on the financial statement. Surgery is necessary. These arteries may lie in accounting, raw materials, transportation costs, etc. Many companies do not have the resources to figure out a solution. That’s when the surgeons of the business world step in – professional sourcing experts. Their job is to find a way to restore normal money flow. Different processes are analyzed; and the most efficient and effective way to keep the heart of the company pumping is recommended. If the company wants to lead a healthier life, it should consider following the “doctor’s” orders.

Ironically, it is the health-care sector that may soon begin or have already begun to feel pressure to cut costs. I came across an article in The Wall Street Journal titled “Health-Stock Refuge No Refuge at All.” When the economy seems to be doing poorly, many investors automatically look to pour their money into health-care stocks. It is very logical, considering the necessity of the sector’s products and services. However, investors are thinking twice this time around. Health-care stocks are not performing as well as expected. The underlying problem is that more health care costs are being shifted from employers to employees.

Some companies are aware that the approach to cutting costs is not to attack the core of a business. Many companies have focused on where a good chunk of their funds are allocated – health care plans; and this is why the health-care sector is struggling. Insurers face challenges as the number of jobs offering health benefits declines. Employers are requiring their employees to pay higher premiums; and some employers are even becoming self-insured or adopting high-deductible plans. These employers have been passed the scalpel and are beginning to make some clean cuts in their spending.
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How Much Are You Betting and What are the Chances of Losing?

on Wednesday, June 18, 2008

Last week in "Are You A Gambler", I discussed supply chain risk. When you gamble, do you know the amount of your bet and the relative probability of winning or losing? Since most companies have no formal risk assessment methodology or processes to mitigate risk in their supply chains, they do not know the amount of their wager or their risk of losing. Usually the costs of failure become known after the failure occurs and they are far greater than anyone has imagined. How do you develop a process to identify risk in your supply chain?

The process generally begins with a supply chain map. What is a supply chain map? A supply chain map is a graphical representation of the flow of goods from your supplier until they reach your customer. A complete map should identify every process (physical, financial, informational, relational and innovational) in your supply network. Highly detailed maps can extend to forth or fifth tier suppliers. Some organizations may have multiple supply chain maps or they may prefer to map by commodity. Regardless of preferences, all that matters is that you get started.

Why should you create a supply chain map? If done properly, some benefits of a well executed map are: quick identification of weaknesses, dependencies and overlaps, support for your strategic planning process, facilitate supply chain redesign, clarify channel dynamics, augment communications and provide a basis for supply chain analysis. Most people can grasp process flow better when it is graphically represented. Thus, a map can be quite helpful in understanding a company's supply chain, for evaluating the current supply chain, and for contemplating realignment of a supply chain.

Once the map is completed, then the fun begins: identification of the possible failures in your supply chain. Supply disruptions generally fall into two main categories - Supplier failure (performance, strike, bankruptcy etc.) and environmental (weather, earthquake, terrorists, SARS etc.). Environmental disruptions are generally sudden in nature and are difficult to predict. The effects of environmental interruptions can best be mitigated through geographical supply chain diversity and disaster recovery planning.

On the other hand, supplier failure disruptions can be predicted and planned for. A key component if your supplier management and development plan should be to create a supplier risk scorecard. This scorecard should quantify the likelihood of whether a supplier will fail to perform and identify the financial impact to your organization of the failure. Quantitative failure metrics to measure your suppliers should include relationship, performance, human resources, supply chain viability, financial health and environmental indicators.

Each of your suppliers can be charted on a grid as to their probability of failure and the related financial impact. Now you have completed step one of controlling risk in your supply chain - you have identified the potential points of failure, you know the size of the bet and the relative probability of failure. Next - Risk mitigation strategies.
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Savings...What Savings?

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PricewaterhouseCoopers recently conducted a survey of sixty retail and consumer goods companies from around the world. The goal of the survey was to better understand how and why companies source globally. Although most companies cited cost savings as a major driving force behind global sourcing decisions, the survey determined that 21% of these companies don’t know what savings to expect, and 25% never find out what their actual savings are.

As the adage goes, “Success is not a measure of where you are, but a measure of how far you’ve come.” It is impossible to determine the effectiveness of a sourcing initiative without baseline cost figures, tangible goals, and meaningful metrics. For a moment, ignore the multitude of qualitative factors that should be considered when sourcing and focus solely on the bottom line. From this perspective managers must ask themselves three important questions; “What are we spending now, what do we expect to save, and how much of these savings are actually being realized?”

A manager should be able to say something like, “Currently the total cost of ownership for one widget is 25 cents, and we buy 1,000,000 widgets a year. With this sourcing initiative we can expect a 5% drop in the TCO for each widget we procure.” Once the initiative is put into place, the manager’s job is not finished. Although it is a laborious and sometimes tedious process, the tracking of actual savings is a necessity.

If a manager notices that a sourcing project is yielding unsatisfactory savings, he will be able to pinpoint problem areas and look for solutions that will optimize savings. If trends begin to suggest that a reasonable amount of expected savings cannot be realized, managers will have learned a lesson and know to start looking for more promising opportunities.

Survey titled, “Global Sourcing: Shifting Strategies”
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Companies Trimming Down: Crash Diets vs. Healthy Exercise

on Monday, June 16, 2008

Over the years people have concocted all sorts of diet plans that have proved to be as senseless as they are creative. From cabbage, to cutting carbs, to prune juice, to dog food, the metabolically challenged never seem to run out of ridiculous ideas for fad diets. The bottom line is that your body is a machine that must be kept in tune and sustained by healthy inputs. Any other sort of weight reduction leads to yo-yo results and long-term malnutrition. A company is no different.
In the face of current economic turmoil, far too many companies are turning to crash solutions like layoffs and cutbacks to solve their problems. Much like starving your body while exercising more, careless cutbacks can put members of your organization in a position where they are expected to produce more with fewer resources. The result is a temporary reduction of costs that eventually brings about the costly and sometimes fatal backlash of a malnourished company. Before a company goes bulimic, management needs to search for innovative ways to whip things back into shape.
You can’t cut the fat until you distinguish the fat from vital muscles and organs. In order to do this, a company’s managers must conduct a thorough analysis of every aspect of the company’s operations. This analysis needs to be more than just a quantitative overview. Managers also need to diagnose every facet of their companies’ operations through a qualitative, value-oriented lens. While the numbers and ratios are valuable troubleshooting tools, they must be augmented with critical thinking before they can be used to find the fat.
“Crash-diet” managers are inclined to view a reduction in employee productivity or shrinking profit margins as a signal for layoffs and cutbacks. “Healthy” managers will be motivated to figure out why these numbers are troubling. Productivity may be low because employees need more training or because they are using outdated equipment. Margins on products with solid potential may be shrinking because of process or procurement inadequacies.
If managers cut based on numbers alone, they are virtually starving out the fat. These companies are sure to end up skinny, but frail. When trimming down, companies need to do more than just cut the fat; they need to work until they turn it into muscle.
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Supply Chain Software Market

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Online publication, “Computing”, recently wrote a summary of a recent Gartner analysis. There are some interesting numbers in the Gartner analysis, but I question how they were calculated.

According to the article, the Supply Chain Software Market accounts for $6bn annually, and is growing at 17% per year. Gartner reports that SAP is leading the race with 22% of the entire market (or $1.32bn), Ariba holds 5% ($308million last year).

Although I agree with the size of the marketplace, and that there is some room for consolidation, I question how they calculated the 22% share that SAP supposedly owns. Perhaps they have sold that many licenses for Supply Chain Solutions, but they certainly have not actively deployed working software in that much of the market.

For better or worse, we encounter triple the amount of clients/prospects that actively have Ariba deployed in the organization. And we have yet to encounter a single organization that is using a fully functional version of SAP’s solution. This year at the ISM conference we talked to handfuls of people that had acquired SAP and Oracle’s supply chain solutions, but either had 5 year deployment schedules, or had no intention of using the solution at all.

It would be interesting to see the study conducted again, but based on actual functional deployments (with case studies), not the numbers that the software giants are reporting to the press.
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We Have Moved

on Friday, June 13, 2008

We have recently changed our hosting of the Strategic Sourceror in order to take advantage of some new blogging features and technologies. We appologize if any old links no longer work to our site. For future reference, our site is now located exclusively at http://www.strategicsourceror.com/.

For those of you that subscribe to our feeds, please remember to update your RSS feed location to: http://www.strategicsourceror.com/feeds/posts/default
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Are You A Gambler?

on Wednesday, June 11, 2008

Taking risk can be exciting. The rush of adrenaline and the thrill of winning gets more intense as the risk goes up. Or perhaps, the stress and anxiety increase and you have no fun at all. When it comes to your supply chain, are you a gambler?

Most companies have no formal risk assessment methodology or processes to mitigate risk in their supply chains. Many executives will agree that risk in their supply chain has increased in recent years, but few are taking any definitive action. Why? Are there a lot of gamblers in corporate America?

Quite often the attitude is "if it ain't broke, don't fix it". A lack of resources and short term goals force executives to focus on day to day operations and leaves little time for long range planning. Not knowing or not looking is equivalent to sticking your head in the sand. Your exposure may be far greater than you realize. Do you know where your suppliers get their raw materials and components from? What about your suppliers' suppliers? Are any of your suppliers having financial difficulty? Could they go out of business? What would a failure in your supply chain cost you?

Supply chain failure costs are far greater than most people realize. The impacts can be financial, loss of a key customer or customers, damage to company reputation, loss of competitive edge etc. Depending upon the degree of failure, the list can go on and on and may even result in the failure of the entire enterprise.

What can you do to reduce supply chain risk? Any plan should include the following elements: identify risks, develop strategy to mitigate risk, implement and monitor. Future posts will discuss each of these elements in more depth.
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Self Contained Purchasing Department, hold the Strategic Sourcing?

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A recent “Talkback” article on Purchasing.com caught my attention. Hilton Hotels' purchasing organization says "The bucks start here". In quick summary, the article explains how Hilton Hotel’s purchasing department is in fact a profit center for the business.
Although it is impressive what Hilton has opted to do in order to maintain their own purchasing and supply chain departments as a cost-neutral entity, I had to read the article carefully to really understand what they were saying. I would argue that the article (or Hilton) is a bit liberal in defining what they call their “purchasing department” as it includes a marketing department and its own finance department. It is in fact, a self contained consulting firm or outsourced purchasing company.
Looking at the numbers, Hilton is managing $2 Billion in annual spend, with 147 people. That works out to just $13.6 million of managed spend per person, and only has an annual impact on the corporations spend of about 1% in savings. By using the numbers that they published in this article, I calculate only a $145k annual cost savings per purchasing department employee, or as high as 180k/person if you factor in their revenue. Also, keep in mind, these numbers simply talked about savings and revenue, and did not account for any overhead costs. With what Hilton is doing, I would expect there are some significant annual software licenses and infrastructure costs that need to be accounted for, which could drastically reduce these numbers.
The numbers indicate that while Hilton is maintaining a cost-neutral procurement center, they probably are not very focused on the actual strategic sourcing. I am sure that a large portion of the staff is dedicated to maintaining contracts, collecting fees, marketing, and managing finance, and can’t help but wonder how much resource is actually left over for the actual strategic sourcing aspect of procurement. Although I commend Hilton for the team that they have built and the obvious success they have achieved, I believe Hilton could still benefit greatly by supplementing their strategic sourcing resources with the outside consulting world.
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Strategic Sourcing Used in Chauffeured Services

on Tuesday, June 10, 2008

A recent article on Business Travel News Online discusses the new levels of creativity that Chauffeured Services organizations are now forced to take in order to keep costs down and profitability up in the world of $140+ barrel oil.

In reality, most of the concepts that are being employed to keep fleet costs down are nothing special. Companies are now focusing on making sure that vehicles are not idling, and that tires are properly inflated (with Nitrogen in some cases). But these are not really creative ideas, a quick search for “ways to increase your mpg” in any major search engine and you will find hundreds of results telling you to do the same things.

One thing that is creative and is now becoming more common in the transportation industry is to employ trainers to teach their drivers effective driving and ways to consume less fuel. While the ideas, if implemented properly will almost certainly gain a small measurable savings in the fuel costs for chauffeured services organizations, I doubt the intention is to actually pass along the savings to the customer (as the article indicates), but rather to protect profitability.

Dav El's CEO, Scott Solombrino, says "You're seeing a lot more strategic sourcing and procurement departments than I've seen in my 31 years in the industry," Solombrino added. "It's helped consolidate the business because procurement seems to be able to get policies enforced."

I agree with Mr. Solombrino, we are seeing a lot more “Strategic Sourcing Managers” in just about every industry we go into, especially in the last 18 months. And we also agree that it seems, in some measure, that procurement departments are now doing a better job of getting policies enforced, however we also see unreasonable expectations set on a lot of these procurement managers, so I suspect they are just working harder to ensure the policies are enforced that they ever have been before.

The BTNOnline article continues to talk about more and more organizations are now going through formal RFP processes for contracting with Chauffeured Services organizations, and that there are a lot more questions today than there ever has been.

It is good that strategic sourcing managers are starting to understand the cost components of this type of spend, but I wonder how many of these organization still believe that Strategic Sourcing is the processes of writing a RFP and getting three vendors to bid... I would suspect that it is still the most common practice in most organizations and that many organizations are missing out in developing truly creative collaborative solutions with their suppliers because they simply throw out a RFP document for a bid.

If your organization wants to go beyond the “Three Bid RFP” process, contact Source One for assistance.
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Comments on a Recent Sourcing Innovation Post

on Wednesday, June 4, 2008

Thanks yet again to the doctor for covering some news in the sourcing front with his piece ThomasNet Takes Sourcing to the Masses.

I think the doctor yet again hit the nail on the head with his understanding of this particular offering. For those of those that have not read the press release, Source One and ThomasNet have recently partnered in order to provide basic e-sourcing tools to the procurement and supply community. These tools currently offer basic RFX management as well as Reverse Auction tools for free to both buyers and suppliers.

Anyhow, I was going to leave some comments over there, but realized that this would be a bit of a lengthy rant, so decided to post it here.

The criticism, resistance and negativity that certain members of the procurement solutions provider community continue to comment on about tools such as www.WhyAbe.com and now ThomasNet should not surprise me. In fact, I actually find some relief in the amount of interest these business models are generating, because I detect a certain level of fear from some providers.

When we first launched WhyAbe we were told by many individuals and “industry experts” that we would put ourselves out of business and that there would be no way we could afford to maintain the tools for free. Here we are approaching our third year of success, and not only is our community stronger than ever, but we have many more rounds of releases in the works. The feedback from users of the tools have been overwhelmingly positive while the feedback from people that sell their own solutions has been overwhelmingly negative. And Source One, as a company is stronger and more recognized than ever before.

As Jason Busch commented over on Sourcing Innovation, perhaps ThomasNet is a little late to the game in providing these types of solutions to their user base. However, I have to disagree on rest of your points Jason. To think that ThomasNet missed the online sourcing boat altogether is completely incorrect. Not just to quote the major analyst firms (since many readers hate them), but our own experience with the end user community tells us that less than 10% of all companies have any type of e-sourcing system at all. If my math is correct, that means that the market is open to over 90% of worldwide companies (of all sizes) for various types of e-sourcing solutions. Perhaps, as I blogged before, that is why there seems to be dozens of new competitors in the market space.

Even if the market was flooded, to think that a creative solution could not disrupt the status quo would be a mistake. Anyone heard of MySpace? They were not first to market, and did not even have a unique idea. Facebook anyone? Some would argue they should not have even attempted to start-up because MySpace dominated the market. My point is, even though you can come late to the game with a product or service, there can always be a big spot for you in it, with just a bit of creativity.


Now let me get to some of Alan Buxton’s comments. First off, let’s look at what Alan termed as “utilization” of WhyAbe. Alan specifically looked at some recent “Public” RFX events that have been conducted on WhyAbe and assumed that this was a reflection of the adoption and utilization of the site. In fact, the mass majority of all events conducted on the site are held privately, and cannot ever be seen unless you were specifically invited by a buyer. Most companies are simply not comfortable with “open” or “public” events.

We have one organization in particular that has on average 3-5 successful events per week and has been conducting them for over the last year and a half. In fact, that particular organization completely abandoned a very well known major sourcing application in order to adopt WhyAbe.

Secondly, Alan indicates that there is a lack of suppliers for a particular commodity that he searched in. This is not proof that there is no utilization of the site, it simply indicates that there is weak supplier registrations in a particular commodity. In fact, one of the main motivations of striking the ThomasNet deal was to build a toolset jointly that can tap into their massive database of suppliers. But even if we had every supplier listed in the world, having a big database does not substitute proper strategic sourcing processes and supplier relationships. Most of the users at WhyAbe tend to invite their own suppliers after they have been qualified anyhow. WhyAbe was never originally intended to be a supplier identification tool.

To answer Alan’s questions as why RFX tools are better than email/outlook. I could name many reasons, but just to look at a few:

  • The ability to add coworkers as reviewers (without sharing your inbox or forwarding every response)
  • The ability to automatically relist an event and run it again in the future
  • Certain compliance with internal or external policies
  • Avoiding the “oops” of sending responding to a question or forwarding a document to the wrong supplier
  • and both sets of tools support Reverse Auctions (which cannot be done in email)

And as per the comment “You don't need to read a 60 page manual to send an email.“ My site analytics show me that less than one half of a percent of all users have even ever clicked on the manual. The tools were developed specifically so that users can hop right on and start using them, without any implementation or training. In fact, we only wrote the manuals because one customer specifically required them in order to adopt the toolset.

Do the “masses” want this tool or any tool? That remains to be seen. But considering that WhyAbe has held hundreds of events and ThomasNet, brand new, has already held dozens of events, I would think it is clear that many users want some type of tool.

Also, thank you Eric Strovink for backing us up on the “pay to play” model that Charles Dominick suggested we may have participated in. I can definitely see why Charles said what he said, because I absolutely believe it to be true that you have to pay to play with most of the analyst firms. However, we have never contributed a dime to Gartner, they found us. Source One has been around for 16 years, way before most solution providers were even conceived, and WhyAbe has been around for almost three years, this past January was the first time that Gartner had ever even heard of us, so it is a long lengthy process to get noticed, if you are not investing millions into marketing (like almost everyone else is).

To wrap up this lengthy post (or rant), let me say a few things. Source One, WhyAbe.com, and ThomasNet are here to challenge the “traditional” model of e-sourcing solutions and procurement services in general. We are not surprised, but rather flattered, that other providers are attempting to find reasons why our models will not work, when clearly there is a market for them.

I think the doctor completely understands what we are doing, as he writes “Then, when an organization has identified it's needs, and, more importantly, identified what it can do well in house - and what it can not, it can always upgrade to a more extensive e-Sourcing platform and retain a PSP, like Source One, to help it with those categories that it doesn't have the experience, or the leverage, to get savings on.” I could not have said it any better myself. Source One is doing very well with providing Strategic Sourcing Resources to our customers. And we do not intend to compete with robust full-service procurement systems. We offer basic tools for basic needs.

As a shameless plug, here is something for “competing” service providers to consider. WhyAbe.com recently announced sponsorship opportunities on its site. Rather than criticize the tools, we welcome a full-service technology provider to advertise with us, and have the opportunity to show first-time procurement tools adopters what they are missing in the world of procurement and spend management technology.

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Where are the Low Cost Countries?

on Tuesday, June 3, 2008

We receive a lot of inbound calls asking for low cost country sourcing help. The requests have one similarity this year. Everyone wants out of China. The calls go as follows: We have been manufacturing our product in China for 5+ years and costs are rising. We want to investigate other low cost countries that may be more competitive. Sometimes the calls focus on reduced risk - we don't want to have all of our eggs in one basket and we don't have the resources to investigate other potential countries ourselves.

Rising labor costs, falling dollar, earthquakes, intellectual property violations, Olympic Games commerce disruptions etc. are making companies re-evaluate the China risk / reward scenario. Companies want to know where to go to remain competitive and to reduce single country sourcing risk. It is easy to identify potential candidates - Vietnam, South Korea, Taiwan, Malaysia, Eastern Europe, Africa, South America ....... Which countries are right for you?

The low cost country selection process starts with the product that you are trying to produce. Are the raw materials available? Can you find a reliable supplier with the capability to meet your specifications? Are certifications needed? Are there export / import restrictions? There are many more issues that need to be investigated just to short list a supplier before beginning sample production. Many companies are looking at the in country market for their product as one way to mitigate some of the risk.

It is helpful to have in country experts that can help you to navigate the local legal, political, cultural and logistic landscape. At Source One, we have built a global network of in country partners that can ease the difficulties associated with supplier identification and qualification. After review of your requirements, we can help identify the best low cost countries to target for alternate sources of supply. With the rapid shifts in global markets, you don't have to do all of the heavy lifting.
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SEC mandates XBRL

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The Securities and Exchange Commission voted this past May to propose requiring U.S. public companies to file their financial reports with Extensible Business Reporting Language (XBRL). Read about it.

If this proposal goes though, it would mean that traditional financial statements and documents would have to be tagged with XBRL identifiers. In essence, financial statements will become easily searchable, comparable and interactive.

“This is all about bringing investors better, faster, more meaningful information about the companies they own," SEC Chairman Christopher Cox said in a statement. While targeted at investors, the actual application of XBRL means formatting financial documents to be more easily searchable, and will lend itself to reorganized databases that can be easily downloaded into spreadsheets and applications and will provide many practical comparative and analytical uses.

I suggest that spend management technology providers should be following this closely, as it can lend to very practical integration into existing software solutions. The first one that comes to mind is the D&B Application, since they already have a massive database of public organizations. While the XBRL tagging of SEC filings in itself does little for the procurement professional, it will provide an easy way to match suppliers and potential vendors within software solutions, to provide quick and easy reporting and qualifications on a company’s financial viability.

The proposal, if approved, suggests that it will first mandate the XBRL reporting based on company size, with an eventual goal of tagging all public company’s financial statements. It will be interesting to see which providers, if any, are first to market with this type of reporting through spend management and spend analytics applications.
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Metal Casting Reference Website Launched for Buyers and Engineers

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Okay, I am a couple of weeks late reporting this news, but a new website, http://www.metalcastingdesign.com has been jointly launched by Engineered Casting Solutions (ECS) magazine and the American Foundry Society (AFS).

The new website is apparently a replacement for an older site, and promises to provide white papers, blogging, podcasts and tools to help engineers design castings. They also claim to provide information to buyer’s to help purchase castings.

When I get some time, I will review the site in more depth, but at first glance, one major piece that seems to be missing is the ability to download cad models for engineers. Of course the focus is more for custom designed castings, so I could see engineers turning to sites like ThomasNet.com to download their “standard” casting models.
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