Archive for May, 2009

Adding some D&B spice to your SAP risk management solution

May 29, 2009

Yesterday Jason Busch at Spend Matters (D&B: Powering Multiple Spend and Supply Risk Offerings) provided some insight into D&B:s strategies going forward with their supply management solutions:

In a recent conversation with D&B’s Jim Lawton, who serves as Senior Vice President and General Manager of the Supply Management Solutions (SMS) business unit, I confirmed D&B is moving to a “D&B inside” model to enable supply management and spend visibility providers to leverage D&B data to help customers move toward more strategic risk management.

Now this is great news, managing supply risk is so much more than just having data readily available at your fingertips and what D&B now are moving towards is a model which enables those with experience, know-how and process knowledge with better data which in turns leads to better value for the customers.

It is also something that goes hand in hand with some of the functionality available in SAP SRM 7.0 (which analysts and bloggers alike will surely explore now that it is on the market). SAP now provide for a bird’s eye view on supplier management through custom scorecards which can aggregate data from numerous sources such as D&B. No doubt will D&B’s proposed openness add even more value to applications such as SAP – what still needs to be seen is how and when the SAP supply chain partners pick up this lead and how they will attempt to exploit the possibilities. Because when (and if) they do; that is when the real value will come alive to the customers.

Posted in Risk Management, Supplier Performance | 2 Comments »

Sure signs of summer: fraud invoices

May 27, 2009

A few weeks ago Ernst & Young unveiled a study entitled “Corruption or compliance: the 10th global fraud survey” in which Ernst & Young’s Fraud Investigation & Dispute Practice Service assess the level of understanding of anti-corruption practices and how these are abided by (or bypassed) in business.

Says David L. Stulb, global leader of the Fraud Investigation & Dispute Services:

“Executives in some companies today may still believe that paying bribes is good business; it “works”. But the risk of such action has certainly increased markedly in recent years.”

The report also concludes that corruptive behavior intensifies in times of turmoil – which anyone working with purchasing cannot have missed. Turmoil leads to confusion which leads to lack of transparency, which is further amplified by the effects of the downturn economy on staffing redundancies which in other cases could have been able to offload the workload to ensure full visibility into the processes.

So what measures can purchasing take to battle these unwanted behaviors?

A clearly defined and communicated purchasing policy is certainly a good start, usage of sourcing tools that ensures transparency and full visibility is also vital as are comprehensive purchasing processes.

On a more transactive level; a no PO/no pay policy in combination with widespread e-procurement adoption is a key lever that can secure that smaller corruption and fraud offenses such as fake invoices never see the light of day.

Posted in E-invoice, eprocurement, Governance, Organization, procure-to-pay cycle, Sourcing, Supply Chain Management | Leave a Comment »

Doing better by standing by your contracts

May 25, 2009

If everyone paid on time, it would give an enormous boost to local, national and regional economies. Not only would 270 billion Euro (*) per annum in written-off receivables be saved, but Europe’s firms could also save at least 25 billion Euro by not having to chase slow payers. Chasing debtors consumes time and money. Apart from breaking a contract, bad debt also helps to drive up the price of goods and services. Research shows that if companies did not have to allocate costs to get pain or have to write off sums of money, they could lower prices, increase investments and improve margins.
* 2,4% of GDP EU27

Last week Intrum Justitia released their annual European Payment Index report where they expose some of the shadier parts of a downturn economy:

  • Delay in getting payment beyond the agreed term has stretched from 17 days in 2009 to 19 days in 2009 (on average)
  • Written-off percentage has increased from 1,9 percent in 2007 to 2 percent in 2008 to 2,4 percent in 2009

Furthermore the report notes that 7 of 10 respondents believe that settlement risks will increase further during the coming 12 months. Bad news for smaller suppliers no doubt, especially in times of hard to get credit. Still from a procurement angle the report offers some really good incentives to get initiatives rolling:

  • 1 in 3 state administrative inefficiency as a reason for late payment
  • 1 in 4 claim disputes regarding goods and services delivered

”Administrative inefficiencies” is of course just another way of saying that there is a need to automate the procure-to-pay process. And the claims dispute angle is as strong an argument internally as it is externally. Supplier want to get paid on time instead of spending time disputing what was ordered and how much it costs.

Posted in Business, eprocurement, procure-to-pay cycle, Procurement | Leave a Comment »

Procurement outsourcing – pooling for whom

May 15, 2009

As procurement outsourcing once again starts to grab headlines; one of the main arguments used by the BPO providers is the benefits of pooling – or to be more specific, the benefits of pooling volumes across company borders using the BPO provider as supplier interface. Unfortunately this reasoning mostly falls flat. Certainly there are categories which benefit from pooling volumes across company borders, but these are few and the largest potential savings are not realized due to increased volumes.

One rationale for pooling – especially in IM&S categories – is assortment standardization. Unfortunately for most buyers, local and regional needs and supply bases often obstruct any real savings in this area. In many cases, companies have a hard enough time to standardize their assortment internally; making pooling across company borders a paper dragon. The time spent on assortment standardization would quickly eat up any cost benefits, even when performed by an outside partner.

Suppliers will always approach business from a value perspective and the buyers need to be able to control that volumes are directed to their chosen suppliers. Contract compliance and committed volumes will make more impact on the bottom line than an increased volume addressed to one enterprise wide supplier.

So if a BPO provider approaches you with a pooling proposition, be aware, pay more attention to the provider’s category expertise, process efficiency and ability to monitor the contract after implementation. Because there areas of the BPO is what is going to really make a difference.

Posted in Procurement Outsourcing | 1 Comment »

Using managed sourcing to tackle project based spend

May 8, 2009

A few weeks ago I listened in on a webinar where The Hackett Group explored some of their recent research relating to lost spend (Hackett: By Controlling Project-Based Indirect Spending Companies Can Net Significant Savings ). Many purchasing focused news feeds have already picked up the press release and just a few days ago both Purchasing.com  and Spend Matters added their comments on the problems of project based spend.

Jason Busch of Spend Matters neatly outlined some practical ways of dealing with this type of spend based on hand on experience:

  • First, if project-based spending categories fall outside of a core area of internal category knowledge, bring in the consultants. In fact, this is a great place to leverage either large-firm or boutique experts to achieve savings.
  • Second, focus on helping procurement serve as a bridge connecting all of the different stakeholders in the project — internal design engineers, third-party architectural/engineering/project management firms, primes, etc.
  • And third, offer to aggregate and take control of raw material and commodity spend on behalf of both internal and outside stakeholders with various management roles in the project.

I would say that this is a typical case for exploring the possibilities of Managed Sourcing since not all of the categories considered in the research is “just” project based. Take for an example Marketing Spend related to Trade Shows and Events; most companies that indulge in this type of activities do it more than once a year – and they typically want the same message to be delivered, so even if there are geographic challenges to be dealt with, the core suppliers of the event are often one and the same (or belonging to a network).

When applying the consultant/managed sourcing approach it is important to ensure that the assignment also includes implementing the contract and supplier follow-up. Often consulting assignments end with the consultant just delivering the contract to be signed – while this may be enough in some cases, for much IM&S spend the real savings are reaped after contract implementation and unless you have a strong e-procurement program in place with strict policies the savings may not materialize if the contract is not monitored and promoted and the supplier relationship not developed over time.

If the purchasing function is overloaded or lack the proper category skills in the sourcing phases, chances are that they will also be lagging when it comes to implementing and monitoring the contract. So if you’re looking into tackling these lost categories – make sure that your partners support you as deep into your purchasing process as necessary.

Posted in Business, eprocurement, Governance, Negotiation, Sourcing, Strategy | 1 Comment »

7 out of 10 CPOs feel the pressure of managing risk

May 6, 2009

Spring finally kicked in with a vengeance in Stockholm this weekend and as always it’s accompanied by a number of sure to tell spring spend management signs.

First, we’ve got the eProcure & Supply – Germany’s largest purchasing and supply management event with approximately 125 exhibitors and an expected attendance of around 3000 purchasing professionals.

Second, and from my perspective a little more interesting is the annual spring unveiling of Aberdeen’s CPO Agenda report; this year subtitled “Smart Strategies for Tough Times”. As always, Andrew Bartolini has done a solid job, yet there are few headline grabbers lodged in the 36 pages.

The one standout metric unveiled relates to 2009’s big spend management topic: supply risk.

“71 % of CPOs believe supply risk is increasing, yet 30% have a formal program in place to manage it.”

Now, that a figure that definitely will be front and center in many vendor presentations as the year rolls-on.

I for one think many more companies actually have a formal risk management program in place, it’s just that it probably did not involve the purchasing department, let alone give purchasing the responsibility to actually own and manage the process.

Posted in Business, Risk Management, Strategy, Supply Chain Management | 2 Comments »

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