In the previous installment I discussed the revolution and changes that e-catalogues have under gone in the last few years as well as the benefits and advantages of Hosted Catalogues. In this installment, I would like to discuss Punch Out Catalogues or Round Trips as they’re called.
With Punch-Out Catalogues, the data and catalogue administration is managed by the supplier and the level of buyer customisation is usually correlated to the buyers influence and the deal they can work.
Lack of Control
Supplier catalogues can offer more functionality, but one of the greatest challenges is the lack of control over what is presented and the UI of that catalogue. Navigating to a Punch Out catalogue is the same for all suppliers, but once you are there, you enter the supplier site and must know how to navigate that particular catalogue to find what you want.
With both Hosted and Punch Outs, the buyer accesses the catalogues through their own purchasing system, selects the item that they wish to purchase and essentially “brings back” all the attributes necessary to fill out a PR or PO. These documents are then routed internally for spend approval and submitted back to the supplier for purchase. It is important to note that catalogues do not need to be associated with an e-marketplace and can still be effective by using mail or fax communications.
Yet another advantage of using e-catalogues is in the business rules related to PR/PO approval. These rules can be automated and the threshold for PR to PO to supplier release can be streamlined. It should not be necessary to apply the same approval scrutiny with catalogue generated PR’s vs. off catalogue spend, because catalogue items have already been vetted and price validated. Following the practice of ‘prescriptive bureaucracy’, catalogues should make it very easy to do the right thing and make it increasingly painful to go against desired policy.
Dynamic Interface
Interfacing with catalogues has also become increasingly dynamic. The features and functionality found in Google and Amazon are now available in many modern catalogue solutions. As in Google, items can be searched for by product groups, attribute, or related item. The system can provide hints or reminders and like items can be compared.
- Like Amazon, shopping carts can be created, saved, shared and reused.
- The information from which to select a product or service is also enhanced.
- Images can be displayed and even flash demos viewed.
- Attachments can be made available for download including PDF spec sheets, MSDS and more.
In reality, the attributes available are almost unlimited, next we may even see carbon contribution and other sustainability information included for download and processing. e-Catalogues can also be used to requisition from internal warehouses and don’t necessarily require a supplier interface.
Interesting Future
The future is even more interesting. New advances using federated search protocols and web crawling algorithms are converting supplier content into a preferred buyer formats almost automatically. The criticism around UI mentioned above with Punch Out catalogues is solved. New technology will import supplier data and convert that to buyer information, which maintains the same user experience for all catalogues, regardless of the format in which the supplier presents it. The same result can be achieved today, but requires an additional service from the catalogue or e-business supplier.
Additional advances are also lowering the threshold for real time information exchange. We have all heard about the linkage between supplier inventory levels and up to date shipping information by large multi-billion dollar organisations and their suppliers; these systems were quite complex and expensive, putting them out of reach for most organizations.
Now new catalogue tools can put this information in the hands of a much wider variety of companies without the expense or need to hard wire your systems directly to each and every supplier.
Today’s catalogues are now even better at solving the fundamental problem of directing our buyers to approved products. They are exponentially easier to use and content rich as well as cost effective for most organizations and are accessible through most any purchasing system. With e-catalogues, Procurement can finally begin to feel comfortable that the savings we work so hard to negotiate will finally hit the bottom line.
Tags: hosted e-catalogues
In the previous post, my esteemed colleague Chris Haydon highlighted the emergence of the e-catalogue as a player in today’s global marketplace. I would like to go into a little more detail and explain why the e-catalogue revolution can and will impact your company’s bottom line.
One of the realisations of the GFC has been how little control companies have over what they spend. Even though procurement may have done the work and set the agreement, one of our greatest criticisms, is that the deals we do don’t hit the bottom line. Our savings or improvement claims shows up in finance at only a fraction.
Not Buying What Is Negotiated
Why is this? Well to oversimplify, it’s because buyers are not purchasing what has been negotiated.
There are usually multiple reasons for this, but one of the greatest comes down to access to information and ease of making that purchase. E-catalogues have been around for some time, but the modern equivalent as Chris mentioned, they are more flexible, easier to use and implement, content rich and cheaper than ever before.
E-catalogues can solve many of the problems that occur between the time the deal is signed and time the buyer needs a good or service. They can:
- Make it easy to find and purchase an approved product or service
- Dramatically reduce cycle time and hopefully any down time
- Ensure negotiated T’s and C’s are used every time
- Cuts invoice mismatch, lowers Accounts Payable Error rate and lowers processing costs
- Will work with almost any purchasing system, so long as they can speak cXML or OCI
Electronic catalogues have undergone a substantial revolution over the past decade and are no longer relegated to simple approved product lists, sitting in Excel or a dusty corner of the ERP. Then, all the information had to be manually collected and maintained and the number of attributes was limited to little more than a vendor part, company part number, a price and a brief item description.
The information frequently went out of date and the search capacity was limited with the end user having trouble finding what they wanted to purchase. They have always been a good idea, but in the past were considered just a bit too hard.
Nothing Like Their Predecessors
Even though it has been just a few short years, 2010 catalogue solutions are nothing like their predecessors. Today’s catalogues solutions come in two basic forms, Hosted and Punch Out.
Hosted Catalogues are stored by a third-party catalogue service provider.
- They are completely secure and dedicated to a single buyer or buyer group.
- They allow the buyer to control the User Interface (UI) and all the information that is presented, so that it looks the same for all items, regardless of the supplier.
- They negate the need for buyers to maintain their own master data.
- They can be updated by the buyer, the supplier or the catalogue solution provider.
- Where a buyer chooses, suppliers can update information within the catalogue and the buyer will receive a message to approve the changes.
In this way, the supplier keeps the information current and the buyer need only approve the changes. Should the buyer wish, even the approvals can be automated with rules maintained within the buyer’s ERP, or within the hosted catalogues themselves. It may not be necessary to approve an item description, but may be desirable to approve a new product add or price increase.
The complexity of the business rules can also now reflect the creativity of modern procurement. Price increase changes of less than 2%…auto approve. Price changes of 3%, route for validation. Change in product specification, route to John in engineering for notification. Discontinuation notice, route to Tammy in Legal…etc.
In the next installment, I will discuss Punch Out Catalogues also known as Round Trips.
Tags: catalogue solution, e-catalogues, e-procurement, hosted e-catalogues, Procurement, Punch Out e-catalogues
As we enter into a new year following a long global recession that appears to be ebbing, many companies are beginning to position themselves for growth through selective technology investments.
One of the biggest upticks has been creating more buyer choice by employing hosted catalogues. In past this wasn’t always the case because interfaces weren’t particularly user-friendly and e-catalogues suffered from non-standardized data, which, in turn, meant low supplier adoption, limited product choices and selections.
So what’s changed?
- Firstly, search technology is much, much better now and end users are able to quickly find what they want with faster and more productive searches. Buyers can simplify searches and shop within a multi-supplier catalogue of complex goods and services.
- Secondly and maybe the most important is that buyers have less religion now thanks to new UNSPSC (Universal Standard Products and Services Classification) standards. With better clarification of standards, hosted catalogue solutions allow buyers to focus on a category management approach instead of worrying about constantly recreating and updating catalogue content.
- Thirdly, hosted e-catalogue systems can now be seamlessly integrated with financial and ERP systems, which not only increase efficiency and better utilize resources (reducing re-to-order cycle times from 8 days to less than 1, for example) but reduce costs and improve margins. In other words, it allows companies to get to new categories of spend because of enhanced visibility into patterns and history.
After hitting bottom for the past year, many forward-thinking companies are giving careful consideration to how they use their resources and control maverick spend. That’s what makes e-catalogues an attractive option. Now they can easily scale their business whether they need 200 catalogues or 2000 with accurate and up-to-date product data everywhere along the complete delivery chain.
As the Holidays rapidly approach and the world economy appears to be coming out of the recession, here are some lunch links of interest for you:
Procurement Could Pay the Price for Lack of SRM
The day of reckoning could be close at hand for procurement organisations at some of the world’s largest companies. That’s the warning from John Henke, president of US-based consultancy Planning Perspectives, who believes that those companies that failed to develop sustainable and mutually beneficial relationships with their suppliers during the tough times, could find themselves on the receiving end as the global economy recovers.
Senior execs expect US VAT within five years
More than half of senior US business executives expect some type of federal value-added tax (VAT) to be introduced within five years. Acknowledging the need for additional revenue to help address the “growing chasm” between the country’s existing revenue flows and its built-in expenditure obligations, 57 per cent of the executives in a new Tax Governance Institute (TGI) survey said they believe VAT legislation will be introduced in the United States within five years, while 18 per cent expect it within 10 years.
15 Smart Guidelines from Little Black Book of Outsourcing Authors
There are many guidelines for how to minimize risks from global sourcing, but maybe none as practical as those published earlier this year by Douglass Brown and Scott Wilson over at The Black Book of Outsourcing.
They offer their recommendations for minimizing supply chain risks from offshore outsourcing arrangements. While they have a bit of an IT or business-process outsourcing slant, we think they are very appropriate for general product outsourcing as well:
I have spent a good portion of my career managing and leading various types of integration projects and it’s interesting to note that almost all of the challenges are similar and common.
Those hurdles which almost always arise – content mapping, knowledge, and most importantly coordination – are the byproducts of customization. Few of the market places currently offer content mapping and companies need to be mindful of hidden customization costs. You may get one cost and then discover that the time, cost and resources consumed are much higher than the original estimate.
I’ve noticed in various technical team presentations over and over when it comes to integrating content maps into their solution. I think if you look at it as a two-step process, you can determine how to save more time and costs.
- Standardization – This would blindly copy or map all the fields from one format to other and this covers major chunk of content mapping.
- Custom Integration – This will help to handle custom fields or to integrate custom piece.
The truth is by having solutions or maps that can handle standard formats from a basic ERP system means the trading partner doesn’t need to re-invent the wheel. So when it comes time for customization, there’s no need to be spending more money on doing content mapping again and again.
What’s nice about this is that instead of every trading partner forking over large chunks of money, the use of standard maps reduces the time and energy spent on knowledge, coordination and content mapping and that means integrating faster and more efficiently.
In our last installment, I wrote about the issues and reactions that can arise between contract owners and contractors when it comes to managing cost-plus contracts.
Most, if not all of these problems can be solved through better information sharing and process transparency from both sides. What seems to be missing in most situations is a measurement and reporting layer to give comfort to procurement and the ability for contractors to demonstrate that they are able to purchase efficiently.
Smart RFQ Tools
One successful strategy addresses this challenge through technology and the use of smart RFQ tools. These are not full-blown Strategic Sourcing tendering engines, but simple, price based yes/no question quote applications. The process is simple and straightforward.
- The buyer sponsors a sourcing tool that the contractor is required to use for all spend over a set dollar figure or for a specific set of goods or sub-contracted services.
- The Buyer’s basic terms and conditions are presented as a precursor for doing business; acceptance of which is a required to bidding on the event.
- Once the T’s and C’s are accepted, the supplier then bids and the contractor chooses the product or service − as they would in any standard e-RFQ.
- The difference is that there is now a record, which can be accessed by the buyer and reported on by the contractor.
For these types of services, web-based tools work the best. They don’t require access behind each other’s firewall and allow the buyer to receive regular updates or audit the events on an ad-hoc basis. If the buyer uses a sourcing tool for their own RFQ’s, it’s that much better. The contractors will add to their knowledge library and facilitate price arbitrage across multiple sub-contractors or for purchasing agents within their own business.
Low Cost – Big Savings
Who pays for the tool can be a discussion point. If it is a new contract, suppliers can be asked to build the price into their bid, or if the contract is a mid-term, the buyer may wish to cover the cost. Either way, the cost of running e-RFQ’s through a web-based application is quite low. And better yet, there is overwhelming evidence that e-tools generate large savings multiples over their costs to operate.
Cost-improvement initiatives with suppliers or sub-contractors will always work better if there is some improvement share. Consider sharing some of the savings generated through use of the tool. This will increase the adoption rate and show you are serious about helping them improve their business.
Modern supply chain techniques encourage buyers to delve into their supplier’s value chains. It is procurement’s responsibility to assist suppliers in reducing their operating costs to our businesses, not just beat them up on price. Sponsored access to e-sourcing tools is one such way that buyers can assist their sub-contractors in achieving better prices, without having to take control of the process.
Here in the antipodes, contract manufacturing and outsourced service provision relies heavily on “cost-plus” models.
With these types of arrangements, the customer (Contract Owner) outsources a section of their need to a third-party service provider (Contractor), who then performs the work and submits their costs, plus a pre-agreed margin. These arrangements are common in government, contract mining and infrastructure management (roads, rail, ports, water, energy, etc.).
Administering cost-plus contracts is relatively straight forward. That is why they are attractive; one invoice, one payment. However, they are rarely managed well by either side and the contractor churn rate is often unnecessarily high.
The More “Cost” – The More “Plus”
The obvious problem for buyers (Contract Owners) is the more “cost,” the more “plus.” So, in many cases, these models provide a negative incentive for Contractors to improve their procurement activities and become more cost-efficient. Contract owners become frustrated over time because they can’t see what is happening, believe they are being charged too much and then become dissatisfied with the contractor’s performance. They react by attempting to control to the situation, often by adding administrative complexity or pulling back a portion of what they have outsourced.
The most common reactions include:
- In-sourcing the purchasing of materials. This adds unnecessary work to the Contract Owner’s procurement department, complicates the communication layer which can then be a source of finge- pointing and contract delays. The Contractor loses the pool from which to add a plus which can cause them to cut corners and deliver a poorer service overall.
- Pre-set the price for sub-components, such as building materials, of the cost-plus contract. When this occurs, the Contractors can react by building in a buffer for uncertainty, thereby contributing to higher costs than are necessary. Contractor buffers are usually the largest when the contract contains some form of maintenance component. Things don’t usually break on schedule so it is difficult to forecast demand when the problem has not occurred yet.
- Dictate a product source or specific serialised component. This is a strategic sourcing no-no that we hate facing from our internal customers. However, it is surprising the number of times we seek to do it to our Contractors. The contract should be open to purchasing the products and fittings that the Contractors suggest. Don’t mandate things that typically are not that important.
- Re-tender the contract before it expires. Tendering has costs for both sides; they include the cost to develop, submit, evaluate and then the cost to change if the incumbent is unsuccessful in retaining the contract.
The Contractor’s Best Interest?
None of the above is desirable and it is important for procurement professionals to remember that it is not in a Contractor’s best interests to take advantage of ‘the plus.’ Over the long term, they are likely to lose the extra margin one way or another either by losing control and flexibility or by losing the contract.
Most, if not all of these problems can be solved through better information sharing and process transparency from both sides. We’ll explore those solutions in Part 2.
European businesses have been pursuing paperless invoicing for years to increase efficiencies, reduce errors as well as the data that must be interpreted and re-keyed. And yet the growth remains somewhat constrained as countries struggle with the implementation and nuances of compliance.
There’s no question of the potential benefit of paperless invoices for business, but how it’s applied is vital to achieving maximum savings.
Reverse Purchase-to-Pay
I like to think of it as a “reverse” Purchase to Pay program that basically creates a closed loop process by reducing the variation upstream with your suppliers.
How do you accomplish this? By collaborating with your varied suppliers to create a streamlined, standardized automated system for everyone – one that places a priority on matching orders to a goods receipt.
To understand it better I’ll use an example. If you ordered five widgets at $10 from your supplier and he sends you an invoice for six widgets for $12, in an automated system that hasn’t taken this reverse purchase-to-pay approach, it’s not going to match and won’t load Thus, it becomes an exception and the payment cycle slows down.
Now imagine you’re a large company who processes 50,000 invoices annually. If only 3% are in error, that’s 1,500 incorrect invoices. And that is the problem. Computers can’t resolve issue arising from an invoice in error. Only people can do that. If it takes 20 minutes to resolve one issue, that’s almost 62 days worth of time during the year just to resolve mistakes.
What happens if you can eliminate or even reduce that number to 1%? Then the impact to your business is 20 days or a savings of 42 days.
Collaboration is the Key
That’s been the one distinct feature I’ve noticed when it comes to automating invoice and P.O. systems. Those companies who collaborate and work to create standardized easy-to-use process with their suppliers take advantage of the full suite of e-invoicing services and create the closed loop process that virtually eliminates the exceptions and errors.
And it works on both ends too. Suppliers can monitor the progression of POs and invoices throughout the purchase-to-pay process, eliminating uncertainty with respect to status and required actions on their part. And to them, the most important goal: They can receive payments with even greater speed and reliability — improving trust and enhancing valued relationships.
The company that employs a Reverse Purchase to Pay strategy has a much better chance of reducing the administrative processing, time and expense, as well as minimizing inquiries, errors and cycle times, the need for human intervention, most notably for the matching and reconciliation of POs, and invoices. This is turn allows personnel to focus exclusively on the highest-priority, business-critical tasks.
I would say that’s a win-win for everyone.
Tags: Purchase to Pay
Research carried out by Procurement Leaders in April this year into the number of procurement professionals that command a board seat in the world’s largest companies painted a picture of our profession growing in stature and influence said PL’s David Rae.
According to their research, the number of Euro-500 companies which have procurement at board level increased by 32% on 2007. And, despite this stellar rise, Europe still lags behind the US where 14.4% of the largest 500 companies have procurement represented at board level, compared to 11.6% in Europe.
Former Bush Procurement Official Convicted
While former President George W. Bush has said numerous times that’s it’s good to be out of the spotlight, his former administration aides keep dragging the 43rd President back into the spotlight — and not in a good way.
Former General Services Administration (GSA) Chief of Staff David H. Safavian, the most senior procurement official in Bush’s administration, was sentenced to one year in prison for obstruction of justice and making false statements in connection with the investigation into the activities of former Washington lobbyist Jack Abramoff.
Get Ready for the Export Boom
Spend Matters outstanding blogger Jason Busch opines that the fall of the dollar and how US deficit spending might, ironically, become a savior of the overall US economy if our loose monetary policy and free spending ways lead to a continued slide of the currency, making exports more attractive. Jason offers a few quick tips on how companies should consider gearing up from a Spend Management perspective for increasing export volumes.
Are data extraction tools the next big thing? Is Oprah having an effect on your supply chain. This and more in today’s lunch links:
Data Extraction Tools: Next Big Thing?
Spend analysis company Rosslyn Analytics is the latest company to have dusted down its crystal ball to produce five predictions for 2010.
It believes that data extraction tools will surge in popularity as companies look to leverage their existing investments in ERP systems. This is a solid argument – there are many organisations that have already pulled out of expensive ERP consolidation projects, so the ability to extract information from a sea of meaningless data cost effectively is a compelling argument.
Supply Chain Failure ‘Key Risk’ for Global Retail Industry
The current economic slowdown, damage to reputation and disruption or supply chain failure are the top three risks facing global firms, new research reveals.
Aon Analytics’ 2009 US Retail Industry Report noted that preparedness for risk in the retail industry was demonstrated by having in place a plan to address the risk or having undertaken a formal review of that risk.
The “Oprah” Effect – A Negative for Supply Chains?
While an Oprah endorsement can delight a CEO and marketer, it can agonize a supply chain manager who needs to ensure that the product is available for purchase when a customer wants it. Even the largest supply chain can be strained under an Oprah endorsement, and even when it has early warning. For example, Amazon was stocked out of the Kindle within a week of Oprah’s October 24 endorsement of the Kindle and was subsequently out of stock for most of the 2008 holiday season.
Is a Post Tender Negotiation Acceptable?
“I have seen a key project fall down because sealed bid tenders did not produce savings anticipated (and promised up the chain) and so the buyer tried to negotiate with the winning bidder – whilst it reduced the cost of the project it caused service levels to be compromised and opened leeway into the specification.”