Category Archives: sourcing

Who needs another framework?

Standard

Carnegie Mellon – the brand behind the global CMM standard for software providers,- or rather another part of Carnegie Mellon called the ITSQC -has another model available specifically for e-sourcing: the eSCM-SP and eSCM-CL or eSourcing Capability Model for Service Providers and Client Organizations respectively. Wikipedia link here. ITSQC homepage here.

I’ve had a read of the eSCM-SP and am struggling to see what value it adds, certainly in terms of how I understand sourcing and eSourcing. Two things to bear in mind with this model:

  1. The acknowledgements list includes contributers from Satyam, IBM, HP, Accenture, Deloitte etc. No mention of an Ariba or a Freemarkets (let alone anyone else in the space). No long list of CPOs from major organisations. No mention even of any organisations that track and analyse the space. Yet the ITSqc says in its description of the ITSqc research consortium that Our members consist of international industry leaders in eSourcing on both the Client Organization and Service Provider Sides of the relationship, including clients, service providers, advisors or consultants, and the standards community.
  2. I’m dubious about the value of their definition of sourcing vs e-sourcing. You’ll have to download the documents yourself to see the graphic I’m referring to – in the meantime here are the definitions:
  • IT Sourcing contains Applications Development & Management, Desktop Maintenance, Application Service Provider, Data Center Support, Telecommunications Network Support
  • Task & Business Process Outsourcing contains everything from IT Sourcing and also includes Finance & Accounting, Engineering Services, Human Resources, Data Capture, Integration & Analysis, Call Center, Medical/Legal Transcription, Purchasing
  • eSourcing covers IT Sourcing and also Task & Business Process Outsourcing
  • Sourcing contains everything in IT Sourcing and Task & Business Processing Outsourcing and also the likes of Janitorial Services, Lines Services

Clear? Like I said – you’ll need to look at the graphic in their documentation to get a better understanding. In the meantime here is my interpretation:

According to the model the core of sourcing is the sourcing of IT-related services, e.g. Desktop Maintenance, Applications Development, Data Center support.

The next level up in the sourcing definition brings in the sourcing of what has become known as BPO (Business Process Outsourcing), e.g. the sourcing of Accouting services, the sourcing of Legal Transcription services, the sourcing of HR services, putting together call centers.

Both of these levels are covered by the model’s eSourcing definition. The sourcing stuff that is outside of scope of the model is, for example, Janitorial Services and Linen Services.

There is a pattern in all of this: The model defines eSourcing as the stuff you can outsource to a 3rd party offshore provider. It excludes from scope the stuff that needs people onsite, or transportaton of physical goods.

Now – if you look back at the list of the contributors of companies to the definition of the model you’ll see that, surprise surprise, they tend to be the providers of the outsourced services that can be provided offshore (e.g. legal transcription, application development services).

But when someone tells me that they are looking for eSourcing or IT-enabled sourcing, to me that means using IT to help make sourcing better. This can mean anything from using SAP to using Excel templates (or anything in between) and can certainly by used to source Janitorial Services better just as it can be used to source Desktop Maintenance better. The definitions used by the eSCM suggest that they see eSourcing as the procurement of services that can be provided remotely using the internet.

So is the model going to help you decide whether to go Ariba or SAP, or whether to outsource the whole of your sourcing function to China? Probably not. But will the model help you decide whether Accenture or Wipro will be best to run your 400 person call center? Possibly yes.

So tread carefully – and beware that just because people are using the same words doesn’t mean they are talking about the same thing.

While I’m on the subject of the eSCM here are a few more thoughts:

The eSCM shares the same brand as the CMMI that has become very popular with IT service providers over the past decade. But it doesn’t follow that just because the CMMI is a de facto standard in the IT industry that the eSCM will become a standard in the procurement space. In fact CMMI level 5 certification is not in itself a guarantee of a stable, quality provider: Satyam (coincidentally one of the contributors to the eSCM) are CMMI level 5 certified (check their awards page and scroll down to 2005-2006 for CMMI and pre-2001 for SEI-CMM, the predecessor of CMMI) and yet its leaders are at the centre of a fraud probe.

As far as 5-level maturity models go in the sourcing space I am quite taken with Hackett’s one. Incidentally my post on the subject is one of the most popular pages on this blog.

Till next time.

Unite Members to Protest Against Council Tendering

Standard

See here.

Unite, Scotland’s largest trade union, will hold a demonstration [Wednesday, 4th June] outside South Lanarkshire Council offices in protest at the blind bidding process for the care and support services for adults with learning disabilities.

South Lanarkshire Council set up an e-auction for firms to tender for providing care at home by submitting charges by the hour.

Thus begins the press release. Looks like an e-auction is the root cause of the antipathy.

Well – look again, further down.

Bidders were given no information in the tender document on the current terms and conditions of the employees who would be transferred.

In other words: the union’s issue seems to be with the quality (or lack) of information that was given out to bidders rather than with the bidding process itself. Once again – to run a good sourcing process (whether it involves an e-auction or not) you still need to be clear with suppliers. And make sure they have full access to the information they need to place sensible bids.

 

 

Procurement Blogs I’m reading

Standard

Here are the procurement blogs I have on my current reading list

These are without a doubt the top 2 blogs in the space. Top 2 in terms of quality and quantity. Read these blogs first; anything of burning significance will end up on one of these two sooner or later.

Blogs allied to a particular vendor/service provider.

General supply chain commentary

Other specialist blogs (dare I call them niche?)

Ones that I enjoyed but seem to have tailed off in recent months. Watch them if they come back

The various magazines also have their own blogs/RSS feeds. I distinguish between a blog which by its nature is more immediate and informal and an RSS feed of magazine articles. The blogs in my list right now are:

From what I can tell S&DC Exec and CPO Agenda don’t (yet) offer blogs.
   

 

Greener sourcing – a personal tale

Standard

Last year I moved out of London and bought an electric scooter from these guys for driving the 3.5 miles between my new house and the train station.

The story so far:
1. When it first arrived it didn’t work: the batteries weren’t functional. It took a good two weeks to get it workable.
2. Finding an insurer was a mission. There’s apparently only one in the UK. They aren’t cheap.
3. Stuff just fell off the scooter. Nothing major (yet). But still I haven’t got working replacements.
4. One of the options I bought they never even delivered. Kept fobbing me off for best part of 9 months (and I didn’t have time to chase every day).
5. It was vandalised once (someone yanked an important cable out) – and the supplier  expected me to be able to fix it. Heck, I don’t even own a soldering iron, let alone feel confident digging around in the bowels of the scooter.
6. Kids have sniggered at the man on the scooter … Until they realise it’s electric whereupon their sniggers are replaced by wows.
7. Fellow commuters are impressed by the electric scooter. Then they overtake me on the way home.
8. It is fun to drive a nearly silent machine. But it would be nice if it would go faster.
9. It’s nice not to need to stop and fill up with petrol (though I have no idea whether the electricity I use to charge it is cleaner, greener and/or cheaper than petrol would be).

It’s clear that this bike is still bleeding edge. It’s still the domain of enthusiast hackers. Definitely not ready for consumer prime time.

Parallels for professional buyers:

Beware of getting too far ahead of yourselves on green initiatives. Unless you have the time, inclination and executive support get too far ahead of the pack and you could struggle (1,2,3,4,5).

There is a good marketing angle (6,7).

And, heck, it might even make you feel better (8,9).

To be honest: When I look at my buying decisions at work I haven’t gone out of my way to buy greener at work. The only thing I can recall doing recently is ticking the box marked “plant a tree for every server” on a hosting deal.

 

How many suppliers should I have in a reverse auction?

Standard

A few years back we did some work with Oxford University. They were interested in how procurement auctions fitted into the bigger auction picture. We were interested in finding out how in line with auction theory we were. I was looking through my old material from that study and I want to share a neat graph from that work that models how expected savings rise the more suppliers you include in an auction.

 How increasing suppliers increases savings

If you assume that all suppliers in a marketplace have a price evenly distributed between a low price and a high price then, on average, the savings you would get increase as shown in the graphic above. This helps emphasise that 4 bidders is a good number for a reverse English auction, as I have often said. But one thing to clarify: this is a model – you can do better than the model by ensuring that when you select potential suppliers that you are selecting suppliers who have a lower price rather than selecting suppliers at random from the marketplace.

Procurement Solutions Expo

Standard

At Procurement Solutions, in between presentations.

Some notes:

1. It’s a bewildering exhibition. From carpet tiles to legal services via tablet PCs. Too broad I think.

2. The TradingPartners blue bouncy balls are a big hit. With everyone picking them up for their kids/grandkids, I am predicting a surge in demand for TradingPartners services in about 30 years.

3. I was reading in Public Sector Procurement magazine about Zanzibar (the UK Public Sector eProcurement system) that Zanzibar has recently added RFQ processes. Before this, everything I have seen from the OGCbs has kept “procurement” separate from “sourcing”. Looks like this move by Zanzibar challenges that distinction. It will be interesting to see if ProcServe (the company behind Zanzibar) make a move on the eSourcing framework when it comes up for renewal.

Where next has changed.

Standard

Don’t adjust your browser settings. You’re in the right place. This is still Alan Buxton’s blog. But with a new look and focus.

(Note: The old URL and old Feeds, whether from WordPress or Feedburner, will continue to work)

I started this blog with the vague intention of blogging about eAuctions in particular and Business Technology in general. But the more I write the more I want to keep these areas distinct. So much so that I’ve now decided to start another blog, Golden Pebbles to get tech stuff off my chest.

In parallel, over the last two years I’ve realised that the distinction between eAuctions and eSourcing is more arbitrary and more complex than I originally thought. I’ll try to explain:

The vast majority of the questions/issues/challenges I hear about reverse auctions are not about reverse auctions at all. For example:

  • Auctions aren’t able to handle quality – they just consider price
  • Auctions lead to suppliers selling at unsustainable prices, which is bad for the supply market
  • Auctions lead to poor decisions because they try to compare suppliers bidding apples with suppliers bidding pears
  • etc

But hang on - auctions are a tool. Used by buyers. Some buyers are keen to hammer suppliers on price. They may or may not use auctions to achieve this. For sure they can use auctions to hammer suppliers. But there are also plenty other ways to hammer suppliers. Check the recent “flaming lamborghini” stories about some of the negotiation tactics used by retailers. So change the word “Auctions” in the bullet points above with “Some buyers” and you have a more accurate picture of the reality.

Additionally, from the reverse auctions I’ve seen, it’s clear that the better ones need a lot of up front work to deliver. What you see on auction day is just the cherry on the cake. Before the auction you need to select suppliers, agree specifications, make sure everyone is clear on what is being contracted etc etc. In other words all the same stuff buyers should be doing anyway when they are sourcing. Whether they do an auction or not.

So my epiphany is that auctions are just sourcing. On one level it’s abitrary where you put the line between them because really an auction is not a different way of sourcing. An auction is just the best way of harnessing competition in your sourcing projects.

But running a good auction is about more than just turning on a piece of software. There is a lot of thought and hard work to do up front to give you the biggest chance of success. Again this should be no surprise. If you send out RFPs then the challenge is more to do with putting together sensible questions in the RFP. The challenge is not really about which piece of software is used to issue the RFP.

So while I remain a staunch advocate of auctions (and use them myself when I can) I find myself taking a broader view of auctions & sourcing than perhaps I did 2 years ago. And I figured it’s time to grow up a bit and get a proper domain name. My trials and tribulations with domain names are a story for another day but I finally settled on www.esourcingplace.com. A place for sourcing. Still focussed on auctions because it’s what I’m closest too. But I’ll also drop in some more general sourcing points now and again.

 

What I learned from the conference season

Standard

An aside: Is conference “season” a North American thing? Or is a global phenomenon. I will readily admit to not being a conference junky. I only tend to go to conferences at which TradingPartners is exhibiting.

I’ve only been to one conference this “season” so far: eWorld Purchasing & Supply in Feb. I will be at Procurement Solutions next week, again speaking about eAuctions.

So what did I learn from eWorld Purchasing & Supply?

Briefly:

1. Hackett’s keynote fascinated me. It made the case that procurement as we know it (strategic sourcing, supply chain management etc) can only add so much value to the organisation. In order to advance beyond this then procurement will need to re-invent itself.

2. There seems to be a renaissance in eSourcing providers out there these days. I think we were in double digit identikit eSourcing software vendors exhibiting - many of whom I had never heard of before. How can vendors stand out in this kind of marketplace? Focus on key competencies.

3. But the real topic of conversation amongst the delegates, and the real reason most went, was to learn something about “green” and “sustainability”. And many felt let down by the advice that “you can be green and save money by using less packaging”. There is obviously a large gap in the market here. This is encouraging. But at the same time it’s worrying because the pent-up demand for green solutions of some shape or form is going to be an irresistible tempation for hucksters. Buyer of green solutions, beware. As ever.

The poor, misunderstood reverse auction

Standard

Reverse auctions as we we know them today started in the mid 90s. So now seems about the right time for them to be going through their poor, misunderstood phase.

Tim Cummins writes a great analysis of how buyers reap what they sow: screw your suppliers when times are good and you can’t expect your suppliers to queue up and looking for win-win opportunities when the markets move against you.

Two years ago, IACCM was warning its members that the change was coming and that suppliers were shifting their loyalties – for example, they were investing their marketing dollars in emerging markets, rather than their traditional (disloyal) customers.. We alerted buyers to the fact that they would pay a price for alienating the supply base. But the good times rolled on – commoditization, reverse auctions, confrontational contract terms – these were just some of the ways that buyers showed their lack of loyalty to the traditional supply base in their haste to grab low prices and exert their dominance.

A timely warning, and nothing contentious, you might think. But now read the paragraph again and see how “reverse auction” is equated with “showing disloyalty to your suppliers”.

This is to put the cart before the horse. It’s (short-sighted) buyers who screw suppliers, not reverse auctions. And don’t forget that short-sighted buyers are able to screw suppliers with all kinds of methods: you certainly don’t need an auction to demonstrate disloyalty to your suppliers. You can screw a supplier perfectly well using certain contract clauses – but that is not to say that contracts are a bad idea.

From my own experience: I recently awarded a contract for software development services via a reverse auction. I have a good relationship with both the current and previous supplier. I believe this is because I was open and up front during the whole process (including explaining to the incumbent why I was going to market). The reverse auction in fact helped the decision making process be more transparent. And the contract was far easier to implement than would have been the case without an auction.

In that example the reverse auction helped both with achieving the right price and with helping build the supplier relationship.

 

eAuctions in the news

Standard

Always good to see some  (positive) coverage of eAuctions in the trade press. Here’s an article from Purchasing.com about BlueBird’s use of eAuctions. For non-US readers, Blue Bird make those iconic yellow N. American school buses.

Blue Bird procurement uses an e-auction tool to help consolidate the company’s supply base and transform purchasing.

Whose e-Auction tool? TradingPartners’, of course!

 

But you have to read the article carefully to get the full story. On the one hand Purchasing says

In the year since he assumed his current post with the bus manufacturing company, Marshall has used an e-auction tool of Trading Partners in Chicago to negotiate pricing with suppliers of safety supplies, crib supplies, corrugated packaging and office supplies. While the lowest bidder doesn’t necessarily get the contract—quality and delivery are equally important criteria, he says—the tool has helped to reduce costs in some spend categories by 30%.

Read this paragraph and you’d get the impression that Blue Bird bought a license to use a piece of software to run their auctions on.

 

But later on Purchasing says

Marshall, who has more than 30 years experience working in purchasing in the auto industry, views Trading Partners, which has conducted more than 20 e-auction events for Blue Bird, as an extension of his purchasing team and sought its expertise when analyzing the company’s spending. Blue Bird’s database is huge—there are approximately 30,000 part numbers on an average bus.

In other words – it’s the service that Blue Bird has bought into, not just the software.

 

This is an important distinction.

 

If you buy software for your e-auctions (which may well be pretty cheap), then unless you have some pretty dedicated people on board, you will struggle to achieve the adoption levels you hoped for. Strategic Sourcing (and, by extension, Auctions) is a very different beast to processing purchase orders. Strategic Sourcing is much more of a “Barely Repeatable Process”, to use Sig’s phrase than the kinds of “Easily Repeatable Process” that ERP-biased software houses build their software around.

 

So, until some BRP-style software for eAuctions turns up you should consider carefully whether what you really need is the software, or whether what you really need are the results. If it’s results you are after then think seriously about buying the service rather than just buying the software.