Posts Tagged ‘Category Management’

Everything has Big Data, Big Data Has everything

February 24, 2016

During the course of 2015 and on into 16 I have been studying, researching as well as working. My study, research has been on various topics from IoT, Sustainability, Environment, Food Security, Complex Decision making, Supply Chain Management, Cyber Security, In memory Computing, Statistics to name but a few(FutureLearn). Work wise I have been a Consultant for Enterprises Solutions(Trobexis), Enterprise Asset Management, Enterprise Content Management (OpenText) in a variety of Industries, which include, Oil & Gas, Utilities, Construction, Maintenance even Banking. Here is the thing though, what do all these study, research and work all have in common? Simple BIG DATA!!!! That’s getting bigger everyday.

T1

If you want to be successful with big data, you need to begin by thinking about solving problems in new ways. Many of the previous limitations placed on problem-solving techniques were due to lack of data, limitations on storage or computing power, or high costs. The technology of big data is shattering some of the old concepts of what can’t be done and opening new possibilities for innovation across many industries (SAP S/4 HANA.)

The new reality is that an enormous amount of data is generated every day that may have some relevance to your business, if you can only tap into it. Most likely, you have invested lots of resources to manage and analyse the structured data that you need to understand your customers, manage your operations, and meet your financial obligations. However, today you find huge growth in a very different type of data. The type of information you get from social media, news or stock market data feeds, and log files, and spatial data from sensors, medical-device data, or GPS data, is constantly in motion.

These newer sources of data can add new insight to some very challenging questions because of the immediacy of the knowledge. Streaming data, data in motion, provides a way to understand an event at the moment it occurs.

Working with TROBEXIS over the last 12 months we have built a model which has big data constantly in motion, which is both structured and unstructured, coming from a variety of sources, in a variety of formats. The data is constantly in motion and events occur when you least expect them, giving rise to exceptions and causing problems to occur in the best laid plans. Some of the questions that we have found ourselves asking are:

– Do we have the right people, with the right skills, in the right place, at the right time, in the right phase of the project, with the right materials, for the right service, at the right cost, in the right numbers, against the right contract, for the right client?

– What if we do this job, in a different phase of the project, using a different contractor, with a different set of numbers, an alternative process, with a higher cost?

– Are we buying the right materials, through the right channel, at the right cost using the right process?

Data in Motion – a real world view.

To complete a credit card transaction, finalise a stock market transaction, or send an e-mail, data needs to be transported from one location to another. Data is at rest when it is stored in a database in your data center or in the cloud. In contrast, data is in motion when it is in transit from one resting location to another.

Companies that must process large amounts of data in near real time to gain business insights are likely orchestrating data while it is in motion. You need data in motion if you must react quickly to the current state of the data.

Data in motion and large volumes of data go hand in hand. Many real-world examples of continuous streams of large volumes of data are in use today:

✓ Sensors are connected to highly sensitive production equipment to monitor performance and alert technicians of any deviations from expected performance. The recorded data is continuously in motion to ensure that technicians receive information about potential faults with enough lead time to make a correction to the equipment and avoid potential harm to plant or process.

✓ Telecommunications equipment is used to monitor large volumes of communications data to ensure that service levels meet customer expectations.

✓ Point-of-sale data is analysed as it is created to try to influence customer decision making. Data is processed and analysed at the point of engagement, maybe in combination with location data or social media data.

✓ Messages, including details about financial payments or stock trades, are constantly exchanged between financial organisations. To ensure the security of these messages, standard protocols such as Advanced Message Queuing Protocol (AMQP) or IBM’s MQSeries are often used. Both of these messaging approaches embed security services within their frameworks.

✓ Collecting information from sensors in a security-sensitive area so that an organisation can differentiate between the movement of a harmless animal and a car moving rapidly toward a facility.

✓ Medical devices can provide huge amounts of detailed data about different aspects of a patient’s condition and match those results against critical conditions or other abnormal indicators.

The value of streaming data

Data in motion, often in the form of streaming data, is becoming increasingly important to companies needing to make decisions when speed is a critical factor. If you need to react quickly to a situation, having the capability to analyse data in real time may mean the difference between either being able to react to change an outcome or to prevent a poor result. The challenge with streaming data is to extract useful information as it is created and transported before it comes to a resting location. Streaming data can be of great value to your business if you can take advantage of that data when it is created or when it arrives at your business.

You need to process and analyse the streaming data in real time so that you can react to the current state of the data while in motion and before it is stored. You need to have some knowledge of the context of this data and how it relates to historical performance. Also you need to be able to integrate this information with traditional operational data. The key issue to remember is that you need to have a clear understanding of the nature of that streaming data and what results you are looking for. For example, if your company is a manufacturer, it will be important to use the data coming from sensors to monitor the purity of chemicals being mixed in the production process. This is a concrete reason to leverage the streaming data. However, in other situations, it may be possible to capture a lot of data, but no overriding business requirement exists. In other words, just because you can stream data doesn’t mean that you always should.

How can you use data to change your business? In the following use cases, look at how organisations in several industries are finding ways to gain value from data in motion. In some situations, these companies are able to take data they already have and begin to use it more effectively. In other situations, they are collecting data that they were not able to collect before. Sometimes organisations can collect much more of the data that they had been only collecting snapshots of in the past. These organisations are using streaming data to improve outcomes for customers, patients, city residents, or perhaps for mankind. Businesses are using streaming data to influence customer decision making at the point of sale.

Use Cases

2015 became the age of the data driven organisation. Thanks to the rise of easier collection mechanisms and the ubiquity of available data sources, savvy organisations are now implementing data in new and novel ways that address real business issues. Here are just a few worth a mention: –

Objective: Operational Analysis; Efficiency Enhancement & Risk Elimination

Organization: Siemens

Article title: Using Big Data and Analytics to Design a Successful Future

Overview: Siemens Mobility Data Services division is capitalising on big data and analytics to ensure transportation around the globe is fast, reliable and more energy efficient. Innovation that includes predicting failures, ensuring a seamless supply chain for parts to reduce or eliminate downtime and use weather data to differentiate problems in the same train model in different regions.

URL: http://blogs.teradata.com/customers/siemens-using-big-data-analyticsdesign-successful-future/

Objective: Cost Analysis & Reduction, Operations Analysis, Risk Elimination

Organization: N/A

Article title: Could Big Data be the Solution to Clean Technology?

Overview: Big data analysis is extraordinarily useful and powerful in terms of identifying ways to reduce waste and improve processes. There is a massive amount of data available today that can be used to predict energy needs, improve energy production methods, build more energy-efficient structures, and even curb consumer energy consumption.

URL: http://blog.syncsort.com/2015/04/could-big-data-be-the-solution-to-cleantechnology/

Objective: Efficiency Enhancement, Market Sensing & Predictive Analysis

Organization: IBM

Article title: Big Data & Analytics adds to the power of Renewable Energy

Overview: Sophisticated weather forecasting and analytics matures renewable energy market

URL: http://www.ibmbigdatahub.com/infographic/big-data-analytics-adds-powerrenewable-energy

Objective: Cost Analysis & Reduction, Risk Elimination

Organization: N/A

Article title: Use Big Data to Survive Market Volatility

Overview: For every single well they own, executives in the oil and gas industry must know full lifecycle costs, from exploration to abandonment. Data is the foundation of this understanding; even at a basic level it requires looking at everything from geophysical exploration data to real-time production data to refining operations data to trading data, and more.

URL: http://data-informed.com/use-big-data-to-survive-market-volatility/

Objective: Operations Analysis; Revenue Generation / Customer Acquisition

Organization: Panjiva

Article title: The global import-export data you need to take your business across borders

Overview: From import-export trends, to the tally of cargos for individual shippers or consignees, right down to the details of each transaction – you are just clicks away from information you need to gain market insights

URL: http://www.panjiva.com/

Objective: Risk Elimination

Organization: N/A

Article title: How advanced analytics are redefining banking

Overview: Innovators are using big data and analytics to sharpen risk assessment and drive revenue.

URL:http://www.mckinsey.com/insights/Business_Technology/How_advanced_analytics_are_redefining_banking

Objective: Efficiency Enhancement

Organization: Nutanix

Article title: The Impact of Big Data on the Data Supply Chain

Overview: The impact of big data on the data supply chain (DSC) has increased exponentially with the proliferation of mobile, social and conventional Web computing. This proliferation presents multiple opportunities in addition to technological challenges for big data service providers.

URL: http://linkis.com/flashglobal.com/86eXA

Objective: Market Sensing / Predictive Analysis

Organization: DHL

Article title: “Big Data in Logistics: A DHL perspective on how to move beyond the hype”

Overview: Big Data is a relatively untapped asset that companies can exploit once they adopt a shift of mindset and apply the right drilling techniques.

URL:http://www.dhl.com/content/dam/downloads/g0/about_us/innovation/CSI_Studie_BIG_DATA.pdf

Objective: Operations Analysis

Organization: N/A

Article title: Making Big Data Work: Supply Chain Management

Overview: The combination of large, fast-moving, and varied streams of big data and advanced tools and techniques such as geo analytics represents the next frontier of supply chain innovation. When they are guided by a clear understanding of the strategic priorities, market context, and competitive needs of a company, these approaches offer major new opportunities to enhance customer responsiveness, reduce inventory, lower costs, and improve agility.

URL:https://www.bcgperspectives.com/content/articles/technology_making_big_data_work_supply_chain_management/

Objective: Efficiency Enhancement

Organization: Transport for London

Article title: How Big Data And The Internet Of Things Improve Public Transport In London

Overview: Transport for London (TfL) oversees a network of buses, trains, taxis, roads, cycle paths, footpaths and even ferries which are used by millions every day. Running these vast networks, so integral to so many people’s lives in one of the world’s busiest cities, gives TfL access to huge amounts of data. This is collected through ticketing systems as well as sensors attached to vehicles and traffic signals, surveys and focus groups, and of course social media.

URL: http://www.forbes.com/sites/bernardmarr/2015/05/27/how-big-data-and-theinternet-of-things-improve-public-transport-in-london/

 

And one of my particular favourites being a lover of Starbucks……

Objective: New Product Creation

Organization: Starbuck’s

Article title: How Big Data Helps Chains Like Starbucks Pick Store Locations – An (Unsung) Key To Retail Success

Overview: The reality is that 94% of retail sales are still rung up in physical stores, and where merchants place those stores plays an outsized role in determining whether their chains fly or flop.

URL: http://www.forbes.com/sites/barbarathau/2014/04/24/how-big-data-helpsretailers-like-starbucks-pick-store-locations-an-unsung-key-to-retail-success/

Strategic Sourcing, what is it all about?

December 17, 2013

Strategic sourcing processes introduced in the mid-nineties have proven to be so robust that even today they remain broadly similar.

This quick overview is not an absolute step-by-step template, because each organisation is unique and each deployment, although broadly similar, will be unique. It is not designed as a one-size-fits-all approach as this will not align your sourcing strategies with what your organisation wants to achieve. One thing that has been learnt from multiple deployments is that successful organisations drive deployment of strategic sourcing in their own way. 

Definitions

stra·te·gic [struh-tee-jik] – adjective

1. Helping to achieve a plan, for example in business or politics;

2. Pertaining to, characterised by, or of the nature of strategy: strategic movements;

3. Of an action, as a military operation or a move in a game, forming an integral part of a stratagem: a strategic move in a game of chess.

sourc·ing [sawr-sing, sohr-] – noun

1. Buying of components of a product or service delivery from a supplier.

Strategic sourcing is an integral part of a wider business strategy to improve profitability and, in turn, shareholder value. It is directly linked and specific to the business, and illustrates opportunities within the supply base to either reduce cost or increase the value of products or services required by the business. Typically, it includes demand management and supplier management. However, increasingly it is becoming important to factor in total cost of ownership (TCO) and sustainability. 

Demand management

Understanding the specification and volume requirements from the business ensures that needs can be appropriately met and that resources are not being wasted. Demand management is not about reducing contract volumes. Rather, it is about ensuring that contract volumes are appropriate for meeting the needs and objectives of the organisation. A core process that will contribute to the strategic sourcing plan is the sales and operations planning process (S&OP).

The S&OP is an integrated business management process through which the business continually achieves alignment and synchronisation between all functions of the organisation. It generally includes:

• an updated sales plan;

• a production or delivery plan;

• inventory holdings;

• customer lead times and commitments;

• a new product development plan;

• a strategic initiative plan;

• a financial plan.

The strategic sourcing team would ultimately be involved in several of these areas, to contribute towards capacity planning and to understand how each feeds into the overall plan and influences demand profiles.

Supplier Management

Understanding the capability, costs and capacity within the supply base ensures that business requirements can be appropriately matched without incurring higher costs. Systematic improvements in supplier management not only improve cost of goods and services but can also improve relationships with suppliers. This can lead to supplier relationship management (SRM) – tools and processes that enable the proactive management of an ongoing business relationship to secure a competitive advantage for your organisation.

To deploy SRM, an organisation needs to decide on a segmentation approach that considers the internal needs of the business, spend, and also accounts for risk to the business. Broadly speaking there are four high-level categories of suppliers.

Transactional suppliers are where little or no relationship or performance management activity is undertaken. Either the suppliers are utilised infrequently or the supplier is of low value to the business. These suppliers can be easily switched for another if required.

Performance-managed suppliers focus on ensuring delivery of the contracted goods and services to the required cost and service levels, rather than on building a collaborative long-term relationship.

Relationship-managed suppliers have some strategic value, so elements of SRM needs to be applied here.

Strategic suppliers are typically either business critical suppliers, or high spend suppliers. Generally the most effort is expended on this category to drive a mutually beneficial collaborative relationship. This is an effective route to improving costs through the Value Add or Value Engineering (VA/VE) process. A close working relationship with strategic suppliers also leads to a greater understanding (and reduction) of the TCO of products or services. 

Total Cost of Ownership

Understanding TCO is becoming increasingly important to procurement. Legislation concerning the environment is affecting the way we do business either through EU directives such as the Waste Electrical and Electronic Equipment (WEEE) Regulations or through corporate social responsibility programmes that drive different behaviours from the business. It is important to factor in not just the acquisition costs but also the cost of doing business with the supply base and any return flows or on-cost from recycling. 

Sustainability

The fourth element of strategic sourcing also provides part of the rationale for driving it within the organisation. Being able to sustain the supply of goods and services while de-risking the supply chain as well as balance the total costs is ultimately the responsibility of procurement.

A coherent approach

Tying all activities together into a coherent plan will transform the business, as only the procurement team can do. Internal ‘silos’ are built as a company grows. Although each silo represents the company’s acquisition of knowledge and improves the ability to deliver value to the customer, they can also create inefficiencies in the business, leading to organisational inertia. This can slow the pace of change and reduce the capability for innovation. Creating a plan balanced across the four areas ensures you will engage with the business and supply base.

When creating a communications plan, consider each of the four areas and how they might affect the stakeholder. Simple, bite-sized statements work well for those in more senior levels of the organisation. However, greater detail will be needed for others, especially where they perceive they might have to change what they do. Build in the wider plan, so each stakeholder can see all issues and organisational levels have been considered.

Develop your plan and highlight the best solutions for each area of the business. Consider using a SWOT analysis (see below) to develop the ideal outcomes.

 

Collaboration in SCM

January 16, 2013

Over the years, many technologies have evolved to support both asynchronous and real-time collaboration. Most of the older technologies, such as teleconferencing, video conferencing, e-mail, etc., have major limitations that lower their value in product development environments. The newer and still-evolving technologies that enable PLM allow the management of product information and the processes that are used to create, configure, and use the information in a manner never previously thought of before.
We talk a lot about collaboration, but do we really understand what it means? In general, collaboration is an iterative process where multiple people work together toward a common goal. Methods of working collaboratively have existed as long as humans have joined together to accomplish tasks that could be done better by a team than an individual. Early man is probably the best example of collaboration when hunting for food for the village or the tribe.

There are two modes of collaboration: synchronous and asynchronous. Users working in an asynchronous manner carry out their assigned tasks and then forward the data to the next person. This way of working is serial in nature and only allows users to participate one at a time. Communication among collaborators is normally carried out using telephone or e-mail. Effective collaboration requires an area of storage for information from which product definition data can be shared with all those that require it. This shared area is commonly referred to as a data vault. Flow control and task execution is performed in an asynchronous way using workflow and project management tools. These tools allow data to be routed to users and progress to be monitored.

Synchronous or real-time collaboration enables users to view, work with 2D (e.g., specifications, drawings, documents, etc.) and 3D data (e.g., mechanical CAD models), and carry out interactive communications with each other in real-time. In addition, PLM-enabled collaborative solutions often support the ability to view, rotate, add notes and annotation pointers, and some also offer functionality to change the 3D design model data. This provides the same communication effectiveness as having all participants in the same room, at the same time, looking at the same data.
The following describes some of the processes commonly supported by PLM-enabled collaborative technologies.

Supply Chain Management—The move to a partnership-oriented supply chain means that suppliers, partners, sub-contractors, and customers are all involved in product definition. For companies to embrace the true potential of the distributed supply chain, collaborative tools can be used to manage data and processes across a distributed environment.

Sales and Bidding—Opportunities exist for sales, engineering, purchasing, and manufacturing to engage in collaborative sessions where product options, alternatives, and concepts are reviewed by each discipline at the same time. This is faster, more efficient, and can produce more accurate and cost-effective bids.

Maintenance and Support—The application of collaborative tools in maintenance and support activities is gaining acceptance in a number of different sectors such as aerospace and defense, automotive, process, and machine tools. For example, animation and simulation tools are being used to demonstrate how products are operated and maintained.

Change Management and Design Review—Adopting a different design review process, where project teams join a shared collaborative review session can result in significant benefits as potential conflicts and errors can be identified early in the product development lifecycle.

Senior Managers in the business world understand economic cycles are a known fact of life. The key to success is the way managers and organizations adapt to these cycles. Since they are a fact of life, we know that we can’t just ignore downturns and hope for a better day. So instead, those that are successful learn how to become more efficient while still ensuring that they deliver the best value to the markets they serve (i.e., making available the right product, at the right price, to the right market, at the right time, at the right quality, (The 5 Rights!)).

Best Practices for performance metrics improvement

January 5, 2013

The Supply Chain in many organisations has become longer over time and contains more partners than ever before.
These longer supply chains are the result of vertical integration strategies yielding to first outsourcing and then off-shoring. In addition, organisations continue to add more products, more suppliers and more plants or distribution centres. They have also evolved their customer and product mixes, implemented new postponement or replenishment strategies, or simply scaled in volume, leading to a significant change in the structure of their supply chains.
As the assumptions used in the initial supply chain model change over time, its model and processes are not likely to keep pace with the changes. What was once a smooth and efficient supply chain can begin to show weak performance metrics! As organisations seek to improve their supply chain metrics, the key question is what best practices they should adopt?
Based upon experience from a number of different industries, here is a list of ten best practices that an organisation could or should implement as it seeks to improve its performance metrics.
1. Create a consensus demand plan: An organisation can get consensus on market requirements and business assumptions by incorporating new product introductions, product retirement, upcoming promotions, financial projections, investor commitments and sales forecasts into the demand planning process, and creating a consensus plan around it. Without building consensus, everyone has a different perspective of customer demand and it becomes difficult to Synchronise Demand and Supply.
2. Ensure supply demand synchronisation: By using techniques such as Sales & Operations Planning (S&OP), as well as creating a supply plan that maps to demand while also incorporating key constraints, a company can ensure that it will be able to meet its delivery commitments without incurring expediting costs or higher inventory. Such capability not only reduces costs, but increases customer loyalty.
3. Streamline supplier interactions: By providing suppliers ongoing visibility into their forecast and consumption plans, as well as current inventory status and planned receipts, manufacturers can get their suppliers to improve replenishment lead time and become more responsive to their changing needs. It also allows them to implement programs such as Vendor-Managed Inventory (VMI), cut costs through reduction in inventory and safety stock, reduction in overtimes or expediting costs.
4. Get visibility into supply chain events: Traditional supply chains are evolving into a worldwide network of suppliers and manufacturing or distribution facilities. Such an environment requires stakeholders to share any shipment or material information such as plans, current status or exceptions with each other in a timely manner in order to improve overall supply chain performance. Without the ability to provide such levels of visibility to each other, each stakeholder ends up continuously reacting to unplanned surprises with limited time to act, not to mention carrying extra inventory to compensate for such surprises. Visibility into shipments and material-related information promotes faster decision-making within the supply chain and enables each stakeholder to proactively respond to issues. Supply Chain Event Management (SCEM) addresses these requirements.
5. Automate trade compliance: As organisations grow in scale through new products and expanded geographical markets, or setting up plants in other countries, or turning to offshore suppliers, manual methods of managing the export and import compliance process become exponentially more complex and time-consuming. Even significant increases in headcount may not resolve the issues. Streamlining the export and import management process brings benefits such as significant cost savings, improved productivity, fewer shipment delays and reduced risk of penalties and fines due to non-compliance.
6. Rationalise the supply base: By reducing the number of suppliers, procurement managers can take spending on a category that is currently scattered among multiple suppliers and award that volume of spending to a smaller number of suppliers to gain volume discounts. Rationalising the supply base also reduces complexity associated with new part introduction and simplifies supply collaboration.
7. Integrate engineering and sourcing into supply chain management: New product introduction (NPI) and sourcing are key elements of effective supply chain management. Without expertly incorporating NPI into the supply chain planning process, a manufacturer runs the risk of inventory write-offs or shortages of critical components. Similarly, the sourcing process should incorporate requirements such as ability to deliver in the right replenishment model, responsiveness and flexibility to react to sudden changes in business needs.
8. Continuously measure key performance metrics: One best practice is getting visibility into key supply chain performance metrics on an ongoing basis and using that information to continuously improve the supply chain. SAP’s supply chain performance management solution can assist in closing the loop for its customers.
9. Focus on time and inventory: While one can focus on improving multiple aspects of the supply chain, the greatest impact can be had by focusing on continuously improving on two fronts: increasing the velocity of process and information flow and focusing on activities and actions that can reduce inventory within the system.
10. Deploy an integrated solution: When the supply chain capabilities of ERP systems were not as mature as they are today, best-of-breed solutions were the preferred approach. However using such systems created information integration issues. Today, It is recommended that companies evaluate supply chain systems from their ERP vendors before looking at other options.

The butterfly effect on enterprise data within SCM

January 2, 2013

After doing a couple of projects where master data was a critical element but unfortunately nothing was done to correct it, I thought that I would reintroduce the post on the Butterfly effect in Master Data. All to often the master data is completely forgotten in projects and in the end costs money to rectify and could lead the software to fail after go live. So to learn more about the butterfly effect and it’s impact on master data read on!

The term “butterfly effect” refers to the way a minor event – like the movement of a butterfly’s wing – can have a major impact on a complex system – like the weather. The movement of the butterfly wing represents a small change in the initial condition of the system, but it starts a chain of events: moving pollen through the air, which causes a gazelle to sneeze, which triggers a stampede of gazelles, which raises a cloud of dust, which partially blocks the sun, which alters the atmospheric temperature, which ultimately alters the path of a tornado on the other side of the world.

Enterprise data is equally susceptible to the butterfly effect. When poor quality data enters the complex system of enterprise data, even a small error – the transposed letters in a street address or part number – can lead to revenue loss, process inefficiency and failure to comply with industry and government regulations. Organisations depend on the movement and sharing of data throughout the organisation, so the impact of data quality errors are costly and far reaching. Data issues often begin with a tiny mistake in one part of the organisation, but the butterfly effect can produce disastrous results.

An ERP or supply chain system focuses on parts, descriptions and inventory data. Since government agencies don’t control the way supply chain and ERP data is defined, you may not have an idea about how the data should look in an ideal state, but it should provide an accurate depiction of the physical warehouse or just-in-time supply chain system. You need to know what is in stock, when it can be supplied and how much it costs.
Holding just the right amount of inventory is crucial to optimising costs. After all, inventory costs are incurred every hour of every day in areas including warehouse storage, heat and electricity, staffing, product decay and obsolescence. With this in mind, consider the impact of a transposed letter in an ERP system. Someone enters part number XL- 56YJM instead of LX-56YJM. Until the error is discovered and corrected, you may hold duplicate parts in inventory or not be aware of parts carrying the slightly different SKU because of the transposed letter.

You also want to take advantage of volume discounts. If the data is unstructured, making it difficult to understand global buy patterns, the company may miss out when negotiating with the vendor.

Because there is no standard format for ERP data, few of the steps for fixing the data are done for you ahead of time. It is critical to establish a methodology for data profiling in order to understand issues and challenges. Since there are few governing bodies for ERP and supply chain data, the corporation and its partners must often come up with an agreed-upon standard, with input from users of the data to understand context, how it’s used, and the most desired representation.

If you have clean data in your supply chain, you can achieve some tangible benefits. First, the company will have a clear picture about delivery times on orders because of a completely transparent supply chain. Next, you will avoid unnecessary warehouse costs by holding the right amount of inventory in stock. Finally, you will be able to see all the buying patterns and use that information when negotiating supply contracts.

Driving collaboration through Contracts Management

January 2, 2013

The contracting process has always been a major point of discontent between procurement and legal functions within an organisation. The goals of the legal department to achieve control and compliance often clash with procurement’s objectives to build collaborative relationships with suppliers. This has become extremely pronounced now, that procurement feels that it needs to become a strategic value contributor pushing the business performance of the organisation rather than simply focusing on getting the lowest price. A collaborative culture of contract authoring can be built using the right contract management technology, which can bring together the two functions and drive compliance and control while at the same time foster better supplier relationships, which in turn can deliver real savings with minimal risks to the supply chain. This paper takes an in-depth look at the reasons for the collaboration challenges between procurement and legal departments and the technology and process initiatives that can bridge these gaps.

Procurement and Legal at loggerheads

A recent study by IACCM throws up several results that suggest that the relationship between procurement and legal teams are less than cordial in most organisations. Nearly 70% of the study respondents felt that the relationship between the two functions needed to improve. It is not surprising that the primary reason for discontent between the two functions was the contracting process. The biggest fear that most legal departments have is the whether the procurement function can actually ensure that the contracting terms
will be adhered to post contract awarding. This may seem like a paradoxical situation. If the procurement function gets into contracts with suppliers in the first place, why would it not want to adhere to them?

There are several factors that result in maverick or off contract purchases. A majority of these occasions are primarily ad-hoc purchases, where buyers resort to buying from whichever supplier is available quickest and at the most opportune time. More maverick spending means higher total procurement costs and fewer on-time orders which is clearly not a recipe for achieving procurement efficiency. A research by APQC says that organisations with 16% maverick spend spend on an average nearly $17,000 more per procurement FTE as compared to organisations with maverick spend of 1%.. In fact even the on time delivery percentages for such organisations was nearly 6% lower than their peers. It is therefore definitely not surprising that legal teams have their doubts over the correct execution of contracts by the purchasing / procurement department. In the IACCM report referred to above governance of contracts post award and the ability of procurement to effectively manage contracts was cited by nearly 60% of the participants as a critical factor causing high level tension between procurement and legal functions.

Conflicting approaches with a common need for change

Analysing from an organisational perspective Legal and Procurement teams approach the contracting process from two very different angles. Legal teams look at contracts as tools to streamline processes and establish strict controls while procurement looks at it as the first step in establishing cost savings and supplier relationships. With the economy becoming vastly different – with supply chains becoming growingly interconnected and vast- these disparate perspectives of the contracting process have brought their own unique challenges for both the departments. Legal teams now have to handle a much larger number of contracts in multiple languages and with a wide variety of, at times very specific and unique contracting terms and conditions. The increased workload and the looming threat of non-compliance to several contracts makes it imperative for legal teams to manage contracts more efficiently and leverage the right automation to maintain control. Standardising the contract creation process is often made the primary goal.
Procurement, no longer a tactical function, needs to develop long term strategic relationships with suppliers and add more value to the company’s bottom line. This needs contracting to be more flexible to generate additional savings and contribute in value creation. This may include insertion of necessary clauses that help them take advantage of dynamic marketing conditions – say for example escalation and de-escalation clauses for highly volatile commodities. This of course becomes the first bone of contention between the two functions as one aims to standardise while the other needs more flexibility. The pressure between the two teams is to create a contracting process that not only helps procurement generate savings and account for frequent renegotiation but also helps legal enforce compliance in contract execution and get better outcomes out of the contract resulting in sustainable savings.

An often neglected area of discord between the two teams is the time taken to create contracts. Procurement with its need to take advantages of prevalent market conditions and the supplier’s disposition to discounts at the time of negotiation needs the contract creation and execution cycles to be as short as possible. Legal teams on the other hand have a primary responsibility to ensure every contract is free of risk to the organisation and hence may take frustratingly long periods to go through minute details in all clauses within the contract. This may result in procurement missing out on additional savings based on time discounts or market variations. Automated contract authoring technology that provides standard clauses and templates is the the answer to not only reducing the time for contract creation and approval but also ensuring that risk mitigation is easy.

The need of the hour

The need of the hour is for the contracting process to enable collaboration between the procurement and legal functions rather than be a cause for dissent. At a strategic level there is a growing need to redefine the relationship between the two functions. The contracting process needs to ensure

Real and incremental savings

Improved contract outcomes

Better process streamlining and compliance

Mitigation of risks while taking advantage of dynamic market conditions and better
renegotiation

Proactive and collaborative management of change

Powerful analytics that deliver strategic value

Getting the right solution

All this is easier said than done. It is imperative that a process is created within the organisation that makes contract authoring, creation and management simpler. Although getting buy in from employees in the procurement and legal teams is important, the first step to have an effective process in place to invest in the right technology. A contract management solution should be able to foster collaboration by providing clause libraries and standard contract templates that ensure contracts don’t miss out on any mandatory clauses and terms. This will help in reducing the time for legal review as well as ensuring minimum exposure to risk. Although it should provide a sufficient collection of standardised clauses and templates the contract management solution should also have customisable workflows that permit the insertion of clauses that help organisations take advantage of market conditions and supplier discounts. There should always be room for renegotiation especially for volatile commodities. This can be achieved by putting clauses like escalation/de-escalation clauses or conditions on contract renewal based on prevalent commodity market prices that insure the organisation against volatility risks

Technology as an enabler:

An ideal solution to this collaboration conundrum would be a solution that streamlines all the steps of the contract management process

A typical contract management process can be divided into three major stages.

Contract Authoring

The solution should be able to create contracts with pre-defined workflows that not only incorporate feedback from all relevant stakeholders during the contract creation process but also take care of exceptions and approvals. The authoring process can be made easier and more compliant by having a central template repository that contains all pre-defined clauses. Legal teams should have access to this repository to continuously update the latest clauses and ensure that the organisation has no unforeseen risk in getting into the contract. All contracts should be housed in a central repository where they can be tracked and managed. The contracts should also be easily available through simple search processes to ensure easy access to all necessary stakeholders.

Contract Negotiation

Contracts should contain well-defined service level agreements (SLA), which are transparent to suppliers. The contracts should be the basis of all supplier performance measurement and should be the guiding factor to defining the KPIs for all supplier performance management processes. Alerts should be configurable within the contract management system for tracking compliance both for users within the organisation as well as supplier performance to contracted terms. Besides compliance alerts the solutions should also have alerts for contract renewals so that evergreen contracts don’t get renewed repeatedly without the scope of renegotiation-something legal teams always have on their cross hairs. Contracting solutions should be able to match contracts with spending data to help track any maverick spend and in turn provide potential opportunities to save. Analytics should also be provided on supplier performance in term of discounts adhered to and quality.

Contract Sign Off’s

Electronic signatures have to be mandatory for any contract management solution implemented and should be enabled during various stages of the contract creation and approval process.

Reaping the desired results

An effective contract management process if setup as mentioned above can result in the following benefits

Reaping the desired results
An effective contract management process if setup as mentioned above can result in the following benefits

Risk mitigation due to increased visibility into existing contracts

Improved contracting process and reduction in overall cycle time

Adherence to regulatory compliance requirements due to increased tracking of contract compliance

Increased compliance to terms and conditions

Spend compliance ensuring sustained savings. In fact a recent survey of nearly 600 procurement professionals suggested that doubling contract compliance leads to a near 600% increase in savings generated through spend management activities

Better collaboration due to standardised processes and agreed SLA’s between Legal and Procurement as well as procurement and suppliers

In closing an effective contract management solution can help organisations generate sustained savings and build effective supplier relationships. But one of the major benefits of implementing a robust contracting solution-that both stores and authors contracts-is increased collaboration between procurement and legal working to the benefit of both. Procurement is able to drive sustainable savings and meet its goal of being a strategic value contributor to the organisation while legal teams are able to mitigate risks to the organisation and ensure control and compliance.

Planning and Scheduling in the Supply Chain

December 28, 2012

Before relying on an ERP system to manage planning and scheduling activities, all companies should first make sure that the right processes are in place, standardized and uniformly used across the enterprise. Robust processes and policies will allow the company to generate accurate and timely data. Only then will a company be in a position to use an ERP system to improve planning and scheduling activities.

Major companies have invested heavily in ERP implementations and have suffered business disruptions whilst implementations have taken place. Despite good intentions, most companies haven’t come close to realizing the value achieved by those featured in various ERP case studies across the globe. Revenues have not increased by 20%. Operating costs have not fallen by 15%. Finally, on-time deliveries have never reached record highs of 95%.

So what is stopping companies achieving ROI? In my mind it is very clear that companies lack understanding and commitment! Firstly, the understanding that business value is inherently linked to business change, not systems change. From the commitment side it’s all about executing a good plan. However, this is another story! What we are confronted with now is that we have an ERP that is implemented which may or may not have achieved its ROI. Now we have got to get down to the operational level and try and recover what may have been lost or disrupted during the implementation however long ago it was.

The opportunity we are now presented with covers the whole enterprise and should allow the company to gain post implementation value, this area I am referring to is the whole Supply Chain, starting at the front end with Planning and Forecasting all the way through to settlements (including cash flow management). The area that we will concentrate upon here of course is replenishment planning, which by its very nature covers nearly all aspects within Supply Chain Management. This is where a company’s supply meets its demand!

Companies that plan well are more likely to:

·         Anticipate demand and respond nimbly to unforeseen market shifts

·         Have higher customer satisfaction rates

·         Have less cash tied up in obsolescing inventory

It’s where forecasts are converted into purchase and/or production orders. Planning activities influence inventory levels and, by extension, cash flow. The sad truth is that most companies’ ERP systems issue poor planning recommendations – ones that, if acted upon, would lead to a huge mismatch between supply and demand. Because those system-generated recommendations don’t reflect true operating realities; planners, purchasers, materials managers, production managers and others often ignore system-generated planning signals and advice.

Almost always, however, poor planning advice has little to do with the software itself. Software is made up of a bunch of 0s and 1s, and simply generates outputs from formulae and rules. In all likelihood, the formulae and rules were programmed just fine. Rather, poor recommendations are usually the result of inaccurate and untimely base data.

The good news is that any company can significantly improve its planning and scheduling activities. And, if it does, it’ll go a long way to generating that seemingly elusive ERP-related business value. From a high level, there are three key success factor to planning. They are:

·         Accurate Item and Movement Data – The system needs accurate data to simulate a company’s operating reality. Key data requirements include item-level order modifiers), bill of materials and routings.

·         Accurate Inventory Data – If inventory counts and movements are not accurately reflected in the system, the planning engine will either make recommendations that cause the company to 1) prematurely order inventory or 2) deliver items beyond the due date. The former case constrains cash flow and unnecessarily increases the value of a depreciating asset class. The latter case leads to higher rates of customer dissatisfaction and turnover. In our experience, a planning engine will only be capable of issuing meaningful planning recommendations when a company:

o    Has accuracy rates of 95% for its on-hand inventory

o    Maintains accurate demand and supply forecasts

o    Knows its minimum inventory level requirements (safety stock)

·         Timely Recording of Material Movements – The status of purchase orders and production orders varies over time, as materials flow through supply chains and production. To ensure that planning signals and recommendations are meaningful, the company needs to update the system promptly. Businesses can choose to do this a couple of ways – through manual input or in an automated fashion.

Vendor Rating and Management

December 20, 2012

Vendor rating is the result of a formal vendor evaluation system. Vendors or suppliers are given standing, status, or title according to their attainment of some level of performance, such as delivery, lead time, quality, price, or some combination of variables. The motivation for the establishment of such a rating system is part of the effort of manufacturers and service firms to ensure that the desired characteristics of a purchased product or service is built in and not determined later by some after-the-fact indicator. The vendor rating may take the form of a hierarchical ranking from poor to excellent and whatever rankings the firm chooses to insert in between the two. For some firms, the vendor rating may come in the form of some sort of award system or as some variation of certification. Much of this attention to vendor rating is a direct result of the widespread implementation of the just-in-time concept  and its focus on the critical role of the buyer-supplier relationship.

Most firms want vendors that will produce all of the products and services defect-free and deliver them just in time (or as close to this ideal as reasonably possible). Some type of vehicle is needed to determine which supplying firms are capable of coming satisfactorily close to this and thus to be retained as current suppliers. One such vehicle is the vendor rating.

In order to accomplish the rating of vendors, some sort of review process must take place. The process begins with the identification of vendors who not only can supply the needed product or service but is a strategic match for the buying firm. Then important factors to be used as criteria for vendor evaluation are determined. These are usually variables that add value to the process through increased service or decreased cost. After determining which factors are critical, a method is devised that allows the vendor to be judged or rated on each individual factor.

It could be numeric rating or a Likert-scale ranking. The individual ratings can then be weighted according to importance, and pooled to arrive at an overall vendor rating. The process can be somewhat complex in that many factors can be complementary or conflicting. The process is further complicated by fact that some factors are quantitatively measured and others subjectively.

Once established, the rating system must be introduced to the supplying firm through some sort of formal education process. Once the buying firm is assured that the vendor understands what is expected and is able and willing to participate, the evaluation process can begin. The evaluation could be an ongoing process or it could occur within a predetermined time frame, such as quarterly. Of course the rating must be conveyed to the participating vendor with some firms actually publishing overall vendor standings. If problems are exposed, the vendor should formally present an action plan designed to overcome any problems that may have surfaced. Many buying firms require the vendor to show continuing improvement in predetermined critical areas.

CRITERIA FOR EVALUATION

Vendor performance is usually evaluated in the areas of pricing, quality, delivery, and service. Each area has a number of factors that some firms deem critical to successful vendor performance.

Pricing factors include the following:

  • Competitive pricing. The prices paid should be comparable to those of vendors providing similar product and services. Quote requests should compare favorably to other vendors.
  • Price stability. Prices should be reasonably stable over time.
  • Price accuracy. There should be a low number of variances from purchase-order prices on invoiced received.
  • Advance notice of price changes. The vendor should provide adequate advance notice of price changes.
  • Sensitive to costs. The vendor should demonstrate respect for the customer firm’s bottom line and show an understanding of its needs. Possible cost savings could be suggested. The vendor should also exhibit knowledge of the market and share this insight with the buying firm.
  • Billing. Are vendor invoices are accurate? The average length of time to receive credit memos should be reasonable. Estimates should not vary significantly from the final invoice. Effective vendor bills are timely and easy to read and understand.

Quality factors include:

  • Compliance with purchase order. The vendor should comply with terms and conditions as stated in the purchase order. Does the vendor show an understanding of the customer firm’s expectations?
  • Conformity to specifications. The product or service must conform to the specifications identified in the request for proposal and purchase order. Does the product perform as expected?
  • Reliability. Is the rate of product failure within reasonable limits?
  • Reliability of repairs. Is all repair and rework acceptable?
  • Durability. Is the time until replacement is necessary reasonable?
  • Support. Is quality support available from the vendor? Immediate response to and resolution of the problem is desirable.
  • Warranty. The length and provisions of warranty protection offered should be reasonable. Are warranty problems resolved in a timely manner?
  • State-of-the-art product/service. Does the vendor offer products and services that are consistent with the industry state-of-the-art? The vendor should consistently refresh product life by adding enhancements. It should also work with the buying firm in new product development.

Delivery factors include the following:

  • Time. Does the vendor deliver products and services on time; is the actual receipt date on or close to the promised date? Does the promised date correspond to the vendor’s published lead times? Also, are requests for information, proposals, and quotes swiftly answered?
  • Quantity. Does the vendor deliver the correct items or services in the contracted quantity?
  • Lead time. Is the average time for delivery comparable to that of other vendors for similar products and services?
  • Packaging. Packaging should be sturdy, suitable, properly marked, and undamaged. Pallets should be the proper size with no overhang.
  • Documentation. Does the vendor furnish proper documents (packing slips, invoices, technical manual, etc.) with correct material codes and proper purchase order numbers?
  • Emergency delivery. Does the vendor demonstrate extra effort to meet requirements when an emergency delivery is requested?

Finally, these are service factors to consider:

  • Good vendor representatives have sincere desire to serve. Vendor reps display courteous and professional approach, and handle complaints effectively. The vendor should also provide up-to-date catalogues, price information, and technical information. Does the vendor act as the buying firm’s advocate within the supplying firm?
  • Inside sales. Inside sales should display knowledge of buying firms needs. It should also be helpful with customer inquiries involving order confirmation, shipping schedules, shipping discrepancies, and invoice errors.
  • Technical support. Does the vendor provide technical support for maintenance, repair, and installation situations? Does it provide technical instructions, documentation, general information? Are support personnel courteous, professional, and knowledgeable? The vendor should provide training on the effective use of its products or services.
  • Emergency support. Does the vendor provide emergency support for repair or replacement of a failed product.
  • Problem resolution. The vendor should respond in a timely manner to resolve problems. An excellent vendor provides follow-up on status of problem correction.

In an article produced by Supply Management states that while pricing, quality, delivery, and service are suitable for supplies that are not essential to the continued success of the buying firm, a more comprehensive approach is needed for suppliers that are critical to the success of the firm’s strategy or competitive advantage. For firms that fall into the latter category performance may need to be measured by the following 7 C’s.

  1. Competency—managerial, technical, administrative, and professional competence of the supplying firm.
  2. Capacity—supplier’s ability to meet physical, intellectual and financial requirements.
  3. Commitment—supplier’s willingness to commit physical, intellectual and financial resources.
  4. Control—effective management control and information systems.
  5. Cash resources—financial resources and stability of the supplier. Profit, ROI, ROE, asset-turnover ratio.
  6. Cost—total acquisition cost, not just price.
  7. Consistency—supplier’s ability to exhibit quality and reliability over time.

If two or more firms supply the same or similar products or services, a standard set of criteria can apply to the vendor’s performance evaluation. However, for different types of firms or firms supplying different products or services, standardized evaluation criteria may not be valid. In this case, the buying firm will have to adjust its criteria for the individual vendor. For example, Honda of America adjusts its performance criteria to account for the impact of supplier problems on consumer satisfaction or safety. A supplier of brakes would be held to a stricter standard than a supplier of radio knobs.

AWARDS AND CERTIFICATION

Many buying firms utilize awards and certification programs to rate vendors. Attainment of certification status or an award serves as an indicator of supplier excellence. Certification and awards-program recognition represents a final step in an intense journey that involves rigorous data collection under the total-quality-management-rubric as well as multitudes of meetings with suppliers and purchasing internal customers. Serious buying firms view these programs as an integral part of their overall efforts to improve the total value of the company.

The attainment of a supplier award usually serves as an indication that the vendor has been rated as excellent. Intel awards their best suppliers the Supplier Continuous Quality Improvement Award (SCQI). Other firms may utilize a hierarchy of awards to indicate varying degrees of performance from satisfactory to excellent. DaimlerChrysler awards its best suppliers the Gold Pentastar Award. Several hundred vending firms receive this award per year. However, only a handful (less than a dozen) of DaimlerChrysler’s vendors are good enough to garner the Platinum Pentastar Award.

For other firms, supplier certification is desirable. Supplier certification can be defined as a process for ensuring that suppliers maintain specific levels of performance in the areas of price, quality, delivery, and service. Certification implies that participating firms have reached a level of excellence that other firms were unable or unwilling to achieve. For example a quality certified firm maintains a level of quality such that customer-receiving inspection may be utilized with decreasing frequency up to the point where it is eliminated altogether. Theoretically, this will ensure that all of the supplier’s products meet the customer’s product specifications. In this case, the goal of supplier certification is quality at the source.

While it is uncertain whether individual firms are consistent in the manner in which they certify vendors, a quality certification would likely require that the vending firm be part of a formal education program, utilize statistical process control (SPC), and have a quality assurance plan (set written procedures).

BENEFITS

Benefits of vendor rating systems include:

  • Helping minimize subjectivity in judgment and make it possible to consider all relevant criteria in assessing suppliers.
  • Providing feedback from all areas in one package.
  • Facilitating better communication with vendors.
  • Providing overall control of the vendor base.
  • Requiring specific action to correct identified performance weaknesses.
  • Establishing continuous review standards for vendors, thus ensuring continuous improvement of vendor performance.
  • Building vendor partnerships, especially with suppliers having strategic links.
  • Developing a performance-based culture.

Vendor ratings systems provide a process for measuring those factors that add value to the buying firm through value addition or decreased cost. The process will continually evolve and the criteria will change to meet current issues and concerns.

For example, today the supplier evaluation must now reflect the strategic direction of the buying company’s environmental initiatives. As a result, some firms have recently developed supplier evaluation systems that place significant weight on environmental criteria. It is now an important criteria for the evaluation of suppliers that they have firm CSR programmes in place and that they are observant of governmental rules and regulations.

The Butterfly effect within the Supply Chain, Specifically Master Data Management!

October 27, 2012

The term “butterfly effect” refers to the way a minor event – like the movement of a butterfly’s wing – can have a major impact on a complex system – like the weather. The movement of the butterfly wing represents a small change in the initial condition of the system, but it starts a chain of events: moving pollen through the air, which causes a gazelle to sneeze, which triggers a stampede of gazelles, which raises a cloud of dust, which partially blocks the sun, which alters the atmospheric temperature, which ultimately alters the path of a tornado on the other side of the world.

Enterprise data is equally susceptible to the butterfly effect. When poor quality data enters the complex system of enterprise data, even a small error – the transposed letters in a street address or part number – can lead to revenue loss, process inefficiency and failure to comply with industry and government regulations. Organisations depend on the movement and sharing of data throughout the organisation, so the impact of data quality errors are costly and far reaching. Data issues often begin with a tiny mistake in one part of the organisation, but the butterfly effect can produce disastrous results.

The Supply chain system ( whatever that system may be) focuses on parts, descriptions and inventory data. Since government agencies don’t control the way supply chain and ERP data is defined, you may not have an idea about how the data should look in an ideal state, but it should provide an accurate depiction of the physical warehouse or just-in-time supply chain system. You need to know what is in stock, when it can be supplied and how much it costs.
Holding just the right amount of inventory is crucial to optimising costs. After all, inventory costs are incurred every hour of every day in areas including warehouse storage, heat and electricity, staffing, product decay and obsolescence. With this in mind, consider the impact of a transposed letter in an ERP system. A part number gets entered into the system as AB-21602M instead of BA-21602M. Until the error is discovered and corrected, you may be holding duplicate parts withinin inventory or not be aware of parts carrying the slightly different SKU because of the transposed letter.

You also want to take advantage of volume discounts. If the data is unstructured, making it difficult to understand global buy patterns, the company may miss out when negotiating with the vendor (if you can”t describe an item, you can’t buy it).

Because there is no standard format for ERP data, few of the steps for fixing the data are done for you ahead of time. It is critical to establish a methodology for data profiling in order to understand issues and challenges. Since there are few governing bodies for ERP and supply chain data, the enterprise and its partners must often come up with an agreed-upon standard, with input from users of the data to understand context, how it’s used, and the most desired representation. The most simplest standard to use is Noun, Modifier, Characteristic, works well for any industry, example Valve, Butterfly, 10 inch, 600 lb, CS, ASTM XXX etc and always make sure that the manufacturers part number is available, they make it so they should also be able to describe it.

If you have clean data in your supply chain, you can achieve many tangible benefits. First, the company will have a clear picture about delivery times on orders because of a completely transparent supply chain. Next, you will avoid unnecessary warehouse costs by holding the right amount of inventory in stock. Finally, you will be able to see all the buying patterns using spend analysis and use that information when negotiating supply contracts.

Contract Management – Incumbent exit Strategies

October 26, 2012

Long term service contracts have the potential to create problems when the time comes to bring services back in house or move them to a more competitive supplier. Most buyers and suppliers do not want to consider the negative concept of exit when negotiating a contract so it gets left or given just cursory consideration.

Exiting from a strategic long term contract is not straight forward. 30 days notice is just not long enough to organise a graceful exit. A good rule of thumb is a month for each year of the contracted relationship however six months to a year would not be unreasonable.

In an outsourcing partnership the incumbent supplier is there because they are expert in the provision of the services required. It is not in their interests to disclose the ‘how’ a service is undertaken, if anything the ‘how’ is a unique selling point and may be specific to the company engaged. The combination therefore of the long term relationship, the lack of provision in the contract and the nature of suppliers not to disclose more then they need to, means exit at best, is problematic. So, what can be done about this situation?

The contract has to be the starting point. If you are considering a new partnership then focus on securing the best and most advantageous provisions in the contract when negotiating the deal. If you are ‘in-flight’ and consider the exiting provisions to be weak then negotiate and agree a binding exit strategy, using change control, to improve the exit arrangements.

So what do good arrangements look like for exit and/or transition? An orderly exit demands legal weight therefore an exit schedule is appropriate setting out the precise expectations of each party.

Here are a number of  pointers which will help you reduce cost and risk.

1. Set a time when both parties should get together and jointly develop an exit strategy. There is no point in doing this on Day 1 of a contract as there will be other pressing demands on both parties. Pick a time; say six months in, when the new service has stabilized. Specify the need to agree a strategy within one month and get both parties to commit to doing this.

2. Specify that the supplier must prepare a disengagement plan, in a specific time period, once notice has been give. It is well worth setting out what the plan might contain and at all times should be congruent with the buyers retendering or return to in house service plan at all times.

3. It is important to protect services during the uncertain times of transition. Ensure it is explicitly stated that service does not decay because the staff have taken their’ eye off the ball’; performance of all services must continue.

4. Where staff are in scope to transfer set out the information requirements relating to each member. Secure an early statement of staff working more than 40% of their time, or those materials to the services, giving all relevant details including costs, skill sets, role and secure their continuity of service from the moment notice of termination is served.

5. Secure an asset list of all property owned by the customer and operated by the supplier. Seek to secure an asset list of key assets owned by the supplier and used to operate the service, even, if they are shared with other parties. This is not to say the ‘how‘will be replicated post transition but indicates the scale and nature of any infrastructure in use.

6. Gather together all material subcontracts used in the service delivery. These may need to be novated to the new service provider. Check these contracts have clauses to permit novation and communicate with these suppliers so their service levels and relationships do not decay in any way.

7. Intellectual Property and Confidential Information is invariably critical to an outsourced service. Again ensure this the customer IPR and confidential information is identified and recorded. Over a long term relationship new IPR and confidential information may have been developed. Ensure the contract states all IPR belongs to the customer even where jointly developed and is deposited in a repository. Make sure all documents and digital material contains some form of copyright statement. It may be appropriate and necessary to license the outgoing supplier for jointly developed IPR. If the incumbent supplier has used its IPR make sure there is an option to procure a license for its use post exit.

8. Ensure the Exit schedule includes the requirement to co-operate with the re-procurement and transition process. It might be desirable to appoint a single point of contact for the whole process with mini-service levels to ensure cooperation with the buyer’s project manager responsible for exit and/or transition.

9. Costs to support exit and/or transition can be neglected by both parties, beware however, if the contract remains silent additional charges will be made. Clearly some charges must be expected. Make sure your Exit Schedule bounds what is paid for and what is not. Asset and IPR registers are usually part of the on-going service so it should not be necessary to pay for the register twice so take care to ensure transition costs do not get out of control.

10. Ensure your incumbent will co-operate with the candidate and successful suppliers. Do this by agreeing a clause for co-operation and access for due diligence purposes. Suppliers generally do not like to open up their service to a competitor’s inspection so ensure minimum levels of access and co-operation are defined including a process for requesting access is detailed and agreed.

Transitioning an outsourced contract is never easy and does require careful planning. Early planning and securing commitments will reduce risk and cost and increase levels of co-operation so it is a good practice to anticipate exit right from the start.