Posts Tagged ‘Supplier Relationship 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.

 

Risks to Avoid or Manage before they become issues on Business Systems Implementations (SAP Specific)

November 28, 2013

Specifically, the SAP system has been implemented successfully in at least 50000 customers globally. The Majority of project failures are not related to the product or software but tied to the project execution, the software implementation partner or just the people themselves.

This brief will help you maximize your chances of a successful SAP implementation and you are more than welcome to discuss with me any specific questions you may have about managing risks on your SAP project.

Risks and issues are part of any and every major Business transformation project. Put in perspective of large business transformation projects which involve the larger ERP’s (SAP and Oracle) but not limited to, these risks and issues can be huge which could destroy the entire project if not managed and mitigated in a timely manner. Most of these risks and issues discussed here are applicable to any Business System implementation project. However, this brief is based on my several years of experience in leading, overseeing and participating in large ERP projects and also based on some of the projects that have not gone all the way to plan.

Most Common Risks on SAP Projects
These risks listed below are the ones that occur very frequently on a challenged or failed SAP project. There will be no reference to any specific project, but once you read through the risks you will probably be able to guess who and where the project may have been. The ERP Project world has become such a small place that everybody knows every bodies business.

Risk #1: SAP System not producing correct output or not working properly during UAT or post go-live
During UAT or post go-live, your organization realizes that SAP system is working correctly for certain business scenarios but produced inaccurate results for business scenarios with few deviations. You may also see unexpected behaviour of the system such as inability to execute end-to-end business process or cause systems short dump. This risk is common on SAP projects where business requirements have not been captured in detail or poor quality system design during realization phase or the business does not really understand their own process. Ideally this may also mean inadequate testing of your business scenarios.

Risk #1 Mitigation
 Ensure that business requirements gathered during blueprint phase are at sufficient level of detail that clearly describes your business process with examples. Verify that all business requirements are reviewed by the subject matter experts (SME) and approved by the business lead and/or business process owner.
 Ensure end-to-end business process in clearly documented in BPRD documents and process flows covering the most common business scenario as well as all the process variants. Verify that each BPRD document is reviewed and accepted by the SME(s).
 Validate that proper SAP software fit-gap analysis is performed on each and every business requirement. Each business requirement that is classified as “fit” should have corresponding SAP standard functionality covering the requirement or “gap” should have a RICEF object that needs to be developed to address the gap in the SAP standard functionality. This will mean that you have 100% coverage of business requirements with either a standard SAP solution or a RICEF object.
 Integration and User Acceptance Testing (UAT) should be very thorough to cover all end-to-end business processes. Each test case should be driven based on business requirements and business process. In other words, each business requirement should be tested with at least one test case. Most projects have test cases that only test most common business scenarios which can lead to system malfunction when there are variations in business process inputs or process step. It is very important that the test cases cover most common business scenarios and all its variations that represent your day to day business operations.
 Every SAP project should have a high quality requirements traceability matrix (RTM) that will ensure that your RICEFW functional designs and technical designs trace back to meet all business requirements associated with a specific software gap. RTM will also assure the business that each business requirements has a SAP standard solution, RICEF and further on a test case to test each of these requirements.

Risk #2: Project experiencing frequent delays in deliverable completions and slippage of deadlines by the Systems Integrator (SI)
Is your project experiencing severe delays with deliverables taking longer than expected? Are project deliverables submitted as complete not being truly finished and lacking detail?” One common risk on SAP implementations is that your Systems Integrator (SI) may take longer than anticipated to complete project activities and deliverables there by missing your project deadlines. If this happens, it can delay your project phase completion and also result in cost overruns. I have noticed that this risk mostly occurs when the project work effort is incorrectly estimated or SAP skilled resources from your systems integrator are inadequate and does not possess required solution expertise or experience. From programme governance perspective, this risk can be accurately monitored by having a good project plan with well-defined work breakdown structure that will provide visibility into key activities associated with production of essential project deliverables.

Risk #2 Mitigation
 First and foremost, I would recommend that your SAP project leadership and PMO should have a clear visibility to the progress of every key activity and deliverable completion on the project. In order to achieve this, it is important to have a project plan with a good work breakdown structure. This project plan should also be adequately resource levelled to ensure that SAP skilled, SME and project architects are not over resourced

Example: Blueprint phase work breakdown structure for a sample business process ABC may look like the following:
ABC Business Process

a). Requirement Gathering work sessions (AS-IS including a SWOT Analysis)
b). To-Be level 2 and level 3 business process design and Workshops
c). ABC BPRD (Business Process Requirements & Design Document), sign off to commence
d). Fit Gap Analysis
e). High level SAP Solution
f). BPRD and Requirement Review and Approval by the Business Stakeholders

PMO and program managers should review the weekly progress and identify any work streams that are facing delays and likely to be a bottleneck to overall project progress. Attempt to resolve the delays by hopefully increasing participation of SME or project architects. It may also be helpful if any outstanding unresolved items can be de-prioritized if these are not critical to business operations.
 Projects may also have SAP skilled consultants that lack required experience with a specific SAP module that is being implemented. In both these situations SAP customer leadership is unable to identify these kinds of issues because the leadership assumes that your SAP systems integrator is bringing the best SAP consultants to the project. To mitigate this risk, it is extremely important that your project leadership with the help of your SAP project advisor (third party SAP project leadership expert) interviews all systems integrator resources especially the business leads, solution architects, SAP consultants and team leads provided by SI.
 Most often the delays in SAP implementations are caused by under allocation of SAP skilled resources on the project. Ensure that your project has well balanced teams of SME (subject matter experts) from your business and SAP solution experts. Try to keep the resources from your SI like business analysts or systems integration analysts to minimum that do not have any prior SAP implementation experience. You are better off investing this money to have additional SAP skilled resources on project work streams to produce deliverables quicker.

Risk #3: Ineffective use of standard delivered SAP functionality due to lack to knowledge within consulting organizations

Predominately all SAP modules and industry solutions are proven to meet 60-90% of business requirements within a specific industry. This percentage of standard SAP package fit is higher with products that have gone through multiple release cycles compared to those that are just launched. There have been projects where systems integrators lack in-depth expertise of the modules that are being implemented. This results in poor quality SAP software fit gap analysis during blueprint there by resulting in higher RICEFW objects especially with enhancements. A few large enhancements can easily transform into custom development projects thereby blowing the project budget off the roof. I strongly recommend having a project solution architect with in-depth module knowledge or having a senior expert consultant from SAP or your local division of SAP to assure that your project is leveraging maximum standard delivered functionality.

Risk #3 Mitigation
The best way to mitigate this risk is to have representation of at least one senior consultant with product expertise from SAP. As a Project Manager I usually recommend this on most projects that are implementing a new industry solution of SAP. If the project does not allow extra budget for this resource, then one thing every SAP customer should do is to review the fit gap analysis output with SAP and solicit their feedback. This will help your project eliminate RICEFW objects where SAP might have standard alternative solutions.

Risk #4: Lack of business subject matter experts causing project delays
Business team members from the company implementing SAP play a very crucial role on the project. Each major business process or operational area should be represented by at least one subject matter expert who understands how the end-to-end business process is handled today and also how this process needs to work in the future. Inadequate business SME can directly impact quality and progress of requirements gathering, review and approval of to-be business process designs and verification of project deliverables. It is very important to ensure that your business provides required number of SMEs without jeopardizing you current daily production operations.

Risk #4 Mitigation
 In project planning or blueprint phase, meet with business stakeholders to ensure that each business process or operational area is represented with experienced SME. If required numbers of resources are not available, then it may be wise to split the project into multiple releases.
 Do not supplement your business SME needs with business analysts from your SAP systems integrator. Only your SMEs and business process owners understand business requirements. It may not be effective for an external consultant to fulfil this role without understanding your internal business operations.

Risk #5: Lack of confidence of business team in understanding and acceptance of blueprint and overall solution in SAP system
To me this is one risk that every executive and project sponsor of a SAP project should pay close attention. The ultimate goal of any SAP implementation is to transform current business operations into the new SAP system. It is very important that business subject matter experts, analysts and process owners understand the future state business requirements, new to-be business process flows, solution design in SAP and functional documents. If the business team is not onboard with requirements that are gathered during blueprint and solution design in SAP then your project is running a very high risk of business operations not working as anticipated upon go-live. I recommend that every SAP project leadership especially the executive project sponsor and overall project business lead to verify that business requirements, blueprint documents (process flows, BPRD documents, solution design and solution architecture) is reviewed and approved by SMEs, process owners and the business lead. This will ensure a high quality blueprint and realization of blueprint in design & build phase. Ultimately I also suggest that test cases cover all of your business processes and its variations.

Risk #5 Mitigation
 Key business team members especially SMEs should be part of business requirements gathering work sessions. SME should have clear understanding of to-be detailed business requirements, business process design and solution design in SAP.
 SMEs should review and approve each business requirement associated with their business process.
 SME and business process owners should review and approve process flows, business process requirements and design document (BPRD) and high level solution design created during the blueprint phase
 Client Solution Architect (not from your SI) should review, validate and approve the SAP software fit gap analysis and overall solution architecture. This task can be accomplished together by Client Solution Architect and your leadership QA advisor if you have one on the project.
 DO NOT approve any blueprint document or deliverable which is not 100% complete. Do not let your systems integrator invent the definition of “Complete” in order to meet project deadlines. Complete means the document is fully finished and needs no re-work unless there is a change request.
 Business team and stakeholders should have a full buy-in of the solution that is being designed and developed. All the steps above will ensure that you are heading towards a successful path rather than a mysterious avenue of uncertainties during realization and go-live.

Risk #6: Ineffective, rigid and political project leadership
On a very large undertaking like an SAP implementation, the project leadership plays a crucial role in the success of your project. It is not uncommon to see corporate executives (level of vice presidents and senior directors) in the project leadership who are slow decision makers, enforcing cumbersome decision making process when not needed and creating unnecessary political environment thereby causing bottlenecks and impeding project progress. I treat an SAP transformation initiative as a fast moving train and every project leader should adjust and cope with the pace of this train rather than slowing it. What I precisely mean is that lot of decision on an SAP project need to be made very quickly and issues should be resolved in an expedited manner. This will help tasks and deliverables on critical path completed in a timely manner without affecting dependent activities. I use this train example very often and suggest that every leader in a SAP project should be flexible, adaptive and work collaboratively with project leadership to meet one common goal of the project i.e. “Successful on-time and on-budget go live”. -individual decision making authority -always have leadership backup to expedite decision making -leadership and steering committee escalations if bottlenecks are causing project delays. Engage an independent leadership QA advisor to monitor resolve and escalate these issues without any influence of project or corporate environment

Risk #6 Mitigation
 Select project leadership (executive sponsor, business lead, IT lead, change/training lead and project management lead) from your internal organization that have proven track record of successful IT transformation implementation. Make sure these executives are flexible, capable of handling complex project challenges and able to make decision without causing bottlenecks on the project.
 One ineffective and political leader can bring the whole project down. Make sure that you have leaders that are excellent team workers and not the ones that are eager to demonstrate power and authority.
 Decision making on a SAP project (whether a business decision, deliverable approval or issue resolution) should not be solely in the hands of one leader. Depending on the work load, a project leader may have backlog of several key project decisions that need to be made which can ultimately become show stopper on the whole project. Project leadership decision makers should have backup individuals who can evaluate situations and make decisions in scenarios where primary decision maker is not available or lacks bandwidth.
 Critical project risks and issues should be proactively escalated to the project sponsor and the steering committee. Steering committee should also be presented with analysis, alternatives and possible solutions to risks and issues that are escalated.
 Communication is the key between the project leadership and it is important that there is full transparency about project key decisions, risks, issues and status between these leaders. On large SAP projects, I recommend that project leadership should meet at least once every week.
 Project Leadership should keep a “Anonymous Project Feedback & Suggestion Box” for project team members to provide project feedback, express concerns, raise potential problems and suggest avenues of improvement. This will ensure that major unforeseen project issues and challenges are reviewed and addressed in a timely manner. This gives every project team member irrespective of their role and title to voice their concerns or suggest improvements on the project.

Risk #7: Offshoring SAP design and build effort: Is it cost saving or risk doubling? Tighter control on resource skills, work quality and on-time delivery capability
Offshore development centres of big 5 and other SAP systems integrators have proven to be cost effective option to lower the cost of overall SAP implementation. The same SAP skilled resources that cost between $200-300 per hour onsite in the US can be available offshore in countries such as India, Philippines, Europe, etc for $30-70 per hour. This is a no brainer cost saving initiative for any SAP project. But off shoring your SAP project work comes with its own set of risks and challenges that clients in the US are not aware or often hidden due to lack of visibility thousands of miles away. Some of the major risks with offshore development centres are the following:
 Under-qualified resources in design and build teams
 Major discrepancies between actual deliverable progress versus the one reported in weekly project leadership meetings
 Lack of key senior SAP functional and technical key members on the offshore team which leads to critical solution quality risk.
 Language and cultural barriers leading to project work ethics being compromised which can lead major project delivery issues to go unreported and escalated till the very last minute
 Incorrect project progress reporting by offshore leadership to alleviate concerns and anxiety of project leadership.
 “Lost in translation” often business requirements are missed or misinterpreted and similarly functional designs and so on.
SAP customers such as your company does not have visibility and leadership control on what happens in the offshore development centre for your project. We realized this as a huge risk on many SAP implementations. Recently our company launched a new practice of “Offshore SAP QA & Advisory Leadership” which allows one of our experienced SAP senior executive to be your exclusive independent QA representative and work onsite at the project offshore delivery centre. This is not the focus here so if you need more information then you can reach our company.

Risk #7 Mitigation
The best way to make sure your project offshore team is transparent, effective and well qualified to deliver your project on time is to engage a third party SAP project QA advisor (one of our offering) that will allow a senior SAP industry leader to serve as your exclusive representative at the offshore location closely working with the offshore leadership, entire offshore project team and collaborating with your internal US project leadership. Remember that this resource does not work for your SAP systems integrator but for the SAP customer leadership. An Offshore SAP QA Project Advisor will mitigate all the risks mentioned above by doing the following:
 Interview and select each offshore project leader and team member by conducting project management, SAP functional and technical interviews.
 Ensure balanced SAP design and build teams with adequate number of architects, senior designers, developers with some room for junior SAP resources.
 Review project and deliverables progress with offshore SAP project manager and also conducting independent verification of these project deliverables.
 Ensure end to end SAP solution integration with collaboration between project teams across various work streams.
 Independently report project progress to project sponsor and leadership. Also proactively report offshore project risks, issues and recommend areas of improvements to deliver high quality SAP solution.
 Ensure that level of communication between business SME and onsite team members is appropriate so that business and SAP functional requirements are clearly understood.

Risk #8: Inaccurate or incomplete work estimation on SAP projects resulting in cost overruns and schedule delays
Several projects fail or end up being prolonged due to cost overruns as a result of work effort being inaccurately or incompletely estimated. SAP projects have been no exception to this situation. Work estimations should be done at various points on a SAP implementation. Blueprint work estimation should be done during project planning phase. After SAP software fit gap is complete and RICEF inventory is finalized, the work effort should be estimated for design, build, testing and deployment of your SAP system. So from where do these estimation risks surface? Often project estimators from the systems integrator do not include the client employees (SME, analysts, etc) that are required to be consulted or complete the deliverable. Estimates in producing a deliverable should include time required from SI as well as client resources. The work effort for SAP solution related items should directly be tied to a RICEFW object or SAP configuration object. Legacy or external systems remediation effort to integrate these systems with SAP should be added to the above estimates. Sometimes work effort associated with mandatory SAP work streams such as hardware setup, security, systems administration (SAP BASIS) and network administration is often missed. Note: Re-estimations should be done in early realization phase if you realize that RICEFW objects are taking longer than expected due to project cultural or operative barriers. This should ideally be resolved by project leadership and if not addressed can delay the entire project. There may be some RICEFW objects especially a select few Enhancements that are super complex and as such these should be estimated separately. Because these super complex objects may take much longer to be designed and developed.

Risk #8 Mitigation
 Make sure each RICEFW, configuration and other work object is classified as “High”, “Medium” or “Low” and work effort includes design, build and testing effort from system integrator as well as client resources.
 It may be a good idea to do parallel prototype of 2-3 RICEFW objects to convince the project leadership that RICEFW development can be optimistically delivered as per the estimates.
 Verify that project estimates include hardware setup, network administration, security and SAP systems administration effort.
 Estimates should also include duration based work effort components such as PMO, OCM/Training and testing.
 It is very important that “super complex” enhancements are estimated separately and not by the SI estimation tool. This will allow for accurate reflection of work effort for completion of these complex enhancements on the project plan.

Risk #9: Choosing an incorrect Systems Integrator with limited track record of successful SAP systems delivery in “specific SAP industry solution” can lead to project failure on multiple fronts
This is one risk that can be avoided if you follow the principles on which I basically operate on any SAP project. During early blueprint and there on your project leadership may realize that you have not chosen the best SAP systems integrator for variety of reasons. These reasons may include poor quality resources that lack proper SAP knowledge, project delays, and poor project execution and so on. It can be very painful and cost prohibitive to change your SAP systems integrator at the end of a phase and more so in the middle of a project phase. As such it is very important to carefully evaluate, verify and strategically engage a SAP systems integrator for your project during project pre-planning phase.

Risk #9 Mitigation
 Verify that SAP systems integrators (vendors) bidding for your SAP implementation have implemented specific SAP solutions at two or more customers in your specific industry.
 Conduct reference calls with these customers. Check how these vendors have performed on these other SAP projects. Was the delivery in line with original project budget and timeline?
 Ensure that SI or vendor partner and senior executives that will be part of your project also have been part of at least one of these prior SAP implementations. It is important that senior executives and client partners have successful track record in delivering SAP transformation projects in your industry.
 Include financial and corrective penalties in the Statement of Work (SOW) in case the project milestones or Q-gates are delayed.
 It is absolutely crucial to include clear and detailed scope of work in the SOW. SOW should not have any ambiguities that can compromise the successful delivery of project.
 Engage an independent SAP project advisors right from the beginning of the project if your project budget allows.

Risk #10: Inefficient Project Management Office (PMO) with poor project visibility, deliverable tracking, issues/risks management and communication shortfalls

This is one area where I have hardly compromised when setting my expectations from the PMO of the SAP projects that I served. PMO is the backbone of any IT transformation project and most of what is mentioned here about PMO applies to SAP as well as non-SAP projects. PMO should serve as the single source of truth to project an accurate project status at any point in time. It should provide full visibility to project status by presenting the clear picture of work activities, tasks and deliverables progress. I expect the SAP project manager and PMO team to work with individual business, IT and other teams and their underlying work streams to gather correct work progress and reflect the same in the project management tool such as MS Project. A highly effective PMO is the one that deploys, monitors and enforces the proper usage of tools and methods and properly manage time spent by project resources to deliver the tasks as per plan. PMO should ascertain that all project risks and issues are entered into risks and issues management tools and ensure resolution of these items in a timely manner as set in the project charters.

Risk #10 Mitigation
 Verify that PMO is working with good project plan with well defined work breakdown structure that depicts accurate progress of tasks and deliverables.
 Every week PMO team should work with team leads and update the project plan. Any delays in completion of tasks and deliverables should be reflected in the team leads weekly report and also highlighted in the weekly PMO meeting.
 SAP Project Manager (or also referred to as PMO Lead) should work with the programme manager or Project Director, project sponsor and independent project advisors to discuss project progress and also seek recommendations to bring project back on track in case of delays.
 In the blueprint phase, PMO must ensure that all business requirements, BPRD documents, SAP solution design, SAP solution architecture, organization change management strategy, etc are reviewed and approved by the business or IT lead and other corporate stakeholders.
 In the realization phase, PMO must ensure that each RICEFW functional and technical design, unit tests and UAT are approved by the customer business and IT teams.
 No deliverable should be set as “complete” in the project plan unless it is reviewed and fully accepted by the business leads.
 Project capital and expenses should be accurately tracked as per guidelines from leadership and CFO (Chief Financial Officer). Total project costs incurred should be reported on a weekly basis in the project leadership meeting.

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.

Adoption of sourcing technology – ease of use.

January 3, 2013

Organisations spend millions of dollars on technology implementations. It has been seen that many projects fail within one year of implementation. In a recently issued study report from the World Economic Forum 2010-2011, Sweden and Singapore continue to dominate the rankings, whereas Malaysia ranks 28th and Oman stands only 41st in terms of technological savvy nations. One of the reasons for this could be lack of adoption of new technologies within the organisation.

Employees using a new software system exhibit steep learning curves and resistance to change which is evident from the large percentage of organisations feeling their ability to deal with change being poor. Most of the time this failure can be attributed to a lack of communication between the decision maker (which in our case, would be the CPO or the VP procurement) and the end user(buying manager, buyers etc.). The point being, that such an environment is not conducive for effective software implementation.

Procurement technology solutions have also not been immune to adoption failure. Let’s take a look at a case study.

An $11 billion organisation had in place an existing eSourcing solution from a major solution provider. The investment for the same was close to $ 100,000 and there were 100 user licences which had been purchased. After a Post implementation review it was observed that there existed only 5 active users of the application whilst 95% remained inactive indicating lack of adoption amongst the users. More importantly, what was not considered was the comfort level of the suppliers who would be an important end user of the sourcing solution. Suppliers would not respond to RFIs created within the tool citing it to be too complex and would send in quotes through excel documents making evaluation almost impossible and tedious.

This post will explore the major challenges involved in adoption and how an organisation can use four strategies to overcome the adoption challenges and ensure acceptance of the eSourcing solution by the end users.

Challenges Faced!

Before I discuss the ways to increase procurement technology adoption within organisations, let us look into what are the major challenges that organisations face with respect to procurement technology adoption.

The first and foremost challenge is to deal with the resistance to change. Even when organisational members recognise that a specific change would be beneficial, they often fall prey to the gap between knowing something and actually doing it.

The second reason can be attributed to the complexity of technology which detracts the end user since it requires acquiring new technological knowledge and skills. Complex features may sound great in product demonstrations and data sheets but become a bane to adoption at the ground level.

The third reason could be a lack of visibility into benefits of the software post implementation. It’s important to note here that a benefit needs to be expressed in the parlance of the end user. The end user needs to see how the technology will benefit him in his job. In short what is the take away for him?

So how does one overcome these challenges? Here I would like to draw your attention to what I want to call the “For Ease Strategies” of efficient user adoption. These are – Ease of Use, ease of user Involvement during evaluation, ease of Training and Adoption and finally ease of Metrics & Incentives. Let us look into each of these “ease strategies” and the role they play in overcoming the challenges.

Overcoming challenges to procurement technology adoption is the key to ensure that an organisation reaps the benefits from their implementation. In this section I will discuss the importance of having the right strategy to overcome the adoption challenges.

Strategy 1. Ease of Use

As discussed earlier, complexity of technology was one of the major reasons for lack of adoption. This is where having a technology which is easy to use goes a long way in fostering acceptance among the end users. Let’s consider a very simple example here.
Consider an i-Phone or i-Pad as an innovation which although loaded with several sophisticated features is extremely easy to use for the end users leading to quick and higher adoption levels. Ease of use of course should not be at the cost of functionality.

Organisations should work on achieving a balance between satisfying all key core requirements and enhancing the user experience. While talking of ease of use, it is of utmost importance to speak from the perspective of the end users. Technology vendors and decision makers often confuse what is naturally easy for them as ease of use when discussing software.

Organisations must ensure that the new technology that they are planning to implement shall be easy to use not just for the stakeholders but the eventual users of the solution who will use it day in and day out. Technology must make things simpler for the end user.

Features need to be mapped with the needs within the organisation rather than looking at solutions which have the maximum number of features which don’t really satisfy the inherent needs in the process.

Strategy 2. User involvement

User involvement goes a long way in overcoming adoption challenges. User involvement can be accomplished by involving the end user in the initial stages of the software selection process. Users can be involved in the product demonstration process, which would help in conveying the benefits of the product to the end user for e.g. Using the ‘drag & drop’ feature within e-sourcing can be used to set up complex events in just minutes ensuring 100% category coverage. Demonstrating this to an end user will help convince him/her to create all events within the solution.

This process can now be followed up by a pilot process involving the end user. This would further convince the end user regarding the benefits by understanding how a particular feature directly benefits him in his work process.

Once the user receives a hands-on demonstration of the tool’s capabilities, make sure to have a feedback about the experience. Such an activity would ensure greater buy-in from the end user and also considerably reduce the objections arising post implementation.

Strategy 3. Training

Training should be arranged both pre and post implementation.. The training can be conducted by a variety of means . Combining periodic on-site training with regular feature level training provided online in the form of user sessions, webinars etc. is the most effective way of achieving user adoption goals. It is recommended to have the vendors / Suppliers involved at every stage of training to ensure a constant communication between the end user and the trainer.

Ideally there should be a training council formed comprising of members from both the vendor / Supplier and organisation. Once the training is conducted organisations can also look at conducting product knowledge tests and quizzes. This has dual benefits;

1. Makes the end user more responsible
2. Helps in judging the effectiveness of the training sessions

Strategy 4.

Once the technology has been implemented, top management needs to sit with the end user and decide on how to measure the performance of the end user. Including the end user in setting performance goals inculcates a lot of responsibility and accountability among the end users. Organisations must ensure setting fair, consistent and rigid goals which are transparent in every sense. I offer an example of how this could be accomplished.

Example 1. Consider an organisation who has just implemented an eSourcing solution. Suppose the organisation has 50 sourcing events scheduled to take place in the year. One of the check points could be to see how many of these sourcing events were channeled through the eSourcing platform. With deliberation organisations can set a goal of 80% of the sourcing events to be conducted through the e-sourcing platform.

Or another example

Example 2. If an organisation enters into say 100 contracts in a year, one of the objectives would be to have say 90% of contracts under the contract management system.

Once the objectives have been set by deliberation with the end user, the next logical step could be to link the incentives of the users with the objectives set. A simple incentive can be percentage sharing of the savings achieved from implementation of the solution. These can be benchmarked with similar numbers before the software was implemented to derive the results or direct benefits from the solution implementation.

Managing Change.

A learning orientation is critical during implementation stages. This brings us to the next point which is concerned with managing change. In order to successfully manage the change process, I recommend the following four steps:-

Inform

Brief the end user about the new technology and involve the end user in the evaluation stages.

Educate

Educate the end user about the product in the form of product training, workshops (video, onsite etc), webinars etc.

Monitor

Devise mutually accepted metrics for measuring the performance of the end user post implementation.

Reward

Linking the objectives with incentives, with disbursement of incentives related to the objective met.

Conclusion

Companies must do away with persuasion and edict as part of technology implementation and adoption processes since both involve little or no user input in decisions regarding implementation and adoption. Also, change management is the key to ensure buy-ins from the various related stakeholders thus ensuring benefits from the technology implementations.

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.

Supply Chain Performance

December 27, 2012

In recent months I have been asked to define Supply Chain Management for people that still do not really understand what it is and what I do as a supply chain management consultant, so for your benefit here is a brief explanation and how it drives all businesses today. Without a good Supply Chain Management Strategy in place there is a distinct risk of misalignment or failure of the overall business.

Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It also includes all of the logistics management activities, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.

Having looked at the Supply Chain management model, one has to ensure that it is performing as well as it can, therefore Performance Monitoring is an absolute must in businesses today! What do I need to look at to ensure my Supply Chain is performing?

There are predominately five Supply Chain performance attributes: Reliability, Responsiveness, Agility, Costs, and Asset Management. Consideration of these attributes makes it possible to compare an organization that strategically chooses to be the low-cost provider against an organization that chooses to compete on reliability and performance.

Reliability

The Reliability attribute addresses the ability to perform tasks as expected. Reliability focuses on the predictability of the outcome of a process. Typical metrics for the reliability attribute include: on-time, the right quantity, the right quality. Reliability is a customer-focused attribute.

Responsiveness

The Responsiveness attribute describes the speed at which tasks are performed. Examples include cycle-time metrics. Responsiveness is a customer-focused attribute.

Agility

The Agility attribute describes the ability to respond to external influence and the ability to change. External influence include: Non-forecasted increases or decreases in demand; suppliers or partners going out of business; natural disasters; acts of (cyber) terrorism; availability of financial tools (the economy); or labor issues.  Flexibility and Adaptability can be included as KPI’s. Agility is a customer-focused attribute.

Cost

The Cost attribute describes the cost of operating the process. It includes labor costs, material costs, and transportation costs. KPIs include Cost of Goods Sold and Supply Chain Management Cost. These two indicators cover all supply chain spend. Cost is an internally focused attribute.

Assets

The Asset Management Efficiency (“Assets”) attribute describes the ability to efficiently utilize assets. Asset management strategies in a supply chain include inventory reduction and in-sourcing vs. outsourcing. Metrics include: inventory days of supply and capacity utilization. KPIs include: Cash-to-Cash Cycle Time and Return on Fixed Assets. Asset Management Efficiency is an internally-focused attribute.

Supply Chain Relationships

December 26, 2012

Over many years in Supply Chain Management I have had to understand how supply chains are actually structured, there is a clear similarity across all the supply chains irrespective of the industry being researched. I have spoken with many CEO’s, CPO’s and CFO’s and they have all told me “in our industry we do things differently”. I am sorry to say that this is not the case! So we have pretty much a situation where every industry does the same thing and has standardization in processes, so what makes things different? The main difference is each of the supply chains are the strategies we use and our relationships with our supplier base. How we choose a strategy and how we work with our suppliers defines who we are as a company and how the supplier network regards us.

Success in our supply chains relies heavily on the relationships with our partners. How well do you work with your suppliers? Contract manufacturers? 3PL and 4PL partners? These relationships hold the key to a well made product or service delivered to your customer on time and within cost.

The first step in this journey is to understand which suppliers you need to have strong relationships with. Just as in our social and professional lives where we know many people but spend most of our time with a few select friends and colleagues, your business has many suppliers but only needs close relationships with a few. So where should you develop your close relationships? The answer lies in your business plans and supply chains. Look for those suppliers that represent a significant portion of your spend, provide critical components, or support strategically important product or service lines. These are the companies that you want to be close with.

Close relationships don’t just happen, and they do not just involve your procurement personnel and their sales force. Relationships should begin with product or service design, making sure that the supplier’s role in producing the product or service is clearly understood and fully integrated with the overall product/service design and specifications. There also needs to be a shared understanding of the production and supply chain objectives as well as roles and responsibilities. Finally, a good relationship relies on communication, including understanding who to call and making sure the phone is answered. Open communication is built on trust and respect. In every supply chain, things go wrong, working with partners means understanding that and working together to resolve the minor issues that arise. Penalties should be reserved only for the major transgressions.

So, how are your supply chain relationships? Spending your resources and time with the partners that will generate the most benefit is critical to improving your supply chain and delivering better products and services to your customers.