On-Demand Supply Management: World-Class Strategies, Practices and Technology

by Douglas Smock

Overview

Technology offerings for supply management are changing rapidly. To outpace the competition, today's firms must be able to understand and implement the latest advances. This book explains how to incorporate the use of supply management technology into advanced sourcing practices to produce significant competitive advantage. On-Demand Supply Management offers new tools and advice to facilitate the internal technology debate between procurement, IT and finance executives to enable faster adoption of the correct strategies and tools to lower procurement costs and improve bottom-line results. It also provides a practitioner's view of decision-making processes and adoption challenges that come with constantly evolving technologies. The authors examine IT investment (including make or buy), training, supplier relationship management, corporate governance issues (including Sarbanes-Oxley) and which metrics must be in place for success. This book is a must read for anyone involved in procurement and supply management, and for executives in finance, information technology, manufacturing and R&D.

Product Details

ISBN-13:	9781932159622
Publisher:	Ross, J. Publishing, Incorporated
Publication date:	02/01/2007
Pages:	328
Product dimensions:	6.00(w) x 9.00(h) x 0.90(d)

About the Author

Douglas A. Smock is Editorial Director of GlobalCPO.com, an online source of procurement analysis and best-in-class practices. Previously, Doug was Editor-in-Chief of Purchasing Magazine. During his tenure, the magazine received five national awards for editorial excellence from the American Society of Business Press Editors. No other publication in this field had ever won even one of these awards. During his career, he also served as chief editor of Plastics World, Associate Publisher of Modern Mold and Tooling at McGraw-Hill, and staff writer for the Pittsburgh Post-Gazette. He founded and produced the Urethanes Report and High-Tech Molding newsletters and has won or supervised staffs that earned three Jesse Neal awards - one of the most prized awards in the industry that recognizes editorial excellence in independent business publications. He is co-author of the supply management best-seller Straight to the Bottom Line. Robert A. Rudzki is President of Greybeard Advisors LLC, a firm that assists enterprises improve their financial performance. He is also a director of a privacy and security software company, and is an Advisory Board member of several companies. Previously, Bob was Senior Vice President and Chief Procurement Officer at Bayer Corp., where he led a nationally recognized transformation effort. Prior to that he was an executive of Bethlehem Steel Corp., which he led to recognition from Purchasing Magazine as a Best Places to Work, and a top-quartile ranking in a best practices survey of 160 global corporations. In the course of his career, he has held various executive management positions, which included finance, accounting, procurement and logistics, business development and P&L responsibility. He is co-author of the supply management best-seller Straight to the Bottom Line. Stephen C. Rogers is currently a Senior Consultant with The Cincinnati Consulting Consortium where he specializes in purchasing and supplier management. He is also the Program Director of The Conference Board's annual SRM Conference and an adjunct professor at Xavier University. During his 30 years at Procter & Gamble, Steve had functional roles in Purchasing, Manufacturing, and Marketing with both domestic and global responsibilities, including development and expansion of global sourcing efforts, redesign of the Folgers Coffee supply chain and leadership of P&G's worldwide Purchasing training system. He was awarded a career Sourcing Award, recognizing his role as P&G's "father" of strategic sourcing and in delivering in excess of $1 billion of hard savings during his time there. He has written several articles and spoken at a number of forums on supply related topics and is on the advisory board of a software company.

Table of Contents

Foreword   Robert F. Cervenka     xix
Preface     xxi
Acknowledgments     xxiii
About the Authors     xxv
Web Added Value     xxix
Getting Started
The Demand- and Technology-Driven Supply Chain     3
Procurement and Supply Management     4
A Defined Role and Focused Objective     4
ROIC     4
Inclusive Supply Management Strategy     5
The Right Foundation     5
Evaluation and Selection of Technology     6
Making the Technology Decision     8
Pitfalls     8
Using the Tools     8
Readiness     8
After the Technology Decision     9
Closing Thoughts-Technology and Competitive Advantage     10
The Basics Plus
Spend Analysis-Start Your Engines     13
The Kennametal, Inc. Experience     14
The Company     15
The Investigation     15
Product Codes     16
The Classification System     16
The Results     18
Spend Visibility     18
Benefits     18
Limitations     19
Recommendations for Success     19
Solution Selection     20
Spend Knowledge     21
Closing Thoughts about Spend Analysis     22
Understanding Uncle Sam's Spend     23
Lessons Learned     24
Sourcing Strategy-The Brains Behind the Game     25
Strategic Sourcing versus Sourcing Strategy     26
Understanding Leads to Strategy     27
Technology and Standard Processes     27
Gaining Understanding-Supply and Demand Analysis     29
Market Services Subscriptions     30
The Cargill, Inc. Experience     31
Pitfalls     32
Strategic Use     33
Choosing the Tools     34
Gaining Understanding-Suppliers and Industries     34
LexisNexis     35
The P&G Experience     36
The Value of Information     37
Gaining Understanding-Buyer/Seller Market Dynamics     37
Cox's Methodology     38
The Concept of Power     38
Analyzing the Balance of Power     39
Closing Thoughts-Sourcing Strategy Is a Mental Game     41
Lessons Learned     41
Going to Market-Electronic Supplier Engagement     43
Reverse Auction-Strategy Considerations     44
e-RFI     45
Using Information     45
Making Decisions     46
Reverse Auction-The Bidding Process     46
The Electronic Sealed Bid     46
The Classic Reverse Auction     46
Considerations and Limitations     46
Evolution     47
Prequalification     48
Bid Lots     49
Transparency     49
Bidding Techniques     49
Closing Thoughts about Resistance     49
Reverse Auction-The Rules of Fair Play     51
Optimization-Going to Market with Complexity     53
Tool Adoption-Barriers to Optimization     54
Software Capability and Complexity     54
User Maturity, Expertise, and Philosophy     56
The Maturity Factor-The Motorola Experience     57
The Complexity Framework     59
The Complexity Factor-The P&G Experience     62
Closing Thoughts-Supplier Relationships and Optimization     65
SRM-Bringing Home the Value     67
SRM-The Genesis of Confusion     67
The Practitioner Side     68
The Software Side     69
SRM-From the Practitioner's Perspective-A Definition     70
SRM-e-Tools     71
Supplier Performance Management-Data, Tracking, and Metrics     72
Software     72
Supplier Scorecards     73
Nonquantifiable Factors     74
Supplier Relationship Support-Tools and the People Part     75
Relationships and Sourcing Strategy     76
Interpersonal Interaction and Partnersmith     77
The J&J Experience     77
The BCBSRI Experience     78
Gaining Insight-Niche Tools     79
SurveyMonkey     79
General Idea Software     80
Closing Thoughts-Supplier Segmentation and Applying the Tools     81
Lessons Learned     83
P2P-Where e-Procurement Meets Accounts Payable     85
The Building Blocks of e-Procurement Success-A Kitchen Table     87
User-Friendly Interfaces     87
Smart, Practical Sourcing     88
Staffing     88
Channel and Tool Choices     89
Policy Compliance     90
Supplier Enablement     91
Catalog Management     91
Real-World Application     92
The Table Top-Constancy of Purpose     93
The HP Experience     93
The Pfizer, Inc. Experience     94
Closing Thoughts-The Accounts Payable Interface-Do Not Drop the Ball!     96
Lessons Learned     99
Contract Management-Documenting and Using the Deal     101
Contract Management-A Corporate Priority     102
Contract Management-Systems     104
Closing Thoughts about Contract Management     106
Lessons Learned     107
PLM-Everyone Gets Together     109
PLM-Internal and External Collaboration     110
PLM-The Lucent Experience     110
The Transformation     111
Consistency     111
Leveraging     111
Outsourcing     113
Software Utilization     113
Network Architecture     113
The Results     114
Supply Base     114
Inventory     114
Pricing     115
Quality     115
The Pros and Cons     115
The Metrics     116
Enabling Software     116
PLM-The J&J Experience     118
PLM-Internal Data Management     118
Bills of Materials     119
Product Records      120
Bidding     120
Collaboration     120
PLM Software-An Added Bonus     123
Closing Thoughts-What Is Next in PLM?     123
Lessons Learned     124
Should Cost-From Spreadsheets to Science     125
Cost Accounting Systems     126
Traditional Accounting Systems-The Challenges     126
Software Solutions     128
Understanding Costs     129
Supplier Pricing Verification     129
An Inward View     129
Cost Modeling     130
Using Should-Cost Systems     131
Costimator-The IBM Experience     132
Cost Estimating-The Challenges of Functional Isolation     134
CAD-The Akoya Experience     135
BDI Software-Current versus New Design Analysis     136
Closing Thoughts about Should Cost     136
Lessons Learned     137
Services-The Hidden Gem     139
Software Products and Solutions-Services Management     140
Travel and Entertainment Expense     140
Telecommunications Expense     141
The Workforce     142
Nontraditional Spend     142
Adopting a Services Model-The JCI Experience     143
Closing Thoughts about JCI     144
Governance and Risk-Living in a Regulated and Dangerous World     145
SOX-What Does It Mean on the Supply Side?     146
Accuracy and Timeliness     147
Process and Organizational Requirements     147
Electronic Access and Separation of Duties     148
Operational Risk-The Second Half of the Governance Issue     150
Savings versus Disruptions     150
Planning     150
e-Tools and Risk Assessment     151
e-Tools and Import/Export Management     152
Supply Chain Security     153
RFID     154
Supplier Financial Risk     156
Assessing Risk     156
Banking-Federal and Industry Regulation     157
Closing Thoughts about Risk Assessment     157
Lessons Learned     158
The On-Demand Supply Chain-What Is It?     159
On Demand-Supply Chain versus Software     160
The Whirlpool Corporation Experience     161
Customer Requirements     162
Sales and Operations Planning     163
Challenges     164
Closing Thoughts-The Benefits of Being Demand Driven      164
Lessons Learned     165
Business Darwinism at Work
On-Demand Transformation-IBM     169
IBM History     170
The IBM Transformation     171
Purchasing and Product Development Processes     172
The Dysfunctional Phase of the 1990s     172
The Internal Supply Chain     173
Procurement and Design Processes     175
Standardization     175
Governance     176
Supply Metrics     177
Supplier Relations     178
Core Suppliers     179
A Virtual Network     179
Relationship Challenges     180
Data Management     181
Closing Thoughts about IBM     182
Lessons Learned     183
Tool and Die-The Tortoise or the Hare?     185
The Die Maker Was King     185
A State of Change     186
Rethinking Quality Requirements     188
Moving to Functional Build     189
Measuring Repeatability     189
Gaining Efficiency and Competitiveness     190
Closing Thoughts-The Future     191
Lessons Learned     192
Now Do It!
Money-Making the Business Case      195
Strategy     196
Participants     197
Technology Evaluation     198
Situation Analysis     198
Vendor Selection     200
The Business Case     200
Hard and Soft Benefits     201
Other Considerations     202
Closing Thoughts about Business Case Analysis     203
The Sandbox Technique     203
Lessons Learned     204
Master Planning-Creating and Following a Practical Blueprint     205
The Master Plan     205
Tools-More than Just Functionality     207
Determine Focus     207
Processes First, Then Tools     208
Procurement Transformation-The GSK Experience     208
Choose Tool Providers     210
Pros and Cons     210
Due Diligence     212
Costs-Price the Tools, Get the ROI, Manage the Costs     212
The Organization and Time-Absorption and Promotion     215
Closing Thoughts-The Rest of the Story     216
Lessons Learned     218
Adoption-The Real Measure of Success     219
Cultural Change     219
The Initiation Stage     220
Leadership Alignment      221
Tool Selection     222
Organizational Emotion and Success     222
Adoption Measures     223
The Reinforcement Stage     225
Maintain Constancy of Purpose     225
Anticipate and Manage Expertise Erosion     226
Adopt Sustaining Measures     226
Closing Thoughts-Using Tools to Drive Tool Change Management     227
Lessons Learned     228
Education-Training the Tools and Tools for Training     229
Training the Tools     229
Tool Suppliers as Knowledge Expanders     231
Provider Infrastructure     232
User Infrastructure     232
Provider Training Options     233
Tools as Trainers     234
The Administrative Side     234
The Content Side     234
Intranet Tools     235
Lessons Learned     236
Goals and Measurements-Defining Winning     237
The Goals and Measurements Discussion     238
Organizing the Topics     238
What Should Be Measured?     239
Implementation and Metrics     240
Closing Thoughts about Measuring Progress     242
The Future-Crystal Ball Gazing      243
The Role of Technology     244
Data-The Base     244
Mathematical Analysis-The Power of "What If" and "Why"     244
Economics-The Affordability Factor     245
Capabilities-Ever Evolving     245
Challenges     246
Time and Turnover     247
Complacency     248
Corporate Culture     248
Closing Thoughts about Change     248
Epilogue. Personal Words from the Authors     251
Example of a Request for Information for Supply Management and Procurement     257
Source Notes     275
Index     285