Acquiring e-sourcing and e-procurement Technology What Questions Should You Really Ask? by Michael Lamoureux, Ph.D. Editor-in-Chief, Sourcing Innovation http://blog.sourcinginnovation.com/
Webinar Overview The e-frenzy, in Review The e-platforms of Major Concern Your e-journey The e-platforms Addressed A Note of Caution Vendor Selection Key Questions for S&P Technologies One Final Point of Advice
e-negotiation It s an e- frenzy out there! e-sourcing e-rfx e-procurement e-invoicing e-auction e-contract
But not all e- s are the same! e-negotiation e - Sourcing e-contract Management Decision Optimization e-auction e-rfx Spend Analysis Invoice Goods Receipt Reconciliation Purchase Order e - Procurement Payment Source-to-Pay Approval Tax Reclamation Requisition Analysis Sourcing Innovation, 2007, 2013
The e-platforms of Major Concern e-sourcing e-procurement e-trade e-logistics P2P S2P
Your e-journey Start at 30,000 feet and identify challenges Dive to 10,000 feet and identify cause(s) Glide to 1,000 feet and find the process and technology gaps Identify the e-solutions that may be capable of filling the process and technology gaps
Your e-journey explained For example, if your biggest challenge is: identifying savings opportunities & categories for sourcing events then you need to determine if this is because you have a problem gathering data, analyzing data, building should cost models, or identifying category targets.
Your e-journey explained If your problem is: gathering data? you might need a data store or integration effort analyzing data? you likely need a good spend analysis solution identifying category targets? you might need category expertise and a BI solution building should-cost models? you might need a decision optimization solution
will often lead to a Major e- e-sourcing e-procurement P2P (Procure-to-Pay) S2P (Source-to-Pay and these are the solutions we will focus on in this presentation.
A Note of Caution Vendors use the same e-terms differently There are commonalities between use, but they are not always consistent It s important to understand what is common and what is not
Vendor Selection The Real Overview Key Points of Consideration List the Potential Vendors Send them the Business Needs RFI Disqualify those that can t serve the business Define the Functional Needs Send those that remain the Full RFP Disqualify those without core functional abilities Build the Cost Models Judge the Responses Meet with the Top X that make the cut
Key Points of Consideration C-Suite Support is Vital or you won t get past the requirements gathering Don t Forget IT or don t be surprised when you get backstabbed Preferred Vendors are best organizationally, not who is best for Engineering, Marketing, etc. Trade Rags & Analysts Give you Bad Vendor Lists they have to promote who pays them There s always multiple options (BoB, BoB-on-ERP) and multiple delivery methods (On-Site, ASP, SaaS)
Key Points of Consideration It doesn t matter how strategic the vendor is only how strategic its solution is to your business It s not best practices it s best-fit practices Never disqualify for minutia only for megutia Stakeholders don t know what they need only what they need done
List the Potential Vendors The Vendors should advertise even in a down market and be on the tips of peers tongues and be given some positive promotion and be mentioned by the analysts with some not-negative comments
The Business Needs RFI What countries do you do business in? What currencies, laws, and regulations need to be supported? What languages do your, and your supply base, need to be supported? What support services do you require? What geographies do you need help in?
The Business Needs RFI Continued Supplier Qualification. What is the supplier s background? (formation, product history, etc.) ownership and financial situation? office situation? operating culture? and who are the supplier s competitors? customers (that you can talk to)
The Functional Needs From a back-office perspective (Finance, Procurement, & IT), From a stakeholder perspective (Engineering, Marketing, etc.), and From your supplier perspective (What is the Tech. Level of Competence) And Chuck the Checklist. RFP Templates are Poison Pills.
The Full RFP Outline the full RFP selection process Outline the Functional Needs focus on the processes that must be supported Define any necessary integrations and any standards that must be adhered to Ask what is required to get the full benefit 3 rd party system integrations, specialized training, supplier onboarding, etc. Where will you likely be in 6, 12, 24, 36 months? Who needs to be trained and how long will it take? What is the full cost breakdown over 1, 3, 5 years?
The Cost Models On-Premise, Hosted ASP, and SaaS/Cloud require different cost models The cost should be computed for 1 year, the number of years you expect to keep the platform, and +/- 2 years to understand the total cost of ownership
On-Premise Cost Model License Cost (Up Front) Maintenance & Support (Annual) Dedicated Server Costs Supporting Software Costs Implementation & Customization Costs Integration Costs Training Costs (Up-Front) Internal Support Costs Major Software Upgrade Costs Hardware Upgrade Costs (Re)Training Costs (on Upgrade)
Hosted ASP Cost Model Annualized License and Maintenance Cost Annualize Hosting Cost Major Software Upgrade Costs Implementation & Customization Costs Integration Costs Training Costs (Up-Front) (Re)Training Costs (on Upgrade)
SaaS / Cloud Cost Model Annualized License, Hosting, and Maintenance Cost Implementation & Customization Costs Integration Costs Training Costs (Up-Front)
Judging the Responses Core solution litmus test Willingness to adapt End-to-end total cost of ownership elucidation Third party claim verification Open-book negotiations Open finals
Don t Forget the Gotchas e-sourcing and e-procurement Technology is mature and most functions commoditized The ROI of any solution should be quantifiable, measurable, and known to the vendor An Uncombed Contract is Full of Thorns - toothless SLAs - exorbitant gratuities for that free-lunch - hidden future costs - meaningless escrow The Big Lie asking a vendor if they can provide X after they are shortlisted will almost always elicit a yes even if the vendor cannot; always ask how they solve X-Prime
Key Questions for S&P Technologies We will cover some key questions for: Spend Analysis RFX and Auction Optimization Contract Management e-procurement Supplier Networks & Catalogs e-payment
Spend Analysis Questions How much flexibility do I have in spend cube creation? How should I deploy spend analysis? What if I am resource constrained, and I need to outsource spend cube services? How much reporting flexibility do I have? What should I know about data cleansing? Does the tool support derived and ranged dimensions? Can the user fix any desired set of filters while pivoting and drilling? What if I have multiple accounting systems? How easy is it to get data in and out of the system? How much knowledge is captured in the application? How easy is to to change and add reports on the fly?
RFX & e-auction Questions How much flexibility do I have in form definition? Can I build advanced sourcing grids? Can the forms be completed by the vendors off-line? Are the forms secure and uniquely identified? How easy is it to export the response grids for analysis? Can I define my own bid type(s)? Can the tool support complex formulas, splits, and crosslot rankings? Does the tool integrate with an optimization solution?
Decision Optimization Questions Are the four pillars of strategic sourcing decision optimization satisfied? 1) Sound & Complete Mathematical Foundations 2) True Cost Modeling 3) Sophisticated Constraint Analysis Capacity/Limit; Basic Allocation; Risk Mitigation; Qualitative 4) What-if Capability? Does the application support the creation and comparison of multiple what-if scenarios? Does the application automatically identify the most constraining and costly constraints? Does the application support the automatic creation and solution of relaxed and perturbed scenarios? Does the application support make-vs.-buy and arbitrary product substitution?
Decision Optimization Questions Continued How fast is it for different average model sizes? If it supports "real-time" is it "true" real-time or "near" realtime? What situations have you encountered where you could not model the situation exactly? Can we do a pilot project before committing to a long term license?
Contract Management Questions Does it allow you to define your own meta-data dimensions? How easy is it to export the meta-data, or any desired subset, in a standard format recognized by other Sourcing/Procurement apps? Does it support free text search? And does free text search work? Does it support proactive alerts - on contracts NOT composed using the standard templates or built-in functionality? Does it support buy-side and sell-side contracts? Is it easily accessible and usable by everyone in the organization? Does it support the creation and management of initiatives such as risk management and IP-based revenue generation around your contracts? How hard is it to get the data AND contracts out of the solution?
e-procurement Questions Does it support requisitions, orders, goods receipts, invoices, and m-way matching in an integrated fashion? Does it integrate with a modern supply/commerce network offering that lets you and your suppliers manage your catalogue and pricing? Does it integrate with your payment system and allow payments to be correlated to invoices? Does it support true end-to-end invoice automation?
Supplier Network / Catalog Questions Does the solution support integration with your suppliers' current solutions? What's involved? Does it support the integration of multiple catalogues into one coherent view? Is it expensive for suppliers to use the supplier network / catalogue management solution? How did you amass all of the suppliers currently in your network? Does it allow for override pricing based on business rules? Can the solution be integrated into our current e-procurement platform?
e-payment Questions Does it integrate with our ERP and/or e-procurement Platform? Does it integrate with our AP system? What level of volume can the system support? Does it detect duplicates? Does it support early payment discounts? What is the true cost of the system? How are rejected transactions managed? What types of payment are supported?
One Final Point of Advice Make the Decision Committee-Based Don t be ruined by Maury the Management Moron Look at that nice flash interface with fancy dashboards and full color graphical reports. It s obviously a superior product. After all, how else would MoneyPit have all of our "big-name" competitors as customers? http://blog.sourcinginnovation.com/2012/10/23/why-your-peers-buy-stupidproducts.aspx
And If You Need RFP Help Sourcing Innovation would like to remind you that there s RFP HELP HERE! http://blog.sourcinginnovation.com/2008/09/10/reminder-rfp-help-ishere.aspx
Thank You! Any Questions?
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Have a Great Afternoon! the doctor has left the building!