Supply Chain Management

In a Sourcing team meeting at a client I recently worked for, a senior Sourcing Manager lamented that instead of “Sourcing” they were merely consolidating suppliers. A pretty insightful statement! And it is true for many organizations where the central focus of “Sourcing” is just to achieve greater volume leverage during negotiations, and using that leverage to get a better purchase-price from a subset of incumbent suppliers. This pure ‘purchase-price reduction by supplier consolidation’ approach does have its merits, but is this what sourcing is all about?

The best-in-class Sourcing organizations do not think so. For them, Sourcing starts way early, with an analysis of spend by categories, and the creation of a sound organizational sourcing strategy which also places emphasis on factors like cycle times, standardization, compliance etc., rather than just purchase price. This is followed by prioritization of sourcing categories, supplier prospecting, and an RFx process that adheres to the sourcing strategy. The result being that such organizations are able to identify and establish a long-term, high-benefit relationship with suppliers which helps achieve lowest total cost, and gives best results on product development, quality and services. The pure purchase-price saving on goods and services is just one of the many benefits.
 
The client that I quoted earlier, is already on its way to become a “sourcing organization”. Using simple IT tools, they now have a clearer understanding of their spend categories. This has led to a better prioritization of categories for sourcing. An emphasis on long-term supplier relationships has opened up opportunities for collaboration in new product development while inclusion of non-cost parameters in RFx scoring has ensured that quality and compliance are not compromised upon. And yes … the pure purchase-price savings are getting better too.

Posted by Sameer Prashar at 05:54 AM | Permalink | Comments (4) | TrackBacks (0)

In my last post on this blog I had talked about Supply Chain being a strategic lever in a declining economy. I had indicated that one of the key areas for companies to focus was in managing Supply Risk in a robust manner to accommodate shrinking capacities and supply failures.  I think that Supply Risk is a fairly complex variable which is not always looked at unless an enterprise faces “supply failure”. In this posting I wanted to try and disaggregate Supply Risk to a degree and provide a framework to think about it.

Let’s consider the example of the automotive industry in the United States. A significant fall in demand due to the economic recession has led to unprecedented reduction in demand from all the major automotive manufacturers. The Automotive value chain supported a substantial supply chain [$ trillion/ X% of US GDP]. These suppliers predominantly supplied GM, Ford and Daimler Chrysler; but also supplied in a small measure to ancillary industries. There are multiple instances where companies that depended in some measure on this vast network of suppliers are now subject to significantly greater supply risk.  Say a GE Wind buys heavy duty, high precision bearings from the same supplier that supplies crankshaft bearings to GM for for automotive engines – understanding these risks is key to managing Supply Risk effectively.
Value Chain Risk
1. Capacity for a product of strategic importance [Volume or Value]
a. Available capacity in market versus demand
b. %age Capacity committed to buyer
c. Exposure to other industries
2. Strength of supplier fundamentals
a. Sustainability of supplier’s economic model
b. Relative position in peer group
c. Investment in product development and growth

Supply Chain Risk
1. Commodity type supplied by the supplier [Strategic/ Leverage/ Routine/ Bottleneck etc]
2. Relative supply performance
3. Strength of relationship
4. Exit barriers [for buyer]
a. Product Development and Design IP ownership
b. Specialized tooling [since high cost, depreciated tooling is valuable]

Country Risk
1. Currency Risk [driven by local economy]
2. Political Risk [buying from Africa for example]

The critical question most companies are asking – and there are more and more everyday in this economy – How do we understand what our Supply risk is? How do we manage it down or mitigate it? I would propose that any discussion of this Risk in particular has to be in context of impact on Buyer [your client or employer] in the event of a possible failure of supply, either voluntarily by supplier or through supplier going bankrupt.  

Having established the context, I would propose that this risk has to be evaluated in context of the entire supplier base, commodity strategy and lastly at the level of an individual supplier. All three steps are essential [to some degree] to successfully understand and mitigate risk.
Step 1: Supplier Base Assessment
This essentially is a high level assessment of the entire supplier base. Assessing risk across a buyer’s supplier base is important as it quickly identifies primary drivers of risk and allows buyer to focus on mitigating the highest risk elements first.

Step 3: Commodity Strategy
Evaluating Risk in context of commodity should be a critical component of establishing a winning commodity sourcing strategy. The key questions answered here are:
1. How much of buyer spend [e.g. high pressure oil seals for a Hydraulics Manufacturer – a critical item] is focused on a single supplier?
2. How much of the lead supplier’s capacity is committed to buyer?
3. What alternative sources of material does buyer have?
Strategies for “Strategic products” versus “Routine” or “Leverage” products are very different.

Step 2: Supplier Performance
Supplier performance is a key input into the evaluation of risk from a performance failure standpoint. These are fairly well understood and part of most supplier performance management systems

Mitigation strategies
Do not be the company that discovers they have unaccounted for risk in the supply chain when a strategic supplier you place a purchase order is no longer in business! Mitigation strategies range from having a supplier performance balance score card closely monitored through a real time dashboard [Tactical] to a fully functionality Supplier Accreditation program [Strategic].
While the tactical approach addresses the immediate risks, it does not provided adequate insight into the future. Additionally, the performance score card is fairly transactional in nature. Most suppliers will not share information that they are at financial risk voluntarily. They may continue to perform well till the last day of operations completely blind-siding the Buyer. Agreed that this is an extreme scenario but it is plausible without a more complete approach to Supply Risk.
The supplier accreditation program is in some ways the “Cadillac” of Supply Risk mitigation strategies. A well constructed program would take into account both Performance/ Commodity strategy as well as assess fit from a future strategy standpoint [position in Value Chain/ brand recognition etc]. It will identify and enforce a true partnership across multiple forums. The deeper information exchange and engagement would enable the buyer to identify potential risks early and address them proactively – replacing those suppliers that continue to pose significant risk.
Have you assessed supply risk for your organization lately? Do you have a Supplier Accreditation program in place to mitigate supply risk? I look forward to your comments on this blog…

 

Posted by Saurabh Agrawal at 07:02 AM | Permalink | Comments (5) | TrackBacks (0)

A few days back I got the opportunity to talk about the challenges for 3PLs in today's economy on a webcast (available here) with Greg Aimi from AMR.

Greg talked about the latest trends in the space, while I talked about the best in class abilities that a 3PL's WMS should have. During the QnA session at the end, there was a question about the key IT differentiating capabilities for such a WMS. I mentioned that multi tenancy is a hygiene factor and is a given.

A question that cropped up later was what are the best in class multi-tenancy features? 

A laundry list of my must-haves follow:

• At its very basic level, the WMS should be able to host multiple customers on the same instance.This includes the ability to host multiple catalogs, customer databases, warehouse layouts

• The WMS should be able to network the inventory organization. The customer should have the ability to view inventory across multiple levels.

• The WMS should be flexible to segregate customer inventory on the same physical layout

• The WMS should host different solutions for its customers and for its customers' customers.

• Varying access and security rules should be possible by customer.

• The WMS should be able to host different versions of the same solution by customer. For instance, the customer wants to run DCs under different business rules as compared to its store rooms. So while at an enterprise level the customer should be able to see global inventory, processes within each component of the supply chain could be different.

(The common thread is a principle that I call Singular Diversity - within IT, I define it as the ability to manage diverse information as a collective and conversely the ability to manage an assimilation by managing its disparates.)

So, what else would you add to the laundry list above?

Posted by Chandradeep Bandyopadhyay at 02:45 AM | Permalink | Comments (1) | TrackBacks (0)

A very interesting article titled  Managing the Biggest Supply Chain Risk of All: Constant Change by Noha Tohamy of AMR Research rightly points out – that the biggest supply chain risk of all time is constant change.

The article also mentions that although being a manufacturing hub of the world, China contributes to the most risk to global supply chains, 9 out of top 15 risks. The top of the list is Intellectual property infringement followed by quality failure risk and security breach issues.
Intellectual property infringement is indeed the top rated risk by high-tech and discrete manufacturing companies. In December, during my speaking session at joint workshop on “Supply Risk Management” organized by SMI (Supply Management Institute, Germany) and IIM-B (Indian Institute of Management – Bangalore), this point was overwhelmingly brought out by some of the participants. Intellectual Property Infringement, in essence, is the unauthorized use or distribution of protected copyright, trademark, patent or trade secrets misappropriation. Failure to take action against counterfeits products would pose not only the risk of damage to organization’s brand value and public confidence, but also the risk of purchasing counterfeit products that do not meet the quality expectations of customers who mistake them for genuine products. Various counterfeit products are being discovered all over the world and examples of skillful counterfeiting are on the rise. Litigation costs in for a lawsuit often exceeds $1mn and this emerging exposure can have serious consequences on companies. Some of the popular measures to mitigate this risks are listed below. 

1.    IP Risk Management Audits wherever coverage is available.
2.    Direct visits to government organizations in places where counterfeit goods have been discovered in order to exchange opinions about methods of countering counterfeit products.
3.    Take advantage of the “well-known trademark” recognition to continue with countermeasures with the aim of achieving a fundamental solution to the problem of counterfeit products.
4.    Buy insurance policy protecting infringement of Intellectual Properties. Although, this is offered by a very select group of insurers and comes with many “fine prints”.

None of the measures are full proof. This risk needs to be assessed, measured and monitored all the time. During recession time, consumer buying behavior is dramatically changed. Cheaper product options coming to market using infringed IP pause a serious risk of threatening original product sales. It’s important for organizations to put emphasis on IP infringement in their supplier risk management program during recession.

Posted by Mitul Shah at 01:57 PM | Permalink | Comments (0) | TrackBacks (0)

Recession is here. Slower demand, shrunk liquidity and increasing pressure on cost is here. Auto industry has suffered from severe decrease in the demand which has resulted into steep production cuts. Suppliers get paid 45 to 60 days after delivering parts, and this may cause a wave of failures in March and April, when the nearly total shutdown in U.S. auto production at the start of the year starts to hit their balance sheets hard. To other industries also, recession presents increased credit risk and a very real risk of supplier insolvency. In my opinion, supplier bankruptcy causes two different kind of risks.

The first and obvious risk due to supplier bankrupcy is Supply Chain Disruption. Based on the size and  dependency on the supplier, this risk has a potential of minor disruption to complete shut down. Having identified alternative suppliers for key components is one of the best way to mitigate this risk. Yet, getting new suppliers in the supply chain is not an easy tasks. It may take few months.

Another option is to involve a  bank/financer at a very early stage in the transaction. Companies can send the POs to the supplier simulataneously passing the information to the bank. Based on the account liquidity and supplier’s credit history, banks can qualify whether the supplier is fit enough to serve the future demand or not, thus, reducing the risk of disruption should the supplier go bankrupt. At the same time, information from the extended supply chain is leveraged by banks to offer trade finance to suppliers at various stages within the supply chain. This process mirrors the 'just-in-time' approach used by large corporates to optimize inventory holdings. The liquidity risk is substantially reduced given the visibility of information throughout the transaction. Regular reports from Banks / Credit Rating Agencies about your suppliers’ credit health are certainly worth during recession.

The second type of risk arises from supplier filing for Bankruptcy Protection. Under the US Bankruptcy Code, supplier may be allowed to delay the decision on the contract till the end of the case – which could last for weeks or months. It also prohibits company from terminating the contract and requires continuous receipt of goods/services and paying the supplier. Even if the Supplier Contract allows you to terminate it at anytime and without cause, or terminate it if supplier becomes insolvent, the clause is uneforceable under Bankruptcy Protection Code. 

How to mitigate such severe financial and legal risk? Regularly obtaining financial information of the supplier certainly helps. Ensure that you retain ownership and control of software, equipment, data, deliverables and work in progress and supplier owned items that are critical to your business. Insulate yourself from any legal claims from supplier’s subcontractors. Ensure that the supplier is prohibited from delegating his responsibility without your approval.

Tough times calls for tough measures! Understanding interwoven relationship of financial supply chain & product supply chain and controlling the risk emerging out of it should be the priority of organizations during recession. 

Posted by Mitul Shah at 12:12 PM | Permalink | Comments (3) | TrackBacks (0)

Image this. In one of your S&OP cycle meetings, Mr A from Demand Planning makes an adjustment to the Forecasting numbers of product X. Very recently he has been given to understand from the Engineering department that product X will be getting superceded by product Y in unforeseen future. Mr B from sales believes supply chain to be completely elastic. He expects supply chain to respond very quickly to any demand surges without any loss of sales. Mr C from Supply Planning side has allocated resources and materials in the supply chain based on product X's converted demand in the market. In many cases Mr C has been reprimanded for taking a conservative approach that results in stocks being unavailable when it is time to make hay. While Mr A has been experiencing the phenomena called "I perhaps know more than others", Mr B believes in "Stretch and compress the supply chain at will", Mr C has been experiencing a phenomena called "falling short today and hence make up by tomorrow". Sounds familiar ? It is. All of us are familiar with a situation where each team member believes in local maxima agnostic to global maxima.

 

 In a supply chain boardroom, no one wins a slugfest. In fact everyone leaves out bruised and scarred. The war of the sensibles becomes war of the decibels. Particularly in context of corporations of today fighting to save each and every penny, the last one would want would be giving way to ego-fights and individual fiefdoms driven by their own secular view of the world.

As an independent supply chain thinker, the time seems to have come for thinking new and radical on how a corporate should organize its resources to manage its supply chain. Some of the suggestions that businesses of today could possibly apply:

1. Break the walls: It is time to make interpretation and dessimination of information more democratic. Have moderated platforms of information exchange in an organization, where any supply chain relevant information is exchanged with all key stakeholders - direct or even indirect in the process .

2. Specialists vs Generalists: An organization should really start evaluating the value of a specialist function in supply chain who sometimes has a deep parochial view of the world rather than a generalist who forces himself to think in an end-to-end manner. Example forecasting is not about accurate prediction of sales, it needs to be redefined as the best way a demand can be managed given the resources in the supply chain.

3. Create cross-functional positions: Organizing the supply chain functions based on a product division rather than departmental (like sales, demand planner or supply planner) makes more sense today - where the key is to manage a series of supply chain processes. The KPIs of today need to look at neither Forecast accuracy nor lost sales, but at converted demand to supply ratios.

4. Keeping things simple: The cost of maintaining complex processes is immeasurable. It not only requires very deep specialist skills but also makes the process overly dependent on people. Any decision node with multiple options thus needs to be very carefully evaluated in terms of ease of maintenance.

Supply Chains of today is all about keeping your businesses running, however we are getting to a point where we need to run to stand at the same place. Supply chains of tomorrow may very well need to fly to be where they are !

Posted by K. Srinivas at 10:01 AM | Permalink | Comments (1) | TrackBacks (0)

Pharmaceutical industry - defensive and an inelastic sector as far as demand is concerned - is known to be relatively less impacted by this recession. But then, it is far from remaining immune and certainly cannot escape unscathed. The lay-off announced by the leading pharma players (Sanofi 650 US sales reps, Novartis 550 US sales reps, Merck ~8000 jobs, AstraZeneca 1400, Wyeth ~5000 and GSK 1000) is proof enough of the problems present in this industry. Though the problems stem from poor drug discovery and expiration of patents, the recession is certainly compounding the situation. Naturally, belt-tightening is high on the corporate agenda with inefficient supply chains ranking at the very top among all the belt-tightening opportunities available.

Perhaps, this particular pharma major forecasted the grim situation today and timely dug a path of making their supply chain lean and efficient; a path they are currently treading that should hopefully lead them to supplier collaboration nirvana. They realize that in this complex world of extended supply chains, there is an increasing reliance on partners – in this case, suppliers and third-party logistic providers - to execute and manage their critical supply chain functions. The company wants to move away from the traditional purchase order process (which offers minimal information exchange) to a full-blown supplier collaboration model which involves providing accurate forecast and stock information to suppliers and have them manage the replenishment. In effect, they want to arm suppliers with the required visibility and give them the flexibility to manufacture economically within agreed parameters. And they are not resorting to this Vendor Managed Inventory (VMI) process for their routine, low-priority buying needs but are instead doing so for their direct material namely Active Product Intermediaries (API’s) and formulations.

What do they hope to achieve? For starters, with this free flow of information, they want to reduce inventory and free up the locked cash. Reducing warehouse space requirements and shortening the lead times, besides freeing up resources involved in cutting purchase orders, is definitely on their “expected benefits” menu. But the biggest benefit, in my view, is the strong positive message they are sending out to their supplier community. By truly integrating them in its supply chain, the pharma major is setting the foundations for a strong long-term relationship thereby sowing the seeds for exponential wins to accrue.

Why are they doing it now? It is not that they hadn’t thought about VMI before. In fact, they have this process up and running but in a nascent manner. They now want it to be scalable and standardized. They realize that in this era of complex contract manufacturing and volatile demand, the “talking” is even more necessitated. 

 

Posted by Amit Tambi at 02:36 PM | Permalink | Comments (4) | TrackBacks (0)

I was wondering how would the warehouse of the future look like? Say even 10 to 15 years from now. Well not all of them would have transformed by then, but some of them might have definitely. Maybe, some of them have already had, or are in the process of doing so.

So what is the transformation we are talking about? And how would it affect the way we operate these warehouses? Well, we are looking at how warehousing will be transformed into a highly automated environment. There would be no labour required in the first place, in fact they will be no space for humans to walk (except for service engineers). There will be rails and tracks all around on which automated pick Robots would move to pick and putaway pallets and cases around the warehouse. These robots would move on horizontal and vertical tracks and can reach every location within each zone where they operate. There will be sensors all over the warehouse to guide robots, round the clock.

Now to have such a warehouse to turn into reality (there are quite a few out there), we need to understand what building blocks to be put in place first. First, we need to design the warehouse in such a way that maximum space is occupied, for e.g. these robots will move in rails vertically and horizontally, we do not have to waste space between aisles as there would be no Forklift trucks to be used. Secondly, the size of the carton/box should be of standard sizes, within the maximum limits that each robot can lift and place cartons from one location to another.

There will be extensive use of conveyor systems both for inbound and outbound operations. Zone Picking would be the preferred method to adopt since a set of robots can be positioned to work within a confined zone, rather than having them scaling the entire warehouse to carry out putaway and picking operations. Each zone will be linked to a lane that would join the main conveyor moving goods in/out of the warehouse. These will be of two types, the inbound and the outbound conveyor. So what kind of WMS system would run such a warehouse? Well, that would be the nervous system of the warehouse. It will be like any other WMS, except that it will not print a pick ticket, send instructions to a RF gun or print a work order. No human dependency to report back to the system. Instead, it will send instructions to a large PLC or multiple PLCs to operate all the automated robots and conveyors in the warehouse. We will touch upon these aspects in next part of this blog. 

 

Posted by Lokmanya Rawat at 12:08 PM | Permalink | Comments (7) | TrackBacks (0)

Supply chain execution investments are increasingly becoming network centric to efficiently manage order delivery and fulfillment visibility across multi-player ecosystems. The emerging technologies for supply chain execution are also keeping to this need.
Adopting network centric technologies brings along multiple challenges that delay the return from such investments. The salient benefits from network based execution management most often have to ride on an over-arching integration initiative which spans across enterprises (in the “network”) and factors in their IT and business change cycles.
Network technologies today  involve replacement of running homegrown execution platforms, for example a warehouse management system.

Organizations that have traditionally invested in optimizing processes and their implementations in legacy execution platform are facing the double edged sword of losing stable execution platforms and investing in integration to make the most of network technology investments, adding to this is disruption on the floor level execution. This disruption is due to the change management introduced as a result of new application and screen flows. This disruption is very often the most important challenge to move to a network based ecosystem since change management needs to be comprehensive and cover all handling locations. A rapid adoption cycle is still nascent and hence today’s multi-year WMS consolidation programs across multiple warehouse and locations add to the delay and cost.

Traditionally supply chain processes are event centric. Alternative approaches to network technology adoption can be evaluated critically using an event based model where contextual intelligence from local execution with existing underlying systems are extracted and co-related  to give an in-flight view of execution across the network.

Infosys’ Warehouse Advanced Visibility Enterprise Solution (WAVES) is a solution concept where is architected on the premise that keeps workforce disruption low, IT integration overheads manage-able by banking on maturing of technology interoperability and controlling carnage of data movement, taking an event context publish design from a “wrap around” fashion. Add to it the top down architectural setup to make the whole concept to be “shrink wrapped” on all network participants -- actors and systems purely focusing on visibility across the network that spearheads exception impact to be seen at right level and act accordingly.

Long story short, a short pick event in one drop ship vendor's warehouse gets visible as a order fill rate risk much before warehouse updates have come by the end of day leaving enough time to trigger alternate fulfillment and track the same to closure.

Posted by Satadal at 11:44 AM | Permalink | Comments (1) | TrackBacks (0)

There have been numerous articles or reports written on building a ‘world-class’ or a ‘best-in-class’ supply chain that you would have surely read. Few of them definitely outclass others in terms of the focus and clarity they provide to the supply chain enthusiasts and practitioners. One such report that I would like to bring to your notice is recently published by McKinsey & Company called “The Race for Supply Chain Advantage” – an outcome of an intensive research done, with large multinational companies participating from multiple industry segments. The report provides the six key practices that would drive supply chain performance, and make companies world-class with outstanding results in some of the most critical parameters such as customer service, cost and inventory. I wouldn’t like to comment anything on the practices listed but I do feel worth mentioning an interesting finding in this report and that’s about the better performance of companies with fewer formal IT systems as compared to the ones that have invested heavily into technology.

As per the report, “IT investment is often not as useful as managers expect”. I find it contradictory to the popular belief that IT investment is not just an essential requirement but a necessary one too. What is your opinion on this?

I personally agree to the finding based on my industry and consulting experience. I have seen supply chain organizations that are fairly mature in operations and there are still these key business users who continue to use simple spreadsheets for most of their effective decision making. The business needs IT to just support the decision making and therefore, “IT as a strategic investment” may not be highlighted as amongst the primary drivers of improving supply chain performance. There are so many instances that we come across as supply chain practitioners where the decision is taken without any data and it’s purely based on experience and instinct. IT can’t capture all that and that’s one of the reasons why IT can’t be a strategic driver. Having said that, I also believe that as businesses grow and become more complex in nature, IT definitely plays a very important role in just ‘facilitating decision making’ and in reducing the level of anxiety and ambiguity in managing business.

With these thoughts shared, I would like to know your opinion on this subject matter. I would welcome your experiences on this and it will be really great to know the reasons and viewpoints in case you differ with my opinion…

Posted by Aatish Goel at 07:26 AM | Permalink | Comments (5) | TrackBacks (0)

Over the past two decade or so, supply chain operations have become increasingly complex because of access to new global markets and adoption of global sourcing/outsourcing strategies. On the back of these changes, most global organisations have transformed their supply chain processes with significant investments in best of breed supply chain planning, execution & collaboration technologies. If you study the transformation closely, it has actually occured in two waves.

In the first wave, organisations have adopted best-of-breed supply chain solutions that have driven significant changes in their business processes very rapidly, while helping them with some quick wins - reduced inventory, increased space productivity, automation of processes etc., At the same time, they had access to so much information that the real value out of this information could not un-locked. Realisation of the full potential was probably suspect in a number of organisations.

These two waves of transformation had another important impact on the industry as a whole. That is, learning from one organisation to the other was quick and the knowledge transfer was achieved on the back of mature and rich packaged software capabilities. Software companies constantly enriched the supply chain solution capabilities based on continuous learning achieved, thereby providing standard features that matched industry best practices.

• Has this knowledge transfer ensured consistent levels of supply chain maturity across organisations within industry verticals? Therefore reduce differentiation?
• After multiple waves of investment and mature product capabilities, are there organisations that have leapfrogged in achieving supply chain excellence and benefited from it?

The answers to both of these questions is probably “yes” in some sense and therefore an expectation that there is a foundation within each industry vertical that is consistent across enterprises. However, it does not mean the differentiation has completely vanished. Leading enterprises continue to leverage these investments better than others and compliment these investments with processes that help them sustain differentiation, some of which are

Industry leaders are seeking better insights into their supply chain
For example, focus on category analytics for better insights on customer/demand side and increasing focus on spend analytics for better insights on supply side.

Leverage these insights to devise and constantly refine their demand and supply strategies.
For example devising (or) refining promotion strategies, pricing strategies are driven by these category insights whereas sourcing strategies are refined based on insights from spend analytics.

Tighter integration between strategy and execution through better collaboration and process integration.
For example, demand planning process helps integrate promotion strategies with efficient supply response and maximise revenue, whereas contract compliance processes are critical to integrate sourcing strategy and operational procurement to realise benefits projected by sourcing strategies.

Focus on a robust governance mechanism to ensure consistency and compliance to processes.
Consequently, Sales & Operations Planning (S&OP) process has widely been acknowledged as a means to achieving much needed governance for global supply chain operations.

Therefore, while it’s undeniable that investments in supply chain technologies have delivered a common platform based on technology, it’s time to start creating a supply chain eco-system that can help differentiate and sustain excellence through better integration and collaboration on a global scale.

Posted by Manohar K Venkatagiri at 05:02 PM | Permalink | Comments (2) | TrackBacks (0)

In my last blog, I discussed on the confusion with the Frictionless acquisition by SAP, now I would like to share the difficulties that I see to convince customer to have both these applications operational in the landscape.
Why is it difficult to convince customers to have both these applications operational in the same landscape?
-          Frictionless commerce (now SAP E-Sourcing) has overlapping functionalities with SAP SRM which happens to be its core SRM solution
-          Customers already using SAP SRM, would need a strong business case to convince CPO desk for SAP E-Sourcing licenses
-          Integrate the applications, as they don’t talk to each other still.
-          What is the ROI for such an integration
-          Is there a customer base that will really look forward to integrate these 2 applications  
There is another application, xCLM (Composite application for Contract Lifecycle Management) which SAP is very successful in selling.
This application has the category management and the contract management functionalities of Frictionless commerce. The sourcing functionality has been removed.
Now the confusion with customers grew bigger. Customers were simply unable to understand the classification.
Was there a need to strip the same application and make it available to customers to get more licenses?
I think, potentially there’s more to this than just stripping and rebranding.
I think there was a strong realization from SAP on the positioning perspective. Let’s understand the underlying logic.
Category Management and Contract Authoring and collaboration, were one of the major gaps with SAP SRM, if we plug this gap by making a bolt on application available, it would strengthen the business case for adoption of an SAP on SAP solution than going with “Best of Breed”.
In addition to that, customers can still continue to use the sourcing processes with SAP SRM and plug-in xCLM to handle category mgmt and contract management to overcome the overlapping functionality syndrome.
So I leave the discussion open
…with Frictionless commerce coming in, are most of these gaps for SAP SRM suite offering eliminated or is there a stronger recommendation from the rest of the world?

Posted by Tridip Chakraborthy at 03:20 PM | Permalink | Comments (2) | TrackBacks (0)

The last 7-8 months have been the most demanding phase for SAP to position the SAP SRM suite offering.
As a consultant, I am still trying to understand why this acquisition? Am trying to logically place these questions to arrive at an answer
Whats the confusion?
SAP SRM (version 5.0 and lower) was always ranked low in comparison to what “best of breed” offers for Sourcing and Contract management functionalities.
However, to overcome this, they acquired Frictionless commerce (now rebranded SAP E-Sourcing) to bridge this gap. They had a strategy to sell it as an On-demand solution only they have been successful in selling the on-demand solution. But they realized the need to make the on-premise solution available for customers who where skeptical in parting with data, but however the On-premise solution brought with it major confusion, leaving the suite offering with heavy questions, reasons stated below.
SAP has also provided integration with SAP ERP for customers who already have an SAP ERP shop and are looking forward for a sourcing application to sit on top of the ERP application. The definition of such customers would be those who haven’t yet implemented SAP SRM or some one who might have opted to use Best of Breed to do the sourcing bit and flush results back into the ERP to feed operational procurement instead of investing in SAP SRM licenses.
With the release of SAP SRM 7.0, SAP had announced that the gap has been bridged, however, not all the extended functionalities that came as a part of Frictionless acquisition have been made available, reasons could be many.
Some known gaps with SAP SRM, version 5.0 (limited to Strategic sourcing process only)
-          Contracts in SAP SRM are limited to Operational contracts; Contract Authoring process is a limitation, limited collaboration features b/w Buy-Sell side.
-          Complex Sourcing processes for RFx and Auctions cannot be handled via SAP SRM in comparison to what the “best of breed” offer.
-          Category Management with SAP SRM can be addressed with implementing cProjects and is not functionality with in the tool.
-          Forward / Dutch Auctions capability isn’t available.
In my next blog, I will talk about “why is it difficult to convince customers to have both these applications operational in the same landscape?”
…also what is xCLM and the confusion that came with it and the benefits it pumped in.

Posted by Tridip Chakraborthy at 03:13 PM | Permalink | Comments (0) | TrackBacks (0)

How is your organization adapting to the current economic environment ? Tightened budgets across the board are making organizations wary about not only their organization’s financial viability but also their suppliers and competitors.

But most companies are cautiously progressing towards application investment with lots of options /variations, Capitalize the investment in the application vs. Expense, Utilization of IT resources vs. placing the burden of implementation and ongoing management of the application on third party, Customize and interconnect solutions vs. configure and use as OOTB, do the same for less money vs. more for the same price.

Participate in our on-going series of Supply Chain polls to gauge the trend across the industry in order to provide organizations with focus areas as they embark on streamlining their supply chains.

Posted by Raj Rajendran at 12:25 PM | Permalink | Comments (3) | TrackBacks (0)