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

by Smock, Douglas

• ISBN13: 9781932159622
• ISBN10: 1932159622
• Format: Hardcover
• Copyright: 2007-02-01
• Publisher: J. Ross Publishing

Summary

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.

Author Biography

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