E-procurement and North Korea are unlikely to have appeared in the same sentence too many times in the past but the world’s most secretive state has once again caught the west on the hop after they announced the launch of an e-commerce site for shoppers in the country.

The move is aimed at earning North Korea some much needed foreign currency and the site, available in Korean, English, Chinese, Russian and Japanese, will enable consumers to purchase machinery, building materials, vehicles and industrial art objects (you’re guess is as good as mine).

Sadly, I can’t tell exactly what the site looks like as, in keeping with the nation’s somewhat erratic record, it appears to be experiencing some technical problems.

It’s always exciting to be involved in something unique and, with that in mind, it’s little surprise that there’s a real buzz at ELP this afternoon.

ProcureTech Live 2007 – the first procurement conference delivered 100 percent online – appears to have captured the imagination of the procurement community and this afternoon’s ‘live’ presentations certainly appear to have given everyone involved in this ground-breaking event some food for thought.

I’m not sure if it was because everyone was either safely tucked away in their offices, or perched by their laptop at home, but there appeared to be a genuine sense of excitement as I made my way from the Conference Hall to the Lounge – a journey which took longer than anticipated due to the juggling of four real-time conversations.

“Intriguing” was a word, which cropped up again and again in the early stages of the event, and it was this curiosity that appeared to draw people into the kind of conference that few had ever experienced.

Now, as the presentations go on, the chat continues, and the lounge fills up with leading figures from across the procurement and supply chain world, it seems that the format is one that could be here to stay.

Are we witnessing the conference of future? Log on and find out.

In the last edition of European Leaders in Procurement magazine Jason Busch wrote an insightful article on the future of procurement technology entitled 'Are we facing a free for all?', in which he introduced our community to Coupa Software.  Coupa is the brainchild of two Oracle veterans Dave Stephens and Noah Eisner, who set to tackle the problem at the root of most e-procurement failures: employee non-compliance.

It seems Dave and Noah's approach to revolutionise the e-procurement space is continuing to gain momentum, with the announcement they have secured A-round funding from the leading early-stage venture capital fund BlueRun Ventures, as well as several private investors. Coupa will use this investment to accelerate market and product development plans. The company also announced that Jonathan Ebinger, managing partner at BlueRun, and Vineet Buch, a BlueRun principal, joined the Coupa board of directors.

"E-procurement has hit the wall, and traditional solutions cannot be improved to re-energize it. Coupa's mission is to radically simplify e-procurement, make it affordable, and bring its unfulfilled promise of increased savings and efficiency to companies of all sizes." said Dave Stephens, CEO and co-founder. "Now, with Jonathan and Vineet on our team, we have additional operational expertise to build a strong and growing company."

"Unlike others in the industry, Dave and Noah clearly understand that the real innovation in e-procurement will happen in two areas. First, you must ensure that the average employee actually buys into e-procurement and, second, you must make the solution cost-effective enough to be accessible to companies across a broad spectrum of industries," said Jonathan Ebinger. "I believe that the convergence of significant market opportunity and the founders' expertise make Coupa a marketplace winner."

For any company looking to implement a spend analysis solution then this afternoon’s webinar on the subject, “Spend Analysis: A European Perspective”, would have made interesting listening.

According to Andrew Bartels of Forrester, the use of automated spend solutions has increased hugely over the past 12 months, and as more and more companies search for a solution that gives them clear, simple and manageable data, it’s easy to see why.

Although Bartels was keen to stress there is no ‘quick fix’ to spend analysis issues, he did outline the main ways in which many multi-national companies would benefit from implementing an automated spend analysis solution.

He believes for companies with a high volume of complex spending the benefits can be seen in several ways. Firstly, it makes the consolidation of spending easier – or as Bartels put it: “you know what you’re buying and you know who you’re buying it from”. Secondly, he believes categorising spend means you can concentrate valuable time on sourcing. Finally it assisted those companies that have to comply with SarBox, by making the identification of rogue spending a simpler task.

Add to these increased supplier compliance and improved procurement satisfaction and you’ve got a number of very good reasons why automated spend analysis is one subject most procurement professionals just can’t get enough of right now.

Bartels’ insight was swiftly followed by a great example of what spend analysis can do for a large multi-national company. Edgar Heitmann, a senior project manager at Orkla ASA detailed how a spend analysis solution has helped Norway’s largest public listed company achieve both huge savings and increased transparency.

If your company thought it had a big job on its hands, the tale of how Orkla managed to consolidate data from fragments of 50 companies into a system that now offers the company up-to-date spend analysis data on a monthly basis, should offer everyone hope.

At the backend of last week I was lucky enough to get a sneak peak at Actionable Analytics v4.0, the latest version of the Zycus’s latest Spend Visibility suite. The new release focuses on breaking the mold of traditional business intelligence solutions, by firstly empowering the category managers to quickly find saving opportunities via a new feature set called “Opportunity Finder”. And secondly, allowing procurement leaders to track and manage their savings mandate using a pipeline base approach via the “Opportunity Pipeline Management” module.

Unlike the business intelligence solutions of old, going through the process of finding opportunities was surprisingly intuitive. Although I have not got the years of experience of a procurement practitioner, I can only assume category managers would very quickly be able identify savings opportunities using this solution.

Once a savings opportunity has been identified, it moves to the Opportunity Savings Pipeline. Based on the workflow of a sales pipeline you commonly find in a CRM solution, like Salesforce, the “Opportunity Pipeline Management” module allows category managers and procurement leaders to qualify the savings opportunities through further analysis.

The joy of this module is the ability for procurement leaders to review saving opportunities based on facts and figures, approve and prioritise them, and then create a funnel of savings activities. This type of functionality has enabled sales directors for years to accurately forecast and manage their sales pipeline and now this functionality is finally available for procurement professionals. Maybe this cross over from sales to procurement will be reflected in bonus payments for procurement leaders/managers based on the savings they deliver!

Pipeline based Spend Analysis Process for Procurement Leaders

• Get visibility into all identified savings opportunities across the organisation
• Prioritise opportunities that need to be acted upon
• Set savings & compliance target to the team and effectively track them

For procurement heads looking for a solution to gain better visibility of their spend and effectively manage saving opportunities, I would recommend taking a good look at the Zycus solution. Over the next few months I will be reviewing the other Spend Analysis solutions in the market and will come back to this short review, to give you a full comparison of the products out there.

Over the next twelve months I plan to start taking a closer look at the procurement technology solutions currently available. My journey will explore solutions with a range of functionality and scalability. As a former technologist, I look forward to learning about the different solutions and how they can benefit the business community. The first entry will look at the Zycus solution and its ability to deliver "Actionable Spend Analysis".

If there are particular solutions you would like me to review, then please feel free to make your suggestions. 

In parallel to the reviews of procurement technology, I will also be sharing my experiences of using Microsoft Vista and Office 2007. Diving in head first I have got a new laptop en route with the new Vista operating system installed on it. People might suggest using a version of Windows before service pack1 has been released is crazy. However, as the likelihood of any large organisation adopting Vista in short term is very low, I thought it would be interesting for me to let you know what your missing and not missing about the new Microsoft experience.

High performance purchasing with long-term strategic orientation is a key factor for successful international competition. Therefore, purchasing is one of the most important issues in a company – material costs are the largest cost block in an industrial company. Due to this situation, efficient cooperation with suppliers is becoming increasingly important.

An important success factor for professional purchasing is achieving transparency, especially regarding company-wide purchasing activities, purchasing volumes, frame contracts as well as detailed information about current and potential suppliers. A company can attain this comprehensive view through integrated supplier qualification, contract management and spend analysis.

An active and targeted supplier management is the prerequisite for strategic purchasing. Cross-functional supplier rating identifies supplier strengths and weaknesses. Suppliers are categorized according to their performance and strategic significance based on a substantiated and objective supplier classification. This is the basis for targeted and structured supplier development including measures controlling. During this process, supplier goals are set, deadlines and responsibilities defined, sustainable optimization measures implemented and development progress monitored.

Experience indicates that the individual components must interact with each other in order to provide consistent process support and that maximum benefit can only be achieved through the consolidation of the corresponding information obtained.

A Global 50 company recently invited me to speak to their top suppliers about the value of e-sourcing. At first, I felt a bit like Colonel Custer being sent off to resolve the pesky “native problem” at Little Bighorn. (And we all know how well that turned out for Custer.) However, as I investigated the issue, I uncovered much evidence on how e-sourcing is actually helping suppliers and the entire supply chain by making negotiations more fair, more efficient, and more effective at determining best-value relationships, enabling suppliers to differentiate on their total solution attributes — not just price.

Knowing that my audience would be predisposed to act hostile, I avoided emphasizing the basic fact that e-sourcing is strategic sourcing. (Although, Gartner Group research sums it up best: “e-Sourcing has developed from a crazy e-business idea to become a standard tool in the process portfolio of all large enterprises…Leading edge adopters now use e-sourcing for practically 100% of their procurement requirements across direct and indirect goods.” And, if that wasn’t enough, CAPS drives the point home reporting that “all of the evidence suggests that electronic reverse auctions are here to stay…”)

Instead, I set out to dispel “The 7 Myths of e-Sourcing.” Here are some of the highlights of my case:

Myth #1: e-Sourcing is all about lowering prices. False. Thanks to tightening supply markets and maturing sourcing methods (and e-sourcing functionality), price-only negotiations have gone the way of Member’s Only jackets. Advanced auctioning capabilities enable buyers to evaluate suppliers on a myriad of price and non-price factors, such as lead-time, delivery, quality, and payment terms. Nearly all e-sourcing users engage in multi-threaded negotiations (e.g., e-RFI-to-e-RFP-to-auction), enabling qualification and evaluation on all attributes of a supplier’s capabilities and costs. And many optimization-based sourcing tools allow suppliers to offer alternative bundles or bids that boost their profit margins and further differentiate their offerings.

Myth #2: e-Sourcing is unfair to suppliers. Untrue. In most cases e-sourcing introduces greater integrity into the sourcing process than existed in the offline mode. e-Sourcing mandates that buyers clearly articulate their selection criteria and award decision framework to all participating suppliers. Suppliers go into a negotiation full knowing how they will be judged and how the award decision will be made. Any clarifying questions asked by suppliers and corresponding answers from the buyer are available for all suppliers to see, further leveling the playing field. This was best summarized by a VP of Sourcing at Cadbury Schweppes “We emphasize fairness and open disclosure on both sides of the sourcing process. We have shut down ‘backdoors’ for internal stakeholders and suppliers.”

Myth #3: e-Sourcing is unfair to incumbents. Nope. Competitive incumbents are in a better position to be exposed to more business volume and new business opportunities, particularly considering that any strategic sourcing initiative goes hand in hand with a supply base rationalization effort. Better e-Sourcing tools also enable the ability for users to incorporate “transformational” elements that give “credits” (in the form of switching costs or innovation credits) to good performing incuments. As a result, incumbents don’t need to be the lowest price bidder in order to win the business. Consider the approach taken by Eastman Kodak: “We sat down with incumbents to explain why we were [using e-auctions] and prepare them with the right strategy and techniques to competitively participate in the event.”

Myth #4: e-Sourcing makes it difficult to win new business. On the contrary, e-sourcing dramatically shrinks sourcing cycles. These efficiencies alone enable buyers to negotiate more spend volumes, across more spend categories, with more suppliers. As noted in the previous example, qualified incumbents in good performance are in a position to expand existing business and be exposed to new business opportunities. One large industrial manufacturing used its e-sourcing strategy to cut the number of MRO suppliers from nearly 2,000 to just 20. Incumbents retaining the business are doing 4X to 10X the volumes than in the past, and they’ve added new, more profitable revenue streams, such as integrated supply relationships.

Myth #5: e-Sourcing lengthens the sales cycle. There is ample evidence that e-sourcing shortens sourcing and, hence, sales cycles. And as an old boss of mine would say, “In a sales cycle, getting to no fast, can be as valuable as getting to yes.” His point was getting to “no” enables you to focus your salesforce on the opportunities they can win.

Myth #6: e-Sourcing burdens suppliers with new cost, technology, and resource requirements. Wrong again. There is compelling evidence that e-sourcing also reduces overall SG&A costs. A recent study from the University of North Texas found: “A supplier can reduce its cost of sales (salesperson commissions, advertising, etc.) using reverse auctions.”

Myth #7: e-Sourcing eliminates buyer-supplier relationships: I recently asked a supply management executive at a major life sciences company how he was able to drive such aggressive use of reverse auctions. His response, “I tell suppliers, ‘If you believe your customer relationship is all about negotiating, then you don’t have a relationship.’” This isn’t just rhetoric. Many companies have begun partnering with suppliers to remove cost from the entire supply chain. New multi-tier sourcing, co-sourcing, and buy-sell approaches are being embraced by a wide range of enterprises (particularly in the aerospace, automotive, and high-tech sectors) looking to gain better visibility into costs and risks inherent in the sub-tier supply and to aggregate spend volumes and remove costs from the total supply chain.

For more e-sourcing strategies and tips, visit www.supplyexcellence.com