5 cost savings actions HigherEd need to execute

We’ve heard it over and over… endowments are down, grants are down and budgets cut. Costs are high – too high in many HigherEd institutions and we all know it. Our institutions need to reduce costs with the least impact to learning quality for students.

So who’s willing to walk the talk?

The talk is all about improving efficiencies and reducing costs. The walk is often about self preservation and the confidence that we’ll still be around doing the things we have always done. It’s often hard to change for the better and rocking the boat just isn’t worth the hassle sometimes.

To walk the talk, I believe that all HigherEd institutions need to be executing the following five key initiatives:

1. Initiate Spend Analysis to determine what is addressable and of which, what is on-contract and what is off-contract

2. Collaboratively Bid on on-contract renewals and off-contract addressable spend internally and/or externally where applicable

3. Achieve Compliance to contracts across all facutlty buyers with a one-stop shopping portal for on-account purchases or off-premise PCard purchases. An online (private) portal with all eligible suppliers and their products or services searchable and accessible for selection and internal approvals where applicable

4. Record receipt of goods or acknowledgment of services where applicable

5. Receive all invoices electronically, have them matched electronically and then feed back end finance systems electronically for payment.

In my opinion there is little excuse in any HigherEd institution not to be executing most of the above initiatives. Some institutions are executing all five initiatives and the resulting cost savings is significant. For many others the value of these initiatives is recognized but not prioritized. Often there are other initiatives that are more visible and therefore are perceived as more important.

Hundreds of billions dollars are being spent in HigherEd each year. When these initiatives are widely adopted by our institutions, it will save students and tax payers hundreds of millions of dollars year on year. Furthermore, executing these initiatives does not need to be as trying as you might expect – these projects are not in the same ballpark as ERP implementations yet they yield significant cost savings. Cost savings that need to be perceived as important.

One day these initiatives will be mandated by State Systems. Its just a matter of time… and leadership.

Finance functions at our institutions have the visibility into the problem but often lack the consistent support and institutional leadership to put solutions in place. In corporate organizations this is a lot easier – management acknowledge the problem and then address it. Change is often hard but it happens, and organizations that make the hard decisions and adjust the status-quo often reap the rewards of doing so. In both corporate and public sector, change doesn’t happen by accident. Strong leadership in either case is essential.

In both corporate and public sector, change doesn’t happen by accident.

Unfortunately its not that easy in public sector and in particular, HigherEd procurement officers are caught between a rock and a hard place. On one hand they are constantly reminded of the cost problem from their CFO’s but equally reminded by their faculty buyers not to interfere with how they spend their budgets. Not only do procurement officers need to be strong analysts and achieve the best contracts for their respective institutions, they also need to be effective salespeople internally. They need to sell the benefits of business process change to folks who have done the same thing for a long time. Folks that themselves are often under-resourced and naturally have little time to spend on initiatives outside of their core areas of focus and expertise.

To encourage positive change to those who literally own budgets takes certain expertise too. Change is hard, and even more so when internal customers do not prioritize the need to become more efficient with easier buying processes, respond to potential supplier optimization opportunities or even comply with existing cost savings contracts. One of the answers is to make things easier for internal customers. Show them this online ‘universal market’ houses all their current suppliers in one place. They do not lose anything they have today, but they gain an easier way to get to products and services and an easier and faster way to process orders.

I respect that often schools are under resourced. Its impossible in many cases to expect one person or a partially-allocated person to effectively get 50%+ of addressable spend under contract, let-alone then achieve compliance across these contracts. But before procurement officers throw their hands in the air or wave the white flag there is another way… work across schools together. Avoid some of the strategic sourcing duplication across the sector.

The paradigm shift required to achieve significant cost savings across HigherEd is called Collaborative Sourcing, for this approach will get significantly more addressable spend under management faster.

This is particularly useful when taking into account the seasonable spend across HigherEd. For example, we all buy student mattresses and rock salt at the same time every year. We all have similar demand on transportation, utilities, technology, facilities and office products. We all go out to bid individually (when we have time) and cost our suppliers the effort of multiple responses (when they have time). The concept of one school initiating a bid and inviting in collaborators to add their demand before managing the bidding process with or on behalf of all bidders through one aggregated process is now available for all HigherEd institutions. When effectively utilized on mass this will save students and tax payers billions of dollars per year.

This approach enables institutions to share in the workload to establish bids while adding specific requirements where necessary. Something that some HigherEd consortiums have achieved manually without collaborative tools for years. For these consortiums utilizing collaborative sourcing technology is a way to do what you have been doing… just faster.

Example: Today HigherEd institutions such as Manhattan College in New York, Central Ohio Technical College in Newark and the University System of New Hampshire are collaborating internally or with their respective neighbors to aggregate demand for expenditures through collaborative sourcing technology – from rock salt to IT servers to paper.

Collaborators could be within an existing buyer consortium or assembled on-demand for a specific bid. It is up to the initiator of the bid. The beauty of this approach is that instead of one person doing sequential contracts that is duplicated at the next institution [one-to-one] there are many people sharing the workload of contracts on behalf of many others. This accelerates the process of getting [more] spend under management [faster]. The technology enables forums and discussions across buyers and/or suppliers so that all bid communication is registered and consistent.

So once competitively bid contracts are secured we achieve 25% toward potential savings.

After eSourcing… eProcurement is key. One “Universal Market” for all suppliers into an institution with all contract products and services maintained by suppliers and searchable by internal buyers. A place where thousands of [the right] suppliers can be accessed and buyers can add [the right] products and services to their shopping cart [at the right prices]. Once checked out, a shopping cart becomes one or many online requisitions that [after automatic budget checks] are approved through effective [rule based] workflow before becoming purchase orders that are submitted electronically to suppliers. Once shipped or provided, products and services can be received or acknowledged so that when electronic invoices come in the system knows which lines are eligible for payment. Non eligible lines are reported automatically to suppliers so they can resubmit invoices with eligible lines only or followup with buyers on lines suppliers believe should have been received or acknowledged.

Can all suppliers electronically invoice?? YES! – NO INVOICES NEED TO BE DOUBLE KEYED If a supplier has an internet connection they can invoice [by simply logging in and selecting or searching for orders to invoice or by sending in an electronic invoice feed]. If they do not then institutions can fetch invoices themselves based on keying PO numbers for a supplier [the system can translate this info into inbound invoices automatically] then key in the suppliers invoice number. Most high volume suppliers have CXML capabilities so their AR systems can generate consolidated invoices and feed eProcurement systems automatically where they are matched and automatically fed into customer AP systems for payment. Some eProcurement systems can also process ACH payments to suppliers and truly complete the Source-to-Settle business processes.

So once competitively bid contracts are secured and procurement can be online we achieve 50% toward potential savings.

After effective eSourcing and eProcurement is deployed… the remaining 50% of savings depends completely on user adoption. Adoption drives contract usage. Contract usage drives contract compliance. Contract Compliance drives cost savings.

Effective user adoption depends on effective leadership, communication and easy-to-use technology.

Take out as much clutter and complication from the process as possible. Make the purchasing process intuitive for internal customers – make them want to use it. Make sure the right suppliers are accessible in the ‘universal market’ for all eligible buyers and they will ensure the right products and services are present at the right time at the right price. Suppliers will manage their content rich catalogs, whether hosted or through punch-out.

Make sure your eProcurement provider has delivered an intuitive, easy to use user interface that promotes adoption -> compliance -> savings.

Disclosure: I am the founder and CEO of Unimarket, a company with a mission to be the online procurement service of choice for our customers. For many years we have listened, learned and developed technology that resonates with the strategic needs of Public Sector organizations. Unimarket is a SaaS company in the cloud (and always have been) with integration to all leading finance systems. More importantly, we are proud to be saving millions of dollars every year for our valued customers through our unique collaborative procurement technology.

 

Where should credit card transactions stop and electronic purchase orders start?

Many B2B procurement professionals have had or currently have this question on their mind. Some have clear guidelines in their organizations whereas some do not. Clear guidelines were the case when I worked at large corporates. Today I work primarily in the public sector and in areas such as HigherEd, buyers have more choice on the method in which they spend their budgets. It is here that I have become quite fascinated in the usage and application of credit cards in the absence of effective eProcurement and eInvoicing systems. I think PCards (restricted purchase cards) or credit cards and purchase orders are complimentary. There are situations in most businesses where either method makes more sense than the other. But is there a logic line than can be drawn across the board of when one method should be used over the other?

From a business process perspective, the “party-line” is easy… PCards are useful for high volume/ low value transactions. In the old days (pre credit card) it often cost more to process paper orders and payments than what we were buying on those orders! PCards are also required for travel and fast-convenient purchases when ‘out and about’.

The introduction of PCards was a paradigm shift. For a % of the order value, a clearing house would pay the supplier immediately at the time of purchase and the buyer didn’t need to fill in all the paperwork upfront, just a reconciliation/coding exercise at month end. A “win-win”.

But has this gone too far in some sectors? With the advancement in recent years with alternative electronic transactions such as eProcurement/eInvoicing should the line between PCard and On-Account be re-established? Should it be clear or subjective? Does it depend? On what? Would you spend $125,000 on one scientific equipment transaction on your PCard? Why?

Today, online SaaS solutions such as Unimarket.com can process small-to-large orders electronically with complete integration with suppliers’ supply chains and buyer financial systems. In many cases suppliers still get paid rapidly through online matching and payment processes like ACH (automatic checks or ‘cheques’ if you are reading this from off-shore) or even just getting to the regular check run faster. Even if you are not direct-crediting customers for payment, having an eProcurement system match the eInvoice to the original order and receipt of goods or services accelerates the process of getting paid. Many customers are willing to offer shorter payment terms in return for suppliers adopting eProcurement translating to a huge increase in contract compliance, controls and visibility while maintaining automation and efficiency (including fast payment to suppliers).

We have noticed a number of customers working with their suppliers to come off credit card and on to account. The immediate gain is the elimination of the credit card merchant fees the supplier pays. Often customers get a rebate from credit card companies for usage. Obviously this comes out of the margin credit card companies make from suppliers, so customers can still achieve this rebate from their suppliers that move over to eProcurement directly. Usually there are costs suppliers incur from connecting to eProcurement companies but this too can be recovered from the margin left on the table in merchant fees no longer required.

So given this I find the following statistics interesting:

According to the 2005 Purchasing Card Benchmark Survey (Palmer and Gupta, 2007)

•          2003 pcard spend = $80 billion

•          2005 pcard spend = $110 billion

This is an increase of 37.5% in two years.

The use of Purchasing cards has seen a dramatic rise in recent years with many government organizations now using them to remove “red tape” and reduce costs. For example, in 2001 the Department of Defense (DOD) had 230,000 card holders with an annual spend of $6.1 Billion. Organizations typically use purchasing cards to target low value goods and services, as it offers a mechanism to do these transactions at a significantly lower cost than traditional methods.

Software-as-a-Service eProcurement also allows easy purchasing online from an organization’s preferred suppliers on-account or on PCards. This often resolves the off-contract spend issues, but in the case of PCards, still leaves the supplier paying large transaction fees to the processing and credit card companies for the benefit of a streamlined process, and of course immediate payment.

Combine eInvoicing with eProcurement and “wah-la” the efficiency of PCards is achieved by eProcurement. The automatic matching and fast payment through eInvoicing translates to a significant reduction in cost for procure-to-pay, not to mention the complete line level spend visibility across all purchases.

Today all suppliers, large or small, local or national, can submit electronic invoices through eProcurement systems. Larger suppliers that are often selling high-volume, low-dollar orders are typically equipped to handle CXML feeds into eProcurement for immediate matching. Smaller, less technically inclined suppliers can simply log into their supplier portal and automatically convert eligible purchase orders into eInvoices. In both cases these invoices are often fed directly into their customers AP system once matched. No additional keying is required and eProcurement customers often pay suppliers on the next payment run eliminating the benefit of PCards in certain categories. Approvals are interesting too. Of course, these are work-flow based and depending on the eProcurement solution can be very flexible. The end result is rapid approvals and therefore increased speed to ordering.

So where should PCard usage stop and on-account expenditure start? I believe the line needs to recede. Over the last 10 years PCard usage has often spread beyond high-volume, low-dollar purchases where they work well.  On Account or Purchase Order spend can now in fact process large volumes of orders irrespective of order value and automatically match these orders for automatic payment. This means many organizations can restrict PCards to just off-site travel and convenient purchases, leaving the new breed of automated procurement solutions take care of the rest.

I am interested in comments on this blog from different perspectives. PCard and Purchase Orders are complementary but do you see the line between the two blurry or clear?

 

The beauty of SaaS product updates in the Cloud

This morning I was reviewing a Unimarket SaaS Collaborative eProcurement customer update and was so impressed I just had to Blog all about it… I remember the issues with updates/patches to licensed software and in reading this I believe these are things of the past. At least in the areas that SaaS is available…

I’m including the update verbatim but above the impressive details there is a great message for all SaaS companies and folks considering SaaS applications – when done right deploying SaaS applications can be regular, rapid and rewarding. The agile approach to deploying the best possible product for our customers, in the best possible way in the fastest possible time so surely is now considered best practice?

Before updates are made to Unimarket’s SaaS product they start with well defined business requirements followed by a review and prioritization. Early on this was completely internal to Unimarket where the product strategy team reviewed requests by various internal teams. Each request would be first valued, weighted and prioritized within each respective area then ‘en mass’ at the higher level designed to get relatively higher priority items across all areas and geography’s bubbling to the top. Unimarket is now looking to directly involve customers in this weighting through forums, user conferences and continuous feedback. Unimarket owns the roadmap but customers dictate the direction in terms of which specific roads to take and turns to make along the way.

With 100% multi-tenant SaaS applications, changes can be deployed to hundreds of thousands to millions of users instantaneously. There is no need to download updates or engage with consultants for time consuming and expensive gap analysis to mitigate risk before migrate versions of software. We now live in a much more dynamic, configurable world of technology, a world where mass updates are not as scary as they used to be. SaaS companies have significant change control, regression testing and discipline to make sure continuous waves of improvements are rolled out in such away that existing users (or their administrators) can ‘opt-in’ or ‘opt-out’ of certain improvements or simply enjoy site-wide updates.

Now for the detail… again this is a note sent to customers by Unimarket’s Operations team. For those readers not interested in eSourcing/eProcurement/eInvoicing best to treat this as an example of rapid response & deployment. For those that are interested in the specifics please don’t hesitate to contact me if you would like to know more:

Unimarket Updates

It’s been a busy start to the year at Unimarket, and we’ve changed the way we both roll-out enhancements, and how we communicate them.

Regular Updates

You may or may not have noticed, but in 2011 Unimarket changed from bi-monthly releases to smaller more regular releases. We did this for the following reasons:

* Smaller updates, mean updates are easier to test

* Bugs can be fixed more quickly

* Major enhancements, can be broken down into smaller jobs and in turn, released for general consumption more swiftly

* Minor enhancements, can be released as soon as they’re developed (rather than waiting two months for the next major release)

* Risk of introducing new bugs to Unimarket is reduced significantly

New Features and Fixes Communication

With the more regular updates, we changed our communication strategy from bi-monthly emails, with PDF attachments to bullet point posts on the Unimarket Helpdesk Homepage, (which greets Unimarket buyers and suppliers when posting comments on Helpdesk tickets) and swifter updates of the Unimarket Help Documents.

We’re conscious however that while the key Unimarket champions may have been getting the message (via updates on the Unimarket Helpdesk Homepage), not everyone has been in the loop. With that in mind, we will be returning to monthly email updates, summarizing enhancements rolled out over the previous month.

If you’d like to be in the loop as and when new features hit Unimarket, please subscribe to the ‘New Release’ post in Unimarket Helpdesk (here’s the link: http://unimarket.zendesk.com/forums/50946-new-release and just click ‘Subscribe’. You may need to sign up for Unimarket Helpdesk if you have not visited before). You will then get sent an email as soon as a New Features and Fixes update is posted.

We hope you appreciate the more regular updates and for your reference, below is a summary of the New Features and Fixes implemented over the past quarter:

New Features – January 19, 2011

General Community Improvements

* In Edit Community, under the Email tab, communities can now define multiple email addresses for Approvals, Invoicing, Orders and Lite Suppliers emails.
* In Manage Tax, communities can setup “Predefined” tax codes to be used for products/services that already have a supplier-defined tax (typically quotes).
* Buyers can select “Predefined” tax codes for products/services that already have a supplier-defined tax, or they can choose a different tax code to override the supplier-defined tax.

General Supplier Improvements

* UNSPSC codes have been updated to reflect UNSPSC website
* Allow image links (URL) to be entered in “Image Name” column during catalog upload
* Ability to upload a CSV catalog or quote, without the need to zip file
* Allow suppliers to send electronic quotes directly from their systems to Unimarket via XML webservice
* Allow suppliers to have multiple email addresses for Invoicing, Orders and RFQs (This allows suppliers with cxml integration the ability to receive manual orders to a separate email address)

Blanket Order Improvements

* Rejected Invoices for Blanket Orders now displays the rejection reason to the supplier
* Rejecting a Blanket Order Invoice requires a reason as a mandatory field and the comment is now visible

RFX (Bidding) Improvements

* Allow communities to easily assign an evaluator across all RFX criteria
* Allow communities to invite non-Unimarket suppliers to participate in an RFX via an invitation
* Allow communities to award and decline suppliers on an RFX so the suppliers are notified of their award status
* Provide a history tab which displays a history of the quotes provided by each participating supplier
* Provide communities with greater control over the re-quote process, including which suppliers can resubmit quotes after the “Close Date”

Bug Fixes

* Resolved a date popup issue in IE when creating transaction runs
* Resolved an error when deleting a user in a hierarchy
* Resolved an intermittent error when loading Account Codes
* Resolved an error when a supplier sorts a catalog by code
* Resolved an error when finalizing certain orders with GL codes
* In Manage Buyer Groups, if you add a supplier to one group, then add to another it, the supplier is no longer removed from the first group

New Features and Fixes – Feb 17, 2011

Approvals

- Improvements

* Approval screen now utilizes “Approve/Decline” button (rather than drop-down list and “Save” button)
* All pending approvers now display in View Requisitions and Manage Requisitions screens
* Allow e-mails to be disabled for approvals, (so that the approver is not emailed)
* Allow approval creator to auto-approve for their chains
* Allow named (custom) chains to be added/removed through the Unimarket User Interface
* Allow community administrator to setup pick list option meta data
o Added support pick list option meta data in csv upload
o Added support pick list option metadata in account code update message

- New Features

* Added support for getting approval from every approver below the person with the necessary limit
* Line Level Approvals:
o Approval Screen UI for line level approvals
o Added support for line level requisition approvals

- Advanced Advance Features

* Unimarket SOAP interface upgraded to 1.1

General Community Improvements

* Allow community administrator to browse loaded account codes (on the “Configuration Tab” of “Edit Community” it is now possible to search for account codes)
* On the Create Invoices screen, the invoice time now defaults to 12:00 AM (midnight)

Supplier Improvements

* Catalogue CSV template is now downloadable on the last page of “Create a New Catalogue”

BidTogether Bug Fixes

* Lowest possible price now displays correctly
New Features and Fixes – March 1, 2011

Improvements

* Ability for buyer to visualize the approvals required for a requisition to be approved

RFQ Bug Fixes

* The “Unimarket has encountered an error” screen no longer displays if an approver tries to approve a quote that has expired or has been canceled.
o New error message within the pop-up approval screen notifies approver of the expired quote

* When a buyer looks at a cancelled or superseded quote, they now see that it is no longer valid.

General Bug Fixes

* When a requisition is split into multiple orders, by manually releasing some line items, all orders of the requisition are now visible

New Features and Fixes – March 16, 2011
Quote Enhancements

* Buyer View Quotes functionality
* Supplier View Quotes functionality
* Community Administrator Manage Community Quotes functionality
* Ability for supplier to create quote without an RFQ request

General Bug Fixes

* Updating user details in Manage Community Users gives support error when email address is missing

RFX Bug Fixes

* Thumbnail image can now be zoomed by the Buyer (only supplier)
* Quote CSV extracts with prices are now in currency format not number format.
* When removing a supplier and re-adding them they are added back to the RFX with a state of ‘Accepted’
* Max zip file size for quote upload is set to 10meg not 1meg
* Change wording on Add supplier tab (Premium yes_no)
* Minor wording change on the publish page
* RFX Award process changes

New Features and Fixes – March 24, 2011

New Features

* Approver can modify the requisition (change account codes).
* Account code wildcard framework
* Allow suppliers to filter View Invoices screen by community and run number

General Bug Fixes

* Shipping Tax from invoice message is now being picked up in Unimarket
* Copy down when editing requisition account number
* Can now view past date quote’s in shopping carts

 

The Power of Strategic Suppliers in the Cloud

The Power of Strategic Suppliers in the Cloud

We now live in a connected economy where to survive we must do a good proportion of our business online. But how best to do it?

If you’re a business selling to businesses or consumers, an eCommerce site is manditory in 2010. But what if your business customers use eProcurement? Depending on which direction these organizations have gone in this regard has considerable implications on how their suppliers engage electronically.

We also need to take into account what type of customer we are dealing with. A customer who has a central purchasing department/function is very different to a decentralized one. Direct spend (manufacturing) or indirect spend (MRO/maintenance, repairs and general operations) is also managed differently.

Then we need to take into account what type purchasing system our customers use. I.e.

• No system: paper forms/ manual processes e.g. signed forms/faxing orders
• Purchasing/AP modules within wider ERP/Finance systems: These have varying capabilities – not just functionality within their own system but how they connect with others. Depending on what industry you sell into often dictates the systems you will come across. E.g. in HigherEd you might find SunGard Banner or Datatel as most dominant, whereas in manufacturing it would be SAP and Oracle.
• eProcurement: Some ERP’s have this module and their are best-of-breed solutions available too. The trend is for these systems to be in the cloud with access to suppliers through a customer segmented marketplace.

Connecting to these systems is where the fun starts, but before we discuss this, the question of why should we connect to customer systems should be asked?

• When buying on account, your customers often still need to create requisitions and get them approved before generating the purchase order number for you. Often this takes time and double entry for your customer as the order goes into their system and yours if they are not integrated. If you don’t have a system you often would rely on the order to be faxed through and you would need to double enter this into your supply chain system.
• If we don’t connect then we are outside of the loop. We are at the peril of the customers internal practices as regardless of its advanced functionality, your eCommerce site may or may not be used because it is not connected to the way your customers chose to buy in ‘every’ scenario.
• Traffic to your eCommerce site, or if you don’t have one you can publish catalogs or list generic products with a ‘get-quote’ button that ensures the buyer provides additional information before you reply with a specific price.
• Customers can also exclude non-preferred suppliers so that contract compliance is significantly increased to those connected. Rather than needing to be sold the benefits, customers want to utilise a your eCommerce site (or published catalog), as the overall business process becomes easier and simpler, than picking up the phone.

Whats the cost of connecting and automating?

• For ERP’s, the leading systems have well published integration points and if you have an IT team, your customer has an IT team and both IT teams have resource available at the same time, then integrating is a matter of following procedure and aligning to standards. No matter how straight forward the process appears at the out-set, this typically requires a costly integration project for every customer you decide to integrate with.
• For eProcurement, if it is an ERP eProcurement module the above applies unless your customer has integrated their eProcurement system with a supplier network (eMarketplace).
• The leading Best-of-Breed eProcurement products are hosted/multi-tenant solutions that come with a eMarketplace in the cloud. These customers have moved eProcurement in the cloud to make it easier for suppliers to automate business processes with them to achieve efficiencies across the supply chain.

Supplying customers through the cloud is the best of both worlds for suppliers. Suppliers integrate once into the cloud (rather than multiple times directly to each customer) and the eMarketplace takes care of all further integration to customers’ respective finance systems (for orders/invoices etc). In addition suppliers can also segment products and services so that only customers suppliers wish to do business with are eligible to buy and furthermore, they see the products, services and prices that the supplier wants them to see.

The Power of Strategic Suppliers in the Cloud is clear when you can rapidly access all customers small or large from one place. Maverick spend is reduced as your customers only see contracted or preferred suppliers in the eMarketplace. As this is dynamic, suppliers can instantly introduce or retire new products or change specs/pricing. You can evenly and instantly launch spot promotions, that once selected, will integrate into customers’ finance systems and your supply chain system. No more errors due to out of date catalogs hosted on clients’ finance systems. Suppliers have full control of the catalogs customers connect to, ensuring accurate information every time they search and select products and services.

Probably one of the most satisfying quotes that Unimarket has had was from a leading office products supplier. It has always been a mandate across our organization to ensure we are continuously improving our value proposition to all stakeholders of the system:

“The attitude that we found from Unimarket, particularly to ourselves as a supplier, is that they work very hard at delivering, or building relationships with ourselves and haven’t primarily focused only on the customer. They’ve focused across the entire supply-chain, which has been both of benefit to us and to the customer in the long run. I have no hesitation in recommending Unimarket as a marketplace and have found them to be both easy and friendly to do business with.” - Brian Rosenberg, Executive GM, Corporate Express

If you are interested in listening to other quotes, some of our customers have graciously gone on camera to tell you what they think! http://www.unimarket.com/index.php?page=our-customers

 

Collaborative Procurement verses Reverse Auctions

I often get asked about the difference between Collaborative Procurement and Reverse Auctions so thought I should share my thoughts in this blog.

‘Procurement’  encompasses so many varying business processes that work differently in different organizations. E.g. some organizations compete with each other and some can partner. Some are large and some are small. Some buying organizations are all alone in their procurement and work directly point-to-point with suppliers. Others collaborate.

Some organizations are centralized with very few professional buyers whereas others are decentralized with thousands of often infrequent buyers. Some organizations have a small set of focussed suppliers whereas others have tens of thousands of suppliers often with a long tail of infrequently used suppliers. Some suppliers transact high volume, low value orders whereas others deliver low volume, high value products or services. In 2010 many organizations are collaborating across supply chains for mutual benefit – initially this was more with decentralized organizations but we now see more and more centralized organizations adopting networked procurement with cloud-based eProcurement providers.

Although most organizations strive for best practices in Procure-To-Pay (P2P) there are probably few that really take advantage of the advanced features that are now available for procurement business processes. This blog is intended to start the discussion on Collaborative Procurement vs Reverse Auctions so that readers can be comfortable with the differences and determine when to use which feature in procurement practice.

Both Collaborative Procurement and Reverse Auctions drive per-unit prices down for buyers:

Reverse Auction events are typically a request for products or services that one ‘buying’ organization requests from many ‘supplying’ organizations

• Often these requests (buying events) are for well defined products or services or commodities making it easier for suppliers to bid on an even playing field (apples for apples)
• Suppliers then dynamically bid against each other to drive prices down within a given time period (that can sometimes extend)
• The winning supplier is selected (not always the lowest price as a selection weighting can be applied to each supplier on various other factors)

Collaborative Procurement events are typically a request for products or services that many ‘buying’ organizations request from one to many ‘supplying’ organizations

• These requests can be buyer driven (buying events) or supplier driven (supplying events) and in both cases can include varying requirements for similar products and services.
• In the case of buying events, buyers essentially pool their demand before going out to suppliers for bids. One buyer may have the same or varying requirements to others but the expectation is that the pooled or aggregated demand is for similar enough fit, form & function that one supplier could fulfill. Although multiple suppliers may be required. During the event buyers and suppliers can utilize social networking to discuss various aspects of the purchase in private (buyer-buyer) or public (buyers-suppliers)
• If the event is supplier driven, the respective supplier can offer volumetric price breaks across many buying organizations to pool their demand and establish economies of scale. This allows suppliers to control the scope of the event, the timing of the purchase and the participants so that they can achieve efficiencies in their supply chains. Buyers then dynamically bid together to achieve price breaks that drive prices down within a given time period

Which approach should you use? That really depends on your requirements.

Reverse auctioning is not new, but there are a significant number of service providers since FreeMarkets (www.ariba.com) became the first real success with this procurement solution. Reverse Auctioning is often utilized cyclically over time in various categories to level-set the cost of supply.

Buyers’ working together is not new either, but effectively utilizing cloud solutions to automate collaboration is. Unimarket (www.unimarket.com) is one of the pioneer’s in Collaborative Procurement.

Collaborative Procurement is more for everyday utilization in various categories. E.g. when public sector organizations require multiple quotes for orders over $x then they can cast the net and see if any other organizations want to aggregate demand for the same category. This example would be an RFQ or ‘request-for-quote’ that generates multiple quotes to choose from before selecting. RFXc (Collaborative RFX) could be for RFP’s, RFI’s etc.

Also important to note that both techniques are not just about price. Scorecards are utlized and effective weighting based on other factors such as quality, reliability and service.

So in summary:

Reverse auctioning requires suppliers to bid against each other to drive prices down for their customers, whereas Collaborative Procurement allows buyers to bid together to achieve economies of scale for suppliers to drive prices down.

Both techniques have their important place in the always improving toolkit for procurement professionals.

 

Is that a cloud or just dirty smoke?

It’s very interesting to me to see companies with patched together legacy solutions portraying themselves as SaaS or ‘in the cloud’, when really behind the smoke screen the same old licensed solution exists.

My interpretation of a 100% true cloud application is one that is multi-tenant and hosted for many organizations to share. This means that each organization that accesses the software can be securely partitioned from others when it makes sense, but also allows collaboration when sharing makes sense too.

Although this sounds logical, it is not necessarily easy to design, build and deploy so the often incumbent legacy license solutions that do not have this capability are left to make it look like they do in order to remain competitive!

I recently saw an organization explain that they are ‘On-Demand’. They have an installed licensed product which means they install a version of their product for each customer. So how do they make this claim? Well, technically a license software company could host each specific solution for each customer themselves, and then charge subscription fees. But I think this is more like dirty smoke than a cloud!

 

Procurement on the move!!

Last week I was at a National Higher Education Procurement conference in Denver Colorado. At the opening reception I couldn’t help but notice an excited procurement officer explaining to his peers this cool new mobile app… I have an iPhone so have seen a few and as he had a Blackberry what could possibly be causing such interest??!

As I got closer I realized this wasn’t just any app, this was a serious procurement app for the modern procurement officer that is always on the move. This procurement director was showing several people how he could complete an entire new sourcing bid, including adding attachments for detailed requirements and inviting in bidders from around the country… with a beer in his hand on a Blackberry!

The bids came in (must have been expecting notifications… surely?) and the procurement director reviewed his scorecard and selected the winning bid to the amazement of 8-10 people around his tiny little screen. This naturally became a requisition and passed an automatic budget check then was approved by his boss 1/2 way across the country on his Blackberry. The successful supplier received the order at the same time it was automatically integrated to the finance system that encumbered the funds.

I felt compelled to buy this gentleman a drink for he was using Unimarket’s collaborative eProcurement software! This leading cloud-based application can now even go further than this… if he had wanted to, this procurement director could have invited everyone around the table, or everyone in the conference to join in on this bid. Unimarket’s collaborative technology has the ability to pool the demand of many collaborating organizations before the initiator decides to go out to suppliers. The collaborators can be on a PC, Mac, iPhone, iPad, Blackberry or any other device with a web browser – they can discuss elements of the bid between themselves or state questions to the suppliers through social networking threads.

This truly is procurement on the move!!

Funnily enough, I heard another story last week and this should tell you a little something about the caliber of dedicated procurement professionals we have in 2010!…

A Unimarket customer was enjoying a day’s skiing in Vail, Co and while on the chair lift pulled his glove off and his Smart Phone out… naturally folks next to him thought he was checking the weather or the NCAA scores but no, he is a dedicated procurement manager, so was actually reviewing the daily spend KPI’s and approving requisitions.

Although great to hear this story… I’m not sure all procurement folks would have this activity very high up (excuse the pun) in their vacation to-do lists but regardless, later he quite rightly told me that he was responsible for “taking procurement to new heights”

While on the mobile feature rant… another useful Unimarket app is the SaaS Expense module. This can also be accessed from mobile devices (although I prefer to use my MacBook) so that keeping expenses up to date while traveling is easy. This is particularly useful from a spend management perspective, as all expenses are categorized like regular eProcurement expenditure with the optional use of UNSPSC classification codes. Expense approvals go through the same consistent electronic approval rules as eProcurement but of course end often with employee reimbursement instead of payment to a vendor. This also allows procurement officers to analyze total spend by category/supplier/department etc. with on-contract, on-account or even on-card details.

About me:

I am passionate about collaborative, sustainable SaaS eProcurement to enable clusters of partnering organizations to spend together electronically for mutual benefit. My background is in management consulting with focus on implementing supply chain leading practices. I understand that effective change management is critical and effective utilization of enabling technology can save significant time and total cost from suppliers’ supply chains through customers’ customers.

As founder and CEO of Unimarket (‘one’market) I am fortunate to work day in and day out with experts in supply chain, eCommerce and eProcurement to help Unimarket’s customers enable best practices for spend management and their internal customers to simply transact efficiently.

For more information about Unimarket, please click Unimarket Benefits, Unimarket News or visit Unimarket.com.

 

Collaborative Procurement in the cloud – fact or fiction?

The concept of collaborative procurement, or the ability for buyers to work together across organizations to purchase from many suppliers all in one place, is not new. However the ability to effectively execute on this ideology across all suppliers, from the smallest to the largest, by large decentralized organizations certainly is.

Cloud applications enable a new breed of effective collaboration, where buyers and suppliers can proactively initiate multi-layered, mutually beneficial events to dynamically generate supply chain cost savings. I believe the general acceptance of Software-as-a-Service (SaaS) combined with Web 2.0 or more dynamic, user friendly web interaction, will now accelerate the utilization of Collaborative eProcurement and the related benefits.

Who needs Collaborative eProcurement?

Buyers within or across organizations who can work together on spend management verses those who procure alone are best suited to Collaborative eProcurement. Sectors with organizations that don’t compete against each other with procurement, such as government, health and education, can achieve considerable benefits.

Sectors that are traditionally decentralized and somewhat fragmented in the way they spend often have significant challenges with effective procurement. Collaborative eProcurement is certainly one of the solutions – it supports shared services and the streamlining of operations in order to do more with less. Of course it also reduces costs.

SaaS, Collaborative eProcurement just requires an internet connection so no matter where buyers are, they can access their organization’s buying agreements and purchase related products & services.

If you search the internet for collaborative procurement, you will see discussions dating back to 2001 and earlier on the theory of multi-to-multi transactions and more of a network approach to B2B e-procurement.

Unfortunately truly effective collaborative eProcurement is easier to talk about than do, but now with the emergence of cloud thinking it is absolutely achievable. It’s still not easy though, as often business processes including policies and procedures need to be more flexible to go across organizations from suppliers’ supply chain’s to customers’ customers. Technology needs to be multi-tenant, meaning multiple organizations, whether groups of buyers or groups of suppliers, need to be playing in or at least accessing the same environment. However the most important component of effective Collaborative eProcurement is people. People make changes to status-quo happen, and in the case of Collaborative eProcurement, it takes a CFO/CIO and/or a strategic procurement leader to maximize the benefits.

Fact:

• By pooling demand within and across organizations lower unit prices are achieved, economies of scale result, unit costs reduce.
• By utilizing world-class eProcurement for P2P, procure-to-pay processes are streamlined, time is reduced, errors are reduced, and costs are reduced.
• By utilizing a supplier network, master data maintenance can be managed by suppliers and buying organizations can buy through their one eProcurement window across all suppliers. Compliance is increased, consistency increased and internal customer service improved.
• By accessing an organizations segment of the cloud, buyers can only see the suppliers and contracts they are eligible to see.
• Group Purchasing Organization (GPO) contracts can be accessed through the cloud to ensure buyers are buying from the right contracts at the right time.
• Social networking techniques are applied to procurement during Collaborative eProcurement events. Buyers and suppliers can discuss various aspects of a bid and information shared where appropriate across participants and organizations.
• Collaborative eProcurement is available today through a true 100% multi-tenant, Software-as-a-Service cloud consisting of one segmented marketplace (not many duplicated marketsites), allowing one connection in for suppliers irrespective of how many customers they have and one connection in for customers irrespective of how many suppliers and buyers they have in their community.
• Collaborative eProcurement compliments existing investments in ERP/finance and even other eProcurement providers.

About me:

I am passionate about collaborative, sustainable SaaS eProcurement to enable organizations to spend together electronically for mutual benefit. My background is in management consulting with focus on implementing supply chain leading practices. I understand that effective change management is critical and effective utilization of enabling technology can save significant time and total cost from suppliers’ supply chains through customers’ customers.

As founder and CEO of Unimarket (‘one’market) I am fortunate to work day in and day out with experts in supply chain, eCommerce and eProcurement to ensure Unimarket’s customers in the United States and Australasia enable best practices for spend management and transact efficiently. For more information about Unimarket, please click Unimarket-WhatOurCustomersSay and Unimarket news or visit www.unimarket.com.

 

SaaS Spend Management meets SaaS Student Management

It is widely known that costs of Higher Education have been rising globally for some time. It is no surprise then that all responsible schools are actively looking to reduce costs.

In challenging financial times, organizations look for better, faster and cheaper solutions to execute day-to-day activities.

In 2008 SaaS (Software-as-a-Service) matured. Good SaaS solutions complement existing customer investments and reduces the need for license software costs and related stand-a-lone maintenance. Reducing the need to manage infrastructure, applications and large IT teams in-house for non-core business.

A good example is in the education sector where schools are now turning to SaaS applications for both the faculty and the administration.

Why?

Here’s a 5 key reasons:

1. Simplicity: “All you need is a web browser and an internet connection”
2. Flexibility: “Use what you need”
3. On-Demand: “Scale up, scale down”
4. Responsiveness: “A dedicated service provider just a click away”
5. Return on Investment: “It’s already live, just plug in, configure and start saving within months not years”

Organizations who choose to build IT infrastructure or software when it is not their core business often do so thinking “its only a few computers… its only a few people… its only a few web pages… its only a few licenses” only to find that they’ve often “created a monster”!!

SaaS solutions combined with cloud infrastructure are built on a different ‘school of thought’ this is collaborative thinking where schools don’t need to ‘go at it alone’ – shared infrastructure, shared services and collaborative technology directly impacts the bottom line.

Unimarket (www.unimarket.com) and TopSchool (www.topschoolinc.com) are two such ‘like-minded’, ‘next generation’ solutions. Both saving time and money across the sector on spend management and student management respectively. The partnership between these two high growth companies leverages synergies and shares resources to ensure respective customers can save money across the board.

Please contact inquiries@unimarket.com or support@topschoolinc.com should you like to learn more.

 

What is social networking for procurement?

Top Procurement Managers who source deals and negotiate contracts have used automated spend management solutions for years.

Manufacturing companies who have recipes or bills of materials can setup sophisticated supply chain solutions that can explode specifications & recipes to automatically order from suppliers with no human intervention. Defaults and parameters are set for attributes like economic order sizes, order interval days, reorder points, reorder increments etc.

However the products and services loosely categorized as MRO or ‘Maintenance, Repairs and General Operations’ is harder to automate because they require human intervention. The problem of course is that up until recently this type of spend was forced through systems designed for manufacturing spend management.

Spend Management software companies have done a tremendous job over the last ten years organizing this category of spend and make it easy for buyers and procurement managers to manage significant MRO spend. But unfortunately these solutions have been expensive so many organizations do not see enough return on investment. The recent emergence of a few SaaS or ‘Software-as-a-Service’ eProcurement solutions has changed that with hosted solutions no longer requiring hardware, software or maintenance.

Spend Management Software companies have developed leading edge software to facilitate the functions performed within corporate buying organizations but in other sectors procurement needs to be more open. Sectors that are traditionally fragmented or decentralized. Sectors where many buyers make decisions on what they purchase and when.

It’s always important for the procurement administration function to ensure effective policies and procedures are in place and depending on the organization, varying levels of controls. However, all procurement managers should achieve complete visibility of spend, whether on-contract, off-contract or reimbursed on expense reports. With this information contracts can be negotiated and better compliance & pricing.

In addition to this, there are sectors such as education, health and local government who manually work together across departments & campuses and across organizations to source deals and execute on contracts. This is manual collaboration.

With the advancement of Web 2.0 and social networking, solutions can finally be offered to these sectors that automate the very activity that they do manually today. This is called Collaborative Procurement.

To work it must be SaaS and to work across organizations it must be 100% multi-tenant. It must be hosted and it must connect both buying and supplying organization seamlessly. The ability to interact is important and the ability to react and adjust to the effective flow of information between trading partners and preferred suppliers is critical.

If you collaborate, or at least cooperate with other departments and organization then collaborative procurement should be considered when looking to upgrade your procurement applications.

Unimarket is the leader in collaborative procurement solutions and offers a powerful procure-to-pay and order-to-cash network for customers globally. All solutions integrate with leading finance and supply chain solutions to ensure collaboration is complimentary to existing investments.

Please contact inquiries@unimarket.com should you like to learn more.