eCommerce Support of Procurement Models

Acuity (Consultants) Ltd Executive Interm Manager and ACUITY Director, Tony Colwell’s Blog post this week titled 5 Models for Procurement Organisation, discusses the differences in the definition between Procurement and Purchasing. It also outlines the different types of procurement models. There are three basic models for procurement, any others being a combination of these three:

Local – All activity, decision making and control is performed locally and is autonomous.

Central – Decision making and procurement activity is centralized. (There may be local activity and controls outside the scope of procurement, for example, calling off supply under a centrally negotiated contract.)

Networked – Activity is co-ordinated across local units. Decision making is not independent but is controlled in some way by a node, or nodes, on the network

Being a great advocate of eCommerce, I was struck by how eCommerce was compatible with each of the models.

In a Centralized system, Company/Agency wide contracts can be offered and easily used by anyone with ordering capability. Rules and workflows can be put in place to facility large buys and prevent rogue purchases. Consolidated purchasing data is collected which can be used for strategic sourcing and other business analysis.
In a Localized system, a centralized eCommerce site can still be used. Rules can be put in place to display local contracts only to local users. These users can receive regional pricing. Each local buying group will have the feel and control of a local system, but the company can still gather the consolidated purchasing data for business analysis.
A Networked system can show both the Centralized and Local contracts and include business rules for specific items.  It could allow unrestricted purchasing for certain dollar thresholds and workflows for higher priced items or items whose […]

Why Strategic Sourcing Works

I saw a discussion recently on LinkedIn discussing why companies are turning toward having a few preferred suppliers rather than selecting items on price alone. This strategy is known as Strategic Sourcing. The question spurred quite a discussion.  Here are some of  the key points.

Price alone has nothing to do with material standards, product quality, or timeliness of delivery. Most often a manufacturer can excel at two of three key things…price, quality or service. A savvy buyer develops relationships for their company that balance all three.
Consolidating vendors helps reduce costs, and increases price leverage opportunities. A reduced vendor base can also help focus the procurement department’s ability to focus on quality, service and pricing.
Once you have developed a relationship with a supplier and know that they are reliable, you are often able to negotiate better pricing than they would offer to others. Another reason is that they know that you can deliver, such as paying on time,  which further solidifies their willingness to do business with one company over another. It goes both ways.
The simple answer is “Value.” Preferred suppliers are chosen for many reasons including: pricing, quality and service.  Some companies sell strictly on pricing and the notion that “you get what you pay for” usually holds true. I suggest that you demonstrate value and you may get more results than strictly pricing.
With a few preferred suppliers you can develop a kind of partnership which means long-term benefits for both parts, a win-win situation. Along with your supplier you can sometimes even develop or change products by using your joint knowledge and other things that you are unable to affect if you are frequently changing suppliers.
The movement toward fewer preferred suppliers is a […]

How to Increase Accuracy in Supply Chain Management

Accuracy is an essential ingredient in supply chain management. Without it, managers have a more difficult time making the right decisions for their organizations.

There are three main ways organizations can improve the accuracy of their supply chain system. First, use barcodes and scanners. Second, use inventory management software to organize the data. Third, automatically update the accounting database at the same time as the inventory database.

1. Using Barcodes and Scanners

With the help of barcode software and portable scanners, organizations can easily keep track of their inventory levels, place orders and accurately assess their ever-changing inventory needs.

When new products arrive, workers can scan them in and instantly update their inventory database. This saves time and reduces the risk of errors creeping into orders and inventories. If employees have to type product numbers and quantities into a computer by hand, they are more likely to make errors than if they scan product barcodes.

2. Using Inventory Management Software

Barcodes and scanners are great tools, but unless they have an organized place to put their information, they are useless. Inventory management software helps companies stay up to date on their inventory situation. An electronic inventory database can be instantly updated via barcode scanners so that at any given time managers know how many products they have and how many they need.

Inventory management software is also a good tool for estimating future inventory needs. Based on past sale cycles and changes in consumer demand, the software can help managers order more or less of certain products to maintain a balance between being overstocked and out of stock.

3. Updating Accounting and Inventory Databases

If managers have to enter the same information into multiple databases, they have a higher chance of making a […]

Cost-Cutting Solution: Inventory Management Software

When it comes to organizations’ finances, some years are better than others. It’s no secret that for many in the private and public sectors, the last few years have been on the lean side.

It requires creativity for a company or government department to tighten its belt without cutting its services or quality. With fewer goods being sold, companies earn less money and the government takes in less in sales and payroll taxes.

How can these organizations effectively cut costs and maintain their overall strength? One way is with inventory management software. Inventory management software is an automated system for keeping track of inventory levels, product shipping and sales.

Two typical inventory-management problems that can hurt organizations’ financial health are having too much or too little inventory. Many times, a company or government department purchases products or parts in bulk to ensure they have enough on hand to meet demand the moment an order comes through. They also may think the discount they get by buying a large number of products or parts will offset any potential risks.

However, this strategy leaves them vulnerable to product spoilage and obsolescence. An overstock of products or parts also prevents the capital that was spent on them from being used in more productive ways. Organizations have a finite amount of capital to work with, so it’s important that they spend their money as effectively as possible.

Being understocked on products is what most organizations try to avoid. Not having enough inventory on hand causes manufacturing delays, and it can drive customers away.

To find a balance between an overstock and an understock of products, many groups turn to inventory management software. Using barcode scanners to receive, track and sell products, organizations can know […]

Naming Conventions and Standardization: Improving Findability on the DOD EMALL

“What’s in a name? That which we call a rose by any other name would smell as sweet.”

Shakespeare’s famous quote may be true of flowers and lovers, but what about hardware and repair parts?

Name standardization and good data quality are important aspects of eCommerce,  but they are especially imperative in a Government eCommerce site, where the Federal Catalog System has required item identification and naming standards  since World War II.

Unfortunately, some manufacturers label items using cryptic part numbers that confuse customers.   Vendors frequently shrug this off, saying, “My customers know what my products are and how to find them.”  Vendors making this case, however, are simply cutting themselves off from a much larger customer base.

Naming conventions are one way to solve this, but even then, the conventions themselves must be standardized.  Lack of standardized naming conventions is a frequent problem within Government eCommerce sites.  A single item may have one name in the private sector, and an entirely different name in the government space.

Names may even change from region to region.  Take gypsum board, sheet rock, and wallboard, for instance.  Many customers might be surprised to find that these names all refer to the same item.  Allowing for the use of colloquial names makes it easier for the customer to find items in a Government eCommerce site.

Partnet continues to search for new ways to make products easier to find on the DOD EMALL.  Using standard naming conventions across suppliers and enabling colloquial search criteria are two ways we’re simplifying the process for EMALL customers.

In doing so, perhaps we afford them a chance to take time to  smell the roses.

Supply Chain Inventory Management: Turning Methodology into Strategy

I’ve uncovered an interesting article by Chris Stephenson—writer for Manufacturers’ Monthly.  It was written a few months ago, but reads like a perfect companion piece to Terryl Benson’s post on supply chain inventory management—featured on this blog a few days ago.

Stephenson’s article talks about lean logistics methodologies as a primary improvement model for manufacturers, and how most enterprises fail to apply these methodologies across their supply chain networks.

The article provides a number of good recommendations, but three in particular stood out:

Invest time in back-end business planning, up-to-date enterprise and supply chain planning, and execution applications.
Review outdated legacy IT and traditional ERP systems to ensure they fit with your networked supply chain model.
Embrace technology to help meet customer demand for service through an increasing number of [service] channels.

What struck me about the article (aside from its reinforcement of sound, supply chain inventory management principles) was the way it outlined challenges currently facing the industrial private sector, and how they so closely parallel the logistical problems our government wrestles with.

At least, they are both uniform in their need for tighter integration, new enterprise-planning resources, and access to timely, reliable data sources.

Over the past year, Partnet had the opportunity to meet with government logisticians and planners from across the globe, and several highlighted these same concerns.  This is precisely why Partnet is developing new, integrated applications that improve supply chain visibility and reduce the need for planners and manufacturers to manage market variability with surplus inventories.

We feel it’s a step in the right direction.

New IT investments, however, are only part of the solution.  It’s up to manufacturing and logistics communities—whether private or public—to decide how to take lean methodologies and turn them into functional strategies.

(And […]

Why Government eCommerce Over Traditional Procurement?

There are several good reasons.

It has long been known that traditional procurement processes, whether public or private, are often arduous and time consuming. By establishing long-term purchasing contracts with strategic companies and letting junior buyers place delivery orders against those contacts from an online marketplace, senior acquisition professionals are freed to work on major acquisitions. Government eCommerce is also much more economical because online ordering is quick and easy once those contracts are enabled, and establishing multiple contracts for a given commodity also ensures competition and price competitiveness.

Government eCommerce also provides potential visibility into vendor inventories. Using a distributed architecture, online marketplaces can communicate directly with vendors using application integration tools. This allows secure, reliable messaging and data transmission; including elements like order status, back-order information, stock-on-hand, and stock-out data.

The DOD EMALL is an example of Government eCommerce in action. The Defense Logistics Agency’s (DLA) distributed architecture system allows Department of Defense and other Federal Agencies to house long-term contracts and leverage the government’s buying power. DOD EMALL currently maintains over 2000 individual contracts to support more that 60 million items—helping DOD EMALL to exceed $800 million in FY09.

As the world becomes more integrated online, its only logical that governments take proactive measures to keep pace with the private sector. Government eCommerce ensures that Federal, state, and local purchasing stays ahead of the curve.

IT Software Strategies for Reduced Supply Chain Inventory Management Budgets

IT budgets for Supply Chain Inventory Management investments have shrunk considerably during the most recent economic downturn.  This is true of both Government and commercial enterprises.   Industry research shows that appetites for large scale projects have all but disappeared as enterprises look for targeted and cost-effective solutions that will provide immediate value.  Instead of throwing large amounts of money up front at expensive and often excessive SCMS and ERP systems, enterprises are now looking at alternative methods to solve their most pressing supply chain challenges.

One alternative strategy that is receiving a lot of attention is Software as a Service (SaaS).  While this software model provides some benefits, including the reduction of upfront costs, it also has some disadvantages that enterprises should consider.  These include the loss of control over data, limited customization options, and an inability to integrate with additional services.  Furthermore, this delivery model requires ongoing payments for the service, often times prolonging the budget shortfall by committing future IT dollars to an unproven solution.

A second strategy being taken by enterprises is to purchase lightweight and highly targeted off-the-shelf applications that can be easily plugged in and configured to address a specific Supply Chain Inventory Management problem. This class of application normally incorporates Service Oriented Architecture (SOA) principles, thereby enabling them to be extended, scaled, and incorporated into a larger IT vision at some point in the future—once more funding is made available.

Partnet sees great potential in leveraging this second strategy.  Government, as well as commercial enterprises, need to look at smarter IT solutions—not necessarily larger, more comprehensive ones.  Simple integration tools—targeting critical data sets within the supply chain—often bring more value than cumbersome enterprise systems.

DOD EMALL, which currently employs an enterprise integration […]

Contingency Contracts and the DOD’s Humanitarian Mission

According to the United States Southern Command (US SOUTHCOM), over 6000 US military personnel — alongside six naval vessels and 20 aircraft — are currently deployed to Haiti in support of the humanitarian relief effort to more than three million Haitians affected by the January 12th earthquake.

Increasingly, the US military finds itself in this position.  Because of its unrivaled ability to project and sustain large-scale operations over extended distances, the DOD is often called upon to support humanitarian assistance and recovery operations abroad—like those currently underway in Haiti, and now, Chile.  And increasingly, DOD is confronted with the problem of finding effective and feasible contingency logistics strategies.  In other words, finding fast, effective ways to supply our military personnel with the equipment and resources they need to carry out their missions.

In order to effectively manage its growing humanitarian commitments abroad, the DOD is looking towards IT-based solutions to facilitate its contingency contract process.  In the 2009 Quadrennial Defense Review, the DOD states that current supply-chain management processes inadequately address its responsibilities abroad.
“The conventional acquisition process is too long and too cumbersome . . . the Department [of Defense] must improve how it matches [logistical] requirements with mature technologies and maintain disciplined engineering approaches [to] institutionalize rapid acquisitions capabilities.” –Page xiv, 2009 Quadrennial Defense Review (Department of Defense).
Partnet is busy developing new IT-based solutions that will achieve this “rapid acquisition capability” the DOD is rightfully pursuing.  Among these innovations is an automated, contingency contract and planning tool that could be leveraged to enhance and support existing DOD logistical investments.  The goal is to create an integrated system capable of implementing contingency contracts with global vendors—as well as local suppliers—that quickly locates and sources mission-critical supplies […]

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