DSSI — Redefining MRO Distribution and Outsourcing (Part 2)

Please click here for Part 1 of this series.

Even though the breadth of DSSI's services in MRO and related industrial spend management spans quite a wide area, their focus on sourcing and item-level cost reduction actually takes a simultaneously broad and in-depth approach. Consider how DSSI will pursue different options to drive costs down, including spend aggregation within a client (e.g., across sites or locations) and spend aggregation across their own client base, where appropriate. A set of internally developed sourcing tools supports this spend (and supplier) rationalization approach to sourcing, including reverse auction technology, spend analysis and item-level benchmarking capabilities. I was personally surprised during my briefings, demonstrations and interactions with DSSI at just how much the provider had gone down a "roll your own" approach to building technology rather than licensing off-the-shelf tools.

DSSI does not stop at sourcing in terms of client cost reduction and working capital improvement. While I'll leave the nuances of their internally developed eProcurement and related tools to a specific post, one area that struck me is how DSSI runs one of the most robust supplier connectivity programs in the business. They administer, for example, through their own AP program and system, direct financial settlement with over 5,000 suppliers in the categories they serve. Given their outsourced model, even though customers might issue an order in their own eProcurement or direct materials requisitioning system, the order is ultimately routed through DSSI's own tool. In certain cases, DSSI may get a weekly (consolidated) invoice from suppliers that that they feed directly into their GL which is then updated in the client's own ERP/procurement environment.

DSSI's approach to AP is to be selective when they pay suppliers, but in most cases, it is "as soon as an invoice comes in" because of the impact that early payment can have on the availability to take discounts as well as overall supplier management and relationship enhancement. Discounts are shared with clients, but in certain cases DSSI will act as a source of third-party financing for customers (taking a bigger cut of the early payment savings) when necessary and directed by a customer. In these situations, a client pays DSSI on extended terms even though DSSI is paying the supplier as quickly as they receive an invoice.

Outside of payment, DSSI gets involved on a much deeper level than most outsourced providers across its clients (and deployments) in the area of catalog and content management. They maintain catalog information in a manner that lets suppliers keep their local part number but then translates this number to a manufacturer's identifier. DSSI takes control of "each manufacturer name and part number and assigns each item a unique part number...[then] a reference table is constructed to capture/report the individual plant location part numbers." On a broader scale, DSSI maintains a single indirect purchasing database across its customers, serving as a content-management driven intermediary in an area where traditional eProcurement systems alone have often come up short because of a limited ability for suppliers to self-manage information with internal -- or in this case, third-party -- validation of terms, changes, etc.

In terms of content and other transactional support and management, DSSI supports a range of supplier connectivity options including web-based, FTP, EDI, email and their own direct-connect system. Buyers typically connect to DSSI to an interface with supplier data from a search, ordering and management perspective over a web environment, but information exchange can also occur over a VPN, FTP or EDI environment. Regardless of the means of access, it's clear that DSSI has experience supporting the lowest (and most sophisticated) common denominator environments on both the buyer and supplier side in acting as a content-focused intermediary in the categories it supports.

For tactical buying and administration, DSSI provides its own catalog shopping environment, enabling a range of capabilities, including the ability to schedule orders, provide approvals and associated workflow, track budgets and, of course, maintain and approve catalog management changes. For order fulfillment and logistics, DSSI enables users to query the system to view shipment and order tracking information, claims/return information and a range of other related queries. In short, regardless of their back-end (or own internal eProcurement environment), DSSI's tools sit on top of client systems while also providing a range of additional support services to facilitate both the successful category (and item-level) management of different spent areas as well as every day tactical and spot purchases.

Stay tuned as our analysis of DSSI continues.

Jason Busch

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