DSSI — Redefining MRO Distribution and Outsourcing (Part 5)

Click here for the first three posts in this series: Part 1, Part 2, Part 3, Part 4.

In summarizing DSSI, it's hard to describe what they really are in a single sentence, other than a minority-owned provider with a highly targeted MRO (and related indirect) Spend Management offering for the industrial manufacturing community. On the one hand, they're nearly always providing a hybrid BPO/distributor model to clients where they actually take title to the goods being transacted (and get involved, as required, in serving as "a bank" for their clients when extended payment terms are needed). But on the other, they're a highly expert services organization that understands all elements of MRO/indirect strategy sourcing and spend analysis. And let's not forget they also have their own broad set of P2P and sourcing technologies that they developed internally. DSSI has an online MRO benchmarking offering, but I'll leave that to another post. If you're getting the sense that DSSI is a multi-headed industrial Spend Management hydra, you're correct. But this is one monster that manufacturers should welcome rather than fear.

It's worth drilling down on the DSSI distributor model because unlike other BPOs, one could argue that they're really more like a hybrid BPO/GPO. Not only is DSSI taking title to the goods they buy as principal in many cases, they're also aggregating spend on behalf of their clients. As they put it, "if we get a better deal, then all customers benefit." Yet DSSI is not about mandating that customers use a specific supplier or part. On behalf of their customers, DSSI sources "exactly the manufacturer's part number" without the use of market baskets to estimate or implement savings, as is so often the case in indirect sourcing programs that are run by a third-party. DSSI quotes and gets everything quoted on a line-item level.

In using DSSI as in intermediary, a customer's purchase order then results in a DSSI purchase order. In turn, DSSI is responsible for payment to the vendor and following up to receive payment from the client (who can then count DSSI as part of their diverse spend, given DSSI's status). On a monthly basis, DSSI's consolidated invoice summary shows clear line-item detail that also ties to specific user activity -- a level of information that MRO distributors will rarely provide, unless prompted by their manufacturing clients, because it can make it easier for companies to engage in new sourcing exercises.

Even though DSSI serves as a reseller, customers have a unique view of their own catalog information, including pricing. DSSI did tell Spend Matters than one industrial supplier they work with requires that they maintain separate pricing based on each actual end-use customer (based on this manufacturer's overall market presence/dominance), but in general, the spend aggregation model holds across all the categories they source on behalf of users. Another major benefit in serving in the role of an informed, data-driven intermediary is the information exhaust all the buying activity generates. This has resulted in a new spin-off business from DSSI, Relativity, which offers highly detailed benchmark prices for MRO items based upon a variety of price intelligence sources (including their own). In Spend Matters' view, Relativity is a nifty (but separate) price benchmarking service, albeit one that requires its own analysis on these virtual pages to do it justice (so stay tuned).

In short, Spend Matters believes that even though DSSI may not be a household procurement name like a Grainger or Ariba, that industrial manufacturers looking to drive savings on the plant level for MRO and related categories while also increasing their diversity spend, should consider their unique, inclusive offering that transcends an easy-to-label definition. Even companies with either highly advanced P2P deployments for indirect (e.g., Ariba, SAP, Coupa, Oracle), another BPO solution already in place across other categories and/or internal category expertise already in the area would be well served to consider DSSI as a potential partner. There's really not any other provider in the MRO and indirect marketplace who looks exactly like them. And that's a good thing.

Jason Busch

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