What Procurement Can Learn From the SAP Acquisition of SmartOps

SAP just acquired supply chain planning vendor SmartOps. SmartOps and Optiant came onto the supply chain scene over 10 years ago, and there were a few aspects of their solution that I found important as it relates to not only the broader supply chain, but to procurement specifically. These include:

  •  A focus on the extended supply network.  Traditional planning approaches tend to be single tier – both in Procurement and in Supply Chain.  For example, in transportation sourcing, you want to optimize around not just your own network/resource, but also those of your suppliers, 3PLs, carriers, etc. If you want some gory detail on this topic, and the most complex paper I ever wrote, some of the vestiges of it are detailed here.
  • The importance of design beyond basic product design.  By re-thinking something like the “point of postponement” and combining it with things like VMI, transportation sourcing (per above), make-vs-buy, multi-tier cost modeling, etc., you can really start to strategic re-shape your supply networks to not just reduce total costs, but also manage your networks much more strategically.  There’s a lot of focus on this now just from the risk standpoint, but for manufacturers, you need to formally model this to manage it.  P&G was recently talking about this here.  Of course, you don’t supply network design software to do this, but you need to do it in great detail for your core value chains (something I learned from Scott Searls a long time ago – Scott is the only 2-time Gene Richter award winner from ISM).  That said, I strongly believe that supply network design models will become critical for procurement technology and service providers in the future – but this is a topic for another day.  Bottom line: design matters and procurement must learn to impact design beyond the design of spend taxonomies, bidding events, etc.
  • Demand sensing.  To better secure supply, you need to understand demand, whether in a post-sourcing supply chain planning context, or for better strategic sourcing.  Duh, right?  Yet, to gain spend influence without the big mandate, so many procurement organizations don't do many of the basics.  Are you baked in to the Cap Ex approval workflow (and have early visibility into it)?  Do you see your pending contract renewals? Is procurement baked into large project plans in IT, Facilities / Real Estate, etc.?  Are you involved in your stakeholder’s annual planning / budgeting process?  Do you involve them in yours?  Do you see large unused budgets as the end-of-year looms that will invariably turn into a last-minute negotiations scramble at year-end?  You get the point.  Find better ways to sense and shape demand for all spend.

Of course this says nothing for how SAP is going to integrate the capabilities of its newly acquired SmartOps asset into its procurement and supply chain suite of capabilities (from Supplier InfoNet through Commodity Management – and maybe someday, a next generation flavor of the Ariba network). We'll examine this in the future.

I’m a bit of geek around supply network design, and think it’ll be a core skill and technology capability in extending out to the supplier tiers.  What do you think?

Voices (2)

  1. Michael Schmitt:

    The devils in the details, better management of spend dictates more granular levels of detail uncovered on a timely and accurate basis to reduce lead times and inventory buffers. For dircect materials a fair amount of information exists in in Tiers 2 through Tier X. Trading Partners working together, with better information, can make better decisions and help enterprises manage demand they can’t predict with supply they don’t control.

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