Spend Matters Premium Content:
Commodity Management

Will the Cost of Energy Increase? On Statistics from the US Energy Information Administration [PRO]

- July 31, 2014 10:27 AM

Of all the things procurement buys, nothing is more critical to business operations than energy – both price and availability. The US Energy Information Administration (USEIA) has just published their most recent numbers for the nation’s electricity generation, capacities, and prices. The administration defines net summer capacity thus: "the maximum output, commonly expressed in megawatts (MW), that generating equipment can supply to system load, as demonstrated by a multi-hour test, at the time of summer peak demand (period of June 1 through September 30.) This output reflects a reduction in capacity due to electricity use for station service or auxiliaries.”

However, the USEIA provides no summer/winter comparisons in their numbers, nor do they provide a comparison between existing and projected capacities with consideration given to both new and retiring plants. So are we gaining or losing power generation ground? Since the USEIA also does not provide us with a report on the realistic future power generation capacity, Thomas Kase (VP of research, Spend Matters) ran the numbers himself. This Spend Matters PRO research brief is accompanied by two downloadable detailed spreadsheets.

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Write Better RFPs – How to Get What You Want (and Need) From Suppliers [PRO]

- January 10, 2014 12:11 PM

The typical business challenge when you go to market with an RFP centers on getting ideas for what is possible, and identifying suppliers that either already have these ideas or are willing to work with you toward that end. Targeted activities are often services or complex products where quality, service, or the engineered final product will be different from each vendor responding. We've put together some fresh ideas to an old challenge: conveying your needs in ways that a supplier can relate to and that encourages them to put their best foot forward, with a proposal that goes beyond your wants, and addresses your needs as well.

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Using DMAIC 2.0 to Blow Up the N-step Procurement Process [PRO]

- December 5, 2013 5:21 PM

An n-step chevron process is a siloed procurement-centered sourcing methodology geared towards supplier rationalization. It’s a fine start for procurement hitting cost savings goals, but it’s not a great way to align to the broader organization as procurement evolves. So, we’re proposing DMAIC as an emerging, superior approach, but it’s far beyond the DMAIC that you usually think of. The n-step sourcing process has had a good run, but let’s not try to make it do unholy things. Read on to see how other companies have used DMAIC.

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Don’t Discount the “Wow” Or Umami Factor in Procurement Solutions – A Chef’s Checklist [PRO]

- November 27, 2013 1:38 PM

In the world of procurement technology (and technology in general for that matter – think the original iPhone and IOs) there are certain solutions that have brought umami qualities and truly helped them stand out from the crowd. Like in cooking, it's a "wow" factor that separates out certain approaches and capabilities from the pack without ever being directly comparable in a feature/function manner to others. We could name names, but it's better to know in the buying process whether the procurement technology has umami. So here's a checklist of questions to ask yourself. And we can't hesitate to also toss in a list of providers we think have the umami qualities -- as well as a couple of solutions that do not (hint: does "15 clicks to buy" ring a bell?) Spend Matters PRO subscribers can click through to read the full text.

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Top 10 Ways to Radically Expand Category Management Value Creation [PRO]

- November 20, 2013 2:34 AM

In the never-ending quest to deliver more value, procurement organizations are trying to squeeze more savings and innovation out of spend categories. But, eventually the well starts to run dry, and when that happens, you need to either get more out of that well (fracking for spend savings, perhaps?), dig a deeper well, find another place to dig, or find another way to get the water. My point? To improve category management, you sometimes have to expand it or blow it up completely. Here are some ideas that I’ve seen work elsewhere that can hopefully give you some inspiration and raise your category management game.

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Re-thinking and Re-claiming “Tail Spend” [PRO]

- November 13, 2013 3:44 AM

The idea of “tail spend” doesn’t seem very complicated at first. Run a pareto analysis on your spend categories and suppliers to make a cut off at, say, the 80% that represent only 20% of your spend. Your numbers will of course vary, but the idea is to find a way to better manage such “nuisance” low-dollar spend that doesn’t detract from your efficiency, or worse yet, from spending time managing the truly strategic spend categories more deeply. You might think of this as the spend in the lower-left quadrant of the famous Krajlic 2x2 matrix, which describes a strategy of “purchasing management” to manage non-critical, abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And, maybe, if you manage this nuisance spend properly, you can even extract some value from it (e.g., a “quick source” process to gain some speedy spend savings). Sounds straightforward, right? Well, it’s not, and I have purposefully led you astray to prove a point.

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Zycus: Singing from the Ariba Hymn Book for Source-to-Pay Suite Leadership [PRO]

- October 28, 2013 4:42 PM

If it wasn’t clear before now, Zycus’ CEO Aatish Dedhia is playing for keeps in attempting to become the top independent source-to-pay suite “alternative” in the procurement technology sector left by the void when SAP acquired Ariba. Of course, Ariba has not technically disappeared, but it’s certainly distracted as it works the reverse assimilation of the SAP Borg. During this morning’s session at Zycus’ Horizon customer conference in San Antonio, Texas, Aatish shared his perspective on the evolution of the procurement market, including an increase in demand for integrated solution suites from best of breed providers (rather than customers buying single, modular procurement technology products alone) or from suite providers who have acquired and “loosely coupled” some of their modules (IBM/Emptoris, SciQuest/AECSoft/CombineNet/Upside, etc.).

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Commodity Management: Drilling into the Supply Chain and the Technology Landscape [PRO]

- October 21, 2013 3:33 PM

My colleague Jason Busch penned an excellent piece on commodity management last week. I wanted to dive into some of the details around that and its relation to the broader supply chain, but also the different solution approaches being used to tackle it. In the value-chain mega chart below (which basically follows a design > source > plan (supply) > deliver (inbound) process flow from left to right), I’ve outlined the various processes (brown rectangles) and some supporting solution types (blue ovals) for commodity management. PRO members, click through to see the graphic in all its glory - plus way more on how commodity management touches on many aspects of supply chain/procurement (and is supported by fragmented solution types).

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Manufacturing’s Procurement Black Hole: Sourcing and Commodity Management [PRO]

- October 11, 2013 3:09 PM

Earlier this week, Spend Matters and MetalMiner convened for our joint event, Commodity/PROcurement EDGE. We welcomed a range of manufacturers, technology providers, and consultants focused primarily on direct materials procurement and procurement technology solutions spanning a broader range of spend areas. Coming out of the event – and based on our research leading up to it – we saw several trends within manufacturing companies suggesting that most procurement organizations (except a handful of exceptions at the top) are really failing the business and ultimately, shareholders in deploying the right sets of strategies, tools, and tactics to bridge commodity management, sourcing and broader procurement activity. Click through to read the key areas where they’re coming up short.

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Commodity Price Management at BorgWarner [Plus +]

- May 13, 2013 3:39 PM

In a Supply Chain Management Review article I penned last year, I talked about some research I had done regarding the integration (or lack thereof) of input cost planning and forecasting to the business plan (including the impact on profit). The figure below shows that 39% of procurement organizations perceive that they do a decent job at mitigating price inflation, but less than a third have an integrated cross-functional process for doing so, and only a fourth of firms use centers of excellence, specialized analytics, and third-party services to help them anticipate future input costs.

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