DSSI — Redefining MRO Distribution and Outsourcing (Part 3)

Please click here for Part 1 and Part 2 of this series.

One of DSSI's most differentiated solution elements is its own software platform including both sourcing and P2P components (the former is exposed and available to users on the customer side plus for DSSI support personnel working on behalf of customers; the latter is primarily the tool by which DSSI facilitates transactional connectivity between its customers and suppliers). Given this backdrop, DSSI told Spend Matters that its platform was developed to support multiple levels of interaction from the targeted (e.g., strategic sourcing, managing relationships with suppliers) to the more comprehensive (e.g., full outsourcing of procurement, purchasing, financial settlement). Even though DSSI had the option to license technology off-the-shelf from different providers to deliver a solution with a similar footprint -- both for customers and for internal use on behalf of customers -- they opted to build their own, given their unique role as intermediary and provider plus industry and category-level customization required.

Spend Matters had the chance to demo DSSI's toolset and found the sourcing capability relatively simple. The interface and capability would be sufficient for many companies for basic quoting and sourcing, but was not as user-friendly as some. However, it supports the creation and management of simple RFQs, price queries, etc. For reporting, users can conduct queries that examine overall spending that mimics that of foundational spend analysis tools. It's Spend Matters' view that DSSI could probably get what they are looking for in today's source-to-pay environment from off-the-shelf tools, but at the time the decision was made to build their own capability, the third-party options were certainly more limited in the many-to-many environment they must support, hence the decision to build from the ground-up made sense.

Since most companies are using DSSI to achieve savings rather than licensing a capability, the means to do so is the more important issue. On an aggregated spend basis, DSSI bids out each of the commodities it manages on behalf of customers (as an intermediary) at least every three years. But in reality, DSSI notes "for every commodity in which we do business, every time we work with a customer, we are examining benchmarks and going to market for pricing" to insure maximum contract competitiveness. Benchmarking is a key aspect of DSSI's value proposition and their approach relies on examining every customer location and item (at each location) to arrive at specific, site-based understandings of current cost.

When it comes to P2P, DSSI's toolset, EPIC, is used primarily by DSSI on behalf of its clients. It can interface directly with external systems such as SAP SRM and Ariba P2P or Buyer. Practitioners (i.e., DSSI customers) can also search catalog items within EPIC (either as a punch-out from existing applications they might have) or directly to search for an item they are looking for. EPIC is a surprisingly deep P2P application when it comes to such areas as permissions, workflow approval, access, roles, etc. Despite the configurability, DSSI has experience in getting EPIC running up and running in a particular client instance in some cases "in a matter of days" but the speed with which a particular user can integrate existing applications and get their chart of accounts ready can vary materially between customers.

When a user processes an order via EPIC, accounting strings are integrated directly with each customer's own systems (although EPIC also signs its own codes, these become linked). For example, department codes, account codes, project codes, and employee codes that are reflected in a user's procurement or ERP/MRP system are also mirrored in EPIC. From an approvals standpoint, DSSI configures EPIC on a customer (and role) specific basis when it comes to such areas as approval spending limits. This is important given the fact that certain elements of the integration (e.g., invoicing) might not be integrated in real-time and are instead provided to a customer on a consolidated basis.

Once an order is in process through EPIC, on the supplier side, DSSI acts on behalf of customers and issues the purchase order to suppliers and is responsible for payment, follow-up, etc. In acting as principal and taking title, DSSI is technically a reseller like a Grainger. But in reality, based on the broader role they take on from both a strategic sourcing advisory and BPO and GPO perspective at most clients, they far exceed the role that most distributors play in the MRO and indirect purchasing industrial ecosystem.

Stay tuned as our analysis of DSSI continues. We'll conclude our series looking in more detail at the DSSI business model as well as the DSSI customer experience.

Jason Busch

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