DSSI — Redefining MRO Distribution and Outsourcing (Part 1)

It's rare at Spend Matters that we come across a provider organization (e.g., software company, solutions integrator that combines multiple vendor capabilities, BPO firm, GPO, consulting firm, systems implementation shop, boutique expert advisory firm, etc.) that we can't classify into one or more categories, usually with a single designation leading the way. Yet DSSI (AKA, Direct Sourcing Solutions), a company that brings particular MRO (and beyond) expertise and a highly unique and specialized offering to the world industrial manufacturing, is truly difficult to slot into a single area. They defy categorization. On some levels, DSSI looks most like a specialized hybrid BPO/GPO that leverages spend to maximize discounts and improve vendor management programs by consolidating multi-company spend with fewer suppliers.

Yet DSSI also serves as a traditional distributor/broker, taking title to items that pass from suppliers through to their customers (they've even gotten involved in funding working capital in certain cases, serving as a financing arm for customers). And don't forget that they also wrote their own P2P software and have a range of additional advisory capabilities designed to help companies streamline and redefine what MRO buying should look like. In short, they're a unique species of provider. While small (by relative BPO standards), I find the DSSI approach that relies on deep category specialization and a broad portfolio of capabilities -- ranging from services to software to market intelligence -- a potentially interesting model for others to follow across a range of categories.

In a multi-part post examining DSSI's capabilities and the broader opportunity for industrial manufacturers to look at opportunities for MRO and related spend cost reduction, we'll begin to explore a category that's been given short shrift by all media in procurement and supply chain since the demise of Purchasing, which covered the topic on a regular basis. As we kick off our examination of DSSI, we'll start first by exploring the range of their capabilities. Next, we'll turn our attention to the nuances of their approach and solutions. And finally, we'll share some anecdotes we learned from talking with their customers.

DSSI provides a range of services that span the source-to-pay continuum for industrial MRO. They offer self-described capabilities specific to "strategic sourcing, procurement outsourcing" and what they describe as "integrated supply" as well as consulting. Yet in reality, what DSSI is about really amounts to a hybrid of what a next generation Grainger combined with an Infosys might look like -- not to mention with a bit of 3PL DNA tossed in for good measure -- for a specific category of spend. Indeed, DSSI not only offers the basics when it comes to sourcing (e.g., spend analysis/assessments, defining specifications, supplier identification and qualification, competitive bidding, contract implementation) but they also offer a range of capabilities around what they define as category management, transaction processing, financial settlement, in-plant services and warehouse management.

We'll flesh out many of these areas in subsequent posts in this series, but it's worth noting up front what comprises DSSI's in-plant services and warehouse management capabilities, as these two areas, when combined with the rest of their offering, help to really make the provider stand out from the crowd. For example, by specifying, deploying and then administering a range of vendor managed inventory (VMI) programs to its customers, DSSI can create additional value tied to fulfillment and working capital reduction outside of the standard source-to-pay arena. In the warehouse management area, DSSI provides "demand management, cross-docking, supplier management, inventory management, order fulfillment, pick/pack, kitting and packaging and shipping capability."

Of course DSSI will note that they're not just about serving the needs of MRO buying, warehouse management and the like for customers. They also offer services across the IT, standard indirect (e.g., printing, office supplies), chemicals and business services (e.g., temporary labor) areas. But MRO is what they're most known for. And given the unique needs of MRO, that's what we'll focus on in our continuing coverage. Stay tuned!

Jason Busch

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