Suppliers, we'll contact the Category Manager of your
customer which you can recommend anonymously.
Carriers, we'll do the same with your shippers. This past week I got to sit down and
interview an industry leader who has defined what collaborative sourcing is
when he first created the system at Bristol-Myers Squibb 15 years ago. Jeff Ryan of Bravosolution, a previous
contributor to the GTBP.org, teaches his clients, which include industry
leaders (BASF, Campbell's, Con-Way, FedEx, IBM, International Paper, Johnson
& Johnson, Sara Lee, Scotts, Tyco, Unilever), how to get to the next level
of collaborative savings after ‘blood-letting' suppliers on price based
auctions. He believes that a variety of
non-price criteria need to be considered alongside price to achieve
long-lasting relationships beneficial to both parties. If you click on the link at the bottom, you
can recommend a customer who you think might be in need of an education.

GTBP: Jeff, first of
all what is Basic Sourcing?
Many times when I walk into a company and they tell me that
they are using collaborative sourcing; I try and peg them to see where they are
in the above sourcing evolution. If they
start using terms like, "We just started using sourcing for the first time
across all of our business units to obtain savings from the low hanging
fruit. We have $10MM of spend in this
category going to 300 suppliers and we are trying to rationalize that down." Then that tells me that they are probably
using and should be using a do-it-yourself auction software platform such as our XE platform or those from Ariba or Emptoris. They are simple
price focused RFP platforms that will save them a pile of money.
This is not Collaborative Sourcing. At this point, we call this Basic Sourcing,
and most companies need to operate at this level for at least a couple of years
before they are ready to take the next step to Collaborative Sourcing.
GTBP: What would
cause a company to go beyond Basic Sourcing?
After a couple of rounds of re-compiling RFPs, leveraging
your volume, taking the low hanging fruit, and beating your suppliers up on
price with auction software, the savings begin to plateau. The pool of suppliers is smaller and the
category manager still needs to perform on cost. They have already applied Basic Sourcing to
the MRO, facilities, packaging, and shipping suppliers. Where is he going to find the savings? This is where Collaborative Sourcing is ready
to be used.
The other area that Collaborative Sourcing could be engaged
is with mission critical suppliers. With
these suppliers simple Basic Sourcing would not work because you would end up
with a low cost supplier in a third world country, shipping work-in-progress
materials from one end of the continent to the other and put your corporation
at more risk than the savings is worth.
GTBP: Okay, what is
Collaborative Sourcing?
Collaborative Sourcing is fundamentally a process of
collecting detailed information on your supplier base, allowing them to create
custom bids where they believe they could offer the most value to the customer,
and having a large analytical engine to overlay all of the information, bids,
and scenarios to map out the strategic savings.
Let me give you one simplified example. In the Basic Sourcing model, a Category
Manager might slice up the facilities management category into a lot of little
pieces; like housekeeping, building maintenance, lawn mowing, and cafeteria
services, and auction off the pieces to suppliers. But then one supplier might come forward and
say, "You never give me an opportunity to bid on multiple auctions, and if I
could win six of these pieces, then I could offer a killer price." Another supplier might want to bid on all of
the pieces but only for a certain region that he is located. While yet another might want to just do one
task but could do it for the most competitive rate if he could perform the task
nationwide.
In this case the Category Manager wants to slice it up and
have companies bid by piece and in return the suppliers want to give custom
bids. The Category Manager just does not
have a vehicle to manage and analyze how the multiple custom bids would best
suit his company. That is what Bravosolution Collaborative Sourcing tools do.
We entertain the disparate bids from the suppliers. We don't tell them how to bid, but we can
structure it for the customer. So one
guy can bid on his six tasks, the nationwide guy can bid on his single task,
the regional supplier can bid on their region, and the Bravo system puts the
best solution together for the client.
The Bravosolution Collaborative Sourcing analytic engine offers
multiple scenario generators. It is not
uncommon for the ‘What if' generator to offer 200 scenarios for a big nasty
problem because you are looking for a solution that fits your business, makes
your stakeholders feel comfortable and saves you a pile of money.
That is Collaborative Sourcing.
GTBP: I assume that
this is web based to offer easy access for suppliers to input their
information, respond to the requests and feed the engine without the need for
manual re-keying of data. What type of
information are you collecting?
It depends on the category, but detailed information on
everything from distribution to capacity, to the types of machines used, and
where they are located. The more
detailed the information is that is collected the more strategic opportunities
can be discovered using the analytic engine.
GTBP: Doesn't Big ERP
systems like SAP and Oracle allow for supplier custom bidding and scenario
generation.
No it does not. Our
best clients are the ones that had to try and make due with limited sourcing
software solutions that their IT department brought in and asked all category
managers to use. We are dealing with
clients that are unhappy with the internal software and support. There is nothing on the market that is close
to the Bravo service that we provide today.
GTBP: Who are your
best clients? Who brings you into an
organization?
Our clients are billion dollar corporations spending more
than $10MM per category. The person who
bring us into an organization and request funding are the Directors who manage
the Category Managers.
GTBP: What is your
revenue model? How do you charge?
They pay for what they use.
Time and materials per project.
After the first project, the client can use the solution with less
consulting services to set up the process with the next category. Some clients use the solution as an ongoing
category management system. The solution
is offered in a SaaS (software as a service) model. This makes it easy for the director and
manager to select and use the system. It
does not require internal IT resources.
GTBP: Jeff, thank you
for your time. You mentioned that you
have a special offer for the readers of the Global Trade Best Practices Org.
Yes, I understand that the GTBP is read by a number of
businesses both small and large as well as many carriers and shippers. Here is the offer:
If you are stuck in the Basic Sourcing model with your BIG
billion dollar client/shipper/buyer, and you believe that you could offer them
more business, in a strategic integrated manner, click on the following link
and fill in your buyers contact information.
You can do it anonymously but provide some helpful conversation starter
information, and I'll do what I can to put a Collaborative Sourcing system in
place.
Click here to evolve your customer to collaborative sourcing
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