Purpose Built Applications Busch

The Rise of Purpose-BuiltProcurement Applications

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If we look back at the history of spend management tools in the past

decade, we’ve seen a constant march to sameness from providers. Far too

many vendors have been racing in a functional parity derby, jockeying their

applications horses to a type of sameness designed to be the 80% solution

– inclusive of software and sometimes services – that organizations must

fit their processes around (at least in the case of more sophisticated buying

organizations who have a point of view over what an application should do).

By Jason Busch

As an example, in the area of spend visibility, one of the largest providers in the broader sector has designed a data acquisition process for a typical buying organization with specific system request fields. Yet when a more sophisticated company worked with this provider and sent over extensive AP and invoice line-item level details from across their spend categories, the initial situation was one where the vendor had no idea what to do – overwhelmed with the extensive nature of the datasets that their “average” customer would never conceive of shipping off. Of course, it is precisely invoice-level line item detail which can enable greater visibility into spending history and the best possible sourcing and category management strategies.

This is just one example. It would be possible to pick on nearly every major vendor by name with a particular pet peeve such as this. Yet some organizations are pushing their providers to move in more advanced directions to build what I’ll call “purpose built applications”. On a basic level, this might be spend analysis for advanced procurement organizations (maybe even on a category specific level in terms of field requests). But a more interesting case is what Unilever has done in the transportation category area in working with BravoSolution. I had the chance to listen in on a Unilever presentation earlier this year concerning their transportation management center, which got me thinking about the potential for more companies to demand purpose-build solutions that aren’t designed for the masses, but rather more advanced needs and requirements, many of which are often customer specific.

Unilever identified that transportation spend would be a strategic category for their procurement and operations teams to manage more effectively. It represented not only a large spend area, but was “critical to good customer service” while enabling sales support, promotions and broader supply chain efficiency. The biggest challenge in the area historically, from a sourcing perspective, was certainly savings erosion. For one, awarded carriers often would not accept tendered loads and non-compliant carriers were often used. There was also a lack of savings because they had no consistent means of tracking compliance. Moreover, Unilever was always fighting a moving target – new lanes would emerge overtime as partners changed their networks, volumes would also shift based on production changes as well as demand, new business units would introduce

additional complexity and new geographies would bring expanded challenges.

At Unilever, contracts were often stored in file cabinets or, in other cases, were non-existent. And course you can guess operating system and application for managing the category – Excel. Moreover, getting data out of their transportation management system (TMS) proved as challenging as any endeavor in effectively managing the category.

In short, Unilever needed a new sort of spend management solution specific to their transportation needs. It would not just include sourcing capabilites – or advanced sourcing for that matter. Nor would it only include spend analysis or stand alone contract management. It would have to incorporate a range of requirements including carrier discovery, sourcing optimization, contract/rate management, routing guides, load scheduling, payment/claims process and, of course, compliance and performance management. It would also have to provide basic administration: the ability to manage shipment specifications and carrier profiles (i.e., supplier management), and institutionalize and provide a means to share the firm’s broader knowledge across its operating units on how best to effectively manage the broader and expanding category.


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Purpose-Built Applications

Next week, we’ll explore the purpose-built application Unilever implemented in more detail and establish why even best-of-breed stand-alone capability would not do the trick. Indeed, Unilever ended up specifying and deploying something that looks like nothing we’ve seen in the market because it was purpose-built – built to their broader category needs around the overall business goals of transportation spend management. This is a trend Spend Matters believes we’ll see far more of in 2012 and beyond, especially as more sophisticated companies move down the path of cloud/SaaS sameness for basic spend. Additionally, it’s our belief that we’ll begin to see where the 80% solution – even the category specific 80% solution – comes up short in more and more complex spend areas.

On a late-night flight heading back from Oracle OpenWorld on Wednesday evening, I realized that I had the time to reflect on a number of inbound calls and discussions that resulted from my initial comments last week focused on the need for purpose-built procurement applications – in contrast to the mass of generic capabilities that may work perfectly well for paperclips or the basic sourcing of a more complex category, but are unlikely to meet the needs of any nuanced spend areas in terms of total cost management. At a speech that I presented

earlier this week at Consol’s Thought Leadership Forum, a number of attendees voiced the same ideas around SOW spend (specifically) – namely, that the generic, one-sized fits all solution often won’t work.

Continuing on in this analysis looking at how Unilever’s unique approach better tackles all aspects of transportation spend and links sourcing to execution to compliance in a manner that off-the-shelf Spend Management, TMS and logistics capabilities could not enable, let’s first explore today the guidelines that would steer their solution ideation, roll-out and implementation for this complex category. In this regard, Unilever figured out that the essential challenge they needed to overcome was to combine the benefits of active contract management and visibility with an optimization-driven sourcing model while also creating the single version of truth where team members could measure and analyze ongoing costs and performance. Their strategy would also need to be able to adjust to the often-changing requirements and contributing strategies driving the evolution of their transportation spend profile.From a data-driven architecture perspective, Unilever would need to consolidate information from their ERP system (SAP), TMS tools, payment data and other files in a consolidated database that would contain information in a range of areas – shipments, requirements, contracts, performance and other data fields. And they would need to do this frequently to stay on top of changes in the underlying system information sets. This dynamic and targeted data warehouse would then feed their purpose-built Spend Management system which would include the ability to manage requirements, strategically source vendors (through an optimization-driven approach), manage contracts, provide reporting capability, enable both internal and external participants (e.g., carriers, auditors, team members, other stakeholders). And then, following information updates based on new sourcing exercise, contracts and process sign-offs (including the ability to manage changes by exception), the purpose-built application would need to feed updated information back into the original system or record, including SAP and TMS.

While the approach might sound complicated on paper, in practice it would ultimately enable Unilever to formulate a data-driven category strategy based on the right set of inputs

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– regional/local requirements, essential data-elements such as rates, etc. As important, it would ensure data integrity by allowing Unilever to close the transportation spending loop through successfully planning, sourcing and executing from the ground up with a quality data foundation. Despite the effort required (as well as the cost savings the application could drive), the purpose-built application would also enable Unilever to become a preferred customer to its suppliers by enabling new levels of collaboration and better service through a shared understanding of information and the ability to have carriers focus on their specific areas of strength in specific markets/lanes. It would also foster better communication internally (and with suppliers) by providing a truly consolidated, centralized rate database without any inconsistencies. And this in turn would be a key engine to help drive compliance. The system would also support Unilever’s geographic expansion by providing consistent and harmonized processes that would not only enable the decentralized implementation of best practices but also ensure local regulatory and legal compliance.

Unilever’s success at rolling out a purpose-built application for transportation spend would exceed the sum of the individual solution parts (e.g., sourcing optimization). Moreover, the CPG giant realized that by pursuing specific and broad business outcomes at the category level that would need to encompass and transcend their operations, sourcing and logistics functions

working as individual silos, that they would be able to drive a truly new level of savings, compliance and overall category success. Working with BravoSolution to dissemble core category enablement tools (e.g., data acquisition, master data management, analytics, contracts and sourcing) and then rebuilding them together into something entirely new (along with additional third-party tools and integration capabilities), Unilever proved the value in stepping back from the one-size-fits-all approach to an area of spend that could have game changing consequences for both the bottom and top lines of the business if they changed the way they pursued it.

Have you got a purpose-built category success story on your hands? Share it with us and we’ll feature it in our continued coverage of how organizations can leverage the right combination of capabilities to get more from their most challenging spend areas. No generic solutions built on “best practices” need apply. After all, in the case of complicated categories, pursuing improvements incrementally and effectively through the most proven, traditional approaches won’t break down the walls that are necessary to truly achieve a breakthrough. This requires thinking about the outcome and working backwards to what a solution must look like –rather than pursuing and deploying what is simply being served up already on an a la carte basis.

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About BravoSolutionSupply management executives are now, more than ever, under pressure to deliver more savings, develop and manage strategic supplier relationships, accelerate procurement cycles, and maintain process excellence. Confronted with these diverse yet consistent challenges, CPOs and sourcing professionals must seek tailored solutions that deliver rapid ROI to their business. BravoSolution offers leading software and services to fit the needs of today’s sophisticated supply management organizations. Our services organization, one of the world’s largest teams of professionals dedicated exclusively to sourcing and procurement consulting, delivers lean, targeted services

to support strategic sourcing and procurement initiatives. Our industry leading software toolkit supports the full supply management lifecycle across a myriad of industries, geographies and business models.

As of today, over 40,000 procurement professionals in 60 different countries are benefiting from BravoSolution’s technology and services, unlocking tangible benefits including increased process efficiency, decision support, cost reduction, improved process governance, greater quality relationships with vendors and the ability to share, understand and act upon the wealth of sourcing-related data held within their organization.

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Purpose Built Applications Busch