MetalMiner’s sister site, Spend Matters, recently put out a series of questions to a range of experts at technology vendors. Our line of questioning centered on the technology renaissance, which is in its early days of taking shape, as more firms take advantage of specialized manufacturing-centric procurement technology.
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We’ve been featuring this series on MetalMiner over the past couple months and hope you’ve been getting as much out of it as we have.
This interview features Dan Willmer, vice president of sales and operations at Jaggaer, a leading procure-to-pay provider in the higher education and government sectors.
MetalMiner: Why are we hearing about a “direct procurement” renaissance of sorts in terms of procurement technology? What’s changed?
Dan Willmer: Since auctions were introduced to the direct materials sourcing area 20 years ago, you have seen that generation of materials and commodity managers look for ways to leverage technology to create efficiencies within that market. There have been a few runs at creating efficiencies in that market, with integrating sourcing into the design process probably being the most worthwhile from my perspective.
The challenge is that direct materials sourcing is usually seen as a competitive advantage versus one’s peers and utilizing third parties to help given that mindset. Consultants have always been a popular choice (AT Kearney, McKinsey, etc.) but I think, while an engagement like that adds value, those are short-term fixes which have hindered sustainable options like technology to take root.
As Spend Matters has rightly said in an article a couple years ago, direct materials technology is very broad and “can” address many issues, but it’s impossible for one solution to do all of it. That fragmentation has created a big hurdle initially, but I think we’re finally at a point where some solutions are getting critical mass in addressing a larger portion of those challenges.
MM: What are the top challenges your customers in the manufacturing sector are facing right now?
DW: Globalization, M&A and other factors in the manufacturing sector have created a lot of opportunities but equal amount of challenges. Those dynamics have put commodity managers in the middle of a microeconomic storm:
1) They have limited budgets to integrate back-end systems to best address procurement challenges like spend visibility, sourcing and supplier management.
2) With divestitures, acquisitions, new capital projects and reorganizations, commodity managers need to be able to quickly pivot to add value when the target keeps moving.
3) Global markets, which some of them may have little experience with, are calling for their attention but with little financial/budget support available to stay in touch with each segment.
The answer is that solutions within procurement/sourcing require a technology- and back-end-system-agnostic solution that aggregates knowledge and data into one work desk so that they can appropriately prioritize and act against the savings opportunities that are available. Whether a customer wants to analyze spend, find common suppliers across regions, business units or similar corporate entities or manage supplier data effectively, the need is there for a solution to help in these areas.
MM: What is your view on commodity price volatility? What are you hearing from your customers?
DW: While each customer has some unique themes they are trying to address, a common theme and concern we hear is the emergence of an inflationary market. Commodity prices have remained relatively stable/flat for an abnormally long time. For a variety of reasons, we are seeing some leading indicators point to a price increase across commodities. I’m sure supply chain and commodity managers cringe upon reading that, but based on what we’re seeing we do believe that cost increases are in the future.
MM: What technologies are most “in demand” for procurement in manufacturing today? Do you see this evolving or changing in the second half of 2017 and in 2018?
DW: As I mentioned before, I think aggregation technologies are most valuable – pulling data from multiple systems to address spend visibility, supplier management or sourcing are very popular.
Given our recent acquisition, we obviously are seeing an increase in the need to manage direct materials in a different way going forward. Manufacturers have always been engineering- and process-driven organizations and introducing solutions that allow technology to facilitate those processes in a scalable solution has been on the wish list of a number of professionals. We believe that the Pool4Tool (JAGGAER: Direct) solution set addresses this need in a unique way and allows our combined solutions to become a complete toolset for direct and indirect materials.
As far as the future, I think continued digitization will continue to be a theme. The influence of AI and digital innovations will force providers to embed those gains into their platforms. The winner in this space, I believe, is one that can be proactive in understanding a customer’s situation and offering alternatives to solve challenges that the customer may not even be aware of. While at one stage in my career I would have said that it takes a service to do this (working in Accenture’s BPO practice), I believe that software providers will be the conduit for this shift.
Embedding knowledge and insights based on the existing data within the platform is the holy grail that I know we at Jaggaer are driving toward. I could go further on this topic but I feel like this topic should/could be a separate discussion.
MM: How do you see procurement and supply-chain applications overlapping (or not) from a technology perspective in manufacturing? What is “the line” between them (if there is one anymore)?
DW: The fundamental challenge in this area is who “buys” the applications – is it the CPO or someone within operations? If indirect and direct are managed within the same vertical org structure, then you see that customer think more holistically and ask for broad solutions. However, if you are working/selling into an organization that doesn’t align its spend holistically, then you get different requests and wish lists. Within both worlds, though, spend visibility, sourcing and supplier management are common – the metadata, the analytics/reporting and the flexibility to do both types of spend are a huge differentiator. IT organizations are pushing their enterprises more toward a single solution, so being able to address a broad footprint (direct and indirect) provides value beyond the actual business sponsor needs.
MM: If you had $100 to invest in different procurement technology-centric solutions in a manufacturing context, how would you divide it up (assuming only MRP/ERP as a baseline)? In what areas would you place your bets and in what order?
DW: Not to be coy, but I think I’d spend it all on a spend visibility solution if I didn’t already have one. If I can’t see what I buy or have a platform to get insights, any other tool I have would be a guess as to what I need to do. I would then use what I learn with that solution to self-fund other solutions that I have. The insights you should be getting from your spend analytics solution are hiding in a usually cumbersome array of disparate data and inputs. Providing a tool that peels that onion to your most intellectually curious team members would be a crucial step toward procurement excellence.
MM: On Trump, Mexico and China: Where do we end up from a trade perspective in 12 months? Can technology help mitigate any trade risks?
DW: If I’ve learned anything from the political arena in the last 12 months, it’s that it is wildly unpredictable. Putting politics aside, though, I am seeing the private sector respond. Here in the Steel Belt (I’m based in southwestern Pennsylvania), nearly dormant steel mills are laying groundwork to increase production, business leaders are thinking more toward growth versus just bottom-line savings, which is typical in a flat economy. Will that growth come in short order? Again, the last 12 months make me put my chips back in my pocket when considering a bet, but signs are pointing toward a more bullish business future.
Can technology help? Going back to my previous answer, I think the best thing is to have a spend visibility solution that at least sheds light on your international exposure, as I do think a more “pro-American” stance on trade by this administration will come at a cost for international sales for those companies that are more globally reliant on foreign consumers.
MetalMiner would like to thank Dan Willmer for his thoughtful input and analysis.
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