Author Archives: Jason Busch

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.

MetalMinerWhy 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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This is the second in a two-part interview with Paul Noel, senior vice president of procurement solutions at Ivalua, Inc. Missed Part 1? Read it here.

MetalMiner: 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)?

Paul Noel: Procurement and supply chain applications traditionally overlap. Both these applications have the following:

  • Supplier master data and item master data
  • New product introduction data, such as BOM, designs, specifications and project plans
  • Product quality data, such as initial reviews, quality certs, first article inspection data, APQP reviews and data
  • Supply chain and supplier risk data
  • Supplier performance, KPIs and error data, along with improvement plan data
  • Assets and tooling data, including supplier loaned and leased assets
  • Inventory data, such as central, in-factory stock-rooms, vendor managed inventory data, etc.

Our view is that procurement applications are developing and innovating at a more rapid pace than supply chain applications when it comes to affecting core business operations, expanding their functional footprint into the supply chain, and in some cases, becoming the primary master source of record (e.g. in case of supplier master and risk data). As an analogy, procurement applications today represent multiple “garage bands” — some in the process of becoming rock stars — of the business, while supply chain is a conductor, orchestrating activity deep within the supply base. Both are different — and needed.

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Supply chain is, however, continuing to orchestrate activity.

MetalMiner: What is your view on commodity price volatility? What are you hearing from your customers?

Paul Noel: The most current information is key, of course. That means that when you are buying volatile commodities, you need to have a facility to quickly perform item validations with contracted vendors to ensure you are seeing the best price for the current market. In some industries, it needs to be a lights-out operation that reminds suppliers of their commitments and solicits their re-bids on a schedule. This isn’t just asking for the latest price, but also changes in packaging, lead time, ship-from information and so forth. Read more

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. We will feature this series on MetalMiner in the coming weeks and hope you look forward to it as much as we do.

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The first interview (divided into two parts) features Paul Noel, who serves as senior vice president of procurement solutions at Ivalua, Inc., a procurement technology provider that works with leading manufacturers such as Meritor, Whirlpool, Michelin, Faurecia, Valeo, Thales and PSA Peugeot Citroën.

MetalMiner: Why are we hearing about a “direct procurement” renaissance of sorts in terms of procurement technology. What has changed?

Paul Noel: The rise of interest in procurement technology for direct procurement is due to the confluence of four trends.

First, the current economic climate is characterized by slow global growth, a retreat from global trade to nationalist economic policies and interest rate and tax policy uncertainty that have the potential to re-draw supply chains. In this environment, manufacturers that account for the bulk of “direct procurement” cannot fully control their top line. However, they do have control over their bottom line, and procurement technology is one of the key levers to reduce direct spend.

Second, since the early 2000s, manufacturing executives have focused more on managing indirect procurement and less on direct procurement — as indirect spend was then the biggest untapped opportunity. Enterprises have done a great job getting a handle on indirect spend, partly due to successful adoption of procurement technology. Direct spend now represents a big untapped opportunity from a procurement technology investment standpoint, given past under-investment.

Third, procurement technology that’s relevant for direct spend — partly owing to similar success in indirect spend — has developed at a rapid pace in recent years. When e-procurement first came out, direct materials was already pretty much set with MRP demand communicated over EDI. Why would you need human-centric e-procurement with that in place? Today, however, if you look at teams of direct materials procurement people, you realize there is a need to help them deal with the volume of exceptions thrown every week by MRP. Spot bids, expedites, last minute part changes. All of these need human intervention, and those humans need technology.

And fourth, with the success of both procurement and supply chain leaders in large global companies, these functions have become even more centralized across direct/operations and indirect, as well as globally across regions. With this organizational shift, these leaders want to adopt procurement suites that can address both indirect and direct spend in a single suite — hence extending their indirect procurement technology suite to address also direct procurement. Read more

Oracle announced Thursday it agreed to acquire Textura, a cloud-based solution for the construction industry with end-to-end capabilities spanning from initial bid estimation and sourcing through to subcontractor management, communication and collaboration, invoicing and payment.


Textura can not only catalog the cost of installation of this structural form, but also log its completion and pay the sub-contractor that put it in. Image: Jeff Yoders/MetalMiner.

“Textura’s mission is to bring workflow automation and transparency to complex construction projects while improving their financial performance and minimizing risks,” Textura CEO David Habiger said in a statement. Read more

Regardless of where you sit in metals markets, liquidity and cash flow serve as the lifeblood of the supply chain and the individual company.

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Manufacturers, service centers and producers largely play a zero-sum game: optimize working capital at the expense of broader total-cost, innovation and risk-management opportunities that ought to bring all parties closer together.

In a zero-sum game, buying organizations — when engaging directly with suppliers — often deploy forceful if not arbitrary rules around payment terms, delivery terms and even the reduction of inventory levels (another tool in the working capital arsenal). All of these tactics are used in a game called “reducing working capital” but each introduces additional risks as well.

Inventory Finance and the Big Picture

Managing inventory effectively, as part of a broader working capital management and/or balance sheet improvement strategy, matters even more in volatile markets, particularly when doing so without negatively impacting supplier relationships. Fortunately, some new techniques and business practices based on inventory financing tied to broader procurement and supply-chain strategies have started to become more mainstream. Manufacturers, service centers, producers and even trading firms have begun working with banks, trading firms, third-party lenders and other partners/lenders (or a combination) directly.

In short, procurement and supply-chain inventory financing can allow an organization to build on its balance sheet and/or take advantage of additional liquidity if needed. None of these forms of financing or techniques negatively impact suppliers.

Procurement-led inventory financing is a complement to other sources of capital. Even for organizations with a tight revolving credit facility, they can still access unsecured credit and “lock-in” balance sheet improvement opportunities without sacrificing actual physical inventory.

What Can It Do For Me?

Done right, procurement-led inventory finance offers a range of benefits:

  • Working capital and balance sheet improvements that align with executive, procurement, treasury and accounts payable strategies
  • An ability to keep current credit facilities and tap new ones
  • Low risk and predictable capital: another “tool” in the working capital belt with assured outcomes (unlike other options)
  • Supply-chain risk reduction
  • Improved supplier relationships
  • Lower landed cost of goods
  • Ability to source globally without impacting working capital

Inventory financing approaches today are changing in part because of increased available capital and a willingness to lend. In addition, new technologies provide increased transparency and connectivity between buyer and supplier systems,  reducing risk for all participants.

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As our introduction to the topic continues, we’ll explore how inventory finance works as well as some of the new tools and models that can streamline the process. In the meantime, for further reading on the topic, see our network site Trade Financing Matters:

Stepping Out of the Box – One Bank assists with Inventory Finance

Inventory Purchase Financing – The Flip Side of Funding Trade Payables

Inventory Purchase Financing – The Flip Side of Funding Trade Payables (Part 2)