Author Archives: Jason Busch

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.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

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.

Two-Month Trial: Metal Buying Outlook

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.

Construction_yoders_550_030116

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.

Free Sample Report: Our April Metal Buying Outlook

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.

Free Download: The March 2016 MMI Report

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)