Ariba LIVE 2014—Spotlight on Procurement and Predictive

Ariba LIVE 2014 was the 15th annual customer conference (or collaborative commerce summit, if you will) by Ariba, an SAP company, and the largest one thus far with 2,200 attendees. The conference’s mission remains the same: to be a forum for sharing ideas and best practices, networking with peers, and learning how technology and network insights can drive cost savings, efficiency, risk mitigation, and innovation for businesses big and small. The major themes of this year’s conference were: 1) Procurement/sourcing and business networks as strategic platforms for innovation (rather than tactical and reactive departments); 2) Enabling the business of tomorrow today (via predictive capabilities and timely recommendations in a connected world); and 3) Focusing on business outcomes.

As for the latter theme, it was woven into a vast number of breakout sessions as well as keynote presentations by Ariba’s customers, who talked about their implementation journeys and the benefits they achieved. The conference’s opening entertainment was performed by Lindsey Stirling, a talented violinist and performance artist with a story quite relevant to Ariba’s business network/connected world message—Stirling was shunned at the audition for “America’s Got Talent” 2010  by the judges as “not good enough,” but she didn’t quit performing; instead she leveraged social networks to build her fan base and  enable her journey to fame.

Bert Jacobs, the very casually dressed and unkempt co-founder and “chief executive optimist” of Life is Good (which happens to use SAP’s Apparel & Footwear Solution [SAP AFS], but not Ariba, yet), gave a rousing motivational speech on forging relationships and partnerships by doing good. Jacobs is one of six siblings who grew up in a rugged Boston neighborhood, but made it rich via unrelenting optimism and the zeal to help those in need. His self-deprecating humor laced with poignant messages of businesses and individuals giving back to communities, the power of being positive, and acting as a change agent for doing good left the audience inspired and laughing while occasionally holding back tears when listening to real-life optimism stories about misfortune-stricken kids.

Strategic Value of Procurement
Both Ariba and its customers have voiced the trend of sourcing and procurement becoming more strategic. In his conference opening remarks, Tim Minahan, executive vice-president (EVP) and chief marketing officer (CMO) of SAP Cloud Solutions, opined that procurement and supply chain departments are no longer solely about cutting costs (improving the bottom line), but are now also about delivering value and being change agents for cash flow improvements, increased sales (the top line), and stronger branding.
Customers these days want ever more specialized and cool products that leverage new materials and specialized manufacturing processes. Procurement and strategic sourcing can certainly help with finding those materials and/or suppliers that can help a company deliver and sell more innovative products. Material analysis helps one figure out how to change ranges of attributes on current materials and processes versus buying new ones. This analysis could impact a large number of items and thus must be done early, and sometimes exotic materials are complex to procure. We have all heard about Apple buying almost all of the global laser cutting capability to cut Apple logos and other precise holes and openings into metal cases for its trendy consumer electronics products. As another example, sourcing and procurement were crucial in ensuring the production of the cheap Tata Car in the Indian market.
Sourcing and procurement is also about protecting the company’s brand—think of using fair trade suppliers, non-conflict minerals, minority owned suppliers, and other socially responsible ways of doing business. Corporate social responsibility (CSR), or the lack thereof, in these days of social media and a sensitive, socially aware public can make or break a company.
Procurement and sourcing must be involved early in the product lifecycle, as reducing time to market (TTM) with rare (esoteric) materials is also a major challenge. Measuring supplier quality and leveraging the six sigma concepts for process improvement should improve supplier performance and product shelf life. Ensuring better quality, lowering the risk of using delinquent suppliers, and reducing time to market all decrease costs, but can also certainly translate into more sales, both of which translate into more profits and more available funds for research and development (R&D) and innovation.
Early Vertical Focus
But while this was the 15th Ariba LIVE conference, it was the very first one with some industry focus—retail, utilities, and banks. The related marquee keynote presenters were Kohl’s—for retail, Deutsche Bank—for financial institutions, and Southern California company Southern Cal Edison—for utilities. A number of breakout sessions talked about how procurement differs among these focus industries. For example, if you think about checks, banks have a lot of contracted volume and these checks must be made to certain specs. Utilities have to hedge commodities, and often have a lot of outsourced services and fixed assets. And different again is the process of sourcing products in retail—it is complex and seasonal, with a long lead time, whereas orders for standard packaged items come through enterprise resource systems (ERP).
Ariba has traditionally been very strong in handling indirect materials and indirect spend. But while consumables and other products that aid in production might seem trivial, they do require lots of attention. MSC Industrial Supply Co.’s CEO Erik Gershwind gave a great analogy comparing direct and indirect spend and how ERP systems generally control these. You’ve just spent a long time clearing out the garage, and it is now all clean and tidy, with everything well labeled and all the junk removed. But then your wife says “Honey, now that you’ve done that, can you take a look at the attic?” The dark and dirty attic is even worse than the garage, full of unlabeled boxes, stuffed in the space haphazardly. The garage (direct spend) is fine, but the attic (indirect spend) has been ignored, just like your maintenance, repair and operational expenditure (MRO) spend (indirect, or goods-not-for-resale) if you have a regular ERP system.
Gershwind provided a startling stat that there is $145 billion (USD) of MRO inventory out there in companies, and $100 billion of that will never get used: that is a lot of capital tied up. He said that one needs the following three things to get a grip on this spend: time, technology (Ariba, not a regular ERP system), and a second pair of eyes (analytics). Another image that stayed with the audience was the comment “let technology be a flashlight”: if you use a Network to service your customers, it will be good both for you and them.
Enabling Tomorrow’s Business Today
In her keynote presentation, Rachel Spasser, Ariba’s senior vice president (SVP) and chief marketing officer (CMO), said that in today’s fast-moving global marketplace, companies are under intense pressure to anticipate business needs and stay ahead of the game in order to remain competitive and maximize profit. As a result, the way trading partners (buyers and sellers) communicate, transact, and collaborate has shifted significantly—and we have business networks to thank for this evolution.
Companies today are smarter than they have ever been—and, empowered by business networks combined with cloud-based applications, they can become even more intelligent and agile, and more strategic decision makers. Harnessing all of the interactions, transactions, commentary, and massive amounts of insights networks have to offer, companies of the future will be able to leverage this greater connectivity to eliminate the blind spots in their procurement process and enable new channels to drive innovation. Real-time response is no longer enough, and predictive capabilities are the power of analyzed business networks. Think of predicting a new cool trendy material, manufacturing process, and reliable supplier before your competitors do.
Spasser mentioned a number of recent enhancements to the Ariba Network designed to, in a manner of the “Google effect,” fuel the new levels of connectivity, collaboration, and insight required to optimize buying, selling, and managing cash in today’s fast-moving and networked social and mobile economy. Through smarter automation and simplified processes, selling organizations can more quickly and easily identify new business opportunities and collaborate with trading partners. New custom products and services categories within Ariba Discovery enable better matching of buyer postings to seller opportunities and the automatic delivery of more qualified leads, with daily delivery of leads categorized as new, best match, or closing soon. And with new email capabilities, buyers can view and reply to sellers directly from their email client without logging into Ariba Discovery.
The power of business networks comes from their size and the energy within them, said Dr. Chakib Bouhdary, EVP, and chief strategy and customer value officer at SAP, after joining Minahan on the stage. A lesser-known fact is that SAP processes about 70 percent of text messages worldwide, which presents a major “big data” challenge and opportunity, given that the future of business is digital transaction management.
SAP acquired Ariba for strategic reasons, and is investing with a longer-term view, especially with regards to powering the business commerce network. A separate article entitied "SAP and Ariba Synergy" analyzes how SAP and Ariba have been meshing together to mutual benefit.
Related Reading:
AribaLIVE 2012: What Was Jolly Good (and What Could Improve) - Part 2 (June 2012)

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