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Member Question Regarding Ariba Experience

Written by: Jon Hansen

Article Overview: Member Question: Does anyone have any experience with a company called Ariba and their ability to do spend analysis for a procurement group? Question Submitted By: Patrick Program Manager United States

Member Question Regarding Ariba Experience

It is interesting that you ask this question, as I did an interview (actually a series of interviews) that were initiated by Ariba's senior VP this past summer.

Titled The Ariba Interviews: Re-engineering the Future of On-Demand (see below for the URL Link to the full article), it was a very interesting discussion on a number of levels.

To begin, Ariba as is the case with most Tier One vendors have had their difficulties in delivering on the promised ROI. In fact, numerous industry studies indicate that approximately 85% of all initiatives actually fail to deliver the results. Again, this problem is not indegenous to Ariba alone. Oracle (with the VHA, Province of BC) and SAP (City of Houston, King County and Sobey's) clearly demonstrate the inherent flaws in traditional methodologies that are centered around an ERP-based application.

Spend analysis is just one of the many areas in which there are significant gaps in terms of reliability and cost versus return.

This is one of the main reasons why, with funding from the Government of Canada's Scientific Research and Experimental Development (SR&ED) Program I led a research team on identifying and tracking commodity characteristics in an attempt to quantify potential areas of savings relative to spend.

The results, which spanned a period of approximately 14 years were quite telling.

Here is an excerpt from the first in a series of articles/papers I have written on what has been called "breakthrough" findings. (Note: the link to the article which is titled Dangerous Supply Chain Myths - Part 7 is also below.)

Excerpt Start:

Over a period of 14 years (11 years from the point of identifying the existence of Historic Flat Line and Dynamic Flux characteristics) we have monitored commodity characteristics in an effort to properly align the purchasing processes organizations’ use to procure goods (and services).

Through this exhaustive exercise we have discovered that all commodities consistently fall into 1 of 2 categories – Historic Flat Line and Dynamic Flux. In the resulting paper titled Acres of Diamonds: The Value of Effectively Managing Low-Dollar, High Transactional Volume Spend I provide specific examples of each characteristic. (I would be happy to provide you with a copy upon request.) In the meantime the following is a brief overview of the difference between a Historic Flat Line and Dynamic Flux commodity.

A Dynamic Flux commodity is characterized by a dramatic and consistent fluctuation in cost that is mirrored by a steady downward price performance over an extended period of time. It is further accentuated by a wide (usually significant) floor to ceiling price chasm. Indirect Materials and in particular MRO commodities commonly exhibit Dynamic Flux characteristics. Dynamic Flux commodities on average account for 15 to 20% of an organization’s overall spend, and 90% of its procurement cycle time.

Individual commodities within the Indirect Materiel ORM classification tend to exhibit both Historic Flat Line and Dynamic Flux characteristics.

The reason that commodity characteristics are important is that the absence of this knowledge has been a major contributor to both process and technological misalignment.

Excerpt End

Given the limitations of space, I will not be able to go into the other areas of my exhaustive research and analyses, however I have provided a link to an article titled Double Marginalization and the Decentralized Supply Chain, which you should find helpfuladjunct.

The key point to remember Patrick is that traditional definitions and the corresponding methodologies they employ are not reflective of a true dynamic market. In reality, they are more a reflection of technological limitations versus operational imperatives.

Note: To obtain the corresponding reference material, please contact the author.

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Article Tags: 11 years, ariba, breakthrough, city of houston, commodities, commodity, ed program, excerpt from, experimental development, gaps, government of canada, myths, province of bc, sap, sobey, supply chain, tier one, traditional methodologies, url link, vp



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