What Will 2008 Bring in the Metals Markets? Earlier today, Lisa Reisman and Stuart Burns penned a thoughtful and lengthy post over on Metal Miner offering up their predictions for the metals markets in 2008. Among the metals categories they take their crystal ball to, the two examine where steel, stainless, nickel, aluminum, copper and zinc prices might be headed to on a global basis. In the same article, they also tackle the impact of a falling dollar and rising oil prices on global metals sourcing. What are some the assumptions driving the forecasts they present in their post? According to the metals blogging dynamic duo, “In the face of a slowing US economy, a mixed position for the European economies and a still strong Asian market, it is a particularly tough call this year to judge where prices will go. Our call is the US will teeter on recession. Europe though restricted by high ECB interest rates will still enjoy some (if reduced) growth providing the Euro/US Dollar exchange rate does not strangle exports. Asia in general and China in particular are still enjoying robust growth. China may well drop from the double digit growth of the last 5 years to high single digit figures but that is still a very significant driver for the world economy and particularly the world metal markets.”

Reading Stuart and Lisa reminds me about how much domain knowledge really counts in analyzing and covering specific commodities markets. Call me biased -- yes, I am married to one of the authors -- but relative to the price alerts and regurgitated crap that only mildly passes for journalism that the trades put out on metals, there's no substitute for the type of coverage that only true industry experience can bring to the table. Seriously, do we really want to know that the sky is falling and copper is up today, or do we care about why and where it might go tomorrow -- and what to do about it from a sourcing and trading perspective?

- Jason Busch

Thanks in part to strong regional growth the Asia-based Global Supply Chain Council (which used to be known as the China Supply Chain Council) is booming. According to a recent press release, the five-year old group has risen to "become the largest and the most famous reputable supply chain professional organization in Asia ... representing almost 500 paid corporate members and a community of some 10,000 companies and several hundred thousand employees. the Council strives to serve its members and the general interests of the supply chain profession in Asia." Given that Asia is such a huge collection of separate markets, it's not surprising that this China-based group has been able to expand its tentacles in so many directions.

But what is noteworthy is how this organization is thumbing its nose at other industry groups. The organization's founder, Max Henry, claims that "whether they like it or not, other organizations like the Council of Supply Chain Management Professionals (CSCMP), the SCOR Supply Chain Council, The Association for Operations Management (APICS), Institute for Supply Management (ISM), The Chartered Institute of Logistics and Transport (CILT) have already lost the battle here in China ... these organizations have historically done a poor job in expanding outside their home market, and they provide very little benefits and activities and nearly no local support to leading companies operating in Asia."

Even though this is obviously the competitive posturing of one individual, I'm not surprised that all the big names have fallen flat in the race for the wild east in comparison. After all, at places like ISM, you need to submit a speaking prospectus nearly one year in advance of their annual conference. In China time, that's about ten years.

- Jason Busch

While cruising about on the excellent blog Strategic Sourcing | Europe, I came across this elegantly simple downloadable template to use when thinking about category prioritization for strategic sourcing initiatives. In the words of the author, "Nothing fancy here, only pragmatic factors about markets, suppliers, products and 'buying', sorted in a .xls table to review and weight per Sourcing Group. The more points you give to a Sourcing Group the best it is. An example is attached. Hope it helps." It certainly does, especially considering it's free. I bet a few of my consulting friends start using it as well if they don't have their own already developed. So before they charge you for a similiar quick analysis, why not try it yourself.

- Jason Busch

Before I left FreeMarkets, one of my last acts was to assemble a team to construct a customer publication that would analyze regional and global supply market category trends. That humble project has morphed into a quarterly publication, Ariba Supply Watch (note to Tim Minahan: notice the legacy FMKT influence in the use of the term "supply" ;-). The latest edition, linked above, is free to all readers via the Ariba Spend Management learning center. Without exaggeration, it's probably the most useful publication that any vendor or service provider in the Spend Management arena publishes or distributes. Every time I read it, I can't believe that Ariba gives it away to registered users of their learning center -- the level of intelligence it provides is something that many have told me that they could most certainly charge for.

Each issue of Supply Watch details savings and category pricing trends on a global basis across such areas as capital goods, construction, engineering, electronics and electrical, IT/telecom, hardware, metals, paper and packaging, plastics and rubber, raw materials, services and MRO, and transportation and logistics. In addition, each issue offers a feature article that examines a category trend in more detail. In the Q106 issue, the feature article, authored by Justin Falgione, an Ariba Category Manager, offers a deep dive on sourcing and managing contract labor spend.

I also enjoyed the "Category Field Guide" on the automobile components market in India, which provides a detailed breakdown on the Indian tier one and tier two automotive market, including providing information on suppliers in key categories. According to the article, the major advantages of manufacturing in India are: "low labor costs, engineering and design capabilities, quality (there are 384 ISO certified, 223 QS9000, 83 TS16949, 9 QHSAS 18001, and 1 Japan Quality medal companies operating in India), available of qualified engineers, flexible production lines and a high level of employee cross-training, ability to implement continuous improvement initiatives, high operating efficiencies which allow for cost control despite volatile raw material costs, good adaptability to eProcurement, constantly reducing excise and custom duties, and ... [low or no] exports are subject to taxes."

If you're involved in any aspect of sourcing or Spend Management, Supply Watch should be required reading. As I read through each issue, the question that always pops into my head is when will Ariba begin to monetize the type of IP it now gives away for free in resources such as this? The good news is that until they figure this out, we all stand to benefit. As further reading, check out a previous post of mine on a similar subject.

- Jason Busch

I had a quick conversation with Aberdeen's Sudy Bharadwaj last Friday. Last time I spoke to Sudy earlier in the year, he was evaluating whether or not to become an industry analyst. Based on our recent discussion, it's clear that he's made the right choice. But with Tim Minahan's departure in the middle of his start / hiring process at Aberdeen, Sudy certainly had some unexpected shoes to fill when joining the firm. The good news is that I can report that he's hitting the ground running and there's a number of good Spend Management research in the firm's pipeline. One upcoming report is focused on sell-side contract management (you can participate via this link) while others are examining such areas as direct materials procurement and category management. As I've said recently, it's critical that Aberdeen not rest on its laurels (scroll down for post). Sudy and his team must focus on continuing to produce a top notch product to carry their firm forward rather than relying on the reputation of those who have left. With Aberdeen competitor AMR Research cranking out some great analysis at the moment (stay tuned this week as we look at some of their latest research), the spring Spend Management analyst research season should be a great one to watch.

- Jason Busch

Early in the week, I had the chance to read the March edition of Manufacturing Insights' newsletter, Theory and Practice. As I wrote about in a past entry, Manufacturing Insights is a new IDC spin-out, whose research agenda and advisory practice focuses on a number of areas including supply chain, sourcing, and procurement that are especially relevant for manufacturers making Spend Management investments. In this edition of Theory and Practice, Bob Ferrari writes about the “rash of announcements related to acquisitions of smaller SCM best-of-breed technology vendors”. Included in his write up are analyses of Dunn and Bradstreet’s Open Ratings acquisition and i2’s acquisition of RiverOne’s assets. But most prescient are not his discussions on the individual deals, but what companies buying Spend Management technology are actually looking for: “Manufacturing companies have become very savvy and very particular in selecting their technology vendors. They rely on a mix of large strategic and smaller specialist vendors to support pilot programs or broad proofs-of-concept activity, before signing the "big deal". These companies also want differentiation in their supply chain process capabilities ..." Even if you're not a Manufacturing Insights' client, you can subscribe to Theory and Practice by clicking here. Even for non-manufacturers, it's more than worth the time to read it.

- Jason Busch

While it's not exactly Spend Management related, I was playing around on Google's new finance page which is designed to give Yahoo Finance a run for its money. The charting capability and blog tie-in is quite cool (but obviously these features won't help the fact that the charts for most of the publicly traded Spend Management providers are not looking so hot as of the past 12 months). Still, I'm holding out hope for growth, and I plan to bookmark the site for financial information and news on Ariba, Inc. (Nasdaq:ARBA), ePlus, Inc (Nasdaq:PLUS), Verticalnet, Inc. (Nasdaq:VERT), and i2 Technologies, Inc. (Nasdaq:ITWO), among others.

- Jason Busch

I've been enjoying keeping up with E-Sourcing Forum in the past couple of days, as Iasta publishes the highlights from its E-Sourcing benchmark via RSS. You can read the first, second, and third days of coverage by clicking the above links. In no particular order, here are some of the highlights that I've found particularly insightful (even if they're not a complete surprise):

The study found that 88% of companies with over $5 billion in revenue have standard sourcing processes and procedures. Yet, this number drops to less than 25% in small and middle market companies of less than $1 billion in revenue. Given the lack of established sourcing processes in smaller companies (not to mention lower than average reverse auction usage), it seems to me that one of the best opportunities for Spend Management providers in this segment would be to offer solutions that provide equal parts process and unit cost savings to create a combination of sustainable and immediate results.

Here are some additional findings from the study: "Though 63% of companies responded that PRICE was the primary reason to switch suppliers, only 5-25% of companies actually switch suppliers ... A large number of respondents (70%) indicated that only 25% of spend was too strategic to source. Yet despite the availability of spend, only 5% of spend is sourced via reverse auctions. Though incumbent suppliers may lower prices during negotiations, far more savings may be left on the table from potential suppliers.

"Key success factors for e-Sourcing: 1: Visible, vocal leadership with a plan; 2: Long-term commitment to strategic e-Sourcing; 3: Use of commercially available e-Sourcing tools/application; 4: Use of standardized operating procedures that evolve with business needs; 5: Commitment to team through training and new skill acquisition."

- Jason Busch

I'm looking forward to reading Iasta's sourcing benchmarking survey which they'll be releasing on eSourcing Forum next week. Kudos to Iasta for: 1) Completing a benchmarking study on their own (there are software vendors with more staff in marketing than Iasta has overall which do not complete primary research and thought leadership like this); 2) Releasing the study results via RSS on their blog (in my view, RSS is future of content syndication); and 3) Digging into a Spend Management subject which is generating new levels of enthusiasm of late, and relying on their own primary research to guide their analysis. You can check out the demographic profile of the participants in the study by reading today's post on eSourcing Forum. According to David Bush's post, "This final report is a holistic view of the data covering over 40 detailed questions about strategic sourcing tactics, technology usage patterns, future plans and perceived vs. real benefits."

- Jason Busch

I'm excited to announce that registered Spend Matters readers can now qualify to earn the Senior Professional in Supply Management (SPSM) certification at a discounted rate for a limited time period through our affiliate partner, Next Level Purchasing. The SPSM certification provides core training in such areas as strategic sourcing, reverse auctions, and eProcurement. The program is based on six self-paced online courses which enrollees have up to two years to take. If you're interested, you can learn more about the certification and check out discounted fee that is only available to Spend Matters readers here.

- Jason Busch