Want Real Progress? Disrupt Your Procurement!

Today, TechCrunch Europe kicks off in London. Designed to highlight up-and-coming technology start-ups, it pits them against each other in a start-up battlefield where the top fifteen, chosen from the hundreds that attend, get to pitch their products live in front of a a panel of expert judges and a live audience of thousands. After demos, pitches and questions, the judges select six to do it again the next day. The top company then takes home £30,000 (about $50,000 US on a good day) to try and take their start-up to the next level.

While the doctor doesn’t know how productive it is for hundreds of start-ups to waste tens of thousands of hours battling it out for a mere £30K, the fundamental idea of disruption could be very beneficial to your Supply Management organization if it truly wants to get to the next level on its Supply Management journey.

It’s time to get real. The reason 92% of organizations are not in the Hackett top 8%, and on their way to strategic business enablement, which is the third level of organizational maturity (as defined in Sourcing Innovation’s white-paper on Taking the First Step on Your Next Level Supply Management Journey), is because they don’t have the right Ts. Talent, Technology, Transition, Tracery (and two more Ts that will only come into play when they have the first 4 Ts down, which will be revealed in the sequel white-paper series).

The organization doesn’t have the right technology in place to help it automate the tactical and focus on the strategic. It hasn’t transitioned to the right process to maximize its efficiency. And its talent doesn’t have the knowledge and skills required to compete at a higher level of achievement. The status quo has to be disrupted for progress to be made.

Of course, since a primary precept of risk reduction is disruption elimination, disruption will be strongly resisted. That’s why you will have to provide the team incentives to support it.

Get permission from the C-suite, and a bit of a budget, and take a lesson from Disrupt and offer incentives to the team members who come up with the best ideas for process improvements, technology upgrades, and knowledge improvement. It doesn’t have to be large cash rewards — it could be public recognition (in an awards ceremony), extra time off, or even a bigger bonus if the effort generates a Return on Investment and extra realized savings at Procurement time. It doesn’t have to be a big cheque up-front. Most Supply Management professionals want to make things better, and if you give them a good incentive, they will go against the grain and disrupt their daily routine in an effort to make it, your Supply Management department, and your organization better.

So get disruptive.

LOLCAT Wants …

Bring Me A ... Rubber Chicken

Do you know why LOLCat, who usually wants a shrubbery, wants a rubber chicken today?

45 years ago today was the first airing of episode 3 of Monty Python’s Flying Circus which, if the doctor is correct, is the first episode to feature a fully suited knight who, in his first scene, walks up to counsel in the courtroom and hits him with the traditional raw chicken. LOLCat is asking for a rubber chicken because, if he asks for a raw chicken, he knows the stupid dog will eat it. (And, of course, once the dumb dog brings LOLCat the rubber chicken, you know what’s going to happen next.)

60 Years Ago Today TI Launched the Mobile Music Revolution

Steve Jobs may have wanted you to think that the iPod launched the Mobile Music Revolution, but it was just a new-and-improved mobile MP3 player which replaced the portable CD player which replaced the portable cassette player which replaced the portable 8-track player which replaced the portable radio.

And guess what made radios portable — the transistor. Before transistors, invented in 1947, revolutionized computing for the masses, these semiconductor devices used to amplify and switch electronic signals and electrical power, revolutionized the portable music industry with the transistor radio that was announced by Texas Instruments 60 years ago today. Before the transistor radio, the average small vacuum tube radio weighed about 20 pounds or so and didn’t fit in a pocket, whereas a small transistor radio weighed less than a pound and fit in a (large) pocket.

And those who were Young at Heart could take music with them wherever they went.

LogicSource OneMarket – An Interesting Solution for Sourcing Projects

LogicSource OneMarket, which grew out of a unique automated procure-to-play platform to enable buyers and suppliers to more effectively address the complexities of print management, is a unique platform for sourcing “projects”. Marketing and advertising projects, capital equipment and leasehold acquisition projects, temporary labour projects to meet the holiday rush, etc. The developers — having recognized how the pre-cursor complex category platform they developed to specifically handle complex categories such as direct mail promotions, marketing collateral, promotional items, and packaging was being used across a wide range of industries — also recognized that what made these categories complex was the project-based nature of the categories, and focussed on extending that.

A few years later and they have a distinct platform that, while not specific to marketing, capital acquisitions, or labour projects, is well suited for those types of one-off sourcing events. While the platform has four components — the main e-Procurement (Sourcing) Engine, the Analytics Platform (designed for Finance), Digital Asset Management (designed for Marketing), and Visual Merchandising Management (designed for Operations) — we’re only going to discuss the e-Procurement / Sourcing component in this post.

The module is built around “campaign” management, and that’s why it is effective in special projects that are essentially campaigns to get something specific, and special, accomplished like managing a print advertising campaign for a new product, acquiring a new office building that meets everyone’s needs*, or quickly hiring 100 new workers to staff the warehouse to get all the packages out on time for the holiday rush.

Campaigns are much more challenging than regular commodity/product/service sourcing projects where you can just send out a bid for a group of SKUs, ask carriers to quote on lanes, and request standard rate cards for well defined service roles, as you need to develop customize requirements and RFIs, allow for and handle highly variable RFPs depending on the solution proposed by each vendor, compare bids at different levels of granularity, support complex review and sign-off chains, and capture the data required for detailed Statement-of-Work addendums to the contracts that can be used to generate the appropriate POs for whatever billing framework and schedule is agreed to.

To support this type of special project, each campaign starts with a specification where the buyer defines what they are looking for to the best of their ability, defines the workflow, selects the initial suppliers, includes any known products they need (quoted) from the built-in catalog capability, and/or defines any services they need (quoted) and attaches the rate cards they need filled out. The buyer can also choose to automatically populate the RFPs sent to suppliers with known or historical prices for known product or service needs, which then requires the supplier to only provide updates where necessary and fill in prices for products or services not known to the buyer.

Special projects can have multiple RFX rounds and the product logs all steps and changes for historical audit purposes. When the project is complete, an award can be created and, if necessary, split across multiple suppliers at different levels of project granularity. For example, if it was an advertising campaign project, one supplier might get a region (southern), another might get a state (California), and another might simply get a city (such as New York) because of distinct consumer preferences in a large target marketplace.

Once the award is made, the tool can be used to track project progress and handle the traditional billing and payment cycles (which you would expect as it evolved from an e-Procurement platform). In addition, it can track all change orders and everything related to project management is integrated, logged, and audited. In addition, suppliers can generate invoices within the supplier portal against work orders at agreed upon payment schedules for milestone driven projects, which makes it a lot easier for payment review and approval then when a supplier sends AP an invoice for “Services Delivered Against Campaign X” and the accounts payable clerk has no clue if the milestone has been hit or not.

LogicSource OneMarket is a fairly unique solution that is worth checking out if your organization does a lot of campaign-based projects across disciplines and your standard sourcing suite doesn’t suit the purpose. Keep it in mind the next time you hit a brick wall with respect to campaign management in your previous-generation sourcing suite.

*but not everyone’s wants — because, as poor Dilbert found out in the “Tower of Babel”, Episode 7 of Season 1 of the animated TV Show, if you try to satisfy everyone, you satisfy no one.

Procurement Trend #31: Increased Competition

Today we continue our coverage of each and every “future” trend that we debunked in our Future of Procurement series that falls under old-blues and ongoing news. Before all is said and done, we’re not only going to make sure that you not only understand why the historians are still talking about these ancient trends, but why they are still relevant to many Procurement organizations stuck in the past with the historians as well as what your organization needs to do to prevent getting sucked into the historical time vortex as well. So on to trend number thirty one!

As per our original series, while an idiot, and maybe even an imbecile might not be aware that Globalization is, obviously, going to lead to increased competition (and that as the pace of Globalization increases, so does the pace of increased competition), but even your everyday dull-witted dimwit is going to realize this, as is everyone of average intelligence (and it’s pretty unlikely that you’re going to find anyone of lower IQ in a senior management or Procurement position [with the possible exceptions of Texas and Florida]). As a result, not only is this trend as old as globalization, but it has been obvious for almost as long.

So why are the historians still pegging it? What are some of the primary reasons?

  • Emerging markets are new Emergent Markets

    and even emergent markets are outsourcing

    China is no longer emerging, it is now the world’s second biggest economy, regardless of whether you take the UN, IMF, or World Bank GDP calculations as gospel, Brazil is the seventh, Russia is the eighth, and India is the tenth. In other words, the BRIC are all top 10 economies. If that’s not an emerged market, I don’t know what is (especially since Canada and Mexico, the latter of which used to be buoyed by American near-sourcing, have been knocked down the list. Canada is not even top 10 anymore! [the doctor blames Harper.])

  • A New Set of Emerging Markets are Rising

    and even Africa is seeing investment

    A few years ago, people were talking about BRICS. Most because they saw the beginnings of the rise of South Africa, which matched the beginnings of the rise of the BRIC a decade or so ago, and a few because they were forward looking. But now that the BRIC has emerged, focus is shifting to the MIKTS (Mexico, Indonesia, South Korea, Turkey, and South Africa). As a result of the continual rise in transportation costs, labour costs in China, and automation, progressive American multi-nationals are realizing that near-sourcing to Mexico is not only the low-cost opportunity, but increases JIT capability in their supply chain. Indonesia is the new China and Vietnam for traditional manufacturing. South Korea, while very technologically advanced, is not as prominent as Japan or China as an outsourcing destination and, thus, provides additional opportunities for forward-looking multi-nationals for high-tech outsourcing. And Turkey, like Poland, has considerably lower labour costs than Western Europe but still has top-notch manufacturing standards and capabilities that not only meet Western European standards and capabilities, but in some industries, such as steel, exceed those capabilities. (For example, 1 US Dollar is approximately 2.3 Turkish Lira, and minimum wage in Turkey equates to about 4.3 Lira per hour, while the minimum wage in their neighbour Greece is about 2.5 times that, and the average Turk makes about 2,000 Lira or $800 US a month).

  • Developed Markets are becoming hyper-competitive

    and sometimes the only option is global expansion

    Despite the irrational beliefe by some US leaders that markets can grow forever (because, theoretically, population can grow forever), from a global perspective, relatively speaking, market share at any given time is a zero-sum game. Your economy grows at the expense of another economy. At any given time, the are a fixed number of people on earth with a fixed number of hours to contribute to create a fixed amount of product — which means at any given point in time, there is a fixed global gross domestic product. So if your economy is getting more for that product than another economy is getting for an equivalent product, then your market share is growing at the expense of that market.

    So it should come as no surprise that now that reality has sunk back in and companies realize that market growth is limited to population growth, markets are becoming hyper-competitive as each company wants a bigger share of the fixed pie.

So what does this mean for you?

  • Emerging markets are now Emergent Markets

    Don’t look for outsourcing cost savings from these markets, look at new customer opportunities and opportunities for nearby, or even local, production to keep global transportation costs and transportation delays down.

  • Third World Markets are Now Developing Markets

    If you must outsource, you need to look to the MIKTS, not the BRIC. If you still believe there is labour arbitrage, cost savings, etc. by outsourcing, then you have to look at Mexico, Indonesia, Turkey, or South Africa or get ahead of the curve and figure out what markets will be developing markets in 10 years.

  • Developed Markets are Becoming Hyper-Competitive

    Savings is not the answer — someone bigger can use leverage to save more. Value is the answer — value to the consumer, value to the company, and value to the supplier. So look for value generation in everything your organization does.