Monthly Archives: March 2007

Davie and the Coupa Factory

When I was in in the valley, I checked in on Coupa. I’m happy to report that the Coupa Oompa-Loompa‘s are hard at work developing the new version of their open-source e-Procurement product, which should be ready in the near future. (Rumors are the next enterprise version will be ready in a month or so.) I wish I had details to share, but everything is hush-hush and I was warned by the Grunka Lunkas not to ask about the secret new features (and since I didn’t have an evil alcohol chugging robot or one-eyed mutant to back me up, I decided to heed their warnings). However, if you listen hard, you just might be able to hear the Oompa-Loompa’s song floating on the breeze.  (At least when they’re not watching TV!)

Oompa Loompa Doom-pa-dee-do
I’m building a great product for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise download it for free.

What do you get when you go open source?
Straying away from the Oracle course
Where you are going terribly flat
What do you think will come of that?

I don’t like the look of it

Oompa Loompa Doom-pa-dee-dar
If you are willing, you will go far
You will live in happiness too
Like the Oompa Loompa Doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-dee
If you are wise you’ll take a look-see

Oracle’s fine when you have lots of cash
It stores all your data and caches it fast
But when you’re cash-strapped, you’re hung out to dry
To watch the vultures circ’ling high

Up in the dark’ning skies

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-derd
If you are wise, you will spread the word

Ask who they’ll blame when your spend is off track?
Deep in the red and there’s no turning back
Contracts alone will never be enough
If your software’s not up to snuff

And doesn’t track your stuff

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do

Oompa Loompa Doom-pa-dee-do
I have a great product for you
Oompa Loompa Doom-pa-dee-dise
If you are wise, you’ll buy enterprise

Recquisitions with a click of the mouse
No more mistakes for accounting to delouse
One click receipts when the order arrives
Invoice matching that always jives

You’ll have no … you’ll have no … you’ll have no regrets

Oompa Loompa doom-pa-dee-dar
But now there’s Coupa, you can go far
You will buy in happiness too
Like the Oompa-Loompa doom-pa-dee-do

And yes, this is to the tune of the Oompa Loompa chant, as first heard in Willy Wonka & the Chocolate Factory.

On Demand VI: The Future Will Not Be Boxed!

Recently, Knowledge@Wharton ran a great article on Why Software Business Models of the Future Probably Won’t Come in a Box that made some great points that are definitely worth repeating, despite the fact that the article is focussed primarily on Microsoft and the challenges that lie ahead for the lumbering behemoth.

The article begins by noting that the software business model that has made Microsoft so dominant for the last 20 years may begin to fade in the decade to come as new software business models — from open source to advertising supported software — gain increasing traction. (The article is being kind. I think it’s safe to say that this is not a “may”, but a “will”, and that the only unknowns are how soon?, and by how much?)

“Open-source“, which largely relies on voluntary programmers to build applications that are distributed freely; “enterprise open-source“, where a company builds a basic application and gives it away for free, making money on either services and support or on custom / extended versions; “ad supported” software which is free to consumers if they agree to accept advertisements; and “on-demand” software where

customers rent software applications when they need them and pay only for what they use are all gaining in popularity.

According to Kendall Whitehouse, a senior director of information technology at Wharton, there probably isn’t one model that will win out; instead you will have a blend of business models. Kartik Hosanagar, an operations and information management professor at Wharton, agrees that a hybrid model, consisting of all of the above contenders and some traditional licensing, will likely emerge in the software industry.

The article also points out a major advantage of on-demand and open-source applications: they can evolve more quickly. (For more advantages, see Part I.) Furthermore, in the corporate setting, you don’t really own boxed software as much as you pay for access to it. By the time you factor in the cost of routine updates and maintenance, perpetual licensing costs a lot more than the up-front license fee. That’s probably why companies offering access to on-line subscription services are adding customers at a rapid clip – and why you should be looking primarily at on-demand or enterprise open-source solutions when you select your supply chain applications. It’s the future!

The Consultant Corral

In Perfect Partners, over on SupplyManagement.com, we are told that a recent poll indicated that 57% of purchasers questioned believe consultants offer value for money. (Or, in other words, only 43% believe that brilliant bloggers like myself and Jason Busch are full of it. But that’s another post.)

The point of the article is that purchasing will increasingly need to rely on the knowledge and credibility of consultants so that it can continue to raise its game. Furthermore, if they are to maximize the return on their investment (in consultants), these purchasers and purchasing organization must make an effort to manage the relationship properly.

Consultants are valuable because some have skills you will never have, others are good at getting quick wins on the board, and yet others can bring benchmarking capabilities to your organization. They also bring a third party perspective that can be invaluable in helping you understand where you are doing well – and where you are not.

Despite the statistic above, I was pleased to see that the article noted that most purchasers agree that the cause of many complaints about consultants comes down to the client, not the consultant. It’s true that our profession, like any sales-based profession, is going to have a few snake-oil salesmen promising a tremendous return tomorrow for a big investment today. But for the most part, most sourcing and procurement consultants are honest, hard-working men and women with one goal – to get you results. We want to make a good living at it, but we want to see that you get a return.

As the article points out, too few clients properly consider their reasons for employing consultants. If you do not have clearly defined goals, how can you expect specific results? Do you want to transform your skill set, implement a new technology, or drive savings? Each goal requires a different focus and is associated with a different result. Without a clearly defined goal, a consultant will focus on the area she thinks she can make the largest impact and add the most value. But if you had a goal in mind, and did not clearly communicate it, this may not be what you wanted.

It also notes that you should involve consultants in the requirements phase of a project. Getting their insight and input will help you determine if they are the right consultants for you. Most consultants and consulting firms will not mind devoting some time up front on a large project to make sure the project is right – and right for them.

Another good point brought up is that sometimes you don’t need a consultant – sometimes you need a managed services provider. If you just do not have the resources in house to do well on a category, consider outsourcing that category, and others that you are unable to handle well, to a third party with the skills and resources to do it right and drive efficiencies and cost reductions you would not see otherwise.

Regardless of which path you choose, it all comes down to capability. The right consultant will have the capabilities you need. Get to know the consultant before both parties agree to a long term engagement. And if you find the right one, do whatever you can to keep him or her happy.

AMR’s Search for Strategy

AMR recently released a two-part article where they noted that a supply chain strategy can be an elusive enigma, something every organization should know it needs, but something many an organization is uncertain on.

To help organizations out, AMR searched and searched and, after answering some basic questions, outlined what a strategy might look like, what some of the important elements are for success, and developed a framework for strategy development based on their demand-driven supply network (DDSN) world-view (no surprises here!).

AMR points out that before one can explain what a strategy is, one must first point out what it is not. To this end, AMR notes that a supply chain strategy is not:

  • focused solely on supply or company operations
  • inward-facing
  • focused only on your company
  • technology centered
  • point-in time based
  • a substitute for business strategy
  • a financial plan
  • buzzword bingo

AMR then points out that a good plan is realistic, clear, actionable, and approved by leadership and stakeholders. It is based on market performance, emerging market dynamics, and supports the strategy. Furthermore, it considers and defines the following elements:

  • holistic design
  • process evolution
  • talent
  • predicted power shifts
  • key relationships
  • network design
  • simulations

Furthermore, a good supply chain strategy supports the business strategy from start to finish. It supports the current and expected future states of the business and details relationship strategies and process for demand, supply and innovation over five to ten years.

Furthermore, the strategy addresses:

  1. business strategy
  2. supporting supply chain strategy
  3. supporting business processes

Each of these components are devised by starting with a proper goal and asking the right questions.

Business Strategy

Goal: What is the right direction to increase the value of the company?

  • What is the best way for the company to compete?
  • Which businesses and markets best support the strategy?
  • What events and market shifts need to be incorporated?
  • How are evolving technologies, customer preferences,

    product competition, and channel dynamics changing the ecosystem?

  • What is the true market opportunity?
  • To capture this market opportunity, should the company be a cost leader or a differentiator?
  • What is the brand?
  • What are the risks and how are they balanced?
  • How are assets and relationships aligned to win the market?
  • How does the business strategy translate into a financial strategy?
  • What is the role of technology?
  • How should award systems be aligned?
  • What is the necessary organizational culture?
  • Is the plan actionable?
  • What will success look like?

Supply Chain Strategy

Goal: What supply chain strategy is necessary to support the business strategy?

  • What organizational structure and talent is required?
  • What does success look like?
  • How many supply chains are required and how are they designed for success?
  • How are demand, design, and supply networks aligned to maximize the value of relationships?
  • What should be global and what should be local?
  • How should demand, supply, and product processes be synchronized to create opportunity?
  • What supply chain competencies are core and what should be outsourced?
  • How is risk to be mitigated?
  • What does global mean to the organization?
  • How is the profitability of relationships increased?
  • What is the right level of complexity?
  • What is the right IT strategy for the supply chain?
  • What are the right supply chain metrics?
  • How does the organization measure up to its peer group?
  • What is the execution roadmap?

Business Process

Goal: How do I do the right things right in the execution of the strategy.

  • What are the supporting business processes?
  • What are the gaps in process and organizational roles and responsibilities?
  • What is the best organizational structure?
  • How is continuous improvement best enabled?
  • How should network relationships be defined?
  • How should opportunity sensing, complexity, and risk mitigation be balanced?
  • How is demand best measured?
  • What is the right balance of assets?
  • Are there untapped opportunities in working capital or cash-to-cash efficiency that can improve cash flow?
  • What reliability is required to support the supply chain strategy?
  • How should manufacturing quality, logistics, and IT systems be aligned to support reliability?
  • How should shared-services organizations be aligned?
  • How should processes be designed to be outside-in and adaptive to the business climate?
  • What can be learned from leaders?
  • What must be measured?

Once all these questions are answered, then, provided that the end result is:

  • feasible from a physical capacity perspective,
  • feasible under a price / volume analysis, and
  • feasible from a profit perspective using activity-based costing

The organization should now have a decent, starting, supply chain strategy. (I say starting because a first cut should always be revised using input from all affected stakeholders and the plan should be reviewed every year for continued relevance in light of market changes and new knowledge obtained by the organization.)

All-in-all, not a bad pair of articles.

The Basics of Competitive Intelligence

Last week, in A Competitive Advantage, I too discussed the recent article Competitive Intelligence: The New Supply Chain which recently hit the on-line edition of the Supply Chain Management Review. However, I only discussed what I believed competitive intelligence really was, and did not really discuss the article in detail.

Even though I was unhappy with the fact that they did not paint what I believed was the whole picture with regards to what competitive intelligence really was, they did a great job with respect to defining what competitive marketplace intelligence was, how to ethically acquire it, and how to analyze it. To that extent, I’m going to elaborate on some of the great points the article made.

The article points out that there is a code of ethics, complied by the Society for Competitive Intelligence Professionals (SCIP). The basics of this code is the following:

  1. You cannot lie when representing yourself or your company.
  2. You must strictly adhere to your company’s legal guidelines.
  3. Secretly recording an interview is not permitted.
  4. Bribes of any kind are not permitted.
  5. Eavesdropping devices are not allowed.
  6. Deliberately false or misleading statements are unacceptable.
  7. Under no conditions will price information be swapped, traded, or exchanged in any way with a competitor.
  8. Misinformation may not be swapped, traded, or exchanged with a competitor.
  9. Procurement of property indirectly is not permitted.
  10. “Pumping” someone for information is unfair.
  11. Dumpster diving is fair play (unless there is a municipal law prohibiting otherwise), but unnecessary because the SCIP estimates 95% of the information that you want is publicly available. *

Once you’ve mastered the code, you can move onto the following basic steps of competitive intelligence:

  1. Identify What’s Important
  2. Focus on Key Competitors
  3. Identify Potential Competitors
  4. Get the Data
  5. Don’t Wait for All of the Information to Come In
  6. Look for ways to improve*

Data can come from multiple sources. The article classifies these sources as either primary (straight from the source) or secondary (at least once removed from the primary source). Valuable primary sources include:

  • Annual Reports
  • Stockholder Communications
  • Financial Press Releases
  • Management Speeches
  • Employee authored Articles, Research Papers, and Books
  • Web site content
  • Patents and Commercial Registries
  • Surveys and Interviews
  • Remote Sensing
  • Building Permits
  • UCC (Uniform Commercial Code) Registration

Secondary data sources include:

  • Newspapers, Magazines, and Print Media
  • Electronic Sources (The Internet)
  • Analysts Reports and Expert Opinions
  • Books
  • Published Commentary and Observations
  • Legal Briefs and Filings
  • General Blogs
  • Employee Blogs

Once you have data, you move onto the analysis. A number of tools can be used, including the Balanced Scorecard, a simple SWOT assessment, and a Scenario Planning analysis.

Remember to keep in mind Michael Porter’s common barriers to competitive entry when conducting your analysis:

  1. Economies of scale, without which competing is most difficult.
  2. High costs of switching from one vendor to another.
  3. Customer loyalty and bonds created by your product.
  4. Difficulty of accessing alternative channels of distribution.
  5. High cost and amount of capital, coupled with the existing large investments of the market leaders.

It’s a lot of work but, as the article says, optimizing supply chains and managing them to outperform competitors will increase revenue, profitability, and ROI while at the same time providing the underpinning for solid business growth in the future. But, as the article states, management can no longer rely on their instincts to achieve supply chain superiority. Instead, they need a structured approach to benchmarking both their own supply chain performance and that of their competition. In the end you must not only understand where your competition is performing well, but where you are not. That’s where you start.

* Identifies author’s addition relative to the original article.