Monthly Archives: March 2007

Sourcing 2007: Part V

In parts I, II, III, and IV, I summarized a number of predictions made from a number of bloggers, analysts, and media publications. About the only thing I missed was Supply Chain Digest‘s First Thoughts piece by Dan Gilmore, Editor-In Chief, who predicted the following top 10 supply chain technologies and strategies:

  1. E-Auctions
  2. Labor Management Systems in Distribution
  3. Spend Management Visibility
  4. Demand Management / S&OP
  5. Supplier Portals
  6. Network Optimization
  7. Transportation Management Systems (TMS)
  8. Strategic Sourcing
  9. Wireless in the Warehouse
  10. Yard Management Systems (YMS) and Dock Door Scheduling

But the time for predictions in over. This post is to review which predictions appear to be on the money based upon recent movements in the space. Specifically, the following predictions appear to be right on track.

  • Spend Visibility
    Not only has there been a slew of activity from the vendors, recent discussions with Iasta, Ketera, and Procuri, as well as rumblings from the behemoth, Emptoris, indicate that there is considerable uptake.
  • Optimization
    The prediction here was that it will gain more traction. Although it’s probably not going to take off for another year or two (despite the fact that it could skyrocket savings for many organizations), it appears that a number of best-in-class companies are now beginning to seriously consider optimization, and a number of vendors with offerings are considering beefing up their capabilities in different areas, Best of Breed and Platform Optimization Engine vendors alike. CombineNet is starting to capitalize on this opportunity with industry specific offerings like CombineNet Energy, Iasta is extending their platform solution to include freight, more constraints, and better reporting, and I hear Emptoris is doing some major usability enhancements on their solution as well.
  • Should Cost Modeling
    The prediction here was that models that broke down total cost of ownership, and techniques that allowed a buyer to model expected costs, would start to gain traction. Based upon the recent traction that modeling firms like Akoya and Apriori are getting in the market, I think this is a sure bet as well.
  • Sustainable Supply Strategies
    With Walmart leading the charge, energy prices spiking, and raw material supplies being stretched to the limit in some categories, this prediction was definitely on the money.
  • Major Supply Chain Disruptions

    • Imperial Oil already won my bet. And I’m sure more companies will in the months ahead. Too much focus on low cost country sourcing. Not enough focus on risk.

However, although this wasn’t really touched upon in the blog entries or media, it looks like one more prediction could come true this year as well:

  • Supply Chain Community

    Procuri just launched Top Supply Tips, Iasta just launched the eSourcing Wiki, Spend Matters just let slip that it is working on something far bigger than creating a cross-blog meta-index for procurement, another major vendor is currently putting the final touches on a community offering, and a couple of other vendors are working on some spectacular ideas for later this year. That’s a lot of individuals focusing a lot of effort on community – either they’ve identified a burgeoning desire, or a new drug from South America has hit the streets and they’re all on it. I’m betting on the first option.

Am I wrong? Let me know. (Just be sure to let me know why!)

Disaster Management Lessons from the Private Sector

I’ve been harping about Risk Management a lot lately, but that’s because I know that your supply chain will be disrupted (and in the case of Imperial Oil, as pointed out by David Rotor in his recent post, it already has). It’s a statistical certainty outranked only by death and taxes. The only things I don’t know is when, how bad, or how much it will cost you. Hopefully it won’t be the result of a natural disaster that shuts you down temporarily, but it could be, and that’s why I’ve talked about Disaster Recovery Planning in the past and taken efforts to make sure you understand that Your Supply Chain is NOT Secure in my efforts to drive home the importance of good planning.

Recently, the Supply Chain Management Review published a great article titled Disaster Management: Private Lessons for the Public Sector that reviewed best practices used by private industry to weather the storm and included a great Disaster Management Checklist that is worth repeating.

According to the article, successful organizations weather the storm by working closely with suppliers, customers, and even competitors. Moreover, effective supply chain management is critical to disaster planning and response. Organizations need to understand the resiliency of their suppliers, identify their downstream points of vulnerability, and collaborate across internal and external organizational barriers in order to protect assets and deploy supplies in the face of a disaster.

Furthermore, disaster-management supply chain processes can be segmented into three primary foci: (1) sourcing, (2) warehousing and asset protection, and (3) staging and distribution. You need to determine what items you need to stockpile and where they should be stored. You need to set up standing agreements for emergency services with a resilient base of contractors. And you need to identify alternate sources of supply and supply networks for flexibility, especially for items that cannot be stockpiled. You also have to prepare for power loss and the resultant cash economy.

You need to find the balance between stockpiling in anticipation of the surge in demand for critical supplies against the cost of maintaining inventory and storing it in a potentially vulnerable location. You also have to consider how you will protect assets in potentially exposed area, balancing the cost of added protection against the value of the goods. You have to figure out how you are going to get stockpiled supplies to an affected region quickly. You need to have processes in place for operating in an offsite location if necessary, often shifting your entire operation out of a potential disaster zone before the disaster hits. You need to be prepared.

The disaster management checklist provided is very handy. In short:

  • strengthen supplier relationships
  • collaborate with suppliers
  • diversify suppliers
  • plan for power loss
  • plan for a cash economy
  • build backup plans
  • find inventory equilibrium points
  • distribute resources
  • batten down the hatches
  • locate disaster-recovery staging areas

… But I Took Purchasing

To the tune of First We Take Manhattan by Leonard Cohen.

They threatened me with thirty years of boredom
But I promised that I’d get the best of them
They tried to cubicle me in accounting
But I slipped their grasp and I took purchasing

I’m guided by desire to save money
I’m guided by desire to always win
I’m guided by the beauty of a P.O.
So I slipped their grasp and I took purchasing

I’d really like to cut back spend today
I love the hunt and tactics and strategy
But you see that minute hand winding up to twelve
I’m running, I’m running, running out of time you see

I did my job when we were losers, I did my job when we all got to win
If only you managed risk, but you don’t have the discipline
So now I must put out the fires, before my work begins
Too bad I slipped their grasp and took up purchasing

I don’t like your mismanagement mister
And I don’t like the decisions that you make
I don’t like what happened to you, sister
Did I make a mistake when I took up purchasing?

I’d really like to just do my job today
And get some thanks for all the savings that I find
But Nero plays his plywood violin
   and the factory burns to the ground
Could have had accounting, but I took purchasing

I am guided

Ah remember me, I used to live for the hunt
Strategy and tactics, I would fight to win
But outsourcing put our supply chain in shambles
Could have had accounting, but I took purchasing

CBC vs. The Little Guy

It’s a common known fact that american network TV steals, or at least allegedly steals, ideas for TV shows on a regular basis. (One of the more recent fights is chronicled on Corante.) And it’s also a known fact that most of the reality shows take all of your rights away just for the privilege to appear on them. (Take American Inventor for example.) And if they couldn’t steal jokes, some TV shows would have nothing left. (Without borrowed content, Family Guy would be nothing but dead air.)

However, some of us were kind of hoping the good old Canadian Broadcasting Corporation held itself to higher ideals. But that might not be the case. Check out this post over on BongWaterMusic. Is the CBC trying to hone in on the action and steal a great idea from a little guy who’s been pouring his heart and soul into it for two years? I don’t know … but I will be following this story.

(Competitive Intelligence is) A Competitive Advantage (in the Supply Chain)

Earlier this week, the article Competitive Intelligence: The New Supply Chain Edge hit the on-line edition of the Supply Chain Management Review. Almost immediately, Jason did a complementary post over on Spend Matters on Building Supply Chain “Competitive” Intelligence.

However, consistent with the original article, I think Jason missed a key point in his post. Jason quotes the article, which defines competitive intelligence as the art of acquiring, presenting, analyzing, and refining knowledge about the competition’s supply chains and then reaching actionable conclusions about improving your own, when he points out the following questions that indicate types of competitive intelligence worth considering:

  • Would the availability of metrics for your competitors’ supply chains help improve your own supply chain?
  • Would it be helpful to know if your competitors’ supply chains were relatively better (cheaper, faster, more cost efficient, and so forth) than yours?
  • If they are better, what actions should you take in response?
  • Are your competitors automating parts of their supply chains to reduce costs and gain speed?

These questions are a good start, but they simply echo the sentiment of the article that states the basis for good competitive intelligence is a consistent probing and analysis of the competitive environment using primary and secondary data. However, as far as I’m concerned this is not the basis of a competitive analysis. It’s part of a good competitive analysis, but not the basis.

The true basis of a competitive analysis is understanding how well you are doing, compared to how well you could be doing. This will require studying the market, to get some general perspectives on how well you could be doing based upon the performance of your competition, but, more importantly, it will require studying your processes and identifying areas for, and means of, improvement.

If you do not know how much you are spending on a certain raw material, then it doesn’t matter how much you think your competitor pays. Competitively, you are doing poorly and even without knowing how much your competitor pays, you know you need more visibility (and a visibility tool). If you’re producing 1,000 units a day, but six sigma efficiency experts think you should be producing 1,200 units a day, then you know you probably need to shore up your processes even without knowing how many units your competitor produces with similar resources. Moreover, although your competitors might have some good ideas, they are not the only sources. Third party consultants, analysts, industry experts, and even your own people might have the ideas you need to improve. Just take the time to listen. Furthermore, a market comparison will only tell you whether or not your competitor appears to be doing better than you given the same resources. Thus, even if the analysis were to indicate that you are doing better than a competitor, it cannot indicate whether or not you could be doing better still.

As the article states, analysis, conclusions, feedback – and then ongoing refinement of those conclusions in the face of new information – are the key actions driving this process, but this process goes beyond just an analysis of your competition, it also includes an analysis of your operations. It’s a good article, and worth checking out, but just remember that although a competitive analysis will definitely point out weaknesses, it will not always provide you with the solutions.