Monthly Archives: May 2009

Competitive Advantages of Contract Management Solutions

A recent article in Material Handling Management provided a good overview of why “contract management is a critical competitive advantage” for today’s supply chain centric organizations. When you consider that a typical fortune 1000 company cannot locate over 10% of its 20,000 to 40,000 active contracts at any given time, the importance of a good contract management application should be immediately clear. But just in case it’s not, here are seven more reasons a contract management solution is important, as covered in detail in the article:

  • Standard Contract Templates
    This can help to insure consistent contract creation across departments using standard templates with standard terms and conditions sanctioned by the organization’s legal department.
  • Organization-Wide Visibility
    This allows all departments easy access to contracts created by other departments. Sourcing can immediately query existing logistics contracts, R&D can review existing sourcing agreements, etc.
  • Status & Metric Tracking
    Certain conditions, such as automatic renewal dates, spend tolerances, limit quantities, and pricing need to be tracked and monitored for compliance. In addition, certificates of insurance, price adjustments, and escalator clauses need to be monitored.
  • Maverick Spend Control
    With a contract management system that maintains a centralized contract repository, it’s easy to determine if a contract exists for a given good or service, who the suppliers are, what the prices are, and what any associated conditions are. There’s no excuse for off-contract buying.
  • Compliance
    All your contracts in one place make it much easier to comply with operational policies, regulatory requirements, and corporate performance requirements.
  • Internal Controls (SOX)
    SOX requires that signing officers are personally responsible for establishing and maintaining internal controls designed to ensure material financial information is known to those officers. Contract Management helps a company meet that requirement.
  • Competitive Advantage
    For each dollar earned, as much as eighty percent is lost to procurement costs. As most of these costs are external expenditures, the strategic importance of good contract creation, execution, and monitoring cannot be underestimated. A good contract management system will reduce costs, improve compliance, and rope in maverick spend … giving you an edge over your competition.

Let’s All Hope That A Rational Version of American Clean Energy and Security Act of 2009 Passes

March ended with the introduction of the “American Clean Energy and Security Act of 2009” (registration required) by representatives Edward Markey and Henry Waxman, as outlined in this recent article on “Green Logistics” in Logistics Management.

The act, which currently calls for:

  • a reduction of emissions by 20% below 2005 levels by 2020,
  • a low-carbon transportation fuel standard,
  • a focus on transportation efficiency that would order the EPA to set emission standards for locomotives and marine vessels, and
  • authorization of the EPA to carry out the SmartWay Transportation Efficiency Program to increase the efficiency of highway transportation

would go a long way to tackling the significant amount of climate change emissions which is a direct result of global shipping.

After all, as I pointed out in What’s Worse? The Personal Automobile or 15 Container Ships, a single giant container ship can emit the same amount of cancer and asthma-causing chemicals as 50 Million cars in the course of a year. And while some will try and argue that it’s not fair to compare a container ship against an automobile, and have a valid point as they are in two separate vehicle categories, I’d like to point out that I don’t think it’s fair that our cars are regulated to the point where the air exiting our vehicle (after going through mandatory catalytic converters) is cleaner than the air entering our vehicles in a big city like Los Angels while there are no regulations (at all) on container ships that collectively spew 6,000 times the emissions of every single automobile on the planet. That’s right … the ocean shipping industry alone is 6,000 times as damaging as the personal automobile industry. (That’s right … you could drive that Hummer till you drop and still not make a noticeable contribution to global warming relative to the shipping industry.)

And I’m getting fed up of business and media and environmental action groups trying to blame the consumer when all the studies I’m reading on energy waste and pollution clearly demonstrate that big industry, often completely unregulated, is 10 times, 100 times, and sometimes 1000 times, as damaging as the common man who, in this day of age, is starting to realize that there’s a more important green than the money in our wallets.

I’m not saying I’m not willing to do my part, or that we shouldn’t do everything we can to be green, but that it’s time we insist that big industry be held accountable for their actions as well.  It’s only fair that everyone takes equal responsibility.

Supply Chain Management Gets SaaS

A recent headline in Industry Week stated that “On-Demand Supply Chain Management Solutions (are) to Increase as Economic Pressures Accelerate”, so I clicked on the link hoping for a new study that would indicate the further rise of cost-effective SaaS solutions in the SCM space. What I got was an article by Mr. John Sicard of Kinaxis, a vendor who offers Rapid Response Management On-Demand. But even though it wasn’t what I expected, I ploughed on, knowing that it was likely to contain some good tidbits as Randy Littleson, blogmaster of The 21st Century Supply Chain and a VP of Kinaxis, has been publishing some great pieces lately, and I expected that the article would build on them.

With many companies now outsourcing most, if not all, of their manufacturing operations to regions outside their target markets, which dramatically increases supply chain complexity and volatility, the need for supply chain management solutions is greater than ever. Add this to the fact that the precarious global market place is demanding more from corporate performance than ever before while stressing staff and budgets, and we have the ideal situation for SaaS offerings. By consolidating multiple traditional desktop SCM solutions into a single low-cost on-demand offering, companies can rapidly gain tangible benefits without stressing IT or the bank account because SaaS removes many traditional barriers to software adoption by minimizing ownership costs and implementation risks.

SaaS solutions generally deploy faster, cost less, and reduce risk when compared to traditional on-premise enterprise solutions and can be a much easier sell to finance departments willing to pay a small monthly fee for an immediate ROI rather than pay out a large sum for a system whose timeframe for return is uncertain at best — especially when you consider that software licenses, unlike physical equipment assets, tend to have 0 resale value. They can also be more flexible (especially since, if the vendor fails to perform, you can extract your data, terminate your contract, and move to a new provider next month), provide superior security (as they have IT security experts on staff while you don’t), and scale better, and faster, as they were built for the cloud.

Nothing SaaS converts didn’t already know, but it’s good to reiterate it regularly as new SaaS solutions come online every day and just because there wasn’t one that met all of your needs yesterday doesn’t mean that there isn’t one today. Keeping an open mind might allow you to find a great new solution at a cost that is but a fraction of the ROI it will return.

The New Global Sourcing Professional

A recent article in Global Services had an interesting take on “The Rise of the Global Sourcing Professional”. According to the article, experienced IT professionals have a unique opportunity to transition into global sourcing professionals due to their role in the evolution of outsourcing in its infancy to a mature industry.

The article, which starts by noting that companies need to move beyond the traditional outsourcing model if they want to continue to reduce costs, indicates that the next round of cost savings will only be realized if a high level of productivity between vendors and employees is reached. Furthermore, this will only happen if global sourcing professionals are able to help management understand their unique issues around outsourcing and build a new organization that focuses on communication and collaboration.

In this brave new world, experienced IT professionals have a unique opportunity to transition into the role of Global Sourcing Professional as they have the technical knowledge, a keen awareness of business processes, and an understanding of system and automation infrastructures. A GSP needs to have a full understanding of the company’s culture, how they align with the vendor of choice, and recognize opportunities … and IT professionals face these issues every day. Furthermore, the best GSPs seek out new ideas and processes, and this is what drives IT professionals. It’s something to think about.

The Top 10 Myths of Workforce Development

Industry week recently ran a great piece on “the top 10 myths of workforce development” that is worth repeating since there is a big difference between effective workforce development that will increase the productivity of your staff and ineffective workforce development that will decrease the motivation of your staff.

  1. If you build it, they will come.
    Tell that to the manager who spent a million dollars on a “smart” toilet paper dispenser that insured no one could take more than the allotted number of tabs per trip to the toilet.
  2. When times are tough, cut training first.
    When times are tough, you should double the training budget as you have to get lean and mean. If you really need to cut, fire the moron in management who is the first to suggest you cut training.
  3. Just build e-learning courses. It’s cheaper.
    You need customized content development by an expert, which is costly, and then customized IT development, which is costly, and then controlled testing to make sure your students took the course and grasped the material, which is costly. If you add it all up, you’ll find that custom e-learning course development is not cheap at all.
  4. All training must be done in an instructor-based classroom setting in order to be valuable and convey important knowledge.
    Uhm, no. Some training can be pre-defined cookie-cutter web-training. Some can be on-line multi-media delivery. Some can be classroom.
  5. Once learners go through training, the manager never needs to find out how they are applying what they learned … that’s why they went through training.
    The first thing the manager needs to do is find out what they aren’t applying that they learned and how he can redesign processes and remove roadblocks to help his employees apply that knowledge.
  6. It is always better to look for your own local vendor.
    You need the experts, regardless of where they are located.
  7. Sending people on a training course will solve all performance problems and development needs.
    Sending people on a course will help them identify all the performance problems that are likely your fault. Until you eliminate those, there will continue to be performance problems.
  8. It will be obvious to a skilled trainer what each class participant needs so there is no need to discuss it in advance.
    As a former Professor and Professional Trainer, I love this one. I’m supposed to know the difference between a student who is staring blankly because he doesn’t know the prerequisite material from one who has trouble with the language of the course from one with an attention deficit disorder from one who finds the material too remedial if he won’t talk and you never discussed the goals and individual learning needs with me? HA!
  9. I’ve done presentations. Professional trainers make out that it is far more difficult than it really is.
    There’s blowing your own horn and actually conveying knowledge to another person. I would contest that many “presenters” don’t know the difference.
  10. We don’t need a university — we have a learning management system.
    If you hear this, be sure to follow it with a “and we don’t need you either” because if that kind of thinking is allowed to fester in your organization, you can forget about ever achieving any innovation whatsoever.