Monthly Archives: May 2010

How To Respond to Dubious Unsolicited Business Propositions

We all get them … that sleazy e-mail, call, or, when the con-artist, or, sales representative, is really ambitious, an impromptu office visit offering to slash your software license fees by 90%, reduce your toner cartridge costs by 60%, or securely meet all your cleaning needs for 20% less than the cleaning agency down the street. And we always know, in the back of our minds, that this is just another scam. But how do we respond? Especially when we know we should be polite and professional?

We should follow the lead of Mike Nash and confront the offeror with our suspicion. Because, sometimes, con-artists are more honest than your boss, who’s really only interested in climbing the corporate ladder on your back. Check out this skype transcript where, when a scammer was asked if his important business proposition was really an offer of millions of dollars that I won’t get because you’ll rip me off with advance fee fraud, the scammer, realizing the intended mark isn’t going to bite, got right to the point and said you are right and moved on.

The Seven Deadly Software Sins

Regular readers will notice that I regularly rally against a number of different software products and platforms. It’s not necessarily that I think they’re (intentionally) evil (well, at least not in most cases), but that they commit one or more of the seven deadly software sins and perpetuate myths over reality, which helps no one. So what are the software sins? And why are they dangerous? Let’s answer these questions once and for all.

  1. “Shrinkwrap”

    This is the notion that software can be “packaged”, sold, and never touched again. No software is bug free, no software can be configured for every possible platform, no integration works issue free out of the box, and every piece of software ever written has a shelf life, which gets shorter by the year. Thinking you can sell a piece of software, install it, and be done with it for however long finance says your customers can “amortize” the license cost is delusional. That’s why I like SaaS, and, more specifically, the pay-as-you-go software model. Especially in business, we have to start treating information technology as a utility, because that’s what it has to become to be truly useful.

  2. “The Cloud”

    This is the notion that the cloud is a fluffy magic box that will solve all our problems, which it’s not. It’s simply another delivery model, where the Software-as-a-Service (SaaS) provider outsources its infrastructure to an Infrastructure-as-a-Service (IAAS) provider who specializes in green data center management, leaving the SaaS provider to focus on its software strength.

  3. “Dashboards”

    They don’t call them idiot lights for fun! They call them that because dangerous and dysfunctional dashboards give you a false sense of security that the ship isn’t sinking when in fact it’s going down faster than Maury the Management Moron’s fraudulently expensed Thai “Masseuse” for his “stiff joint” because the idiot who configured the dangerous and dysfunctional dashboard thought that “pump performance” would be a better gauge than “water on board”.

  4. “Spreadsheets as BI”

    Business Intelligence is the deep insight that can only be derived through a thorough and detailed multi-dimensional analysis of all relevant data through a true data analysis tool, not a wimpy two dimensional spreadsheet that only allows for a small number of statistical calculations and bland graphs. That’s why Excel is not a supply chain solution. It was designed to be a simple accounting tool, and that’s all it is. Trying to use it for more is just asking for disaster, as demonstrated by the fact that 90% of spreadsheets have non-trivial errors in them. Get a real e-Sourcing, e-Procurement, or Trade Data Management tool.

  5. “Sizzle over Substance”

    It’s what the tool does, not how it looks. Just because the company in question hired a few Flash monkeys and integrated some animated charts and graphs doesn’t mean the tool does anything. In fact, if the capability is being promoted as a strong selling feature, I’d argue that the tool probably doesn’t do anything at all. Some of the best analysis tools in the space still use simple 8-bit Windows Interfaces built in Visual C and Visual Basic. They’re the best tools because, instead of wasting the last ten years redesigning the UI every year to look flashier, the developers spent the last ten years adding more analysis power, speed, and flexibility. If it sizzles, there’s no beef in that double cheese burger, just bacon. And you’ll be left hungry. Similarly, if the PowerPoint Rangers spent too much time on that presentation, ask yourself what the provider is trying to hide. If the solution is really great, the sales person won’t be able to get to the demo fast enough (because truly great software sells itself).

  6. “Social Networking”

    This is where you build your offering around, or attempt to integrate with, social networking where it makes absolutely no sense to do so. Business is business, not fun. Plus, let’s look at the definition of social. Seeking or enjoying the companionship of other people. People! Not computers. And definitely not bots. You say you can tell the difference? Are you sure? Some of the chat bots are so good that it’s pretty hard to tell the difference between them and a r34l g4m3r that’ll p4wn ur @ss. In fact, if you administered the Turing Test, you’d probably choose the chat bot. Secondly, where’s the “networking”? How are you “networking” by farming someone’s virtual fields in cyberspace? Or poking them? Or by reading time-lagged status updates? You’re not. Thirdly, and most importantly, as it stands now, “social” networks are nothing more than a useless time suck. And, as a bonus, if you’re on Facebook, all your privacies are belong to us“. (Pop Culture Reference) See SI’s previous posts on Facebook for details. The reality is that, where networking and companionship is involved, you’re better off playing a MMORPG and joining The Guild. In fact, you’ll even learn collaboration skills, cultural sensitivity, project management, time management, and economics whereas most social networks won’t teach you a damn thing.

  7. “Alert Communication”

    This is the asynchronous “communication” that Twitter purports to offer … but comments are not conversations! Furthermore, Twitter will make a twit out of you, literally, as a study has found that potheads are smarter than Twitterers. This also means that “sound bites” and pointless press releases add no value to your software.

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What is The Price of Flexible Supply Chains? Part III: A Customer Focus

In this post, I’m going to discuss highlights from the CPO Executive Debate on the price of flexible supply chains and focus on why you have to focus on the end consumer.

Although Supply Management doesn’t typically deal with the end customer, one of the ultimate keys to success is a fanatical focus on the end customer. In a successful organization, everything you source is sourced to add value to the products and services you offer the end customer. Everything. No exceptions. Legal spend? Services to protect your IP and ensure you can offer your customers unparalleled products and services. Market spend? Services to not only communicate the products and servies you offer to the market, but to also educate the market as to the value they contain. IT? Systems to help you source higher quality materials at lower price points to increase the overall value of the products and services you offer. Simply put, if a product or service isn’t adding value to the end customer, it’s not adding value to the organization’s bottom line. This means that it isn’t increasing shareholder value (which business is all about) and the organization should be thinking twice about that product or service. But enough of my ranting … let’s see what the participants of the executive debate had to say.

When asked if it is a priority for any business to know exactly what their customers want and to build everything around it and if it should become a high priority for the corporate strategy, Austen Bushrod responded that we don’t want to wait for the customer to get to that point. We have started putting in some strategy in terms of targeted marketing, which allows us potentially to tie in with various suppliers in terms of targeted promotions. This is because successful Supply Management operations know what their customers want and actively pursue sources of supply that will give the organization’s customers exactly what they want.

Furthermore, when asked how it would work in a business-to-business environment as opposed to business-to-consumer environment, Guy Allen responded that if you don’t totally satisfy your customer, they will cancel the contract, but if your customer only thinks you are average you could lose out on extending that contract and taking on new areas, indicating that you need to be almost obsessive about what your customer wants and deliver service above and beyond what they are expecting.

But if you become obsessed about the customer, as Austen Bushrod noted when asked if they were first out of [the recession], you will be the first to recover after a down-market when customers start spending again because, just as Colin Davis said when asked if he was talking about the people, when it comes to a focus on the customer, the answer is yes, absolutely.

In the next post we’ll talk about how you have to balance this customer obsession with supply base involvement.

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The IFRS is Coming – Is Your Supply Chain Ready?

That’s right, the International Financial Reporting Standards (IFRS) could be replacing the Generally Accepted Accounting Principles (GAAP) at your US headquarters in as little as four years with the current proposals on the table. And since you have to maintain double books for a year (in GAAP and IFRS) before you switch over, to make sure you have a good handle on the new rules, that means your new IFRS-friendly systems have to be in place in less than three years. Which means your people have to be trained in less than two years … especially since major exams, like the CPA, will start testing on IFRS material in 2012. (And when you consider that the EU has been using IFRS for five years now, and that over 120 countries have already adopted it, it’s about time that North America caught up. Canada catches up next year, and Mexico follows suit in 2012.)

The IFRS has a number of changes in store for supply chain management, including these four outlined in this recent ISM article on the accounting changes ahead:

  • Last In, First Out

    IFRS does not permit inventory to be valued using LIFO. This can have significant tax consequences.

  • Inventory Valuation

    Under IFRS, the inventory valuation you use must reflect current market price.

  • Long-Term Contracts

    Under IFRS, when you take possession of inventory, you take responsibility for it and it must be reported on financial statements.

  • Management Responsibility

    The responsibility of management with respect to data collection and reporting is much greater under IFRS.

The complete overhaul of systems that will be required at many companies could make SOX look like a walk in the park. If you haven’t yet figured out how it’s going to affect your organization, better find an expert sooner rather than later.

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What is The Price of Flexible Supply Chains? Part II: Strategy

In this post, I’m going to discuss highlights from the CPO Executive Debate on the price of flexible supply chains and focus on why you have to take a strategic focus.

In response to whether a CPO would be prepared to be more fluid on quality or on price in order to get that flexibility, Colin Davis said that their organization’s primary goal is going all the way back to the sourcing decision and making sure that they have got everything absolutely aligned to business drivers with the initial contracts and also in the relationship going forward. In response to whether non-retailers get this flexibility to be part of the corporate strategy, Andrew Vaughan said that it comes down to the link with the market, and that if you start with the market from a strategic perspective and work back down, then to my mind it is just about effective communication. And in response to what extent might they be out of the loop if the stakeholders are talking to the suppliers directly, Andrew then said you want your stakeholders to engage because you want to drive innovation. What we try to do is operate cross-functionally so we go together as a team and discuss innovation; we discuss delivery and we discuss quality and costs.

Clearly one of the primary prices of flexible supply chains is strategy, but this is a good thing. Because when you get right down to it, your ultimate success or failure comes right down to your supply chain strategy. If your strategy is to ocean freight high-priced low-volume consumer electronics like laptops, tablets, and cell phones to try and save a few dollars on freight, which is a rather low percentage of the total cost of these items, instead of air freighting them in well-engineered, low-volume, packaging, you’ll not only have difficulty responding to demand changes (when it takes three weeks to restock instead of three days), but lose more in market value than it costs you to ship the products (as most products depreciate in value a couple of percentage points a month).

Furthermore, if your strategy is purely to get the best price today and you overlook the going-forward innovation capabilities of a supplier who could be a strategic partner and who is willing to work with you to take cost out over time, you could not only be giving up 5% year-over-year savings in the future, which the supplier might be willing to commit to because your contract will enable them to purchase more efficient equipment and institute more efficient processes, but a potential source of innovation, integration, and/or inspiration that could be the source of the next big breakthrough in your market … which the supplier might end up taking to an emerging competitor who is willing to look beyond current cost to future value.

You need strategy, and in particularl, you need a strategy that is collaboratively derived through the participation of stakeholders because if what you have is a failure to communicate, your supply chain won’t be very effective, with everyone walking around blindly with dead eyes, following orders, not knowing what they do, not caring. If you want to succeed, you have to remember that your assignment tonight is strategic. You can’t give the enemy a break and the only way to win is to saddle up, lock and load and tackle strategy head on. But with double digit percentage returns available from strategic spend analysis, strategic sourcing enabled by advanced negotiation methods (such as strategic sourcing decision optimization), and global trade visibility, what do you have to lose?

In the next post we’ll address why a customer obession has to be part of this strategy.

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