Daily Archives: June 15, 2010

Only Three Weeks To Go. Help Dave Reach 10 Million Views!

On July 6, 2009, Dave Carroll shared his story with the world about how United Airlines carelessly broke his guitar on March 31, 2008, when he was on the way to a week-long tour of Nebraska, and how United refused to accept any responsibility or fix it. (Full story.) As you may recall, his story, expressed in a music video on YouTube, was an overnight sensation that quickly received over Three Million views in the first week. It was such a sensation that it even inspired the Harvard Business Review to do a case study on how viral videos spread and what firms can do about them.

To date, the trilogy has garnered over 9,860,000 views!

United Breaks Guitars Views (June 15, 2010)
Song 1  8,676,851 
Song 2  1,025,128 
Song 3  160,662 
TOTAL  9,862,641 

Since the first video was released on July 6, 2009, this means that we’re only three weeks away from the one year anniversary! It’s time to step up and thank Dave by ensuring that his fantastic efforts receive the Ten Million Hits they deserve before the anniversary is reached … because the airlines, as a whole, still haven’t gotten the message. United Breaks Guitars, Northwest Breaks Dulcimers, and now Delta Smashes Bicycles, proving that they just don’t care whether or not you TriAndGiveaDam or whether or not the children in Africa have water.

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You Can Have Any Color You Want …

so long as it is black.

This is one piece of advice from the early 20th century that we should not have forgotten in the early 21st. Maybe if a few more companies remembered this, they would not be in such dire straits. Consider the case of PolyOne Corporation that we discussed in a recent post on coming back from the brink to cash in the bank and how the complexity of too many manufacturing locations producing too many product variants was running them deep into the red.

Now consider the case of Apple — one iPad with 2 network connectivity options and 3 memory options. That’s only 6 variations, with only 2 components different in each variation. They’re “you can have any iPad you want, as long as it’s white” produced the best selling pad/tablet PC this year (with sales in excess of 2 Million units in less than 60 days, before it was available outside of the US), just like their “you can have any iPhone you want as long as it’s black” produced the best selling phone three years ago.

I was reminded of this while reading a recent piece on getting a handle on complexity which offered up a four step approach to reduce complexity, which, while workable, lacks the simplicity of:

You can have any color you want, so long as it is black.

Remember this, and you just might get your complexity, and associated costs, under control.

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The e-Auction: A Great Way to Buy Commodity Software

In a recent post here on Sourcing Innovation, we endeavored to explain how sometimes old-school works just fine with a case study from EC Sourcing Group that illustrated how a mid-size apparel retailer was able to use an old-fashioned multi-round RFX to streamline their ocean freight bid and reduce their costs by 19%, a savings significantly larger than what was expected in a time of rising costs.

Another situation where tried-and-true works just fine, also courtesy of EC Sourcing Group, is with respect to the purchase of certain classes of enterprise software that can now be considered a commodity. For example, a diversified manufacturing organization required an Enterprise-Wide Automated Travel & Expense Solution. Since this was a piece of relatively non-strategic software that carried a hefty price tag by the time license fees, maintenance fees, and, most importantly, installation fees were taken into account, and since there are a large number of providers of such solutions which have, more or less, similar features and functionality, the organization decided, with the help of their e-Sourcing provider, that the best approach was to use a multi-round e-Negotiation that began with an RFI/RFP and finished with an e-Auction.

After a detailed needs analysis that documented their current platform, functional requirements, integration requirements, and organizational processes, the e-Sourcing team constructed an RFI with over 100 qualitative questions designed to capture all of the information required to determine whether or not the provider’s platform could meet the organizations needs along with a RFP with over 50 line items designed to break out all of the relevant cost components to allow apples-to-apples comparisons and identify potential cost savings opportunities.

Each of the responses was scored by each team member against a pre-defined rating and then the suppliers was ranked automatically using the RFX software. At the end of the first phase, after the scorecards had been reviewed and analyzed, the decision was made that the top four (4) vendors who could meet the basic requirements would be invited to the auction, with the initial bids in the RFP used as starting bids. Before the auction, the bids ranged from approximately 575K to 1.425M. After the auction, the bids ranged from approximately 545K to 635K. In other words, the auction reduced the spread from approximately 850K to 90K, with one vendor reducing its bid by almost 45%! (Full case study.)

In the end, the organization was able to select the solution with the best price/value ratio (using a weighted auction where the ranking from the RFI and the RFP affected the final rank) at a cost that was significantly less than what they would have achieved using a straight-forward negotiation where the vendor would have charged literally as much as it thought it could get away with. The reality with enterprise software is that most vendors will try to charge as much as they think the customer will bear, which is often much more than what the software is really worth. The best way to get a good price on commodity enterprise software is to open up the sourcing process and use competition to your advantage — something that is easily done with any decent e-Negotiation suite.

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