Daily Archives: February 4, 2011

Don’t Forget The Most Important Principle of Performance Measurement

SIG just ran a great article on the Three Guiding Principles of Performance Measurement that hit upon a key point that is regularly and repeatedly overlooked. Simply put,

Your data is good enough. Really, it is.

As the author says, your data will always be murky. No matter how many times you clean it, massage it, enrich it, transform it, and polish it up, there will always be errors. There will always be omissions. There will always be inaccuracies.

But that’s okay. Remember the 80/20 rule, which is just as appropriate here as it is everywhere else. (In fact, more appropriate.) The law of the vital few states that roughly 80% of the effects come from 20% of the causes. This says that only 20% of your data is vital anyway. And since it is expected that at least 80% of that data will be clean, it’s going to be quite straight forward to spot important trends. (That go just beyond who your top suppliers are, but which items are ordered the most. What types of purchases are regularly bought off contract. What products are really selling best. Etc.)

And if the decision being made is critical or risky, the data will always come up short. There will always be some flaw, some missing piece of information. Because if there wasn’t, the proverbial pointy-haired boss could be an effective manager. Executive decisions will always require a bit of a risk, but they will be much better when there are data to base them on then when there aren’t. So measure, manage better, and manage some more.

“Trendspotting”

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

the doctor requested that I look at Panjiva’s new product, Trendspotting, which they are advertising on their site and blog. It has some good points, but it also has many not-so-good points that will ultimately render it unusable for many purchasing people.

Let’s look at the three main features:

“Crack the HTS code.”

The world really does need an HTS-to-your language translator. I don’t think there’s one into English, and this definitely isn’t one. From their demo page, put in “computers” and see what happens. You won’t find anything. OK, that’s a trick because I know that the entire global customs community calls them “automatic data processing machines.” So, type that in the search box.

You get a list of potential HTS codes. Here the system shows its US-centricity. I’m in Mexico, the internet knows I’m in Mexico (when I go to Google.com I get their Mexican home page) but Panjiva gives me the special 10-digit US codes. That’s still helpful in the goal of finding the right countries if you are in North America. It’s not so helpful if you are somewhere else.

“Find countries”

Pick the first HTS code (8471.30.01.00) and click “Trends.” You get some really helpful data on laptop imports. You can see that the two primary sources are China and Malaysia. You can see their trends. This is really a handy sourcing tool. However you can get the same data free from the US International Trade Commission‘s web site. I’ve been advocating doing that for about 14 years in my seminars. The USITC site is less graphically pleasing and slightly harder to use, however. Panjiva did a good programming job.

“Find suppliers”

Here it really falls apart. You would expect to find Lenovo and Foxconn as suppliers of laptops. They’re not listed. However, you do find Autoliv China Inflator Company Ltd, who makes airbag inflators. What’s going on here?

It’s a data source problem. They list companies for one of two reasons. One is that a company shows up as a sea freight shipper of automatic data processing machines on a public data base. There’s no such data base for air shipments. Very few laptops travel by ocean.
I’ve been using this kind of data for more than a decade. It has two more big problems. First if the words “automatic data processing machines” (ADP machines) show up on import documentation, the exporter gets listed. That gets items that connect to, contain, or are parts of ADP machines. Second, many companies have set up legal entities in China that purchase for them. The Chinese entity (i.e. HP China) buys the goods, and ships them to HP US. HP would show up as both the exporter and importer and you would never find the name of the manufacturer.

Of course, your results could be different than mine. Try it on a product where you know what the countries are and where the suppliers are and see what happens. Maybe it will work better for you than for me.

Thanks, Dick.