Daily Archives: August 25, 2011

Are You a Procurement Master?

Leave it to a Big 5 Player, and Accenture to be particular, to decide we need yet another set of terminology to describe the same old Procurement goal. In their recent piece on Compulsive Contributors, they focus on Procurement Masters and Procurement Contenders, differentiated by TCO vs TVO (no, not TiVo, but that was my first take too . Picking up on the Total Value Management (TVM) concept that leading bloggers like yours truly have been preaching for five or so years now, they have decided to embrace it as a cornerstone of Procurement Mastery, but relabel it Total Value of Ownership (TVO). This is good, because TVM is necessary for mastery, while simultaneously annoying, as we don’t need new acronyms for established concepts. (I know, I know. You can’t use someone else’s acronym as then you can’t take credit for the idea.)

However, I must say that I like the fact that they state that masters, who go beyond simple TCO in their award considerations, also take into account the need to:

  • enhance materials sourcing and labor
  • reduce fixed cost structures
  • optimize processes
  • eliminate non-value add activities
  • increase working capital efficiency
  • eliminate unnecessary demand
  • accelerate new product introduction
  • increase revenue
  • reduce risks to supply and brand
  • reduce the carbon footprint

Even if they re-invent the language wheel, it’s important that the big firms (with the big marketing budgets) get the word out that Procurement Mastery is

Public Procurement in 2020 — Are You On Track? Part IV

At the beginning of the week, we began our discussion of Hansen’s predictions for public procurement in 2020, which were offered as a 5-part series last month in response to the 5 predictions of Bob Lohfeld (of Lohfeld Consulting) that were published in Washington Technology in early July. We started with a discussion of the Government Market and then moved onto discussions of Workforce and Process. Today, we tackle the Technology predictions.

In his piece, Lohfeld prognosticated that:

(1) Virtual businesses will avoid brick-and-mortar costs, reducing operations costs and increasing their competitive edge. (2) Mainstream companies will exist in virtual space with no physical offices. (3) Cloud computing will be accepted as the norm, IT security protection will be expected, and IT infrastructure will be designed for virtual workforces. (4) Both contractor and government workforces will telecommute, and geographic boundaries will diminish as virtual meetings replace trips to personal offices.

To this, Hansen quickly responded that once again, the above prognostication says a great deal without actually providing any meaningful insight or substance as it reflects broad generalizations without getting into the mechanics in terms of practical application.

SI has to agree. Why? Let’s review the prognostication sentence by sentence. Virtual businesses are already avoiding brick-and-mortar costs, just as they have been since the mid-nineties and the beginning of the e-Commerce and dot-com boom. Not only can we consider a number of virtual businesses as mainstream in the niches they serve, but many companies, especially in consulting and IT, have been aggressively moving towards virtualization since broadband penetration reached the point that real-time video conference was an affordable reality for a majority of their workforce. Even in our space, many of the office locations of your global solution providers are shared business centers or home offices of key personnel. Since one can define “cloud” any way one wants to, as no one knows what “cloud” really is, we can already say that “cloud” is the norm. Furthermore, IT security has been expected by anyone with any technical savvy for a decade and IT infrastructure has been designed for virtual workforces for the better part of the last decade. Finally, many government departments are already allowing their contractors who don’t interact with the public to telecommute, as this reduces their fixed overhead. With budget shortfalls expected to be the norm for the foreseeable future, and office space so expensive in ideal metropolitan locations, it’s obvious that the amount of telecommuting is going to increase and that most consulting organizations are going to strive to have all of their contractors work remote.

However, Hansen, who simply reprinted a post he wrote in 2007 on the emergence of the metaprise (that runs on a distributed synchronized supply chain platform that simultaneously links the unique operating attributes of all transactional stakeholders on a real-time basis), also failed to provide any useful insight. While the post did note that process and not technology is the driving force behind a successful e-procurement initiative, it was essentially a post on cost avoidance through advanced spend analysis (that included commodity-characteristic analyses) and the need for process and technology alignment to realize such cost avoidance.

the doctor has to say that he was disappointed with Hansen’s effort on this piece. While the doctor, who has been immersed in cutting edge technology on an almost daily basis since starting his Master’s research back in 1994, knows better than anyone the difficulty in predicting the technology landscape even three to five years out, he did expect a much better response to Lohfeld’s post and some solid predictions (or at least some more direct rebuttals). Unlike many bloggers and analysts in the space, who come from non-technical backgrounds and couldn’t cut a line of code if their life depended on it, Hansen actually has technology in his background and a pretty good understanding of what it can, and can’t do, as well as where it’s likely to go based on where it is now and where it’s been. And, more importantly, there’s no way he could have done any worse than Lohfeld!

So what will the Supply Chain technology landscape look like in 2020? Pretty much what it looks like today, actually. Until we see a quantum leap in computing (theory), it’s just going to be more of the same old, same old in a new package. The only difference is that it’s going to be faster and more powerful. Not only will optimization on even the largest global supply chain models be real-time (and power every real-time e-Negotiation with your supply base if the organization uses a leading platform from a leading provider), but analytics will be real-time across all organizational transactions. A couple of providers already have real-time optimization capability for models of moderate size (where changes are limited to price, volume, and “route” availability, for e.g.) and at least one provider has a spend analysis solution that allows an analyst to real-time drill on a spend cube of up to 10 Million transactions on a laptop. Expected improvements in bus speed, parallel processing, inline computation, and federation technology will soon allow real-time drilling on a spend cube of 1 Billion transactions. It’s only a matter of time before 1 Trillion transactions can be handled and data can be explored in real time. This will not only improve forecasting, but allow for a host of predictive analytics applications that can be used to update forecasts for global demand and market prices in real time.

Furthermore, as broadband penetration becomes almost universal and more modern standards are adopted for data interchange by supply management solution vendors, the metaprise will become a reality and end-to-end supply chain visibility will finally become a reality for the average Fortune 3000 company. However, what we won’t see are any entirely new applications or software capabilities that aren’t already being investigated. Since the tens are shaping up to be another decade without any quantum leaps in the computing world, and since the specialist enterprise space always lags the consumer space, which always lags fundamental research, even if a quantum leap is made in computing technology this decade, Supply Management still won’t see anything new for a while.