Daily Archives: September 29, 2011

Stop Hoarding and Invest In Your Supply Chain

By now you might think SI is a broken record, since this is the third day in a row it has complained about the fact that the “Global 2000” are hoarding cash like it’s never to be seen again, but when even Forbes.com decides companies are hoarding too much cash, as per its recent article on how cash isn’t king, this should drive the point home.

And the situation is even worse than Financial Director and Hackett reported. According to a recent Forbes article, the Federal Reserve reported in June that U.S. businesses were saving cash at unprecedented levels, with balances climbing to 1.9 Trillion! That’s 2.23 times the cash reserves of the top 1000. If the situation is the same in Europe, cash reserves must be topping 1.6 Trillion Euros (or 2.16 Trillion US). That’s an estimated 4 Trillion in cash reserves! To put this in perspective, this is 100 Million jobs for one year at the average US salary, and unemployment is roughly 74.7 Million across the US and the EU. Get the picture?

Now, saving for a rainy day sometimes makes sense, but when you start saving to the point where even your investors are concerned that cash is not being put to work earning a reasonable return, not only are you helping to tank the economy, but you are biting the hand that feeds. And given that, due to the lack of innovation and planning, which is largely due to the lack of manpower to do innovation and planning, your transportation costs are about to soar, your commodity costs are rising across the board, and your current talent pool is overworked, unhappy, and ready to change jobs as soon as the next better offer comes along (with job satisfaction at an all time low), how much longer can you really afford not to invest in new talent and new technology to help them innovate your way to a better future?

Then, as the Forbes article points out, as the ever increasing gap between high-quality borrowers (you) and low quality borrowers (your cash-poor suppliers) widens, more and more of your suppliers will experience cash flow issues (as you are not only hoarding all your cash, but borrowing from limited funding reserves to do so). This will lead some into bankruptcy and failure, which will create disruptions in the supply chain that will disrupt your operations and cost you sales and brand equity and, in the end, time and resources to regain your customers’ trust. But all of this can be prevented by investing into your supply chain up front. It’s your choice. Spend and profit. Or hoard and lose.

High Definition Adoption Measurement Part IV

Today’s guest post is from John Shaw (Senior Director, Adoption Services) of BravoSolution, a leading provider of spend analysis, (e-)sourcing, supplier performance management (SPM) and healthcare sourcing solutions and a sponsor of Sourcing Innovation (SI). It is the fourth of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace next Wednesday.

Yesterday’s post (Part III) discussed the concept of adoption from 30,000 feet and how this typical view is both useful and useless from an adoption perspective. While it is usually directionally accurate and good for identifying low-hanging fruit, it typically does not indicate if supplier value is increasing, transparency is improving, or efficiency intensifying. For that, more visibility is needed.

Today’s post will provide an example to illustrate this claim.

Company A: Measuring Supplier Value

So let’s go deeper into the challenges of each of our example companies. Company A is a global manufacturer who has been using their e-Sourcing tool for some time. At the 30,000-foot view the project appears to be progressing nicely. However, a key question that is important to Company A remains unanswered: “Are users using the system in a way that helps them to maximize supplier value?”

In order to answer this question, we must first understand what system behaviours drive supplier value. If we start simply, we can conclude that an event should have some basic characteristics:

  • Supplier Participation:

    Maximizing qualified suppliers generally increases award quality.
  • Event Structure:

    Well structured events facilitate a better understanding of supplier capabilities.
  • Spend Value:

    Managing greater volumes of spend increases potential event value.

Next, we create simple measures at the User and Category level. This becomes our 10,000-foot view. We are drilling deeper into the current situation and finding our next layer of adoption improvement opportunities.

Using this level of data we can now begin to look deeper into understanding how system activity is correlating to our business objectives.

By creating a few simple metrics for each of our basic event characteristics we can see the symptoms of poor adoption emerge.

Symptoms of poor adoption.

These patterns become a roadmap of improvement activities for the Adoption Team to explore. Notice on the chart below that Adoption Team activities typically start with an interview and continually ask more questions!

Part V will discuss the importance of understanding the category impact and its implications for the transition to high definition adoption measurement.