Monthly Archives: October 2011

Centralize or Not?

Badly judged centralization can stifle initiative, constrain the ability to tailor products and services locally, and burden business divisions with high costs and poor service. However, insufficient centralization can deny business units the economies of scale or coordinated strategies needed to win global customers or outperform rivals.
McKinsey Quarterly, “To Centralize Or Not To Centralize”

So how do you answer the question? Especially when none of the executives interviewed in 30 different global companies volunteered an orderly, analytical approach for resolving centralization decisions when interviewed. After all, benchmarks, politics, and fashion — the usual approaches — are not the answer.

In the above referenced article, McKinsey put forward a decision making framework based on three questions. According to the framework, centralization should only occur if at least one of the following questions can be answer affirmatively.

  1. Is it mandated?
  2. Does it add significant value?
  3. Are the risks low?

For the most part, SI agrees. The only disagreement is with the explanation of value. According to McKinsey, it should add 10% to the market capitalization or profits or be part of a larger initiative that will add 10%. Significant value is not always immediately quantifiable, especially where innovation is involved. Thus, SI would also recommend centralization if the following question can be answered affirmatively:

  1. Will it increase the chances of innovation without significantly reducing any of the benefits decentralization provides?

If, for example, the only downside to centralizing a certain buy is that you have to add more users to your online supply chain platform and buy a few more licenses, this would likely be a case where you would centralize the buy as it would provide opportunities to innovate in network design and inventory management.

High Definition Adoption Measurement Part VII

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 seventh of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace tomorrow.

Yesterday’s post (Part VI) provided a case study that describes typical challenges faced by an energy company in a (European) regulatory environment. In the case study, a 30,000-foot view would also show positive progression even though a number of users are not creating public notices or providing award notifications within the designated time window.

 


Today’s post provides another example of High Definition Adoption Management for a national producer of construction materials.

Company C: Measuring Efficiency

Our final company is a national producer of construction materials. The organization has recently created its first centralized sourcing team and that team is working diligently to bring more spend under management. The team knows there is an abundance of opportunities to provide value if they can simply find ways to be more efficient in applying their sourcing process to more spend.

When looking at sourcing efficiency, the organization is focused on the following areas:

  • Spend Volume:
    Measurements to track the amount of Spend being sourced through the system.
  • Event Size:
    Tracking how much spend is managed per event, a key indicator of efficiency.
  • Event Speed:
    Breaking the process down into its component steps and measuring duration.

These measurements help us to understand the speed and throughput of spend through the sourcing team.

Symptoms of poor adoption.
Part VIII, the final part of the series, discusses some best practices for progressing from the 30,000 foot view to a detail view.

Product Safety Challenges in European Business

A recent article over on Industry Week on “What [You Need] To Know About Product Safety Challenges in European Business” pointed out something very important that U.S. business that want to expand into Europe need to know — U.S. product safety regulations are not enough if you want to sell your wares over in Europe. As per the article, if you want to sell in the 27 member states of the EU, you need to meet the “made in Brussels” European legal regulations (that set an identical standard throughout the entire EU). Before a product can be sold in the EU, it must have a CE mark that verifies that the manufacturer has ensured that the product conforms with the essential requirements of the EC directives. It must also have a declaration of conformity that includes the manufacturer details (name, address, etc.), requisite EC standards and performance data, relevant id number of any notified body, characteristics of compliance, and a legally binding signature. And if the more stringent requirements are not met, your product cannot be sold.

High Definition Adoption Measurement Part VI

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 sixth of an eight (8) part series, which, when complete, will form a white-paper that BravoSolution will be releasing to the general populace this Wednesday.

Last Friday’s post (Part V) discussed the importance of the category to High Definition Adoption Measurement (HDAM) and the process required to transition to HDAM given that understanding. HDAM is achieved when adoption measurement and adoption opportunity assessment have been aligned with organizational objectives and category-specific strategies.

 

Today’s post provides an example of HDAM for an energy company operating in a regulatory environment.

Company B: Measuring Transparency

Our second company is an energy company operating in a European regulatory environment. The organization receives funding from the government and has a legal obligation to follow public sector procurement regulations. These regulations focus heavily on creating a sourcing process that provides equal opportunity to all suppliers.

Whereas the previous private sector manufacturer (Company A) focused their e-sourcing tool on generating supplier value, this organization’s primary focus is:

  • Process Compliance:
    Specific timeline requirements for public notices and publications must be met.
  • Equal Treatment of Suppliers:
    Communications and Evaluations must be timely and fair.
  • Auditability:
    All supplier interactions must occur in the system.

As in our previous example, we can monitor system activities to understand how user behaviours roll up to this overall business objective.

As we change the focus of the analysis to transparency, the metrics we measure in the system also change.

Now we are looking to understand where system functions tie directly to regulatory compliance. Beyond looking for violations, this data also has the potential to serve a quantitate evidence of fair dealings with suppliers in the event of a supplier challenging an award decision in court.

Here are some examples of the types of data we might monitor and react to:

Symptoms of poor adoption.
Part VII will provide an example case study that describes some of the adoption challenges of a national producer of construction materials with respect to sourcing process efficiency.

You Can Search, Search, Search … or Just Read SI!

In 2008, Google had indexed One Trillion Web Pages. And many, many more have been added since then. According to Rick Skrenta, co-founder of blekko, there are now more web pages than there are things in the world. And while it’s likely not the case yet, as there are probably 10.5 Sextillion bugs in the world (as it is estimated that there are 1.5 Billion Bugs per person, and there are close to 7 Billion people), and we could count each individual bug as a thing, at the rate the web is growing –especially when each post, each comment, and each tweet can be its own web page — it might not be long before this is true, especially since predictions put the size of the web at 600 quintillion web pages, or one for every 17.5 bugs, by 2020 (which puts us at one page per bug by about 2021).

With content proliferating faster than even the fastest computer virus, it’s getting almost impossible to find what you’re looking for through a web search. Good luck coming up with an initial query that returns less than 100,000 pages. I tried three random combinations of unlikely words in Google, and the best I got was 190,000 pages. (Dodo, apollo, elvis – 961K; Risk, canary, electricity – 1.43M; Poppins, Hamlet, vikings – 190K.) There’s a reason that Googlewhacking died a long, long time ago. There is no one result anymore.

And that’s why blogs, which have been proclaimed dead by the twits who think tweets are the future, are going to return to the glory days. You need someone to sift through the noise and find the useful content to get you through your day, because it’s now beyond the power of even the most powerful search engines to do most of the time. So keep reading SI, and you’ll have one fewer (time-consuming) search to do each day.