Monthly Archives: December 2011

Caught Now In A Bind

To the tune of Caught Somewhere in Time by Iron Maiden.


If you had the time to lose
An open mind and time to choose
Would you care to take a look
Or is your data an open book?

Time, it’s never on your side
Time, it’s never on your side

If I tempt you, come with me
And maybe you will fulfill your dream
Because I will take you there
Will you come, or are you scared?

Time, it’s never on your side
Time, it’s never on your side

Don’t be afraid, you’re safe with me
Safe as any soul could be … honestly,
Don’t let yourself be

Caught somewhere in time
Caught somewhere in time
Caught somewhere in time … oh, oh

Like a wolf in sheep’s clothing
Your systems hide your deepest sins
And all the things that you’ve done wrong
Do you know where your money’s gone?

Time, it’s never on your side
Time, it’s never on your side

I’ll make you an offer you can’t refuse
You’ve only got your shirt to lose …
Eternally … Just let yourself see you’re

Caught somewhere in time
Caught somewhere in time
Caught now in a bind!


And Sourcing Innovation, with the forthcoming release of The Ultimate Guide to Spend Visibility: An Implementation Guide, which is the first e-book, to the best of the authors’ knowledge, that actually gives you practical advice on how to implement a multi-year spend visibility and analysis effort that will generate year over year returns — complete with detailed guidance on how to identify over a dozen different kinds of savings opportunities — will get you out of that bind.

Plus, you do not have to drop transactions on the floor, you do not have to sell your soul to any vendor, and we will even tell you how to insure that your numbers are accurate to the level required to even pass SOX scrutiny — something that will make your CFO jump for joy.

Stay tuned.

Safety Stock or Service Levels?

The answer is easy. Both!

A recent article in Industry Week on “The MRO Dilemma” asked if you should focus on safety stock or service levels. The answer is both.

The article, which notes that waste is generated every time a piece of equipment breaks down or runs at less than optimal speed because of needed repairs, and that these repairs are delayed if there is not enough spares on hand, notes that more MRO inventory translates to higher inventory carrying costs but also likely higher service levels while less inventory will reduce the carrying costs [while putting] service levels in jeopardy. This is obvious.

It is also obvious that trying to maintain 100% service levels is likely not an option for most companies because that would mean you just about built a duplicate plant in your store room.

But what might not be so obvious is that the 95% service level recommended as a good target is not good advice at all. The target service level does not, as the article indicates, depend on what your company can afford, but depends on what is optimal for your company. And it is often production line / product specific. A production line producing your most profitable product line should never be down, and if that dictates a costly 98% service level, so be it. However, the turn around time on replacing a printer in the admin offices is not nearly as critical and you can accept a service level of 90%, or less, from your internal IT support, especially if they have outsourced the function to a vendor and a higher service level would increase costs 20%.

Just like you optimize your buy, you optimize your service levels. If downtime on a production line costs you $1,000,000 per hour, you spend $100,000 to make sure you have spares for every moving part that can break. If downtime on a secondary machine that is only required for custom orders, which account for less than 10% of profits, only costs you $10,000 an hour, and stocking the same level of spares would cost you $50,000, you opt for a lower service level. It’s all about optimization.

And, there are companies like Servigistics and MCA Solutions, just to name a couple, that can help you optimize this trade-off so that you’re not improving inventory carrying costs at the expense of service levels and vice versa. With optimization, you can have both … at the right levels that are the most profitable for your organization. Be smart.

How to Identify a Dangerous SalesPerson

A blog post over on the HBR last month on the worst question a salesperson can ask provides a great gauge that you can use to determine the quality of the salesperson selling to you.

If the salesperson starts out by asking what’s keeping you up at night, you know you didn’t get the best your vendor has to offer. Why?

As the article explains, you don’t always know what you want. Just because you know the symptoms of the problem you are experiencing, you don’t necessarily know what the problem is. Just ask a doctor. Fatigue (which we’re all facing being overworked and underpaid in this challenging economy) could be a result of post-viral fatigue, POTS, mononucleosis, epstein-barr, sturgeons, sleep disorders, heart disease, adrenal exhaustion, anaemia, cancer, depression, and diabetes just to name a dozen possible causes.

The same holds true in business. Chances are you need a technology solution to streamline something, but it may not always be the obvious solution. For example, you’re having trouble getting your supplier’s invoices turned around within the discount window. Maybe you need an e-invoicing solution, but maybe you need a better inventory management solution. For example, if Finance will not pay an invoice until it can verify all of the goods are received and in inventory, that a goods receipt has been generated, and there are no goods in need of immediate return, then, if your inventory system requires manual data entry of each item in a slow and laborious process, that’s a problem — especially if your supplier is equipping your palettes with RFID chips. In this case you need an inventory management system that allows automated addition of goods to working inventory once (  a  ) the line-item invoice has been received, (  b  ) the RFID chip has been scanned and (  c  ) a warehouse worker has verified that the containers are in your possession. If you’re not aware of Finance’s policies and not aware that it takes the warehouse a minimum of two weeks to complete the requirements because of the process required and constant backlog, you’ll never know you need a newer inventory management system and might get suckered into buying a new invoice management system that won’t help in the least.

As the blog post points out, you want a salesperson who is a Challenger who can identify, and reveal, potential problems, and solutions, that you don’t even see. That way you can explore all potential sources of a problem until you identify what the real problem is. Then you can select the right solution — which is one that maximizes the overall value you receive. Not before. So if a salesperson starts out by asking “what’s keeping you out at night”, show them the door before, as the authors note, you are robbed of an hour of your life.