Monthly Archives: April 2012

Reasons The US Post Office Isn’t That Important

The US Post Office is important, but the recent cut-backs aren’t as bad as some people are making it out to be. One article on the subject that recently caught my attention was 10 Reasons the Post Office is Important to Us over on Change of Address because it didn’t really give the full picture.

For example:

  1. There are other ways to get medication to housebound patients.
    Private Shipping Services and Local Delivery Companies do the job just fine. Not every country has six-day mail service. Canada has five-day mail service and we survive.
  2. The economy will rebalance.
    The $1 Trillion dollar mailing and shipping industry won’t go away, the work will just go to the providers who can do it the most cost effectively.
  3. It’s not ending the postal service.
    There is just not as much need for as many offices or for six-day mail service now that so many documents can be delivered electronically and other private services provide other options.
  4. Shipping companies can still use the postal service.
    And they can partner with other companies that offer complementary services.
  5. Physical Goods Can Still be Delivered
    Just not on Saturdays.
  6. Publishers can still get their print publications out.
    They just have to adapt to no Saturday service and different printing deadlines to make different drop-off deadlines. Not a big deal.
  7. Rural Americans will still get their mail
    The Post Office isn’t taking away this service, and since most private delivery companies don’t operate in rural areas, this market will exist for years to come because of
  8. The Universal Service Option
    which still applies.
  9. Most communities with a sense of community have a community centre.
    That is independent of, and does not rely on, the post office.
  10. Major carriers can provide security as well.
    UPS and Fedex and similar companies are setup to track shipments along every mile and every individual who has access to those shipments because they import and export and this is a requirement to be in that business (10+2, etc.) and they use the same system across their business.

There’s nothing wrong with right-sizing an institution to stem massive bleeding, and while this will, unfortunately, result in some job layoffs, as the article notes, the need for document and parcel delivery still exists and it’s a given that the private sector will expand to meet this need and create new jobs to balance most of those jobs that are lost. It’s sad that the Post Office took so long to take action, and now has to take a massive action, but the Post Office is not going away and the mounting losses are more important than losing a day of service. Let’s just hope that they rebalance their operations the right way and don’t have to do this again.

I Still Can’t Find My Marbles … But I’m Sure I Know Who Hid Them!

Twitter Bird

A few years ago:

Follow Me! Follow Me!
Who are you?
I’m the Twitter Bird!
What’s a Twitter Bird?
It doesn’t matter. Follow me! Follow me!
Whatever. Have a nice day.

A couple of years ago:

Follow Me! Follow Me!
Back again little bird?
Follow Me! Follow Me!
You’re persistent, aren’t you. But I’m not much of a ornithologist.
Who cares? Follow Me! Follow me! Everyone else is!
I find it hard to believe everyone is following a little thrush. You’re cute, but not worth much more than a passing glance.
Follow me! Follow me! Join millions of people around the world.
Millions of people? I think you flew into a patio glass door a little too hard.
Celebrities. Scientists. CEOs. They all follow me. Follow me! Follow me!
Okay, I’ll check you out.

Let’s see. A centralized website for sending 140-character blurbs to hundreds, and even thousands, of friends and “followers”. Mass SMS, or, for those of us who are UNIX, a web-based write command that has been around in UNIX operating systems in one form or another since at least 1969! Potentially useful for getting quick messages out, but so is e-mail and SMS. Possibly useful for consumer goods companies wanting to send quick product announcements or, more likely, quick “special of the day” announcements to consumers (if they will actually follow the company) and for gossip-mongers. (I can’t wait for Perez Hilton to tell me what Lady Gaga is thinking right this second! I need to know now!) But for the rest of us? Those of us in the enterprise market? Those of us who don’t give a damn about celebrity rantings? Those of us who actually want to have a real conversation? Doubtful.

Sorry little bird. You’re not my style.
You will follow me! Everyone will follow me! I’m the Twitter Bird! And even the fail whale can’t stop me!
Maybe you should see a veterinarian. Obviously you never quite recovered from that encounter with the patio door. Goodbye

A few months ago:

Follow me! Follow me!
Back again little Twitter bird? You certainly are persistent.
Time to Follow me! Time to Follow me! Four score and twenty million users sending more tweets per day than there are people in the U.S.A can’t be wrong!
That’s a lot of followers. Not Facebook level, but a lot of followers.
So follow me! Follow me! Popularity awaits!
I’m about knowledge. Knowledge isn’t about popularity. It’s about truth. And those who seek shall find.
They’ll find it faster if you follow me! Follow me!
Knowledge isn’t a destination, it’s a journey. And journeys take time, like the acquisition of knowledge.
Follow me! Follow me! I’ll lead you down the yellow brick road!
I’m not looking for courage, a heart, or a brain, as I already possess all three, and I don’t believe in a magical wizard who will solve all my problems. I think I’ll keep going down the road I’m on. I’m joined by thousands of readers making well over a hundred thousand visits per month in their mutual quest for knowledge.
But it’s not millions! Follow me! Follow me!
I’m writing about Supply Management. You could count every practitioner on the planet and you wouldn’t reach a million. And if only 1.5% of people on the planet are on your network, that’s not many more readers for me.
They will follow me! You’ll see. Follow me! Follow me!
You never did see that veterinarian, did you?
Follow me! Follow me!
I’ve tried to be patient and polite with you, little bird, but enough is enough. I swear that as long as I have my marbles, I’ll never follow you!
See you in a few months! Then you’ll follow me! Follow me too!

About a week and a half ago.

My marbles! Where are my marbles! I’ve lost my marbles! I don’t know what to do! How can I make sense of this crazy world without my marbles?

This is an automated e-mail message from the Facebook borg. Resistance is futile. You will join us. You cannot resist.

I … cannot … resist. Friend me.

Look at all the pretty pin boards you can make! Web works of art. It will change the way you bookmark.

I have no idea what a pinboard is or how to make one. But the borg say I can’t resist. So why not? Pin with me.

I’m back! Now you will follow me! Follow me!
I know I shouldn’t. I really, really shouldn’t. But without my marbles to connect my logic centre to my action centre, I can’t stop myself. I … must … follow … you! Follow me!.

And, while you’re at it, don’t forget to:
Card Me,
Circle Me, and
Link With Me*.

Damn you! Damn you to hell Twitter Bird!
I know you hid my marbles. I don’t know how you got them, but I know it was you! Someday I’ll get you for this! Someday!

*Assuming I know who you are. Otherwise, Friend Me first. I believe in keeping my LinkedIn Network limited to those people I have actually interacted with at some point.

Should You Hedge Your Transportation Costs?

It’s a tough question, and one that you need to answer sooner rather than later. If you read this recent article on how global shipping lines grapple with plunging rates, overcapacity, and faltering recover, you realize that the global shipping industry is likely in for a very shaky ride over the next few years given the unpredictable demand, the strong likelihood of consolidation, and the big bets some major shippers are making that could intensify the current overcapacity problem.

The following tidbits of information in particular are worrisome:

  • GDP growth forecasts for Canada in 2012 have recently been revised downwards by various analysts to just above 2%
    Canada, which has done quite well in weathering the global economic storm (through better bank regulation, smarter risk aversion, and a focus on natural resources) is barely going to grow. Imagine how the Eurozone and the USA are going to fare in 2012.
  • China growth, while in the high single digits, is slowing
    When GDP growth in the country that houses one-sixth of the world’s population and that is still on track replace the USA as the dominant economic superpower in under fifteen (15) years is slowing, what hope does the rest of the world have for a quick recovery?
  • The dollar still drives decisions. Green is of secondary importance.
    With little incentive to look at new technologies, there is little incentive to look at sustainable solutions that could be more cost effective in the long run. (Such as more efficient engines, on-board solar and wind power, etc.)
  • Maersk, which ordered 10 Triple E vessels capable of carrying 18,000 TEUs in February 2011, ordered 10 more mega-vessels that will cost US $190 Million in late June.
    All of these vessels are bigger than the 15,000 TEU Emma Maersk, which will remain the largest container ship on the high seas until 2013 when the new ships are deployed. But where is the volume going to come from to fill them?
  • Maersk is betting that Asia-Europe trade will increase by 5% to 8% annually over the next four years.
    China’s GDP growth is around 9% and falling. And not all of that is due to trade. The Eurozone is dealing with one financial crisis after another, and no other country in Asia is going to keep up with China.
  • Box freight rates on the Far East-Europe spot market have plunged below zero after stripping out bunker surcharges. Worse, the rates will continue dropping as the big carriers engage in a “destructive” rate war.
    Price wars always have casualties.
  • Net rates are now lower than during the darkest period of the 2009 container slump.
    Rates have no where to go but up (although they may not start rising until we have a few price war casualties).
  • Alphaliner estimates that idle container ship tonnage will climb above 500,000 TEUs by the end of December.
    To put this in perspective, that’s 19.25 Million m3 of idle cargo space which could hold approximately 33.258 Trillion iPad 2’s in the box, if Foxconn could produce them all. (This is 4.75 iPad 2’s for everyone on the planet.)

Put all this together, and you see that:

  • (Some) carriers are going to go out of business.
    It could be yours!
  • Shipping lanes are going to close.
    Carriers will have to drop low volume lanes and consildate volumes to keep costs down and stay in business.
  • Rates are going to go up.
    As those carriers that don’t go out of business will have no choice to raise rates if they stay in business, even with lane consolidation and elimination of discretionary and low-volume ports.

If you don’t have a ocean freight backup strategy, it’s time to get one, and if a delay could cause you a significant loss or increase in rates as you scramble to divert cargo to a higher cost carrier, it might be time to hedge your bets. the doctor may not be an expert in ocean freight, but this crystal ball is not very hard to read.

Procurement Game Plan: A Review Part III.3

Charles Dominick of Next Level Purchasing and Soheila R. Lunney of Lunney Advisory Group recently released The Procurement Game Plan: Winning Strategies and Techniques for Supply Management Professionals. And even more recently, SI began it’s detailed review, in three parts, of this new Procurement Guide. So far, in our review, we’ve covered the Purchasing Professional’s 10 Commandments, organizational role, Supply Management strategy, talent, social responsibility, strategic sourcing, supplier qualification, negotiation, supplier relationship management, and success reporting. This post, which is the beginning of the end of our review, dives into techniques for improving Procurement performance and a few specialized areas of Procurement, as covered in the second last chapter of the text.

The authors define four main technologies for improving performance:

  • Procurement Outsourcing
    which is the shifting of some procurement tasks to an external organization
  • Group Purchasing Organizations
    are entities that are responsible for sourcing and managing aggregated contracts on behalf of a discrete group of companies
  • Procurement Cards (P-Cards)
    that allow organizations to take advantage of the existing credit card infrastructure to make electronic payments for a variety of business expenses
  • Procurement Technology
    that includes e-Procurement and e-Sourcing and allows a buyer to take it to the next level

Since Procurement Outsourcing will likely be restricted to tactical functions if your goal is to create a first-rate strategic Procurement Organization, since GPOs primarily offer advantages only on categories where you just don’t have the volume or the manpower, and since proper coverage of the technologies you should be familiar with and using on a daily basis is a book in and of itself, we’re going to restrict our review of performance enhancing technologies to P-Cards.

Procurement Cards are a tool that can be adopted to reduce tactical activities as they negate the need for POs and simplify payment, which can be made by the buyer placing the order. If three-way match is used (which is the matching of a Purchase Order to an Invoice to a Receiving Record), it can reduce administrative costs as it negates the need for a separate invoice review and payment by accounts payable. Of course, on the other side of the coin, a P-Card can also increase the potential for fraud.

However, as the authors note, implementing P-Cards is not as simple as calling up your local merchant account provider. Due to the ease with which a user can pay for goods not received, overpay, or open the company up to fraud (by forgetting their card at their favourite restaurant), a number of decisions need to be made before the first card is issued. As per the text, some of these decisions include:

  • should there be one spending limit for all holders, spending limit by categories, or individualized limits by buyer?
  • are there limits by transaction, day, or month?
  • are any categories restricted? exempt?
  • who is eligible for a P-Card and who is not?
  • is the P-Card limited to purchases from approved suppliers?
  • what transaction information and reporting capabilities do you require?
  • which provider(s) can meet these requirements?

And these decisions need to be made in context of the advantages and disadvantages P-Cards can provide, which include:


  • reduced cycle times which free up your staff to do strategic, instead of tactical, work
  • faster supplier payments which can reduce a supplier’s cost of capital if they have to borrow less (and, in turn, the cost they pass on to you)
  • extended payment terms (which do not impact your supplier as you owe the P-Card provider, not the supplier)
  • less maverick buying (if P-Cards are made mandatory for certain purchases and controls that restrict payment amounts and vendors are put in place)
  • better transaction data for your spend analysis

  • increased chance of theft/fraud (as it’s just another credit card)
  • longer reconciliation time (if one payment is made for multiple invoices)
  • less budget visibility (as they track transactions, not budget)
  • another system to reconcile (if they are not made mandatory for certain classes of payments)
  • move maverick buying if controls are not well defined (as Homer can now order anything he wants from Mighty Office Express Supplies [MOES] if MOES is an approved vendor with no limit)

Implemented effectively, P-Cards can be a great tool. Implemented poorly, they can be your worst nightmare.

After a whirlwind tour of the technologies employed by leading Procurement organizations, which includes e-Procurement, e-Sourcing, and (Decision) Optimization (explained by the doctor in the Inefficiency Eliminator wiki-paper and the two-part Next Level Purchasing Podcast on Supply Chain Optimization [Part I and Part II, with transcript]), the book moves into a discussion of specialized areas of Procurement where special teams are important.

These areas include Global Sourcing, Procurement Outsourcing Provider (POP) and Global Purchasing Organization (GPO) management, services procurement, and inventory management. Since a discussion of each of these topics is a post in itself, and the discussion was quite dense, we’re just going to focus on a key element of success discussed in the penultimate chapter that many books miss — Project Management. As the authors note:

As organizations have grown globally, Procurement is called upon to unify everyone with a common buying strategy. This requires that a leader assemble a team and coordinate the efforts of subordinate Procurement staff, business unit representatives, and management. There are limited resources, goals, and timelines. Does this sound like the project management discipline? You bet it does!

Project management is an essential element of successful Procurement and every Procurement professional needs to be educated in Project Management methodology (which is why NLP has a course on Professional Purchasing Project Management). This section of the chapter discusses the project charter and its importance, project plans for simple projects, project plans for highly complex projects, and risk analysis — a key part of every project plan. This is a section of the text that everyone should read carefully — twice!

At this point, the reader should have a strong understanding of the basic knowledge required for Procurement success, be aware of her weaknesses, and have a plan to address them (such as through additional [online] training, certification, or mentoring). At this point she is ready to begin her career in the Procurement workplace and become a perennial all-star, which is the subject of the final chapter of the book and will be the subject of our final post.

To be concluded!

Some Takeaways from the E2Open sponsored SCM World Collaborative Execution Study

SCM World recently released a study on Collaborative Execution (defined as two or more parties working together to improve supply chain performance by continuously solving real problems with better information), focussed on Speed, Innovation and Profitability, overseen by Kevin O’Marah, and sponsored by E2Open that had some rather interesting, and in a few cases, surprising results. First off:

For suppliers, collaboration is primarily a means by which their customers share demand information, with 73% strongly agreeing this is a key aspect of collaboration.

For buyers, an overwhelming 83% believe collaboration revolves around the supplier sharing availability information (e.g. capacity, lead times, etc.).

In other words, both sides agree that collaboration centres on information sharing and, furthermore, the study also found that,
both sides need visibility and want a dedicated problem solver

This means that the primary barrier to collaboration between most supply chain partners is the fact that companies struggle to share information effectively, with 54% seeing lack of data visibility across trading partners as a perennial problem. Furthermore, the next biggest barrier was speed of issue resolution, with almost 50% agreeing that this was a barrier to effective collaboration. (In addition, 92% agree that quick problem resolution is part of good collaboration.)

But the most surprising result of the survey was that trust, governance, and benefit sharing were not the biggest barriers to collaboration, as commonly suggested, but the ability to connect trading partner information flow, insure quality of information, and synchronize that information for quick problem solving. (For example, almost one half of respondents felt granularity of data was a problem, speaking to the quality issue, and almost one half of respondents saw timeliness of information as a problem.) This says that, for the most part, it is not lack of desire, trust, or willingness to collaborate that is the problem, but a lack of technology to enable collaboration. (And this is a shame, considering that such technology has existed in more than adequate form for at least five years now for even the largest of multi-nationals with the most complex supply networks. It may take some effort to get used to some of the technology, which is only now maturing on the usability front in some cases, but how much of a barrier is it really to spend a few days learning a technology that is going to cut your issue resolution time in half and decrease your risk substantially?)

Given that:

  • collaborative relationships were more cost effective,
    55% of respondents agree
  • good collaboration minimizes risk, and
    75% of respondents agree
  • learning is faster in a collaborative environment
    70% of respondents conclude that the rate of leaning increases by at least one-and-a-half times

Acquiring the technology that your organization needs to take collaboration with your trading partners to the next level should be a no-brainer. (Especially since the last finding means that any operational metric targeted such as inventory days, total landed cost, cash to cash cycle time can be expected to improve one and a half times as quickly as would be the case without collaborative execution. Thus, any appropriate technology acquisition is going to give you a very quick ROI.)

The only other point of interest was the not-so-surprising result that management by exception it seems is still not part of a “truly collaborative” trading partner relationship for a substantial number of companies. This would indicate that collaboration, even among market leaders, is still not very mature. In a mature relationship, each party trusts the other to do what they do best and only gets involved when a deviation is detected or an idea is devised to improve the process or product. But still, it’s nice to know that both buyers and sellers do not see trust as a barrier to collaborating for mutual gain.