Monthly Archives: June 2012

For a Good Lesson in e-Procurement System Selection, Ask Discount Tires.

This winter, Chief Executive ran an article on The Synergy Mirage: A Case Study that had a great lesson for every Supply Management team looking to select an e-Procurement system with the intent that anyone in the organization who wants to order something will use it. The lesson was simple:

Customers don’t want to buy new tires. They need to buy new tires. It’s expensive and it takes time out of their day. As a competitor, [Chairman] [Bruce] Halle benefited from making the process somewhat less expensive and taking less of the customer’s time. He also spent extra time cleaning up the shop, including the bathrooms, to make the customer visit a bit more comfortable. Customers appreciated the discount that came with the off-brand products Halle offered, but they also appreciated the opportunity to leave as soon as possible.

Similarly, in your organization:

Administrative assistants don’t want to place re-orders for toner cartridges. Engineers don’t want to have to order new workstations and business analysts don’t want to have to buy reams of papers. And office managers definitely don’t want to order pens. They need toner, computers, paper and pens to do their jobs (and make sure their coworkers can do theirs). Finding the best value for the organization is not their strength and it takes too much time out of their already too busy day. They want a process that is easy and quick. They want to find what they want as fast as possible, place the order, make it someone else’s problem, and get back to their job. And if they have to do it anyway, they would like an experience that is clean, comfortable, and relatively stress free. (And if they have to fill out 17 fracking forms to procure a single pencil they have two choices: pull out their hair and go postal in the classic sense, or just not do it.) They appreciate a tool that simplifies their life and lets them get back to their job as soon as possible.

So if you want to be the organization with 90%+ e-Procurement system penetration (as opposed to the one with 30% to 40% e-Procurement system penetration), you better make sure that whatever e-Procurement system you select is trivially easy to use and designed to make the location and ordering of a particular item quick and easy. Otherwise, you’ll just be buying more shelf-ware. There’s a reason that companies like b-pack, BravoSolution, Coupa, Iasta, and iValua are tearing up the middle market. They get that systems have to be easy to use. And there’s a single reason in particular that BravoSolution is making waves in the Fortune X where only Ariba and Emptoris used to play and that Coupa has reached the upper end of the Mid-Market (and started to sneak into a few Fortune X’s) in five-short years. Their systems are about ease of use. In all of these examples, their systems are about allowing a user to do what they need to do and get back to the more important aspects of their job. And, most importantly, their systems are about customer success.

And that’s also why you are going to see new waves forming in the Fortune X. Companies like hubwoo, IBX, and Wallmedian in particular are each going to make a [big] splash as their focus on helping Fortune X clients stuck on SAP get more value from their ERP system (from a Supply Management Perspective) with a lot less pain is going to start paying off as SAP gets stuck in the Fusion quagmire trying to integrate its latest acquisition. Watch for Wallmedian in particular, a name you’re probably unaware of on this side of Atlantic, to come over and pull a BravoSolution in the Fortune X SAP user base. (Remember when we didn’t know who BravoSolution was on this side of the Atlantic? It wasn’t that long ago and now with Ariba swallowed, they will soon be one of the biggest stand alone names out there in the Supply Management space.)

It used to be that Doctors made Life and Death Decisions. Now Supply Managers do too!

This recent CSR briefing over on the CPO Agenda on when good procurement can be a life and death factor is great food for thought as it points that not Supply Management is more then just sourcing and procuring, it’s also also sustaining and securing — in more ways than one!

Focussing on how the early 2000s saw several incidents where hospital patients inadvertently received excess doses of their drugs that resulted in fatalities, the article pointed out how a poor selection of IMDs (Interactive Medical Devices) that didn’t do anything to prevent common human errors was the reason that a premature baby died after receiving 10 times the required dose of diamorphine and a person lost their life after receiving a dose 24 times too high after a daily dose was miscalculated as hourly when it would have been trivial to code in a dosage check that asked a nurse or doctor are you sure before administering a dose outside of the range. After all, it’s easy to mistype a decimal point and then 13.5 ml becomes 135 ml, or click the hourly instead of daily button if you’re in a rush (and what health-care professional isn’t overworked these days)?

Now, you could say that the real problem was lack of training, as better training could have minimized the possibility of human error, but in each case sourcing was involved. In each case, a wide range of IMD devices were in service in each of the hospitals. And in each case, each time a procurement exercise took place, a different machine was chosen as the most cost effective. The factor that should have been last on the list was placed first and people died. Remembering that Supply Management’s ultimate goal is value (creation), not cost (reduction), and in this case, the value was procuring the best IMD for the hospital, not the cheapest one today, where the best IMD was one that was easy to use, programmed with easy range checks, reliable, fault tolerant, long lasting, and safe and reasonably priced with respect to these requirements. Considering the inherent value in human life (and the cost of the lawsuit or settlement that the hospital is going to have to pay as a result of a preventable death), if that means spending 20% more, so be it.

If instead of sourcing IMDs as one-off sourcing events when a need arose, Supply Management put security and sustainability first and foremost and redefined IMF sourcing as a multi-year master contract agreement, negotiated against projected demand over the next 3-5 years, lives might have been saved as there would likely not be more than two types of IMDs at any one time (the ones sourced during the last contract, and the ones being sourced during the current contract, where the contract length is defined to insure all of the old machines are replaced before a new contract is negotiated with the possibility of switching vendors) and the amount of training the health care staff would need would be minimal.

And the reality is that medical device sourcing is not the only area of Supply Management where lives are at stake. Supply Managers also source food and beverage categories, and melamine in the milk, diethylene glycol in the toothpaste, salmonella in the spinach, bovine spongiform encephalopathy in the beef (which can cause Creutzfeldt-Jakob disease), and botulism in the chili sauce can all result in death, and if not caught in time, can be as deadly as a plague or coronavirus (SARS).

And Food & Beverage is just one example. The chemical sector is another. What if the chemicals are hazardous and the storage units are poorly made and leak? Cyanogen chloride is colourless, and deadly, and used in the production of Chlorosulfonyl isocyanate which is used in medicine in the production of Beta-lactams, which form the foundation of antibiotics (including penicillin).

Another is heavy machinery. Carbon monoxide (CO) is regularly produced by internal combustion engines in enclosed spaces. If the exhaust system is not airtight and properly insulated, CO could leak into the factory and poison (or kill) your workers before they even know it’s there as it is an odourless colourless gas.

The point is, where physical products are concerned, almost anything you source could be a hazard to human health, and even life. (We still have problems with led in the paint and asbestos in the insulation when sourcing from overseas.) This doesn’t mean that you don’t have to worry about services — it just depends on what you’re sourcing and what products and materials the service providers have to use in the performance of their jobs. For example, Janitorial Services could be a problem if the company is contracted to provide the cleaning products and they consistently use cleaners with too high a borax concentration which is not properly cleaned up.

So, next time you source, get out that corporate social responsibility scorecard; make sure safety, security, and sustainability play a prominent role, and remember that, indirectly, you could be responsible for someone’s life.

Your job just changed, didn’t it?

The Procument Game Plan – The Missing Chapter

Back in March / April, SI did a detailed review of Charles Dominick and Soheila Lunney‘s recent book, The Procurement Game Plan. This review was in-depth and spanned eight posts, which are indexed at the end of this post.

Astute readers will note that the doctor never finished the review. There were a couple of reasons for this, but one of the reasons was that he felt that something was missing from the final chapter of the book, on how to become a perennial Procurement all-star. It was good, but becoming an all-star is harder than you think, and if you’re only going to write a chaper on the subject, you better hit the nail on the head – fast. The chapter didn’t entirely do it for me.

Turns out, they were saving some of their best material on that point for the interviews. A few weeks (or so) ago they did a Q&A with Buyers Meeting Point that I bookmarked but didn’t bother to read closely until today. Answering a seemingly unrelated question on what place that traditional associations have in today’s social media environment, Soheila gave the best piece of advice a seasoned veteran can give a new entrant to the Procurement Game, especially if such entrant wants to be a Procurement All-Star. Soheila said you tend to get as much out of these opportunities as you put in – either a little or a lot. If you want to be a Procurement All-Star, you have to give it your all. Just memorizing the tips and techniques isn’t enough, you have to put your heart and soul into them. You can’t just go through the motions, you have to make them part of you. They have to be natural and instinctual because the Procurement Game is, in reality, as unpredictable as you can get. You could have an IT problem. You could have a market fluctuation that totally changes the supply-demand balance or projected exchange rates halfway through a negotiation. Your shipment of fig paste could be mistaken for hash by an untrained, inept cargo inspector and destroyed. (It has happened.) Every day presents a multitude of opportunities for your game plan to be turned inside out, upside down, and outside in (simultaneously) and you have to be able to react and take a reasonable course of action in real time. You might not even have time to wait for your boss to return from lunch. But if you’ve put all you got into it, you’ll have all you need to get it all back, and then some.

Anyway, check out the Q&A with Buyers Meeting Point. It offers some great insights into the book. (And Charles’ recommendation for Managing Indirect Spend by Joe Payne and William Dorn of Source One, also reviewed in depth on SI earlier this year, is dead on.) (Soheila’s recommendation for Charles Poirier‘s The Supply Chain Manager’s Problem Solver is a good one too. Although the nature of technology and the internet have changed in the last decade, most organizations are still making many of the 12 mistakes covered in the book.)

To be concluded???

Procurement Game Plan: A Review Part 1.1
Procurement Game Plan: A Review Part 1.2
Procurement Game Plan: A Review Part 2.1
Procurement Game Plan: A Review Part 2.2
Procurement Game Plan: A Review Part 2.3
Procurement Game Plan: A Review Part 3.1
Procurement Game Plan: A Review Part 3.2
Procurement Game Plan: A Review Part 3.3