Monthly Archives: June 2012

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

How Do You Find an Innovative New Vendor?

Brian Sommer over on ZDNet just ran a great post on how to easily identify the up and coming innovative vendors in the space. All you have to do is look at who the big established players are trash talking! After all, if the company isn’t innovative, they have nothing to fear from the competitor, and will say something like “yes they also have a solution suite that could potentially help you, but” … “they are missing these key features that we have found to be instrumental to customer success” or “we have done more implementations in your space” or “we have a more mature professional services organization” or “we fit better with the platforms and processes that you have in place” or “we are more committed to customer success” or “we have won more awards proving the maturity of our solution” and just shrug them off. But if the company is innovative and poses a real threat, they will try to trash-talk it out of your candidate pool. And they will use predictable language like “what they are offering is a cool feature, not an application” or “they’re inconsequential” or “their solution is immature and / or will never catch on“. These phrases are your first clue that this is a vendor you should be looking at. It might not be mature enough to meet all of your needs today, but maybe if you can bolt on the innovative new features they are offing to your existing ERP, you can, with a little elbow grease, extract more value and, as the company grows, be the first to take advantage of their new features and applications as an early adopter preferred customer.

And not only did Brian do a great job of pointing this out, he also created a great table that summarizes all of the common phrases an established, fairly un-innovative, company will use to trash talk an innovative startup in its infancy, a rapidly growing new competitor, and an upstart that’s all grown up now. And then, to complete the picture, he also points out what they say when the decide to acquire the grown up upstart because it has a more innovative solution.

Click this link to read Brian’s full post on the Software Smack Talk Playbook. It’s awesome.

 

You need a Platform that Supports Sustainability

I think we can all agree that sustainability is important – very important. You might be in business to make money, but the only way you’re going to make money is if you stay in business. The only way you’re going to stay in business is if you’re sustainable, because, otherwise, you risk running out of resources, money, or, and I’m not kidding, customers. The earth is finite, so it stands to reason that there is only a finite amount of any resource. A company has a finite amount of money, and wasting it is the quickest path to going out of business. Today’s consumer is concerned about the environment – harming it will drive them away, and with no customers, you have no business.

So how do you achieve this magic of sustainability? Well, you can achieve it the same way you achieve everything else in business – hard work, perseverance, and ingenuity. But the real trick comes in sustaining sustainability – and the best way to do that is to have not only supporting processes and methodologies, but a supporting platform as well.

A supporting platform can help you keep track of your initiatives which can range from your office recycling program to your global waste reduction initiative. Recycling efforts within a single large office building can save hundreds of thousands of dollars. As noted in a now classic S&DC article on “Building the Green Supply Chain”, the Boulder Community Hospital reduce, reuse, and recycle program saved the hospital $600K a year. On a global scale, Walmart saved 2.4M in shipping just by reducing packaging requirements. And Interface Inc, in their effort to move to a zero environment footprint, have saved more than 260M in the first decade of their sustainability program.

More importantly, it can also help you get control of your global sustainability initiatives when it comes to environmental impact reduction, social responsibility, and prevention of animal cruelty. Unlike internal waste reduction initiatives, which often do not exceed the complexity of making sure the used toner cartridges were shipped back to the manufacturer, global sustainability initiatives require you to also insure your supply chain does not violate the initiatives you commit to. Just because you don’t have a sweatshop, pump out toxic emissions in excess of the Kyoto protocol, or skin cows alive does not mean that your suppliers do not.

In order to insure that you have a supply chain in compliance with your initiatives, you have to track relevant information from your suppliers and have them track the corresponding information from their suppliers. This is an insurmountable challenge unless they can provide you with the information you need directly into your systems, as the average large company has dozens, if not hundreds of essential tier 1 suppliers and thousands of less critical suppliers. This requires a web based platform capable of securely collecting, storing, indexing, aggregating, and unifying all of the relevant information from each supplier.

Furthermore, depending on where you want to do business, sustainability might be more than just an initiative – it might be a fact of life. If you want to do business in the EU, you need to comply with REACH and RoHS, and possibly half a dozen other directives. California has introduced its own green legislation, and parts of Asia, suffering from severe pollution as a result of the rapid build up of manufacturing capability over the last few decades to meet the demands of American and European multinationals focussed on low cost country sourcing, may not be far behind. You have to not only maintain all of the documentation necessary for compliance purposes, but have to be at least 99.999% certain you are in compliance before making a shipment into the region. If even the tiniest removable part of your electronics system, such as the removable power cord, is not in compliance, your entire shipment could be blocked, seized, or destroyed.

This dictates the need for a platform that tracks not only all information related to your sustainability programs, but all product related information from raw materials through final production. This is the only way to minimize your risk of non-compliance. That’s why you need a Supplier Information Management (SIM) solution, or an e-Sourcing/e-Procurement solution with enhanced Supplier & Sustainability Information Management. Fortunately, you have a lot of options. We’ve covered many on SI in the past and will cover more in the months to come.

Successful Supply Management Organizations are Empowered

“What Works for Nations Works for Business”, and what works for business works for organizations within the business — Supply Management included. This recent article, over on Chief Executive, that reviews the new book, Why Nations Fail, noted that just as nations flourish when they foster political and economic institutions, and they fail when power and opportunity are concentrated in the hands of the few, companies are setting themselves up for trouble when decision making is almost entirely restricted to top executives. Similarly, your Supply Management organization is setting itself up for trouble if all (major) decisions have to pass through the Director or, even worse, CPO.

In order for your supply management organization to be successful, your people have to not only be in a position to make the decisions that need to be made when they need to be made, but feel empowered to make such decisions. They need to know what authority they have, when they have it, and feel trusted to use that authority. They should only be going to their manager, director, or CPO when a new issue arises that is beyond their experience where they should have some guidance to solve it. And if your supply chain organization is filled with talented, empowered people, this is not an event that should be happening every day.

I’m keeping this post short because I want you to read the article on “What Works for Nations Works for Business” and dig further into this issue, both in the SI archives and the CE publication. It’s one issue that should not be overlooked.