Monthly Archives: July 2012

Are you ready for the replacement for the EC Data Protection Directive?

Pretty soon, the EU will adopt a modification of the new draft regulation for a general framework governing data production to replace the existing EU Data Protection Directive 95/46/EC that will set out the rules on the protection of personal data processed for the purposes of police and judicial co-operation in criminal matters. There are a number of changes coming, as summarized in this recent article on “the draft regulation” over on Outsource Magazine, but the following four appear to be the most important.

  • Registration:
    a requirement for data controllers to maintain documentation of all processing operations for which they are responsible
  • Consent:
    consent from data subjects must now be explicit, and, moreover, consent will not be valid where it is the result of a significant imbalance between the data subject and data controller (e.g. employer-employee)
  • Right to be Forgotten
    which means that, in certain circumstances, data subjects can require erasure of data
  • Enforcement
    which gives Data Protection Authorities the power to impose fines on a sliding scale up to 2% of worldwide turnover for breaches.

In other words, Europe, which is (thankfully) much more progressive than the United States (as someone has to take the lead) is taking greater measures to insure that a person owns his or her data, an individual has a right to force you to delete certain data that applies to them (if you have no right to it), a data controller is fully responsible for all data they collect and (have) process(ed), and any data controller that breaches their responsibility can be levied massive fines if the situation warrants.

In other words, depending upon how much POS data you collect, especially from your on-line operation, if you are doing business in, or even with, Europe, you are (likely) subject to these regulations and if you collect more data than you need, and save that data, you could be in jeopardy of breaching the new act. It would be a good idea to review the data collected throughout the organization, summarize it, and get legal’s advice, especially if the plan is to expand (supply management) operations in Europe.

How to Ignore Bad Advice

Last month, Forbes ran an article that needs to be in every Supply Manager’s toolkit. Given that the number one priority of most Supply Management organizations is to gain trust across the organization and get more spend under management (SUM), an average Supply Manager, as she gains trust, is going to get a lot of advice from the individuals on the cross-functional teams she is going to build. Some will be good, but some will be bad (and downright ugly). A good Supply Manager knows how to latch onto, implement, and encourage the good advice while carefully avoiding the bad advice.

Ignoring bad advice, especially if is from an individual who’s buy-in you need and who thinks it’s really, really good, can be tough, so I’m glad Forbes ran this article. Even though the article was written more for entrepreneurs about to embark on a startup, it is just as applicable to Supply Managers about to take on a new category. So what was the advice?

  1. Look Forward – not back.
    Study trend lines that correspond to what you need to buy, not historical demand levels. Demand could be falling. The last thing you want to do is be stuck with a warehouse of obsolete inventory. So make sure you don’t just get last quarter’s numbers, ask for the last three years.
  2. Ignore Your Friends – talk to customers.
    It’s not what engineering or marketing wants — it’s what the end consumer wants. If you don’t procure the products and services that the end consumer will buy, it doesn’t matter how good you do your job as the organization won’t last long without sales. So no matter how good they claim the advice is, be sure to say that sounds like an awesome idea, let’s run it by our customers to see if they are ready for it.
  3. Consider the source.
    Everyone has their own bias and point of view. It’s important that you balance all the views in your sourcing decision to arrive at what’s best for the organization as a whole, not just what’s best for engineering, marketing, or even your own Supply Management organization. The best Supply Management organizations increase overall value. So when engineering gives you a great idea, be sure to say that’s great, now how do we sell it to marketing and vice versa. When everyone gets on the same page, the advice is likely to be better, or at least consistent.
  4. Learn to Love the Word No.
    Some requests will be so bad that there will be no way to address them besides just saying no. For example, marketing will insist on a certain print shop which costs 50% more than the next highest bidder because of a great relationship. There’s just no way to deal with this situation delicately. Print is print. It’s not creative, and there is absolutely no rationale argument for such a premium. In this situation, you will just have to say no and move on.
  5. Bet on yourself – always.
    At the end of the day, you have to make the decision, and, most importantly, as you are being held accountable, you have to make the right one. If you’ve done your homework, that’s something you will be able to do. You just have to have the confidence that you can do it, even if everyone else is pulling you in a different direction. Don’t expect other organizations to echo your views, they won’t. They have their own goals. Your job is to get everyone on the same page when you can, and make the tough call that is best for the organization when you can’t. C’est la vie de gestion des approvisionnements.

As the article says, simply put – advice is an input. Treat it as one of many.

Is it Time to Stop Blaming Governments and Start Blaming Economists for All the Economic Turmoil?

How many recessions has North America had in the last two decades? How long has the Eurozone crisis been going on? Does anyone know anymore? It’s been nothing but doom and gloom for years. Doom and gloom which immediately followed periods of growth that was too rapid or optimism that was too unfounded. What the heck happened?

We can blame the governments for failing to keep the currencies in check and failing to invest in innovation and jobs, we can blame the private sector for trying to rampage out of control, or we can blame the economists who give everyone bad advice. Maybe that’s what we should be doing. According to some very recent research, by Emre Soyer and Robin Hogarth, which is being published in a special section in the July-September 2012 issue of the International Journal of Forecasting, we have “The Illusion of Predictability” [preprint] (How Regression Statistics Mislead Experts) which can be succinctly summarized by saying “economists are overconfident [and] so are you” (as summarized by Justin Fox over on the HBR blogs).

Soyer and Hogarth did a study with 257 economists who were asked to read about a regression analysis that related independent variable X to dependent variable Y and then answer questions about the probabilities of various outcomes. When the results were presented in the typical manner (as average outcomes followed by a few error terms), the economists did a really bad job of answering the questions. They paid too much attention to the averages, and too little to the uncertainties inherent in them, thereby displaying too much confidence. Moreover, they did only slightly better when they were shown the numerical results plus scatter graphs. Only the economists who were shown only the graphs actually got most of the answers [close to] right.

In other words, when the data is presented in standard form, statistically literate experts are just as likely to glom (glom glom) onto the point estimate and discount the uncertainty as innumerate journalists and make the same mistakes. (They could use Pinky and the Brain’s refresher refresher lesson on statistics.) Ouch!

We in Supply Management know that the world is often much less predictable than economists would lead us to believe — having to deal with the effects of demand spikes, supply shortages, currency fluctuations, labour strikes, and natural disasters on a(n almost) weekly basis — and that no economic model is going to capture the full extent of the reality of the situation. It’s too bad that an average economist doesn’t, because if (s)he did, then maybe the advice wold be better, and the markets would, as a result of more rational actions, be more stable and make our job a little easier. In the interim, we can do our part by making sure that we help procure any services that require an economist or economic analysis and insure that such economist or group has a tendency for presenting, and analyzing data, the right way without unnecessary exuberance, one way or the other. Because this result, captured in the preprint, is scary:


72% of the participants believe that for an individual to obtain a positive outcome with 95% probability, a small X (X < 10) would be enough, given the regression results. A majority state that any small positive amount of X would be sufficient to obtain a positive outcome with 95% probability. However, in order to obtain a positive outcome with 95% probability, a decision maker should choose approximately X=47.

Simple math says that the majority of the participants were off by a factor of 5 (or more). Ouch! Late last year the BBC ran a point of view article that said we should beware of experts when it comes to running things. Maybe they were right!

Happy Procurement Independence Day

It’s the 6th anniversary of Procurement Independence Day, first celebrated at the Coupa Cabana Cafe back in 2006.  I hope it was a good one for you!

Coupa is still going strong, as you might have guessed from the flurry of press releases coming out of their doors lately.  Before the summer is over, we will be checking in on Coupa to not only see where the past year has taken them, but, more importantly, where the next year is taking them.  Their pace of development has not relented, and they have even more cool stuff coming down the pipe later this year. 
We will review some of the forthcoming capabilities in detail and see whether they are ready to make the leap to the big-time with the Series E injection they just raised in May.  They’ve come a long way from the new kid on the block they were six years ago, going from a few sales in the low end of the mid-market to a lot of sales in the high end of the mid-market to making progress in the Fortune 500, where they recently landed a few significant customers.  Will they be able to turn that into a few dozen Fortune 500 customers and become one of the next big pure-plays in the space who fill the void left by the recent acquisitions of Emptoris and Ariba?  And will they be able to successfully penetrate the European market?  Only time will tell, but I can say that the fact that they have almost 300 customers with a 95%+ renewal rate is certainly nothing to scoff at and pretty telling.  
Stay tuned.  SI was one of the first blogs to bring you in-depth coverage of their capabilities when they were just starting, and it will be one of the first to bring you in-depth coverage of their new platform capabilities that might just make them a true Fortune 500 / Global 3000 player in the coming years.
While you wait, you can revisit some of the classic posts or sing a few songs from the “A” side: