Monthly Archives: August 2012

45 Million People Are Blind today!! Cheesecake Factory Might Be the Answer? (Part 2 of 2)

Today’s guest post is from Dalip Raheja, past contributor to Sourcing Innovation and CEO of The Mpower Group, Inc.

Would You Go to McDonald’s for Surgery? What if I Added the Happy Meal Toys?

Atul Gawande just wrote a piece in The New Yorker in which he applies The Cheesecake Factory (TCF – restaurant chain) model to the healthcare system. He cites soaring costs, mediocre service, unreliable quality and significant variability in outcomes/results as the dominant attributes of the current medical system in the USA. Sounds like the typical Supply Chain/Sourcing issues that almost all of us are trying to deal with on a daily basis.

Why did Atul choose The Cheesecake Factory as a model? Because they are a chain with 160 restaurants with 308 dinner items and 124 beverage choices serving more than 80 million people a year. And they manage to do it with very high quality, every entre cooked fresh, reasonable prices, etc. etc. Oh by the way, they put out a new menu every 6 months! I will let you read why TCF is highly successful but mostly it’s all the stuff that you and I are so used to dealing with in our professional lives. Size gives them buying leverage, centralized common functions, demand forecasting integrated with inventory management, etc. etc. They aim for no more than 2.5% waste in an industry where the shelf life is very short. (Editor’s note — this is only 6.25% of the average food waste in America! See yesterday’s post … )

In addition, there are some things about TCF that are quite intriguing. They’ve laid out their kitchen like a manufacturing production line. They have a very good POS system integrated with their kitchen to track “manufacturing” and “delivery” times. They make sure that their staff is well trained and provided with all the tools necessary. They have a well-defined oversight process that provides positive and negative feedback at the end of the manufacturing line.

An immediate challenge is that doctors have been historically paid for effort, and not results. While Hammurabi dictated that a surgeon’s hand be cut off if the patient died, we have apparently moved away from that as I don’t see too many one handed surgeons out there. Healthcare reform is now starting to link compensation to outcomes. Standardization has long been looked at very suspiciously by the medical community.

Gawande discusses an attempt at standardizing knee replacement and how it impacted his mother’s surgery — reducing recovery time in the hospital by more than half and reducing rehabilitation time by 3/4ths! And did I mention all at lower costs and better outcomes? The doctor has gathered best practices and then standardized them — an unheard of phenomenon. All the way from anesthesia to rehabilitation, including cutting down on the number of options for prostheses surgeons could order. It is a fascinating must read for ALL supply chain/sourcing people as it reads like a classical case study.

The challenges that Gawande lays out for the medical community are very significant. The first and biggest challenge is the incredible amount of time it takes for this profession to adopt (AEIOU) new ideas — decades for new protocols and guidelines to be adopted. This should come as no surprise to readers of the doctor‘s blog and our numerous discussions on this topic. Competency Development in the medical community is still not focused appropriately — “In medicine, we hardly ever think about how to implement what we’ve learned“. An example he cites is Dr. Armin Ernst who is essentially the Chief Adoption Officer. Ernst does not deal with patients — but works with the doctors at their 10 ICUs in ensuring that best practices are being adopted. He provides the same kind of oversight that was found at TCF. Do you have a Chief Adoption Officer?

The transformation in the health care sector is underway and it will borrow heavily from our profession. Supply Chain/Sourcing can and will contribute significantly. As Dr. Gawande points out, “We’ve let healthcare systems provide us with the equivalent of greasy spoon fare at four-star prices, and the results have been ruinous. The Cheesecake Factory model represents our best prospect for change“.

Thanks, Dalip.

Not Criminal, But it Should Be!

I gotta stop reading, or I’m gonna be more of an angry dad than angry dad Homer and become the Homer Hulk. What’s making me red with rage or green with gall this time? This recent report on Packaging World that America Trashes 40% of Food Supply.

How can this be? Food reserves are at an all time low; almost 1 Billion people, including almost one third of children in developing countries, are malnourished and hungry; and the cost of staples is rising to the point that people are rioting in some developed countries because prices are getting to the point where many low income families can no longer afford to put the basic staples on the table. All this in a time when world agriculture produces 17% more calories per person today than it did 30 years ago, despite a 70% population increase. This is enough to provide everyone in the world with at least 2,720 kCal per person per day – which is 30% more calories than the average person needs. In other words, if (North) Americans (and other people in developed countries) weren’t so damn wasteful, we could, in all likelihood, feed the world!

According to the article, which is summarizing research from the Natural Resources Defense Council. Given that getting food to our tables eats up 10 percent of the total U.S. energy budget, uses 50 percent of U.S. land, and swallows 80 percent of freshwater consumed in the United States, we should not even be wasting 4% of our food supply, yet alone 40%! Not only is this costing us $165 Billion that we should be using to ship excess food to those in need, but the rotting food is emitting almost 25% of U.S. methane emissions.

According to the article, reducing losses by just 30%, which is a drop in the bucket compared to the level that the losses should be reduced by, could feed more than 50 million Americans. Given that one in six Americans lack a secure supply of food to their tables, this would almost eliminate hunger in America. Drop losses by 80%, which would get them to an almost acceptable level (assuming this was just the first step in an ambitious continuous improvement effort), and that would probably wipe out hunger in the Americas.

And, getting back to the title of the article, any producer, distributor, or retailer of food products that has waste in excess of 10% annually should be fined until waste levels are under that threshold. And then, they should be forced to reduce waste by at least 10% a year for the next five years until a maximum acceptable level of waste, which I’ll pin at 5%, is reached. We can take lean to extremes on the shop floor and virtually eliminate all waste (as everything is reduced, reused, and recycled), so there’s no reason we can’t take it to extreme in the food supply chain either.

Since feeding the world is one of the biggest contributions an organization can make to corporate social responsibility, this should be a top priority.

Relative to Procurement Tools TCO

Rant on blogger, rant on along
Rant on buddy till the day is through
Rant on brother, sister too
Rant on momma like I asked you to do
And rant on fellow blogger, rant on (Rant On!) 

Today’s guest post is from Ron Southard, the founder and CEO of SafeSourcing Inc, a provider of SaaS e-Procurement solutions.

The single most significant obstacle to improvement, whether personal or professionally, is indecision, so my rant this month is relative to companies that suffer paralysis through excessive analysis when it comes to making a decision about using e-procurement tools. Too many times companies spend excessive amounts of time trying to understand or figure out procurement tools and their TCO, ROI, and CBA etc. instead of just making a decision to try something.

It really is that simple to just DO something! Make a decision already!

It is just so easy to get started with these tools today, that the above will become obvious almost immediately.

There are way too many buzz words and acronyms being thrown around when trying to decide on an e-procurement platform. As such, companies waste way to much time and money trying to understand the complexity of these tools rather than the simplicity they create in helping you and your team in executing your job.

Way too many retail companies spend way too much time meeting, talking, planning, evaluating, designing, trying to implement and then complaining about their procurement solutions. They also spend way to little time DOING. Many of these companies do not have the procurement tools, personnel or the collective capacity driven by both in place in order to compete with the big category killers in any industry (you already know who they are). So here’s a unique chance to DO SOMETHING, ANYTHING. Because the more you talk, plan and evaluate the more behind you will get. And here’s another unique thought, KNOWING is not DOING! Just make a decision.

Just because you have heard about all of the tools available to you today in the form of SAAS, IAAS, PAAS or AAAS (also none as XAAS) all delivered via the CLOUD, does not mean you know how to use them or the strategies required to make them a recurring part of your sourcing strategy and tactics. That is why they all end in the letter (S) which stands for service. And you better believe that service is defined differently by almost every solutions provider in the e-procurement space. The tools are at least 80% the same across the board, and will all drive results. The best results however will come from the companies with the best services attached to those tools. Tools that make customers say, “No one else will do the things you do for us”. The good news is that the CLOUD and all of the AAS’s mentioned above simply means that you can begin as soon as tomorrow. And, there is very little risk. So why do all of the analysis? Just make a DECISION to do something.

It’s really not that hard. Here’s what you need to do. Find a cloud based e-procurement solutions provider with all of the AAS procurement solutions and ask for three references (CEO or CFO). If the references come back as excellent, give the provider a category or two to source for you ASAP. They will probably agree to not charge you if you don’t save at least the cost of the event (cost neutral). The chances are you will see significant results in less than two or three weeks and the payback (see title) will astound you. If it doesn’t, you can turn them off (a benefit of the cloud) and begin with another immediately (another benefit). Perhaps you could even have a bake off with two or more solution providers. It’s just that easy.

If you don’t use e-procurement tools today, you are way behind the curve. The early adopters have done moved on to more sophisticated offerings. This is now a regular part of how they run their business. The good news is you can catch up quickly (another benefit of the cloud and XAAS). Don’t let the clouds and financial acronyms and all the AAS’s get in the way of a decision. Just make a decision.

See. It’s really pretty easy.

Thanks, Ron.

Best Practice Vendor Selection for True Multi-Nationals Part V: Stuck with an ERP? You do have options!

Despite claims to the contrary, you are not stuck being a sap or hearing prophecies from an ethylene-gas inhaling delphi. You do have options. Acquisitions might have some analysts in a tizzy, but you only need to remember one thing. Don’t Panic.

Ariba & Emptoris were not the only best-of-breed game in town
You still have options, and these options are on both sides of the Atlantic.

Best of Breed vendors eat, sleep, and drink procurement
Unlike do-it-all or ERP vendors, best-of-breed procurement vendors are focused entirely on procurement and, as a result, they tend to be much better at it than do-it-all or ERP vendors, especially supplier enablement, which we all know fuels the e-procurement benefits engine.

Best of Breed on an ERP backbone can offer significant advantages

  • Best of Breed providers often know the ERP systems better than the consulting implementation partners, who care more about weaseling their way into long-term strategy consulting than a successful implementation. (For example, there are a couple of vendors with over 100 customer SAP implementations, who know the system way better than a Big 5 consultant on his second implementation.)
  • Best of Breed providers have enabled hundred of thousand of suppliers, maybe more, over the years … in all regions of the world … your 347 suppliers aren’t going to make them flinch (and it’ll be faster and cost less, because once again, they’ve been there, done that … a few hundred thousand times.)
  • Best of Breed provider’s customers are all former ERP e-procurement / consulting implementation customers … that’s right, most of whom have already failed using the ERP/consultant approach, spent the millions, got 7 punchouts and 11 catalogs implemented … now they spend thousands and get … well, you already know … actual results and benefits.
  • Best of Breed providers have to be better than the ERP or broad portfolio providers, because they can’t fall back on their CRM sales or app server license revenue if they don’t deliver.
  • And because of all of this, Best of Breed providers have way more references than the ERP providers. Those big ERP guys based in Germany have two significant e-procurement references … one they’ve been using for 3 years, and another from a company I never heard of on this side of the Atlantic … I know of one Best of Breed provider who has 19 published case studies, and has only lost one customer in 14 years, and that was after this company was a customer for 9 years, and decided to outsource IT, and the outsourcer, IBM brought in an ERP to replace all of the internal systems.
  • Best of Breed providers’ SaaS-type offerings and supplier networks eliminate the need for your IT department or external consultants to be involved, so they implement faster and less expensively
  • The most successful Best of Breed providers have service organizations around the globe to assist with implementations and provide stability.
  • Best of Breed providers fill in the gaps where ERP fall short. ERP may try, but it is not all-in-one and they are usually a year or more behind the Best-of-Breeds functionality-wise.
  • Best of Breed works and they have the client stories to prove it. Follow SI’s advice and check their references.
  • Best of Breed will help your SUM (Spend Under Management) soar.

Consider your options carefully. A Best of Breed solution on your ERP backbone might be the best decision you can make.

The Lost Art of Account Management

Rant on blogger, rant on along
Rant on buddy till the day is through
Rant on brother, sister too
Rant on momma like I asked you to do
And rant on fellow blogger, rant on (Rant On!)

Today’s guest post is from Dan Kane, a Project Analyst at Source One Management Services, LLC.

In today’s information age, businesses are gaining unparalleled access to data from their suppliers. However, this new focus on a customer’s ability to access account information on their own has had an unexpectedly negative effect on the quality of supplier account management, and the ability for customers to get assistance from their account management team. This issue is especially prevalent in the technology, and financial industries, where complex issues can require multiple points of contact, and significant end-user involvement before they can be resolved. In part, this can be attributed to increasingly complex products; however a large part of the blame rests with the organizations themselves, and a new-found reliance on automation, and customer self-service. While it is understandable that not every supplier representative is versed in every aspect of these specific solutions, it is imperative to the management of a customer relationship that businesses are provided a single point of contact with whom issues can be addressed.

Problem resolution can often take the form of education, by making sure that customers have the knowledge required to access information on their own, and understand the products and processes involved with their partners. This method has yet to be widely adopted, and account managers tend to refer questions to complicated service guides, or online portals, without the instructions on how to interpret these complex, customer-facing tools.

Some functional separation is fine, and many suppliers are attempting to provide account representatives who can completely manage services provided to national organizations, however it is important to note that a single “contact” should not be SINGLE PERSON on whom organizations are completely reliant on, Situations out of the individual’s control, such as sickness, can arise and leave an organization with no recourse to solving their problem.

Few things are more frustrating to businesses than calling for support, spending 10 minutes on hold waiting to get connected, finally reaching an operator who refers them to a single person for help, and happens to be out of the office.

The necessity of accessible information should not be a reason to diminish the functionality of account managers. Even if the information that a customer wants is available to them, the purpose of management is to identify solutions to problems, and assist customers with the tools that they may or may not know are at their disposal. It is counter-productive to decrease the level of live, human support in exchange for automation, and the self-serve environment that many organizations are migrating to.

What ever happened to the delicate, human touch, and a little thing called customer service?

Thanks, Dan!