Monthly Archives: October 2012

Three Critical Operating Imperatives to Mitigate Increasing Volatility

This summer, Patrick Burnson, the Executive Editor of the Supply Chain Management Review, published a great piece on Operating Imperatives to Mitigate an Increasingly Volatile 2012 that summarized the findings of a recent Hackett Group piece on “Six Imperatives to Respond to Increasing Economic Uncertainty”.

In brief, the six imperatives were:

    • Pursue World-Class Cost Levels
      Typical companies can realize average savings of 27 percent on the delivery of their main business services functions by achieving world-class performance levels.
    • Reduce Complexity
      In finance, for example, reducing application architecture and data complexity can enable process cost reductions of nearly 50 percent.
    • Redesign Process, Governance, and Organization Models
      Adopt business process reengineering focused on an end-to-end approach for both transactional and knowledge-centric process.
    • Move from Functional Centralization to Global Business Services (GBS)
      Oranizations that migrate to a GBS model typically go through three stages of complexity, and most are still moving from stage 1 to stage 2, which is the basis for our last post where we asked how advanced your shared services really are.
    • Build a Common Integrated Technology and Information Architecture
      Hackett Group’s research confirms that the IT strategy of technology architecture rationalization is a top priority.
    • Upgrade Talent to Support Today’s New Realities

Talent is the most critical competitive differentiator today.

But as far as SI is concerned, if you really want to mitigate volatility, the three you need to focus on, in order, are:

  1. Upgrade Talent
  2. Reduce Complexity
  3. Implement Better Technology

Because if you do this, the other three factors will fall into place. Talent realizes the best way to get results is to work efficiently and effectively and will start by trying to reduce unnecessary process complexity. If you let them do this, they will be able to redesign process, governance, and organization models to better fit your organization. This will allow them to not only impelemtn better technology, but do so in an integrated fashion. Then they will be able to get consolidate views of data that will translate into decision support information that will allow them pursue world-class cost levels. In this effort, they will determine if the best results will be obtained by keeping the function in-house or moving to a GBS model. And then the new realities will be supported.

It’s ultimately all about talent, technology, and transition — and talent has to come first.

Federalist No. 15

In Federalist No. 15, Hamilton returns to the helm to address the insufficiency of the present confederation to preserve the union; a topic he will take up in the next few essays. He does so very astutely in the questions that he asks. Consider the following:


Have we valuable territories and important posts in the possession of a foreign power which, by express stipulations, ought long since to have been surrendered?
These are still retained, to the prejudice of our interests, not less than
of our rights.

Are we in a condition to resent or to repel the aggression?
We have neither troops, nor treasury, nor
government.

Are we even in a condition to remonstrate with dignity?
The just imputations on our own faith, in respect to
the same treaty, ought first to be removed.

Are we entitled by nature and compact to a free participation in the navigation of the Mississippi?
Spain excludes us from it.

Is public credit an indispensable resource in time of public danger?
We seem to
have abandoned its cause as desperate and irretrievable.

Is commerce of importance to national wealth?
Ours is at the lowest
point of declension.

Is respectability in the eyes of foreign powers a safeguard against foreign encroachments?
The imbecility
of our government even forbids them to treat with us. Our ambassadors abroad are the mere pageants of mimic sovereignty.

Is a violent and unnatural decrease in the value of land a symptom of national distress?
The price of improved land in most
parts of the country is much lower than can be accounted for by the quantity of waste land at market, and can only be fully
explained by that want of private and public confidence, which are so alarmingly prevalent among all ranks, and which have
a direct tendency to depreciate property of every kind.

Is private credit the friend and patron of industry?
That most useful
kind which relates to borrowing and lending is reduced within the narrowest limits, and this still more from an opinion of
insecurity than from the scarcity of money.

In other words, the current confederacy of the time could not:

  • secure the valuable territories and foreign posts that would be the right of the Union
  • repel an aggression by a foreign empire
  • remonstrate with dignity
  • freely navigate the Mississippi
  • secure the public credit required for a strong nation
  • engage in free and unrestricted commerce
  • gain sufficient respectability in the eyes of foreign powers to prevent unwanted encroachments
  • etc.

In other words, given the lack of power, resources, and population within each of the separate loose confederacies, neither on its own could hope to preserve the union against an attack thereon.
That’s why Hamilton implores us to make a firm stand for our safety, our tranquillity, our dignity, our reputation and at last break the fatal charm which has too long seduced us from the paths of felicity and prosperity.

How advanced are your Shared Services?

Especially if you’re not a global 3000 working with a BoB (Best of Breed) Shared Services Advisory firm?

A recent article over on the Shared Services Link describes “Six Trends that define the Shared Services age today”. In particular, it notes that:

  • Shared Services Continue to Move Up the Value Chain
    The argument is that much of the finance function has been outsourced, the dynamic of staff in an SSO is changing (as teams no longer crunch and enter data) but instead judge and advise, and the model works.
  • Business services rather than finance services
    The argument is that we’ve moved on to business functions like HR, IT, and Procurement and this provides the organization with greater value.
  • Outsources gain share, but slowly
    Since 2007, there have been 850 major finance multi-process outsourcing deals.
  • Shared services find better ways to work in a multi-ERP environment
    They have adopted middleware technology to integrate the systems.
  • Data is evolving into insight
    Now that we’ve moved beyond process consolidation and off-shoring, we can focus on BI (Business Intelligence).
  • A new breed of being — the global process owner
    We have created end-to-end process guardians who oversee the global implementation of a process.

And while I believe this is true for the 850 multi-nationals that entered into big shared-services deals with “tier 1” shared service providers, for mid-size companies just jumping on the bandwagon, are they as lucky? Yes, the technology and processes will be there in the providers, but in order to take advantage of it, it often requires considerable restructuring and change management on the part of the company. Sometimes so much so that the leading organizations, uninterested in what will be a losing engagement during the learning curve, may inadvertently scare these organizations away to “tier 2” providers that mainly focus on process standardization and data consolidation and haven’t advanced to the third wave of BI and expert consulting. So if you’re not in the big leagues, have you yet to catch sight of the third wave?

Federalist No. 14

In Federalist No. 14, Madison returns to the helm to answer objections to the proposed constitution from extent of territory.

The first thing Madison notes is that, in a democracy, the people meet and exercise the government in person; in a republic, they assemble and administer it by their representatives and agents. A democracy, consequently, will be confined to a small spot. A republic may be extended over a large region. Hence, any objections to the loss of democracy should be refuted by this statement alone as a republic can extend government by the people over a much larger territory.

Then he goes on to note that, in the first place it is to be remembered that the general government is not to be charged with the whole power of making and administering laws. Its jurisdiction is limited to certain enumerated objects, which concern all the members of the republic,
but which are not to be attained by the separate provisions of any. The subordinate governments, which can extend their care to all those other subjects which can be separately provided for, will retain their due authority and activity. Hence, any objections to the government amassing too much power should be dealt with as the government gets no more power than the people give it.

In addition, he notes that if some distant states should derive less benefit, therefore, from the Union in some respects than the less distant States, they will derive greater benefit from it in other respects, and thus the proper equilibrium will be maintained throughout. So while some states may have to send representatives further than others to take their seat on the government, they will benefit from the greater protection offered by the union.

So while objections can be made as to the potential strength of a union, versus a loose confederacy, they can also be countered. In this piece, Madison echoes Hamilton and again conveys the argument that united we stand and divided we fall.

PDF? PDF? You call that e-Invoicing?

Over on the TradeShift website, a recent post highlights “the downsides for enterprise” of PDF invoicing. I know that SI has been preaching going “e” at all costs, but, where Supply Management is concerned, PDF is not really “e”. It’s just paper being sent over the wire.

When your buyer’s organization gets a PDF invoice, the accounts payable clerk has to print it out and then manually enter the information in the accounts payable system. And yes, they typically do have to print it out as they are usually given a single monitor setup and the entire display is usually taken up by their AP program so they have to print it out. So all you’ve done is shifted the task of printing out the paper (and killing a tree) to them.

And, more importantly, you haven’t increased the speed at which they can process the invoice, or the accuracy, and have sacrificed the benefits you get when going electronic. If you use EDI, XML, or another standard, open, document format, then the buyer can import it into their AP system automatically with 100% accuracy — and you get all the benefits that go along with faster, 100%, accurate processing. These benefits could include getting in the queue in time for early payment discounts (should you want a quicker payment) and a buyer who can more quickly detect who the active, relevant, suppliers are as your transactions get in the system faster.

So don’t replace paper with PDFs that just get turned into paper. It doesn’t help anyone. And don’t trust anyone who claims they have software that can “automatically process PDF invoices”. There are so many different invoice formats that there is no software that gets, or even comes close enough to, 100% accuracy that you know, at some point, your invoice is going to get totally messed up and you are going to get 201,211.13 for that Million dollar invoice (when it thinks the date stamp, 20121113, is actually the total amount due).