Monthly Archives: December 2013

The First World Postal Services are in Trouble, But …

Royal Mail in the United Kingdom was founded in 1516.

The first post-master general was appointed in the US in 1775.

Canada Post was founded in 1867.

But yet it’s Canada Post that could be the postal service to show how struggling postal services may yet survive in the twenty-fist century!

As reported in this post over on The Economist Blogs, Canada Post, also looking at large pension shortfalls (to the tune of 6 Billion), is the first of the big postal services to make the drastic changes required to keep financially viable in the new world of online advertising, billing, and payments and private delivery services. It appears that Canada Post is going to be the first to eliminate home mail delivery — putting everyone on community mailboxes.

Home delivery to the 5 million households who still receive it will be phased out over four years, beginning in 2014. They will join the 3.8 million households that already go to a group mailbox to collect mail and parcels. (Canada’s remaining residents collect mail from building lobbies, public and private post offices, or rural mailboxes.)

Unfortunately, staying alive will also result in 8,000 postal workers being cut from a postal staff of 55,000. Hopefully the private parcel delivery services will continue to grow, especially with the growth of online commerce in Canada (led by Amazon and it’s recent introduction of its Prime Service in Canada), and pick up a large number of these displaced workers.

Now, the home mail delivery alone, estimated to save 500 Million a year, won’t make that much of an impact against a 6 Billion pension shortfall, but it’s a good start, especially if Canada Post’s savings projection of 700M to 900M a year by 2020, from all of the changes it plans to make, comes true.

Why Big Brains Will Beat Big Data in Procurement


Today’s guest post is from Ryann Kahn, Marketing and Communications Manager at Source One Management Services.

Two weeks ago, the Sourcing Innovation blog published an article about how the three cognitive traps stifle global innovation. I couldn’t help but think about how the same points could be made in procurement: data (though usually we don’t have Big Data) can help overcome some common issues, but ultimately Big Brains are more important and effective at the same job.

Take a procurement sourcing project for example.

The commonly used traditional three-bid process is data driven. It implies that if you collect enough (i.e. three pieces of) data, then you are making a good decision. Now, by collecting three bids, you know you are not getting the worst price and service out there and you are encouraging some competition. But without category expertise or a strategic process in place, can you really consider the data alone enough to justify that you have made a wise and innovative decision? Data != strategic sourcing.

But the data itself can often lead to the confirmation bias that the doctor referenced previously. Was your RFP template (or software solution) structured in a way that drove you to the conclusion that you already had envisioned? For example, if you want to remain with your local incumbent supplier, does your scorecard penalize suppliers for not having a location near you? Did you only request pricing on a specific product, which you knew your preferred supplier had the best (or only) price available? Confirmation bias in the sourcing world is real and common. Many companies effectively eliminate competition with better solutions because of the way they structure their questions.

By contrast, a true strategic sourcing process uses data in a Big Brain process.

The first step is a spend analysis of data from contracts, supplier invoices, P-Cards, supplier reports, POs, and more. (That’s a lot of data.) Then we look at market intelligence, historical trending, new products or process enhancements and benchmark data. (Now that’s Big Data!) All of this information is pulled, assessed, and analyzed. But the data alone does not give a full picture of a company’s spend. It takes the “curious, open mind” to uncover the whole story. Data may suggest inadequacies, but only through more in-depth research and thorough interviews with stakeholders and end users will one be able to identify problems and usage requirements.

The next step of the strategic sourcing process is the sourcing strategy. Again, it begins with data collection to cast a wide net of suppliers and determine their capabilities. But the bulk of the work in this stage belongs to the Big Brain: creating the supplier strategy, envisioning an RFx strategy, and planning for an execution strategy.

Even if procurement evolves to join the Big Data bandwagon, data will never be able to replace a human category expert. A category expert comes armed with nuanced knowledge of market trends, characteristics, players, and history, and uses analytical skills to apply that to plain data. Or, as the HBR article says, “When we look at markets different from our own we often have little information”. An expert who has been intimately involved with sourcing a category for years will be able to achieve better results than a novice armed with data, or the most powerful e-sourcing tool, any day.

In the final phases of the strategic sourcing process, implementation and compliance, it is entirely the work of a Big Brain. Experts must ensure that a company is actually achieving the results that were identified in the earlier phases in terms of savings and level of service. These experts may use tools to help collect the data to support the process, but the tools themselves don’t do an adequate job of capturing the data that is important to the unique organizational situation.

Data can, and does, help make good sourcing decisions, but ultimately it’s the Big Brains that lead the way. A Big Brain will always be needed to strategically apply the data (big or small), and be the “curious, open-minded researcher” to make a good decision.

Thanks, Ryann.