Monthly Archives: March 2014

Time Critical Transport – Is it Still Needed?

A recent article over on Inbound Logistics on Time-Critical Transport: Devising a Master Plan makes it sound like expedited or time-critical transport is still difficult or even needed regularly. The reality is that, for any Procurement and Logistics organization that is with the times and using the right technology, it’s easy and rarely needed.

Traditionally, time critical transport was needed when something went awry in the supply chain and a shipment had to be expedited to prevent a disruption or stock-out that could be disastrous to a company’s bottom line. Otherwise, unless you were talking about perishable deliveries on a non-refridgerated truck, proper planning mitigated the need for expedited shipment. This situation, of course, worsened with the introduction of JIT (Just in Time) Manufacturing and delivery in the supply chain, especially considering that not only have natural and financial disasters been on the rise since this paradigm became popular, but, as expected, so did disruptions as there were no longer weeks worth of buffer inventory to absorb a minor supply chain shock.

But if you have good visibility, proper planning, and the right tools at your disposal, whether or not you are JIT makes no difference — the odds of a disruption being so significant as to require expedited shipping are low.

Specifically, if you have:

  • multi-tier supply chain visibility,
    like the kind Resilinc gives you, and know about a disruption the minute it happens three levels down in your supply chain, and not the day after a product was supposed to reach your warehouse
  • access to modern platforms to find and secure transport in real time,
    like BuyTruckload.com and FreightOS, then you can quickly get a truck when you need a truck and
  • license to global trade document platforms,
    like Integration Point or Amber Road that handle import and export compliance, including advance notification, that help you to insure there are no delays at the border

then you will be notified of potential disruptions well in advance and in time to take appropriate actions, and in the situation where it was an unpredictable disaster (such as a fire, earthquake, or flood) at your supplier’s DC just as product was about to ship, and a new shipment has to be made immediately from another location, your immediate ability to secure a new truck almost always alleviates the need for an expedited shipment — a need which is further alleviated by your ability to get your import, export, and compliance documents in order before the product ships, preventing unnecessary delays at the border.

Basically, about the only time you would have to do an expedited shipment is if you were a medical organ transport company and a new doner heart, needed halfway across the country, just became available. Other than that, with all of the options available to you to prevent the need for unanticipated shipments, or to get them under control as soon as the need arises, there just isn’t that much of a need for time-critical transport anymore. (Unless you’re still living in the eighties and using paper and fax to manage your logistics.)

Your thoughts?

Sole Sourcing In Your Supply Chain: Oversight Or …

An indicator of fraud?

As per a number of Sourcing Innovation posts, and a recent post over on Procurement Leaders on “Procurement Fraud: A Shocking Wake-Up Call”, procurement is a ripe area for occupational fraud. Outside of Accounts Payable, Procurement generally controls or influences the most organizational spend.

And not only is “Procurement Related Fraud on the Rise” (Spend Matters UK), but it is taking place at 2 out of every 3 organizations — many of which are even unaware of its presence! Furthermore, every organization affected by fraud is likely losing 2% of its revenues to fraud. Forget overpayments, duplicate payments, and other recovery audit targets that, even when extremely successful, aren’t likely to recover more than 0.5% of your revenue in supplier credits — especially when most of these overpayments can be prevented with good invoice automation. Fraud is the bigger uncontrolled drain on the average organization’s coffers, and the issue that most needs to be attacked.

Fortunately, there are tell-tale signs of fraud, and if you regularly look for, investigate, and take precautions to prevent certain scenarios, the chances of fraud occurring in your organization will be significantly reduced. A number of these signs are succinctly summarized in Mr. Ashcroft’s post on Procurement Fraud: A Shocking Wake-Up Call, referenced above, but it’s the first four that really catch your attention.

  1. Single Source Decisions
  2. Insistence on Sole Contact With Suppliers
  3. Reluctance to Change Suppliers
  4. Refusal to Issue Invitations to Tender

All of these relate to sole-sourcing, which we all know to be a significant supply chain risk as a single disruption can wipe out an entire product line or category. Sole-sourcing should generally only be used when you are producing a new product which involves turning over a lot of proprietary knowledge to the manufacturer, proprietary knowledge upon which your competitiveness is dependent, or when the product requires a new type of technique that only one supplier can currently offer at an affordable price point. Otherwise, for supply assurance and risk mitigation, dual (or tri) supply should be used.

If something is being sole-sourced for which there is no good justification, then the sole-source arrangement should be carefully evaluated as the reason therefore could be fraudulent (or, if not fraudulent, unethical, as the buyer could be choosing that supplier simply because the supplier constantly gives the buyer free tickets to sporting events, free trips to industry conferences, etc.). And if any suggestions to change the supplier meet with unnecessary reluctance or insistence not too, that’s an even bigger indicator that something could be happening under the table.

In other words, when you get right down to it, sole-sourcing is generally not a good decision. When you combine the opportunities it presents for fraud and disruption, the risk is typically too great.

Pre-Package vs. Post-Package? Or How About No Package?

Amazon wants to pre-package goods and ship them to a location near you in anticipation of your upcoming order (as per our recent post on how anticipatory demand planning is good, but anticipatory shipping?) It’s an interesting idea, but the shipping companies are going to have to upgrade their systems to make it work (as per our recent post).

However, if you’re talking about the Food & Beverage Industry, as per this recent article over on Inbound Logistics on Packaging Postponement: A Game Changer for F&B Companies, by positioning product packaging further downstream in the supply chain and closer to the consumer, food manufacturers can take advantage of different selling opportunities. If the product is selling better in a certain retail location, major restaurant chain, or even through a set of strategically-deployed vending machines, you want to get it where it’s selling best in the quantity that can sell. This will generally require the right packaging, since a vending machine portion will generally be smaller than a store portion which will be smaller than a restaurant portion as the restaurant will order in bulk to prepare in bulk.

Packaging is a conundrum. But do you even need packaging at all? (At least at the individual product level.)

Let’s consider the Amazon situation. Do they even have to package the products they are shipping in bulk at all? While it’s true that they are not a traditional store where you can walk in and pick up the item, this doesn’t mean that you can’t walk in to a “store” and pick up the item. Nor does it mean that you need packaging to affix a shipping label.

Consider Amazon’s expanding Locker service. If a good is placed in a locker, it doesn’t need a package. Neither does any good placed in any neighbouring locker. All of the goods going to the lockers can be shipped in a single “package”, and then put in the appropriate lockers. But the “package” doesn’t have to be a package — it can be a reusable shipping container. Then there’s no packaging, no waste, and shipping is on its way to becoming a sustainable business.

Basically, Amazon can re-invent the mail-order model developed by Sears, Roebuck & Co. where “mail-order” is replaced by “e-mail order” and “counter pickup” is replaced by “locker pickup” and bring back the “reusable crate”, only this time it’s probably a “eco-friendly heavy-duty plastic crate” that will last much longer.

And while you might think that this concept cannot be translated to Food & Beverage, challenge that notion. The Bulk Barn‘s entire business model is built on bulk, package-free, purchases. And all of the food and beverage products they sell can be shipped in reusable containers. (Now, I know it doesn’t work for liquids in the current business model*, but it works fine for most dry goods.)

What’s the point? You can package when, where, and how you want, but first think about whether you even have to package at all, and, if you do, if you can use re-usable shipping containers. Environmentally friendly and cost-effective, it will save you money and image points on an ongoing basis.

* But even then, we can bring back the classic milk delivery model where you return the reusable models, but update it such that you pay a high deposit each time you buy a reusable bottle, which is waived each time you return a reusable bottle, just like the eco-conscious micro-breweries are doing.

Top 12 Challenges Facing India in the Decades Ahead – 05 – Sanitation

Sanitation in India is a major problem. The fact that India is 13th among a list of the 16 countries outside of sub-saharan Africa that are poorer than it in the rankings does not do the severity of the problem justice. As we noted in our post on Poverty, in India, 55% of households practice open defecation. In comparison, in Bangladesh, which has half of the GDP of India per capita, only 8.4% of the population practices open defecation.

Moreover, only 88% of the population has access to an improved (clean) water source (for drinking). In rural areas, the statistic is even worse — 84% (compared to 96% in urban areas). That’s 16% of the population without even access to clean water. For an emerging country, this is a disgrace. In China, a country with three times the land area, the statistics are 98% and 85% (and 91% overall). Why is it so bad? Well, for starters, as of 2010, only two cities in India — Thiruvananthapuram and Kota — get a continuous water supply (which is a situation that needs to change).

This is a huge problem. Even worse than the health care situation. When you get right down to it, if more people had access to sanitary conditions, communicable diseases and infections, which account for a percentage of deaths that is (at least) 20 times the percentage of deaths that communicable diseases and infections should account for, wouldn’t be so widespread. (People can’t die from a communicable disease or infection they don’t get, and the number one way to stop the spread of communicable diseases and infection is better sanitary conditions and sanitary practices.) With respect to diarrhoea, 88% of deaths occur because of unsafe water, inadequate sanitation and poor hygiene.

Sewerage, where available, is usually in a bad state. In Delhi, for example, the sewerage network has lacked maintenance over the years and overflow of raw sewage in open drains is common, due to blockage, settlements and inadequate pumping capacities. The capacity of the 17 existing wastewater treatment plants in Delhi is only enough to process about 50% of the waste water produced. Across India, the most recent estimate (in 2003) was that only 27% of India’s wastewater was being treated, with the remainder flowing into rivers, canals, groundwater or the sea. Abysmal!

Just how bad is the situation? Consider this passage from Wikipedia:

For example, the sacred Ganges river is infested with diseases and in some places the Ganges becomes black and septic. Corpses, of semi-cremated adults or enshrouded babies, drift slowly by. NewsWeek describes Delhi’s sacred Yamuna River as “a putrid ribbon of black sludge” where the concentration of fecal bacteria is 10,000 times the recommended safe maximum despite a 15-year program to address the problem. Cholera epidemics are not unknown.

Plus, the continuing depletion of ground water tables and the continuing deterioration of ground water quality are threatening the sustainability of both urban and rural water supply in many parts of India. India can’t afford to pollute any more of its water supply and needs to get waste water treatment under control rapidly. Otherwise, health care problems are just going to get worse, and the repercussions will be substantial.

Nine Rules for Insuring the Dash For Cash

CFO World recently published a short piece on “ending the dash for cash” in which they outlined then steps to success that an organization can take to help shrink working capital in which they got it all wrong.

Good working capital management doesn’t shrink working capital, it enlarges it. So, in the spirit of Mark Perera’s “Nine Rules for Stifling Supplier Innovation” (Old St Labs), Sourcing Innovation gives you nine rules for insuring that you will eventually have to dash for cash to keep your business afloat.

  • Focus on recently overdue accounts. If the customer has a history of paying on time, but just missed a payment or two, even though chances are they just screwed up because they haven’t implemented proper e-Invoice Management and temporarily misplaced your invoice, call them up and give them a stern lecture on how deeply disappointed you are in them.
  • Insist that there is no acceptable excuse for late payment. Even if the excuse is that the customer is disputing the amount you charged them because you failed to apply a discount or mistyped the quantity they actually received (because there is no integration between your shipping system and billing system and a data entry clerk has to key in quantity). Insist they should pay now and you will resolve the dispute later.
  • Never change your standard payment terms. They worked ten years ago, why shouldn’t they work now?
  • Pay on your terms, no matter what. Who cares that the supplier has to borrow at 20% annual compounding interest to float your 120 day payment terms. That’s their problem, right?
  • Don’t fret the inventory. If sales ordered it, they’ll move it when they’re good and ready. It’s not your problem, it’s the COO’s.
  • Forget next quarter. Wall Street is only going to judge you on this quarter, so do whatever you can to put the books in the best possible light, especially if it’s year end. You’ll figure out next quarter when next quarter arrives.
  • Link performance measures to year-over-year profit. Again, that’s all Wall Street cares about, so forget about those pesky savings targets, sustainability initiatives, or long term cost reduction measures. They never materialize anyway, right?
  • Focus on quarter-over-quarter cash on hand and net income reporting. Reporting on increases in current and future liabilities just dampens everyone’s mood unnecessarily.
  • Don’t be a sucker for early payment discounts. It lowers your cost, but it lowers your cash on hand even more — and that’s what Wall Street will judge you on.

Follow these rules and I ensure you that, sooner or later, you will be making a dash for cash.