Monthly Archives: June 2014

The (Board) Gamer’s Guide to Supply Management Part XXV: Interlude or Why You Need to Game More to Add More Game To Your Sourcing Skills, Part I

Sourcing, like many facets of Supply Management, is not as easy as it seems. The skills required to identify the products and services required, identify potential suppliers, construct an appropriate RFI, evaluate that RFI, construct an appropriate RFP, evaluate that RFP, identify suppliers for negotiations/RFQ, assess the market, assess the RFQ responses against the market, select one or more finalists, negotiate, define the award, create a contract, and manage the whole process are quite numerous. Especially since that’s just the basic process. A determination of demand, of current market conditions, of expected cost, etc. will require spend analysis, (should-cost) modelling, and (statistical) trend projection. If multiple bids are competitive, and an auction is out of the question, then (strategic sourcing) decision optimization, and the mathematical modelling it entails, is also required. Plus, if the buy is strategic, then multiple stakeholders will be involved and cross-functional team-management skills will also be required. All this, and more, may be required just to get to a contract.

Then comes the actual Procurement. This will involve considerable skills in logistics, inventory, and global trade. When do you place the order? What is the best mode of transportation? Do you cross-dock or not? If the inventory is available too early, do you store it over-seas, before export, or locally, after import. If there are value-add components, do you take them or leave them, as they can considerably increase import or export tariffs? For example, sometimes the difference between shipping a cartridge in a printer and shipping it separately will save a few percentage points off of the total cost. (Check the HTS codes if you don’t agree.)

So, to re-iterate, you need the following skills at a minimum:

  • (Cost) Analysis / Market Analysis
    What are the current market conditions, what is the expected or best cost, etc.
  • Logistics
    What is the best method of transportation and how do you time it to optimize costs and revenues, etc.?
  • Needs Identification
    What do you need, when, and are there alternatives, etc.?
  • Negotiation
    What do you offer? What’s your minimal viable alternative? etc.
  • Project Management
    How do you balance your resources (time, money, talent) to achieve the goal? etc.
  • Resource Management
    What’s the best use of your limited resources? When do you buy and sell? etc.
  • Supplier Identification
    Which suppliers want to supply you? Which suppliers are acceptable to you? etc.
  • Trend Identification / Projection
    Are demands going to increase, decrease, or stay the course? etc.

These skills are not easy to come by and not easy to advance. For example:

  • Analysis
    requires mathematical skills and training
  • Logistics
    requires cost analysis and network modelling skills and training
  • Needs Identification
    requires the ability to elicit details from both analyses and stakeholders
  • Negotiation
    requires training and people skills
  • Project Management
    requires knowledge and training
  • Resource Management
    requires strong analysis skills and an understanding of the inherent value and limitations of each resource
  • Supplier Identification
    requires the ability to assess a supplier across multiple dimensions and know what those dimensions should be
  • Trend Identification
    requires analysis, statistical training, and an instinct for the right questions

But when do you practice them outside the job? About the only time you’ll practice analysis at any level of sophistication outside the job is when you are buying a house or a car, which is a rare occurrence. You don’t practice global logistics at home. Needs identification is limited to you(r family’s) needs, not a multitude of stakeholders across multiple departments. Negotiation is limited to bargaining with your kids to do their chores. Project Management is really time management to fit all the family activities in. Resource Management is practiced daily, but at a much smaller scale. Supplier Identification is limited to (online) store identification when you need something, and trend identification doesn’t really enter into the picture.

But gaming changes the scenario.

Turbulence, Not Just for Airplanes Anymore!

Turbulence, a flow regime characterized by chaotic property changes, that occurs regularly in the earth’s atmosphere and makes for bumpy air travel when encountered, is not just restricted to air. It’s commonly found in water as well, when the oceanic currents mix, causing rough times for many a seafaring ship.

And when you consider that one of the most common causes is the rapid variation of pressure and velocity in space and time you see that it’s not even restricted to fluid dynamics. The general concept extends to the flow of physical goods and of virtual information when that flow, seemingly regular under normal circumstances, becomes highly irregular with the slightest perturbation.

Turbulence is a hidden risk in every supply chain, and one most organizations are never prepared for because, when a risk assessment is done, it is always focussed on easy-to-identify technological, economic, market, financial, organization, environmental and social risks — not random events that can temporarily interrupt your supply chain and cause temporary disruptions with serious financial or brand consequences. Temporary disruptions which, if regular in nature, can put your organization in real jeopardy and temporary disruptions, which, by their very nature cannot be planned for or even identified in an up-front risk assessment.

For example, when buying product components from China, an experienced risk team is going to identify:

  • Supplier Risk
    Are they financially stable? Will they adequately protect your IP? etc.
  • Factory Risk
    Is the quality acceptable? Are there workplace or safety hazards that could shut it down?
  • Port Risk
    Will the product be safe? Is there any danger of strike or overcapacity? On both sides …
  • Export and Import Risk
    Are all regulations adhered to? RoHS? WEEE? Has all the paperwork been completed and submitted on time?
  • Technology Risk
    Is the real-time product tracking and distribution system reliable? Backed Up? Integrated properly with all parties?
  • Environmental
    Is the product being made or stored in areas subject to regular natural disasters such as hurricanes, typhoons, earthquakes, etc.?
  • Social Responsibility
    Is the product conflict / slave labour free? Are all employees of all partners treated equitably? Is the product, and its production, environmentally friendly or at least environmentally safe? Can the product be safely disposed of?
  • Market
    Will the market still want your product when it is available? Is a competitor going to beat you to the market?
  • Economic
    Will the economy maintain or improve? Or will it worsen, leading to reduced demand across the board? What is the job forecast looking like in target markets – job loss in those areas can weaken consumer demand.

and a few dozen other common risks from the risk identification and management playbook. But it’s not going to identify one-time random events such as:

  • Unlikely Terrorist Attack by a random civilian who goes postal and, when trying to go postal, thanks to a gas leak, accidentally blows up a building due near the docks and causes the port to become unaccessible for 3 days
  • Delayed Delivery due to Paperwork Mix-Up
    One truck is scheduled for delivery of your product to your distribution warehouse, another for mid-term storage at a competitors warehouse on the other side of the continent. And because the small carrier you’re using doesn’t have real-time inventory tracking, and your product is schedule for JIT delivery, the mix-up isn’t detected until the expected delivery date when your product is half-way across the country.
  • False Stock-Out due to Inventory Mis-Key
    The clerk enters 8,000 units instead of 80,000 into the system, stores exactly 8,000 in the proper location in the ware-house, and puts the other 72,000 units of your hottest selling product at the back of the warehouse reserved for discontinued inventory.

Each of these events can happen, and each can cause a real, unexpected, and unpredictable turbulent impact to your supply chain. Are you ready for it? Can you react and adapt when it does?

The (Board) Gamer’s Guide to Supply Management Part XXIV: The Builders (Middle Ages)

It turns out that you did such a great job building the city of OddVille that you have been recruited by another city as one of The Builders and it’s your job as a foreman to build the machines and buildings they need for their city.

In The Builders, you are one of the foreman pursuing your dream of becoming the First Builder of the Kingdom, a position that will be granted to the foreman who builds the most (valuable) buildings in the time allotted. This won’t be an easy task, as you will be vying against other foremen for the best buildings and will have a limited number of workers available to you. Each worker has a different skill set, and is capable of providing you with the different resources you need to build your buildings. Only by selecting the right buildings and the right workers will you achieve victory and become the first builder.

Another resource management city-building card-game, you have limited money to hire workers, each worker has limited ability to generate materials required for building, and you have limited time to deploy those workers. But you need to deploy enough workers to finish your buildings, as the only way you can become the First Builder of the Kingdom is to finish enough buildings to secure your victory. (Which is secured as soon as you build 17 victory points worth of buildings.)

In The Builders, you start the game with:

  • one apprentice and
  • ten coins

Then, on each turn, you can perform three actions. The actions you can choose from are:

  • begin construction of a new building or machine (by selecting one of the available five buildings)
  • recruit a worker (from one of the five available workers)
  • send a worker to work (on a building by paying his wages)
  • earn coins (by spending an action)

Just like in the real world when you are building a new Procurement department, you start with a small budget, one or two assistants, and a potential set of sourcing projects that you have to select from (as you don’t have the resources to do all of them); then you have to recruit new workers, task them with sourcing projects, pay them to tackle the projects, and hope you succeed in time. Also, if times are hard, you moonlight by taking on GPO work to make ends meet.

The complexity of the game is that, just like you experienced in OddVille, each worker has a different experience level and brings with him different resources (stone, wood, tile, and knowledge) that can be used in the buildings you need to build, and each take different amounts of different resources to build. Furthermore, you can’t assign two workers to the same building on the same turn (without sacrificing extra actions), your earnings become exponential if you sacrifice multiple actions (1 coin for 1 action, 3 coins for 2 actions, and 6 coins for 3 actions), and you can buy extra actions for 5 coins. Plus, every machine you are able to build before the game ends gives you an advantage. For example, the circular saw produces 2 or 3 wood, the crane produces 2 or 3 stone, the tile oven produces 2 or 3 tile, and the survey tool produces 2 or 3 knowledge, depending on the one that you build. These tools can be used like workers, but you don’t have to pay them.

Similarly, in the real world, each of your workers have different backgrounds and bring different skills with them; each sourcing project requires a different skill set; you add communication complexity if you assign too many resources to a single sourcing project (and pay for it with delays); building and maintaining a team costs money; and you can acquire additional revenue for your department by providing GPO services.

The game ends at the end of the round in which one player reaches 17 victory points (tallied as the sum of the completed building and machine victory points and the amount of coin possessed divided by 10).

Like OddVille, The Builders (Middle Ages) is a neat little game that, like OddVille, has the advantage that you can generally finish a game with 10 minutes per player once you get that hang of it. You can play multiple head-to-head games against your cube mate, or a couple of 3 or 4 player games in a lunch-hour.

Enjoy Your 32 Day Vacation!

The World Cup starts today.

For 30% of you, that means a 32 day vacation until the final match is played on July 13, or, at the very least, your best effort to work as little as possible during matches so that you may watch as many matches as possible.

How do I know this?

Is the doctor psychic?

Does the doctor have inside information?

Has the doctor been informed of your plans en masse?

No, he just has historical knowledge to guide him. SI has been going for 8 years (as of Monday, June 9) and over this timeframe has grown steadily in readership quarter-over-quarter, and often month-over-month, with only one exception which lasted for one month, where it saw, on average, a temporary drop in stats of almost 30%. An exception which happened almost four years ago to the day which, of course, coincided with the start of the 2010 World Cup.

So, for those of you taking vacation, enjoy it!

For the rest of you, you’ll be happy to know that SI plans to keep publishing, and will keep bringing you insights day in and day out.