Monthly Archives: August 2014

There’s More Than 50 Ways …

… to leave your lover. There’s more than 50 shades of grey (as there is infinite intensity to grey-scale). And there’s certainly more than 50 shades of pay …

Over on Spend Matters, Pierre Mitchell is penning a series on 50 Shades of Pay: Spend Analysis’ Many Profitable Pleasures where he notes that spend analysis is not a quickie event and nothing could be closer to the truth. Spend Analysis is an on-going process that never ends. There’s always new spend, always new quotes, and always new ways to look at data. It’s wham, bam, spend cube and start all over again. And again. And again.

And it must be an evolving competency that is refined over and over again. There are many reasons for this, and, as Pierre pointed out,these include the facts that:

  • You can’t manage and improve what you cannot see
    and the more you see, the more you manage, and the more you’ll manage, the more you’ll see …
  • It’s a fundamental part of corporate strategy as the more you see and manage, the better you’ll be able to manage your resources and opportunities, which is what corporate strategy should be focussed on.
  • Managing your spending includes internal spending too even if you can’t control it, you still need to understand what it is, where it is going, who controls it, what could be done about it, and what the recommendations should be.
  • Spend analysis is a gift for your partners – not an IT project because it really is decision support for the organization.
  • Spend is the flip side of supply and it is about maximizing bang (supply value) for the spent buck (spend magnitude). It’s the other end of the source-to-settle process. And to optimize your Supply Management, you need to optimize your entire source-to-settle process.
  • Finance will get even more turned on by spend analysis than you if you do it right. They like shiny reports — and a good spend analysis solution can produce them en masse. (The reporting engine is actually the least useful part of a good spend analysis tool, but just like Sonny goes cuckoo for cocoa puffs, finance and the C-Suite love their reports.)
  • Spend analysis shines a bright light on the master data problems which can be cranked up to the point that it’s blinding. Some people may be embarrassed at the mess master data is in (because they spent millions on a broken ERP), but what’s more import, their pride or your bonus (which requires the company to be profitable)?
  • It’s incremental in nature – the Trojan rabbit of procurement transformation. Just like the rabbit of Caerbannog, it looks cute and sweet, but, in the right hand, spend analysis is a vicious killer of inefficiency and waste.

If Pierre manages to write 50 pieces, it will shape up to be a great series for those of you who have Plus membership. For those of you who don’t, I’ll remind you that SI co-wrote the book on Spend Visibility with Lexington Analytics 3 years ago, and this book, which has garnered over 10,000 downloads since its release, is still available for free. I’m sure Pierre will get to more advanced topics in the later part of his series then what we covered in the book, but it’s a great start. And maybe by then you can convince your boss to pay for the Plus membership to read Pierre’s posts.

Sourcing? Yes! Sourcing Tool? Maybe …

Yes, that’s right. (Strategic) Sourcing? Yes! Sourcing Tool? Maybe!

As a regular reader you’re probably confused as this blog has been advocating the acquisition and implementation of strategic sourcing solutions since day one, tirelessly explaining the benefits they can bring to one and all if they are appropriately selected, implemented, and utilized.

The reality is that a system that doesn’t support your needs and organizational processes, that is cumbersome to use and costs more in organizational inefficiency than it returns in savings or value identification, or that just sits on the shelf because your employees refuse to use it en-masse has no value. It has to be the right system for you. This system may be a low-end system, even though, as pointed out by The Prophet over on Spend Matters in his three-part series on Lower End Sourcing (Part I, Part II, and Part III),

these tools often lack more advanced capabilities, including tighter integration into third-party tools; supplier collaboration processes and overall project management; category management and comprehensive knowledge repositories; advanced workflow support and automation; access restrictions and audits beyond the basics; and advanced data collection and bid analysis

because, if an organization is just (gasp!) beginning its sourcing journey, is at the low end of the mid-tier and has relatively simple buys, or is understaffed and just needs to get the job done and get some quick hits to get more budget and support for a bigger and better system, it might be the right tool for the job. Or, if the organization is a large multi-national with complex category buys with a significant amount of its products coming from Asia, it could be the worst tool for the job, unable to support the detailed bids required, the Mandarin language for the English-challenged Chinese suppliers, or capture the information necessary for compliance and regulatory support.

An organization needs the right tool for the job — and it’s not always as simple as organizational size. One might think that Fortune 500 / Global 2000 always needs the most complex sourcing solution, high-end mid-tier needs a mid-market leader, and emerging mid-market needs a low-end solution, but that’s not always the case. It depends on what the organization is sourcing, how it is sourcing, and the gaps in current organizational systems and processes. There are situations where a low-end sourcing system is perfect for a Fortune 500. Take a bank, for instance. Most of what it sources are services. As a result, it probably has a great services and talent management solution, but needs something better for office supplies, servers, and other consumables. These are not the most complex categories or the most complex buys anymore. And a mid-market player designing custom manufactured electronic components, which uses outsourced manufacturing in China and Brazil, probably needs a significantly more advanced sourcing solution than other companies with a similar valuation.

So while the doctor fully supports sourcing systems and believes every company should have one, like a shoe, the system has to fit (like a glove). Otherwise, just like a dancer with two left feet, the organization will constantly be tripping over itself and see no benefit at all.

Today Is A Historic Day for LOLCats!

Cat Film Festivals are the new craze and today you can see your favourite internet cat stars North and South of the border!

Today, if you happen to be in Vancouver, you can check out Just For Cats, an Internet Cat Film Festival that has been touring the country coast to coast, and if you are in Indy, you can check out the Internet Cat Video Festival!

What does LOLCat have to say about this?

I am ready for my closeup!

60 Years Ago Today A New Era in Air Transport Was Born

Sixty (60) years ago saw the first flight of the C-130 Hercules transport aircraft. Originally designed as a troop, medical evacuation, and cargo transport aircraft, the airframe was adapted over the years to airborne assault, search and rescue, scientific research, aerial refuelling, patrol, and aerial firefighting — and now it is the main tactical airliner for military forces around the globe. There are now over 40 models and variants of the Hercules in service in more than sixty (60) countries.

With a range of 1,300 miles or 2,000 kilometers, take-off capability from short and unprepared strips, and the ability to fly with one engine shut down, back in 1954, the new Hercules represented a considerable step forward in supply and transport capability. And this was just the beginning. A number of enhancements have been made to the Hercules over the years to the point where it’s still poised to be the transport vehicle of choice for years to come. Right now, the US Air Mobility Command, Air Force Materiel Command, and the Air Force Research Labs are in the early stages of defining requirements for the C-X next generation airlifted program to replace the C-130s and C-17s. But this isn’t the first time a program has been proposed to replace, rather than improve, the C-130s. Programs to replace the C-130s were proposed as early as the 1980s, but the end result was always improvement of the C-130 design. The most likely outcome is a next generation C-X that takes into account everything learned over the years and produces a next generation Hercules transport vehicle.

You Need to Get Sustainable Because Customers Won’t Pay!

As per Monday’s post on Do as I Say, Don’t Do as I Do, while customers say they try to buy from companies with a good record on sustainability and ethics, but don’t always, the reality is that only 9% of UK customers and 16% of US customers rate ethical company/brand in their top 3 attributes, being considerably more concerned with value for money, price, and quality. Furthermore, while most customers say they will pay more to buy from a sustainable company, they won’t pay more than an extra 5%.

As a result, the inclination of most senior buyers might be to forego sustainability and ethics when sourcing and go for the supplier that provides the best value for money, quality, or price, especially since that’s what the average buyer wants. But this reactionist approach is the exact opposite of what you should be doing! In fact, you should be doubling down on sustainability efforts.

Consider what the average consumer wants to buy. Fashion. Electronics. Media. Now consider what these items are made of. Cotton. Rare earth Minerals. Paper. All of these items are in limited, decreasing, supply. Increased drought and increased need of limited farmland for food production are causing cotton prices to increase. Rare earth minerals are decreasing but demand in modern electronics gadgets is steadily increasing. And paper, well, there are only so many trees and some take decades to grow.

In other words, costs are going to go up — and, at some point, costs are going to go up significantly. At that point in time, the best strategic sourcing and negotiation skills in the world aren’t going to be worth a dime because you can’t source for less than cost, and if costs skyrocket because there is (much) more demand for the materials than there is supply, your costs skyrocket and your consumers go elsewhere.

But if you double down on sustainability, and source products that use alternative, more readily available, and if possible, renewable materials, from suppliers that focus on recycling and material recovery, then your costs will stay down while your competitors’ costs go up. That’s why, despite your inclination to follow your customers, you have to do a 180 in the other direction to make sure that you keep those customers as time moves on.