Monthly Archives: September 2014

Why Don’t We Hear Anything About Market Informed Sourcing?

Because the acronym is a MIS!

While I agree that we need more discussion around Sourcing Optimization, I don’t think calling it Market Informed Sourcing is going to help any just because people are afraid of the “O” word. Even though good optimization is “market informed” and uses up-to-date market data, people don’t really understand what “market informed” really is. When people hear informed, they tend to not only think of fact but opinion, and optimization is all about fact, not fiction.

In a recent 3-part series (Part I, Part II, and Part III) by Alan Geelson over on Spend Matters UK, of Keelvar, a company which SI reviewed in its recent post on Strange Name. Uncommon Results, he notes that while there is no consensus on the name that best describes the approach — Market Informed Sourcing (MIS) Sourcing Optimization, or Collaborative Sourcing, the view at the heart of these propositions, namely, that suppliers should be afforded the opportunity to have greater flexibility as to how they engage with buyers, is an important one. And optimization is what enables this.

Furthermore, it also enables all parties to play to their strengths without discriminating against any one group. Suppliers can submit “sealed bid” bids bundling and packaging lots together as they see fit, offering price breaks and rebates for certain volume purchases. And buyers can weight the advantages and disadvantages of aggregating spend with less suppliers, finding the right balance between economies of scale and risk mitigation should one supply source go down.

However, sourcing optimization still has not enjoyed mass adoption. Some reasons for this, as noted by Alan, include:

  • lack of process, technology, and key benefit understanding,
  • cost, which is believed to be prohibitive, and
  • perception of complexity.

In other words, as SI pointed out in its recent post on how, When It Comes to Optimization, You Need Every Insight You Can Get!, it all comes down to

  • misinterpretation and misinformation,
  • cost, and
  • fear.

Even though it should all come down to, as Alan points out,

  • finding savings without “squeezing” suppliers,
  • gaining greater control over outcomes with business constraints,
  • while keeping acquisition cost and operating costs down.

Maybe some day the truth will be known and accepted, but, until then we have to keep spreading the truth.

Doing Procurement Right Regardless of Organizational Size

A few days ago, in our post on how You’ve Negotiated but you still might not be realizing savings on marketing print, we pointed out two great guests posts by Santosh Reddy of GEP on how just throwing a problem over the wall to an expert doesn’t necessarily save you money — it just guarantees that someone else, namely the Print Management Company (PMC), makes money on your behalf.

Today, we’re going to point out another guest post by a GEP consultant, Sanyam Khurana. In his recent post on Spend Matters on Procurement Lessons for Small Businesses and Large Multinational Corporations, he notes that some strategies work well regardless of organizational size. Thus, if you are a small business that wants to get bigger, you should take take these lessons to heart and work on these strategies.

Flexibility

If you’ve been paying attention, you know that Sourcing Innovation has been emphasizing the importance of the 3T’s to successful Supply Management — Talent, Technology, and Transition Management. Transition Management requires a lot of things, but above all else, flexibility as your organization needs to adapt to, and be in, a state of constant change, in order to navigate the ebbs and flows of today’s global economy.

Cost Optimization

Whether you’re buying 100 units or 100,000 units, you still have to make sure you’re paying the right price for the right product. Over paying by 10% is still overpaying by 10%, and with smaller budgets, and margins to work with, 10% is still a lot.

Supplier Rationalization

Whether you’re a 1 Million, 100 Million, or a 1 Billion dollar company, you still depend on your suppliers for your success. In Sanyam Khurana’s post, he gives the example of a bakery that requires raw material, namely flour, to produce its goods. If the suppliers don’t deliver, the bakery can’t bake its bread. Having the right suppliers that you can depend on through thick and thin is important regardless of organizational size.

Data Management

Not only does each of the above strategies require good data to be effective, but so do other organizational strategies. For example, you can’t optimize cost unless you know how much you are paying, how much you could be paying and the value you are getting. You can’t rationalize on the right suppliers unless you are keeping good performance metrics. And while you can always be flexible, there’s no point in being flexible unless you know the direction that you should be be flexibly moving in! Plus, in today’s economy, social media is often critical to marketing, sales, and advertising — and in order to focus on the right channels, you need data!

Data, data everywhere
And all the tables burst
Data, data everywhere
It can not get much worse!

Easy Question. Easier Answer.

A recent post over on Strategic Sourcing that asked Executives:Do You Have the Right Resources asked an easy question with an even easier answer. NO.

How does the doctor know this?

1) Not only did The Hackett Group 2014 Procurement Key Issues survey report that 76% of companies stated that they needed to expand Procurement’s scope/influence, but previous studies have shown that as little as 8% of organizations are world class.

2) Large organizations that embark on a Procurement transformation journey generally take 5 years or more to become world class, and by the time they reach this point, a number of technologies or processes that were upgraded in the first stage remained untouched for three years, meaning that these organizations have to go back and start a transformation journey all over again just to stand still.

3) Since the definition of the right resources changes with operational changes, product and services changes, market changes, and new developments in talent management, technology, and operations research, even if you had the right resources yesterday, you may not have the right resources today.

When you put all this together, the chances of a large organization having all the right resources are so astronomically small that they are effectively zero. A few organizations, which fall into the Hackett Group’s world class organization bucket, are close, but the vast majority, which make up the average or laggard category, are nowhere close.

So what are these resources? For a start, as pointed out in Mickey’s post, they are the right talent, technology, and transformation (capability) resources — the 3Ts that form the base of a successful, aligned*, organization.

Talent

Even though everything changes as time goes on, one thing has been the same since global trade began. Ever since goods first floated down the Nile or first travelled the Silk Road, people ran the supply chain. And even though they may employ a wealth of tools and be hindered and aided by a plethora of government regulations, they still do. You need the right talent to succeed.

Technology

Always in a state of change, and sometimes flux, you have to not only identify the best products for your organization, but implement and utilize them properly.

Transformation Capability

Remember, it’s not people, technology, process; it’s talent, technology, and transformation because you need the ability to constantly evolve your process as needed to meet the current needs of the supply chain. If you don’t have transformative capabilities, buying the best processes and practices from a big 6 consulting firm won’t do you any good.

You need to not only acquire the right talent, technology, and transformative capability but you also need to maintain the talent, technology, and transformative capability as time goes on to truly succeed. And if you ever say you have the right resources, in today’s economy, you’ve lost the supply chain battle before it has even begun.

* More to come on this!

You’ve Negotiated – But Are You Realising Savings on Marketing Print?

You’ve Negotiated – But Are You Realising Savings on Marketing Print?

Spend Matters UK recently ran a two-part guest post by Santosh Reddy of GEP that asked if you were really realizing savings on marketing print (Part I and Part II) if you were using an outsourcing partner, such as a Print Management Company (PMC), to manage your marketing print.

In his posts he notes that the PMC comes with advantages, such as one or more pre-qualified vendors that can do all of the print jobs for all of their clients and who offer the PMC a preferential price for the guaranteed influx of work in addition to IT tools that can help your shop with digital asset management, etc. However, the PMC also comes with a disadvantage — the PMCs primary mission is to make money, not to save money for you. So the savings you get may not be as much as the savings you could get.

However, the key to savings in print is typically volume, so if you don’t use a PMC, then the category manager has to function as the PMC and make sure all print jobs get routed to the preferred vendor with preferred pricing and value-add benefits. But, as Santosh points out, this can be difficult to achieve since many internal departments, including marketing, retail, and HR, may not see the presence of Procurement as a benefit but instead view it as a loss-of-control or an unnecessary time-wasting step in the process. So how do you get the other departments on board?

Santosh presents four benefits you can sell and four less-friendly tactics you can employ if need be. Four of these suggestions in particular are quite powerful:

If these two benefits don’t get the job done:

  • one point of contact
    either the PMC or the category manager will be the sole point of contact for all internal customers – they won’t have to deal with five different print shops to find out who can do a rush print job
  • budget compliance
    it’s Procurement’s job to keep costs in line, not theirs, freeing up more of their time to do their jobs

then these two tactics will:

  • involve AP and inform them that policy states all invoices must be approved by you before being paid, as per the Procurement policy, then
  • incentivize compliance through gain or pain by rewarding those who use the process with faster services, more savings credited to their budget, etc. and punishing those won don’t by delaying invoice payments, reporting organizational losses from their actions to management, etc.

And he also gives you great advice on how to source, select the right technology to manage the process internally (whether or not you use a PMC), and establish a contract. This 2-part series is worth checking out. Given the cost of ink in North America, every penny counts!

A Brief History of Labour Day

SI was going to give you a brief history of Labour Day in North America, and Canada and the United States, in particular, where it is observed as the first Monday of September (and not May 1, which is International Workers’ Day and synonymous with Labour Day in Many Countries), but the LOLCats thought that was just too boring and did this:



Maybe next year. In the interim, maybe The Cat Whisperer can help me out!