Monthly Archives: November 2015

Where do you start on your Supply Management Journey?

In our last post on the subject matter, we noted that there is no one platform, just one workflow, and the only way to make progress is to define the one workflow, identify a set of overlapping/integrating systems to achieve the one workflow, identify vendors that can provide these systems, and then select those vendors that best meet overall organizational needs and move forward.

But where does one start? This is a very tough question, and very organization dependent.

  • What does the organization have now?
  • Where is the organization in its Next Level Supply Management journey?
  • What is the talent profile — what is its average and collective IQ, EQ, and TQ?
  • What are the organization’s biggest pain points?
  • What are the organization’s top pressures?
  • What is the organization’s budget?
  • What resources does the organization have available to support implementation and change management?
  • What resources and programs do its current, and prospective, vendors have to help?
  • And so on.

It’s tough. Typically, an organization makes the jump when it’s desperate to get savings, and typically, when doing a systems buy, the organization will focus on the system that is advertised to identify the biggest return. In Supply Management, that’s a true strategic sourcing system that supports complex sourcing as only decision optimization and spend analysis technologies have been repeatedly found to identify year-over-year savings in excess of 10%, with everything else being single digits.

But identification is not realization. In an average organization without the proper processes and systems to support contract implementation, as per a classic AMR series on reaching sourcing excellence, an average organization will only capture 60 cents to 70 cents of every dollar of negotiated savings at the end of the day.

If the organization is not set up to capture savings, it has to start simple. Processes. e-Procurement. SRM to get suppliers on board with processes and programs that will allow it to capture data and insure the suppliers deliver the value they promise without constant monitoring by the buyer. If the organization is set up to capture savings, but can’t identify any, it has to look at more complex platforms or options. However, regardless of the answers to the above questions, it should start simple and work it’s way up the technology and process complexity ladder. The key to success will be adoption, and that will mean not overwhelming those that will be required to adopt the new systems and processes if success is to be achieved.

Technological Damnation 93: Technological Disasters

When we covered Environmental Damnation 18: Natural Disasters, we noted that natural disasters — including earthquakes, volcanic eruptions, and tsunamis — are on the rise. However, these aren’t the only disasters that can bring your supply chain to ruin. Man made disasters stemming from technological advances can also disrupt, and sometimes destroy, an entire supply chain (region).

Three major disasters we need to be on the lookout for are:

  • Nuclear Meltdowns

    While the proponents might like to sell us on how clean nuclear energy is compared to petro-carbon alternatives, the fact of the matter is that while the energy is clean, the waste is much dirtier, with Plutonium-239 having a half-life of 24 Thousand years and Neptunium-237 has a half-life of 2 Million years! Plus, while an explosion at a petro-carbon energy plant might wipe out the plant and immediate surrounding area, an explosion at a nuclear power plant can make an entire city, or even a small state, uninhabitable for millennia! For example, the 30 km exclusion zone surrounding Chernobyl will not be safe for human life for another 20,000 years (and even today, 30 years later when [over] half of the iodine-131, caesium-134, caesium-137, and strontium-90 — the four most harmful radionuclides that spread as a result of the explosion — have reached their half-life, workers are not allowed to work in the zone for more than 5 hours a day and not for more than one month at a stretch due to the ongoing risk to one’s life).

  • Chemical Leaks

    Most of the chemicals we use in manufacturing and production need to be transported, and most are transported by tanker truck or rail car (or pipeline between plant locations), but some are transported by barrels, especially when being shipped by sea (or air). Leaks can be dangerous if the chemical is explosive, acidic, or poisonous, especially if the leak is near a populated area or a water supply. For example, the Bhopal disaster of 1984 exposed over 500,000 people to methyl isocyanate (a toxin often used in pesticides such as Carbaryl which are designed to kill bugs hardier than us, and banned in many countries) and resulted in 3,787 confirmed deaths, 3,900 severe and permanent injuries, and 558,125 reported injuries.

  • (Natural) Gas Leaks

    Gas leaks, whether chemical or hydrocarbon, are among the most dangerous leaks, and natural gas leaks are among the most dangerous. Not only are they toxic (as we are talking about a mixture of methane, carbon dioxide, nitrogen, etc.), but they are also highly explosive, requiring only a single spark to (potentially) obliterate an area the size of (multiple) city blocks. Recent examples are the 2012 explosion in Springfield Massachusetts that destroyed 2 buildings and damaged 42 and the 1992 explosion in Guadalajara that killed over 200, injured 500, and left 15,000 people homeless.

The more we progress, the more we need more, and, stronger energy sources and more chemicals to produce our new technology, and the more danger we place ourselves, and our supply chains, in.

This necessitates the need for more safety audits, more safety practices, and more oversight — especially as more regulations start popping up to try and prevent more accidents and control dangerous substances. So not only do you have to worry about the well being of people in your supply chain, you have to worry about the well-being of your brand if you fail to maintain top safety practices, go afoul of regulations, or take your time switching away from dangerous chemicals or energy sources to more environmentally friendly sources.

This damnation always needs to be at the back of one’s mind or when it unexpectedly rears its ugly head, one will not be ready.

There is no ONE platform!

As much as we would like to realize the dream of one platform for Supply Management, it’s not going to happen — at least not within our professional lifetime. The internet, and software development, might be moving in cat years, but let’s face it, it’s been 90 cat years since true first generation strategic sourcing, e-Procurement, and other fledgling Supply Management products hit the scene and we still don’t have a single end-to-end strategic source to pay platform! (Yes, there are source-to-pay platforms, and some are rather good, but there is not one that is not missing some key piece of functionality for strategic sourcing, such as optimization or advanced analytics, or for e-Procurement, such as e-Invoicing and automated m-way match.)

But what can we expect, with the exception of a handful of organizations (that can be counted on your fingers, minus your thumbs), we haven’t even reached the era of one ERP. Larry had a dream, but outside of Oracle, I believe the number of global organizations that successfully migrated their international operations to one global (Oracle) ERP instance is 5 (and that’s why the vision of one platform went away and Oracle acquired so many other leading ERP platforms, leaving only its rival SAP standing at the end of the day once the acquisitions on both side are tallied up.)

We have the situation that no one vendor, and this includes SAP, Oracle, and IBM even after their string of acquisitions over the last 90 cat years, has a platform that fully addresses basic Sourcing, Procurement, and Logistics, and once you start factoring in CLM, SRM, Sustainability, Talent Management, and Innovation Management needs, nothing comes close, or will come close, for at least another 60 cat years at the current development pace. In addition, with the constant pace of innovation in terms of process, and the constant shift both towards globalization and specialization, nothing may ever come close.

Sauron may have forged the one ring, but not even the almighty Google will forge the one platform. So you have to stop focussing on finding the right vendor and shift to finding the right platforms to serve your Supply Management needs. To do this, you have to first ask, what is the workflow?

Even though the organization may have different processes and procedures for T&E, P-Card, indirect, and direct purchases, depending on category, department, amount, and budget owner, there is still one (mega) process that is followed.

There will be a needs identification followed by an identification of whether or not an inventory, contract or preferred vendor exists to fill that needed followed by a determination of whether an event is needed or not, followed by the determination if a requisition is needed, followed by an order (which may or may not require a purchase order) followed by goods delivery and an invoice, followed by acknowledgement and inventory, followed by determination of an approval process, followed by an approval process for the invoice, followed by a payment, followed by data capture and archival in the right systems. There is a mega-flowchart that defines the mega-workflow that is defined by everything the organization needs to directly and indirectly support the process that defines system needs and integration needs.

The answer is to identify one or more minimal set of overlapping platforms that fulfill the workflow needs, integrate with the underlying ERP and / or (Master) Data Management (MDM) systems, and, directly or indirectly (through the underlying systems) integrate with each other. Once these system sets are identified, one works with the vendors that best meet the organization’s overall needs and implement the systems that accomplish the workflow. That’s how progress is made. Nothing is gained by seeking out the one platform. It is a myth, and a myth that destroys organizational progress and productivity.

Influential Damnation 95: Competitors

Conferences are annoying, Consortiums are frustrating, but Competitors are outright damning as they are there, in your face, day in and day out. Your company makes an announcement. They try to one up the announcement. Your sales team gets in front of a customer. They weasel their way in. Your engineers get a great idea. They try to steal it. Your scientists make a big breakthrough. Here comes the corporate espionage! And so on.

But that’s just the tip of the iceberg. Procurement has its own set of problems to deal with. These include:

They compete for limited supply and drive prices up.

Markets are all about supply and demand. Sometimes supply is based on demand, as more demand leads to more supply, but sometimes supply is based on raw maw material availability. Raw materials are often in limited supply due to the amount that can be mined, harvested, or processed. And if your competitors need these raw materials as badly as you, and there is not enough to around, either your prices are going up or you’re the organization not getting your demand met.

They compete for limited talent and drive prices up.

Procurement professionals need to be jack-of-all-trades and masters-of-one. These individuals are very few and far between and your competitors will want them just as bad as you. So, not only will you have to vie for their attention, but you will have to offer the salary, training, international experience, socially responsible, and very attractive opportunities the best candidates are looking for, and one way or another, that’s going to cost you top dollar.

They compete for limited expert (technology) resource time.

Let’s face it. You’re never going to be able to find and hire enough talent in-house to tackle all of your Procurement project needs, which will include complex sourcing, strategic procurement, non-complex/non-strategic sourcing, contract (lifecycle) management, supplier (relationship) management, performance analytics, technology implementation, and data feed integration, and you will need third parties to assist you. However, due to ever increasing requirements for supply management success, and the ever increasing sophistication of platforms and processes needed to manage your constantly evolving global supply chains, you will not only need the best vendor partners, but the best talent at those partners, which is a relatively small percentage of the overall workforce. Your competitors will be vying for this talent too, and some will be making bigger (and in the eyes of the vendor) better offers for the time of these expert resources, which could leave you up the creek without a paddle.

While your organization might need competitors to justify its market, when it comes to Procurement, sometimes that’s the last thing the organization needs. That’s why Competitors are another perpetual damnation.