Monthly Archives: April 2016

Consumer Sustentation 74: Demand Planning

Demand Planning is a damnation. Why? As per our original damnation post,

  • traditional demand planning models require historical data
  • traditional demand planning models require market predictability
  • traditional demand planning models require market foresight
  • traditional demand planning requires knowledge of the expected price point

And how often in today’s constantly changing consumer marketplace, with new product releases coming faster and faster (to the point where your phone, laptop, and music device is out-of-date by a whole new release within a year), do you have good historical data, market predictability, and foresight? And how often can you be confident in the price-point, as a skunk-works product release by a competitor between sourcing and sale can force a price reduction to prevent inventory sitting on the shelves indefinitely.

So what can you do? (Besides burying your head in the sand like an ostrich?)

1. Get as much market data as you can.

Collect as much data as you can on your competitors imports, sales, and revenue using publicly accessible import data, analyst data, and company annual reports. It won’t be accurate, but with enough data you can often identify better trends than you could on the most similar product in your own inventory (which might not be similar, or recent, enough to be sufficiently relevant).

2. Have third parties conduct surveys on your behalf.

Sometimes the best way to gauge a market forecast is to actually conduct customer surveys and have a third party use the data to estimate demand for you. If you have no clue, the best thing you can do is admit it and get an expert to help you come up with a realistic demand forecast range.

3. Don’t focus a number, focus on a range and a potential rate of ramp-up or ramp-down.

If you know the demand is expected to be in the 100K to 200K units a month range, and the demand could double overnight, then you know that you need to contract for the low-end, but with a supplier that could ramp up to double production in a matter of weeks if necessary. And you have to negotiate a contract that allows orders to escalate, with pre-defined increases if the supplier is forced to work overtime (so you don’t get any billing surprises or animosity down the road).

4. Keep on top of sales data in real-time.

Be sure to get at least weekly PoS updates, and re-run the projections on a regular basis to detect an upswing or downswing early, so that you don’t get caught with your pants down, or, even worse, your pants off.

If you follow these tips, then you can get a reasonable grip on demand planning while your competitors flounder with the flounders.

Technology Sustentation 78: e-Privacy

Hot on the tails of data loss, comes the issue of e-Privacy. Privacy is a good thing, and e-Privacy is a better thing, but that doesn’t mean it’s not an eternal damnation to Procurement. Why?

As per our post on the technological damnation of data loss,

  • customers are always demanding more privacy rights,
  • oversight requirements are increasing as regulatory acts are multiplying, and
  • the technological sophistication required to achieve an acceptable level of security and privacy safeguards is now through the roof.

Add this to the customer fear combined with a lack of the technological understanding of the underlying security requirements to achieve e-Privacy, and it’s a very difficult damnation for Procurement to tackle. But that does not mean that e-Privacy is not capable of being tackled. Where do you start? First of all, prevent against data loss using the techniques in that post. Namely:

1. Identify the subset of data that needs to remain private.

Name, government identification number, medical record, etc.

2. Identify the systems necessary to process that data.

HR, Payroll, etc. Make sure the systems are secure, encrypt all the sensitive data stored in the application or the databases they access, and only decrypt the data for the properly authorized individuals.

3. Make sure all access to private data is logged and auditable.

And, most importantly, backed up in secure off-site backups.

4. Make sure that only the private data that is truly necessary is maintained in application systems.

Maybe you needed to do a full drug check, credit check, etc. on a potential employee as part of the hiring process, but besides “drug free” and “acceptable credit score”, does that data need to be maintained? No. Similarly, only a health practitioner needs full medical records.

5. Be sure to inform consumers of the measures you will take to protect their data.

A little education goes a long way.

LOLCat is Anxiously Awaiting Your Garden

While LOLCat appreciates the indoor lawn, now that spring has been with us for a month, LOLCat really wants to enjoy the outdoor garden again.

Also, LOLCat would like to remind you that some of the most famous people in history, ever since Nebuchadnezzar II commissioned the Hanging Gardens of Babylon, have commissioned famous gardens (including Thomas Jefferson, 19th American President), some of the most brilliant scientists have been gardeners (including Ralph Gardener, a famous research chemist), and many of your most beloved celebrities (including Oprah) are avid gardeners. It is said that the founding fathers love of gardening shaped their vision for America, and the British have always been enthralled by gardens (just count the number of famous public and private gardens in the greater London area alone).

Not only does gardening bring a number of expected, and unexpected (mental) health benefits, but it gives you a strong appreciation of the work that goes into raw material (food) production and, in turn, a greater appreciation for the complexity of the supply chain you manage a portion of on a daily basis. Remember, LOLCats are always smarter then they look. 🙂

Boost Your Procurement Value Engine

As per our last post on the subject, Procurement does not exist to buy stuff (which was its origins, but thanks to the Internet, everyone can buy stuff), but to provide value to the organization. But the identification of organizational value is not always straight-forward. Every organization is different, and every Procurement function has a different level of organizational maturity. As per the classic Hackett Hierarchy of Supply, a supply organization could still be at the level of supply assurance, could have moved on to analyzing landed cost, may have begun its entry into the modern era with an analysis of TCO, might be poised to become a leader with a foray into demand management, or, and this is the highest level of maturity, may be focussed on the art of value management.

But delivering value first requires understanding what value is to the organization (and how Procurement can contribute to it) and then requires getting a mechanism in place to repeatedly deliver that value at regular intervals. There are various mechanisms that can be considered, but regardless of the mechanism you choose (and whether it is process-based, platform-based, or a hybrid approach), it needs to be powered by an engine. And in particular, that engine, which needs to keep on churning out value like a real engine keeps churning out power, needs to be efficient and effective.

One has to keep the productivity plateau in mind. An organization that only focusses on efficiency will, at best, fail slowly. Similarly, an organization that only focusses on effectiveness will, at best, survive. But what an organization really wants to do is excel, and that requires the right intersection of efficiency and effectiveness. In particular, the organization has to focus on effective goals, implement them as efficiently as possible, and then use the savings to take on even more effective goals.

So how does a Procurement department improve its productivity? Generally speaking, the Procurement organization increases its value (for money, VfM), and the basic formula for that is simple:

Value Increase = Reduce Input + Increase Output + Reduce Energy

while focussing on categories important to the business

And how can it do that? In a category-agnostic way, it can:

  • reduce demand
  • increase Spend Under Management (SUM)
  • decrease contract costs
  • increase contract compliance
  • decrease storage and utilization costs
  • reduce risk

And how can it do this efficiently? In a general way, it can:

  • implement systems to improve cycle times
  • implement processes to reduce maverick spend
  • manage market dynamics better

And how can it translate the general to the specific? That’s a harder question to answer, but one that is addressed in considerably more detail in a new white paper co-authored by the doctor and the procurement dynamo, sponsored by Pool4Tool, on how to Boost Your Procurement Value Engine. Part I of a II-part series (with Part II coming out in Q3), this paper will give you the insights you need to understand the various levers you have to deliver true value and how you can do so in an efficient, effective, and sustainable manner.

Technological Sustentation 86: Template Mania

While template mania isn’t nearly as bad of a damnation as Big Data, Cyberattacks, Spreadsheets, Dashboards, and The Cloud, it’s a damnation nonetheless. Why?

Let’s start with the definition of a template. A template is defined using, well, any one of a dozen different definitions, including the following found on Wikipedia:

  • a pre-developed page layout in electronic or paper media used to make new pages with a similar design, pattern, or style;
  • a standardized non-executable file type used by computer software as a pre-formatted example on which to base other files, especially documents; and
  • a master page on which you can globally edit and format graphic elements and text common to each page of a document.

But none of these help Supply Management. Consider the definitions of templates commonly used by Supply Management vendors, which include, but are not limited to:

  • RFX templates to quick start sourcing projects for common or previously sourced categories
  • Strategic Souring Decision Optimization templates for pre-defining models
  • Data collection templates for analyzing surveys using BI tools
  • Scorecard templates for supplier performance monitoring
  • Workflow templates for setting up a sourcing project
  • Workflow templates for (automatically) approving invoices

And, by now, you should be thoroughly confused. And that’s the point. Extreme proliferation makes it hard to even identify what a template is. Even if we can define what a template is, it’s hard to know when it can be used. And even if we know when a template can be used, we don’t often know the right one. So how can we overcome this damnation and get through it.

1. Identify Where Templates Can Be Used

Templates can be used in spend analysis, sourcing events, contract creation, procurement monitoring, supplier monitoring, and related tasks. Start here.

2. Have Experts Identify the Right Templates for Each Instance

Have the experts in the organization identify the right templates for each area. For example, there are “canned reports” that can be used to jump-start any spend analysis effort, standard workflows / RFIs / lot structures for sourcing events that have been repeatedly found to work well, standard templates that legal starts with for templates, well known KPI-scorecards that effectively monitor Procurement progress, and best-practice supplier scorecards for strategic and tactical suppliers by vertical. Create and adopt these where needed.

3. Adopt Platforms that Embed the Templates into the Process

Now, considering that some platforms have customers with 1000+ spot-buy templates, 100+ category templates, and 200+ RFIs tied to verticals and supplier type and category, the number of templates the organization will have after step 2 will be overwhelming unless they are embedded into a platform that, using known data, guides the user to the rather small set of templates appropriate to the situation at hand, possibly by way of a few supplementary questions embedded in a wizard-guided workflow. The user should not have to search for a template, the platform should present the right template(s) based on the situation. Only then do templates become a blessing rather then the curse they have historically proven themselves to be.