Monthly Archives: June 2016

Don’t Let Tail Spend Take You For a Tail-Spin!

Download Sourcing Innovation’s new white paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) and find out how tail spend could be keeping an additional 3% of revenue from hitting the bottom line (and, depending on your industry, and its margins, reducing your profit potential by up to 50%).

The first thing that the paper does is define just what tail-spend is. It’s more than just the “tactical” (or “nuisance”) spend in the lower-left quadrant of the famous 2*2 Krajlic matrix, which describes the traditional strategy of “purchasing management” to manage non-critical abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And it’s less than any transaction less than $200,000 which is how Accenture describes tail spend.

Tail spend is essentially that spend that shouldn’t be put through a rigorous sourcing project, because the ROI that would be obtained is not enough to warrant the effort. If the ROI is not at least 3x, the spend just needs to be appropriately managed. Maybe that’s a low bid auction. Maybe it’s the cheapest product or service in a vetted catalog. Maybe it’s the preferred item from a catalog (or even strategic) supplier to increase total spend and negotiate additional volume based discounts.

It’s not leaving it up to whomever to do whatever whenever with whomever they like. When tail spend is not managed, the following can happen:

  • rebates and discounts can be lost
    when contracted volumes are not met
  • process costs can increase
    as tail spend invoices, often submitted through fax and e-mail, continue to increaseas tail spend will inevitably expand over time (and it will increase with no accompanying or referenced purchase order)
  • liability risk increases
    when service vendors without appropriate insurance are contracted
  • reputational risk increases
    when junior buyers buy from a supplier with a poor CSR record
  • supply risk increase
    when junior buyers buy from unstable suppliers
  • non-compliance risk increases
    when mandated MWVDBE vendors or fair-trade vendors are bypassed
  • (personnel) fraud risk increases
    as buyers can put charges on p-Cards with little or no documentation (and submit the same receipt 3 times over 6 months)

In other words, tail spend needs to be managed, but it can’t be managed until you understand what it is and how it should be dealt with. This is where Sourcing Innovation’s new paper on An Introduction to Tail Spend — and why you need a technology-based solution (registration required) today (sponsored by Claritum) comes in. It will help you understand what tail spend is, why it is important, how you can manage it, and the value that can be extracted from good tail spend management.

What’s the Real Reason for the Driver Shortage?

SI has regularly blogged about the driver shortage and the dire predictions that the shortage in the US alone could top 100,000 drivers in a few years. (See this classic post on how new estimates put the driver shortage at 240K drivers, for example.)

A lot of reasons have been given for this including, but not limited to:

  • low wages
    truck drivers make an average wage over 4K less than per capita income and 13K less than median household income
  • poor working conditions
    truck drivers often have to be behind the wheel up to 14 hours a day (sometimes sitting in traffic or in lines to load/unload for over half of that), six days a week, and they don’t often get to eat well
  • poor healthcare
    as they have the worst plans possible, can’t keep regular appointments, and can’t always see a doctor on the road
  • danger
    not only do truck drivers often have to sleep in their cabs in unsafe conditions, risk getting robbed on the road, but 12% of all work-related deaths in the US are from truck drivers in auto accidents

But is the real reason that we have a driver shortage perception and stereotypes? When you get down to it, almost 95% of truck drivers are men. Even though the stereotype of the driver as a brawny, macho man dressed in a lumberjack shirt has fallen by the wayside, driving is still very much a man’s world. And even if the majority of drivers are not perpetuating the man’s world stereotype, they certainly aren’t doing anything to counter it. Consider this article over on the BBC from late fall that asked Why Don’t Women Become Truckers?

All over the world it’s the same – a woman driving a lorry gets funny looks and has to listen to unfunny jokes.

How are we ever going to solve the driver shortage if 51% of the population doesn’t want the job?

In other words, the real reason for the driver shortage may be the industry’s own fault.

Tard Wishes SI Happy Birthday


Happy Birthday. You Got Old.
 

That’s right. SI turned 10 on the 9th of June (which was two days ago). Ten long years. Many blogs have come and gone (and, in fact, only SI and SM remain) but SI shows no sign of slowing down. Education is needed as much today as it was 10 years ago, and SI will continue to deliver.

P.S. That’s high praise from Tard. At least we didn’t get:


"Happy

Decideware: Taking Marketing Magic to a Whole New Level!

When we last briefed you on Decideware, they were Taking Agency Expense Management to the Next Level! Their Production module had just entered beta, and they had the facility to track not only quotes but actual costs down to the lowest level of detail and associate it with tasks, budgets, providers, and even individual resources.

In the production module, clients define jobs in detail, associate team members, define workflow, assign to vendors, breakdown costs, and go. The definition of job can be quite detailed — name, scope, lead, budget and budget period, type, geography, org unit, and so on. It can be as detailed as necessary, supporting everything from the creation of a simple banner advertisement to a full-scale shoot of an extended informercial, with costs ranging from 10 thousand to 10 million.

Costs can be broken up by phase, and then broken down by expense type, and even resource. The module can track estimated, actual, and will then compute the variance automatically by line item, task type, and phase. This may simply sound like an enhanced version of their scope of work, but the breakdown is much more detailed and their ability to capture data much more refined. This is important, because it supports their new dashboard module.

Their dashboard module, which needs a better name, is not a dashboard at all, but the release beta of their new deep BI capability. Decideware have recently integrated Tableau and can finally bring Marketing the deep insight into spend, and performance, that Marketing has until this point lacked.

Using Tableau, they have developed custom level 1 and level 2 dashboards for over a dozen big clients and are providing marketing spend insights that are going light years beyond what Marketing has ever seen, with the deep drill down you’d expect from a standard spend analysis tools.

At level 1, clients can see how much they are spending by agency, project type, phase, task, or resource, drill down on any available dimension, and, once and for all, see average costs for resources, tasks, projects and other deliverables. They can see when the average cost per hour for banner ad creation and management is $75 and one firm is charging them $125.

This is great, but the real value comes when you start importing performance data and contrasting it against cost. Nowhere is it more true than in marketing that “it’s not what you spend, it’s the impact you make”. It’s not how much more or less than the average you pay for social media campaign marketing, it’s how many impressions you make and clicks you get. If the average impressions on a campaign that cost $5000 is 500, and the average click throughs 15, then paying a company $10000 for a campaign that gives you 2000 impressions and 100 click throughs is a great deal, as you are paying 100 per lead vs. 333. And while most good marketers will get this data from a focussed campaign, how many can integrate it with the cost of campaign (banner ad) creation, how many can contrast it against similar campaigns, and how many can do that against normalized costs around the globe? None. But now they can.

With their latest development, DecideWare have not only taken (Marketing) Agency Management to a whole new level, they have also taken the insight into the ROI into a whole new level. Which creative genius is worth the $500 / hour (as his contribution can now be compared to end results across all his projects and his cost per effect normalized and compared against the other creative geniuses at the other agencies)? And which one isn’t even as productive as a $50 grunt doing stock art. With the new Decideware platform, not only can Marketing win the Agency Management Battle, but the cost management war.