Monthly Archives: August 2016

One Hundred and Forty Years Ago Today …

Thomas Edison received a patent for the Mimeograph, one of the first low-cost duplicating machines that was commonly used to print small quantities in office work, classrooms, and even churches. It was essentially the predecessor to the modern photocopier and allowed for widespread distribution of information and communication. While primitive by today’s standards, it was advanced by 1870’s standards and a critical step towards the information revolution and a boon to journalism everywhere.

And while SI typically leaves its history lessons to the weekends, this is important enough to be noted on a week day.

Economic Sustentation 21: Climate Change

When it comes to damnation, this is a doozy. While many damnations have a silver lining — a pocket of hope in a coat of despair — this is not one of them. Climate change is wiping out your crops, closing your shipping lanes, and, sometimes, killing your people.

Let’s consider the climate change shock waves discussed in our initial damnation post.

Hotter summers

More drought. More wildfires. More loss of crop, and more loss of life.

Colder winters

More blizzards and ice storms that shut down cities. More cold spells that freeze people to death.

More regulations

More paperwork hell as a result of dumb politicians, who confuse feelings with facts, that pass laws that often do the opposite of what they intend those laws to do (and almost never what they should do).

What can you do?

Very little, except do your best to prepare for the coming apocalypse and mitigate it as best you can.

1. Geographically Diversify Sourcing of Raw Materials

While major natural disasters can be devastating, they are usually localized to a small region so if you are sourcing from multiple regions, your entire supply is never affected at one time.

2. Maintain multiple options

In food and beverage, substitute fresh with frozen. In electronics, have designs that can use alternate materials, even if those materials are more expensive or slightly less preferable. For example, maybe you want silver for your devices (because it is more conductive), but if silver becomes scarcer than expected, copper might still get the job done.

3. Artificial options

For example, field grown is usually preferable (better, cheaper), but greenhouse grown is viable if it’s the only way to guarantee supply. (But not GMO over heirloom. Don’t believe the extravagant claims by those that profit most from GMO.) Zirconia can often replace diamonds. With a hardness of 9.5 on the 10 Mohs scale, it can often be substituted in high pressure experiments and in high power SiC electronic devices. Be creative. We’re coming into a world where only the strong, and ingenious, survive.

Economic Sustentation #10: Mini-Trends and Macro-Trends

As noted in our initial damnation post, trends are the foundation of forecasting, but they are also the foundation of disruption when they change unexpectedly. When it comes to Procurement, the relevant trends may be consumer demand trends, inventory trends, market trends, or any other trend that Supply Management believes will impact its operation. Trends are damming because they are truly can’t live without them, can’t live with them events. Sort of. And we’ll discuss shortly.

First we need to point out that, when it comes to trends, there are two types of trends. Macro-Trends and Mini-Trends. A macro-trend is a large-scale, sustained shift in whatever is being measured. It could be a sustained consumer shift away from landlines to mobile phones as the primary means of voice telecommunication. It could be a sustained shift from overstocked warehouses to just-in-time delivery across retail chains. Or it could be a sustained shift upwards in the value of cotton, rice, coffee, or other staples where demand, and reserves are shrinking.

Mini-trends are emerging trends, often not yet acknowledged by the media or market, that may or may not culminate in large-scale, sustained shifts in the marketplace like their macro-trend counterparts, but are still likely to have a sustained impact over a period of time long enough to be significant and have the potential, in the future, to become, or replace, an existing macro-trend. Good examples of mini-trends that do not culminate in large-scale, sustained shifts are fashion trends — such as bell bottoms, balloon pants, hip huggers, long waistcoats, or any other fashion garment that is here today, gone tomorrow. Examples of mini-trends that became macro-tends are walkmans (that helped the cassette tape industry take off), cell phones (which have migrated from business phone to home phone), and gluten-free food products. Initially, these were all small markets but all are now global.

Both can make, or break, a company, and the ability to deal with these trends is what makes, or breaks, a great Procurement organization. But how does Procurement use trends to its advantage?

1. Identify marco-trends early in their lifecycle.

The sooner the organization is aware of a macro-spend, the sooner the organization can begin to insure products are appropriately designed, sourced, and inventoried to support marketing and sales through the macro-trend. The Procurement leader will have to work with the Chief Strategy Officer to select an appropriate market research firm to help the organization identify the appropriate emerging macro-trends, so that Procurement can figure out how the organization will be prepared to deal with the macro-trends when they hit their peak.

2. Identify potential mini-trends in the incubator stages.

Min-trends rise fast, and disappear faster. An organization has to identify micro-trends that could become mini-trends as soon as possible, select those it is in the best position to deal with, and prepare ready-to-go mini-trend product/sourcing plans the same way it would prepare risk mitigation plans, so that as soon as a micro-trend (which can be thought of as a small-scale, localize, mini-trend) starts to expand (virally) into a mini-trend, the organization can put the plan into action. When a mini-trend springs up, an organization that wants to take advantage of it has to be ready to source at a moments notice. It can only do that if it knows what it needs, what suppliers could meet the need, what transportation options can get the products to market quick enough, and how it can maintain just-in-time capability for surges as long as Sales needs it too.

3. Enable Marketing to Influence the Trends.

If the market research identifies two potential mini-trends that could arise, help marketing find the right advertising agencies with the ability to create campaigns to influence consumers towards the mini-trend the organization can best support. And make sure marketing minimizes its spend so it always has the budget it needs when it needs it. This is a book on its own (and the reader should check out SI’s post on marketing procurement as well as the doctor‘s joint series with the anarchist over on Spend Matters Plus [membership required] on how to Master the Marketing Way [Part I, Part II, Part III, Part IV, Part V, and Part VI]), but the importance of the organization influencing spend, and Procurement supporting that cannot be underestimated.

Procurement Sustentation 73: Individual Consumers

As we said in our damnation post, of course individual consumers are a consumer damnation. They are the consumer damnation. From your point of view, corporations (which will soon rule the world) are bad, governments are worse, but individual consumers take the cake, especially considering most of them bring their views to corporate and government purchases. And you are left trying to deal with the inanity and the insanity. When dealing with consumers, damnations are plenty.

Why are they so damn damning?

  • Consumers are fickle.
  • Consumers are demanding.
  • Consumers are impatient.
  • And some are outright vindictive!

So what do you do?

1. Insist on Third Party Marketing Research jointly overseen by Procurement.

Do you really need feature X or function Y? Does it really have to be blue? Does the schedule really have to be moved ahead 3 months at the cost of quality and reliability? Make sure all demands come out of a well designed survey that truly captures, objectively, consumers’ true desires. And make sure you understand what they are willing to pay, when, and why. Don’t let marketing force their assumptions on you at the expense of quality, reliability, and safety.

2. Make sure you clarify the value delivered, and the trade-offs associated with altering that value.

Make sure marketing understands what they can promote, Sales what they can sell, and all departments understand what the value is — and how that value will be altered if specifications are changed. Make sure Sales and Marketing understands how costs change, quality changes, and value delivered change if anything changes so that changes are not promised, and then mandated on high too late into the NPD process to allow the organization to keep costs low and value high.

3. Make sure all products are worth the weight.

If you can demonstrate that the value delivered will be more than your competitors, whether with new features, better (streamlined) functionality, or a lower cost for a higher quality products, then most consumers will be willing to wait.

4. Demonstrate a responsible supply chain.

You’re going to get sued, even if you did nothing wrong. So make good and damn sure you took every precaution to do everything right.

5. Implement a truly hassle-free return and replacement process.

You can minimize complaints and associated costs by making it easy for unhappy consumers, regardless of the reason, to get a replacement or a refund as fast as possible.

In other words, by making sure decisions are objective, and planning is done ahead, you can minimize the damnation that is going to come your way.

Eved: Events Demystified

Eved, an event commerce company, was started to fill one of the holes in big organization spend management — event spend management. In many organizations, including those that use Ariba, event spend management can be a Million-dollar black hole — per event! For example, all most sourcing platforms can do is cut an all-inclusive PO to the event management vendor and process an all inclusive invoice, which could just be an invoice for venue, food, and services. Not much visibility or control into event spend management!

Without good expense management, companies are missing out on opportunities to impact millions of dollars of meeting and event spend because of disparate, disconnected systems and manual processes. This results in, among other inefficiencies, missed sourcing opportunities, extreme workflow inefficiencies, budget overage and spend leakage, and compliance (policy) risk.

However, with the Eved platform, the organization’s sourcing platform can cut a PO to be managed by the Eved platform, which can give fine-grained spend visibility into all event costs, track, and limit them, to a budget. The Eved platform has evolved over time to meet the needs of end-to-end event spend management including, but not limited to, budget management, program management, schedules, purchase orders, services, invoices, receiving, and other event-related requirements.

It also supports the full event sourcing process including, but not limited to, sourcing, supplier management, award, contract, change orders, invoices, reconciliation, and payment — capturing all of the necessary data for analytics and tax management. It also handles registration, attendee management, and related activities. The expense reconciliation is in real time, budget updates are real time, purchasing policies can be created and enforced, and the platform can be integrated with your accounts payable processes.

Both the sourcing process and the scheduling process can be governed using calendar-based program management. Just like good sourcing requires a good project plan with milestones, good event management also requires a solid timeline, with dates that often cannot slip in order to ensure a successful event. The platform allows milestones, tasks, and change orders to be tied to calendar dates to ensure that events get finished on time and that an event manager can see what is due to today and what is coming up. In addition, the integrated user-assigned color coding allows the event manager to see what types of tasks are (coming) due.

There are also strengths in collaborator management, statements of work, analytics, Ariba integration, and payment (including EvedPay that, through a Merchant partnership, allows event managers to use pre-paid debit cards that can be tracked through the platform using a p-Card type system). For more details on these strengths, and some of the unique Eved platform offerings, check out the recent Pro series by the doctor and the prophet over on Spend Matters Pro (membership required) [Part I]. The insights provided in this piece, particularly those straight from the prophet, are worth the long multi-part series read.