Monthly Archives: April 2017

Dave Caroll was Lucky! United Only Broke His Guitar!

Reading this incident (reported on cbc.ca) about how United is now forcibly removing paying passengers from planes after assigning them a seat and allowing them to board, and knowing how little room there is to maneuver in those aisles, it seems that boarding a plane now comes with the risk of getting broken bones! (While it, fortunately, did not happen this time, getting an arm or leg caught on an armrest or having one’s head banged into the overhead bins could easily result in a dislocation, fracture, or even a break!)

I guess the lesson here is clear! Do NOT fly United! (And when sourcing travel, leave them OFF of the potential preferred carrier list during negotiations.)

For those who have forgotten, you can go view the entire trilogy of videos Dave made about his horrendous experience on YouTube through the links in this 2010 post:

United Breaks Guitars (The Trilogy): 10 Million Views, All Thanks To You!

(FYI: The trilogy is now closing on 20 Million Views.)

Coupa Enters into a Share Purchase Agreement for Majority Ownership of Trade Extensions

SI typically does not do analyze of acquisitions and, unlike it’s brethren, does not do public analysis of transactions until the deal is done because it ain’t over until the fat lady sings, or in silicon valley, it ain’t over until the money hits the bank. And even though the chances of this deal not completing are, in the doctor‘s view, extremely small, he’s still going to withhold his analysis until the deal is done.

That being said, there are huge implications for both parties once the deal completes, and just like you should be doing risk mitigation when a potential disruption event is identified in your supply chain, you should be doing a cost/benefit advantage/disadvantage analysis as soon as a large acquisition that impacts your primary platform is announced. Every acquisition brings with it opportunities, but if an organization is highly resistant to change or locked into an existing platform or, even worse, a current (but now no longer) partner solution, there could be disadvantages as well. So do your homework and be prepared to take advantage of any opportunity that arises.

And if you want analysis, Spend Matters US and Spend Matters UK have chimed in already. You can start there. SI is providing these links as information only. While the doctor did provide his insight into the Trade Extensions’ technology platform strengths and capabilities for an upcoming piece on Spend Matters, he is not releasing his views on the merger (announcement) until its done and none of the speculations as to the implications of the merger in that piece are his. (However, the technology assessments of Trade Extensions are likely all his, and as these are not impacted by a business transaction, he will comment on these freely if asked. Great thing about software is it’s code, and code is algorithms, and algorithms is math, and it does what it does.)

Coupa Enters an Agreement to Buy Trade Extensions: A Game Changing Move For Strategic Sourcing by the prophet, Spend Matters US

Coupa Acquires Trade Extensions, Leading Sourcing Optimisation Software Provider by the public defender, Spend Matters UK

The SEC filing is online for those interested.

Classic (Friday) Rant: The Key to a Successful (Virtual) Procurement Center of Excellence? No MBAs and No PMPs!

As you know, the doctor is pushing for platform-powered Virtual Procurement Centers of Excellence, and some of you might be wondering how to staff them.  The answer is, with the best Procurement Pros you can get.  Who are they? The answer is often industry, Company, and sometimes even category specific, but to get you started, we’re going to reprint this classic post that defines who they are not and, in traditional SI style, pulls no punches.

Regular readers will know I’ve been blasting MBAs (Master of Business Administration) for years and feel that the degree on its own is worthless (a belief that has started to be echoed by many progressive US companies who realize that MBAs have too much training on the coastline of business and not enough on the mainland, as pointed out by Robert Kaplan on The Hollow Science). In a nutshell, if all you have is an MBA, then, as far as I’m concerned, you’re just a Master of Business Annihilation!

But what regular readers don’t know is that I hold project / product managers with no education or skill in what they are attempting to manage in the same regard and believe that PMPs (Project Management Professional, as certified by PMI for e.g.) with no other skills are nothing more than certified, legitimized, pimps. (Think about it. All you are to them is a resource with a skill to be sold to the highest bidder. The only difference between them and a street pimp is that, while the street pimp is selling a resource with physical skills to the highest bidder or favoured client, they are selling a resource with mental skills to the highest bidder, or favoured executive.) The reason that I’ve been quiet is, until now, I’ve had no proof. But thanks to a recent Hackett Group study, nicely summarized in this Information Week article on Project Management Offices: A Waste of Money, we now know that not only are you not expected to get better business outcomes or project delivery performance if you use a PMO (Project Management Office) staffed with PMPs, but using one might actually decrease outcomes and/or performance. In fact, the study found that an IT organization’s performance actually improved once the PMO was eliminated.

What everyone seems to be forgetting is that, especially today when the level of process and technical sophistication in most fields is higher than its ever been and the pace of advancement is still relentless, you cannot effectively manage what you do not understand. While the basic principles of good business and project management are the same across disciplines at the high-level, 30,000 foot view, the implementations vary, and the knowledge needed to understand if a project is really on schedule or if a disruption is serious or not is different across every industry, organization, and project — especially in software and engineering. Every project comes with its own unique challenges, many of which will be deeply technical or process oriented. And if you don’t even understand the ramifications of the second law of thermodynamics, don’t expect to understand the challenges your design engineer is facing when the system keeps overheating at normal usage levels and how long those challenges might take to resolve.

Now, to be clear, I’m not denying the usefulness of MBA skills or project management skills, as they are useful when layered on top of a deep understanding of the organization’s supply chain or a relevant engineering degree (when one is managing an engineering project) — as they are incredibly useful in these circumstances, just denying that these degrees and/or certifications have any value on their own. In fact, as some recent studies have shown, on their own they can be down-right destructive!

So if you want a successful Supply Management Center of Excellence, forget about the MBAs and the PMPs and look for people with the skills in the disciplines necessary to create and deliver your products and services. If you produce electronics, look for designers, electrical and electronics engineers, risk management experts (to prevent supply disruptions from your dependence on rare earth metals), finance experts (to help manage working capital until the first product is sold), and any other cross-functional expertise necessary for a successful product. If you find the right experts, you can then train them in the project management and business skills that are required. And since these skills require substantially less capability and training than the disciplines the experts have already mastered, your experts will be able to master these skills given sufficient time and proper training. (On the flip-side, the chances that a PMP with only an associate’s degree in psychology is going to gain a sufficient mastery of power electronics to truly understand the project requirements to design a new overload reset switch for a local power grid are slim to none.)

To Truly Be Successful at Supplier Risk Management, ADMIRE!

Now that we’ve carefully explained that you’re just not up to the task of preventing a black swan event, hopefully you have made risk management a priority. So, to help you understand, at a high level, what this is, we’re reprinting this classic post from 2010. Most of the articles out there get the basics wrong, but if you get them right, it’s not that hard to do a decent job (especially if you get a good platform to help you out). Enjoy!

Not only is supplier risk at the forefront of thought these days, but articles on it are at the forefront of online publications as well, including this recent article in Supply Chain Digest on the key drivers of successful supplier risk management. However, most of the articles miss the point.

For example, according to this article, the trick to successful supplier risk management is to:

  1. engage top-level management,
  2. segment suppliers based on relative risk,
  3. rigorously measure and manage risk,
  4. give category managers tools and training, and
  5. collaborate with key suppliers.

Which is all good advice that is fine and dandy, but it misses the point. Risk management is all about identify risks, identifying mitigations, monitoring risks, and executing mitigations at the appropriate time. Management support is important, but it doesn’t have anything to do with risk identification or mitigation. Segmentation is a good tactic as more attention needs to be placed on suppliers which represent more significant risks, but again it has nothing to do with risk identification or mitigation. The same goes for giving category managers tools and training. Collaboration is relevant only if the mitigation requires collaboration. In other words, in this list, the only key driver is the “rigorous management and mitigation of risk”.

The reality is that success depends on your ability to ADMIRE the situation. Specifically, the ability to:

  • Ascertain the risks,
  • Define the risks that could cause significant damage,
  • Monitor those risks,
  • Identify appropriate mitigations,
  • React when signs of the risk begin to materialize, and
  • Engage the supplier when collaboration is required to mitigate the risks and
  • rinse and repeat

That’s it. But don’t forget the rinse and repeat. The biggest risks today are not the biggest risks tomorrow, so you always have to be actively engaged in risk management. Always. And since there are always more risks than you can actively address and mitigate, at any particular time you need to focus on the major ones (but still monitor for, and evaluate, the rest and as soon as they become likely or potentially costly, elevate the priority so that a mitigation plan is prepared in time).

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The Black Swans are Gunning For You!

Maybe, after years of humming and hawwing you finally put a proper supply chain risk management program. Maybe you feel you’ve learned enough about disruptions to identify them early and react quickly and the threat of those black swans has been minimized. Maybe you just had the worst disruption in a decade and you know that there are few of them (outside of their native Australia), but many organizations, and the odds are that you won’t see them again for a decade. Maybe you’re safe. Maybe.

But what you don’t understand is these swans are angry. Very angry. And they have a right to be. How would you feel if you were, more or less, consider the ugly duckling compared to your white cousins. Ridiculed and reviled thanks to Dr. Taleb who called you out as the cause of every single unexpected event that few predict, especially when those events have devastating consequences. And to top it off, associated with your raging white cousins that are, the vast majority of the time, the perpetrators of the “swan attack”.

So what do you do when you’re angry? You get revenge. On the biggest targets. And what’s the biggest target? The modern, global supply chain.

And before you think the doctor‘s off his gourd, he knows that, 99.999% of the time your supply chain disruption is not the direct cause of a black swan attack, but that no matter how good you think you are at preventing and detecting black swan events, you’re not good enough. At least not yet.

How does he know this?

  1. The percentage of Procurement organizations that have dedicated risk management solutions is miniscule.
  2. The percentage of Procurement organizations that have dedicated risk management solutions and leading SRM solutions is smaller still.
  3. The percentage of Procurement organizations that have dedicated risk management solutions, leading SRM solutions, and modern strategic sourcing / supply chain optimization solutions is much smaller still.
  4. The percentage of Procurement organizations that have dedicated risk management solutions, leading SRM solutions, modern strategic supply sourcing / supply chain optimization, and six sigma level disaster planning capability is so much smaller still that it’s almost non-existent.

And the reality is that unless you’re at level 4, you’re not going to see enough of the potential disruptions headed your way to analyze their impact probability and potential severity, and you won’t even get a hint of coming big, “black swan” events, until the tsunami is right on top of you and there’s nothing you can do to get out of it’s way. As a recent post by the public defender  points out, events that seem unlikely, surprising, or virtually impossible do happen, more often than we expect, and our risk analysis, mitigation approaches and management actions should bear this in mind.

And most importantly, just because they are half a world away doesn’t mean that they won’t devastate your product line in two months when you’re supply can’t supply because their supplier didn’t supply because the raw material supplier couldn’t supply because the earthquake collapsed the mine — something you could have known two months ago with monitoring, which might have given you enough time to get your disaster recovery plan in place. You’ll still be affected. Costs will still go up. Workloads will still double. But you won’t be up the creek without a paddle (just in a more expensive boat with an un-preferred, less favoured one.)