Monthly Archives: September 2019

How Do You Identify Dead Companies Still Standing?

They still use Excel.

We’ve known for over a decade now that errors in spreadsheets are pandemic. Needless to say that it boggles my mind that Microsoft Excel still continues to be the application of choice for supply chain and logistics managers around the world. Why do we need to remind you that Fidelity lost 2.6 Billion as a result of a spreadsheet error, that Fannie Mae made a 1.13 Billion honest mistake with a spreadsheet, and RedEnvelope lost more than a quarter of their value in a single day after they warned of a fourth-quarter loss due to a spreadsheet-based budgeting error that resulted in an overestimate of gross margins.

How long is it going to be before someone accidentally uses a plus sign instead of a minus sign in a profit formula and forgets to uncap an inventory calculation and instead of ordering 100,000 units of a profitable product, instead orders 1,000,000 units of a product that actually results in significant losses at the target sale price, for which the market demand is weak, ties up all of the organization’s working capital, and essentially bankrupts the company?

My guess, with the steadily increasing complexity of S&OP, JIT inventory management models, and supply chains, any day now! But, maybe after a few companies are brought to their figurative knees from spreadsheet errors, we’ll see the day when Excel is sh!tcanned along with the dinosaurs who still think it has any more use than a HP or TI calculator.

It’s time for anyone still using Excel to wake up and realize we don’t live in Walt Disneyland and that the story of the prince and the pauper is a fairytale. A pauper is not going to become the benefactor of princely riches by trying to save money on real supply chain and logistics software by stretching Excel to the limits just so that it can temporarily inflate the balance sheet or the profit and loss statement. In today’s uber-connected world, appearances don’t account for much. It’s not long before someone digs deep and uncovers the truth.

There’s a reason why customers are demanding end-to-end visibility of their supply chains, including those of their supply chains logistics’ partners. And a reason customers ow expect all of their suppliers and business partners on the supply chain (including logistics providers) to participate in a supply chain network. It’s because they know that the only way they can accurately manage their supply chain is to keep on top of it, that the only way they can build accurate models is with accurate data gathered from partners, and that the best reports they are going to get are going to come from supply chain visibility and planning software plugged into these “networks” (where, in reality, these are “enterprise communities” that allow the necessary collaboration, not “consumer [social] networks” where you can poke, prod, and shake your buddy for no apparent reason).

In other words, Excel has become the new paper, and, like paper, it needs to be abandoned. So if you don’t want to be the pauper, move off of this outdated technology and onto solutions designed for your supply management needs. With a plethora of Best-of-Breed solutions on the market, including modern Source-to-Pay solutions, designed for large and small providers, it’s extremely likely that there’s at least one solution that meets your needs almost exactly without too much tweaking. If you look hard enough, the doctor would bet that there’s at least three, or will be before you can look twice

Suppliers in the Solution Economy are NOT Suppliers in the Industrial Economy

Given that, in today’s Solution Economy, a company that suppliers a customer with a product or service often outsources the production of that product, or the implementation of the service, to a third party, the company needs to thoroughly understand its suppliers’ strengths and weaknesses to select the right supplier to manufacture that product or provide the service to the end consumer.

This means that, where its suppliers are concerned, a company needs to have a much better understanding of its suppliers than it did in the industrial economy. This means that a company has to start by:

  • Asking different questions, much more often
  • Observing the supplier directly

The questions need to move away from “do you have the facilities to make this product” to “what value-add do you add in the term of usability, reliability, or warranty support that we can use to meet the needs and want of our customers” and the questions have to be asked every time the customer needs change, not just once every three years when the category is resourced. You may not be able to change suppliers or alter the contract, but if you put in continual improvement and collaborative design clauses, you can at least make sure that subsequent iterations improve in the right direction. Similarly, on the service front, the focus should move from “do you provide service X” to “give us examples of how your delivery of service X met the following customer values and led to higher satisfaction ratings”.

Similarly, it’s not enough to just do a plant visit during the supplier qualification phase. There needs to be continual observation and interaction through the full contract life-cycle to make sure that the supplier undertakes continual improvement efforts, that issues are quickly identified and brought to your attention if they can not be quickly resolved, and that the level of professionalism and attention paid to you does not decrease over time as new customers enter the pipeline.

In other words, it’s not just send out an RFQ, select a supplier, have the product shipped to the end consumer … it’s make sure it’s the right product that meet’s the consumers needs and gets there at the right time with the right level of usability and reliability.