Author Archives: thedoctor

Walmart: Still Running on a 56.6 baud Modem …

Walmart recently released a statement that it plans to use employees to do home deliveries, presumably to fulfill online orders, as recently reported on The Washington Post. the doctor couldn’t believe it at first … convinced it was an article from the Onion misposted on a real news site, but apparently it’s real.

Overlooking all the things that could go terribly wrong with this, and all of the new legal liabilities this could cause them to incur (which would give your average risk manager and Chief Counsel nightmares for months), this makes absolutely no sense from a supply chain perspective where the name of the game is cost control (unless, of course, Walmart is looking for a way to actually lose money as a tax avoidance scheme).

There’s a reason even Amazon uses third party carriers for its prime service, and the reason is that, as stated by the article, last mile logistics are costly. Very costly. And they can only be minimized by maximizing the number of packages delivered per hour by a driver. An employee who can only deliver a few packages due to space limitations in their car can’t maximize deliveries compared to a Fedex or UPS van driver that has a van built to maximize the number of packages that can be carried at one time and that is making deliveries determined by software that minimizes the delivery radius of all assigned packaged and delivery time using route optimization software (that eliminates left turns and backed-up routes).

Now, maybe Walmart is thinking that they can introduce a new kind of package assignment algorithm that minimizes the distance from an employee’s home route, and then just pay that employee for additional distance and time required (using google map calculations, etc.), but you still have the problem that the closest employee(s) may not be working that day, may not be able to do deliveries that day, or may not be able to fit the packages in their vehicle. Most of the time the software will have to re-assign and re-assign again until a viable sub-optimal match is found, and at the end of the day the cost would be more than just having a full time driver deliver everything according to route optimization software at a cost that is still more than negotiating a good volume-based outsourcing agreement with the dominant local carriers who can increase the delivery density even more.

The reality is that just because something sounds good (as in 90% of all customers live within 10 miles, where most employees are also located), does not mean it is good — and that’s why you need to perform analytics and optimization before embarking on major initiatives such as this. Because even if Walmart could get near-optimal assignments, it still needs volume, and as long as it takes 3 times as long to do anything on their site as it does on Amazon (and that is definitely true in Canada, where the outsourced development organization prefers to benchmark against sites for other real-world retailers and not Amazon from an online retail perspective), and as long as they continue to ship 6 (light) items on the same order across 5 boxes, their online volume growth is not going to be fast enough to make this idea anywhere as efficient as they hope in the next few years. This is one case where the doctor hopes their trials flop and they see the error of their ways and go back to investing in more hybrid vehicles, more efficient warehouses and inventory management methods, and other initiatives guaranteed to increase efficiency and sustainability.

Are BoB’s Days Numbered?

Today Jaggaer, formerly SciQuest, announced their merger with Pool4Tool, the world leader in direct (materials) sourcing (procurement) with the most extensive direct procurement suite and one of the largest manufacturer client bases in the Supply Management world. Hot on the heels of Coupa’s recent acquisitions of Spend 360 and Trade Extensions, Jaggaer appears to have rekindled the old SciQuest motto of buy it, don’t build it (as they acquired AECsoft for Supplier Information Management, Upside Software for Contract Management, Spend Radar for Spend Analysis, and CombineNet for advanced sourcing and decision optimization) as they haven’t really built anything new since they built their basic e-Procurement solution (originally for the Government and Education Sectors) last decade. Add the BravoSolution acquisition of Puridiom, the acquisitions of b-pack and Iasta by Selectica in the creation of Determine, and we are now in the situation where 6 of the top 9 Source-to-Pay providers got where they were through (multiple) acquisitions. [The big 9 Source-to-Pay providers that were invited to SpendMatters upcoming Strategic Sourcing Solution Maps are SAP Ariba, BravoSolution, Coupa (Trade Extensions), Determine, GEP, iValua, Jaggaer (Pool4Tool), Synertrade, and Zycus. All but Ivalua, Synertrade, and Zycus have acquired major BoB players as part of their growth.]

The BoB pool is shrinking rapidly. [Only 6 BoB providers were deemed critical enough for the first round of the SpendMatters Sourcing Solution Maps: Bonfire, EC Sourcing, Keelvar, Market Dojo, ScanMarket, and ScoutRFP. ScanMarket is already being used by Basware as their Sourcing portal and will likely be acquired in days to come, ScoutRFP is backed by VCs looking for a big exit, and Keelvar is the last BoB optimization-backed sourcing platform on the market. This list could shrink by half within a year.] This begs the obvious question, are BoB’s days numbered?

Let’s start by asking why are BoB providers being gobbled up like thanksgiving turkeys in meat-loving America? The answer lies in the fact that many older executives still believe that you can’t go wrong buying IBM, which, today, translates into you can’t go wrong buying from the biggest company in the space. So now all the big companies are trying to get bigger so that not only can they be the biggest game on the block, but also be big enough to not be crossed off the list as too risky. It won’t be long before any big procurement company wanting to be a big source-to-pay company merges or acquires the above (and any of the best-of-breed sourcing wanting to be a best-of-breed source-to-pay does the same).

It won’t be long before only a handful of BoB providers among the ones listed (and among the BoB invited to the initial SpendMatters e-Procurement Solution Maps) remain. But does this mean it’s the end for BoB?

Not necessarily. While larger mid-size and large enterprises will continue their quest for one-stop-shop solutions, mid-size enterprises will not be able to afford the increasingly large price-tags that these end-to-end suites (with all their bells and whistles) come with. As a result, while the current class of BoB providers will continue to shrink over the next year or so (as the M&A cycle peaks again), a new slate of best of breed providers will crop up to serve the mid-market, which is still a bit of a blue ocean as 40% of these companies still don’t have a solution at all!

So while it looks like BoBs days are numbered, BoB will rise again. (And then, a few years later, the M&A cycle will begin anew.)

A Supply Management Alphabet

Inspired by Edward Gorey.

A is for analysis, of data sets quite large.

B is for bid, which might leave out the surcharge.

C is for contracts to cover our backsides.

D is for demand ‘cross the customer divides.

E is for ethics, which often get overlooked.

F is for finance, where the books will get cooked.

G is for global, the world is our stage.

H is for hub, where our goods get waylaid.

I is for inventory, obsolete by the day.

J is for JIT, a difficult ballet.

K is for Kaizen, often mispronounced.

L is for labour, who strike unannounced.

M is for majeure, which suppliers will claim.

N is for negotiate, the salesperson’s game.

O is for optimize, as we’re lost in the woods.

P is for procure, we need our missing goods!

Q is for quote, where assumptions abound.

R is for requisition, for products unsound.

S is for supplier, our life in their hands.

T is for taxes, which cross many lands.

U is for upcharge, which blows up our cost.

V is for value, which always gets lost.

W is for warehouse, where our goods disappear.

X is for XML, held hostage by the code buccaneer.

Y is for yield, which is never as expected

Z is for zone, where trade is inspected.

Demand Control: Reduce, Reuse, Recycle, Redefinition and … Requisition Everything!

Part of good cost avoidance in Procurement is good demand management — reducing the consumption, and expenditure, on MRO, T&E, one-time buys for events, etc. We’ve covered the classic techniques in the past, which include:

Reduce: which can be accomplished by accurately predicting needs (and reducing waste) based on past use and current trends (and not maintaining volume levels on toner cartridges for a printer line being phased out)

Reuse: which can take the form of repurposing old equipment (as old developer workstations are probably just as powerful as the business user desktops used in the rest of the organization) or simply collecting unused/discarded collateral at an event and using it again next time

Recycle: where MRO inventory can be replenished by breaking down equipment (like workstations, production lines, etc.) that go out of service and harvesting still working parts that can be used in other equipment

Redefinition: where it’s not a need for more paper, but a need for second / bigger monitors so that people don’t need to print invoices / documents still submitted as (scans of) handwritten documents that can’t be OCR’d or that aren’t in a format the OCR recognizes or for tablets that allow executives to access their reports on the go

but a new type of demand management is popping up in the Procurement world, and it’s called:

Requisition Everything: where you have to literally submit a requisition to the procurement system so that all demand, and consumption, is tracked (and you can be visually guilted to control demand or utilization if you are consuming significantly more of a resource than your peer).

Now, this probably sounds very onerous to you and not worth it, but it all comes down to the implementation and user experience. At Coupa inspire, one company described an innovative method that they used to track and control demand on the factory floor (where workers would forget where they put their gloves, or realize they left them in the lunch room, and just go to the closest supply room or where workers would store extra tools or parts at their desks, just in case, leading to low stock signals and unnecessary ordering). They installed vending machines and when a worker needed something, they needed to go to the machine and punch in their id and slot number. Nothing was restricted (and no limits were placed), but every “requisition” was sent to the central Procurement system which not only updated MRO inventory but also tracked who used what, and allowed Procurement, and departments, to understand usage patterns better. This simple process reduced demand as it instilled the notion of cost consciousness and responsibility in the workers (who knew that their usage patterns could be analyzed and if they consumed considerably more than their peers, it would show), and didn’t really add any time or complexity to the process (as all the workers had to do was punch a few buttons) — especially since this process insured that the workers always knew where the stock was (which wouldn’t happen if it was moved around on the shelves).

Moreover, this technique is not limited to what fits in a vending machine — one could also use cheap RFID tags for larger items (of sufficient value) that would automatically be requisitioned when the tag left the store room (and be assigned to the right person using the employee record obtained from the entry control system when the person swipes their key card).

And, with micro-budgeting, it can be used to insure departments don’t go over their allotted new-hire budget unnoticed. New hire equipment can be kept in the secure storeroom, automatically tracked when retrieved, and automated re-orders made if stock gets too low. Plus, reusable equipment can be returned on employee departure, residual amortization amounts credited back to the micro-budget, and employees / departments who opt to use recycled equipment can be charged a deep discount against their micro-budget (and, more importantly, rewarded at annual recognition events as reuse stats can be tracked).

Now that almost everything can be automated, it might just be the time for Requisition Everything as the new method of employee-based demand management and cost control. Thoughts?