Category Archives: Agile

Platforms are Needed to Accelerate Procurement Agility – But Don’t Overlook the Offline Contributions

Over on Spend Matters UK, the public defender wrote a great post on Why Platforms are Needed to Accelerate Procurement Agility and discussed how the digitization of our everyday lives through cloud-based services served up over the internet is arguably the single greatest consumer trend of the modern era. In this post, he noted that the digitization trend has also worked its way upstream into B2B value chains and since businesses don’t want to be “digitally disrupted” by others they are searching for new supplier capabilities they can serve up as new customer-facing services.

This is a great use of digitization capability where it makes sense, but it’s not just online agility that is needed, it’s offline too. And this is where modern platforms can make the most impact.

Consider the NPD/NPI lifecycle. Right now, what typically happens is engineering works in their own little world designing a product, and when it’s mostly done, they contact procurement to help them find sources of supply and qualify their preferred manufacturing houses. This is typically done in CAD/CAM software, disconnected from everything, and can be a slow process.

Initial design might have to be slow, but the fact that its disconnected can really slowdown the NPI cycle. If design is not plugged in to the rest of the enterprise, and Procurement cannot be involved from day one, the engineers might choose discontinued parts, work with unfavourable suppliers, or even work on features that are not desired by the majority of current customers.

Then there is sourcing. Without advanced knowledge, Sourcing will not only need ramp up time to identify sources of supply, but might be stuck trying to source materials in limited supply that have a locked in price higher than the organization can afford if it wants to meet cost targets. Early involvement can help Engineering understand where the cost is and select the right design options when it has a choice.

Then there is inventory and manufacturing planning. Procurement needs to be plugged into marketing and sales to accurately estimate demand, and have to be in tune with supplier production capacities and shipment times to make sure orders are placed on time and stock-outs can be addressed quickly in times of demand surge.

The only way NPD/NPI time can be minimized is if the process goes smoothly. The only way this can happen is if Procurement is involved from the beginning and can connect with each impacted department in the organization at the right time and can communicate with suppliers quickly and consistently. This can only be done with a modern platform and illustrates why platforms are truly needed for Procurement agility.

Will Factories in a Box Revolutionize Sustainability Initiatives?

Gizmodo just ran a very interesting, and vey insightful article on how The Next Industrial Revolution Starts in this 20-foot Shipping Container about Re-Char and their Shop-in-a-Box that can perform rapid fabrication of steel parts by way of software and a CNC plasma torch. With the Shop-in-a-Box described in the article, Re-Char can produce 600 lids for Climate Kilns. This is a specialized lid-and-chimney integration that adapts a 55-gallon drum to produce the soil amendment biochar. (In Kenya, farmers burn sugarcane debris in an open field and release tons of carbon. A Climate Kiln controls the burn to produce the carbon-rich charcoal biochar that, mixed into soil, reduces the fertilizer requirements for crops by half.) This required the precision cutting of 18-gauge metal, which, in East Africa, leaves you the option of using a guy with an oxy-acetylene torch on the side of the highway or importing a full production run out of China, one full shipping container at a time. But for 30,000, Re-Char was able to produce a Shop-in-a-Box metal cutting and joining setup that could be run by two two people and produce 600 lids as a time, when needed, where needed (as the shop in a box can be moved to a new community when the needs of the current community have been fulfilled).

From a sustainability perspective, this is incredible. It’s lean, green, and completely against the routine. Actually, lean is an understatement. The power requirements are limited to what is needed to produce the lids. The energy required just to light, cool, etc. an average factory typically takes a 600 V feed … or two … or three. It’s green in that it can be powered by sustainable energy, including wind power, water power, or solar power – whatever is available. (Transformers come with the standard kit, along with generators for [natural] gas power for stability. Just add batteries and a UPS and it’s 100% green power most of the time.) And it’s completely against the routine. When the industrial revolution started, you can be that the robber barrons never predicted a moveable factory.

To date, the most (wide-spread) innovative use of containers has been data center modules, with Google a leader in this technology. (But this has been taken to the next level. For example, Green Data Center has designs for completely self-contained data center modules that you can drop anywhere. Just hook-up a power feed and an internet feed, and you’re literally good to go. (And since you can easily put a generator, or two, in a second container, you don’t even need a power feed. Just a natural gas feed, split between a couple of generators if you don’t have a sustainable power feed, for a primary feed.)

But we don’t have to stop at data centers and steel-part fabrication shops. Especially when we are talking about the developing world (which still includes much of Africa, South America, and parts of Asia). Do we really need to refine cane sugar 2,200 kgs at a time, for example? Or how about water purification? If we’re talking about a small community of a couple of hundred people, and the primary focus is clean drinking water, we don’t need to purify 100,000 liters a day! Purifying 1,000 liters would do nicely! Both processes would fit nicely in a container system. (After all, the sugar refinement process is not radically different from micro-brewing in terms of what is needed, and you could fit that nicely in a container too — although we can’t necessarily bring the same humanitarian arguments if we did.)

And when we’ve insured that everyone has the absolute necessities of clean air, clean water, and healthy food — we could ship them clothing factories in a box. It doesn’t make sense to sew shirts in sweat-shops on another continent just to ship them to small communities in Africa, or South America, or Asia, where the living wage is $2 a day or less. Considering the shipping costs alone, you couldn’t set the price at a point where you’d make many sales. Just ship a container to the town, train a few locals on the cloth-cutting production lines and find a few budding seamstresses to do the stiching, and produce the clothing where it will be sold. A zero-mile supply chain that emits zero-carbon and has zero shipping costs. And since you don’t have time-sensitive fashion industries in developing economies, you could even rotate it between a few small communities in the beginning while the consumer base and local economy built up. (Hopefully you’d also move the employees too if they were willing, as you could outfit another container as temporary living quarters without much cost or effort.)

I think the physical manifestation of the Solution-in-a-Box approach has the potential to revolutionize manufacturing, distribution, and sustainability. And it’s not like we have a shortage of containers thanks to the outsourcing craze of the last fifteen years. They’re just sitting there waiting for a good use. And with all the super-panamax ships, and super-panamax capable ports, that we have at our disposal, we can get them from any continent to any other continent with ease, in bulk, and pretty close to where we want them. And then we just need a freightliner to haul them, and there’s no shortage of those.

Why You Need Visibility

The simple act of placing data in front of people changes their behaviour.

For example, as per this recent blog post from Andrew Winston’s Harvard Business Blog, if you put an energy meter inside a home and show people total usage in real time, a miraculous thing happens: they use about 10% less energy. This is because data makes people smarter and inspires them to make small changes to save money.

So get yourself a real data analysis solution. And by this, I don’t mean a “spend visibility” system that gives you a high-level spend report once a day that isn’t useful to anyone. Nor do I mean a “spend analysis” system that doesn’t allow you to drill down and re-dimensionalize your data on the fly to find out not only which departments are spending more money on telecommunications or energy than they should, but why. Knowing that marketing is driving up your phone bill is useless if you can’t find out it’s because they never switched to your new long distance carrier. Knowing that a particular manufacturing plant has a 30% higher than average energy bill isn’t very useful if you can’t pinpoint when they are using the energy and who they are buying the energy from at that time. Maybe they are buying too much energy from the back-up supplier at a higher rate, maybe one of their machines is drawing too much power, or maybe they are just inefficient. You’ll never know if you can’t drill into the data and provide the plant manager with the information he needs to track down the reason.

You need a solution that lets you do analysis … anything else is just flash without substance. And, as David Bush astutely notes in this dead reckoning post over on e-Sourcing Forum, unless you’re shopping for lemons, beware the Purchasing Magazine list. At least half of the “solutions” on this list are not spend analysis solutions as far as the doctor is concerned.

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Some Tips on Building an Agile Organization

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A recent article in Business Intelligence had some good tips on how to build an agile organization. Since agile organizations have the processes and structures that enable them to know what is going on both internally and externally, as well as to provide the mechanisms needed to act quickly on that knowledge, agile organizations are more likely to survive in tough markets … especially if the agility extends to the supply management organization.

While many people might associate agile with technology, since agile development was the hot trend a few years ago, there is some evidence to suggest that agility has as much to do with the standard operating practice of a company, and that the best way to achieve agility is to follow some basic organizational and managerial practices and principles that allow you to see the organization in a different light, provided you have a willingness to adjust and change as needed.

To this end, the Business Intelligence article on building an agile organization listed three tips that will get you well on your way to an agile organization.

  1. Lean to Sense and Respond
    • establish relationships with your customers, suppliers, and partners and have them feed you timely information
    • create structures and processes to organize and distill the information into knowledge you can act on
    • assess how business technology investments are handled and optimize future spending
  2. Emphasize Improvement and Innovation
    • follow best practices, listen to your customers, and improve existing capabilities
    • focus on creating innovative processes through new technologies, services, and strategies
    • combine continuous improvement and innovation initiatives to constantly reposition yourself as a market leader
  3. Distribute and Coordinate Authority
    • adopt radically different forms of governance that distill your mission and objectives into easily understandable cores
    • replace traditional command and control approaches with those that facilitate coordination
    • supplement processes with personal accountability