Optimism is cute …
… but managing by spreadsheets isn’t effective. Get yourself a real analysis or trade management solution.
Category Archives: Knowledge Management
Does your Global Trade Management Platform Have Content and Connectivity?
A recent article in Industry Week on “The Role of Content & Creativity in Global Trade Management” by Adrian Gonzalez of ARC Advisory Group noted that compliance is only one component of a best-in-class global trade management solution: content and connectivity are also critical. According to Adrian, companies must have accurate and complete trade content for every country they operate in and trade with in order to successfully comply with trade regulations and prevent customs clearance delays because a GTM solution without a comprehensive and continuously updated trade content database is only marginally useful.
According to Adrian, trade content should include:
- denied parties
- embargoed countries
- harmonized system chapters and descriptions
- license codes, descriptions, & requirements
- document templates
- duty, value added tax, excise taxes, and seasonal taxes
When you think about it, Adrian is right. Without proper tax rates, you could pay the wrong duties and get hit with fines and penalties. Without harmonized tax system data and license codes, you could mis-categorize your shipments and have them seized. And, without denied party or embargoed country lists, you could risk criminal charges. You need content. And if your platform provider can’t provide it to you, you need to get it from third parties, just like you’re probably doing with your supplier data.
Plus, sourcing in a trade data silo can have serious and costly consequences. Purchasing managers must take into account duties and taxes in total landed cost calculations, as well as countries of origin. Are there currency exchange risks that need to be estimated? Additional transportation costs? Preferential trade agreements, or a lack thereof?
Sourcing professionals will not be able to get this data without connectivity, which is also of critical importance because a cross-border shipment typically involves the exchange of information with about 25 external parties, including custom agencies, freight forwarders, brokers, banks, regulatory agencies, transportation providers, and suppliers. Thus, it’s important to make sure that the solution you select integrates with key external systems and supports open standards for information exchange.
Purchasing 0.3
Is Purchasing Magazine trying to give me a heart attack? Isn’t it enough that they refuse to acknowledge the presence of Sourcing Innovation (which, as you know, is one of the few blogs that brings you real supply management content you can use day-in, day-out six days a week, every week) which they dropped from their “News from the Web” feed years ago (when I first ripped apart one of their sloppy articles)? After reading a few of their recent articles, my blood is boiling!
That’s right! That bullcr@p that Spend Analysis is expensive (see last Thursday’s post) is just the tip of the iceberg. And even though many of the quoted individuals had good advice to share, in the end, Purchasing’s recent article on “Purchasing 3.0” is just as bad and filled with absurdities … which start on the first line! (If Purchasing had their way, we’d regress to Purchasing 0.3!)
Have you used Social Networking to build supplier relationships?
I Hope Not! Since all Facebook is good for is Facebook parties that result in “Million dollar homes being trashed” (Metro.co.uk) …
If you want to build drinking buddies relationships, yes, Facebook will work great … but what you want is productive and professional relationships where you can work together to make each of your businesses better.
Are you sure you’re using Excel effectively?
You can’t use Excel to manage your supply chain! How many fracking times do I have to say it? Spreadsheets are bad strategy, prevent innovation, and cost you billions! You’re better off using an etch-a-sketch like the dork in It’s All About the Pentiums (2:54 mark). (And just because it’s still all about the pentiums, baby, that doesn’t mean it should be!)
Do you, uh, Tweet?
Are you kidding me? Hasn’t Twitter Turned Too Many Into Twits already? It appears that Twitter has already made twits out of at least 3 in 10 students! The only things that should go “tweet” are Tweety Bird bird and Rockin’ Robin (Muppet Version).
With the prevalence of ERP systems in large companies, more purchasing professionals … should be focusing on developing advanced database skills.
Uhhm, no. Purchasing professionals should be focussed on learning advanced data analysis skills. This is not quite the same as learning advanced database skills. Purchasing managers don’t need to know how to configure, manage, scale, back-up, restore, and replicate databases … that’s what DBAs are for. Purchasing managers know how to use today’s spend analysis tools, which require them to learn how to build and manipulate cubes through dimension-driven UIs, not how to optimize 4 level nested SQL statements … that’s what the tools do! (And frankly, even your average CS graduate would have a hard time optimizing 4-level nested SQL statements across multiple tables, if they could even write them in the first place!)
The article also promotes the new Microsoft Online Services
which will only work if everyone on the team is using a supported version of Windows. And even then, it might not work. (Furthermore, even though they claim that LiveMeeting works on Safari and Firefox on Mac, even if your system meets all the requirements listed, it often doesn’t.) Mac is around 15% of the market and growing, Linux is on the rise (especially in Netbooks), and a number of organizations still use AIX and UNIX based platforms (which could become popular again if thin-client desktops [e.g. SunRays] take off). Not everyone is in the Microsoft eco-system anymore. (And the majority of supply management systems are NOT built on .NET.)
And then the last paragraph indicates that mobile devices are the answer to requisition approval (to keep projects moving), commodity price updates, and procurement communication!
This is probably the most dangerous message of all, because now we’re in Yes, … but territory. Not all requisitions can be approved on a 3×5 screen. What if there are 20 (or more) line items? What if your system flagged 5 as off-contract? What if it’s an unusual request for a significant amount? You’re going to need more data to make the right decision than you’re ever going to fit on that itsy bitsy teeny weeny tiny Blackberry Storm or Curve. It’s one thing to approve a new laptop or mobile phone for an employee that needs it right away to continue working, but another to approve an order of 10,000 units of SKU XYZ123, when the contract is for ZYX321! Why is the order off contract? Oversight? Have requirements changed? Or is your supplier out of ZYX321 and you need an acceptable substitution right away? And what good is a commodity price update if you can’t see the history and the trend graphs. Unless you’ve already done the analysis and figured out that you should buy when it hits 75 or sell if it hits 100, because you’re hedging risk on the commodities markets, that update is useless. And communicating in 140 byte tweets? That would just make you a Twit!
Let me finish by saying that I’m so glad that you, dear reader, are an educated, informed, and intelligent individual who would drop this blog from your feeds faster than a hot potato if I ever published anything as ridiculous as what Purchasing and other publications are getting away with these days!
If You Still Don’t Think We Need a Leonardo da Vinci …
… then take a look at this recent Harvard Business Review blog post on “the decade in business ideas”. I found it thoroughly depressing. Let’s take a close look at the most influential management ideas of the millennium (so far):
- Shareholder Value
Yes, businesses exist to generate a return for their shareholders and yes they should, but there’s more to value than profit and there’s more to business than just creating profit. As the article points out, the pursuit of shareholder value eclipsed all and pushed the consideration of stock price effects deep into operational decision making, which is precisely where it does not belong. As Jack Welch proclaimed, “Shareholder value is a result, not a strategy.” - IT as a Utility
IT may be, and in many cases probably should be, a service, but it’s not a utility in the traditional sense by any means. You just can’t equate ERP and Data Analysis with electricity and water. One powers your equipment, one powers your decisions. One refreshes your employees, the other refreshes your business. Saying IT is a utility is buying into the BS that BI can be used to automate business decisions. It can’t. Period. - The Customer Chorus
Just because new, social network, technology has made it easier for customers to provide feedback in droves, this doesn’t mean that you should listen to each and every one. Just because every customer and his dog can describe their problems doesn’t mean that they know what the right solution is. Fact of the matter is, they usually don’t. And if you try to make everyone happy, you’ll end up pleasing no one. You have to pick a market, which is likely becoming more niche by the day, and go after it. - The Creative Organization
Creativity is good, to a point, but only to a point. It’s one thing to encourage creativity when trying to innovate a new product, but another to encourage creativity across the board in marketing, sales, operations, etc. You see, not every new idea will work. In fact, many will fail. And while failures are good (as long as you learn from them), too many at once will take down your business. You have to make changes one by one, keep the ones that work, and replace the ones that don’t. - Behavioural Economics
Economics studies the production, distribution, and consumption of goods and services and behavioural economics focusses on the selfishness of the economic agents that produce, distribute, and consume the goods. Now while it’s important to understand your audience, you can’t assume that your entire market is selfish … just like you can’t assume that your entire market is rational. - High Potentials
Yes, high potential leaders are important, but so are leaders who have reached their potential and, more importantly so are good, talented employees. One man does not make a successful multinational. - Competing on Analytics
What’s wrong with this? Especially since I proclaim the importance of good analytics on a daily basis? Well, the majority of firms are not competing on analytics. They’re competing on automatically generated reports from automatically “cleansed” and “enhanced” data from automatically generated “cubes” that are automatically generated from multiple “data feeds” that are never, ever, ever reviewed by a human. As a result, each stage introduces, propagates, and magnifies the error until a thoroughly inaccurate and useless report is produced. Firms should be competing on intelligence, backed up by analytics hand-driven by intelligent, educated, users. - Enterprise Risk Management
Okay, this one isn’t too bad. Risks are multiplying, and you have to be prepared for them, but instead of trying to identify and manage risks after making a operational decision, wouldn’t it be a novel idea to identify the risks associated with each option before making the decision (and then choosing the one with the least, or most manageable, risk)? Or is that just too crazy? - Open Source
Okay, this one isn’t bad either, but unless you’re planning to be a service company, you’re not going to even make enough profit to stay in business, yet alone achieve the “shareholder value” that everyone is so relentlessly pursuing. - Going Private
This is one of the three, straight-up, good ones in the mix. It lets you get away from the relentless, and meaningless, Wall Street focus on quarterly earnings (which has killed long-term planning and the research labs that made North America great after WWII and made the US economy the most significant global economy by far for decades) and get back to business. However, it’s not really a “management idea” (as it’s a business structure). - Reverse Innovation
This is the second of the three, straight-up, good ones in the mix. No reason innovation can’t come from foreign markets. However, this isn’t much of a “management idea” either (as it’s a form of innovation). - Sustainability
This is the last of the three, straight-up, good ones in the mix. And while it’s not really a “management idea” either, it’s an important “management goal” because, let’s face it, you can’t make profits tomorrow if there is no tomorrow.
Transfer Knowledge to Reduce Risk
Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.
As reported on August 15, 2009 in my local South Florida newspaper, two New Jersey police officers in their 20’s failed to recognize singer-songwriter Bob Dylan. Mr. Dylan was wondering around a low-income neighborhood when he was spotted by someone who apparently called the police to report a suspicious character. It’s important to note that Mr. Dylan did not have identification on him. The police officers escorted Mr. Dylan to the resort where tour management confirmed his identification.
[Editor’s note: People worry about a return to 1984, but this smacks of a return to 1963. For those of you old enough to remember, it’s alright, ma.]
Around this time I attended a business event and saw some folks I knew from my networking who invited me to join their group. During our conversation I made a reference to the classic rock band Deep Purple (one of my favorites) as we were discussing colors and shades for use in corporate marketing. A young lady in the group, I have no doubt in her 20’s, looked puzzled and said she was unfamiliar with this band. I asked her if she knew the song Smoke On The Water and did my best to hum the famous guitar riff. She confessed she still did not recognize the tune which is understandable if you’ve ever heard me attempt anything musical, though I suspect this was more related to a generational gap. (I did receive a follow-up e-mail from her a few days later stating that she was familiar with the riff but not the band behind it. She may have followed my suggestion and did a YouTube(R) lookup.)
More so in lean economic times companies have a habit of getting rid of employees with deep knowledge and replacing them with younger less-experienced and less-knowledgeable people. This is not a very wise decision when reliance on such knowledge is what separates the company from its competitors as would be the case in most companies.
(One only need look at the demise of Circuit City as an example: experienced floor sales people were let go to bring in a younger less-expensive sales force which failed to provide the same level of customer service and left customers taking their money elsewhere.)
Typical when experienced employees are (suddenly) replaced, there is a failure to transfer critical knowledge. Older employees must understand that they have a responsibility to their employer that goes beyond their own interest of self-preservation: Unless you work for yourself your knowledge belongs to your employer and they have every right to require that you document what you know and provide training to those less-experienced. Good sustainability and risk management practices require this and Sarbanes-Oxley compliance demands it.
Studies have shown that Millenials (aka, Generation Y, born between 1978 and 1989 depending on whose definition you look at) tend to be more result-oriented than process-oriented. This can be problematic in regulated enterprises and public companies. This can run counter to Lean thinking and Six Sigma methodologies that look to process improvements for efficiency. Entities such as ISO (International Standards Organization) rely on documented processes for their certifications.
Is it any wonder why Gen Y is so results oriented when knowledge can be so difficult to acquire and job performance tends to be based on results and not how those results were achieved? It’s important for enterprises to explain and show why the process matters and encourage process improvements that do not cross the line of regulatory or certification requirements.
Classic rock may one day face its own extinction in one form or another and the world will be a sadder place the day the music truly dies.
Enterprises have a more immediate need to and face a greater crisis in the short-term due to knowledge gaps. Risk is reduced when knowledge is transferred. Enterprises should work towards closing generational gaps by creating teams that use the best characteristics of its generational members. Each generation needs to respect the other and acknowledge the benefits each brings to the table. Torches will forever be passed and this does not require that anyone get burned in the process.
Norman Katz, Katzscan