Category Archives: Knowledge Management

Spend Matters on SCM: Data, Data Everywhere …

This is part three of a three-part series.

Two days ago, we overviewed the key points that Jason “The Prophet” Bush, the Spend Master of Spend Matters, is making in his annual soapbox road tour, including his five — new and improved — predictions for the procurement world of tomorrow. Yesterday we discussed what it means if he’s right. Today we focus on his response to my question that put him on the spot.

A few of the presentations at the recent 6th International Symposium on Supply Chain Management, sponsored by PMAC and the DeGroote School of Business at McMaster University, were about ERP implementations and how, done right they can save you time, money, and paper-based nightmares. But for every success story bloggers like Jason and I have ever heard, we can recount twice as many failures, including fiascos that have cost organizations hundreds of millions of dollars and put more than a couple out of business. (Some of the greatest supply chain failures of all time, including the collapse of more than one Billion dollar enterprise, can be blamed on bad ERP implementations.) So I had to ask, what’s the right solution: ERP or Best-of-Breed?

But in yet another instance of blogger brilliance when pinned to the wall, he managed to sidestep the question entirely and point out, consistent with a couple of points in his presentation, that it’s not about the application … it’s about the information … and the future will be applications that enable the acquisition, access, and and application of information, which makes the ERP vs. BoB question irrelevant. But what are you to do if you’re an average organization with …

Data, data, every where
And all the tables burst
Data, data, every where
It can not get much worse

… and a Bloomberg terminal for sourcing is still a thing from an uncertain future?

You need an answer. And you need it today. Because you might not be around tomorrow if you make the wrong decision today.

So what’s the answer? Hard to say … it still largely depends on your specific organizational needs, and that’s likely why the question was sidestepped. However, I believe it’s still possible to provide some starting guidance which will at least lead you to ask the right questions and, if you are unable to come up with the right answers, call in some expert advice (and yes, this is one area where the doctor can help you).

So what does the doctor recommend?

It depends on whether or not you already have an ERP. If you do, you keep the core and use it for what’s it good for — data warehousing and transactional processing. Most ERPs were designed to be transactional powerhouses … and that’s probably why so few are good at supporting the best of breed strategic applications of today … and they should be used simply as the transaction processing engines they are. Then, you find compatible best-of-breed applications to support your strategic sourcing and decision making functions, such as true spend analysis, decision optimization, and demand forecasting, and utilize their strategic strengths to complement the tactical strengths of the ERP backbone. You also audit your ERP implementation and make sure that you don’t buy, or, in many cases, maintain, modules you aren’t using and that you don’t buy more licenses until you are sure you are using all the licenses you have. (The average organization has roughly 30% more user licenses than users actually using the system. Add this to the maintenance cost of blindly paying support for modules that were thrown in as part of a “package deal” that you never use, and the costs add up quickly … and significantly. And if you don’t believe me, ask Vinnie.)

If you don’t have an ERP, you figure out whether you can get away with a good data store and a functional ecosystem of best-of-breed products that can be integrated rather seamlessly using standard XML. In other words, can you start with a solid, well documented, standard schema relational database, like Oracle, and then build your perfect supply chain support platform on top of it by integrating the right sourcing, procurement, and supply chain management solutions? I say solid, standard, and well-documented because it clarifies why SAP is rarely, if ever, the doctor‘s first recommendation. Oracle exposes it’s schema. As a rule, SAP does not. This is very important if you need to do custom development, as it’s easier to develop off of a standard, documented, relational database whose base schema rarely changes from version to version as compared to a system where the only data access is through APIs, which are constantly evolving, and where the schema is subject to change at any time. This might be meaningless to you as a user, but as a former enterprise system architect, it’s VERY meaningful. Does this mean I’d recommend Oracle iProcurement over SAP SRM? Not necessarily. It’s a good transaction engine, and it has some good features, but it all boils down to whether it supports your processes and best-practices. If it does, use iProcurement. If not, use the underlying high-performance Oracle RDB and transaction engine and stick a best-of-breed solution, like Vinimaya, on top of it.

And make sure to consult an expert with supply chain and supply chain technology expertise before finalizing your solution. Sometimes your first-choice products will play nice together, sometimes they won’t, and sometimes your second-choice products have some benefits that magnify when they are used in conjunction and will give you a better overall solution. The reality is, today, the only thing I can tell you for sure is that there is no one-size-fits-all solution and no vendor, SAP and Oracle included, that can meet your every need. (That being said, there are some independent consultants, not tied to ay product, that can help you piece together the right solution for you and you should take advantage of them.)

A Chief Executive’s Advice for Performance Improvement

In “Turnaround Time: Ways to Jump Out of a Slump”, Mark Gottfredson and Steve Schaubert wrote a remarkably perceptive article that outlined a clear and simple process for navigating your way out of a downturn:

  1. Diagnose the “Point of Departure”, or where your business went wrong
  2. Identify the “Point of Arrival”, or where your business needs to be at the end of a period of time to be successful again
  3. Define a small number of key initiatives that will sequentially get you from the “point of departure” to the “point of arrival”

Ok, maybe it’s not so simple as many business have a hard time identifying, at least internally, where they went wrong, have a harder time figuring out what will make them successful, and often have the hardest time of all identifying that sequence of innovative initiatives that will take them from here to there. However, the article does note that when businesses start to fail for performance reasons, the vast majority of the time it is because they violate one of the following four fundamental laws that, despite not being built on an economic theory, do capture, in an almost eery way, some fundamental truths of business:

  • Costs and Prices ALWAYS Decline
    It is a basic law that inflation-adjusted costs and prices in nearly every competitive industry decline over time. Raw material costs going up? Then you have to find an innovative method of production to keep costs done, or a way to make the product from an alternative, cheaper, material, or a way to make a higher quality product that carries more (perceived) intrinsic value. (Successful cell phone manufacturers live and die by the latter.)
  • Competitive Position Determines Your Options
    Leaders are always in a good position to gain more market share through investment or to raise industry standards in quality, service, and innovation. Followers are stuck with doing their best to keep up until they hit upon an aggressive innovation strategy that can move them into a leadership position.
  • Customers and Profit Pools DON’T Stand Still
    The desires of your customers will change over time, as will the amount of disposable income they have. You need to know what your most profitable customer segment is and meet their needs.
  • Simplicity gets Results
    In addition to simplifying your processes, you must also simplify your strategy, organization, breadth of product line, and, most important, usability. Apple understands this well.

The authors also give you a good working definition of “point of arrival”. Specifically, it means a set of defined, numerically specific goals that can be accomplished in just two or three years. In other words, don’t shoot for the moon if you haven’t even successfully launched a rocket into space yet. Although the goals should be bold and compelling, they must be realistic. No amount of motivational speaking will get your employees behind something they know is fundamentally impossible.

Finally, they give you some advice on how to select the right initiatives to get you there. Specifically, select ones with measurable metrics that address the following characteristics of the four laws:

  • Law 1: Costs and Prices Always Decline
    • Cost/Price Experience Curve
    • Relative Cost Position
    • Product-Line Profitability
  • Law 2: Competitive Position Determines Your Options
    • ROA/RMS
    • Market Share Trends
    • Capability Assets and Gaps
  • Law 3: Customers and Profit Pools Don’t Stand Still
    • Customer Segments and Trends
    • Customer Loyalty
    • Profit Pool Migrations
  • Law 4: Simplicity Gets Results
    • Product & Service Complexity
    • Organizational & Decision Making Complexity
    • Process Complexity

The Importance of the Job Description to your Talent Management Strategy

A few months ago I brought you a post on Purchasing Certification as a Savings Strategy that described the significant ROI that a company can expect to obtain by getting their entire purchasing department trained and certified. A department-wide certification ensures consistent processes and results across your purchasing team and insures that your overall performance, and, more importantly, whether or not you meet you savings targets, does not rely solely on a handful of star performers. Although it’s true that a star purchaser will often save three, five, or even ten times as much as an average purchaser, just like your star salesperson will often sell three, five, or even ten times as much as your average performer, betting the company on a single individual is akin to betting on a horse to win at the track. Not a strategy I’d bet my company on.

The post served as another example of how critical talent management is to today’s company, and today’s purchasing / procurement / supply management department in particular with commodity, raw material, and energy prices rising across the board in a stagnant economy where even holding prices steady might not be enough to keep a company in the black. Talent management, which starts with the acquisition process and extends to the eventual retirement of your talent, is a complicated topic and includes the marketing strategy you use to convince people to consider you as an employer.

Part of the marketing strategy you use to attract new talent is the job description, and even though you might not give it much thought, it turns out that getting this job description right is extremely important. As pointed out in a recent Next Level Purchasing (now the Certitrek NLPA) white-paper, an outdated purchasing job description can have undesirable effects on a company’s talent management strategy. According to Next Level Purchasing, there are two severe consequences associated with using outdated purchasing job descriptions:

  • an outdated purchasing job description is likely to attract a purchaser who possessed the skills necessary for succeeding in previous years, but who does not possess the skills necessary for success today
  • an outdated purchasing job description can set the bar too low for the standard skill levels to which your current professionals will aspire

As a former R&D director, I can attest to the importance of a good job description. Without one, your probability of attracting the right candidate are low. For instance, although I can remember having to sift through fifty to one hundred applications on a regular basis just to find three to five candidates worth an interview even with a good job description, I can also remember more than one occasion where I did not get to write the job description and where I could not identify one suitable candidate among dozens upon dozens of applications. So what did this tell me? A bad job description was very unlikely to yield good candidates and a good job description, which was much more likely to yield good candidates, also served as a good foundation for eliminating those candidates obviously inappropriate for the job without the need for a lengthy interview process.

The white-paper also outlined the important components of today’s purchasing job descriptions, and, like many of the articles that Next Level Purchasing makes available on its website, is worth at least a once-over.

The Comic Art of Strategic Intelligence Using Nanotech Digital Forensics in Sustainable Business

The U.S. Bureau of Labor Statistics (BLS) projects that the U.S. economy will add 15.6 million jobs in the decade between 2006 and 2016. But those jobs won’t be evenly split across regions or industries. Many traditional industries, like manufacturing, will see declines. Industries that hire graduates of popular majors in business, social sciences / history, and education may see a rise if the opportunity is there, but may not. But since not every student has the aptitude to be successful in these fields, and since many will ultimately have to take positions outside of these fields of research due to limited jobs in these fields today, it’s hard for a college student these days to pick a major these days that’s likely to land him or her a job.

That’s why it was good to see an article in the current edition of The Futurist on “Majoring in the Unusual” that highlighted degrees in unusual fields from the recent edition of “They Teach That In College?” that might help a new graduate secure a job in an emerging field.

The article highlighted the following five fields as the most eye-catching:

  • Sustainable Business
  • Computer & Digital Forensics
  • Comic Book Art
  • Nanotechnology
  • Strategic Intelligence

… and, in my view, among the most lucrative. Here’s why:

  • Sustainability is soon going to be a necessity. You can follow the doctor and lead the way or get caught up in the tide.
  • Everything is “e” these days. Since you can’t follow someone who never leaves their office, the days of Sam Spade and Dixon Hill are coming to an end. Digital is here, like it or not.
  • Die hards will hold onto books for a long time, but the days of the text-based books are coming to an end as we read more and more on our computers and e-readers. But since e-readers still can’t replicate the texture of art on the page, graphic novel and comic sales are going to stay strong for a while.
  • We love miniaturization … and nanotech, which will be very useful in medicine, is miniaturization to the extreme. It’s true we might accidentally build replicators, but it’s also true that the new large hadron collider might destroy the planet next month, and we built that.
  • Considering that, in the doctor‘s view, most businesses don’t have a lot of intelligence to begin with , there’s always a need for strategic intelligence!

The Shared Services & Outsourcing Network – A Useful Resource for Sourcing Professionals

Not too long ago, the Shared Services & Outsourcing Network was brought to my attention. Even though I was afraid that it might be another Supply Chain Social Network, I decided to check it out anyway. I’m glad I did. It’s along the lines of the type of Knowledge Network that I’ve been promoting behind the scenes for a while now — and I’m glad to see that they’re starting to appear.

The site supports two types of members: Premium Member and Associate Member. Premium memberships cost 149.99 a year and come with exclusive access to Shared Services News magazine, regular e-newsletters, full access to online articles, and upcoming job section access and three free job postings a year. Free associate memberships come with access to some of the articles on the site, the regular monthly newsletter, up to four specialist alerts, and basic access to the upcoming job section.

I signed up for a free associate membership. The Industry News goes back four months, and is indexed on five topics (strategy & governance, process & technology, people & culture, customer satisfaction, and globalization) and four functions (human resources, IT, finance & accounting, and other). The networking is limited to knowledge sharing Q&A forums and Blogs (which include Peter Allen from TPI, Sam Poston of ScottMadden Inc, Dave Griebl of Monster Worldwide, and Ed Martinez of BellSouth Affiliate Services Corporation). The event listings are reasonably well populated, and broken down by Continent and Country and there are numerous resources for on-line learning including interviews, presentations, podcasts, and webinars.

In all, I think it’s a good resource for sourcing professionals who need to manage shared services or outsource business processes. There’s a significant amount of information available for free members, and with over 7,000 global members, a wealth of information available for premium members – which I believe would be a great investment for any organization that’s looking for a shared services or outsourcing partner. Take a few moments and check it out. I think it will be worth your time.