Category Archives: Market Intelligence

Supply Managers Will Be the RockStars of The Resource Revolution


I’m through with standing in line
To clubs we’ll never get in
It’s like the bottom of the ninth
And I’m never gonna win
This life hasn’t turned out
Quite the way I want it to be

  from Rockstar by Nickelback

Supply Management hasn’t exactly been the poster-child of the corporation in recent years. In fact, in some organizations it would have been lucky to be the Island of Misfit toys that Mr. Dominick of Next Level Purchasing has compared it to. But if the Resource Revolution comes to pass, that might all change.

A recent article in the 2014 Q2 Edition of the McKinsey Quarterly that asked Are you ready for the resource revolution? said that another industrial revolution is coming, and while the first two focussed on labour and capital, two of the three primary business inputs identified by Adam Smith in his classic treatise The Wealth of Nations, the third will focus on the last input identify by Adam Smith — resources that come from the land.

According to the authors, who recently authored Resource Revolution, five approaches will be utilized by companies that lead the resource revolution. And three of these — namely substitution, optimization, and virtualization — will be critical to success. (The other two, circularity — or design for reuse and recycle, and waste elimination — or lean to the next level, will primarily be used in conjunction with the other methods to deliver significant enhancements that neither approach on its own to achieve. )

Substitution, the process of replacing costly, clunky, and/or scarce materials with cheaper, better, and more readily available materials, is already being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Optimization, the process of embedding software in resource-intensive industries to improve how companies produce and use scarce resources, is also being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Virtualization, the process of moving processes out of the physical world, is being employed by leading manufacturers (who will use a platform like Aravo’s) to determine the most efficient and cost effective process to produce a part as well as aircraft and car manufacturers (who will use advanced 3D modelling tools) to determine the most environmentally friendly or best performing design. But this too will be used more and more by leading Supply Management organizations to design the best supply chain to support the products and the business.

And when you get right down to it, no other organization in the corporation is in a position to make more use of these approaches than any other. That’s why, if the Resource Revolution is to come to pass, forward-thinking Supply Managers will have to lead the way, and become the corporate rockstars they always desired to be. (And put those motor-mouth marketers in their place.)

65 Years Ago Today the Microfilm Revolution Began!

65 years ago today, the first microfilm magazine was offered to subscribers. Newsweek, by offering its publication on microfilm, sparked a microfilm revolution and within a few decades, libraries everywhere were storing large collections of newspapers and magazines on tiny microfilm collections. This allowing libraries to maintain large collections of historical documents in limited space and was the precursor to the current digital revolution, which saw micro-films replaced with (optical) disks, which were soon replaced by storage area networks.

Screening Questions to ask Prospective Suppliers

A recent article over on Supply Chain Digital on “nine crucial questions to ask prospective suppliers” was in the right direction when it presented a small set of questions to screen prospective suppliers. Before inviting a supplier to an RFP, the following questions should be included on every RFI:

Can we have a copy of your Code of Ethics?
If the vendor doesn’t have one, or won’t give it to you, sound all the sirens and run for the hills. No organization can afford a publicity disaster these days.

Can you provide 3rd party proof that you live up to it?
It’s one thing to say you have an ethics policy, it’s another to follow it — and another yet to have true third party proof that you do. Make sure the certification is from a true third party and not from a small consortium of vendors that fund the certification agency.

Can we have a copy of your Quality Assurance Process?
If the vendor doesn’t have one, or won’t give it to you, then you need to ask yourself what kind of quality you can expect.

What certifications do you have with regards to this process? ISO? ASQ? etc.
If the vendor doesn’t have any certifications, how much faith can you put into the process the vendor is using?

Can you provide references from current AND former clients who did business with you for at least 2 years?
You don’t want references who have been with the vendor less than a year because the blush is still on the rose and they will be full of peace and love for the vendor. You need a real review from an experienced customer who can tell you what’s good and not so good. No vendor is perfect, and if the not so good is not relevant to your business, then their imperfection is irrelevant. Plus, if customers’ left, why? Was it due to a change in business? Or poor performance? If the customer left for due to a change in business, and they still have a good reference for the former supplier, then that speaks volumes. If the customer left due to continuously poor performance, that also speaks volumes.

Do you understand our business? Explain!

If the supplier has never supplied a customer in your vertical, and you have special needs, this could be an issue. It could also be an issue if they have never supplied a customer with special needs in your vertical or you have considerably different requirements than the average company in your vertical. Make sure the vendor has a good understanding of who you are as a company by asking this open ended question.

Who are your top competitors? Why are you better for us?

Everyone has competitors. If they don’t, then they are misguided or selling a product or service no one needs. There are no Blue Oceans any more, just open oceans that are only sparsely sailed (by a few companies who are eager explorers). Make sure they give you a few real competitors as well as a good reason as to why they are better, as this will serve to not only enforce their answer to the previous question (and let you know if they really understand your business) but let you know that they have attempted to be honest in their assessment.

2 in 5 Fleet Owners Suspect Fuel Invoice Errors. What About the Other 3?

A recent article over on TruckingInfo that wanted to know if you are Staying On Top of Your Fuel Invoices noted that only 40% of respondents to a recent survey by FuelQuest suspected errors in their fuel invoices. SI’s question is, what about the other 60%?

According to the article, unaddressed, bulk fuel invoice error rates tend to hover around 25%, but some companies have rates as high as 55%. This is due to complex fuel and freight contracts as well as manual or sample-based reconciliation processes. This is because they lack the processes and technologies to insure complete, consistent, and effective invoice matching and review.

Furthermore, the lack of proper processes and technologies results in the business impact from invoicing errors including overpayments, increased operational costs, and lost trust in suppliers being significantly underestimated. If a large fleet company is consistently being over billed 3 cents/gallon, that’s up to $12 of over-billing on every fill up and up to $2,000 a year of over-billing for every 18 wheeler (with an older model getting an average of only 5 mpg). If you have 50 trucks in your fleet, that’s an over-billing at a rate of 100K/year until it is detected. And how much will be recovered?

Even if you are a 3PL/Logistics Carrier you need end-to-end invoice automation, m-way matching, and exception-based management. Otherwise, you don’t know how much money is being needlessly burned by your fleet.

Will Increased Cargo Theft be the Next Impact of MAP-21?

MAP-21, the short-hand for Moving Ahead for Progress in the 21st Century Act, took effect October 1 of last year (and shortly thereafter we asked if your supply chain was compliant in Part I and Part II). This 584 page monstrosity had ramifications across your transportation-based supply chain and included, among other things, in the Commercial Motor Vehicle Safety Enhancement Act: Subtitle 1, section 32918, a requirement that each broker subject to the requirements of this section shall provide financial security of $75,000 for purposes of this subsection, regardless of the number of branch offices or sales agents of the broker, a seven-fold increase for the average small carrier.

As a result of this requirement, we asked if the act should be more accurately renamed RIP-21 as the act led to the forced closure of over 9,800 freight transport brokerages that were unable to put up the significantly increased bond. Overnight, 46% of independent brokers disappeared! Some eventually came up with the bond and reopened, but the number of independent brokers is down 40% year over year.

So what does this have to do with increased cargo theft? One of the fastest growing forms of cargo-theft is deceptive / fictitious pick-ups. The scheme, as described in an AP article last year on how “thieves pose as truckers to steal huge cargo loads”, works as follows.

 


Thieves assume the identity of a trucking company, often by reactivating a dormant Department of Transportation carrier number from a government website for as little as $300. That lets them pretend to be a long-established firm with a seemingly good safety record. The fraud often includes paperwork such as insurance policies, fake driver’s licenses and other documents.


Then the con artists offer low bids to freight brokers who handle shipping for numerous companies. When the truckers show up at a company, everything seems legitimate. But once driven away, the goods are never seen again.

And now thieves have over 9,000 cargo companies, many of whom with good safety records, to work with. Now more than ever, you need to keep a close eye on your cargo on American soil, or you may not see it again! Makes you wonder just who MAP-21 is for, eh?