Category Archives: Market Intelligence

Three Does Not a Monopoly Make

But it does make competition hard and collusion easy. So what am I referring to now? As recently expounded upon in this recent article in the online version of The Economist, UPS has made a bid for TNT (Express), the fourth largest logistic carrier in the world, the second largest in Europe, and the largest in Britain and Italy. If UPS gobbles up TNT, it may not only shift the balance in power in the near-duopoly between FedEx and UPS in the US, but give UPS the edge it needs in Europe to take on DHL toe-to-toe in Europe (where it controls up to 50% of the market). If UPS succeeds, UPS would have at least a quarter of the market in three big European centres — Britain, France, and Italy. Unless Federal Express scooped up DHL (and it’s pretty easy to predict that bid would happen if UPS scooped up TNT), FedEx might soon go the way of the Pony Express in Europe.

While UPS is likely claiming that this will benefit shippers as it will allow them to offer better service at lower prices, the fact that we could soon be dealing with a duopoly, and would effectively be dealing with a duopoly in the US (UPS and FedEx) and Europe (UPS and DHL) is a bad thing. Consider the fact, as pointed out by Leigh Merz in A Shipper’s Right, that UPS and FedEx have already mandated that shippers can only work with FedEx or UPS directly (and not through brokers or other third parties). Hopefully this restriction will be removed as an anti-trust violation in the upcoming court-case between AFMS and the UPS-FedEx anti-trust lawsuit, but until then, United States shippers are already operating at a disadvantage.

And if we get a local duopoly and a global triopoly, there’s a good chance it could only get worse. All it will take to enforce a new, shipper preferred, style of business is for three senior executives to meet for lunch at the Executive’s club, spontaneously decide that, from now on, all products that weigh less than 5 lbs per unit go first class air freight, and, presto, no ocean cargo for you! And all it will take for prices to rise, on average, 5% across the board is for the CEOs to play a around of golf and decide that, next quarter, as a result of fuel increases, all prices will rise an average of 5%. Now, each shipper will still have lanes where it will be more competitive, but switching won’t save significant dollars as the competitors prices rose in sync. Not saying this will happen, but you see how easy it could happen if, by chance, it happens that each organization happens to have at least one senior executive who is less than honourable at all times. And this is an industry where price collusion happens more regularly than it should. As The Economist article noted, in March, the European Commission handed out fines totalling 169 Million Euros to 14 freight-forwarding companies, including UPS subsidiaries, for price collusion.

Right now, the EC is undertaking a phase II merger investigation, as per this recent press release, and has until November 28 to determine whether the proposed transaction would significantly impede effective competition in the European Economic Area (EEA). I hope they do. In the meantime, the case details are available at the EC site and, as per the initiation of proceedings, published in C226, the Commission invites interested third parties to submit their observations on the proposed concentration to the Commission. While it’s now too late to have the observations fully taken into account in the procedure, if you’re a major multi-national with a big voice, it might not be a bad idea to get your observations in anyway. Often, it only takes a few very noisy squeaky wheels to slow things down and force a good look.

Wallmedien: A New Option for North American MultiNationals to Eke Procurement Value out of their ERP

Last week we noted that if you were stuck with an ERP, you do have options! Specifically, we noted that you could acquire a best-of-breed solution that runs on your ERP backbone to automate and enhance Procurement in ways that ERP never dreamed of (and will likely never aspire to) and extract the value that your smaller competitors, not locked into an ERP, are extracting with the big names in stand-alone best-of-breed Procurement, which, with the recent SAP acquisition of Ariba, now include relative newcomers (to this side of the Atlantic) like Coupa, iValua, and GEP (which was formerly Global eProcure and which acquired Enporion).

In addition to the traditional, known options of (CC-)Hubwoo and Capgemini’s IBX, you have a European player by the name of Wallmedien which has been around for fifteen (15) years, has over one hundred (100) customers (with dozens of big names including Johnson Controls, Continental Tire, Syngenta, Ford, Alstom, Bayer, BASF, and Alcoa), has offices on three continents, has enabled over sixty thousand (60K) suppliers globally, and, most importantly, has rolled out their solution in twenty-six (26) languages across forty-five (45) countries! In the sourcing and procurement world, this last feat is rare and somewhat astounding when you consider most of the smaller companies still haven’t hit double digits in the language metric.

Wallmedien has a powerful Procurement Automation Suite that includes all of the standard features in a new, consumer-inspired, easy-to-use cart-based UI which allows for easy catalog-based purchasing (whether it be through EDI, cXML, or a custom database), punch-out to a supplier’s online store, and services procurement as well as straight forward RFX capability which can be used with our without their private supplier network portal. Their portal is a standard web-based supplier interface that allows for easy supplier communication and document exchange. And it all runs seamlessly on top of SAP, with or without SAP SRM, and Oracle (although most of their customers are currently SAP, as that is the ERP platform they cut their teeth on).

And like BravoSolution, which is rapidly becoming a global best-of-breed leader in (e-)Sourcing, especially now that IBM has scooped up Emptoris, Wallmedien backs all this up with an extensive suite of end-to-end services that cover implementation, integration, hosting, catalog and application management, benchmarking, and, most importantly, a wide-range of consulting services including process improvement, technical backbone improvement, sourcing integration, and getting the most from your SAP (SRM) (or Oracle) ERP implementation.

And the new North American team of Wallmedien consists of the market leaders who previously brought you ground-breaking sourcing and procurement innovation at GE, TPN Register, B2EMarkets, VerticalNet, and Vinimaya … just to name a few. This company is going to become a force to be reckoned with in the global procurement space, especially since their platform works just as well if you don’t have SAP and they have pretty much been-there, done-that where all of the international (e-)procurement headaches are concerned. Keep your eye on ’em. On this side of the ocean, they’re movin’ on up.

The Lost Art of Account Management


Rant on blogger, rant on along
Rant on buddy till the day is through
Rant on brother, sister too
Rant on momma like I asked you to do
And rant on fellow blogger, rant on (Rant On!)


Today’s guest post is from Dan Kane, a Project Analyst at Source One Management Services, LLC.

In today’s information age, businesses are gaining unparalleled access to data from their suppliers. However, this new focus on a customer’s ability to access account information on their own has had an unexpectedly negative effect on the quality of supplier account management, and the ability for customers to get assistance from their account management team. This issue is especially prevalent in the technology, and financial industries, where complex issues can require multiple points of contact, and significant end-user involvement before they can be resolved. In part, this can be attributed to increasingly complex products; however a large part of the blame rests with the organizations themselves, and a new-found reliance on automation, and customer self-service. While it is understandable that not every supplier representative is versed in every aspect of these specific solutions, it is imperative to the management of a customer relationship that businesses are provided a single point of contact with whom issues can be addressed.

Problem resolution can often take the form of education, by making sure that customers have the knowledge required to access information on their own, and understand the products and processes involved with their partners. This method has yet to be widely adopted, and account managers tend to refer questions to complicated service guides, or online portals, without the instructions on how to interpret these complex, customer-facing tools.

Some functional separation is fine, and many suppliers are attempting to provide account representatives who can completely manage services provided to national organizations, however it is important to note that a single “contact” should not be SINGLE PERSON on whom organizations are completely reliant on, Situations out of the individual’s control, such as sickness, can arise and leave an organization with no recourse to solving their problem.

Few things are more frustrating to businesses than calling for support, spending 10 minutes on hold waiting to get connected, finally reaching an operator who refers them to a single person for help, and happens to be out of the office.

The necessity of accessible information should not be a reason to diminish the functionality of account managers. Even if the information that a customer wants is available to them, the purpose of management is to identify solutions to problems, and assist customers with the tools that they may or may not know are at their disposal. It is counter-productive to decrease the level of live, human support in exchange for automation, and the self-serve environment that many organizations are migrating to.

What ever happened to the delicate, human touch, and a little thing called customer service?

Thanks, Dan!

The Hubris Hypothesis is Alive and Well in Supply Management

It looks like we’re back to the merger and acquisition frenzy again in the space, which seems to begin anew at the start of every boom in the continual boom-bust cycle that Wall Street so favours. Big cash-rich giants are again gobbling up cash-poor gnomes in an effort to bolster either the breadth of their offerings or expand their (potential) customer base. This is a good thing and a bad thing. If you’re on the market for supply management technology, or a customer of one of the cash-rich giants, this can be a good thing. If you’re a shareholder of the cash-rich giant, or a customer of the cash-poor gnome, this can be a bad thing. If you’re anyone else, it probably doesn’t affect you.

It’s probably a bad thing if you’re a shareholder of the cash-rich giant as 4 out of 5 mergers and acquisitions fail to deliver the expected value, and often fail to do so spectacularly. As Richard Roll notes in his classic paper on “The Hubris Hypothesis of Corporate Takeovers”, decision makers in acquiring firms pay too much for their targets on average. I believe this to be especially true in the enterprise software space where the value of a platform decrease at a rate that is in-line with the expected depreciation of a new car purchase. Every time a newer, better, piece of software hits the market, the value of all existing platforms drops. And since, in the enterprise software space, all acquisitions tend to do is freeze innovation on the platform of at least one party, if not both, until integration is achieved, value drops — and in this space, it’s rarely regained. While the value associated with software doesn’t disappear as fast as it does on Wall Street every time a newly created bubble finally bursts, it still disappears. And it’s not like we don’t have our own horror stories like the i2-Nike PR nightmare, the Hershey Foods WMS failure, or the ERP/MRP fiasco that brought down the multi-billion pharmaceutical Foxmeyer. And while none of these are directly related to M&A, they do demonstrate how any attempt to integrate even partially incompatible systems can wipe out hundreds of millions (or more) of value.

Similarly, if you’re a customer of the cash-poor gnome, it can also be a bad thing if your system is “locked down” until the features/functionality is integrated with the giant’s platform, that you will eventually be forced to implement (when the term of your original agreement runs out). Chances are that you bought the gnome platform because the giant platform wasn’t what you needed, was way more extensive than what you needed, or didn’t deliver enough value from the extra functionality relative to the cost.

But if you’re customer of the cash-rich giant, who, chances are, is no longer capable of innovating it’s way out of a wet paper bag, this can be a great thing. As soon as the initial integration headaches are solved, you’ll have access to new, innovative to you, functionality without having to find a new vendor, do custom integration, or even do extensive mods to the platform you have — especially if you’re using a hosted/SaaS service and it just gets enabled in the next release. And, if the giant is fair to you, as a loyal customer who had to wait, the additional cost won’t be that significant and will be drawfed by the new-found value your organization can generate.

But if you’re not a customer of the cash-rich giant or the cash-poor gnome (and not a shareholder of the cash-rich giant either), this is definitely a great thing. As we’ll delve into in more detail in a future post, when you’re on the market looking for a new supply management technology platform, you’re asking three questions (if you’re doing it right) before seriously considering a vendor: can the vendor support me, are they stable enough to support me, and are they still innovating. While it is often straight-forward to answer the first question, it’s hard to answer the second if the company is private and hard to answer the third if you’re not intimiately familiar with the space and the competition (as innovation can be relative). But if a vendor gets acquired, you know that it likely wasn’t stable enough as most companies that get acquired are cash-poor, have limited growth options on their own, or have a specific innovation or customer a cash-rich giant wants (and once a cash-rich giant sets their sights on a target, that target’s resources will be consumed with either friendly bids, or hostile bids, which would still limit its ability to support you). And if a vendor does the acquiring, then there is a good chance that it’s not innovating (at the rate it used to) or not capable of further growth without a fresh blood infusion (which would eventually limit innovation).

This means that every merger and acquisition identifies two more companies that, at the very least, should be given serious scrutiny before being added to your list of potential solution providers, if they should even make the list at all (at least until a succesful integration is completed — which, if one of the fish is really big, could take years) as a merger or acquisition usually signals a lack of innovation on one side and cash on the other. And, more importantly, it shines a light on those companies in the middle — stable, growing, and full of innovation ready and waiting to take your Supply Management practice to the next level.

A new wave of best-of-breed players is rising in the space. Since they haven’t yet been entangled by the hubris hypothesis, it might be time to give them a serious look.

The (Board) Gamer’s Guide to Supply Management Part V: Small World

I’m tickled technicolor to continue this one-of-a-kind summer series that will help you whether you are just interested in finding out about this new and exciting career opportunity, or ready to take your Supply Management career to the next level. Not only is it more fun than reading the latest study on the daily migration patterns of the three-toed sloth, but when you can grasp a lot of the basic concepts by playing the right mix of strategic (and sometimes tactical) board games with your friends, it’s three blasts and a half!

While we are still putting off the economic games (like Puerto Rico) that we are going to get to at some point, we’re going to make use of the fact that, thanks to unprecedented generosity of Wil Wheaton (@wilw) and Geek & Sundry, we have yet another fantastic TableTop episode where Wil Wheaton introduces us to the mechanics — and fun — of the game. Until we run out, we are going to take advantage of the priceless gifts that Mr. Wheaton has granted us with this spectacular educational series.

As with every other episode in the series, Wil Wheaton gives us a very succinct introduction to Small World in TableTop Episode 1, a classic victory-point game with near endless variations that give it exceptional replay value.


Small World combines the military strategy of risk with the delightful art and fantasy races of cosmic encounter. Whoever has the most points at the end of nine rounds wins the game. We earn points by conquering and ? territories. Empty territories cost two units to conquer. Every item in a territory costs one more unit to conquer. … At the beginning of every game, each player will choose a fantasy race, like Orcs, Elves, or Dwarves. Each race is combined with a unique special power like seafaring, flying, or heroic. These power and race combinations change every game, giving Small World tremendous replay value. No empire lasts forever, so don’t get too attached to your diplomatic skeletons. You will inevitably run out of units to conquer new territories. But don’t worry. When that happens, you simply put your active race into decline and choose a new one from the board and begin conquering all over again. It’s a very small world. And only one person can be the victor atop the bloody stinking heap of his vanquished opponents!

So what does this have to do to supply management? It introduces us to the intricacies of the markets that marketing and management expect us to indirectly support not only with products and services, but with market-entry advice (because, after all, we’re already sourcing from there so advising the organization on how to sell into there shouldn’t be that hard, right?). An alternate introduction to the game could be:

Small World combines the military strategy of risk with the marketing strategies of an MBA program. Whoever has the most money at the end of year wins. We earn money by conquering and maintaining market territories. Empty, blue ocean, territories cost two units to conquer. Every competitor or obstacle in a territory costs one more unit to conquer. At the beginning of every game, each player will choose a primary market strategy, like brute advertising force, niche marketing, or price-undercutting, and combine it with a perceived marketing advantage such as a big war chest, coveted partnership, or new manufacturing process that allows production costs to be drastically slashed. The primary market strategy and perceived marketing advantages change every game, giving Small World tremendous replay value. No market lead lasts forever, so don’t get too attached to your past successes. You will inevitably run out of units to conquer new market territories. But don’t worry. When that happens, you simply put your current market strategy into decline and choose a new one from the board and begin conquering all over again. It’s a very small world. And only one company can be the victor atop the looted corporate carcasses of its vanquished opponents.

And the great thing about Small World is that victory points are measured in victory coins, for which a player gets one victory coin for each region his race tokens occupy. Whereas some games, like 7 Wonders, give you half a dozen ways to score victory points, scoring victory coins in Small World is straight forward. It’s simply a function of how many regions you occupy, and how many extra bonus coins you get as a result of race or special ability. Plus, conquests can be first (it’s a blue ocean market and you are the first entrant, having only to conquer obstacles such as resistance to foreigners or geographic distance to your target market), takeovers (where you use overpowering force to take over a market from another player), or a hail-mary conquest where a player knows he does not have enough resources to take over any more regions with certainty, but chooses to make one last attempt, literally betting everything on luck (that boils down to the roll of a die). Finally, when all is said and done, a player may redeploy his resources among the various markets he controls in an effort to either maintain them in the next round or move into adjacent markets.

The game is brilliant, and should definitely be in your organization’s lunch room. Forget about those boring seminars and brown-bag lunches. If you really want to push your Supply Management brain cells into overdrive, this is the way to do it!


It’s a small world
But it’s the only one we’ve got
Huey Lewis