Category Archives: Marketplaces

Can You Solve the Compliance Challenge?

Regulatory compliance is usually defined by an organization’s adherence to laws, regulations, guidelines and specifications relevant to its business.

There are two primary categories:

  • Internal compliance that focusses on the policies and procedures of the organization (which must be followed to insure SOX compliance) and is focussed on personnel and procurement
  • External compliance that focusses on the (government) legislation and agreements that govern the operation of the organization and falls into the categories of:
    • financial/operational
    • import/export
    • environmental
    • private data / worker’s rights
    • insurance / liability

Non-compliance can be a very costly situation for an organization to find itself in as it can cost an organization hundreds of millions of dollars in some cases. Consider the following costs of external non-compliance:

Financial

  • SOX violations can cost up to 5M per violation; even Deloitte, known for its audits, had to pay 2 Million for a SOX violation
  • Anti-bribery violations have no ceiling; Aon paying £ 5.25 M in 2009, Wills Limited paying £ 6.9 M in 2011, and Macmillan Publishers paying £ 11.26 M in 2011
  • FCPA violations don’t have a ceiling either; Weatherford International paid $152.6 M in 2013, Alcoa paid $384 M in 2014, and Siemens paid $800 M in 2008

Import/Export

Meggitt paid 25 M in 2013 to settle charges of AECA & ITAR violations, Standard Chartered Bank paid 132 M in 2012 to settle charges of OFAC sanction violations, and ING Bank N.V. recently paid 619 M to settle charges of several OFAC sanction violations

Insurance

In 2012, Wal-Mart paid $8M to settle a workers’ compensation class action settlement, and in 2010 a jury awarded $82.5 in a workplace death lawsuit

Lack of compliance costs. Dearly. Why is there a lack of compliance in most organizations? Lack of knowledge, policy, visibility, analysis, and procurement technology. Knowledge can be addressed with training. Policy can be fixed with planning. But visibility, analysis, and procurement fixes require technology.

What kind of technology?

Supply Chain Visibility, Spend Analytics, and a Procurement Marketplace that captures, tracks, and maintains an audit trail of all of the relevant data to insure SOX and FCPA are not violated, import and export restrictions and requirements are adhered to, and that suppliers comply with insurance and regulatory compliance.

To find out how a Procurement Marketplace helps your organization solve the compliance challenge, reduce maverick spending, and enable organizational growth, download Sourcing Innovation’s latest white-paper on The Procurement Marketplace and The Power of Compliance (registration required), sponsored by Vinimaya.

You’ve Negotiated – But Are You Realising Savings on Marketing Print?

You’ve Negotiated – But Are You Realising Savings on Marketing Print?

Spend Matters UK recently ran a two-part guest post by Santosh Reddy of GEP that asked if you were really realizing savings on marketing print (Part I and Part II) if you were using an outsourcing partner, such as a Print Management Company (PMC), to manage your marketing print.

In his posts he notes that the PMC comes with advantages, such as one or more pre-qualified vendors that can do all of the print jobs for all of their clients and who offer the PMC a preferential price for the guaranteed influx of work in addition to IT tools that can help your shop with digital asset management, etc. However, the PMC also comes with a disadvantage — the PMCs primary mission is to make money, not to save money for you. So the savings you get may not be as much as the savings you could get.

However, the key to savings in print is typically volume, so if you don’t use a PMC, then the category manager has to function as the PMC and make sure all print jobs get routed to the preferred vendor with preferred pricing and value-add benefits. But, as Santosh points out, this can be difficult to achieve since many internal departments, including marketing, retail, and HR, may not see the presence of Procurement as a benefit but instead view it as a loss-of-control or an unnecessary time-wasting step in the process. So how do you get the other departments on board?

Santosh presents four benefits you can sell and four less-friendly tactics you can employ if need be. Four of these suggestions in particular are quite powerful:

If these two benefits don’t get the job done:

  • one point of contact
    either the PMC or the category manager will be the sole point of contact for all internal customers – they won’t have to deal with five different print shops to find out who can do a rush print job
  • budget compliance
    it’s Procurement’s job to keep costs in line, not theirs, freeing up more of their time to do their jobs

then these two tactics will:

  • involve AP and inform them that policy states all invoices must be approved by you before being paid, as per the Procurement policy, then
  • incentivize compliance through gain or pain by rewarding those who use the process with faster services, more savings credited to their budget, etc. and punishing those won don’t by delaying invoice payments, reporting organizational losses from their actions to management, etc.

And he also gives you great advice on how to source, select the right technology to manage the process internally (whether or not you use a PMC), and establish a contract. This 2-part series is worth checking out. Given the cost of ink in North America, every penny counts!

1950 Years Ago Today

The Great Fire of Rome, which burned for 6 days, broke out in the merchant district and caused widespread devastation. It was an early example of how a natural disaster could bring a supply chain to its knees (as it wiped up most of the goods in Rome, which were then stored in shops).

The moral of the story is clear — Natural and Man-Made Disasters have always been with us and always will.

The (Board) Gamer’s Guide to Supply Management Part XXVII: At the Gates of Loyang Part I

It’s 28 AD and Luoyang is the newly declared capital of the (Eastern) Han Dynasty and the new focal point of trade in eastern China (and will soon become one of the four great capitals of old China). (In fact, in 40 years time, the White Horse Temple, which will be the first Buddhist temple in China, will be established under the patronage of Emperor Ming.) The economic upturn of the now-flourishing city requires a better supply of basic foodstuffs. These are provided by the local farmers who plant wheat, pumpkins, turnips, cabbage, beans, and leeks in their fields.


After each harvest, the farmers assemble at the gates of Loyang to sell and trade their vegetables. They deliver to their regular customers or lucratively sell their vegetables to passing shoppers. Vegetables can also be traded at Market stalls or used for seed and planted in fields. If the farmers need vegetables that they don’t have in stock, they can buy them in the Shop. Twenty different helpers, each with different individual skills, are available to assist them.


The most successful farmer (and the victor) will be the one who moves furthest along the Path of Prosperity within the given timeframe.


Each step costs more and more money, which is also needed for investments. Farmers have to find the right balance. The coins have square holes, so they can be held on strings. They have the Chinese name “Cash”, which is the derivative of the modern term.

At the Gates of Loyang is an economic farming game for 1 to 4 players (that plays best with 2 or 4 players) set in ancient China where success depends on your ability to not only grow vegetables and service your customers, but on your ability to trade for what you don’t have to service new customers when the opportunity arises and on your ability to gain wealth. (In the Han Dynasty, a total assessed taxable wealth of one hundred thousand coins was a prerequisite for holding office, which is why many who needed additional funds for education or political office found farming a decent profession because, while humble, it was not looked down upon by fellow gentrymen. Plus, the Han court upheld a socio-economic ranking system for commoners and nobles that allowed all non-male slave commoners to be promoted in rank to level eight, which entitled the individual to a annual salary of 400 bushels, 8 times that of the level one gentleman commoner. However, the government often sold ranks to collect more revenues for the state. This is the inspiration for the path of prosperity — in Loyang, when you are buying your way along the path of prosperity, you are buying rank.)

In addition, success depends on your ability to choose the right actions at the right time, with limited resources. In particular, many actions require Cash, of which you have a limited amount, and serving customers requires crops, of which you can produce at most one in the first round, three in the second round (if you are fortunate enough to acquire an extra field as you are only guaranteed to acquire one new field each turn), five in the third round, and so on, to a maximum of 13 in the 7th round — but only if you have money for seed – on average, you’ll be lucky to have more than 7 active fields mid-way to late in the game. (But only if you can acquire enough fields to plant, and harvest, more than one crop.)

In Loyang, you start the game with 10 Cash, 1 field, 1 storehouse, 1 cart, and access to a shop with 11 vegetables (consisting of 3 wheat, 2 pumpkins, 2 turnips, 2 cabbages, 2 beans, and 2 leeks) that only you can sell to or buy from (to seed fields or satisfy customers) during the game (unless you play with the nine lantern helpers). While playing the game, you will acquire regular customers (which must be satisfied four times, in four consecutive turns, or you lose favour and possibly even Cash), one-time customers which can be satisfied at a time of your choosing, (one-time) helpers that give you temporary advantages, and access to new market stalls (that only you can trade with, unless another player has access to a special helper). In each turn, you will perform actions in an attempt to maximize your Cash so you can advance further up the path of prosperity than your peers.

Each round of the game has 3 phases:

1. Harvest Phase
a) Each player turns over the top field from his private field stack, which he can use to plant more crops.
b) Each player harvests exactly one vegetable from each planted field that has a vegetable for harvest.
c) Each newly emptied field is remove from the game (to simulate the need for a field to lie fallow on a regular basis).

2. Card Phase
a) Each player receives a hand of 4 Action cards.
b) The distribution round begins.
i) Each player*1, in turn, places one card from her hand into the “Courtyard” until
ii) One player takes exactly one card from the “Courtyard” and one card from her hand for her play area. Then
iii) Each remaining player does the same, placing any remaining cards into the Courtyard until all players have placed two cards, then the remaining cards are discarded.

The cards available will be:

  • extra fields (6) which cost 2 Cash to buy but allow you to plant more vegetables
  • regular customers (14) which require a delivery each round, or, after you miss one delivery, demand 2 Cash reimbursement for each successive delivery missed
  • casual (one-time) customers (14) which have a specific order, but who will wait as long as necessary without penalty
  • market stalls (14) that will have three vegetables you can trade one or two of your vegetables for
  • helpers (13 non-lantern/22 in total) that will help you (once) with special abilities

3. Action Phase

If the nine (9) lantern helpers, which take actions that affect other players, are not used, then each player may perform her action phase simultaneously. Otherwise, each player will perform her phase sequentially (beginning with the starting player, which is the last player to place two action cards in the previous round). In the action phase, each player performs as many of the following actions as many times as she likes (with the exception of purchasing a “two-pack”) in any order:

  • Sow Vegetables (as Seed)
    by taking one vegetable from your cart and placing it on an empty field (which will be filled with vegetables of the same type from the global Supply).
  • Buy Vegetables (from the shop)
    and place them in your cart, by paying the (total) purchase price.
  • Sell Vegetables (to the shop)
    by taking the vegetables from your cart and adding them to the shop (for the selling price).
  • Trade Vegetables at a Market Stall
    by trading one or two vegetables from your cart for one vegetable in the stall.
  • Play or Discard a Helper
    and use the helper’s ability if desired.
  • Deliver to a Regular Customer
    with vegetables from your cart or storehouse.
  • Deliver to a Casual Customer
    with vegetables from your cart or storehouse
  • Take a Loan
    that provides a player with 5 Cash, but that also results in the player moving backwards 1 space along the Path of Prosperity at the end of the game
  • Buy a Two-Pack
    of action cards using your Cash and keep up to 2 of them for your use.

Then, at the end of the action phase, a player:

  • must store any remaining vegetables left in her cart in her storehouse (which can hold one vegetable at the start of the game, or 4 if upgraded for 2 Cash) or, if insufficient room, sell them to the stop or, if insufficient room, discard them
  • may pay to move along the path of prosperity; the first space in each round costs 1 Cash, but each successive space costs Cash equivalent to the value of the space (and moving to space 4 costs 4, to space 5 costs 5, etc.)

The economic trade-offs make the game quite challenging, just like a value-add trade negotiation between multiple potential suppliers in the real world. You want to acquire more regular customers (that can provide you with up to 34 Cash over 4 rounds and advance you quickly up the path of prosperity), but, as each regular customer requires two vegetables, each regular customer requires you to acquire and plant additional fields to meet their needs, and this requires up-front Cash. You can always take a loan, but each loan sets you back one step on the path to prosperity. On the other hand, you can take a casual approach and try to satisfy only casual customers with whatever you have, by occasionally trading for what you need, but if your livelihood is dependent upon casual customers, they quickly become aware of this fact and haggle you down (and they become less lucrative as they pay 2 less Cash). (Casual Customers are more lucrative if you have more regular customers as they will pay 2 more Cash in this situation.) You also want to make sure you have exclusive trading access to the right market stalls as it’s unlikely that you’ll always have what your customers want (as you generally can’t produce all six vegetables at one time until late in the game), but for every market stall you acquire access to, you sacrifice a potential customer, helper, or field. Acquiring available helpers (such as the Haggler, who will let you buy a vegetable 2 for 1 or the Harvest helper, who will let you harvest 2 vegetables from each of your fields instead of 1 in a round where you need extra vegetables) can also be very beneficial, but only if you get them at the right time as you are again sacrificing a potential customer, field, or market stall to acquire this helper.

At the Gates of Loyang is a great economic strategy game that will have you donning your thinking cap and wearing out your thinking chair in no time at all. As such, it’s a great way to keep those strategic thinking and planning skills sharp. Even true “Masters” of the game only reach jade stone 19 on the 20 stone path to prosperity! And that is truly a rare occurrence (just like only true Sourcerors beat the best-price model generated by a detailed market-driven optimized should-cost model).

Come back for Part II where we will provide a solo walkthrough of the game in preparation for a more detailed analysis of the game and the trade-offs that one will face in Part III, which will demonstrate why strategic, economic worker-placement/tile-placement/trading games are a great way to keep your strategic analysis skills sharp and maybe even learn how to analyze situations in new ways as we will demonstrate in Part IV that analysis works when we replay the game in Part II with new insights and do better. If soccer is not distracting you, take the time to work through this intense series — we need all the brain training we can get in our field!


I want to plant
I want to trade
I want to walk down the path
That’s covered in jade
I want to go out
And trade the grain
At the Gates of Loyang

*1 In a two-player game, each player may turn over a card from the top of the deck to add to the courtyard to increase the options available.

The Board Gamers Guide to Supply Management Part XVI: The Rivals for Catan

You’re enthralled with (The Settlers of) Catan. Whether you are settling the uncharted islands of Catan or the uncharted planets in Star Trek Catan, you love acquiring your resources, negotiating the best trades, building your outposts and upgrading them into cities (in space), and sneaking your way to victory with a timely acquisition of the longest supply route or the largest force (with the occasional surprise victory point from a well-timed development). You really wish you could square off against the new guy one-on-one who thinks he is better than you, but (Star Trek) Catan is a 3 to 4 player game.

Fear not! Today Sourcing Innovation brings you the answer in its continuing guide to board games for (aspiring) supply management professionals. The answer is the two player variant called The Rivals for Catan, which was released on the 15th anniversary of the Catan Card Game, which was released shortly after the original release of The Settlers of Catan. (Which, low and behold, also comes in an iOS Version. It’s a good implementation and you will find that the tutorial in this game is also well done. However, while the doctor certainly prefers the iOS version of Le Havre for a one-on-one game, due to the significant amount of set up and tear down the board game requires, The Rivals for Catan is one game where the doctor definitely prefers the board game version if the circumstances permit.)

In Rivals of Catan, just as in The Settlers of Catan, you are trying to build your way to victory, which is achieved when you get to seven victory points in the base game or twelve victory points in an extended game (to be discussed at a later time). You receive one victory point for each village, two for each city (which is upgraded from a village), and one victory point each for the strength or trade advantage.

You build using the five standard resources of wood, brick, grain, wool, and ore, just as in regular Catan, but, if you get any, you can also take advantage of a sixth resource — gold — that can be traded for other resources you require. Resources are produced by a die roll at the start of each player’s turn, and the resource(s) that are produced are those produced by resource cards owned by the player which bare the number rolled, provided a player has enough room to store the resource. In Rivals for Catan, a resource card can only store 3 resources.

Each player starts the game with two villages, one road connecting them, and one production card for each resource. Each time he or she builds an additional village, she gets two more resource cards (if slots are available to hold them). In addition, if the player has a scout, he or she can choose what those resources are (instead of getting random resources). (A Scout is an expansion card.) However, she can only build a village if she has already built a road with an open end.

The big difference between Rivals For Catan and the Settlers for Catan, besides the fact that it is designed for 2 players, is that development cards are replaced with expansion cards (which can add buildings, ships, and heroes to your province) and success is highly dependent on strategic utilization of these cards. In the base game there are 36 expansion cards divided into 4 stacks. At the start of the game, each player takes 3 cards from the top of 1 card stack. These cards form the player’s hand and she can play them at any time on her turn if she has the resources and space to do so.

The expansion cards come in three forms: buildings (14), units (6 trade ships and 6 heroes), and 9 actions. The buildings generally increase resource production (such as the marketplace which gives you an extra resource if a production roll gives your opponent more resources than you), protect you resources (as the storehouse protects resources on neighbouring regions when the brigand is rolled), or enable progress (as each progress point given to you by a building allows you to hold one more card in your hand). Ships improve your trading ability with the bank (as the brick and grain ships, for example, will let you trade two to one instead of the base rate of three to one), and heroes contribute towards a strength or trade advantage (providing 1, 2 or 4 strength points and 1, 2, or 3 commerce points). The first player to reach 3 strength or commerce points has the strength or trade advantage until the other player exceeds the strength or commerce point total achieved by the first player to achieve the advantage. The actions allow you to trade 3 gold for 2 resources, trade (up to two) other resources one for one, choose the result of a production roll (like a Munchkin Loaded Die), relocate any two production regions or expansion cards, or Scout for resources of your choice.

Furthermore, to add more chaos to the mix, each production roll is accompanied by an event, determined by the event die. The event can be a plentiful harvest (which grants each player a resource of her choice), a celebration (which allows the player with the most skill points to receive 1 resource of her choice), a trade day (which allows the player with the trade advantage to receive 1 resource of her choice from her opponent), a brigand attack (which causes each player to lose all of her gold and wool if she has more than 7 resources), or a random event (drawn from the event stack). The random event could be a fraternal feud (which sees the player without the strength advantage losing two cards from her hand), a travelling merchant coming to town (that allows each player to trade gold for resources one-to-one, a year of plenty (which sees each player getting an extra resource for each storehouse and abbey in their province), a trade ships race (where the player with the most trade ships gets an extra resource), a feud (where the player without the strength advantage loses a building), or a new invention (that sees each player get a resource of his choice for each progress point he’s acquired). A lucky roll could see your province suddenly become resource rich and an unlucky roll will not only result in your province becoming resource poor compared to your opponent, but could also result in the destruction of a much needed building.

Remembering that we are Supply Chain Professionals doing business in the global marketplace, the first of us to secure and deliver all of the products and services we need to meet all of the customer demands wins the game. We secure the products and services we need by managing supply and reserving limited production and distribution capacity. We find out which resources are limited by watching the market and taking note of tumultuous events. In today’s marketplace, no supplier will be able to meet all of our component or service needs on their own, so we will not only have to barter and trade with multiple suppliers, but also with our competitors and their suppliers in tight markets. And there will be nasty surprises waiting for us. A natural disaster may wipe out part of the raw material supply or Somali pirates may seize a precious shipment. We hate the pirates. They are dicks. But if our shipments get robbed, it’s not the end of the world. There are other ways to serve our customers. We can use the insurance money to buy from someone else, we can redesign our products to use alternate materials, or we can focus on a new or different substitute product or service to get us, and our customers, through the worst of times.

And as The Rival for Catan, we are constantly trying to secure the resources we need to acquire our workers (heroes), construct our buildings, procure our ships, grow our company (to new villages and cities), and obtain strength and trade advantages over our competition. We have to do this in the midst of disaster (pirate attacks, what dicks!, civil uprisings, and legal injunctions [that take your resources from you]). And we have to take advantage of good fortune when the opportunity arises (and the market prices drop and we can trade [significantly] cheaper than normal).

The Rivals for Catan a great two-player game to sharpen your strategic supply management skills. Try it out. (And for extra practice, and training, try the iOS Version).