Category Archives: Miscellaneous

Wait!

That’s right, don’t make that big decision today, Wait and use the art and science of delay to your advantage.

With summer came heat and a new book by Frank Partnoy, Professor of Law and Finance at the University of San Diego and the Co-Director of the Center for Corporate and Securities Law. In Wait, Frank proposes a contrarian perspective on decision making that suggests that slowing down your response time can yield better results as per a recent review over on S+B.

According to Frank, decisions of all kinds, whether “snap” or long-term strategic, benefit from being made at the last possible moment. The art of knowing how long you can afford to delay before committing is at the heart of many a great decision. This is a great maxim for Supply Managers to live by. There’s a reason that sales people often want you to “act now” and have you “take advantage of this deal before it’s too late” is they know that if you don’t act now, and do your homework, you’ll probably figure out the merchandise is over-priced, over-represented, or not quite what you’re looking for and that you can get the same deal, with a bit of patience and negotiating, from a hungrier supplier down the street.

And this goes double for software sales. If the sales-person is paid a variable commission based on total sales for the quarter, or year (which is a stupid way to implement an incentive model, by the way*), at certain times of the year he’s going to be very pressured to just make a sale, any sale, and all too eager to over-promise what he knows the IT department will likely under-deliver on.

This maxim should also be applied in the selection of new logistics providers, supply chain designs, and operating procedure changes. While it is imperative that your supply chain be as lean and mean as possible, it often happens that rushing to meet the goal only results in a whole lot of running as rushed implementations often end up with holes that require a whole lot of rushing to fill. And while it’s likely that you are losing money every day you don’t implement that new supply chain design that is expected to save you millions, if you don’t take the time to do a proper risk assessment, you could lose your savings five times over when a new tariff scheme gets approved in six months (that everyone who did their research saw coming) or a trade agreement expires.

So while you should be exploring new technologies, processes, and innovations that could enhance your Supply Management organization as soon as you discover them, you shouldn’t rush a final decision until you’ve given yourself some time to re-examine all the findings. (But then, once you’re sure, jump in with both feet. If you hold back, in Supply Management, even the best laid plans will fail.)

* While a software company should incentivize it’s sales team to sell more, it should not do so at the cost of customer success. There are better ways to implement an incentive model which will allow both goals to be achieved.

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.

What Does AmazonSupply Mean to the Business Supply Chain?

Rummaging through the Supply Management sites recently, looking for tidbits I might have missed, I came across this post over on Supply & Demand Chain Executive that asked what AmazonSupply means to the business supply chain. Given the force that Amazon is in the consumer world, it’s certainly a question worth asking, but is it a question worth answering?

If you check out the AmazonSupply beta web site, you see that they carry a wide range of products classified into thirteen categories which primarily focus on shop floor manufacturing, basic laboratory equipment, cleaning, and office supplies — which is only a sampling of the categories that are easily obtained through MFG.com or Alibaba.com. Plus, the prices on some of the products aren’t that great. For example, the LEGO Education DUPLO Playhouse Set in the Science Education Category, as I write this, is $99.58, while the same product on the legoeducation.us site is $104.95. Sure, that’s a savings of slightly over 5%, but no where near what you could get sourcing direct from the manufacturer in bulk (even at small volumes). And the DeWALT DCD940KX 18V 1/2″ Cordless XRP Drill/Driver Kit is 229.57, only 11% less than the same product on CPO PowerTools and more than what I’ve seen the same product on sale for at Home Depot – a consumer retail establishment.

In other words, it’s very convenient, and probably guaranteed not to charge you any more than the hardware / office supply / janitorial supply / laboratory supply store down the street / in your local industrial park for the vast majority of items carried, but certainly not revolutionary for anyone need to source more than one drill bit, or drill, when sourcing product. As far as I am concerned, it is NOT a threat to e-Procurement providers and, in its current form, no where near as revolutionary as Amazon was to the book distribution market a decade ago in its current form. Right now, the only people who have to worry are chains like Home Depot and Canadian Tire, Staples and Office Depot, Henry Schein and Sanplatec, and your local providers of cleaning supplies and machine parts. Basically, any store where someone would go for a one-off purchase risks losing business. But anyone who was selling in bulk, on negotiated contracts at discounted rates, hasn’t a thing to fear with AmazonSupply.

In fact, the only companies with anything to fear are e-Procurement solution providers who provide nothing more than catalogue and punch-out functionality, as AmazonSupply makes that irrelevant for many companies who will be able to use AmazonSupply as a one-stop one-off shop and the ability to easily track orders is a big plus for anyone having to deal with mounds of paper receipts. And while AmazonSupply could, with time, offer a more integrated supply management solution with financing, purchasing support, and even spend categorization and baseline analysis, I don’t see this maturing all that quickly. What good is advanced functionality that only works on a small portion of you one-off off-contract spend? In other words, for the foreseeable future, any e-Procurement platform with any level of sophistication has nothing to fear.