Category Archives: Miscellaneous

Can the US Post Office Be Fixed?

As chronicled in SI’s winter post that decided it was Too Bad the US Post Office Did Not Follow Royal Mail’s lead (before we got wind of the Royal Mail Fiasco), it’s old news that the US Post office is in dire straits. (No, no, not this Dire Straits. The US Post office definitely are not The Sultans of Swing.)

When you have more debt than 50+ countries have capita, that’s a bad thing, and not something a single (barrel) of sourcing projects is going to fix overnight. (Any operation hemorrhaging cash that bad should have hemorrhaged management years ago!) A drastic Supply Management-led transformation is required, but what should it look like? Obviously, Saturday service can be eliminated (as we Canucks do without it just fine), and obviously the sorting centres should be more efficient, but that’s a small drop in the labour and overhead categories relative to the 20 Billion the US Post Office needs to save (if it doesn’t want a good excuse to be shuttered).

Where should it start? Damn good question. Obviously, a technological transformation is a great place to start, but even the doctor is at a loss at how you cut 15 Billion when the bigger problem is obviously that you lost it in the first place! However, a few people are taking stabs at it, and this recent piece over in Progressive Railroading, on how Intermodal rail [is] a ‘sensible’ transportation option for U.S. Postal Service, that quoted a report recently issued by the U.S. Postal Service Office of Inspector General‘s Risk Analysis REsearch Office, showed someone has a head on their shoulders.

In “Strategic Advantages of Moving Mail by Rail”, shifting a portion of mail volume from tuck to intermodal rail could yield $100 Million in annual cost savings without requiring changes to the postal service’s network. Wow! Imagine how much could be saved if the network was optimized. I’m guessing double that, or more. If I’m right, that could yield 1 Billion in five years. With almost no effort!

They have to do something. As CNN notes, it’s a summer of discontent at [the] Postal Service. But given that it’s on the verge of defaulting on a $5.5 billion payment covering retiree health care due August 1, what can we expect?

At this point, I have to agree with Bob Ferrari, who, in his recent Friday Rant*, said that solving the problems of this agency involves a number of structural changes as well as an infusion of modern supply chain management practices related to efficiency and productivity. We have been clear that the U.S. needs a vibrant and efficient postal service and that may not necessarily equate to wholesale privatization. And, most important, there is an obvious need for a non-partisan, independent commission to oversee the process of re-structuring the USPS. Instead of audit agencies reacting to the obvious and pointing to required management changes, an independent commission should be tasked with a comprehensive look at how the USPS can be transformed to a highly efficient agency that instills modernized physical distribution and information management practices. Hear, hear! Let’s face it — 3.3 Billion is an awful lot for highway transportation contracts, even if you are the USPS.

* What’s with S.M. bloggers and Friday Rants anyway? Haven’t they figured out yet that any day is a good day for a rant!

What’s Worse Than a Walmart Consultant? A Sleazy Consultant!

After my recent post on how Walmart Changed the World … But Not Necessarily for the Better, I reminded my Twitterers* about what happens when you use Walmart Consultants. In a nutshell, when you pay a cut rate, you get a cut job … and the pleasure of the consultant blaming you for his or her incompetence.

However, this is still better than what you get when you use a sleazy consultant (who, in another life, was probably a lemon, err, used car salesperson). As per this great post over on the Enterprise Irregulars on “Screwing the Customer” (Tales from the Crazy Consultant File), we can still be surprised by the antics of some consultants. The post chronicled two stories.

In the first story, a small, profitable business that was a multi-million dollar money machine, bought on-premise ERP software from a reseller that poorly fit their needs. Since the reseller did not specialize in implementation, the firm wanted the vendor to find them another implementation services company. But since the vendor had no relationship with the buyer, the buyer was dependent on the reseller to find, and manage, the implementation of software that poorly fit their needs. The buyer has outsourced control, leverage, and judgment to an unworthy consulting firm. Translation — the customer is screwed.

In the second story, a small consulting organization has a multi-million dollar change management contract with a large state agency. Part-way through the project, the consulting company unilaterally shifted its focus to advising on tools and methodologies. The state agency threatened termination, and the consultancy responded with a large invoice and threats of legal action. Meanwhile, the agency hiring manager has limited options since any change would involve delays and additional expense. Translation — this customer is also screwed.

Unfortunately, the sleaze is not limited to these two examples. The Supply Management space also has its share of sleazy consultants, which are our equivalent of the the used car (lemon) salespersons, and many of them fall into the following two categories:

Slippery Spend Analyst

Yes, it’s true, that the doctor promotes a good spend analysis almost as often as he promotes a good optimization-based sourcing project, but there are two types of spend analysts in the world. Those that educate you, and those that just tell you where your spend is too high and offer to negotiate it down for you. In the short term, this works great — the consultant identifies a category, like telecom, where you are 15% over market average and the consultant negotiates your rates down to 5% below market average and you save 20%. But in the long term, as users are added to and removed from the plans, and usage changes, rates creep back up and in three years your organization is again paying 15%-plus over market average. And, again, you have to pay the consultancy to do the spend analysis to reduce your rates. Now, if they had trained you on their process and one or more tools, you’d have the option to do it yourself, or to just use them for the negotiation. But since they didn’t, you’re left in the dark.

Recovery Specialist

This is a wonderful racket. Almost every big organization overpays its suppliers due to duplicate payments on the same invoice (by accident, when it is resubmitted due to a late payment), duplicate payments against the same products (as the organization will resend the invoice with each shipment corresponding to the same PO), overpayments (because negotiated payments were misapplied), and failed deductions (because parts were bad and payment was not refunded). But not every organization catches all of these overpayments, which can add up to Millions for Global 3000s. There are consultancies out there that specialize in this recovery, and this is a good thing as long as they don’t take advantage of you.

The problem is that most of the consultancies that specialize in recovery use “black-box” methods to identify these overpayments, which are guarded more securely than Fort Knox. So even though they might find an organization a Million in savings, and take Two Hundred Thousand as a Fee, the organization isn’t that much better off than if it hadn’t hired the consultancy because. In as little as eighteen months, there will be another Million in overpayments hidden in the books because the consultancy didn’t tell the organization how the majority of overpayments originated or what best practices the organization could adopt to minimize the amount of overpayments it made. This could allow the organization to go longer between significant recovery audits, and the organization would likely pay less, and lose less, over time. A good recovery firm will do this, and a really good recovery firm will even advise you on the software options that exist to plug some of the holes in your payment processes and/or tolls that will automate part of the recovery process.

* Yes, the doctor is on Twitter, riding the Fail Whale as he chases the Twitter Bird (because the doctor wants his marbles back)!

The (Board) Gamer’s Guide to Supply Management Part III: Munchkin

I’m ecstatic 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. As I said in my last post, learning Supply Management can be infinitely more fun than watching paint dry. And 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 a blast and a half!

While this might be a good time to move on to a game like Puerto Rico, an economic city building game where you select a trade (such as captain, mayor, trader, settler, craftsman, or builder) in an effort to achieve the greatest prosperity (and highest respect) by shipping goods, building impressive cities, and managing their colonists and plantations, it’s still a little advanced for our budding gamers, so we are going to select a different game for our third post. Plus, while Ticket to Ride (Part I) helped us understand the capacity limitations of the shipping industry and The Settlers of Catan (Part II) helped us to understand the balance between supply and demand in limited commodities, they both limited our view to a competitive market where each player was acting independently at all times. (And while trading is a big part of Catan, your opponent only traded when it was in his interest to do so, and partnerships were never formed.)

In Steve Jackson’s Munchkin, we still have the situation where every player is out for herself, but where players will often unite for brief periods of time to accomplish a goal where there are mutual rewards (or bribes) to be made. Plus, as we will quickly discover, Munchkin brings a reality to gaming that neither Ticket to Ride nor Catan bring to the table. And most importantly, we have another fantastic TableTop episode where Wil Wheaton (who still claims to be In Exile) introduces the game with the help of the game’s creator, Steve Jackson (and Felicia Day and Sandeep Parikh). As long as he keeps churning them out, we are going to take advantage of the priceless gifts that Mr. Wheaton has granted us.

When it comes to Munchkin, as Wil Wheaton says,

The goal is very simple. Get from level one all the way up to level ten. To do that we’re going to kick in doors. Bam! And fight the monsters that we find behind them. Now, if a monster is too tough for us, we can ask our friends for help. Maybe they’ll make it less scary. . . . Of course if a monster looks like it’s getting to be too easy for us to defeat, those same ‘friends” will turn around and make that monster harder for us to defeat. . . . If we are able to defeat the monster and don’t have to run away, we’re going to go up a level and we get to take one of its treasures, always something that helps us. . . . Munchkin is a game where you really find out who your friends are. Generally, not the people sitting around the table with you.

In addition, Munchkin is a turn-based game where, at the start of your turn, you may play as many cards from your hand as you’d like, trade items in play with other players, or sell items for levels. Then you have to kick in the door, where you will generally find a monster (which must be fought immediately), a curse (which applies to you immediately), or another card that may be put in your hand and saved for later or played immediately. Other cards are generally monster modifiers (that make them weaker or stronger), a race (such as dwarf, elf, orc, etc. that gives you a special ability), a class (such as warrior, wizard, bard, etc. that gives you a special skill), or another special card that can be played at a later time. If you fight a monster, you either beat it (with help), or you try to run away. If you beat it, you get its treasurer. If you don’t, you suffer bad stuff, such as losing a level, losing an item, or, in some cases, you die. If it’s not a monster, you get to look for trouble (and play a monster from your hand to fight, if you have one), or loot the room (where you take a second door card and put it in your hand).

It’s representative of our job many days because we never know what interruption (probably caused by a gremlin) we are going to have to deal with, and we never know if we’re going to be able to conquer it without help. Sometimes we can solve the problem with help from within our organization, but sometimes we will need help from our competition. And this is where Munchkin gets interesting when compared to Ticket to Ride or The Settlers of Catan. Maybe when our primary distributor ‘loses’ the shipment of tantalum we need to keep our mobile phone capacitor production line operational, we can call up our competitor a few miles away and find out that they will sell us some of their excess inventory (at a mark-up) that will keep our production line going until we can get a replacement shipment. But maybe they will instead take advantage of this moment of weakness to lock up even more supply from their distributor, in the hopes that our production line will stay down for weeks and give them a chance to leapfrog us on New Product Introduction into the rapidly evolving mobile market place. We don’t know. Munchkin is one of the few games that will help us understand the intricacies of a co-opetitive market (which may not be a good thing for your supply chain, as per this post).

The trading aspect introduces us to the ways that we can barter inventory when cash is at a premium, the selling aspect (treasure for levels) introduces us to the ways we can profit off of excess inventory if we are smart about it, and the cursing aspect introduces us to the dirty tricks we might have to deal with from shady suppliers. Plus, classes demonstrate how skills acquired through education can improve your capabilities and races demonstrate how specializations in certain functions, processes, or technologies can take you up the Procurement ladder. And, just like in real life, if you don’t have enough excitement in your job, you can always look for trouble and hedge your bets (by buying on the spot market or, even worse, hedging) or, if you see a supplier or competitor in trouble, you can, in effect, loot the room.

It’s a great game. And since, as Wil says,

Sometimes you don’t care about someone’s rich personal backstory. You don’t care about a character’s precious little hopes and dreams. Sometimes you just want to kick in the door, kill the monster, and take it’s treasure without any of that pesky role playing.

So, without further ado, it’s time to kick in the door, mutilate the bodies, and backstab each other as we fight to see which one of us in the biggest munchkin.