Category Archives: Miscellaneous

… But The End Of Home Depot May Be In Sight … (HD Part II)

In our last post we discussed the recent snafu made by Home Depot during a recent upgrade to its online website on February 1st where some incomplete planning and testing “Left Home Depot Customers Running in Circles” (which is terrible as there was no danger and there should have been no doubt*). Home Depot likely made the right business decision (despite the protests of some E-commerce folk) when it decided to start an upgrade at noon on a Wednesday, did the right thing when it put up a “Pardon Our Dust” notification page, but screwed up when it directed visitors to its blog that was filled with links back to the Home Depot e-Commerce site, which was offline and which resulted in users seeing a “Moved Permanently” page which redirected to the “Pardon Our Dust” page which, of course, redirected to the blog … in an endless circle of redirects. This was bad, but as explained in our last post, definitely not the end of Home Depot (online). In fact, it’s likely that it won’t even make a blip on their bottom line when all is said and done.

But this isn’t to say it has problems. In this blogger’s view, it has big problems, and they could be getting bigger by the day — and Home Depot probably isn’t even aware of them. What are these problems? Unsatisfied Customers! That’s right, every day it’s unsatisfied customer count is likely increasing, and it probably doesn’t even know it. How do I know? the doctor has been unsatisfied in his past 5 (five) visits and has been told each time, by at least one associate, including the manager, in the store, that they’ve been having this problem regularly lately and that there’s nothing they can do about it unless they send half a dozen e-mails and go through eight levels of approval. (Probably an exaggeration, but I’m sure the effort to try and fix the problem, which can only be done on a piecemeal basis, is not worth their pay-check or sanity.)

So why did I leave as an unsatisfied customer 5 (five) visits in a row and why am I sure that I am not alone? And why do I suspect it’s happening to thousands, if not tens of thousands (or more), of other customers across North America? Because of the (ultimate) source of the problem — a source that, I am told, is universal across every Home Depot location in North America. What is that source? It’s the supply management evil called ARS, and more specifically, it’s SARS. An unfortunate, but accurate, acronym.

So what does ARS stand for? Automated Replenishment System. And is it evil? Only when misapplied. And the mis-application in particular is Storefront Automated Replenishment System — SARS for short. And it is evil. Unchecked it is more devastating to your supply chain than a tsunami, earthquake, or other natural disaster that wipes out your primary supplier’s central manufacturing facility. There isn’t a single supply management solution that will create more of a disaster if misused than SARS. Every supply management solution from RFx through e-Auction to Decision Optimization, from e-Requisition to P2P, and inventory / warehouse management to distribution management can be misapplied and cost an organization millions of dollars in the wrong, untrained hands, but SARS doesn’t even need any hands at all to bring an organization to financial ruin! It does that all on its own. How?

First of all, we need to step back and define what ARS, or an Automated Replenishment System, is and why one has to be wary of such a technology. An automated order replenishment system is a system that tracks inventory levels in near-real time and automatically re-orders stock when a minimum threshold is reached or when, in a more advanced system, it detects that certain inventory is moving faster than expected. Based on the idea that one of the most costly events under a retailer’s control is a stock-out, which happens, on average, in 8% of products for a retailer without an ARS, the system attempts to prevent such stock-outs by detecting when a product is too low or moving too fast. It ties into the POS system and receiving system, downloads data at least daily, and calculates current inventory levels based on the last known amount, the amount received, and the amount sold, and if the inventory hit a threshold or dropped too fast, automatically sends a purchase order for more inventory to the supplier with a target delivery date. Now, a retailer, who carries thousands of products and who can’t keep an eye on every one in real time (without investing a lot of money in manpower who can make mistakes) will typically think this is the greatest thing since sliced bread the first time he hears of it, but what he doesn’t understand is that this system only works in a perfect world model, and there ain’t no livin’ in a perfect world. He can keep on dreamin’ that there is, but there ain’t. Why?

*Don’t get it? Too bad … but on the bright side, you feel just like a Home Depot customer who visited the site after 11:59 am on February 1st or how the doctor felt each of the last five times he visited his local Home Depot store!

Online Snafus Will Not Be The End of Home Depot … (HD Part I)

As chronicled in a recent issue of StoreFront BackTalk, a recent try at not shutting down completely “Left Home Depot Customers Running in Circles” (which is terrible as there was no danger and there should have been no doubt*). Basically, what happened was that on Wednesday, February 1st, Home Depot took its web site offline to upgrade IBM Websphere from v. 6 to v. 7 (in a blatant display that it doesn’t understand e-Commerce very well, but that won’t be the end of Home Depot either, so that’s ok). This wasn’t the problem — the problem was that, in an effort to ensure that visitors still had something to look at, the “Pardon Our Dust” page that informed customers the site was temporarily down included a link to the company blog (still up) that had a new post for Do-It-Yourselfers at the top of the page. What’s wrong with that? Well, the post linked back to the product on the Home Depot site which was, naturally, redirected to the “Pardon Our Dust” page. Most of the other links went to a “Moved Permanently” Page which, in turn, linked either to another “Moved Permanently” page or the “Pardon Our Dust” page. The customer was left chasing his own tail. It was bad, and, as StoreFront BackTalk suggested, they should have just closed the e-Store for the day.

But it won’t be the end of Home Depot by any stretch of the imagination, even though e-Commerce folk still grumble that sites today — with mirroring and cloud options — shouldn’t have to shut down at all for simple scheduled software upgrades, as pointed out in StoreFront BackTalk’s follow-up on how Home-Depot’s WeekDay Noon Shutdown “Made Perfect Clock Sense”. After all, the retailer does most of its online business on weekends and mornings, and with an 18 hour upgrade, that left noon on a weekday — so it either had to pony up the $$$’s to replicate it’s site during the outage or take the small revenue loss from being down for the 18 hours that were projected to be the least revenue producing. (And sometimes it can be more distracting, and thus more costly, to aim for 100% uptime because if something doesn’t re-route properly, a poorly working site can do more reputation damage than a site that’s taken down completely and replaced with a pleasant notification. After all, Apple takes their online store down all the time and they still make a fortune as their customers know their will be new and better products to buy when it comes back up.)

And then there’s the customer reality to consider.

  • Customers Understand All Sites Need to Go Down For Maintenance
    They just want to be notified — and not run in circles if the site is down. And if Home Depot apologizes for this oversight in its maintenance, they’ll forgive it.
  • Most of Home Depot’s Business Is In Store
    I don’t know the stats, but I know the reality. (1) Before an average consumer buys something for her home — which is going to cost quite a few shiny nickels — she wants to see it. Most people use the on-line site for research. When they purchase, it’s typically because they’ve already seen the product in the store and are ordering it online because they want it delivered. (2) Most of their big dollar transactions are from contractors. And contractors are buying in the store, not online. That’s why they have contractor sections in the store.
  • Only a very small percentage of (potential) customers would have visited the site in that 18 hour window and noticed the problem.
    Again, most customers are using it primarily for research for DIY products, which is happening mainly on the weekend, or to order something they researched and found in-store on the weekend or the night before, which is happening mainly in the morning.
  • No animals were harmed by the downtime and no child labour was sweating in a factory to bring the site back up.
    e-commerce snafus don’t bring down a 68 Billion dollar plus home improvement chain. A one-day snafu won’t even make a noticeable change to its bottom line. Let’s face it — a small corporate social responsibility slip-up such as forgetting to audit a supplier’s supplier who uses child labour will do much more damage to its brand and bottom line than any website snafu ever will.

To make a long story short, it had a snafu, but it has nothing to worry about as a result. However, this doesn’t mean it has nothing to worry about. It has a lot to worry about. In fact, it’s entire business could be at stake as you read this. And the sad thing is, Home Depot might not even know it!

*Don’t get it? Too bad … but on the bright side, you feel just like a Home Depot customer who visited the site after 11:59 am on February 1st!

What Does Free Really Cost? Part II

In our last post we discussed how we can’t go a day without another FREE software solution being offered to our business and that we don’t believe these offers because everything has a price, even if it’s not immediately obvious or we are not the ones to (initially) pay it. Referencing a recent piece on “From Free to Fee” from ChainLink research which discussed how the definition of value has been redefined in the digital age, we discussed what people now expect for Free and why these expectations are not always in line with reality because someone has to code the app, someone has to maintain the app, and someone has to support and train the users on the app, and that someone will expect to be paid to do these tasks. Also, the app has to run on hardware, which takes power, and be available over the internet, which takes connectivity, and all this takes money. We concluded that using a Free app has a number of costs, and that they warranted a discussion.

So what costs is an organization accepting when it chooses a Free app?

  • Platform Limitations
    All free(mium) platforms have limitations. The best things in life may be free, but the best things in enterprise platforms are not. You’ll be paying for all the inefficiency in your organization.
  • Data Loss Risk
    No money, no guarantees. If your files are lost, and you’re not paying for backup, they’re lost forever. And even if you’re paying, and you’re not using a quality service with off-site backup, you could be in the same boat as the MegaUpload users. You’ll pay dearly when your data goes up in smoke.
  • Service Loss Risk
    Again, no money, no guarantees. The service could be here today, gone tomorrow, and with no escrow, you’re out of service. You’ll pay dearly when you have to scramble for a new service provider.
  • Supplementary Platform Limitations
    The free service may only work will files in a certain format, may only work in IE on Windows, etc. You could be locking in your platform requirements to those that are not the best for your organization. And then when the number of vendors who can provide that platform diminish to few, or one, you’ll be reaped over the coals at upgrade time.
  • Vendor Lock Ins
    Let’s say you managed to negotiate a FREE license to a piece of enterprise software to support your organization in exchange for a big services spend or marketing consideration. This may save millions of dollars in licensing costs, but if that software only works on top of a certain ERP system also provided by the vendor, the vendor has you over a barrel and will more than make up the loss on the Free license to the specialty module with the premium you’ll be forced to pay on the base ERP. And this is true across IT systems. The not-so-bright negotiators at a big University who recently negotiated Free Cloud-based Microsoft Exchange mail didn’t save 2 Million over X years, they locked in probably 10 Million of spend on Microsoft Operating Systems, Office Packages, and Back Office Suites over the next X years as Exchange only integrates fully with other Microsoft products. And how much of a break are they going to get on these products when Microsoft just gave them mail for Free which is, sadly, a service that is already almost Free if you decide to go with something like Pronto on Linux (as your only cost is the cloud computing platform and internet connectivity).

And these are just the obvious costs. There’s no Free lunch in enterprise software or supply management. You always pay in the end. And, if you’re not careful, you’ll pay much more than you save by choosing a Free platform. Remember that, and pay up front, and you’ll avoid rude, costly, awakenings when something goes terribly wrong.

What Does Free Really Cost? Part I

It seems we can’t go a day today without another FREE software solution being offered up for your business. But is it really free? What does it really cost your business to use it? The reality is that everything has a price, and the price for a business is typically a lot higher than the price for an individual. So what is the price? Good question. Let’s start with a recent research brief from ChainLink Research on “From Free to Fee”.

First of all, the move to ‘Free’ has redefined the definition of value in the digital age, which includes:

  • the value of audience
    visitors, opt-in subscribers, and the ability to mine consumer information
  • the value of the network
    a bigger, better network that matches yours
  • the value of the platform
    that is interoperable, and integrates, with yours
  • the value of human interactivity
    social and collaborative connections

Value that we expect to access for free through free conference services, file transfer, file storage, social networking, and even free ERP systems. Even in the enterprise world where we want to be using apps that millions of people use.

But nothing is free. Everything costs. Someone has to code the app. Someone has to maintain the app. Someone has to support the app and train the users. And that app has to run on hardware, which takes power, and be available over the internet, which takes connectivity. And people, power, and technology take money. And, for some apps, lots of it.

That’s why the big free apps, with enterprise uses, need conversions from free(mium) to paying subscribers. Hence the segmentation of features, basic access for free, more advanced features, like back-up, for money. Free may be a great way to enter the SMB marketplace, but it’s not a long-term strategy to stay there.

And it’s not just because it’s costly for the providers of the free solution, which have to pay their bills, but because it’s costly for the organization — something the article misses.

When an organization accepts Free, it accepts a number of costs that will be discussed in tomorrow’s post.

How Do We Drive Technological Advances? Part III

In our first post, we noted that an organization must master the three T’s — talent, transition, and technology — to excel in Supply Management, and lamented that an average organization has not yet (truly) mastered any of the T’s, with technology often being the T in which the organization is the furthest behind in. We lamented on the lack of advice on what to do to drive organizational advancement and dove into a recent article from Chief Executive on “Seven Strategies for Driving Technological Advances” in the hopes that it might provide a guide for an organization wishing to catch up on the technology curve.

Unfortunately, after reviewing the piece, the verdict was not very good. While the article was well intentioned, and gave SI hope that the adoption problem was understood, the advice contained within really wasn’t that good. While it would certainly encourage a progressive leader to be more receptive of new technology, it’s not going to encourage the organization as a whole. So what is a Supply Management Leader to do?

First we take a page from BravoSolution’s playbook on High Definition Adoption Measurement and Measure what the organization is using, and, most importantly, what the organization is not using relative to the organizational goals.

For example, if the organization obtained an e-Sourcing platform with e-RFx, e-Auction, and Decision Optimization a year ago, and 50% of the team is using the e-RFx, 25% of the team is using the e-Auction solution, and only 5% has ventured into Decision Optimization, there are obviously problems across the board. First of all, unless there is a really esoteric category where all of the suppliers are stuck in
That 70’s Show, just about every Supply Manager should be using the e-RFx. In addition, it’s likely that 25% of the categories could literally be set up on e-Auction auto-pilot and that the additional savings that may be obtainable on another 25% of the categories would be worth the extra effort, indicating that at least half of the Supply Managers should be using the e-Auction tool. And even if the team is not ready to trust allocations from a decision optimization tool, at least half of the team should be using the team to compute a minimal spend baseline to guide analysis and negotiations. This means that usage of each tool is at most 50% of what it should be.

The next step is to Identify the likely causes of non-use. Is it lack of awareness of the tool? Is it lack of awareness of the potential capabilities of the tool? Is it lack of awareness of the key features of the category that would make it suitable for e-Sourcing? Or is it, more likely, Fear of the Unknown?


Aware of what will hurt you
You’re prepared to remain this way
So sad yet safe with your afflictions
Afraid to start a brand new day

These words, writ and recorded by Siouxsie and the Banshees almost twenty-one years ago, are probably the best descriptor of the average pseudo-technophobe in a modern multi-national Supply Management organization. They know not using technology will hurt them, but they are safe with their affliction, and prepared to remain technophobic as they are afraid to start a brand new day — and possibly a brand new, technology enabled, career. And it’s completely illogical. It’s like


We all get the strangest feeling
When we’re standing mighty tall
To jump from seventeen floors
And crash into free fall

It just doesn’t make any sense. If this is the case, you have to identify it. Then, once you’ve identified the issues holding your team back, you have to Resolve them. Start by identifying common-sense resolutions that will be comfortable and affect the team on an emotional level, even if such resolutions are not the most efficient or logical. For example, if the issue is that a Supply Manager doesn’t think auctions are appropriate for a category that he can save 20% on simply by pitting the two leading office supply vendors off each other, you may have to ignore the fact that, if the volumes are high enough, this will enable suppliers with 3PL capabilities to also bid directly and all bids to be compared on landed cost and instead focus on how it will automate data collection and award and allow the Supply Manager to get the same result with much less work. This will in turn allow him to run more events, save more money, and maybe get a bigger bonus. And if it’s fear that the technology acquisition is an intermediate step to manpower reduction (once everything is automated), you have to demonstrate to the team that it can’t run on auto-pilot (even if it can for a few simple e-Auction categories) and that a human always has to drive the technology to get results (and disable any auto-pilot modes that may be built in). Once the team realizes that the tool is to enable them to do their job better, or that it is easy to use, then you can always turn on automation or incorporate advanced features.

Then, once the initial trepidations are overcome, you have to Train your team on the Technology. Start with a SWOT analysis viewpoint as the team has to understand the strengths, weaknesses, opportunities for cost avoidance and reduction it will enable, and the threats that the technology poses to the organization if your competitors use it and you don’t. Then move onto transition training and demonstrate how to move from current, mostly manual processes, to newer, mostly automated, technology-enabled processes that let the team focus on the strategic opportunities and leave the time-wasting tactical processes to the technology. Finally, focus on category specific training tailored to the use of the technology for strategic and high value categories.

Finally, you have to Hatch the organization out of its shell. This means getting off the egg and letting them break free. This will require Trust, Empowerment, Acknowledgement, and Mentoring on their terms, not yours. You have to trust them to their jobs and empower them to make decisions. You have to acknowledge that their will be mistakes and a learning curve, but with mentoring and guidance, they will be identified, corrected, and the organization will be better for them. In other words, you will have to rely on true TEAMwork. Not an easy task, but a doable one.

In other words, the key to Technology Adoption is MIRTH (Measure-Identify-Resolve-Train-Hatch). Furthermore, MIRTH is a suitable acronym because, when done right, and technological advances pervade your organization, there will be gaiety, jolity, and joviality — a state of affairs that is sadly lacking in many organizations today (that are not on the Top 100 employers list).