Category Archives: Miscellaneous

Blogologues on Hiatus

I know that you’re still without your evening monologues, and as defacto members of the larger Colbert Nation, I know that you’re finding it tough, but it is that time of year where even pundits take a break for the holiday season. Furthermore, with the 12 Days of X-emplification starting tomorrow, you’ll still be receiving your daily dose of the doctor‘s wisdom, and you should be able to manage just fine.

After all, it is time that you started kicking in a bit of overtime at the office and at home to get ready for the holidays. This hiatus will insure that even if you have to reduce the amount of time you spend on your daily blogs, you will not have to miss out on any literary goodness. So relax and enjoy the holiday season! You deserve it.

The 12 Days of X-emplification: Prologue

Last year, I brought you the 12 days of Christmas, which went as follows:

On the twelfth day of X-Mas
my blogger gave to me
an ounce of cunning,
another vendor hyping,
blog posts worth keeping,
spend vendors lancing,
thoughts for a shilling,
strategies for winning,
tactics for saving,
five golden rings,
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

This year, in the spirit of giving, and in the spirit of Questions to Ask your Optimization Vendor, the doctor exposes the elephants in the room (Part II), and the doctor goes mental (on Auctions and on Optimization), I’m going to give you twelve posts on twelve different sourcing and procurement technologies and services that expound upon the questions you should be asking, the answers you should be expecting, and, most importantly, why, so that when you set about choosing a technology to help you with your sourcing and procurement challenges, you choose the right one.

Now, I know that Procuri (acquired by Ariba, acquired by SAP) and some other vendors put out a series of RFP template documents, that included The Sourcing RFP Template, The Supplier Management RFP Template, The Contract Management RFP Template, and The Spend Analysis RFP Template and that some of you might think that these posts are therefore unnecessary, but I assure you that the opposite is true. The problem with these RFP Templates is that they were written from a feature perspective, and were designed to make the sponsors look good (whether the sponsors want to admit it or not). The reality of the situation is that the number of features a product offers is irrelevant if it doesn’t support the key processes you need it to support to add value to your business. In other words, a product with only 100 features could be many times better than a product with over 1000 features if the product with 100 features supports the ten functions you need to support and enable your best-practice based business processes. For example, it doesn’t matter if a spend analysis package comes with 100 reports out of the box if you can’t build a template for the one report your boss demands to see every week.

Thus, when it comes to the technologies you use, or should use, every day, I think it’s time that you as a buyer knew the questions you should be asking, and not necessarily the questions the vendors want you to ask. Then you’ll be in better shape to select the right technologies to meet your needs.

Before the series gets started, I have a couple of things to take care of.

First of all, please understand that just because the templates I called out above (and those like them) are not appropriate templates for you to be using in your efforts to find the right product for you, this does not necessarily imply that the solutions offered by those same vendors are not appropriate for your needs. The solutions might be appropriate, and they might not. But unless you ask the right questions, how will you know?

Secondly, if you thought my blogologues were hard hitting as of late, and even a little scathing, as they used to say, you ain’t seen nothing yet. Although I’m not going to discuss specific vendors with respect to the technologies in the 12 posts that follow, I can guarantee that for any given post, there are going to be a number of vendors who are not going to be too happy after reading it – because their solution, whose last major update was five plus years ago, not only doesn’t cut it, it doesn’t even come close!

the doctor’s Guest Contributions: The Half Year in Review

Since the last summary of my guest post contributions (in June), I’ve blogged a number of guest posts over on eSourcing Forum [WayBackMachine] as well as authored or co-authored a number of the initial versions of the wiki-papers over on the eSourcing Wiki [WayBackMachine]. I’ve also contributed articles to the EyeForProcurement monthly newsletter as well as Efficient Purchasing.  For those looking for some more insights on various topics, here they are.

e-Sourcing Forum

A Case for E-Sourcing and E-Procurement Integration
A Global Trade Primer
Applications of Spend Analysis
Brunswick Corporation’s e-Auction Best Practices
Collaborative Negotiation
Confucious eSourcing Project Management Tips
Five Ways to Take Your Sourcing to the Next Level
Incentives Motivate
Key Challenges of Tomorrow, Part II
Key Challenges of Tomorrow, Part III
Nine Steps to e-Procurement Success
Optimal E-Tool Selection
Optimization is the Future And The Future is Now
Seven Tips for SaaS Selection
Some Low Cost Country Sourcing Insights
Supplier Enablement
Ten Common Negotiating Mistakes
Ten Tips for Talent Retention
The Benefits of Purchasing Consortiums
Twelve Steps to Purchasing Program Predominance

e-Sourcing Wiki

The Basics

  • Strategic e-Sourcing Best Practices : A Total Value Management Perspective
  • On-Demand / SaaS Application Platforms : Introduction to a Rapid Software Deployment Model
  • The Quest for Purchasing Fire : Develop the Internal Strategies for Selling the Procurement Tools Internally
  • Strategic Sourcing Success Factors : Best Practice Principles of Corporate Procurement

The Technologies

  • Spend Analysis and Opportunity Assessment : There’s Gold in Them There Hills … Of Data
  • e-RFx & Supplier Management : The Strategic Sourcing Workhorse
  • e-Auctions in Sourcing : The Strategic Sourcing Equilizer
  • Sourcing Decision Optimization : The Inefficiency Eliminator
  • Contract Management and Compliance : A Total Value Management Introduction

The Methodologies

  • Center Led Purchasing : The Procurement Organization of Tomorrow
  • Cost Reduction and Avoidance : Best Practice Principles of Corporate Procurement
  • Demand Driven Supply : A pull-based customer-centric approach to supply chain planning and execution
  • Next Generation Sourcing : 21 Strategies to Innovate Sourcing
  • Procurement Outsourcing : A Brief Introduction
  • Purchasing Consortia : The Emerging Collective
  • Six Sigma : Improve Supply Chains through Methodology
  • Supplier Performance Management : Measure, Analyze and Manage
  • Suppliers in a Supply Organization
  • Talent Management : Build and Retain World Class Sourcing Talent

A Global Sourcing Primer

  • Corporate Social Responsibility : A Sustainable Solution
  • Low Cost County Sourcing : A Blogger’s Perspective
  • An Introduction Global Trade : The Basics of Global Trade
  • An e-Procurement Primer : 9 Steps to Procurement Success
  • A Supply Chain Finance Primer : Financing Your Way to Success
  • A Customs and Security Primer : Keeping the Global Supply Chain Secure
  • A Free Trade Primer : Global Tax Relief
  • A Regulatory Compliance Primer : Keeping it Legal
  • Supply Risk Management : Mitigate Risks and Reap Rewards

Articles

Why aren’t you optimizing?, Efficient Purchasing Issue 5, Fall 2007

Why Aren’t You Optimizing Your Sourcing Decisions? EyeForProcurement August 2007 Newsletter

 

The Third Era of Supply Chain Transformation: The Everyday English Version

World Trade Magazine recently published an article by Dr. Sandor Boyson titled “Supply Chain Globalization: The Era of Revitalized Command is Upon Us” that wasn’t too bad, provided you could translate all of the academic-speak into everyday English. Since it’s slow reading for anyone not accustomed to such pretentious verbiage, and almost ten pages, I thought I’d summarize some of the more salient points.

It starts off by noting that the first era of supply chain globalization was the era of vertical integration, exemplified by the Ford Motor Company that organized its production and supply chain as a completely vertically integrated system in the 1920s. It owned the entire process: manufacturing and assembly plants, lumber camps, intermodal transportation assets, and even private airports. Its strategy was designed to ensure continuous availability and “the uninterrupted supply of raw materials of high quality free from market changes”.

The second era is defined as the era of virtualization that began in the late eighties and early nineties and consisted of a broad fabric of alliances for managing the entire value chain. Sun Microsystems exemplifies the virtual enterprise approach – it never touches 90% of the server computers it sells globally – rather, an outsourced Sun supply base receives Sun customer order signals directly and ships the orders to the global customer base via outsourced third-party logistic carriers. Information technology and pervasive outsourcing have enabled the pooling of assets and capabilities into multi-enterprise virtual networks well beyond the formal/traditional boundaries of any single enterprise.

However, according to the article: We are approaching the end of this headlong plunge into supply chain virtualization and dispersion. While this business model has driven cost efficiencies and operational flexibility across global enterprises, it has also led to a heightened perception of eroded strategic command and control and a loss of network coherence at the level of the corporate senior executive suite.

Furthermore, the emerging emphasis is on corporate risk management. Enterprises are re-calibrating their globalization strategies and strengthening the core of their organizations as the risks of the over-extended and over-outsourced enterprise have come into sharper focus.

Thus, according to the article, As we go forward into a third era of globalization – that of revitalized command – we are witnessing yet another metamorphosis in enterprise strategy and structure. The multinational enterprise is becoming more risk-averse and less likely to over-extend itself through alliances, and is showing an emerging bias toward more direct absorption and control over assets in its network.

Or, in plain English, companies have realized that the strategy of outsourcing every function but the function of outsourcing itself might not have been the best strategy. Although it’s true that end-to-end vertical integration is probably not the right strategy, because no company can do everything well, it’s also true that outsourcing too much is not a great idea either, because then you’re left with a shell that can’t do anything. Thus, companies are beginning to realize that the right approach is to find a balance somewhere in the middle – a balance that allows them to retain the functions that they are good at, and core to their, business and to outsource those functions that are not core, or that they are not very good at. Thus, the third era of supply chain will be the era of balance – where a nice equilibrium is found between the “vertical” do-it-all-yourself strategy of the past and the “horizontal” outsource-everything-under-the-sun strategy of the present.

The article then discusses what this might mean for the public sector, the varying impact by company size and scale, and the results of a survey designed to help determine the extent of supply chain management in the global marketplace. The study, which tried to assess a range of factors, found that the degree of supply chain collaboration between respondents and suppliers was moderate at best. Considering that failure to develop a supply chain management program that fully accomplishes integrated operations may result in poorly engineered products, product recalls, excess inventory costs, stockouts, and diminishing levels of customer satisfaction, I would hope that the sample size (of about 300 respondents) is not indicative of the vast majority of global multinationals, since this would indicate most companies still have a long way to go to get a grip on their supply chains and find the balance that is their key to success.

Real Analysis Solutions Uncover Actionable Data

Supply & Demand Chain Executive recently publish an article by Kari Dwyer titled “Paving The Way For Continual Performance Improvement” that stated that through the availability of actionable data, supply chain visibility solutions become an invaluable asset in providing continual performance improvement.

The article, which pointed out that actionable data are the precursor for effective change, since isolating the root causes for specific performance measurements and providing a tactical approach to resolving them is the fastest, most effective way to gain performance improvements, also submitted that one effective and powerful way to receive actionable data is made possible through supply chain visibility solutions. This is because visibility solutions have the infrastructure in place to prominently display data that need attention, whether through alerts, dashboards, reports, e-mails, hand-held devices or text pages, and direct the information to the right people.

The author then states that visibility solutions allow the presentation of higher-level metrics with the ability to drill into the supporting detail, often through multiple layers, to get to the detail that drives action and that robust visibility solutions build metrics from the bottom up, using the most granular level of detail available to build a solid foundation as a basis for all higher-level metrics. Up to this point, I agree wholeheartedly!

The issue that I have is that the author appears to be implying that a visibility system is enough to turn data into actionable data. A visibility system is absolutely necessary, but it may not always be sufficient. Just because a dashboard turns red does not mean you have enough information to fix the problem! The author correctly notes that:

    • for the majority of supply chains, corporate-level metrics and performance numbers are often comprised of results from different systems,
    • information [only] becomes actionable once the data can be analyzed in such a way that a decision can be made to effect a desired outcome, and
    • knowledge of pertinent information is essential to effecting change that will lead to cost savings

.

However, the author then implies that a visibility solution alone will meet all of these requirements. Let’s analyze the example provided which states that knowing that vendor compliance averaged only 98% last quarter is not actionable in its truest form. If you take out the two worst performing vendors, it could be that compliance was 99%, with the two worst vendors performing at 95% and 93%, respectively. In this situation, it would be wrong to chastise all of your vendors and say they had to do better – as the correct solution would be to, if they were willing, sit down and jointly work out the reasons for their poor performance along with the required resolutions, and if they were not willing, to terminate the relationship. However, just being able to drill down into the performance metric and find out you have two vendors with poor rankings is not enough. It does not tell you why the rankings were poor.

What if the rankings were poor because the supplier was consistently one day late with their shipments – would the visibility system tell you this? Presumably you would be able to drill down on the supplier’s overall performance metric and determine it was it’s delivery metric leading to its poor performance, with quality and reliability and other rankings A+. If the visibility is based on a reporting system – it might only contain this scorecard data and you might not be able to figure out that the supplier was only one day late when it was consistently late. Although the visibility system has identified the source of the problem, the data is still not actionable. Unless you know how late the shipments are on average, and the reason for the lateness, you cannot act upon the data to effect a desired outcome. What could be happening is that the truck could be showing up at 10 am when it’s supposed to be there at 8 am. Because the warehouse inventory system only tracks lateness in terms of days, each time the truck shows up at 10 am, it is recorded as being one day late in the metrics column being sucked in by the visibility system – which ignores the arrival time column, which shows it arriving on the correct day, but two hours late. Furthermore, this could have all been because of a simple miscommunication by a junior member of the procurement team who told the supplier that the warehouse needed the truck there by 10 am to have it unloaded on time, when in reality the warehouse needed the truck there by 8 am to have it unloaded on time. And as far as the supplier was concerned, it was compliant on delivery terms at least 99% of the time.

The fact of the matter is that most visibility solutions today are simply reporting solutions on top of traditional data warehouses, which suck data into a static cube and run roll-up reports on that cube to produce metrics and KPIs. Although this is often a great solution for identifying where you have a known problem, it doesn’t always give you enough information to allow you to figure out why you have the problem and what you need to do, at a detailed level, to correct it. Chances are you’ll need to augment it with a sophisticated analytics (or business intelligence) tool that can not only do a deep dive into the data in the solution and the data in the systems the data was amalgamated from, but one that can also build cubes on the spot and slice and dice them in dozens of different ways until you find the data you need to identify the source of the problem.

Furthermore, visibility tools can only tell you when you have a known problem type, they can’t tell you about unknown problem types. For example, let’s consider small package freight. A visibility solution would only generate an alert or turn a dashboard red if you were not being charged at contracted rates. It wouldn’t detect that 90% of your packages were going out as 5 pounds when, in fact, 80% of these packages should be going out as 2 pounds or less because most are simply short documents and contracts! And it definitely wouldn’t detect when you are sending federal express packages between neighboring buildings or, even worse, between two floors in the same building! (It happens!) Thus, a visibility solution on its own will never be enough – you need to constantly be applying analytics to find missed exception cases which translate into new rules that need to be added to the visibility system.