Category Archives: Miscellaneous

Six Sigma NOT a Silver Bullet

Shout if from the rooftops! Six Sigma is NOT a Silver Bullet! And now you have research from business advisory firm The Hackett Group to back it up. According to Hackett Senior Business Advisor Penny Weller (who is a Motorola Certified Black Belt), as quoted in a recent Supply & Demand Chain Executive, Six Sigma is great, particularly for companies seeking to streamline operations and eliminate variation in processes, but, like any tool, it can be used properly or improperly, to varying results. The goal is to create a continuous improvement mindset that is embraced at all levels of the organization.

I’m not trying to put down Six Sigma (as I chronicled over on e-Sourcing Forum [WayBackMachine]), as I’ve been known to promote it on occasion, but simply the stigma that goes with the sigma – that it is the silver bullet, the ultimate solution for all of your business problems. Not only is there no silver bullet for all of your business problems, there is no silver bullet for even one of your business problems. There is no 100% solution. There are solutions that work the vast majority of the time, maybe even more than 99% of the time, but the unpredictable, sometimes chaotic, nature of business indicates that there is no perfect solution, and the only true way to be a market leader is to identify when a solution will and will not work, and where it will not work, identify an alternate solution and keep building toward that perfect solution, knowing that you’ll never truly get there.

The second paragraph of the Supply & Demand Chain Executive article makes a great point. Many executives use Six Sigma or other continuous improvement programs to drive enhancements in finance, information technology (IT), procurement, human resources (HR) and other selling, general and administrative (SG&A) functions. But according to Hackett research, many executives fail to realize the benefits of these initiatives because Six Sigma is, by definition, an incremental process improvement methodology and is not appropriate for situations that require significant transformational change.

If you don’t have the right process to begin with, no amount of improvement will make it right. It all comes down to understanding the problem, identifying the right solution, implementing that solution, and continually striving to make it better. Six Sigma is just one methodology you can use to make it better, there are others.

The Vendor in Black

The sun did not shine.
We had no time for play.
So we sat in the office.
On that dark, stormy day.

I sat there with Sally.
We sat there, we two.
And I said, “How I wish
We had good tools to use!”

We’re deep in the red.
Our paychecks are stale.
So we sat in the office.
And tried not to wail.

So all we could do was to
Sit!
Sit!
Sit!
Sit!

And we did not like it.
Not one little bit.
>BUMP!<
And then
something went BUMP!
How that bump made us jump!

We looked!
Then we saw him step in on the mat!
We looked!
And we saw him!
The Vendor in Black!

And he said to us,
“Why do you sit there like that?”
I know you are broke
And your paychecks are flat
But we can find
Savings to tuck under your hat.”

“I have some tools that you can use,”
Said the Vendor.
“I have some new tricks,”
Said the Vendor in Black.
“A lot of good tricks
I will show them to you
Your boss
Will not mind at all if I do.”

Then Sally and I
Did not know what to say.
Our boss was out of the office
For the day.
But Diligence said, “No!, No!
Make that vendor stand by!
Tell that Vendor in Black
You do NOT want to try.

He should not be here.
He should not be about.
He should not be here
When our boss is out!”

“Now! Now! Have no fear.
Have no fear!” said the Vendor.
“My tricks are not bad,”
Said the Vendor in Black.

“Why, we can find
lots of savings, if we try
with a report that I call
vendor-GL_code drive by!”

“Please get out!” said Diligence.
“This strikes me as void!
Please get out! said Diligence.
I do NOT wish to be unemployed!”

“Have no fear!” said the Vendor.
“My tool will always work.
It will find you savings
Wherever they lurk.
With a click of a button.
And your ERP app.
It will find you savings!”
Said the Vendor in Black.

“Look at it!
Look at it now!” said the Vendor in Black.
“It’s finding you savings.
To tuck under your hat.
It’s comparison report.
Can handle two divisions.
Broken down by category.
Into subdivisions.

And look!
Pie chart comparisons for one and for all!
But that is not all!
Oh, no.
That is not all … ”

“Look at it!
Look at it!
Look at it now!
It can handle AP data,
with the module that knows how.
It doesn’t cost much more.
Than the basic module costs.
But it’s worth the price.
To prevent savings loss!

And with extra reports.
Your savings explode.
You’ll find hidden treasure.
With that extra code.
Don’t fear the price tag.
It’s a nominal fee.
You heard me clear.
Have no fear!

Just a nominal fee!”
That is what the vendor said.
Then he fell on his head!
He came down with a bump!
From up there high on the wall.

And Sally and I,
We saw ALL our prospects fall!
And Diligence he gloated.
While grinning he did.

He sad,
“Did I not tell you?”
Oh, yes! I sure did!
This was not a good game,”
said Diligence in a fit.

“No, I did not like it,
Not one little bit!”
“Now look what you did!”
Said Diligence to the Vendor in Black!

“Now look at this mess!
Look at this! Look at that!
You took all our money.
Sank us deep in the red.

You made us false promises.
Then you fell on your head.
You SHOULD NOT be here.
When our boss is gone out.

You get out of this office!”
Said Diligence with clout!
“But I like to be here.
Oh, I like it quite a bit!”
Said the Vendor in Black

To Diligence with wit.
“I will NOT go away.
I do NOT wish to roam!

And so,” said the Vendor in Black,
“So, so
so …
I will show you
Another module you should own!”

And then he ran out,
And, then, fast as a fox,
The Vendor in Black
Came back in with a box.

A shiny blue box.
It was sealed with red tape.
“Now look at this,”
Said the Vendor.

“Take a look!”
Then he climbed on the soapbox.
And with a tip of his hat.
“I call this module Enhanced-Data-Blocks,”

Said the Vendor.
“In this box, two CDs.
I will load for you now.
You will like these apps,”
Said the Vendor with a bow.

“I will unseal the tape.
You will see something new.
Two apps. And I call them
App One and App Two.

These two apps will not hassle you.
They integrate well.”
Then, out of the box
came CDS for App One and App Two!

He installed them at once.
Then said, “They’re ready to use.
Would you like to try out
App One and App Two?”

And Sally and I
Did not know what to do.
So we decided to try out
App One and App Two.

We loaded them both.
But Diligence said, “No! No!
Those Apps should not be
on our system! They must go!
“They should not be installed
When our boss is not here!
Uninstall! Uninstall!
Said Diligence, wrought with fear.

“Have no fear, Diligence,”
Said the Vendor in Black.
“These apps are good apps.”
And he gave them a nod.
“They are great. Oh, so great!
They were built to work well.
They will save you more money
and make you feel swell.”

“Now, here is a new trick that I like.”
Said the vendor.
“They augment your data,”
Said the Vendor in Black.

“No! Not in our system!”
Said Diligence, quite hot.
“They should not change the data
in our system! They should not.
Oh, the errors they’ll make.
The mistakes I will find.
Oh, I do not like it!
Rewind, Rewind!”

Then Sally and I
Saw them merge our transactions.
We saw those two Apps
Put our systems in traction.

Bump! Thump! Thump! Bump!
For hours on end there was no reaction.
App One and App Two!
Power Down! Power Up!
Our processors maxed!
It was not abrupt!
In want of more memory,
swap space was used.

And our brand new SAN,
those Apps did abuse.
Then those Apps they spit out
A slew of reports.
Across all our data,
they said we were short.

And I said
“I do NOT like the way that they run.
If our boss saw this,
would he have bought one?”

Then Diligence said, “Look! Look!”
And trembled with fear.
“Our boss is on her way back!
Do you hear?
Oh, what will she do to us?
What will she say?
Oh, she will not like it
To find our systems this way!”

“So, DO something! Fast!” said Diligence.

“Do you hear!
I saw her! Our boss!
Our boss is near!
So, as fast as you can,
Think of something to do!
You must get results from
App One and App Two!”
So, as fast as I could,

I loaded Excel.
And I said, “With Excel
I can get meaning I bet.
I bet, with Excel,
I can use those reports yet!
Cut and Paste, Slice and Dice
Make our new reports useful and nice!”

“You see!” said the vendor
“Our new apps work great.
You’ll save.
Yes you’ll save.
Oh you’ll save
Ain’t that great!”

Then he left us the box
with the CDs inside.
And the Vendor went away
gleaming with pride.

“That is good” said Diligence.
“Vendor’s gone away. Yes.
But our boss will come back
She will find this big mess!

And the mess is so big
And through all systems spread,
We can not clean it up.
We are so dead!”

And THEN!
Who was back in the office?
Why, the Vendor!
“Have no fear of the mess,”
Said the Vendor in Black.
“I solve all your problems,
And so …
I have here another module
to answer your woes!”

Then we saw Vendor install
App Three, Your Original View.
For another small fee
our data renewed.
Our original views,
and our new views too
plus a hundred reports
and a slew of canned graphs
in bright shiny colors
to show us our gaffs.

Then Vendor was gone
with a tip of his hat.
Then our bass walked in
And asked of us two
“Did you accomplish your goals?
Tell me. How did you do?”
And Sally and I did not know
What to say.
Should we tell her
The things that went on here that day?

Should we tell her about it?
Or hope she never finds out?
Well …
What would YOU do
If your boss asked YOU?

Is Green about to hit the Big Time?

It’s been a while since my last green post, but that’s simply because Tim Minahan of Supply Excellence [WayBackMachine] has been doing such a great job on the topic as well, especially considering his recent set of posts on “Sustainable Supply”.

However, since I’ve accumulated approximately 40 links on green and green technology since my last post, it’s time for an update. After all, considering that atmospheric carbon dioxide levels are at the highest they’ve been in 800,000 years, we need to consider what is required to to repair and reboot the ecosystem.

On the political front, Autopia reports a bipartisan group of senators have introduced a bill in the US to cap greenhouse gas emissions by 2012 to 2004 levels, with further reductions thereafter; the Economist reports that green states are taking the federal government to court in an attempt to force it to curb emissions of carbon dioxide; CNet summarizes Bush’s platform on better energy conservation in his State of the Union address (maybe because he has been ripped on global warming, unfortunately Bush’s plan is likely to fall short); on a more positive note, Bush recently signed an

Executive Order requiring all federal agencies to buy EPEAT registered

“green” computers; the Economist hypothesized that America may step up in the fight against climate change since it is Waking up and Catching Up. On a global note, the Associated Press reports that “China lacks the resources to cut critical emissions”, which is disturbing when you consider that China is the world’s biggest and producer of coal, and is expected to surpass the United States as the world’s No. 1 greenhouse gas emitter in the next decade.

On the automotive front, Autopia reports that ZAP s showing off new prototype electric vehicles, (CNet) Crave reports that BMW just built the Hydrogen7 which can run off gasoline or hydrogen (which could turn out to be a great move if we can cleanly convert coal into hydrogen).

On the energy front, the Economist reported that investors are ramping up clean energy investments, noting that the clean-energy business is turning into the next big investment boom; Wired News Autopia reports that scientists at MIT have created a genertically altered yeast that improves ethanol production by 50%, which is critical since CNet reports that the average individual who wants to use biofuel has difficulty locating it; MIT also finds that geothermal energy potential is largely untapped, as summarized by CNet; CNet also reports that BP is building wind power projects at five sites around the US; CNNMoney.com reports that Exxon is trying to green up its act; Magenn Power is building a helium-filled balloon that generates electricity using wind power, as reported in CNet; Fortune reports on a buoy that can convert wave motion into electricity;

ZDNet reports the result of an IDC study that found that energy efficient PCs can actually save a company money (sentiments echoed in a CIO Insight article);

finally, CNet put together a nice guide to alternative fuels.

On the retail front, the Economist reports a big move in green retailing. Not surprising, since even Walmart is making a big push on the green front, including recycling. (And as soon as they enter the tackle & bait business big time, they’ll be on the road to green success) Moreover, when we have Plug+Play Construction that makes high tech green buildings a snap, retail should not only be green, but be green end-to-end.

On the academic front, Fortune reports that Universities don’t ace the green test and that a Cambridge-based not-for-profit called the Sustainable Endowments Institute is aiming to shed some light on the matter.

For a look at the coming future, CNNMoney.com overviews 8 technologies to save the world, including a home hydrogen fueling station, a nuclear waste nuetralizer, and a sonic water purifier. In addition, CNNMoney.com published a Go Green, Get Rich guide summarizing companies tackling big problems, including global warming, and the technology they have developed. Finally, the CNet Green Tech section has matured from a few stray links to a solid resource section.

Note that on March 20, 2007 @ 1:00 pm EST, Supply & Demand Chain Executive is hosting a webinar on “Nontoxic Chemical Inventories: New Insights for Greening the Supply Chain”, sponsored by Dolphin Safe Source. After all, you don’t want to be yet another lost soul Ignoring an inconvenient truth when we’re very likely the cause of global warming. (Think of the victims of climate change, which include those of us living in coastal areas. Maybe it’s not easy being green, but it’s worth it. And if you can come up with a way to scrub greenhouse gases out of the atmosphere, more specifically, a way to remove one billion tons of carbon gases a year from the atmosphere for 10 years, you could be eligible for a 25 Million Dollar prize, courtesy of Richard Branson.)

P.S. Here is a list of recent green posts from Supply Excellence [WayBackMachine].

  • Sustainable Supply: There’s No Denying It
  • Sustainable Supply the Martha Stewart Way
  • 2007: The Year of Sustainable Supply Strategies
  • The Cost (and Payback) of Going Green
  • Pump Up Green Supply – Or Else
  • Clinton Initiative: Time to Get Inspired Again

Fox in SOX

Fox
SOX
Box
Knox

Knox in SOX.
Fox in box.

Knox on fox in SOX in box.
Fox in SOX on box on Knox.

Feds with bills come.
Feds with wills come.
Feds with bills and wills and tills come.

Look, sir. Look, sir. Mr. Knox sir.
Let’s do tricks with bills and tills sir.
Let’s do tricks with Feds and wills sir.

First, I’ll make a quick trick income statement.
Then I’ll make a quick trick expense statement.
You can make a quick trick SG&A.
You can make a quick trick COGS.

And here’s a new trick, Mr. Knox …
SOX behind Feds and Stripes on Fox.
Fox in deep inside your tills.
Now Knox in jail for fraudlent bills.

Don’t join Fox and Knox in stripes.
Know your SOX and do it right.
Know when Fox is inside your tills.
And when he may be fabricating bills.

And to find the answers you seek.
Read your blogs each day of the week.

Supply Management Contract Writing, A Review Part II

When I reviewed Next Level Purchasing’s (NLP) (now the Certitrek NLPA) course offerings to date: Mastering Purchasing Fundamentals (Parts I and II), Savings Strategy Development (Parts I and II), and 14 Purchasing Best Practices (Parts I and II), I did so in two parts. In the first part, as I did in Part I, I presented an overview of the course, the key topics contained within, and a general discussion on why it is worth your time and money. In the second part, I dived into a few select topics, with kind permission, that serve to illustrate the quality and usefulness of the course to a procurement / purchasing professional. This post will continue the pattern.

In the first lesson, you are introduced to the six major purposes of a contract. These are:

Formalization of obligations and rights.
Written contracts formalize the parties rights and obligations in such a way that misunderstandings are minimized and legal remedies can be sought if required.
Control and allocation of risk.
A well-written contract will specify which party is responsible for all possible consequences and make sure that one party does not unfairly bear too much of the burden.
“Locking in” benefits.
A good contract will guarantee one or more benefits, such as performance, price, and/or warranty, for a long period of time.
Elimination of the need for further negotiation.
Negotiation takes time away from strategic activities that can reduce cost and increase performance – a contract locks in an agreement and minimizes the need for future negotiation.
Formalization of an agreement on exception handling.
Things inevitably go wrong. You can thank Murphy. However, documenting who is responsible and what corrective actions will be taken up front minimizes risk and loss as it allows for expedient and focussed resolutions.
To solidify an advantage.
Whenever you can identify a specific advantage that would not be realized in the conduction of business in the absence of a contract, you should formalize a contract.

In the third lesson, the course dives into three monetary remedies and three non-monetary remedies you can choose from in the construction of your performance clauses. Financially speaking, you could negotiate the right to withhold payment, cover damages, and liquidated damages. Alternatively, you could go a non-financial route and negotiate termination, specific performance, and injunctions.

Let’s dive into four of these briefly. Specific performance is a remedy that allows you to force a supplier to do exactly as the supplier promised to do. Injunction is a remedy that allows you to prevent the supplier from doing something. Chances are they would not appear in the same contract and serve complementary purchases. You’d use specific performance if you were buying a one-of-a-kind item, such as an original Van Gogh for your conference room (since you wouldn’t want a forgery) and you’d use injunction if a manufacturer was making a custom part to stop that supplier from making that part for anyone else (should that supplier stop doing business with you for any reason).

On the other hand, as you might have picked up from one of the other courses I reviewed, cover damages and liquidated damages are not the same thing. Cover damages refer to a calculated amount the seller has to pay for failure to deliver and occur when a buyer has to acquire the goods from another seller. They are generally calculated as the difference between what the buyer had to pay versus what the buyer would have paid if the supplier delivered. Liquidated damages refer to a fixed amount the seller has to pay for failure to honor an obligation, such as a fixed late fee for each day the seller is late. Whereas the premise behind cover damages is that the buyer loses money when the buyer has to obtain goods from a different seller, the premise behind liquidated damages is that the buyer suffers financial harm when the seller fails to deliver.

Finally, in lesson five on key commercial provisions, there is a very good discussion of the shipping clause, what needs to be addressed, and what questions you need to ask when writing this clause. If you are buying goods, this is one of the most critical clauses, since it determines when the risk transfers from the seller to you, the buyer, and who pays the various expected and unexpected shipping costs that can arise.

Shipping terms should address the method by which purchased goods are shipped, the carrier who will deliver (or at least which party has the right to choose the carrier), the party who bears the shipment costs, and the party who bears the risk of loss in transit.

That’s it for my review of “Supply Management Contract Writing”. So, assuming I have convinced you its worth your time, after acknowledging that neither Next Level Purchasing nor Sourcing Innovation practice law, that Next Level Purchasing and Sourcing Innovation are not rendering professional legal services with regards to this (online) class, that neither Next Level Purchasing nor Sourcing Innovation will be responsible for any contract, either in whole or in part, based on any material presented in the (online) class, whether used in whole or in part, go on over to Next Level Purchasing and find out more.