Category Archives: Problem Solving

The Procurement People-Process-Technology Pain Cycle …

Recently on LinkedIn, someone asked the trick question of which came first: process or technology. The answer, of course, was people since, when Procurement, the world’s second oldest profession, started, it was just a buyer haggling with the seller for their wares. and this is how it was for a long (long) time (and in some societies was as far as “procurement” progressed), until shortly after a culture advanced to the point where people could form private businesses that were entities unto themselves. Once these entities started to grow, and multiple people were needed to do the same job, they realized they needed rules of operation to function, and these became the foundations for processes.

But when business buying began, there was typically no technology beyond the chair the employee sat in, the table they used to support the paper they wrote their processes and records on (and the drawers they stored the paper in), the quill and ink they used to write with, and the container that held the ink. And in many civilizations, it was like this for hundreds of (and sometimes over a thousand) years. The first real technological revolution that affected the back office was the telephone (invented in 1876, the first exchange came online in 1878, and it took almost 30 years for the number of telephones to top 1,000,000 (600K after 24 years, 2.2 million after 29 years). [And it took 59 years before the first transatlantic call took place.] The next invention to have a real impact on the back office was the modern fax machine and the ability to send accurate document copies over the telephone. Even though the history of the fax machine dates back to a 1843 patent, the modern fax machine, that used LDX [Long Distance Xerography], was invented in 1964, with the first commercial product that could transmit a letter sized document appearing on the market in 1966. Usage and availability was limited at first (as the receiver need to have a fax machine compatible with the sender), but with the 1980 ITU G3 Facsimile standard, fax quickly became as common as the telephone. But neither of these inventions are what we consider modern technology.

When we talk about “technology” in modern procurement, or modern business in general, we are usually talking about software or software-enabled technology. This, for some businesses, only became common place about 30 years ago (since most businesses could only afford PCs, and even though they were invented in the 1970s, it was the 80s before they were generally available commercially, and the 90s before most smaller businesses could afford them [for the average employee]), and only commonplace in the largest of businesses 50 years ago. Once has to also remember that the first general purpose automatic digital computer built by IBM (in conjunction with Harvard) only appeared in 1944, and that IBMs first fully electronic data processing system didn’t appear until 1952, and, as a result, back office technology really only began in the fifties, and was only affordable by the largest of corporations. (Furthermore, even though he first MRPs were developed in the 1950s, the first general commercial MRP release wasn’t until 1964, and it took over a decade until the number of installations topped 1,000. [And MRP came before ERP.]) In other words, technology, beyond the telephone [and fax] did not really exist in the business back office until the MRP. And it wasn’t common until the introduction, and adoption, of the spreadsheet. The first spreadsheet was VisiCalc, on the Apple II, on 1979. This was followed by SuperCalc and Microsoft’s Multiplan on the CP/M platform in 1982 and then by Lotus 1-2-3 in 1983, which really brought spreadsheets to the masses (and then Excel was introduced in 1985 for the Mac and 1987 for Windows 2X). (And 36 years later Excel is still every buyer’s favourite application. Think about this the next time you proclaim the rapid advance in modern technology for the back office.)

In other words, we know the order in which people, process, and technology came into play in Procurement, and the order in which we need to address, and solve, any problems to be effective. However, what we may not fully realize, and definitely don’t want to admit, is the degree to which this cycle causes us pain as it loops back in on itself like the Ouroboros that we referenced in our recent piece on how reporting is not analysis — and neither are spreadsheets, databases, OLAP solutions, or “Business Intelligence” solutions as every piece of technology we introduce to implement a process that is supposed to help us as people introduces a new set of problems for us to solve.

Let’s take the viscous cycle created by incomplete, or inappropriate, applications for analysis, which we summarized as follows:

Tool Issue Resolution Loss of Function
Spreadsheet Data limit; lack of controls/auditability Database No dependency maintenance; no hope of building responsive models
Database performance on transactional data (even with expert optimization) OLAP Database Data changes are offline only & tedious, what-if analysis is non-viable
OLAP Database Interfaces, like SQL, are inadequate BI Application Schema freezes to support existing dashboards; database read only
BI Application Read only data and limited interface functionality Spreadsheets Loss of friendly user interfaces and data controls/auditability

This necessitated a repeat of the PPT cycle to solve the pain introduced by the tool:

Technology Pain People Process
Spreadsheet Data Limitations Figure out how to break the problem down, do multiple analysis, and summarize them Define the process to do this within the limitations of existing technology
Database Performance Issues Define a lesser analysis that will be “sufficient” and then figure out a sequence of steps that can be performed efficiently in the technology Codify each of those steps that the database was supposed to do
OLAP Stale Data Define a minimal set of updates that will satisfy the current analysis Create a process to do those updates and then re-run the exact same analysis that led to the identification of stale data
BI Tool inability to change underlying rollups / packaged views define a minimal set of additional rollups / views to address the current insight needs, as mandated by the C-suite create a process to take the system offline, encode them, put the system back online, and then do the necessary analysis

In other words, while every piece of technology you implement should solve a set of problems you currently have, it will fail to address others, introduce more, and sometimes bring to light problems you never knew you had. Although technology was supposed to end the pain cycle, the reality is that all it has ever done is set it anew.

So does that mean we should abandon technology? Not in the least. We wouldn’t survive in the modern business world anymore without it. What it means is that a technology offering is only a solution if it

  1. solves one or more of the most significant problems we are having now
  2. without introducing problems that are as significant as the problems we are solving

In other words, technology should be approached like optimization (which, in our world is typically strategic sourcing decision optimization or network optimization). Just like each potential solution returned by a proper mathematical optimization engine should provide a result better than the previous, each successive technology implementation or upgrade should improve the overall business scenario by both solving the worst problems and minimizing the overall severity of the problems not yet addressed by technology.

This is why it’s really important to understand what your most significant business problems are, and what processes would best solve them, before looking for a technology solution as that will help you narrow in on the right type of solution and then the right capabilities to look for when trying to select the best particular implementation of that type of technology for you.

85 Years Ago today, the smallest sovereign city-state in the world was established.

That’s right, eighty-five years ago today the Lateran Treaty was signed, bringing Vatican City into existence. With only 44 hectares, and 840 citizens and residents, it is the smallest independent state in the world by both area and population with an annual GDP in the magnitude of 20 Million and not Billions or Trillions.

It is more comparable to a mid-size company with 840 employees who live in residence year round and whose every need requires attention in addition to all of the maintenance associated with the business and resident properties, except this company has valued assets over 10 Billion dollars (as that is the estimated foreign investment by the Institute of Religious Works – the Vatican Bank – in the 1990s) and non-valued assets worth billions (upon billions) more on the open market, which include priceless buildings and works of art going back millennia.

The head of Procurement must have one of the most interesting jobs in the world. First of all, that individual would be procuring almost every commercial and consumer item at one point in time or another. Second, deliveries are limited to truck, train, and helicopter. (There is no airport, only one train line, and deliveries can be made to the gates.) Third, while that person would have every pressure to keep costs down for every day items and maintenance, that person would have an almost unlimited budget for works of art and historical artifacts of religious significance desired by the church. Fourth, security would be a concern with every purchase and delivery. And so on.

Relatively speaking, for an average mid-size company, Procurement is fairly straightforward. But how do you effectively management Procurement for the smallest independent city-state in the world?

If you have educated guesses, leave a comment or send the doctor an e-mail!

Cost Savings – It IS The Whole Package!

As per yesterday’s post and a recent article on Inbound Logistics, when Finding Cost Savings: It’s the Whole Package! Sometimes the only way you can save money is to first spend money.

The article, which says this is counter-intuitive (although it really isn’t), gives the example of an electronics manufacturing company that had a relatively low 2% damage rate, but needed to reduce shipping damage even further due to the high value of it’s products. They decided to work with their pallet provider to reduce the strength of, and add strength to, their pallets and boxes. The new packaging cost more to produce, but the smaller footprint reduced their LTL shipping costs and their reduced damage rate of a mere 0.1%, which was 20 times better than their previous damage rate, saved them considerably more than what they spent on improved packaging.

This goes back to yesterday’s post where true, sustainable, savings only come from the perfect order. If anything screws up, any cost savings you identified earlier in the process are more than negated by any screw-up that comes later. But even getting the order perfect from the supplier isn’t enough if you’re buying products for resale and then they get damaged when you ship the product from your facility to the customer’s location. The perfect order isn’t just from the supplier to you, it’s from the supplier to the end customer. The perfect order crosses the entire supply chain from the initial obtainment of the raw materials for the product three tiers down until the final product arrives in the hand of the end customer.

The other issue, as pointed out by the article, is sustainability. Your brand reputation might depend upon your commitment to sustainability and Corporate Social Responsibility – ignoring it to cut a few cost corners could result in a consumer backlash that will take significantly more off of your bottom line than the few pennies you save buying non-fair trade coffee or conflict diamonds.

Moreover, true sustainability always delivers cost reductions, especially where the consumption of natural resources is concerned. While there will be an upfront cost to install new technologies that reduce water and energy consumption, or to build new solar arrays and wind turbines to produce more sustainable power, which will be stored in a battery array for dark and calm times, this is a one-time up-front cost. Ongoing costs will be significantly reduce as the sun and the wind is free – unlike coal and oil which gets more expensive by the year. As the article says “any wasted money is wasted over and over again” and even if it takes three to five years to recover the investment made to prevent money being wasted, a company in it for the long haul will make it up four times over in the following twenty years.

So always look at the big picture – then true cost savings opportunities will emerge!

The (Board) Gamer’s Guide to Supply Management Part III: Star Trek Catan

Space, the final frontier. These are the voyages of the interstellar supply fleet. Their interstellar mission: to find new sources of raw materials, to build new outposts and new star-bases, to build new supply routes where no supply routes existed before!

So, it’s been a while and you’ve progressed to the point where you’re now Master of Catan. Always the first to build outposts, transform them into cities, build new supply routes connecting them, and amass the largest armies to protect those supply routes, you think you’re a master of supply as you deftly conquer the ports to secure the trade advantage, always outsmart the pirate, and never allow your rivals to secure a longer route. Maybe you are the Master of the lonely isle of Catan, but are you ready to supply the final frontier?

In Star Trek Catan, you’re settling the final frontier – space. You are a merchant selected by the Federation to build supply outposts to supply the different federation members. Instead of building roads, you are building starships; instead of building settlements, you are building outposts; and instead of building up those settlements into cities, you are building those outposts up into star-bases. Just like roads, settlements, and cities required resources that could only be collected from regions that neighboured your existing settlements and cities, starships, outposts, and star-bases require resources that can only be collected from nearby planets. (Wood and brick are replaced by dilithium and tritanium, and sheep, wheat, and ore are replaced by food, water, and oxygen.) You still have development cards, but instead of soldiers that build your army, there are star-fleet interventions that augment your security, and the progress and “victory point” cards have been appropriately updated as well. But the biggest difference is the introduction of support cards. In regular Catan, all you could do was build, trade, or play a development card. In Star Trek Catan, you always have one support card which gives you a unique advantage and the choice of when to play it (which is important as any given support card can only be used twice).

The support cards, which are, of course, modelled after original Star Trek characters, give you special abilities on your turn or in certain circumstances. Eight of the abilities can only be activated on your turn:

  • Uhura:Forced Trade You have the upper hand and can force up to two players to give you a resource type you desire in exchange for a resource type you do not.
  • Scott:Starship Building Miracle When building a starship, you may replace 1 dilithium or 1 tritanium with any resource of your choice.
  • Sulu:New Heading You may move any starship on the board at the end of one of your supply routes to the end of another one of your supply routes.
  • McCoy:Development Specialist When buying a development card, one resource of your choice can be replaced with another resource of your choice.
  • Chekov:Klingon Decoy Move the Klingons to the asteroid field and take 1 resource of the type produced by the planet the Klingons left.
  • Rand:Free Trading Outpost Receive one resource of your choice and perform one or more border trades with that resource type at the 2:1 trading outpost for that resource type.
  • Chapel:Liberate a Resource On your turn, after the production roll, take one resource of your choice from a rival with more victory points than you.
  • Sarek:Swords to Plowshares You may discard one Starfleet Intervenes card to build an outpost for the same cost as a starship.

The final two abilities are activated on production rolls:

  • Spock:Resource Compensation On any non-“7” production roll where you receive no resources, you still get to take one resource of your choice.
  • Kirk:Protection from Klingons When a “7” is rolled, if you have more than 7 resources, you may use this ability to prevent resource loss or, if you have 7 or less resources, to take a resource of your choice.

These abilities, which encapsulate some of the different skills deft supply managers may possess, can completely change the game dynamics. Think you’ve done a good job acquiring a monopoly on water or air? Think again. An opponent with the Spock or Uhura support card can still acquire those resources from you or the main supply. Or use Scott or McCoy to substitute another resource for that resource. And it changes the dynamic for you too! Once you’ve deftly placed those star-bases and are acquiring resources faster than you can build, if you can secure it, you can use Kirk’s special ability to keep those Klingons away and achieve victory even faster.

And if you play your cards right, you’ll always score two (of the needed 10) victory points for the Longest Supply Route.

Could there be a better game for a budding Supply Manager to cut his teeth on as he takes up the art of strategic board-gaming to refine his supply mastery skills? the doctor, who believes we should all be preparing for Extra-Planetary Supply Management, thinks not!

The original Board Gamer’s Guide series:
Part    I: Ticket to Ride
Part   II: The Settlers of Catan
Part  III: Munchkin
Part  IV: Castle Panic
Part   V: Small World
Part  VI: Zombie Dice, Tsuro, and Get Bit!

… and the new Board Gamer’s Guide series:
Part  VII: Upon a Salty Ocean
Part VIII: Agricola
Part    IX: Small World Part 2
Part     X: All Creatures Big and Small
Part    XI: Agricola Part II-A
Part   XII: Agricola Part II-B

Thirty-Five Years Ago Today, Trans-Atlantic Balloon Shipments Became a Reality!

Not necessarily a safe or cost-effective reality, but a reality when the Double Eagle II, piloted by Ben Abruzzo, Maxie Anderson, and Larry Anderson, became the first balloon to cross the Atlantic Ocean when it landed in Miserey, France (after leaving Presque Isle, Maine).

Where transportation is concerned, this was quite a feat!