Category Archives: Supply Chain

Seventy Three Years Ago Today

The space race begins with the launch of a V2/A4-rocket from Test Stand VII at Peenemunde, Germany which becomes the first man-made object to reach space.

Less than nineteen years later, Yuri Gagarin became the first man in space when he orbited the earth on 12 April 1961 in a Soviet Vostok spacecraft.

And a mere eight years later, unless conspiracy theorists are to be believed, the United States put the first man on the moon on 20 July 1969.

Less than two years after that, the Soviet Union launched the first space station, Salyut, and public-sector extra-planetary supply management began.

Speaking of the space race, the Space Shuttle Atlantis made its maiden flight thirty years ago today on 3 October 1985, forty two years after the space race began. Atlantis, the fourth operational space shuttle, flew thirty-three missions and orbited the earth a total of 4,848 times, travelling a distance that was more than 525 times the distance from the Earth to the Moon. Notable missions were it’s 4th, which deployed the Magellan probe bound for Venus, its 5th, which deployed the Galileo probe bound for Jupiter, its 14th, which represented the 100th US manned mission and the first shuttle docking with Mir, its 21st, which was its first docking with the International Space Station (ISS), and its 30th, which was the final Hubble Space Telescope Servicing Mission.

And eleven years ago, less a day, on 4 October 2004, SpaceShipOne won the $10 Million Ansari XPrize when it became the first-even private vehicle to carry a human being into space.

And this year, Space Exploration Techologies, SapceX, became the first company to ship private cargo to the ISS using its own rocket and ship, the Dragon.

And Virgin Galactic is working on a new SpaceShipTwo that could be ready to take commercial passengers into space as early as next year.

It won’t be long before someone puts up a private space station, and private sector extra-planetary supply management becomes a reality. (And when it does, and you need someone to optimize those supply models, you know who to call.)

Is Your SRM Program Leaving Hundreds of Millions on the Table?

With external spend in an average company between 60% and 80%, a considerable amount of an organization’s value is dependent upon its supply base. Quality, reliability, and attractiveness are all dependent upon the supplier’s ability to create a quality product for your supply base. Service, repair, and timely customer interactions related to such all rely on the suppliers ability to deliver quality service and quality, timely, communication.

Moreover, the average organization is not only relying on its suppliers to create its value, but is losing out on hundreds of millions of dollars of value due to inefficient, and sometimes ineffective, supplier relationship management. For example, a recent study by Vantage Partners found that the top ten performers in SRM reported an average of $298 Million in financial benefits from SRM in 2014. That’s a lot of cash. As summarized in this article titled “unlocking potential value srm through effective governance” over on My Purchasing Center, there is a lot of value to be had by investing in better supplier governance.

For example, companies with good supplier relationships have suppliers who alert them to potential issues or potentially late deliveries at the earliest sign of trouble and jointly work with them to identify a resolution. But this is just the tip of the value iceberg. Joint cost reduction initiatives. Joint innovation. And so on.

But how do you get there? According to the article, the starting points are

  • supply base segmentation
  • policies and procedures
  • alignment with sourcing, category, and contract management
  • (designated) executive sponsors
  • (designated) relationship managers
  • strategic business plans

which is true, but this only addresses three of the six pillars of SRM, namely

  • stakeholder engagement & support
  • governance & process
  • business driver and value

but doesn’t really address the other three pillars of SRM,

  • people and skills – talent matters
  • information and technologies – platforms enable process
  • relationship development and culture – management is just the start

But, fortunately, there’s still time to get a handle on all of this and, more importantly, find out where your organization stacks up with respect to its peers as you still have one week to participate in the 2015 SRM Survey by State of Flux. Taking this survey, which is the most extensive survey out there on SRM, will not only give you first look into the survey results, but also give you first access to what has become the largest, most in-depth, SRM report on the planet. The 2014 SRM Survey Report clocked in at 216 pages of data, results, and expert interpretation and was full of valuable, actionable, insights — including the pillars and the ten essential starting points, not six — that your organization can use to launch an SRM program — and it’s free to all survey participants as well! Moreover, you’ll also get the full 2015 Report as soon as its available – and this will be invaluable as it will be the first report focussing on what a Supply Management organization can do to gain the executive sponsorship and support it needs for success, and the first report written with the C-Suite in mind. You will be able to use it in your quest for purchasing fire.

So don’t delay and take the 2015 SRM Survey today, before it’s too late!

Your Supply Chain is in Flux. Last Chance to Find Out How Big those Oscillations Are!

A few weeks ago we asked if your SRM was in a State of Flux because good SRM is critical to smooth supply chain operations. Later or sooner your supply chain is going to be disrupted, and without good supplier relations, you will not have any notice, or any help dealing with the disaster that is headed your way. (The chances of your organization NOT not having a major supply disruption in the next 12 months are less than 15%. Think about that.)

Then, a couple of weeks ago we remind you that your SRM, despite what you may think, is in a state of flux and that you should find out where. Especially now that you have the chance to do it for free. State of Flux, a provider of Supplier Relationship Management software and services, and the initiators of the ground-breaking SRM Research Report, are undertaking the seventh annual study which aims to understand not only the state of the practice in SRM, but what is needed for companies to get the executive sponsorship and support they need to not only master SRM but excel.

Last year’s 2014 publication was one of the most ambitious Supplier Relationship Management reports ever published — clocking in at 216 pages of data, results, and expert interpretation and full of valuable, actionable, insights that any organization can use to advance their SRM practices. This year’s study, which will likely have over 500 global participants, should be equally insightful and all those organizations that participate get full access to the results and underlying research ahead of the market. You can measure up against your peers, and improve, well before the average, laggard, organization (which will only have restricted data access if not a State of Flux customer), has a chance to register, download, and review the final report.

Considering that this study will only take about 45 minutes of your time, the reward is infinitely more valuable than the cost! But you’re running out of time. The deadline for participation in this year’s study is July 10th. (Next Friday.) Don’t miss out on this great opportunity — take the 2015 SRM Survey today!

A Few Reasons Why Your ERP is a Disaster Waiting to Happen

In our last post we said that If You Still Rely On ERP, You Could End Up in the Supply Chain Disaster Record Books, and we meant it. Over-reliance on outdated and antiquated ERP systems is just a disaster waiting to happen, and here are just a few reasons why in half a dozen supply chain areas.

Sourcing and Contract Management

A critical requirement of a multi-round RFX or multi-round negotiation is the ability to support multiple prices at different volume levels and price history. One of the biggest ERP systems on the market today still does not support this simple, basic, requirement. It’s crazy, but it’s true. And without the ability to store proper prices, volume breaks could be missed and millions could be lost.

Procurement

A critical part of Procurement is m-way matching between the invoice, purchase order, and goods receipt. And a critical part of procurement performance management is tracking each mismatch. How often does a supplier over-bill? How often does a supplier under-ship? This can only be tracked if there is a complete invoice history, but many so-called “modern” ERPs only allow for one version of an invoice. So when it is corrected, the history is lost. And a supplier’s true performance is never known. Performance that could cost you dearly if an under shipment results in a stock out that costs millions in revenue.

Logistics

A critical part of logistics is tracking not only order dates and received dates, but required ship-by dates, receive-by dates, and outbound ship-by dates to avoid missing customer requirements. Some ERPs can only track the date the PO was cut and the date the goods were received — that’s not enough. Another critical part of logistics is ensuring that each carrier has enough insurance to cover the replacement cost of the load, which requires tracking the cost of the load and the insurance coverage of the carrier. With respect to this, the best the average ERP system can do is allow you to look up the PO total and, if you are lucky, extract the last copy of an insurance certificate stored as a PDF in a blob or similar structure in the document store. No meta-data to tell you what’s in the certificate or if it’s even still valid — which could expose you to a huge liability.

Forecasting

Most ERP systems are still using 20 year old forecasting models, and look at what these models did for Cisco and Nike! Should you still be using them?

Compliance

Most of these systems were built before the introduction of acts like 10+2, REACH, SOX, and WEEE — acts which require you to track, report, and store certain data to maintain compliance with these acts. Compliance which is critical to avoid fines, penalties, seizures, [temporary] business closures, and even criminal charges. Compliance which is not maintained by ERP systems that aren’t set up to store all of the data required on an import/export form, track detailed BoM (Bill of Material) data to ensure acts like REACH and WEEE are not violated, and the detailed audit trails required to satisfy SOX.

Risk Analysis

While there are a plethora of risks that can not be predicted due to their nature (like natural disasters, geopolitical uprisings, etc.), there are a plethora of risks that can be predicted with high likelihood if they are monitored for. However, this monitoring depends on the availability of good data. For example, supplier failure can often be predicted if the organization monitors shipments, third party risk data, and market data. If shipments get progressively later, contain higher defect rates, and third party financial ratings for a supplier get weaker every month, that’s a sign of supplier distress and a potential bankruptcy, and it’s critical that the buyer assess the supplier’s health and monitor the situation. This will only be detected if the system tracks delivery dates and defect rates, third party data, and appropriate econometric models. However, all most ERPs track is good receipt dates and returns (but no meta data tying them to orders to calculate defect rates). No market data, no financial ratings, no modern econometric models. No way to detect imminent disaster.

And this is just a short list of ERP failings that could bring imminent disaster. To find out more about ERP’s shortcomings, if you still have not done so, (register for and) download the recent white-paper by b2bconnex on “Why ERP is NOT Enough”. The sooner you learn this, the sooner you can correct the situation and join the leaders with a modern supply chain.

Environmental Damnation 24: Rare Earth Metals

As defined by Wikipedia, a rare earth metal (REM), or rare earth element (REE), is one of a set of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides, as well as scandium and yttrium (because they tend to occur in the same ore deposits and exhibit chemical properties). While many of these elements are relatively plentiful in the Earth’s crust, they are rare in that, due to their geochemical properties, they are typically dispersed and not concentrated in ore deposits that are (easily) economically exploitable.

They are a damnation because:

  • almost every piece of modern technology depends on at least one of these elements
  • many of these elements are in short supply and supply, based on current mining capacity, is expected to be insufficient as early as 2020 for some of these elements
  • many of them cost more than precious metals
  • on average, 95% (or more) of rare earth metals are now being mined and provided by a single country: China
  • … and China is considering export restrictions that could significantly cripple global production of modern technology if implemented

To illustrate just how important these metals are, consider the common uses:

Metal Selected Uses
Scandium aerospace, metal-halide and mercury vapor lamps, and radioactive tracing agents
Yttrium lasers, superconductors, microwave filters, and spark plugs
Lanthanum flint, hydrogen storage, battery electrodes, camera lenses
Cerium oxidizing agent, polishing powder, catalytic uses
Praseodymium magnets, lasers, carbon arc lighting, didymium glass
Neodymium magnets, lasers, didymium glass, ceramic capacitors
Promethium nuclear batteries and luminous paint
Samarium magnets, lasers, neutron capture, masers
Europium phosphors, lasers, mercury-vapor and fluorescent lamps
Gadolinium magnets, lasers, X-ray tubes, computer memory, neutron capture, MRI contrast agent, magnetostrictive alloys
Terbium phosphors, lasers, fluorescent lamps, magnetostrictive alloys
Dysprosium magnets, lasers, magnetostrictive alloys
Holmium lasers, optical spectrophotometers, magnets
Erbium lasers, vanadium steel, fiber-optics
Thulium X-ray machines, metal-halide lamps, lasers
Ytterbium lasers, decoy flares, stainless steel, nuclear medicine
Lutetium positron emission tomography, lutetium tatalate hosts

And every computing device requires magnetics, memory, and optimal transmission (and this includes your laptops, phones, cameras, cars, etc.). These days almost everything has a microchip with a persistent (flash) memory. So when you consider the five-pronged reality described above, rare earth metals are quickly becoming a thorny Procurement Damnation.