Category Archives: Technology

If You Won’t Splurge for Supply Management Technology (Rant)

When:

  • Spend Analysis can save you 10% to 15% of your total spend,
  • e-Negotiations can save you 5% to 15% of your total spend,
  • Strategic Sourcing Decision Optimization saves 12% above and beyond what you can save with e-Negotiation alone,
  • Contract Management can save you 13% on your contract labor and professional services spend alone,
  • e-Procurement will quickly reduce maverick spend by 36% or more,
  • Supply Chain Finance / Working Capital Optimization platforms can decrease your cash conversion cycle by up to 83%, and
  • Global Trade Visibility systems can decrease transaction processing time requirements by up to 96%

… and that’s just the tip of the iceberg with respect to the total savings available to you, if you won’t splurge for supply management technology, especially when many enterprise systems can now be obtained at a cost of only five figures a year (which is ten times less than they used to cost), then you’re a Complete Idiot and should join your kin in the tundra biomes of the Arctic. Continental, Delta, United, and Alaska Airlines all fly to Anchorage, and you can book flights through all of the major web portals. Get to it! The rest of us need to move forward.

Global Sourcing: Addressing Myths with Capabilities Part IV: Politics, Local Context, and Enabling Infrastructures

Today’s post is from David Henshall, Founder of Purchasing Practice. Dave can be reached at dhenshall <at> purchasingpractice <dot> com.

In this four part series, we examine eight dimensional capabilities that will help you overcome the myths surrounding global sourcing. In today’s post, we will focus on the final dimensions of politics, local context, and enabling infrastructure. (Yesterday’s post addressed risk and opportunity.)

Dimension #6: Politics

Politics matters in LCCS. As stated in my introduction to the series (Part I), much of the political noise from politicians, humanitarians and environmentalist can be misleading, resulting in flawed policies and strategies for governments and companies alike. This noise generally consists of allegations of:

  • Job exportation
  • Sub-standard quality
  • Child labour
  • Slave wages
  • Environment pollution

The problem with many of these allegations are that they come from a benchmark of western standards applied in a developing nations context. The assumption is that if we apply these standards it must surely help the people in developing countries. However, there is a real risk that codes of conduct, when applied inappropriately, may worsen social and environmental conditions for workers in these communities. To avoid such unintended consequences, Wilding & Braithwaite (of the Cranfield School of Management) advise companies that they must:

  1. anticipate the ultimate impacts of implementing codes of conduct,
  2. contextualize their application instead of simply demanding compliance with conditions that make little sense in a particular developing country context, and
  3. incorporate the voices of workers and communities in the design, implementation, monitoring, and impact assessment of codes in order to ensure a better fit between what workers and communities prioritize as opposed to what Western society think they ought to prioritize.

Some companies panic in response to negative media exposure of poor working conditions or the use of child labour at their supplier factories, and choose to sever their connections with these suppliers. Companies need to resist this ‘cut and run’ response and engage deeper with suppliers in applying policies which fit the local context.

Dimension #7: Local Context

Dr. Peter Lund-Thomsen, a visiting Researcher with the Copenhagen Centre for Corporate Responsibility, advises that organisations need to take the social, economic, environmental, and linguistic contexts into which codes of conduct are being implemented into consideration if we want to avoid producing unintended, often negative, consequences for the intended beneficiaries of codes.

The implementation of codes in isolation is unlikely to bring about sustained improvements in working conditions. Lund therefore advises that the emphasis needs to be placed on incorporating the concerns and voices of the ultimate beneficiaries of codes of conduct in the design, implementation, monitoring and impact assessment of codes.

Dimension #8: Enabling Infrastructure

For buyers, technology is a key component. The capability to view supply chain data on a single platform can be critical to achieving the real time visibility necessary to successfully mitigate the risk in extended supply chains. Technologies such as RFID can also support the transactional visibility as goods move between handling units in the supply chain.

Buyers can play a role in enforcing local legislation and in providing the necessary expertise, resources, and infrastructure that enable developing country suppliers to meet their legal obligations.

Organisations who engage with suppliers over the long term, in terms of providing the necessary resources and expertise that will enable them to improve their social and environmental performance, are likely to be the most successful in maximising the benefits of LCCS. The ‘cut-and-run’ response in relation to negative media publicity is likely to do more harm than good if the aim is to improve the workers’ conditions and reduce environmental pollution at supplier factories.

Thanks, Dave.

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The Right Thing To Say When A Vendor Offers to Sell You Custom Software …

… that it hasn’t built yet, as reported by Dan Gilmore in funny stories from a career in supply chain that were actually scary, sad, insightful, humiliating, and, well, just plain stupid (in that order), is the following:

How much are you going to pay us to teach you how to build this solution so you can eventually sell it to others?

The reality is that there are a lot of shops out there these days that can build a decent software solution, given a specification, but not many shops have the right business knowledge, experience, and insight to design a truly great solution. So, if the shop expects you to provide the IP, make sure you get a great deal on the solution because that IP is valuable.

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Want that new Supply Chain System? Avoid These Hot Buttons

A recent article over on the Harvard Business Review that chronicled “eight things executives hate about IT” just handed you a checklist that you can use to make sure your request for that new IT system isn’t immediately denied. All you have to do is find a system that doesn’t have any of these issues.

  1. IT Red TapeIf your organization has an IT bureaucratic process that rivals the tax code in complexity, and approval depends on IT’s okay, you’re probably already sunk.
  2. Heavy Internal Support RequirementsIn most organizations, high level people in IT are never available and the low level tech support is overworked. Although this won’t be a show stopper, if enterprise history is that most platforms with heavy internal support requirements end up becoming shelf-ware, you’ll be fighting an up-hill battle.
  3. Fixed Process RequirementsYour business, and the process that run it, are always changing. If it’s hard to change the workflow, that software essentially comes with an expiry date that’s not much further out than a litre of milk.
  4. Flashy Bells and WhistlesYou’re in business to make money. Flash doesn’t add to the bottom line, features do. And paying for functionality you’ll never use is one of the reasons Gartner says that eight out of ten IT dollars is “dead money”.
  5. Extensive Implementation/Integration Requirements Chances are there are already too many never-ending IT projects in the organization. The last thing the C-suite wants is another one.
  6. Not Forward LookingOrganizations want to be strategic and proactive, not tactical and reactive.
  7. No Innovation SupportEven if they don’t actually do it, everyone wants to say they’re innovative. So the platform better support innovation!
  8. High Likelihood of Bad NewsExecutives know that even a successful launch is always accompanied with the inevitable onslaught of bugs, crashes, and change requests. If it looks like the number of these will be higher than usual, you’ll have a lot of eye rolling to deal with, at best.

I’m not saying finding such a solution will be easy, but if you can do it, you’ll probably get your system (provided it doesn’t cost more than the GDP of some smaller countries).

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SYSPRO: Forecasting and Inventory Optimization for Small & Mid-Sized Businesses, Part I

SYSPRO is an established ERP suite provider (that has been around for over 30 years) that also provides Forecasting, Inventory Optimization, and Warehouse Management solutions in addition to the 40+ other modules that it provides. The Inventory Optimization solution (in SYSPRO 6.1) is one of their newest offerings. It’s built on top of their solid forecasting module and provides SMBs with a good inventory management and optimization solution, especially if they are already running SYSPRO.

While SYSPRO (a Microsoft Gold Certified Partner) isn’t an Oracle or SAP, they are a fairly significant company in the mid-market with over 14K customers in 60 countries that contribute to their 300M footprint. Furthermore, their solution is built on top of the Microsoft .Net platform, integrated with the Microsoft Office suite, and easy to pick up by anyone who is familiar with Microsoft Small Business Products. In particular, if you can use Microsoft Project, you can use their products. This is an appropriate technology stack (and strategy) for most of their target market who are already using Windows and Microsoft (Back Office) Products as it minimizes the new-user learning curve.

Their forecasting solution is quite robust. (For a discussion of forecasting, see the glossary page, which also contains links to some relevant posts.) It allows you to forecast at the individual SKU level and at the product family level, which generally creates more robust long-term forecasts. The forecasting solution can take into account historical data, projected sales, promotions, current stock levels, target stock levels (by location), lead times, and policies and create a (monthly, weekly, or daily) forecast using a variety of algorithms. You can select your preferred algorithm, or let the program choose the algorithm that is the best fit given historical data patterns. The program tracks the current forecast, the draft forecast (revision) under consideration, and the suggested forecast created from the last modelling session, which you can manually alter or revise to create a new draft forecast, which will become the new forecast once approved by an administrator.

The algorithms at your disposal include competition, Holt-Winters additive, Holt-Winters multiplicative, annual seasonal profiles (smoothed and unsmoothed), mean, median, moving average, exponential smoothing (with or without trending), multi-period weighted average (six, twelve, etc.), and a few others. (A good overview of these forecasting models can be found on resample.com.) In each case, the system will generate a forecast and graphically plot it against sales for the last three relevant periods (e.g. if you were forecasting Jan to Dec 2010, it would plot Jan to Dec 2007, Jan to Dec 2008, and Jan to Dec 2009, if available), the current forecast, and the current draft forecast so that you can visually see whether the forecast is in line with historical behavior and what is currently expected. This allows you to quickly spot whether a trend might be out of whack or whether (or not) the revised forecast produces spikes in line with upcoming promotions.

The system will also generate all of the relevant statistical data, including the cumulative forecast error, mean absolute deviation, mean square deviation, mean absolute % error, and tracking signal so that you can check the calculations and understand how much confidence you should have in the result. For each algorithm, it will also allow you to alter any of the controlling parameters (and re-run the forecast at any time). (But you should only do this if you are well versed in the art of forecasting and know what you are doing. However, if you are an expert, it’s great to have all this power to run multiple what-ifs and understand the ripple effects minor deviations in sales trends have on your forecasts, which in turn can effect your optimal inventory strategy.) And, as I noted above, you can do this forecasting at the group / product family level or the individual SKU level. This allows you to quickly generate a robust group forecast and then dive in and alter only those individual SKU forecasts that need to be tweaked to take into account upcoming promotions or new seasonal trends. In addition, you can also restrict the group forecast to any meaningful combination of warehouses, stock codes, suppliers, and product classes — which gives you a lot of power and flexibility in forecast creation. And the more advanced users can set up batch forecasting runs, forecast-over-forecast comparisons, and even Pareto analyses, but this takes us into the realm of inventory optimization, which is the subject of Part II.

In other words, the SYSPRO forecasting module packs a lot of power into a relatively easy to use SMB software solution. And with SYSPRO 6.1, you now get a true Inventory Optimization Solution!

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