Category Archives: Technology

Machine-To-Machine Strategies Could Lower Your Production Costs

A recent article in Supply Chain Digest noted that it was Time for Manufacturers to Take Stock of Machine-to-Machine (M2M) Strategies. The logic is that M2M — which leverages connectivity to communicate directly with one another — carries the potential to serve as a “game changer” that can dramatically reshape a company and how it goes to market.

Done right, M2M could enable companies and their customers to make faster and better decisions as there would be real time visibility into the status of each machine and production line it is part of. It will allow the development of closed-loop applications and processes where decisions can be transmitted and the results retrieved to verify the implementation of those decisions. It could reduce service costs as real-time monitoring of systems will indicate when preventative maintenance is required and could also reduce fuel expenses associated with fleet management.

It’s certainly something worth looking into if your production costs are high.

People versus Technology

Consider this excerpt from a recent article on “The Big Picture” in Industry Week:

We reviewed several conveyor delivery systems and settled on cutting-edge technology. It eliminated so many positions that the payback was very quick. Parts were routed through the department and into a sorting area to be automatically picked … we were really proud of this engineering marvel. … Then, reality started to set in. We weren’t ready for cutting-edge technology. It required engineers to program and mechanics to maintain all the little switches and gates. … The downtime had gotten so bad that we positioned full-time mechanics on the line. … We were missing cycles on the main assembly line and having to manually run interiors over to catch up with product. There was considerable capital investment and lots of sweat equity.

So the company brought in TBM and Shingijitsu lean consultants and started to study the Toyota Production System. They started with a week long kaizen event focussed on one component that resulted in a U-shaped cell delivering JIT to the assembly line that worked nicely on 90% of products. Additional kaizen events totally changed the department layout to a smaller footprint that verified the methodology. Then the plant ripped out the high-tech conveyor systems and performance improved while the production footprint decreased almost 45%. As a result, the plant was able to in-source a regional distribution center that generated additional savings and created synergies across the supply chain.

Moral of the Story: technology is good, the right technology is better, but nothing beats a great team with the right training and the empowerment to do what needs to be done.

Market Realities and Mind Games in Technology Negotiations (Software Acquisition Insider Tips V)

By Vinnie Mirchandani

Abruptly end a meeting mid-stream to make a point? Make the salesman sweat at quarter-end to squeeze a few extra discount points? Scream emotionally that you are going to report their price gouging to the regulators? Yes, I have used all of these techniques and many more in the negotiations/background deal advice I have contributed to as a Deal Architect. And I’m not proud of any of them.

My ideal way of conducting a negotiation is identifying an empowered executive in each of the competing (finalist) vendors and “signaling” where the economics and t’s&c’s should roughly come in. I would rather finish the negotiations weeks before quarter end and have the grateful sales executive move on to some other negotiation’s set of mind games.

No, I am not a walk over. My “signals” are based on a continuous monitoring of market trends. If you read my Deal Architect blog, I am into disruptive vendors and economics and very critical of “empty calories” in the price and performance of many of the industry’s large vendors. And lest I under play the complexity of the deals — plenty of legal, procurement, financial and, of course, IT folks are typically involved — the “signals” I am talking about are not stuff you can communicate in a 140 character Tweet.

My two favorite negotiation tools — vigorous bid competition and emerging market benchmarks — apply broadly across technology sectors. I will bring in SaaS economics to play into outsourcing deals. Telecom early termination clauses into SaaS contracts. Cloud computing benchmarks of availability and recovery/response times when negotiating support expectations from on-premise software companies. E. European and S. American competitors when Indian competitors only expect to see their peers in competition. On my other blog, New Florence, I am constantly looking for innovations in technology that are a rich source for the “unorthodox competition” I like to bring to negotiations.

The one humbling principle I live by: implementing technology is exponentially more difficult than negotiating it. So, I am constantly pacing myself to get the negotiation out of the way of implementation. It breaks my heart to see some buyers delay a project for months for another 2-3% in savings which should be far offset by the benefits the implementation team could have leveraged in that time frame.

Of course, not every client I work with is willing to be that “innovative”. Often I am stuck with a short “approved vendor list” to run the bid with. Worse, when it comes to renewals, many clients hurt themselves by not considering any alternatives to the incumbent. Some clients have transparency requirements which make my “back-channel” conversations difficult.

And even more so, it is tough to find enlightened vendor executives who accept the concept of market reality. Many are trained to rotely repeat things like “we have never accepted that price point or legal clause“. Unbelievably, many will pull out their quarter-end, blue plate special when I have told them I want to be finished of the negotiation way before quarter-end. Often they will adopt the Letterman version of “stupid salesman tricks” I have written about before. Others will take advantage of your offer to debrief why they lost the deal to try and claw their way back into the deal.

But when the deal is allowed to be driven by market realities more than mind games, I can tell you magic happens. It’s like a well fought chess game. There are rules and time constraints and each side is civil (at least somewhat) to each other.

But more importantly, both sides walk away feeling they won. Or at least tied. And us negotiators can scurry on out and let the business folks get on with making their magic with the technology they just bought.

At Gartner, and since with his sourcing advisory firm, Deal Architect, Vinnie Mirchandani has negotiated or advised clients on over $ 5 billion in software, offshoring, hosting, telecom and other technology and BPO contracts.

Has Aberdeen Caught the Green Bug?

Browsing the Aberdeen site, I noticed a benchmark report on “Going. Going Green: Planning for The Green IT Ecosystem” which caught my eye for three reasons: (1) I hadn’t noticed a study of this specific nature before (and as far as I can tell, it’s their first), (2) last year was the first time I noticed Aberdeen addressing the concept of Green (with their “Green Initiatives: Lowering Costs and Increasing Efficiency in the Data Center”), and (3) if they build on the research they started with “Building a Green Supply Chain”, it could revolutionize both their “Procurement & Supply” and “Supply Chain & Logistics” practices, which, despite their continued consistency in benchmark quality, could use a little jazzing up as many of the topics they’ve been covering haven’t changed much in the last few years, and the benchmark reports start to become nothing more than updated statistics once you get to the third, fourth, or fifth study on a topic. (While this is great for tracking your progress against your best in class peers, it’s not so great if you are looking for new ideas to take your practice to the next level once you reach best-in-class.)

This latest report, which notes that the global economic downturn and the fluctuations in energy prices emphasize the financial need for organizations to understand and manage their consumption of energy as a key part of their ongoing corporate strategy requires IT to examine its role in the larger organization relative to corporate responsibility and to implement strategies that not only decrease consumption and optimize performance, but also catalyze the proper management and achievement of overall corporate sustainability goals.

IT can play a big role in energy reduction and sustainability efforts as it can:

  • decrease power consumption requirements in the data center and on the desktop (see my posts on Green Your Desktops and Green Your Data Centers for more details and check out the Green IT Savings Template to calculate how much Green IT can save you)
  • decrease the size of the data center
  • decrease the cooling requirements of the data center
  • reuse the heat generated by the data center to heat the surrounding building

The study found that of the best-in-class performers in Green IT,

  • 67% have a formal green/sustainability policy and documented energy efficiency policies
  • 78% include sustainability principles in the requirements for new systems and products
  • 81% use energy efficient components to decrease power consumption
  • 69% use tiered storage to manage the data life-cycle
  • 63% use alternative data center cooling technologies

and this tells us that you can Green Your IT Ecosystem and Save if you

  • make it a mandate to go Green
  • develop and document appropriate procedures and policies
  • take a holistic approach in your operations
  • make green a requirement in everything you source
  • take advantage of new technologies to reduce your energy and operating footprint

Allowing you to sustain the environment and sustain your business at the same time. How can you go wrong?

Want more information on green technology? See my previous posts on greening your data centers, greening your desktops, and calculating your savings with green technology.

 

 

The New Delphi of Oracle Sourcing On Demand

Jason Busch had a great post on Oracle’s new Sourcing on Demand offering on Spend Matters in “Going SaaS – Oracle Launches Sourcing On Demand Part 2” yesterday. Although it was a few paragraphs longer than his average post, and included a laundry list of features, it’s worth a read as it has some insightful information that is hard to come by. (Oracle, like a few other large players in this space, are very selective in who they talk to and, as such, solid information is hard to come by on the independent blogs.)

As I have not had the opportunity to demo the product, I’m not going to do a technical review but I am going to highlight two important take-aways from Jason’s post.

  1. The original design of R12 (and MRD), which the new on-demand solution is based on, was written in 2004 and was 3 years in the making before its initial release in 2007.
    This says that while the solution may still be good, don’t expect the latest best-of-breed functionality. It’s not going to be there.
  2. The list pricing is $850 per user per month with a minimum of 20 seats (and a set up fee of $5,000)
    Doing the math, that’s a minimum of 17,000 a month or 204,000 a year. That’s likely (at least) twice what you’ll pay for what I consider to be competitive on-demand best-of-breed sourcing solutions, especially in this market. I’m not saying it’s not worth it, but if it doesn’t “fit” snugly into your current platform, the ROI might not be there. Be sure to do a TCO/TVM assessment before making a decision (and consider bringing in an RFP Expert and Deal Architect to help you out).