Category Archives: Technology

Every Check Has A Cost (So Streamline Your Workflows)

Paul Graham wrote a great article last November on PaulGraham.com on how Artists Ship. In the article, which starts off by noting that one of the big differences between big companies and startups is that big companies tend to have developed procedures to protect themselves against mistakes while a startup walks like a toddler, bashing into things and falling over all the time explains that the gradual accumulation of checks in an organization is a kind of learning that is based on responses to disasters that have happened to it or other companies in similar situations. For example, after giving a contract to a supplier who goes bankrupt and fails to deliver, a company might require all suppliers to prove they’re solvent before submitting bids.

As companies continue to grow, they invariably accumulate more checks, either as responses to disasters or as a result of hiring people from bigger companies who bring more checks with them for protecting against disasters which have not yet happened (and which may never happened).

But not all checks are good. The reality is that every check has a cost, and sometimes the cost can outweigh the benefit. For example, it might be prudent to make a supplier verify it’s solvency, but the cost to you could be substantial. For example, the best supplier might be the one that can’t spare the effort to get “verified” or who falls just short of a solvency bar that’s set too high. After all, do they really need to have one year of operating capital in the bank for a six month contract?

Before a check is instituted, it’s cost should be well understood. For example, consider the example given by Joel Spolsky of Joel on Software on arbitrary approval thresholds. In many companies, software costing up to some nominal amount, such as $1,000, can be bought by individual managers without any additional approvals, but software that exceeds the nominal threshold has to be approved by a committee. This process, which has to be babysat by the prospective vendor, is quite expensive and the net result is that software that you might have sold for $5,000 now has to be sold for $50,000 to recover the costs associated with having to sell to a committee. Thus, although the purpose of the committee was to ensure the company doesn’t waste money, it could end up causing the company to pay 10 times as much for basic software.

Checks on purchases will always be expensive, because the harder it is to sell something to you, the more it has to cost. If you’re too hard to sell too, the only people who will sell to you are those companies that specialize in selling to you — and they are not likely to be the companies making the goods and services you need the most. This creates a whole new level of inefficiency where you pay exponentially more for inefficient products.

Thus, although checks are important before you make any purchase, it’s important that the checks be balanced … the cost of the check should not exceed the benefit the organization experiences as a result. So continue to do your solvency checks before handing out those million dollar contracts, but when it comes to office supply spot buys, lose the check. Worst case scenario, you go across the street.

Turn to Technology, But Make Good Decisions

There’s been a plethora of articles in recent months on how you can “leverage technology to thrive in a down economy”. And while I generally agree that technology can improve your operations and save you some serious cash, I want to remind you that technology alone is not the answer. Remember the results of the recent McKinsey Quarterly article on “managing IT in a downturn”: The impact on run-rate EBIT from optimizing supply-chain processes with streamlined systems is 3 to 4 % … which is 6 to 8 times the impact on run-rate EBIT from transactional IT cost reduction which tops out at 0.5%.

So why the focus on IT? As the article points out:

  • IT can streamline processes
    The right technology can improve productivity, empower knowledge workers, and help you satisfy customers efficiently.
  • IT can enable best practices
    The right tools can make best practices available company wide and provide a foundation for their implementation.
  • IT can ensure compliance
    Compliance is not just a threat, it’s an opportunity … with the right systems, you can use your compliance to your advantage.
  • IT makes document management easily
    Never search for a contract again!
  • IT enables visibility and collaboration
    You can track the progress of each project and work with your suppliers.
  • … and so on …

And while all this is true, it’s only true if you select the right technology. In order to get maximum benefit, you have to:

  • Select the tools that enable the right processes
    This is not necessarily the process you use now, and most likely not a fixed pre-packaged process the tool comes with, but the process that will allow you to meet your needs with a minimum amount of work. This means that the tool needs to support flexible workflows to allow you to set up the process that best-fits your needs today, and revise it as you discover better ways to get the job done.
  • Make the right-decision with respect to on-premise vs. SaaS
    If a provider can manage the solution for you more effectively and more cost-efficiently, because IT just isn’t your strength, you have to seriously consider SaaS. This is doubly true if data security is an issue, because a certified SaaS provider often has better security in place in their data center than you do in yours.
  • Remember that technology is only the enabler
    You still have to do the work, and, most importantly, use your brain.

So how do you make good IT decisions when trying to improve your supply chain processes? As per this recent SCMR article on “making better IT decisions”, which attempts to introduce a supply chain IT governance framework, you need to:

  • Take a Holistic Point of View
    The best decision will require the input of all of the stakeholders.
  • Be Involved
    Don’t just select a system and hand the project off to IT to get it installed and integrated. It’s your processes that need to be enabled, not theirs.
  • Communicate
    Before, during, and after the implementation.
  • Think Collaboratively
    Let everyone give their input and consider all of the strengths and weaknesses associated with every decision.
  • Learn from Previous Projects
    And, most importantly, don’t repeat the same mistakes you did last time.

Supply Chain Responsibility

Chances are that if you’re (out)sourcing globally, your supply chain is not as responsible as you think it is. Even leaders in supply chain social responsibility still struggle with fiascos, as illustrated by The Gap, who faced child-labor allegations in India earlier this year when, without its knowledge or consent, a vendor subcontracted part of an order to an unauthorized facility that used child-labor to produce garments. Considering the impact this can have on your brand, you should be taking steps now to make sure this doesn’t happen to you.

So what should you do? Without reference to the Stanford Global Supply Chain Management Forum, as quoted in this recent Supply Chain Management Review article on “Taking Supply Chain Responsibility to the Next Level”, I can tell you that you need to put greater emphasis on the social side of the equation. And in addition to the models and measurement systems, you need an overall monitoring framework that will give you real-time visibility into your supply chain, and, most importantly, your suppliers.

In addition to the basic supplier performance management functions, which should include compliance status and the findings of the most recent supplier audit, this framework should also tell you which of your suppliers are actively working on your active orders, and what the status is. This will enable you to properly determine which suppliers pose the most risk, and, more importantly, which suppliers need an active (surprise) audit, and which suppliers don’t.

Furthermore, the technology should lay the foundation for trailblazers to implement structural changes within their supply management function to insure that social and environmental responsibility is considered as part of every award. It should also support the collaboration required to develop innovative products, processes, and technologies that can transform the supply chain and the business.

So how do you select the right technology? Find a technology that can support the holistic, dynamic, and flexible supply chain model that can improve your overall business performance. As highlighted in “taking supply chain responsibility to the next level”, leaders make the following assumptions about their supply chains.

  • Social and environmental factors strongly correlate with supply chain performance
  • The extended supply chain is fluid, and may not look the same tomorrow as it does today
  • Getting it right is a journey, not a destination, and definitely not a sprint. It takes time to get it right, and the key to success is to get progressively better each day.

In my view, even if it’s not perfect, any technology that can allow you to integrate supply chain responsibility into your overall sourcing process is a step in the right direction. Good examples are Aravo‘s Supplier Information Management (SIM) platform that can allow you to track, report, and execute on all of the data you need to be socially responsible, EcoVadis‘ sustainable supply management solution which tracks the relevant data on your suppliers CSR practices, and SupplierSoft‘s supplier information management platform.

Don’t Be Seduced by Change Management Tools

Industry Week recently ran a great article on “change management tool seduction” and the damage these tools, and the programs they support, can cause, which include:

  • Wasted Time
    The wrong change programs will do nothing but consume time that could be better spent on other tasks. For example, documenting all of your processes only to find out they’re poor isn’t worthwhile
  • Increased Politics
    Employees might look upon it as punishment, and rebel, or simply use any new data that results from the effort to try and blame other departments for organizational failings.
  • Functional Distractions
    Employees might get caught up trying to figure out how to meet the new requirements rather than working towards process improvement.
  • Strategic Misdirection
    If the change management program selected doesn’t actually improve product or service quality, it’s pointless.

Change management, and change management tools, only work if you’re implementing the right changes, and not the latest fad, cliche, or feel-good organizational change theory. You don’t change just because your competitor did. You change because a detailed analysis caused you to conclude that you will likely see a significant return from going through the effort. You change because your analysis revealed that the process improvements you identified will have a positive impact on your operations and will increase efficiency, reduce costs, and improve quality.

So how do you know if you’re on the right path? The Industry Week article had some great advice for determining whether you’ve embarked on a successful change management project or been seduced by the latest change management tool (or fad). Specifically, if one or more of the following five scenarios exists at your company, you might have to adjust your plans in order to reap benefit from your change management initiative:

  • Tool Tossing
    Are managers trying to solve problems just by throwing technology at the situation? Technology is an enabler, not a solution upon itself.
  • Consultant Lure
    Are consultants repeatedly brought in to tell you what most of the organization already knows?
  • Buzzwords
    Do managers use buzzwords excessively, particularly with the goal of making themselves look knowledgeable?
  • Change Program of the Week
    Has your company introduced so many change programs in the last few years that your staff feels whiplashed?
  • Plan Blindness
    If management believes that a plan in and of itself is progress, look out!

If you want to get help finding and staying on the right path, the article also offers some advice on how to assess the likely impact of a potential change management program to determine if it’s right for you. It’s definitely worth a read.

The Sourcing Maniacs 2008 Vendor Tour Part 19: Servigistics

Today’s post is a little length, so it’s been broken up into Survey, Service, and Servigistics.


Survey

 

Wakko in a pie shop, somewhere outside of Boston
What’s taking so long?
Dot It’s only been twenty seconds!
Wakko But I want my pie now!
Dot When don’t you want pie?
Wakko When I want baloney.
Yakko Figures.
So, SupplierSoft‘s supplier management applications, built on Salesforce were really cool.
Dot Who knew that SRM, like CRM, had so many fundamental similarities … that both required extensive information management capabilities.
So, where are we off to now?
Yakko Are we still on the S’s?
How about Saqqara?
Dot What do they do?
Yakko e-Procurement and Item Master Management I believe.
Dot Anything unique on the e-Procurement Side?
Yakko I think it’s primarily catalog and content management.
Dot Probably worth checking them out. Where are they?
Yakko They’re back in California.
Dot I’m still not ready to go back yet. Who else?
Yakko SciQuest?
Dot Aren’t they working with Emptoris now?
Yakko I think so. Maybe we shouldn’t bother. I’d hate to trek all the way back to North Carolina just to be shut out again.
Dot Do you really think they’d do that?
Yakko I don’t know. I do know that the doctor hasn’t covered them, despite the fact he thinks they’re important enough to make his Vendor Day listing, so I’m not taking that as a positive either.
Dot Okay. So we’ll leave them until we happen to be back in the area. Who else is there that starts with S? Didn’t the doctor tell us the name of a company that starts with S that we were supposed to check out?
Yakko I think he did! Let me check my notes.

Here it is … Servigistics!
Dot SERVIce loGISTICS? What on earth would they do?
Yakko I haven’t a clue. Maybe we should check out the doctor‘s posts for some background. I’m getting a little tired of looking stupid …
glaring at Wakko
Wakko What I’d do now?
Yakko ignoring Wakko
According to the doctor, in his post Servigistics – Tomorrow’s Strategic Service Management Today, Servigistic’s does strategic service management, particularly in the areas of parts, pricing, and workforce management.
Dot What’s strategic service management?
Yakko According to his wiki-paper, it is a proactive approach to satisfying the customer in a manner that is both efficient and profitable while balancing organizational strategy, resources, commitments, and pricing. Strategic Service Management supports the integration, optimization, and management of core business processes, adds to your overall business solution, and helps to differentiate your offering from that of your competitors.”
Wakko That’s a mouthful. What does it mean?
Yakko Good question. Just a sec …
taking out his cell-phone
bip-bip-bip
ring … ring
the doctor Hello?
Yakko Hello, Doc. We have a question. Let me put you on speaker.
Yakko activates the speaker phone.
Wakko We don’t want to look stupid.
the doctor We’ve been over this already, Wakko. I’m not *that* kind of doctor. You want a plastic surgeon …
Yakko No, no. What Wakko means to say is that we’ve decided to go see Servigistics and we don’t want to show up not knowing anything about strategic service management. We’re getting tired of looking stupid because of our ignorance.
We skip ahead a bit here. Part 16 filled in the blanks.
the doctor Okay. So what do you want to know?
Yakko When you say that “strategic service management is a proactive approach to satisfying the customer in a manner that is both efficient and profitable while balancing organizational strategy, resources, commitments, and pricing”, what do you mean.
the doctor That’s from the wiki-paper. Did you happen to read more than the first sentence?
Yakko The first paragraph …
the doctor If you’d learn some patience, and read the great materials that are available to you — at no cost, I might add– in full, you’d probably find that the wiki-paper answered most, if not all, of your questions.
Yakko Well can you give us the highlights?
the doctor I guess so. What, specifically, do you want to know?
Yakko Can you give us the nut?
the doctor But you already have Wakko.
Wakko Hey!

 



Service

 

the doctor Well, when I say that strategic service management is a proactive approach to satisfying the customer in a manner that is both efficient and profitable while balancing organizational strategy, resources, commitments, and pricing, what I am effectively saying, if you’re a procurement organization, is that services are as important to your cost management initiatives as direct and indirect goods, and that, properly managed, they are a point of savings and revenue generation, and not just a cost.
Dot But how does that work? Services require people — who cost money, and tools — which cost money, and parts — which cost money.
the doctor Let’s break it down.
Wakko Break it down?
the doctor Yes. Let me ask you this. How many people? What tools? And how many parts?
Dot What do you mean?
the doctor Let’s say you have 10 people, but you could provide the same level of service with only 7 if you managed them better, or, preferably, manage service for a customer base that is 40% larger with the same number of staff! Let’s say you’re using an expensive ERP-based enterprise CRM but you could get away with a SaaS solution based on open source. And let’s say that you currently stock ten 225 KVA three-phase transformers, when you only use an average of two in any given month. How much more are you spending than you need to?
Dot A few thousand?
the doctor Try a few hundred thousand. A good service professional, depending on what you’re servicing, costs you somewhere in the 50 to 150 K band annually; ERP-based enterprise CRM systems often cost in the millions annually when the TCO is fleshed out, while a SaaS solution will often cost less than 100K; and those transformers list for 15K a-piece, storing eight more than you need at an annualized overhead of 35% is almost equal to one person’s annual salary.
Dot So good service management can really save you a bundle.
the doctor And make you a bundle too. What do business customers pay for?
Dot Goods and services.
the doctor And what goods and services do they pay more for?
Dot Uhmm .. the ones that provide more value?
the doctor That’s right. And how do you provide more value?
Dot Better products and services?
the doctor Yes, and value-added services to be precise. Good service management will allow you to deliver a better level of service than you do now, for less than it is costing you to deliver your current service level. And customers will not only pay for that, but they’ll likely pay a little more for that if you reduce their workload.
Wakko So strategic service management is about managing your people, parts, and technology in a way that allows you to do more with less and deliver more with less, decreasing your costs while increasing your revenues. It’s strategic sourcing, on steroids, for services.
the doctor stunned
You’ve got it, Wakko!
Yakko, does that answer your question?
Yakko I think so. Now can you tell us what Servigistics does?
the doctor I don’t want to spoil your fun. Go find out!
click

 



Servigistics

 

Yakko So now that we know what strategic service management is, let’s see if we can piece together what Servigistics does. In his post Servigistics – Tomorrow’s Strategic Service Management Today, the doctor indicates that Servigistic’s does strategic service management, particularly in the areas of parts, pricing, and workforce management. Then, in Workforce Management: A Servigistics Approach, the doctor dives into workforce management and says it is “a software-based solution that optimally plans and dispatches field service technicians and their properly stocked vehicles to a customer’s location in a timely manner in order to deliver on their service commitments” and that it will “typically addresses demand management, workforce scheduling, workforce dispatching, and mobility solutions”.

Diving in, the posts says that the Servigistics “workforce planning component forecasts workload to determine the appropriate workforce size, the scheduling engine automatically sets and adjust optimal assignments based upon available data and available rules and updates those assignments in real-time if a higher-priority service call enters the system, the web-based appointment request feature allows customers to self-schedule, and the service mobility solution not only enables workforce communication, but allows the technicians to indicate where they are in the delivery cycle”.
Dot It sounds pretty sophisticated.
Yakko Sure does. Let’s go talk to them.
  the maniacs travel from Boston to Atlanta, Georgia
Wakko tap, tap, tap goes the mini-mallet
Hello. Hello.
Sharp Dressed Man a sharp dressed businessman opens the door
Hello … oh no!
Wakko looking around in a confused manner
What?
Sharp Dressed Man You!
Yakko You know who we are?
Sharp Dressed Man Of course I do! I read Sourcing Innovation every day. It’s the best blog out there! You usually spell Trouble with a capital T, and we’re a no-nonsense operation here!
Yakko We’re not here for trouble!
Dot We just want to learn more about strategic service management.
Yakko And how it can help companies.
Dot And what you do.
Wakko the doctor sent us!
Sharp Dressed Man He what?
Yakko Well, he didn’t exactly send us. He told us if we really wanted to learn about strategic service management, and what innovative companies are doing, we should consider checking you out if we were in the area. And here we are!
Sharp Dressed Man Yes you are. Well, the doctor‘s right in that respect … we can teach you about SSM … and if you really — really — want to learn, I’d be happy to talk to you. But you have to be good.
Dot We’re always good!
Sharp Dressed Man looking directly at Wakko
And put away the construction tools, roman candles, mechanical gadgets, and anything else that can be used for destructive purposes. Got it?
Wakko putting his mini-mallet away
Got it.
Sharp Dressed Man Okay. So, do you know what strategic service management is?
Wakko It’s about managing your people, parts, and technology in a way that allows you to do more with less and deliver more with less, decreasing your costs while increasing your revenues. It’s strategic sourcing, on steroids, for services.
Sharp Dressed Man Not bad. Do you know how we enable it?
Yakko You provide solutions for parts, pricing, and workforce management – the cornerstones of strategic service management. Your workforce management product, in particular, is quite extensive and includes workload forecasting capabilities, a dynamic scheduling engine, and a service mobility solution that service personnel can use to stay up to date in the field.
Sharp Dressed Man Not bad. But do you understand how these solutions provide value to our customers?
Dot They allow you to do more calls with less people through optimal scheduling, identify the most cost-effective tools and solutions to get the job done, and optimize inventory to maximize service levels while minimizing carrying costs?
Sharp Dressed Man Correct, but do you understand how we provide value to our customers? Do you understand why a customer wouldn’t just go out and buy a parts management solution from competitor Alpha, a best-of-breed price management engine from competitor Beta, and a workforce management solution from competitor Gamma?
Yakko I guess not.
Sharp Dressed Man We provide a holistic solution to strategic service management.
Wakko I like 3-D.
Yakko Not holographic, holistic — as in concerned with the whole and not just the parts?
Sharp Dressed Man Correct. You see, the full value of strategic service management only materializes when you tackle the whole problem. You can have the best workforce scheduler, but if they don’t have the parts, your personnel can’t perform the service. You can have the best inventory forceasting and management solution, but if the parts aren’t available where your service personnel need them when they need them, it’s for naught. And you can have the best pricing engine in the world, but you still need to have the parts available where the people are going to buy them.
Wakko So there’s no real value unless you look at the whole picture?
Sharp Dressed Man Correct. And that’s what we do. Through our Command Center, we unify our parts management, workforce management, pricing management, and knowledge management solution — which makes your workforce more productive — into one cohesive platform which doesn’t “improve” one aspect of service, such as workforce management, to the detriment of another, such as parts & inventory management.
Dot I never knew there was so much to good service management.
Sharp Dressed Man Now you do. And with that, may I bid you good day?
Yakko Since we’re here, we really should get an update for the doctor!
Sharp Dressed Man If it will get rid of you … and keep you OUT of my server room …
glaring at Dot and Wakko
I can do that.

Since we last spoke to the doctor, four big things have happened for us here at Servigistics.

First of all, we’ve made a number of updates to our workfoce management solution, including a web-based portal for customers to track their service status — think Fedex package tracker on a steroid shake; we’ve enhanced automatic e-mail notifications and the command center dashboards; we’ve added dispatch capability to TomTom navigation devices, e-mail, and SMS; and, probably most significantly, leveraged grid-computing technology in computation-intensive portions of the software for dramatic improvements in scalability.

Secondly, we’ve made some significant enhancements in internationalization. We now support 8 different languages, including double-byte Japanese, Mandarin, and Korean; we can add a new language in two to three weeks, and each user can see the same data in her language and custom date and currency formats.

Thirdly, we’ve added some specific aerospace functionality with respect to fleet provisioning, rotable pool planning, inventory consolidation, PBH/PBL cost-based planning, RTP and de-manufacture, scheduled maintenance planning with respect to repair BOMs, and replacement forecasting for life-limited parts.

Finally, in addition to netting a number of significant new global customers, we’ve also landed some very big aerospace manufacturers, carriers, and MROs

Anything you need elaboration on?
Yakko Uhmm … no?
Sharp Dressed Man Great! Thanks for stopping by. Have a great day!

Editor’s Note: At this point, we’ll be taking a short break for the 12 days of X-Mas, but we’ll return with the final two parts of the maniacs’ road tour on December 29 and December 30.