Category Archives: Uncategorized
Time to Remove e-Auctions from the Strategic Sourcing Toolkit
Time to face the music. There’s absolutely nothing strategic about them.
Strategic Sourcing is supposed to be strategic. Something that is strategic is something that is carefully designed or planned to serve a particular purpose or advantage. What is carefully designed about an auction, and where’s the advantage from a strategic supply management perspective?
Auctions are not a new invention. Recorded auctions are over 2,500 years old, having been recorded as early as 500 B.C. by Herodotus, who recorded the Babylonian auctions for women for marriage. Shortly after, Romans adopted the practice to auction off the spoils of war, including slaves. (So, not only are you using something non-strategic and ancient you are using something that had its beginnings in oppression and slavery. Think about that for a moment as you write your annual Corporate Social Responsibility report.)
The only difference between the auctions of old and the reverse auctions of today is that instead of selling, you are buying and asking bidders to progressively lower their bid until all but one drop out. And instead of oppressing people, you are oppressing corporations as sellers are told they do not get any business at all unless they bid the lowest, and adhere to that bid, no matter what the toll on them.
And when they were invented, there was no careful design. It was merely a way to close multiple transactions in a short time and get the best price for the best “merchandise”. No thought about how that best price would be obtained ever entered the picture — it was up to the bidder to figure out how he (yes, *he*) would honour his bid.
And there is no advantage. The advantage that auctions are sold on is “savings“. But, as per our last post on Savings Machine or Inflation Nightmare, there is no savings in an auction. None. Any savings identified are illusory at best, and hard costs that will have to be paid in the future at worst.
In fact, what you actually get is risk. Lots of risk. Quality. Compliance. Liability. And, depending on the auction, possibly a dozen other types of risk. How so? Download Sourcing Innovation’s latest white paper on The Dangers of e-Auction, sponsored by Trade Extensions, today and find out the many, many hidden dangers of e-Auctions which could quickly become Procurement’s worst nightmare as long as they remain in the strategic sourcing toolkit.
It’s Time To Rev Up Your Procurement Value Engine. But Do You Know How?
Procurement doesn’t exist to just buy stuff. Procurement exists, at least if it’s a modern Procurement organization, to identify and deliver organizational value. Long gone should be the days when Procurement, staffed by the island of misfit toys, existed only to process the paper work that allowed manufacturing to buy the parts it needed or the back office the paper and calculators required to do the day-to-day accounting.
But the identification of organizational value, as long-time readers of SI know all too well by now, is not always straight-forward. Every organization is different, and every Procurement function has a different level of organizational maturity. As per the classic Hackett Hierarchy of Supply, a supply organization could still be at the level of supply assurance, could have moved on to analyzing landed cost, may have begun its entry into the modern era with an analysis of TCO, might be poised to become a leader with a foray into demand management, or, and this is the highest level of maturity, may be focused on the art of value management.
However, delivering value takes more than just realizing that your function is to deliver value. It is understanding what value is to the organization and how Procurement can contribute to it. Simply put, one way of defining value to the organization is whatever allows the organization to increase its revenue potential. (More sales, more market share, more brand recognition and brand love, and so on.) One way of assisting the organization in the capture of this value is to deliver products, services, and knowledge that will assist the organization in strengthening its Unique Selling Points (USPs) or Unique Value Propositions (UVPs) that give the organization the competitive advantage it needs to increase its revenue (or profit) potential.
It is not easy to do, especially since a Procurement organization has to understand not only what it must do, why it must do it, and how it will achieve it, but how to be good at it. Few organizations get demand management under control and step up to the highest level of the pyramid. Fewer still can stay there as they will struggle with the how. And even if they occasionally understand the how, they may never master the art of being good.
If one wants to be good and drive to success, one has to have a vehicle powered by a finely tuned engine that can deliver value lap after lap around the sourcing track. Such an engine must be efficient, effective, and sustainable. Only then will Procurement be able to get good and stay good. So what does such an engine look like, what sort of value will it deliver, and how will it deliver that value?
For the answer, check out the new white paper co-authored by the doctor and the procurement dynamo, sponsored by Pool4Tool, on how to Boost Your Procurement Value Engine. Part I of a II-part series (with Part II coming out in Q3), this paper will give you the insights you need to understand the various levers you have to deliver true value and how you can do so in an efficient, effective, and sustainable manner.
Forty Years Ago Today
Apple, Inc was formed by Steve Jobs, Steve Wozniak, and Ronald Wayne. And while they might have been thought to be April fools at the time, it now occupies the 5th place on the Fortune 500, well ahead of Amazon at 29, Microsoft at 31, and Google at 40.
And while it might not seem like that long, as Apple only became a household name for many with the launch of the first iPhone back in (June of) 2007, there are those that remember the Apple 1, and those of us that remember the first MacIntosh computers from the mid eighties which were released with an easy to use graphical user interface, about eight years before Windows 3.1 (that launched Microsoft into the modern GUI era).
Four Hundred Years Ago Today …
The Catholic Church attempts to return the world to the Dark Ages when they ban Nicolaus Copernicus’ book: De revolutionibus orbium coelestium where he puts forward the correct heliocentric theory that the Sun is the centre of our solar system (which was essentially the known Universe at that time).
And while he was not the first to do so, as Aristarchus of Samos had posited such a theory almost 1,900 years earlier, it was the seminal work on the matter during the Renaissance and one of the most detailed as Copernicus went to great detail to reconcile the known orbits of the planets with his heliocentric model. The only drawback of Copernicus’ model (published in 1543) was that he held onto the circular orbits of the Ptolemaic system (that put the earth at the centre), something not corrected until Kepler posited that the orbits were actually elliptical in 1609.