The Road to Riches? The Rails, My Friend, the Rails.

Every day, SI is becoming more convinced that if you want your Supply Chain to be a success, you need to ride the rails. It used to be if you were shipping goods long-haul over land, you’d ship them by train. There was no long-haul trucking and air was just too expensive. But then the war ended, Dwight D. Eisenhower championed the National system of Interstate and Defense Highways, the Federal Aid Highway Act of 1956 came into effect, long-haul trucking became an option, buses became more popular than trains for many trips, the railroads started to struggle financially, and ground eventually overtook rail for most cargo in the US.

And today, people in North America associate trains with the Wild, Wild West despite the fact that rail is, by far, the most cost-efficient way to move cargo over ground for distances in excess of 500 miles. It’s also typically the best choice for intermodal ocean freight as the major rail networks will not only have their terminals in the ports, but SLAs (Service Level Agreements) to make sure cargo is quickly transferred from ship to rail-car. For example, agreements between the Port of Halifax and CN Rail gives you a double-stack rail-service direct link to Chicago in 71 hours, which is typically a 3-day drive when you factor in daily driver limits and border crossing.

Why is SI becoming more convinced that Rail is the Future? Three reasons:

  1. Fuel Efficiency
    Efficient trains can move a ton of freight nearly 450 miles on a single gallon of fuel. Find a truck that can do that!
  2. Predictability
    The railroads control the rails – and can schedule them to maximize capacity and prevent traffic jams that can delay trucks for hours or more. Plus, well maintained lines and trains that keep to schedules suffer significantly less accidents than traffic on the road.
  3. Adoption by the East
    While the young and immature west might have dumbly abandoned trains just like it abandoned trams (and replaced them with gas guzzling polluting busses), the East is investing Billions in new (high-speed) rail lines everywhere. Consider the amount being invested in the Kunming-Singapore Railway with Laos alone committing to invest 6.2 Billion on the 260-mile segment between Kunming and Vientiane straight through the mountainous region of Northern Laos. Think about that. The GDP of Laos is only 9.3 Billion! That’s a huge commitment for a country the size of Laos, even if the commitment connects China to Thailand and will capture a sizeable portion of the 4 Trillion worth of imports and exports that flow into and out of China. This 6.2 Billion dollar railway will require 196 km of blasting and will create 76 tunnels. To put this into perspective, combined they would form a tunnel long enough to connect Korea to Japan under the sea.

It’s time to ride those rails! All around the world!

If you still think you don’t need to get with the program … Part II

So, if you’re still reading, you don’t believe that you are losing:

  • opportunities,
  • time,
  • innovation, and
  • value

by sticking with your 2nd (or, even worse, 1st) generation S2P platforms without program management. That’s fine. Maybe you have a crackerjack analyst team that is exceptional and finding opportunities. Maybe you have very well designed processes and your team, with experience, has actually become very efficient at using the platform. Maybe you R&D team is already using a cloud-based innovation platform. And maybe you actually got a good deal on the older platform you are using and actually realized value. It could happen. But, that’s not all you are missing by not getting with the program. You’re also missing:

Opportunities

… you don’t find. Let’s face it, no matter how great your team is, they can only analyze so much. And only on the data they have. An integrated S2P platform / process with integrated program management can allow all parties to not only do analysis to identify potential opportunities, but provide data, insight, and research the team didn’t do.

Relationship Building

Maybe you have SRM, and it contains functionality to manage your supplier relationships, but supplier relationships aren’t the only important relationships. Relationships with your extended team, especially the team members who manage your supplier and third party relationships, are critical. And without a platform to keep tabs on where they are, and how things are going, are you really maintaining the right relationships with the extended team across the global organization?

Process Innovation

Maybe you have an innovation platform that helps R&D with product innovation. And maybe it works great. But if you really want to maximize value, you have to optimize process efficiency. And if the process is disconnected across multiple BoB platforms, and only the core Procurement team is on the platform, you don’t get the full perspective, which means you don’t get enough perspective on how to possibly innovate the process. Which is another loss.

Enhanced Collaboration

If your platform is disconnected, your team is disconnected. Yes, you can do a lot over the phone and video conferencing, but that’s disconnected from the process. And where’s the record of it? And how do you know what’s been collaborated on, and what hasn’t? You don’t. Collaboration without program management is, whether you want to admit it or not, limited.

And this is just the tip of the iceberg of benefits you are missing without program management. So why don’t you get with the program?

If you still think you don’t need to get with the program … Part I

… maybe we should ask why?

Earlier this year, SI authored a paper, sponsored by Synertrade, on The importance of program management for savings and value realization (registration required), that laid it bare as to why you need to get with the program.

And then, over the past few months, over on Spend Matters Pro [membership required], the doctor, with the help of the prophet, the maverick, and the revolutionary, has been penning a series on Program Management and how you might go about actually doing it across the Source-to-Contract cycle. For those who might have missed it, here are the links:

But, of course, the how to is irrelevant if you don’t accept the why. Without getting into too many details, as you can download The importance of program management for savings and value realization for free upon registration, the main reasons we pushed you to get with the program were:

  • lost opportunities,
  • lost time,
  • lost innovation, and
  • lost value

But maybe you think you have all the answers with your current non-program based S2P platforms and systems. Maybe you think your processes are sufficiently refined such that you can identify all the opportunities, attack them efficiently, and still innovate acceptably without program management. And if this is the case, you’re probably quite happy with an easy to use, adoptable, second generation S2P platform(s) and see no need to modernize again. But you need to. Why?

Come back for Part II.

Is Procurement the Valley of Lost Souls?

Back in 1990, near the end of the hair metal days, Poison released their third studio album called Flesh & Blood with a deep cut called the Valley of Lost Souls. And since Procurement is the Zombie Function of the Enterprise (it’s dying, it’s dead, but it’s still here), I am nominating this as Procurement’s new theme song. If we analyze it carefully, it fits the bill.

I hit the highway
Touch life barely sixteen
… many Procurement newbies who didn’t get moved into the organization as a pre-retirement “reward” are fresh out of college and brand new to the business world …

No angel of mercy
Coming down to save the soul of me
… Procurement is the black sheep of the enterprise and gets no regard, no regard at all …

I took a Greyhound limousine
Straight to grand central NYC
… after all, we have to practice what we preach and cut costs, to the point it hurts

It was ass, gas, or grass, living fast
Nobody rides for free
… and don’t we know it!

Chorus:
Living it up, giving it up
Living in the valley of lost souls
… we have to give up too much to get our savings

Wanting it all, taking the fall
Living in the valley of lost souls
… and when things backfire, even if we’re ordered to make a suboptimal decision, we still take the fall

Miss Misery come ride me
How I love her company
… we have to love her to love this job

She did Boston justice
And wronged all the right out of me
… at the end of the day it’s no wonder why some Procurement professionals accept “Japanese” auction software where a supplier can bid against itself

The devil wears a black suit
He says I’m livin’ like a bum
… and he’s being nice …

So what I’m looking like I’m half dead
A gypsy on the run
… working OT to meet an unrealistic target …

Chorus

Feels like time’s running out on me
… it’s no wonder the average CPO changes jobs at least every 3 years …

But I wasn’t born to play nobody’s fool
… so gotta get out before they push me out

Ain’t nobody gonna hold me down to play nobody’s fool
Ain’t nobody gonna hold me down

… we got resolve … that’s what it takes to do this job …

I’ve got to roll, roll, roll, roll, roll, roll
… so we change jobs if we must

Chorus

Somebody save me
… because, someday, it may just get too overwhelming …

e-Procurement Benefits – What’s the ROI? Part II

In our last post we reminded you that there are valuable benefits to e-Procurement systems, as evidenced by the fact that many organizations are claiming to have saved millions of dollars thanks to their modern e-Procurement systems. This is great, but one shouldn’t just look at the savings, because if you spend enough on anything, you will likely show some savings for it. The real measure is the ROI.

And when you break it down as to where the ROI comes from, you see that it’s possible to get almost the same benefit from pretty basic systems that enable the proper processes and provide the right insight, often at a fraction of the price tag that comes with the big P2P/S2P systems. This means that the organization is not getting the ROI it could be — and isn’t the smartest business move to always chase the biggest ROI? (Since that leaves more money on the table for other high-performing initiatives?)

Yes, it is. So does this mean you go with the cheaper systems? That depends. On what? On what else the integrated system brings, your ability to use it, and your ability to define more sophisticated — and more appropriate — ROI models. If the benefits you expect to take advantage of in the beginning are few, and there are lower-end systems that give you 80% or more of those benefits for a fraction of the price, maybe you should acquire a low-cost SaaS subscription to a lower-end system for a few years. Reap the reward, improve your Procurement proficiency, and when you are ready to take advantage of more benefits, then you can upgrade to a bigger better system.

For example, a bigger, better, more integrated system can also bring the following benefits:

  • negotiation management and contract creation support — integrated redlining, audit trails, e-Signing
  • centralized supplier data and scorecards — make better informed, more risk averse decisions and identify opportunities for non-risky supply base consolidation and volume leverage
  • wider adoption throughout the enterprise — this is important especially when department managers are authorized to do their own purchasing up to 10K or 25K …
  • … and a slew of others …

But only if the organization is ready for them. In other words, in order to determine if an e-Procurement system is the best buy, the organization needs to evaluate the solution against an ROI model that accurately models the benefits its able to capture, not the benefits that are theoretically there.

In other words, just like there is still no one-size-fits-all P2P/S2P solution (and that’s why the doctor works with Spend Matters to make sure Solution Maps accurately capture and convey the differences), there’s no one size fits all ROI model either. Just because a competitor saved 9M on a 1.5M investment and saw a 6X return, that doesn’t mean you will. You have to take your time, do the proper evaluation, and run the proper analyses. That’s the only way to truly benefit from e-Procurement.